Comrade Case puts forth several points as immediate and partial solution to the 2008 crisis. These points begin with: 1). "Economic infrastructures, including much of the financial system must be further socialized. This is necessary to begin the large institutional restructuring process without which recovery is impossible. Institutions whose failure creates systemic risk must be nationalized in whole or in part." (end quote). The infrastructure is the physical components - applied technology, upon which sits the organization of a company or society. For instance the military infrastructure or society infrastructure of roads, communications, transportation, and so on. The infrastructure of the financial sector is the buildings, desks, computers, communications system, hardware and software; underlying technology and tools giving systems shape; and how people are organized to use them. The computer and software is at the very heart of the new non-banking financial infrastructure and made it possible for the speculative sector of capital to consolidate itself as a dominating class. The speculators and speculative capital serves no socially useful purpose owing to its detachment from production. Speculative capital dominating and writing the agenda for capital, by definition causes systemic risk because it’s tendency is to converts productive capital into speculative capital. Beginning in the 1980s this meant asset stripping and fire sales of companies. Here is another danger to Chrysler Motors being owned by Cerberus, with the company also owning 51% of General Motors. Also, the auto producers suffer from overcapacity, with roughly 30% of their capacity permanently not utilized. Perhaps abolition of non-productive capital is in order? 2). "At the same time well-functioning markets must not disappear, but in fact improve. A big government, more socialist, regime can correct many instabilities, can improve the distribution of wealth to moderate inequality, and it can train and pay intellectuals and scientists to invent new ideas, but it is notably less successful at deploying the benefits of new technology throughout an economy, at least insofar as the myriad of unimportant transactions between producers and consumers of goods and services are concerned." (end quote). The size of government is depended on the underlying technology and division of labor that defines the infrastructure upon which it sits and operates, in the last instance. However, government can be inflated by political means or the "payroll padded" as it is called. If technology is rendering labor superfluous in one sector of the economy after the other, government must also be affected. Government can be looked at in the same five period context that defined eras of the industrial system and capital. The major task of government is to create the structural programs and policies that allow the economy to function. For example, when the government was the instrument of the farmers, that government did the things necessary to protect and expand the farm. The Indians were annihilated and cleared from the fertile lands, slavery was protected and extended, shipping lanes for export were cleared and frontiers expanded. As the farm gave way to industry, the government transformed itself into a committee to take care of the new needs of industry. At that point, government began to grow. Industry needed literate workers, so the school system expanded under a Secretary of Education. The army needed healthy young men to fight the wars brought on by industrial expansion, so a school lunch program was started. As industry got big, a Department of Housing and Urban Development provided order to the chaotic, burgeoning cities it created. Government became big government in order to serve the needs of industry as it became big industry. The workers were kept relatively healthy and the unemployed were warehoused in such a manner as to keep them available for work with every industrial expansion. Why would we need a big government today? Government does not have to be enlarged to put people to work. Other than giving the mandate and serving as watch dogs, government does not have to be involved at all. In virtually every single city in America there already exist non-governmental labor agencies in the form of "temporary help" businesses and non-governmental training and hiring agencies. It is these agencies that need to be contained in their pursuit for profits. Many layers of government only function to service capital interests, and would be abolished immediately with a communist government. A host of non-governmental agencies can be created whose purpose is the economic, social and cultural development of the proletarian masses. 3). "The reuniting of finance capital with production capital to fully deploy the new technologies will likely require huge public and international investments. For the next decade, at least, we should expect a public intervention on the scale of up to 100 percent of GDP, or more. The initial trillion dollar bank bailout represents about 10 percent of current GDP – by comparison. The precedent: World War II spending reached 110 percent of GDP, and finally lifted the economy out of the great depression. " (end quote). Finance capital is inseparable from investment in the production of commodities, hence "productive capital. " This is so because finance capital once meant "financial-industrial capital," but today the industrial sector of capital no longer exists. Every major and not so major company in America exists by the behest of financial markets. A massive public works program, which our middles classes and a section of the poorest proletarians urgently need, along with providing socially necessary means of life to all, including those who cannot work or will not work for various reasons, is urgently needed. Perhaps a word on financial capitalism today is needed. Finance capital cannot be reunited with productive capital because it is not separated, in the meaning of a rupture, from productive capital. Finance capital operating with non reliance on production (separate as in rupture), or split from productive capital is called speculative capital. When capital operates as a notional (imaginary, abstract or fiction) value, in structured finance, credit is no longer anchored in equity but by circular debt selling. Debt to equity ratio in no longer a measure of the amount of built up value (equity) in a thing. Here is the meaning of speculative capital as a form of capital. In speaking of finance capitalism the economist Henry Liu writes: "Finance capitalism is operating with less and less reliance on capital. Capital has become a notional value in structured finance. Credit is no longer anchored by equity but by circular hedges. Debt-to-equity ratio is no longer a relevant consideration. Practically all US major businesses nowadays, with their high debt leverage based on an unprecedented asset bubble, would have negative real equity if the price/earning (P/E) ratio were to return to historical norms. Blue-chip corporations are being shut out of the unsecured short-term commercial paper market as their credit ratings are downgraded. Corporate credit ratings have been inflated by exorbitant market capitalization value, which in turn reflects irrational P/E ratios. Even now, during what many on Wall Street contend to be a savage bear market, the Standard & Poor's 500 Index yields 25 times earnings. It would have to fall by another 41 percent to reach the median valuation prevailing since 1957. When that happens, the derivative defaults will hit the financial system like a tsunami." _http://henryckl.ipower.com/page142.html_ (http://henryckl.ipower.com/page142.html) Speculative capital is to be abolished.
4). "Some separation between finance and production capital is thus also inevitable and a key challenge will be to understand the process better and establish a balance between financial instructions, government and production that hopefully will permit growth and innovation – without either excessive instability, or stagnation from an over-regulated environment." The separation within finance capital as sectors is productive capital and speculative capital. As a concept finance capital has to be described in its history, connection or non-connection with production and environment because an abstract finance cannot exist. For instance the financing of the Civil War to the tune of $3 billion for the feds, meant the extending of credit for expansion of production capacity to meet war demands. Speculation built on the potential of these industries, even when it reaches outrageous proportions implies connection with production of material value. Debt instruments in and of themselves are not inherently destructive when anchored to production and expansion of the peoples living conditions. At best debt instruments can be used as a measure of value, resource allocation and future planning when anchored to production. At worse debt instruments can be used for usury. Modern speculation on the part of the speculative regime turns debt instruments upside down by detaching financing from production through its regime of modern financial products. This email was cleaned by emailStripper, available for free from _http://www.papercut.biz/emailStripper.htm_ (http://www.papercut.biz/emailStripper.htm) **************New year...new news. Be the first to know what is making headlines. (http://www.aol.com/?ncid=emlcntaolcom00000026) _______________________________________________ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
