Theorizing the process of financialization through the paradox of profit: the credit-debt reproduction mechanism

Javidanrad, F, Ackrill, R ORCID: https://orcid.org/0000-0002-0739-1812, Bakas, D ORCID: https://orcid.org/0000-0003-4771-4505 and Garratt, D, 2024. Theorizing the process of financialization through the paradox of profit: the credit-debt reproduction mechanism. Journal of Post Keynesian Economics, 47 (3), pp. 566-588. ISSN 0160-3477

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Abstract

Financialization occurs where, over time, capitalist economies undergo a transformation, with profit-making via investment in production declining, to be replaced by profit-making via investment in financial markets. In the present research, we offer a novel theoretical explanation for this process, that we call the credit-debt reproduction mechanism. We derive this inductively, starting with Marx’s analysis of the paradox of monetary profit and its practical manifestation in the capitalist economy, the shortage of money in circulation. This shortage results in capital becoming increasingly expensive, making long-term investment decisions less certain, less profitable and less justifiable. Investment in financial markets grows, but this leads to an ever-expanding cycle of credit and debt, which puts capitalist economies on a one-way road from productive investments to predominantly unproductive investments. We include in this analysis important reflections on the distinction between ‘financialization’ and ‘financial development’. We also revive and revisit the notion of the shortage of money as a key driver in this process. Another contribution made in this research is to draw a distinction between practical and theoretical solutions to the paradox of monetary profit. Crucially, our research confirms the absence of a theoretical solution to the paradox, there existing only practical solutions.

Item Type:	Journal article
Publication Title:	Journal of Post Keynesian Economics
Creators:	Javidanrad, F., Ackrill, R., Bakas, D. and Garratt, D.
Publisher:	Taylor & Francis (Routledge)
Date:	16 April 2024
Volume:	47
Number:	3
ISSN:	0160-3477
Identifiers:	Number Type 10.1080/01603477.2024.2327998 DOI 1869015 Other
Rights:	© 2024 The Author(s). Published with license by Taylor & Francis Group, LLC. This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way. The terms on which this article has been published allow the posting of the Accepted Manuscript in a repository by the author(s) or with their consent.
Divisions:	Schools > Nottingham Business School
Record created by:	Laura Ward
Date Added:	01 Mar 2024 13:46
Last Modified:	27 Aug 2024 14:39
URI:	https://irep.ntu.ac.uk/id/eprint/50997

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