Surplus Money Capital as Crisis Mechanism

Jim Kincaid



Profits are at the heart of the chain of crises which started in 2007. But this is not because the rate of profit has fallen in the major economies, as in the crisis of the 1970s. Since around 2000, the combination of a rising mass and rate of profit and lagging rates of investment has led to a global surplus of money capital . This has been a crisis of a particular type of disproportionally. Levels of surplus value extraction have been higher than the capacity of the system to absorb them. As a consequence - excess capital in the money form.
The tendency of the rate of profit to fall, which Marx correctly identified, has been reversed in the recent period by the strength of a range of countertendencies. Investment levels in the major economies have lagged in money terms, as the value and price of investment goods has fallen. Corporate strategies in the productive and financial sectors have shifted over the past three decades to defensive and aggressive operations in the market for corporate control, to the maintenance of high share-prices. These objectives require large war-chests of money capital, and a careful rationing of investment expenditure. Generous levels of capitalist consumption by executives and shareholders have also been a priority.
As the rising surge of surplus loanable capital was transferred to the banks and financial markets from 2000 onwards, the consequences were contradictory. Large profits initially in the financial sector, but on-going difficulty in finding a large enough supply of safe assets and reliable borrowers. Disaster hit in 2007 after more than $1 trillion dollars had been lent in unsustainable subprime mortgages in the US, and securities based on these mortgages had been sold on a huge scale to banks in the US and Europe. Severe strains arose after Northern European banks had lent lavishly to finance unsustainable booms in the peripheral economies. And since then, a seemingly intractable combination of ultra-low interest rates, demand deficiency, and faltering growth in key sectors of the world economy.
Marxist political economy can explain the causes, logics, and consequences of such a crisis of surplus money capital. But some changes in our angle-of-vision - and in ways of reading Marx - are required. Especially, a greater emphasis on the mass as well as the rate of profit. Attention not just to the instabilities of high debt levels, but to the risks and dangers the financial sector faces in finding enough safe assets to match very large inflows of loanable capital. The patient tracing of the channels through which excess accumulations of money capital build up - and their sources in underlying modes of surplus-value extraction.