Thursday, January 31, 2013

Jim O’Reilly — Capital is power: an extremely useful simplification

Jonathan Nitzan and Shimshon Bichler in their work ‘Capital as Power’ bring us directly to the essential point: the fundamental fact of our socio-economic system is power. Capital isn’t a “factor of production”; it’s simply power, nothing more. That capital is power and power is capital is a highly fruitful simplification which must be accepted if we are to understand the nature of our system.
A brief look around shows us that the capital / power identity is self evidently true. In the United States, we know that the bottom 80% of the population owns just 7% of financial wealth and it’s about the same everywhere else. It’s certainly even more unequal than this given the massive hoards held in secret “offshore” accounts. Just 500 corporations control 40% of global sales and every major industry is under oligopolistic control.
David Rothkopf, well connected former managing director of Kissinger Associates, observes in his book ‘Superclass – The Global Power Elite and the World They Are Making’, that “A global elite has emerged over the past several decades that has vastly more power than any other group on the planet” and estimates that this elite numbers just 6,000 individuals. Stefania Vitali, James B. Glattfelder, and Stefano Battiston performed a comprehensive network analysis of direct and indirect corporate control and found that control is concentrated within a “tightly knit” core of financial institutions which they brand a “super-entity”. According to them, just 737 global holders control an incredible 80% of the value of all transnational corporations.
These are stark figures indeed and they make a mockery of such mainstream economic ideas as unfettered free markets....
Capitalism is a system of exploitation and mass prosperity is simply not part of the equation. The great “economic” problems of our world can be directly traced to this fact 
Let’s look at the system from a very high global level, assuming realistically that there are two fundamental classes, owners and workers, that our productive capacity is far above what is being utilized, and production is only undertaken when it’s profitable to owners. We can easily demonstrate that worker consumption can never be stand alone profitable to the owners. This is because the total possible sales proceeds for the owners are limited to the wages paid to the workers. No matter how hard the owners may try, sales for worker consumption products will always exactly equal the wages paid out and there will never be a profit.
Excluding the unsustainable possibility of ever rising worker debt, this is self-evidently true. A company cannot make a profit selling only to its own workers and similarly the consumer industry as a whole cannot make a profit selling only to consumer industry workers.
The unprofitability of worker consumption is a fundamental and greatly under-appreciated reality of the capitalist system. Simple logic tells us that workers will not be employed to produce for their own good. They won’t because it can’t ever be profitable.
The rest gets into the Kalecki profit equation: Profit = Capitalist consumption + Investment and its implications.

Jim concludes:
What I’ve said will be obvious to most of my readers and for that I apologize. But it’s not obvious to the many center-left “liberals” out there nor the well intentioned “centrists”, so I think it’s worthwhile to keep trying to simplify things. And the most fruitful simplification I think we can make is that capital is nothing but power. 
Comments on Global Political Economy
Capital is power: an extremely useful simplification
Jim O’Reilly

See also Chris Dillow, Mario Balotelli & primitive accumulation, at Stumbling and Mumbling.
So, is the inequality between worker and capitalist unjust? You can certainly tell just-so stories in which it isn't. But Marxists take a historical perspective. Marx devoted a large part of Capital vol I to describing "primitive accumulation", the process whereby capital came into the world as a result of theft, slavery and conquest: "capital comes dripping from head to foot, from every pore, with blood and dirt." This is, of course, no mere history: how did Russian oligarchs get rich?
An overlooked difference between Marxists and their opponents is that Marxists think this matters.
See also P2P Foundation, Book of the Day: Why Small-Scale Alternatives Won’t Change The World: review by Michel Bauwens, quoting the author, Greg Sharzer:
Our world is structured by how wealth gets produced. As I argue in my book No Local: Why Small-Scale Alternatives Won’t Change The World, capitalism is a system of making wealth socially and keeping it privately. Most of us, the ‘99%’, have to work; a very small number of people, the capitalists, get to own.
The latter face two major problems: they have to expand their production and lower their costs or risk competitors swallowing them up. This constant drive to expand creates unnecessary production and crisis. When the profit rate falls, capitalists have to do everything in their power to restore it. That can mean a recession and austerity, or even a war – anything to eliminate excess capacity and ‘surplus’ workers.
How we respond to this austerity – resistance or adapation – depends on how we understand capitalism. Localism sees it as uneven and fragile; the dispossessed can operate at the margins to create a fulfilling life for themselves. The alternative, a democratic, revolutionary socialism, agrees that capitalism is unstable and open to change, but not at the margins: rather, capitalism creates its own grave-diggers at its very centre. The working class, who have nothing to sell but their work, create everything and can therefore run everything. Capitalism can be organized against and overcome.
In the abstract, we can choose both. By going back to the land, we can create communities of resistance that provide the material and moral strength to resist neoliberalism. However, by not confronting capitalism, this localist form of citizenship fails on every level: ethical, practical and political.
Social democracy is in the air.


