Wednesday, December 29, 2004

History and Class, 3


At the end of two decades of civil war disguised as anti-imperialist war, Venezuela had lost 1/3 of its population and almost all of its cocoa economy.

The dis-integrative configuration of the property relations between city and countryside were reproduced in the disintegration of Bolivar's vision of a regional, and continental, republic. In 1829, Paez led Venezuela out of Bolivar's Gran Colombia and into 130 years of government by caudillo, condemning the great liberator himself to the death sentence of exile.

Unable to introduce, impose, organize a fundamental change in the relations of production, the criollo elite opted for substitutes. Coffee substituted for cocoa. The caudillos, bumpkin Bonapartes with private armies, were given the proxy for the exercise of power; maintaining in that exercise order, property, and poverty, with occasional improvements of infrastructure.

Coffee production in Venezuela differed greatly from that of cocoa. First and foremost, production took place on smaller units, utilizing seasonal labor, share-cropping, wage workers. Without the yearly expense of supporting slave labor and with favorable prices, smaller farmers were able to increase their portion of the profits from coffee production. The plantation/slave economy withered.

However, without a developed infrastructure for transportation and communication, the necessary seasonal labor-power could only be obtained if the labor itself were tied to the land through subsistence agriculture. Capital again reproduced itself half-formed, or rather half-deformed, from the material of its own origin. Without the reciprocating demand, the historical need, for access to "free," detached, useless labor in the urban areas, the existence of capitalist relations between land and labor in the countryside could neither create nor satisfy a domestic market; could neither undo nor prevent further concentrations of the land in large, and unproductive, estates; could not reproduce that critical circuit in capitalist expansion where labor is appropriated through its expulsion from production, where labor power provides expanding value through its own relative and progressive diminution.

This "failure" of "development" was not at all the result of "surplus transfers" from the "periphery" to the "metropolis," not at all the result of the extraction of mineral resources, nor the result of the looting of indigenous cultures, nor the inevitable outcome of an economy for export. This was not an underdevelopment forced upon an emerging capitalism by European and North American competitors.

The criollo elite, at its best, dreamed of being a poor substitute for the industrial bourgeoisie. However, without the will, the power, the connection to production to revolutionize relations between land and labor, it was only at its worst, when immiserating almost all of the society, that the elite became truly bourgeois.

S. Artesian

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Saturday, December 25, 2004

History and Class, Part 2

Convergence and Conjunction Continued

The history of the attempted bourgeois republican revolutions in Venezuela is history given short shrift and the shrift reads "too little, too late." Imagining itself inspired by the ideals of the French Revolution, the criollo elite was in reality driven forward by the end of that revolutionary process, by its consolidation within the historical limits of private property.

First convening itself in support of the Bourbon throne and against Napoleon, this would-be bourgeoisie declared itself a junta, then a congress, remaining all the while little more than the city council of Caracas. So began the life of the short-lived La Patria Boba, the Silly Republic.

This first Republic lasted just a year, crumbling in the great earthquake of March 1812, formally surrendering in July 1812. The Republic had ceased to be even before its declaration. The criollo elite were more agents than owners, more functionaries than class. Without that specific relationship to the organization of production, the criollo elite could not press forward a republic as the basis, and the repository, for social equality-- for the equality of producers large and small. Such "equality" is itself formed only in the expropriation and reorganization of rural property as a means of production where expanding agricultural production creates a domestic market for the growth of the technical component of capitalist reproduction; in short, for the expulsion of labor from the production process, from the instrument of production, from the land itself.

Bolivar, embodying nothing more and nothing less than this predicament of the would be national, regional, continental bourgeoisie, of the criollo elite, manifested this historical failure in the second republic, it too lasting just a year.

Only when Jose Antonio Paez, a mestizo caudillo convinced the cattle farming llaneros of the Rio Apure region that social equality was possible only through the overthrow of Spanish rule, was Bolivar able to achieve his victories and establish a third republic.

Still, the actions and the ascendancy of the caudillo measure the weakness of the class as a class, as a force for reproducing new social relations of production, for expanding the reproduction of capital, for "freeing," detaching labor from land. The historical possibility for such separation of labor from private property in land distinct from the emancipation of labor from private property itself was already in eclipse. In this sense, the "backwardness" of the Venezuelan bourgeoisie is the token of advancing capitalism, where capital has run up the wall of a cage from the inside, the cage of private property.

S. Artesian

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Sunday, December 19, 2004

History and Class, Part 1

Distinto, Differente

Capital distinguishes itself, its commodity production, its exchange, from that of predecessors and competitors through the separation of labor from the means of production. Capitalism begins this differentiation through the expulsion of labor from the conditions of its self-maintenance. Reproduction thus of any commodity entails reproduction of labor itself as a commodity, and reproduction of labor is only possible through its organization as labor time. Need, use as qualities are dissolved, subsumed in the continuous exchange between labor power and means of production. More precisely, need, use, and availability exist, converge in the market only tangentially through the exchange of the means of production as private property with wage-labor; and the exchange itself is simultaneously, immediately, and identically, the aggrandizement and expulsion of labor power from production.

Capital realizes itself, reproduces itself as a whole, only through the enforced separation of its parts. This and this alone is what constitutes the freedom of free labor. And this freedom alone is the surplus value, the self-expansion of capital. All other exchanges in the web of capital's markets, those of commodities based on slavery, plantation production, precious metals extraction, mercantile advantage are given value only through capital's ability to reproduce those exchanges in the basic aggrandizement and expulsion of wage-labor; by reproducing its fundamental social relation or production; by undermining the very foundations of those other systems.

In all its moments of contraction and expansion, crisis and boom, capital is driven by the constant relation and ever-changing ratio between the means of production organized as private property and labor organized as wage-labor. Thus at every moment, capital's concerns, its hopes and fears, nostalgia and dread, its shortages and abundances are moments in class struggle.

The inability to recognize capital's specificity determines not only that its past remains misapprehended, mystified; not only that its present predicament be misrepresented; but that its future, and the future prospects for its revolutionary replacement are obscured, submerged, lost. Opposition will become accommodation.

It is in fact the denial and rejection of the specificity of capital's origin that is reproduced in the failures "anti-imperialism," "nationalism," "radical ecology," and of course, my personal favorite, the pseudo-socialist Mal-en-thusiasm of the "left" Hubbertists. This miscomprehension itself is the product of the defeats of the workers' struggles. Historical intelligence no less than personal intelligence is a social product.

Convergence and Conjunction: Venezuela

In 1498, Columbus, on his third voyage, first sighted Peninsula de Paria, leading to the land that would become Venezuela. Entranced by the pearl ornaments of the indigenous peoples, Columbus thought he had discovered the Garden of Eden and immediately compelled the native tribes into extended and dangerous diving for pearls around an island renamed Margarita, from the Greek word for pearl.

Exhausting the pearl beds before the labor source, Spain found little use for the land except for slaving purposes, warehousing the indigenous peoples for shipment to the Caribbean and Panama at Coro and El Tocuyo. Resistance was, and remained, fierce for more than a century, until the indigenous people were all but exterminated. Their resistance, nevertheless prevented the centralization of Spanish rule for two hundred years.

Without easily identifiable resources of precious metals to finance its wars, Spain was so uninterested in the land that it actually dispossessed its own slavers, and leased the territory to the German banking House of Welser.

Some Spanish slavers pushed eastward, and after defeating native resistance, the forces of Diego de Losada established Caracas 1567.

The "value" of Caracas to the mercantile, non-capitalism of the Spanish was not its location dominating the fertile agricultural lands nearby, but its access to the seaport of La Guaira. Reproducing the mercantile, non-capitalist path taken in the Philippines, the conquistadors and administrators ignored most of the territory that would become Venezuela. Instead, Franciscan and Capuchin missionaries explored and subjugated the Rio Unare Basin, the Rio Orinoco, and the Maracaibo Basin during the 17th and 18th centuries, introducing the landed-estate Catholicism so essential to the redemption of souls, and a "friarocracy."

By the end of the 16th century, agriculture had become Venezuela's major economic activity. The provinces of Venezuela, ruled from an the viceroyalty of New Granada centered in Bogota, were agriculturally self-sufficient. Surpluses in wheat, tobacco, animal hides, and meat however were of no interest to the Spanish crown, which could not reproduce the values therein contained. Spain could not support the trade of agricultural surplus to other countries. Britain, France, and the Netherlands could. And did.

In the 1620s, cocoa, indigenous to the coastal valleys and the tropical forests of the Orinoco and Amazon, became the major product for export. Cocoa maintained this primacy for two centuries, replaced by coffee after the years of civil war. The cultivation of cocoa however was patterned upon the social organization of production Spain employed in every arena-- extraction for market, based on forced labor. The plantation and the mine; chocolate and silver were both products and producers of captured labor; labor chained literally to the implements of production; the system capable only of repetition, an arithmetic accretion, rather than expanding social reproduction.

The population of Venezuela was transformed along the historical lines of plantation production. The indigenous people, all but exterminated, reduced to 10 percent of the population, survived only in poverty, attached to the society in continued marginalization. The peninsulares, born in Spain, occupied the highest positions in church, state, and landed property. Criollas, born white but in-country, formed a secondary elite, occupying the professional, functionary, property-owning layers. White Canary Islanders, attracted to Venezuela by the opportunities for cocoa farming, wound up as wage-laborers in the cities or as small farmers, attempting to produce for more than subsistence with their own labor, some employing the labor of freed former African slaves.

