Compulsive investments.
Common wealth and private wealth are in contradiction. Riches are accumulated by individuals at the expense of the community. This is quite obvious in the case of conquest and colonial land grabs, when societies are subjected to the rule of might. The contradiction is blurred in the case of usury and commercial profit. Bankers and merchants have social functions. They insure the circulation of money and commodities. However, their intermediary position allows them to prey on depositors and creditors, on producers and consumers. They decide the price of borrowing and lending, of buying and selling. This considerable power opposed them historically to the ruling landowning aristocracy. Another blurred contradiction is the private property of the tools of production. Before the advent of steam engines, tools were essentially hand tools and of little consequence. The exceptions were mills powered by water and wind. Tools of production benefit their owners, but they are also the source of work and wage. The industrial entrepreneur gives work and takes a profit. The combination of capital and labour produces the wealth they share between them. However, capital is not only renewed, it claims a part of the value added by labour as a dividend. The means of production are privately owned so that land receives rent, money obtains interest, trade makes a profit and machines bring a dividend. The rest of the added value pays the work force, while taxes take a slice of the whole cake.
The state owns the nation. It can expropriate and make war, but its main function is to guard property with law and order. The state is the watch dog of property. It defends (and may expand) the nation’s borders, and guarantees the limits of private property within those borders. In most modern states it is a constitutional duty to protect property, thereby reducing the pursuit of happiness to the accumulation of personal wealth. That wealth and happiness are synonymous is epitomised by celebrity culture. A social model where the happy few fill the day-dreams of humanity, as did the imperial and royal splendours of the past. What has changed is that working class footballers and stock exchange wizards have replaced hereditary earls and merchant princes. Anyone can become a celebrity, but very few will succeed. The pyramid is maintained and renews itself in a most effective way. The pyramid is unquestioned, and its perpetuation seems a part of social evolution, a constant adaptation to changing circumstances. Arthur Koestler argued that hierarchy is inherent to all living matter, from the simplest forms to the most complex (Janus, 1978). But he described a hierarchy of communication, not one of power and wealth. And, ten years later, he might have written of webs and hubs. Whatever may be, the pyramid lives on growing ever higher and wider. And the higher it gets, the greater the pressure on the base.
As millions became millionaires, a few dozens were promoted to billionaire status. How does one spend a billionaire’s income? Building extravagant palaces and running private armies are things of the past. So the wealthy must resign themselves to investing the income they do not spend. This increased investment brings in even more income that must in turn be invested, and so on, and so it goes all the way down to the levels where income is never in excess. Always more for those who have too much, the Draconian law of capitalism where wealth is private and its usage must bring a return. And so wealth accumulates without restraint, with the state its obedient servant.
Karl Marx had imagined that mechanisation would reduce labour to the point where surplus value was no longer sufficient to pay a return on investments. Well mechanisation has not brought down the edifice, but the sheer quantity of investments does shake it severely at regular intervals. The finality of production is consumption, and all value produced must ultimately be consumed. But the division of labour and the complexity of production have increased to such an extent that most activity concerns the primary and intermediary stages. Machines to get the raw materials, and machines that make machines to make machines, chemicals to make chemicals, et cetera. Then there is transport, insurance and banking. So that only a fraction of all production is directly linked to feeding, clothing, housing, educating, healing and entertaining the population, and moving them around. And yet that is where all the value ends up, along with the upkeep of the state apparatus. All value produced must ultimately be consumed, but this is in contradiction with accumulated wealth as the path to happiness. Incomes are invested and, as a consequence, consumer supply is always in excess of demand. This inconvenience can be overcome in two ways. Unfortunately, both are dead ends.
Excess consumer supply can be traded abroad for raw materials, or for intermediary products. Consumption becomes investment through exchange. Weapons, consumer goods par excellence, can be transformed into Arabian light, the ideal investment. A perfect swap that has its limits of course, but the arms trade is a great exporter of consumption. This unbalanced trade means that one nation can invest without consuming, while the other must consume without investing. No investment means no work and no demand, so the imported consumer supply goes to state employees and supporters, often the military. The dividing of society into a privileged few and a mass of unemployed leads to social unrest, insurgency and terror. And the trading partner is faced with a moral dilemma. It must justify the support of its client regime even when it is illegitimate, which helps to explain why the terrorist threat replaced the communist menace at such short notice.
