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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