Marx proven wrong by Progressives and Liberals once again (Part 3)
3. Finance capital and the disconnection of profits from production
To return to Paul Krugman’s question in which he asks:
“So what’s really different about America in the 21st century?”
He gives the following answer:
“The most significant answer, I’d suggest, is the growing importance of monopoly rents: profits that don’t represent returns on investment, but instead reflect the value of market dominance.”
The term ‘monopoly rents’ employed here is a poor choice, since it makes it appear as if ‘rents’ are obtained when a company acquires a monopoly position in some area of production. The profits generated by the monopoly are said to be similar to the rent a class of landowners might obtained on land. The landowners do not produce the land, nor do they necessarily do anything to improve it or exploit it, they simply collect rent on the employment of the land by others owing to their title to it. The term ‘monopoly rent’ when applied to capital is a misleading or, at best, an ambiguous analogy. At worst, it proposes that profits can be created by selling commodities above their values, which is nonsense.
But it is employed by Krugman in this case to describe a situation where profit is produced but the capital itself is not employed for any purpose that produces surplus value. Is this possible? Is it possible to produce profits without producing surplus value?
In the case of finance capital, Krugman is in effect suggesting money-capital is lent out at interest, but the interest paid does not result from the actual production of surplus value. This, I think, is distinctly separate from the typical case of loaned capital. In the typical case, although the owner of the capital does not employ it productively himself, he does lend it to someone who does. The borrower employs the capital, turns it into real capital, and produces surplus value, which he then shares with the lender of the original money-capital.
Capital that produces what Krugman calls “monopoly rent” — more accurately, fictitious profits — is never employed productively: it is lent out at interest, but the borrower never turns it into real capital and never produces surplus value by consuming it. This, for instance, is the case with all consumer loans: the value of the loaned money is consumed without producing any surplus value at all. If the worker is to repay her debt plus the interest, she must sell her labor power and repay this past debt by consuming less in the future. The advance of loaned money to the worker is, therefore, subject to the definite limit that she must be able to continue as seller of labor power and also repay her debt with interest.
It is also the case with public debt: since the state produces nothing, and does not function as a capital even when it buys labor power, the loaned capital it receives produces no surplus value. The interest and the original principal is not repaid by the production of value and surplus value. It can only be repaid by taxes or other forms of like revenue (or simply by rolling over the debt, which only pushes present obligations into the future) or by counterfeiting its currency. When Krugman speaks of ‘monopoly ‘rents’, of ‘profits without production’, he is clearly referring to the profits realized on loaning money-capital to the state and nothing else. The fascist state is the only organism in society that is able to repay interest without producing value, simply by counterfeiting the fiat currency it owns.
The puzzle of finance capital’s dominance over industrial capital leads us to the domination of the fascist state over social labor — and this is the third rail of progressive politics. It is the one subject never to be broached with an Obama-bot, emoprog and, in most cases, even with a fucking Marxist. But, as I showed in my last post, any attempt to avoid this very touchy subject leads along the road to another fucking Auschwitz. You want to deny the state’s role in this, you are a fucking Nazi waiting for the right Hitler. You are already a fascist. So it is only a matter of time before you become a fascist of the Hitler type. Talking about finance capital without talking about the critical role of the fascist state in the formation of finance capital leaves you talking about a bunch of Jews on Wall Street.
So, you decide. You have a choice between Michael Hudson’s explanation of finance capital, which points directly to the conclusion the Jew has somehow escaped his social and political isolation. Or you have Marx’s explanation for finance capital, which points to industrial capital itself as the progenitor of finance capital.
Take your fucking pick.
Assuming you don’t want to be a Hitler-type fascist, and that you have no other explanation for the genesis of finance capital, what explanation does Marx offer on this subject?
Marx locates the genesis of finance capital in the falling rate of profit on industrial (productively employed) capital. This falling rate of profit increases the minimum size necessary for any capital to continue functioning as a productively employed capital. The falling rate of profit, therefore, renders an increasing share of marginal capitals unprofitable, which leads to these results:
- The marginal capital stop functioning as capitals altogether — it is turned into a hoard of gold and the capitalist into a miser;
- the marginal capitals turn their capital over to larger capitals (loan it out) in return for a claim on a share of profits;
- they go bankrupt; or
- they go to the casino on Wall Street to speculate.
