Economic crisis Pt 3: Thieves fall out
Posted by n3wday on October 28, 2008
This article was written by Eddy Laing for the Kasama Project and is the third part in a series. For part 1 and part 2 click the links.
Economic Crisis, Part 3:
Thieves fall out — Growing Imperialist Contention.
By Eddy Laing
“The development of capitalism has arrived at a stage when, although commodity production still “reigns” and continues to be regarded as the basis of economic life, it has in reality been undermined and the bulk of the profits go to the “geniuses” of financial manipulation. At the basis of these manipulations and swindles lies socialized production; but the immense progress of mankind, which achieved this socialization, goes to benefit . . . the speculators.” (Imperialism, the Highest Stage of Capitalism. “I. Concentration of production and monopolies.”)
The present financial crisis has drawn the governments of all of the imperialist powers into action; first to deny its systemic nature and then to commit huge sums of money-capital from the national treasuries in attempts to slow its growth.
The character of the current crisis is global and systemic, and the allegation that the current crisis is primarily the result of defaulted home mortgages is false. The speculation in debt extends vertically and horizontally throughout finance capital and is cascading through every economic sector. Similarly, the present crisis is moving through one national economy after another, articulating the global nature of finance capital. And so, early press conferences to the contrary, the cross-national assemblies such as the G7, G8, G10 and G20 are as revealing of global competition and contending interests as they are of any shared interest in stanching the open wound of debt defaults.
The current crisis is rooted in the parasitic features of the imperialist system; not only consumer debt, but much larger and extensive matrices of ‘finance capital’ which enmesh the globe. In order to paint an adequate picture of those matrices, we need to look under the hood, so to speak; at the balance sheets and SEC 10-K reports where capitalists talk to each other. In the course of this look, we will be able to discern the larger patterns of the current crisis, and of the system that spawned it.
The example of four large formations
As this crisis intensifies and spreads, the competition (for markets, resources, and human labor to exploit) will move from the strictly economic field of debt financing and become greater geo-political contention, in every meaning of that term. To illustrate why and how this is, let’s consider four big corporations that compete globally: General Electric Company (US), Hitachi Ltd. (Japan), Samsung Electronics (South Korea) and Siemens AG (Germany). A balance sheet snapshot is shown in Table A.
These four formations are prominent within their respective countries and internationally. They demonstrate the extensiveness of individual capital formations and how unitary formations are enmeshed within the socio-economic matrix of global capitalism.
Each of these formations is an aggregate of operations that span a range of sub-sectors, highly integrated as well as concentrated within umbrella organizations. (Table D)
General Electric consists of five major operating segments, with activities as divergent as corporate financing, railroad construction, power generation, medical equipment, and television stations. The largest unit, GE Capital Finance, rivals any Wall Street bank for the amount of money-capital it dispatches. Capital Finance revenues were $66 billion last year; four times as much as the Consumer & Industrial division. (1,2)
Hitachi Ltd. is diversified into seven operating divisions, which are involved in an equally diverse spread of activities: nuclear power plants, computers, transoceanic fiber-optic cables, semiconductors, washing machines, and financial services. Hitachi’s Power & Industrial Systems collected revenues of $35 billion last year, seven times the revenue from the Finance Services unit. (3)
Samsung Electronics Co. Ltd. is comprised of five segments: digital media, telecom networks, semiconductors, LCD displays and home appliances. Last year, Digital Media had revenues ($23 billion) four times larger than the home Appliances division. The electronic corporation is itself a unit within Samsung Group with diverse holdings in chemicals, oil & gas extraction, ship-building, credit cards, insurance, hotels & resorts, marketing services, and investment management. It also owns a research institute, a hospital and a baseball team. Last year, Samsung Group’s insurance and finance units had revenues of $41.5 billion. (4)
Siemens AG is likewise diversified with wide-ranging operations. It’s income is spread among ten major divisions and 913 subsidiaries in Europe, the Americas, Asia and the Pacific. Siemens has operating units in factory production systems, electrical power turbines, medical equipment, computer systems, railroad locomotives and networks, real estate and corporate lending. It’s largest unit last year was Automation & Drives (15.3 billion Euros), which accounted for six times the revenue of its Finance & Real Estate unit. (5)
Extensive formations within a larger matrix
These detailed descriptions illustrate how each of these very large capital formations is horizontally extensive, and considered as a whole, vertically concentrated. As significant is that each of these capital formations have integrated industrial and banking capital activities. This is not to say that each of these formations is ‘independent of the banks’, far from it. The integration of these formations within the larger matrix of imperialism is indubitable.
A few specific examples of equity holdings help to illustrate the matrix. Among Samsung’s large shareholders are Citibank N.A. (8.28%) and Samsung Life Insurance (6.33%). General Electric’s large shareholders include Barclays Global Investors (3.8%) and State Street Corp. (3.3%). Hitachi’s large shareholders include Citibank N.A. (9.2%, via a shell company) and State Street (7.77%). The single largest shareholder in Siemens AG is WestLB AG (11.8%, a unit of Mellon Asset Management).
These equity holdings are not ‘controlling’ interests; large capital formations are self-controlling, with their own webs of subsidiaries and joint-ventures. The bank investments are precisely that – money-capital seeking the best rate of return. But they also indicate how the financial operation of one company interacts with and influences the condition of another.
Put another way, in mid-2008 (as shown in Table A), 11.8% of Siemens AG shares was worth about $4.8 billion and 9.2% of Hitachi shares was worth $2 billion. Of course, the credit crisis has been accompanied by a general decline in stock prices. The closing price of Siemens (SI.N) on August 1, 2008, was $119.60 and on Hitachi (HIT.N) was $74.72. At the close on October 15, Siemens was at $58.65 (down 51%) and Hitachi at $52.70 (down 30%).
On the results of these two stock holdings, Citibank and WESTLB AG’s equity portfolios (part of their assets) devalued by several billions over a few months. Combined with other equity losses, these bank portfolios may have devalued by the hundreds of billions since September. As we now know, stock holdings have been frequently used as collateral to create other debt instruments. In addition, stock holdings themselves were being purchased by incurring other debt (buying on margin), speculating that stock prices would rise and cover the value of the debt.
The merging of bank and industrial capital today
Each of these four exemplar firms not only engage in manufacturing and trade operations; as their revenue reports indicate, each also engages in extensive financial operations, lending money-capital to other enterprises. Aggregated by firm, the reported money-capital outstanding in FY 2007-2008 is shown in Table B.
Each of these firms borrows money-capital as well, “collateralizing” the firm itself, as exemplified in the schedule of bond and other long-term debts given in Table C.
As shown in Table C, the debt obligations of GE far exceed those of the other three firms. At current exchange rates, all of Hitachi’s long term debt totals about $2,800 million and Samsung’s totals about $3,000 million. Of special note here, highlighting an unequal relationship among finance capitals, is the fact that a part of Samsung’s debt obligations have been calculated in foreign currencies and must be repaid in those currencies.
In his 1916 theorization of imperialism, Lenin identified five basic features. Here we see two of them graphically represented: 1) the concentration of capital into monopoly formations; 2) the merging of bank and industrial capitals to form finance capital, which controls billions in money-capital and traverses the global economy.
Spheres of influence
In addition to the concentration of production and the emergence of finance capital, Lenin’s theory of imperialism identifies three other key features: the high importance of exporting capital; the division of markets among groups of monopolies; and the territorial division of the world among the biggest capitalist states into spheres of influence. The last century has shown the interactions of these three factors repeatedly in Central and South America, the Middle East, Africa and South and Southeast Asia, with expeditionary and neo-colonial wars being the most concentrated examples.
The companies reviewed above are again illustrative. Siemens AG has hundreds of subsidiaries all over the globe. Samsung Electronics operates thirteen factories in China and eight others in South and Southeast Asia, two in Eastern Europe and four in the Americas; the Samsung Group operates scores of production and services subsidiaries throughout Asia. Hitachi operates 28 subsidiaries including in China, the US and Europe. General Electric Company operates in 61 other countries in Asia, Africa, Europe and the Americas. Not only do these firms organize production globally, they operationalize money-capital globally as well. The four firms compete with each other directly in several key economic sectors and geographic regions; i.e. electronic equipment, energy generation plants and equipment, construction equipment, railroads, and notably, finance. The money-capital segments of these firms exceed the asset bases of many if not most commercial banks. The only geographic region where segments of these four may not be competing directly is Africa, where General Electric has an organized presence in seven countries, from Algeria to South Africa.
