I would like to consider a paradox. On the one hand, prices are driven by demand for the product, and thus for the expenditure of savings from the income of labour. On the other hand, prices are shaped by the accumulation of savings which are diverted from ordinary spending to extraordinary spending on financial commodities. Rather than being used to buy goods, the money from wage labour is used to buy more money, forming capital.
This money-making-money capital form is the basis for the modern economy, as it allows investors to divert income from wage labourers to the cause of speculation in future prospects of industries. In order to placate investors, companies and even whole countries make adjustments to their internal structure to ensure they maintain external competitiveness, and thus creditworthiness in the eyes of investors.
Today we see two processes simultaneously undermining the normal operation of the market economy through the extraordinary excess of capitalist development: the global savings glut, and the global accumulation of debt. Savings are funnelled into the acquisition of debt securities, and thus fuel the financialisation of the economy as a whole, as money flows from the real basis of the economy in physical commodities to the abstract superstructure of ‘fictitious commodities’ such as debt securities.
This is the paradox of capitalist development: without savings and finance, there could be no growth in spending and trade — but as the core miracle of capital rises in prominence within the wider economy, the whole economy crumples under the pressure. The rise in capitalist originality initially disrupts market banality, but eventually merely reproduces it.
Thus the market state is, in its capitalist formulation, a snake that eats its own tail. Hence, the secret to capitalism’s success is the key to its downfall. External intervention from the state can ‘buy time’, to quote Wolfgang Streeck. But it cannot solve the fundamental contradiction. Nothing can. Perhaps, except, a miraculous effect internal to the contradiction itself. Just don’t count on it.
Edmund Wilson 