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Fictitious Capital: How Finance Is Appropriating Our Future
The 2007–08 credit crisis and the long recession that followed brutally exposed the economic and social costs of financialization. Understanding what lay behind these events, the rise of “fictitious capital” and its opaque logic, is crucial to grasping the social and political conditions under which we live. Yet, for most people, the operations of the financial system remain shrouded in mystery. In this lucid and compelling book, economist Cédric Durand offers a concise and critical introduction to the world of finance, unveiling the truth behind the credit crunch. Fictitious Capital moves beyond moralizing tales about greedy bankers, short-sighted experts and compromised regulators to look at the big picture. Using comparative data covering the last four decades, Durand examines the relationship between trends such as the rise in private and public debt and the proliferation of financial products; norms such as our habitual assumptions about the production of value and financial stability; and the relationship of all this to political power. Fictitious Capital offers a stark warning about the direction that the international economy is taking. Durand argues that the accelerated expansion of financial operations is a sign of the declining power of the economies of the Global North. The City, Wall Street and other centres of the power of money, he suggests, may already be caked with the frosts of winter.
164 pages, Paperback
First published January 1, 2014
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December 22, 2017
In this book, Cedric Durand borrows Marx’s concept of “fictitious capital” from Capital: Volume III to explain the oft discussed contemporary phenomenon of financialization. Fictitious capital encompasses a variety of financial instruments: bank credit, public debt, company bonds, and company stock shares. What all of these have in common is that they are not valuable in and of themselves. Instead, they derive their value from the future profits that they promise to bring. Fictitious capital is valuable because it promises its owner a certain stake in the profits of a productive activity that the capital will be financing. But because fictitious capital’s value is only a promise, a central problem arises: what happens when the promise can’t be kept?
The 2008 financial crisis is a perfect example for what happens when fictitious capital fails: massive increases in unemployment, major contractions in economic growth, and the displacement of thousands from their homes - the consequences are catastrophic.
Given the tenuousness of fictitious capital, Durand’s investigation has central importance in understanding the potential pitfalls of the current economy. Since the 1970s, financial wealth in advanced industrial countries has been rising while investment in fixed capital (i.e. investing in real things that make useful stuff) has been stagnating or even declining. Therefore, the house of cards is being built higher and higher with less and less real stuff to back it up. Even though financial crises like the ones in 2008 momentarily stem the rise of fictitious capital, the historical trend shows that even the most devastating crisis since the Great Depression cannot stop the ascendance of finance. Durand demonstrates how the buildup of fictitious capital is increasingly putting a burden on the 99% to the benefit of the rich. While financial institutions use huge sums of debt for risky gambling, their losses fall upon the government and thus, the average taxpayer. Financial institutions know that they have guarantors in the government and the central bank and can call upon the public to cover their losses when things go sour. Due to both increased public debt from necessary Keynesian policies and the interest rates paid on government bonds, the taxpayer is increasingly forced to provide financiers with their profits.
Something Durand should be applauded for is his insistence that fictitious capital is not completely autonomous from the production process. Too many commentators observing the increasing digitization of financial processes have made this claim that finance has become completely disconnected from anything real. But if this were true, then there would be no reason for financial bubbles to ever pop because there would be no real value to pull prices downwards. So then how is fictitious capital accumulating in a seemingly autonomous way despite the fact that there’s less and less real production to back it up? Durand’s answer is globalisation. Instead of reinvesting domestically, financial capital is reaching towards cheap labor sources abroad that have opened up with the disintegration of the Soviet Union and China’s integration into the world market. The real accumulation is happening in developing countries in the global South while investment continues to stagnate in the countries that actually hold fictitious capital. Therefore, financial wealth expanding in the global North is backed by the development of foreign industry - a wealth that is increasing its exploitation of workers more and more.
Marx’s notion of fictitious capital is woefully undertheorized and it’s impressive that Durand is capable of making so much out of it. By supplementing Marx with post-Keynesian economics, Durand hits the most important concern of every Marxist: the impact of capitalism’s developments on the working class. This is precisely why his tracing of financial accumulation to real production in the global South is so important. Durand does not read the financial world from the bourgeois perspective of the investor, but rather from the perspective of working class people who bear the burden of neoliberalism’s and Wall Street’s losses. There seems to be little hope that we’ll break out of the cycle of financial crises that Hymen Minsky described so presciently, but analyses like Durand’s are the prerequisite for ever achieving that goal.
The 2008 financial crisis is a perfect example for what happens when fictitious capital fails: massive increases in unemployment, major contractions in economic growth, and the displacement of thousands from their homes - the consequences are catastrophic.
Given the tenuousness of fictitious capital, Durand’s investigation has central importance in understanding the potential pitfalls of the current economy. Since the 1970s, financial wealth in advanced industrial countries has been rising while investment in fixed capital (i.e. investing in real things that make useful stuff) has been stagnating or even declining. Therefore, the house of cards is being built higher and higher with less and less real stuff to back it up. Even though financial crises like the ones in 2008 momentarily stem the rise of fictitious capital, the historical trend shows that even the most devastating crisis since the Great Depression cannot stop the ascendance of finance. Durand demonstrates how the buildup of fictitious capital is increasingly putting a burden on the 99% to the benefit of the rich. While financial institutions use huge sums of debt for risky gambling, their losses fall upon the government and thus, the average taxpayer. Financial institutions know that they have guarantors in the government and the central bank and can call upon the public to cover their losses when things go sour. Due to both increased public debt from necessary Keynesian policies and the interest rates paid on government bonds, the taxpayer is increasingly forced to provide financiers with their profits.
Something Durand should be applauded for is his insistence that fictitious capital is not completely autonomous from the production process. Too many commentators observing the increasing digitization of financial processes have made this claim that finance has become completely disconnected from anything real. But if this were true, then there would be no reason for financial bubbles to ever pop because there would be no real value to pull prices downwards. So then how is fictitious capital accumulating in a seemingly autonomous way despite the fact that there’s less and less real production to back it up? Durand’s answer is globalisation. Instead of reinvesting domestically, financial capital is reaching towards cheap labor sources abroad that have opened up with the disintegration of the Soviet Union and China’s integration into the world market. The real accumulation is happening in developing countries in the global South while investment continues to stagnate in the countries that actually hold fictitious capital. Therefore, financial wealth expanding in the global North is backed by the development of foreign industry - a wealth that is increasing its exploitation of workers more and more.
