• Marx, Hilferding and Finance Capital – A Roundtable on the Continued Relevance of an Old Book

  • Lutz Brangsch , Patrick Bond , Radhika Desai , Ingo Schmidt , Claude Serfati | 19 Apr 18
  • At the invitation of the transform! Europe Yearbook, scholars from three continents discussed their experiences with Marx. The discussion initiated and coordinated by Lutz Brangsch included Radhika Desai (Canada), Patrick Bond (South Africa), Claude Serfati (France), and Ingo Schmidt (Canada/Germany).


    Lutz Brangsch: Dear colleagues, let us begin our talk about Marx and what his thought means 200 years after his birth or 150 after the publication of the first edition of Das Kapital! As a point of departure I want to ask you two interconnected questions:

    • What was new for you when you recently read a text by Marx?
    • How has your view of Marx changed from when you first came into contact with him?

    Patrick Bond: My initial contact with Marx’s work was during the early 1980s when I was curious whether insights on capitalist crisis contained in Capital were useful, in light of the profound failure of bourgeois neo-classical and Keynesian traditions in which I was trained in Philadelphia. Indeed, those insights were very compelling, and I moved from the Wharton School of Finance (where none of my professors except Ed Herman had a clue about the Third World Debt, redlining/gentrification, financial volatility and power, the threat of securitisation, etc.) to Johns Hopkins to study economic geography with David Harvey.

    The central shift I have subsequently made - since taking up residence permanently in Southern Africa nearly thirty years ago - is drawing upon more of Marx’s analysis of primitive accumulation. The tradition that followed this argument – from Rosa Luxemburg to Harold Wolpe to Samir Amin to Harvey – has explained how capitalism often requires contact with non-capitalist relations to create more amplified forms of uneven development in search of profits.

    So I’m wondering from others, since Southern Africa has been the world’s worst site of income inequality and still utilises the colonial era’s migrant labour system, whether in your sights it’s also important to relate capitalism to exploitative systems that have proven profitable for corporate manipulation. These include racial and ethnic divisions, ecological abuse, the gendered reproduction of labour and society, spatial segregation, etc. And then, if so, whether our understanding of the ‘laws of motion’ of capitalism requires more attention to systematic super-exploitative processes, especially when internal over-accumulation tendencies compel capital to search further and faster for profits?

    Radhika Desai: Reading and re-reading Marx is a constant source of pleasure and intellectual stimulation of the deepest sort. Every time, one is struck with new insights. Let me give you some examples from my more recent encounters.

    a) This is not so recent but happened about five years ago when, along with a rather large Marx reading group in Winnipeg, we read all three volumes of Capital. One major thing I was struck by was Chapter 25 of volume one, entitled ‘The General Law of Capitalist Accumulation’. One might imagine that, with a title like that, the chapter would be all about machinery and equations about value and what not. But, of course, Marx considered capital a relation, not a thing. And the chapter is all about… population, human beings. It is one of the three long chapters of Volume 1 (the others being on machinery and the working day). It is well known that Marx spoke of how capitalism generates surplus populations, and certainly that is discussed here as part of the laws of population specific to capitalism (this was surely a riposte to Malthus, who posed ‘eternal’ and biological laws of population on the basis of the fertility of the soil and the fertility of humans). But Marx also says another thing here on a topic which has become very trendy in our time, migration. In effect he says, given the tendency of capital to suck in vast quantities of labour in expansionary times and to expel it during contractions, migration is an essential feature of capitalism. Just as Barrington Moore proposed ‘no bourgeoisie, no democracy’ (it would be truer to say ‘no bourgeoisie, no liberal democracy’), a careful reading of Chapter 25 suggests ‘no migration, no capitalism’. Read alongside careful contemporary treatments of migration like Saskia Sassen’s, which do not assume, as so many do in our time, that the Third World is simply teeming with people banging at the doors of western countries, we realise that the highly controlled population movements of our time are actually set off by the capitalist core.

