Commentary on Political Economy

Friday 21 October 2011

The Crisis Cometh - On the Tsunami that is about to engulf Global Capital

The profound capitalist crisis that is now engulfing Western Europe and that will surely drag the rest of the global capitalist economy down with it as it deteriorates and escalates further - this crisis, we were saying, offers excellent illustrations not merely of how capitalism works but also of its state of development and of the types of problems and developments that it is likely to experience in the foreseeable future.

In a way, the discord and disagreements between member states in the eurozone merely reflect the divide within the European bourgeoisie as a whole and its national "fractions". European capitalism offers a perfect illustration of the "social dynamics" that we have described theoretically and abstractly in our most recent posts on "the science of choice and the society of capital" and on "the profit motive and the entrepreneurial spirit". What we have seen is that capitalism cannot function without "profit". But "profit" is the extension and expansion of political command over living labour through acquired proprietary rights over social resources expressed in "monetary terms" over the cycle of investment, production (valorisation) and realisation (sale or consumption).

The problems connected with this capitalist cycle are twofold: the first is the necessity to ensure that "the monetary mass" at the end of the cycle effectively corresponds to the overall expanded command of capital over living labour - especially and crucially the control of social resources (means and materials of production and rproduction of the society of capital); and the second, very difficult one, is that the "relative pricing" of these social resources is "correct" so as to reflect the "strategic importance" of each "sector" of capitalist industry (what are called "product markets") to the overall political stability of the system.

So in other words we are looking at the ability of the capitalist class to control and to ensure the "political effectiveness and effectuality and efficiency" of the monetary medium - the "oil" or "lubricant", if you like - that secures the "smooth and stable functioning" of the system: "smooth" in technical terms, and "stable" in political terms. Seen in this light, the phrases "price stability" and "financial stability" (everything from liquidity and solvency down to "balance-sheet accounting") begin to acquire a very ominous "ring" to them in the sense that what seemed to be "technical" economic and financial matters to be debated and resolved by a select coterie of bourgeois leaders (political, industrial and academic), now begins to assume an openly and irrepressibly political vigor and antagonism that threatens the very "existence" of the system.

Of course, we are in favour of further European "integration". But we are seeing the very "meaning" of this word being systematically demolished by the inter-capitalist rivalries that now threaten - as they did from 1890 to 1945 -to tear asunder the very fabric of European society. For as long as capitalist "profitability" continued unabated through the Great Moderation from 1980 to 2007, few questions were asked and bourgeois self-congratulation reached an apex. The problem is that a lot of that "profitability" was in fact entirely "fictitious", the "value" - that is, the political command that corresponded to what seemed an unprecedented wave of capitalist accumulation - behind those profits was simply "fictional" and amounted to nothing more than a massive, horrifying transfer of social resources from the rest of society to the finance sector (the banks and the private funds) in the form of "paper profits" that allowed them to charge "interest" - a legally enforceable claim - on the resources needed for the reproduction of capitalist society.

And "when finally the bottom fell out," to paraphrase Bob Dylan (from 'Tangled Up in Blue'), "[they, the banks] became withdrawn" and had to be rescued "politically" by the "collective capitalist", the State that has now become, quite fittingly, a perennial Crisis-State because the only way it can continue to govern and to claim political legitimacy is to invoke a "crisis" that it simply cannot resolve so as to justify its "crisis-mode" operation - that is to say, the attack on the welfare and liberties of the rest of society, which means "us".

The European crisis illustrates, evinces and shows conclusively - it demonstrates! - that a capitalist society run under the sign of "greed is good" will function only as long as "the greedy" are tightening their power over the less greedy (living labour). But once it is shown that their "greed" is not having any real effect over the rest of society, then the political control over living labour by capital mediated by the "legal claim" (the monetary medium) over existing social resources - this "control" can only be maintained by the "greedy" private capital at the cost of severely undermining the legitimacy of the Crisis-State that is supposed to protect and enforce those "legal claims" the "greedy" have over what become increasingly evident "social" (!) resources!!

In other words, what we are witnessing is the gradual COLLAPSE of the distinction between "public" and "private". Indeed, because the collapse of this distinction involves and invests also the collective capitalists themselves, what we see increasingly is that "inter-capitalist rivalries" become increasingly and dangerously "international conflicts" that are less and less capable of mediation!

For those of you who are small investors - and I have neglected to comment on these matters for a while because I am tired of advising ignoramus buffoons such as Bill Gross - you should steer well clea of equity markets no matter how high these robber imbeciles may drive them in coming days, depending on the next "deal" sealed over a cocktail by "Merkozy" at the Frankfurt Opera House! The fact of the matter is that "all the king's horses and all the king's men cannot put European capital together again!" This crisis has a long way to go. Its political repercussions have longer still to run!

