An inextricable mess

The exchange of commodities goes far back into prehistory. At the beginning, when hunters lived in autonomous family groups that only gathered together occasionally, exchanges concerned very few articles. Then the Neolithic division of labour between ploughman and herdsman promoted exchanges, and their multiplication produced the concept of money. It took on various forms, cacao beans, seashells, animal hides, axe heads, et cetera, but it finally adopted the identity of metal coins. Without money, exchanges are complicated. The producer of article A, who wants article B, must find the producer of article B, who wants article A. And there is the problem of value and its divisions. Half a shoe or one shoe have neither use nor exchange value. So that metal, so easily divided, was the perfect intermediary for all exchanges large and small.

Money is the universal measure of value, which exalts it to the position of value as such. So the intermediary becomes the beginning and the sought after end. In the endless chains of money circulating from hand to hand as payment for goods and labour, money can be between two commodities in selling to buy, and commodities can be between two amounts of money in buying to sell (1). In the first case, money is the go-between of commodities and measures their equal values. Commodity A is exchanged for B, C and/or D that have the same exchange value as A but different usages. These necessary exchanges result from the division of labour and its multiple specialisations. In the second case, commodities are the go-between for sums of money with the same usage but different values.

Buying to sell instead of selling to buy was a new division of labour that resulted from trade routes opening on land and sea. As commodities moved over increasing distances, merchants controlled their motion and the corresponding flows of money. Commercial profit was the second form of return on investment, after the primordial land rent. They competed for shares of surplus value, and this competition opposed towns and country. Most of the population was rural, so the land owners could levy poorly equipped troops in large numbers. The towns had fortified walls and arms for a citizen’s army. The struggle was never decisive and some great ports formed city-states. Elsewhere trade was hampered by taxes, to the advantage of land rent. But, wherever trade flourished, merchants became bankers.

Historically, trade enriched the merchant bankers at the expense of the landed aristocracy, who were forced to share surplus value. The shopkeeper’s balance joined the hereditary sword as a symbol of power. Foreign trade has always bordered on piracy. Taking by force can be direct plunder or indirect extortion, and the nature of exchanges can have far reaching consequences. Flooding foreign markets with excess production could be a cause for war, so that trade was soon oriented towards regions that did not have a war making capacity. To lessen the pressure on each other’s markets, the cities of ancient Greece (and later the European states) started to trade overseas. They shipped their surplus production and their warmongers round all the Mediterranean (the Europeans did it all round the globe).

Trade brought new commodities to the market, which increased the value exchanged and the surplus value that could be extracted as rent and commercial profit/interest. If the sword finally accepted to share wealth and power with the balance, it was because the prize they were sharing was multiplying. The merchant princes of the Renaissance had precedents in Athens and Rome. It was the next step into the machine age that had never been taken before. However, might and money continued to struggle over the booty, and it was more than two centuries after Columbus’ discovery and Lorenzo Medici’s birth that a third contender challenged their rule.

Planet Earth with its exceptional particularities is the primeval source of wealth. Dominion over land and sea is the property of might – they can be taken and held by force – whereas exchange is a nomadic and fleeting event controlled by money (basically credit). But both depend on the productive and transformative powers of human activity, on skills and motive forces. Before the Middle Ages, animal and mainly human muscle was the only motion-producing energy on hand. Boats had sails as well as rowers, and the waterwheel was a late invention of the Roman period. Then, as the Middle Ages drew to a close, ships were built that could beat to windward and sails were adapted to turn millstones. And that seemed to be it, while wealth creating labour remained essentially the straining of muscles by man and beast. However, the explosive force of gunpowder and the mechanical reproductivity of the printing-press set off some imaginative thinking. It took time, but four centuries after Crecy and three centuries after Gutenberg, James Watt was putting the final touches to the steam engine. Since then machines driven by fossil fuels and electricity have replaced productive muscle power just about everywhere. Hence the obsession with sport.

