Finance capital and the World Economy — Prabhat Patnaik

THE period of neo-liberalism [corporate capture of the government] witnesses an increase in the share of economic surplus in total output [aggregate economic rent inherent in commodity production in monetary production economies] both in individual countries and also for the world as a whole. This is because the “opening” up of the economy to freer trade in goods and services leads to a rapid introduction of structural-cum-technological change, which, because of its labour-displacing character, keeps down the growth rate of employment, to even below the natural growth-rate of the work-force. The resulting increase in the relative size of the reserve army of labor [surplus workforce] restrains the level of real wages everywhere, even as labour productivity grows massively [through scaling technological innovation], causing a rise in the share of economic surplus [rent extracted by the owners of the means of production].

Such a shift from wages to surplus [rent extraction] depresses the level of consumption demand [effective demand], and hence aggregate demand, and causes a tendency towards an over-production crisis [surplus production]. Since fiscal conservatism at the insistence of finance capital, prevents any offsetting of this tendency through State spending, the only possible counter to it within a neo-liberal economy, is provided by asset price bubbles that also have the effect of boosting demand [wealth effect]. But even if such a bubble perchance gets generated that keeps at bay the over-production crisis for a while, its collapse again pushes the economy into a crisis.... [Minsky]...

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Finance capital and the World Economy
Prabhat Patnaik | Indian Marxist economist and political commentator, Professor (retired) at the Centre for Economic Studies and Planning in the School of Social Sciences at Jawaharlal Nehru University in New Delhi (1974-2010) and formerly vice-chairman of Kerala State Planning Board (2006-2011)