"Towards a Critical Theory of Finance": An Essay by Paul North (Keywords: Capital; Financialisation;Marx;Commodity Fetishism;Credit;Critique;Democracy)

From The Philosopher, vol. 114, no. 1 ("Towards a Critical Theory of Finance")

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I want to propose four ways to think about ‘finance,’ for those who want to critique it. Critics can think of finance as a parasite, as an organ, as an ongoing struggle, or as a decision. In what follows, I will explore these four different ways to think of finance, these different meanings, and the different possibilities they offer for mounting resistance to it.

Let’s divide talk about finance into two sides. Finance has meanings, but it also has a referent. Its referent is pretty evident to anyone who looks into it. Finance refers to economic functions that have to do with credit. The definition of credit is also pretty straightforward. Credit is value advanced on the promise of future increase. This makes it similar in structure to industrial capital, which is also value advanced on the promise of a future increase. The difference between capital and finance is production. Industrial capital receives its increase when value is invested in production. Say I am a capitalist. With my capital, however I obtained it, I found a company that produces microchips. As microchips roll off the line and are sold, the original value I advanced grows because workers work more than they are paid for and in the extra hours they make more microchips than I need in order to pay the costs.

Credit is slightly but significantly different. Credit is value that grows because of a contracted promise to pay the original back with a surplus at a specified point in time. The promise says nothing about where that surplus ought to come from. When the loan comes due, the payment can come from profits or from further credit. It doesn’t matter to the bank or the credit card company. How to pay back the original plus the surplus is the debtor’s problem. We know credit intimately of course. In some situations, we are the creditors. When we deposit money in a savings account or a mutual fund, we ourselves are giving credit to a bank or another financial actor because they promise to increase our original sum over time. The same is true where the bank or fund is the creditor and we are the debtor, as in a home mortgage. A bank extends credit to us on the promise of paying back so and so many times the original sum over twenty or thirty years. Where we obtain the money and whether we can actually pay when the time comes are our problem. Obviously, our capacity to pay the bank back is much weaker than the bank’s capacity to pay their depositors. That is one unfairness in the system, one among many. Still, we want to concentrate on the type of thing finance is.

Since credit is not tied directly to any particular source of repayment, it tends to float above economic functions that directly affect our lives. It tends to separate itself from the production and consumption of life’s necessities and take on a life of its own, where credit breeds more credit and more and more credit. It always had the possibility to drift off, credit, but since about the 1970s, this sector of economic life has drifted far from production and consumption and has become an enormous detached sphere of its own. By some accounts the financial sector now accounts for 60% of global wealth. This massive shift is sometimes called ‘financialisation.’

While the referent of the term ‘finance’ is pretty evident today, the meaning is contested. Several meanings are possible. We will leave aside, here, those who think finance and financialisation are unreservedly good or necessary in its current shape. Those who hold this view are almost always the few who benefit substantially from finance, the owners of credit and lots of it. Those who think finance is necessary and beneficial to economic life, even if it drifts and occasionally blows up, are not our concern here. For those who see financialisation as devastating to politics and social life, for those who see it as a major cause of rising inequality, anti-democratic movements and authoritarianism, neoimperialism and global plunder, however, it can have four different meanings, or so I propose. To repeat, it can be thought of as a parasite, an organ, a struggle, or a decision. We need to investigate the differing critical potentials inherent in these different meanings.

Finance can be thought of in four ways: a parasite, an organ, a struggle, or a decision.

Finance as parasite. Thinking of finance as an unsightly creature that leeches off production puts us in a particular position of we want to critique it. Under this meaning of finance, we deny finance the right to control credit flows and interfere in the productive economy. What right does a leech have over the body whose blood it drinks? This critical position might be called, by writers and activists who assert it, ‘anti-finance.’ It does, perhaps, too easily join the theater of protest and get adopted by people who don’t know the reach and power of finance today. It may be too easy, with this meaning, to condemn it out of hand. This is because such a critical stance denies that finance and beliefs about finance are actually intertwined with the economy. Under this meaning, finance looks easily removable, like a parasite living on top of and at the expense of production relations.

Finance as organ. This meaning of finance puts us in a different critical position. Under its sway, we deny the distinction between the real economy and finance. In this view, finance is as integral to production and consumption as an organ is to the body. Holding this view usually requires a historical perspective that ties finance to production and trade as a natural and inevitable element of them, often tracing them back to the earliest human collectives. Such historicising has positive and negative sides, although both sides have an air of myth.

