economic globalisation

jones/bhandari djones at uclink.berkeley.edu
Tue Aug 15 18:59:18 MDT 1995


I have the following questions based on Paul C's very thought-provoking post.

1. if industrial capital increasingly frees itself from bank capital, how
are we to explain increasing problems with debt/equity ratios? Or to put it
another way: while there may seem to be excess capital in the hands of
speculators--a seeming confirmation of Lenin's thesis about growing
parasitism--isn't industrial capital itself short of the surplus value
necessary for further accumulation as minimum capital requirements rise, as
theorized by Marx's theory of the concentration of capital?

2. Moreover, doesn't  the deployment of rentier capital for speculative
purposes indicate a crisis of industrial profitability, that accumulation
is no longer generative of a sufficient mass of surplus value?

3. if speculative profits are so sure, why then all the financial activity
geared to gain insider control of industrial enterprises?  Aren't rentiers
easily shaken off by those with power over the industrial means of
production, i.e., those who can withhold dividends and transfer profits
through various mechanisms to themselves? Mustn't industrial capital itself
seek to constrain the power of rentier capital?  Is such a constraint
really a proletarian programme? It seems to have little to do with workers'
struggles at the point of production.

4.  what is the relationship between industrial capital and finance capital
defined as pension funds, insurance companies and investment trusts? Whose
capital is the latter mobilizing? Hasn't industrial capital itself gained
control of finance capital?  For example, isn't GMAC controlled by
industrial capital, General Motors itself?  Or the same question as above:
doesn't GM's search for profits through loans and insurance suggest a
crisis of industrial profitability?

I think that Paul's analysis of consumer and government debt is also very
important, but nothing for now.  I apologize for reproducing it below but
it was so well-thought-out I thought it best to keep our attention on it.

Rakesh


>In 20th century capitalism there was an
>increasing separation between the ownership and
>control of capital. The 19th century millowner,
>who managed his own works, was replaced by a
>Public Limited Company employing professional
>managers. As time passes, the shareholders,
>nominal owners of these companies, are
>themselves replaced by insurance companies,
>investment trusts and pension funds. These in
>their turn bring into being a vast rentier
>interest.... Whilst the old owner
>manager played some useful function in the
>production process, the modern owners of
>capital are entirely parasitic.
>
>. When Elizabeth Windsor's fund
>managers 'reinvest' her profits, they do it by
>purchasing new stocks and shares. This form of
>'investment' creates no new factories and no
>new jobs. But it is none the less profitable to
>the rentier for that. Increased demand for
>shares pushes their prices up, and the rentier
>class as a whole seems to make handsome capital
>gains.
>
>Rentier ideology has it that shareowners serve
>a useful function,  providing the capital that
>firms need for new investment. This is a myth.
>Established firms generally rely upon their own
>profits to finance investment. Obtaining
>capital from the banks or the stock market
>risks debt or the dilution  of existing
>shareholders capital. One can show that for
>industrial capital as a whole, investment must
>be almost entirely self financing.
>
>Suppose that the industrial firms of the world
>decide to invest an additional $100 billion in
>new factories, aircraft and ships. Collectively
>this costs them nothing, for, from whom are
>these ships factories and machines bought?
>

>Since industrial firms can not, in general, be
>forced to borrow, it must be lent to the other
>players in the capitalist game: the working
>class in their role as consumers, and states.
>Thus we explain two universal phenomena of
>modern capitalism: the growing indebtedness of
>the state and of consumers via mortgages,
>credit cards etc. Should either of these
>parties decline to borrow, the rentiers thrift
>becomes a pathology.
>
>Look at what happened in Britain during the
>Thatcher years. De-regulation of the banks and
>building societies allowed an vast expansion of
>consumer credit. The uptake of borrowing by
>consumers was so effective at absorbing the
>savings of the rich, that for a few years the
>government ran a surplus and started to pay off
>the National Debt. But whilst the credit limits
>of the state are very elastic, those of working
>class consumers cannot stretch very far. They
>reached their limit.
>
>Two things then happened in succession:
>1. Industrial firms, unable to go on selling to
>the consumer market, started to make losses.
>They ran up overdrafts with their banks and for
>a short while this involuntary borrowing
>absorbed the rentiers savings. But firms won't
>put up with losses for long. They laid off
>workers to cut costs. As a result:
>
>2. The government lost the income tax that the
>workers formerly paid, whilst having to pay out
>more in social benefits. As a result all
>pretence at paying off the National Debt had to
>be dropped as public borrowing rose again.. The
>state is the borrower of last resort whose
>existence closes the loop.
>
>This then is the characteristic pattern of the
>developed world: governments going deeper into
>debt, employment stagnant or falling, the gap
>between rich and poor always widening. The
>wonder is, that such a manifest failure of the
>economic system has not led to rebellion
>against the rentier class, for who benefits
>from the current order?
>
>Clearly not the working-classes, nor the state
>forced as it is into debt. One might think that
>the middle classes and industry too, had little
>to gain from it. Why then, do we see not only
>the repeated election of those politicians most
>closely identified with the rentier interest,
>but also moves by the 'left' to tailor their
>programs to the rentier interest.
>Although the deflationary policies of the
>rentier interest are deterimental to industry
>in one sense - low growth, less opportunity for
>expansion - they are beneficial to it in
>another. Conditions of mass unemployment allow
>individual firms to hold down wages, even if
>they restrict the market for firms as a whole.
>Beyond this, the managers of firms often hold
>large share portfolios and the attitudes that
>go along with them.
>
>This provides a clue also to the attitudes of
>the middle classes. A  defining mark of the
>salariat is that its members earn enough to
>save. As savers, their interests become tied up
>with those of the financial institutions. At
>the very least they come to fear the effect of
>inflation on their savings. At the same time
>the growth of the financial sector means that a
>growing portion of the salariat are actually
>employed in banks, insurance companys, etc.
>Since their social function is to serve the
>rentier interest, their conciousness is drawn
>along with it - just like the butlers and
>flunkies of a previous generation.
>
>Paul
>
>
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