The Fall and Rise of American Finance: From J.P. Morgan to BlackRock

Finance capital and U.S. imperialism

The re-emergence of finance capital in the U.S. economy?

The recent book by Maher and Aquanno is an ambitious attempt to analyse the trajectory of U.S. capitalism during the last several decades. They delve primarily into the rise of the U.S. financial sector, aiming to draw conclusions about the broader development of U.S. capitalism and its geopolitical position.

At the heart of the book lies the claim that finance capital has re-emerged in the U.S., broadly along the lines that Rudolf Hilferding laid out in the early 1900s. U.S. non-financial corporations have become financialised roughly since the late 1970s, and at the same time, U.S. financial corporations have grown enormously. Moreover, the centre of gravity within the financial sector has shifted, particularly after the Great Crisis of 2007–9.

Commercial banks have retreated while various types of “shadow” institutions have ballooned. Three of the latter—BlackRock, State Street, and Vanguard—now control a huge proportion of the equity of the entire corporate sector of the U.S. The Big Three represent the re-emergence of finance capital, and they apparently dominate U.S. non-financial capital.

For Maher and Aquano, these developments represent the return of “American” finance to the driving seat of U.S. capitalism. Setting aside the unfortunate epithet—since “American” means a lot more than merely the United States—their claim has a broad historical dimension.

The return of finance capital has presumably occurred after a hiatus of several decades commencing in the 1930s when the state began to intervene and exercise a controlling influence on the financial system. Even during that time, however, there were precursors of financialisation as managerial capitalism emerged, and U.S .enterprises acquired organisational structures appropriate to handling financial operations.

The re-emergence of finance capital has thus relied on the crucial role of the state, particularly via the Federal Reserve. This is evident in the characteristic current practice of the state “de-risking” private money lending. The Fed engages in liquidity provision and manages the repo market to ensure returns and to protect the operations of U.S. finance capital.

Moreover, the authors believe that Hilferding (and Lenin) was wrong to claim that monopoly is a characteristic aspect of finance capital. Competition among huge corporations remains the name of the game, and financialisation has not occurred at the expense of the non-financial sector in the U.S. The profits of non-financial corporates have been substantial and distributed to equity holders via the stock market.

Finally, for Maher and Aquano, U.S. capitalism, led by finance capital, remains exceptionally powerful internationally. Even so, Hilferding made a serious mistake when he claimed that the rise of finance capital in this time would lead to “organised capitalism.” Crises are inherent, and U.S. capitalism has generated enormous pressures on domestic workers, raising the prospect of social reaction from the bottom up.

In sum, there are considerable strengths to Maher and Aquanno’s book, not least in recognising the importance of financialisation for U.S. capitalism as well as differentiating between the present period, dominated by “shadow banks,” and the previous period, marked by a strong role for commercial banks. It is also heartening to see an explicit discussion of Hilferding, the true originator of the Marxist theory of imperialism, which Lenin made canonical.

There is no doubt that a proper analysis of contemporary financialisation and imperialism must commence by settling accounts with the economics of Hilferding’s finance capital. But in this respect, the book lays itself open to criticism. The argument that finance capital has re-emerged and taken the driving seat in U.S. capitalism is not persuasive, as I will show in the rest of this article.

Equally seriously, the international power of U.S. capitalism is not what it once was—economically, politically, and militarily. The rise of China but also of India, Brazil, Russia, and other powers from what were the “Second” and “Third” Worlds is indisputable. U.S. hegemony is currently challenged, and the result is an unprecedented intensification of tensions and the threat of war, in which the U.S. is the leading culprit. Meanwhile, the “old” imperialist powers are, at least for the moment, following Washington.

Directly related to the emerging hegemonic challenges are the pronounced difficulties of capitalist accumulation in the U.S. and indeed across the core of the world economy. The list is long: growth rates are weak, investment levels are poor, productivity growth is often non-existent, profitability is precarious and depends heavily on pressing real wages downward, “zombie” firms are a permanent fixture of core economies, and so on. These key issues are not discussed at the requisite depth by Maher and Aquano. Welcome as their book is, it leaves the reader wishing for more insight from the authors.

It is thus helpful to look more closely at the theory of finance capital for the current era and draw some implications for imperialism, hegemony, and the persistent malfunctioning of capitalist accumulation at the core of the world economy. The discussion that follows is based on the recently published The State of Capitalism, which is concerned with precisely these issues.1

The political economy of finance capital, or Financialisation Mark I

If an analysis of contemporary U.S. capitalism is going to deploy the concept of finance capital—however adapted—it is important to get Hilferding’s economics straight.2

The first step is to appreciate the importance of the emphasis on monopoly. For the Marxist political economists of Hilferding’s time, monopoly indicated advanced concentration and centralisation of capital, which afforded market power and created room to direct entire sectors in terms of prices, trading processes, credit availability, and conditions of production. It did not indicate the absence of competition but rather pointed to competition occurring under conditions of pronounced market power for participants. Huge enterprises certainly cooperated, cartel-like, but they also competed ferociously, especially in the international arena.

The concept of finance capital proposed by Hilferding and adopted by Lenin3 is impossible to construct in the absence of such monopolistic tendencies, as will become clearer below. By this token, if the concept were to be somehow deployed to contemporary capitalism, it would have to refer to large concentrations of capital, above all, to the enormous multinationals. Clearly, it would not relate to the small and medium enterprises found across core and peripheral economies.

Taking a step further, for the concept to make sense it was—and remains—imperative to consider the investment practices of non-financial enterprises, i.e., the realities of production. Hilferding’s key economic point, which fit the evidence of his time, was that monopolistic non-financial enterprises engaged in heavy long-term investment in fixed capital.4 This was driven by the nature and technologies of production in Germany (and Austria)—steel production, heavy engineering, chemicals, and so on.

The question then inevitably arose: how did monopolistic enterprises finance such investment? Own capital was insufficient due to the volume of required funds, and thus monopolistic enterprises had to rely on external funding. This meant primarily borrowing from commercial banks but also issuing securities in the Stock Market, that is, shares and bonds. The issuing of securities again pivoted on banks, but this time on investment, not commercial banking.

It happened that, at the time, Germany was the classic country combining these banking activities into “universal banking.”5 Similar patterns could be observed in other leading capitalist countries, such as Belgium and even in the U.S., but not in the leading capitalist and imperialist country at the turn of the twentieth century, Great Britain.

For Hilferding, then, the “bank-based” German financial system, dominated by large monopolistic banks, represented the cutting edge of historic capitalist development. This had two fundamental implications.

First, the banks that lent for long-term fixed capital essentially locked their loanable capital into the enterprises for many years. Their loans became, in effect, a form of equity. Consequently, banks had a strong incentive—indeed, a need—to get actively involved in the management of enterprises at the very least to protect their loans.

Second, the banks that oversaw the issuing of securities by non-financial enterprises could make profits from the systematic difference in the price of securities compared to the monetary value of the actual capital invested by non-financial enterprises. This difference is a direct result of the pricing of securities in the Stock Market, which reflects ultimately the difference between the rate of interest (used as discount rate for securities) and the rate of profit across the economy (implicitly discounting the capital invested).

