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International Critical Thought

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The global financial crisis in the eyes of

Japanese Marxist economists
a

Masao Watanabe & Tan Xiaojun

Graduate School of Social Sciences, Hitotsubashi University,

Tokyo, Japan
b

Academy of Marxism, Chinese Academy of Social Sciences,

Beijing, China
Version of record first published: 17 Sep 2012.

To cite this article: Masao Watanabe & Tan Xiaojun (2012): The global financial crisis in the eyes of
Japanese Marxist economists, International Critical Thought, 2:3, 404-411
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International Critical Thought

Vol. 2, No. 3, September 2012, 404 411

The global nancial crisis in the eyes of Japanese Marxist economists

Masao Watanabea and Tan Xiaojun b

Downloaded by [University of Memphis] at 15:31 29 September 2012

a
Graduate School of Social Sciences, Hitotsubashi University, Tokyo, Japan; bAcademy of Marxism,
Chinese Academy of Social Sciences, Beijing, China

On the global nancial crisis and the European sovereign debt crisis, the Japanese Marxist
economists have conducted many studies from different perspectives and published many
works. This article will mainly introduce the views of the three main schools of the Marxist
economists in Japan, namely the orthodox school, the Uno School and the Regulation
School, to render a better understanding of the Japanese Marxist economists view on the
global crisis.
Keywords: Japan; Marxist economics; nancial crisis; European debt crisis; modern
capitalism

Since the breakout of the global nancial crisis, the Marxist economists of Japan have undertaken
many detailed and in-depth studies of it and have published many works. Nevertheless, in order to
fully understand these ndings, we need to rst have a review of their studies on the latest changes
of modern capitalism conducted in the 1990s, as the latter studies serve as a foundation for their
analysis of the nancial crisis.
In the 1990s, with the Japanese economy entering into a downturn, the Marxist economists of
Japan shifted their research focus to modern capitalism again. In 1995, the Japan Society of
Political Economy, the biggest association of Marxist economics in Japan, held its 43rd National
Congress at Keio University. During the Congress, Isamu Kitahara, Makoto Itoh, and Toshio
Yamada, three representatives of the three major schools of the Marxist economics in Japan,
delivered keynote addresses from their respective perspectives and induced hot discussions
among the attendees. Afterwards, the three scholars published a book in Japanese called
[How to view the modern capitalism] in 1997 through the Aoki
Shoten Publishing Co. It is fair to say that the three addresses represent well the main views of
the Japanese Marxist economists on modern capitalism.
The rst chapter named The status and prospect of capitalism at the end of 20th century: A
perspective from the new state monopoly capitalism is delivered by the Emeritus Professor Isamu
Kitahara (1997) of Keio University from the perspective of the orthodox Marxist economics
school. In it, Kitahara contends that the economic system of the twentieth century is the monopoly
capitalism of the economic stagnation era, and based on the treatment of the Great Depression of
the 1930s, it is a kind of state monopoly capitalism.
The second chapter named The Uno Theory and historical backward ow assumption of
capitalism is delivered by the Emeritus Professor Makoto Itoh (1997) of the University of

Corresponding author. Email: tanxj@cass.org.cn

ISSN 2159-8282 print/ISSN 2159-8312 online

# 2012 Chinese Academy of Social Sciences
http://dx.doi.org/10.1080/21598282.2012.706783
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405

Tokyo. According to Itoh, the capitalism after 1973 is one with the individualistic market
economy principle returning to the mainstream, hence demonstrating a tendency of returning
to classical capitalism in the twentieth century. Itoh thinks that during the reversal, the principle
problem mentioned in Marxs Capital (1972) re-emerges.
The last is The collapse of Fordism and new explorations: A study of modern capitalism from
the Regulation School delivered by the Honorary Professor Toshio Yamada (1997) of Nagoya
University. The main viewpoint of the address is similar to that of the French regulation
school, namely Michel Agliettas reading of the American capitalism after World War II as
Fordism (Aglietta 1979), which is a system of compromise between the workers and the capitalists. In the system, the workers accept productivity indexed wage1 and the capitalists embrace the
view that huge production would bring huge consumption. The Oil Crisis of 1973 ended this
period of rapid economic growth, hence ushering capitalism into a post-Fordism era.
Based on these basic understandings of modern capitalism as reviewed above, the different
schools of Marxist economics in Japan have given further analyses of the nancial crisis since
its breakout in 2008.

