Ph.D. Octopus

Politics, media, music, capitalism, scholarship, and ephemera since 2010

The Rise of Finance is a Sign of Autumn

with 2 comments

By Wiz

Kevin Drum and Matt Yglesias are concerned about reports that, although U.S. corporations have tremendous financial assets, they are using them to buy back stock, rather than invest in new production. “Increasingly,” Drum says, “investors simply don’t believe that there are great opportunities to invest in the real world. So instead they invest in the shiny, bubbly financial world.”

Fernand Braudel

Or as Braudel might say:

In the eighteenth century, when money was lying idle all over Europe, and finding uses only with difficulty and on poor terms, princes had only to snap their fingers and the rich Genoese, Genevans, or Amsterdammers came running to offer their money. In the spring of 1774, just after a severe depression, the coffers of Amsterdam were open to all callers…

Was this burst of financial activity an aberration as some historians, taking a moral tone, have suggested? Was it not normal development? Already in the latter part of the sixteenth century, another period when capital was superabundant, the Genoese had followed the same itinerary, as the nobili vecchil, the official lenders to the King of Spain gradually withdrew from commercial activity. It looks very much as if Amsterdam, repeating this process, dropped the bird in hand to go chasing shadows, abandoning the money-spinning entrepot trade for a life of speculation and renteirdom, and leaving all the cards to London- even financing her rival’s rise. But then, did Amsterdam really have any choice? Indeed had the rich Italians of the sixteenth century had any choice? Was there even the remotest chance of stopping the rise of the North? At all events, every capitalist development of this order seems, by reaching the stage of financial expansions, to have in some sense announced its maturity: it was a sign of autumn. (pp. 245-246)

Replace Amsterdam with America, and Britain with China and you’ve got journalism, not history. Of course, at some point, the whole world is financialized, and then we’re in trouble. In this vein I strongly encourage everyone to read Robert Brenner’s analysis of the origins of our crisis. Long story made short: profits in the financial industry have papered over decades long decline in global demand and oversupply of manufacturing goods.

I’m all for Krugman’s calls for more stimulus, but its hard not see such things a bit like morphine, reducing the pain of our inevitable decline rather than ever reversing it. (One suspects that Krugman, like Stiglitz, is just a step away from starring into the abyss, realizing the rot goes deeper than a New York Times columnist is allowed to perceive, while his Keynesian fantasies, as well meaning and laudable as they are, hold him back.)


Written by Peter Wirzbicki

June 18, 2010 at 15:39

Posted in Uncategorized

2 Responses

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  1. pretty sure Wiz here has one of the best feels for the Pulse around. you always seem to be on key and a bit more keen than other voices. you’re good, man. hope the audience finds you.


    June 18, 2010 at 17:09

  2. Excellent post.

    uff the fluff

    June 24, 2010 at 13:27

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