    b) In recent years, at the urging of my good friend and colleague, Peter Kulchyski here at the University of Manitoba, I have been reading and thinking more and more about the situation and struggles of Canada’s indigenous peoples. I have already been arguing, inter alia in my Geopolitical Economy (2013), that nation-states are as material a product of capitalism’s development as are its classes. To this I would now add that the processes of separating people from their land is a process that is just as endemic. I think David Harvey has done a great disservice in implying that, according to Marx, original or primitive accumulation happens only at the ‘beginning’ of capitalism. In any case, it ‘begins’ at different places at different times. It’s a part of an ongoing process, as Rosa Luxemburg also recognised. There is nothing in Part 8 of Volume One that implies anything else.

    c) Finally, one theme I am thinking about constantly is how mistaken is the view that Marx has a commodity theory of money: on the contrary, anyone who reads even Volume One, with its chapter on Money and critique of Say’s Law, let alone the sophisticated if incomplete Volume Three, cannot make this mistake. Anyway, how is a critique of Say’s Law compatible with the ridiculous story about the commodity theory of money?

    I am not sure my view of Marx has changed after my contact with him. What struck me when I first encountered him was the sheer intellectual power of his questions, let alone his answers. What attracted me to Marx was that he was asking questions which ‘dull normal’ social science never even considers asking. In a recent article, ‘The Value of History and the History of Value’,1 I also argue that what is distinctive about Marx is something which so many who consider themselves Marxists miss because they are trained in ‘social science’ which is methodologically opposed to Marx’s historical approach. The former is synchronic or static, the latter diachronic or historical.

    Ingo Schmidt: I did some re-reading of classical Marxist political economy (Hilferding, Lenin, Luxemburg, Baran, Mandel, Amin) before re-reading Capital last year. What struck me was that there are rather different readings of Marx which can legitimately call themselves Marxist – whether they read Marx as a guide to social democratic reformism (Hilferding), socialist revolution (Lenin, Luxemburg), anti-colonial revolution (Baran, Amin), or they try to pull various strands of socialist thinking and strategy together (Mandel).

    I took this as proof that claims to represent what Karl really meant are futile, though all of the above mentioned were guilty of doing so to different degrees. It also seemed to me that different readings of Marx are important to understand today’s world as the political projects around which these readings developed and shaped this world even though all of these projects either failed or were defeated.

    This plea for understanding Marxism in the plural doesn’t mean that anything goes. Each reading needs to be checked for logical consistency, in the light of Marx’s texts and empirical data available to respective authors and re-interpreted in the light of texts and data available today. From this angle I concur with Radhika that interpretations of Marx that accept Say’s law don’t contribute much to our understanding of the past or present, though Marx’s praise for Ricardo brought him sometimes close to being a ‘Sayist’ himself.

    I first read pieces by Marx in secondary school and was stunned how much they spoke to the world around me. Coming from a family of factory workers in the GDR, at university I was puzzled by the thinking of the offspring of the educated classes. They behaved in a more radical fashion than I ever dared to do, which included putting well-articulated claims to knowing what Marx really meant. What was confusing was that many of these ‘definitive interpretations’ were logically incompatible. I think it was just thanks to continuing political activity that I learned to ask questions relevant from a strategic angle and to use Marx as a deliverer of ideas helpful in coming up with my own answers. In short: I first saw in Marx somebody who had a lot of answers; now I see his work as helpful in getting the questions right and finding answers without being obsessed with definitive interpretations.2

    Claude Serfati: I would say that I have always been inspired by Marx’s writings but not in a sycophantic way. I always endeavoured to connect his writings with the analysis of contemporary capitalism. To give a recent example, a very useful rereading of Marx has been when I wrote a chapter on the relevance of the concept of finance capital in a collective book.3 My opinion is that there is no reason to ‘throw the baby out with the bathwater’, that is, to drop the concept of finance capital because of Hilferding’s flawed definition. I’m not concerned that Marx offers no ‘unifying concept’ of finance capital, as he addresses the role of lendable capital in different ways and in different pieces of his work. As an example, he separates the functions of ‘Geldhandlungskapital’ (money-dealing capital) from money capital as a historical phenomenon – which at his time reflected the development of lendable capital.