Hilferding was the first political economist to identify this type of return as “founder’s profit,” a source of rent-like income for Stock Market participants, i.e., the basic form of capital gains allowing for the financial expropriation of other people’s money and capital.6 This remains the most important theoretical innovation by a Marxist economist in the field of profit-making since the days of Marx.

Under these conditions, finance capital in Hilferding’s (and Lenin’s) theory represented the amalgamation of monopolistic industrial with monopolistic banking capital. Huge banks played an active role in monitoring the productive activities and managing the finances of huge industrial enterprises. They ruled the roost by placing their own people on management boards and ensured profits from lending as well as from “founder’s profit.”

Maher and Aquanno believe that the characteristic feature of Hilferding’s finance capital was the holding of equity by banks. This is, unfortunately, not the case. Banks held shares in enterprises, cementing the relationship between the two, though such equity holding was never a dominant aspect of German banking. But the economic processes that led to the emergence of finance capital were the advance of loans and the management of Stock Market operations aimed at financing long-term investment, not holding property rights over non-financial capital. This was the characteristic feature of the first historic version of finance capital, what we might call Financialisation Mark I.

Once that theoretical foundation was in place, it was possible for Hilferding—and mostly for Lenin—to spell out the underlying political economy of imperialism at the time. The economic “policy” of finance capital pivoted on domestic activities but also, crucially, involved activities abroad.

Regarding the former, it is clear with hindsight that Hilferding was led astray when he claimed that a domestic economy dominated by enormous monopolistic amalgamations of industry and finance would take an increasingly “organised” form, thus avoiding crises. Lenin never fell into this trap.

Regarding the latter, both Hilferding and Lenin insisted that finance capital would naturally seek to expand across borders and that meant accelerated internationalisation of commodity capital (i.e., imports and exports) and of loanable money capital (i.e., capital flows). Globally competing finance capitals sought to obtain exclusive privileges in these activities and in the conditions of the time that entailed creating territorial empires stretching over colonies and relying on the military support of the national state. Finance capital drove imperialism and led to world war.

Contemporary non-financial and financial enterprises, or Financialisation Mark II

How is Hilferding’s theory of finance capital relevant to U.S. capitalism today?

Τhe U.S. economy and indeed other core economies such as Japan, Germany, and the U.K. are dominated by huge non-financial and financial corporations. There is domestic financialisation, and the huge capitalist units are active internationally, leading to what could appropriately be called global financialisation. Moreover, the U.S. is the leading imperialist power, but hegemonic contests have greatly escalated, raising the prospect of world war.

Regarding the historic rise of finance since the late 1970s the classical Marxist theory of finance capital is indeed broadly relevant, and the period might be called Financialisation Mark II. Above all, the method of Hilferding and Lenin, namely seeking the roots of the period in the conduct of fundamental units of the capitalist economy, remains indispensable. However, in respect of the characteristic behaviour of monopolistic enterprises, both non-financial and financial, and the implications for contemporary imperialism, Hilferding’s concept has very limited applicability.

A crucial aspect of the period, especially since the Great Crisis of 2007–9, is the sustained underperformance of the core of the world economy. This is apparent in the case of Japan, which has stagnated for decades, but even more in Europe, which has performed abysmally in the 2010s and the 2020s up to now. The record of the U.S. has also been weak, despite a brief upsurge since the end of the pandemic, in large part due to extraordinary government spending.

The period since 2007–9 could properly be called an interregnum,7 during which financialised capitalism has lost its dynamism, but no new way of structuring accumulation is emerging. Its most pronounced feature is the weak growth of average labour productivity,8 despite the introduction of ever newer “industrial revolutions” pivoting on telecommunications, information technology, AI, and the like. Weak productivity growth restrains profitability and forces capitalists to seek higher profits by squeezing wages.

The single most important factor behind weak productivity growth is the relative lack of investment in the core countries of the world economy.9 This is a key point of difference with Hilferding and Lenin’s time. The monopolistic corporations of core countries do not invest strongly in fixed capital and, insofar as they do, rely heavily on their own funds. Moreover, they also hold vast amounts of money capital as liquid reserves.

Large corporations today are financialised, but this is mostly in the unusual sense of being holders of large sums of money capital for lengthy periods of time. Such capital is available for financial transactions, though that does not at all mean that corporations become banks. Their profits still come overwhelmingly from production and trade, not from finance.10 It means, however, that corporations are able to use a variety of financial methods, such as share buybacks, to shift profits in the direction of shareholders. It also means that they are not dependent on banks in the sense of Hilferding and Lenin.

The fundamental drivers that led to the emergence of finance capital at the turn of the nineteenth century are not present today. Large corporations naturally and inevitably relate to large banks as they engage in their operations, but there is no amalgamation of the two and no evidence that banks dictate terms of conduct to non-financial corporations. Hilferding’s finance capital simply does not exist today.

This is the appropriate context in which to approach the extraordinary rise of “shadow banking” in the U.S. and elsewhere, including the astounding proportion of the total equity of the U.S. held by the Big Three. The rise of the Big Three after the Crisis of 2007–9 signals the end of what might be called the Golden Era of contemporary financialisation. That period started in the early 1990s, was dominated by commercial banks, and came to a head with the real estate bubble of 2001–6, which ushered in the Great Crisis. Large commercial banks had their wings clipped by the crash and subsequent state regulation.

The path was laid even wider for investment funds and other types of “shadow banks” to expand within the financial sector. They are essentially portfolio managers who make profits by trading securities on both sides of their balance sheets, thus necessarily trading derivatives to protect and lock in the overall value of their portfolios. It should be stressed that there is no opposition between banks and investment funds; indeed, banks provide vital credit to funds. But banks are active lenders of loanable capital and not merely portfolio managers, signalling a shift in financialisation as the interregnum unfolded after 2007–9.11

In the most fundamental sense, fund profits depend on capital gains from securities trading and are thus crucially dependent on the difference between profit rate and interest rate across the economy. Fund profits thus reflect financial expropriation and are forms of Hilferding’s “founder’s profit” but in a complex and sophisticated form, following a century of financial development.

Furthermore, the funds are owners of corporate equity in the sense that they buy shares in the open market, but they are themselves owned by other funds, corporations, and rich individuals. The huge equity holdings of the Big Three are part of a complex and articulated structure of ownership in contemporary capitalism. Such holdings do not represent the concentration of property rights in the hands of a few capitalists.

Which brings us to what is perhaps the most striking absence in Maher and Aquano’s book. Do these funds dictate the conduct of the non-financial enterprises whose shares they hold? Only if that could be demonstrated would a plausible case be made for the re-emergence of a form of Hilferding’s finance capital today.

Maher and Aquanno assert as much in several places of their book but offer no commensurate evidence. In work by mainstream theorists there is some evidence that the vast shareholdings of the Big Three appear to have an impact on the decision-making of the management of non-financial corporations.12 But having an impact on decision-making is a long way removed from being in the driving seat of U.S. capitalism.