In some other sectors, such as metals & minerals – a $1.4 trillion sector – it is quite obvious that capital formations lay claim to specific resource territories. The mining monopoly Anglo American plc, for example, exists only through its subsidiaries in South America and Africa. AngloGold Ashanti, Anglo Base Metals, Anglo Platinum, and DB (De Beers) Investments mine, process and market a large percentage of the global supplies of gold, platinum, diamonds, coal and base metals from sources in South Africa, Namibia, Ghana, Tanzania and Botswana. Anglo Base Metals mines and processes copper, nickel and other metals in Chile, Peru, Brazil and Venezuela. The growth rate of the mining and metals industry as a whole has been declining in recent years and analysts are projecting further contraction (so-called ‘negative growth’) over the next several years. The South African segment of the industry, conversely, is expected to increase by 29% by 2011. Nearly half of the South African metals and mining activity is in precious metals and minerals. Mineral extraction – and the surplus-value created thereby – is, obviously, site-specific. And while General Electric obtained a gross profit of about 12.6% in 2007-2008, AngloAmerican converted nearly 25% of revenues as profit. (6,7,8)
The global poster case for territoriality is, of course, oil. The 30 largest oil and gas companies represent a $3.1 trillion sector of global capitalism that for decades was dominated by a handful of monopolies in the US and Europe (e.g. ExxonMobil, Royal Dutch Shell, British Petroleum). The largest national market for oil and gas is the US, at about $716 billion in 2007. While the three largest oil corporations collect about 30% of the global oil revenues and almost 35% of global profits, newer formations centered in China, Venezuela, Brazil and India are growing at a quicker pace. China’s oil market has been projected to grow by 174% over the next three years, while India’s sector is projected to grow by 125% and Brazil’s sector by 104% over the same time frame. The US market has been projected to grow 79% over the same period. The central question in all of this growth is: where will those oil and gas supplies come from? The most salient contention right now is in Southwest Asia and the oil fields located under Iraq, Iran and Azerbaijan, but as the economic crisis deepens, similar imperial pressure is almost certain to be applied to national economies elsewhere, especially in South America and Asia. (9,10,11,12,13,14)
ExxonMobil is also a case study in a vertically-organized and globally extensive capital formation; its operating segments explore, extract, refine, distribute and sell petroleum products directly to industrial and commercial end users. In 2007 it was operating over 900 wells in 24 countries on 14 million acres of leases (with leaseholds on another 74 million acres in 36 countries), and extracting 2.6 million barrels per day. ExxonMobil extracted 717,000 bbl/day — with earnings per barrel of $17.37 — from its operations in Nigeria (per capita income – $2.46/day), Angola (per capita income – $5.17/day) and Equatorial Guinea (per capita income – $5.75/day). Obviously, oil wells and these super-profits are site-specific. (15,16)
Arenas of competition
Despite the periodic declarations that ‘we’re all in this together’ emanating from US and EU government leaders, the current crisis is straining existing geo-political relationships and exacerbating inter-capitalist contradictions. The old orders of alliances are facing new strains and new, alternative alliances are taking shape.
One category of tension is evident in the scramble by US and EU national treasuries to try and slow the spread of the credit crisis.
At the beginning of October, German chancellor Merkel, among others in Europe, explicitly blamed the crisis on the US government for failing to regulate its own financial institutions. Even after it was presented with its $700 billion by Congress, the US treasury only started buying equity stakes in the biggest banks when it saw that France, the UK and Germany were injecting money-capital into their troubled banks. Internationally, economists and state officials are concerned that actions by central banks will confer a competitive advantage to that state or to specific sectors amidst the chaos of the collapse. US treasury officials have cited ‘competitive disadvantage’ particularly in regard to European states and that is one factor compelling an inter-state meeting to discuss the debt crisis. (17,18,19,20,21,22,23)
Concurrently in mid-October, French president Nicolas Sarkozy announced his intention to call a special meeting of EU members in late November to try and harmonize their responses to the banking crisis. Several days later Bush jumped out to propose a G7 or G8 meeting in the US by early December. Subsequent to that, the secretary general of the UN announced that he would be happy to host such a meeting at the UN. Meanwhile, the World Bank president declared that the G7 was obsolete and called for a “new multilateralism” that included ‘emerging economies’ as well as the G7 countries. (24,25)
Bush and Sarkozy have subsequently coalesced on a mid-November meeting in New York of the G20* to discuss the global financial markets, Sarkozy remarking that “since the crisis started in New York, maybe we can find a solution in New York. This is a worldwide crisis and therefore we must find a worldwide solution.” (26)
The terms and amounts of assistance are also fulcrums of contention. The financial papers now regularly blame the US treasury for not acting to fund Lehman Brothers and letting it collapse instead, claiming that this act ‘triggered’ the credit collapse. At the meeting held with the first group of banks to receive US treasury money-capital, there were disagreements about the size of the purchases and about the extent to which the treasury would dictate other terms to the receiving banks. In Europe, the decision by the Irish government to guarantee bank deposits drew protests from other EU nations, who were then compelled to respond in some manner or watch deposits migrate to Ireland.
Significantly, newer industrial centers, such as China and South Korea, and ‘oil states’ such as Saudi Arabia, Abu Dhabi, and Venezuela are less involved in the credit default swaps and covered debt obligations that are undermining the G7 economies. South Korea’s ‘public debt’ is 28% of GDP, whereas Japan is at 180% and the US is 60%. As a result, China and South Korea have been able to deal with ‘troubled’ formations using their own ‘infusions’, whereas smaller capitalist economies such as Ukraine, Iceland and Pakistan have had to go begging to the IMF, Russia, or China for loans. Also, some treasuries such as Abu Dhabi are using their own sovereign funds to buy into the big formations like General Electric and AIG. (27,28,29,30,31,32,33)
A second category of tension is evident in political realignments taking place, especially apart from the US-EU axis.
The debt crisis gripping money-capital in the US and EU has had less of an immediate effect in the economies of so-called ‘emerging markets’ such as China, India and Russia. To the extent that those economies continue to be productive — extracting surplus-value from real human activities – and to the extent that they are not compelled to trade in US dollars or euros, these ‘emerging markets’ have side-stepped some aspects of the collapse. However, the unequal arrangements that these smaller capitalist states have with the bigger capitalist states, especially in regard to exchange that is tied to dollars, euros and yen, both promises to drag them down too and to widen the rifts that already exist between the two broad groups. (34,35,36)
So far, for example, China’s central finance ministry has been able to redirect money-capital to the few banks that have been affected through their international transactions. The stock equity markets have been subject to the same speculative dysfunction as those in Japan, Europe and the US, but to date those stock devaluations have not had a significant effect on production or even finance. As in the US and Europe, the stock markets have mainly been trailing along behind the evaporating debt obligation rather than directing the composition of money-capital.
Political Fall-out
As important are the geo-political ramifications of all of this. Russia has been especially active over the past decade in solidifying alliances with its close neighbors, as shown by the Collective Security Treaty Organization and the Shanghai Cooperation Organization. The CSTO holds joint military exercises periodically, such as this past August in Armenia. In June, Russia and India announced a joint program for training high-altitude mountain troops. The SCO especially, (Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan) with its Council of Defense Ministers, and with India, Iran, Pakistan and Mongolia included as ‘observer’ states, is being viewed by some as a counterpoint to NATO. Within this group of states, Russia is stepping up its international trade in armaments as well as energy and in other sectors. It recently announced further large equipment deals with China and India, a $1 billion arms financing deal with Venezuela, sale of submarines and fighter plans to Indonesia, and the continuation of existing arrangements with Libya, Algeria, Angola, Namibia and several other African states. (37,38,39,40,41,42,43,44,45,46,47,48,49)
On the other side of this equation, within the last decade NATO has rather quickly taken in eight eastern European states (with newly-installed pro-US governments) which border the Confederation of Independent States and is pursuing the further addition of two CIS states that now have their own newly-formed pro-US governments (Ukraine and Georgia). This all transpires while NATO conducts an expeditionary war against Afghanistan, with at least a few NATO states (Bush’s ‘coalition of the willing’) part of the US expedition against Iraq, with ongoing US threats against Iran and North Korea, etc.
These realignments are not without ongoing internal stresses. Each of these states is ruled by a distinct capitalist class, with competing interests internationally. Those interests may include alignment with X but not with Z, or an alignment today but not tomorrow. To the extent that ‘emerging market’ states can leverage the current crisis to advance their own positions globally, they must do so or remain ‘junior partners’. To the extent that major powers see their positions slipping, they too must act to maintain dominance in a specific relationship or to maneuver to gain dominance in relation to others. The increasing disparity between the biggest capitalists and the lesser capitalists, and the emergence of new imperial actors, threatens to toss aside the decades-old geo-economic pecking order established in 1945 and which placed the US in the keystone position of the capitalist world. (50,51,52,53,54)
Scenarios
“Without forgetting the conditional and relative value of all definitions in general, which can never embrace all the concatenations of a phenomenon in its full development, we must give a definition of imperialism…” (Imperialism, the Highest Stage of Capitalism. “VII. Imperialism as a special stage of capitalism.”)
Lenin’s theory of imperialism was developed in critique of the framework that produced the inter-imperialist 1914-1918 war. The global economic and political relationships that produced that war, however, gave way to a sequence of responses that defined the next 80 years.
The world today shares features with the capitalism of 100 years ago, but it is also changed in significant ways. The past is prelude, but social history does not simply repeat itself.
While contemporary capitalism continues to compel highly concentrated formations, such as through mergers and acquisitions, the monopolies created are not as all-encompassing as those of the past, but the largest of these present-day formations command productive forces on par with the cartels and trusts of 1900. Also different today are the arrangements of neo-colonies and subaltern capitalist states. Imperialism has continued to penetrate every corner of the planet, looking for people and resources to exploit, no matter how remote. But the structure of ‘mandates’ and colonies has been superseded by extensive networks of subsidiaries and home-grown compradors willing to administer their homelands as plantation estates for finance capital, given enough military assistance. And, as the current crisis shows, the role of the banks has not been fully replaced by monopolies that merge banking and industrial capital. A separate finance sector continues to command huge aggregates of money-capital that exert great influence on the direction taken by capitalist economies as a whole.
The past century has also demonstrated the tremendous interactions of the superstructure with the economic base. Not only did the 20th century witness two of the most radical social revolutions in history, in Russia and in China, it also demonstrated how counter-revolution can be orchestrated politically as well as by force. Perhaps most significantly, the 20th century shows that nothing in social history is inevitable; it must be made by us. Toward that effort, as part of the critique of the current crisis, the following are suggested as plausible hypotheses.
* The present debt crisis is finally stanched within the current imperial framework, and while trillions in surplus is destroyed, and capital is still further concentrated, and tens of millions of workers, peasants and others are still further impoverished, a re-consolidated global capitalism is able to emerge and stagger on toward its next economic crisis.
* The present crisis continues to deepen, more sectors are draw into its vortex resulting in a much broader and general crisis. The collapse of individual capital formations is followed by the collapse of whole sectors within specific countries. The central state response proves wholly ineffective. Competing state interests prompt the already-fragile cooperation to fall apart, and one or more states ‘fail’, enabling a partial recovery by the others, including by picking over the remains.
