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A theoretical framework for the analysis of the current global economic crisis: The financial market and the real economy

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  • Özgün Sarımehmet Duman

Abstract

This article argues that the current global economic crisis is an outcome of the excessive growth of the financial market over the real economy, and hence, of fictitious profits over real profits. In investigating the interrelation between the financial market and the real economy, it makes a comparative inquiry into two key assertions regarding economic crisis within Marxism: the tendency for the rate of profit to fall and overaccumulation of capital. Accepting the claim that economic crisis is inherent to capitalism, this article probes the role of countervailing tendencies in battling the tendency for the rate of profit to fall. While crisis is an outcome of both the extensive growth of fictitious profits and the tendency for the rate of profit to fall, the latter is identified as the fundamental reason for the current crisis. Labour market reforms that were implemented following the emergence of the economic crisis represent the resurgence of countervailing tendencies and are the most explicit evidence that the fundamental reason for the crisis resides in the real economy.

Suggested Citation

  • Özgün Sarımehmet Duman, 2014. "A theoretical framework for the analysis of the current global economic crisis: The financial market and the real economy," The Economic and Labour Relations Review, , vol. 25(2), pages 240-252, June.
    • Handle: RePEc:sae:ecolab:v:25:y:2014:i:2:p:240-252
    DOI: 10.1177/1035304614520669
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    References listed on IDEAS

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    1. John Holloway, 1996. "Global Capital and the National State," Palgrave Macmillan Books, in: Werner Bonefeld & John Holloway (ed.), Global Capital, National State and the Politics of Money, chapter 6, pages 116-140, Palgrave Macmillan.
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    4. Werner Bonefeld, 1996. "Monetarism and Crisis," Palgrave Macmillan Books, in: Werner Bonefeld & John Holloway (ed.), Global Capital, National State and the Politics of Money, chapter 3, pages 35-68, Palgrave Macmillan.
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    More about this item

    Keywords

    Current global economic crisis; fictitious profit; financial market; labour market reform; Marxist theories of crisis; overaccumulation; rate of profit; real economy; real profit;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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