Chapter 10 – Project Zero
The Dissolution of Capital Within The Capitalist System
“If you believe there is a better system than capitalism then the past twenty-five years have felt like being – as Alexander Bogdanov put it in Red Star – 'a Martian stranded on Earth'” (p 263)
What is worse, it has been obvious, during that period, that, not only is a better system, but even a better capitalism was possible, during that period. Throughout capitalism's history, there have been periods of idiocy, such as the South Sea Bubble, John Law's Mississippi Scheme, the Railwaymania and so on. As Marx points out in Capital, the individual capitalist, beyond a certain level of development is always torn in two opposite directions. On the one hand, as the personification of capital, the capitalist is pulled, by the requirements of competition, to utilise their profits to accumulate, on the other hand, as with all previous ruling classes, they are drawn to use those profits to provide for their own unproductive, conspicuous consumption.
For so long as capital remains in the form of the monopoly of private capital, the former must always be the dominant force, because, without accumulation their continuance as a capitalist is in jeopardy. As Marx puts it in Capital III, Chapter 15.
“And the capitalist process of production consists essentially of the production of surplus-value, represented in the surplus-product or that aliquot portion of the produced commodities materialising unpaid labour. It must never be forgotten that the production of this surplus-value — and the reconversion of a portion of it into capital, or the accumulation, forms an integrate part of this production of surplus-value — is the immediate purpose and compelling motive of capitalist production. It will never do, therefore, to represent capitalist production as something which it is not, namely as production whose immediate purpose is enjoyment or the manufacture of the means of enjoyment for the capitalist. This would be overlooking its specific character, which is revealed in all its inner essence.”
Bur, as soon as the monopoly of private capital begins to dissolve, and is replaced by socialised capital, the glue holding together these two contending forces is dissolved along with it. The objective nature of capital as capital, to self-expand, and thence for profit to be accumulated as capital, remains as real as before, but its personification is now not the private capitalist, but the functioning capitalist, the day to day professional manager, technician or administrator, increasingly drawn from the ranks of the working-class itself.
At the same time, the private capitalist is released from that constraint. As they become merely an owner of loanable money-capital, which they use freely to lend wherever it will bring them the greatest immediate total returns (yield plus capital gain), so the requirement of competition to accumulate is removed for them. The private money-lending capitalist is thereby placed in the same position as every previous ruling class, whose only imperative to accumulate assets is the subjective desire to increase their personal wealth, and to increase their potential future returns.
Once this situation arises, the interests of these money lending capitalists, and the form of property they own – fictitious capital (shares, bonds, property and their derivatives) comes into increasing contradiction with the fundamental form of property under capitalism – capital itself. The owners of fictitious capital seek to maximise their total returns, by maximising the revenue they obtain in the form of interest/dividends and rents (as property itself becomes a tradable financial asset) and by attempting to obtain capital gains from speculation in these assets. Their immediate objective is unproductive consumption, including in the form of gambling in stock, bond and property markets, for the purpose of obtaining these speculative gains. But, this objective requires them to maximise the proportion of profits they can obtain as interest/dividends and rent, which minimises the proportion of profit left over as profit of enterprise, available for accumulation.
The owners of fictitious capital thereby become the immediate opponents of the functioning capitalists, as the personification of socialised capital. Other than in the worker-owned cooperatives, where the workers themselves exercise control, the money-lending capitalists assert their interests as against real capital, by appointing executives and boards of directors, which sit above the actual functioning capitalists, and thereby exercise control.
On the one hand, as Marx sets out in Capital III, this represents the dissolution of capital within capitalism itself. But, so long as the owners of fictitious capital are enabled to assert control over real capital, that process is held back. Fictitious capital continually asserts its interests as against real capital, until that results in an inevitable financial crisis, in which the predominance of real capital asserts itself. But, the attempts of fictitious capital to assert its influence results in real destruction. As Marx says in Capital III, Chapter 23,
“...profit of enterprise is not related as an opposite to wage-labour, but only to interest …
assuming the average profit to be given, the rate of the profit of enterprise is not determined by wages, but by the rate of interest. It is high or low in inverse proportion to it …
Therefore, the industrial capitalist, as distinct from the owner of capital, does not appear as operating capital, but rather as a functionary irrespective of capital, or, as a simple agent of the labour-process in general, as a labourer, and indeed as a wage-labourer...
But since, on the one hand, the mere owner of capital, the money-capitalist, has to face the functioning capitalist, while money-capital itself assumes a social character with the advance of credit, being concentrated in banks and loaned out by them instead of its original owners, and since, on the other hand, the mere manager who has no title whatever to the capital, whether through borrowing it or otherwise, performs all the real functions pertaining to the functioning capitalist as such, only the functionary remains and the capitalist disappears as superfluous from the production process.”
And,
“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.”
(Capital III, Chapter 33)
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