Costas Lapavitsas, Guest Blogger
This is the final installment of a four-part interview with Costas Lapavitsas, author of Financialised Capitalism: Expansion and Crisis (Maia Ediciones, 2009) and Profiting Without Producing: How Finance Exploits Us All (Verso, 2014). This part considers the solutions to the problems of financialization, pointing ultimately toward a broad anti-capitalist program and new “avenues toward socialism.” (See the earlier parts of the interview here, here, and here.)
Dollars & Sense: Do you anticipate, out of this crisis, there being a major restructuring of capitalism in high-income capitalist countries? There seem to be little signs of a dramatic change at this point, with the continuity of neoliberal policy and the financial sector still riding high. Should we be thinking of this era in terms of possibilities of a dramatic change in the way capitalism works?
Costas Lapavitsas: The crisis has not led to dramatic change from within. That’s clear now. When it was at its peak in 2008-2009, it was legitimate to expect that it might bring a profound change in outlook leading to a structural transformation of capitalism—effected from within the capitalist class, or from above, as it were.
The financializing layers have controlled policy—they have effected policy capture—and they have taken measures which basically defended the financial system and protected financialization. Financialization is continuing. It hasn’t gone away, it’s here. Many people expected financialization to come to an end because they saw financialization as a matter of policy, you see. Well, we now know that this isn’t the case. Financialization has continued, policy hasn’t changed, because the social interests embedded in finance and connected to financialization will not allow it to change. They have acted to protect themselves and have been successful at it.
Now, this doesn’t make financialization stable, for the reasons that I’ve outlined. Instability is there. Inequality is there. The system is deeply unstable, and yet is not changing. At the same time, at the level of ideology, we’ve got complete domination of neoliberalism, and it hasn’t been shaken in the universities, in the think-tanks, or in other ways. Our time is basically characterized by intellectual immobilism. Combined with the unstable outlook of economy and society, inequality and the inability to grow fast, we also have immobilism in policy. That’s where we are, and that’s how things can be expected to continue for a while at least.
D&S: You’ve argued that reregulation is not an adequate response. In light of this view, what sort of transformation is necessary, in terms of a broader anti-capitalist agenda? Fundamentally, are we talking about a transition to a distinctly different economic system from capitalism as we understand it?
CL: We’ve now come to the most difficult part, the crux of all this. In my view, we need to start with the problems of financialization as a historical period and what it has meant for capitalism, and then to decide how to confront it and what to do about it. First point to establish is that we need to reverse financialization. Not simply to overtake it, or to replace it, or anything like that. Financialization has to be reversed. We don’t need all this finance, and we don’t need all these financial modes, techniques, methods, and institutions in modern society. We need to reverse financialization. The question is how.
Clearly, regulation will be an important part of the process. I have said that financialization hasn’t been caused by regulation, and it isn’t simply a matter of policy, but that doesn’t mean that we don’t need to change policy. Obviously, we need to reregulate finance and we need to effect regulation with teeth regarding what financial institutions can do, where they can operate, the activities they can engage in, the prices they can charge, and the credit they can give. But if financialization has not been caused by regulation, then re-regulation is not enough, even if it has teeth. Financialization cannot be reversed by regulation alone. We need further important action. We need to reverse financialization at the level of nonfinancial corporations, we also need to change the way financial institutions work, and finally we need to change the conditions of the household.
As far as non-financial corporations are concerned – at the level of commercial and industrial enterprises – we need policies that create a new outlook for production and trade that puts investment and jobs at the forefront and puts financial game-playing right at the back. It is impossible, I would argue, to bring this change about without a new spirit of public intervention in the non-financial sector. More than that, it is important to re-establish public ownership in key areas of the non-financial sector, at the very least to facilitate general public intervention. So that’s the first element.
For banks, it is obvious that we need a different type of banking and financial system, not simply through regulating the practices of the current system but in terms of outlook in general. Here I would again argue that we need to consider ownership, not simply regulation. We need public financial institutions with a new public mandate, a new public spirit of operation that would engage in credit and other activities of finance on a different basis to the currently failed private finance. The new institutions would support production and employment but also allow people to use finance in a beneficial way in everyday life. The new structures of finance would thus avoid the cycles of bubble and burst that have caused so much social harm these last few years.
For households, finally, we need a broad range of interventions to reverse financialization. Above all there must be renewed public provision for housing, for education, for health, for insurance, for pensions. We need to make private finance retreat from these areas and we must establish public and communal mechanisms of provision. Obviously, that has to be accompanied by decisive redistribution of income and wealth, particularly as real wages have suffered for a long time.
Reversing financialization is much, much more than simply reregulating finance. It’s a new way of operating the public and the private elements of the economy. Reversal of financialization would seek new ways of organizing the public side of the economyby emphasizing the associational and communal dimensions of the economy. In effect, it would bring about a wholesale transformation of the economy in an anti-capitalist direction. Basically, the changes that I’ve mentioned above tend to be anti-capitalist. So, reversing financialization is a vital part of a global anti-capitalist strategy. To me, reversing financialization it a fundamental part of the struggle for socialism, and of opening up fresh avenues towards socialism for this century.
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