Mello sabadini (eds ) financial speculation and fictitious profits; a marxist analysis (2019)

MARX, ENGELS, AND MARXISMS

Financial
Speculation
and Fictitious
Profits
A Marxist Analysis

Edited by
Gustavo Moura de Cavalcanti Mello
Mauricio de Souza Sabadini


Marx, Engels, and Marxisms
Series Editors
Marcello Musto
York University
Toronto, ON, Canada
Terrell Carver
University of Bristol
Bristol, UK


The Marx renaissance is underway on a global scale. Wherever the critique
of capitalism re-emerges, there is an intellectual and political demand for
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Gustavo Moura de Cavalcanti Mello
Mauricio de Souza Sabadini
Editors

Financial Speculation
and Fictitious Profits
A Marxist Analysis


Editors
Gustavo Moura de Cavalcanti Mello
Department of Economics and
Post-Graduate Programme in
Social Policy
Federal University of Espírito
Santo (UFES)
Vitória, Espírito Santo, Brazil

Mauricio de Souza Sabadini
Department of Economics and
Post-Graduate Programme in

Social Policy
Federal University of Espírito
Santo (UFES)
Vitória, Espírito Santo, Brazil

ISSN 2524-7123    ISSN 2524-7131 (electronic)
Marx, Engels, and Marxisms
ISBN 978-3-030-23359-4    ISBN 978-3-030-23360-0 (eBook)
/>© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer
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Acknowledgement

This study was written by some members of CAPES-PRINT Inter-­
nationalization Project from UFES and was financed in part by the
Coordenaỗóo de Aperfeiỗoamento de Pessoal de Nớvel SuperiorBrazil
(CAPES)Finance Code 001.

v


Series Foreword

The Marx Revival
The Marx renaissance is underway on a global scale. Whether the puzzle
is the economic boom in China or the economic bust in “the West”, there
is no doubt that Marx appears regularly in the media nowadays as a guru,
and not a threat, as he used to be. The literature dealing with Marxism,
which all but dried up 25 years ago, is reviving in the global context.
Academic and popular journals and even newspapers and online journalism are increasingly open to contributions on Marxism, just as there are
now many international conferences, university courses and seminars on
related themes. In all parts of the world, leading daily and weekly papers
are featuring the contemporary relevance of Marx’s thought. From Latin
America to Europe, and wherever the critique to capitalism is remerging,
there is an intellectual and political demand for a new critical encounter
with Marxism.

Types of Publications
This series bring together reflections on Marx, Engels and Marxisms from
perspectives that are varied in terms of political outlook, geographical

base, academic methodologies and subject matter, thus challenging many
preconceptions as to what “Marxist” thought can be like, as opposed to
what it has been. The series will appeal internationally to intellectual communities that are increasingly interested in rediscovering the most powerful critical analysis of capitalism: Marxism. The series editors will ensure
vii


viii 

SERIES FOREWORD

that authors and editors in the series are producing overall an eclectic and
stimulating yet synoptic and informative vision that will draw a very wide
and diverse audience. This series will embrace a much wider range of
scholarly interests and academic approaches than any previous “family” of
books in the area.
This innovative series will present monographs, edited volumes and
critical editions, including translations, to Anglophone readers. The books
in this series will work through three main categories.
Studies on Marx and Engels
The series will include titles focusing on the oeuvre of Marx and Engels
which utilize the scholarly achievements of the ongoing Marx-Engels
Gesamtausgabe, a project that has strongly revivified the research on these
two authors in the past decade.
Critical Studies on Marxisms
Volumes will awaken readers to the overarching issues and world-­changing
encounters that shelter within the broad categorization, “Marxist”.
Particular attention will be given to authors such as Gramsci and Benjamin,
who are very popular and widely translated nowadays all over the world,
but also to authors who are less known in the English-speaking countries,
such as Mariátegui.