Marx’s notion of fictitious capital is woefully undertheorized and it’s impressive that Durand is capable of making so much out of it. By supplementing Marx with post-Keynesian economics, Durand hits the most important concern of every Marxist: the impact of capitalism’s developments on the working class. This is precisely why his tracing of financial accumulation to real production in the global South is so important. Durand does not read the financial world from the bourgeois perspective of the investor, but rather from the perspective of working class people who bear the burden of neoliberalism’s and Wall Street’s losses. There seems to be little hope that we’ll break out of the cycle of financial crises that Hymen Minsky described so presciently, but analyses like Durand’s are the prerequisite for ever achieving that goal.
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October 27, 2022real lifers will know that i have expressed precisely 0 interest in finance throughout the course of my short life. unfortunately we are now in a recession, i live in an epicentre of finance and don't like not knowing things and hence this book. durand is great in that sense because he spells out many of the mechanisms of finance capitalism - and precisely where the literature fails to explain phenomena - in idiot proof ways for people like me while providing key definitions for terminology that my mind has always glazed over. particularly insightful is his articulation of marx's 'fictitious capital' in the context of the post-70s (and post-2008, and post-2014) state of finance capitalism, and namely how the constant repackaging of value that finance capitalism needs in order to sustain itself signals the declining power of economies in the global north.
please do not ask me to recap the book in any more detail than this because reading this book was a truly heroic and unexpected exercise on my end. so many times my mind wanted to take tangents on metaphor and the use of the word 'speculation' in financial terminology and still i did not.
please do not ask me to recap the book in any more detail than this because reading this book was a truly heroic and unexpected exercise on my end. so many times my mind wanted to take tangents on metaphor and the use of the word 'speculation' in financial terminology and still i did not.
July 3, 2018
Inelegant, but short and fairly balanced--not many economists would trace the idea of fictitious capital back to Marx and Hayek. Very solid statistical work shows the increasing prevalence of broadly speaking financial wealth throughout the developed world; Durand deals with others' arguments about this (is it all a boondoggle? is it a matter of historical cycles? is it something else?) and his own arguments are fair (roughly: financial profits rely on some historical development, and on some essentially extractive industries. The relative cheapness of developing nations' labor and commodities makes it possible for industries of all kinds to make more money; that money won't be invested in developed countries; it has to go somewhere; it goes into finance; this jacks up the price of investments in the developed world, which are by far the best way to profit off all that capital that you have no other use for; hence property bubbles, tech bubbles, FAANG bubbles and so on). My only real complaint is Durand's simplistic understanding of Marx's understanding of the commodity, and when that's your only real complaint, you've got a solid work--the kind of thing that shows why "left-wing economist" need not be an oxymoron. The other complaint is the inelegance, which might be a problem of translation, as well. So my reconstruction of the argument might well be inaccurate.
August 14, 2024
a wonderfully concise and yet empirically rich account of how Marx's concept of fictitious capital helps us to understand the financialisation of capitalism on a global scale.
July 26, 2022
Professor Durand demonstrates how the rise of fictitious capital comes at a cost to society. The author begins with recalling how unaccountable financial forces fueled the 2007 financial collapse. The socialization of the costs from the disaster supports the author’s contention that fictitious capital controls the real economy – not the other way around.
Professor Durand defines the three forms of fictitious capital – credit money, government bonds and shares – to show how they represent outsized claims on future receipts; thus diminishing real productive investment, slowing economic growth, and widening inequality. Importantly, professor Durand presents original research to prove how the financial sector has grown. We learn how indebtedness is a crucial mechanism for amplifying finance’s power over business, government and society.
In the powerful concluding chapter, professor Durand puts it all together. We see how globalization has empowered fictitious capital to exploit uneven relations between nation-states. We understand how politics has championed specific policies that have broken the working class by subsidizing finance. This fascinating journey helps us appreciate that fictitious capital cannot stand on its own. It’s a critical insight worth remembering as we struggle for a better economy that works for the many, not just the few.
Professor Durand defines the three forms of fictitious capital – credit money, government bonds and shares – to show how they represent outsized claims on future receipts; thus diminishing real productive investment, slowing economic growth, and widening inequality. Importantly, professor Durand presents original research to prove how the financial sector has grown. We learn how indebtedness is a crucial mechanism for amplifying finance’s power over business, government and society.
In the powerful concluding chapter, professor Durand puts it all together. We see how globalization has empowered fictitious capital to exploit uneven relations between nation-states. We understand how politics has championed specific policies that have broken the working class by subsidizing finance. This fascinating journey helps us appreciate that fictitious capital cannot stand on its own. It’s a critical insight worth remembering as we struggle for a better economy that works for the many, not just the few.
November 27, 2018
Recommended for: Finance nerds, economics nerds, those tired of spending our country's treasure chest on subsidies for Wall Street goons.
tl;dr: Fictitious capital, or that which is invested in stocks and securities and the like, has become the apparent focus of our political economy at the expense, quite literally, of all else.
I've been sitting on this review for a while because I couldn't quite decide what to make of the book. The thing that I liked least about it is in some sense its greatest strength, namely that it approaches the sociological question of fictitious capital's appropriation of our society in rigorously financial terms. Being a sociologist by training, I found this off-putting and impressive simultaneously. People like data, even when those data are almost mystically complex. In fact, the premise of the book suggests that some people might like data because they're mystically complex.
Durand's argument, in essence, is that the financial crisis laid bare the political economy of financialization. That is, the rupture in the economy revealed a lot about its structure. A foundational aspect of capital is that it tolerates no limits on its growth. Marx, Bataille, Durand-- all have recognized and emphasized the fact that capital will never cease looking for new avenues.
Durand's point beyond that is that fictitious capital has become the primary means by which capital can engage in its expansion. Following the explosive growth of the post-war period, economic slowdowns have been reality, arguably since the 1970s. Fictitious capital and finance have provided the relief valve for this. For my part, I can't help but note that this has been executed in tandem with marketing and consumption's move into the foreground of our lives. Our subject positions as consumers have become our most central and finance has been instrumental to this move. Car manufacturers offer in-house, artificially low financing for new vehicles but not for used. Department stores offer financing without interest for a fixed period.
