Search

In the period following the Great Recession of 2007-9 the financialisation of the US economy reached a watershed characterised by stagnant financial profits, falling proportions of financial sector and mortgage debt, and rising proportion of public debt. The main macroeconomic indicators of financialisation in the USA show structural breaks that can be dated around the period of the Great Recession. The reliance of households on the formal financial system appears to have weakened for the first time since the early 1980s. The financial sector has lacked the dynamism of the previous three decades becoming more reliant on government. The state has increased its own indebtedness and supported large financial institutions via unconventional monetary policy measures. At the same time, state intervention has tightened the regulatory framework for big banks. The future path of financialisation in the USA will depend heavily on government policy with regard to state debt and financial regulation, although the scope for boosting financialisation is narrow.

Since the Great Recession of 2007-9 the financialisation of the US economy has reached a watershed characterised by stagnant financial profits, falling mortgage debt and rising public debt. The reliance of households on the formal financial system appears to have weakened for the first time in the post-war period. The financial sector has lacked the dynamism characteristic of the previous three decades and has become more reliant on the state, which has greatly increased its own indebtedness and has driven public interest rates close to zero. At the same time, state intervention has tightened the regulatory framework for big banks. The future path of financialisation in the USA will depend heavily on government policy with regard to state debt and to financial regulation.

Financialisation of developed countries includes increased lending to individuals as well as adoption of investment banking by commercial banks, thus contributing directly to the crisis of 2007-9. Financialisation has acquired an international aspect since the 1990s, primarily through liberalised capital flows. In the 2000s international financialisation has resulted in net capital flows from developing to developed countries, thus imposing substantial costs on the former, while subsidising the USA as leading issuer of quasiworld- money. International financialisation has also spurred domestic financialisation in developing countries through development of bond markets and foreign bank entry. Developing countries have been drawn into the crisis as current accounts declined and short-term capital flows were reversed. Financialisation of developed countries includes increased lending to individuals as well as adoption of investment banking by commercial banks, thus contributing directly to the crisis of 2007-9. Financialisation has acquired an international aspect since the 1990s, primarily through liberalised capital flows. In the 2000s international financialisation has resulted in net capital flows from developing to developed countries, thus imposing substantial costs on the former, while subsidising the USA as leading issuer of quasiworld- money. International financialisation has also spurred domestic financialisation in developing countries through development of bond markets and foreign bank entry. Developing countries have been drawn into the crisis as current accounts declined and short-term capital flows were reversed.

Ottoman industrialisation in cotton spinning was led by the town of Naoussa in Macedonia. This paper shows that Naoussa capitalists grasped the opportunities created by trade liberalisation, accumulated capital in domestic manufacture of woollen cloth, and secured a regular supply of low-wage female labour and free hydraulic energy. It is further shown that they took advantage of local institutional and political mechanisms within the Christian community independent of the relatively remote Ottoman state. But there was no capitalist transformation of agriculture, even though Naoussa capitalists often owned large land estates. Lack of broader institutional and political influence and absence of capitalist transformation of agriculture hampered the transformation of Naoussa capitalists from a provincial social group into a broad-based capitalist class.

This paper presents the Marxist theory of the financial system and the capital markets. First, it surveys the orthodox literature on the relationship between finance and the economy. Then, the function of the capital markets is analysed. Finally the differences between the orthodox and the Marxist perspective are being explained.