Author: IPE
IPE LECTURE 8
John Maynard Keynes in 1930s predicted the “death of the rentier”: finance capital -> state capital.
Washington Consensus of 1990s founded upon the free flow of “hot money”: state capital -> finance capital.
Different forms of money: exchange -> store of wealth -> capital = money making money. Pre-modern economies: wealth as flocks and land -> wealth as taxes and rents. Moral economy: local markets = selling agricultural surplus and buying luxuries -> merchant capital = buying cheap in one place and selling dear in another. Long distance trade: profiting from connecting separated local markets: the Silk Route and the Spice Trade. Merchant families and trading peoples lived inside a subsistence agricultural economy. Religious taboos against usury: Catholic prohibition and Sharia law = protecting the feudal moral economy. Money lending delegated to a pariah group: Jews in Europe and Armenians in Caliphate. Anti-semitism = “socialism of fools” (August Bebel).
Money = universal commodity. Money as measure of social wealth: cattle -> grain -> precious items -> metal currency. State power = market peace: royal coins and civil law (Eugeny Pashukanis). Evil rulers = clipped coins and insecure property. Bastard feudalism = rent in kind -> money rents. Absolute monarchy = feudal host -> professional army. Proto-industrialism = just prices and artisan production -> market prices and factory production. Transition to modernity: direct dependence -> indirect dependence.
“He must be rich or poor according to the quantity of labour which he can afford to purchase.” Adam Smith, The Wealth of Nations (1776).
Max Weber: modernisation = predatory capital -> productive capital. Capitalist version of pre-modern imperialism: tax revenues -> professional military -> territorial expansion -> more taxes. 16th and 17th century Spanish and Portuguese conquest of Central and Latin America = looting -> mining -> agricultural rents. British empire: Caribbean slave plantations -> Indian Raj -> Scramble for Africa. 1940s Nazi Germany looting European and Russian conquests.
Productive capital = exploitation by force -> exploitation by consent. Capitalism = “community of money” (Karl Marx). 15th century Renaissance Italy: merchant princes, banking houses, double-entry bookkeeping, bills of exchange, heroic artists and humanist philosophy. 16th century Dutch Golden Age: nation state, insurance markets, joint-stock companies, financial speculation, printing presses and puritan morality. 17th century English Revolution = political revolution -> financial revolution -> industrial revolution. Liberal individualism destroys monarchical absolutism: Whig oligarchy, commercial media and Anglo-Scottish Enlightenment. End of ban on usury: Bank of England, Lloyd’s and Royal Exchange. Rise of agribusiness: land enclosures, day labourers and agricultural improvement. Emergence of proto-industrialism: mechanical power, factory workers and scientific innovation.
“Private vice is public gain.” Bernard de Mandeville, Fable of the Bees (1714).
Ellen Meiksins Wood, The Pristine Culture of Capitalism (1991).
Fernand Braudel, The Wheels of Commerce (1985).
Money as finance capital = liquid and abstract v. money as industrial capital = concrete and fixed. Market freedom and consumer choice -> factory discipline and exploited workers. Adam Smith: profits = rewards for investment -> David Ricardo: profits = deduction from wages -> neo-classical orthodoxy: profits = reward for “abstinence” from consumption. Finance capital: mobilisation of surplus social wealth for investment in industrial production. Family firm -> joint-stock company -> Fordist corporation = separation of owner/rentier v. manager/entrepreneur Rudolf Hilferding; Adolf Berle and Gardiner Means). Stock markets = buying and selling claims to profits from dividends and capital gains. Equalisation of rate of profit between different sectors of production = driving force of scientific innovation by redistributing wealth from labour intensive firms -> capital intensive firms. Bond markets = buying and selling claims to tax revenues. Equalisation of income from different financial investments = individual indifference to sources of social wealth. Commodity fetishism: social relations between people mediated through money and capital.
Karl Marx, Capital Volumes 1-3 (1867-94)
Alain Lipietz, The Enchanted World (1985).
1815-1914 Gold Standard = self-correcting regulatory mechanism for global economy. Too many imports and too few exports -> trade deficits -> outflow of gold -> scarcity of credit -> higher interest rates -> economic recession -> business bankruptcies and rising unemployment -> price cuts and falling wages -> reduction of imports and increase in exports -> inflow of gold -> trade balance -> economic prosperity. Imperialism of free trade: Spanish rule over Latin America = direct exploitation -> 1820s wars of independence -> voluntary submission to British domination = indirect exploitation. British empire: global liberal economics still needs nation state violence. Gunboat diplomacy to open up foreign markets: 1838-42 & 1856-60 Opium Wars v. China. Armed expeditions to intimidate debt defaulters: 1882 invasion of Egypt. Military mobilisation to secure gold supply: 1899-1902 conquest of the Boer Republics.
1914 = collapse of Gold Standard -> 1914-8 = credit money -> wartime inflation -> 1918-29 = failure to resurrect Gold Standard. 1924 Dawes Plan: American loans money to Germany -> Germany pays war reparations to France and Britain -> France and Britain pay off war debts to America. 1925 British return to Gold Standard = economic deflation -> 1926 General Strike -> 1931 abandonment of Gold Standard. Roaring Twenties in USA: 1920s property and share speculation -> 1929 Wall Street Crash -> 1930s Great Depression = global market -> state planning. Eclipse of US finance capital: New Deal regulation of banking sector and 1929 share prices only recovered in 1954.
J.M. Keynes, The Economic Consequences of Mr. Churchill (1926).