By the middle of the 1700s, pardos, those of mixed race, made up half, and African slaves constituted a fifth, of the total population.

Cocoa became part of the triangle trade between Africa and Europe, and as was the case with most of the triangle trade, the Spanish again were originally unable to capture the profits. British and Dutch traders conducted the trades, transporting the cocoa to markets that included Veracruz.

The Spanish crown commissioned a Basque trading company, Real Compana Guipuzcoana de Caracas, known as the Caracas Company, as the sole authorized trading agent for Venezuela.

The Caracas Company was quite successful at monopolizing the cocoa trade. Yet it's monopoly did nothing to facilitate the "progress" of Spain towards a capitalism similar to that of Britain or even Holland. In 1749, the "success" did provoke a revolt, a revolt led by a poor immigrant cocoa grower from the Canary Islands, Juan Francisco de Leon. He attempted to unify the lower classes against the landed-estate mercantilism of the peninsulares. Troops from Santo Domingo were sent to crush the revolt. The criollos stood silently to the side.

That the relations between city and countryside, agriculture and production, land and labor, were so uneven, so ill-formed, was a result not of the weight of advancing capitalism pressing down on the non-indigenous emerging bourgeoisie of Venezuela. These economic relations were the deformed offspring of the already determined yet still emerging obsolescence of the Spanish landed-estate crown economy. The centripetal forces inherent in the forced labor plantation system were supported by the administrative weight of mercantile royalism.

The underdevelopment so determined was an underdevelopment of the bourgeoisie, where landed property could not be liberated as an instrument of production through the separation of the laborer, through the dispossession of individual owners. The dispossession of such owners, the separation of the laborer entailed the emancipation of the collective laborers from very existence of private property itself. Thus the capitalization of land, as an integrated segment of production detaching, expelling labor from its process of reproduction, became an impossibility. And in Venezuela, the maintenance of the landed estate system through African slavery made every revolutionary impulse of the criollas a threat to their own privileged economic status.

Saturday, December 11, 2004

Buying Time

Note: This article was written in 2000, and buying time refers not only to the way capital organizes its functions, daily, weekly, yearly, but also to the fact that while I am working on something that requires more time than I have, I don't want to lose your interest, modest or immodest as it, and I, may be.

Hopefully, it, the article, will be worth the wait, and the purchase, but I make no guarantees.

S. Artesian

Havana C+

A ten thousand ton elephant sat inside the Palacio de las Convenciones at the Second Conference of Economists on Globalization and Problems of Development. Omnipresent, yet invisible. Snoring soundlessly. Impervious to the criticisms that were short of merciless. Unharmed by attacks falling short, going wide of and missing the mark, and the market. That elephant was the United States economy. The United States doesn’t exist as a national economy at all, but as the lynch pin of a global economy spinning rapidly between success and failure, spinning simultaneously between the appearance of prosperity and the reality of deprivation.

That the elephant was there, slept so soundly, was so impervious, wasn’t due to the lack of effort by those assembled for this second conference. Effort isn’t everything. Almost isn’t close enough, and close doesn’t count. To reach a conclusion, you need the beginning. And the beginning for globalization is a continuous assault on the living and laboring standards of the working class, on the global level. That beginning can be traced to 1973 when the ruling capitalist ruling class, that of the United States, launched two critical tactical assaults, one the dramatic increase in oil prices, and the other the overthrow of the Allende government in Chile. The former rearranged profits in the world economy to offset the declining rate of return confronting the oil corporations. If OPEC hadn’t existed, the United States would have had to invent it. OPEC did exist and the United States still had to invent it.

The latter was the overture to the ideology of "liberal" globalization where the virtues of the free market, the wisdom of the invisible hand of capitalism, were secured by bayonets against the free collective actions of the Chilean workers. The working class of the entire world, east and west, was going to go to school, the Chicago School. The Chilean workers were the first class of an industrialized country to be subject to its discipline, its curricula anti-vitae of privation and military terrorism.

The results and prospects for globalization are marked by specific and general declines in the living and laboring standards of the working class on a global basis. As such, it is a logical self-contradiction, an oxymoron, to discuss the "benefits" of globalization based on the "economic" performance of any particular country or even group of countries. The ideology of globalization demands that its performance be analyzed on the global platform. The much lauded performance of the United States economy since 1992 is not a result of some free market wisdom. It is the product, the culmination, of a twenty year program of reducing wages, minimizing labor costs, devaluing and depreciating fixed industrial capital, and increasing the rate of exploitation, and doing all those things on a global scale. In a nutshell, animating proportionately more capital with proportionately less labor power, thus offsetting a decline in the rate of profit with higher rates of exploitation. The inevitable result of this process is overproduction as the costs of the production process for each of the units of production decline while the overall investment increases more rapidly than older equipment can be depreciated. Then the methods of depreciation and devaluation become more drastic, moving from debt to bankruptcy, from attrition to destruction, from austerity to war.

Like good generals, good economists are always well prepared to fight the last war again. So that critical analysis of the success of the US economy begins at just that moment when the success is fading. This year that success is blinding. Next year, after the US has slipped into a recession, after the capitalist class has installed a Republican president to preach the gospel of austerity and the virtues of poverty to those whose lives are about to made more austere and more poor, the long expansion of the US economy will be a shadow. The journals of finance and commerce will be pointing to the low savings rate, the assumption of debt, the trade imbalance, expanded consumer spending, low interest rates, raised interest rates, increased speculation, excess liquidity, decreased liquidity, all those elements of the previous period’s growth to explain the contraction. You can bet on it.

"There are lies, damn lies, and statistics," said the US author, Mark Twain. The claim that capitalist globalization has led to rapid global growth is a lie. The assertion that the capitalist growth has benefited all classes is a damn lie. But the prosperity of the US economy is a statistic, more damning than a damn lie. That growth has been the producer and product of growing inequality. For the United States prosperity has meant not so much the production of wealth as the reapportionment of the produced wealth, the transfer of wealth from the pockets and hands of the poor into the financial instruments of the rich.

After the first oil shock of 1973-74 real wage growth slowed drastically in all countries. After the second oil shock of 1979, the United States capitalist class unleashed its penultimate weapon against the working class, --higher interest rates. No less important, no less brutal than the 1981 dismissal of the striking air traffic controllers, high interest rates began the process of locking out, on a class scale, hundreds of thousands of organized, highly paid, production workers. Railroads collapsed, steel mills closed, the United Auto Workers lost half its membership. By 1998 unions represented only 13.9 percent of the total labor force and only 9.4 percent of workers in the private sector.

The internal trajectory of the US economy was matched in the international arena, where the US launched its ultimate weapon against the working class. The US support for counterrevolution in Afghanistan had as its real target, the living standards of the Soviet workers. The population of Mexico was sacrificed almost en masse at the altar of higher interest rates. The living standards of the Mexican workers have not recovered to this day and stand as the real message of NAFTA and globalization.

If interest rates were the international demand of capital against the working class, exports, imports, trade was the supply to that demand. Thus, Jaruzelski in Poland, in his struggle against the Polish coal miners and their strike, could count on Thatcher to supply him with coal mined by British miners, and then repay the favor in kind when Thatcher, closing pit after pit in Britain, imported coal from Poland and broke the British miners’ resistance.

During that decade, as wage rates were being driven lower, and as manufacturing capital was being depreciated, more capital was deployed into financial instruments. The 80s opened with the firing of the air traffic controllers. The 80s closed with the collapse and bail out of the savings and loan industry. Between and throughout the beginning and end of the decade was the leveraged buyout, where debt subjugated equity, liquidated productive assets, and used the proceeds to reward itself for a job well done. The leveraged buy out was in fact, the financial equivalent, of the owners’ "lockout" of the workers, as manufacturing wages declined precipitously during the sell off and shutdown of industrial assets. The leveraged buy out was capital’s own preemptive bankruptcy. In reality, the Washington Consensus was nothing other than the imposition of the leveraged buy out economy on the world economy.

The nineties opened, finding once again in oil the concentrated version of the movement of capital. The overproduction of oil called forth the invasion of Iraq and the destruction of its production capacity. This grand alliance of capitalists from east and west and would-be capitalists from the east, marched in unison to a cadence pounded out on 55 gallon drums.
In the United States, the legacy of the drastic depreciation of manufacturing capital in the 80s was reflected most acutely in the "new" structure of poverty, a wage poverty. Between 1974 and 1994 the proportion of US workers making less than 75 percent of the median wage increased by 10 percent, from 31 percent of 34 percent of the total. While the number of workers engaged in manufacturing remained stagnant between 1980 and 1997, that total represented a 50 percent decline in relation to the total labor force. Class I railroads reduced employment by more than half. Petroleum production employed one-third fewer workers. During this period, real hourly earnings in private industry declined by five percent.

The period from 1992 through 1999 in the United States has seen average annual increases in capital spending of approximately nine percent. This is a rate far above the historical average. The investment has been concentrated in the means and methods of communication and transport. For example, the capital budget in 1998 for one particular class 1 railroad exceeded the amount spent in 1981 on capital programs for the entire railroad industry.