    Most authors (Marxists and non-Marxists) feel that ‘financialisation’ better reflects an outstanding feature of contemporary capitalism than the term finance capital. As there is nothing incorrect in this claim, the danger is not to see how deeply embedded in the long-term dynamics of capitalism is the existence of both the capital-property and the capitalism- function sides of the capitalist. Instead, a mainstream ‘Keynesian-Marxist view has long considered that ‘alongside’ a capitalism involved in the endless development of the forces of production, there are capitalists who step in once the production process has been carried out and whose activities drain the surplus value created.

    In a long comment on the formation of interest-bearing capital on the basis of capitalist production,4 Marx chides ‘the nonsensical pronouncements of those who consider the different forms of surplus value [profits of enterprise, financial profits, etc., C.S.] to be merely forms of distribution; they are just as much forms of production’.5 I’m sure that this sentence, were it pronounced today by a political economist, would be criticised on the ground that value has to be produced before being distributed, etc.

    What I understand Marx to be arguing with this remark is obviously not to say that the labour process is no longer the only place where value is created, but that capitalism is a social mode of domination based upon private ownership of the means of production against which the production process takes place. Ownership of capital (capital-property) is not a quality added to the allegedly ‘real’ capital in-function, not least because the former has to be protected, including by politically coercive means, if the latter is to proceed ‘smoothly’. Exploitative social relations are politically built and territorially defined. At the world level, they shape a specific configuration of capitalism (this is how I understand Radhika’s proposal of geopolitical economy). In short, the existence of capital-ownership and capital-in-function are evidence of the ‘two-faced’ nature of capitalism as a specific exploitative system.

    It is one reason why I concur with those who claim that primitive accumulation is not a past history that existed before the ’full development’ of capitalism, which ‘at the end of the day’ would look like a ‘pure capitalism’ (let’s say as in Volume 2 of Capital), but an ongoing and contemporary process.

    In my view, the relevance of finance capital for our understanding of contemporary capitalism is that the social and political consolidation of the capitalist class as a rentier class (not a transnational one!) gives overwhelming importance to value capture – including through the ‘exhaustion of nature’, wars, etc. – over value production (which obviously remains essential). I think it is more accurate to place finance capital against the background of the internal limits of capitalism, so much stressed by Marx, than limit it to a ‘distributional conflict’.

    PB: This is a good point, about the institutional definition. Because too much emphasis is often placed on the power of ‘finance capital’, it is vital to bear in mind financialisation’s vulnerabilities. I think the leading example is the debate between Rudolf Hilferding – who in 1910 explored the way various fractions of capital fuse under the thumb of the banks – and Henryk Grossman, who wrote about the coming economic collapse in his book The Law of the Accumulation and Breakdown of the Capitalist System, well timed for publication in March 1929.6 Keeping the balance between understanding finance’s power and vulnerability is critical, and the best new example in my view is François Chesnais’s book Finance Capital Today.7

    CS: At least, it is my understanding of finance capital informed by Marx’s insight; hence I define financial capital as the intertwining of various forms of capital – commercial (think of large retailers and branding companies today), banking, industrial, real-estate, etc. – now subjected to the compelling logic of capital-property.

    IS: As I see things, Marx’s motivation to engage in intellectual inquiry was mostly driven by his political activism throughout his life, from the days he fought for the republic and delved into philosophy to later days as an economist seeking to build an autonomous workers movement. What I find fascinating with regard to the latter is reading Capital (and other economic manuscripts) alongside the political stuff he wrote at the same time for the IWA. Many Marxists hang on to this idea that Marx, had he lived longer, would have written a book about wage labour. Yet, in his last years he wasn’t working on Capital very much but studying non-Western societies (without publishing anything about it so this stuff wasn’t known to his contemporaries and early followers) and he gave up a lot of time working/ writing for the IWA, which is about wage labour – in ways defying any charges of reductionism that one could possibly level against Capital. So you get the activist recognising and trying to understand labour in all its different aspects (including race, gender, and nationality), on the one hand, and the decipherer of the logic of a rather colour-gender-blind logic of capital. One wonders whether this was Marx’s blindness or whether he just reflected an unfolding logic that could grind down ‘tastes for discrimination’. Hope nobody takes offence at this ‘Beckerite’ reading of Marx.

    Sure it’s useful to consult Marx to understand today’s conditions. Question is why.