The available evidence indicates that, so far, the Big Three operate essentially as rentiers seeking to ensure returns from securities trading, which are then distributed among the owners of the funds (policyholders). This is consistent with the motives of fund managers, whose remuneration is basically linked to the monetary value of the assets they manage and who therefore have a strong incentive to increase the volume and the prices of fund assets.

In sum, there is no finance capital today in the sense of Hilferding and Lenin or in any sense in which large financial institutions dominate large non-financial enterprises. There is, however, a pairing of huge corporations with huge banks and “shadow banks.” In no meaningful way are these components structurally opposed to each other. Rather, they are integrally related while extracting profits from production, trade, and financial operations.

The role of the state and the re-emergence of imperialist conflict

This brings us to the role of the state, first, in the domestic economy but, second and crucially, in the international arena. Financialisation Mark II would have been impossible without the active involvement of the state in the U.S. and elsewhere. The list of state actions that have catalysed its emergence is well-known,13 and there is no need to rehash them here except to mention that the state has intervened at crucial moments to rescue financialised capitalism from its own lethal contradictions. The most prominent such intervention occurred in the Great Crisis of 2007–9, which ushered in the interregnum.

The point that must be mentioned, however, is that the main lever of state intervention is the central bank, the dominant state economic institution of the decades of financialisation.

The unprecedented role of the central bank in contemporary capitalism merits detailed analysis, especially as it involves some of the most complex arcana of finance. There is currently an expanding literature on the central bank in the repo market, its role in the provision of liquidity and in supporting index funds, and so on. Much of it comes from Modern Monetary Theory and post-Keynesian radical economists, for instance, the emphasis on the “de-risking” role of the state, which Maher and Aquanno adopt.

The historic significance of the central bank, however, does not lie with the obscure technicalities of the repo or any other market. It rests squarely with the issuing of state fiat money, the true pillar of Financialisation Mark II.

It is easy to imagine that the period of financialisation has been characterised by the expansion of credit money issued by private banks, which is undoubtedly a prominent aspect of contemporary capitalism with several complex implications. But the most striking monetary feature of the period is the issuing of state-backed central bank money with a strong fiat character.

During the interregnum, the volume of such money issued by the Federal Reserve, the European Central Bank, the Bank of Japan, the Bank of England, and other core central banks has been without historical precedent. Issuing fiat money has allowed the balance sheet of the U.S. central bank to achieve enormous dimensions in the region, for instance, of $9 trillion in 2022.14 Quite apart from the gigantic boost this gave to the U.S. state’s ability to engage in fiscal expenditure, the expansion also enabled the absolute domination of the money market by the central bank.

The money market is the fundamental market of the financial system, the terrain where the rate of interest is determined.15 In advanced capitalist countries the money market currently pivots on the repo market, but it is also broader, and its dominant player is the central bank, as it has long been historically. Indeed, in the U.S. in the years of financialisation and especially during the interregnum, the Federal Reserve has effectively engulfed the money market.

The historically unprecedented power of central banks deriving from the issuing of fiat money has allowed them to control interest rates with great facility. The implications are crucial, always bearing in mind Hilferding’s crucial concept of “founder’s profit.” Manipulating the rate of interest relative to the rate of profit has been a pivotal factor in securing capital gains and thus profits for both financial and non-financial enterprises. This is particularly important for the “shadow banks” that have risen to such prominence in the contemporary system.

In short, the pairing of monopolistic enterprise with monopolistic financial institutions that characterises contemporary capitalism relies crucially on the state not only for its survival but also for its regular profit-making. The economic foundation of its dominant domestic position is the issuing of fiat money by the state.

Equally crucial for the dominant capitals in the U.S. has been the role of the U.S. state in the international arena. This is the field of imperialist and hegemonic contests which have become notably acute in the years of the interregnum and currently raise the threat of world war.

The most crucial point in this respect, which is unfortunately not discussed by Maher and Aquanno, is that large U.S. non-financial enterprises are internationally active not simply through exporting and importing commodities or by engaging in loanable money capital transactions but also by producing across borders. The internationalisation of productive capital is a distinguishing feature of Financialisation Mark II and a point of qualitative difference with the times of Hilferding and Lenin.

The world economy is currently shaped by global production chains dominated by huge financialised monopolies. The expansion of commodity trade is in large measure an outcome of the globalisation of productive capital. Moreover, the production chains that encircle the globe do not necessarily rely on property rights possessed by the lead multinationals. On the contrary, local producers can join purely based on contract. Lead multinationals control these chains through privileged access to technology, pricing, tax avoidance, subsidies, and so on. Not least among such factors is access to international finance.

The internationalisation of productive capital has proceeded alongside the internationalisation of financial capital by banks and more recently by “shadow banks.” The crucial element here is the export of loanable money capital in the form of capital flows. The great bulk of such flows in the last four decades has been among core countries, but a significant part has also been from the core to the periphery. In the interregnum, flows have increased from China to the periphery but also from periphery to periphery.16

These are decisive developments that help characterise contemporary imperialism. The pairing of non-financial and financial enterprises at the global level is the driver of globalisation and financialisation across the world, led by the U.S. The underlying force of imperialism today is this combination of capitals.

Contrary to Hilferding and Lenin’s time, these enterprises do not seek territorial exclusivity through colonial empire. Their international profit-making is served through open access to global markets for loanable, commodity, and productive capital. What they require are clear and enforceable rules for investing, trading, and lending abroad. Even more important is a reliable form of world money to act as a unit of account, means of payment, and reserve of value.

The state that meets these requirements is the hegemon, and that is obviously the U.S., supported by a host of international institutions—IMF, World Bank, WTO, and so on. However, the most important institution in this regard is domestic to the U.S., namely the Federal Reserve. The U.S. central bank is a vital pillar of the domestic configuration of U.S. capitalism, as well as being the main pivot of the hegemonic and imperial power of the U.S. Both roles are served through the issuing of fiat dollars.

The trouble for the U.S. is that the global dominance of huge multinationals from the core has had contradictory results for its hegemony.

On the one hand, it has encouraged the export of productive capital and the establishment of capacity abroad, thereby weakening the domestic industrial base of both the U.S. and other core countries. This has contributed to the underperformance of core economies in recent decades, which is characteristic of the interregnum.

On the other hand, the export of productive, commodity, and loanable capital has helped the emergence of independent centres of capitalist accumulation in what were previously the “Second” and the “Third” Worlds. To be sure, the main factor in this regard was the action of national states in those parts of the world, but the shift of industrial capacity boosted the process.

Large concentrations of industrial, commercial, and financial capital have now emerged in key countries—China, above all, but also India, Russia, Brazil, and so on. The features of these capitals differ according to country, but the broad parameters are similar: internationalisation of production wherever possible, internationalisation of finance, and a pairing of the two on a national basis.

Internationally active capitals from different countries compete incessantly for productive capacity, markets, and lending. There is no world capitalist class and never will be. The uniquely hegemonic dominance of the U.S. for nearly three decades after the collapse of the Soviet Union allowed this essentially misleading notion to take root for a while, particularly as the U.S. also gave the enterprises of other historic imperialist countries room to manoeuvre globally.