Reception Studies and Marxist National Traditions
Political projects have necessarily required oversimplifications in the twentieth century, and Marx and Engels have found themselves “made over”
numerous times and in quite contradictory ways. Taking a national perspective on “reception” will be a global revelation and the volumes of this
series will enable the worldwide Anglophone community to understand
the variety of intellectual and political traditions through which Marx and
Engels have been received in local contexts.
University of Bristol
Bristol, UK
York University
Toronto, ON, Canada

Terrell Carver
Marcello Musto


Foreword

This book, authored by Gustavo Mello and Mauricio Sabadini, is important not only because of the clarity of its explanation of a difficult subject,
but also because it comes at a time when financial globalization once again
threatens to provoke a large-scale economic crisis. It provides the necessary elements for understanding the potential effects of an increase in
speculative parasitism and fictitious profits on the economy and, therefore,
on labor, from the point of view of both wages and unemployment.
Increases in financial activity are not naturally parasitic. In general,
companies operate in a macroeconomic environment over which they
have little long-term control and in which they operate with incomplete
information. Today, the complexity of production increases uncertainty
regarding the profitability of projects. Covering these new risks leads to
the development of complex financial products. In a way, the complexity
of the financial market is a consequence of the complexity of production.
Such financial complexity is developed through financial liberalization

(de-compartmentalization, disintermediation and deregulation). This has
a cost, but it makes it possible to obtain a higher profit that exceeds this

On the theme of Marxism, he is the author of Sur la Valeur (Ed. Maspero), in
partnership with Valier J.; Une introduction à l’économie politique (Ed. Maspero)
in partnership with Mathias G.; L’Etat surdéveloppé (Ed. Maspero-La decouverte)
and Nature et formes de l’Etat capitaliste, analyses marxistes contemporaines (Ed.
Syllepse), with A. Artous, JL Solis Gonzales and T. Hai Hac.

ix


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FOREWORD

cost.1 Therefore, the development of finance and the growth of sophisticated financial products makes possible, in abstract, the development of
capital. This is because the capital cycle only develops if financial activities
permit the growth in value of productive capital. Currently, the growth of
the industrial sector demands a more than proportional development of
the financial sector.
However, finance, like a Janus, has two faces. One is “virtuous”, as we
have just mentioned; the other is “vicious”, having acquired an
­uncontrollable amplitude with financial globalization. Financialization is
the childhood disease of finance, its own monster. Financialization is the
threshold from which the financial sector, more profitable than the industrial
sector, develops to the detriment of the latter. That there has been a shift
toward “financialization,” since its development is mainly due to the
attraction exerted by these new financial products in themselves, rather
than the function of reducing risk in production.

In this way, the financial sector seems to become autonomous from the
productive sector and, in this sense, we can say that the relationship
between finance and labor is both fetishized and complex. It is fetishized
because finance and labor seem to operate in separate watertight spaces:
money seems to become autonomous, just like the miracle of bread, and
to generate money from itself without there being a relationship with
labor and working conditions. It is complex because there are relationships between the development of finance and working conditions (total
wages, employment and types of jobs), relationships that develop underground, appearing more clearly in times of crisis. In the context of commercial and financial globalization, these relationships, in addition to
national determinants, are difficult to decipher, especially since the virtuous and vicious aspects are the two faces of the same coin. In other words,
virtuous finance contains within it the tendency to financialization.
Therefore, there is a dialectical relationship between them.
Much has been written about the origins and causes of the financial
crisis in developed countries and its highly negative consequences for economic activity. The development of speculative bubbles and their bursting
have been facilitated by: (1) techniques that are at the very least “misleading” in assessing risks, (2) the possibility of banks profitably “selling” the
risks they take by designing and issuing increasingly complex derivative
financial products (securitization) and deleting them from their balance
sheets, and (3) the adoption of accounting rules that value assets based on
their market prices (“mark to market”). Financial engineering, conceived


