Financialization, Household Credit and Economic Slowdown in the U.S

Deepankar Basu

Working Papers from Political Economy Research Institute, University of Massachusetts at Amherst

Abstract: Three important features of the U.S. economy during the neoliberal era since the mid-1970s have been: (a) growing financialization, (b) increasing household debt, and (c) stagnant real wages for production and non-supervisory workers. This paper develops a discrete-time Marxian circuit of capital model to analyze the links between these three features and economic slowdown. The discrete-time model is used to address two important theoretical issues of general interest to the heterodox economic tradition: profit-led versus wage-led growth, and the growth-reducing impact of non-production credit. First, it is demonstrated that both profit-led and wage-led growth regimes can be accommodated within the Marxian circuit of capital model. Second, it is demonstrated that the steady-state growth rate of a capitalist economy is negatively related to the share of consumption credit in total net credit, when the total credit is large to begin with. Bringing these two results together, the paper demonstrates that the three characteristics of the U.S economy under neoliberalism can have a growth-reducing impact on a capitalist economy. Hence, this paper offers a novel explanation, rooted in Marx’s analysis of the circuits of capital, of the slowdown of the U.S. economy during the neoliberal period.

Keywords: financialization; nonproduction credit; circuit of capital; economic growth. (search for similar items in EconPapers)
JEL-codes: B51 E11 O40 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://per.umass.edu/fileadmin/pdf/working_papers ... rs_251-300/WP261.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to per.umass.edu:443 (No such host is known. )

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:uma:periwp:wp261

Access Statistics for this paper

More papers in Working Papers from Political Economy Research Institute, University of Massachusetts at Amherst Contact information at EDIRC.
Bibliographic data for series maintained by Judy Fogg ( this e-mail address is bad, please contact ).