Bob said...

"Capitalism is a system of exploitation and mass prosperity is simply not part of the equation. The great “economic” problems of our world can be directly traced to this fact "

Excellent observation: Here is an example courtesy of You Tube TYT,

Billionaire owners of NFL teams are playing chrony city managers against each other for the right to subsidize the owners at the cost of cutting the local police force plus extrem debt. quote from Cent "I love the game but I don't love the billionare owners so much that I want to give them my tax money,and by the way they often pay for this thru sales tax etc. that hit the poor and middle class thru lotteries etc. and alot of these people do not get to go to the game because they cant afford the 80 dollar tickets."

1968 high priced super bowl I tickets 12.00 Greenbay against KC at Los Angeles.
2013 SUPERBOWL TICKETS 3400.00 per.
THANK YOU Senator Albright and the 1913 Federal Reserve act for not causing the hidden evil tax of inflation and for putting the black hand IRS into business the same year to keep minions like myself in line.

Matt Franko said...


These city oriented professional sports teams and NCAA D1 Football and Basketball programs are like modern pagan cults.

People lose all rationality about them and the costs become no object... this goes back to the Colosseum and even the Temples....

You see statues around them and they have "Hall of Fame" etc..

That said, Go Ravens! ;)

(I'd like to see Joe Flacco get his ring....)

Matt Franko said...

This from the wiki on 'Capitalism':

"The term capitalism, in its modern sense, comes from the writings of Karl Marx.[4] Before Marx, "capitalism" simply referred to the possession of capital.[10]"

So "Capitalism" comes from Marx....

Now here from the wiki on Libertarianism:

(which btw this entire wiki is extremely disturbing to read to me)

"Along with anarchism, Libertarian Marxism is one of the main currents of libertarian socialism.[153]"

Then it continues:

"In the 1950s, Russian-American novelist Ayn Rand became one of the most influential thinkers among conservatives and right-libertarians. Rand developed a philosophical system called Objectivism and expressed her ideas in her novels"

So now you have Larry Kudlow say: "Free market capitalism is the blah, blah, blah..."

So this all looks like a giant libertarian civil war that I am witnessing.

Here from winter again the other day:

" Fiat currency is a marker of sovereign power, and a sovereign which chooses to tax needs to supply currency the same way that a sovereign which chooses to imprison needs to issue laws. A failure to print (and unprint) is a failure to rule, and is ultimately the irresponsible position to take."

I couldn't agree more with the exception I would take out the word "power" and put in "authority"...

"1 Let every soul be subject to the superior authorities, for there is no authority except under God. Now those which are, have been set under God,
2 so that he who is resisting an authority has withstood God's mandate" Romans 13

Right now we have a govt and non-govt institutional (ie business) leadership populated by libertarians who do not have authority in view and hence are acting stupidly: "We're out of money!" ... "We're borrowing from our grandchildren!" "It's funny money!" "Debasing!" etc.. LOL!

They are all being disgraced.

Paul continues in Romans 13, writing at a time when we still used nomisma which is an important distinction:

"7 Render to all their dues, to whom tax, tax, to whom tribute, tribute, to whom fear, fear, to whom honor, honor.
8 To no one owe anything, except to be loving one another, for he who is loving another has fulfilled law.
9 For this: "You shall not commit adultery," "you shall not murder," "you shall not steal," "you shall not testify falsely," "you shall not covet," and if there is any other precept, it is summed up in this saying, in this: "You shall love your associate as yourself."
10 Love is not working evil to an associate. The complement, then, of law, is love."

Paul makes the connection from Authority > Law > Love here for the nations (ie "the west"), it cant ultimately work well for us any other way in this eon.

For the nations, ie the west, it should start with a view of authority which will ultimately lead to love.

This view was apparently lost when we went off of nomisma and onto the metals soon after Paul wrote the above...