Finance as struggle. Under this meaning we recognise unconditionally finance’s right to control credit flows and at the same time the productive economy’s unconditional right to resist it and assert its own unique primacy. This creates a zone of struggle, with room for international political economists to argue over theory and also room for syndicates, unions, and collectivisations of all types to contest both policy and practice. This is the space of norms. It isn’t only conservative, however; it also gives ground for Gramscians, Marxists, Keynesians, and so forth to question finance, just as much as it gives ground for hedge fund Hayekians, the Koch Brothers, and governments to revel in finance’s hegemony.

Finance as decision. Finally, if we understand finance as something that can be decided upon, we become able to recognise an external authority over it. Whether the authority is a God who hates usury or a sovereign who hates bankers, a demos that somehow takes power over its creditors, an army of regulators, momentary pressures of geopolitics, or a new technology we can’t yet imagine, this is the realm of wishes. A finite few theorists work in this area, although anyone who curses the asset class or a bad day on the stock market transits through the area briefly, wishing – for an instant – to stop the constant agitation of credit markets and make a decision on its uses and abuses at last.

Step into finance: if you’re lucky you lose a shoe, if unlucky, you sink without a trace.

Four different meanings of finance give four different critical opportunities. The outcome of each critique will be determined to a large degree by its starting point in the field of finance. If you start out thinking finance has an organic unity with the economy, your critique will only go so far before it hits a natural need for finance. If you start out thinking finance is a decision, that it can either be dominating the economy or not, according to someone’s best reasoning, your critique might go so far as to suggest abolishing finance. Of course, there is no telling whether this will be successful. Under this meaning, critique may exceed the reality it wants to change. Such a critic would have to be right when they say that a reasonable group can normatively approach the financial field. In truth, finance is less like a field than like a bog. Look at any individual financial chart. A single chart represents only one layer of an amalgam that has to be represented in a myriad of charts. One shows ‘asset class notional dynamics,’ one shows ‘volatility dynamics,’ one shows ‘growth rates,’ one shows the changing size of ‘credit markets’ (which have tripled in size since 2018, incidentally), another chart depicts ‘structured finance issuances,’ and so on. When you place all the charts atop one another, then can you see the phenomena in their natural mashup, a delirious sedimentation, a layered mat of spongy ground. Step into finance: if you’re lucky you lose a shoe, if unlucky, you sink without a trace.

Let’s go into a little more detail about the four meanings and the four kinds of critique they make possible. The first starting point for critique, the first meaning of finance, denies finance a role in economic and social matters. As a parasite, finance has no right to control credit flows and interfere in the real economy. It is an alien growth on the economic body. This argument – more a cry of outrage – should be put into context. On one hand, classical political economy often made this outcry, ‘finance isn’t real!’

Across the short history of the discipline, roughly from the 18th to the 21st century, modern economists have often been skeptical of finance, as though it were a foreigner come to unbalance the perfection of market exchange. In their theories, bankers come second or even third to labor and goods, distribution of wants and needs, the division of labor, growth and taxes, international trade. By and large, the discipline of economics is still concerned with ‘produce,’ as Adam Smith put it, concentrating on the arts and costs of producing life’s goods. In itself, finance appears to have little to do with produce. It wouldn’t know a spool of yarn if it were woven into an analyst’s merino sweater. Finance doesn’t know raw materials and it doesn’t know finished products so much as it knows money and credit flows, bills of exchange and other payment deals, double-entry bookkeeping, interest rates – deals done behind the back of production, as Marx would put it. It has its own origin stories and technical vocabularies, as well as its own booms and busts, not to mention a holy swagger and a dress code of merino and silk and jets. Finance lives a high life, far above productive and reproductive pursuits.

Finance lives a high life, far above productive and reproductive pursuits.

Overall, Smith denies that finance has an important role to play, and because it is trivial, it could be lifted off the productive society. A more recent example acknowledges finance’s overwhelming influence on the economy, and yet still considers it removable. Let’s look briefly at the Occupy movement. In 2011, the hosts of the adbusters.com website made the summons: ‘we call on jammers across the world to occupy financial districts on September 17.’ Tacitly, the slogan ‘we are the 99%’ indicated a belief that the majority of relations were not actually financial anyway. 99% of the populace stood outside wall street, and although they suffered from finance’s excesses, they had little access to finance themselves and, the implication was, they could do without it. They received most of its ill effects and none of its benefits. While the main mission of Occupy was to remove corporate money from politics, and their view of the ‘1%’ was basically corporate, they set up their protest against ‘Wall Street,’ intuitively lashing out against a main artery of financial capital. Occupy’s more direct attack on the finance sector, however, was the demand to cancel personal debt, especially student debt. ‘We live in a debt society’ (Occupy Gazette #5, 17) and ‘we claim the necessity of debt abolition’ (18). It blamed a ‘creditor class’ for oppression and exploitation, fraud, and government bailouts that left the options ‘for any democracy quite stark’ (22). Democracy dies in debt – this was the sentiment. Clearly this was an anti-finance position, based on a belief that the 99% was excluded from finance’s gains and also that the 99% didn’t need finance, even though finance needed them. In any case, to imagine finance either as a parasite that is too small to matter, or as a giant succubus that is devastating and should be plucked off the people’s back by a movement, leads to very specific critical thoughts and actions.

