Monetary Economies of Production
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Monetary Economies of Production

Banking and Financial Circuits and the Role of the State

Edited by Louis-Philippe Rochon and Mario Seccareccia

The central focus of this book is the relationship between money, the sphere of production, and the State. It explores how best to adapt the fundamental ideas of the circulationist perspective to achieve a better understanding of the financialisation of the production processes within contemporary capitalist economies. Importantly, the expert contributors illustrate that the true challenge ahead is to address how these new emerging forms can be eventually tamed, a challenge that the recent financial crisis has forcefully proven essential.
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Chapter 8: Financial institutions and the State: a re-examination

Victoria Chick and Sheila Dow


Alain Parguez always has a new slant on old problems. In this case, we are stimulated by his idea, expounded in recent papers (see for example Parguez 2011), that interest-bearing liabilities issued by the State provide the banks with an unnecessary subsidy, to look again at the relationship between the State and the financial institutions – a relationship that is constantly evolving. The Circuit and Post-Keynesian approaches focus particularly on credit relations between banks and the rest of the private sector, but here we want to draw the role of the State in banking to the surface. Our concern is not so much the traditional chart a list concern with the relationship between the means of payment and tax obligations to the State but more with how the evolving relationship between the State and banks facilitated the dominance of money provision in the form of private sector bank deposits. We are acutely aware that the system within the euro zone has evolved in a peculiar manner that deserves a separate enquiry, but here we examine features of British financial institutions, contrasting the period from the end of the Second World War to the early 1970s with some of the key changes after 1971 that led to the crisis that began in 2007.

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