Commentary on Political Economy

Monday 15 August 2011

The Concentration Of Capital and of Capitals

This article by Robert Gottliebsen in "Business Spectator" is a little gem because it contains and links handsomely many of the points about the implosion of capitalism that we have tried to highlight on this site. I would invote our friends to read it carefully and take note of the following headings. (I am busy writing the final stages of the 'Nietzschebuch', so articles like these are a God-sent for me on this site.)

Notice how Gottliebsen sharply takes up a point by Michael Spence about the decline of the "traded goods" sector in US and European capitalist economies. That just about gives the whole game away. You can see that capitalists much prefer to use the social resources that they own privately to produce "objects" that can then be "consumed" in relatively short time so that we all keep working like slaves only so that we can return to work another day! By contrast, "non-traded goods" are the kinds of "services" that we need to remain "human" - and this is what owners of capital definitely do not want.

The most important aspect of "the wage relation" is that it presents our social work - the division of "social labour" - as a mass of "individual labours" that can be remunerated "separately". This is achieved by capitalists quite simply by "owning" the means of production so that "one" capitalist can concentrate "many workers" to work these means of production: a single "will" can control many wills! This is the true "concentration of capital".

Of course, as capitalism encounters our antagonism to this artificial "division" of social labour into "separate labours" - "the wage relation" - capitalists are forced in crises "to merge" their businesses and grow bigger - which leads to the "concentration of capitals" (notice the plural, "capitals"!).

Notice also the roles of China (the capitalist dictatorship) and Germany (an ex-Nazi dictatorship) in preferring "traded goods" for export - things like cars, white goods and so on.

The main point is that it is the collective capitalist, the State, that takes over "non-traded goods" - health, transport, communications. But when it does not and they fall in "private" hands - then they pose a "systemic risk" to the entire reproduction of the society of capital! Which is why the State should "nationalise" firms like Societe Generale.... Cheers to all.

The strong rallies on global sharemarkets are a reminder of how the surplus funds in the world are seeking a way to make money in times when, in some cases, interest rates have turned negative, forcing institutions to pay money to put large sums in the bank (Stuck in a vicious market swirl, August 12).
Once sharemarkets turn up, they become like a snowball which gets larger and larger as it rolls along.
But to avoid the snowball smashing to pieces, US and European politicians will need to tackle what are deep structural problems. And they will also need to understand that many global institutions are very fragile – none more so than Société Générale, France’s third-biggest bank and one of the biggest global players in equity derivatives.
Last night I was reminded of the US and European structural problems by Michael Spence, who is a Professor of Economics at New York’s Stern School of Business. Speaking at the Grattan Institute, Spence pointed out that in recent decades, all the US jobs growth has been in non-tradeable goods like health, government services and housing construction, which was unsustainable. Future jobs growth would have to be in tradeable goods and services. It reminded me of the remarks of the Chinese rating agency Dagong, which downgraded US debt in advance of Standard & Poor's.
Dagong described the US as a country living beyond its means (China sounds a dollar warning bell, August 8).
Spence says that similar structural problems exist in Europe – with the notable exception of Germany, which around 2000 began addressing its competitiveness and investing in tradeable goods and services. Unfortunately, divided US and Europe politicians are not able to take the tough decisions that Germany embraced.
But Spence warns that if the change is too sudden it may be counterproductive.
While the US and Europe have structural problems, they also have corporate weakness, which is equally dangerous. On the weekend The New York Times alerted the world to the dangerous situation of Société Générale, whose position in equity derivatives means that it does business regularly with the other key players in the market – Goldman Sachs, JP Morgan Chase and Deutsche Bank.
But Société Générale has a tradition of becoming involved in dangerous situations. For example, Société Générale would have been crippled had the US government not bailed out AIG in 2008, which gave the French bank $US11.9 billion in American government money.
It’s therefore no surprise to discover that it owns the majority of a Greek bank and has a big exposure to bonds issued by Greece, Portugal, Ireland, Italy and Spain.
The New York Times says that in the latest Greek bailout, Société Générale was among the banks that agreed to forgive about one-fifth of the value of the country’s debt. As part of that deal, a pan-European fund is supposed to make money available to help banks that may need assistance covering their losses on Greece – although each of the seventeen eurozone nations’ governments must still vote on whether to finance the bailout fund.
Effectively in 2008, during the AIG rescue, the US showed that it could not allow Société Générale to fail. The French bank can therefore afford to take risks knowing it will be rescued if they blow up.
Société Générale will not be the only institution in this situation, which is a warning that while the current rally is strong there are deeper problems that must be addressed.

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