* The present crisis continues to deepen, opening up rifts between competing capitals in the geo-political realm, with the subaltern capitals aggressively pushing out the formerly uncontested capitals, until some tipping point is achieved. The economic-political alliances become military ones and all out war ensues.
* The present crisis continues to deepen, more sectors are draw into its vortex resulting in a much broader and general crisis. The collapse of individual capital formations is followed by the collapse of whole sectors within specific countries. The central state response proves wholly ineffective. Significant numbers of organized people within an increasingly rebellious population determine that enough is enough and revolution breaks out, overthrowing the old imperial regime.
* Or, some international combination of the above.
The future is unwritten; it is now time to start.
notes:
* The “G20″ was first convened in the wake of the late ’90s economic crisis and consists of Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United States, and the European Union.
1. “Invest and Deliver Every Day; GE Annual Report 2007.” General Electric Company, Fairfield, CT, USA.
2. “Form 8-K General Electric Co – GE; Report of unscheduled material events or corporate changes.” Filed: October 08, 2008 (period: October 08, 2008)
3. “Leveraging Group Strengths, Raising Corporate Value; Hitachi Annual Report 2008.” Hitachi Ltd., Tokyo, Japan.
4. “2007 Samsung Electronics Annual Report.” Samsung Electronics Co. Ltd., Seoul, Korea.
5. “Annual Report 2007.” Siemens Aktiengesellschaft. Munich, Germany.
6. “Global Metals & Mining” Datamonitor Industry Profile. Ref Code 0199-2106. August 2007.
7. “Metals & Mining in South Africa” Datamonitor Industry Profile. Ref Code 0044-2106. August 2007.
8. “Metals & Mining in the United States” Datamonitor Industry Profile. Ref Code 0072-2106. August 2007.
9. “Global Oil & Gas” Datamonitor Industry Profile. Ref Code 0199-2116. August 2008.
10. “Oil & Gas in the United States” Datamonitor Industry Profile. Ref Code 0072-2116. August 2008.
11. “Oil & Gas in India” Datamonitor Industry Profile. Ref Code 0102-2116. August 2008.
12. “Oil & Gas in China” Datamonitor Industry Profile. Ref Code 0099-2116. August 2008.
13. “Oil & Gas in Russia” Datamonitor Industry Profile. Ref Code 0153-2116. August 2008.
14. “Oil & Gas in Brazil” Datamonitor Industry Profile. Ref Code 0076-2116. August 2008.
15. “ExxonMobil 2007 Financial & Operating Report.” ExxonMobil. Irving, TX, USA.
16. “Per Capita Income Around the World.” accessed at http://www.success-and-culture.net/articles/percapitaincome.shtml
17. “Financial crisis brings global cooperation as everyone scrambles; Analysis.” Baltimore Sun. 9 October 2008.
18. “EU countries to bolster banks; U.S. may have to step up efforts here.” USA Today. 13 October 2008.
19. “World Leaders Vow Concerted Action; Finance Officials Promise ‘All Necessary Steps’; U.S. Stocks Flail to Worst Weekly Decline.” Washington Post. 11 October 2008.
20. “S. Korea Backs $100 Billion in Debt to Calm Markets (Update 2).” Bloomberg.com. 19 October 2008.
21. “Japan considers bigger role on economic stage.” International Herald Tribune. 21 October 2008.
22. “Global Collateral Damage; S. Korea Reels Under Crisis Created in U.S.” Washington Post. 10 October 2008.
23. “Fed Offers GE, Citigroup Commercial Paper Subsidies (Update 4).” Bloomberg.com. 15 October 2008.
24. Bush wants to scramble the Gs – G7 on Sat, maybe G8 later.” Market News International. 9 October 2008.
25. “Bush to host global summit on economy, aide says.” International Herald Tribune. 18 October 2008.
26. “Bush invites world leaders to summit.” International Herald Tribune. 22 October 2008.
27. “Rebuffed by China, Pakistan may seek IMF aid.” International Herald Tribune. 18 October 2008.
28. “Ukraine nears deal with IMF for up to $15 billion.” International Herald Tribune. 17 October 2008.
29. “Hungary signs 5 billion deal with ECB to keep euros flowing.” International Herald Tribune. 16 October 2008.
30. “Prudential in talks to sell stake, buy AIG unit: report.” Reuters. 19 October 2008.
31. “Libya Buys UniCredit Stake Worth EU1.1 Bln, Owns 4.2% (Update 1).” Bloomberg.com. 17 October 2008.
32. “Idea of sovereign wealth funds divides Europeans.” International Herald Tribune. 21 October 2008.
33. “GE, Abu Dhabi firm in $8 bln joint venture.” Reuters 22 July 2008.
34. “Korea Ready to Take More Financial Measures If Needed, Jun Says.” Bloomberg.com. 22 October 2008.
35. “China Caps Bank Overhaul With Agricultural Bank Aid (Update 1).” Bloomberg.com. 22 October 2008.
36. “Emerging Market Bonds Fall, Adding to Worst Month Since 2002.” Bloomberg.com. 16 October 2008.
37. “Tajikistan, China interested in expanding military-technological cooperation – Chinese defense minister.” Russia & CIS Military Weekly. 19 May 2008.
38. “A Look at China-Russia Relations.” Jakarta Post. 5 July 2008.
39. “Tajik paper says Shanghai bloc can become counterbalance to NATO.” BBC Monitoring International Reports. 18 September 2008.
40. “Russia, India to share experience in training mountain troops.” RIA Novosti. 24 June 2008.
41. “Russia-led security bloc holds drills in Armenia.” BBC Monitoring International Reports. 22 August 2008.
42. “Belarus defence minister praises military cooperation with China.” BBC Monitoring International Reports. 11 September 2008.
43. “China, Russia condemn US missile defense plans.” Associated Press. 23 May 2008.
44. “Russia rebuilds Soviet-era military-technical ties with Africa.” RIA Novosti. 17 September 2008.
45. “Shanghai cooperation organization members start anti-terror drill in Russia.” BBC Monitoring International Reports. 3 September 2008.
46. “Post-Soviet security bloc backs Russia over Georgia arms embargo.” RIA Novosti. 3 September 2008.
47. “Putin says Russia may launch nuclear cooperation with Venezuela.” Thai Press Reports. 29 September 2008.
48. “Venezuela’s Chavez in China to sign new deals.” Thai Press Reports. 25 September 2008.
49. “China defense could be $360 billion a year by 2020.” Associated Press. 1 August 2008.
50. “Why Shanghai is not Warsaw.” Radio Free Europe. 28 August 2008.
51. “Suddenly, Europe looks pretty smart to Americans.” International Herald Tribune. 19 October 2008.
52. “U.S. and NATO strengthen ties with Baltic States.” International Herald Tribune. 22 October 2008.
53. “China is Russia’s geopolitical ally, but problems in relations many.” TASS. 24 May 2008.
54. “China reduces dependence on Russian weapons – HK paper.” BBC Monitoring International Reports. 12 July 2008.
Keith said
There is a lot that is useful in this analysis, but it would be much stronger if it were rooted in Marx’s value theory instead of Lenin’s theory of imperialism.
Lenin’s concept of finance capital is a fake concept. Lenin claims, repeating the arguments of the social democrat Rudolph Hilferding, that finance capital is the merger of bank and industrial capital. The proof is supposedly the empirical fact that banks are investors in industrial firms and industrial firms have financial operations.
It is true that financial capital and productive capital are united in one firm. But the concept “finance capital” adds nothing (except confusion) to what was already present in Marx’s concept industrial capital. For Marx the circuit of industrial capital already includes bank or financial capital, as well as merchant and productive capital, with each representing various moments in the circuit. So Hilferding literally discovers nothing empirically or theoretically, but the imagined conceptual innovation has driven us further form Marx’s value theory.
“The real circuit of industrial capital in its continuity,” writes Marx, “is therefore not only a unified process of circulation and production, but also a unity of all its three circuits” (v.2 p.185, penguin edition) That is to say, the circuit of money capital, productive capital, and commodity capital make up the three moments of the general circuit of industrial capital. They may be “merged,” “the movements of capital appear as the actions of the individual capitalist in so far as he functions as the buyer of commodities and labor, seller of commodities, and productive capitalist and thus mediates the circuit of his own activity.” (ibid). Or the circuit may be disaggregated, the productive capitalist may have to get a bank loan, thus the bank would mediate the activity of the would-be productive capitalist and then a portion of the surplus value is claimed by the bank as interest, the productive capitalist may then decide it is more efficient (profitable) to have a different capitalist take the commodity to the market and try to sell it. Although three capitalist, are involved in various moments of the circuit, the circuit in its entirety is called “industrial capital” by Marx. Whether one capitalist acts, in all three roles (money, commodity, production), is important for the analysis but does not new theoretical concepts or abandoning Marx’s value theory.
Eddy said
The point was (and remains) that certain formations are able to operationalize money-capital independently of the banking sector. The examples I cited show that those formations also operationalize money-capital acting as banks to other formations (e.g. GE Capital Finance).
None of this ‘refutes’ Marx, nor was it (ever) intended to, but it does describe a specificity that did not exist in the 1850s. Perhaps you could move past your aversion to the term ‘finance capital’ and critique Lenin’s five features for their ‘fake’ qualities, as you see that.
r graves said
Interesting analysis. Good to see use of financial statistics from real companies. Keith appeals to Marxian value categories as central– has anyone seen work that empirically documents a rising organic composition of capital and a declining rate of profit based on corporate statistics like Eddy deploys here?
Keith said
Eddy, as you know I think that Lenin’s theory of imperialism is wholly wrong and not scientific. But, I would like to proceed systematically. Finance capital is an indefensible concept. Once it falls other errors will also fall.
Hilferding deploys this concept to explain a supposed “merger between bank capital and industrial capital.” But “the merger” is not anything new or anything that cannot be explain using Marx’s concept of industrial concept. If it is not meant in opposition to Marx’s categories why does Hilferding develop it?
