Editing Finance capitalism

{{Short description|Economic system that prioritizes accumulation of money and securities over production}}
{{Capitalism sidebar}}
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| caption1  = Courtyard of the [[Amsterdam Stock Exchange]] (or [[:nl:Beurs van Hendrick de Keyser|Beurs van Hendrick de Keyser]] in Dutch), a powerhouse of [[Economic history of the Dutch Republic|Dutch capitalism]] in the 1600s. The birth of the world's first formally [[listing (finance)|listed]] [[public company]] (the [[Dutch East India Company]]) and first formal [[stock exchange]] (the Amsterdam Stock Exchange), in the 17th-century Dutch Republic, helped usher in a new era of finance capitalism.<ref>Neal, Larry: ''The Rise of Financial Capitalism: International Capital Markets in the Age of Reason'' (Studies in Monetary and Financial History). (Cambridge University Press, 1993, {{ISBN|9780521457385}})</ref><ref>Goetzmann, William N.; Rouwenhorst, K. Geert: ''The Origins of Value: The Financial Innovations that Created Modern Capital Markets''. (Oxford University Press, 2005, {{ISBN|978-0195175714}}))</ref><ref>[[Murray Rothbard|Rothbard, Murray]]: ''Making Economic Sense'', 2nd edition. (Ludwig von Mises Institute, 2006, {{ISBN|9781610165907}}), p. 426. In own words of the [[Austrian School]] economist [[Ludwig von Mises]], "A [[stock market]] is crucial to the existence of capitalism and [[private property]]. For it means that there is a functioning market in the exchange of private titles to the [[means of production]]. There can be no genuine private ownership of capital without a stock market: there can be no true [[socialism]] if such a market is allowed to exist."</ref><ref>[[Ronald P. Dore|Dore, Ronald]]: ''Stock Market Capitalism, Welfare Capitalism: Japan and Germany versus the Anglo-Saxons''. (Oxford University Press, 2000, pp. 280, {{ISBN|978-0199240616}})</ref><ref>Preda, Alex: ''Framing Finance: The Boundaries of Markets and Modern Capitalism''. (University of Chicago Press, 2009, pp. 328, {{ISBN|978-0-226-67932-7}})</ref>
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| caption2  =  The [[trading floor]] of the [[New York Stock Exchange]] (NYSE), a foremost symbol of American finance capitalism, in the early 21st century.
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'''Finance capitalism''' or '''financial capitalism''' is the subordination of processes of [[Production (economics)|production]] to the accumulation of [[money]] profits in a [[financial system]].<ref>"Capitalism" by John Scott and [[Gordon Marshall (sociologist)|Gordon Marshall]] in ''A Dictionary of Sociology'' Oxford University Press 2005. Oxford Reference Online. Oxford University Press</ref>

Financial capitalism is thus a form of [[capitalism]] where the intermediation of saving to investment becomes a dominant function in the economy, with wider implications for the political process and social evolution.<ref>[https://www.theatlantic.com/doc/200905/imf-advice  Simon Johnson, "The Quiet Coup", May 2009, The Atlantic.]</ref> The process of developing this kind of economy is called [[financialization]].

==Characteristics==

Finance capitalism is characterized by a predominance of the pursuit of profit from the purchase and sale of, or [[investment]] in, [[currency|currencies]] and financial products such as [[Bond (finance)|bond]]s, [[stock]]s, [[Futures contract|futures]] and other [[Derivative (finance)|derivatives]]. It also includes [[usury|the lending of money at interest]]; and is seen by [[Marxism|Marxist analysts]] (from whom the term finance capitalism originally derived) as being exploitative by supplying income to non-laborers.<ref>[https://www.jstor.org/stable/2634101 "The Contradiction of Capitalism in the Search for Democracy"], ''Latin American Perspectives'', Vol. 24, No. 3, Ecuador, Part 1: Politics and Rural Issues (May, 1997), pp. 116–122</ref> Academic defenders of the economic concept of capitalism, such as [[Eugen von Böhm-Bawerk]], see such profits as part of the [[roundaboutness|roundabout]] process by which it grows and [[hedge (finance)|hedge]]s against inevitable risks.<ref>F. Boldizzoni, ''Means and Ends: The Idea of Capital in the West 1500–1970'', Palgrave Macmillan 2008, pp. 128–32</ref>

