It has to do with the role of banks. Banks start out as the middlemen between industrialists. A business that wants to expand to a new market or start a new branch would take out loans from a bank where the business is expected to pay interest. The problem is if you have 1000+ businesses taking out loans from the same bank, the bank, unlike the 1000 individual businesses, has a much better picture of the financial health and trajectory of each one of those businesses and the industrial sector those businesses belong to. The bank is not just passively earning money through interests but also actively investing money in prospective businesses with the goal of earning dividends. All other things being equal and over time, the bank will outplay those individual businesses in knowing who or when to invest, and they will outcompete industrialists who are only privy to the financial trajectory of their particular industry. You do this enough times with enough M-M’ circulation, and banks and the financial sector in general will not only command vast amounts of capital, but also completely dominate over industrial capital. Financial capital will transform the economy away from the direct production of commodities and towards an investing economy or in other words, financialization.

Owning industrial production gives you power, but that power lacks flexibility. Factories exist somewhere, need to be staffed with people that live near it, require a flow of raw materials to work on. Your power over it ends where the property line does. Financialisation lets you use existing capital as leverage; take out a loan with your factory as collateral, and now your assets are liquid. You can by shares in factories and companies all around the world – your reach is extended and, so long as you don’t default, you haven’t actually given anything up to do so.

Both Marx and Lenin had predicted the “industrialization” of finance capital. Before the 19th century, banking mostly existed in what Marx called the “usury capital”, i.e. interest extraction that concentrated wealth at the landlord class.

Marx saw the emergence of the German financial system under industrial capitalism and predicted that finance capital would eventually be subordinated to industrial capital, allowing productive investment to be made to expand the industrial economy of the 19th century European powers. Lenin further developed this in his imperialism thesis.

Marx had predicated his thesis on the bourgeois revolution overthrowing the landlord class (following the writings of Adam Smith and Ricardo), which would lead to the elimination of interest extraction/rentier economy under industrial capitalism. However, post-WWI saw the counter-revolution and the return of the landlord class as the financial class.

In short, Marx and Lenin both predicted the “industrialization of finance capital”, but what transpired in the 20th century was the “financialization of industrial capital” that led to the de-industrialization of the US empire.

I highly recommend reading this (rather long) primer by Michael Hudson based on his lecture to the Chinese School of Marxist Studies more than a decade ago. It is a very good introduction on how Capital Vol. 3 can be applied to the present day contexts.

Comrade Frank Sovotka sums it up

Actually was just going through an article about this. Haven’t finished it quite yet but planning on later today. Like most of Michael Roberts work I’ve found it useful , I appreciate the ways in which he guards against a vulgar or even Keynesianesque readings of Marx. You can try searching his website or Monthly Review for “financialisation” and that should lead you to some more resources on the matter.

Not replying to the comments directly because phone but I am really thankful for each and every response. Extremely helpful.