Between 1987 and 1997, US producers’ net stock of durable equipment doubled for information processing and communication, increased by 25 percent in transportation, and by 18 percent for industrial production. The truck, actually the container, and the telephone are the twin symbols of capital’s charge through the world markets. With the efficiencies in communication, information processing, and transport, capital is able to reduce both the time and the costs of circulation, thus "sharing" less profit with the mechanisms necessary to realize those profits in the markets. Just as important, the biggest consumer of capital, the largest demand for capital comes from capital itself. Demand economics, public consumption, has precisely nothing to do with the expansion or the general well-being of the capitalist economy. Profit has everything to do with that economy. Profit is that economy. Between 1980 and 1997, manufacturing as a percent of the total US economy declined by one-third, however the relation of manufacturing profits to manufacturing doubled.

It is the gravitational pull of the US economy, for better for the capitalists, always for worse for the workers, that accounts for the impact and transformation brought about through globalization. If globalization has changed certain characteristics of the economies of developing countries in general and Latin America in particular, an increase in direct lending by banks, accelerating use of capital markets, the decline in foreign government and official aid, an apparent shift from "commodity" (natural resource) production to technology and industrial based exports, certain characteristic remain the same, and they remain the same in their decline.

Despite the emphasis on world trade, exports of technology and industrial products, the terms of that trade have worsened for the non-OECD countries in general and Latin America in particular. Between 1981 and 1998 Latin America’s share in world exports declined from 4.7 percent of the total to 3.1 percent. For non-OECD countries as a whole the decline was from 34.6 percent to 27.5 percent. The decline in the share of imports for Latin America was from 4.9 percent to 4.1 percent. For the non-OECD countries it dropped from 32.7 percent to 27.3 percent.

The worsening of the terms of trade during this the self-proclaimed utopia of world trade provides insight into the fundamental character of globalization: all capitalist economy is the economy of extraction. The use of debt, the terms of repayment of that debt, the assaults on a national currency, the flights of capital are manifestations of the economy of extraction, the transfer of already existing wealth to those with the greatest already existing wealth.
The mechanisms of capital’s stabilization are mechanisms of dynamic disequilibrium. So that grants, aids, loans, currency supports, special drawing rights, even tourism become new vectors for destabilization and exploitation. That is the lesson of globalization. The meaning of that lesson is not that new and more refined mechanisms for aid, support, and trade are required. Regional trade groups, currency blocs, restrictions on capital flows, like growth itself, have only the transient existence allowed by a specific moment in global capital movement. At the next moment, these mechanisms are attacked, shattered, and converted into mechanisms of destabilization. Currency hedging, for example, was initially utilized by transnational corporations to stabilize their earnings and protect their business activities from swings in currency values. So much for good intentions.

Globalization is the activity of a specific class controlling a specific organization of the economy. As such, globalization is both program and power. A significant response can only be created in a program of power for a different class, a class that takes upon itself the immense burden of providing initially for the simplest of needs on its own terms. Where there is no access to sanitation, that class of workers takes the responsibility for demanding and creating that sanitation. Where there is no safe water supply, that class demands and accepts the responsibility for providing that water supply. Where disease and infant mortality compete with drought, flood, and famine for the crown of misery, that class demands the power to overthrow the crown.

S. Artesian

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Sunday, December 05, 2004

Reprint on Reproduction

The Wages of Overproduction

1. The Rewards of Empire

At a cabinet-level meeting of the faith-based initiative called the Bush administration, boy George entered the executive office holding a stack of envelopes in one hand and the bible in the other. "Mail call," called the first male, licking his lips as he tossed brown envelopes to all present. The officers of the state tore into their envelopes like school children tucking into ice cream. Inside each envelope were three checks issued by the US Treasury, payable to the officers of state as private citizens. Soon all joined the President in the smacking of lips so appropriate to this banquet of salesman, consultants, dissemblers, entrepreneurs, golf pros, dimwits, extortionists, and con men.

These checks were not another in the series of tax refunds that had done so much for so few. The President knew, because somebody had told him, that these checks were better than tax refunds, although he wasn’t sure that was possible. The first check was the peace dividend, secured in the collapse of the Soviet Union, realized in the destruction of Afghanistan, Iraq, Gaza, the West Bank and collateralized by the insolvency of private pension plans. The second check was a payment based on the complex formulas of the oil depletion allowance, where the price of oil is adjusted to deplete earnings from all the other endeavors of capital. The third check, by far the smallest sum, was the profit sharing distribution of US corporate capital to its bagmen. The Secretary of Commerce, chagrined, shrugged his shoulders as if to say, "What can I say?" What he did say was, "Wasn’t really that good a year."

The President surveyed his ministers. He started to tell them not to spend it all in one place, but the Vice-president interrupted him. Cheney knew. What, where, and how much didn’t matter. It would all be spent in one place.

2. Your Check is in the Mail

In 1991, the military victory of the US in the Persian Gulf was overshadowed by the victory capital would achieve in conquering a bigger and better target. Moscow. Compared to the money to be made in demolishing the social base of the Soviet economy, the destruction of Baghdad was a distraction, and so the position was closed out, temporarily.

Moscow, the dream of the millions of dwarf Napoleons, mini-Pauluses, midget Pattons, was open to the future, the market, and most importantly, the futures market. Shortage, scarcity, hoarding of goods; dismantling, shuttering of the industrial plant; immiseration of the population in general and dispossession of the workers from the work place in particular raced through the economy, an army of disorganization and destruction unencumbered by the need for resupply, an army organized against resupply, replenishment, reproduction.

Capital was triumphant. More or less. The dawn’s early light was the glow of trash fires burning in Moscow, Manila, Mexico City. Letting freedom ring was the opening bell of the New York Stock Exchange. There was liberty with options and strike prices for all. Almost. Everything looked good when backlit by piles of depleted uranium.

US capital, emerging from the recession of 1990-1991, securing the home front advantage through the NAFTA accords, had two bulges in its pants pockets, one guns and the other money, and was happy to see both of them. Capital spending began a sustained long march where it increased its stride by an average 12 percent each year. In 1994, the manufacturing sector accounted for the single largest amount, some 28 percent of the total. Within manufacturing, expenditures on motor vehicles and vehicle parts, and communications equipment/computers were the largest components. The service sector had the second largest expenditure, and 20 percent of that was concentrated in auto and truck rental. The communications industry increased spending 7.6 percent. Spending on communication and transportation as a whole measured 25 percent of all capital spending.

Capital spending in 1996 was 30 percent above the 1994 level, with manufacturing expenditures close to 200 billion dollars. Communications spending had increased 40 percent from the 1994 level.

The pattern of capital spending increases was to continue. By 2000, US capital spending was twice the 1994 level. Capital spending in the now titled "information" sector increased 34 percent from 1999’s mark. Spending in wired telecommunications was up 31 percent. Spending for wireless communications increased 77 percent.

The expenditures on communication, information, and transportation, in a word- circulation, are expenditures on the realization of the value derived from the exchange of capital with wage-labor. The expenditures are part of the total costs of production. For the individual capitalist owning the fleet of trucks, the locomotives, or the fiber optic network, money is spent on these mechanisms to reduce his or her unit cost in circulation process. And by 2000 unit costs for freight transportation had declined 50 percent from the 1990 level.

For capital as a whole, improvements in the circulation process bring the commodity to market faster and more cheaply, presenting not only a saving in units cost, but an increased velocity of capital’s turnover, and the velocity of the turnover is critical to both the mass and rate of profit.
Between the appropriation of surplus value in production and the realization of that value as profit there are the boundaries of time. It is in fact in this gap between appropriation and realization that capital confronts its self-contradiction as social production and private property. The exchange between capital and wage-labor is only half-completed in the transformation of social labor into private property through the production of commodities. The commodities themselves, the private property itself, has to prove itself socially necessary in relation to all other commodities, and prove it fast. Capital organizes itself at every opportunity to compress the delay in the process of realization. Production drives circulation forward, demanding that its own speed be matched in the markets by the speed of the transformations of commodities from values to objects and from objects to expanded values. The time of circulation, the costs of circulation, are absorbed into the reproduction of capital as part of the total cost of production. The accelerated turnover of capital facilitated by improved circulation both appears as increased cash flow and disappears as part of the increased profits of capitalist production.

3. Your Separate Checks are in the Mail

The bourgeoisie see in the separation in time between production and circulation, expropriation and realization, as more than a delay, and more than an obstacle, but as the separation between production and value itself. Realization is mistaken for creation. Cost and only cost is attributed to production. Profit, and thus value itself is the result of the market. Capital expenditures appear to exist only to reduce unit costs, to increase productivity, output per hour. Yet, in making the improvements in the machinery of circulation part and whole of reducing the costs and increasing the velocity of the commodities brought to markets, these improvements become necessarily improvements and costs of the production itself. Then everything that occurs in the circulation of commodities, in the attempted realization of profit, in the reproduction of capital is the reflection of the primary exchange at the source of capitalist production, between wage-labor and capital, a reflection of the expropriation of surplus value.
Certainly, the expenditures made in the 1990s did increase output and productivity. Between 1992 and 2000 US manufacturing output increased 42 percent, and output per hour grew 50 percent. But more than that, or more than equal to that, the capital expenditures positively restrained wage demands of the workers. Real hourly compensation in manufacturing grew only 9 percent. In terms of purchasing power, while the increase in producer prices between 1992 and 2001 reduced the power of the dollar used by production owners by 12 percent, the increase in consumer prices reduced purchasing power for wages by 22 percent.

Productivity, then, measured the accelerating expropriation of surplus value, where the workers, as a class, reproduced the social equivalent of the value necessary to sustain a relatively declining standard of living in less and less time. That’s the hard mouthful to swallow about the great boom of the 1990s.

