Theorizing the process of financialization through the paradox of profit: the credit-debt reproduction mechanism

Farzad Javidanrad, Robert Ackrill, Dimitrios Bakas, Dean Garratt

Research output: Contribution to journalArticlepeer-review


Financialization occurs where, over time, capitalist economies undergo a transformation, with profit-making via investment in production declining, to be replaced by profit-making via investment in financial markets. In the present research, we offer a novel theoretical explanation for this process, that we call the credit-debt reproduction mechanism. We derive this inductively, starting with Marx’s analysis of the paradox of monetary profit and its practical manifestation in the capitalist economy, the shortage of money in circulation. This shortage results in capital becoming increasingly expensive, making long-term investment decisions less certain, less profitable and less justifiable. Investment in financial markets grows, but this leads to an ever-expanding cycle of credit and debt, which puts capitalist economies on a one-way road from productive investments to predominantly unproductive investments. We include in this analysis important reflections on the distinction between “financialization” and “financial development.” We also revive and revisit the notion of the shortage of money as a key driver in this process. Another contribution made in this research is to draw a distinction between practical and theoretical solutions to the paradox of monetary profit. Crucially, our research confirms the absence of a theoretical solution to the paradox, there existing only practical solutions.
Original languageEnglish
Number of pages23
JournalJournal of Post Keynesian Economics
Early online date16 Apr 2024
Publication statusE-pub ahead of print - 16 Apr 2024

Bibliographical note

Copyright © 2024, The Author(s). Published with license by Taylor & Francis Group, LLC. This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (, which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way. The terms on which this article has been published allow the posting of the Accepted Manuscript in a repository by the author(s) or with their consent.


  • Paradox of monetary profit
  • credit-debt reproduction mechanism
  • financialization
  • monetary production economy
  • shortage of money in circulation


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