1.

The orthodox schools view on the global nancial crisis

In terms of how to view the current global crisis, Kiyoko Imura (2005, 2010, 2011), another representative of the orthodox school and also an Emeritus Professor of Keio University, gives an
especially comprehensive and insightful analysis. Her analysis is pillared on the following
three arguments.

1.1.

The metamorphic transformation of modern capitalism

According to Imura (2005), since the 1970s, modern capitalism has undertaken a metamorphic
transformation and entered into a new period. There are two factors leading to this transformation.
The rst one is the suspension of the xed Gold Dollar exchange rate and the collapse of the
early International Monetary Fund regime, namely the conversion of xed exchange rate to oating exchange rate; the second is the failure of economic policies for sustaining economic growth,
which renders a neoliberal turn towards economic policies.
For Imura, the xed Gold Dollar exchange rate of Bretton Woods system is helpful for curtailing ination and credit expansion, and the abolition of it means that the limitation of gold
reserve for issuing US dollar is lifted, and consequently the capability for controlling scal
decit is lost. As a result of this change, the United States, unlimited by gold reserve and international balance of payment, is now free to enlarge its ination, credit expansion and scal decit
according to its strategic goals, and extend liberalization of capital transaction both domestically
and internationally. The dollars privilege as the key currency is set free from the limitation of
gold reserve and gets unprecedentedly strengthened. Other countries in the world are also set
free to adopt policies for stimulating economic growth, including measures such as ination,
credit expansion, and scal decit, etc., since they are free from the obligation of maintaining
xed exchange rate and international payment balance (Imura 2005, 7, 9).
The result is that the huge amount of American economic decit was owing into overseas
countries in the form of surplus capital, and resulted in ination, credit expansion, etc., and
huge speculative investment in those countries with the dollar as the settlement currency. Consequently, since the 1980s when the Euro-American economies got in stagnation, the huge surplus
1

This means that the growth rate of nominal wage is kept below the growth rate of the productivity.

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capital then rushed all over the world for speculations, and rendered the international speculative
nancial transaction a normal state (Imura 2005, 11). To meet the demands of this era, the
monetary engineering developed various nancial instruments, and dispersed the risks to
the whole world. As the unreliability and speculation of monetary market continued to grow,
the foreign exchange market also signicantly strengthened its speculation.
As for the second factor, i.e. turn of economic policies towards neoliberalism, Imura (2005)
thinks that Ronald Reagan in the United States, Margaret Thatcher in the United Kingdom, and
Yasuhiro Nakasone in Japan have all actively pushed for the transformation. Under such a transformation, the attitude of the enterprises has also undertaken signicant changes. Imura especially
emphasizes that moral risks or loss of ethics have appeared in the attitude of those enterprises that
were previously relying on technological improvement and long-term planning.
1.2. The separation of monetary activity from real economies
After establishing the rst point about the metamorphic transformation of modern capitalism,
Imura develops her second point about the separation of speculative monetary activity from
real economies, and takes the latter as the essence of the transformation.
For Imura, after the United States had the international payment crisis, the xed exchange
between the dollar and gold was suspended. But now the United States continues to use dollar,
without being backed by gold, for international trade and capital transactions, and allows domestic banks to expand credit unlimitedly, which has consequently led to the continued increase
of decit, as well as the continued investment and attraction of capitals overseas. In order to
gain monetary prots from non-real economies, banks have also accelerated their monetary activities, and ushered the monetary expansion and consequent metamorphic transformation. Previously the issuing of credit by banks was limited by the prots of real economies, but now it
is separated from the latter and seeks prots from the monetary activities themselves. Consequently, a new virtual monetary prot is created through the new credit expansion mechanism
and an independent world of monetary activities that is not reliant on real economies is created. A
situation thus emerges in which the speculative monetary activity continues no matter whether the
real economies are in good or bad situations.
Of course, no matter how the expansion of monetary assets and prots is separated from the
real economies, in terms of purchasing power, they manifest the same as the added value of real
economies, such as prots, wages, etc. In other words, because the consumption activities,
especially of durable goods such as cars, furniture, and electronic appliances, etc., are continuing
due to the monetary expansion, the latter actually makes certain temporary contribution to the
consumption side of the real economies, and if it is linked to the technological improvement
aspect of the production of the real economies, the monetary expansion then would have some
positive meanings (Imura 2005, 19). Nevertheless, in reality the monetary expansion is not
linked to such technological improvement, and the unusual ourishing of the monetary world
has increased the probability of nancial crisis rather than inducing resonant expansion in the
real economies.
As we can see, so the nancial crisis of the twenty-rst century is a metamorphic transformation of nance caused by the metamorphic transformation of modern capitalism, namely the
expansion of speculative monetary activities separated from real economies.
1.3.