In specific sectors, productivity exceeded the 50 increase for all of manufacturing. Productivity increased 60 percent in basic steel production, 70 percent in petroleum refining, 100 percent in coal mining, 400 percent in telecommunications, and an astounding 1100 percent in electronic component and semiconductor fabrication.

With the accelerating extraction of surplus value, both the rate and mass of profits for US manufacturing increased with the rate of growth of profit exceeding the rate of growth of sales. Between 1991 and 1997, US manufacturing net sales increased 40 percent while net operating profit increased 65 percent. Between 1997 and 2001, net sales grew 10 percent. Net operating profit which had grown by 15 percent to year 2000, fell by almost half, to mark a negative growth rate of 40 percent for the 4 year period.

Profit rates are calculated differently by almost every econometric group who after all have to distinguish their statistical products from the other products on the market, but all the such groups agree that 1997 was the peak year for the profitability of US manufacturing. In a study released in 2002, The Bank of England calculated the peak rate of profit for US manufacturing occurring in 1997 and measuring 25.2 percent (see "International Comparisons of Company Profitability," Economic Trends No. 587).

In 1997, investment in information processing equipment and software accounted for 32 percent of all new nonresidential fixed investment. In 1999 information processing accounted for 34 percent of the total, and in 2000 it reach 35 percent. The application of this technology to production and circulation, to inventory and material requirements, to asset utilization, meant that greater output could be achieved with reduced production costs, and just as importantly to the process of general capitalist accumulation, relatively stable production prices. Thus the boom era with its highly touted "efficiency of the markets" was nothing but the reflection of the tremendous technological inputs to production.

Capital imagines itself as the eternal, permanent, and ultimate creation of the market. In reality the market merely reflects the exchange between capital and wage-labor. Capital expands. The expanded capital, the expanded inanimate property, then becomes the zero sum all over again and must exchange ever more of itself with wage-labor. Thus the more capital accumulates, the more it exchanges with wage-labor, the more it reproduces wage-labor as a shrinking proportion of the process, the less capital exchanges of itself with wage-labor. The rate of profit declines and the very expansion of capital becomes the growing zero sum. Circulation then realizes the declining rate of profit in the shrinkage of demand, in the slowdown of reproduction, in the decline in the mass of profits. The falling rate of profit is product and producer of overproduction.

4. A Brief Digression: Speculation: Your Options, Derivatives, Futures Check is in the Mail, But the Mail is Delayed: after 1997, in Asia, after 2000 in the US.

A New Neue Rheinische Zeitung, May-October, 1850/1998-2003

"What appears to the superficial observer to be the cause of the crisis is not overproduction but excess speculation, but this is itself only a sympton of overproduction.....we shall enumerate only the most significant of these symptoms of overproduction....
...Anyone who saved a penny, anyone who had the least credit at his disposal, speculated in
railway [emerging market, internet, energy trading, fiber optic, telecommunication] stocks [debt, currency, interest rate swaps] ...Printers, lithographers, bookbinders, paper-merchants and others, who were mobilized to produce prospectuses, plans, maps, etc; furnishing manufacturers who fitted out the mushrooming offices of the countless railway [emerging market internet, energy trading, fiber optic, telecommunication] boards and provisional committees--all were paid splendid sums.... There gradually arose in this period a superstructure of fraud reminiscent of the time of Law and the South Sea Company [and the Savings and Loan debacle]. Hundreds of companies were promoted without the least chance of success, companies whose promoters themselves never intended any real execution of the schemes, companies whose sole reason for existence was the directors’ consumption of the funds deposited and the fraudulent profits obtained from the sale of stocks. [Hundreds of companies collapsed, companies which a year or two before were heralded as vibrant, healthy, vital. Companies where real productive assets had expanded at an astonomical pace. Companies whose shuttering, destruction, bankruptcy was triggered by the self-devaluation of capital as the rate and mass of profits declined from yesterday’s, just yesterday’s high, and liquidation replaced liquidity as the demand of creditors.]."

5. Semiconductors: Capital on a Wafer, or, The Transubstantiation of Value, or, Your Virtual Check is in the Email

Semiconductor fabrication has always been a cyclical business, but a cyclical business with a difference. Over the past 40 years, the semiconductor industry has achieved a compounded annual growth of 17 percent per year. That’s a big difference.
The capital investment requirements of the industry are enormous as the production process can only circulate its capital and operating costs by introducing accelerating speeds, power, and quality to each successive product, thus devaluing its previous products, its previous capital investments. Technical innovation in the production process through capital investment reduces the unit costs of production in conjunction with the technical innovation of the finished product.
The result of this juncture of technical innovation in both process, measured by cost per kb, and product, as measured in millions of instructions per second (MIPS) has been the dramatic decline in semiconductor prices. Private and government organizations have taken on the challenge of quantifying the adjusted price drop for semiconductors, expressed in dollars per kilobit for the individual products of the industry and for all products. The US Bureau of Economic Analysis has that ratio for DRAM chips produced in 1975 at 1.8125. In 1995, the ratio was calculated at .0030 or 1/600th of the 1975 ratio. For the total basket of products, the index of prices in 1996 were less than half the index of prices in 1992. The rate of growth of semiconductor prices for the period 1975-1985 is a negative 36.9 percent per annum. For the 1985-1996 period, the annual rate of decline was approximately 20 percent.

In the mid 1980s, Japan was the source of most of the world’s DRAM production. US companies, reluctant to invest in what had become essentially contract bulk production, abandoned the field and retooled for the production of specialty chips, microprocessor systems,
MOS logic chips, and flash memory products. Intel, which accounts for 80 percent of microprocessor sales, developed its "copy exactly" fabrication plant system during this time, bringing these plants online in the mid 1990s. Revenue per employee, measured at $114,000 in 1985, climbed to $461,000 in 1995. Overall corporate revenues tripled while the work force had declined some 30 percent. The estimated capital investment in each new fabrication plant was $1.2 billion.

For the semiconductor industry as a whole, product sales increased 265 percent between 1991 and 1995, leaping ahead 40 percent in 1995 alone, only to collapse in 1996 as the industry had produced too many fabrication plants extracting proportionately more surplus value from less labor and thus, could not offset the reduced rate of profit. Sales declined 8 percent in 1996. Sales did not exceed the 1995 mark until 1999 when revenues were reported at $149 billion.
At the same time as fabrication plants were being closed in 1996-1997, the industry began again its cycle of technical innovation in production process and product. This process centered around developing the 300mm fabrication process, in which a larger wafer would be the basis for production, yielding a greater number of processors, with each processor of greater quality than the previous generations. The capital requirement for each 300mm fabrication plant is estimated to be $2.5 billion.

Capital intensity in the production process, the increased value of the instruments and products used in fabrication, had recorded a compound annual growth rate of 13 percent between 1987 and 1995. Between 1995 and 1999 that growth accelerated to reach 19 percent.

The microprocessor fabrication process was re-engineered to produce an economically viable yield at a faster rate. Utilization of more advanced and reliable manufacturing equipment, faster and better methods for wafer inspection were employed to decrease the time from production to market. Through this acceleration, the fabrication process sought to offset the devaluation of its previous products and techniques.

Sales again rocketed forward, this time to $204 billion in 2000. And once again, at their new historical peak, sales collapsed. In 2001, sales fell to $139 billion. By the end of 2001, 34 fabrication plants, 11.5 percent of the North American total, had been taken out of production.
By the very demands of its own process to realize profit, semiconductor fabrication has replaced its cyclical nature with a structural predicament. The industry itself recognizes that the 2001 contraction is more severe and different in kind than the previous cyclical downturns. Capital spending in 2002 was 38 percent below the 2001 level.

The structural predicament is the result of the accumulation of capital depressing the margin of profitability. The implied margin (revenues minus costs, divided by total revenues) in the fabrication process had declined by 17.5 percent between 1993 and 1999, from 88.2 to 72.8. At a certain point the expansion of production, the increase in the mass of profits cannot offset this decline in margin, this fall in rate of profit. We call that overproduction.

6. Your Check Has Been Lost, But the Bill is Due. Please remit.

If in the past, the years of Thatcher and Reagan and Jaruzelski and Pinochet, capital sustained itself through reducing the standard of living of the society as a whole, the workers in particular, and by creating more and more impoverished poor, that "solution" while still available and still utilized, is no longer sufficient. The structural predicament of capital is no longer remedied by lowering wages, by aggrandizing more surplus value. The structural predicament is the structure itself, the development of the capacity productive apparatus beyond its capacity to reproduce enough profit quickly enough. Now the capitalists, wedded not to production, not to any objects of production, not to any need or use for such products, not to any part of social framework necessary to sustain the previous growth of industry, but only to property and wealth, sees in those articles and objects, that productive apparatus, that social framework, in all that accumulated, crystallized, labor a living threat. A threat no less real than that of workers on strike.

The bourgeoisie, to preserve their property, have to attack and destroy the existing productive capacity. The bourgeoisie sees a possible solution in the South Korean "model," dismantling and selling off productive capacity; or in the Russian "model," reducing GDP by half, life-expectancies by 40 percent; or in the Iraq "model," destroying outright the productive capacity, infrastructure, welfare apparatus of an entire country.

The struggle against capital is the struggle for social expropriation of the means of production. It is a collective act against the destruction of human labor by the demands of private property. Those are the terms of the struggle forced upon the workers, who organized as part of capital itself must stand for the emancipation of all of society from the demands of profit in order to achieve its own emancipation.