Machines had not begun with Watt, nor with Savery or Papin. Their most rudimentary forms are as old as humanity. But the construction of a mechanical driving force was revolutionary. By multiplying horse-power, motors multiplied production and its surplus value, and set off a new struggle over the partition of the extra wealth, in a triangular contest that completely changed the rules. The power of land was (is) territorial, whereas the power of money was (is) extra-territorial, which meant that territorial government was controlled by land-owners. The power of machines was (is) also territorial, themselves and their infrastructures. And it was at this stage that government became bipolar, land and machines on opposite sides and money in the centre dithering back and forth. And, as power swung between left and right, the state took on an autonomous identity. It became a sort of arbiter, benign or authoritarian, taking a share of wealth, commanding the armed forces and trying to steer the nation, a materialisation of the prevailing ideology.

Government may favour land-owners, or it may favour machine owners, while the bankers do business with all three. Ruling power alternates according to the strength of the opposing forces in their ideological battles. One side groups real property both large and small. The other owns brands, patents and copyrights. There are a lot of crossovers, but the two compete for political dominion and for portions of surplus value. The economic tensions between rent and dividend are played out on the political arena as a continual spectacle, with the regular highlights of electoral circuses. This permanent activity at the front of the stage distracts attention from another more fundamental conflict, where capital acts in unison against labour. Politicians are the front-men for lobbies, by conviction or material interest. The wealthiest and most “convincing” lobbies are those of property, which means they monopolise the representation. Requested to vote, the people are given the choice of property or property. The only systemic difference is that agriculture tends to employ an unskilled work force of underpaid immigrant day-labourers, while industry tends to employ a skilled work force of salaried qualified collaborators, hence their respective reactionary and liberal discourses.

The proprietors of land, money and machines demand surplus value, that part of the value added by labour over and above the cost of labour’s upkeep and renewal. Like the machines they serve, workers have running costs and the aged must be replaced by new generations. The feudal lord and his retinue consumed his surplus value. His only investment was war, which seldom brought a return. Trade and credit were profitable, but subprime debts have always been catastrophic. So that capital accumulation only began to expand freely with the mechanisation of industry. Trade can participate in the exploitation of labour, but it cannot modify the value produced. Though it can change demand, as in 16^th century England where land was closed for rearing sheep for the wool trade instead of growing corn for bread (2). Machines modify production. They are multipliers of strength and speed. They offer the unlimited means for the unlimited growth of surplus value. Or so it seemed, and still does to many. The system did stall occasionally – quite regularly in fact – and competing nations went to war. There were large scale destructions of wealth, police states, imperialism, global pollutions and weapons of mass destruction. But all this was obviously the fault of evil people and of Evil per se, because the private property of the means of production and the toll it takes have no alternatives. Evil of course is just a perception that has no master-plan and, on closer inspection, surplus value has a very problematic existence (3).

The price obtained on the market for goods and services is made up of numerous different parts. Some go to refunding investment and renewing machines, buildings and the supply of energy and raw materials. Some go to maintaining the working nation’s generations with the necessities of life and happiness, some go to the state for security and legislation, and some to property as surplus value. Exchanges on the market always have money on one side of the deal. If the goods and services supplied contain all the above mentioned values, the wherewithal of demand must also contain them. So the value obtained on the market is distributed to create a new demand. This extremely varied demand has a major dividing line between investment and consumption. On one side, demand concerns goods and services that will either transmit their value or acquire more value during a production process. On the other, demand concerns goods and services whose value will be consumed. A portion of demand gets its value back enhanced by rent, interest or dividend, while the rest of demand is consumed and its value needs to be created all over again.

