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Shalva Eliava wrote
What is particularly noteworthy about this piece is that it's written by
CNN's economic editor:
"In simple terms, what this means is that rather than funding the
new ideas and projects that create jobs and raise wages, finance has
shifted its attention to securitising existing assets (such as
homes, stocks, bonds and such), turning them into tradeable products
that can be spliced and diced and sold as many times as possible –
that is, until things blow up, as they did in 2008. In the US,
finance has doubled in size since the 1970s, and now makes up 7% of
the economy and takes a quarter of all corporate profits, more than
double what it did back then. Yet it creates only 4 % of all jobs.
Similar numbers hold true in the UK.
American corporations now get about five times as much of their
revenue from financial activities such as offering credit to
customers, tax “optimisation,” and trading, as they did in the 80s.
Big tech companies underwrite corporate bond offerings the way banks
do. Traditional hedging by energy and transport firms has been
overtaken by profit-boosting speculation in oil futures, a shift
that actually undermines their core business by creating more price
volatility. The amount of trading done by these organisations now
far exceeds the value of their own real-world investments, a sure
sign of financialisation)
http://www.theguardian.com/commentisfree/2016/may/21/crisis-in-capitalism-and-role-of-wall-street
------------------------------------------------------------------------
Here is Michael Hudson with a challenging interpretation of "the
perverse effect that financialisation can have on corporate culture",
presented at Left Forum 2016,Marxist Laws of Motion and Today's Economic
Collapse (with Michael Perelman and Bertell Ollman), where he offers a
precis of his forthcoming book, J is for Junk Economics
https://www.youtube.com/watch?v=AtQTLmK6lnQ, proceeding first on the
accepted premise that "stocks, bonds and bank loans are not means of
production; they're financial claims on production" and concluding that
"instead of finance being industrialized [as Marx expected], industry is
being financialized":
"So, what we're having today is, in my analysis, a constant build-up of
debt, and what junk economics doesn't show is that America has taken off
into a higher and higher level of debt in relation to government income,
of family income and of corporate income, and I think we've finally
reached the limit. And I think we're now in what used to be called "the
final crisis. "The final crisis" is when the environment can't continue
along the laws that it's been doing. It can't restore the status quo
ante because there's only one way to restore equilibrium, and it's not a
self-stabilizing, an automatic stabilizer. If the problem is the credit
system taking more and more personal income, for mortgage debt, student
loans, for bank loans and the credit card debt, the only way that you
can restore equilibrium is to wipe out the debt to the financial class.
... So you had a circular flow, which kept rising and rising until you
had a 1929. And that led to a kind of crisis that, well, you didn't have
socialism out of it, but a New Deal to kind of postpone real socialism.
I think we're in a kind of similar place in the world today, and the law
of anarchy, which is one of these laws of motion, takes place and
everything is up for grabs. And the question is, where are these laws of
motion leading today. Well, I think if you're having the impact of
rising levels of debt on a national economy, the model to look at for
tomorrow is Greece .... What's going to happen? Well, the IMF and the
Germans say, you're going to have to do what the Germans did after World
War one, you're going to have to borrow the money. But they can't borrow
the money because nobody's going to lend to Greece anymore. The IMF will
only lend the money to pay off the bondholders. So you'll have to sell
off the property. Privatize... So, we're in the process of rolling back
capitalism, rolling back even to feudalism, where we're rolling back
public investment in property, rolling back ownership of the commons, of
the basic public utilities, of the roads, the land, the government, the
ports, everything that is in the public sector, all the way from the
temples and palaces of Mesopotamia. We're rolling back, actually, to,
what would you call it, well, you could call it neo-feudalism because
we're going back to pretty much what Marx was describing. And it's the
result of foreclosure - we're into a time of foreclosure right now; and
what's happening in Greece is a kind of voluntary foreclosure, as long
as Greece remains in the Euro zone and remains in the European monetary
system, the IMF and the World Bank, it's going to shrink and have an
exodus of labor.
You're having privatization of government; you're having a return from
democratic government back to oligarchic government. The whole fight of
Ricardo and the land reformers in the 19th century, the progressives,
was to extend the vote, to empower the House of Commons over the House
of Lords. The idea, obviously as we know now it was a silly idea, was
that people would vote in their own self-interest. And the idea was
that, when they did it, they would vote in their own economic
self-interest. And that would promote economic reform, would cure the
problem of the idle rich.
