Covid paranoia has played a useful role for the dominant section of the ruling class over the last two years. As the potential for extending austerity measures, to slow economic growth, had been exhausted, the moral panic created around Covid served as a good proxy, instead, by directly slowing economic growth, by physically imposing lockouts and lockdowns.
The dominant section of the ruling class has needed to slow economic growth, so as to slow the growth in the demand for labour, and so as to slow the underlying rise in market rates of interest, which threatens to cause asset prices to crash. The dominant section of the ruling class, today, holds its wealth almost exclusively in the form of these assets – fictitious capital – and not in the form of real industrial capital, as its 18th and 19th century predecessors did. Generally, the ruling class derives its wealth and power from the revenues its obtains on the basis of the ownership of those assets, and because, under current company law, the ownership of shares also gives it control/voting rights in relation to that real industrial capital – socialised capital - which it does not own, depriving its real owners – the associated producers (workers and managers) – of such control, in the process.
However, from the 1980's onwards, as asset prices rose astronomically – initially due to secularly falling market rates of interest and rising rates of profit – even rising revenues on those assets, in the form of dividends/interest and rent, represented falling yields. If the dividend you get on a £1 share rises from £0.20 to £0.50, it still represents a falling yield, if the price you now have to pay for such a share rises from £1 to £5, i.e. it falls from 20% to just 10%. For a time, precisely because shareholders do exercise control over the socialised capital they do not own, and appoint the boards of directors that make these decisions, those boards could vote to simply devote increasing proportions of company profits to the payment of dividends, rather than using those profits to accumulate additional capital. Former Bank of England Chief Economist, Andy Haldane, has pointed out that where, in the 1970's, only about 10% of company profits went to pay dividends, today, that proportion has risen to 70%.
But, the more profit going to pay dividends the less that goes to accumulate real capital, and grow the business, and, thereby, future profits. As Marx pointed out this is the fundamental contradiction that exists within the mature form of capital between the owners of fictitious capital, who act as merely money lenders to industrial capital, and whose interests reside in the maximisation of those interest payments, as against the industrial capital itself, whose interest resides in minimising the payment of interest, and maximisation of the profit of enterprise available for accumulation.
“It is indeed only the separation of capitalists into money-capitalists and industrial capitalists that transforms a portion of the profit into interest, that generally creates the category of interest; and it is only the competition between these two kinds of capitalists which creates the rate of interest...
The purely quantitative division of the profit between two persons who have different legal titles to it has turned into a qualitative division, which seems to spring from the very nature of capital and profit. Because, as we have seen, as soon as a portion of profit universally assumes the form of interest, the difference between average profit and interest, or the portion of profit over and above the interest, assumes a form opposite to interest — the form of profit of enterprise. These two forms, interest and profit of enterprise, exist only as opposites. Hence, they are not related to surplus-value, of which they are but parts placed under different categories, heads or names, but rather to one another. It is because one portion of profit turns into interest, that the other appears as profit of enterprise...
… (the) antithesis to wage-labour is obliterated in the form of interest, because interest-bearing capital as such has not wage-labour, but productive capital for its opposite. The lending capitalist as such faces the capitalist performing his actual function in the process of reproduction, not the wage-worker, who, precisely under capitalist production, is expropriated of the means of production. Interest-bearing capital is capital as property as distinct from capital as a function. But so long as capital does not perform its function, it does not exploit labourers and does not come into opposition to labour.
On the other hand, profit of enterprise is not related as an opposite to wage-labour, but only to interest.”
(Capital III, Chapter 23)
By the 1990's, the owners of fictitious capital were already viewing the capital gains on their assets as a more significant source of wealth and power than their increasingly dwindling revenue yields on those assets, yields which fell all the more as the prices of the assets continued to rise. That applied equally to property assets as to financial assets, as a similar astronomical rise in property prices meant that, even with rising rents, rental yields continually fell. And, conversely, the more this ruling class saw the source of their wealth and power residing in the ever inflating prices of those assets, and the capital gains flowing from it, the more they feared any crash in those asset prices, as representing an existential threat to their wealth and power. The state, and the central banks as a component of it, were set the task of ensuring that no such crash in those asset prices was allowed, or that, were it to occur, they reversed it, even if that meant trashing the real economy, and real capital, by holding back capital accumulation, slowing economies via austerity, and so on.
The underlying expansion of economies, apparent after the onset of the new long wave upswing in 1999, meant that, gradually, aggregate wage demand would expand. Even with wages themselves unchanged, a growing number of employed workers – and globally from the 1980's, the size of the working class doubled – meant a growing mass of wages, and growing demand for wage goods to be produced, which in turn creates the conditions in which firms must compete for that growing market, and so accumulate capital to do so. Part of that accumulation is the accumulation of additional workers, and as productivity growth from technology slows, labour supplies start to get used up, which begins to feed through into higher wages themselves. The mass of profit continues to grow, but this rise in wage share squeezes profits relatively, and that means that to finance capital accumulation, the demand for money-capital relative to its supply rises, causing interest rates to rise, which then leads to highly inflated asset price bubbles bursting. The crash of 2008 was its manifestation.