    Anyone reading Capital as a theoretically guided history of capitalism has difficulty explaining how that analysis could still be relevant in light of the radical changes that happened since Marx’s days (maybe most notably the migration of industrial working classes from the imperialist centres (a term not used by Marx, of course) to parts of the periphery.

    Anyone seeing capitalism catching up to what Marx had predicted only now (for German readers: ‘die Wirklichkeit kommt auf ihren Begriff’) should admit that this is a Hegelian, not a Marxian argument (which, if it helps us to understand the world would be quite alright, of course); one would also have to explain how somebody could have such foresight (I don’t think that’s possible) and why mass movements (without everyone in them necessarily reading Marx) were inspired by a text speaking about a future – a perspective explicitly rejected by Marx and Engels in some of their mass-distributed texts.

    Anyone seeing Capital as deciphering the logic of capital has to explain the changing forms (not just of value but also institutions) through which this logic unfolds. That’s what I’m trying to do, being fully aware of the difficulties of mediating between abstract logic and concrete appearances in such a way that neither implies an invisible hand replacing human agency nor stokes fantasies about ‘struggles’ as the wonder weapons bringing everything into existence regardless of underlying conditions.

    CS: I would say that Marx was neither an economist nor a philosopher (nor, as Schumpeter suggested, both an economist and a sociologist). In a limited way it could be argued that he created a discipline of its own, called by him ‘critique of political economy’. This would still be misleading and would narrow the scope of Marx’s life. I understand that Marx’s objective was to combine the deciphering of the economic law of motion of modern society (capitalist social relations) – developing, in order to do so, a critique of classical political economy – with contributions to practically transform the society he was analysing. He never disconnected these two activities during his own life. It is thus rather amazing, to say the least, that Marx throughout his life jumped from quite abstract writings to political writings. Just to give an example: between 1848 and 1850 works by Marx include a critic of The German Ideology in 1845, The Poverty of Philosophy in 1847, the Manifesto in 1848, a speech (in 1848) commemorating the 1846 Krakow uprising, The Class Struggles in France 1848-1850, etc.

    His focus on economic development had little to do with a preference for being an economist. Note that ‘economics’ as a disciplinary field did not exist at that time. His own presentation as ‘being both German and economist at the same time’ in his polemics against Proudhon should obviously be taken as a joke. Rather, his interest in political economy was a logical consequence of his own understanding that social relations are based on a specific form of economic exploitation.

    This raises two issues:

    First, for ambivalent reasons the social sciences have increasingly split into compartmentalised scholarly fields for a century and half, whose practitioners, if drawing upon Marx’s analysis, would have difficulty finding their way in their respective professional fields. It might be that my view is distorted because I’ve been trained as an economist. For four decades, economics has been a powerful ideological spearhead for the great social and political upheaval beginning in the 1980s. This discipline should nevertheless not be abandoned by Marx-inspired economists, even though to stay in discussion with the discipline we have to adopt a critical political economy framework while engaging in dialogue with the ‘heterodox’ economists (drawing upon other disciplines’ findings in order to do so).

    Second, as soon as one accepts that one major source of the fecundity of Marx’s output was his ability to combine theoretical analysis and political activism, a similar question emerges today. As the French saying has it, ‘comment mettre ses actes en accord avec ses paroles?’ (How can one square one’s acts with one’s words?)

    RD: In a Gramscian sense, in the sense Gramsci meant when he said that all ‘men’ are intellectuals, we too need to be and are all three things. Whether we support the current social arrangements, acting as the loyal bearers of its structures or wish to transform them, a certain understanding of what they are (economist), what they imply for human existence (philosopher), and how to maintain/transform them (political activist) are all part of our everyday actions whether we understand this or not. Marx took this combination to new heights of elaboration, sophistication, and self-awareness.

    I am interested to see, however, that Claude has inadvertently opened another question which I want to respond to because it is critical for our understanding of Marx and Engels and their work, particularly Capital. That question is whether Marx is an economist, sociologist, or political scientist. To this question, I have already given some answers.8 In short, Marx was none of these. Using these categories is anachronistic because the division of the study of society into different ‘disciplines’ was part of an attack on Marxism perpetrated by bourgeois thinkers who had lost any revolutionary zeal they may have once had and had begun cleaving to the aristocracy and any other conservative forces they could hook into (like the church, etc).

