On the day that capitalisms greatest current asset- that of Citigroup- has had to be nationalized by the US government, the following is a backgrounder on such current events that finishes with a request for answers to an important question.
Pro-market. Anti-capitalist. What to do?
Two distinctive realities are frequently conflated into one by theorists on both the political right and the left. The first and oldest of these is the system of exchange of goods and services on what I will call the free market. This entails a fairly spontaneous division of labour in which producers exchange the fruits of their labour. These fruits will be those products that they have chosen to produce according to their calculations of whether or not they can exchange them for those fruits produced by others. Two factors will influence the presence of a generalized state of wellbeing in such a market oriented economy- the distribution of the means of production, including access to resources and skills and the ability to exercise power over other traders by force of arms. Where these factors are not subject to monopoly control it is more likely that both the community as a whole, and individual members of it will flourish. The existence of this form of exchange means that the wealth of the community will grow as new people arrive and introduce new ideas and products. The free and open market also enables people to distinguish themselves as individuals and to develop trust through their mutual exhanges.
The second distinctive reality is the system of capitalist accumulation. Its chief characteristic is that it is in isolation a project without end. Whenever means are employed to produce and end this end is rapidly transformed into another end through a process which Schumpeter called “creative destruction”. The process begins with the transmogrification of a concrete end into a molecule of capital. The most basic example of this is the potential for arbitrage, whereby a given commodity can have two distinct values at the same time in two different markets. The prototype capitalist will identify that the cost of sugar in one market is lower than its sale price in another. Through the medium of money she can exploit this differential so that the real commodity is mysteriously transformed into the abstract entity of profit. This profit can never be enough- that is to say it can never be an end and exists solely to appropriate the ends produced by others. The essential condition for this profit is the imbalance of information between on the one side the capitalist and on the other, his fellow traders.
The capitalist and others that follow him will repeat this process until all opportunities for profit are exhausted. However, by this stage the molecules of capital accumulated will make it easier to enter other markets and repeat the trick. In this way, the capitalist is able to dominate markets, although in doing so it will become increasingly apparent to other participants that her profits and her power are frequently obtained at their expense. A good way of concealing this sleight of hand is by manipulations of money and other financial instruments derived from it. Yet these manoeuvres frequently come to light when speculative financial bubbles explode and scatter their debris all over the real market economy. Never mind, says the capitalist because now I have the state behind me I can monopolize the use of force to tell any dissenters to shut up.
It has been useful for capitalists to conflate these two distinct realities and in some ways this confusion was consolidated by Marx and his followers. Despite his astute analysis of the contradictions of the capitalist process he tended to see it as something indelibly linked to the free market rather than the perversion of its processes of distribution. The question now is this; how can it be possible to disentangle these two realities so that the markets healthy processes can be isolated from the continual sicknesses suffered by its capitalist cousin?
Two distinctive realities are frequently conflated into one by theorists on both the political right and the left. The first and oldest of these is the system of exchange of goods and services on what I will call the free market. This entails a fairly spontaneous division of labour in which producers exchange the fruits of their labour. These fruits will be those products that they have chosen to produce according to their calculations of whether or not they can exchange them for those fruits produced by others. Two factors will influence the presence of a generalized state of wellbeing in such a market oriented economy- the distribution of the means of production, including access to resources and skills and the ability to exercise power over other traders by force of arms. Where these factors are not subject to monopoly control it is more likely that both the community as a whole, and individual members of it will flourish. The existence of this form of exchange means that the wealth of the community will grow as new people arrive and introduce new ideas and products. The free and open market also enables people to distinguish themselves as individuals and to develop trust through their mutual exhanges.
The second distinctive reality is the system of capitalist accumulation. Its chief characteristic is that it is in isolation a project without end. Whenever means are employed to produce and end this end is rapidly transformed into another end through a process which Schumpeter called “creative destruction”. The process begins with the transmogrification of a concrete end into a molecule of capital. The most basic example of this is the potential for arbitrage, whereby a given commodity can have two distinct values at the same time in two different markets. The prototype capitalist will identify that the cost of sugar in one market is lower than its sale price in another. Through the medium of money she can exploit this differential so that the real commodity is mysteriously transformed into the abstract entity of profit. This profit can never be enough- that is to say it can never be an end and exists solely to appropriate the ends produced by others. The essential condition for this profit is the imbalance of information between on the one side the capitalist and on the other, his fellow traders.
The capitalist and others that follow him will repeat this process until all opportunities for profit are exhausted. However, by this stage the molecules of capital accumulated will make it easier to enter other markets and repeat the trick. In this way, the capitalist is able to dominate markets, although in doing so it will become increasingly apparent to other participants that her profits and her power are frequently obtained at their expense. A good way of concealing this sleight of hand is by manipulations of money and other financial instruments derived from it. Yet these manoeuvres frequently come to light when speculative financial bubbles explode and scatter their debris all over the real market economy. Never mind, says the capitalist because now I have the state behind me I can monopolize the use of force to tell any dissenters to shut up.
It has been useful for capitalists to conflate these two distinct realities and in some ways this confusion was consolidated by Marx and his followers. Despite his astute analysis of the contradictions of the capitalist process he tended to see it as something indelibly linked to the free market rather than the perversion of its processes of distribution. The question now is this; how can it be possible to disentangle these two realities so that the markets healthy processes can be isolated from the continual sicknesses suffered by its capitalist cousin?
Comments
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free
25.11.2008 16:47
I believe there would have to be some kind of shared control over the market or its pricing or what was prodcuted beyond the easilly and often distorted system of supply and demand.
My understanding of some of the theories regaridng 'participatory economics' (which in my appears to combine aspects of market economy, anarchist theory, socialism and various other economic theories) allow for a non capitalist market, however indidual producers give up some of the control as to what they produce to consumers.
i'd suggest reading real uopia for a general overview of participatory theory or parecon for a more indepth economic overview.
ether
historical view
26.11.2008 12:49
the free market is anathema to the capitalist. in order to secure a sufficient return on their investment they need to close markets. this is clearly seen in the drive to establish patents on medicines which exclude others from the marketplace. when the patent system was first proposed in England in the 16th century it was vigorously opposed by advocates of competition in the marketplace.
of course as you suggest some form of governance is required for markets to function. although control as such may not be necessary if we imagine markets as social as well as economic mechanisms
as for money it is a necessary evil. the problem with money explodes however when usury is permitted. Money is required as a means of exchange and a store of value- this includes the forms of currency used in places like Argentina where people excluded from the formal capitalist economy have had to devise systems of barter aided by alternative currencies.
i do not intend here to tell people what to believe. it is just worth the effort to consider whether there is any truth and utility in these points. like many I have spent plenty of time abhorring´neoliberalism and the promotion of ´capitalist free markets´
for a more concise and detailed view of these points it would be worth referring to Proudhons ´What is property?´or Fernand Braudels ´Capitalism and material life´ trilogy
anon