The demands of finance and the glass ceiling of profit without investment

Abstract

In post-Keynesian recent works the ‘profit without investment’ case has made its appearance as a particular accumulation regime, one claiming along with two others (the contractive and the expansive case) that it can account for the different conceivable dynamic patterns at work in financialised capitalism. Actually, profit without investment—or rather, profit beyond investment—is in the very nature of capitalism. It is not a special case. The dividend channel is an essential component of profit formation. We show that its enabling condition, and what at the same time limits its width, is firms’ resort to debt. Beyond a certain point, the divorce between dividends and investment is such that firms’ policies leave their viable domain—a domain bounded by their wishes to be self-financing. Past that point, any increase in profits runs into a ‘glass ceiling’ in terms of outlets for those profits. It is when the demands of finance (i.e., of shareholders) reach this limit that the three regimes identified in the literature make their appearance, including the one called ‘profit without investment’. Seen in this light, these regimes are therefore all cases of profit without investment, ones that take on some reality and some plausibility when finance tries to drag profit without accumulation outside of its viable domain.

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