    Marx and Engels constituted the culmination of the long tradition of the classical political economy we date back to Petty and earlier, essentially the tradition of trying to understand the new, capitalist society emerging before the eyes of observers. It was not always right, it was confused by many key questions, including what value was, but it was, as Marx and Engels noted, still, for the most part, scientific. They brought it to its culmination by resolving its key questions: what value was, what surplus value was, why crises happened, why profit rates fell, etc. The problem was that this analysis pointed in socialist directions. Now political economy had become dangerous and had to be replaced by ‘economics’, which was promptly provided by the so-called ‘marginalist revolution’ that gave us neoclassical economics three years after the publication of Das Kapital. Max Weber now initiated a new social scientific division of labour by hiving off sociology from economics (he was trained as an economist), claiming, in the tone of weary regret he adopted when endorsing things he knew the mass of the people would find unpalatable, that this was necessary because ‘modern’ (capitalist) society tended to differentiate into separate and autonomous spheres which needed to be studied by separate disciplines. In reality, the only sphere whose separation and autonomy he was worried about was the economy because the working class was getting more and more organised and capable of demanding that since capitalist states routinely intervened in favour of capitalist classes, the working class should also intervene in its own favour.

    Finally, as I have argued in ‘The Value of History and the History of Value’ and ‘Capital at 150’, Marx and Engels, and the tradition of classical political economy they brought to its culmination, were historical above all. More than the separation of the study of society into separate disciplines, it is the ability to think historically – about change, transformation, and politics – that we have lost in adopting the ‘social scientific’ approach. There is no such thing as Marxist social science, or Marxist economics, only classical political economy and Marx and Engels’s critique of it.

    As I mentioned before, I wanted to respond to a particular point Claude made earlier:

    Claude refers to the question of the relevance of Marx’s writings to our form of financialised capitalism and I agree with him entirely and might even go further. There is a more sophisticated understanding of money, its various forms and functions in capitalism, their changing nature and the history of money than the overwhelming majority of allegedly Marxist economists even suspect. As I’ve underlined, Marx (like Keynes) began with the critique of Say’s Law, and such a critique puts the role of money at the heart of understanding capitalism and the historically distinctive dynamics money acquires in it, the latter theme being necessary because, of course, money predates capitalism and manifested very different dynamics in other social formations.

    What I found intriguing is Claude’s reference to those who suggest that we should discard Hilferding’s concept of finance capitalism because it does not deal with the financialisation that we know today. I have not come across such folks, perhaps because they are writing in French. What I have encountered in the English language literature is a far worse situation: the conflation of Hilferding’s finance capital with today’s financialisation, with reverential references to how Finance Capital helps us understand financialisation. At least the people Claude is reading are aware that what Hilferding called finance capital was not the same as today’s financialisation. However, even they are making one mistake: they forget that in Finance Capital Hilferding specifically contrasts the ‘continental model’ (preeminently Germany but also other continental European countries and the US) with what he called the ‘British pattern’. It was the latter that was akin to what we call financialisation (which later became the target of J. M. Keynes’s attack on speculators and rentiers) and it remains so to this day. And, until the launch of the euro, the continental pattern of banking retained the key elements of its original finance-capital form, though since then it has edged closer to the British model and paid a heavy price in the form of the shock of 2008 and the Eurozone crisis, particularly because its very different structures were simply not up to the new ‘British-Pattern’ activities it was exposing itself to.

    I broadly agree with Claude when he speaks of the distinct processes of value production and capture. I would add that the exact way in which the dominance of the latter in our time has come about is related to what he calls ‘the internal limits of capitalism’. Specifically, it is related to the exhaustion of necessarily national markets, jointly and severally, leaving investment prospects dim and leading to an increasing mass of profits directed not to productive investment (M-C-M’) but to purely financial investment (M- M’). In this sense, financialisation has routinely been, and remains today, a symptom of the sickness of capitalism. As more and more such idle capital seeks a return without producing value, margins get razor-thin and only those with vast amounts of such capital can make even a reasonable return, we see the distinctive contradictions of this form of competition between money capitals. I discuss all this in great detail in the eighth chapter of Geopolitical Economy: After US Hegemony, Globalization and Empire.9