 FOREWORD 

xi

in this way, provided an exciting logic: credit is less and less granted from
the prospective income of lenders, being more and more from the anticipation of the asset value acquired by these lenders, as we observe with the
case of real estate and financial bubbles. To return to Minsky’s expression,
Ponzi-type financing is quickly arrived at and instability is reproduced. The
financial system implodes with brutal devaluation of assets and what previously favored the bubble (the equity value, that is, the positive difference
between the market value and its commitments) becomes its opposite (the

market value plummets, falling below the value of the loans to be repaid).
The resumption of the cycle causes an acute shortage of liquidity.
Financial companies seek liquidity to finance a risk that only the day
before, transferred and disseminated, was considerably revalued. Banks
stop lending to each other and, à fortiori, brutally break their loans to
companies to individuals. Non-financial companies, with the devaluation
of their capitalized securities, see a series of rates “turn red” and are confronted with a growing lack of liquidity. The “credit crunch” turns financial crisis into economic crisis. It becomes systemic, affecting companies
and banks, including those that have maintained prudent management of
their assets. It forcefully spreads across borders through the channels
forged by financial globalization.
In search of liquidity, banks and multinational companies liquidate a
portion of their assets abroad, particularly in Latin America, repatriating a
significant portion of their profits and interrupting the purchasing of
bonds. Foreign banks provide much less credit to Latin American exporters. In addition to these difficulties, there is a reduction of commitments
in industrialized countries due to the crisis in the real economy that is
developing. Lack of liquidity, capital flight and reduction of external commitments are the factors that transform the financial crisis into a crisis of
the real economy in emerging economies.
Interest rates and the importance of these currencies have made various
authors return to the foundations of the Marxist theory of currency, developed in Book I of Capital, and of finance, developed in Book III of
Capital. Thanks to this theoretical deepening, the authors go beyond
simple description to grasp the essence of the causes and consequences of
financial globalization. If currency and financial globalization are given
priority in this remarkable book, it is because financial globalization is
much more prominent than commercial globalization. When the financial
crisis in advanced countries provoked a “credit crunch” (an accentuated
shortage of liquidity), the subsidiaries of multinational companies repatri-


xii 

FOREWORD

ated a significant portion of their profits to compensate for the lack of
liquidity of the parent companies in advanced countries, resulting in a
change to the world economy. The foundations of the emerging Latin
American countries, although relatively good, with a low degree of openness, simply did not constitute a sufficient defense against the “solidarity”
of the balance sheets of transnational companies and the financial crisis,
through contagion, affected the “real” world with a force ten times stronger.
Paris XIII University
Paris, France

Pierre Salama

Note
1. In Marxist terms, work in the financial sector is “indirectly productive”, like
those of the commercial activities analyzed by Marx. The work that develops
is not productive, but it is not unproductive either. Paid on account of the
added value, it allows for free growth, among other things, of a significant
increase in the rotation of capital. However, the growth of the financial sector does not only meet the conditions of capital appreciation, it is also the
cause and consequence of speculation. Its predatory dimension, in relation
to surplus value, is accentuated and, to a certain extent, indirectly productive labor becomes unproductive. That is, incapable of creating value, even
if indirectly. In this way, two distinct dimensions coexist in this type of work:
indirectly productive and unproductive. With financialization, the second
factor prevails over the first.


Titles Published

1. Terrell Carver and Daniel Blank, A Political History of the Editions
of Marx and Engels’s “German Ideology” Manuscripts, 2014.

2.Terrell Carver and Daniel Blank, Marx and Engels’s “German
Ideology” Manuscripts: Presentation and Analysis of the “Feuerbach
chapter,” 2014.
3. Alfonso Maurizio Iacono, The History and Theory of Fetishism, 2015.
4.Paresh Chattopadhyay, Marx’s Associated Mode of Production: A
Critique of Marxism, 2016.
5.Domenico Losurdo, Class Struggle: A Political and Philosophical
History, 2016.
6. Frederick Harry Pitts, Critiquing Capitalism Today: New Ways to
Read Marx, 2017.
7. Ranabir Samaddar, Karl Marx and the Postcolonial Age, 2017.
8.George Comninel, Alienation and Emancipation in the Work of
Karl Marx, 2018.
9. Jean-Numa Ducange and Razmig Keucheyan (Eds.), The End of
the Democratic State: Nicos Poulantzas, a Marxism for the 21st
Century, 2018.
10. Robert Ware, Marx on Emancipation and the Socialist Transition:
Retrieving Marx for the Future, 2018.
11.Xavier LaFrance and Charles Post (Eds.), Case Studies in the

Origins of Capitalism, 2018.

xiii


xiv 

TITLES PUBLISHED

12. John Gregson, Marxism, Ethics, and Politics: The Work of Alasdair

MacIntyre, 2018.
13. Vladimir Puzone and Luis Felipe Miguel (Eds.), The Brazilian Left
in the 21st Century: Conflict and Conciliation in Peripheral
Capitalism, 2019.
14. James Muldoon and Gaard Kets (Eds.), The German Revolution
and Political Theory, 2019.


