wall street

Hinrich Kuhls kls at SPAMonline-club.de
Sat Mar 17 09:41:26 MST 2001

George Snedeker wrote:

>I was wondering if anyone on this list can explain the operations of the
>stock market from a Marxist perspective. I am primarily interested in the
>lack of connection between production and the value of stocks. why do stocks
>not express the value of material production. it seems to me that this
>problem also says something about the function of money in late capitalism.
>is it still a means of exchange and the measure of value.

Three hints referring to

Karl Marx, Capital Vol. III : The Process Of Capitalist Production As A Whole.
Part V : Division Of Profit Into Interest And Profit Of Enterprise.
Interest-bearing Capital.
London: Lawrence & Wishart (1954)

1st quote:

Chapter 29:  Component Parts of Bank Capital  (p. 466-468)

Even when the promissory note -- the security -- does not represent a
purely fictitious capital, as it does in the case of state debts, the
capital-value of such paper is nevertheless wholly illusory. We have
previously seen in what manner the credit system creates associated
capital. The paper serves as title of ownership which represents this
capital. The stocks of railways, mines, navigation companies, and the like,
represent actual capital, namely, the capital invested and functioning in
such enterprises, or the amount of money advanced by the stockholders for
the purpose of being used as capital in such enterprises. This does not
preclude the possibility that these may represent pure swindle. But this
capital does not exist twice, once as the capital-value of titles of
ownership (stocks) on the one hand and on the other hand as the actual
capital invested, or to be invested, in those enterprises. It exists only
in the latter form, and a share of stock is merely a title of ownership to
a corresponding portion of the surplus-value to be realised by it. A may
sell this title to B, and B may sell it to C. These transactions do not
alter anything in the nature of the problem. A or B then has his title in
the form of capital, but C has transformed his capital into a mere title of
ownership to the anticipated surplus-value from the stock capital.

The independent movement of the value of these titles of ownership, not
only of government bonds but also of stocks, adds weight to the illusion
that they constitute real capital alongside of the capital or claim to
which they may have title. For they become commodities, whose price has its
own characteristic movements and is established in its own way. Their
market-value is determined differently from their nominal value, without
any change in the value (even though the expansion may change) of the
actual capital. On the one hand, their market-value fluctuates with the
amount and reliability of the proceeds to which they afford legal title. If
the nominal value of a share of stock, that is, the invested sum originally
represented by this share, is £100, and the enterprise pays 10% instead of
5%, then its market-value, everything else remaining equal, rises to £200,
as long as the rate of interest is 5%, for when capitalised at 5%, it now
represents a fictitious capital of £200. Whoever buys it for £200 receives
a revenue of 5% on this investment of capital. The converse is true when
the proceeds from the enterprise diminish.

The market-value of this paper is in part speculative, since it is
determined not only by the actual income, but also by the anticipated
income, which is calculated in advance. But assuming the expansion of the
actual capital as constant, or where no capital exists, as in the case of
state debts, the annual income to be fixed by law and otherwise
sufficiently secured, the price of these securities rises and falls
inversely as the rate of interest. If the rate of interest rises from 5% to
10%, then securities guaranteeing an income of £5 will now represent a
capital of only £50. Conversely, if the rate of interest falls to 2 1/2%;
the same securities will represent a capital of £200. Their value is always
merely capitalised income, that is, the income calculated on the basis of a
fictitious capital at the prevailing rate of interest. Therefore, when the
money-market is tight these securities will fall in price for two reasons:
first, because the rate of interest rises, and secondly, because they are
thrown on the market in large quantities in order to convert them into
cash. This drop in price takes place regardless of whether the income that
this paper guarantees its owner is constant, as is the case with government
bonds, or whether the expansion of the actual capital, which it represents,
as in industrial enterprises, is possibly affected by disturbances in the
reproduction process. In the latter event, there is only still another
depreciation added to that mentioned above. As soon as the storm is over,
this paper again rises to its former level, in so far as it does not
represent a business failure or swindle. Its depreciation in times of
crisis serves as a potent means of centralising fortunes.

To the extent that the depreciation or increase in value of this paper is
independent of the movement of value of the actual capital that it
represents, the wealth of the nation is just as great before as after its
depreciation or increase in value. [...]

Unless this depreciation reflected an actual stoppage of production and of
traffic on canals and railways, or a suspension of already initiated
enterprises, or squandering capital in positively worthless ventures, the
nation did not grow one cent poorer by the bursting of this soap bubble of
nominal money-capital.

All this paper actually represents nothing more than accumulated claims, or
legal titles, to future production whose money or capital value represents
either no capital at all, as in the case of state debts, or is regulated
independently of the value of real capital which it represents.

In all countries based on capitalist production, there exists in this
foreman enormous quantity of so-called interest-bearing capital, or moneyed
capital. And by accumulation of money-capital nothing more, in the main, is
connoted than an accumulation of these claims on production, an
accumulation of the market-price, the illusory capital-value of these claims.

