The Influence of the Interest Rate in Capitalist Competition: Capital Differentiation and Structural Change

Nicolás à Guila () and Juan M. Graña
Additional contact information
Nicolás à Guila: Centro Interdisciplinario para el Estudio de Políticas Públicas (CIEPP)
Juan M. Graña: Centro de Estudios sobre Población, Empleo y Desarrollo (CEPED), Instituto de Investigaciones Económicas, Universidad de Buenos Aires, Argentina
Authors registered in the RePEc Author Service: Juan M. Graña

Bulletin of Political Economy, 2020, vol. 14, issue 2, 153-177

Abstract: We contribute to the Marxist discussion on the role of the interest rate in the investment and financing decisions of firms, a crucial dimension that has not received sufficient attention in the literature. The market rate of interest acts as a benchmark for the profit rate of each capital, allowing firms to decide how to allocate their funds between industrial accumulation and financial valorization. Once they resolve to invest, the interest rate also influences their choice on how to finance the investment between their own and borrowed capital. Considering capitalist competition as a process resulting in the differentiation between ‘normal’ capitals - that appropriate the general rate of profit - and ‘small’ capitals - that appropriate a lower-than-general rate of profit -, we show that changes in the interest rate have different consequences for these two types of capitals. ‘Normal’ capitals invest if the general rate of profit is higher than the interest rate and borrow capital to finance their investment, thereby appropriating a higher rate of profit of enterprise. Meanwhile, ‘small’ capitals are regulated by the interest rate. If the rate of interest increases, even if it remains below the general rate of profit, it could push them into bankruptcy and turn them into interest-bearing capital. Moreover, they face restrictions to access credit, further widening the gap between their rate of profit of enterprise and that of normal capitals. Finally, the paper presents some ideas to build a framework to analyze the consequences of different interest rate regimes for structural change in the context of capital differentiation, and argues for state direction of credit.

Keywords: Marx; interest rate; competition; investment; financing; structural change; credit policy (search for similar items in EconPapers)
JEL-codes: B51 E43 L16 O23 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
https://serialsjournals.com/abstract/36898_2-final_aguila.pdf (application/pdf)
https://www.bulletinofpe.com/nicol%C3%A1s-%C3%A1guila-juan-m-gra%C3%B1a-20202 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:awu:journl:v:14:y:2020:i:2:p:153-177

Access Statistics for this article

More articles in Bulletin of Political Economy from Bulletin of Political Economy
Bibliographic data for series maintained by Maria Cristina Barbieri Goes ().