Marx on Financial Intermediation: Lessons from the French Credit Mobilier in the New York Daily Tribune

The role of financial intermediaries in economic development can be clarified by examining Marx's contributions to an old debate among economic historians regarding the role of joint stock investment banking and, in particular, the rise of the French Credit Mobilier, in French economic development. Marx's account of the Credit Mobilier in a series of articles written for the New York Daily Tribune during the 1850s, contains the outlines of a theory of the potentially destabilizing role of financial intermediaries in economic development. Five propositions regarding financial intermediaries (FIs) in development emerge: First, FIs promote the multiplication of financial claims to social wealth beyond any conceivable basis for their realization in production. Second, FIs immobilize and misallocate capital. Third, the lender of last resort function of the Central Bank is necessarily ineffective in confronting crises of FIs. Fourth, FIs accelerate the restructuring and concentration of capitalist property. Finally, FIs play an explicit political role in "buying time" in the context of class struggle, deferring conflict to a later date.