    PB: Agreed! The overaccumulation crisis tendencies work their way into the financial and monetary circuits; there is thus displacement (not resolution) of these tendencies (until a crash devalorises finance, as well as other forms of exposed overaccumulated capital). Harvey pays especially close attention to the three kinds of ‘fixes’ that allow crisis displacement: a spatial fix (e.g. globalisation), a temporal fix (e.g. financialisation which allows capital to postpone its reckoning with credit), and accumulation by dispossession (e.g. imperialism). These tactics of shifting, stalling, and stealing deserve much more attention since they too reach their limits but become ever more frenetic as the more powerful capitals resist devaluation by pushing the problems onto new terrain.

    RD: So, in (provisional) conclusion, I believe there is a wealth of understanding to be gained about the national and international dynamics of capitalism in the various economic writings of Marx, provided, and this is a major proviso, one sheds the lenses of neoclassical economics and the social- scientific division of labour it created and reads Marx and Engels as they must be read: as historical thinkers writing about the system they witnessed developing. On money and finance specifically, one should remember that Marx’s first major work analysing capitalism, Contribution to a Critique of Political Economy, focused on money almost exclusively, particularly on nutty bourgeois theories of it which were embraced even by political economy’s most sophisticated intellectuals such as Ricardo. This was, to Marx as it should be to us, a dead giveaway that mystifications of Money are deeply necessary to the functioning of capitalism. This was true then and remains so today. Whoever it was who said ‘give me the child until he is seven and I will give you the man’ was speaking about education, but the acute observer of the child does end up knowing the personality and fundamental motivations of the adult more surely than those who only meet him or her later in life. Marx and Engels were such acute observers of a young capitalism, and their analysis remains unsurpassed today: Keynes came close but had none of that ‘nothing-to-lose’ determination to go to the heart of the matter which has given Marx’s work its uniquely honourable and uncompromising character.

    IS: On Hilferding: No doubt, his empirical point of reference was the German banking system. To make any use of his work today we need to ‘lay bare’ the logic of his arguments behind the empirical references, at least try to do so. Same as Marxists eventually figured out that it’s necessary to read Capital outside and beyond its English industrial context. All older works need to be read in their respective historical contexts to get to the heart of their logic (if there is one) and possibly draw on that for an understanding of today’s capitalism.

    On razor thin margins: That’s only true seen from the perspective of heavily inflated money capital. With nature and living labour being treated as if in unlimited supply, i.e., dirt cheap, the rate of surplus value is sky high – which could open the way for another cycle of ‘disaster accumulation’ (disastrous because of its reliance on dirt cheap nature and labour) after a financial meltdown not compensated by blowing up a central bank bubble [...] which leaves us in the uncomfortable spot of possibly praying that over- accumulated money capital may stay with us until I don’t know when, haven’t calculated my time preference rate yet.

    PB: These observations help us in thinking about whether Hilferding (and others in his tradition) put excessive emphasis on institutional ‘finance capital’ power overwhelming the underlying contradictions of capitalism: ‘taking possession of six large Berlin banks would mean taking possession of the most important spheres of large scale industry, and would greatly facilitate the initial phases of socialist policy during the transition period, when capitalist accounting might still prove useful.’ Hilferding believed that the ‘increasingly dense network of relations between the banks and industry [...] would finally result in a single bank or a group of banks establishing control over the entire money capital. Such a “central bank” would then exercise control over social production as a whole.’

    The reasons for his confidence include:

    • first, the ability of ‘finance capital’ to manage and share risk effectively;
    • second, the belief that a strong gold reserve and other state policies can shore up the creditworthiness of the system;
    • third, a decline in the volume and importance of speculative activity (at the powerful urging of key institutions of ‘finance capital’); and
    • fourth, the ability of production by joint-stock companies during a downturn to continue since such production need not realise an immediate return.

    Here is one critique, by Grossman:

    Hilferding needed this construction of a ‘central bank’ to ensure some painless, peaceful road to socialism, to his ‘regulated economy’ [...] The historical tendency of capital is not the creation of a central bank which dominates the whole economy through a general cartel, but industrial concentration and growing accumulation of capital leading to the final breakdown due to overaccumulation.

