“This theory contains a germ of truth. It is supported by facts of economic development that show an actual growth toward Socialism. It was Marx and Engels who first set forth these facts and explained the scientific laws that govern them…
“The corporation renders the person of the capitalist wholly superfluous for the conduct of capitalist undertakings. The exclusion of his personality from industrial life ceases to be a question of possibility or of intention. It is purely a question of POWER.
This preparation for Socialism through the concentration of capital is meanwhile only one side of the process of gradual growth into the future state. Along with it there is proceeding an evolution within the working class that is no less of an indication of growth in the direction of Socialism.”
(The Road To Power)
(The Road To Power)
Looking at the situation then purely from an economic perspective, we have, on the one hand, workers, including managers, the value of whose labour-power is objectively determined; we have a mass of profit, which is equally objectively determined; and we have a rate of interest, which is determined on the basis of the competition between the demand for money-capital from industrial capital, and its supply by money-lending capitalists. From an economic perspective, the only thing that the owners of loanable money-capital are thereby entitled to receive is this average rate of interest. If we ignore the question of rent, after deducting this interest from the mass of profit, we have the profit of enterprise, which is available for accumulation.
Whether the money lending capitalist is a shareholder, a bondholder, or a financial institution that makes a loan to the industrial capital, all it is entitled to receive, on the basis of these economic laws, is this average rate of interest. However, it becomes apparent that, at times, this is not the case. In recent months, we have seen Hillary Clinton, in the US, bemoan the consequences of “Quarterly Capitalism”, whereby firms activities have become increasingly shaped by the need to produce good results every quarter, so as to maximise shareholder value. A similar sentiment has been expressed by Andy Haldane, of the Bank of England, who spoke of a process of “capital eating itself”, because an increasing proportion of company profits was being used to pay out dividends, and other forms of capital transfer to shareholders, rather than for productive investment. They are, in fact, simply reflecting the simple economic fact that in drawing out these higher levels of revenue, this money-lending capital is acting contrary to the interests of productive-capital.
Haldane referred to the fact that, in the 1970's, only about 10% of profits went to pay dividends, whereas today the figure is around 70%. Clinton gave similar figures for the US. And yet, dividend yields, as with bond yields and rental yields, are at extremely low historical levels, because the prices of fictitious capital – shares, bonds and property – are at astronomically high levels, having been continually inflated with the support of governments and central banks. The reason that the proportion of profits allocated to dividends and other types of interest payment has risen to these high levels (and the same applies to high levels of rents) is then to compensate for these increasingly falling yields. But, in order for companies to pay out these higher dividends, a decision to do so must be made by the company.
If the company, is then a form of socialised capital, owned by the associated producers, why would it make such decisions to pay out these higher levels of dividends, and other forms of capital transfer to shareholders? The answer is that the money-capitalists, have established forms of governance, in respect of joint stock companies, over this socialised capital, that enables them to do so. Even considered from a legal standpoint, the socialised-capital of the firm, belongs to it, and not to the money-capitalists who merely lend to it, as share and bondholders. A bank that provides a mortgage to a house buyer, does not own the house, and has no right to a say in how the buyer uses it. The same is true when it makes a loan to a firm. In fact, the same is true with the buyers of a company's bonds.
The shareholders, have no right to use any of the company's property as if it were their own, as was demonstrated in a court case in the 1930's.
"A company is an entity distinct alike from its shareholders and its directors.” (Shaw & Sons (Salford) Ltd v Shaw [1935] 2 KB 113 by Greer LJ.
And yet they do. Not of course, in the sense that individual shareholders come and use that property for their private purposes, but in the sense that they demand the right to appoint Boards of Directors over the actual professional managers, the functioning-capitalists, and it is these Boards of Directors who appoint executives who make important strategic decisions over the use of the socialised capital, including the level of dividends to be paid, transfer of capital to shareholders and so on. As Marx put it,
“On the basis of capitalist production a new swindle develops in stock enterprises with respect to wages of management, in that boards of numerous managers or directors are placed above the actual director, for whom supervision and management serve only as a pretext to plunder the stockholders and amass wealth...
The remuneration of the directors of such companies for each weekly meeting is at least one guinea. The proceedings of the Court of Bankruptcy show that these wages of supervision were, as a rule, inversely proportional to the actual supervision performed by these nominal directors.”
(Capital III, Chapter 23)
In other words, what we have here is not an appropriation of surplus value by a section of money-lending capitalists – the major shareholders – justified by the economic laws of capitalism, or even by legal entitlement, but simply by power. There is no economic nor juridical justification for the lender exercising control over the capital, whose possession they have temporarily given up, and for which act they are rewarded by the payment of interest. Unlike every other lender of money-capital, and indeed the seller of any other commodity, the shareholders seek to be paid the market price for selling the commodity they own, the use value of capital, and yet to retain the right to continue exercising control over that use value, and thereby to retain possession of it. It is no different than were the seller of umbrellas to be paid for having sold an umbrella to a customer, and yet having been paid for it, then demands the right to tell the buyer how they can use that umbrella, or indeed to demand the right to use it themselves whenever it rains! To the extent that the power exercised by this infinitesimally small number of money-lending capitalists acts in contradiction to the economic laws, it acts against the accumulation of capital.