Originally produced August 2003.
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Saturday, November 27, 2004

Electric Slide

1. Big Surprise..not really. In 2003, global use of coal increased 6.9 percent over 2002 levels. Oil consumption, by comparison, increased a "mere" 2.1 percent. Prices jumped 80 percent to $50 a ton. US production measured nearly one billion tons, with 04 production estimates up another 3.7 percent to 1.2 billion tones. China's 2004 production is estimated to jump 10 percent to nearly 2 billion tons. The only thing missing is the usual doomsday chorus from the miserable claque of hydrocarbon depletionist-heat death carolers, tolling their Calvinist Christian curve shaped bells and bell-shaped curves, announcing the approaching, or surpassed, peak of coal production; the impending decline of coal reserves; the beginning of the coal wars.

So where are they? Why aren't our little anti-Santas out there, telling everybody that the one thing that for sure won't be in next years' stockings are lumps of coal?

2. It's electric....really. Coal accounts for 50 percent of US electricity generation, and accounts for it pretty cheaply. A current prices, coal costs $3 per million BTU while gas is $7 per million and oil cost $8 per million. Oil use for electricity generation reached 30 percent in 1979, declining almost steadily to 3 percent in 2003. That decline has been more than matched by the increase in use, and the increase in generating capacity, of natural gas fed units. In 2003, natural gas was used to generate 629 billion kilowatt hours, approximately 15 percent of the US total.

While natural gas usage grew 169 percent overall between 1970 and 2003, all of that growth occurred after 1990. Between 1970 and 1990, natural gas generation showed zero growth. Growth, consumption, supply, demands are, under capitalism, always functions of production. Production is a function of investment, and investment is always a product itself of profit.

Between 1960 and 1970, US electricity demand grew at 7 percent, doubling both the rate of growth of the overall economy, and its own size. US generating capacity also doubled, adding some 17 million kilowatts per year, to 336 million kilowatts. Despite, or rather due to, the increase in oil prices and the general slowing of overall economic growth in the 1970s, electrical generating capacity added another 23 million kw per year. In the 1980s, OPEC and Volcker finally got through to those fixed asset fetishists in the generating industry. Capacity growth was brought into a 1:1 correspondence with the overall (lack) of economic growth. Happy days weren't here again, and that was the good news the executive branch of finance capital wanted to hear.

Electrical generating is always to the story of too much too late, capital spending, and too much, too soon, capacity expansion. Between 1980 and 1999, capacity expansion grew a modest 10 million kw per year, but after 1995, capital spending began to accelerate at rates greater than both output replacement and economy wide capital expenditures. Utility expenditures in 1999 exceeded 1998 levels by 24 percent; expenditures in 2001 expenditures exceeded 2000 by 35 percent. Between 2000 and 2003, the US added 186 million kw of generating capacity, a rate of growth 3-4 times that of the economy as a whole, and 4 times the consumption rate of growth.

It's a gas... Utilities, whether power generation or goods circulating (transportation), are compelled to size capacity to peak demand. In electricity generating, capacity is summer capacity designed to meet the peak demand during the summer months. Between 2000 and 2003, summer capacity increased 125 million kilowatts. Eighty percent of that increase consists of natural gas fed, or dual-fired (gas, with oil backup) installations. In fact, ninety percent of all new capacity is gas or dual-fired.

Capacity margin is defined as the difference between total generating capability and actual or estimated peak load. The industry tracks peak loads separately for summer and winter months with summer loads 12-15 percent greater. During the prior slow growth period, summer capacity margins were reduced from approximately 30 percent in 1982 to 7 percent in 1999.

In 2001, capacity margins had increased to 12.2 percent, and by 2002 orders for future generating equipment collapsed. New generating installations were being discounted up to 50 percent in distress sales. Overproduction, the alpha and omega of capitalism was laying these plans of continuous, accelerating, expansion to rest, as it had with the telecommunications, semi-conductor, steel, and petroleum industries.

Increases in natural gas prices were not in fact the product of accelerated rates of consumption. The price increases were mechanism for devaluation of fixed assets, the overproduction of which were both product and producer of declining rates of profits.

Three quarters of electrical generating costs are fuel costs. Natural gas unit costs ($/BTU) are about twice that of coal in electricity generation. Operating costs are theoretically recovered through extended efficiency and reduced maintenance of the generating units themselves. But those are costs retrieved over time. The real meaning to overproduction, to reduced rates of profit, is that time is running out.

S. Artesian 11-27-04
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Tuesday, November 16, 2004

Imperialism Reconsidered Reposted

Donde Estan Las Super Ganancias?
1. The problem with death is that it makes it hard to develop a position. Others do that for you, and generally do a poor job, since they are adapting a work cut-short rather than developing a work in progress. The body gets put in a crypt, or a mausoleum, or an urn, and the words get carved into tone. In both cases, the breathing has stopped. The metabolic process ends. Ambiguity, critical, essential contradiction is replaced by canon.

Lenin's theoretical positions are infused with exactly this sort of ambiguity, vital imprecision, that manifests itself in programmatically awkward formulations. While such imprecision and awkwardness appears in remarkable contrast to Lenin's tactical clarity, his political decisiveness, the ambiguity is essential to the of the tactical decisions as it allows Lenin to "catch up with history," once history, that is to say the class struggle, has taken matters into its own hands and out of arms of theory. So we get Lenin's position that 'class consciousness' can only be brought to the workers from 'outside,' a position overwhelmed by the revolution of 1905, demolished in the organization and functioning of the soviets, and transformed by Lenin himself in the demand for "All Power to the Soviets." We get Lenin's characterization of the anticipated Russian revolution as "democratic dictatorship of the proletariat and peasantry," a construction of such internal contradiction, such compressed disorder that it can barely be uttered without stumbling over the words. Still, the very awkwardness of the construction facilitates its own abandonment when the Russian revolution manifests itself as the task, the necessity of the Russian working class. And just as revolution poses, resolves, reposes the links of class and history, production and power, the same demand, "All Power to the Soviets" resolves the ambiguity in Lenin's formulation and transforms the workers'struggle into part of the permanent revolution.

Written in 1916, Lenin's Imperialism: The Highest Stage of Capitalism sought to develop a general picture of capitalism at the start of the 20th century for both political and polemical reasons. Almost everything Lenin wrote was written for and as the fusion of the political and polemical. In this case, the political reason was to assess the mechanisms for capital's accumulation, expansion, and concentration which drove the system as a whole into world war. The polemical reason was the refutation of Kautsky's writings on imperialism.

Lenin had correctly assessed Kautsky's formulations as an index of and to the Second International's accommodation to capitalism, and the socialists' surrender to capital's first world war. Something, some things, had obviously changed during the life of the Second International. These things prefigured the war and the International's capitulation to the war. Lenin knew that the actions of the particular national capitalism's so furiously engaged in executing their own and each
other's soldiers, were in fact actions required by the needs of international capital as a system, maintaining itself as a whole only through the sums of the destruction of its parts.

Where Lenin clearly identified the changes in the manifestations of accumulation and reproduction, he ambiguously identified these changes in the mechanisms for appropriation with the requirements of appropriation itself. Lenin imprecisely records the manifestation of capital's development and maturation as fundamental shifts in capital's accumulation process itself.

The resolutions of Lenin's ambiguity regarding party and class and the social content of the Russian Revolution benefited from a revolution ascendant. The ambiguities, imprecisions, and contradictions in his Imperialism: The Highest Stage of Capitalism, had no such luck. Despite the victory in Russia, the revolution as the overthrow and replacement for the totality of capitalism is contained, rolled-back, and defeated, beginning with its very triumph in isolation. Then the imprecise characterizations Lenin makes during this ebb and flow become, on his death, a living part of the retreat of the revolution itself. The very notions of "super profits," "bribery of the working class," in part or whole, the distinction between the export of capital and the export of commodities, imprecise, confused, awkward and mistaken, are taken over and substituted for the analyses of the social relations of production. These notions reflect the failure of the revolution to apprehend capital as a whole, misidentifying changes in the technical composition of capital as changes in capitalist appropriation, and therefore, as changes in the relations of classes. With the death of Lenin, the polemic becomes gospel, the imprecision becomes dogma, the ambiguity is replaced with ideology.

2. When Lenin traces the concentration and accumulation of capital in the metropolitan centers of capital, he is looking back to the emergence of capital from its "long recession" of 1872-1892. Lenin links the concentration of capital in cartels, trusts, and banks, into the emergence of finance capital, a "liquid" form of property, requiring export to colonies to find successful employment as self-expanding value. Lenin then identifies this export of capital to "backward" countries as the "typical," signal, characteristic of modern capitalism.

It is the export of capital replacing the export of commodities that distinguishes mature imperial capitalism from emerging market capitalism. The truly typical features of Lenin's assertion regarding the export of capital are imprecision,
confusion, and ambiguity. While Lenin notes the growth in capital invested abroad by metropolitan Europe, he fails to compare that capital value to the value of commodity exports. He distinguishes between the capital exported to America and the capital exported to Asia, Africa, and Australia, but he does not distinguish Canada, or the US, or Australia from Jamaica or Argentina. He misexplains the reason for the export of capital, stating: "The necessity for exporting capital arises from the fact that in a few countries capitalism has become 'over-ripe' and (owing to the backward state of agriculture and the impoverished state of the masses) capital cannot find 'profitable' investment."