From another perspective, finance is anything but removable. Here finance is seen as integral to the global economy, as noted, like an organ. Analysts are almost unanimous about this meaning, especially those working in the area of ‘financialisation studies.’ It may have grown into a cancer over the last fifty years or so; yet with the right treatment we can shrink finance back to a reasonable size and let it get back to its real work. No doubt, if we construe the object this way, critique becomes more difficult. Try and say ‘no’ to a stomach or a kidney. Whether you accept it or reject it, the economic body depends on it, or so the story goes.

If exchange produces the fetishism of commodities, then finance produces the fetishism of credit.

‘Financial relationships are not about mediating something else on the ‘real’ side of the economy they are the constitutive relationships of the whole system.’ Perry Mehrling makes a case for the integral view, while leaving room for criticism. What’s more, he gives an easy handle with which to grasp this view. He reduces ‘finance’ to what he thinks is its basic gesture, which he calls ‘a promise to pay,’ and this germ of a credit economy is obviously integral to any society bigger than a single person alone. Robinson Crusoe only made promises to himself, if we ignore Friday. Indeed, ‘promise to pay’ allows us to connect the earliest economic activities with the most modern ones. Instead of asking, what went wrong with capitalism?, we ask, how can this basic operation, this organ for production, finance, be tuned up so that it does the societal job it was supposed to do: to make and fulfill promises. If finance is integral to any human societal system, it is triply so in capital. Credit is in capital’s DNA. Under this argument, critique takes the form of treatment on the sick organ. How can promises to pay be fulfilled, or, in more technical terms, how can outflows be lined up with inflows (4)? That is, this critique is not external to the economy but internal to it. Here critique runs the risk of becoming technocratic, a temporary treatment of symptoms, a search for best practices, without considering finance’s ill effects as a whole. The same is true of the state, with its internal critics, university economists and regulators. If the state gets involved, it does so as an economic actor itself, and so its internal critics are limited by the interests of their boss. The protagonists here are the university economists, who become de facto vassals of the state, and their salaried counterparts, the regulators, who stand like tiny Davids against goliath funds, pushing with all their might to redirect speculative investments into blue chips. ‘Credit isn’t good or bad, so much as it is disciplined or undisciplined’ (5). The mythic creature ‘credit’ is beyond good and evil and predates us all; it is the foundation and the fate of our culture and we have no choice but to propitiate it.

Finance relations are turning commodity relations outside in again

The first two starting points, parasite and organ, construe finance as a living thing. Finance is there, leeching off us, and we ought to remove it. Finance is there and indispensable and we must work within its logic to ameliorate its worst effects. This leads to the third meaning of finance, the third starting point for critique, which neither discounts it as a superfluity nor capitulates to it as fate. It is perhaps the best framework we currently have for critique, although it has its drawbacks too.

If we recognise finance’s right to control flows and at the same time we recognise the real economy’s right to resist and assert its own primacy, critique becomes struggle. The struggle between production and finance can take place on different grounds with different weapons. Rhetoric often gets shrill here, as critics face the true evils and the true intractability of the object they are struggling against. Metaphors proliferate. Finance has been called a casino, a nest of swindlers and thieves, a zone of fiction, a madness of depressions, panics, manias, and crises. Shrill metaphors reveal, on one hand, the resistance of finance to everyday thinking and, on the other, critics’ difficulty finding the right weapons for their struggle. It is as though finance were so technical, and so powerful, critics need to demonise it.

This third way of construing the object of critique respects what finance has established and the ways in which economic relations have become reliant on it, without, at the same time, giving in to admiration. For Marx, ‘the development of credit and the abundance of loan capital… corresponds to the capitalist mode of production’ (Vol 3 828). This is a truth. But it is also true that, although finance goes along with capital, its functions, for Marx, grow out of the valorisation process and owe their profitability to production. As lofty and airy as it may become, as untethered from real needs, finance originates in production. Production ‘develops from within itself credit and the credit institutions’ (1023). Rudolf Hilferding followed Marx in this view.

