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