In any case they are rendered superfluous to the productive employment of capital and cease operating on their own as capitals. The operation of the law of the tendency of the rate of profit to fall is not a mystery. Marx explained this completely in chapter 15 of volume 3 of Capital. Michael Hudson, who actually refers to volume 3 of Capital in his own argument, deliberately distorts Marx’s argument in the volume. This is not surprising, since I already proved he is a bare-faced liar in almost everything else he said on this subject already.
To put it simply: Marx never suggested industrial capital would subjugate finance capital — not once, not ever. He argued that the falling rate of profit: “breeds over-production, speculation, crises, and surplus-capital alongside surplus-population”. Which is to say, the falling rate of profit on productive employment of capital leads itself to speculative finance capital and its entirely fictitious profits.
Contrary to Hudson’s bald lies, here is how Marx actually describes what becomes of these superfluous capitals thrown off by the improvement in the productive capacity of social labor:
“At a certain high point this increasing concentration in its turn causes a new fall in the rate of profit. The mass of small dispersed capitals is thereby driven along the adventurous road of speculation, credit frauds, stock swindles, and crises. The so-called plethora of capital always applies essentially to a plethora of the capital for which the fall in the rate of profit is not compensated through the mass of profit — this is always true of newly developing fresh offshoots of capital — or to a plethora which places capitals incapable of action on their own at the disposal of the managers of large enterprises in the form of credit. This plethora of capital arises from the same causes as those which call forth relative over-population, and is, therefore, a phenomenon supplementing the latter, although they stand at opposite poles — unemployed capital at one pole, and unemployed worker population at the other.”
Engels, who, as Hudson notes, edited volume 3 of capital, puts it this way:
“If the crises demonstrate the incapacity of the bourgeoisie for managing any longer modern productive forces, the transformation of the great establishments for production and distribution into joint-stock companies, trusts, and State property, show how unnecessary the bourgeoisie are for that purpose. All the social functions of the capitalist has no further social function than that of pocketing dividends, tearing off coupons, and gambling on the Stock Exchange, where the different capitalists despoil one another of their capital. At first, the capitalistic mode of production forces out the workers. Now, it forces out the capitalists, and reduces them, just as it reduced the workers, to the ranks of the surplus-population, although not immediately into those of the industrial reserve army.”
Again, Michael Hudson is a liar who deliberately erases inconvenient history, lies about what remains, and lied about Marx’s own prediction of the necessity for the emergence of a purely speculative finance capital, based not on a Jewish conspiracy, but on the basis of the very development of industrial (productive) capital itself.
And if Hudson has a problem with me calling him a bald-faced fucking liar, he can find me.
The question is how does this superfluous capital, capital that no longer can produce any sort of surplus value, become finance capital? It becomes finance capital when it begins to finance the fascist state. It is through this financing that the state establishes its domination of all economic activity within society.
The state, therefore, rescues the superfluous capital thrown off by the development of the forces of production from oblivion by borrowing it and paying interest on it through the counterfeiting of the currency. Without the state paying fictitious interest on this superfluous capital, this capital would produce no profit at all. The disconnection between productive employment of capital and profits, cited by Krugman, is nothing more than the disconnection of value production from the production of use values. This disconnection begins the moment the fascist state begins borrowing the superfluous capital produced by the falling rate of profit and paying interest on it by counterfeiting currency.
The counterfeiting of currency allows profits to increase even as the socially necessary labor time required for the production of use values contracts. On the other hand, it makes possible the production of non-use values — values that satisfy no human needs whatsoever. In this latter category we can include the massive military expenditures of the fascist state headquartered in Washington. These massive expenditures become possible because the fascist state pays for them simply by counterfeiting the currency. Which is to say, Washington does not pay for its military expenditures at all, either directly or indirectly — not the profits nor the constant and variable capital used up in the production of this waste.
As can be seen from the above, finance capital has nothing whatsoever to do with the primitive merchant capital of precapitalist modes of production. This earlier form was subordinate to the production and exchange of commodities, while finance capital is completely independent of production of commodities. This is the essence of the deliberately misleading argument of Michael Hudson, and even, and more ominously, the errors of David Graeber: trying to link the debts of the fascist state to the debts of antiquity must, intended or not, play with the fires of the Holocaust. It misdirects attention from the true source of finance capital — capitalism itself — to a bunch of greedy Jews on Wall Street who are now realizing their ancient goal of world domination.
The truth of the matter is that all the opponents of labor theory run into a dead end particularly with their analysis of finance capital and must choose a way out of their theoretical difficulty. The first avenue of escape we have already seen play out in Europe; the other points toward the necessity of putting an end to the capitalist mode of production and to the state itself.