Seventeen Contradictions and the End of Capitalism (27 page)

There have been several bouts of financialisation throughout capital’s history (the latter half of the nineteenth century, for example). What makes the current phase special is the phenomenal acceleration in the speed of circulation of money capital and the reduction in financial transaction costs. The mobility of money capital relative to that of other forms of capital (commodities and production in particular) has dramatically increased. Capital’s penchant for the annihilation of space through time here has a large role to play. This, says Craig Calhoun in a recent essay, ‘facilitates the “creative destruction” of existing structures of capital (e.g. specific modes of industrial production) and spurs the development of new technologies’, which in turn spurs ‘the development of new products, production processes and new sites of production’. Uneven geographical developments become even more pronounced as capital searches out and moves to newer and lower-cost locations. The pressure asserted by finance ‘drives investment towards ever more short-term profits and undercuts long-term and deeper growth. It also produces speculative bubbles and busts. It increases market pressure on firms bringing less than median returns to capital, driving disinvestment from still-profitable older businesses and thus driving down wages and reducing the tendency of industrial capitalism to share profits through rising wages.
It intensifies inequality
’ (my emphasis). But rapid-fire financialisation also ‘leads to returns on invested wealth that far outstrip returns on employment. It rewards traders more than material producers … It makes all other sorts of businesses pay more for financial services. The 2010 bonus pool for securities industry employees in New York City alone was $20.8 billion; the top 25 hedge fund managers earned $22.7 billion. And this was after the market meltdown revealed the damage that financialisation was doing to the larger economy.’
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Traders of all sorts benefit, not only those trading in money. Those trading in information and all the accoutrements of the economy of spectacle and the manufacturing of
images and fetish desires are also part of the deal, as well as all those who trade in futures, no matter how fictitious these turn out to be. The merchants and the rentiers as well as the financiers are repositioned as the arbiters of capital accumulation relative to industrial capital. This is how the distribution of wealth and income became so distorted from the 1970s onwards.

But this has made capital itself less secure, more volatile and more crisis-prone, because of the resultant tensions between production and realisation of social value when the main arbiters of capital accumulation have little or nothing to do with actual production. The engine of capitalism has been groaning under the strain. The engine could easily blow up (China would almost certainly be the epicentre for that) or grind to a halt (as seems to be the more likely outcome in contemporary Europe and Japan).

There is, in all of this, a deep irony. Historically, industrial capital waged a mighty struggle to free itself from the chains of the landlords who extracted rent, the usurious financiers and the merchants who looked to rob or buy cheap and sell dear in unevenly constructed markets. Twenty-first-century capitalism seems to be busy weaving a net of constraints in which the rentiers, the merchants, the media and communications moguls and, above all, the financers ruthlessly squeeze the lifeblood out of productive industrial capital, to say nothing of the workers employed. It is not that industrial capital disappears. It has merely become subservient to capital in its other more fantastic and virulent forms.

A form of capital has emerged that is ruthlessly dynamic in the field of technological changes and in the globalisation of social relations, yet which not only pays no mind to the conditions under which social labour produces but even seems not to care too much whether production takes place at all. However, if all capitalists seek to live off rents, interest, profit on merchant’s and media capital, or even worse just on speculating in asset values or living off capital gains (as most of the top 1 per cent of income earners do in the USA), without producing social value, then the only possible outcome is a calamitous crisis. A political economy of this kind also betokens
the concentration and centralisation of immense economic wealth, power and privilege among the merchant and media capitalists, the financiers and the rentiers. The emergence of such a plutocracy is, sadly, all too plain to see. The fact that it does so well while the mass of the people does so badly is hard to disguise. The big question is if and when a mass political movement of the dispossessed might arise to repossess that which has been lost.

This leaves us with one critical residual question: if the immense disparities of wealth and income now emerging are a reflection of the rise of this new form of capital, then what were the contradictions that made for the rise of this new form of capital? This is a crucial question that will be taken up later in the context of the dangerous contradictions. It was not, I shall hope to show, a mere accident of history.

The political implications of all this for an anti-capitalist strategy are simple enough but far-reaching. If, for example, the poll data for the United States is at all emblematic, then there will be massive public support for a reform movement that produces far more egalitarian outcomes than is currently the case, even as it demands that the state not be the vehicle to accomplish this. There would be and is widespread support for worker-control initiatives, solidarity economies and autonomous communitarian and cooperative structures. The example of Mondragon, the largest and most long-lasting workers’ cooperative in Europe, with its collective management bragging, until very recently, an income disparity of no more than three to one (compared to the 350 to one in a typical US corporation) is appealing.

In this case we also see the potential value of a very important category of political action. This is the idea of ‘revolutionary reform’. Plainly, the reduction of wealth and income disparities from their current levels would not challenge the reproduction of capital one wit. Indeed, such a reduction, it can be plausibly argued, is absolutely necessary for capital to survive in the present conjuncture because the current disparities threaten to become an absolute contradiction by virtue of escalating imbalances between the capacity to manage the contradictory unity between production and realisation.
But, if the theory of capital’s necessary inequalities is correct, then there will come a point where a programme to reduce wealth and income inequalities will threaten the reproduction of capital. Once a move towards a profit squeeze gets under way, then it can ultimately threaten to squeeze the lifeblood out of capital to compensate for the way capital systematically sucks the lifeblood out of labour. Nobody knows exactly where the breaking point might lie, but it will surely be well before the levels of equality preferred in the US public opinion polls are reached. A reform movement around reducing social inequality can become the cutting edge for revolutionary transformation.