Even the point that Eddy makes above– certain capitals are involved in financial processes independently of banks– can be explained using Marx’s concepts. Here again is Marx, “the movements of capital appear as the actions of the individual capitalist in so far as he functions as the buyer of commodities and labor, seller of commodities, and productive capitalist and thus mediates the circuit of his own activity.” What is added to Marx’s description by the fake concept finance capital?
While Hilferding’s concept of finance capital is not meant as a refutation, as Eddy says, it is certainly supposed to be a necessary theoretical innovation necessitated by historical developments that make Marx’s concepts in some way inadequate. Hilferding is profoundly mistaken about that (I am not sure if Eddy denies it, but the theory of finance capital along with the theory of monopoly capitalism which are the heart of Lenin’s theory of imperialism are usually described as representing a theoretical advance (a “new synthesis” in some quarters) necessitated by new historical development–capitalism has entered a “new stage,” and Marx theorizes capitalism as it was in the 19th century, but Lenin is looking at 20th century capitalism, hence “Leninism”).
R. Graves asks the important question: Has anyone used Marx’s value theory and its central concepts– surplus value, law of the tendential fall in the rate of profit, rising organic compoition of capital– to apprehend this crisis and the answer is, as far as I know: NO. (although, I am trying to with some Comrades).
Why not? Because of notions like “new synthesis” or “a new stage of capitalism,” and fake concepts like finance capital.
Eddy said
Keith wrote:
You seem to think that reiterating a description of the archetypal capital circuit, combined with your declarations that “Lenin’s theory is fake” and “Hilferding was a social-democrat” comprise a comprehensive analysis. Well, they don’t.
If the merging of banking and industrial capital is adequately described by the archetypal circuit of capital, then obviously Lenin’s description is not ‘fake’.
And why can’t you provide a refutation of the other features cited by Lenin’s theory?
Keith said
Eddy wrote:
“If the merging of banking and industrial capital is adequately described by the archetypal circuit of capital, then obviously Lenin’s description is not ‘fake’.”
I didn’t say that his description is fake. I said the concept “finance capital” is fake. The concept is fake because it is supposedly produced out of necessity. Something historically unprecedented has supposedly occurred rendering Marx’s concepts inadequate. But that is not true.
Marx’s concept of industrial capital is perfectly adequate to apprehend all the phenoumena that Eddy described in his initial post.
“The real circuit of industrial capital in its continuity,” writes Marx, “is therefore not only a unified process of circulation and production, but also a unity of all its three circuits.”
The three circuits are money, production, and merchant capital. They are united in the circuit.
So what does the concept of finance capital add other than confusion?
I will be glad to move on to a critique of Lenin’s monopoly theory and the theory of imperialism but if we can’t agree on the critique of the concept of finance capital then how will we agree on anything else.
I showed beyond any doubt that Marx’s concept is capable of grasping reality and has no need of Hilferding’s improvement.
Hilferding just didn’t understand Marx’s basic concepts. He made an elementary mistake. If we agree on this point then we can move on.
Keith said
I am going to assume, based on the lack of repsonse, that Eddy agrees that “finance capital” is a faux concept.
So then the next dogma (dogma is defined as assertion without proof) of Lenin’s theory of imperialism is the concept of “monopoly capitalism.”
It is harder to critique monopoly capitalism because whenever its inadequacies are brought to light were told “that is not what Lenin meant.”
So let’s let Lenin speak for himself.
“[M]onopolies have already arisen,” writes Lenin, “precisely, out of free competition! Even if monopolies have now begun to retard progress, it is not an argument in favor of free competition, which has become impossible after it has given rise to monopoly” (Lenin, Imperialism p. 137 Peking press).
We can see two errors in the above quotation. First, competition and monopoly, for Lenin, are linked linearly in time – one follows the other chronologically. This is how we get the wrong idea that there is a “new stage” of capitalism.
For Marx, competition and monopoly are dialectically linked—returning into and conditioning one another. In Marx monopoly intensifies competition.
Secondly, Lenin views “free competition” and monopoly as policy choices of the bourgeoisie. Lenin is mistaken, competition cannot be overcome with state power (or the power of capital) this side of communism.
The actual policy choices of the capitalist state are between free trade or protectionism. The rise (and recent fall) of the neo-liberal form of capitalism reflects a change in the dominant policy of the bourgeoisie from protectionism towards free trade. Neither protectionism nor free trade can negate the law of value — it only can transform the field on which capitals compete. The idea that monopoly or competition are policy choices is premised on the notion that power can overcome capitalism’s laws of motion, this is a social democratic illusion.
Lenin’s theory abandons the law of value and hence scientific analysis. Again that is why so few are using Marx’s value theory to analyze this crisis.
Eddy said
Keith, to be useful in your crtitique, you should address what is actually written by Lenin about imperialism. I will follow along.
In regard to the supercession of laissez faire capitalism by monopolies, Lenin wrote:
“Private property based on the labour of the small proprietor, free competition, democracy, all the catchwords with which the capitalists and their press deceive the workers and the peasants are things of the distant past. Capitalism has grown into a world system of colonial oppression and of the financial strangulation of the overwhelming majority of the population of the world by a handful of “advanced” countries. And this “booty” is shared between two or three powerful world plunderers armed to the teeth (America, Great Britain, Japan), who are drawing the whole world into their war over the division of their booty.” (Imperialism, Preface to the French and German editions)
And this:
“Competition becomes transformed into monopoly. The result is immense progress in the socialisation of production. In particular, the process of technical invention and improvement becomes socialised.
“This is something quite different from the old free competition between manufacturers, scattered and out of touch with one another, and producing for an unknown market. Concentration has reached the point at which it is possible to make an approximate estimate of all sources of raw materials (for example, the iron ore deposits) of a country and even, as we shall see, of several countries, or of the whole world. Not only are such estimates made, but these sources are captured by gigantic monopolist associations. An approximate estimate of the capacity of markets is also made, and the associations “divide” them up amongst themselves by agreement. Skilled labour is monopolised, the best engineers are engaged; the means of transport are captured–railways in America, shipping companies in Europe and America. Capitalism in its imperialist stage leads directly to the most comprehensive socialisation of production; it, so to speak, drags the capitalists, against their will and consciousness, into some sort of a new social order, a transitional one from complete free competition to complete socialisation.
“Production becomes social, but appropriation remains private. The social means of production remain the private property of a few. The general framework of formally recognised free competition remains, and the yoke of a few monopolists on the rest of the population becomes a hundred times heavier, more burdensome and intolerable.”
And, as cited in my essay above (Part 3):
“Translated into ordinary human language this means that the development of capitalism has arrived at a stage when, although commodity production still “reigns” and continues to be regarded as the basis of economic life, it has in reality been undermined and the bulk of the profits go to the “geniuses” of financial manipulation. At the basis of these manipulations and swindles lies socialised production; but the immense progress of mankind, which achieved this socialisation, goes to benefit . . . the speculators. We shall see later how “on these grounds” reactionary, petty-bourgeois critics of capitalist imperialism dream of going back to “free”, “peaceful”, and “honest” competition.” (Imperialism, Chpt. I. Concentration of production and monopolies)
Keith said
I am not sure what all the quotes from Lenin are supposed to prove, Eddy. You put them forth without explaining. My point isn’t to deny imperialism, my point is that imperialism as a phenomena (although we still have to define what we mean by “imperialism”) is readily graspable with Marx’s concepts.
I am making 3 points.
1. “Finance capital” is not a real concept (I already argued that out)
2. There is no “monopoly stage” of capitalism. This second point is the one that I am trying to make in this series of posts. Capitalism’s laws of motion discovered by Marx in the 19th century operate with more exactness than at any other point in history, and as capitalism continues to development the laws of motion will be increasingly relevant.
3. Marx’s value theory is the only scientific guide that the working class has to political practice and Lenin’s concept of monopoly is the greatest obstacle to that theory achieving hegemony in the (coming) working class movement. (I won’t argue this until point 2 is established.)
If you want to reduce Lenin’s monopoly stage to the idea that capitalist firms are now very big, Ok, but then who cares? Lenin certainly meant it to mean more.
I quoted Lenin when I first wrote about monopoly and showed that he thinks:
1. monopoly overcomes inter-capitalist competition and displaces that competition onto the imperialist nation-states (thereby reducing Marxism to bourgeois international relations theory)
2. monopoly capitalism is a new stage of development.
Both 1 & 2 are wrong. And then make Marx’s mature theory unnecessary. That is why so few “Marxists” read Marx.
Now you can deny that Lenin argues points 1 & 2, and that there is no contradiction between Lenin and Marx’s value theory, but then what is the point of Lenin, and the “highest stage” of capitalism, and what is the relationship between the supposed “highest stage” and Marx’s theory?
BTW, I am not arguing anything controversial. It is well known that the basic Leninist premise is that Marx’s analyzed 19th century capitalism and Lenin is (supposedly) analyzing 20th century capitalism. The idea that Marx is inadequate according to Leninism is well established. Paul Sweezy’s book “Monopoly Capitalism” is probably the most systematic and sophisticated attempt to use Lenin’s ideas in a concrete analysis and he starts by saying that the law of value doesn’t operate under monopoly. If it did then there would be no point to the concept “monopoly capitalism.”
All I am saying that is new is that the Leninists are wrong. Todays’ capitalism is much closer to theory that Marx produced.
Eddy said
Keith, if you want to make a critique of Lenin’s theory of imperialism you will need to address it specifically. As you must know, Lenin identified five features, the first being the concentration of production in monopolies.
The cited text (obviously) presents Lenin’s summary of the feature that he described as the vertical concentration of production in monopoly formations (cartels, trusts, etc.), which he has identified as a new (at that time) development within capitalism. (As I pointed out in my essay above, contemporary oil companies still exhibit this type of concentration.)
I take it that your critique of this description of concentration is ‘so what’, is that accurate?
Arthur said
My eyes glazed over both in reading the 3 parts of the article and the discussion.