The conversion of modern capitalism crisis into scal crisis

For Imura, some new situations, such as the sovereign risk of the 2010 EU nancial crisis, have
emerged in modern capitalism crisis. For this EU crisis started in Greece and later spread to
Portugal, Ireland, Italy, and Spain, the media generally thinks that it is caused by the lack of

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supervision by the governments. Imura, however, thinks otherwise and contends that one of the
causes is those countries adoption of the United States neoliberal strategy and consequent
pursuit of monetary foundation for the state since the 1990s. The United Kingdom has been
actively pushing for monetary liberalization and internationalization since the 1990s, and has
become the main country in the EU trying to spread speculative monetary activities in Europe.
Through the media of the United States collateralized debt obligation (CDO) and credit
default swap (CDS) transactions, the United Kingdom indeed made great prots from the activities. Ireland and Spain followed suit soon afterwards. Besides the purchase and utilization of large
amount of CDO, bonds, and CDS from the United States, the EU monetary institutions have also
developed their own monetary products within the EU. And now it is those institutions as well as
their patronage states that are heavily stricken by the US nancial crisis to the edge of bankruptcy.
These states, previously seeking to have a monetary foundation, now are implicated due to their
nationalization measures that have induced signicant decit (Imura 2005, 106).
Another reason is that the national debts, once woven into the web of monetary products, play
the role of crisis spreader. According to Imura (2005, 107), after the collapse of Lehman Brothers,
the monetary institutions of developed countries found no good places to invest, so owed their
capital into the national debt market of the EU that was in dire need of assistance, and wove them
into the products of investment trust and index investment trust; while the signicant increase of
the CDS of these national debts has bolstered the credibility of the latter, it has also increased their
risks. This is also the reason why the nancial crisis and the rankings of national debts are linked.
Because the national debts can easily attain monetary guarantee, credits then expand, which in
turn induces the accumulation of decit, but this cannot continue forever, so once a nancial
crisis strikes, the expanded credit collapses and the risk of default is very high. Just as Imura
(2005, 107) points out,
the states neglecting the decit certainly should be held responsible, but as 70 to 80 percent of those
states bonds are bought by the monetary institutions, the latter have certain responsibilities as well, as
without their purchase, the states certainly could not continue to issue so large an amount of bonds that
were over their GDP; one could say that reliance of overseas funds to digest state bonds would lead to
slack nancial expenditure, huge pouring of public funds into the monetary institutions, as well as the
attempt to save them.

Therefore, we can see that what is behind the 2010 EU sovereign debt crisis is the metamorphic transformation of modern capitalism, with the consequence of rampant speculative
monetary activities independent from real economies, and the impasse of the strategy of establishing a monetary foundation for the state.
2.

The Uno Schools view on the global nancial crisis

Now lets turn to the analysis of Makoto Itoh, a representative of the Uno School. In his article
From subprime crisis to the global nancial crisis, Itoh (2009, 82) points out that even
though the current nancial crisis, caused by the global restructuring of real capital and
moneyed capital, and the burst of bubble, is different from the classical economic crisis and
the ination crisis of the 1970s, we need to acknowledge that it is still a money credit crisis
caused by the surplus accumulation of real capital as well as the consequent sudden decrease
of prots. This understanding is actually already seen in the book Political Economy of Money
and Finance co-edited by Itoh and Lapavitsas (2002, 132), as it says:
From the nancial crisis of Japan in the late 1980s to the Asian crisis in 1997, they are all caused by
the speculative investment of excessive money capital not fully absorbed into the real economy, as

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well as the consequent instability . . . in essence, the panic induced by this second type of a general
industrial and commercial crisis is more powerful as manifested today.

