This article argues that the driving force behind the structured credit products that triggered the financial crisis was a global excess demand for securities, and that key to the build-up of this demand was the huge accumulation of private wealth. The argument is Marxian inasmuch as it builds on Marx's insight that crisis is endemic to capitalism because the commodity form by its very nature gives rise to the possibility of a separation between supply and demand, and because periodic realization of this separation arises out of the fact that the value of the labour capacity is generally less than the value of the output produced by it. The argument is an unorthodox Marxian one in that its specification of the mechanism through which the effects of exploitation feed into crisis is different from that specified by Marx himself. While the separation between supply and demand is central to the crisis transmission mechanism described here, the difference is that the commodities in question are financial commodities rather than material commodities. Prevented from surfacing ‘below’ in GDP space in the form of an excess supply of material goods, the effects of exploitation have instead surfaced ‘above’ in capital market space in the form of an excess demand for debt securities."> This article argues that the driving force behind the structured credit products that triggered the financial crisis was a global excess demand for securities, and that key to the build-up of this demand was the huge accumulation of private wealth. The argument is Marxian inasmuch as it builds on Marx's insight that crisis is endemic to capitalism because the commodity form by its very nature gives rise to the possibility of a separation between supply and demand, and because periodic realization of this separation arises out of the fact that the value of the labour capacity is generally less than the value of the output produced by it. The argument is an unorthodox Marxian one in that its specification of the mechanism through which the effects of exploitation feed into crisis is different from that specified by Marx himself. While the separation between supply and demand is central to the crisis transmission mechanism described here, the difference is that the commodities in question are financial commodities rather than material commodities. Prevented from surfacing ‘below’ in GDP space in the form of an excess supply of material goods, the effects of exploitation have instead surfaced ‘above’ in capital market space in the form of an excess demand for debt securities."> This article argues that the driving force behind the structured credit products that triggered the financial crisis was a global excess demand for secu">
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Forum 2011

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  • Photis Lysandrou
Abstract
type="main" xml:lang="en"> This article argues that the driving force behind the structured credit products that triggered the financial crisis was a global excess demand for securities, and that key to the build-up of this demand was the huge accumulation of private wealth. The argument is Marxian inasmuch as it builds on Marx's insight that crisis is endemic to capitalism because the commodity form by its very nature gives rise to the possibility of a separation between supply and demand, and because periodic realization of this separation arises out of the fact that the value of the labour capacity is generally less than the value of the output produced by it. The argument is an unorthodox Marxian one in that its specification of the mechanism through which the effects of exploitation feed into crisis is different from that specified by Marx himself. While the separation between supply and demand is central to the crisis transmission mechanism described here, the difference is that the commodities in question are financial commodities rather than material commodities. Prevented from surfacing ‘below’ in GDP space in the form of an excess supply of material goods, the effects of exploitation have instead surfaced ‘above’ in capital market space in the form of an excess demand for debt securities.

Suggested Citation

  • Photis Lysandrou, 2011. "Forum 2011," Development and Change, International Institute of Social Studies, vol. 42(1), pages 183-208, January.
    • Handle: RePEc:bla:devchg:v:42:y:2011:i:1:p:183-208
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    References listed on IDEAS

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    1. Ronald Dore, 2008. "Financialization of the global economy," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 17(6), pages 1097-1112, December.
    2. Claudio Borio, 2008. "The financial turmoil of 2007-?: a preliminary assessment and some policy considerations," BIS Working Papers 251, Bank for International Settlements.
    3. Maurice Obstfeld & Kenneth S. Rogoff, 2009. "Global imbalances and the financial crisis: products of common causes," Proceedings, Federal Reserve Bank of San Francisco, issue Oct, pages 131-172.
    4. Engelbert Stockhammer, 2009. "The finance-dominated accumulation regime, income distribution and the present crisis," Papeles de Europa, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Estudios Internacionales (ICEI), vol. 19, pages 58-81.
    5. C.A.E. Goodhart, 2008. "The background to the 2007 financial crisis," International Economics and Economic Policy, Springer, vol. 4(4), pages 331-346, February.
    6. John Grahl & Photis Lysandrou, 2006. "Capital market trading volume: an overview and some preliminary conclusions," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 30(6), pages 955-979, November.
    7. Jan Kregel, 2008. "Minsky’s Cushions of Safety: Systemic Risk and the Crisis in the U.S. Subprime Mortgage Market," Economics Public Policy Brief Archive ppb_93, Levy Economics Institute.
    8. Photis Lysandrou, 2005. "Globalisation as commodification," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 29(5), pages 769-797, September.
    9. L. Randall Wray, 2008. "Financial Markets Meltdown: What Can We Learn from Minsky," Economics Public Policy Brief Archive ppb_94, Levy Economics Institute.
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