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And now, we do have, finally or currently, a dynamic tying all this together. We’re not aiming to be surprising in the basic outline. Anyone can see the Neoliberal order and the massive development of capitalism in general. What is more unusual is what we see if we look at how the new, supposed “information economy” relates to all this.
So what we’re talking about more or less the Neoliberal order combined with the “information age”. But to distinguish this existing dynamic from the ideal visions of those talking of Neoliberalism or the information age, we label our process as the “infoscheme”. [See murder mystery, our methods, and how to proceed in general etc.]
Beyond the death and destruction, the horror of an event like September 11th is the horror of losing control of your world. This feeling is an extension of the ordinary experience of being a resident of modern capitalist America. Here, work, commuting, shopping, television and the Internet are transmitted to you in ways that are any individual or collective control.
Aside from reflexes of anger, the explosion of Internet texts and public discussions here shown the great need to get a handle on the events.
This text is one more contribution towards creating such an understanding. And we naturally aim to make some connections that have not yet been made. We aim to show the connection between the organization of daily life and various disasters which seem to come from nowhere, we aim to demystify the secrecy which swirl around this entire world, aim to go beyond any particular conspiracy theories and show these events as natural products of the system as a whole.
Illicit, offshore banking links al-Qaida, Enron, and Argentina.
Fluid capital and banks piping speculative capital to risky schemes link
Enron and Argentina. Enron and Bin Laden are linked as players who
bought foreign policy concessions of various sorts from the United States.
And just as much, they were folks who were part of US policy.
Many other links can be made can be made at this level. We can also go up a level. America runs a massive trade deficit with the rest of the world. To deal with this deficit, it is necessary to “recycle” the dollars that get spent each year. This recycling can be seen as generator for many of the world’s strange flows. Recycling is aided by the instability of much of the world, where many people prefer to have US dollars and accounts in US dollars than accounts in their native currency. Recycling happens through world oil transactions being denominated in US dollars. Recycling happens through offshore banking. But even the US deficit can be seen as simply a means to organize the world market and solve the crisis of excess demand. The process goes on.
To envision the present world, imagine crisis piled on crisis, with each solved through more extreme measures. America is the consumption capital of the world. Part of this could be call imperialism. Part of this is an economy distorted by layer upon layer of crisis and short-term solution. Speaking very roughly, the solution to each crisis requires that consumption be both increased and controlled.
Keeping this situation, we would like to sketch something like the current dynamic that drives the present order. Obviously, this economy involves a balance of secrecy and order, a balance exploitation and terror and so-forth.
The ideological level isn’t all the ideas that are out-there but the ideas which television is able to successfully impose on people. The economic level isn’t all position production but that production organized by capital. The economic production is simply one view of human productive activity. The military/strategic level is the direct domination by raw force.
These blocks relate together in a complex and often secret ways. While the operations of these blocks are hidden, many folks have documented this in consideration detail; Barnet Coleman, Labevier, Michael Ruppert, Doug Nolan, Guy Debord, and beyond are all useful. Despite these being large, invaluable portraits, none of these pictures are either in great enough detail, in a large frame or reliable enough for our purposes. This is natural both for a world-scale process and also given the universal secrecy that pervades the present world.
Many folk have documented how Unocal oil, with help from Enron Corporation, gave consideration to the Taliban during their rise to power in an effort to speed the way for a natural gas pipeline through Afghanistan. It has been speculated that the US invasion of Afghanistan was an effort to continue this policy and indeed perhaps it was an effort to bailout Enron from the whole which it was in.
We could say the opposite. Economic pressures seemed to have been towards the initial strategy of trying to bomb the Taliban into submission and it was primarily the ideological need for the image of a successful war that caused the US to give full support to unreliable Northern Alliance. And even now the Northern Alliance seems to be engaged in enough faction fight to make a stable and economically valuable Afghanistan unlikely for a period of time.
But this is our particular calculation, based on a number of information sources, none of which can entirely reliable. And that brings us back to the question of how can address this entire process.
Both its secrecy and its complex interlocked interests make simple statements like “it’s all about oil!” seems pretty dubious. Discovering which blocks came together to create what effect is interesting but ultimately does not get us enough insight into the entire process.
We can see several other weaknesses we can see of the different “large frame” documenters. Often they take their particular “area of expertise” as being excessively decisive within the total dynamic of world events. Often they take information outside “their” frame at face value, ignoring manipulations and secrecy in this other frame. Even if they take alternative info seriously, they have no choice but to take it at face value as well. Often, they take the view of salvaging one part or another of capitalist society.