A highly unusual historical situation has thus arisen in which the old European powers, Japan, and others adapted to the hegemonic position of the U.S. In the years of the interregnum, this has taken the form of submission, though there is nothing that would guarantee the long-term perseverance of such arrangements.

Even more critical is that the new arrivals in the world market have begun to contest U.S. hegemony with China in the economic and Russia in the military lead. Theirs is not an attempt to create separate imperial blocs since their underlying economic structures are not of that type. Rather, they seek a powerful independent say in setting the terms of investment, trade, and finance. Above all, they seek a say in how world money is determined and supplied.

U.S. hegemony has paid handsome benefits to the U.S. ruling bloc, not least through a flow of implicit returns from other countries holding vast amounts of dollar reserves. Private U.S. corporations have drawn profits from their globally dominant positions, especially in finance. But other forms of U.S. capital have had to carry the burden of an underperforming domestic economy, the U.S. working class has paid a painful price in terms of downward wage pressure and poor employment, and the country as a whole has had to carry the costs of a vast industrial-military complex to support is hegemonic imperial position.

U.S. hegemony is now challenged in ways that were simply impossible for a long time after the collapse of the Soviet Union. To be sure, the “old” imperial powers are quiescent, but nothing guarantees that this is permanent. Moreover, the challenge posed by the new powers is fundamentally economic and neither ideological nor truly political. In this regard, the current disposition of world powers resembles that of pre-1914. Challenging hegemony ultimately involves armies, navies, and airpower, and hence the threat of world war is as serious as at any time during the long U.S.-Soviet confrontation.

Maher and Aquanno have laid out some of the relevant factors in this regard by analysing the trajectory of U.S. capitalism while focusing on financialisation and the interactions between non-financial and financial enterprises. There is a lot more to say, however, based on a Marxist political economy. Engaging in this work and drawing political conclusions is the primary task of the Left today.

Notes

1. Costas Lapavitsas and the EReNSEP Writing Collective, The State of Capitalism: Economy, Society, and Hegemony (Verso, 2023).

2. See Rudolf Hilferding, “Finance Capital: A Study of the Latest Phase of Capitalist Development,” Marxists Internet Archive, updated October 31, 2023, https://www.marxists.org/archive/hilferding/1910/finkap/. First published in 1910.

3. See Vladimir Ilyich Lenin, “Imperialism, the Highest Stage of Capitalism: A Popular Outline,” Marxists Internet Archive, accessed December 12, 2024, https://www.marxists.org/archive/lenin/works/1916/imp-hsc/. First published in 1916.

4. See Costas Lapavitsas,”Hilferding’s Theory of Banking in the Light of Steuart and Smith,” in Research in Political Economy: Neoliberalism in Crisis, Accumulation, and Rosa Luxemburg’s Legacy, ed. Paul Zarembka and Susanne Soederberg, vol. 21 (Emerald Publishing Limited, 2004), 161–80.

5. See Richard Tilly, ‘Universal Banking in Historical Perspective’, Journal of Institutional and Theoretical Economics 154, no. 1 (1998): 7–32.

7. See Lapavitsas and the EReNSEP Writing Collective, The State of Capitalism.

8. Alistair Dieppe and Gene Kindberg-Hanlon, “How to rekindle productivity growth, in five charts,” World Bank Blogs, January 14, 2020, https://blogs.worldbank.org/en/voices/how-rekindle-productivity-growth-five-charts.

9. See “Gross fixed capital formation (% of GDP) – OECD members,” World Bank Group, accessed December 12, 2024, https://data.worldbank.org/indicator/NE.GDI.FTOT.ZS.

10. See Joel Rabinovich, “The financialization of the non‐ financial corporation. A critique to the financial turn of accumulation hypothesis,” Metroeconomica 70, no. 4 (2019): 738–75.

11. See Lapavitsas and the EReNSEP Writing Collective, The State of Capitalism.

12. Lucian Bebchuk and Scott Hirst, “Big Three Power, and Why it Matters,” Boston University Law Review 102 (2022): 1547–600.

13. See Lapavitsas, Profiting without Producing.

14. “Credit and Liquidity Programs and the Balance Sheet,” Board of Governors of the Federal Reserve System, updated December 6, 2024, https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm.

15. See Makoto Itoh and Costas Lapavitsas, Political Economy of Money and Finance (Macmillan, 1999).

16. See Lapavitsas and the EReNSEP Writing Collective, The State of Capitalism.

Costas Lapavitsas

Costas Lapavitsas has taught economics at SOAS since 1990 and has done research on the political economy of money and finance, the Japanese economy, the history of economic thought, economic history, and the contemporary world economy. He has published widely in the academic field and writes frequently for the international and the Greek press. His most recent books include: Against the Troika, with H. Flassbeck (Verso, 2015); Profiting Without Producing (Verso, 2013); Crisis in the Eurozone, together with several RMF researchers (Verso, 2012); Social Foundations of Markets, Money and Credit (Routledge, 2003); Development Policy in the Twenty-first Century, ed., with B. Fine and J. Pincus (Routledge, 2001); and Political Economy of Money and Finance, with M. Itoh (MacMillan, 1999).

Gerald Epstein

Gerald Epstein is Professor of Economics and a founding Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. Epstein has written articles on numerous topics including financial crisis and regulation, alternative approaches to central banking for employment generation and poverty reduction, economists’ ethics and capital account management, and capital flows and the political economy of financial markets and institutions. Most recently his research has focused on the impacts of financialization (Gerald Epstein, ed., Financialization and the World Economy [Elgar Press, 2005]), alternatives to inflation targeting (Gerald Epstein and Erinc Yeldan, eds., Beyond Inflation Targeting: Assessing the Impacts and Policy Alternatives [Elgar Press, 2009]) and financial reform and the Great Financial Crisis (Martin Wolfson and Gerald Epstein, eds., The Handbook of The Political Economy of Financial Crises [Oxford, 2013]). He is writing a book in connection with an INET project on the social inefficiency of the current financial system and approaches to financial restructuring.

Les Leopold

Les Leopold is the executive director of the Labor Institute and author of the new book, Wall Street’s War on Workers: How Mass Layoffs and Greed Are Destroying the Working Class and What to Do About It (Chelsea Green Publishing, 2024).

Stephen Maher

Stephen Maher is Assistant Professor of Economics at SUNY Cortland and Associate Editor of the Socialist Register. He is also the author of Corporate Capitalism and the Integral State: General Electric and a Century of American Power (Palgrave, 2022). He is the coauthor of The Fall and Rise of American Finance: From J. P. Morgan to BlackRock with Scott Aquanno.

Scott Aquanno

Scott Aquanno is Assistant Professor of Political Science at Ontario Tech University. He is the coauthor of The Fall and Rise of American Finance: From J. P. Morgan to BlackRock with Stephen Maher and author of Crisis of Risk: Subprime Debt and US Financial Power from 1944 to Present (Edward Elgar, 2021).

