End of The Great Moderation

“Money is a bridge between present and future.”  - Keynes in The General Theory.

The bourgeoisie is “at home” with the reality of capitalism. It does not experience its “alienation” the way the workers experience it (Marx, Paris Manuscripts). Because of this, the bourgeoisie is not particularly interested in “the nature and causes” of its “wealth”, the accumulation of capital, for fear of what it may find if it dares to stare into the abyss. It is interested only in the superficial expression of its political command over living labour – profit – and therefore in the effectual material measure of profit – money. But the bourgeoisie, because it does not understand the true social essence of money, can observe only its numerical accounting form – hence profitability is explained away as simply “making money”.

True to form, Keynes’s entire understanding of the essence of capitalism is entirely epigrammatic - superficial, metaphorical, anecdotal and ramshackle. Keynes never scratches below the surface of capitalist reality to understand the essence of the wage relation and therefore of money capital. This is not to say, however, that he did not detect some of the important adventitious epiphenomenal manifestations of capitalist industry and enterprise – above all in the financial sphere regarding the running of monetary and fiscal policy and in the political sphere concerning the role of state institutions and policies in the management of the profoundly divisive and destabilising effect of capitalism on human society taken as a whole.

If money is a “bridge” between present and future, this is because money-as-capital is not a “thing” but a social relation of production linking living labour (money as a violent political claim on the living activity of workers) and objectified labour (money as a claim to already produced goods to be used either as wages or as means of production). Thus, money is a measure of the present command of the capitalist over living labour and means of production in relation to the future production by workers of objectified labour in the form of wage goods and means of production. Profit represents the expanded ability of the capitalist to command more living labour measured in wage goods and means of production (objectified labour) as a result of the present investment on these two components of production.

In effect, there is no absolute guarantee that the present investment of money capital will yield a profit because this will depend on the political relations between the capitalist and the worker through the process of production (valorisation) and the eventual realisation of the value created by living labour in the process of production through the sale of the living labour objectified in the fresh wage goods and means of production produced in the present cycle of production. In this schism, this hiatus (hence, “bridge”) between present investment as valorisation in the process of production and future realisation of the new value created by workers lies the essential anguish of the capitalist: on one hand, the money invested by the capitalist-as -financier or lender is seen by him as necessarily “fructiferous” or “profit- or interest-yielding”), and on the other hand the capitalist as producer or borrower knows only too well that there is no guarantee that the present investment will turn into future profit!

In other words, the schismatic – almost schizophrenic – essence of capital as “value-in-constant-motion” is reflected in the necessary functional separation of the capitalist as “financier” or “lender” in the present and as “borrower” or entrepreneur for the future. That is the real political reason why not “money” but rather “money-as-capital” is, as Keynes only intuited but could not comprehend, “a bridge between the present and the future”. It is this schism at the heart of the social reality of capital that determines, first, the possibility of credit (the separation between lender and borrower) and, consequently, the possibility of “crisis”, that is, the collapse of credit, the inability of borrowers to repay lenders.

So, the next question is: what determines the ability of borrowers to repay lenders? And given the premises that we have outlined above in terms of the real essence of capital and profit, the answer should be almost obvious. What determines the ability of borrowers to repay lenders depends on the ability of capital investments to remain “profitable”. Now, profitability is ultimately the ability of the capitalist, as the owner of dead labour and the potential purchaser of living labour, to command this living labour. In other words, this ability depends on the ability of the capitalist to be able to command ever more workers with each unit of capital. But then, this ability depends on (a) the presence of a reserve army of living labour, of workers; and then, (b) on the political ability of capitalists to impose on workers a certain rate of exchange between dead and living labour.

As we have often argued on these pages, the catastrophic “financial instability” that Hyman Minsky identified at the beginning of the 1970s was a direct result of the inability of Western capital to expand the reserve army of the unemployed – the supply of living labour – in the face of a cataclysmic reduction in the populations of Western nations. And this is where Western capitalism was finally rescued by the Chinese Dictatorship after Nixon met Mao in the early 1970s. Almost overnight, the available workforce available to capital almost doubled! Not only! The new deal struck with the Chinese Dictatorship by Western capitalist meant that half of the global labour force was now ruled by a ruthless dictatorship of truculent murderers and bandits who could expropriate Chinese people and drive them in droves into factories to be exploited ruthlessly!

It is easy to see why the next thirty years brought about what Ben Bernanke called, with great acumen, “the Great Moderation”, meaning thereby the onset of rapid global capitalist growth and profitability with virtually insignificant rates of inflation – quite the contrary of the “stagflation” (stagnation plus inflation) that Western capitalism had experienced in the 1960s and 1970s.