1 REVIEW OF THE MONTH The Financialization of Accumulation JOHN BELLAMY FOSTER In the way that even an accumulation of debts can appear as an accumulation of capital, we see the distortion involved in the credit system reach its culmination. —Karl Marx 1 In 1997, in his last published article, Paul Sweezy referred to “the financialization of the capital accumulation process” as one of the three main economic tendencies at the turn of the century (the other two were the growth of monopoly power and stagnation). 2 Those familiar with economic theory will realize that the phrase was meant to be par- adoxical. All traditions of economics, to varying degrees, have sought to separate out analytically the role of finance from the “real economy.” Accumulation is conceived as real capital formation, which increases overall economic output, as opposed to the appreciation of financial assets, which increases wealth claims but not output. In highlighting the financialization of accumulation, Sweezy was therefore pointing to what can be regarded as “the enigma of capital” in our time. 3 To be sure, finance has always played a central, even indispensable, role in capital accumulation. Joseph Schumpeter referred to the creation of credit ad hoc as one of the defining traits of capitalism. “The money mar- ket,” he added, “is always…the headquarters of the capitalist system.” 4 Yet something fundamental has changed in the nature of capitalism in the closing decades of the twentieth century. Accumulation—real capital formation in the realm of goods and services—has become increasingly subordinate to finance. Keynes’s well-known fear that speculation would come to dominate over production seems to have finally materialized. When Sweezy made his observation with respect to the financializa- tion of capital accumulation more than a decade ago, it drew very little attention. But today, following the greatest financial and economic crisis This article is a revised and extended version of a keynote address delivered at the Fifteenth National Conference on Economics of the Brazilian Political Economy Society (SEP), Federal University of Maranhão, São Luis, June 3, 2010. The author would like to thank Fred Magdoff for his assistance.