Failed experiments

Capitalism’s major problem is how to transform the unpaid added value of consumption into investments that can be accumulated. This can be done by foreign trade, but the process has obvious limitations and it is hegemonic, imperialistic and conflictive. The transformation can also be realised by monetary creations that push up wages and consumer spending. Then prices increase and it has to start over again. This constant monetary devaluation is good for borrowers and bad for lenders who are discouraged (1). However, since the 1970s and the Great Inflation, rising wages have been replaced by rising household debts. Meanwhile public borrowing has risen to levels unseen since WW2. And over the past five years, corporations have acquired huge debts to buy back their own shares.

For the past three decades the profits of consumption have been monetised by consumer credit. Debts have paid for the accumulation of wealth. However, when incomes are fixed, consumer credit can only be paid back by reducing consumption (2). For debt-driven consumer demand to grow constantly, the consumed credit must be renewed, a new credit must be granted to maintain previous growth, plus another one for growth to continue. This means that consumer credit grows much faster than consumer demand, and the financial sector outstrips the real economy as promises of future payments multiply like rabbits. Public spending is predominantly consumption (3), be it military hardware, hand-outs to Big Business, social benefits or salaries, so public debt also adds up faster than public largess. By buying back and destroying their shares, corporations increase the dividends of the remaining shares. This is opportunistic – taking advantage of zero interest rates – and short-sighted (4). When their borrowing reaches its term, they will have to roll it over at potentially much higher interest, or re-emit shares for a payoff and reduce dividends while interest rates are rising. Either they are betting that rates will remain close to nothing indefinitely, or they are only preoccupied by immediate gains. Both attitudes are alarming.

The monetisation of unpaid added value by cash or credit has failed, and there are no other options. It is the failure of the private property of the means of production and its extraction of rent, interest and profit. And it is a global failure, with degrees and consequences as difficult to predict as are those of climate disruption. Both processes are beyond recall and will run their destructive courses. There may be just enough time left, however, to reflect on what the survivors could reconstruct from the rubble, or at least on what could be if the property of the means of production did not entail unpaid added value. Could construction and farming exist without rent, could goods and services be exchanged without interest, could production function without profit? Can the world go on turning without the appropriation of wealth by the private property of the three elements of production? The system’s foundations being force and competition – from the primeval “Robber Barons” to today’s predatory empires – and considering how these values are glorified in sports and fiction, the struggle for life attitude is not about to disappear. It is even conceivable that humanity’s destiny is to wreck the planet and bring about the extinction of mammals, the species having done its time. After experimenting with fangs, claws, horns and brawn, life added frontal lobes to the brain. But remnants of an archaic past persisted in the back of the mind, and the reasoning functions never quite took control. This Jurassic survival means that superior force still decides just about everything.

1. When money circulates faster, as when cheques replaced banknotes, or when plastic cards replaced both, or when pay is spend before it is earned, less of it is needed for the same number of transactions but incomes are unaffected.

2. This is not the case for invested credit, as its value goes into the production process and is returned.

3. There used to be investment in infrastructures, but that was abandoned a while ago.

4. In a desperate attempt to get consumption growing again, the Bank of Japan is offering negative interest rates.