Low angle of high rise buildings. Original public domain image from Wikimedia Commons
By Yannis Bougiatiotis and Hanin Khawaja – Apr 12, 2025
“Everything gives way and nothing stands fast.”
—Heraclitus, as quoted in Plato’s Cratylus1
During the “Age of Catastrophe” (1919–45), a series of profound economic, political, and ideological crises disrupted what had appeared to be the “normal” functioning of capitalism.2 In 1930, a key moment of this “age,” marked by the economic catastrophe of the Great Depression and sharp political polarization under fascist rule, Antonio Gramsci introduced the concept of an interregnum, describing a period in which “the old is dying and the new cannot be born.”3 He used this idea to characterize moments of rupture and reorganization within capitalism and to warn of their potential “morbid symptoms.” Later, Robert W. Cox expanded on this concept in the context of international political economy, applying it to periods of hegemonic decline, where existing global structures lose legitimacy while no clear alternative has emerged.4 Cox’s formulation underscores the instability of such transitions, in which ideological struggles, economic contradictions, and geopolitical realignments shape the contours of a still-uncertain future.
Decades later, the capitalist system finds itself in a new state of flux. Trump’s pledge to “stop America’s decline,” Vor Der Leyn’s acknowledgement of a “new era of harsh geostrategic competition” following the collapse of the “cooperative world order,” and discussions between Putin and Xi Jinping on establishing a “multipolar global order” highlight significant global power realignments.5 Core economies remain stagnant, and while China and other peripheral economies have undergone rapid industrialization, many of the periphery continue to experience exacerbated patterns of uneven development. Intensified competition over access to critical raw materials, markets, and energy has fueled a surge in aggressive protectionism within an increasingly integrated world economy. Simultaneously, the specter of large-scale war looms, with military conflicts escalating. Societies face mounting inequalities, the erosion of democratic rights, and an unprecedented climate crisis. Does the concept of the “interregnum” capture a fundamental aspect of contemporary capitalism’s predicament?
In their recent book The State of Capitalism: Economy, Society and Hegemony (2023), published by Verso, Costas Lapavitsas and the EReNSEP Writing Collective (henceforth referred to as L and C) take on the challenge of addressing this question.6 The authors trace significant transformations in global capitalism following the financial crisis, which the pandemic shock both magnified and worsened.
This collective writing project stands out for its expansive expertise and regional diversity. The book’s analysis benefits from heterodox interdisciplinary perspectives spanning and extending beyond the Marxist tradition. Nevertheless, the book’s primary theoretical foundation rests firmly on Lapavitsas’s established work on financialized capitalism.7 His approach frames financialization as a historical structural transformation of mature capitalism that radically alters the monetary framework of capitalist accumulation across domestic and international spheres. Lapavitsas situates these ideas within Marxist political economy, tracing intellectual lineages from Monthly Review scholars like Sweezy, Baran, and Magdoff to Arrighi, the Regulation School, and various other global theorists.8
According to Lapavitsas, financialization is mainly, but not solely, reflected in a set of important phenomena related to the “extraordinary growth of the financial sector relative to the rest of the economy and the spread of financial practices and concerns amid non-financial enterprises and other fundamental agents of capitalist accumulation.”9 Firstly, non-financial enterprises have become increasingly involved in financial processes on an independent basis. Their direct engagement in financial market transactions has made them more remote from banks and other financial institutions. This shift has in turn altered their profitability, organizational structures and investment outlook. Secondly, banks are transacting more in open financial markets with the aim of making profits through financial trading rather than outright borrowing and lending. Individuals and households have increasingly been targeted as sources of profit by lending and collecting savings. Thirdly, the formal financial system dictates the access of individuals and households to vital goods and services such as health, education, transportation, and housing. Financialization at its core represents
a growing asymmetry between production and circulation—particularly the financial component of the latter…. The asymmetry has arisen as the financial conduct of non-financial enterprises, banks and households has gradually changed, thus fostering a range of aggregate phenomena of financialization. A telling aspect of the transformation has been the rise of profits accruing through financial transactions, including new forms of profit that could even be unrelated to surplus value; this process can be summed up as “financial expropriation.”10
The financialization thesis has sparked significant disagreements, as the book recognizes the lack of agreement when defining financialization.11 Fine’s alternative conceptualization of financialization constitutes an example of such contestations within Marxist political economy.12 Nevertheless, the debate runs much deeper than simply terminological disagreements, with Christophers highlighting the conceptual and empirical limits of the financialization thesis itself.13 These limits concern its “analytical coherence,” the “depth and range of genuinely new insights generated by the positing and theorization of financialization,” and its “strategic significance in highlighting the role of finance in contemporary social life.”