By using the term the panic induced by this second type of crisis, Itoh describes the monetary crisis caused by the instability of speculative capital as mentioned in Marxs Capital (1972).
In the eyes of Itoh, the recurring nancial crisis is a continuing manifestation of the inherent basic
contradictions of capitalism, similar to the the Dutch tulip mania of the seventeenth century, and
the South Sea Bubble of the eighteenth century. Furthermore, due to the nancialization of real
capital itself and the speculative transaction of gradually increasing world excessive capital, as
well as the expansion of credit spread to the consumers, the wage income bears a heavy
burden for paying the interest, hence rendering a tendency for double exploitation, namely one
by the commoditization of labor power and the other one by the nancialization of labor
power (Itoh and Lapavitsas 2002, 84). This renders a situation of a double-track nancial structure, since the American housing nance is poured into the world nancial market through means
such as mortgages, etc., and the latter is also returned to the working class people through loans,
etc. (Itoh and Lapavitsas 2002, 85). With the gap between the two tracks of housing nance
becoming bigger and bigger, once there was some default problem, the negative effects would
then spread to the whole world through chain reactions.
As a result, Itoh lists three factors that could help to prevent a collapse of the global economy.
The rst is the refrain set by modern transnational enterprises to enhance their own tendency of
nancialization and to relieve the destructive power of nancial crisis. The second is that the
economies like China and other low-income countries ease the shock of the nancial crisis.
The third factor is that all countries adopt effective nancial policies and exert great efforts to
prevent the downturn of economy. Nevertheless, Itoh and Lapavitsas (2002, 88 9) also points
out that it is hard to know the effectiveness of these factors, so it is hard to forecast.
Besides Itohs views, Masaru Kanekos ndings also represent the views of the Uno School.
Kaneko (2011) thinks that the current global nancial crisis is a crisis of globalization based on
the liberalization of nance, and in order to deal with it, the bad claims of credit rights need to be
truly settled. Nevertheless, neither Japan nor the United States have undertaken such measures,
since they could lead to the emergence of bubbles, even though they could help to prevent stagnation in the long term. Besides settling the bad debts, the world would also need a new industrial
revolution that could induce an overwhelming investment update and demand update. For this,
Kaneko thinks that the energy eld is a promising one, so its innovations should attract our
expectations.

3.

The Regulation Schools view on the global nancial crisis

In terms of the Regulation Schools viewpoint, Toshio Yamada is a main representative. In his
report the World nancial crisis and the current of capitalism (Yamada 2011), he provides an
analysis from both the diachronical and spatial perspectives.
First of all, the diachronical perspective means to view the nancial crisis within the big
history of capitalisms structural crisis. Seen from this perspective, the current crisis is not a cyclical crisis, but a structural one, namely along the diachronical process of moving from cyclical
crisis to structural crisis and nally to the ultimate crisis. This type of structural crisis and its
development are shown in Figure 1.
Figure 1 is based on the hegemons of the past two centuries and divides the capitalism history
into four periods. The hegemons here mainly refer to the United Kingdom in the nineteenth
century, the United States in the late twentieth century, and the United States in the early twentieth
century even though that is a period of power shifting from the United Kingdom to the United

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Figure 1. The world history of development and crisis.

States. Similar to the portraits of the Kondratiev Wave, each period has its consistent development
phase (the upward wave) and the structural crisis phase (the downward wave). The four consistent
development phases, as called in history, are the Victorian Prosperity of the United Kingdom in
the middle nineteenth century, the Roaring 1920s of the United States between the two world
wars, the Golden Age of Capitalism after World War II, and the New Economy between
the late 1990s to early twenty-rst century. Correspondingly, the structural crisis phases are
the Great Depression of the late nineteenth century, the Great Depression of the 1930s, the
Stagation of the 1970s, and the current World Financial Crisis.
These four periods, according to the analysis of the Regulation School, mean four modes of
development, with the upward wave and downward wave representing the ourishing and declining phases respectively. The four periods could be called the UK mode, the transitional mode,
the Fordist mode, and the nance-led mode respectively. We could say that capitalism consists
in the alternation of these developmental modes, which is the core thread of the historical contour
of capitalism (Yamada 2011).
Before the breakout of this crisis, namely between 1991 and 2008, the Americans have praised
their economic development as the revival of American economy. What kind of revival is it?
Actually when the Fordist mode was in decline in the 1970s, the United States began to adopt a
globalization strategy, which puts US companies global competitiveness as the rst priority
concern of their policy changes. And thereafter the development mode of Fordism featured by
the compromise of labor and capital starts to change. Nevertheless, even though the wage is inhibited and the working environment deteriorates, the US consumers receive low-cost products from
the world market as a return, so they accept the new situations. At the same time, monetary liberalization further develops, and the monetary interest is increasingly taking an advantaged position.
As a result, the United States realizes its transition towards a nance-led economy in the 1990s
(Yamada 2011).
For the nance-led economy, Yamada proposes the following macro-description: in terms of
development mechanism, the increase of assets price such as the share, the housing, etc., is the
prime drive force of the whole economy, which drives up monetary gains such as those from

