How Monopoly-Finance Capital Leads to Economic Stagnation

Yet, rather than ending with such a pronouncement, Magdoff and Sweezy went on to explain in the remainder of their book why a stagnation tendency was so deeply embedded in mature monopoly-capitalist societies, prone to market saturation, and why financialization had emerged as a desperate and ultimately dangerous savior. In their chapter on “Production and Finance,” they introduced a systematic analysis of the relation of the productive base of the economy to the financial superstructure (or as they also called it the relation of the “real economy” to finance), accounting for the increasingly shaky financial structure on top of a “stagnant productive sector.”

In his final article, “More (or Less) on Globalization,” written in 1997, fifty years after the Sweezy-Schumpeter debate, Sweezy depicted the overaccumulation problem of developed capitalism in terms of three conditions: (1) growing monopolization at the global level with the expansion of multinational corporations, (2) the slowing down (or deepening stagnation) of the Triad economies, and (3) the “financialization of the accumulation process.” For Sweezy, these three trends were “intricately related” and anyone wanting to understand the future of the capitalist economy needed to focus on their interrelation, and their presence within a capitalist system that was more and more globalized.

Monopoly-Finance Capital and the Great Stagnation

Our own analysis in this book begins in many ways where Sweezy (and Harry Magdoff) left off, and carries forward as well the analysis of John Bellamy Foster and Fred Magdoff in The Great Financial Crisis: Causes and Consequences (2009). What Sweezy called the “intricately related” aspects of monopolization, stagnation, financialization, and globalization have produced a new historical phase, which we refer to as “monopoly-finance capital.” In this period the Triad economies are locked in a stagnation-financialization trap, while linked to the growth in the emerging economies via the global labor arbitrage — whereby multinational corporations exploit the differences in wage levels in the world in order to extract surplus profits. The result is the worsening of the overall problem of surplus capital absorption and financial instability in the center of the world economy. In this book we are particularly concerned with how this is working out at the global level, with considerable focus (in the later chapters) on how this is related to the Chinese economy.

Yet the central problem remains overaccumulation within the Triad, where the United States, despite its declining hegemony, still constitutes the trend-setting force in the world system of accumulation. The deepening effects of stagnation in the U.S. economy can be seen in this chart showing the long-run downward trend in the growth rate of industrial production in the United States.