Which Crisis, of Which Capitalism? A Marxian and Financial Keynesian Interpretation of Neoliberalism and the Great Recession

Financial Keynesianism should be incorporated into Marxian theory to account for the current ‘great’ capitalist crisis. Capitalism moved into a new stage from the 1970s, associated with changes in banking, finance and debt, but Marxism lagged behind these developments due to its undeveloped monetary theory. The new capitalism is novel in many aspects which requires a new interpretation. The neoliberal counter-revolution was marked by tax cuts and a rise in public debt. Contrary to the common perception, rather than abolishing the state, neoliberalism redefined its functions in favor of capitalist classes. The state was in charge of directly organizing competition and embedding the ‘free’ market into other social institutions. The marketization of government functions is falsely presented as rolling back the frontiers of the state, and ‘regulation-in- denial’ is coined to indicate this contradiction. Neoliberalism is a state-driven project and has nothing to do with laissez-faire. The system was a market-generated functional equivalent of government demand management and sustained consumption by separating purchasing power from individual labor income. Borrowing was undertaken by individuals themselves on the basis of property mortgages or credit card ratings largely divorced from the labor market situation. In this sense neoliberalism can be defined as ‘privatized Keynesianism’. Financialization, in his view, means ‘favoring financial to productive placements’ and it was the result of the combination of government deficits and credit squeeze. The state was pushed into becoming a permanent debtor, forced to contain social expenditures and submit to the commands of the financial elite. The creditors required a rising value-appreciation of their assets and crisis became the key gadget for them to capture political power. In affluent times economic agents tend to invest more into riskier projects which initially nurture faster growth but eventually develop into a bubble and create the conditions for a crisis.