Perhaps the place in which this is most impactful is in higher education. As college degrees have been institutionalized as prerequisites for middle class employment (and even some lower class employment), demand on institutions has risen. But the power of neoliberalism has simultaneously imposed austerity on public institutions, forcing them to use tuition to fund operations. This transformation from a public good designed to build an informed citizenry (even an elitist one) to a consumer good designed to build malleable workers has been well documented and I do not wish to dwell on it. But for our purposes, it's worth noting that the rising cost has opened the door to finance to play an increasingly important role in education. Thus, workers are required to finance their own job training and eligibility at exorbitant rates imposed by the neoliberal regime with loans that cannot be defaulted upon or (typically) forgiven. This thereby guarantees that finance gets a cut of the workers' earnings indefinitely. Even if the loans are repaid in a short period, they are a burden at the most difficult point of the career process-- the beginning-- and as is more common, they simply accompany the worker for most of the worker's career. (The average student loan repayment period for a 10 year loan is 21 years.)
That aside, Durand's point is astoundingly powerful. Fictitious capital works with profit as its base. Because finance inherently produces nothing, it is ultimately vampiric. The conventional wisdom for worshippers of the market is that innovation makes it such that novel profits will be formed as the economy grows. But Durand provides data to show that this is false. As usual, economic orthodoxy is as dogmatic as any religion and equally as problematic empirically. Pure ideology. Durand identifies two processes, dispossession and parasitism, by which fictitious capital forces the development of new profits with which it can work.
Dispossession is the result of state intervention in the economy. Political profits are funneled directly into finance, as we saw with the financial crisis and with the aforementioned example of public education. As lawmakers force students to bear the burden of their education in order to be qualified to work for firms, finance swoops in to devour the newly formed profits. Parasitism, on the other hand, resides within the profit-seeking space. Finance imposes minimum profitability growth standards such that only those activities that meet its demands for new capital are kept, thereby purging even profitable projects that are insufficiently profitable.
In sum, the book is good, but at times obtuse and suffers distinctly from the characteristic academic opacity associated with the French academy. I would emphatically endorse reading it if you would hold strong beliefs on the topic, however.
Visit aroseinmktg.com for more reviews.
tl;dr: Fictitious capital, or that which is invested in stocks and securities and the like, has become the apparent focus of our political economy at the expense, quite literally, of all else.
I've been sitting on this review for a while because I couldn't quite decide what to make of the book. The thing that I liked least about it is in some sense its greatest strength, namely that it approaches the sociological question of fictitious capital's appropriation of our society in rigorously financial terms. Being a sociologist by training, I found this off-putting and impressive simultaneously. People like data, even when those data are almost mystically complex. In fact, the premise of the book suggests that some people might like data because they're mystically complex.
Durand's argument, in essence, is that the financial crisis laid bare the political economy of financialization. That is, the rupture in the economy revealed a lot about its structure. A foundational aspect of capital is that it tolerates no limits on its growth. Marx, Bataille, Durand-- all have recognized and emphasized the fact that capital will never cease looking for new avenues.
Durand's point beyond that is that fictitious capital has become the primary means by which capital can engage in its expansion. Following the explosive growth of the post-war period, economic slowdowns have been reality, arguably since the 1970s. Fictitious capital and finance have provided the relief valve for this. For my part, I can't help but note that this has been executed in tandem with marketing and consumption's move into the foreground of our lives. Our subject positions as consumers have become our most central and finance has been instrumental to this move. Car manufacturers offer in-house, artificially low financing for new vehicles but not for used. Department stores offer financing without interest for a fixed period.
Perhaps the place in which this is most impactful is in higher education. As college degrees have been institutionalized as prerequisites for middle class employment (and even some lower class employment), demand on institutions has risen. But the power of neoliberalism has simultaneously imposed austerity on public institutions, forcing them to use tuition to fund operations. This transformation from a public good designed to build an informed citizenry (even an elitist one) to a consumer good designed to build malleable workers has been well documented and I do not wish to dwell on it. But for our purposes, it's worth noting that the rising cost has opened the door to finance to play an increasingly important role in education. Thus, workers are required to finance their own job training and eligibility at exorbitant rates imposed by the neoliberal regime with loans that cannot be defaulted upon or (typically) forgiven. This thereby guarantees that finance gets a cut of the workers' earnings indefinitely. Even if the loans are repaid in a short period, they are a burden at the most difficult point of the career process-- the beginning-- and as is more common, they simply accompany the worker for most of the worker's career. (The average student loan repayment period for a 10 year loan is 21 years.)
That aside, Durand's point is astoundingly powerful. Fictitious capital works with profit as its base. Because finance inherently produces nothing, it is ultimately vampiric. The conventional wisdom for worshippers of the market is that innovation makes it such that novel profits will be formed as the economy grows. But Durand provides data to show that this is false. As usual, economic orthodoxy is as dogmatic as any religion and equally as problematic empirically. Pure ideology. Durand identifies two processes, dispossession and parasitism, by which fictitious capital forces the development of new profits with which it can work.
Dispossession is the result of state intervention in the economy. Political profits are funneled directly into finance, as we saw with the financial crisis and with the aforementioned example of public education. As lawmakers force students to bear the burden of their education in order to be qualified to work for firms, finance swoops in to devour the newly formed profits. Parasitism, on the other hand, resides within the profit-seeking space. Finance imposes minimum profitability growth standards such that only those activities that meet its demands for new capital are kept, thereby purging even profitable projects that are insufficiently profitable.
In sum, the book is good, but at times obtuse and suffers distinctly from the characteristic academic opacity associated with the French academy. I would emphatically endorse reading it if you would hold strong beliefs on the topic, however.
Visit aroseinmktg.com for more reviews.
August 1, 2018
5 estrellas porque como neofilo en este tema he aprendido muchisimo. Entiendo que quiza a otra gente que sabe mas del tema no le aportara tanto.
Imaginemos un pueblo, la gente alli tiene tierras y las trabaja o los mas pudientes tambien contratan a otros para ayudarles a trabajarlas. De esto han vivido y viven.