2nd quote:

Chapter 24:  Externalisation of the Relations of Capital in the Form of
Interest-Bearing Capital (p. 391-392)

The relations of capital assume their most externalised and most
fetish-like form in interest-bearing capital. We have here M -- M', money
creating more money, self-expanding value, without the process that
effectuates these two extremes. In merchant's capital, M -- C -- M', there
is at least the general form of the capitalistic movement, although it
confines itself solely to the sphere of circulation, so that profit appears
merely as profit derived from alienation; but it is at least seen to be the
product of a social relation, not the product of a mere thing. The form of
merchant's capital at least presents a process, a unity of opposing phases,
a movement that breaks up into two opposite actions -- the purchase and the
sale of commodities. This is obliterated in M -- M', the form of
interest-bearing capital. [...]

[C]apital is not a simple magnitude. It is a relationship of magnitudes, a
relationship of the principal sum as a given value to itself as a
self-expanding value, as a principal sum which has produced a
surplus-value. And capital as such, as we have seen, assumes this form of a
directly self-expanding value for all active capitalists, whether they
operate on their own or borrowed capital.

M -- M'. We have here the original starting-point of capital, money in the
formula M -- C -- M' reduced to its two extremes M -- M', in which M' =
M+DM, money creating more money. It is the primary and general formula of
capital reduced to a meaningless condensation. It is ready capital, a unity
of the process of production and the process of circulation, and hence
capital yielding a definite surplus-value in a particular period of time.

In the form of interest-bearing capital this appears directly, unassisted
by the processes of production and circulation. Capital appears as a
mysterious and self-creating source of interest -- the source of its own
increase. The thing (money, commodity, value) is now capital even as a mere
thing, and capital appears as a mere thing. The result of the entire
process of reproduction appears as a property inherent in the thing itself.
It depends on the owner of the money, i.e., of the commodity in its
continually exchangeable form, whether he wants to spend it as money or
loan it out as capital.

In interest-bearing capital, therefore, this automatic fetish,
self-expanding value, money generating money, are brought out in their pure
state and in this form it no longer bears the birth-marks of its origin.
The social relation is consummated in the relation of a thing, of money, to
itself. Instead of the actual transformation of money into capital, we see
here only form without content. As in the case of labour-power, the
use-value of money here is its capacity of creating value -- a value
greater than it contains. Money as money is potentially self-expanding
value and is loaned out as such -- which is the form of sale for this
singular commodity. It becomes a property of money to generate value and
yield interest, much as it is an attribute of pear-trees to bear pears. And
the money-lender sells his money as just such an interest-bearing thing.
But that is not all. The actually functioning capital, as we have seen,
presents itself in such a light, that it seems to yield interest not as a
functioning capital, but as capital in itself, as money-capital.

This, too, becomes distorted. While interest is only a portion of the
profit, i.e., of the surplus-value, which the functioning capitalist
squeezes out of the labourer, it appears now, on the contrary, as though
interest were the typical product of capital, the primary matter, and
profit, in the shape of profit of enterprise, were a mere accessory and
by-product of the process of reproduction. Thus we get the fetish form of
capital and the conception of fetish capital. In M -- M' we have the
meaningless form of capital, the perversion and objectification of
production relations in their highest degree, the interest-bearing form,
the simple form of capital, in which it antecedes its own process of
reproduction. It is the capacity of money, or of a commodity, to expand its
own value independently of reproduction -- which is a mystification of
capital in its most flagrant form.


3rd quote:

Chapter 27: The Role of Credit in Capitalist Production (p. 436-437)


III. Formation of stock companies. Thereby:

1) An enormous expansion of the scale of production and of enterprises,
that was impossible for individual capitals. At the same time, enterprises
that were formerly government enterprises, become public.

2) The capital, which in itself rests on a social mode of production and
presupposes a social concentration of means of production and labour-power,
is here directly endowed with the form of social capital (capital of
directly associated individuals) as distinct from private capital, and its
undertakings assume the form of social undertakings as distinct from
private undertakings. It is the abolition of capital as private property
within the framework of capitalist production itself.

3) Transformation of the actually functioning capitalist into a mere
manager, administrator of other people's capital, and of the owner of
capital into a mere owner, a mere money-capitalist. Even if the dividends
which they receive include the interest and the profit of enterprise, i.e.,
the total profit (for the salary of the manager is, or should be, simply
the wage of a specific type of skilled labour, whose price is regulated in
the labour-market like that of any other labour), this total profit is
henceforth received only in the form of interest, i.e., as mere
compensation for owning capital that now is entirely divorced from the
function in the actual process of reproduction, just as this function in
the person of the manager is divorced from ownership of capital. Profit
thus appears (no longer only that portion of it, the interest, which
derives its justification from the profit of the borrower) as a mere
appropriation of the surplus-labour of others, arising from the conversion
of means of production into capital, i.e., from their alienation vis-à-vis
the actual producer, from their antithesis as another's property to every
individual actually at work in production, from manager down to the last
day-labourer. In stock companies the function is divorced from capital
ownership, hence also labour is entirely divorced from ownership of means
of production and surplus-labour.

This result of the ultimate development of capitalist production is a
necessary transitional phase towards the reconversion of capital into the
property of producers, although no longer as the private property of the
individual producers, but rather as the property of associated producers,
as outright social property. On the other hand, the stock company is a
transition toward the conversion of all functions in the reproduction
process which still remain linked with capitalist property, into mere
functions of associated producers, into social functions.


More information about the Marxism mailing list