Nor is there any relief in sight for Western capital from the Chinese dictatorship who long delayed the final showdown by enslaving its hundreds of millions of workers for the exploitation of Western capital - this, together with the horrors of nineteenth century England, is a crime of such abysmal brutality and biblical bestiality that each member of the bourgeoisie together with generations of their progeny ought to be quartered for it....but let us leave anger to one side and resume our analysis coolly on second thoughts, although the Western bourgeoisie is celebrating the demise of Gaddafi, they are probably nervously fingering the round of their necks in apprehension at what may happen once this crisis unfolds further. Of course, the Chinese dictatorship are the people who are trembling most at the moment...For them, the devil himself could not devise punishment that befits the horror of their crimes!!

The inability of the European bourgeoisie to agree on a plan of action on the "crisis" that threatens to destroy European capitalism is, as we have tried to show on this site, symptomatic of the very essence of capitalism. The need of capital to reduce living labour to complete destitution so it can "sell" itself in "exchange" for a money wage that represents a legal claim to the dead product of living labour - this need means that at any one time in capitalist society every capitalist is trying to make a "profit" and every worker is trying to free himself from the need to alienate his living labour. The social antagonism that is derived from this fundamental reality is blunt and brutal and spreads to every aspect of social life - variously known as "greed", individualism, speculation - until, especially in times of "crisis" when "social solidarity" is required, it endangers not just the profitability of capital, but - much more important and deleterious - the very survival of society itself.

In the latest editorial from "Il Sole 24 Ore" that I have linked below, the writer invokes Karl Popper (a close friend of both Robbins and Hayek) to auspicate that society should be "entrepreneurial at the bottom and collectivist at the vertices". In other words, the bulk of the population should be very active and creative (that is what they mean by "entrepreneurial") and the leaders should be unanimous in enforcing the laws that facilitate enterprise!

Very well, then! But as we have seen, the very notion of enterprise in a capitalist society means that the only entrepreneurs worthy of notice are those who have "profitable" ideas or innovations - which means that they have to force everybody else to work for them! But no matter how "enterprising" you may be, once you work "for" somebody else - another "entrepreneur" - it is obvious that your "enterprise" will become immediately "the property" of your "employer"!! In other words, the notion of "enterprise" in capitalist society is impossible because capital must forever try to appropriate all social resources that are not already under its exploitative control!

Because it is an antagonistic social system, capitalism does not allow of "competing social systems": the bourgeoisie will try to "assume" them (in Marx's terminology this is called "formal assumption" that is later replaced with "real subsumption" once the bourgeoisie substitutes its own social relations and technologies for the ones it found already existing in the new areas it occupies for its "expanded reproduction"). Indeed, the period of "formal assumption" corresponds with "formal imperialism" whereby a capitalist power militarily occupies a non-capitalist territory. But once the "assumption" becomes "real subsumption", then capitalist bourgeoisies can afford to withdraw from that territory and seek to control it remotely simply by controlling the "capital" that they need for investments. Incidentally, this is why we still speak of a "core" and a "periphery" for the accumulation of capital: capitalism needs to protect its "core countries" politically and industrially, but above all militarily and financially because they constitute the "safe harbour" needed to protect "capital" and to control "peripheral bourgeoisies". We may explore this theme in the following days.

**I just found on the net this wonderful work by Alfred Sohn-Rethel on "Economy and Class Structure of German Fascism" that is one of my favourite politico-economic studies in absolute. I am very sorry to say that it is in German only (!!), so it is only for those of you who reaf German, which is a great pity because  it is such a wonderful study of the imperialist tendencies (still in place!) of the German bourgeoisie from Bismarck to Hitler. I am also linking Sohn-Rethel's other great study for those of you who have time to read. Ciao! (WSJ on fading eurozone prospects) (How Germany has rewarded its own banks and punished Greece) (Finanzkapital as “extortionist”: - “Rein us in and we will not lend” – note comment by G.Feiger) (Extent of crisis reach in public-private divide.) (Blunt talk from China sovereign fund re Euro welfarism) (Magnus on The China Syndrome)
Beijing has to rebalance its investment-centric, credit-hungry economic model to one built round household consumption. But this is complex. It involves a redistribution of income from capital and profits to labour and wages; radical changes in the role of the exchange rate, interest rates and capital markets; and strategies to counter the high propensity to save by households, corporates and central government. It is also politically divisive because power and economic privilege have to be wrested from party elites, state enterprises and banks, and given to new beneficiaries such as private companies, households, college graduates and rural migrant workers, the last of which has become increasingly restive. (The shipwreck of the Chinese economy – Anderlini) (Tony Jackson on interplay of public-private, lending and recapitalization for banks.)
ttp:// (Japan to renew fighter-plane fleet to counter China, Russia – closer ties to US) (Vittori on the coming financial “crack of the whip” on firms) (Funds moving from banks to shadow banking) (China SOEs threaten SMEs) (Growing European trade tensions with Chinese dictatorship) (German elites and Ordnungspolitik leading to European ruin) (EU failed states) (European banks in serious trouble) (Crisis of overproduction or underconsumption? Unemployment in OECD) (Parlous state of Chinese banks) (Contradiction, conflict of govt. punishing systemically risky banks) (G. Tett confuses corporate ex-patriation with ‘autonomy’.) (EU banks in dire trouble) (Obama and the “fracture”)

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