Hoy alguien pone un casino. El casino cambia dinero por rupias. Hoy 10 rupias por euro, pero segun se van agotando, las rupias son mas caras (8 rupias por euro, 6, etc.)
La conversion rupia -> euro se puede hacer instantaneamente cuando alguien te lo compra.
Bien, alguna gente empieza a jugar y a comprar rupias, estas se van agotando, por tanto el precio de la rupia sube.
Gente que metio 100 euros ve que ahora sus 1000 rupias valen 140 euros, pues compra mas, y asi otros.
Despues de varios años la mayoria del dinero no estrictamente necesario de esta gente va al casino, tienen miles de euros cada uno, y no para de aumentar de una manera que nunca han visto antes en sus granjas.
Alguien tiene la oportunidad de comprar una parcela mas grande, pero trabajando la tierra de esa parcela se gana 100 euros al año, con el dinero de la compra en el casino, el dinero se valoriza mas de 250 euros al año. No la compra.
Y asi, mas y mas dinero pasa de ser usado en producir a ser parte del sistema del casino.
Mas y mas se pierden empleos, ventas, compras, actividad economica. Pero increible, la gente es cada vez mas rica, las rupias no hacen mas que crecer en valor.
Pues esto, señores y señoras es nuestro sistema financiero y por que el dinero se acumula en ciertas manos, se pierde trabajo y los capitales huyen.
Este libro lo explica con datos y graficos, para los escepticos.
Imaginemos un pueblo, la gente alli tiene tierras y las trabaja o los mas pudientes tambien contratan a otros para ayudarles a trabajarlas. De esto han vivido y viven.
Hoy alguien pone un casino. El casino cambia dinero por rupias. Hoy 10 rupias por euro, pero segun se van agotando, las rupias son mas caras (8 rupias por euro, 6, etc.)
La conversion rupia -> euro se puede hacer instantaneamente cuando alguien te lo compra.
Bien, alguna gente empieza a jugar y a comprar rupias, estas se van agotando, por tanto el precio de la rupia sube.
Gente que metio 100 euros ve que ahora sus 1000 rupias valen 140 euros, pues compra mas, y asi otros.
Despues de varios años la mayoria del dinero no estrictamente necesario de esta gente va al casino, tienen miles de euros cada uno, y no para de aumentar de una manera que nunca han visto antes en sus granjas.
Alguien tiene la oportunidad de comprar una parcela mas grande, pero trabajando la tierra de esa parcela se gana 100 euros al año, con el dinero de la compra en el casino, el dinero se valoriza mas de 250 euros al año. No la compra.
Y asi, mas y mas dinero pasa de ser usado en producir a ser parte del sistema del casino.
Mas y mas se pierden empleos, ventas, compras, actividad economica. Pero increible, la gente es cada vez mas rica, las rupias no hacen mas que crecer en valor.
Pues esto, señores y señoras es nuestro sistema financiero y por que el dinero se acumula en ciertas manos, se pierde trabajo y los capitales huyen.
Este libro lo explica con datos y graficos, para los escepticos.
March 5, 2019
This is a sprawling and oftentimes hard to follow book, but does have some insights into the financial world that I didn't have before.
February 16, 2018
French economist Cédric Durand's debut book, now translated into English, is an academic and challenging text, at least for someone not really educated in political economy or economics. So I feel a prefatory disclaimer is in order: there might have been some of the author's arguments and linkages that I did not perceive or properly understand. Hence, I write this review mostly in the form of a summary, mainly as an attempt to recapitulate and better understand the material myself.
Fictitious Capital: How Finance is Appropriating Our Future deals with a number of tendencies within capitalism since the 1970s, most notably financialization; why did it erupt, what are its consequences, and how does it relate to other features of contemporary capitalism? In doing so, Durand employs the concept of “fictitious capital”, a term associated with as diverse theorists as Hayek and Marx, building chiefly on the Marxist conception of the term. Fictitious capital is to be understood as capital bereft of a relationship to any prior production process – instead laying claim to anticipated valorization (i.e. profits of the future). As fictitious capital doesn't spring from actual production, its present liquidation has to derive its value from elsewhere, namely transfers from the real economy. Examples of fictitious capital are private and public debt, stocks and bonds, as well as the more sophisticated innovations associated with shadow banking.
Durand points to the paradox that the increase in fictitious capital is actually being facilitated by government intervention. Each time liberalized finance creates a crisis, the government steps in and ensures the fictitious capital has the validation of the state. And so the cycle perpetuates. This can be seen in the increasing levels of debt observed in rich economies during the last four decades, decreasing or flattening in times of crisis, only to subsequently continue its ascent towards new heights.
In the last few chapters Durand delves into the supposed enigma of decreasing levels of investment (as a share of GDP) in rich economies, which some scholars believe is caused by financial parisitism. However, Durand argues the data don't support such a claim. Yes, a larger share of the firms' profits goes to the financial sector, but at the same time an increasing share of firms' profits stems from the financial sector (through dividends, interest and capital gains). The reason for the seeming lack of capital accumulation is to be found in the globalization of production chains and the opening of new markets, which increases the profit margins of the big corporations of the global North. Lack of investment is not caused by a crisis of profitability – it is however being augmented by the the establishment of a minimum profitability norm and shareholder value ideology, leading to an aversion towards irrecoverable costs on the part of the firm. If not elegantly, the author thus uncovers linkages between financialization, globalization and imperialism. The stability of the (increasingly complex) financial system is premised on the global race to the bottom in terms of labour costs and standards, and the political support by governments. The question is: how long can these conditions be sustained? Durand ends off:
Fictitious Capital: How Finance is Appropriating Our Future deals with a number of tendencies within capitalism since the 1970s, most notably financialization; why did it erupt, what are its consequences, and how does it relate to other features of contemporary capitalism? In doing so, Durand employs the concept of “fictitious capital”, a term associated with as diverse theorists as Hayek and Marx, building chiefly on the Marxist conception of the term. Fictitious capital is to be understood as capital bereft of a relationship to any prior production process – instead laying claim to anticipated valorization (i.e. profits of the future). As fictitious capital doesn't spring from actual production, its present liquidation has to derive its value from elsewhere, namely transfers from the real economy. Examples of fictitious capital are private and public debt, stocks and bonds, as well as the more sophisticated innovations associated with shadow banking.