Thus our approach is to tie the various processes together in a process of circulation, which is ultimately an economic framework. This is not saying that at any one time economic considerations out-weight military or ideological considerations. Rather, each possibly decisive factor gets balanced with all the others. Enron’s collapse revealed how it literally banked on an array of military, economic and ideological forces carrying forward its development projects. But, of course, this is how any corporation or Government operates on today’s world stage. And this is how the modern world works. In a sense, this is well known by we modern citizens.
But what both the rulers and ruled sometimes forget, until the crisis comes, is that even rulers are the objects of this circulation as well as it’s beneficiaries. Despite their murderousness, we expect most CIA agents did not expect for the agencies terror methods to return, to recirculate back to the center of the American economy.
· Begin with a system, society or situation where resources cycle through a traditional order.
These can be either non-market systems or systems where the market isn’t highly developed. [Examples]
· Now, disrupt this system and force people to begin to rely in a market to satisfy the needs that previously they satisfied “traditionally”.
This generates development as slowly this market brings production and consumption up to world-market standards. This generates profits as advanced multinationals supply the best technology and information in the process of rebuilding the economy. [Show diagram of the process]
· At the same time, replace the functions of both the government and local community with the activities of a “free market”.
The market will be structured as a “fair dealer” and be equally open to any investor. This new market will allow a flood of outside investment to come into this developing economy, accelerating the economy.
Þ The greatest profits here will naturally go to those with the best information – whether this is market information or information as software to be sold to suppliers or information gathered by intelligence agencies and used in “anti-terrorism” campaigns.
The demand for information and flood of investment will further accelerate development and become an industry itself. [This is derivative capitalism]
As the present today world has unfolded, our infoscheme recipe has been implemented on many different levels. Any process that begins with people satisfying their need directly or a market which is somewhat sluggish or regulated can be fodder for an infoscheme process. So, this recipe has been implemented to various extents on different levels and in different places. And on whatever level this recipe has appeared, it has brought with a series of contradiction [and again these contradictions are not absolutely new but very much manifestations of the classical contradictions of capitalism]:
· You can only sell people information if people start without knowing your information. Because of this, secrecy and obscurity are standard methods for the modern enterprise.
Secrecy becomes more important as the information entrepreneur attempts to convince his investors that he is getting the maximum value from his information. Ideally, you would never give people the information; only sell them the use the information (today, Microsoft, like other software house doesn’t technically sell software but rather “licenses the use” of their software [More examples]).
And this opens the door to everything. It allows the many failures of the information model to be concealed. It allows every sort of fraud for those investing in the unknown information. And so forth.
Security and control ironically are part of the selling of secret information. Several arguments can be made that openness actually creates better safety than secrecy. But naturally the tail of commerce will wag the dog of safety here.
Obscurity is a combination of secrecy and the complexity of the underlying processes. The entire world system is obscure even when it isn’t secret. And obscurity generates a similar effect to secrecy; those individuals and group who seem to have a line on the world-market will become a magnet for investment.
Þ And obscurity is perhaps a better word for the entire process than secrecy.
Obscurity comes with the complexity of the system, with the spread of the system’s processes over many levels, and with system’s resulting being extended to the near and far future.
The spy might know the limits of secrecy but he might still think that mathematicians have a magic for stabilizing markets through computers while the mathematical wizards of financial dynamics can understand the “gamblers ruin” but not know how much of the market is hidden from them. Spies hide as much as they can from each other as well as from the public. Enron hid some thing explicitly and hid some things by the complexity of their enterprise.
· Information develops as much as possible in terms of being generic so as to allow it to be a schema for investment.
Today’s derivative capitalism can be considered the ultimate information capitalism in the sense that derivatives, as bets about the future, involve an exchange based on the quality of one trader’s information versus another.
Dot-com capitalism was based on selling the “click-throughs” of the random web surfer so as to control the movement of this information economy. And even as that dies, similar schemes must take its place. Enron’s fiction of the market for futures in data bandwidth – sense on the practical level yet critical on the level of allowing outside investors to believe they could profit from the coming “information age”. Consultants sell every manner of expertise back to either their former employers or the world at large. Derivative trading is, in many ways, the ultimate in information trading [see derivative section]
And this is only in the public realm; we have every indication that secret services equally consider themselves the masters of a generic information – witness that the signals intelligence based NSA is several times larger than the traditional CIA. Project echelon is a system designed to allow world conversations to be monitored as a single stream using specialized computers known as dictionaries.