    Here’s a later critique by Paul Sweezy: ‘Hilferding mistakes a transitional phase of capitalist development for a lasting trend.’

    I’d argue that the flawed logic stems from a half-dozen mistakes, both theoretical and empirical:

    • the problem of uneven sectoral development between capital goods and consumer goods (disproportionalities between Departments One and Two), upon which Hilferding bases his crisis theory, tends to heighten as finance grows more important, notwithstanding the short- run amelioration provided by credit;
    • the same problems in the productive sector that lead to falling profit rates also force banks to look further afield, geographically and sectorally, in order to maintain lending and a healthy deposit base, and this brings added risk;
    • new forms of financial regulation, which Hilferding suggests are responsible for stabilising an inherently unsound banking system, are often incapable of dealing with a major financial crisis;
    • rather than declining in importance, speculation tends to increase dramatically prior to the climax of a crisis;
    • Hilferding’s argument that joint-stock companies are relatively immune from downturns is contradicted by his analysis of how vital credit is to the smooth operation of stock exchanges;
    • given the system’s crisis tendencies (especially increasing risk, the breakdown of the state’s protective role, and uncontrolled speculation), the combination of industry, commerce, and banking as ‘finance capital’ increases temptations for insider lending and thus for greater than normal risk, leading to a greater chance of financial problems.

    RD: I am afraid, Patrick, we have found another theme on which we are on opposite sides!

    I find myself in profound agreement on some points but also have serious reservations as you go further to speak about financial capital. Let me try to summarise:


    1. I agree with this: it is nicely put: ‘Overaccumulation refers, simply, to a situation in which excessive investment has occurred and hence goods cannot be brought to market profitably, leaving capital to pile up in sectoral bottlenecks or speculative outlets without being put back into new productive investment.’

    2. I also broadly agree with this: ‘When overaccumulation becomes widespread, extreme forms of devaluation are invariably resisted (or deflected) by whatever local, regional, national, or international alliances exist or are formed in specific areas under pressure.’ However, I wonder what you are eliding by using the term ‘alliances’. Why not refer to states and alliances between them. However, on this still rather sensible point, you contradict yourself. See my point 2 under Disagreements.

    3. This is also fundamentally correct: ‘The argument, simply, is that as overaccumulation begins to set in, as structural bottlenecks emerge, and as profit rates fall in the productive sectors of an economy, capitalists begin to shift their investable funds out of reinvestment in plant, equipment, and labour power, and instead seek refuge in financial assets.’


    1. There is no need to beat up Hilferding for pointing to the realisation of the possibilities of socialisation of labour through the agency of banks. Marx also commented on the same in Chapter 27 of Volume III, ‘The Role of Credit in Capitalist Production’. Being Volume III, the discussion is a little ragged but it’s critically important.

    2. I disagree that ‘the only real “solution” to overaccumulation – the only response to the crisis capable of reestablishing the conditions for a new round of accumulation – is widespread devaluation’. Actually, while this may occur in some circumstances where the capitalist class proves particularly inept, as you point out in my point 2 under agreements, they do seek to resist it. Historically, imperialism has been one response and it still remains effective in the greater power of the advanced industrial world in international bi- and multilateral economic and other relations. There is also military production. And there is the sort of geopolitical economy between the advanced industrial states, with each seeking to treat the others as its market, which Brenner described so well in his The Economics of Global Turbulence and which I adapt to my understanding of geopolitical economy.

    3. Your extended discussion of finance capital is an excellent example of the writings I mention, which entirely ignore the critical difference Hilferding posits between the continental and the British pattern. Without that understanding, Hilferding is not critiqued but confounded. You criticise Hilferding for considering finance strong but seem to equate all financial sectors of the time: British and German. But they were very different.