Durand points to the paradox that the increase in fictitious capital is actually being facilitated by government intervention. Each time liberalized finance creates a crisis, the government steps in and ensures the fictitious capital has the validation of the state. And so the cycle perpetuates. This can be seen in the increasing levels of debt observed in rich economies during the last four decades, decreasing or flattening in times of crisis, only to subsequently continue its ascent towards new heights.
In the last few chapters Durand delves into the supposed enigma of decreasing levels of investment (as a share of GDP) in rich economies, which some scholars believe is caused by financial parisitism. However, Durand argues the data don't support such a claim. Yes, a larger share of the firms' profits goes to the financial sector, but at the same time an increasing share of firms' profits stems from the financial sector (through dividends, interest and capital gains). The reason for the seeming lack of capital accumulation is to be found in the globalization of production chains and the opening of new markets, which increases the profit margins of the big corporations of the global North. Lack of investment is not caused by a crisis of profitability – it is however being augmented by the the establishment of a minimum profitability norm and shareholder value ideology, leading to an aversion towards irrecoverable costs on the part of the firm. If not elegantly, the author thus uncovers linkages between financialization, globalization and imperialism. The stability of the (increasingly complex) financial system is premised on the global race to the bottom in terms of labour costs and standards, and the political support by governments. The question is: how long can these conditions be sustained? Durand ends off:
This system’s death-agony has been heralded a thousand times. But now it may well have begun – almost as if by accident. Alas, we cannot see any sign of the tomorrows bearing the song of emancipation. Since the plutocrats cannot settle for stagnation, they now resort to a strategy of crushing the rest of us. Capital stole people’s hopes. The dead weight of fictitious capital deprives them of what they thought they had won for good.
January 8, 2026
When we seek to define ‘fictitious capital’ there are three main varieties we can point to. Credit — the lending of money in the expectation that it will be paid later along with a bonus or dividend according to the rate of interest — is one example. Stocks and securities — titles to a share of future profits — is another and debt issued by nation states — effectively claims on tax receipts — yet another.
Money capitalists making use of these instruments do not strictly speaking contribute to productive investment. Rather than working within circuits which yield value over longer periods, they would rather exploit price differentials between markets by selling claims which inflate or deflate independently of the actual performance of the productive activities in question. They prefer to keep their money in a liquid form and gravitate towards ‘hot’ cashflows. These operators allow far more money to circulate in the economy than can be derived from actual value creation and after the intensive liberalisation projects to which capitalist economies have been subject for the past half century, have become a preponderant source of economic activity, means of capital accumulation — if employers could only invest their real savings, it would be prohibitively expensive to do so at all — but also state capture. With its attenuated regulatory order, the USian state apparatus is largely captured by the power of finance and we are all now having fun finding out how relatively autonomous a state apparatus is when the morbid symptoms of this order is propelled into the cockpit.
This all has enormous consequences for how our societies are currently organised. Ferdinand Braudel’s reading of financialisation as an autumnal phase of capitalist development is legible everywhere in growing indebtedness, inequality and declining in investment / productivity, even as higher profits are levied from the Global South. We know from any number of economists and historians that understood abstractly capitalism tends towards monopoly and that it is highly anarchic. Large companies of systemic importance to the operation of global markets depend on financing that rests on profitability and vice versa at different times and to different extents. If these are not in the same place at the same time, the music stops.
Bretton-Woods, the international monetary system envisioned by John Maynard Keynes in the aftermath of World War II, would rest on a rules-based order that could not be manipulated by larger states. Gold would be retained as the anchor of the system against which the dollar would have its price fixed. Every other nation state would then fix their currency against the dollar and any changes would be determined co-operatively via the supra-national International Monetary Fund (IMF), if it was needed to correct a fundamental disequilibrium in the state’s current account, ensuring economic operators benefited from stability in the prices of the main currencies.
As the twentieth century continued US imperial strategy began to chafe within this dispensation. The Vietnam War brought the US into a structural deficit, further stretched by the US’ dominance in western European markets. The US could have stabilised the dollar by winding down its death-drive - withdrawing from the affairs of other countries or reducing its imports - but the Nixon administration instead destroyed Bretton-Woods by raising interest rates, pressuring Gulf states to raise the price of oil, putting European and Japanese economies into trade deficit and creating a new system of private international lending that would dwarf the IMF and the World Bank. Over time The Brits, the Germans, the French, the Italians were all forced to wind their capital controls down. This strengthened not only the capitalist class, which embarked on an offensive against organised labour in the seventies and eighties, but also the American state itself, now liberated from the same balance of payments restraints to which other nations are subject. If a state is heavily in deficit questions may arise as to whether they will be able to pay off their loans. They may need to sell their foreign exchange reserves, appeal to the IMF or cut back their purchases from abroad, which will have a depressive effect. There is no room for co-operation here in the final instance. According to rules set by the stronger nations, currency stability therefore depends on a state’s creditworthiness, which means integration into American markets.
Writing on subjects like this, which are just that little bit beyond my understanding at present, and therefore compiled to a large extent from notes I’m taking from this book and others, is spurred by my wish to begin to understand the mechanics of capitalism today. For better and for worse, the people most interested in doing the work in the data mines are Keynesians or post-Keynesians, whose heuristics are short to medium-term in scope and pragmatic in nature: a more federal Europe to facilitate more robust investment strategies, dovishness on inflation / allowing public debt to roll, clarifying or potentially democratising the role of central banks. From what I can gather, and this is a hostage to future reading, this amounts to ‘leaning in’ to historical developments already underway. We know banks are central to the metabolism of the global economy. This requires governments, particularly those whose investments and currencies are relatively preponderant in global markets, to interfere in their operations, even though the regnant ideological position — perhaps until very recently — has been one of laissez-faire, out of a wish to avoid raising expectations among the public that large-scale fiscal intervention may be undertaken the purposes of downward, as opposed to upward, wealth re-distribution. In short, it suits the capitalist class to present the operation of banking as beyond the reach of politics but as the world becomes less stable this becomes an increasingly difficult fetish to maintain.
