[Marxism] The Meaning of Surplus Capital

["Jurriaan Bendien" <andromeda246@xxxxxxxxx>]

Hi Bob,

Thanks for the comment. You asked:

Do you agree with those in the U.S. and Europe like Alan Greenspan who
represent the interests of finance capital that this dramatic and escalating
shift in flows of capital can continue indefinitely (as long as enough
surplus value can be squeezed out of a shrinking working class)?

In terms of economic theory, that is a possibility, yes. But in reality, I
think no, basically because I think, with Marx, that the economy is
a social system, not a sort of "engine" which can be controlled
with decisions based on mathematical equations. Even with
the most perfect plans for staged economic adjustment, there's
the people factor, i.e. at the most basic level, what people are
willing to accept, or can accept. Deregulated markets create more
socio-economic inequality and more social competition, and that
creates big problems in terms of organising and unifying people,
getting them to co-operate with plans that could transform
capitalism in sustainable ways. That's a question of power,
of the conflicts of social classes. At stake is not just whether the system
can deliver the goods, but also how it delivers them, and the
latter involves cultural factors which have nothing to do with
economics directly. James Heartfield reminded me poetically
that Marx had no theory of the "automatic collapse of
capitalism". Lenin for his part said, "there are no absolutely
hopeless situations for capitalism", provided that the ability
to accumulate private capital stays intact. But I don't
operate with a unilinear historical schema of feudalism-
capitalism-socialism either; capitalism does not necessarily
lead to socialism, the system could mutate in various
ways. To establish a socialist system requires a class
of people with a definite positive project for the
transformation of society, not simply a bunch of people who
complain about exploitation and injustice, real or imagined,
i..e. some people have to be prepared to shoulder the
social responsibility for this, and provide the leadership
required, based on a realistic vision of what society
ought to be like and can be like..In that sense I find
people like Peter Camejo much more interesting.

You write:

In a series of articles, most recently 1/11/04, US economists Obstfeld and
Rogoff argue that the spiralling process of using European and Asian
surpluses to 'force balance in international payments' raises the spectre of
depression.

Reply:

I don't have a sub to the FT, I think that is a possibility, yes.
But in the medium term, the prospects are just for sluggish
aggregate real growth I would think. GDP figures are less and
less meaningful as indicators however, because they don't
tell you what sectors are really growing, and as the "jobless
growth" phenomenon illustrates, growth in GDP does not
automatically imply increased employment. Also, the
growth of international trade and unequal exchange
distorts the relationship between the reported value of
output and what tangible things are actually produced.
It is very difficult to see more than a few years ahead,
because critical events (not necessarily economic events)
can suddenly have a big impact. You saw this already
with 9/11, in itself not a very significant global event
in terms of its scope, but it had an enormous
cultural impact and an impact on investor confidence.
Generally, in social science you cannot foresee much
beyond 5-7 years, other than in special cases.

You write:

In Kapital V.3 Ch. 25 Marx dealt in a cursory way with the question of
'Fictitious Capital' which he defined as a mass of speculative capital
representing paper claims to a share of the total surplus labor. He
stressed that Fictitious Capital was an essential feature of the
process of capital accumulation, but also that as the ratio of
fictitious claims to surplus labor embodied in circulating use
values rose,  the fictitous house of cards had to come
crashing down eventually.'

Reply:

I don't think that fictitious capital is such a big systemic problem.
Fictitious capital facilitates a transfer of net income to property
owners without involving a corresponding increase in real output,
but there is usually an underlying real asset on the basis of
which fictitious capital can grow. Ultimately of course that
asset is living labor which can create new value. If you
look at the stockmarket crashes since the 1980s,
it's clear they had big depressive effects, but they don't
destroy the capitalist system. What the massive growth
in capital tied up in securities really shows is that there is
now overall less confidence in a trade based on artificially
inflated values. An interesting snippet: Staff turnover among
investment professionals in the U.K. active equity sector has
reached epidemic proportions, according to multi-manager
Investment Solutions. It has conducted a research study which
shows that up to 45% of all investment professionals have
changed jobs in the last three years. Fifty-six percent of
those who left their employer joined a direct competitor.
The report speculates that theses figures reflect a trend
among managers to run hedge funds or to seek more
seniority and higher salaries.
http://www.globalmoneymanagement.com/default.asp?page=1&SID=447788&ISS=11246
Yes, of course the capitalist system is full of contradictions,
but in practice what matters is the timing applied in mediating
those contradictions. The policy makers have a whole raft
of policy ideas in the political cupboard, but what gets
implemented depends ultimately on an assessment of
where people are really at, what is achievable. Ultimately
economics cannot get away from the people factor, and
people of course aren't simply "economic agents" as
Duncan Foley argues in a recent paper.
http://www.newschool.edu/gf/nser/articles/0101_foleyd_strangehist_fall04_final.pdf

You wrote:

Marx was writing about national economies and in the context of  boom-bust
cycles and conjunctural crises. In the globalized economy of today, with all
its internal contradictions, it seems that the question of Fictitous Capital
becomes a central one, as economic crises assume increasingly the form of
credit-monetary crisis.

Reply:

Well the way I have put it is that credit-money enables the postponement
of current costs of consumption in space and time, but the limit consists in
the ability to pay, and and rate of repayment. Debts can be rescheduled or
renegotiated to a large extent. But the question is whether ultimately
debt defaults will occur in critical areas of a sufficient size, and the
"social trust" factor plays a role in this. Then you would get an
Argentina-type situation. Fictitious capital does play a role here,
insofar as artificially inflated values are suddenly popped, such that
an asset which was worth a certain amount is suddenly worth a
lot less (devaluation of assets) which can make it impossible to
repay debts and causes chain reactions of debt defaults. But a
devaluation of assets need not occur as result of an economic
mechanism, it can occur because of extra-economic events.
The viability of the credit system depends ultimately on
social trust and social co-operation. This is essentially why
the bourgeoisie focuses on terrorism, because terrorism is
the antithesis of all that, the absolute negation of social
trust and social cooperation. Which really leads me back to
my initial comment: the people factor, i.e. what people are
willing to accept, or can accept. There may be no absolute
economic limits, but there are human limits. In Marxist theory,
the dialectics of competition and co-operation have never
been well-theorized (John McMurtry has an interesting
article on this though, "How Competition Goes Wrong."
Journal of Applied Philosophy, 8(2): 200-210, 1991).

Jurriaan


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