Thursday, January 08, 2009


1. When Marx wrote in Capital, Volume 1 that "capital comes [into the world] dripping from head to foot with blood and dirt," he wasn't kidding. He wasn't just using a particularly rich metaphor to identify the brutality at the core of the "free" economy. He was not simply capturing in a single phrase the vicious venality of the bourgeoisie.

Marx was first and foremost describing the actual historical process that changed, and changes, the means of subsistence, the means of production, and human labor from quantities into specific qualities, from objects, articles, attributes to conditions and relations. Marx was describing the history of the transformation of land, production, and labor into the interpenetrating relationship of capital and wage-labor.

It is this immediate, enduring, opposite identity of capital and wage-labor that forms the not very secret secret of "primitive accumulation." It is the the expanded exchange of capital with wage-labor that is whispered in every market, and in all capitalist accumulation. .

Capitalism never rids itself of its primitive origins. It does not, and cannot, "clean up well." Expropriation and dispossession are its core. It embeds a little bit of primitive accumulation in every commodity produced, in every one of its billions of exchanges, in every cent of profit so realized.

As it expands, capital's ability to create enough of that profit quickly enough changes. Those very increases in accumulated capital become, sooner rather than later, incapable of sustaining continued expansion. The dollars and euros and yen that gushed from the markets disappear. Barely a penny is spat out where rivers of liquidity once flowed. But the conditions of production have not changed-- capital remains capital, and exchanges with labor that remains wage-labor. And if the conditions have not changed, then capital's ebb flow, its expansion and contraction, must be the product of the changes in the quantities of wage-labor and capital, and the change in the relationship of those quantities. In its contraction realizes the truth of the secret of its expansion-- overproduction, the overproduction of the means of production as capital once able now unable to exploit a sufficient quantity of wage-labor at a sufficient intensity. The means of production have come into conflict with their own conditions, with the social relations of production, with the ownership of production as a private property.

2. The importance of oil to "modern" society is no secret at all. While manufacturing and industry have managed to reduce the amount of oil required for the production of each unit, each commodity, the expansion of production requires increased inputs of energy. Transportation likewise can reduce its oil consumption per unit of value hauled but it cannot change the fact that petroleum provides 98 percent of the energy used in transportation. Circulation sweats money from every pore, as Marx wrote, but oil provides the heat.

The importance of oil in manufacturing, transportation, energy production-- these things are the useful values of oil. These physical attributes however are nothing more than the mule, the pack animal, carrying the conditions for the production of oil, the exchange value, into the markets for the bourgeoisie.

Since 1973, every critical juncture in this miserable, dreary saga of "modern" capitalism has been announced, concluded, and foreclosed upon with a dramatic change in the price of oil. The OPEC price spikes of 1973 and 1979; the price decline of 1986 that finally brought the Soviet Union to ground; the run-up to the first Gulf War, with prices reaching $40 per barrel; the collapse of 1998 with prices sinking below $10 per barrel; OPEC's "third time is the charm" production cuts, triggering the doubling and tripling of prices; the price collapse of 2002, signaling that it was past time for another Gulf War; the speculative blow-off and then price implosion of 2007-2008-- all are different chapters to the same book where every line begins with the word "overproduction."

Capital comes into the world dripping blood and dirt from head to foot, but everywhere it steps, it leaves its hydrocarbon footprint. Everywhere it rest its head, it leaves a greasy stain.

3. It is the condition of the production of oil, and not the qualities of the oil itself, that makes the petroleum industry so dominant, so acute to the conditions of capital accumulation as a whole. It is the relationship between the massive capital apparatus of the industry and the wage-labor required to animate that apparatus that makes the petroleum industry so much more than representative of capitalism as a whole.

In 2007, according to the US Energy Information Agency's (EIA) Performance Profiles of Major Energy Producers, US petroleum companies participating in its Financial Reporting System (FRS) reported their first decline in net income after three successive years of record earnings in 2004, 2005, and 2006. The companies participating in the FRS account for approximately 41 percent of the petroleum, natural gas liquids, and natural gas production of US companies. Net income in 2007 declined 8 percent from the 2006 mark to 125 billion dollars. This "reduced" net income was still the third highest amount recorded in the history of the industry.

For the first time since 2002, operating expenses grew at a rate faster than revenues.

More significantly, and most representatively of the predicament of capital, the return on investment, which the is defined as the ratio of net income to net property, plant and equipment (PPE) declined to 17 percent from the 2006 rate of 21 percent.

This ratio, the rate of return on investment, is, if not everything to capital, pretty close to everything for capital. It measures nothing other than the condition of capital; it's success at being itself, which is to say, its success at successfully exploiting wage-labor at a sufficient intensity; which is to say, its success at increased accumulation; which is to say its ability at reproducing itself, its power, its property.

So if the ratio of net income to net plant, property, and equipment is critical to the petroleum industry, then the ratio of the petroleum industry's net operating income to the total net income for all of US manufacturing, and the ratio of the petroleum industry's net property, plant, and equipment to that of all of US manufacturing is critical for measuring the importance of the petroleum industry to all of capital as value accreting. These ratios capture the specific gravity, the weight, of the petroleum industry in the system of capitalist reproduction and provide an index to the overall conditions of capital.

So... so for 2006, the operating income for the FRS companies was $199.4 billion, and the operating income for all US manufacturing was $420.5 billlion; in 2007, operating income for the FRS companies was $173.6 billion, and for US manufacturing $413.5 billion. Net income, after taxes and consolidating other sources of income, for FRS companies in 2006 and 2007 measured $134.9 billion and $124.8 billion respectively. For US manufacturing companies, the numbers were $487.0 billion and $436.8 billion.

Clearly, the FRS companies capture a significant portion of the realized profits of all capitalist production, garnering 47 percent of all manufacturing operating earnings in 2006, 42 percent in 2007. Just as significantly, the FRS portion of total net income declines, registering approximately 28 percent of the total in each year.

The tendency of US manufacturing companies to generate signifcant portions of net income from sources other than operations is why this analysis, why this decade is not just all about the oil.

Next: Not Just, 2

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