The Keynesian solution is to re-distribute systemic risk at a higher level of complexity, rather than abolishing or neutralising the central antagonism of value creation for the public good value versus the baroque universe of finance capitalism I’ve been trying to outline here. I do not like coming back a fundamental antagonism when there’s no social agent at the far end, but I keep looking over my shoulder in the hope it will will show up.
Money capitalists making use of these instruments do not strictly speaking contribute to productive investment. Rather than working within circuits which yield value over longer periods, they would rather exploit price differentials between markets by selling claims which inflate or deflate independently of the actual performance of the productive activities in question. They prefer to keep their money in a liquid form and gravitate towards ‘hot’ cashflows. These operators allow far more money to circulate in the economy than can be derived from actual value creation and after the intensive liberalisation projects to which capitalist economies have been subject for the past half century, have become a preponderant source of economic activity, means of capital accumulation — if employers could only invest their real savings, it would be prohibitively expensive to do so at all — but also state capture. With its attenuated regulatory order, the USian state apparatus is largely captured by the power of finance and we are all now having fun finding out how relatively autonomous a state apparatus is when the morbid symptoms of this order is propelled into the cockpit.
This all has enormous consequences for how our societies are currently organised. Ferdinand Braudel’s reading of financialisation as an autumnal phase of capitalist development is legible everywhere in growing indebtedness, inequality and declining in investment / productivity, even as higher profits are levied from the Global South. We know from any number of economists and historians that understood abstractly capitalism tends towards monopoly and that it is highly anarchic. Large companies of systemic importance to the operation of global markets depend on financing that rests on profitability and vice versa at different times and to different extents. If these are not in the same place at the same time, the music stops.
Bretton-Woods, the international monetary system envisioned by John Maynard Keynes in the aftermath of World War II, would rest on a rules-based order that could not be manipulated by larger states. Gold would be retained as the anchor of the system against which the dollar would have its price fixed. Every other nation state would then fix their currency against the dollar and any changes would be determined co-operatively via the supra-national International Monetary Fund (IMF), if it was needed to correct a fundamental disequilibrium in the state’s current account, ensuring economic operators benefited from stability in the prices of the main currencies.
As the twentieth century continued US imperial strategy began to chafe within this dispensation. The Vietnam War brought the US into a structural deficit, further stretched by the US’ dominance in western European markets. The US could have stabilised the dollar by winding down its death-drive - withdrawing from the affairs of other countries or reducing its imports - but the Nixon administration instead destroyed Bretton-Woods by raising interest rates, pressuring Gulf states to raise the price of oil, putting European and Japanese economies into trade deficit and creating a new system of private international lending that would dwarf the IMF and the World Bank. Over time The Brits, the Germans, the French, the Italians were all forced to wind their capital controls down. This strengthened not only the capitalist class, which embarked on an offensive against organised labour in the seventies and eighties, but also the American state itself, now liberated from the same balance of payments restraints to which other nations are subject. If a state is heavily in deficit questions may arise as to whether they will be able to pay off their loans. They may need to sell their foreign exchange reserves, appeal to the IMF or cut back their purchases from abroad, which will have a depressive effect. There is no room for co-operation here in the final instance. According to rules set by the stronger nations, currency stability therefore depends on a state’s creditworthiness, which means integration into American markets.
Writing on subjects like this, which are just that little bit beyond my understanding at present, and therefore compiled to a large extent from notes I’m taking from this book and others, is spurred by my wish to begin to understand the mechanics of capitalism today. For better and for worse, the people most interested in doing the work in the data mines are Keynesians or post-Keynesians, whose heuristics are short to medium-term in scope and pragmatic in nature: a more federal Europe to facilitate more robust investment strategies, dovishness on inflation / allowing public debt to roll, clarifying or potentially democratising the role of central banks. From what I can gather, and this is a hostage to future reading, this amounts to ‘leaning in’ to historical developments already underway. We know banks are central to the metabolism of the global economy. This requires governments, particularly those whose investments and currencies are relatively preponderant in global markets, to interfere in their operations, even though the regnant ideological position — perhaps until very recently — has been one of laissez-faire, out of a wish to avoid raising expectations among the public that large-scale fiscal intervention may be undertaken the purposes of downward, as opposed to upward, wealth re-distribution. In short, it suits the capitalist class to present the operation of banking as beyond the reach of politics but as the world becomes less stable this becomes an increasingly difficult fetish to maintain.
The Keynesian solution is to re-distribute systemic risk at a higher level of complexity, rather than abolishing or neutralising the central antagonism of value creation for the public good value versus the baroque universe of finance capitalism I’ve been trying to outline here. I do not like coming back a fundamental antagonism when there’s no social agent at the far end, but I keep looking over my shoulder in the hope it will will show up.
August 31, 2023
This is a book about a somewhat obscure economic concept: fictitious capital. It has more then one definition, but Durand is mostly working off the one provided by Marx. Fictitious capital "represents claims over wealth that is yet to be produced," or in other words something like an IOU. For Marx there are three kinds of fictitious capital: credit money, government bonds, and shares; in his words:
Durand adds in some modern flavors, such as the opaque offerings from shadow banking, and also distinguishes Marx's definition from Hayek's (though both agree on its tendency towards heightening instability).
Overall this is a very short work with a limited scope. It is however enough to show the usefulness of the concept of fictitious capital as a whole, and to make Durand's usage a strong case:
The credit system has a dual character immanent in it: …. it develops the motive of capitalist production … and restricts ever more the already small number of the exploiters of social wealth … On the other hand however it constitutes the form of transition towards a new mode of production. It is this dual character that gives the principal spokesmen for credit …. Their nicely mixed character of swindler and prophet.
Durand adds in some modern flavors, such as the opaque offerings from shadow banking, and also distinguishes Marx's definition from Hayek's (though both agree on its tendency towards heightening instability).
Overall this is a very short work with a limited scope. It is however enough to show the usefulness of the concept of fictitious capital as a whole, and to make Durand's usage a strong case:
The power that fictitious capital has acquired is embodied in the liquidity of the financial markets. Securities represent a pre-emption on future production, but they also offer their owners the possibility of converting them into real money at any given moment. Collectively speaking, this liquidity is just an illusion, for it would be impossible immediately to liquidate all of these promises. But it is certainly a powerful fiction. Since 2008, the absolute priority that the public authorities have given to financial stability has expressed their determination to validate fictitious capital's claim to liquidity. Yet this claim only holds true if the commitments that have already been made are respected. To put it another way: present financial profits sustain the value of accumulated fictitious capital; the promises made today can only be accepted if past ones have been kept. The great mission of governments and monetary authorities faced with each financial upheaval since the 1980s – and all the more so in recent years – has been to guarantee this continuity of financial profits.