In financial capitalism, financial intermediaries become large concerns, ranging from banks to investment firms. Where deposit banks attract savings and lend out money, while investment banks obtain funds on the [[interbank market]] to re-lend for investment purposes, investment firms, by comparison, act on behalf of other concerns, by selling their equities or securities to investors, for investment purposes.<ref>[http://econ161.berkeley.edu/pdf_files/Americas_Steps.pdf  J. Bradford De Long & Carlos D. Ramirez, "Understanding America’s Hesitant Steps Toward Financial Capitalism", 1996, UC Berkeley] {{webarchive|url=https://web.archive.org/web/20120313191856/http://econ161.berkeley.edu/pdf_files/Americas_Steps.pdf |date=2012-03-13 }}</ref>

===Social implications===
The meaning of the term financial capitalism goes beyond the importance of [[financial intermediation]] in the modern capitalist economy. It also encompasses the significant influence of the wealth holders on the political process and the aims of economic policy.<ref>{{cite web 
| url          = https://www.levyinstitute.org/pubs/wp275.pdf 
| title        = Minsky's Analysis of Financial Capitalism 
| date         = July 1999 
| url-status   = live <!-- but www.levy.org/pubs/wp275.pdf is brain dead --> 
| archive-date = November 12, 2019 
| archive-url  = https://web.archive.org/web/20191112154624/https://www.levy.org/pubs/wp275.pdf 
}}<br/><br/>
[and for some more "meta data"], '''"see also"''' https://www.levyinstitute.org/publications/minskys-analysis-of-financial-capitalism ... which was found via a "search results page" at https://www.levyinstitute.org/search/website.php?q=MINSKY%27S+ANALYSIS+OF+FINANCIAL+CAPITALISM in 2024. 
</ref>

[[Thomas Palley]] has argued that the 21st century predominance of finance capital has led to a preference for speculation—[[Casino Capitalism]]—over investment for entrepreneurial growth in the global economy.<ref>Thomas Palley, ''From Financial Crisis to Stagnation'' (2012) p. 218</ref>

==Historical developments==
[[File:Rudolf Hilferding and Gattin, cropped.jpg|thumb|[[Rudolf Hilferding]] is credited with first bringing the term finance capitalism into prominence.]]

[[Rudolf Hilferding]] is credited with first bringing the term finance capitalism into prominence, with his (1910) study of the links between German trusts, banks, and monopolies before [[World War I]]. Hilferding's ''Finance Capital'' (''Das Finanzkapital'', Vienna: 1910) was "the seminal Marxist analysis of the transformation of competitive and pluralistic 'liberal capitalism' into monopolistic 'finance capital'",<ref>Robert Bideleux and Ian Jeffries, ''A History of Eastern Europe: Crisis and Change'', Routledge, 1998. {{ISBN|0-415-16111-8}} hardback, {{ISBN|0-415-16112-6}} paper. p. 356.</ref> and anticipated [[Vladimir Lenin|Lenin]]'s and [[Nikolai Bukharin|Bukharin]]'s "largely derivative" writings on the subject.<ref>Bideleux and Jeffries, p. 361.</ref> Writing in the context of the highly [[cartel]]ized economy of late [[Austria-Hungary]],<ref>Bideleux and Jeffries, p. 357–359.</ref> Hilferding contrasted [[monopoly|monopolistic]] ''finance capitalism'' to the earlier, "competitive" and "buccaneering" capitalism of the earlier [[economic liberalism|liberal]] era. The unification of industrial, mercantile and banking interests had defused the earlier liberal capitalist demands for the reduction of the economic role of a [[mercantilism|mercantilist]] state; instead, finance capital sought a "centralized and privilege-dispensing state".<ref>Bideleux and Jeffries, p. 359.</ref> Hilferding saw this as part of the inevitable concentration of capital called for by Marxian economics, rather than a deviation from the free market.

