End Games

 

Half a century ago it seemed that humanity might destroy itself and the planet, with nuclear weapons. That threat has not gone away, but it has dwindled in front of more ominous ones. Collapsing finance, climate change and pollution in general, as well as declining resources are potentially as destructive as hydrogen bombs, and there are no Commanders-in-Chief who can hold them back or set them off. There is no declaring war or suing for peace with these irreversible processes.

Once upon a time it was believed that the gods decided what happened on Earth, and that they could be induced, directly or through their saints, to be benign rather than vindictive. It was generally accepted that human actions could influence the weather, health and wealth, by interceding on the other side with sacrifices. Over the ages this practice passed from human immolations to donations in kind and cash, by which time credulity had begun to wane. It was perceived that the clergy were the only beneficiaries of the system, and meanwhile natural phenomena were being studied and understood. By the 19^th century the gods were infinite, ethereal and inactive entities who had set down universal laws for eternity, with gravity, thermodynamics and electro-magnetism. However, because of their complexity, two domains kept the unpredictability that favours magic and hocus-pocus. Weather was still an act of God and money a Mephistophelean pact.

The 20^th century started full of certainties and ended in doubt. There were political convictions about nation, race and historic class struggle, and there were scientific beliefs that nature could be dominated. The political faiths turned out to be deadly all to no avail. And instead of mastering the world, applied science has put it off track. In this widespread disillusion, climate and finance have kept their magical powers of controversy. Do they have their own inexorable rules or are they man-made? Is humanity modifying the first and can it control the second?

An ecosystem built by some very unlikely cosmological coincidences and some three billion years of evolving life forms is being squandered, polluted and destroyed. Animal and vegetable species are disappearing as fast as the polar ice-caps. Land, sea and air are full of human garbage, of fumes and junk, of synthetic and mineral poisons. Plants are being modified to produce pesticides and to resist herbicides. Animals are being tinkered with and humans are increasingly prosthetic. An anthropocene, a man-made world, a garden of delights gone wrong, an impossible paradise designed for private profit and driven by the accumulation of wealth and power in the grasp of a tiny minority.

The rent of privatised land, the commercial profit and the financial usury of money, the surplus value of machines and the very nature of capital that forces it to grow or flounder, to eat or be eaten, have made the world a more violent place than the wildest jungle. A property regime obsessed by the rate of return on investment can see no further than the next quarterly balance-sheet, and is oblivious of the pain and harm the balance causes. The Draconian rule of profit or death allows neither scruples nor compassion. Free market capitalism is a devastating force that destroys social bonds, existing environments, labour and ultimately itself.

Production supplies the demand for investment and consumption. With each technological era (e.g. steam, internal combustion, electronics), a cycle begins with investments playing the dominant role, harvesting new minerals, vegetables, animals, and building new machines to make new machines to makes new machines… But once these investments are in place, their final products and infrastructures need to be consumed. At a certain point, the increasing demand must swing from investment to consumption. Planes need passengers, movies need spectators, bicycle-lanes cyclists, search-engines searchers, etc. However, effective demand cannot exist without the wherewithal.

There is renewed demand, the same as yesterday. There is increased demand, more than yesterday. And there is decreased demand, less than yesterday. However, for demand to grow and shrink, the means of payment circulating on the market must also grow and shrink. Means of payment are basically either central bank cash or credit granted by private banks and just about every commercial enterprise. Cash can be spent or saved, whereas credit can only be spent. The old propensity to store cash has disappeared. It all stays in circulation and, as with credit, it can be spent as an investment or for consumption.

As cash was dematerialised from metal to paper and to digital, it became increasingly difficult to distinguish it from scriptural credit, and their distinctive functions became confused. Cash is the proceeds of a previous transaction. Credit is based on the proceeds of a future transaction. Cash gets its full value in an exchange, whereas credit gets only part of its value as it must also pay interest. Cash exists of itself, it has inherent value. Credit only exists as goods and services, its value is theirs. Cash settles an exchange, which suits consumption. Credit postpones the settlement, which suits investments that return their value with a profit. Except that investing credit means sharing the profit with interest, whereas invested cash keeps all the profit. This is a strong incentive to invest cash and to consume with credit.

The invested cash returns with a profit, while the consumed credit means future cash is already spent. Consumption does not return value the way an investment does. So that an increase in consumer demand based on credit (instead of wage rises) quickly spirals out of control, and debts pile up beyond possible repayment (1). It also results in private capital taking an ever larger share of incomes (added value). A growth in production needs more investments (or more productive ones) and then more consumption. The growing investments of a new technological cycle are paid with credit (how else?). When profits (cash) start rolling in, which takes time and leaves many failed enterprises along the way, they are invested and progressively replace the credit. This cash drain means that growing consumption must have recourse to credit, resulting in a fast rising mountain of debts.

When investments are in place, the value they produce needs to be consumed. The credit of growing investments turns into cash when their produce is exchanged on the market. Does this cash replace the credit as an investment, or does it increase consumer demand? Is it the wage of capital or labour? The answer of course is invested cash and rent/interest/profit. And so the system builds the conditions of its downfall. Credit collapse ruins consumer demand, provokes recession, destroys jobs, causes misery, revolt and repression, and ends in some kind of war. The rule of private capital is a scourge that is laying waste the planet. Its financial structures lead to debt “cliffs”, vast disproportions of wealth and their resultant violence and mayhem. It is about time to reconsider this plutocratic power and stop it rising again from the ashes of its coming devastation.

1.  For more on this see   http://lelezard.blogspot.fr/2010/08/binary-production-of-wealth.html