Developed capitalism by nature and definition has to develop agriculture to the degree where it can sustain industrial production in order to separate the population from the means of subsistence and to sustain the entire population. The expansion of commerce, the production of commodities, requires a coincident capitalization of agriculture. The metropolitan capitalist countries exporting capital are the countries with a developed agriculture. And finally, Lenin contradicts himself in his ninth chapter when he provides a table of the increased
export trade of Germany coincident with its increased exports if capital.

The distinction between the export of capital and the export of commodities is at one and the same time valuable and inconsequential. It represents capital's attempt to escape its earthly chains as actual articles of production and use, and ascend to heaven as pure, ethereal, detached value. And the export of capital proves the impossibility of this afterlife as capital is forced to reproduce its earthly self in these Edens by repeating the purchase and exchange of the means of production and wage-labor.

The distinction between the export of capital and the export of commodities is a temporal distinction, indicative of a phase in capital's metamorphosis from value to expanded value. The distinction is not a change in that metamorphosis of capital itself. The only purpose for the export of capital is to increase profit and increased profit can only be realized in the increased circulation of commodities.

3. So what of the current conditions of capital, the current valuations of the export of capital and the valuations of the export of commodities? If Lenin found the study of capital at the close of the 19th and opening of the 20th centuries valuable, a similar review of US capital exports at the close of the 20th and opening of the 21st centuries might be helpful.

Between 1992 and 2001, the US direct investment abroad (USDIA, also known as FDI) grew from 502 billion dollars to 1,382 billion dollars on a historical-cost basis
(US Bureau of Economic Analysis, July 2002). This growth was coincident with rates of internal US capital investment and rate of profit higher than that of any period after 1969. The increase in FDI was part and parcel of capital finding profitable investment in a mature capitalism, with a highly capitalized and efficient agricultural sector.

The export of capital also coincided with increased US exports. Between 1992 and 1997, US FDI expanded 75 percent while exports of goods and services grew 50 percent. Between 1998 and 2001, exports grew only 6.8 percent while FDI grew 38 percent. This discrepancy is exactly the expected result of the overproduction, the overinvestment in the means of production, depressing the rate of profit and reducing profitable exchange. Indeed, the market value of US FDI declined 11 percent between 2000 and 2001. The actual amounts of capital exported as FDI fell from 120.3 billion dollars in 2000 to 88.2 billion in 2001.

Equally important is the destination of these FDI capital exports. On an historical cost basis, 52.5 percent of US FDI is based in the advanced countries of Europe, 10 percent in Canada, 19.5 percent in Latin America,and 15.6 percent in Asia and Pacific (including Japan and Australia). In all these areas, US FDI, US capital exports, have accompanied increased exports of goods and services. In fact, the largest trading partners of the US are also the focus for the greatest capital exports and precisely because of the increased trade capital exports have been able to find profitable employment.

4. The enduring characteristic of capital is the conflict between its compulsion for self-expansion and its need to preserve the dominance of private property. Conflict, compulsion and need, are masked in the income capital derives from its processes of production and circulation. The mask itself is dropped when the relation of income to property, the rate of return of investment falls. Capital is driven to offset this declining rate by any and all means.

Common to some investigations into capital's methods for offset, investigations as apparently different as Lenin's from Rosa Luxemburg's, is a notion of external sources of wealth yielding an almost pure profit without expense. In Lenin's analysis this external source, the export of capital to "backward" areas, is absorbed into capital and appears as a super rate of profit. For Lenin, super profits rescue capital from the overproduction of capital. For Luxemburg, the aggrandizement of non-capitalist wealth sustains capitalist accumulation. For capital itself however, there is no such thing as super profits, and non-capitalist wealth, by definition, cannot augment the expansion of capital values unless it
enters into an exchange with wage-labor.

In 2001, the ratio of direct income receipts to US FDI (the rate of return on direct investment) measured 8.04 percent. The rate of return for investment in Canada was 8.46 percent; for Western Europe 7.67 percent; for Latin America 6.94 percent; for Asia and Pacific 9.79 percent. Does this sound like super profits?

Calculating the average rates of return for the period 1997-2001 produces the following: for all US FDI 9.5 percent; for Canada 9.9 percent; for Western Europe as a whole 9.4 percent; for the UK 6.9 percent; for South America 6.3 percent; for Brazil in particular 5.8 percent; for Mexico 12.0 percent; for Central America as a whole 8.7 percent; for Japan 9.3 percent; for Australia 8.1 percent; for China 11.7 percent; for Korea 11.4 percent. Does any of this sound like super profits?

In Mexico, where US FDI achieved a rate of return 30 percent above the total average, the rate of return has declined every year between 1997 and 2001, falling from 15.8 percent in 1997 to 8.45 percent in 2001. Does this sound like super profits?

5. For the period 1994 to 2001 "indirect income," income generated from stocks, bonds (portfolio income), and other financial instruments exceeded US direct investment income. If, for the capitalist, the commodity's transfiguration from an article, and a cost, of production, into an expanded value, is a religious experience, a miracle, then portfolio income is the Assumption. Portfolio income is value shedding all its earthly imperfect forms, dispensing with its messy intermediate states, and springing forth full grown from its own forehead as value begetting value.

In 2001 US holdings of foreign securities measured $2.39 trillion. Where Lenin saw the decline in the importance of the stock market as indicative of the rise of finance capital, US investment capital itself has raised the importance of foreign stock markets. Stocks accounted from $1.83 trillion of the total. Sixty percent of that stock portfolio is concentrated in Western Europe, ten percent in Japan, 6 percent in Canada. Argentina, Brazil, and Mexico together account for less than 4 percent of the stock portfolio.

Bond holdings are distributed somewhat more evenly with Western Europe, Canada,
Japan, and Australia accounting for sixty percent of the portfolio. Argentina, Brazil, and Mexico account for fifteen percent of the bond portfolio.

For that year, 2001, the entire portfolio of stocks and bonds generated income of $67.4 billion or approximately 2.5 percent. Bond income returned 7.8 percent on the portfolio value. Western Europe accounts for approximately half of the total income. Latin America and other Western Hemisphere areas yield approximately 15 percent of the portfolio income, but this yield is skewed by the overweighted presence in the portfolio of securities from the Caribbean banking centers and Panama. None of this amount in yield, nor the total return, amounts to super-profits, particularly when the total return on 10 year US treasury bills was 11.5 percent for the same period.

Indirect income is also generated by interest claims against unaffiliated foreign companies on money loaned, or loans guaranteed, by US banks and other entities (usually non-bank financial corporations). In 2001, US banks earned approximately $43 billion in this category. The total amount of the bank claims measured $1.07 trillion with 85 percent concentrated in the industrial countries and the Caribbean banking centers.

In truth, these figures conceal as much as they reveal as a portion of the US claims are centered in London, where the funds are subsequently re-loaned to developing
countries through European financial centers. While this process shifts risk to the other metropolitan countries (particularly Japan and Germany), it does not affect the total income derived.

Non-bank claims generated an additional $46 billion in income. The total amount outstanding was $860 billion, 75 percent of which is concentrated in the industrial countries and the Caribbean banking centers.

As a whole then, this "indirect income," the direct income of finance capital, generated a rate of return of 3.5 percent, a rate of return significantly less that the rate of return on direct investment in total or in the specific areas of petroleum, manufacturing, wholesale trade.

6. After the Asian and Russian financial collapses of 1997-98, US banks reduced their overall exposure to "emerging market" debt. This "risk revaluation" process had in fact begun at the beginning of that 90s. Ten years of economic depression in Latin America had brought several US banks, most notably Citibank, to the edge of collapse.

In 1999 US banks reduced their claims on Africa by 5 percent; on Asia by 21 percent; on Eastern Europe by 42 percent. US bank claims on Latin America increased by 12 percent during the same period, with the increased exposure concentrated in Mexico and Argentina. Latin America and the Caribbean account for 60 percent of all US claims on emerging market countries. Claims on emerging markets however represent only 5 percent of US bank assets, while US claims on developed and banking center countries are approximately 12 percent of assets. Indeed, US banks' exposures were so minimal that losses from the 1997-1998 crises were charged against ordinary income rather than capital reserves.

Between 1997 and 1999, Japan's share of claims against Asian counterparties declined from 30 to 23 percent. European banks increased their share to 50 percent, while US claims remained at a mere 7 percent. In Latin America, the US share of claims, 25 percent, was only half that of the European banks.

In 2002, the Bank for International Settlements (BIS) reported claims against emerging market countries represented only 18 percent of all bank claims on foreign counterparts.

The export of capital is clearly not an export of capital simply to the emerging market countries. Rather the export of capital to these countries is a manifestation of the export of capital on a world scale, an activity of capital that reproduces in detail, scale, convergence and divergence, the patterns of trade, production, and profit that have defined capital as an international system for three centuries.

The issue is not the significance or insignificance of the volume of claims, nor the income generated from the claims against the emerging market countries. The significance is in the "integration" of the emerging market countries into the international organization of capital, as internal components of the mechanism for accumulation. Then profits, high or low, are generated exactly as profits are generated everywhere and anywhere. Then wage rates, high or low, are established in any single manifestation of the totality, by the same logic, the same conflict, the same contradiction, as wage-rates are established everywhere. Then the social struggles generated in any single market, any single country, are part and whole of the struggles generated throughout the markets as a whole.