    4. You claim to refute Hilferding on the grounds that ‘the banks that were supposedly at the centre of power in this new era of capitalism suffered tremendous bankruptcies, culminating in system-wide crashes that left the financial system in tatters from 1929-33’. However, one simply cannot discuss what happened to and in the various national banking sectors in the 1920s and 1930s without placing them in the very nationally specific and determinate positions they came to occupy in the ‘vast paper entanglements’ (Keynes) arising out of the ‘reparations, debt repayments and US lending to Europe’ merry-go-round. These processes vastly transformed the financial world. The world of 1914 had simply ceased to exist. You ignore all this and jump straight to Hitler, eliding the necessary examination of the political economy of Germany’s and other countries’ financial sectors during this period. One helpful book here is Michael Hudson’s Superimperialism.

    5. You refer to a rise in the ‘social wage’ due to credit. But is credit a wage in any sense? Moreover, what do you say about the loss of so many working people’s homes, jobs, and pensions today?

    Any understanding of the shifting rules and fortunes of financial capital in all its forms, ‘British’ and ‘continental’ and any others, requires historical understanding. Marx’s was.

    CS: What I mean by ‘there is no reason to “throw the baby out with the bathwater”’, that is, to drop the concept of finance capital because of Hilferding’s flawed definition, is this: There are a number of relevant points in Finance Capital; however, the ‘two-faced’ nature of capital as social relations (productive and property relations are intertwined) is underanalysed.

    Having said that, I’m aware of a danger of ‘fossilisation’ that plagued Marxists involved in academic research in post-Second World War decades in some European countries, in particular in France, where Marxism reached an influential, if not dominant, position among ‘intellectuals’ and in some places was transformed into dogmatism (I am not addressing here the connections at that time between this tendency and the political involvement of a majority of these intellectuals). Today, for obvious reasons, this posture cannot be replicated, and there is a crucial need not to be cut off from discussions among ‘heterodox’ researchers while not dissolving the Marxist analytical background.

    Let’s take financialisation. Financialisation has become a buzzword among radical economists, including Marxists. That should not distract us from looking at the roots of this situation, which can be addressed by drawing on Marx’s writings on money capital, interest-bearing money capital, etc. and the ‘internal limits of capitalism’ as noted by Radhika and pointed to by Patrick (Grossman’s quotation). Hilferding strove to maintain the link with Marx, even though he was wrong on a couple of major points which have been widely analysed in the Marxist literature, not least his conclusions that monopoly capitalism opened the ‘high road’ to socialism. ’Reconquering’ the fruitful concept of finance capital is an effective way – not the only one for sure! – to begin to create a theoretical and political framework for the exploitive nature of capital, as an antagonistic social relation.

    This should not prevent us from benefiting from the contributions of other social thinkers, including Keynes and some post-Keynesians. An approximate analogy could be drawn with the ‘1%’ debate, occupying centre stage in discussions on, and struggles against, social inequalities in developed countries. How that surfaces, and is mainly presented by scholars, as a distributional conflict aggravated by austerity policies is indeed connected to the very nature of contemporary capitalism (‘There’s class warfare, and we’re winning it’ according to Warren Buffet) and is a real challenge worth addressing.


    1. In Turan Subasat (ed.), The Great Meltdown of 2008: Systemic, Conjunctural or Policy- created?, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing, 2016.
    2. https://socialistproject.ca/2017/07/b1448/
    3. Riccardo Bellofiore et al., Monnaie, Finance et Capital. Contributions en hommage à Suzanne de Brunhoff, Rennes (France): Presses Universitaires de Rennes, 2018.
    4. Karl Marx, Frederick Engels, Collected Works, vol. 32: Karl Marx, Economic Manuscripts 1861-1863 vol. 3, Moscow: Progress Publishers, 1989, pp. 477-478.
    5. Karl Marx, Economic Manuscripts 1861-1863, p. 478.
    6. For the local relevance of this in Southern Africa, see my PhD thesis, published as Patrick Bond, Uneven Zimbabwe: A Study of Finance, Development and Underdevelopment, Trenton: Africa World Press, 1998.
    7. François Chesnais, Finance Capital Today, Leiden: Brill, 2017.
    8. Radhika Desai, ‘Marx’s Capital at 150: an invitation to history’, https://www.redpepper.org.uk/marxs-capital-at-150-an-invitation-to-history/
    9. Radhika Desai, Geopolitical Economy: After US Hegemony, Globalization and Empire, London: Pluto Press, 2013.