Trade alone cannot cope with the fast expansion of invested incomes, especially with growing competition on the world market. So the second transformation of consumption into investment is also necessary. Incomes can be lent to the state, an ancient practise, and to the less well off. Here there is no exchange of goods. Income simply passes from one to the other at interest. To a greater or lesser degree, states have always borrowed to supplement insufficient taxes, but consumer credit on a massive scale is a recent occurrence. Granting consumer credit with no guarantees could only lead to millions of micro Ponzi schemes, with new borrowing paying off past debts and their interest. As for 100% plus mortgages fuelling a real estate bubble, they just had to burst. And that is where things are right now.
The state owns the nation. It can expropriate and make war, but its main function is to guard property with law and order. The state is the watch dog of property. It defends (and may expand) the nation’s borders, and guarantees the limits of private property within those borders. In most modern states it is a constitutional duty to protect property, thereby reducing the pursuit of happiness to the accumulation of personal wealth. That wealth and happiness are synonymous is epitomised by celebrity culture. A social model where the happy few fill the day-dreams of humanity, as did the imperial and royal splendours of the past. What has changed is that working class footballers and stock exchange wizards have replaced hereditary earls and merchant princes. Anyone can become a celebrity, but very few will succeed. The pyramid is maintained and renews itself in a most effective way. The pyramid is unquestioned, and its perpetuation seems a part of social evolution, a constant adaptation to changing circumstances. Arthur Koestler argued that hierarchy is inherent to all living matter, from the simplest forms to the most complex (Janus, 1978). But he described a hierarchy of communication, not one of power and wealth. And, ten years later, he might have written of webs and hubs. Whatever may be, the pyramid lives on growing ever higher and wider. And the higher it gets, the greater the pressure on the base.
As millions became millionaires, a few dozens were promoted to billionaire status. How does one spend a billionaire’s income? Building extravagant palaces and running private armies are things of the past. So the wealthy must resign themselves to investing the income they do not spend. This increased investment brings in even more income that must in turn be invested, and so on, and so it goes all the way down to the levels where income is never in excess. Always more for those who have too much, the Draconian law of capitalism where wealth is private and its usage must bring a return. And so wealth accumulates without restraint, with the state its obedient servant.
Karl Marx had imagined that mechanisation would reduce labour to the point where surplus value was no longer sufficient to pay a return on investments. Well mechanisation has not brought down the edifice, but the sheer quantity of investments does shake it severely at regular intervals. The finality of production is consumption, and all value produced must ultimately be consumed. But the division of labour and the complexity of production have increased to such an extent that most activity concerns the primary and intermediary stages. Machines to get the raw materials, and machines that make machines to make machines, chemicals to make chemicals, et cetera. Then there is transport, insurance and banking. So that only a fraction of all production is directly linked to feeding, clothing, housing, educating, healing and entertaining the population, and moving them around. And yet that is where all the value ends up, along with the upkeep of the state apparatus. All value produced must ultimately be consumed, but this is in contradiction with accumulated wealth as the path to happiness. Incomes are invested and, as a consequence, consumer supply is always in excess of demand. This inconvenience can be overcome in two ways. Unfortunately, both are dead ends.
Excess consumer supply can be traded abroad for raw materials, or for intermediary products. Consumption becomes investment through exchange. Weapons, consumer goods par excellence, can be transformed into Arabian light, the ideal investment. A perfect swap that has its limits of course, but the arms trade is a great exporter of consumption. This unbalanced trade means that one nation can invest without consuming, while the other must consume without investing. No investment means no work and no demand, so the imported consumer supply goes to state employees and supporters, often the military. The dividing of society into a privileged few and a mass of unemployed leads to social unrest, insurgency and terror. And the trading partner is faced with a moral dilemma. It must justify the support of its client regime even when it is illegitimate, which helps to explain why the terrorist threat replaced the communist menace at such short notice.
Trade alone cannot cope with the fast expansion of invested incomes, especially with growing competition on the world market. So the second transformation of consumption into investment is also necessary. Incomes can be lent to the state, an ancient practise, and to the less well off. Here there is no exchange of goods. Income simply passes from one to the other at interest. To a greater or lesser degree, states have always borrowed to supplement insufficient taxes, but consumer credit on a massive scale is a recent occurrence. Granting consumer credit with no guarantees could only lead to millions of micro Ponzi schemes, with new borrowing paying off past debts and their interest. As for 100% plus mortgages fuelling a real estate bubble, they just had to burst. And that is where things are right now.
posted by le Lézard at 12:47 AM
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