Marx, Finance and Political Economy

ABSTRACT

Shortly after the publication of Volume I of Capital, the financial requirements of capitalist enterprise forced the financial innovation of bond and stock finance for joint stock companies. Marx intended to re-write Capital in order to incorporate this change. He did not achieve this. The economic analysis of capitalism with long-term finance was undertaken by Hilferding in his Finance Capital. Thereafter, a strand of economic analysis of production and distribution emerged in the work of the Austro-Marxists, Veblen, Keynes, Kalecki, Steindl and Sweezy, and the Italian Kaleckians, Joseph Halevi and Riccardo Bellofiore, which incorporated the change made to the structure and dynamics of capitalism by long-term finance. However, this shift in capitalist financing has largely been ignored in economic theory, while much of the heterodox analysis that seeks to challenge the role of finance in contemporary capitalism has not integrated finance consistently. The change from the classic capitalism to finance capital raises important questions about the meaning and relevance of Marx’s work today.

KEYWORDS:

• Marx
• Hilferding
• corporate finance
• credit

JEL CLASSIFICATION:

• B14
• B24
• E44
• P12

Acknowledgments

I am grateful to Lynne Chester, Steve Pressman and the anonymous reviewers for helpful comments on an earlier draft. Sole responsibility for remaining errors lie with the author.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Engels tried to incorporate this shift into Marx’s Capital with a short chapter on the stock market that he added to Volume III of Capital (Marx 1974b). But Engels did not go beyond deprecating the speculation in that market, in terms that are common currency in modern, superficial critiques of finance (see Dellheim 2018).

2 To give him his due, Hilferding did not mean that capitalism could eliminate its problems and contradictions. But these would be more political and social than economic. Class antagonisms would remain and, of course, the whole system was becoming dependent on imperialism (Hilferding [1910] 1981, Chs. 22, 23).

3 Paradoxically, with the 1929 Crash, it was the social theory, rather than its analysis of long-term finance, that became the distinctive feature of institutionalism. Institutionalism never developed its insights regarding long-term finance into a proper macroeconomics that might have rivalled the more nuanced insights of Keynesianism and neo-classical economics (Sweezy 1958).

4 A similar path to a Ricardian analysis of ‘classical’ capitalism was trodden by the followers of Piero Sraffa, who represented Sraffa’s classic work of logical analysis, The Production of Commodities by Means of Commodities as a model of an actual capitalism, as opposed to an exposition of a logical flaw in neo-classical analysis. The Sraffians differed from Ricardian Marxists in reinterpreting the labour theory of value as a standard of value that is a wage good and analysing a capitalist system of reproduction without using money or finance.