[PEN-L:4819] Re: credit & capital

[Jim Devine <JNDF%LMUACAD.BITNET@xxxxxxxxxxxxxxxxx>]

On Mon, 24 Apr 1995 07:09:12 -0700 Doug Henwood said:
>Jim Devine recently quoted Marx's observation that unlike pre-capitalist
>usury, dominant and even parasitical, the capitalist credit system was
>firmly subordinated to the needs of industrial K.
>
>Is this still the case? Or isn't the credit system looking a bit more
>bloodsucking than it once did? Not only do we have the interest share of
>GDP - a bit lower than the late-1980s peak, maybe, but still very high -
<etc.>

I agree Doug, but this allows me to clarify what I was saying.

Pre-capitalist usury was not part of full-scale capitalism, but
a fragmentary form of capitalism. The modern credit system is
part of full-scale capitalism -- but this does not mean that
it is always in harmony with the rest of the capitalist system.
Like the state, credit and finance are "relatively autonomous."
This last phrase is often used but hardly ever explained.  To
mean it means that c & f are part of the system but can develop
in ways that contradict the healthy workings of that system.
The "health of the system" here measured using capitalist
standards: a sustained high rate of profit, involving exploitation
of wage-labor.

C & F more and more involve speculation about expected profit
rates, not to mention more arcane stuff like the the futures
price of hog bellies.  C & F can develop in a way that builds up
huge paper fortunes for some individuals and institutions.
But ability of these people to earn high incomes is ultimately
based on someone else's production of surplus-value.  If the
money claim on surplus-value exceeds the actual surplus-value
produced, you either get some claims being denied or inflation.

Some financial crunches reflect events in the "real" economy,
i.e., the production, circulation, and realization of the total
product and the surplus-product.  But others occur because of
the autonomous dynamics of C & F. C & F can get out of step
with the "real" economy and come into contradiction with it.
This is the kind of thing that happens in a speculative
bubble.

The latter autonomous dynamics can feed back and harm the
"real" economy, as when the 1929 helped trigger the 1929-33
slump.  But whether this happens or not depends on whether
the "real" economy is stable or not. The government and the
Fed shored up the economy so that the 1987 crash had little
effect but to cut employment in the brokerage "industry."

So, IMHO, even though finance can appear very important
at any one time, in the end its importance depends on the
situation of the "real" economy.

in pen-l solidarity,

Jim Devine
jndf@xxxxxxxxxxxxxx or jdevine@xxxxxxxxxxxxxxx
Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA
310/338-2948 (daytime, during workweek); FAX: 310/338-1950
"Segui il tuo corso, e lascia dir le genti." (Go your own way
and let people talk.) -- K. Marx, paraphrasing Dante A.