Titles Forthcoming

Michael Brie, Rediscovering Lenin: Dialectics of Revolution and Metaphysics
of Domination
August H.  Nimtz, Marxism versus Liberalism: Comparative Real-Time
Political Analysis
Shaibal Gupta, Marcello Musto & Babak Amini (Eds), Karl Marx’s Life,
Ideas, and Influences: A Critical Examination on the Bicentenary
Juan Pablo Rodríguez, Resisting Neoliberal Capitalism in Chile: The
Possibility of Social Critique
Igor Shoikhedbrod, Revisiting Marx’s Critique of Liberalism: Rethinking
Justice, Legality, and Rights
Alfonso Maurizio Iacono, The Bourgeois and the Savage: A Marxian
Critique of the Image of the Isolated Individual in Defoe, Turgot and Smith
Ducange, Jean-Numa, Jules Guesde: The Birth of Socialism and
Marxism in France
Spencer A.  Leonard, Marx, the India Question, and the Crisis of
Cosmopolitanism
Kaan Kangal, Friedrich Engels and the Dialectics of Nature
Victor Wallis, Socialist Practice: Histories and Theories
Marcello Mustè, Marxism and Philosophy of Praxis: An Italian Perspective
from Labriola to Gramsci

xv


Praise for Financial Speculation and Fictitious Profits
“This book offers a wide-ranging critique of contemporary political economy
grounded in the work of Karl Marx. The contributions focus on value, money,
finance and financialisation, and their transformations under neoliberalism.
Financial Speculation and Fictitious Profits is a refreshing and original perspective
which will inform debates within Marxist Political Economy for many years.
Scholars and students will find here a treasure trove of materials to be examined,
discussed and developed: a truly valuable contribution to Marxist debates!”
—Alfredo Saad Filho, Professor of Political Economy, SOAS
University of London, UK
“This collection of essays is a timely intervention at this contemporary stage of
predatory capitalism, with fictitious capital dominating economy and society. A
refreshed understanding of the nature of fictitious capital in both its historical
evolution and contemporary forms is necessary for the search for alternatives to
end its tyranny and for a new chapter of humanity to unfold.”
—Lau Kin Chi, Professor, Lingnan University, Hong Kong
“The distinguishing feature of today’s post-industrial evolution into finance capitalism is fictitious capital—that is, finance capital on the liabilities (debt) side of the
balance sheet taking over economic management from industry and also from
government. The chapters in this book provide a much-needed background to see
the extent to which financial engineering has replaced industrial engineering as the
key to rising ‘wealth.’”
—Michael Hudson, Professor of Economics, University of Missouri–Kansas City,
and Researcher, Levy Economics Institute at Bard College, USA
“The destructive march of capital makes it imperative to systematically study the
Marxian critique of political economy. In undertaking this task, throughout the
chapters that compose this work the authors offer us relevant contributions to a

critical interpretation of contemporary capitalism, especially through a careful and
original analysis of the fictitious forms of capital.”
—Wen Tiejun, Professor of Economics, Fujian Agriculture &
Forestry University, China


“The theory of fictitious capital belongs only to Marx. Yet curiously, despite its
centrality in the working of capitalism since the turn of the 21st century and its
role in the 2008 financial crisis, it has remained an extremely unresearched domain
of Marxist scholarship. The two decades of work from economists at the Federal
University of Espirito Santo has been a notable exception, and this book brings it
finally to Anglophone researchers.
Franỗois Chesnais, Professor Emeritus, University of Paris XIII, France


