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This thesis concerns itself with the increasing role of finance and what it means both as a process and relation emerging globally, particularly as manifest in emerging capitalist countries. My interest is in what this reflects in terms of the changing relationship between workers and capitalists, that between different forms of capital, and the articulation of those interests in the actions of the state. Neoclassical analysis is blind to these lines of investigation, seeing only the results of the decisions of optimising agents in the sphere of exchange amidst a vast array of institutional transaction costs.

Examining these relationships demands recourse to class analysis. Marx’s pioneering work in, for example, The Eighteenth Brumaire of Louis Bonaparte (2009 [1852]), illustrates the method of an historical analysis of Bonapartism through the tensions that lie both between classes, and between fractions of the capitalist class. It was in this tradition that Rudolf Hilferding (1981 [1910]) analysed the increasing dependence of industry on the banks in late 19^th century Germany. Due to the increasing volumes of capital which investment in large-scale industry required and the complexities of cash flow management in such operations, industrialists were

9 For example, in chapter eight, data from the US Treasury International Capital Reporting System is used to afford analysis of the linkages between Mexican firm behaviour and a proxy for gross foreign portfolio inflows.

40 forced both to channel their existing capital and to acquire additional capital via the banks. In return, the banks were investing a larger part of their capital in industry.

Due to the endogenous nature of loanable capital (and hence the money supply), banks were able to insert themselves into the accumulation processes of industrial capital. Hilferding coined the term ‘finance capital’ to describe that “… bank capital

… which is actually transformed … into industrial capital.” (1981, p. 225)

It is important to point out that Hilferding did not portray finance capital as necessarily in conflict with industrial capital, as is the wont of much contemporary work that sees finance only as a rentier layer. Instead, he viewed the two fractions of capital as an amalgam, with industrial capital having a direct interest in the profitability of financial operations. Hilferding was unable to anticipate the precise form of the relationship between banks and firms as it would manifest itself a century later, but his work points out that is only through analysis of this relationship that a full understanding of the circuit of capital and the generation of (financial) profits can be gained. The analysis of this relationship is a key theme of this thesis.

Class itself is, of course, an elusive concept (Wright, 1997). Proper elucidation of the debates over its meaning and import is beyond the scope of this chapter, but sufficient for the present purposes here, is the position of Nicos Poulantzas that “… social class is defined by its place in the social division of labour as a whole. This includes political and ideological relations.”(1974, p. 14) Within these classes can be distinguished fractions, such as industrial and financial capitalists, and social categories including the state bureaucracy and intellectuals.

These sub-groups do not exist separate from class; their members are drawn from social classes which may have taken up different class positions. Poulantzas argues that whether a social class, a fraction or a category forms part of an alliance of dominant classes “… will depend on the social formation, its stages, phases and conjunctures.” (1974, p. 24)

This insight gives a framework within which to understand the changing alliances of the bourgeoisie and the bureaucracy in contemporary Mexican society, as analysed in chapter seven. Depending on the social formation and requirements of accumulation, fractions of the capitalist class may variously oppose, ally with or merge into one another. The boundaries of a ‘fraction’ may change spatially or become porous as different institutional forms engage with different forms of capital.

41 All of these inter-relationships are reflected in the form and actions of the state, the primary location for the reproduction of social relations, remembering that the apparatus of the nation-state bears the imprint of its historical relationship to the world market.

While the struggle between the capitalist classes and the working class occurs primarily in the sphere of production, exploitation of different layers of the working class may occur in the sphere of circulation. This is critical for an understanding of the role of the financial sector in the current period of financialisation. Drawing on Marx’s concept of ‘profits by deduction’ (1991, p. 1001), Paul Baran (2012) argued that when wages rose to a level significantly higher than the socially necessary minimum and when the bulk of output is sold at monopolistic prices, as is the case in many advanced capitalist countries in the contemporary period, price policy can be used to extract surplus value in the sphere of circulation. Costas Lapavitsas (2009b) uses the term ‘expropriation’ to describe the actions of financial institutions to capture profits from workers in the sphere of circulation. These profits do not originate in the creation of additional surplus value. Instead they may emanate either from the capture and re-distribution of existing surplus value (or rents), or in the expansion of the circuits of loanable money capital. Exploitation in the sphere of circulation may mark an attempt by capital to lessen direct confrontation in the sphere of production in a way deemed more socially acceptable or at least less visible.

In sum, this class analytical approach differs fundamentally from the methodological individualism of neoclassical economics, but also from other heterodox traditions such as post-Keynesianism. For neoclassicals there is no class interest, only the aggregated outcomes of the profit-maximising behaviour of individuals and firms. The state apparatus is seen as somehow external to this activity, though since it is composed itself of utility-maximising individuals, the state bureaucracy attempts to capture rents. This rent-seeking behavior is to the detriment of what would otherwise be Pareto-optimising market outcomes.

Post-Keynesian analysis draws inspiration from the class analysis of Marx, particularly work in the Kaleckian tradition (1971). However, for the most part, it has set up a dichotomy between industrial and financial capitalists, the latter taking

42 the form of a rentier class which undermines the productivity of the former¹⁰. Problematically, post-Keynesianism lacks an explicit theory of the state and its relation to class structure. This results in an emphasis on policy fixes to capitalist crises, with the state implicitly posited as a neutral arbiter of conflicting interests.