How Monopoly-Finance Capital Leads to Economic Stagnation

Our own line of inquiry in this book builds on such analyses, attempting to understand the current phase of monopoly-finance capital, in which stagnation and financialization have emerged as interrelated trends on a global scale. Here the paradox of an economy where financialization rather than capital accumulation has now become the motor of the system is explored.

The Globalization of Monopoly Capital, U.S. Hegemonic Decline, and the Rise of China

Still, even on the left the role of monopolization is far from universally accepted today, largely because of the changes in perception brought on by increased international competition (or transnational oligopolistic rivalry). In the 1970s core U.S. industries, such as steel and automobiles, began to be affected by international competition, seemingly undermining the power of U.S. monopoly capital. The rise of multinational corporations, primarily in the Triad, was the vehicle for this enhanced world competition. This caused Joan Robinson to quip, “Modern industry is a system not so much of monopolistic competition as of competitive monopolies.”

Some observers saw this process of the creation of global oligopolies, which necessarily involved the amalgamation or destruction of the weaker of the national oligopolistic firms, as a return of the nineteenthcentury- style competitive system. They were mistaken.

The theory of the multinational corporation, as developed by Stephen Hymer (who is still the definitional economic theorist in this area), saw the rise of these globetrotting firms as the product of the growth of the concentration and centralization of capital and monopoly power worldwide. Rather than a competitive market structure, as envisioned in orthodox economics, what was emerging was a system of global oligopolistic rivalry for the domination of world production by a smaller and smaller number of global corporations. Hymer went on to connect this to Marx’s theory of the industrial reserve army of the unemployed, explaining that the monopolistic multinational corporations were in the process of creating a new international division of labor based on the formation of a global reserve army, and the exploitation of wage differentials worldwide (or the global labor arbitrage). This global restructuring of production adopted a divide-and-rule approach to labor worldwide.

These changes were accompanied by a shift of the United States, beginning around 1980, from a massive surplus to a massive deficit country in its current account (the combined balances on trade in goods and services, income, and net unilateral transfers), turning it into the consumption engine of the world economy or “buyer of last resort.” All of this was made possible by U.S. dollar hegemony, coupled with financialization, whereby, as Yanis Varoufakis has argued, the United States became the Global Minotaur, borrowing and consuming out of proportion to its own production while providing markets for the exports of other countries. This can be seen in a chart showing the growth of the U.S. current account deficit (a good part of which results from the deficit in the trade in goods and services) as a percent of GDP. During the last thirty years the United States has turned into the world’s largest borrower, exploiting its position of financial hegemony and drawing in surplus capital from the rest of the world — while ultimately compounding its underlying problem of overaccumulation.