On the basis of these ongoing debates, MR readers will find the book deliberately pushing conceptual and empirical boundaries, demonstrating how financialization offers fresh insights into contemporary global capitalism while highlighting finance’s profound transformation of capitalism’s essential features. The work also extends and updates MR’s traditional focus on monopoly capitalism by examining how financialization has reshaped fundamental capital accumulation dynamics. It further provides MR readers with a sophisticated framework for understanding contemporary imperialism that builds upon while critically engaging with classical Marxist theories. In particular, readers of MR dissatisfied with the denial of imperialism by certain parts of the left will find the book a solid defense of its contemporary relevance.14
L and C achieve all this by taking up the formidable intellectual challenge of theorizing an interregnum, amidst its inherent turbulence. They posit that since the 2007–09 Great Financial Crisis, global capitalism has entered a transitional phase where financialized capitalism’s dynamism has waned, yet no alternative structure of accumulation has materialized. This theorization amid flux presents both intrinsic limitations and distinctive analytical possibilities, which the authors explore with rigorous intellectual ambition. The interregnum exhibits several defining characteristics that form the book’s central thesis: (a) Weak accumulation and productivity growth in core economies despite technological advances, marked by poor investment, stagnant productivity, and profitability dependent on wage suppression; (b) Evolving financialization and capital accumulation dynamics; (c) Unprecedented state intervention through central banks’ creation of fiat money, balance sheet expansion, and interest rate control, establishing the state as contemporary capitalism’s pillar; (d) A new form of imperialism characterized by internationalized industrial and financial capital operating in parallel; and (e) US hegemony anchored in command over world money, deriving power from the dollar’s position and extracting surpluses through global reserve requirements.
The main part of the book begins with a strong focus on developments in capitalist accumulation, specifically the real sector’s weakness in core economies. Through empirical documentation of profitability patterns, L and C identify feeble capital accumulation following the 2007–09 financial crisis. This condition stems from two interacting forces: an “internal mechanism” of wage stagnation alongside tepid productivity growth, and an “external mechanism” involving inexpensive wage-good imports.15 The combination of demand deficiencies worsened by austerity measures and the “ultimately determinant” production-side limitations—particularly technology’s failure to generate substantial productivity improvements—produced anemic growth, diminished profitability, and languid productivity.16
While there may be disagreements regarding the book’s analysis of the dynamics of capitalist accumulation and its focus on heterogeneous trends in select core economies, substantial evidence highlights the weakness of capitalist accumulation both in the core and globally.17 In this context, L and C make a particularly insightful observation regarding the nature of state intervention and its impact on capital accumulation. The class-biased intervention of the state, characterized by its refusal to pursue structural reform and its reliance solely on monetary measures (such as low interest rates, liquidity injections, bailouts, and monetary easing) primarily served the interests of the capitalist “elite.” Far from addressing the deeper problems of capitalist accumulation or reviving the weakened dynamics of profitability, these policies further deepened income and wealth inequalities, compounding the broader challenges confronting neoliberal capitalism.