The Fall and Rise of American Finance: From J.P. Morgan to BlackRock

Finance capital and U.S. imperialism

The re-emergence of finance capital in the U.S. economy?

The recent book by Maher and Aquanno is an ambitious attempt to analyse the trajectory of U.S. capitalism during the last several decades. They delve primarily into the rise of the U.S. financial sector, aiming to draw conclusions about the broader development of U.S. capitalism and its geopolitical position.

At the heart of the book lies the claim that finance capital has re-emerged in the U.S., broadly along the lines that Rudolf Hilferding laid out in the early 1900s. U.S. non-financial corporations have become financialised roughly since the late 1970s, and at the same time, U.S. financial corporations have grown enormously. Moreover, the centre of gravity within the financial sector has shifted, particularly after the Great Crisis of 2007–9.

Commercial banks have retreated while various types of “shadow” institutions have ballooned. Three of the latter—BlackRock, State Street, and Vanguard—now control a huge proportion of the equity of the entire corporate sector of the U.S. The Big Three represent the re-emergence of finance capital, and they apparently dominate U.S. non-financial capital.

For Maher and Aquano, these developments represent the return of “American” finance to the driving seat of U.S. capitalism. Setting aside the unfortunate epithet—since “American” means a lot more than merely the United States—their claim has a broad historical dimension.

The return of finance capital has presumably occurred after a hiatus of several decades commencing in the 1930s when the state began to intervene and exercise a controlling influence on the financial system. Even during that time, however, there were precursors of financialisation as managerial capitalism emerged, and U.S .enterprises acquired organisational structures appropriate to handling financial operations.

The re-emergence of finance capital has thus relied on the crucial role of the state, particularly via the Federal Reserve. This is evident in the characteristic current practice of the state “de-risking” private money lending. The Fed engages in liquidity provision and manages the repo market to ensure returns and to protect the operations of U.S. finance capital.

Moreover, the authors believe that Hilferding (and Lenin) was wrong to claim that monopoly is a characteristic aspect of finance capital. Competition among huge corporations remains the name of the game, and financialisation has not occurred at the expense of the non-financial sector in the U.S. The profits of non-financial corporates have been substantial and distributed to equity holders via the stock market.

Finally, for Maher and Aquano, U.S. capitalism, led by finance capital, remains exceptionally powerful internationally. Even so, Hilferding made a serious mistake when he claimed that the rise of finance capital in this time would lead to “organised capitalism.” Crises are inherent, and U.S. capitalism has generated enormous pressures on domestic workers, raising the prospect of social reaction from the bottom up.

In sum, there are considerable strengths to Maher and Aquanno’s book, not least in recognising the importance of financialisation for U.S. capitalism as well as differentiating between the present period, dominated by “shadow banks,” and the previous period, marked by a strong role for commercial banks. It is also heartening to see an explicit discussion of Hilferding, the true originator of the Marxist theory of imperialism, which Lenin made canonical.

There is no doubt that a proper analysis of contemporary financialisation and imperialism must commence by settling accounts with the economics of Hilferding’s finance capital. But in this respect, the book lays itself open to criticism. The argument that finance capital has re-emerged and taken the driving seat in U.S. capitalism is not persuasive, as I will show in the rest of this article.

Equally seriously, the international power of U.S. capitalism is not what it once was—economically, politically, and militarily. The rise of China but also of India, Brazil, Russia, and other powers from what were the “Second” and “Third” Worlds is indisputable. U.S. hegemony is currently challenged, and the result is an unprecedented intensification of tensions and the threat of war, in which the U.S. is the leading culprit. Meanwhile, the “old” imperialist powers are, at least for the moment, following Washington.

Directly related to the emerging hegemonic challenges are the pronounced difficulties of capitalist accumulation in the U.S. and indeed across the core of the world economy. The list is long: growth rates are weak, investment levels are poor, productivity growth is often non-existent, profitability is precarious and depends heavily on pressing real wages downward, “zombie” firms are a permanent fixture of core economies, and so on. These key issues are not discussed at the requisite depth by Maher and Aquano. Welcome as their book is, it leaves the reader wishing for more insight from the authors.

It is thus helpful to look more closely at the theory of finance capital for the current era and draw some implications for imperialism, hegemony, and the persistent malfunctioning of capitalist accumulation at the core of the world economy. The discussion that follows is based on the recently published The State of Capitalism, which is concerned with precisely these issues.1

The political economy of finance capital, or Financialisation Mark I

If an analysis of contemporary U.S. capitalism is going to deploy the concept of finance capital—however adapted—it is important to get Hilferding’s economics straight.2

The first step is to appreciate the importance of the emphasis on monopoly. For the Marxist political economists of Hilferding’s time, monopoly indicated advanced concentration and centralisation of capital, which afforded market power and created room to direct entire sectors in terms of prices, trading processes, credit availability, and conditions of production. It did not indicate the absence of competition but rather pointed to competition occurring under conditions of pronounced market power for participants. Huge enterprises certainly cooperated, cartel-like, but they also competed ferociously, especially in the international arena.

The concept of finance capital proposed by Hilferding and adopted by Lenin3 is impossible to construct in the absence of such monopolistic tendencies, as will become clearer below. By this token, if the concept were to be somehow deployed to contemporary capitalism, it would have to refer to large concentrations of capital, above all, to the enormous multinationals. Clearly, it would not relate to the small and medium enterprises found across core and peripheral economies.

Taking a step further, for the concept to make sense it was—and remains—imperative to consider the investment practices of non-financial enterprises, i.e., the realities of production. Hilferding’s key economic point, which fit the evidence of his time, was that monopolistic non-financial enterprises engaged in heavy long-term investment in fixed capital.4 This was driven by the nature and technologies of production in Germany (and Austria)—steel production, heavy engineering, chemicals, and so on.

The question then inevitably arose: how did monopolistic enterprises finance such investment? Own capital was insufficient due to the volume of required funds, and thus monopolistic enterprises had to rely on external funding. This meant primarily borrowing from commercial banks but also issuing securities in the Stock Market, that is, shares and bonds. The issuing of securities again pivoted on banks, but this time on investment, not commercial banking.

It happened that, at the time, Germany was the classic country combining these banking activities into “universal banking.”5 Similar patterns could be observed in other leading capitalist countries, such as Belgium and even in the U.S., but not in the leading capitalist and imperialist country at the turn of the twentieth century, Great Britain.

For Hilferding, then, the “bank-based” German financial system, dominated by large monopolistic banks, represented the cutting edge of historic capitalist development. This had two fundamental implications.

First, the banks that lent for long-term fixed capital essentially locked their loanable capital into the enterprises for many years. Their loans became, in effect, a form of equity. Consequently, banks had a strong incentive—indeed, a need—to get actively involved in the management of enterprises at the very least to protect their loans.

Second, the banks that oversaw the issuing of securities by non-financial enterprises could make profits from the systematic difference in the price of securities compared to the monetary value of the actual capital invested by non-financial enterprises. This difference is a direct result of the pricing of securities in the Stock Market, which reflects ultimately the difference between the rate of interest (used as discount rate for securities) and the rate of profit across the economy (implicitly discounting the capital invested).

