Capital’s humpback bridge: ‘financialisation’ and the rate of turnover in Marx’s economic theory

The article aims to shed light on the role played by the ‘rate of turnover’ of capital in Karl Marx’s economic theory. Oddly enough, such a concept has been neglected by the most part of Marx’s scholars and exegetes, as it is demonstrated by the small number of scientific works dealing with it. Yet, the rate of turnover is a key-category in Marxian analysis, as it enables Marx to address the impact of the improvement in finance and other unproductive industries on the capitalist process of creation (and realisation) of surplus-value. The evidence from the new philological edition of Marx and Engel’s writings (MEGA2) further strengthens this insight. The main goal of the paper is, therefore, threefold: first, to bridge the gap in the literature dealing with the Volume Two of Capital; second, to provide a re-definition of several Marxian concepts in the light of the role played by the rate of turnover of capital; third, to analyse the effect of the developments in the banking & finance industry on the turnover rate and, thereby, on the general rate of profit

From abstract to concrete: some tips to develop an empirical SFC model

The main purpose of this paper is to show how a simple (medium-scale) empirical stock–flow consistent dynamic model can be developed from scratch. Eurostat data and conventional statistical packages (notably EViews, Excel and R) are used. On the theoretical side, the work builds upon the pioneering work of Godley/Lavoie (2007). Sectoral transactions–flow matrices and balance sheets are explicitly modelled and their evolution over time under different scenarios is analysed. On the empirical side, the model draws upon the applied work of Burgess et al. (2016). The case of Italy is considered, but the model can be replicated for other countries. Eurostat annual data (from 1995 to 2016) are used to estimate or calibrate most model parameter values (for example, consumption function and housing investment parameters). Remaining parameters are borrowed from the available literature or taken from a range of realistic values (for example, weight on past errors in agents' expectations). The model is then used to impose and compare alternative scenarios for Italian sectoral financial balances, based on different shocks to government spending

A Marx ‘crises’ model. The reproduction schemes revisited

This chapter builds upon the Marxian reproduction schemes. It aims to test the impact of some of the most apparent ‘stylised facts’ which characterise the current phase of capitalism on an artificial two-sector growing economy. It is shown that, simplified though they are, the Marxian reproduction schemes allow for the framing of a variety of radical and other ‘dissenting’ renditions of the recent economic and financial crises of early industrialised countries with a flexible and sound analytical model

Moneta, finanza e crisi. Marx nel circuito monetario (Money, Finance and Crisis. Marx Within the Monetary Circuit)

The so-called "Theory of Monetary Circuit" not only represents an original Marxian rereading of Keynesian macroeconomic categories, but also provides an essential tool for the analysis (and the critique) of recent developments in capitalist economies, including the financialization process. Starting from a "circuitist" view, it is argued that the twin financial crises of 2000 and 2007 can be regarded as the "friction points" of the law of creation of value and surplus value (that still relies on the extension and intensification of the exploitation of the living labor in the production sphere) with the private realization of value created (i.e. the historically determined way of setting relative prices, including return rates on financial assets) under current financially sophisticated capitalist economies

Welfare, mercato e piano. Critica del paradigma liberoscambista (Welfare State, Free Market and the Economic Planning. Critique to the Neoliberal Paradigm)

In this article it is argued that the opposition "welfare or barbarism" is historically linked to the degree of globalization of advanced economies. It is also argued that the current trend is not the zeroing of the welfare state, but a radical re-definition of it along both "universalist" and "minimalist" lines. In fact, welfare state programmes are being reduced to a unique residual monetary benefit, whose function is to bridge the gap between the actual real wage and the minimum subsistence threshold of the working class. Against this background, the article provides a radical critique to the unconditional, and sometimes apologetic, acceptance of capitalist globalization and of its ideological superstructure, namely, the neo-liberal agenda. In addition, a different idea of the organisation of the economy is proposed, recovering and updating the concept of the "economic planning"