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July 22, 2025Capitalism is a mechanism by which resources (human and natural) are allocated and the resulting products distributed. It has continously evolved since its emergence; the current hegemonic flavour is defined by the centrality of finance or, more specifically as argued by Durand, the centrality of "fictitious capital". This is defined as a claim on future productive activity (via bank credit, government bonds, shares and increasingly exotic financial instruments) as opposed to a claim on already existing productive capital.
Durand explains how the neoliberal political-economic consensus, inaugurated in 1979 with the Volcker Shock, intentionally shifted the balance in favour of a financialised economy. Individual firms' surpluses were diverted away from wage payments and productive reinvestments towards financial products, with the macro effect of increasing wealth inequality between capital holders and wage earners, as well as reducing overall productive investment into the economy.
The crisis-prone nature of an economy reliant on fictitious capital, given the enormous capacity to attract speculative investment on future economic activity that may never materialise, was laid bare in the 2008 financial crisis. Crucially, these economic structures were rescued by state intervention at enormous cost to the tax payer and allowed to continue operating to this day, qualitatively unchanged.
Durand concludes the book by answering the outstanding question of how profits can continue accumulating in the absence of significant productive investment. The answer lies in a theory of imperialism, by which Global North economies are able to coercively extract superprofits from the Global South.
This concise book provides an impressive overview of grand economic processes that define the world we live in. Though some parts feel under-theorised, some too speculative and some just poorly written, as a whole it provides a compelling narrative. An updated version 10 years on would be fascinating, as contradictions continue to mount in Global North economies and China charts a radically different path.
Durand explains how the neoliberal political-economic consensus, inaugurated in 1979 with the Volcker Shock, intentionally shifted the balance in favour of a financialised economy. Individual firms' surpluses were diverted away from wage payments and productive reinvestments towards financial products, with the macro effect of increasing wealth inequality between capital holders and wage earners, as well as reducing overall productive investment into the economy.
The crisis-prone nature of an economy reliant on fictitious capital, given the enormous capacity to attract speculative investment on future economic activity that may never materialise, was laid bare in the 2008 financial crisis. Crucially, these economic structures were rescued by state intervention at enormous cost to the tax payer and allowed to continue operating to this day, qualitatively unchanged.
Durand concludes the book by answering the outstanding question of how profits can continue accumulating in the absence of significant productive investment. The answer lies in a theory of imperialism, by which Global North economies are able to coercively extract superprofits from the Global South.
This concise book provides an impressive overview of grand economic processes that define the world we live in. Though some parts feel under-theorised, some too speculative and some just poorly written, as a whole it provides a compelling narrative. An updated version 10 years on would be fascinating, as contradictions continue to mount in Global North economies and China charts a radically different path.
March 20, 2019
Cédric Durand gives a broad and deep view of capitalism’s contemporary trajectory which is characterized by the increasing tendency towards financialization since the 1980s.
Fictitious capital is an incarnation of that capital which tends to free itself from the process of valorisation-through-production.
According to the Marxist approach, capital is fictitious to the extent that it circulates without production yet having been realised, representing a claim on a future real valorisation process. In other words, as one Austrian school commentator described the torment of autumn 2008 and the boom that had preceded it: All of this new and additional money entering the market is fundamentally fictitious capital, in that it does not represent new and additional capital goods in the economic system, but rather a mere transfer of parts of the existing supply of capital goods into different hands, for use in different, less efficient, and often flagrantly wasteful ways. So fictitious capital is the capital that produces value without producing commodities!
The book explains this process of valorisation without production whose counterpart is profiting without accumulation. It also produces an explanation of how financial profits are obtained in short-term operations abandoning the logic of the Fordist period – which consisted of ‘conserving and reinvesting’ profits in order to maximise growth, and how workers are crushed in these operations since their double separation from the means of production and the products of their labour continues.
Fictitious capital is an incarnation of that capital which tends to free itself from the process of valorisation-through-production.
According to the Marxist approach, capital is fictitious to the extent that it circulates without production yet having been realised, representing a claim on a future real valorisation process. In other words, as one Austrian school commentator described the torment of autumn 2008 and the boom that had preceded it: All of this new and additional money entering the market is fundamentally fictitious capital, in that it does not represent new and additional capital goods in the economic system, but rather a mere transfer of parts of the existing supply of capital goods into different hands, for use in different, less efficient, and often flagrantly wasteful ways. So fictitious capital is the capital that produces value without producing commodities!
The book explains this process of valorisation without production whose counterpart is profiting without accumulation. It also produces an explanation of how financial profits are obtained in short-term operations abandoning the logic of the Fordist period – which consisted of ‘conserving and reinvesting’ profits in order to maximise growth, and how workers are crushed in these operations since their double separation from the means of production and the products of their labour continues.
November 11, 2022
A by-the-numbers rendering of our current financial situation. I won't call it a financial crisis because, honestly, the system of Capitalism is working absolutely as expected and there are quite a number of people who wouldn't change a thing. That said, I think Capitalism is a scourge on humanity and needs to be replaced before the natural operations of the system destroy the planet for human habitation. There is no Socially Responsible Capitalism, as that notion goes against the purpose of the system - that being endless profiteering and untrammeled expansion - but the growth of the financial sector and explosion of fictitious capital as a percentage of the market is unsustainable, even in the short term. The book is dry and data-focused, but it does its job effectively, however lifelessly it is presented. Not much analysis, just the facts.