Just as much, information capitalism involves trading on the predicted outcomes of human behavior.
Þ Yet this genericness is a fiction, distorting the underlying reality. And realization of this distortedness can be postponed until things reach a crisis level.
The dot-com fictions could last much longer than such paltry lies were supposed.
Derivative trading models and computer programs have failed in the situations where systemic crisis change the ordinary logic of the stock markets and destroy the comfortable these things depend on.
· Capitalist Society has a number of physical, methodological and ideological bounds which are necessary for it’s basic functioning. The secrecy and genericness of new, developing info-products means that this development will “corrode” these guides, boundaries and behaviors which allow both capitalism and “normal life” to continue to operate.
Despite the rhetoric of absolute market free, a modern stock itself has many formal and informal guides, especially those designed to prevent pyramid schemes. Those ideal information devices, derivatives, are an ideal way to conceal a Ponzi scheme – and this is one part of the Enron collapse.
The secret motion of operatives has drug dealing as a natural extension and so-forth (this isn’t to say that simple legality is what’s necessary or what is being corroded).
Þ A Powerful aspect of the corrosion of the normal capitalist order is the explosion of covert, illegal capital.
This ranges from corruption to vast offshore banking to covert trade in drugs, weapons, people, counterfeit goods and pirated software.
Of course, a certain amount of illegality can is normal and even necessary for the functioning of a capitalist economy. Yet extreme corruption, including the corruption of the highest official is certainly dangerous for capital’s survival.
· The development of stripped down ideologies serving only immediate interests is a natural corollary of expanding promises into the future.
Ideologies in general justify to the mass the way capital operates as well as organizing what the capitalist themselves do. James Watt’s statement “when we cut down all the trees, Jesus will come” shows guiding principles in harmony with the economic dynamics of the new order.
Just as much, an ideology is a mechanism and enterprise with many experts
which rely its existence. Islamicists not only believe their version of
Islam but also rely on it for their social position and they advance Islam
to advance themselves.
· The dynamic of the market and the information order does not actually produce efficiency and progress.
The movement of outside investment is determined by the dynamics of the unfolding crisis – essentially they need to make quick cash. And the secrecy of this motion conceals the problem.
Fiber optic cable, pipelines, chip factories and houses are built based on their speculative value rather than their ultimate salability.
Information capitalism actually produces a profound series of disconnects. Companies haphazardly organize their activity into programmed points yet this sort of series of goals will not produce a coherent end-result.
Genetic engineering has been a sham both in terms of its safety but also in terms of its effectiveness. Monsanto has failed to reap the amazing profits which it imagined would come out of GE.
(This comes also as the natural result of failing to
· Every aspect of production today pushes consideration of the results out to a further and more obscure future. Whether this is debt, lies or ideology, this brings us back to the classic crisis of capital.
It is a manifestation of the decline in the rate of profit and all the classical problems. Over-capacity on a world scale has massively increased. The world market at best can provide a market for a single commodity for most countries – Iran only markets Persians rugs, etc.
· See The Crisis Of Capital (Appendix)
· More
· Debt, Lies And Rates Of Profit
Any sort of finance operation works by promising someone a future payoff for a present value. Cash, stocks, bonds, 401(k) accounts, and more obscure items all operate this way. Since the wide future seems to offer unlimited possibilities, it can easily seem that finance offer’s it’s users unlimited power. Yet, as managers of Enron Corporation discovered, you can wind-up with a situation where past promises come due more quickly than you can make believable future promises. Just as much, as Enron’s investors found, those who count expanding promises the first to be burned (with the creators of the financial instrument only be punished later, if ever).
Now when this period reduces all human labor to value and money, it offers all of the objective and subjective satisfactions of life at best only in terms that are financial. Satisfaction becomes potential. Labor is compensated with money – potential goods. And the goods themselves change. A shirt has an immediate use – a television merely offers the possibility of some satisfaction at a later point. And jobs today offer survival and at best the potential of a comfortable retirement (avoiding Enron and dot-com stock).
Barrowing and deceiving each essentially involve postponing a reckoning into the future. Lies about the conditions of life tend to be revealed as time goes on while debts come due. Those with tremendous power have many times imagined they could escape a future reckoning by lying and barrowing faster than people could keep-up. The CIA has cast a widening fog over US foreign policy while the advertising industry offers a new piece of junk as quickly as we get bored with the old piece of junk.