And all that is being rolled back today, not only by Citizens United,
but by having people vote on issues of identity other than their class
interests. As I mentioned the other day, you have a National
{Organization] Association [sic] of Women for Wall Street, a National
Association of LGBT for Wall Street, led by Wall Street billionaires,
the National Association of Women is led by a Wall Street right wing
billionaire. You have all these identity groups led by Wall Street
lobbyists. I try to tell people these are identities other than class
identity. And my editors - I'm doing something for the Washington Post,
my editors when I mention working class, they all say, no. no, middle
class. It's like we don't call the Blacks certain names. It's similar
with "working class".
The degree to which voters and workers think of themselves as
capitalists in miniature and landlords in miniature. Let the workers in
telephone buy shares in British Telephone. Offer it at half the price,
one-tenth the price at issue, we can make money, Oops, there, you lost
your job. Maybe landlords in miniature, making a killing on the house,
Privatizing the council housing in Britain, so that the price of housing
is so high in London that you have to live way outside of London and go
to work in London on privatized railways with higher fares and lowered
safety and more accidents, since safety impairs profit. As Milton
Friedman said, the job of capitalism is to make profit. That's
Thatcherism, finishing the job.
Well, that's what's happening today. Actually, we're moving back not
only to feudalism but to what Marx called the ancient mode of
production, usury and slavery. The difference, of course, is that it's
not the type of slavery you had either in antiquity or feudalism. In
feudalism although the slaves were allowed to have families, their labor
belonged to the lords. They couldn't leave the lot, which was owned by
the landlord... [today] if they want security they have to take out a
mortgage. The federal government in this country guarantees mortgages up
to 43% of their income. So, if the worker pays 43%, let's say, for their
home mortgage, about 10% for student loans, because you need to get a
degree in order to get a job in order to qualify for a mortgage, and
then maybe another 10% for an auto loan and some credit card debt in
order to feed yourself, and so you're already up to 60% and then the
government takes 15% as pre-saving for social security and health care
to produce enough of a surplus so that the tax rate on the upper 90% can
be cut, so that the budget is in balance, then obviously, what you're
having is debt slavery, or debt peonage, instead of feudalism. So, I
think if you can look at Marx's laws of motion in a big sense, a huge
grand circle, then what we're really seeing is not progress, but really
what we're seeing is what the ancient concept of time was, circle - the
western idea is there is upward progress, but I think they all add up to
a circular return, kind of a renewal of time, and this was Mesopotamia,
Egypt, my teacher at the University of Chicago, Mercilia Eliade, wrote
about The Myth of Eternal Return, but he didn't talk about debt. And the
whole point of eternal return in Mesopotamia was that any new rulers,
the first thing they'd do was to proclaim a clean slate. wipe out the
debt so that it can begin again. That was the ancient business cycle,
and it worked. That's the only way you can restore the status quo ante.
The only way you can restore equilibrium is for government outside the
business cycle. That's why economists don't talk about it. That's the
difference between the Marxist laws of motion and the economists' laws
of non-motion.
[...]
At issue is, where's finance capital leading? If you ask Marx, well,
he'd say it's merging with industrial capital, but it's going to be
subordinate to industrial capital, because that's what capitalism does:
it subordinates all these preexisting modes of production, existing laws
of motion. But instead of finance being industrialized, industry is
being financialized, as Michael [Perelman] just said. So, this is
something that Marx would not have expected. He thought that capitalism
was going to move forward towards socialism, but it's not moving towards
socialism. And if it's not moving towards socialism, where is it moving?
Well, Bertell [Ollman] often says, it's moving towards barbarism. You
can call it fascism or barbarism, but it's certainly not moving towards
socialism as part of the industrial process, because when finance
capital takes over, it's downsizing, it's outsourcing, its way of making
money is the bubble economy, using debt leverage to increase the price
of stocks and bonds. This is not real wealth, this is not tangible
wealth. this is not a means of production. Stocks, bonds and bank loans
are not means of production; they're financial claims on production. And
as Frederick Soddy said, the exponential growth of finance overcomes the
ability of the economy to produce a surplus in order to pay the debt."
[Also, here's an interesting discussion based on this set of premises, a
plausible prognosis but then arguing for the impossible prescription,
under the regime of capital, of a "steady state economy", at
http://steadystate.org/growth-debt-and-the-world-bank/ "...it requires
physical growth of the economy. Such growth in yesterday’s empty-world
economy was reasonable — in today’s full-world economy it is not. It is
now generally recognized that there is too much debt worldwide, both
public and private."
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