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State and finance in financialised capitalism

This paper from renowned economist Prof Costas Lapavitsas explains that the structural problems within the UK and other mature economies that were brought to the surface during the crisis of 2007-9, are inherent to contemporary mature capitalism. He argues that the problems have to do, primarily, with financialisation - a process that would not have been possible without the active and enabling role of the state.

The exceptional rise of finance in terms of size and penetration across society, the economy and the policy process, is apparent to all. The rise of finance can be seen in commercial and industrial enterprises, banks and perhaps most strikingly, households.

The period of financialisation, from the 1970s to today, has wrought profound changes and has been characterised by extraordinary income inequality. Financialisation has been marked by the rise of neoliberalism, which ostensibly treats state intervention in the economy with extreme suspicion. This paper argues that the reality has been very different and that financialisation would have been inconceivable without an active state.

Lapavitsas argues that confronting financialisation must start from the realisation that it is a deeply rooted development that could potentially be reversed, but with considerable difficulty. Regulation alone will not be enough to confront it. Reversing privatisation and re-establishing public ownership over key areas of the economy would directly reduce the room for financialisation. This would be a vital step to reversing the dominance of finance, while also laying the foundations for a broader transformation of the economy towards the interests of the many.