Of course, it is more accurate to speak of the ruling ideologies of capital than simple lies. An ideology implicitly creates the effect that a conscious lie must actively aim for. The security ideology demands more and more security without offering serious protection – since real life is always insecure, the solution of security ideology is to constantly escalate. Continuing this, the entire reign of ideology thus uniformly falsifies the conditions of life today. This falsification does not solve the various problems but merely once again postpones the reckoning into the wide future – taking postponement to a second or nth degree. And this second degree is the obscure beauty and danger that Wall Street calls the derivative (the name derivative is appropriately taken from the math term for the instantaneous rate of change of a curve or function). [Link to realm of ideology]
Seeing things this way, we can cast the entire history of our period as the history of the financial derivative in a larger sense. We hear that capitalism has experienced many crises over its history but that the wizards of Wall Street seemed to have solved those till recently. Yet we would offer that all these solutions involved postponing the crisis itself into the future as well.
The development of the process of the derivative trading involves the perspective of “profiting through superior information”. This is the approach of the large investment house with banks and corporations ultimately working about the same.
And this “superior information” is only that if it is hidden from the eyes of the general public – i.e. the process implies a covert tendency within capitalism.
Moreover, the vast field of derivative trading can overwhelm any boundaries to these covert operations. This private control of covert information can be cast in many lights. The distortions of derivative trading are fairly simple. More investors can be drawn whenever there is something to trade and some expectation there’s money to be made – whether a long term profit exists is much less important.
This speculation is nothing new in the shady investment world. What’s new is how well the process muddies the waters around what is or isn’t a sound as opposed to a speculative investment.
Investments in oil pipelines and in fiber optic capacity are two very useful activities. Outside investors can quickly measure the capacity that is being created. So it was very logical for Enron to invest heavily in physical and informational pipelines to nowhere. [Insert however detailed a timeline you wish here]
· An Expansion
“To Infinity”?
· The infoscheme
allows problems to be postponed into indefinite and definite futures.
This process can happen on many more levels than simply the economic. Lies and manipulations on many levels can be carried out by all manner of managers to prevent postpone their own personal fall.
All of these expansions compete with the growth of the economy itself. Put as exponential growth, we can see the scheme as unsustainable. But we can see the production system’s success in growing exponentially – if economic relations can cull only a certain amount of bubbles, the rest can be escaped through growth. This is the closest thing to “sustainability” which the system has to offer.
· The “black hole” effect. Info-capital “guarantees” itself by resting every “speculative” investment on top of other “solid” investments and processes. Yet this ultimately means that the unstoppable expansion info-capital simply sucks-up every economy, every ideology, and every nation in the world.
Modern finance attempts to “spread risk” by combining investments. Yet
this stokes the bubble. “Insurance” cannot protect from disasters that
strike simultaneously everywhere.
This effect happens as the bubble expands in framework and as well
as in size. When Wall Street speculation cannot stop a collapse, an offshore
entity may be called-in. On the failure of an offshore entity, the CIA
itself may engage in indirect manipulations to maintain the process.
At one point, finance may substituted for ideology and at other points
ideology may be substituted for finance.
· The interdependency and secrecy of the infoscheme causes crisis to appear as a sudden collapse rather than in any great visible, gradual decline.
The collapse of the World Trade Center is the most extreme example we can mention. The infoscheme involves greater and greater inter-dependency of systems. Derivative capitalism involves each investor becoming more and more dependant on other investors to honor their contradicts. All of the arguments of old-time gambling schemes can be revived once they are couched in the language of mathematical, financial or other expertise. Equivalently, the infoschemes undermining of guides and institutions includes the undermining of processe which prevent crisis from spreading from sector to sector. And this interdependency and secrecy gives either stability or the appearance of stability up until a final catastrophe.
The framework of marketable information in our sense encompasses the dot-com boom, global Neoliberal investment ideology and the massive rise of intelligence agencies and drug-trading. The total process we describe can work to multiple purposes – it aims for multiple effects on multiple people and places.
- To outside investors, the amazing possibilities of Neoliberal development and the information economy become an amazing magnet for further investment.
- To the states around the world, reliance on privatization, on secrecy, and world markets become standard operating procedures. It becomes the only way to be modern.