Hilferding was the first political economist to identify this type of return as “founder’s profit,” a source of rent-like income for Stock Market participants, i.e., the basic form of capital gains allowing for the financial expropriation of other people’s money and capital.6 This remains the most important theoretical innovation by a Marxist economist in the field of profit-making since the days of Marx.

Under these conditions, finance capital in Hilferding’s (and Lenin’s) theory represented the amalgamation of monopolistic industrial with monopolistic banking capital. Huge banks played an active role in monitoring the productive activities and managing the finances of huge industrial enterprises. They ruled the roost by placing their own people on management boards and ensured profits from lending as well as from “founder’s profit.”

Maher and Aquanno believe that the characteristic feature of Hilferding’s finance capital was the holding of equity by banks. This is, unfortunately, not the case. Banks held shares in enterprises, cementing the relationship between the two, though such equity holding was never a dominant aspect of German banking. But the economic processes that led to the emergence of finance capital were the advance of loans and the management of Stock Market operations aimed at financing long-term investment, not holding property rights over non-financial capital. This was the characteristic feature of the first historic version of finance capital, what we might call Financialisation Mark I.

Once that theoretical foundation was in place, it was possible for Hilferding—and mostly for Lenin—to spell out the underlying political economy of imperialism at the time. The economic “policy” of finance capital pivoted on domestic activities but also, crucially, involved activities abroad.

Regarding the former, it is clear with hindsight that Hilferding was led astray when he claimed that a domestic economy dominated by enormous monopolistic amalgamations of industry and finance would take an increasingly “organised” form, thus avoiding crises. Lenin never fell into this trap.

Regarding the latter, both Hilferding and Lenin insisted that finance capital would naturally seek to expand across borders and that meant accelerated internationalisation of commodity capital (i.e., imports and exports) and of loanable money capital (i.e., capital flows). Globally competing finance capitals sought to obtain exclusive privileges in these activities and in the conditions of the time that entailed creating territorial empires stretching over colonies and relying on the military support of the national state. Finance capital drove imperialism and led to world war.

Contemporary non-financial and financial enterprises, or Financialisation Mark II

How is Hilferding’s theory of finance capital relevant to U.S. capitalism today?

Τhe U.S. economy and indeed other core economies such as Japan, Germany, and the U.K. are dominated by huge non-financial and financial corporations. There is domestic financialisation, and the huge capitalist units are active internationally, leading to what could appropriately be called global financialisation. Moreover, the U.S. is the leading imperialist power, but hegemonic contests have greatly escalated, raising the prospect of world war.

Regarding the historic rise of finance since the late 1970s the classical Marxist theory of finance capital is indeed broadly relevant, and the period might be called Financialisation Mark II. Above all, the method of Hilferding and Lenin, namely seeking the roots of the period in the conduct of fundamental units of the capitalist economy, remains indispensable. However, in respect of the characteristic behaviour of monopolistic enterprises, both non-financial and financial, and the implications for contemporary imperialism, Hilferding’s concept has very limited applicability.

A crucial aspect of the period, especially since the Great Crisis of 2007–9, is the sustained underperformance of the core of the world economy. This is apparent in the case of Japan, which has stagnated for decades, but even more in Europe, which has performed abysmally in the 2010s and the 2020s up to now. The record of the U.S. has also been weak, despite a brief upsurge since the end of the pandemic, in large part due to extraordinary government spending.

The period since 2007–9 could properly be called an interregnum,7 during which financialised capitalism has lost its dynamism, but no new way of structuring accumulation is emerging. Its most pronounced feature is the weak growth of average labour productivity,8 despite the introduction of ever newer “industrial revolutions” pivoting on telecommunications, information technology, AI, and the like. Weak productivity growth restrains profitability and forces capitalists to seek higher profits by squeezing wages.

The single most important factor behind weak productivity growth is the relative lack of investment in the core countries of the world economy.9 This is a key point of difference with Hilferding and Lenin’s time. The monopolistic corporations of core countries do not invest strongly in fixed capital and, insofar as they do, rely heavily on their own funds. Moreover, they also hold vast amounts of money capital as liquid reserves.

Large corporations today are financialised, but this is mostly in the unusual sense of being holders of large sums of money capital for lengthy periods of time. Such capital is available for financial transactions, though that does not at all mean that corporations become banks. Their profits still come overwhelmingly from production and trade, not from finance.10 It means, however, that corporations are able to use a variety of financial methods, such as share buybacks, to shift profits in the direction of shareholders. It also means that they are not dependent on banks in the sense of Hilferding and Lenin.

The fundamental drivers that led to the emergence of finance capital at the turn of the nineteenth century are not present today. Large corporations naturally and inevitably relate to large banks as they engage in their operations, but there is no amalgamation of the two and no evidence that banks dictate terms of conduct to non-financial corporations. Hilferding’s finance capital simply does not exist today.

This is the appropriate context in which to approach the extraordinary rise of “shadow banking” in the U.S. and elsewhere, including the astounding proportion of the total equity of the U.S. held by the Big Three. The rise of the Big Three after the Crisis of 2007–9 signals the end of what might be called the Golden Era of contemporary financialisation. That period started in the early 1990s, was dominated by commercial banks, and came to a head with the real estate bubble of 2001–6, which ushered in the Great Crisis. Large commercial banks had their wings clipped by the crash and subsequent state regulation.

The path was laid even wider for investment funds and other types of “shadow banks” to expand within the financial sector. They are essentially portfolio managers who make profits by trading securities on both sides of their balance sheets, thus necessarily trading derivatives to protect and lock in the overall value of their portfolios. It should be stressed that there is no opposition between banks and investment funds; indeed, banks provide vital credit to funds. But banks are active lenders of loanable capital and not merely portfolio managers, signalling a shift in financialisation as the interregnum unfolded after 2007–9.11

In the most fundamental sense, fund profits depend on capital gains from securities trading and are thus crucially dependent on the difference between profit rate and interest rate across the economy. Fund profits thus reflect financial expropriation and are forms of Hilferding’s “founder’s profit” but in a complex and sophisticated form, following a century of financial development.

Furthermore, the funds are owners of corporate equity in the sense that they buy shares in the open market, but they are themselves owned by other funds, corporations, and rich individuals. The huge equity holdings of the Big Three are part of a complex and articulated structure of ownership in contemporary capitalism. Such holdings do not represent the concentration of property rights in the hands of a few capitalists.

Which brings us to what is perhaps the most striking absence in Maher and Aquano’s book. Do these funds dictate the conduct of the non-financial enterprises whose shares they hold? Only if that could be demonstrated would a plausible case be made for the re-emergence of a form of Hilferding’s finance capital today.

Maher and Aquanno assert as much in several places of their book but offer no commensurate evidence. In work by mainstream theorists there is some evidence that the vast shareholdings of the Big Three appear to have an impact on the decision-making of the management of non-financial corporations.12 But having an impact on decision-making is a long way removed from being in the driving seat of U.S. capitalism.