As Marx puts it,
“The credit system, which has its focus in the so-called national banks and the big money-lenders and usurers surrounding them, constitutes enormous centralisation, and gives to this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner — and this gang knows nothing about production and has nothing to do with it. The Acts of 1844 and 1845 are proof of the growing power of these bandits, who are augmented by financiers and stock-jobbers.”
In doing so, therefore, it acts even against its own longer term interests. That is a fact that even some of the more far-sighted representatives of that money-lending capital has recognised. It is what has given rise to the ideas about the need for a review of that corporate governance by both Clinton and Haldane.
When Mike says,
“To start with the common basis at an abstract level, the right of ownership of any thing is the coercive subordination of the non-owners to the owner. This becomes obvious when a non-owner interferes with the thing and the owner uses either forcible self-help or state action (police, bailiffs and so on) to stop the interference.”,
the reality is, then that what we have currently is the coercive subordination of the owners of socialised-capital, in the shape of joint stock companies, by non-owners, i.e. shareholders! That the shareholders do not own the productive-capital, is also witnessed by the fact that, the market price of those shares is determined not by the current value of the firm's productive-capital, but by the firm's prospective future profits along with the average rate of interest, via the process of capitalisation. The vast majority of the firm's capital value, has absolutely nothing to do with the money-capital loaned to it, but is overwhelmingly the result of the firm's own activities, and internal accumulation of surplus value. The owners of this socialised capital, i.e. the “associated producers” within the firm, have every right, economically and juridically, to exercise control over that capital, free from interference from the non-owners, i.e. shareholders, bondholders and other lenders, just as much as a home-buyer has every right to enjoy the home they buy with money lent to them from a bank, free from the bank telling them what colour they should paint the living room and so on. The shareholders have loaned money-capital, in perpetuity to the firm, in return for a share certificate, and the right to receive, the average rate of interest on the money-capital they have loaned. What the shareholder owns, is this share certificate denoting that fact, and far be it from the company to tell the shareholder what they can do with that share certificate, which the shareholder is free to hold on to, or sell in the stock market, to some other buyer.
It is not at all unreasonable, therefore, that a capitalist state should intervene to ensure the property rights of socialised capital are protected against unwarranted interference by non-owners – i.e. shareholders – and that the rights of the actual owners, i.e. the associated producers, are defended in their rightful enjoyment of that property.
Moreover, Mike's statement that the “formal subsumption of labour under capital” (putting out) is thus not superseded by the “real subsumption of labour under capital” (factory production)”, is wrong. Firstly, the formal subordination of labour applies equally to the wage labour employed in factories. In theory, this still handicraft labour could operate independently, as petty commodity producers, provided they could obtain the means of production and consumption to do so. What establishes the real subordination of labour is the transformation of this labour from being handicraft labour, to being just factory labour, without any specific skill set, which could be utilised in independent petty commodity production. It is factory labour, and can only ever operate as factory labour, only ever be sold as a commodity as factory labour to the owners of factories.
But, the same thing applies to money-capital. In previous modes of production, as Marx sets out, money-capital could operate independently, but as soon as industrial capitalism becomes dominant, money-capital is really subordinated to it. Money-capital can only exist on the kind of scale it exists, because of the existence of large-scale capitalist production, which creates both a demand for, and supply of that money-capital. Indeed, on a smaller scale, the demand for money-capital, can be provided by individual private capitalists, and is simply reproduced and expanded out of their own production. It is only because industrial capital takes on a mass scale that additional money-capital must be borrowed, from a class of money-lending capitalists, that the category of interest arises, and it is only because industrial capital produces profit, that it can also pay that interest. The vast masses of money-capital, that currently exist, can only be employed to meet the needs of industrial capital, just as factory labour can only now be sold as factory labour, because both are now actually subordinated to the needs of industrial capital.
Indeed, that real subordination of money-lending capital to productive-capital is displayed every time the supply of money-capital exceeds the demand for it, by productive-capital, by a significant margin. It results in what has been termed "financial repression". As Marx says,
“It would be still more absurd to presume that capital would yield interest on the basis of capitalist production without performing any productive function, i.e., without creating surplus-value, of which interest is just a part; that the capitalist mode of production would run its course without capitalist production. If an untowardly large section of capitalists were to convert their capital into money-capital, the result would be a frightful depreciation of money-capital and a frightful fall in the rate of interest; many would at once face the impossibility of living on their interest, and would hence be compelled to reconvert into industrial capitalists.” (p 378)
The massive inflation of asset prices may appear to represent not "a frightful depreciation of money-capital", as Marx suggests, but the opposite. However, a consideration of the reality shows that Marx is correct. Inflation arises, because the value of money, or money tokens falls, so that a given value of commodities is expressed in a greater quantity of that money or money tokens. The same relation exists here. In order to obtain a given amount of yield - whether as dividends, coupon interest on bonds, and the same thing applies to rent - a higher price must be paid for the share, bond, or property. The value of the money-capital, owned by the lender is depreciated, and that depreciation is reflected in the higher prices of the assets it seeks to buy, just as the depreciation of money and money tokens, caused by inflation, is manifest in the higher prices of commodities. High asset prices create the illusion of increased wealth for the money lenders, but, in fact, represent the opposite.
No comments:
Post a Comment