- To intelligence agencies, the use of this scheme really does organize a lot of the development which is now occurring.
- To the world’s poor, it must appear as an excuse to work even harder.
- And naturally, the process is about satisfying a demand or need which you have created or accelerated – whether this is selling infant formula to third world mothers or drugs to those beaten down by the system.
But even more, with enough secrecy, the system doesn’t have to be successful at all of this at anyone time. Secrecy can keep investors from knowing how poorly the sale of information is really doing. Obscurity and ideology kept Argentineans from realizing what a failure the Neoliberal development process was. Secrecy can conceal the CIA’s willingness to use Al Qaida for its purposes and so-on. For a while things really can keep going by merely “fooling all of the people some of the time and some of the people all of the time”.
But doing this into the future is going be hard [see selling the future].
We have ballpark estimates of the size of the derivative trading economy; derivative trading involves a total “nominal” value of ten times the value of the world economy. This nominal value the amount that folks are risking on the derivative “gambling table” – the amount that is being won or lost normal would something like 1% or 10% of this. But since any further details are confidential, we ultimately don’t know – but neither do many of the players involved with schema.
The WTC attack, Enron and the default of Argentina give us an idea that the system is shaking seriously on its foundations. We can indirectly see a sea of secrecy and manipulation which is seriously disturbed.
Our observation of the dynamics of the system indicate that it increasingly expresses its crisis in a sudden collapse rather than a gradual decline. [see sudden collapse]
The point is that we still can’t really predict the exact point of the end of things. Just as much, we know that the operations of the system involve a willingness to move things in any direction. The “dot-com boom” expressed a rise in irrationality and speculation beyond the normal boom. The system moves to utilize all its resources – and here fear, confusion and uncertainty are part of them.
Thus, claims of a coming recovery seem very plausible. The challenge is exactly what shape this recovery will take.
“Hired-guns” were the standard fare in the recent US presidential election. The most notable aspect of this event is that the “cost-benefit” calculations and maneuvers of Bush and Gore exactly split the electoral college. Nothing could better illustrate the calculated use of ideology of as an instrument. And this calculated use implies a pure cynicism.
The cult-like organization is not new. Modern methods of creating small groups of fanatics have their genesis in the last couple hundred years though “The Assassins” and other groups are older. At the same time, a modern methodology founded on the “creation of corporate cults” is important given the turn which capitalization has taken. It is not that methods of manipulation are actually new, it is simply that they must be sold as new and that they now receive great funding.
The CIA’s instructing of Bin Laden and creation of his organization distinctly fit the bill of a synthetic organization. It is also not strange that Al-Qaida turned angry anti-Western. Rather than wanting lines more friendly to the West, the professional manipulator would seek stripped down ideology which, whatever it’s official angle, demands absolute obedience and allows violence to be directed to nearly any target.
The connection between an advertising spin-off and a terrorist group seem like quite a stretch. But the point of the organization of spin-offs is that they need to make their activity generic. [See the genericness of information as dynamic]
The Gang logic of ideological uniformity and secret betrayals prevails.
The willingness of a CIA creation to transform its ostensible anti-Western
rhetoric into a serious crusade against its one-time mentors is also not
strange within the world of the Infoscheme. Ideology is the guiding and
limiting principle of capitalist society as a whole. At the same time,
it is the basis of the many media-spin-offs/infoproducts which become the
capitalization of the modern world. Arthur Anderson’s simultaneous accounting
and consulting work illustrates – “leveraging” it’s role as accountant
essentially involved a willingness to corrupt it’s supposedly critical
role as a “gatekeeper” preventing Enron’s corruption. [See the Infoscheme’s
corrosion of necessary bounds and supports].
The Infoscheme creates a state with the hollow center. The US with its domestic and foreign policy details apparently up for grabs would qualify as would the third world states controlled by ideological clique.
· Disrupting the traditional meeting of needs and replacing this with exchange relations is a way capitalism has operated from the beginning.
· The most important aspect of it was the end of the Keynesian order. Neoliberalism and other schemes were necessary to order the investment world - to give the capitalist class a definite idea of how further expansion would proceed.
The process happening of course involves an impact the average person.
Credit capital has more and more appeared not as selling commodities but selling continuing processes. Auto insurance, auto credit, mortgages, health insurance, student loans, rent, and other items are continuing processes.
And these actually force the consumer to sell themselves to the industry
as being responsible, credit worthy, healthy and so-forth.