The pandemic crisis exposed stark capacity differences between core and peripheral states under weak accumulation conditions. Core states deployed expansive fiscal and monetary policies, while peripheral states faced currency crises and mounting debt. These disparities intensified with the Federal Reserve’s selective dollar swap lines that excluded peripheral countries, reinforcing global monetary hierarchies. L and C attribute this divergence to core states’ control over fiat money, enabling their central banks to issue currency backed by financial assets. While stabilizing markets through quantitative easing, these interventions failed to address structural problems like low productivity and zombie firms. Core states ultimately prioritized preserving capitalist property rights over implementing transformative changes.
The limits of state intervention under financialized capitalism became evident during the pandemic crisis. According to L and C, early 2020s inflation marked the boundary of state intervention’s ability to sustain demand amid structural supply-side weaknesses.18 Though pandemic disruptions and geopolitical tensions contributed, weak accumulation’s fragility was decisive. Peripheral economies suffered more as energy and food price inflation revealed global shocks’ unequal burdens. Inflation redistributed wealth by eroding workers’ real incomes when nominal wages lagged behind prices, transferring income from labor to capital. It affected capitalists unevenly, boosting some profits while squeezing others’ margins. Inflation particularly destabilized financialized capitalism by undermining debt value—essential for financial profits. L and C conclude inflation emerged as “the cost of state intervention.”19
In the interregnum between the financial meltdown and post-pandemic period, the book examines financialized capitalism’s evolution from “weakening” to “rebalancing.” Financialization’s weakening manifested in commercial banks’ retreat and shifts in financial profits and private debt. Financial profits that had risen for two decades after the 1980s declined as a percentage of GDP, while the dynamism of financial relative to non-financial profits stalled.20 Household debt fell in core economies, while non-financial corporate debt showed varied patterns: stagnating in Japan and Germany, declining in the United Kingdom, and rising in the United States after an initial decrease.21 The “rebalancing” phase featured two key developments: financial profits recovered but remained stagnant relative to non-financial profits, and declining private debt was offset by surging public debt, fueling shadow banks’ growth to “unimaginable” levels—approximately 50 percent of global financial stocks.22
The shift to market-based finance and the ascendance of shadow banks represent the most significant developments between financialization’s two phases. Though our understanding remains incomplete, the book effectively explains how shadow banks differ from commercial banks in evading regulation and in their reliance on public bonds for securitization, and repo markets’ role in their leverage and liquidity. L and C highlight a crucial analytical challenge: shadow banks operate at arm’s length from state control while simultaneously “feeding” off state intervention. Understanding this paradox—the dual rise of state power in finance alongside shadow banking growth—is essential for analyzing the rebalancing moment and its implications for property rights concentration, profit extraction, and financialized capitalism’s class structure.23
In our view, the notions of the “retreat” and “rebalancing” of financialization in the core require further elaboration. Firstly, the writers seem wary of the heterogeneity in their findings, yet there is some generalization about wider changes of financialization out of a set of notable yet specific quantitative trends. Why can these two moments be generalized even given intra-core differences? Secondly, the question still remains on whether such quantitative changes reflect a qualitative change in the nature of financialized capitalism, particularly with respect to the dominance of shadow banks and the role of the capitalist state in the rebalancing moment. To the extent that the financialization thesis is a contested theoretical territory, more solid argumentation and clearer articulation are necessary.
One of the book’s most significant contributions is its analysis of how the state has become the pivotal power in the financial system, particularly through central banks’ ability to issue fiat money. The money market—the fundamental market of the financial system where interest rates are determined—is now dominated by central banks through their unprecedented balance sheet expansion and control of repo markets. The Federal Reserve, as the US central bank, serves as both a vital domestic pillar of US capitalism and the main pivot of US hegemonic and imperial power globally. Through the issuance of fiat dollars, it ensures the returns and protects the operations of US finance capital while simultaneously maintaining the dollar’s position as world money—a unit of account, means of payment, and reserve of value in international transactions. This control over world money gives the United States enormous advantages: it draws huge surpluses as other countries maintain dollar reserves, gains freedom in domestic monetary policy, and establishes the institutional framework for global capital flows. The book persuasively argues that this monetary power is central to understanding contemporary hegemony and imperialism.