Contents

1Introduction  1
Helder Gomes, Gustavo Moura de Cavalcanti Mello,
Paulo Nakatani, Mauricio de Souza Sabadini, and
Adriano Lopes Almeida Teixeira
2The Place of Money in Marx’s Theory of Capital  9
Adriano Lopes Almeida Teixeira
3Speculative Capital and the Dematerialization of Money 43
Reinaldo Antonio Carcanholo
4Crypto-Currencies: From the Fetishism of Gold to Hayek
Gold 63
Paulo Nakatani and Gustavo Moura de Cavalcanti Mello
5Financialization and the Contradictory Unity Between the
Real and Financial Dimensions of Capital Accumulation 87

Paulo Nakatani, Adriano Lopes Almeida Teixeira, and
Helder Gomes
6Parasitic Speculative Capital: A Theoretical Precision on
Financial Capital, Characteristic of Globalization117
Reinaldo Antonio Carcanholo and Paulo Nakatani

xix


xx 

Contents

7Profit, Interest, Rent, and Fictitious Profit139
Gustavo Moura de Cavalcanti Mello and
Mauricio de Souza Sabadini
8The Nature and the Contradictions of the Capitalist Crisis183
Paulo Nakatani and Helder Gomes
Final Words

211

Index213


Notes on Contributors

Reinaldo  Antonio  Carcanholo  (in memoriam) was a professor at the
Department of Economics and at the Post-Graduate Programme in Social
Policy at the Federal University of Espírito Santo (UFES), Brazil. He

received his doctorate in Economics from the National Autonomous
University of Mexico (UNAM).
Helder  Gomes  is a post-doctoral fellow at the Federal University of
Espírito Santo (UFES), Brazil. He received his doctorate in Social Policy
from the Federal University of Espírito Santo (UFES).
Gustavo  Moura  de  Cavalcanti  Mello (Ed.) is  a professor at the
Department of Economics and at the Post-Graduate Programme in Social
Policy at the Federal University of Espírito Santo  (UFES), Brazil. He
received his doctorate degrees in Sociology from the University of São
Paulo (USP).
Paulo  Nakatani  is a professor at the Department of Economics and
at the Post-Graduate Programme in Social Policy at the Federal University
of Espírito Santo (UFES), Brazil.  President of the Brazilian Society of
Economic Policy (SEP) (2008–2012). He received his doctorate in
Economics from the University of Picardie, France.
Mauricio de Souza Sabadini  (Ed.) is a professor at the Department of
Economics and at the Post-Graduate Programme in Social Policy at the
Federal University of Espírito Santo (UFES), Brazil. Director (2016–2018)

xxi


xxii 

NOTES ON CONTRIBUTORS

and President of the Brazilian Society of Economic Policy (SEP)
(2018–2020). He received his doctorate in Economics from the University
of Paris 1 Panthéon Sorbonne, France.
Adriano  Lopes  Almeida  Teixeira  is a professor at the Department of

Economics at the Federal University of Espírito Santo (UFES), Brazil. He
received his doctorate in Economics from the Federal University of Minas
Gerais (UFMG).


List of Figures

Fig. 2.1
Fig. 2.2
Fig. 2.3
Fig. 2.4
Fig. 8.1
Fig. 8.2
Fig. 8.3
Fig. 8.4
Fig. 8.5

Ordering of categories in diverse works
17
The artistic whole (section I of Capital). (Source: Our own
production based on section I of chapter one of Capital.
∗ C = commodity, V = value, W = work, M = money)
23
Development of forms of value
24
The contradictions in motion
28
Monetary base and means of payments USA (US$ billions).
(Source: Federal Reserve: />releases/H3/default.htm. Our own production)
196

USA: Short-term interest rates—2005–2018. (Source: Federal
Reserve: H.15 Selected Interest Rates for Sep 25, 2018. Our
own production)
198
Monetary base and means of payments in the Eurozone
(€ billions). (Source: />do?node=bbn27. Our own production)
198
Balance of payments balance in current account accumulated
between 2006 and 2017 (US$ trillions). (Source: World Bank:
/>International Reserves 2017—Selected countries with the
largest reserves (US$ billions). (Source: World Bank: http://
data.worldbank.org/indicator/fi.res.totl.cd. Our own
production)201

xxiii


List of Tables

Table 2.1
Table 2.2
Table 2.3
Table 8.1
Table 8.2
Table 8.3
Table 8.4

London notebooks (1850–1853)
13
Grundrisse (1857–1858)

