Is the Financialization Hypothesis a Theoretical Blind Alley? – World Review of Political Economy

World Review of Political Economy

• Vol. 9, No. 4,

Journal Article

Is the Financialization Hypothesis a Theoretical Blind Alley?

Stavros Mavroudeas and Demophanes Papadatos

World Review of Political Economy

Vol. 9, No. 4 (Winter 2018), pp. 451-476

Published by: Pluto Journals

DOI: 10.13169/worlrevipoliecon.9.4.0451

https://www.jstor.org/stable/10.13169/worlrevipoliecon.9.4.0451

Page Count: 26

https://www.jstor.org/stable/10.13169/worlrevipoliecon.9.4.0451?seq=1#page_scan_tab_contents

Abstract

The Financialization Hypothesis is a popular argument in contemporary heterodox and also mainstream economics. It maintains that capitalism has undergone a radical transformation over at least the past three decades. The financial system, through a series of innovative mechanisms, has conquered the commanding heights of capitalism and has changed the whole system according to its own prerogatives. Concomitantly, the global capitalist crisis of 2008 is considered to have been a financialization crisis. This article disputes the Financialization Hypothesis and argues that instead of casting light on the actual workings of modern capitalism, it misconstrues them and leads into an explanatory blind alley. The spectacular ballooning of the financial system during the recent decades of weak profitability and accumulation does not constitute a new epoch, let alone a new capitalism. Instead, it represents a familiar capitalist response to periods of weak profitability. This does not preclude the proliferation of new financial instruments, which lend specific new forms to a well-known capitalist process. The Marxist theory of crisis and fictitious capital offers an analytically and empirically superior understanding of this process.