Demand for investments is basically of two different kinds. It is either the renewal of existing investments and comes from that part of the partition of value described above, or it is an extension of existing investments and comes from elsewhere. The shares of demand granted to labour and state functionaries are for the upkeep of people who are doing things. The shares of demand granted to property is also for the upkeep of people doing things, but the individual shares are larger and may be added to shares from labour or state, and may exceed the cost of upkeep if it is thrifty. This can result in hoarding or, more and more commonly over the past couple of centuries, in an investment that brings in more income, which in turn demands more investment, etc. The surplus value of property tends to be invested instead of being consumed, and the supply for consumption is diverted to supply investments. Rural populations, who produced their own needs plus the landlord’s rent and the state’s taxes, were herded off the land into factories to make things they had no use for, while all the things they did need dwindled considerably. However, the supply of investments could only grow so far. Steel production had grown with the railways. Once tracks had been laid on all the continents and were struggling to make a return, expansion stopped and steel magnates turned to making warships and big guns for the state, which made possible the destructive consumption of two world wars. The rail magnates were just bailed out.

When productive investments grow, there is a resulting growth in consumption at some later date. But increasing demand for investments automatically reduces demand for consumption. This dilemma can be resolved by exporting consumption and importing investments. In fact this is the preferred if not the only way to accumulate private capital, but it is highly disruptive for those nations who must necessarily export investments and import consumption. It is the imperial trade of dominion, where raw materials are exchanged for weapons and luxury goods, and for plastic bags and shoes. It destroys existing production, inhibits enterprise and favours tyranny. It produces socio-economic break downs and lawlessness. At which point the balance between loss and gain goes all red. Meanwhile, at the heart of empire, there was a widening productivity gap. Automation was multiplying output, but certain productions still needed agile hands, notably for assemblages such as clothing and electronics, and for picking strawberries, apples and pears. Price competition and imperative profit sent factories abroad and brought in seasonal immigrants. This massive transfer of labour was presented as a brave new world, with a white-collar empire directing sweat-shops and mine-shafts all round the world, which was just a fantasy driven by post-Cold War hubris.

Factories had been built abroad before (VW in Brazil since 1957), but they mostly assembled stuff sent by the company’s home base for the local market. Instead of shipping fragile cars, ship the components and have the work intensive assembly done by cheap labour. It was just one step back from exporting consumption. However, having things made abroad for home consumption means that value, however small, is being added elsewhere. At the beginning, the mass of investments hid this incremental deficit but, with time as more and more factories began producing, it became a chronic commercial debt that could only be settled with Treasury bonds. Meanwhile the empire was suffering the traditional woes of consumption importers. Manufacturing jobs disappeared, putting pressure on the remaining work force. For the middle class, the increased work load meant hiring domestic help, and the wage freeze meant borrowing. There was a brief boom in the services industry (low investments and low pay) and in the distribution of social aids, and a massive expansion of personal debts.

For the past twenty years, the empire has concentrated private wealth as never before and has accumulated three growing deficits that have reached gigantic proportions. The trade deficit is linked to the wage deficit, which causes the budget deficit, but the first and the last cancel each other with an exchange of paper at interest. Pushed by the frantic competition for surplus value, the empire outsourced part of its production and exchanged investments for consumption, thereby reversing the order of a nation’s profitable trade. Private interests, the illusion of a borderless global market and an ignorance of past experiences have built a colossal structure with the paper of debts. And now that its foundations in the real economy are showing signs of weakness, it is easy to predict that the next serious storm will bring the building down. And, unfortunately, lynching bankers will solve nothing, though it might calm angry mobs. All private property of the means of production is involved, and its unquenchable thirst for higher returns on capital investments has brought this about. Production has stalled due to insufficient consumer demand, because property was investing too much surplus value. This means that all the extra surplus value, plus the productive investments that are not renewed, only have the choice of speculative investments that do not increase production, making the last hay before the big freeze-up.

1. Often represented as C-M-C and M-C-M.

The three classic functions of money are, intermediary of exchange, standard measure of value and reserve of value.

2. Large scale enclosures began when Henry VIII confiscated church property, and continued almost to the end of the 19^th century.

3. See Rosa Luxemburg’s study of surplus value in “The Accumulation of Capital”.