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This Palgrave Pivot uses Marxian economic categories and analysis to explore the deeper causes of the 2008 global economic crisis, what the crisis represents for capitalism, and why fiscal and monetary policies pursued in its wake have failed to rejuvenate economies.

With an innovative interpretation of the crisis and a focus on 'toxic capital’ – a sub-division of Karl Marx’s concept of fictitious capital – Tombazos examines the specificities of economic reproduction under neoliberalism and financialisation.



Chapter 1. Introduction

From the early 1980s, the rate of profit recovers, but the rate of accumulation does not track the recovery in profitability. The ratio Surplus Value/Accumulation grows. An ever greater share of surplus value takes the form of money capital and, through credit, is directed to consumption. Marx’s schemas of reproduction are modified to show the increasing importance of private debt in the process of realisation of value. Financial derivatives permitted the creation of an enormous volume of fictitious capital alongside an unsustainable debt. The ongoing crisis is not only “financial”, but it is also the crisis of the neoliberal regime of accumulation. Economic policies prevented the collapse of the financial system and saved the euro, but they did not lead to an exit from the crisis.
Stavros Tombazos

Chapter 2. Profitability, Accumulation and Industrial Capital

The very concept of capital refers to an articulation of three fundamental economic rhythms: the rhythm of valorisation, the rhythm of accumulation and the rhythm of realisation of value. Capitalist growth presupposes a relative compatibility between these three rhythms, while economic crises arise due to the excessive divergence of one of these rhythms in relation to the others. Every economic crisis can be described as an “organic arrhythmia” of the system. During the neoliberal period, the rate of profit (valorisation of value) recovers, but the rate of accumulation does not track the recovery in profitability: A divergence between the curve of the rate of profit and the curve of the rate of accumulation arises. The ratio Surplus Value (or Profit)/Accumulation grows.
Stavros Tombazos

Chapter 3. Private Consumption, Wage Share of GDP and Reproduction Schemas

The financial system of the neoliberal period has allowed the massive “transfer” of future demand by wage earners to the present time through rising debt, whose servicing has increasingly undermined the disposable part of their wages for consumption. Marx’s schemas of extended reproduction are modified to show that borrowing stimulates consumption, which has a positive effect on investment and employment, thus leading to greater production. However, these reproduction schemas are structurally unstable and from the outset have an expiration date. They collapse, once the so-called markets begin to doubt whether the accumulated rights on future wages will be redeemed. Thus, the economic crisis manifests itself initially in its financial dimension, as an accumulation of unsustainable private debts.
Stavros Tombazos

Chapter 4. Money Capital, Fictitious Capital and “Toxic” Capital

Money capital, as a seemingly autonomous entity, does not produce value. Its “profit” arises as interest and dividend from industrial profit for productively invested loans, as interest on taxes levied by the state to service the public debt and as interest from wages for consumer loans to workers. Money capital corresponds to a real value that is either productively invested or consumed privately, but which can expand fictitiously, thus creating a “toxic value”. Financial derivatives created an opaque environment and permitted an unprecedented growth of fictitious value and of its “toxic part”. They stimulated consumption and investment for a while, but they also led to an unsustainable growth of debt that was an integral part of neoliberal schemas of accumulation.
Stavros Tombazos

Chapter 5. Economic Policies and Economic Perspectives

Economic policies prevented the collapse of the financial system and in Europe saved the euro, but they did not lead to an exit from the crisis. The main pillar of monetary policy was negative real interest rates by central banks, but these have a number of “side effects” that require central banks to shift course. However, moving from the state of an unprecedentedly prolonged monetary “emergency” to a state of normality is not an easy task. It would also adversely affect fiscal policies because it would lead to higher interest rates on public debt. The austerity policies in southern Europe establish conditions that no longer allow the return to growth rates of the initial euro period. Greece has been transformed into a debt colony.
Stavros Tombazos

Chapter 6. Conclusion

From the early 1980s, the neoliberal policies that transformed the old Keynesian regulatory framework, transformed also the characteristics of the crises: The crisis of the 1970s was due to the fall in the profit rate. The present crisis is due to the structural slowdown in the rhythm of realisation of value. The current crisis is the crisis of the neoliberal response to the crisis of the 1970s. The neoliberal reproduction of capital survives with the support of economic policies that create new “bubbles” on the one hand, and social disasters on the other. We live in the impasse of a schema of reproduction in which money capital prevails, whose existence is only possible through severe periodic recessions, social regression and political crises.
Stavros Tombazos


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