Theories of Financial Disturbance

Theories of Financial Disturbance

An Examination of Critical Theories of Finance from Adam Smith to the Present Day

Jan Toporowski

Theories of Financial Disturbance examines how the operations of market-driven finance may initiate and transmit disturbances to the economy at large, by looking in detail at how various economists envisaged such disturbances occurring.

Chapter 4: Rosa Luxemburg and the Marxist Subordination of Finance

Jan Toporowski

Subjects: economics and finance, financial economics and regulation, post-keynesian economics


Rosa Luxemburg is best known for her attempt in her book The Accumulation of Capital to show that capitalist accumulation requires external markets in order to overcome a tendency to stagnation. These external markets formed the basis of her theory of imperialism, which was taken over by Lenin and subsequent Marxists. However, in chapter XXX of that book, on ‘International Loans’, Rosa Luxemburg examined the role of finance in capital accumulation. This analysis was perhaps peripheral to her argument. But it has sufficient critical elements to warrant a place for Luxemburg among the pioneers of critical finance, while the fate of that analysis among Marxists reveals how the most important school of radical political economy in the twentieth century came to an attenuated view of finance as a factor in capitalist crisis. 1. ROSA LUXEMBURG’S CRITICISM OF INTERNATIONAL BANKING For Luxemburg, the context of the system of international loans was crucial. Advanced capitalist countries faced crises of ‘realisation’, that is, inadequate demand to allow profits to accrue. At the same time, developing countries lacked the markets for commodity production to take place on a capitalist scale. She argued that international loans are crucial in providing finance so that dependent and colonial countries can buy the equipment to develop their economic and industrial infrastructure, reaching political independence but tied into financial dependence on the older capitalist states: In the Imperialist Era, the foreign loan played an outstanding part as a means for young capitalist countries to acquire independence. The contradictions inherent...

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