This stuff is calculated to reinforce people’s assumptions that there is no way they can understand the economy, let alone run it and that such matters should be left to “experts” who may be unintelligible but must know more than we do since they seem to be able to understand each other enough to be able to argue with each other whereas the rest of us have no idea what they are talking about.
The chorus of enthusiastic “thank yous” are symptomatic of that.
Conclusion. There’s no way out. More useless articles and discussions like this are all we can expect if we don’t actually study economics ourselves, including the rather difficult third volume of capital.
Cheer up though. Even though it is hard work, once you do study it you will at least not feel worried about not being able to follow these sort of articles and discussions.
That won’t solve the problem of being able to write popular expositions of marxist economic theory instead of populist diatribes against greedy speculators and imperialist machinations. But just seeing through the bullshit populism is a good start.
Scientific study will create a necessary precondition for being able to discuss how to write popular expositions. It can’t be done by people who read Marx (or Lenin) looking for quotes to support for the sort of agitational propaganda they have been churning out regardless.
Keith said
That’s right, Eddy. I am asking “so what”?
I am asking because I am not sure if you understand the answer to that question the same way as I do.
As far as I understand Lenin and the theorizing that is based on Lenin’s monopoly theory: the “monopoly stage” implies a change in kind. And the cessation of the type of capitalism analyzed by Marx along with the laws that he discovered.
So, that’s why I ask so what. I am not debating the empirical description but the supposed theoretical consequences (or in other words: “so what?”). For instance there is a very good book called: Marxist Theories of Imperialism: A Critical Survey, by Anthony Brewer and he begins by saying most Marxist theories of imperialism ignore the labor theory of value. When he says this he is just stating a fact. I have never read anyone criticize the text for inaccurately describing the various theories.
So my question to you would be: do you think that monopolies negate the labor theory if value?
Keith said
PS. I agree with some of Arthur’s points, I think. We need to have an analysis of this crisis that is accessible and provides people with a way of thinking about it so that they can act, but that analysis is going to have to be rooted in a more systematic and scientific analysis which is yet to be written. The point of my posts above is to clear some of the theoretical baggage so that we can make that analysis. Still we should be able to make an immediate analysis that makes more sense to more people than anything that is out there now.
As for practice we should be agitating for an immediate worker takeover of the General Motors (and other U.S. automakers). Whenever they start talking bailouts we should be agitating and organizing for worker takeovers (workers takeover physically but ultimately by taking over the board of directors.
All Nationalized financial institution should be put under democratic control (we would have to figure out what the institutions in charge would look like), and those institutions that were “too big to fail” should be broken up into regional and municipal investment banks under local democratic control. And part of the nationalized financial sector should be used for reparations for oppressed nations through self-determining democratic local investment banks.
Arthur said
Keith, you might find this review of Bill Warren’s “Imperialism: Pioneer of capitalism” interesting (and the book itself if you have not already read it).
I agree both with the rejection of “anti-imperialist” revisions of Marxism and the point at the end defending Lenin as not being to blame for the views of the “anti-imperialists” who endlessly quote him.
Don’t forget that short pamphlet on imperialism was written in connection with the first imperialist world war and its author was already well known for his refutation of populism and economic romanticism and had no reason to expect that his views would be misunderstood in the ways that they were.
Anyway, while clarification of the Marxist (and Leninist) analysis of imperialism is highly relevant to other issues like globalization and development it is a side issue in this discussion. Let’s focus on actually relating the volume 3 presentation of financial crises in the context of “overproduction” (a word omitted from all 3 parts despite the glaring fact that large numbers of workers are living in houses that the forces of production were easily able to produce but the market economy has not been able to “finance” without overextending credit).
Actually doing that work is not helped by the focus of your argument about Lenin or imperialism or the “practical” program you put forward which seems equally a mere repetition of demands proposed “regardless” ie popaganda demands disconnected from the results of any actual analysis.
For a more detailed refutation of the idea that a financial and overproduction crisis is a particularly good time to focus on proposals for workers to takeover bankrupt enterprises see the section on “Workers’ Cooperatives” in part 5 of Unemployment and Revolution
I think you will find the whole of that booklet worth reading even though it was written in a different situation more than a quarter century ago. I just read it again and didn’t cringe much.
Eddy said
Keith wrote:
Where or how does Lenin argue against the ‘labor theory of value’ as Marx described it, or as you understand it?
For example, do you think that the concept of ‘super-profits’ contradicts the labor theory of value? If so, how? (You need to be more specific or less oblique in your criticisms.)
here is what Lenin wrote (at length, to provide the context); where he used the ‘super-profit’ term:
“It must be observed that in Great Britain the tendency of imperialism to split the workers, to strengthen opportunism among them and to cause temporary decay in the working-class movement, revealed itself much earlier than the end of the nineteenth and the beginning of the twentieth centuries; for two important distinguishing features of imperialism were already observed in Great Britain in the middle of the nineteenth century–vast colonial possessions and a monopolist position in the world market. Marx and Engels traced this connection between opportunism in the working-class movement and the imperialist features of British capitalism systematically, during the course of several decades. For example, on October 7, 1858, Engels wrote to Marx: “The English proletariat is actually becoming more and more bourgeois, so that this most bourgeois of all nations is apparently aiming ultimately at the possession of a bourgeois aristocracy and a bourgeois proletariat alongside the bourgeoisie. For a nation which exploits the whole world this is of course to a certain extent justifiable.” Almost a quarter of a century later, in a letter dated August 11, 1881, Engels speaks of the “worst English trade unions which allow themselves to be led by men sold to, or at least paid by, the middle class”. In a letter to Kautsky, dated September 12, 1882, Engels wrote: “You ask me what the English workers think about colonial policy. Well, exactly the same as they think about politics in general. There is no workers’ party here, there are only Conservatives and Liberal-Radicals, and the workers gaily share the feast of England’s monopoly of the world market and the colonies.” (Engels expressed similar ideas in the press in his preface to the second edition of The Condition of the Working Class in England, which appeared in 1892.)
“This clearly shows the causes and effects. The causes are: (1) exploitation of the whole world by this country; (2) its monopolist position in the world market; (3) its colonial monopoly. The effects are: (1) a section of the British proletariat becomes bourgeois; (2) a section of the proletariat allows itself to be led by men bought by, or at least paid by, the bourgeoisie. The imperialism of the beginning of the twentieth century completed the division of the world among a handful of states, each of which today exploits (in the sense of drawing superprofits from) a part of the “whole world” only a little smaller than that which England exploited in 1858; each of them occupies a monopolist position in the world market thanks to trusts, cartels, finance capital and creditor and debtor relations; each of them enjoys to some degree a colonial monopoly (we have seen that out of the total of 75,000,000 sq. km., which comprise the whole colonial world, 65,000,000 sq. km., or 86 per cent, belong to six powers; 61,000,000 sq. km., or 81 per cent, belong to three powers).
“The distinctive feature of the present situation is the prevalence of such economic and political conditions that are bound to increase the irreconcilability between opportunism and the general and vital interests of the working-class movement: imperialism has grown from an embryo into the predominant system; capitalist monopolies occupy first place in economics and politics; the division of the world has been completed; on the other hand, instead of the undivided monopoly of Great Britain, we see a few imperialist powers contending for the right to share in this monopoly, and this struggle is characteristic of the whole period of the early twentieth century. Opportunism cannot now be completely triumphant in the working-class movement of one country for decades as it was in Britain in the second half of the nineteenth century; but in a number of countries it has grown ripe, overripe, and rotten, and has become completely merged with bourgeois policy in the form of “social-chauvinism”.”
(Imperialism, VIII. Parasitism and decay of capitalism)
Keith said
Eddy, it is not that Lenin argues against the labor theory of value –the idea that exchange values are determined by socially necessary labor times and what is socially necessary is revealed by market exchanges– he just ignores it.
And it has been ignored by “Leninists” ever since. According to Molotov, Mao told him that he never read Das Kapital. Molotov may be lying to discredit Mao but it is not hard to believe that Mao did not read Kapital. It is widely considered outdated. Are you denying that Marx’s Kapital is widely considered outdated by the new communist left? I would be surprised if we had to argue that out,but if you recognize what is just a fact–that the text is considered outdated– then the question is why? How was that profoundly mistaken verdict reached? And by what dogmas is it sustained?
In any event,
if we agree that finance capital– the meregr of bank and industrial capital –is a faux concept as it adds nothing to Marx’s original concept of industrial capital.
And we agree that the law of value is operational.
And we agree that monopolies do not negate competition but rather intensify competition.
Then we agree on all the important issues. But then I ask of Lenin’s theory “so what”? He hasn’t added anything and certainly has not discovered a new stage of capitalism.
I don’t see how you can have it both ways Eddy. If Lenin is not in contradiction with Marx then his little pamphlet on imperialism is a mildly interesting historical document. Or Imperialism is a new stage of capitalism and “Leninism is Marxism in the age of imperialism and proletarian revolution” (as Stalin defined it for subsequent generations).
To answer your question directly, and I hope that you answer some of mine in the above, the idea of super-profits does not necessarily contradict the law of value, but it depends on what is meant by it. If we mean profits achieved through theft and robbery or slavery then no. We are just talking about profits achieved outside of the capitalist production process.
But, the idea of super-exploitation is non-sense. The rate of exploitation rises as labor productivity increases and the necessary part of the working day shrinks while inversely the surplus extraction increases. So by Marx’s definition U.S. workers despite their high wages– relative to workers in other countries– are among the most exploited in the world, because they are the most productive.
Eddy said
I think its rather clear that banking and industrial capital have been merged in specific formations and some of this merger has been described, including above by me.
That process is not simply a re-statement of the circuit of capital, or a re-statement of the components of capital, but it does not rest on denying either (as you seem to think it must).
And it is an important type of concentration, which arose out of the ‘free competition’ of smaller formations. The concentration of production creates formations that are able to wield greater economic control, including globally. And that economic influence is also manifested within the superstructure.
