Dr. Niu Ziniu: New Developments and New Changes in Contemporary Capitalism

July  2023

Author is lecturer at the School of Philosophy, Nankai University.

Since the 1970s, global capitalism has undergone significant structural adjustments, exhibiting diverse characteristics such as financialization, informatization, flexibility, and globalization. This new face of capitalism is different from both the “Fordism” capitalism of the twenty years after World War II and the industrial capitalism witnessed by Marx in the 19th century.

The main characteristics of contemporary capitalism are significant stagnation and turbulence. Since the 1970s, major capitalist countries have faced a serious problem of capital surplus, with economic growth rates declining year after year and never returning to the level of the “golden age” of the two decades after World War II.

Various economic and social crises frequently erupt, and the means used by capitalist countries to respond to crises are difficult to ease the contradictions in the long run.  They can only delay more serious contradictions and crises until the future. These signs indicate that the contradiction between capitalist production relations and productive forces has seriously intensified, and a sustainable “growth system” can no longer be formed.  The various new changes in contemporary capitalism are all manifestations of capitalism temporarily extending its lifespan through various “repair mechanisms”.

In view of this, contemporary Western Marxists take the “crisis repair” mechanism of capitalism as the main axis, deduce various new phenomena of contemporary capitalism, and construct a diversified and three-dimensional theoretical landscape.

The “financial fix” and the financialization of capitalism

The dominant repair mechanism of contemporary capitalism is “financial repair”. Since the 1970s and 1980s, capitalist countries have shown a distinct trend of “financialization,” with the financial sector expanding rapidly and occupying a dominant position in the national economy. Some Western left-wing scholars believe that “financialization” is a restorative mechanism used by capitalism to transfer its own contradictions.

For example, the monopoly capital school of Western left-wing economics asserts that the trend toward financialization is capitalism’s response to the trend toward declining rates of profit: because of the overaccumulation of industrial capital and the decline in the rate of profit, a large amount of money capital has been transferred to the financial sector in the pursuit of profit, thus maintaining the existence of capitalist investment and accumulation activities.

As John Bellamy Foster has pointed out, how to operate large disposable surpluses in a situation where for-profit investment opportunities are becoming increasingly scarce?  Since the 1970s, their main response has been to expand the demand for financial products as one of the ways to preserve and increase the value of monetary capital.

Against the backdrop of declining profitability of industrial capital, why has the financial sector been able to keep profitability high?

This question is the key to explaining the mechanism of financial repair. To this end, Western Marxists have explored the mechanisms of “credit money” and “virtual capital”.

David Harvey, for example, argues that the contemporary banking system is able to create credit money out of thin air (nothing) through debt without value as a foundation.

These currencies do not represent “value” but “countervalue”, since the debt they create has to be repaid by the value of future production. Credit money provides the financial markets with a large supply of money, which leads to the rapid expansion of virtual capital bubbles and makes it easy for financial capital to profit from them. However, again, virtual capital is not real value, but rather the expectation of future earnings discounted in the present.

In this way, a separation of the monetary system from the value system occurs, creating high monetary profits within financial markets that are not based on value.

However, this does not mean that financial capital can be completely separated from industrial capital and create value independently, but only means that financial capital has plundered the right to distribute future value in advance. Therefore, the “financial repair” mechanism did not solve the problem of declining profit margins, but transformed it into the problem of speculative overheating and debt overhang, thus creating new turmoil.

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