Whereas, until the 1860s, the demands of capital and of the [[bourgeoisie]] had been, in Hilferding's view, [[constitutionalism|constitutional]] demands that had "affected all citizens alike", finance capital increasingly sought state intervention on behalf of the wealth-owning classes; capitalists, rather than the [[nobility]], now dominated the state.<ref>Bideleux and Jeffries, p. 359–360.</ref>

In this, Hilferding saw an opportunity for a path to socialism that was distinct from the one foreseen by Marx: "The socializing function of finance capital facilitates enormously the task of overcoming capitalism. Once finance capital has brought the most importance (''[[sic]]'') branches of production under its control, it is enough for society, through its conscious executive organ – the state conquered by the working class – to seize finance capital in order to gain immediate control of these branches of production."<ref name=Hilferding>"Rudolph Hilferding. Finance Capital: A Study of the Latest Phase of Capitalist Development. Chapter 25, The proletariat and imperialism. http://www.marxists.org/archive/hilferding/1910/finkap/ch25.htm"</ref> This would make it unnecessary to expropriate "peasant farms and small businesses" because they would be indirectly socialized, through the socialization of institutions upon which finance capital had already made them dependent. Thus, because a narrow class dominated the economy, socialist revolution could gain wider support by directly expropriating only from that narrow class. In particular, according to Hilferding, societies that had not reached the level of economic maturity anticipated by Marx as making them "ripe" for socialism could be opened to socialist possibilities.<ref>Bideleux and Jeffries, p. 360.</ref> Furthermore, "the policy of finance capital is bound to lead towards war, and hence to the unleashing of revolutionary storms."<ref name="Jeffries p. 360">Quoted in Bideleux and Jeffries, p. 360.</ref>

Hilferding's study was subsumed by [[Lenin]] into his wartime analysis of the imperialist relations of the great world powers.<ref>Frederic Jameson, 'Culture and Finance Capital', in ''The Jameson Reader'' (2005) p. 257</ref> Lenin concluded of the banks at that time that they were “the chief nerve centres of the whole capitalist system of national economy”:<ref>Quoted in E. H. Carr, ''The Bolshevik Revolution 2'' (1971) p. 137</ref> for the [[Comintern]], the phrase "dictatorship of finance capitalism"<ref>Quoted in F. A Voight, ''Unto Caesar'' (1938) p. 22</ref> became a regular one.

In such a traditional Marxist perspective, finance capitalism is seen as a dialectical outgrowth of [[industrial capitalism]], and part of the process by which the whole capitalist phase of history comes to an end. In a fashion similar to the views of [[Thorstein Veblen]], finance capitalism is contrasted with industrial capitalism, where profit is made from the manufacture of goods.

[[Fernand Braudel]] would later point to two earlier periods when finance capitalism had emerged in human history—with the Genoese in the 16th century and the Dutch in the 17th and 18th centuries—although at those points it was from commercial capitalism that it developed.<ref>C. J. Calhoun/G. Derluguian, ''Business as Usual'' (2011) p. 57</ref> [[Giovanni Arrighi]] extended Braudel's analysis to suggest that a predominance of finance capitalism is a recurring, long-term phenomenon, whenever a previous phase of commercial/industrial capitalist expansion reaches a plateau.<ref>Jameson, p. 259-60</ref>

Whereas by mid-century the industrial corporation had displaced the banking system as the prime economic symbol of success,<ref>A. Sampson, ''Anatomy of Britain Today'' (1969) p. 475</ref> the late twentieth-century growth of derivatives and of a novel banking model<ref>P.Augar, ''Chasing Alpha'' (2009) p. 122 and p. 108</ref> ushered in a new (and historically fourth) period of finance capitalism.<ref>Jameson, p. 256-7</ref>

[[Fredric Jameson]] has seen the [[Globalization|globalised]] abstractions of this current phase of financial capitalism as underpinning the cultural manifestations of [[postmodernism]].<ref>Jameson, p. 268-273</ref>

==See also==
{{Columns-list|colwidth=22em|
*[[Corporatism]]
*[[Economics of fascism]]
*[[Financialization]]
*[[Financial capital]]
*[[Financial Instability Hypothesis]]
*[[Late capitalism]]
*[[Late modernity]]
*[[Post-Fordism]]
*[[Speculation]]
}}

==References==
{{reflist|}}

==Further reading==
*Rudolf Hilferding, ''Finance Capital'' (1981[1910])
*Giovanni Arrighi, ''The Long Twentieth Century: Money, Power, and the Origins of our Times'' (1994)
*[[John Kenneth Galbraith]], ''The New Industrial State'' (1974)

==External links==
* [http://monthlyreview.org/2010/02/01/the-age-of-monopoly-finance-capital The age of monopoly-finance capital]

[[Category:Financial capital]]
[[Category:Capitalism]]
[[Category:Marxian economics]]
[[Category:Dutch inventions]]