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M. Watanabe and Tan X.

capital investment and dividends, as well as consumption, since the household also receives much
increased credit through subprime loans. Furthermore, the increase of share price also decreases
the cost of attracting investment, so makes some contribution to the companys investment as
well. As a result, the demand caused by consumption and investment is enlarged and the
economy is moved forward; this in turn brings good prots to the rms, which consequently
drives up the asset price due to a greater expectation of prot-earning. A benecial cycle,
namely from asset price  monetary gaining / investment  consumption  demands 
prots  asset price is thus formed, and the economy revives.
In a nance-led economy, the prime drive force of the cycle is neither the increase of production such as in Fordism nor the increase of actual working income, but the increase of asset
price, including bubbles, and monetary gains.
Nevertheless, this nance-led development mode entered into a crisis when stricken by the
collapse of the Lehman Brothers, with the benecial cycle ushered into a vicious cycle: as the
assets value decreased dramatically, the monetary gains also dropped signicantly, which
renders great monetary loss and many consequent bankruptcies of nancial institutions; at the
same time, the consumption also collapses, which in turn renders the shrink of the investment
all over the world, the decrease of demands and consequent prots, as well as the expectation
of prots, so the asset value further decreases and the situation gets even worse (Yamada 2011).
Secondly, the spatial perspective refers to Yamadas division of the world economy into seven
types according to their different development strategies. For example, he distinguishes the
nance-led economies such as the United States and the United Kingdom, high-quality
product export led economies such as Japan, Germany, Holland and Sweden, and potential domestic demand led economies such as China, India and Brazil. Through sorting out these different
levels as well as their complementarities, Yamada (2011) hopes to forecast their future
developments.
To sum up, the Japanese Marxist economists have the following common and different understandings about the current nancial crisis.
(1) Common understandings: rst of all, they think that this crisis occurs in a period when the
modern capitalism is entering a new development phase since the 1970s. Secondly, all scholars
think that the change of modern capitalism is the qualitative transition from the production-led
mechanism to the nance-led mechanism. Finally, besides the two common understandings as
reviewed above, they all think the relatively independent monetary world plays a signicant
role in this crisis.
(2) Differential understanding: the rst difference is with the innovativeness of the metamorphic transformation of the nance, with some regarding it historically very unique, but
others regarding it as the second type of monetary crisis as revealed in Marxs writings.
Secondly, they disagree whether to treat the crisis under the metamorphic transformation of
modern capitalism, or in light of modern manifestation of classical capitalism, or just something
in-between the transition.
In a nutshell, in light of the above scholars understandings and analyses, we can see that the
Japanese Marxist economists studies of the crisis are quite multilayered and multi-perspective.
Even though each school has its own standpoint and starting point, they all start with the basic understanding of modern capitalism and analyze the particularity and peculiarity of the current crisis,
which have thus enriched the Marxist economists insights of the current global nancial crisis.

Notes on contributors
Masao Watanabe is Professor of Sociology at Hitotsubashi University in Japan. His books include:
[Class! The conception institution of social recognition] (2004, in Japanese),

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[Civil society and welfare state: The social scientic approach for the modern age]
[Class politics!: How the emer(2007, in Japanese), and
ging political crisis has developed] (2009, in Japanese).
Tan Xiaojun is Associate Professor of Academy of Marxism, Chinese Academy of Social Sciences. She is
interested in theoretical economics and Japanese Marxist economics history. Her recent publication is On the
modern service sector of China: Theoretical analysis on service and military sector (2011).

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