Once upon a time it could reasonably be said that capital cared not a wit about the neediness of the worker, leaving it to the initiative and ingenuity of the workers to reproduce themselves biologically, psychologically and culturally on the basis of the pittance of a wage that capital provided. The workers for the most part conveniently obliged because they had no option. This was the situation that Karl Marx encountered and it was probably for this reason that he left the question of the social reproduction of the labour force to one side in his theorising of capital’s political economy. But plainly, if labourers do not reproduce themselves or are overworked to a premature death down the mines and in the factories (or commit suicide from overwork, as has been regularly happening in Chinese factories) and if capital’s easy access to a labour surplus is somehow blocked, then capital cannot reproduce. Marx recognised this danger when he clearly saw that limits had to be put upon the exorbitant length of the working day and murderous rates of exploitation and that state legislation on this point was just as important to protect the reproduction of capital as it was to protect the lives of the labourers. The contradiction between the conditions required to ensure the social reproduction of the labour force and those needed to reproduce capital has always been latently present. But over the last two centuries it has evolved to become a far more prominent and complex contradiction, loaded with dangerous possibilities and full of far-reaching but uneven geographical manifestations and consequences.

This contradiction became more prominent with the rise of the factory system and the increasing complexity and roundaboutness of capital’s production systems. While traditional artisanal skills were
of diminishing importance, capital became much more interested in the procurement of a modestly educated workforce, one that was literate, flexible, disciplined and complicitous enough to fulfil the variety of tasks demanded of it in the machine age. The insertion of education clauses in the English Factory Act of 1864 was a sign of this increasing interest of capital in the workers’ capacities and powers and this entailed limited interventions in the life of workers outside of the factory. Within capitalism as a whole, this concern for the reproduction of labour power of adequate qualities coincided in many parts of the world with a political project on the part of a reformist bourgeoisie to create a ‘respectable’ working class that would refrain from riot and revolution and succumb to the blandishments that capital could offer. The growth of public education, along with the ‘gas and water’ socialism that prevailed politically in many parts of the capitalist world, certainly eased the lot of the regularly employed worker and did so in such a way as to permit the extension of political representation (the right to vote and thereby influence public policies) to the point of universal suffrage.

The increasing interest in the education of the workforce and the mobilisation of financial resources to accomplish this task has been a major feature in capital’s history. But it has not been a disinterested history nor has it evolved without complications deriving from the dynamics of class struggle between capital and labour. For what has been at stake here, as earlier noted, is what it is that capital wishes the working classes to be educated in and what it is that the working classes themselves want and desire to know. In early English and French history, for example, the autodidact, the self-educated labourer, was a permanent thorn in capital’s side, given to often wildly divergent socialist utopian ideas about alternatives to the form of life that capital offered and prepared to take political if not revolutionary action to bring some anti-capitalist alternative into existence. The incredible flourishing of emancipatory and utopian tracts and sects in France during the 1830s and 1840s (associated with names like Fourier, Saint-Simon, Proudhon, Cabet, etc.) was paralleled across the English Channel by a more sober but nonetheless
persistent literature on worker rights and the necessity to construct institutional solidarities such as trade unions and various modes of political agitation (Chartism) and organisation, some of which was supported by utopian thinkers and practitioners such as Robert Owen. If this was what constituted the education of the working classes, then capital wanted none of it. But faced with the persistent pursuit of self-education on the part of at least an influential segment of the working classes, capital had to come up with something to put in its place. As Mr Dombey put it in Charles Dickens’s
Dombey and Son
, he had no objection to public education provided it taught the worker his proper place in society. Marx, for his part, while critical of much of the socialist utopian literature, learned mightily from it and likewise sought to create a whole anti-capitalist knowledge field that would provide a fount of ideas for anti-capitalist agitation. Heaven forbid that the workers would read such stuff.

While public education has done much to meet capital’s demand for ideological conformity combined with the production of skill sets appropriate to the state of the division of labour, it has not eradicated the underlying conflict. And this is so in part because state interests also enter in to attempt to forge a sense of cross-class national identity and solidarity that is at war with capital’s penchant for some form of rootless cosmopolitan individualism, to be emulated by both capitalist and worker alike. None of these contradictions of the content for public education can easily be settled, but this does not detract from the simple fact that investment in education and training is a sine qua non for capital’s competitiveness. Massive investment in education has, for example, been a striking feature of China’s recent development, as it was earlier in Singapore and other East Asian states. This was so because the profitability of capital rested more and more on the increasing productivity of increasingly skilled labour.

But, as so often happens within the history of capital, education ultimately became a ‘big business’ unto itself. The stunning inroads of privatisation and fee paying into what had traditionally been public and free education have placed financial burdens on the populace such that those desirous of education have to pay for this key aspect
of social reproduction themselves. The consequences of creating a heavily debt-encumbered educated labour force may take a considerable time to work out. But if the street battles between students and authorities in Santiago in Chile that began in 2006 and have continued to this day over the expensive privatisation of both high school and advanced education are anything to go by, then this too will likely be a simmering source of discontent wherever it has been implemented.

The creation of a highly productive labour force gave rise to what is called ‘human capital’ theory, which is one of the weirdest widely accepted economic ideas that could ever be imagined. It found its first expression in the writings of Adam Smith. The acquisition of productive talents on the part of labour, he argued, through ‘education, study or apprenticeship, always costs a real expense, which is a capital fixed and realized as it were in his person. Those talents, as they make a part of his fortune, so do they likewise that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labour, and which, though it costs a certain expense, repays that expense with a profit.’
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The question, of course, is who foots the bill for the creation of such talents – labour, the state, capital or some institution in civil society (like the Church) – and who gets the benefits (or ‘profits’ in Adam Smith’s parlance)?