J.K. Galbraith, The Great Crash 1929 (1954).
1944 Bretton Woods Agreement = US supervision of global financial system. British empire -> American empire = Gold Standard -> Dollar supremacy. National credit money convertible at fixed rate into international currency: dollar/gold. US regulated global financial markets: too many imports and too few exports -> trade deficits -> outflow of dollars -> scarcity of credit -> IMF loans -> economic modernisation and currency devaluation -> increase in exports -> inflow of dollars -> trade balance -> affluent society. Building the dollar zone = US loans for US exports: 1947 Marshall Aid in Europe -> USAID to South. Dollar power in 1956 Suez Crisis = disciplining disobedient Britain and France. Collapse of Bretton Woods Agreement: 1965 American invasion of Vietnam -> US public deficits -> US trade deficits -> foreign dollar holdings -> global inflation -> outflow of US gold -> 1971 breaking dollar/gold convertibility -> floating currencies -> 1974 Oil Shock -> 1970s stagflation = Crisis of Fordism.
Michel Aglietta, A Theory of Capitalist Regulation (1976)
Alain Lipietz, Mirages and Miracles (1987)
The monetary counter-revolution: fixed exchange rates and regulated financial markets -> floating exchange rates and offshore banking business. Dollar seniorage: US deficits = inflationary in 1960s/1970s -> global effective demand in 1980s/1990s. The dominance of Wall Street -> revival of the City of London: 1960s Eurodollar markets -> 1970s recycling oil rents -> 1986 Big Bang deregulation -> 1990s neo-liberal globalisation -> 2006 City overtakes Wall Street. Exclusive services: nominee holdings, political corruption, tax havens, property speculation and money laundering. 24/7 banking: New York-London-Tokyo handover, removal of capital controls, computer trading, 1979-87 Margaret Thatcher as prophet of TINA (there is no alternative): Washington Consensus, the End of History, McKinsey management theory, yuppie entrepreneurs and the masters of the universe. The neo-liberal paradigm: liquid global financial capital rules over fixed national industrial capital. The tyranny of hot money: decline in profits -> outflow of foreign capital -> currency collapse -> IMF intervention -> debt dependency -> privatisation and deregulation -> reduction in welfare and wages -> rising profits -> inflow of foreign capital. The race to the bottom: outsourcing, tax holidays, anti-union laws and sweat shops. Global bankocracy: manufacturing in South -> profits in North.
Thomas Friedman, The Lexus and the Olive Tree (1999)
Jeffrey Robinson, The Sink: how banks, lawyers and accountants finance terrorism and crime – and why governments can’t stop them (2003).
John Gray, False Dawn: the delusions of global capitalism (1998)
Neo-liberal instability: declining profits in industry -> rise of financial speculation. US financial sector = 5% of investment in 1980 -> 40% in 2007. Risk management: futures, derivatives and bundling. Keynesianism = state guarantees the future -> neo-liberalism = financial market guarantees the future (Dick Bryan). 1996-2001 dotcom bubble: venture capital -> vapourware -> IPO. Financial crisis as neo-liberal discipline: 1982 monetarist shock -> 1997 East Asian financial crisis -> 1998 Russian financial collapse -> 2001 Argentina = pegging currency to dollar -> looting of savings by financial institutions. Washington Consensus blames crony capitalism and state controls in South. Crony capitalism in North: 1998 Long-Term Capital Management bailout and 2001 Enron bankruptcy. US wages stagnant while profits rising = lack of effective demand -> financialisation of everyday life: mortgages, credit cards and student fees. 20% of US workers’ incomes = debt financing. Credit crunch 2007-8 = crisis of Anglo-Saxon capitalism: Northern Rock -> Bear Stearns -> Lehman Brothers -> IndyMac -> Fannie Mae & Freddie Mac -> Lehman Brothers -> Washington Mutual, Merrill Lynch & AIG -> HBOS -> $700 billion bail-out.
Dick Bryan and Michael Rafferty, The Capitalism with Derivatives (2006).
Robert Brenner, The Boom and the Bubble (2002).
Revival of managed capitalism in South: 1997 China and Malaysia escape crisis -> 2000 Vladimir Putin takes over Russia. The pink tide in Latin America: 1998 Venezuela -> 2003 Brazil -> 2002 Argentina -> 2006 Bolivia -> 2007 Ecuador -> Paraguay 2008. Mercosur trade bloc and trade with China. The return of Keynesianism in USA & Europe: nationalisation and regulation of banks -> public works and tax cuts -> lower interest rates and printing money.
Nigel Harris, The End of the Third World (1987)
Naomi Klein, The Shock Doctrine: the rise of disaster capitalism (2007).
British empire in 1900s = rentier economy. American empire in 2000s = money-dealer economy. The threat to dollar seniorage = emergence of alternative global currency: 1944 Bretton Woods rejection of bancor -> 2002 launch of euro -> 2008 G20 meeting. US government and trade deficits -> credit crunch -> bigger deficits and falling interest rates -> declining dollar -> flight into euro, yen and yuan -> stagflation in USA -> declining US wages and profits -> fall in US imports -> global deflation -> European Central Bank and/or World Central Bank create effective demand -> EU trade deficits and/or World Bank prints money -> global economic recovery -> seniorage of euro or new global currency.
Within this MySpace version of the electronic agora, cybernetic communism was mainstream and unexceptional. What had once been a revolutionary dream was now an enjoyable part of everyday life.