Essays on Investment Stagnation and Financialization

Abstract

The three essays composing this manuscript examine the problem of capital accumulation from three distinct perspectives. the first essay offers a historical-dynamical view into the work of the pioneer of investment stagnation, Alvin Harvey Hansen. The essay shows that the influence of continental business-cycle theory, and notably the work of Arthur Spiethoff and Gustav Cassel, were critical to Hansen's conceptualization of stagnation as a cyclical process driven by investment spending. By means of a historical investigation into his heretical "stagnation thesis," a dynamic model of cyclical stagnation is constructed to complement Hansen's narrative arguments. The subsequent essay considers one of Hansen's most notorious students, Hyman Minsky. The essay provides an empirical assessment of the latter's "financial theory of investment," the results of which cast doubt on some of the fundamental attributes of Minsky's investment theory. It is suggested that, despite Minsky's keen attention to the relation between finance and investment, the current accumulation regime characterized by the financialization of business strategy has, in fact, undermined Minsky's canonical account of instability. The final essay addresses the question of capitalism's growth imperative by means of a circuitist growth model, as set forth in Johnson (2015). The primary conclusion reached on the basis of the formal model aligns with the theory of the growth imperative. Specifically, in the presence of financial institutions that accumulate bank capital, profits must not only be positive, but high in order that capital accumulation takes place on ever greater levels. The Appendix to this essay includes a rejoinder (Johnson 2015) written in response to a criticism on the dimensional status of loans in the model.