Ponzi capitalism

As unpaid added value needs credit to mediate its exchange on the market, what happens if credit stagnates or contracts? The answer is that when credit stops growing so does the mediated surplus value, and when it shrinks so must surplus value. However, the sharing of surplus value between rent, interest and dividends can be modified. With falling rent and zero interest, corporate profits can continue to grow moderately, making shares the best investment on offer. But soaring share prices (helped by company buy-backs) then reduce the fractional returns of dividends until they join the dismally low returns on real estate and bonds. At which point new capital has nowhere to go, old capital no longer brings a return and incomes promised by pension funds are not forthcoming.

When the traditional returns on investments (rent, interest and dividends) are insignificant, speculation on the value of investments becomes the main source of capital incomes. It is the buying and selling of investments, not the investments themselves, that generate income. Casino capitalism, with nanosecond transactions by programmed computers, merely redistributes existing wealth by feeding on itself. The demands of accumulated capital are greater than the declining credit mediated surplus value, so it compensates by transforming capital into revenue, which is like a Ponzi scheme and is bound to fail. Governments everywhere are sitting on top of volcanos ready to erupt. Are they oblivious, or are they too scared to tell?

Controlling…2

The middle classes are the frame that holds up the structures of power and wealth. They are the backbone of capitalist exploitation by property. Their involvement may be insignificant but it insures their support. Owning some real estate and a few shares and bonds are strong incentives to conservative thinking with regards to property. They are the chains that bind the middle classes, but in the context of a global debt slump the links are slowly rusting away. Impossible mortgages, stagnant incomes, failing public services and the vast gap – unseen for a century according to Piketty – between the middle classes and real wealth are corroding their acquiescence to upper class ideological dominance. And when subordinates feel disaffected by their superiors, it is a prelude to rebellion. A populist class alliance that takes over the state apparatus, modifies taxation and expands government spending. In the past these movements have often brought together nationalistic warmongering xenophobes. But the age when armies were sent off to the front while fortunes were made at the rear ended with the aerial bombardments of the 1940s. Today’s warmongers must choose victims that cannot fight back on an equal footing, those that have neither offensive nor defensive aerial weapons.

The total wars of the first half of the 20^th century ended in total destruction, and those examples have held back from the brink the more virulent bellicosity of nationalist demagogues. However, as the middle classes fall on hard times, nationalism and xenophobia are the best distractions from the structural causes of their deteriorating situation. Instead of finding faults in the capitalist levy and accumulation of unpaid added value, the blame is put on foreign forces, those beyond the nation’s borders and those within. This is an intoxicating mix, and its effects on societies submitted to a strong economic stress are unpredictable. The Cold War covered a period of economic expansion, when the relative wellbeing of the developed Northern hemisphere was increasing. The trickling down of wealth and middle-classification were the ideological counter offensive to communist egalitarianism. But for the past two decades, since Russia and China joined the fold of private capitalist accumulation, sharing riches and bolstering middle incomes have lost their value as propaganda, and hence their utility. The problem this poses for consumer demand was masked for a while by consumer credit, mortgages and public debts, with the ensuing credit crunches, sub-primes and debt inflations. But private capitalism is not preoccupied by general wealth, let alone the wealth of all nations. It is completely focused on the limitless possessions of individual people. It supposes that the magnificence of a few can console the multitude of their dispossession, a slightly outdated notion that is kept alive by the cult of celebrity and a few seconds of fame for those in the crowd. The social bond that exists when the group’s interests override those of individual members cannot hold when the priority is inverted. In that case social cohesion must depend on corruption, constraint and confusion. Private capitalism causes immense collateral damages and at regular intervals its financial institutions are drowned in debt, which all seems an exorbitant price to pay for the mansion life-styles of the mega-rich.

Controlling the multitude

Labour and capital oppose one another in a perpetual struggle over added value. Labour adds the value but capital owns the means of production. Labour cannot produce without the means, and capital will only furnish the means if it gets that share of added value called surplus value (rent, interest, dividends, patent dues and copyrights). What is surprising is that labour, which includes all those who work and hence just about everyone, allows capital, which is controlled by very few, to get away with this blackmail. Force of habit is part of the reason. Going back no farther than feudal times, the hierarchy of property rights has been implanted in the social consciousness by centuries of brute force and law enforcement, and has become an accepted fatality. But even brute force needs intermediaries. An army officer’s orders are obeyed because there are sergeants and corporals to transmit them vigorously. In the same way capital gives rank to some workers and uses them to control the rest. The ranking of the middle class is extremely varied, from its upper reaches, who are allowed to occasionally hobnob with the powerful few, to its lower rungs that dip in the amorphous throngs of poverty. The working class has been described as owning nothing but its capacity to labour. Members of the middle class distinguish themselves by owning something, most commonly a house and a pension fund. But this accession to property makes them its slaves not its masters. They own so little that it constantly risks slipping away and dropping them back into the “dangerous” property-less classes. The fear of losing rank in the social pyramid is probably the strongest hold that the few have over the many, a strangle-hold that perpetuates the system.