Just as capital integrates all forms of exchange, gives value to local, individual exchange by establishing the measure of value in its own products, then all the conflicts, needs, requirements for the welfare of the entire population, the growth of industry, the sustained development of agriculture become the tasks of the antithesis to capital, the overthrow of wage-labor.

7. It is in Lenin's introduction, written in 1920, and the chapter "The Parasitism and Decay of Capitalism," where he makes his often quoted remarks about the bribing of a sector of the working classes of the metropolitan countries, those "clipping coupons," and the rentier state. Lenin's analysis, unsupported and self-contradictory, has been used to rationalize the failure of the workers' revolution to advance beyond Russia and into the advanced countries; to proclaim the migration of revolutionary focus to developing countries; to announce the replacement of workers by peasants, guerrillas, youth, students, information managers, national
self-determination, etc. in the revolutionary process.

Super profits don't exist. Neither does the rentier state. The source of profits for the developed and developing markets alike is in the production and circulation of commodities. If US equity ownership in foreign companies is combined with its direct foreign investment, the combined value is approximately $3 trillion, exceeding the value of all debt claims, and generating profits approximately 50 percent greater than the income from bonds and bank claims. In 2001, 67 percent of the US's $1 trillion in exports was concentrated in capital goods and industrial supplies. Half of US imports were in these categories. Capital goods are neither imported nor
exported for purposes of coupon clipping.

The individual capitalist rushes to market, intent on realizing his or her individual profit, and when the money materializes, claims it as his own or her own. But Marx knew better and the markets recognize no individual. Instead, the markets ration, distribute, the total profit. And what the capitalist holds in his or her hand, is a part of the universe of values. Whether the capitalist is large or small, whether the capitalism developed or developing, the distribution of profit by the market, by which a general rate of profit is established and through which more technically developed, more "capital intensive" industries are sustained, is the process by which capital makes whole the sum of its parts. When profit materializes it is through the appropriation of surplus value as a whole, not from the
individual wage rates in the individual enterprise.

The establishment of a general rate of profit, and we have seen exactly that in the examination of the returns on US foreign direct investment and indirect investment,
abolishes the notion of super profits, and with that, demolishes the claims of the "bribing" of layers or sections of the working class.

The disparities in wage rates, which preceded finance capital, are
historical developments. Every industrial capital formation appropriates its surplus value on the basis of different wage-rates within the entire process of production and circulation. Does this mean that workers receiving a higher wages benefit from workers receiving lower wage rates? Do railroad locomotive engineers benefit from the lower wage rates of track workers and mechanics? To pose the question in those terms is a failure to grasp that the realization of profits is a function of the system as a whole, and that nothing in profits high or low, wages high or low, transcends the fundamental social relation of production that defines capital.

The significance of the emerging markets, the profits derived through direct investment and financial claims is not in their mass and rate, superior or inferior, not in their existence as "external" suppliers of wealth outside the arena of capitalist reproduction, not in their role as "safety valves" for capitalist overproduction, nor as a mythical source of bribes and subsidies to layers of the working classes in metropolitan countries. Rather, the significance exists, and exists entirely, in capital's integration of the emerging markets into the network of exchange, capital's ntroduction of its fundamental social relation into every locality, capital's creation of the most advanced production and class of producers alongside the backward agricultural systems, where the universal problem of capital,
overproduction beyond the capacity of private property to sustain itself, is made more acute by the overall lack of development.

reposted 11/16/04

Sunday, October 31, 2004

Deja Vu All Over Again

1. In his opening chapter of Capital, where he describes the contradiction and interpenetration that makes up the commodity, Marx essentially, and successfully, reduces the complex organism of capital, to its single cell and that single cell to its genetic components. In the existence of commodity as both object and value, there resides the class organization of production; the ownership of the conditions of labor as private property and the existence of labor as labor power, as an unencumbered, detached commodity, useful only in its need for exchange. From this single cell flows the genealogy of capital; the ongoing conflict between the means of production and the relations of production; the recurring, necessary, overproduction; the problems of reproduction; the essential attacks on wage rates and living standards; the ultimate destruction of the means of production themselves.

That at every moment in its development capital has relied, sustained, restored "backward" modes of exploitation, where labor is enslaved, indentured, encumbered by land-debt is above all the exact manifestation of the conflict at the core of capital, between private property and expanded production. The great plasticity of the capitalist markets easily absorbs the products of those modes as if they were commodities produced by free labor, while condemning these pre-existing modes to temporary, peripheral, roles in the continued development of capital itself.

At every equal moment, and against the alliance of property owners, capital has disturbed, disrupted, initiated the impulse to the transformation of those same exact modes. The as if nature of the pre-existing modes then confronts the modern conditions of labor, the development of the class of wage-laborers. The reproduction of capital involves the reproduction of all the anomalies, deviations, deformations surrounding the emergence of capitalist property and wage labor. It could not be otherwise.

2. Those members of the hydrocarbon depletion cult can point to the victory of the Boston Red Sox in the misnamed World Series as one more sign, one more ominous omen, that the universe as we know it is about to end. This combination of ecstasy and obliteration, long a staple of religious sects, secret societies, and trance parties, has its origins in nothing other than the sanctions against sexual pleasure, where the ecstasy of orgasm triggers torrents of guilt and the wish for punishment.

Ecstasy and obliteration have their part to play in capitalist reproduction, but they play those parts as moments in that reproduction; temporary manifestations, designed for and destined to be eclipsed by the conditions of profit.

There is little evidence of hydrocarbon depletion. Reserves of coal have hardly vanished; the truth about natural gas is that supplies have barely been explored, much less developed; that oil reserves and production are economic, not geological, categories, driven by terms of profit.

In fact, the overproduction of oil is the driving force in the world markets. A declining rate of return in the petroleum industry has always prefigured the OPEC price interventions, and this one, since 1999, is no exception.

Now overproduction has nothing to do with need. The aggrandizing of wage-labor, the expropriation of value and its realization as profit, turns the object of production into a mere host. And here, oil plays host to capital's core contradiction. The means of production have overgrown their ability to return enough profit quickly to sustain the reproduction of capital. Private property, the preservation of such property, stands arrayed against any and all terms of development. And so the price of oil lashes the general economy forward into more intense overproduction as every capitalist enterprise presses harder upon wage-labor in order to reduce cost and increase yields, and then the price of oil brings the process to a screeching halt, depleting these enterprises, redistributing their momentary profit recoveries to the oil companies.

The oil majors themselves are awash in cash and, confirming the current overproduction, are distributing some of that cash to their shareholders through dividends and stock buybacks, rather than increasing exploration and development budgets. The seven major Western oil companies are expected to generate free cash of some 73 billion dollars. ExxonMobil already has a cash reserve of $20 billion, this after buying back $7 billion dollars worth of shares. The CFO of Total is on record as stating that giving cash back to shareholders is a better use of funds than investing in capital intensive projects that may not reap adequate returns.

In the masked world of commodity production, history is banished by inevitability, society by nature, and the useful objects themselves by the conditions of profit. If the commodity itself is but an object transformed into a host, then the ideologies and ideologists of shortage, scarcity, depletion, entropy are but hosts for this transfer of profit, and for obscuring the social, class, origins of the current predicament. Despite professions of radicalism, inevitability and always the scarcity theorists are driven to conclude that class is nothing, geology is everything. All that can be accomplished is, at best, a reduced rate of descent into those pre-existing modes of production capital has maintained throughout its existence.

3. Class is everything, however. It is the essential component of commodity production, of the expropriation of labor power, its transformation into value, the value's realization of profit. It, class, is the as if facilitating all exchanges in the world market. In deconstructing the commodity at the core of capitalist production, Marx exploded political economy--the ideological obfuscation of capital's fundamental social relation of production; the masking of capital's inherent conflict between means and relations of production, between private property and social development; the necessity of overproduction. Most importantly, Marx identifies that particular agent of change, that specific social formation that can emancipate itself from the overproduction, the attacks on living standards only by emancipating production itself from private ownership.

A program of transformation then becomes the concluding volume of Capital, a volume that emerges with all the deformations, approximations, deviations of the conditions surrounding its emergence, a volume edited through and by the class struggle itself.

In the current predicament, the outcome of the US elections are immaterial. Certainly the campaign of Ralph Nader is worthy of critical support: support in that no element of Nader's program can be realized without changing the class basis of the institutions of government; critical that nowhere in Nader's program or Nader's organization is there any recognition of that need.

The strands of revolutionary development-- weak, fragile as they are-- pass through manifestations such as the Million Worker March and those actions putting forth a class-based political party.

S Artesian

Saturday, October 09, 2004

Slippery Sisters

1.If the bourgeoisie were an imaginative bunch, they would imagine themselves to be nostalgic, fondly focusing forever backwards on the golden era, that market and marketable Eden, when private property, growing profits, and expanding reproduction of all of capital existed all at once, co-joined head and toe. Memory persists for the bourgeoisie, but it persists as delusion, as shared madness, the collective hallucination of the class of private proprietors. History doesn't exist for the bourgeoisie, since capital is the end, the goal, of all history. Memory exists for the purpose of denying current conditions. Just like propaganda. Like advertising.

So, whether looking backward twenty years to the regime of that pitchman for the soap trade and death squad capitalism, or backward ten years to that of the spokesman for globally positioned, krispy-kremed, digitally enhanced overproduction, the bourgeoisie are engaged in product placement-- as if there were happy days to be had, good times to roll by purchasing this or that commodity.