These are life plans and they are naturally unsustainable. Bankruptcy
is a frequent result. Yet as a means of restructuring life, we can expect
bankruptcies and even weekend jail terms to be an excellent fodder for
credit system, since they provide an continuing, structured income stream.
Basically, the most capitalized methods will correspond to the control
systems which will prevail. Controlling a continuing stream of expenditures
is more reliable than happening to get those expenditures from consumer
choice.
Many auto insurance companies will not insure for the next quarter those
who are not already insured for this quarter, health insurance similarly.
Indeed, health insurance today often doesn’t pay the medical bill but simply
serve to guarantee that the patient will pay – and for that charges several
hundred a month.
Of course, we have a tremendous contradiction between those who effectively
have nothing and are simultaneously handed the demand to consumer everything.
This is a protection racket, with housing as the most key example. To
“escape” the rental “jungle”, the Real Estate Industry is quite willing
to offer loans to “nearly anyone”. Yet naturally the negotiations involve
the end of disposable into for the lucky buyer, until refinances offer
the consumer further chunks of cash but with the likelihood of losing “everything”
at the inevitable crash.
Total increases in productivity have been concentrated in the centralization
of consumption. And this naturally involves an increasing labor-rate of
exploitation which requiring a car simply to get to a store offering savings.
· The Kinds and nature Of Crises
Looking to the crisis of capital, for us as for Marx, we can see the
fundamental crisis as the contradiction between the increasingly social
character of production and the continuing individual control of the means
of production (Capital III). In the case of capitalism, the declining rate
of profit and the need to conceal the conditions of businesses whose profits
have vanished generates a crisis on many levels at once. [Off to arithmetic]
In maintaining it’s condition of equating labor with survival and commodities with usefulness, capital has two dilemmas. How to sell the things it produces and how improve the efficiency of it's operations - how to maintain circulation and how to organize reproduction/accumulation. Problems with accumulation manifest in problems of circulation so these problems are strongly linked.
The crisis of circulation by itself would not be a problem for capitalism. Money and credit can be produced to increase the demand for capital’s production. But solutions of this sort, as they have relentlessly expanded over the last hundred years, have both produced a awkward economy and have collided with the problem of accumulation, the problem of getting capitalists to invest their capital in a way that is profitable, productive and sustainable.
In thinking about this, remember this society is produced, reworked
and recreated by the complex inter-related labor of everyone. At the same,
a small, blind bureaucracy of the rich and the technocrats decides the
direction in which this complex reproduction process will be directed.
The problems of accumulation have historical been the force that truly
laid eggs under the skin of capitalists.
If we divide capital into overt and covert, each of these forms of capital
only has part of a solution to these problems. Covert capital does not
have any solution to the question of improving the efficiency of an operation,
while overt uses open accounting standards to tell investors about the
companies which need more money and thus ideally overt capital produces
a system of continually increasing efficiency. Still, when overt capital
sells uses advertising to tell consumers that they need the products it
wishes to sell, it does not a guaranteed a sale. Covert capital forces
the consumer to buy - buy guns or be conquered, buy drugs because you are
addicted, buy oil because everything needs it, etc.
We can list vast range of symptoms; Currency and other speculation and
fluid foreign investment capital, Ponzi schemes, and fraud, illegal commodities,
secret commodities, offshore banking and fictitious corporations, illegal
money, illegal activities, secret money, secret activities, cell organizations,
mind-control and the generation of fanatics and assassins, the rigid character
armor of everyday conformity, the ideologies of panic and the acceleration
of panic, a system which cannot maintain coherence, a system whose rulers
no longer have enough incentive or resources to support the totality of
conditions. The properties of finance tie these symptoms together. [Multiple
links]
· The Nature Of Capital’s Solutions To Crises
Any Of Capital’s ideological solution to its crisis essentially involves
a claim that production requires two elements, with capital itself being
one of them. The Keynesian order framed this as a partnership between labor
and capital whereas the Neoliberal order involves an ideology requiring
return on risk.
Now, the breakdown of approaches like this comes as the market expands
and capital’s “element” shows itself again to be merely dead labor.
We can see this breakdown in the collapse of Enron. This company seemed
to promise a “multiplier” of profits. But this multiplier naturally turned
out to be a pathetic sham.
Looking at the political arithmetic of exponentially expanding firms,
we can see why capital stokes these firms into inflated monsters rather
than bursting things straight away.