The available evidence indicates that, so far, the Big Three operate essentially as rentiers seeking to ensure returns from securities trading, which are then distributed among the owners of the funds (policyholders). This is consistent with the motives of fund managers, whose remuneration is basically linked to the monetary value of the assets they manage and who therefore have a strong incentive to increase the volume and the prices of fund assets.

In sum, there is no finance capital today in the sense of Hilferding and Lenin or in any sense in which large financial institutions dominate large non-financial enterprises. There is, however, a pairing of huge corporations with huge banks and “shadow banks.” In no meaningful way are these components structurally opposed to each other. Rather, they are integrally related while extracting profits from production, trade, and financial operations.

The role of the state and the re-emergence of imperialist conflict

This brings us to the role of the state, first, in the domestic economy but, second and crucially, in the international arena. Financialisation Mark II would have been impossible without the active involvement of the state in the U.S. and elsewhere. The list of state actions that have catalysed its emergence is well-known,13 and there is no need to rehash them here except to mention that the state has intervened at crucial moments to rescue financialised capitalism from its own lethal contradictions. The most prominent such intervention occurred in the Great Crisis of 2007–9, which ushered in the interregnum.

The point that must be mentioned, however, is that the main lever of state intervention is the central bank, the dominant state economic institution of the decades of financialisation.

The unprecedented role of the central bank in contemporary capitalism merits detailed analysis, especially as it involves some of the most complex arcana of finance. There is currently an expanding literature on the central bank in the repo market, its role in the provision of liquidity and in supporting index funds, and so on. Much of it comes from Modern Monetary Theory and post-Keynesian radical economists, for instance, the emphasis on the “de-risking” role of the state, which Maher and Aquanno adopt.

The historic significance of the central bank, however, does not lie with the obscure technicalities of the repo or any other market. It rests squarely with the issuing of state fiat money, the true pillar of Financialisation Mark II.

It is easy to imagine that the period of financialisation has been characterised by the expansion of credit money issued by private banks, which is undoubtedly a prominent aspect of contemporary capitalism with several complex implications. But the most striking monetary feature of the period is the issuing of state-backed central bank money with a strong fiat character.

During the interregnum, the volume of such money issued by the Federal Reserve, the European Central Bank, the Bank of Japan, the Bank of England, and other core central banks has been without historical precedent. Issuing fiat money has allowed the balance sheet of the U.S. central bank to achieve enormous dimensions in the region, for instance, of $9 trillion in 2022.14 Quite apart from the gigantic boost this gave to the U.S. state’s ability to engage in fiscal expenditure, the expansion also enabled the absolute domination of the money market by the central bank.

The money market is the fundamental market of the financial system, the terrain where the rate of interest is determined.15 In advanced capitalist countries the money market currently pivots on the repo market, but it is also broader, and its dominant player is the central bank, as it has long been historically. Indeed, in the U.S. in the years of financialisation and especially during the interregnum, the Federal Reserve has effectively engulfed the money market.

The historically unprecedented power of central banks deriving from the issuing of fiat money has allowed them to control interest rates with great facility. The implications are crucial, always bearing in mind Hilferding’s crucial concept of “founder’s profit.” Manipulating the rate of interest relative to the rate of profit has been a pivotal factor in securing capital gains and thus profits for both financial and non-financial enterprises. This is particularly important for the “shadow banks” that have risen to such prominence in the contemporary system.

In short, the pairing of monopolistic enterprise with monopolistic financial institutions that characterises contemporary capitalism relies crucially on the state not only for its survival but also for its regular profit-making. The economic foundation of its dominant domestic position is the issuing of fiat money by the state.

Equally crucial for the dominant capitals in the U.S. has been the role of the U.S. state in the international arena. This is the field of imperialist and hegemonic contests which have become notably acute in the years of the interregnum and currently raise the threat of world war.

The most crucial point in this respect, which is unfortunately not discussed by Maher and Aquanno, is that large U.S. non-financial enterprises are internationally active not simply through exporting and importing commodities or by engaging in loanable money capital transactions but also by producing across borders. The internationalisation of productive capital is a distinguishing feature of Financialisation Mark II and a point of qualitative difference with the times of Hilferding and Lenin.

The world economy is currently shaped by global production chains dominated by huge financialised monopolies. The expansion of commodity trade is in large measure an outcome of the globalisation of productive capital. Moreover, the production chains that encircle the globe do not necessarily rely on property rights possessed by the lead multinationals. On the contrary, local producers can join purely based on contract. Lead multinationals control these chains through privileged access to technology, pricing, tax avoidance, subsidies, and so on. Not least among such factors is access to international finance.

The internationalisation of productive capital has proceeded alongside the internationalisation of financial capital by banks and more recently by “shadow banks.” The crucial element here is the export of loanable money capital in the form of capital flows. The great bulk of such flows in the last four decades has been among core countries, but a significant part has also been from the core to the periphery. In the interregnum, flows have increased from China to the periphery but also from periphery to periphery.16

These are decisive developments that help characterise contemporary imperialism. The pairing of non-financial and financial enterprises at the global level is the driver of globalisation and financialisation across the world, led by the U.S. The underlying force of imperialism today is this combination of capitals.

Contrary to Hilferding and Lenin’s time, these enterprises do not seek territorial exclusivity through colonial empire. Their international profit-making is served through open access to global markets for loanable, commodity, and productive capital. What they require are clear and enforceable rules for investing, trading, and lending abroad. Even more important is a reliable form of world money to act as a unit of account, means of payment, and reserve of value.

The state that meets these requirements is the hegemon, and that is obviously the U.S., supported by a host of international institutions—IMF, World Bank, WTO, and so on. However, the most important institution in this regard is domestic to the U.S., namely the Federal Reserve. The U.S. central bank is a vital pillar of the domestic configuration of U.S. capitalism, as well as being the main pivot of the hegemonic and imperial power of the U.S. Both roles are served through the issuing of fiat dollars.

The trouble for the U.S. is that the global dominance of huge multinationals from the core has had contradictory results for its hegemony.

On the one hand, it has encouraged the export of productive capital and the establishment of capacity abroad, thereby weakening the domestic industrial base of both the U.S. and other core countries. This has contributed to the underperformance of core economies in recent decades, which is characteristic of the interregnum.

On the other hand, the export of productive, commodity, and loanable capital has helped the emergence of independent centres of capitalist accumulation in what were previously the “Second” and the “Third” Worlds. To be sure, the main factor in this regard was the action of national states in those parts of the world, but the shift of industrial capacity boosted the process.

Large concentrations of industrial, commercial, and financial capital have now emerged in key countries—China, above all, but also India, Russia, Brazil, and so on. The features of these capitals differ according to country, but the broad parameters are similar: internationalisation of production wherever possible, internationalisation of finance, and a pairing of the two on a national basis.

Internationally active capitals from different countries compete incessantly for productive capacity, markets, and lending. There is no world capitalist class and never will be. The uniquely hegemonic dominance of the U.S. for nearly three decades after the collapse of the Soviet Union allowed this essentially misleading notion to take root for a while, particularly as the U.S. also gave the enterprises of other historic imperialist countries room to manoeuvre globally.