Everything the bourgeoisie have ever produced, marketed, dreamed, hustled -- from pharmaceuticals to philosophy to science is the result of fear and greed.

2. If after 30 years of dismissal and disregard, the Mal(en)thusiastic peak oil theorists now find themselves in hot demand, sought ought by Wall Street journalists, government ministers, on-line dating services, primitive communists and anti-communists alike, it's not because the pseudo-science of "peak production" has become more accurate, it's not because the prospects for a permanent non-nuclear winter have replaced global warming as the number one apocalyptic theory. It's because fear is the hand maiden to greed. The sounds of these two hands, fear and greed, clapping, is the snap of fifty dollar bills being added to the bankrolls of the petroleum majors. Grant's new tomb is a 42 gallon drum.

The Malenthusiasts have altered their theory, putting a little smiley face of their hydrocarbon die-off symphony, changing it from the end of petroleum dirge, to an up-tempo, apocalypso limbo. "How low can you go?" is the sub-text of their new music, proclaiming not an end to oil, but an end to cheap oil. Suddenly or not so suddenly, cold hard physical science has given way to economic categories of price and cost. Big surprise. Or not. Fear and greed.

3. Market economics and pseudo-science reach mutual accommodation, more or less, in references to capacity constraint, demand growth, and accelerating consumption. Oil, like bourgeois politics, can then pretend to be all things all at once-- abundant and scarce, cheap and dear, more important and less essential, post-peak and pre-dawn.

But "the economy," global and national, is not growing dramatically; petroleum "productivity," dollar output per BTU is not declining; transportation demand is not soaring.

For the past three years, US real private non-residential fixed investment, the real bell-weather, non bell-shaped curve measuring the success of capital's self-expansion, its reproduction, has been below its 2000 peak. Annual spending on industrial equipment has declined each year since 2000. In 2003, the spending was 14 percent below the 2000 mark. Spending on transportation equipment, and petroleum provides 95 percent of the energy consumed in transportation, was 25 percent below the 2000 mark. Total net new non-residential fixed investment for 2003 was only 40 percent of its 2000 measure.

Capacity utilization rates for industry remain below the 2001 level. While industrial output for 2002 and 2003 measured approximately 12 percent above the 1997 mark, once high-technology production is removed for the analysis, industrial output is actually below the 1997 level.

Between 2000 and 2003, overall US energy consumption declined 1 percent. Per capita energy consumption, however, has declined 4 percent, and consumption per dollar of GDP has fallen 5 percent. In three years, total petroleum consumption has increased by 3.5 percent, hardly a spectacular rate of growth.

The global economy likewise has not surpassed rates of growth recorded prior to 1997. World trade did grow between 2002 and 2003, but almost 70 percent of that growth was an accounting adjustment for the decline of the US dollar. Real trade grew at 4.5 percent, below the rate of increase recorded in the 1990s, while manufacturing grew only 2.5 percent. None of this growth has exceeded pre-existing capacity in transport or production.

China? China is not so much an economic miracle as it is the force fed goose, about to explode from an enlarged liver.

4. Hubbert the king based his analysis on a single, critical assumption-- that all oil production would follow the pattern of a single oil field. The critical assumption has been taken over, uncritically, by the little Hubbertist knaves. But the history of production has not followed this single field pattern. Indeed, even the US, with its steadily declining production has not shown the same steady decline in proven reserves and proved recoverable amounts. Between 1977 and 2002 US cumulative production increased 68.2 billion barrels, 56 percent, to 189.6 billion barrels. Proven reserves, which measured 33.6 billion barrels in 1977 declined only 25 percent to 24.0 billion barrels in 2002. Proven ultimate recovery increased in this period from 155.0 billion barrels to 213.6 billion. Proven reserves actually increased between 1998 and 2002. The disparity between cumulative production and remaining reserves is itself a product of replacement at the drill-bit-- where production has led to more accurate estimates of remaining reserves. This is the pattern that is being repeated right now in Russia, Colombia, Mexico, Nigeria, Sao Tome.

5. However great the utility of oil, its necessity to production and circulation, oil is not the universal solvent, nor the ultimate source of value, neither the aqua regia nor aqua vitae, of capital. Labor time, more precisely, the expropriation of labor time is all that and more, the royal river transporting all the bourgeoisie's goods to market. The bourgeoisie's rate of success in realizing that expropriation becomes manifest in the mass and rate of profit; in the dedication of profit to reproducing the expropriation of labor-time through the application of greater technical inputs-- into expanding production.

1997 stands as the critical year in that process of reproduction, that success and failure in the reproduction of capital, as 1997 saw the collapse of the newly-emerging economies of Asia, a collapse triggered by overproduction; a collapse pre-figured in the overproduction of the semi-conductor industry; overproduction made manifest in the destruction of the former Soviet Union; overproduction reproduced in the collapse of oil prices a year later.

All that has occurred since 1997 has been the manifestation of this overproduction, this failure of reproduction. Today the future is upon us and it looks just like Afghanistan, Iraq, Jenin. It is a future of where the reproduction of capital consists of the destruction of the prospects for any future at all.

S Artesian
9 October 2004

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Sunday, September 19, 2004


A: Whether our masters quarrel with each other or agree together, our bondage is equally ruinous. The governor has centurions to execute his will; the procurator, slaves; and both of them add insults to violence. Nothing is any longer safe from their greed and lust. In war it is at least a braver man who takes the spoil; as things stand with us, it is most cowards and shirkers that seize our homes, kidnap our children, and conscript our men.

The karaoke President, interrupting his three week viewing immersion into the complete Girls Gone Wild video series, decided to sound presidential. With the help of aides, staff, and Bartlett's Quotations, he lip-synched his way from Madison Square Garden to Madison, Ohio almost getting it right, and almost is close enough for government work. Linking himself, as a compassionate, courageous leader in war times, to a war, World War 2, President, Bush told his audience, "The only thing we have to fear is ourselves. " The audience cheered. The world cringed. Everybody had gotten the malappropriated message.

Continuing on, Bush connected his understanding of politics to that of a another war President, the civil war President, and said "You can't fool all of the people all of the time, but you can fool enough of them, and disenfranchise enough of those you don't fool, every four years to get five votes from the Supreme Court and call that a mandate." And the ex-party of Lincoln howled its approval, recognizing, embracing , and parading its shape-shift, its transformation into the party of 10, 20, 30 million John Wilkes Boothes.

And then he said, giving credit and no bid contracts where credit is due, praising his very own Botha; pointing to his favorite kleptocrat; directing the spotlight to a man who was Lay, Gramm, Black, Goebbels, and Savimbi all in one: "The buck stops over there, at my man Dick's account in the Caymans."

Somewhere, the candidate of the Democrats, lip-synching to the lip syncher, said something and only something, that might have sounded like "Me Too!," but only if anybody had been listening.

And there you had it: the real difference between the two, the sitting and the would be. There you had it, the real difference between all those who had ever sat, save the one who confronted the slaveholders' rebellion, those who would sit.

The real difference between the Republicans and the Democrats? Just this-- whenever the bourgeois order is entering a recession, the bourgeoisie elect a Republican; whenever the bourgeois order is exiting a recession, or trying to exit a recession, then a Democrat is elected.

Not really political parties, the Democrats and Republicans, are auction houses. The recognition and execution of capital's class interest is not determined by or in the electoral process. The electoral process itself is anti-thetical to the social confrontation of that class's interest.

A real political party begins by defining its class needs in oppositon to those of the current rulers. Real political struggle begins when that opposition recognizes in its own need an overthrow and replacement of the current rulers organization of property, of production.

The prospects for a real political party and struggle are not with the Greens, nor with Naders. Despite the horrible name, the prospects begin with the Million Worker March in Washington, DC.

B. This journey has only served to confirm this belief, that the division of America into unstable and illusory nations is a complete fiction. We are one single mestizo race with remarkable ethnographical similarities, from Mexico down to the Magellan Straits.
--Ernesto Guevara de la Serna

The nation emerges from empire ascendant or in decline, whether industrial capitalist or feudal-mercantile, as the result of a social revoluton interrupted; of a social republic thwarted; of social property defeated. This was the case 200 years ago in France where the nation is secured first with the defeat of the Commune and then necessarily by the defeat of the left-Jacobins; 130 years ago in the US where "national," bourgeois, unity is forged first in the defeat of radical Reconstruction and then reinforced in the simultaneous triumph of Jim Crow at home and the defeats of the Philippine and Cuban social revolutions away; 80 years ago when the Soviet Union purchases its national existence with the defeat of revolutions in Europe and Asia; 30 years ago where the social, class, content of the battles against Portugal's empire is lost in the proclamations of a nation of Angola, Mozambique, Guinea-Bissau.

Today? Today, there's Argentina, and Brazil who have authenticated their national self-determination" by deploying troops to support the US invasion and occupation of Haiti.

And tomorrow? Tomorrow there's Venezuela, where the bourgeoisie of the advanced countries see in a "national struggle," perhaps their last chance to derail the social revolution of the workers, the landless, of the poor against private property.

National self-determination is nothing but an impulse to a unified market that capitalism unleashes but is unable to fulfill. The existing barriers, pre-existing, archaic relations of land and labor, represent an obstacle to the reproduction of capital-- but those exact same relations are the private property of capital. Patriotism is the last refuge of a scoundrel. National self-determination is the last refuge of private property.

C. Feet don't fail me now.
--George Clinton "One Nation Under a Groove"

S. Artesian
September 19 2004

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