We had a server outage, and we're rebuilding the site. Most of the site features won't work. Thank you for your patience.
imc indymedia

Los Angeles Indymedia : Activist News

white themeblack themered themetheme help
About Us Contact Us Calendar Publish RSS
latest news
best of news




A-Infos Radio

Indymedia On Air

Dope-X-Resistance-LA List


IMC Network:

Original Cities

www.indymedia.org africa: ambazonia canarias estrecho / madiaq kenya nigeria south africa canada: hamilton london, ontario maritimes montreal ontario ottawa quebec thunder bay vancouver victoria windsor winnipeg east asia: burma jakarta japan korea manila qc europe: abruzzo alacant andorra antwerpen armenia athens austria barcelona belarus belgium belgrade bristol brussels bulgaria calabria croatia cyprus emilia-romagna estrecho / madiaq euskal herria galiza germany grenoble hungary ireland istanbul italy la plana liege liguria lille linksunten lombardia london madrid malta marseille nantes napoli netherlands nice northern england norway oost-vlaanderen paris/Île-de-france patras piemonte poland portugal roma romania russia saint-petersburg scotland sverige switzerland thessaloniki torun toscana toulouse ukraine united kingdom valencia latin america: argentina bolivia chiapas chile chile sur cmi brasil colombia ecuador mexico peru puerto rico qollasuyu rosario santiago tijuana uruguay valparaiso venezuela venezuela oceania: adelaide aotearoa brisbane burma darwin jakarta manila melbourne perth qc sydney south asia: india mumbai united states: arizona arkansas asheville atlanta austin baltimore big muddy binghamton boston buffalo charlottesville chicago cleveland colorado columbus dc hawaii houston hudson mohawk kansas city la madison maine miami michigan milwaukee minneapolis/st. paul new hampshire new jersey new mexico new orleans north carolina north texas nyc oklahoma philadelphia pittsburgh portland richmond rochester rogue valley saint louis san diego san francisco san francisco bay area santa barbara santa cruz, ca sarasota seattle tampa bay tennessee urbana-champaign vermont western mass worcester west asia: armenia beirut israel palestine process: fbi/legal updates mailing lists process & imc docs tech volunteer projects: print radio satellite tv video regions: oceania united states topics: biotech

Surviving Cities

www.indymedia.org africa: canada: quebec east asia: japan europe: athens barcelona belgium bristol brussels cyprus germany grenoble ireland istanbul lille linksunten nantes netherlands norway portugal united kingdom latin america: argentina cmi brasil rosario oceania: aotearoa united states: austin big muddy binghamton boston chicago columbus la michigan nyc portland rochester saint louis san diego san francisco bay area santa cruz, ca tennessee urbana-champaign worcester west asia: palestine process: fbi/legal updates process & imc docs projects: radio satellite tv
printable version - js reader version - view hidden posts - tags and related articles

The Neoliberal Model: Profits without Investments

by Nikolaus Kowall Monday, Apr. 14, 2014 at 5:46 AM

According to the neoliberal myth, higher profits would lead to more investments and more jobs. In truth, higher profits lead to corporations buying back their stock and currency speculation. In truth, higher investments lead to higher profits.


By Nikolaus Kowall

[This article published on March 25, 2014 is translated from the German on the Internet, http://blog.arbeit-wirtschaft.at/das-neoliberale-modell-gewinne-ohne-investitionen/ ]

In the last decades, an increasing “financialization” of the economy occurred. “Financialization” means an expansion of the financial sector, the rise of financial management into the key industry and the gradual subjugation of all other economic areas under the logic of the financial branch. Instead of the promised gains in prosperity, this development led to a weakening of the economy through declining capital investments and an overall economic indebtedness dynamic. The neoliberal model first began to shake with the gravest economic crisis since the 1930s.

Other characteristics that describe financialization are deregulation and globalization of the financial markets, the explosive expansion of new financial instruments, the rise of institutional investors (funds) and investment banks along with the dramatic expansion of credit- and investment businesses for private customers in the form of mortgages, consumer credits and private old age security.


No corresponding growth of goods and services corresponded to the enormou8s growth of financial assets. This is very important. Since the financial assets of one always correspond to the financial liabilities of others in a national economy, financialization is ultimately something like a dramatic balance shift, an inflation of assets and debts which do not always prove valuable. The drastic increase of finance capital compared to the GDP shows this most graphically.

[Chart in original German: Growth of Global Financial Assets and Global GDP 1980-2010 in Trillions. Source: McKinsey Global Institute (2011)]


An important characteristic of financialization was the shareholder-value orientation that reduced all business goals to shareholder interests. Profits were more important than yields. Long-term profitability fell to the background over against short-term financial numbers. Increasing speculation led to price fluctuations, volatile prices, regular financial crises and an altogether unstable economic environment. Distributions, stock repurchases and financial gifts gained importance over against material investments. The volatile prices and shareholder-value orientation made physical capital investments more unattractive for businesses from the supply side while worldwide gifts were simultaneously made easier through liberalization of financial markets. Accompanied by a high-interest policy of the central banks, the profitability shifted from capital investments to financial gifts.

Pull-factors “to financial gifts” exist alongside push-factors “away from investments.” For example, liberalization of the financial markets occurred with the possibility of investing almost anywhere worldwide. Other developments “push away” money from investments and simultaneously “draw” it to the financial sector, above all the change of course of the interest policy of central banks in the 1970s. Since then the interest level surpassed the macro-economic growth rate so credit-financed investments for productive businesses are less profitable while financial gifts become more lucrative. The overall economic growth rate is a good measure for the average return of an investment in real capital.


