Nearing the edge

Profits and interest are the surplus value of capital. They are the unpaid part of labour’s production, the extra value that is added on to costs without an equivalent value being circulated. Finance grants a certain credit and demands more in return. Commerce sells at a higher price than it has bought. Industry has more produce to sell than it has paid for. Capital expects to get more out of the market than it puts in. But all this supplementary value can only be obtained by colonial plunder or by granting credit. As it does not exist here and now, it must come from abroad or from the future. But plundering the planet and accumulating debt have reached their ultimate stages, and printing money is a sign of that finality. It is the last fuel of a failing system.

Capitalism could be dated back to the expropriation of land by armed force and the extraction of rent, or to the profits of trade. The monetisation of exchanges and the development of banking were also a turning point. But it was science and technology that really got capitalism started, by opening the path to unlimited investments and accumulation. A little over two centuries ago, the means of production took on a different signification. They had been essentially land and slave or serf labour. They would increasingly be machines and the buildings that housed them, while labour was “free” to be employed or not on demand. The acceleration brought about by engines resulted in mass production and the necessity of corresponding mass markets. But, as workers were only paid a fraction of their produce, markets had to be found elsewhere. Steam driven jennies and looms in English cotton mills would be the ruin of India. Industrial capitalism was ever more in need of foreign markets to sell its surplus value.

Capital began the 19^th century by selling its industrial surplus for bullion. Then it colonised for raw materials. By the end of the century, European powers had been joined by the USA and Japan, and the fighting for dominion intensified. Meanwhile the Bessemer converter (1855) multiplied the production of steel, and thereby of railways, trains and steamships, and plenty of dreadnoughts and ordnance. Steel replaced textiles as the ruling industry and, along with coal, greatly influenced politics, eventually leading to war on a grand scale. Banking also grew in influence, lending to governments and businesses, organising the flows of capital and receiving the backing of military might. However the colonial system turned out to be a costly failure. After a second global conflict, more extensive and destructive than the first, and a lot of post-war fighting, a new world order was slowly put in place. The newly independent nations would trade their raw materials for consumption. The industrial nations could exchange their surplus value for investments. But this proved insufficient to absorb huge productivity gains, especially once reconstructed Europe and Japan joined the competition for market shares.

Surplus value is unpaid labour that has no equivalent demand. It can be exchanged for investments, or it can be monetised by credit. This advantages investment surplus values that can be exchanged among themselves. And it disadvantages the surplus value of consumption that must be exchanged for investments abroad, or resort to credit on a fast expanding scale. Consumer credit must be constantly renewed. If instead it is paid back, demand will slump. The mounting levels of debt were mitigated by strong economic growth and by occasional bouts of inflation. But, for the past three decades, growth has been mostly in developing nations, notably China and its satellites, and inflation has been historically low. Profit and interest have been paid with debt, and that debt has accumulated to gigantic proportions. And so far no one has implemented anything other than more of the same in ever larger quantities.

Profit and interest are paid with debt and then invested. Capital accumulates on one side and debt on the other. But capital is privately owned, whereas debt weighs on the public domain and on wage earners. Everyone is in debt, but just a few possess the capital. And that possession gives the right to decide how and to what ends it is used. That is, more profit at whatever cost to the community and the environment. Capital has accumulated on a mountain of debt that has no material consistence. It is just paper and writing, engagements and promises. And an increasing number cannot be held and kept. These defaults will leave empty holes in the structures of finance. They have the potential to be so big that even central banks will not be able to fill them. When interest rates start rising steeply, it will be the prelude to pandemonium.