Sunday, January 11, 2009

Not Just, Just Not 2

4. The petroleum industry gives capitalism, in all its petty victories and melodramatic setbacks, its most acute presentation. In its accumulation of capital, its expansion of its property, the industry amasses a machinery of extraction, an asset base, a net property, plant, and equipment, that measures its efficiency in the reduced, now relatively, then absolutely, quantities of wage-labor required to animate the physical plant. In its development, then, the petroleum industry confronts the predicament of capital in a hard way-- the more of its capital it accumulates, the more capital it exchanges with wage labor, the less relatively of itself has in fact been exchanged with wage labor, and the lower the rate of accumulation becomes.

In 2006, the net PPE of the FRS companies was valued at $666.9 billion. In 2007, the value of the PPE increased 4.5 percent to $697 billion. For US manufacturing as a whole, the values were $1217.7 billion and $1229 billion respectively, giving the FRS companies an asset share of about 56 percent of the total US PPE.

This massive fixed investment is animated by a labor force, and a "wage-bill" dramatically smaller than the labor force and wage-bill for US manufacturing.

The number of production workers, adjusted for those self-employed in the petroleum industry, has increased from approximately 111, 000 in 2004 to 127, 000 in 2007. At the same time, the wage-bill for the petroleum [unadjusted] has increased from approximately $13.2 billion to $19.2 billion.

During this same period, production worker numbers in manufacturing, adjusted for self-employment declined from 14.1 million to 13.7 million. The wage-bill in manufacturing [unadjusted] climbed at a considerably lower rate, from $704.4 billion to $746 billion.

With a wage-bill equal to less than 3% of that of manufacturing, the petroleum industry is able to animate property, plant and equipment with a value equal to half of that total value for manufacturing.

It is this, this incredible increased/diminished exchange, this PPE "overweight" in relation to wages, rather than the utility of oil, that gives the petroleum industry its specific gravity, its determinant quality for capitalism as a whole.

5. With this massive accumulation of industrial plant, the "super-productivity of labor, the costs of production and reproduction of the unit quantities of oil are driven to a near-absolute minimum, including in the areas of "difficulty" like the North Sea. The petroleum industry engages in a battle against the enemy that is both itself and the shadow of itself, a declining rate of return. The industry must seek, by hook, crook, line, and sinker, offsets to this decline. Seek and find it does, utilizing market, cartel, and state mechanisms to alter the unit price above the cost of production, and above the price of production, effectively, transferring profit from all other industries to itself.

6. The increased capital investments from 1992-2000 drove the rate of return on investment for capitalism as a whole up and then into decline, leading to the recession of 2001-2003.

The US bourgeoisie, knowing better than some that overproduction is not underconsumption, that overproduction is exactly as Marx described it-- an overproduction of the means of production of capital unable to exploit labor at a sufficient intensity-- built the recovery of 2003 on basis of reduced capital spending, reduced rates of expansion of the means of production, accumulation of capital as money to be hoarded, or distributed to executives, owners, investors, in a word to its classmates, and of course, control of wage rates.

The asset-backed securitization that swept through the US economy during this period was in fact derivative of the restraint on investment and accumulation maintained in the industrial sector.

Indeed, in 2002, 2003, 2004 capital spending was below the values claimed for depreciation and capital consumption of property, plant, and equipment. In the third-quarter of 2001, net PPE for US manufacturing was measured at $1180 billion. A year later, that figure had declined to $1173 billion. By the third-quarter of 2003, the value was $1142 billion, and by the third-quarter 2004, $1101 billion, equal to the net value of PPE in 1999.

While operating income did recover, something else recovered even more for US manufacturing-- and that was recurring income from non-operating sources. These non-operating sources include interest payments, dividends, royalties, earning from minority interests in other businesses. Prior to the recession of 2001, these revenue streams were about 33 to 40 percent of the amounts for operating earnings. However, after 2004, the size of all other income from non-operating sources increases to 50, then 60, and 70-75 percent of the amount for operating earnings, and accounts for almost 40 percent of total income. The US bourgeoisie was earning its money the old-fashioned way-- by making others work productively for it.

At the same time cash, US government securities, and other securities held by US manufacturing companies increased 50 percent from 2003 levels, peaking in the 4th quarter 2007 at $454 billion.

It was a closed fist policy of US manufacturing between 2002 and 2005 , building its cash hoard, investing in stock buybacks, awarding dividends. The FRS companies, awash in cash, averaged $37 billion in stock buybacks in 2004, 2005, 2006, and 2007, dedicating in those 4 years a sum almost about 45 percent greater than the total spent for the 17 years prior.

This closed fist, clasped hand policy created the open palm policy of the investment and commercial banks, the mortgage financing agencies, and the thrift institutions. The only revenue streams that the financiers could tap, that they could attack and divert, were those based on wages and salaries, on the personal income of those working and poor, working and not so poor.

7. The "discipline," in reality deprivation, that the bourgeoisie practiced upon capital spending and fixed assets, it practiced also on the wage portion of capital's identity. By 2003, the manufacturing wage bill had declined 6 percent from its 2001 level. In 2006, the total wage outlay finally surpassed the 2001 mark. By 2007, the manufacturing wage bill was 6 percent above the 2001 mark.

The wage-bill for the petroleum industry shrank also during those glory years of 2003-2006, with the hourly wage dropping 9 percent between 2001 and 2004, before recovering in 2005. In 2007, the industry's average hourly wage was 20 percent above its 2001 level.

In 2005, the petroleum industry resumed its capital expenditures. Unlike the wave of consolidations and mergers that had swept the industry earlier, a major portion of this spending was on actual actual exploration and development. In 2006, capital spending was a record high $200 million dollars. In 2007, while overall capital spending declined from its 2006 peak, development and exploration expenditures exceeded the 2006 level. What did the FRS companies buy with this money? Real estate. Expenditures on proven and unproven acreage in the US soared in 2005, 2006, and 2007. Total exploration and development expenditures in the US doubled between 2005 and 2006. FRS companies' acquisition of proven acreage outside the US also increased in 2006, but not nearly as dramatically.

So if overproduction is, and is always, the overproduction of the means of production as capital, unable to exploit sufficient quantities of labor at a required intensity, the petroleum industry overproduced itself by the book, the book being Capital, Vol 3, as both wage-rates and increases in net property, plant, and equipment took the "sufficient" out of profitability.

The dramatic contraction in the price of oil is, of course, just the market's way of reflecting the declining profitability, and the failure of all the mechanisms-- war, cartel, government-- to offset the decline.

The dramatic contraction in industrial output worldwide, is more than just the market's way of reflecting that decline on an international scale. The contraction means that the bourgeoisie in order to repair profitability must attack the accumulated means of production, devaluing and destroying fixed assets and physical plant, and attack the workers resistance to wage cuts, diminished standards of living, deprivation, and dispossession. Accumulation for capital never stops being primitive.

S. Artesian

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