L and C’s analysis of contemporary imperialism represents an important theoretical intervention. Following the approach of classical theories of imperialism, they argue that imperialism requires historically specific analysis of economic interests and political-institutional-ideological mandates of capital. The book contends that “the molecular structures of capital and the corresponding outlook of the world economy are distinctly different” from those of early 20th century, necessitating modifications to account for financialization’s transformative impact.24
While classical imperialism featured internationalization of commodity and money capital under amalgamating industrial and banking monopolies, the finance capital envisioned by Rudolf Hilferding has been dismantled. Today, the authors assert, “giant financialization enterprises together with transformed financial institutions drive contemporary imperialism.”25 This manifests in the “qualitative transformation of the internationalization of productive capital together with the enormous revival of loanable capital flows,” world money’s dominance, and a capitalist periphery with elites commanding global circuits of capital via international transactions.26 And though the classical theorists correctly emphasized the state’s role, they overlooked world money, an essential feature for understanding hegemony.27
Productive capital internationalization has created complex global value chains (GVCs) dependent on profit-friendly conditions, with governance asymmetries favoring core firms over peripheral enterprises. Financialization deepens this dominance by enabling multinationals to exert control through financial mechanisms.28 Financial liberalization draws peripheral economies into global finance on terms dictated by core countries, creating “subordinate financialization” that heightens peripheral vulnerabilities. This dynamic is reinforced by the dollar’s status as primary reserve currency, compelling peripheral states to accumulate dollar reserves and remain tethered to the core-dominated financial architecture. Controversially, L and C argue that today’s imperialist rivalry no longer seeks territorial exclusivity but instead focuses on shaping rules for investing, producing, trading, and monetary transfers. While structuralist and dependency theories remain “reliable” guides to peripheral subordination, L and C argue that they require updating to account for global capitalism’s new modalities.
The most important development in the interregnum, according to L and C, is the contest over US hegemony, shaped by two opposing trends: the “challenge” of China and the “sickness” of Europe. The contemporary struggle for world hegemony presents a qualitatively different challenge from earlier periods, as China remains a peripheral economy with distinct forms and degrees of state intervention. While the US’s position is undoubtedly weakened, the book identifies domestic challenges related to accumulation, control over world money and global finance, and social struggles as qualifications to China dethroning the US as the leading hegemon. At the other pole is uneven development within Europe, reflected in the large imbalances of the TARGET 2 system, the euro’s failure to act as world money, and Germany’s declining hegemony. These factors demonstrate that Europe’s core powers are incapable of sustaining their hegemonic position, let alone challenging the United States.
Monetary power occupies a central position in the international market, through the pivotal role of world money and the unparalleled influence it bestows upon the hegemon that controls its issuance. L and C contend that the consolidation of imperial power has always been inseparable from the evolution of monetary systems, emphasizing world money’s critical function in sustaining hegemonic dominance. As Arrighi observes, over the past four centuries, the decline of empires has often coincided with their loss of financial dominance.29 He terms this process “hegemonic transition,” tracing a progression from Genoa to Amsterdam, Britain, and ultimately the United States.
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While it is true that control over the issuance of world money has always underpinned hegemonic power, its importance has intensified in contemporary capitalism, becoming central to hegemony and imperialism. This is largely due to its unique ability to mediate tensions between domestic and international markets. The authors underscore the fundamental distinction between the domestic and international realms. Two key points emerge: First, while the global market is linked to the domestic, it is not a mere extension of the latter, and remains fundamentally distinct. Domestically, money facilitates resource allocation through legal, economic, and social frameworks, with the labor market at the core of capitalism. Second, domestic money cannot suffice in the international sphere, necessitating the emergence of a distinct form—world money. Without it, trade and finance would collapse, as its effectiveness depends on the institutions of the hegemon. This distinction becomes especially apparent during clashes between domestic and global markets, when diverging price signals lead to disruptions, instability, and political intervention. Exchange rate crises can destabilize trade and weaken the role of domestic money, and often result in recessions. In such moments, world money dominates, requiring non-market mechanisms to secure access. Access to world money (reserves) becomes critical for both core and peripheral nations to settle their obligations, with the hegemon dictating the terms.