Introduction: the Theoretical Legacy of Augusto Graziani

Augusto Graziani (1933–2014) was one of the most eminent Italian economists of the twentieth century. He is internationally known as the founding father of the Theory of Monetary Circuit. His contributions to economic theory went beyond the circuit, especially in the early part of his career. They included both other theoretical areas (for example, a critical review of Walras’s general equilibrium model) and the analysis of the ‘uneven development’ of the Italian economy. Even his approach to ‘circuitism’ was quite original and cannot be reduced to a special branch of post-Keynesianism. This introduction to the special section of ROKE on Graziani highlights some key points of his heretical thinking, and gives a quick summary of the papers that follow

Unconventional Monetary Policies from Conventional Theories: Modern Lessons for Central Bankers

The aim of this paper is to provide a critical review of some recent developments in macroeconomics. We discuss the introduction of financial frictions in New Keynesian models, which is said to account for the increasing influence of financial markets, institutions and products in real-world economies. For this purpose, we compare the macro dynamics of a benchmark NCM-DSGE model with the behaviour of the same model augmented with a financial accelerator mechanism. Our simulation exercises show that the financial accelerator mechanism can be regarded as an effective, though indirect, way to account for hysteresis in potential output. A fundamental policy corollary follows that central banks should pursue financial stability, rather than price stability, and target current output growth, rather than output gap. Such an unconventional result is obtained by a simple macroeconomic amendment to an otherwise conventional NCM-DSGE model

The Extent and Variegation of Financialisation in Europe: a Preliminary Analysis

This paper provides a preliminary analysis of the variegated extent of financialisation of European economies since circa 1980. For this purpose, the broad characterisation of financialisation offered by Fine (2012) is adopted. This characterisation identifies eight features of the financialisation process. We focus in particular on the size of the financial sector within a selection of European economies. Data show that the financialisation process is not reflected in the share of employment in the financial sector. This is likely to be the result of the labour-saving nature of technological and organisational innovations introduced in the financial sector in the last two decades. By contrast, the increasing weight of finance in the economy is reflected in the ratio of the value added of the financial sector to total value added and by the ratio of the value of financial assets to GDP. Overall, we find that most European countries have undergone a process of financialisation in the last three decades. However, this process has been variegated, leading us to coin the term ‘variegated financialisation’. The variegation of the financialisation process is likely to be explained by differences in economic and social structures between nations, regions and systems

Monetary economics after the global financial crisis: what has happened to the endogenous money theory?

The 2010s have witnessed a new shift in central banking and, partially at least, in monetary economics and macroeconomic modelling. It is a fact that the endogenous money theory has been gradually clawing back popularity at the expense of the classical theory of interest rates, the financial intermediation view of banks, the money-multiplier story and the quantity theory of money. However, the loanable funds theory and the view of banks as pure financial intermediaries (sometimes coupled with the money-multiplier story) are still sometimes invoked. In addition, the dynamic process of creation, circulation and destruction of money is usually neglected. The point is that money endogeneity is still regarded by many mainstream economists as a mere empirical fact, not a key feature of capitalist market-based economies to be properly explained by a logically consistent theory. By contrast, dissenting economists have further advanced the endogenous money view through: (a) a generalised theory of the endogenous process of money creation; (b) the increasing popularity of modern monetary theory in the public debate; and (c) the development of aggregative stock–flow consistent models and agent-based stock–flow consistent models as an alternative to dynamic stochastic general equilibrium models

Cross-border financial flows and global warming in a two-area ecological SFC model

Highlights •The search for safe financial assets can affect economic growth and financial stability. •The search for green financial assets can exacerbate climate change if capitals are free and exchange rates are floating. •Lacking a strong coordination, green government policies are likely to generate negative side effects for other areas. •Ecological efficiency gains are likely to be offset by the higher growth rate of the economy (rebound effect). •The effectiveness of green behaviours and policies depends on the impact of cross-border financial flows on exchange rates