Because Marx has a strong theory of the origin of value, price, and money in production, finance has to be born there as well. A chain of effects starts in production and reaches to finance. That is to say, finance may well be integral to the economy but it is never determinative. And here is the crux of the matter for this kind of critique: the specific way finance intertwines with production. Here is also what is probably the main reason finance is difficult for critical theory. Finance derives from production, let us stipulate this. But how? Unlike a factory floor with its machines and humans, finance is airy and distant, technical and rarified, and it is also untrustworthy, like gambling, criminality, deception, or madness. In fact, for Marx, even these negative qualities derive from the way production is carried out under capitalism. Finance is highly technical and specialised, ungrounded, and untrustworthy, qualities that derive from the basic tendency social relationships under capital exhibit, to pervert relations among humans into relationships between things. Marx called this in Volume 1 of Capital fetishism of the commodity. One strong critique that doesn’t discount finance as separable but doesn’t accept its intertwinement with production as inevitable would start here. When my dependence on you gets expressed through the exchange of one commodity for another, my relationship to the things that unite us and separate us is called a fetish. If exchange produces the fetishism of commodities, then finance produces the fetishism of credit. The best criticism in this area should be, as Marx himself was, immune to the fetish of the asset.

A fourth meaning of finance, a fourth way of looking at it, takes it as a human invention, which, like any other democratic institution, can be managed. That is, under the fourth critical meaning of finance, we recognise an external authority over finance, one that stands outside the economy, uncompromised by financial interests, an authority that has the understanding and the power to decide what to keep and what to ban. There has never been, I think, a god of banking, even if money has installed itself over the last two hundred years or so, as a secular god, whose paradoxical activity is to make everyone more and more indebted to the system instead of releasing them from it. Yet the god money is internal to the capital system; and that is one of the chief claims that the system makes, that it contains all powers within itself and recognises no external authorities.

Critique that says no to finance is saying no to a promise of material well-being.

If we want to recognise an external authority over finance, it won’t be a god, at least not one we recognise. Tests will have to be run after the current authoritarian finance coup to see if a position outside can be established that has sufficient leverage. We will need to see whether, in the US and other nominal democracies, democratic bodies can suspend the pressures of lending and borrowing long enough to decide over their destinations. Credit has penetrated deep into democracy’s dreams. One possible external position has been called ‘global,’ a fantasy about grasping the whole in a hypothetical standpoint or else perspectivally from individual locales on the globe where finance has not yet won the day. Maybe we envision rogue economic communities uncoupled from the financial grid. If credit anarchy seems unlikely or suspect, then full credit governance, this time from a perspective outside any creditor-debtor complex, starts to look desirable. A body not caught by any single economy, a global credit institution could govern the interrelation of national economies. If the US finally becomes or at least learns to see itself as ‘one national economy among many,’ to match the ‘multipolar moment,’ it will go a long way toward what Radhika Desai calls ‘geopolitical economy,’ whose narrative ends in a ‘stable system of international economic and monetary governance.’

And yet, the plan to govern finance externally will undoubtedly hit the obstacle that the system considers itself ungovernable, like a market. And it may in fact be ungovernable in some respects. We would have to carry out a significant analysis of finance as it exists, separate fact from fiction, contradiction from material basis. Only then can we hypothesise whether global governance over finance is possible without changing the nature of credit altogether. Such an analysis will face all the overt blocks, technical and ideological, that the credit system puts up against external governance. It will also likely have to revise Marxist categories. Commodity exchange turned feudal relations inside out. Finance relations are turning commodity relations outside in again. But what a difference from industrial control! As compared to industrial capital, finance is homeless, dispersed, instantaneous; transactions are as particulate as grains of sand on a beach or stars in heaven. A critique has to face a more basic matter as well, harder to overcome. The credit complex makes claims on the future material well-being of participants to a level of detail that most governance cannot or would not. Can we seriously hope to restrict promises to pay in the future without becoming the world’s enemy? It is important to acknowledge the existential claim that finance makes. Critique that says no to finance is saying no to a promise of material well-being. The fantasy that austerity now leads to prosperity later may be bigger than both credit and governance imagine. A global governor may quickly come to look like the cause of our suffering, the thief of our future. It may soon be drawn back into the logic of credit and, like the IMF and World Bank, under the guise of a promise to alleviate suffering, redistribute suffering once again to the powerless.

Paul North is Maurice Natanson Professor of German and Professor of Philosophy at Yale University. He is the author of several books, including The Yield: Kafka’s Atheological Revolution (Stanford 2015), Bizarre-Privileged Items in the Universe: The Logic of Likeness (Zone 2022), and The Standpoint of Marx’s Capital (forthcoming). He is co-editor of a new translation and edition of Marx’s Capital Volume 1 (Princeton 2024) and is at work with Paul Reitter on editions of Volumes 2 and 3.

First published online 6 September 2026

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