Ultimate capitalism

Exchanges between money and commodities (goods, services or labour) can have two different forms. There can be selling to buy and buying to sell. In the first case commodities (C) are exchanged for money (M), and that money is exchanged for other commodities (C’): C-M-C’. Money is the intermediary measure of value that insures an exchange of equal value. The commodities sold have the same value as those bought. In the second case, money (M) is exchanged for commodities (C), and those commodities are exchanged for more money (M’): M-C-M’. Commodities are the intermediaries that increase in value between the two exchanges. The money paid for them is less than the money obtained from their sale. This extra money acquired by those who buy to sell comes from those who sell to buy. And it is capital that buys to sell, whereas labour must sell to buy. Capital buys labour, in some form or another, and sells it back at a higher price. This is problematic, as labour does not possess that extra money and it must come from elsewhere.

Ever since land began to lose its common ownership, proprietors have taken a share of the produce. For most of that long period of history the expropriated part of production was consumed, as such or after exchanges for something else. Landlords lived off the labour of their tenants. The value produced was simply shared with the landowner. This stable situation was irremediably disturbed by mass production of consumer goods and foreign trade. When people have to buy their necessities instead of producing them, they pay more than they get. So the surplus is exchanged abroad, but what comes back has an even higher price because it takes a profit. These early disruptions occurred in Antiquity, notably in Athens, where accumulated debts were a constant cause of social upheavals. Later Rome experienced a similar pauperisation, and resolved it for a while with “Bread and Games” paid by the plunder of conquest.

The transformation of heat into a driving force by steam power brought about mass production on an unprecedented scale. By the end of the 19^th century, most of humanity had become dependent on industrial production of everyday necessities. The transition of common wealth to private wealth, through the ownership of the machines of production, accentuated the unbalance of getting more for less, and the industrial nations were subjected to periodic economic convulsions and imperialist wars. This escalated to a total war that was so destructive that the industrial centres of Europe and Asia were reduced to rubble. However, the blame for all the destruction and death was put on “war criminals” belonging to the vanquished belligerents. The incoherence of profit capitalism was not questioned and was allowed to develop unfettered. But labour was still unable to pay for the surplus value of profits. This problem had been resolved by colonial expansion (1) and by government debt during the war years, but after 1945 both were in regression. A solution was found by allowing labour to take on debt, in the forms of mortgages and consumer credit.

The profits demanded by those who buy labour to sell its produce are paid with debts. And those debts must be constantly renewed and increased to realise increasing production and profits. But debtors are obliged to pay interest, which reduces expendable income and must be compensated by more debt. As the ratio of debt to income grows, the corresponding interest takes an ever larger portion of income growth. On a national scale, when debts equal GDP, its growth rate must be higher than the rate of interest to actually effect growth in demand. However, the debt to income ratio is not only the result of more or less borrowing. It varies according to the rate of real income growth and to the rate of inflation. When prices rise, wages must follow, and outstanding debt is reduced proportionally. But, over the last few decades, inflation has been kept low and most real incomes have stagnated or shrunk. So that debt and interest burdens have grown unhindered. Capitalism’s highest stage may turn out to be debt overload, just preceding environmental collapse.

1. See Rosa Luxemburg’s description of colonial expropriation by Britain in India and by France in Algeria:

https://www.marxists.org/archive/luxemburg/1913/accumulation-capital/ch27.htm

And a previous posting:

https://lelezard.blogspot.com/2017/09/rosa-luxemburg.html