The fiction of information capital’s multiplicative effect needs to
be maintained to maintain the present world power-division. And why must
this division be maintained? Well, certainly the point is that all of the
movers and shakers, by definition, have it in their interests to maintain
it.
· The Decline In The Rate Of Profit And The Seeds Of Disintegrating Solutions; Converting Relative Decline To Absolute Bankruptcy
Capital is essentially a lump of dead labor whose possessor expects to see grow all by itself. Thus a capitalist expects a rate of profit. This is both a ridiculous possibility and the fiction that all energy of the system works to make close to a reality.
Marx began with the analytic tools of “classical political economy”. Ricardo operated assuming that the value of a commodity was based the amount of labor within the good. Marx took labor value as a useful quantity for analyzing the entire capitalist system. For Marx, labor value is the key attribute that unifies the condition of all commodities. Still, Marx discovered that the labor value of a commodity was not generally proportional to the money price of the commodity.
The equation of volume III of capital was rate of profit = V/(C+V). Here, rate of profit is expressed in terms of labor value, V is “variable capital” – the labor part of capital, And C is “constant capital” – the material part of capital. Since the total amount of labor used by a society grows rather slowly and amount of materials, equipment and so-forth used by capital grows very quickly, we can see that rate of profit will decline in labor value terms over time (glossing over a large part of Capital I-III).
The next question is whether this decline in the “value rate of profit” affects the money rate of profit. We say it does and for we discuss the relation between money price of and the labor value of any commodity. The long-term money price of a commodity isn’t identical to the labor value – they are related by a complex, determinant formula worked out by a Russian economist. However, there are a wide variety of “real world” assumptions which allow us to deduce that the money price is approximately proportionate to labor value. We get this assumption by noting that technology has grown in a heterogeneous fashion. While some industries, such as computer chips, have experienced massive automation, other industries, such as housing construction, work on direct labor. Thus the reproduction cost of labor sinks towards a ratio of “diminishing returns” – say D. Thus our money price of item have a fixed labor value L is going to sink to L*D asymptotically. And by this token, our money profit rate will move towards our asymptotic value. We can see that this also seems to be the approximate ratio that the various quantities move towards currently – workers can buy back the objects they produce at some ratio to the labor which they put into them.
Now, we’ve discussed the decline in the long-term money profit, what does that say about the immediate money profit and the crisis of capital. Movement to a stable money profit requires the equalization both of prices and of profits. Price equalization require open markets and profit equalization require that capital be able to flow freely from industry with entrepreneurs having the ability to create competition for any industry which generates unusually high profits. This equalization is thus not instant but happens over a long process inter-industrial flow. And by that token such flows are often not the main concern of the captain of industry fighting for his immediate mass of profits (Marx lists numerous factors which can temporally relieve the decline in the rate of profits and our comments here are mostly rewriting and enlarging these).
Seeing how the decline in the rate of money profits happens, we can see at its effect on particular individually controlled pieces of capital. As noted elsewhere, as production becomes more interdependent, modern capitalist enterprises rely increasingly on loans for the bulks of their activity. Now we assume the greater part of the value is of a corporation is contained in fixed-interest (I) loans on the corporation - debt. The minority part of the value of the corporation is represented by the stock held by the corporation’s owns - equity. Now the rate of profit (R) is rate relative to the total capital of the corporation, debt and equity together (D + E). The stockowners thus get R*(D+E) – I*(D) as their expected long-term return. Remembering E is generally larger than D, we can imagine that if R declines to below, then expected stockholder return becomes negative. This means that the company is worthless and thus bankrupt. Remembering that this is value of a typical company, we can then see the circumstances which could result in a total devastation capitalist corporations.
We’ve seen it could happen. But does it “have to happen”? Why is this a general tendency of capital? Why couldn’t small, incremental decreases in rate of profit happen, the stockholder value be reduced and capital go on with its game? This is because of capital’s tendency to resist the decline. Rather than allowing small declines, the tendency of management is to resist any decline in value until they are absolutely forced to accept it, at which point the entire basis of enterprise has been wiped-out.
We note that since the equalization process is long and obscure, modern managers have generally done many things to postpone it (seizing monopoly control of markets, manipulating supply and demand and so-forth). Just as much, at the point that shareholder value becomes negative, company managers have strong incentive to try to keep the company going nonetheless. And here we can see the Dot-com boom, Enron and further disasters waiting quietly in the wings.