Capitalism stagnates. It’s the fundamental problem underlying financialization, and the fall into increasing risky debt and eventually crisis. Why does capitalism stagnate?
“In a mature economy, growth is increasingly dependent on finding investment outlets, and capital tends to generate more surplus (or investment-seeking capital) than can be absorbed in existing outlets. New industries arise (such as the computer, digital product industry of today), but normally the scale of such industries relative to the whole economy is too small to constitute a major boost to the entire economic system. Although the capitalist economy is not often discussed in terms of such a historical process of industrialization (which lies outside the governing ideology), it is taken for granted in discussions of the world economy that the more mature economies of the United States, Europe, and Japan are only going to grow nowadays at, say, a 2.5 percent rate, while emerging economies may grow much faster. The maturity argument was influenced by Keynes and developed by Alvin Hansen in the late 1930s and early 1940s in such works as Full Recovery or Stagnation? and Fiscal Policy and Business Cycles. But the most powerful and clearest theoretical discussion of maturity was provided by Paul Sweezy, building on a Marxian frame of analysis, in his Four Lectures on Marxism” (John Bellamy Foster 2009, delving back into MInsky, Hansen, Baran, Sweezy & Magdoff).
“Throughout the nineteenth century in the United States the general price level fell with the exception of the Civil War years. Throughout the twentieth century the general price level rose with the exception of the Great Depression years.
The result of all of this is that, given rising productivity, monopolistic corporations end up grabbing as surplus a larger portion of the gains of productivity growth (and virtually all the gains when real wages are also stagnant), leading to a tendency of the surplus of monopoly capital to rise. There is then a vast and growing investment-seeking surplus, which, however, encounters relatively diminished investment outlets due to a number of factors: industrial maturity, growing inequality which negatively affects consumption (insofar as this is based on paychecks not debt), and persistent unused industrial capacity which discourages the further expansion of capacity” ((John Bellamy Foster 2009, delving back into Baran & Sweezy).
This interview with Foster can be found in MRZine. It’s on his & Fred Magdoff’s new book “The Great Financial Crisis: Causes and Consequences“.