The State of Capitalism undertakes a challenging and multifaceted task: on one hand, it recognizes the importance of developing a general theory of contemporary world money and opens this avenue for discussion. Marxist political economists, particularly since the collapse of Bretton Woods in 1971–73—when the dollar became a fully inconvertible form of world money—have taken up this challenge. However, their efforts often culminate in functionalist accounts that passively accept the dollar as the de facto form of world money.30 On the other hand, the authors aim to formalize the relationship between world money and hegemony within contemporary imperialism, highlighting the distinct role of the hegemon in the international realm. Internationally, states operate as independent economic agents driven by power and ideology, engaging in trade and lending, while this realm remains dominated by alliances, conflict, and contested sovereignty. Unlike domestic markets, the world market lacks a supranational authority and is shaped by interstate competition rather than price mechanisms or profit equalization. The hegemonic state steps in to fill this void, “stand[ing] apart from other imperialist states due to its power to mold the institutions of the world market and materially alter its functioning,” with “the most privileged terrain for the exercise of hegemonic power…that of world money.”31
L and C analyze US hegemony by examining its historical development and monetary foundations. They show how shifts in monetary systems correlate with hegemonic transitions: Britain’s decline aligned with the gold standard’s collapse, while US dominance emerged after the Second World War through deliberate policy choices. This transition required the US government to strategically establish dollar hegemony, first through Bretton Woods and later through inconvertible fiat currency. Postwar US hegemony is divided into two periods: 1945–early 1990s, when the US established global monetary dominance while competing with the Soviet Union; and the 1990s onward, when the Soviet collapse elevated the US to peak hegemony despite weakening domestic accumulation. This later phase prompted the Washington Consensus and neoliberal counteroffensive, reshaping global institutions (GATT, WTO, IMF, World Bank) to protect dollar hegemony and facilitate global capital expansion.32 As the European core powers demise, the future of US world hegemony hinges upon the rise of China. While deep hegemonic rearrangements are evident, the ultimate outcome of this struggle remains uncertain.
In conclusion, the book’s answer to the question of the contemporary relevance of the “interregnum” is emphatically affirmative. Since the financial meltdown, global capitalism has entered a state of flux, and L and C mount an ambitious effort not only to describe but to theorize core aspects of this new state. Whether they succeed is for readers to decide. It suffices to note that the interregnum’s uncertainty makes solid theorizing challenging, and the book intermittently faces this inherent difficulty. Undeniably, The State of Capitalism identifies the necessary elements and guides readers toward the critical questions required to advance theoretical understanding, paving the way for future inquiry. More importantly, this collective project transcends intellectual exercise, serving as a political act aimed at fostering the emergence of a progressive “new” from the remnants of the dying “old.” L and C conclude with an initial articulation of the necessary alternative anticapitalist politics that draw from radical economic and social strategies, oppose imperialism and hegemonic power, and advocate for popular and national sovereignty, democracy, and internationalism. Ultimately, the book challenges all its progressive readers to take an active stance on the famous and enduring dilemma: socialism or barbarism.
Notes
1. Plato, Cratylus. in Complete Works of Plato, ed. John M. Cooper and D. S. Hutchinson (Indianapolis: Hackett, 1997), 120.
2. Eric J. Hobsbawm, Age of Extremes: The Short Twentieth Century, 1914–1991 (London: Abacus, 1994).
3. Antonio Gramsci, Selections from the Prison Notebooks, ed. and trans. Quintin Hoare and Geoffrey Nowell-Smith (London: Lawrence and Wishart, 1971), 276.
