(London: Verso, 2013)
Lapavitsas’s Profiting without Production is a tour de force, covering the subject of financialization thoroughly, from the abstract to the concrete, including an impressive analysis of derivative markets, compressed within a short introductory work. Readers will also appreciate his detailed yet clear graphical presentations of data. His time series data sets frequently include comparative data for the US, the UK, Germany and Japan, the four countries that he uses to give a picture of the experience of financialization, usually between 1971 and 2007. In addition, readers will be impressed, if not amazed, by the wide-ranging literature upon which he draws, from Marxist to more conventional sources.
My main quibble is a minor one: the title can be somewhat misleading, suggesting a screed that calls for rooting out finance altogether on the grounds that it is nothing more than an unproductive drain on society. Instead, Lapavitsas acknowledges that finance plays an important, though ambiguous, role in a capitalist economy. For example, people need help from time to time. Friends and family may not be in a position or a mood to offer such help, creating a need for third parties who might stand in the breach. During times of need, people are most vulnerable to third parties, whose methods are most vampire‑like.
Lapavitsas uses Marx’s term, “secondary exploitation,” to analyze the role of such exploitative finance. By secondary exploitation, Marx meant that capitalism exploits workers within the relations of production and then exploits them once again after they are paid. Payday loans, rent to own, and late fees are excellent examples, all of which turn out to be sources of profits for some of the largest financial institutions.
Like ordinary people, business often stands in need of help, especially to assist in the accumulation of capital. While less dramatic than the extraction of profits from ordinary people, Lapavitsas describes how finance also sucks blood from the productive sector, in effect joining financialization and deindustrialization together. The narrative of the increasing unproductiveness of the financial sector in promoting accumulation over the last four decades runs through the book.
In his concluding section, Lapavitsas discusses the prospects for some useful policies to rein in the banks, such a tax on financial transactions or the creation of public banks as an alternative to private ones. However, he closes on a note that is much more realistic than his title:
Financialization cannot be confronted without re‑establishing the ideological primacy of the collective over the individual, and of the public over the private. It cannot be opposed without re‑asserting the superiority of the public interest over profits and benefits of the individual. It cannot be reversed without accepting that public authorities have the right and the obligation to intervene in the economy in the interests of the many. Only on this basis would it be possible to devise policies that could re‑establish control over capital domestically and internationally. Confronting financialization, in other words, is inherently a stance that leads to anti‑capitalist ideas, policies, and practices, and for this reason it should be part of the struggle for socialism. (327)
Near the end of the book he offers a more accurate picture of his intention than his title suggests:
The main thesis of this book is that financialization represents a transformation of capitalism resting on the altered conduct of non‑financial enterprises, banks, and households. The transformation has taken place during the last four decades within a ‘channel of accumulation’ determined by neoliberal ideology and shaped through deregulation of labour and financial markets. (323).
In this regard, Lapavitsas does an excellent job of situating finance as an integral part of capitalism. In other words, the core of the text takes the position that capitalism exploits us; finance also does so, but only as a part of capitalism. While finance contributes positively to the accumulation process, its beneficial role is in fast decline.
This book is really several books in one. Each one is valuable in itself. The first part briefly presents the nature of the modern system of derivatives. It also analyzes the literature regarding the theory of financial capital. In the process, Lapavitsas gives an especially detailed analysis of the theories of Marx and Hilferding. This part of the book is very important in illuminating the differences between the role of finance in the US, the UK, Germany, and Japan. In the latter two countries, enterprises rely heavily on banks, which exercise considerable influence on corporate leadership. In contrast, enterprises in the US and the UK turn to other sources of finance, such as equity markets or the bond market.
Lapavitsas makes clear that Hilferding understood finance in terms of the relatively unique German system. Although his analysis was very deep, his reliance on the German example placed limits on its wider relevance. However, Hilferding’s analysis represents the most exhaustive study of Marx’s theory of finance, so much so that there is a tendency to rely on Hilferding, at the cost of overlooking the richness of the financial analysis of Marx, who paid especially close attention to the political economy of finance in England.
Part 2 is a political economy of finance. By comparing the differing evolution of finance in the US, the UK, Germany, and Japan, Lapavitsas shows the importance of the institutional structure to understanding the way in which finance develops. He explores how finance and industry function together in a capitalist economy. Next, he turns to a more empirical analysis of the evolution of finance in the four countries, followed by an analysis of the recent economic crisis. He concludes with an examination of the control of finance, including the evolution of the relationship between finance and the real accumulation of capital
Throughout this work, Lapavitsas’ excellent visual representations of data clearly illustrate the varying financial systems of the four countries. This combination of detailed empirical data, historical analysis of the political economies of the four countries, and a careful theoretical analysis, makes the book a unique study, which the blurbs of Chang and Pollin accurately describe as panoramic.
The third part concerns the relationship between the productive and the financial parts of the financial system. In this section, Lapavitsas goes into the particular way that finance can serve the interests of productive capital.
The fourth part of the book addresses the difficulties in conceptualizing the political economy of financial profits, providing taxonomy of the various kinds of financial profits.
Lapavitsas concludes by examining various tendencies of modern finance, which he makes more concrete with a careful analysis of the buildup to the recent financial crisis, followed by an analysis of the possibilities of financial regulation.
Probably no book since the third volume of Capital has attempted to look at finance so comprehensively. The book’s 40-page bibliography suggests the thoroughness of Lapavitsas’ effort.
Reviewed by Michael Perelman
California State University at Chico