Development and Underdevelopment in the History of Economic Thought

Krugman's liquidity trap and the negative natural rate of interest

Di Bucchianico Stefano, Roma Tre University

Financialization is a process that accompanied and characterized the last decades of advanced capitalism. The discussion in the Marxian field on the development of financialization and the origins of the last big crisis is very variegated. Traditionally, when discussing structural changes in a capitalist system, a prominent role tends to be attributed to the Law of the Tendency of the Rate of Profit to Fall (LTRPF), stated by Marx in Chapter XIII of his Capital, Vol. III. The idea is that behind noticeable transformations in advanced capitalist economies, falling profitability still plays a remarkable role. This paper aims to focus on a specific point: the connection between financialization and the LTRPF in terms of the former being read as a ‘sixth’ countertendency to the latter in light of Marx’s list of countervailing forces preventing falling profitability (Giacché 2011; Guillén 2014; Mavroudeas and Papadatos 2018). We aim to provide an alternative interpretation of that last countertendency. Hence, we argue that Marx was referring to the tendency for the general rate of profit to settle to a uniform value throughout the economy, rather than to spreading speculation and finance as a factor contrasting a falling rate of profit. We believe our interpretation may contribute to the debate besides the discussion on financialization. For instance, authors such as Sweezy, Foley, and Harvey left that countertendency aside.

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Keywords: Financialization, Marx, Law of the Tendency of the Rate of Profit to Fall, rate of profit

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