A second trend of the neoliberal epoch, namely the redistribution from labor to capital and within work income from poor to rich, is closely joined with financialization. The fact that mass income no longer kept up with productivity growth may be the most important characteristic. The share of mass income in national income clearly declined in all industrial states while the share of capital income rose.

In personal distribution, a polarization occurred. Households with high incomes in industrialized states added shares while lower incomes lost shares in total income. Massive profits were not invested for lack of consumer demand; the rising top incomes were not consumed because of satiation.

Gigantic sums were parked for gifts on the international financial markets. Thus the genesis of vast amounts of speculative capital that was play money for the financial markets was a result of the great redistribution in the neoliberal epoch.


Shareholder value orientation, liberalization of the financial markets, volatile prices and the shift in profitability or viability between the real- and financial management have fundamental effects on the investment conduct of businesses. These supply-side aspects were supplemented on the demand-side by the great redistribution during the neoliberal epoch. Investments diminished on account of financialization and wage reserve in relation to profits in the industrialized states.

For Austria, investments could not keep up with the development of profits which also puts in question the thesis that investments are the result of high profits. The chart shows the development of profits and investments since 1975.

[Chart in original German. Source: Amoco – Data bank of the European Commission]

The red line represents the private gross investments from which profits uncoupled since 2000. The green line represents the private equipment investments. These are very expressive for the economic dynamic because they refer to machines and vehicles, not to home-building investments. Since 1992, macro-economic equipment investments have not kept up with profit development.


At the same time the redistribution led to an indebtedness dynamic. In the US the stagnating mass incomes were overcompensated by private borrowing while wage reserve led to a slowing down of imports and a corresponding development of balance of payment surpluses in Germany and Austria. In the course of redistribution, the private sector in the US and the state sector in Germany, Austria and nearly all countries became indebted. All economic sectors fell out of balance in one direction or another and the gaps between revenue and spending were permanently widened. Financialization acted as a buffer for the imbalances between the sectors.

The turbulences on the sub-prime mortgage market noticeable in 2007/08 in the US were undoubtedly the trigger for the crash of the financial markets. However the permanent increase of indebtedness inherent in the neoliberal model was the cause for the 2007/08 financial crisis and the 2008/09 great recession.

[This article is based on a part of the detailed study “Das neoliberale Modell – Genese, Politiken, Bilanz,” December 2013, 76pp.]

Report this post as:
Share on: Twitter, Facebook, Google+

add your comments

Local News

Woolsey Fire: Worst News of 2018? J01 12:18AM

Oppose Environmentally-Harmful Development D10 4:03AM

Oppose Environmentally-Harmful Development D10 3:58AM

OUR HOUSE Grief Support Center Presents Night for Hope O30 5:38PM

Marshall Tuck’s racist dog whistle O27 5:01AM

Marshall Tuck’s ethnocentrism contradicts Californian values O27 4:32AM

Contra Costa-Hawkins O25 3:48AM

Debunking Some Anti-Prop 10 Propaganda O12 6:56AM

Why Should California Choose De Leon Over Feinstein? O10 9:55PM

Change Links September 2018 posted S02 10:22PM

More Scandals Rock Southern California Nuke Plant San Onofre A30 11:09PM

Site Outage Friday A30 3:49PM

Change Links August 2018 A14 1:56AM

Setback for Developer of SC Farm Land A12 11:09PM

More problems at Shutdown San Onofre Nuke J29 10:40PM

Change Links 2018 July posted J09 8:27PM

More Pix: "Families Belong Together," Pasadena J02 7:16PM

"Families Belong Together" March, Pasadena J02 7:08PM

Short Report on the Families Belong Together Protest in Los Angeles J30 11:26PM

Summer 2018 National Immigrant Solidarity Network News Alert! J11 6:58AM

More Local News...

Other/Breaking News

bataclone J21 8:08PM


Mobile Royale Hack Online Generator - Get Unlimited Crystals J21 3:03PM

Unification, séparation et fragmentation J21 2:48PM

Testing Upload J21 7:10AM



Chemtrails and Prince J20 2:43PM

Wages For Housework J20 2:41PM

Tutelle comportementaliste J20 9:18AM

A Mistake: Jesse Jackson-Toyota deal-in Lexington -Ky is .8 billion over 10 years 2018 J20 1:17AM

If Trump Declares a AantionalEmergency, He'll Be Breaking the Law J20 12:47AM

Jesse Jackson's Sneak Attck on Toyota Lexington Ky and it's workers 2018 J19 9:12PM

Video: Chris Herdges in Eugene, 1 hr 24 min J19 5:37PM



Judge Delays Ruling on Puerto Rico Debt Deal White House Opposes Island's Food Assistance J18 6:04PM



Paraphysique de proxémie guerrière J18 7:59AM


FARCELONA 8.17.2017 J17 3:23PM



PR Debt Cancel, Judge Reviews Cofina Debt J16 9:04PM

Réseautage, fragmentation du capital J16 4:20PM

Paraphysique de manipulation mentale et sociale J15 9:51AM

The Global Justice Project and Human Survival: We're Badly Off Track J15 5:08AM

More Breaking News...
© 2000-2018 Los Angeles Independent Media Center. Unless otherwise stated by the author, all content is free for non-commercial reuse, reprint, and rebroadcast, on the net and elsewhere. Opinions are those of the contributors and are not necessarily endorsed by the Los Angeles Independent Media Center. Running sf-active v0.9.4 Disclaimer | Privacy