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

cordonnier, laurent ; velde, franck van de;

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.