13
From money to capital
15
Total assets of banks and other financial institutions (US$
billions)189
Market value of companies in stock exchanges (US$ billions) 191
Selected government debt securities (US$ billions)
193
Global OTC derivatives market (US$ trillions)
194

xxv


CHAPTER 1

Introduction
Helder Gomes, Gustavo Moura de Cavalcanti Mello,
Paulo Nakatani, Mauricio de Souza Sabadini,
and Adriano Lopes Almeida Teixeira

The recurrent and devastating economic crises, the widened reproduction
of inequality and misery, militarism, the unmeasured thirst for surplus
value, advancing predatorily not only on the working population but also
on nature, to the point of putting at risk the very existence of humanity,
in short, the barbaric dynamics of capital once again silenced the death
sentences of Marxian criticism to political economy. In particular, after the
2007–8 crisis and amid the popular revolts that responded to their effects,

H. Gomes (*)

Post-Graduate Programme in Social Policy, Federal University of Espírito
Santo (UFES), Vitória, Espírito Santo, Brazil
G. M. de C. Mello • M. de S. Sabadini • P. Nakatani
Department of Economics and Post-Graduate Programme in Social Policy,
Federal University of Espírito Santo (UFES), Vitória, Espírito Santo, Brazil
e-mail:
A. L. A. Teixeira
Department of Economics, Federal University of Espírito Santo (UFES),
Vitória, Espírito Santo, Brazil
© The Author(s) 2019
G. M. de C. Mello, M. de S. Sabadini (eds.), Financial Speculation
and Fictitious Profits, Marx, Engels, and Marxisms,
/>
1


2 

H. GOMES ET AL.

Marx’s thinking was revived, leading to a proliferation of efforts to mobilize its analyzes for a critical understanding of contemporary capitalism. As
one of its most salient features is the prominence of the financial dimension of accumulation, Marx’s analysis of the fictitious forms of capital has
acquired particular interest and in recent years has been the subject of
increasing research. It is precisely this investigation that constitutes the
fundamental object of the studies gathered in this book. Composed of
seven chapters, besides this Introduction, three of them unpublished and
the other four revised and expanded versions of articles already published
(but unpublished in English), this book tries to synthesize more than 20
years of research and debates fictitious wealth and fictitious capital. Its
content suggests the need to distinguish the present stage of capitalist

accumulation from the period that stretches from the end of the Second
World War to the mid-1970s. This distinction goes beyond the traits of
the so-­called globalization to the consequences of the restructuring of
production and the application of neoliberal policies. The authors seek to
emphasize the fundamental characteristics and contemporary specificities
of the current stage of the evolution of capital: the domination of fictitious
capital over other forms of capital, together with which it forms a contradictory totality.
In this sense, the book presents a close reading of fictitious capital and
the place it holds in the Marxist exposure of the process of autonomization and subjectivation of capital, emphasizing the power and topicality of
the work of Marx. In addition to this logical approach and considering the
development of capitalist social formations, the authors explore the historical uniqueness of today’s dynamic of capital accumulation, guided by
the appropriation of fictitious profits. From this analysis, the authors provide an explanation of the recent economic crises, highlighting the 2007–8
crisis, and make considerations about the gloomy prospects for capitalism
in the immediate future.
The fictitious reproduction of capital as a modern novelty is not at
issue. The proposal is to consider the special character of this stage of the
accumulation of wealth in which the strong dominance of fictitious capital
is reproduced over and above other forms of capital throughout the world,
particularly going forward from the economic stagnation that began in
the late 1960s. This means that the logic of capitalist expansion is currently based on the fictitious production of wealth and the centralized
appropriation of fictitious profits. Such conclusions did not, however, arise
instantaneously. They began with concerns of researchers Paulo Nakatani