December 9, 2024
really fantastic dive into financialization in relation to the global economy
- defines and contextualizes financialization
- examines origins of financial accumulation
- develops Minsky's crisis framework into broader crisis-regulation spiral framework
- identifies role played by "heterodox" pro-market economists in advising policy leading to financialization
- chapter eight is a total home run, covering developments in corporate structure and drawing a link between financialization and systemic structure of neoliberal capitalism
dense in places but delightfully readable in others, insightful explanations of the power of market liquidity & securitization & derivatives, pleasing graphics, slick cover design. i will be coming back to this one
- defines and contextualizes financialization
- examines origins of financial accumulation
- develops Minsky's crisis framework into broader crisis-regulation spiral framework
- identifies role played by "heterodox" pro-market economists in advising policy leading to financialization
- chapter eight is a total home run, covering developments in corporate structure and drawing a link between financialization and systemic structure of neoliberal capitalism
dense in places but delightfully readable in others, insightful explanations of the power of market liquidity & securitization & derivatives, pleasing graphics, slick cover design. i will be coming back to this one
February 27, 2020
Although this book is short and relatively clear in its prose, it took me a while to get through because I wanted to make sure I as understanding everything (and the author doesn’t do enough to root the economic analysis in some key socio-political concerns like the climate crisis).
“We can mobilise three types of indicators to prove that economies are being financialised: the weight of the financial sector, the importance of this sector’s profits relative to overall profits, and the dynamic of financial profits in non-financial firms.”
“We can mobilise three types of indicators to prove that economies are being financialised: the weight of the financial sector, the importance of this sector’s profits relative to overall profits, and the dynamic of financial profits in non-financial firms.”
January 2, 2018
Three stars indicates my limitations as a reader rather than mediocrity in what was read. I don't read much in economics apart from newspaper articles or other sources of information for general readers. But Durand argues that finance is profit without material backing: there's no there there -- it's a fiction upon which the well-being of nations rests, usually with diminishing returns for most people and a great fiscal enrichment for a tiny percentage of people.
February 17, 2021
The first half of this shows that in the past 50 years there has been a rise in the influence of fictitious capital in rich nations economies, while the second half explores various justifications and implications of this phenomenon. There’s a bit of jargon which made it difficult for me to understand some passages (I don’t have a strong background in economics), but this book helped me put together some pieces of the puzzle of global finance.
December 13, 2022
A good primer on a lot of issues around finance in contemporary capitalism with some very useful frameworks and ideas, but unfortunately cluttered with too much extraneous material (who really needs an argument against "post-operaismo"?) and bogged down by a poorly argued and empirically weak thesis on imperialism as the cause of financialization in the Global North at the end.
January 4, 2026
3.5
Lots of interesting stuff but probably slightly too brief. Most interesting part was the paradox of the private sector knowing it would be bailed out by government and how this form of regulation in the long run allows finance to become riskier. Reminds me of the conversation in the brothers Karamazov about how knowledge of a forgiving god makes it meaningless
Lots of interesting stuff but probably slightly too brief. Most interesting part was the paradox of the private sector knowing it would be bailed out by government and how this form of regulation in the long run allows finance to become riskier. Reminds me of the conversation in the brothers Karamazov about how knowledge of a forgiving god makes it meaningless
March 31, 2023
one of the best overviews on the state of financialization I've read, but also just one of the best readings of Marx's fictitious capital. also just really readable. would LOVE to hear Durand talk about crypto lol.
June 3, 2018
I need to reread this because I barely retained the info. It seems good.
September 19, 2018
Interesting take on the field of finance and how it siphons off value created in the production process thus creating a drag on economic growth.
October 14, 2018
A very thorough look at the changes in our economy in recent decades related to the rise of financial derivatives and other complicated securities over against non-financial sectors.
December 21, 2018
Sometimes a difficult understanding but a brilliant book
April 26, 2019
Good tour through the economic instability and disaster perpetuated through financialization and the workings behind it. Read for feelings of impending doom about the next market crash
March 22, 2020
Based
Read
July 29, 2021short and dense read, one that i'll be returning to more often than not due to its insights; also, because some of its tangents flew past me and require a re-read to fully grasp
February 18, 2020
Ignorance with graphs. Durand has the understanding of a 6 year old forgot in front of the TV running the business TV channel. He thinks he knows and he talks like the big boys, but he has trouble grasping the issues. Take page 55. It starts with:
> La finance n'est pas suspendue au-dessus de l'économie réelle. Au contraire, elle se développe en rapport à celle-ci et contribue à la transformer ; bien qu'elle se tienne à distance du monde de la production et de l'échange des marchandises, elle participe du procès d'accumulation du capital.
That "distance" is a simple division of labor. The banker does not have to sweep the factory floor just because the factory worker with an IQ of 80 would feel good. Yet, the "production" does not happen without the bank. Because the factory needs to be built. And building takes time and money. And until the building is done and the machinery installed the factory will not produce a cent. So most factories today exist because of credit. And even if the entrepreneurs do not use credit, they have to store the money economized over the years somewhere, like the bank.
As for the exchange, most of exchanges done today are through the banks. But the connection is even stronger. To buy the store, to upgrade or renovate the store, and even to conform to the new and kookier governmental regulation, the distributor needs banks. On the other side of the exchange, many products are acquired though credit.
Overall, every page has issues. Some are larger, some are smaller, but overall the poor guy is parroting a doctrine he has heard somewhere than he is upset that the reality does not conform to his coloring book.
> La finance n'est pas suspendue au-dessus de l'économie réelle. Au contraire, elle se développe en rapport à celle-ci et contribue à la transformer ; bien qu'elle se tienne à distance du monde de la production et de l'échange des marchandises, elle participe du procès d'accumulation du capital.
That "distance" is a simple division of labor. The banker does not have to sweep the factory floor just because the factory worker with an IQ of 80 would feel good. Yet, the "production" does not happen without the bank. Because the factory needs to be built. And building takes time and money. And until the building is done and the machinery installed the factory will not produce a cent. So most factories today exist because of credit. And even if the entrepreneurs do not use credit, they have to store the money economized over the years somewhere, like the bank.
As for the exchange, most of exchanges done today are through the banks. But the connection is even stronger. To buy the store, to upgrade or renovate the store, and even to conform to the new and kookier governmental regulation, the distributor needs banks. On the other side of the exchange, many products are acquired though credit.
Overall, every page has issues. Some are larger, some are smaller, but overall the poor guy is parroting a doctrine he has heard somewhere than he is upset that the reality does not conform to his coloring book.
December 5, 2019
I am not convinced this guy understands what Marx means by fictitious capital.
Durand says it includes credit money but im pretty sure it does not.
Durand says it includes credit money but im pretty sure it does not.
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