Of course, this is all subject to continued specific development; through world wars, revolutions, and several economic crises since 1916, for example.
Lenin was describing how capitalism had developed to the point where inter-imperialist war was the logical outcome of global competition.
If you think that’s a trifle, or that global capitalism is today just as it was in 1850, we can stop here.
Keith said
Eddy wrote “I think its rather clear that banking and industrial capital have been merged in specific formations and some of this merger has been described”
Agreed. But that is an empirical fact. But it does not require new theoretical concepts. Hilferding puts forth the concept “finance capital” as distinct from concepts used by Marx of financial, bank or money capital. Hilferding supposedly does more than describe a historical development, he produces a new concept.
I showed that the new concept is not necessary, and is indeed fake, and the idea that a new concept is necessary just reveals an incomprehension of Marx.
Eddy wrote: “The concentration of production creates formations that are able to wield greater economic control, including globally. And that economic influence is also manifested within the superstructure.”
At this level of abstraction I don’t disagree. But we are coming close to what is usually meant by the theory of monopoly capitalism — the cessation of the law of value.
For instance, What do you mean by “greater economic control?”
Do you mean the power to administratively determine prices over long periods? And hence prices are determined not be socially necessary labor times but by relative “economic power.”
Eddy wrote, “Lenin was describing how capitalism had developed to the point where inter-imperialist war was the logical outcome of global competition.”
I think Lenin described how World War 1 was the outcome of inter-imperialist rivalry.
But I think with hindsight we can see that the world wars were more about the collapse of British hegemony and the rise of U.S. hegemony. And that inter-imperialist rivalry is an important feature in moments of transition from one accumulation regime and one hegemon to another.
I don’t think that global capitalism is the same today as it was in 1850. There are two things here. First, there is history and its contingencies and second, there is the theoretical apprehension of the logic of the system and its necessities. A Marxist analysis of concrete conditions attempts to abstract out the contingent and discover the necessities. While concrete capitalism in its historical manifestations is different today the basic features and basic logic of capital as analyzed by Marx remains the same. Marx is far more relevant today then it 1850 the laws that he discovered operate with less friction form previous modes of production and other historical accidents. The more capitalism develops the more relevant value theory.
The historically the working class movement began its theoretical production with the communist manifesto and never incorporated the work that Marx did on the three volumes of Capital in the relative isolation of England. Once we achieve the acknowledgment that Marxists don’t know Marx (least of all Leninist and Maoists)and we start to correct that problem then we can complete the critique of political economy that Marx began and value theory will achieve hegemony in the working class movement.
John Steele said
Keith
You have a tendency to pose forced choices which is not very helpful to this discussion, presenting the question as being either Marx or Lenin (not both). For example in comment #16 you say:
Why is this our choice? Why can’t Lenin not be in contradiction with Marx, and yet his Imperialism be much more than a mildly interesting historical document? Further – recognizing the importance of Imperialism does not have to mean taking up Stalin’s interpretation of Leninism.
There’s a similar problem with your approach to finance capital and monopoly capitalism. In comment 18 you refer to “what is usually meant by the theory of monopoly capitalism — the cessation of the law of value.” Exactly who are you thinking of here? I don’t know of any Marxist theorist who believes that monopoly does away with the law of value. This is really a straw man.
And your argument against the concept of finance capital employs a similar logic: either it supplants and is in contradiction with Marx’s analysis of industrial capital (in which case it is wrong), or Marx’s analysis stands as written and there is nothing to add. This is a false choice. Neither side of the dichotomy you present is correct.
You have some good points. Many Marxists do not read Marx. (Or at least they do not do so rigorously.) This is a problem. The theory of value is foundational in Marx. An anti-imperialism divorced from Marx is a bad basis for a revolutionary politics. I agree with all of that, and it’s valuable to stress it, as you have. But it’s a hindrance to both clarity of thought and felicity of discussion when you present things as metaphysical dichotomies and argue by means of forced choices.
Arthur said
1. Can we now move past the “Marx v Lenin” dichotomy and get back to actually analysing the current crisis?
2. My view is that the quotes from Capital concerning the contradictory movements of money and value in crises are highly pertinent (perhaps even picked up from some mainstream commentary about how financial “experts” are finding Marx an interesting read these days).
But the article does not actually develop any analysis of the interplay between values and prices and the role of overproduction in this crisis.
Nor does the discussion initiated by Keith actually show how to apply the laws of value to analysis of the current crisis. It just calls for doing that and gets bogged down in a more sterile argument about Lenin.
3. My understanding is that there is an underlying crisis of overproduction (exemplified by the glut of housing that could only be sold by overextending credit).
The overextension of credit has resulted in financial crisis which is being handled by nationalization of credit. This may well succeed in preventing complete financial collapse but leaves the underlying overproduction unresolved with the state emerging more and more clearly as the embodiment of capital confronting society with demands made by “the economy” (capital) for drastic regression on fairly explicit grounds that the forces of production are able to produce more than a mode of production based on production for profit can handle.
If that understanding is wrong, it needs to be refuted. If it is correct it needs to be developed and made much less abstract, vague and half-baked so it can actually be connected with concrete proposals as to how revolution would transform society to overcome crises.
Keith said
I think Arthur is right we need analysis based on value theory not just a plea for sd analysis.
It is a big project but I put down some initial thoughts somewhat in line with what Arthur put forth but I try to develop it a bit more.
But one last point on Lenin. I don’t really have a problem with John’s criticisms except that as I mentioned in an earlier post: No Marxist theory of imperialism uses the law of value or even acknowledges it. Anthony Brewer makes that point in passing in his very good survey of Marxists theories of imperialism. Even if they are not necessarily in contradiction one has displaced the other. anyway…
As to the crisis, first over-production is an expression of the tendential fall of the rate of profit which is the main tendency (there are counter tendencies which allow periods of economic expansion or capital accumulation between crisis). So, the tendential fall of the rate of profit is another expression of the accumulation of capital and the increasing productivity of labor. The falling rate of profit, I think, appears as an “over-production” crisis.
Over-production crisis are simultaneously under-consumption crisis. Under consumption crisis appear to be the result of a lack of effective demand. Effective demand is created through a series of Keynesian/social dem economic policies. In the U.S this was Roosevelt’s New Deal. This will mean Obama will be forced to new deal type policies. As Arthur notes the capitalization of the banks (the state transfers value –redistributes it—from debt with projected tax receipt as collateral and gives it to banks by buying stock in the bank) is not going to solve the crisis. The effective demand problem needs to be addressed. (Of course world war is another solution to a falling rate of profit since it destroys productive capacity and sets the stage for new accumulation).
If we think back to the Great Depression we see both war and the new deal as ways of dealing with the crisis.
The New Deal created effective demand by allowing unionization, and various entitlement programs which got money into people’s hands, along with public sector employment. But, by the 1970′s this set up collapsed with dramatically declining profit rates (many causes for this, but the development of the productive forces is not the least of them, that is to say, the effective demand created by Keynesian policies and the destruction wrought by the war providing the framework for capital accumulation and development of the productive forces but by the 1970’s that set up was no longer able to outrun the tendential fall in the rate of profit). ‘
So, the stagflation of the 70′s was a profitability crisis that was solved by a series of policies and practices that are usually called neoliberal. In effect all of the stimulus to effective demand are removed, in an attempt to restore profitability AND further accumulation. It works for 30 odd years. The working classes through wage cuts, loss of entitlements, helps to offset the fall in the profit rate (this is made possible by Paul Volker who as Fed Chair in the early 1980’s raised interest rates to set off a deep recession which undermine workers power to negotiate wage increases).
This gets accumulation going again, along with more cuts, and privatization of the public sector. But, still the effective demand problem must be addressed if the tendential fall in the rate of profit is to be countered. The effective demand problem is eventually solved cheap credit: consumer debt (mortgages, credit cards, car notes, student loans,) the debts are new arena for profit making and create markets for new financial products (securities etc) which after the dotcom bubble bursts cease to finance real value creation and instead are used to create large amounts of fictitious capital that is still in the system waiting to be valorized or destroyed. In effect the workers are in a giant company store of capital. They cut or wages and offered us credit so we could keep consuming.
Easy credit created a load of fictitious capital (paper claims to value that doesn’t exist). Fictitious capital can be realized if by future value production. The Fed and the Treasury are trying to decide who will have their value valorized and who will be destroyed (but they are not “in control” and it doesn’t always work the way they want). Bail outs effectively valorize capital that the market deemed worthy of destruction. The bailout extracts value, from the circuit of revenue (C-M-C), in the form of worker’s wages via taxes. The state promises financial capital a portion of our future wages in order to valorize their fictitious capital. They can do this because of the over-all docility of the U.S working class—it is our docile nature that “restores investor confidence.” But the bailout didn’t go so well politically. There is a vacuum of bourgeois leadership (no one was able to “sell” the bailout to the public on capitals side, but no working class representatives were able to explain it either and why it should be opposed. Just like the workers of the Paris Commune we are afraid of banks. Even though we are against the bailout we are relieved when they get bailed out. We need to analyze the crisis so we can start to plot a political course and explain the crisis in accessible and popular ways—so people understand what will happen if there is no bailout etc.
The story must include the war which I think, in part, was an attempt to restore profitability by repressing OPEC’s (an organization of state’s that collect oil rents) power by getting another puppet in Opec., and by opening the Iraqi market to capital. That project was failure and accelerated the crisis. (This doesn’t address the point Arthur made in a different thread about the way the left responds to the war. The war was a failure form capital’s point of view.
The story must also include the huge trade imbalances and the surpluses in Asia and the middle east which financed U.S. debt and still do.