4. Robert W. Cox, “Gramsci, Hegemony, and International Relations: An Essay in Method,” Millennium: Journal of International Studies 12, no. 2 (1983): 162–75.
5. Donald J. Trump, “Inaugural Address,” January 20, 2025, White House, https://www.whitehouse.gov; Ursula von der Leyen, “Special Address by Ursula von der Leyen, President of the European Commission,” January 21, 2025, World Economic Forum. https://www.weforum.org; “Russia’s Putin discusses multipolar global order with China’s Xi,” ABC News. January 21, 2025.
6. Costas Lapavitsas and the EReNSEP Writing Collective, The State of Capitalism: Economy, Society, and Hegemony (New York: Verso, 2023).
7. Costas Lapavitsas, Profiting Without Producing: How Finance Exploits Us All (New York: Verso, 2013).
8. Costas Lapavitsas, “The Financialization of Capitalism: ‘Profiting Without Producing,’” City 6 (2013): 792–805.
9. Lapavitsas and the EReNSEP, The State of Capitalism, 38.
10. Lapavitsas, “The Financialization of Capitalism,” 794. For a further discussion of “financial expropriation,” see Costas Lapavitsas, “Financialized Capitalism: Crisis and Financial Expropriation,” Historical Materialism 17, no. 2 (2009): 114–48.
11. Lapavitsas and EReNSEP, The State of Capitalism, 38.
12. Ben Fine, “Financialization from a Marxist Perspective,” International Journal of Political Economy 42, no. 4 (2013): 47–66.
13. Brett Christophers, “The Limits to Financialization,” Dialogues in Human Geography 5, no. 2 (2015): 183–200.
14. John Bellamy Foster, “The New Denial of Imperialism on the Left,” Monthly Review 76, no. 6 (2024).
15. Lapavitsas and EReNSEP, The State of Capitalism, 55–60.
16. Lapavitsas and EReNSEP, The State of Capitalism, 53, 56.
17. Michael Roberts, “The State of Capitalism,” Michael Roberts blog, https://thenextrecession.wordpress.com; Deepankar Basu, Julio Huato, Jose L. Jauregui, and Evan Wasner, “World Profit Rates, 1960–2019,” Review of Political Economy 37, no. 1 (2022): 92–107. See also Deepankar Basu, Evan Wasner, Jesus Lara Jauregui, and Julio Huato, World Profitability (2025), https://dbasu.shinvapps.io.
18. Lapavitsas and EReNSEP, The State of Capitalism, 116.
19. Lapavitsas and EReNSEP, The State of Capitalism, 115.
20. Lapavitsas and EReNSEP, The State of Capitalism, 75–76.
21. Lapavitsas and EReNSEP, The State of Capitalism, 79.
22. Lapavitsas and EReNSEP, The State of Capitalism, 75, 80–81.
23. Lapavitsas and EReNSEP, The State of Capitalism, 80, 82.
24. Lapavitsas and EReNSEP, The State of Capitalism, 164.
25. Lapavitsas and EReNSEP, The State of Capitalism, 167.
26. Lapavitsas and EReNSEP, The State of Capitalism, 194, 190, 205–08.
27. Lapavitsas and EReNSEP, The State of Capitalism, 166.
28. Lapavitsas and EReNSEP, The State of Capitalism, 222–23.
29. Giovanni Arrighi, The Long Twentieth Century: Money, Power and the Origins of Our Times (London: Verso, 1994).
30. Suzanne de Brunhoff, “Marx’s Contribution to the Search for a Theory of Money,” in Marx’s Theory of Money: Modern Appraisals, ed. Frederick Moseley (Basingstoke: Palgrave Macmillan 2005), 209–21; Tom Smith, “Towards a Marxian Theory of World Money,” in Mosley, ed., Marx’s Theory of Money, 222–36.
31. Lapavitsas and EReNSEP, The State of Capitalism, 182.
32. Lapavitsas and EReNSEP, The State of Capitalism, 196.
(MRonline)
