'Euthanasia of the Rentier'?

Most explanations of the great financial crisis currently underway have focused on the proximate causes. The feeding of the speculative bubble in the home mortgage market by massive credit expansion, the selling of large amounts of sub-prime mortgages, the peculiar securitisation of the mort-gage loans and the speculative trading of such securities in the global financial markets, the credit rating agencies’ fraudulent ratings, the off-balance sheet device of the structured investment vehicle, and the role of credit default swap arrangements have, taken together, commanded a fair share of attention. In liberal-left circles, the crisis has been seen as a direct consequence of the deregulation of the financial system since the 1970s, especially the cumulative dismantling of Glass-Steagall that was finally buried when the thenUS President, Bill Clinton signed the Financial Services Modernization Act in 1999. But we think the real root of financial implosion goes much deeper.

There is no doubt that, since the late 1970s, a gravitational shift of economic activity from the production of goods and non­financial services to finance has been underway. One indicator of this proc­ ess has been the rapid growth since then of the share of financial profits in total corporate profits. Also reflective of this process of “financialisation” is the explosive growth of private debt – house­ hold, non­financial, and financial business – as a proportion of gross domestic product, and the piling of layers upon layers of claims with the existence of instruments like options, futures, swaps, and the like, and financial entities like hedge funds and structured invest­ ment vehicles. With financialisation, the employment of money capital in the financial markets and in speculation, more generally, to make more money rather than through the route of commodity production (increasingly) became the name of the game.