Part of this just the result of accumulation, and the process that Marx describes as relative surplus value production where the technological innovations of individual capitalist, because of competition, compel other capitals to adopt the innovation and over time this has the effect of developing what Marx calls the technical composition of capital which lowers the value of labor power by lowering the value of the commodities that make up the basket of goods consumed by workers to reproduce their labor-power. Lowering the value of labor power via the production of relative surplus value raises the organic composition of capital and causes the tendential fall of the rate of profit. Concretely this looks like cheap goods from China sold in Wal-Marts so that wages buy more commodities, and the value of labor is lowered.
So at the heart of this crisis is tendential fall of the rate of profit and the simultaneous failure of a number of previously effective counter tendencies (lowering corporate taxes, cutting wages, technological innovation, cheap imports, new markets etc). The next administration will have to find ways to destroy fictitious values and create effective demand. I think agitation around workers seizing corporations by taing over their boards of directors and the demand that nationalized banks be brought under various forms of democratic control is still right but I will read the text Arthur suggested.
Anyway, that is a first crack at using Marx’s categories to apprehend the crisis.
Arthur said
Ok, I hope this will be a protracted discussion. I’ll wait till Keith (and any others interested) have read the material on Unemployment and Revolution linked above.
My eyes glazed over again so I’ll have to read the whole thread more carefully before resuming discussion but my current impression is that Keith’s views include something like the following:
1. Crisis arises from tendency of rate of profit to decline which is somehow connected (in a way I could not follow) with lack of effective demand.
2. Lack of effective demand results from underconsumption (low wages of workers).
3. Neoliberal policies replaced Keynesianism and produced underconsumption.
4. A “story” should mash this stuff together with more of the usual concerning the war, imperialism etc.
I’ll leave aside 4 (and Keith’s “last word” on Lenin) as just a provocative aside from me that can be ignored while also indicating why I am ignoring any such development of stories here. I’m only interested in analysis, not propaganda.
Re 1. The tendency (and counter tendencies) for the rate of profit to fall due to rising organic composition of capital are long run trends whereas cycles are…cyclic. The same long term trend underlying all phases of a cycle cannot be used to directly explain the different phases of the cycle. In part 5 there is an attempt to trace out an indirect connection with the disproportions between expansion of the department producing means for the production of more means of producing final consumption and the department directly producing means of producing final consumption. Please take a close look. I believe that analysis based on disproportionality with only an indirect connection to the tendency of the rate of profit to fall is much closer to Marx’s.
Re 2. “Underconsumption” is the popular “socialist” theory Marx was rebutting in developing his own more scientific analysis. Marx showed the absurdity of underconsumption theories by pointing out underconsumption is common to all modes of exploitation while cyclic crises are specific to capitslism and by highlighting the notorious fact that workers consumption is generally at its highest at the peak of the boom, which is an early warning sign of imminent crisis. In fact he mentions that one of the functional purposes (“final cause”) of every real crisis is to restore the lower level of consumption by exploited workers that is necessary for capitalist accumulation to proceed in a new cycle.
Re 3. I find it another “story” rather close to 4 and would prefer to ignore it from now on while focussing on the two important theoretical questions of the “tendency of the rate of profit to fall” and “underconsumptin v overproduction”. Briefly though, deficit spending is now in the trillions and the role of government in the economy expanded far beyond levels achieved under the banner of Keynsianism. Latest development is nationalization of banking. Its an odd time to be spouting that story.
I’m listing the above as my understanding of Keith’s views and brief account of the refutations written quarter of a century ago based on Marx’s much earlier refutations.
Please correct any misunderstanding that may have resulted from my eyes having glazed over again but respond to the substantive account of my analysis in part 5 rather than to the shorter version here.
Keith said
I will respond in greater detail, but two quick things.
Over-production is just another way of stating under-consumption. Too much production relative to what can be consumed.
So when you say no this isn’t an under-consumption crisis it is an over-production crisis you havn’t escaped the problem with under-consumption crisis theories.
I am arguing that the falling rate of profit produces over-production/underconsumption. So if you want to understand the deeper dynamics you have to look beyond both under-consumption and over production (they are the same thing).
So I am not arguing for an under-consumption theory. I am only arguing that the crisis will APPEAR like an under-consumption crisis. But until profitibility is addressed the crisis will deepen.
NOw there may be something to the disportionality issues that you are raising, but I have to think about that and go back to v. 2.
I am doing some campaigning today for Obama. But I will read and repsond to the essay on unemploymnet.
Eddy said
Arthur writes:
As shown in Part 2, the current financial crisis is not primarily due to mortgage debt, but to much more extensive corporate debt. This crisis is not based on the over production of housing but the speculative collateralization of exchange-values — across many sectors — that did not actually exist. That fact is demonstrated in the data.
and then Keith writes:
The general tendency of the rate of profit to fall as the organic composition of capital changes — new human labor-power added to the process declines in relation to the amount of plant, machinery, materials (‘dead labor’) operationalized — is precisely that, a general law that Marx theorized to show how capital increasingly strains against its internal contradictions.
That process is ongoing. It quite obviously does not result, or mean, nor did Marx intend it to mean, that crisis is persistent or always present. Crises are periodic, not continual. (Two significant changes since the advent of world-wide imperialism are the ‘circuit’ factors contributing to crises and the periodicity between them.)
And, following on that, in part 3, I briefly described the return achieved by ExxonMobil through its extraction and refining operations in Nigeria. That rate of return is tremendously higher than they obtain by similar operations in Texas. The difference cannot be accounted for by an imagined higher productivity on the part of oil workers in Texas over their counterparts in Nigeria, or because an oil refinery in Nigeria employs more workers.
The ‘super-profits’ extracted by ExxonMobil from their operations in Nigeria are accounted for by their monopoly position, globally and in regard to the Nigerian economy. The specificity of these sources of ‘super-profits’ are likewise significant in explaining the global contention among imperial capitals, but it not the only source of contention.
As I pointed out above, the various responses to the banking crises in each state are also forms of inter-imperial contention (and are not simply mechanisms to try to confine each specific debt crisis).
Arthur said
Eddy,
1. We are in agreement that a persistent long term tendency like the rising organic composition of capital and falling rate of profit cannot directly expain periodic crises.
2. We are also in agreement that the current financial crisis is far wider than the sub-prime mortgage crisis (which emerged quite a while ago).
3. But your argument in part 2 follows the mainstream in presenting the “recession” as caused by the financial crisis. In fact there is an underlying “real” overproduction which leads to both. That overproduction became highly visible when the US construction industry was financed to build homes that people could not afford by inflating to credit so banks would extend loans to people they knew could not pay. The various tricks with mirrors to securitize the bad debts and pretend the risks were eliminated by spreading them widely across the financial sector through various derivatives is a financial effect of that underlying real overproduction, not its cause.
Keith,
4. When you read part 5 and write a substantive reply you will need to argue your assertion that overproduction and underconsumption are the same thing. Historically the point of those two different terms was to provide different labels for two opposing theories analysing the visible phenomena of commodities unsold, and workers and means of production left idle. The term “underconsumption” was used to explain the crisis as due to the workers poverty making it impossible for them to buy the goods they had produced. The Marxist term overproduction referred to a quite different explanation resting on an analysis that capitalist production is primarily for accumulation and that disproportions between the different departments are an inevitable result of the “anarchy of production” in which highly socialized production where each is dependent on all still requires realization through the “market” because different parts of the social product are owned by different capitalists.
Keith said
I don’t think that this is a “periodic crisis.” I think that this is, in the parlance of our time, a game changer. This crisis will be deep and wide.
In “The Trillion Dollar Meltdown” by Charles R. Morris, he writes:
“Here is a crude gauge of the credit bubble. Not long ago, the sum of all financial assets– stocks, bonds, loans, mortgages, and the like, which are claims on real things–were about equal to global GDP. Now they are approaching four times global GDP. Financial Derivatives have a notional value of 10 times global GDP.”
This is hard to get think through but the way I understand this is there are four claims on every real asset. 3 out 4 claims are worthless. On top of this are the completely fictitious derivatives, 10 bogus claims on every real asset which also must be wiped out. It is not going to be possible to start new rounds of global accumulation until these bogus claims are cleared out of the system.
As to the falling rate of profit being the underlying factor behind these appearances, I will put forth my own elaboration, but in the meantime you may be interested in two essays by Anwar Shaikh. If you don’t know Shaikh’s work then you will enjoy this. Shaikh is one of the best Marxist theorists out there today. I
This is an old essay that analyzes the crisis of the 70’s using the falling rate of profit.
“The Falling Rate of Profit and the U.S. crisis” . And this is an essay on “History of Crisis Theories” . This essay has critiques of underconsumption theories of crisis as well as the disproportionality theory of crisis.
Arthur said
Thanks for the links to Anwar Shaikh. I will read them carefully as I recall he was about the only allegedly “Marxist” political economist I found worth reading at the time when “Unemployment and Revolution” was written.
Just checked his home page to see if there’s anything on recent events yet. We will have to wait for that but I see there’s been lots of output over the decades that I will want to catch up on when getting to grips with political economy again. (Am currently still focussed on Nepal).
I’d be surprised if you find much support from Anwar on this not being a “periodic crisis”. The Great Depression was and the coming crisis may well be much deeper than that without being a qualitatively different type of phenomenon. It’s been a long interval during which relatively minor fluctuations that were still within the phases of prosperity or teetering on the brink were often mistaken for actual crises.
BTW debts exceeding GDP by 4 to 1 does not in any sense translate directly into a similar ratio between real asset values and inflated financial claims. We need to get to grips with the nature of money and credit in order to understand the cyclic phenomena. The “Contribution to a Critique of Political Economy” is an essential starting point for actually understanding the the first chapters of Capital that are usually “just skipped”.
Eddy said
Arthur writes:
You and Keith both continue to refuse to engage the facts of this matter in manners that defy logic. Beyond that, you both argue in circles (as a review of you posts above shows).
If you read part 1 of my essay, you will note that it documents the value of mortgage debt in the US and it documents the percentage of this debt that is in default. Those sums are a very small percentage of the derivatives that have choked the financial sectors, which is also documented in that section.
