The historical turning point that the world is experiencing, decried by some as “the age of megathreats,” can be described as a “polycrisis,” indicating a dramatic convergence of many crises (economic, social, energy, environmental, democratic, military) that are feeding off each other. One critical element, however, stands out among the others, namely the stage which the financial circulation process analyzed in Riccardo Bellofiore’s new book has reached.
In L’ultimo metrò. L’Europa tra crisi economica e crisi sanitaria (“The Last Metro. Europe between Economic Crisis and Health Crisis”), written together with Francesco Garibaldo and published by Mimesis, Bellofiore describes the nature of this mechanism that is “untethered from trade relationships” and real relationships, thanks to an almost-unlimited liquidity, unrestrained by trends in employment and the fundamentals of the so-called real economy, a mechanism which, in the past decades, has been able to “expand without limits on a transnational scale,” including “in the case of asset bubbles (financial and real estate).”
This is the liquidity created by the “unconventional” monetary policies (quantitative easing and others) adopted progressively since the 2007/2008 crisis by the Central Banks of all countries, as a result of which the world was rescued from the abyss, but which are now being withdrawn, revealing their counterproductive aspects. First and foremost is their contribution to further financialization, which is connected with the “hyperglobalization” of the recent past, just as its floundering is connected with the “selective globalization” that is taking over.
Financial hypertrophy has been fueled by low inflation and low (even negative) interest rates, and now, with inflation and interest rates soaring, it is facing an impasse, as witnessed by the currency and monetary upheaval caused in the UK by a shock proposed budget that was later withdrawn, the growing turmoil in the stock markets, the collapse of the yields of the digital platforms and the difficulties of the highly technologized Big Five.
The monstrous shadow financial system that has been created over time includes the myriad “off-balance sheet” positions in ad-hoc financial vehicles, derivatives markets, securitizations, new highly-leveraged funds, unconventional instruments that enhance financial fragmentation and obscure the perception of systemic risk. Global multinationals are exhibiting a marked financialized character, increasingly resorting to carry trade, capital transfer and financial wizardry, often anything but above-board, to make profits.
Thanks in part to the massive information technology revolution, everything that could be turned into a financial transaction has been used to make a profit, from credit to the insurance field, speculation, foreign exchange, securitization, derivatives and the futures markets.
The new fauna of intermediaries, exploiting the benevolence of regulators, has created instruments and vehicles to distribute and manage risk and turned previously non-tradable debt and credit ratios into marketable securities, allowing profits to increase disproportionately. But in doing so, this fauna of intermediaries has also increased the complexity of the markets themselves, giving rise to unprecedented financial pyramids (for which most of the transactions are off-balance-sheet) and turning risk management into aggressive risk-taking.
The “euthanasia of the rentier,” which Keynes had hoped would put to use capitalism’s inherent susceptibility to periodic crises and give rise to lasting programs of peace and social justice, has been reversed and turned into its opposite. As a result, sources of instability are multiplying, from the exponential growth of private debt in particular to the ups and downs of currencies, convulsions in balance of payments trends, the ups and downs of domestic asset appreciations and depreciations and sudden changes in capital movements. All this is happening all around us, amplified by the economic consequences of the war in Ukraine.
We do not know precisely where the mechanisms of financial leverage, i.e., the tendency to take on more debt, are located and how they work, but we now see how many additional costs and difficulties they have created. After all, financialization and hyperglobalization have been a way of counteracting stagnation and looking for alternative sources of profit. If, instead of reshaping the entire process of economic and social development in a completely different direction and with completely different content by focusing on labor and real unmet social needs, we were to pursue the dangerous path of basing the revival of growth and the search for new sources of profits on “less protection and more competition in services” (which would entail cuts in social spending and new privatizations on a global scale, in strategic fields such as healthcare and similar), this would only exacerbate the problems we’re already seeing.
Similarly, it would be disastrous to surrender to the idea that innovation is possible only if it is channeled through increased expenditures on arms and war (which means public funding should be directed to this as a priority). Instead, we urgently need to find the wellsprings of the innovation of the future in investments for peace.