A highly unusual historical situation has thus arisen in which the old European powers, Japan, and others adapted to the hegemonic position of the U.S. In the years of the interregnum, this has taken the form of submission, though there is nothing that would guarantee the long-term perseverance of such arrangements.

Even more critical is that the new arrivals in the world market have begun to contest U.S. hegemony with China in the economic and Russia in the military lead. Theirs is not an attempt to create separate imperial blocs since their underlying economic structures are not of that type. Rather, they seek a powerful independent say in setting the terms of investment, trade, and finance. Above all, they seek a say in how world money is determined and supplied.

U.S. hegemony has paid handsome benefits to the U.S. ruling bloc, not least through a flow of implicit returns from other countries holding vast amounts of dollar reserves. Private U.S. corporations have drawn profits from their globally dominant positions, especially in finance. But other forms of U.S. capital have had to carry the burden of an underperforming domestic economy, the U.S. working class has paid a painful price in terms of downward wage pressure and poor employment, and the country as a whole has had to carry the costs of a vast industrial-military complex to support is hegemonic imperial position.

U.S. hegemony is now challenged in ways that were simply impossible for a long time after the collapse of the Soviet Union. To be sure, the “old” imperial powers are quiescent, but nothing guarantees that this is permanent. Moreover, the challenge posed by the new powers is fundamentally economic and neither ideological nor truly political. In this regard, the current disposition of world powers resembles that of pre-1914. Challenging hegemony ultimately involves armies, navies, and airpower, and hence the threat of world war is as serious as at any time during the long U.S.-Soviet confrontation.

Maher and Aquanno have laid out some of the relevant factors in this regard by analysing the trajectory of U.S. capitalism while focusing on financialisation and the interactions between non-financial and financial enterprises. There is a lot more to say, however, based on a Marxist political economy. Engaging in this work and drawing political conclusions is the primary task of the Left today.

Notes

1. Costas Lapavitsas and the EReNSEP Writing Collective, The State of Capitalism: Economy, Society, and Hegemony (Verso, 2023).

2. See Rudolf Hilferding, “Finance Capital: A Study of the Latest Phase of Capitalist Development,” Marxists Internet Archive, updated October 31, 2023, https://www.marxists.org/archive/hilferding/1910/finkap/. First published in 1910.

3. See Vladimir Ilyich Lenin, “Imperialism, the Highest Stage of Capitalism: A Popular Outline,” Marxists Internet Archive, accessed December 12, 2024, https://www.marxists.org/archive/lenin/works/1916/imp-hsc/. First published in 1916.

4. See Costas Lapavitsas,”Hilferding’s Theory of Banking in the Light of Steuart and Smith,” in Research in Political Economy: Neoliberalism in Crisis, Accumulation, and Rosa Luxemburg’s Legacy, ed. Paul Zarembka and Susanne Soederberg, vol. 21 (Emerald Publishing Limited, 2004), 161–80.

5. See Richard Tilly, ‘Universal Banking in Historical Perspective’, Journal of Institutional and Theoretical Economics 154, no. 1 (1998): 7–32.

7. See Lapavitsas and the EReNSEP Writing Collective, The State of Capitalism.

8. Alistair Dieppe and Gene Kindberg-Hanlon, “How to rekindle productivity growth, in five charts,” World Bank Blogs, January 14, 2020, https://blogs.worldbank.org/en/voices/how-rekindle-productivity-growth-five-charts.

9. See “Gross fixed capital formation (% of GDP) – OECD members,” World Bank Group, accessed December 12, 2024, https://data.worldbank.org/indicator/NE.GDI.FTOT.ZS.

10. See Joel Rabinovich, “The financialization of the non‐ financial corporation. A critique to the financial turn of accumulation hypothesis,” Metroeconomica 70, no. 4 (2019): 738–75.

11. See Lapavitsas and the EReNSEP Writing Collective, The State of Capitalism.

12. Lucian Bebchuk and Scott Hirst, “Big Three Power, and Why it Matters,” Boston University Law Review 102 (2022): 1547–600.

13. See Lapavitsas, Profiting without Producing.

14. “Credit and Liquidity Programs and the Balance Sheet,” Board of Governors of the Federal Reserve System, updated December 6, 2024, https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm.

15. See Makoto Itoh and Costas Lapavitsas, Political Economy of Money and Finance (Macmillan, 1999).

16. See Lapavitsas and the EReNSEP Writing Collective, The State of Capitalism.

Costas Lapavitsas

Costas Lapavitsas has taught economics at SOAS since 1990 and has done research on the political economy of money and finance, the Japanese economy, the history of economic thought, economic history, and the contemporary world economy. He has published widely in the academic field and writes frequently for the international and the Greek press. His most recent books include: Against the Troika, with H. Flassbeck (Verso, 2015); Profiting Without Producing (Verso, 2013); Crisis in the Eurozone, together with several RMF researchers (Verso, 2012); Social Foundations of Markets, Money and Credit (Routledge, 2003); Development Policy in the Twenty-first Century, ed., with B. Fine and J. Pincus (Routledge, 2001); and Political Economy of Money and Finance, with M. Itoh (MacMillan, 1999).

Gerald Epstein

Gerald Epstein is Professor of Economics and a founding Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. Epstein has written articles on numerous topics including financial crisis and regulation, alternative approaches to central banking for employment generation and poverty reduction, economists’ ethics and capital account management, and capital flows and the political economy of financial markets and institutions. Most recently his research has focused on the impacts of financialization (Gerald Epstein, ed., Financialization and the World Economy [Elgar Press, 2005]), alternatives to inflation targeting (Gerald Epstein and Erinc Yeldan, eds., Beyond Inflation Targeting: Assessing the Impacts and Policy Alternatives [Elgar Press, 2009]) and financial reform and the Great Financial Crisis (Martin Wolfson and Gerald Epstein, eds., The Handbook of The Political Economy of Financial Crises [Oxford, 2013]). He is writing a book in connection with an INET project on the social inefficiency of the current financial system and approaches to financial restructuring.

Les Leopold

Les Leopold is the executive director of the Labor Institute and author of the new book, Wall Street’s War on Workers: How Mass Layoffs and Greed Are Destroying the Working Class and What to Do About It (Chelsea Green Publishing, 2024).

Stephen Maher

Stephen Maher is Assistant Professor of Economics at SUNY Cortland and Associate Editor of the Socialist Register. He is also the author of Corporate Capitalism and the Integral State: General Electric and a Century of American Power (Palgrave, 2022). He is the coauthor of The Fall and Rise of American Finance: From J. P. Morgan to BlackRock with Scott Aquanno.

Scott Aquanno

Scott Aquanno is Assistant Professor of Political Science at Ontario Tech University. He is the coauthor of The Fall and Rise of American Finance: From J. P. Morgan to BlackRock with Stephen Maher and author of Crisis of Risk: Subprime Debt and US Financial Power from 1944 to Present (Edward Elgar, 2021).