Monday, 3 August 2015

Marx and Machines - Part 7 of 7

Paul Mason in his book, argues that capital has invested in nail bars rather than industries based on gene sequencing technology. I have some sympathy with that argument. I have made the point many times that capital in the US, which is by far the world's leading technological power, has failed to direct capital away from low profit areas to these high profit areas of production, and this is one reason its growth has been less than spectacular after the new long wave boom began in 1999.

However, I believe the reason for that is not because we have entered some new paradigm of post-capitalism. The reason is rather to be found in the more mundane realm of politics and material interest.

It is that, after the long wave boom ended, in the mid 1970's, big industrial capital, and the social democracy that rests on it, became weaker and in proportion, conservatism became stronger. That conservatism is based on the financial and landed oligarchy, as well as the remnants of small-scale private capital. Conservative regimes, such as that of Reagan in the US and Thatcher in Britain, pursued policies that furthered the material interests of these elements.

An economic model was developed which was based upon low wages and high levels of private debt. Low wages facilitated an expansion of small scale capitalists such as the nail bars and so on, and this went along with a low productivity economy. A lot of larger scale industry migrated to Asia.  I predicted all of this development back in the early 1980's, as the process began to unfold - See: The linked series of documents on Imperialism and The New International Division of Labour written in 1983.

A low wage, low productivity economy subsisted on increasing welfare payments, which subsidised low paying employers, by sucking increasing amounts of tax out of better paid workers, and thereby undermined the profitability of the more efficient segments of capital by increasing its costs. It acted directly to misallocate capital away from the more efficient sectors towards the inefficient subsidised sectors. It is the same kind of clientelism by conservative regimes, in the interests of their base, of which Greek governments have been accused.

At the same time, the interests of the other conservative clients, the financial and landed oligarchy, was served by a massive rise in private debt, as the other means of maintaining living standards. On the one hand, it has set the stage for the second great expropriation of the peasantry,  as occurred with the Enclosure Acts.  In parts of Europe, its already happened on a small scale with the bank bail-ins. Huge numbers of workers and members of the middle class, in the US, UK and Western Europe were encouraged to buy property at massively inflated prices, and to go into unheard of levels of debt to do so. Those who had already bought property, in the 1950's - 70's, were encouraged to buy more expensive property, or to release equity in their property, or to use it as collateral so that their children could buy property at massively inflated prices, taking on even more debt to add to their student debt, credit card debt and so on.

Yet others were encouraged to speculate in property as buy-to-let landlords, as a means of providing for their pensions. That was necessary because they had previously been encouraged to establish pension funds by buying into massively inflated equity and bond markets, which now offer near zero yields, because the fictitious capital has been pushed up to astronomical prices.

All of this turned the worthless bits of paper circulating in financial markets into items more highly priced than diamonds, and made the financial institutions into the most powerful businesses in the world, whilst the financial and landed oligarchy saw their fictitious wealth soar to unprecedented heights.

As these speculative gains seemed unstoppable, the owners of this fictitious wealth got their representatives on Boards of Directors to ignore all of the vast potential for increasing productive wealth and instead to use available profits for ever more speculation, for the boosting of share prices by share buybacks and so on.

That is why the investment has not gone into these new technology industries in the way it should have done, other than where individual private productive capitalists have directed it, such as with Elon Musk with Tesla and Spacex, or Craig Ventnor with gene sequencing.

When this process hit a barrier in 2008, that same financial and landed oligarchy used its conservative regimes to save it by bailing out the banks, and to pay for it via austerity imposed on the masses. And now, when the value of that fictitious capital is destroyed, those masses will again suffer a huge expropriation. The money saved in the ISA's, 401k's and so on, will become worthless. Their property will drop 80-90% in price – even in Kensington, house prices are reported to have fallen nearly £200,000 last month alone! - whilst they will be left with huge mortgage debts to repay.

In Britain, the Tories are already introducing additional taxes on property, such as the removal of tax relief on buy-to-let mortgages, whilst Carney has given clear warning that interest rates are starting their long rise. One very successful forecaster is predicting that house prices will fall for 18 years, dropping in real terms to their 1955 level.

It is these factors that have acted to limit investment in these areas of technology not the beginning of some new paradigm of post-capitalism. As soon as interest rates rise, the bond bubble bursts, property prices collapse, the stage will be set for a resurgence of productive capital, and large scale investment in these areas. The beginning of it can already be seen if you look.

Not only are there ventures conducted by individual productive capitalists like Musk, Branson etc. in terms of space and other technology, but there is a widespread of growing commodities in the very areas that Paul mentions, such as gene sequencing, and bio-technology solutions to illnesses that even just five years ago seemed incurable.

They may be the basis for the current long wave boom extending for longer than normal, and thereby compensating for the lost ground caused by the influence of interest bearing capital over the previous period.

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