Commentary on Political Economy

Saturday 16 July 2011

The Crisis-State And Central Banks

It is exceedingly obvious, and we have argued this below, that the real effective cause of the current ‘crisis’ was ‘INTERNAL’ to capitalist social relations. The fact that it was not due to ‘external’ or exogenous causes raises the broader question of what REMEDIES are available to deal with the causes and with the consequences of the crisis.

We have seen that finance capital, in response to social antagonism and its wish to avoid it, needs and uses its own ‘liquidity’ and ‘mobility’ as well as its ‘fungibility’ (that is, its ability AS MONEY or MONETARY EQUIVALENT to take any PHYSICAL shape or form that WEALTH can take) – finance capital uses these ‘properties’ TO FORCE upon ‘nation-states’ conditions that it deems to be favourable to its accumulation (both through ‘speculative’ or ‘industrial’ investments) or indeed to its ‘mobility’ and ‘liquidity’ as well.

“Nation-states’ and ‘regions’ RAVAGED by these ‘capital flows’ seek TO PROTECT themselves through a variety of strategies. There are capital controls and financial market regulations. One other strategy is for different ‘nation-states’ to seek ‘to co-ordinate’ economic policies. Of course, for reasons that we canvassed below, some members of the European Community decided to embark on a European Monetary Union with a common currency.

Once again, it is important to note that these developments ARE NOT ACCIDENTAL but they are predictable institutional consequences of the social relations that we have described below. The construction of a ‘State-form’ at the level of the European Union gives us a unique opportunity to observe the complex forces that go into the formation of a STATE, much as the formation of a new galaxy gives us an insight in astrophysical science.

“FINANCIAL REPRESSION” is a misnomer, of course. What is “repression” to financial capital is “protection” to the rest of ‘society’, from industrial capital to workers. What we need to do is NOT to divine or guess what measures ‘nation-states’ will adopt. Rather, the overriding task is to com-prehend  the STRATEGIES that capitalist States will DEPLOY to ensure the survival of the “SYSTEM”.

In the antagonism of the wage relation capital stands to individual workers as the only social power, because it is a CONDITION of the wage relation that the worker ‘exchanges’ living labour (that is, political and social freedom) for a ‘wage’, or the monetary equivalent of objectified, past, dead labour with which to keep alive.

As capitalists compete for a greater share of ‘value’ (of command over living labour), the antagonism of the wage relation forces capital into a movement of greater CONCENTRATION leading to ‘monopolies’ or ‘oligopolies’; but at the same time capital is forced to use TECHNOLOGY to defeat the political composition of workers asking for better wages and conditions.

THE COMBINATION of capitalist “concentration” and “technocracy” we will call “RATIONALISATION”. Through this process of “rationalization” capital becomes MORE than a social force, MORE than even “the most important” social force – no! capital BECOMES SOCIETY!

In other words, we reach a stage where the success or failure of capitalist enterprise  becomes either the GROWTH of “society” or its RECESSION or even DEPRESSION. We have now reached what we can call “THE SOCIETY OF CAPITAL”.

So-called “financial repression” is simply the attempt by “society”, mainly workers but also industrial capital, TO PROTECT themselves from the RAVAGES of “finance capital” once ‘speculative activity’ has reached a stage where it poses a SYSTEMIC THREAT to “the society of capital” AS A WHOLE!

Once capitalist control over the means of production and distribution poses a “systemic threat” to the very survival and viability of “society”, it is “THE COLLECTIVE CAPITALIST”, that is, THE STATE that has to lead “society” POLITICALLY out of the mess – NOT “technocratically”, but “politically”!

Past economists, from Smith and Ricardo to the neo-classics and the Austrian School, even Marx himself, treated the capitalist economy as first and foremost a “market” that is virtually “self-regulating” unless there is some “external interference”. Either through the “law of value” or through “equilibrium” the so-called “market mechanism” manages to function.

BUT the obvious experience of “CRISES” is that the market does not and cannot “regulate” itself and that WHAT ENSURES THE SURVIVAL of the capitalist economy is in reality a POLITICAL MECHANISM. In other words, at the END of the capitalist movement to “concentration” and “technological” control – or “rationalization” – there must be a MECHANISM that allows the State to ensure the survival of this system; a mechanism that warns the State when the social level of antagonism is rising too high and “the system”, “the society of capital” is in danger.

It has become abundantly clear through this ‘crisis’ that that mechanism is MONEY and the CONTROL of money, through the “technocratic” functioning of the central bank, is the single most important gauge of social conflict and antagonism in the society of capital. More specifically, it is INFLATION (or even its “possibility” or “likelihood”) that functions as a “thermometer” to detect how “critical” the capitalist patient is. Money is the “safety valve” of capitalist governments, the difference between “growth” and “depression”. The control of the monetary medium therefore is the VITAL CLUE as to the “space of manoeuvre” (in the words of Max Weber in ‘Parlament und Regierung’) that is still available to the “SOCIAL BRAIN” of capital – the State.

THIS IS WHY the whole study of central bank policy and its interaction with the State and the financial system (a question raised with uncannily good timing by Martin Wolf) is THE KEY to understanding where the society of capital is likely to lead us.

THE QUESTION IS NOT what “technical measures” the State will adopt to e-merge from the “crisis”. The question is what “political strategies” will the State adopt TO RE-CAST the “economic growth” and “legitimacy” of the capitalist economy and, with it necessarily, of the wage relation.

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