Since the mid-1970s, two contradictory tendencies have shaped capitalism: (a) computerisation’s increase of the organic composition that resulted in increasing constant capital costs; and (b) top-down capitalist class struggle that decreased the wage share. As a result, the profit rate remained relatively constant and never returned to the levels of the 1960s. Capital was therefore searching for other ways for making profits, which resulted in an increased financialisation of capitalism. Significant shares of profits were invested in finance because capital is driven by the need to accumulate ever more profits and financial speculation promised high returns. The volatility of the economy steadily increased.
The share of the finance industry in the total value added has in many countries significantly increased. A general increase can be observed that has been especially strong in the USA, where the share has doubled from 1970 until 2005, when it made up 8.1% of the USA economy’s total value added (data source: OECD iLibrary, STAN, financial industry=ISIC Rev. 3, C65-C67). There has been an increasing financialisation of capitalism.
Derivatives are relatively high-risk financial instruments that derive their value from other assets. Over-the-counter derivatives are traded directly between two partners. They include instruments such as foreign exchange contracts, forwards and forex swaps, currency swaps, interest rate contracts, forward rate agreements, interest rate swaps, equity-linked contracts, or credit default swaps. They are high-risk because they are not direct ownership titles, but derived from the value of other assets. Figure 9.5 shows the development of the share (in %) of the global gross market value of over-the-counter derivatives in world GDP.
Chapter Nine | Social Media and the Capitalist Crisis
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The Capitalist Crisis