It is the mainstream explanation that speculative home building (seriously?) and defaulted mortgages are chiefly to blame. This is a feint excuse, intended in part to deflect attention from the actual ‘troubled assets’ — large-scale ‘capital’ debt — that form the base and most of the edifice of the ‘toxic debt’ pyramid.
In part 2, I showed how that credit crisis will spread and become a crisis in productive sectors. As with the data presented throughout, this is not a conjecture, it is happening now. Examples are being reported daily in the news.
then Keith adds:
Rather than detail your internal inconsistency (per your posts above), I will just point out that ALL crises are ‘periodic’ to Marxist political economy, in that they arise periodically out of the internal contradictions of the system. The mechanisms used by the capitalists to mitigate each crisis contribute to the onset of the next one. In the present instance, I suggested that the inter-bank lending rate cuts used to mitigate the 2001-2004 recession promoted the leveraged borrowing that triggered the current crisis.
Since you disregard Lenin’s analysis of global contention of monopoly capitals leading to global re-division as ‘fake Marxism’, I assume that you must expect to see this ‘game changer’ unfold in some other arena. Regardless, it cannot confine itself to a specific national economy, as everyone may sense by now.
What is not at all clear is what will take place in the course of resolution of this crisis. I suggested some feasible routes at the end of my essay above. The reason that the future course is unclear is precisely because we have to make it.
Five Ridges said
You should look into “Crime of Empire” (2003) by Ricco Alejandro M. Santos. It offers an empirical attempt to analyze and measure monopoly profits and imperialist superprofit via trade on the basis of Marx’s labor theory of value. In other words, Lenin’s theory of imperialist superprofit based on Marx’s labor theory of value and “Capital”.
Keith said
Eddy wrote in 24
Keith said
Sorry about the mess I made in post #30. I tried to use block quotes. Maybe the moderator could remove that.
Here is what I wanted to write:
Eddy wrote in 24:
“I briefly described the return achieved by ExxonMobil through its extraction and refining operations in Nigeria. That rate of return is tremendously higher than they obtain by similar operations in Texas. The difference cannot be accounted for by an imagined higher productivity on the part of oil workers in Texas over their counterparts in Nigeria, or because an oil refinery in Nigeria employs more workers.”
This is exactly why I think the theory of monopoly is nefarious. The difference between the rate of return in Texas vs. Nigeria is not the result of monopoly– the energy sector is very competitive– Texas oil fields are far less productive. In fact, the less productive fields play a regulating role in the formation of prices and oil rents. The best Marxist on oil, energy, and rent is Cyrus Bina. His book, “The economics of the oil crisis” is crucial. Here is an essay he wrote, “Development of Rent Theory” . You can’t talk about oil price formation, (or the war in Iraq, and Afghanistan for that matter) without discussing Marx’s theory of rent.
Eddy also seems to be up in arms that there is not enough of an acknowledgment that the debt crisis is bigger than subprime mortgages, and mortgage backed securities. There is no real disagreement here. There will be corporate defaults, the commercial paper markets are in crisis, the commercial property market is also tanking, hedge funds will be collapsing, etc. But how does this undermine the basic outline of the crisis that I put forward (tentatively) using value theory?
You say that Arthur and I are arguing in circles but you don’t provide any evidence of sd argument. Plus, both Arthur and I have sd that we are trying to figure the crisis out. So speaking for myself, I am not arguing for any ready made explanations.
You seem to be upset that whatever the merits of your essay we don’t think it is enough of an explanation. For my money you seem more determined to argue that the empirical facts support Lenin’s theses. Well, I disagree with that. First because I don’t think that there are empirical facts that are theory independent, secondly I already showed that monopoly theory is incompatible with value theory, and third I showed that what Eddy thinks is empirical evidence of monopoly such as the Exxon/Mobil example are not actually examples of monopoly but rather examples the shortcomings of Lenin’s theory and the need to return to Marx. My comment that this is not a periodic crisis is only meant to argue that this is not a part of the business cycle, it is a much deeper crisis.
Overproduction and Underconsumption
I argued previously that theories of “overproduction” are no different then theories of underconsumption.In 26 I linked to Anwar Shaik’s essay on the history of crisis theories and he explains this probably better than I can. But theories that argue crisis result from underconsumption, overproduction, or disproportionalities between production in department 1 (in v.2 of Capital department 1 produces means of production )and department 2 (department 2 produces means of consumption) are basically the same.
In 14, Arthur posted a link to an essay on unemployment that addresses crisis in part 5. In this essay it is asserted that theories of “underconsumption are wrong” but the author misses the fact that overproduction is just the flip side of underconsumption. And later in the essay the author makes the underconsumption argument directly only he clothes it in the language of disproportionality.
In the section of the essay entitled “overproduction” about 8 paragraphs in, the disproportional production between the sector is explained this way:
“It turns out then that for a long time investment has been taking place in the wrong proportions between the sectors producing consumer goods and those producing means of production. More should have gone to producing the means of production for producing more means of production. Less should have gone into directly producing consumer goods because the market there is mainly wages and the workers are not very rich.”
This is the classical underconsumptionist view, too many consumer goods have been produced. More goods are produced then can be purchased by the wages of the workers which means that there is an oversupply relative to effective demand and the prices collapse. This is the scene in the “Grapes of Wrath” when they burn the freshly picked peaches to destroy the supply and bring up the price. An over-production on the supply side is simultaneously under-consumption on the demand side.
The difference between this essay and classic under-consumption theories is that the solution proposed is not to stimulate effective demand as Keynesians proposed. Instead the solution is “socialism” — repair the disproportionality between the departments through economic planning.
As I already argued, and I will try to develop it further, law of the tendential falling in the rate of profit must be at the center of the analysis of this crisis.
Arthur said
Eddy,
That is indeed the way it is beng reported in the news, and also the way you analyse it.
That doesn’t make it true. Your theory, and the media accounts suggests that a financial crisis suddenly broke out (with various different and generally unintelligible explanations) and then, as a result of that financial crisis, we are now headed into recession and possibly much more.
Marx’s theory on the other hand suggests that there is an underlying cycle in the “real” economy (with an explanation that is not easily described or widely understood) and that the outbreak of a credit crisis in a particular phase of the business cycle and the subsequent period of decline are consequences of the underlying movement.
Merely repeating that your account of the external phenomena coincides with everybody else’s account of the external phenomena does not establish the wisdom of not trying to scientifically understand the underlying reality.
More on other points by Eddy and Keith later.
Arthur said
Ok, I’ve now read both the articles by Anwar Shaikh and started the article on rent.
I confirm my impression that Anwar is well worth studying closely. The “kind” of economic analysis he was engaged in is the kind I was also trying to get to grips with in “Unemployment and Revolution”. I am confident there will be a revived interest from now on so I will get back to studying the current data (and the current analyses when they appear) and try to make my own less “half-baked”.
Unfortunately that just isn’t going to be possible in this thread for me at the moment. It will take quite a while and need to be presented in a solid paper.
Briefly though, I confirm that the passage Keith quoted as showing that my view of disproportionality and overproduction is just another way of describing underconsumption, was in fact part of an attempt to illustrate the difference.
Obviously it didn’t succeed. At first I thought Keith was simply reading the paragraph backwards. But I can see it needs a much better exposition than I can do now.
On the solution being socialism as opposed to Keynesian raising of effective demand, that’s more or less my position. But part 7 highlights the difference between the sort of planning we already have under monopoly capitalism, including state capitalism described as “socialism” and what can actually eliminate disproportionalities causing crisis in a communist mode of production where the product remains socially owned and can be allocated rather than bought and sold. Planning won’t eliminate disproportionalities – we’ll be far more inclined towards unbalanced “leaps” than any bunch of capitalist accountants – but the mistakes will just result in lost opportunities, not crises as there would be no dependence on a profitable outcome for the investment mechanism itself not to jam up).
I think Anwar incorrectly mixes together disproportionality theories and underconsumption theories in his survey and fails to prove that the falling rate of profit results in crisis in the other article.
His central point in the survey, which I strongly agree with, is that we have to understand how reproduction works and how it doesn’t work (in crisis) together.
To me that requires following Marx’s explanation in volume 2 of how expanded reproduction works, with a rising technical and organic composition of capital and growing importance of the production of means of production as opposed to final consumption.
The key point then is that there is no inherent regulator, and cannot be any inherent regulator that keeps the necessary proportions. Contrary to equilibrium theory, the system is always in dynamic disequilibrium with the crisis itself as the mechanism switching from one phase to another.
On finance capial, Anwar’s repetition of Marx’s explanation of competition between capitalists leading to the first to introduce a cost reduction profiting from increased market share despite a falling rate of profit when the others follow simply doesn’t cut it in our era.
A modern account has to describe the actual process of investment decisions based on “hurdle” rates with competition for capital in the capital markets.
The much more rapid technical progress requires much greater attention to what Marx called moral depreciation (ie virtual depreciation – the real costs of reproducing an investment declining and devaluing existing capital).
On rent, I’m postponing the rest of the article for later because of my prejudice that nobody except the pseudo-left raving about “oil” still thinks in terms of land or resources being a source of value. Leaving aside “absolute rent”, the Marxist theory of rent has now become mainstream economic orthodoxy (without attribution and using different terminology to cut it off from the rest of his conclusions).
I’ll just have to leave it there for now, sorry.
irisbright said
Hey, just wanted to throw this out there. Wayne County (Detroit’s county) put out forclosure listings in (newspaper sized–so huge pages, not a little book) newsprint for the year. It’s tiny print, miniscule–I’m sure you’ve all seen one.
Well, it was 138 pages.
138 pages long. Thats over an inch thick. And it’s going to get worse.
A comrade threw it down on the table last week and said ‘check that out’. It blew my mind!
davidmc said
Hi
I have just presented a short talk on Australian ABC radio entitled “Should the
financial crisis prompt another look at social ownership?”. Here is the podcast and transcript
You might also find my economics web site useful.