Analysis Of Financialization And The Cause Of Financial Crisis

Nowadays, capitalist centers of economic activity have turned from the industrial sector to the financial sector, and a direct consequence of this shift is the process of capital accumulation. Social resources gradually have been invested in financial services which are far away from the reality of goods and services. Capitals didn’t have great development in entity field. Instead, it fell into the self-expansion of complex financial innovation and expanding financial instruments. The fuse of the crisis is the excessive departure between productive investments and financial capital accumulation. The U.S. subprime mortgage crisis in2007has verified this point.At present, some foreign scholars still deny that capitalist economy have inherent systemic sources of financial crisis. They attribute the crisis to the occasional mistakes of policy behavior or an external impact. These scholars make an attempt to analysis the root causes of these crises and financial volatility cycle with "Four Generations Currency Crisis Models","External Debt Crisis theory", and "Herding Behavior" which based on micro-perspective. However, these theories can only explain the surface reason of once or a few crisis. We don’t have a theory which is systematic and comprehensive to explain the underlying causes.When we open the veil of these surface issues and study the nature of the crisis, we find that though there are some differences on ideology, theoretical perspective, and analytical method between the Marxism and Minsky theories, these two theories are consistent inherently. The comparison and comprehensive of these two will provide us a new perspective to understand the new trend of financial capital and financial crisis. We can say that, the exposition of the monetary and financial in Marxist system have structured a macroeconomic framework for the theory of capital accumulation financialization, and the Minsky’s cash flow analysis-"Financial Instability Hypothesis"-is an microscopic analysis based on the Marxist framework. More specifically, the Marxist system has demonstrated the financial capital’s formation and circulation, as well as the influence of monopoly, institution, and international factors. It has shown us the decisive role of capitalism’s endogenous instability. Minsky’s theory can be regarded as the materialization and dilatation of the above systems, he describes the cause of investment volatility on the level of cash flow and demonstrated the mechanism of financial plunder. In the structure, this article firstly discourses the Marxist system’s financial theory elaborately. Secondly, it introduces the Minsky’s "Financial Instability Hypothesis" and demonstrates the new trend of financial capital and financial crisis on the level of cash flow. Finally, based on the comparison and comprehensive of above two theories, this article expounds the theory origin and realistic foundation of financial crisis. Here, the U.S. subprime mortgage crisis is an established case. The author believes that the continued financial crisis is the consequence of capitalism basic contradiction which continuously deepens and outbreaks in a new historical stage, and the basic contradiction is the persistent ailment of capitalist economic system. Meanwhile, this financial crisis also indicates that financial liberalization policy has its perniciousness. In the reports of Chinese Party’s18th CPC National Congress, it proposes the strategic task of "deepen the reform of the financial system, promote financial innovation and maintain financial stability", this study attempts to provide theoretical material and reference for this crucial task.