As continued bouts of austerity became impossible to justify, other means of slowing economic growth was required. COVID proved a convenient proxy. Its not necessary to conceive of it as some kind of conspiracy. Its very unlikely COVID was created for that purpose, and indeed, its unlikely that the ruling class even seized upon it first to fulfil that role. As I have set out before there is a wide range of groups in society for whom COVID paranoia has performed a useful function. But, when that paranoia had the effect of slowing economic growth, particularly as a result of the active shutting down of large parts of the economy, the ruling class and its representatives will have been quick to recognise its potential as, again, economic stagnation translated into soaring asset prices, as it relaxed the pressure on market rates of interest, and gave central banks the opportunity again to reverse their plans for tapering, and instead to resume large scale QE, and cuts in their policy rates.
But, as I have set out previously, whilst COVID paranoia may have been an easy quick fix, in that respect, it was a very bad longer-term option. Its possible duration was always very limited, and the other side of it was extremely inflationary, meaning that, in the end, it would create even greater problems in terms of interest rates, rampant demand, and consequently a crash in asset prices. So, it has been each time constraints were relaxed. The latest moral panic whipped up, in relation to first the Delta variant, and more recently the Omicron variant, proved much less durable than the initial moral panics. Delta was used to justify a reintroduction of some controls in previous months that slowed economic growth from its rapidly growing path, but not that much, even in Britain, where it has been the effects of Brexit that have had more consequence. Omicron has less potential to hold back growth, despite all of the hyperbola currently being spouted as a unified wall of propaganda around it has been unleashed, conveniently just ahead of today's Bank of England rate setting meeting.
That hyperbola has become increasingly ridiculous in nature. We had Dominic Rabb talking about high levels of people being hospitalised with Omicron, when, in fact, during most of last week there had been no such hospitalisations, and even at the point Rabb made his comment, which he subsequently had to retract, the number was just 10 in the whole country. Today, we have had all of the big guns out again talking about just what a threat Omicron represents, as the number of infections is doubling every day, and already into the thousands. Yet, the government scientists, even as they gave out this information were also forced to admit that the grand total of people now hospitalised with Omicron amounts to just 15! Indeed, the latest NHS data shows that, even as this surge in infections is taking place, the proportion of hospitalisations for all COVID variants, has started to fall for those in vulnerable groups.
The ridiculous nature of the propaganda being pumped out in relation to Omicron is reflected in the fact that it continually focuses on this irrelevant metric of infections and infection rates, rather than the number of people actually falling ill with it, dying, or requiring hospitalisation. That is not surprising given that the metrics for all of these relevant aspects continue to disprove the narrative that is being presented, and undermine the basis of the moral panic that is again being whipped up. The line continues to be presented that, isn't it obvious that even if Omicron is milder, a much larger number of infections will still mean a larger number of hospitalisations? But, of course, no, as I showed the other day, that does not follow at all. The number of people infected might go from 1 million to 10 million, and yet the number of people even made ill might fall to zero, let alone made ill enough to require hospitalisation!
There are literally tens of billions of microbes, and, every day, human beings take in and exude huge numbers of them. We have millions of them living on our skin. But, no one gives a second thought to this fact. Why, because although we are continually being “infected” by these pathogens, which spread very, very easily, they pose no threat to us, in general whatsoever. Some can and do. For example, cervical cancer is caused, in some people, by the Human Papilloma Virus (HPV), not in all, because some people develop an immunity to it. The same virus is the cause of some throat and mouth cancers, often as a result of it being transferred by oral sex. The point is that, its not the virulence of a virus, the extent to which it is spread amongst the population, that is the determining factor, but whether the virus itself causes illness or not, and if it does the extent of that illness.
Omicron was always going to be problematic for those that wanted to whip up a new moral panic around it, as the basis for arguing for further widespread restrictions, precisely, because whilst it is more virulent – and so would become dominant and widespread quickly – it is also a milder form of of COVID, and so one whose impact, in terms of large scale serious illness, and hospitalisations would be greatly diminished, especially in the context of widespread immunity resulting from vaccination and natural immunity. The reality would quickly be seen by populations to diverge sharply with the catastrophic narrative that was being created around it, and that, in conditions where populations have already seen the doom-laden predictions of scientists and government advisors disproven in previous waves.
Omicron, despite all of the hyperbola and catastrophism that has been pumped out in recent days, has not led to people being cowed as they were in previous waves, in the run up to Xmas, as they come to spend large amounts of revenues, again creating a boost for economies that have been running on overdrive as artificially constrained supplies try to catch up with rampant levels of monetary demand for goods and services. Last week saw the US record an official inflation rate on CPI of 6.8%, the highest figure since 1982. Yesterday, the US Federal Reserve announced that it was speeding up its withdrawal of QE, and predicted three rises in its policy rates in the coming year. The UK, this week saw its CPI rise to 5.1%, up from 4.2% the previous month. That is a rise of about 21% over the month. So, its no wonder that, despite all of the hyperbola being spouted over Omicron, the Bank of England too raised its policy rate from 0.1% to 0.25%, a rise of 150%.
In both cases, the central banks are running just to try to catch up with the upward movement of real market rates of interest, as economies continue to expand. As I have set out elsewhere, these very low absolute rates of interest are unlikely to have any impact on the real economy, or firms' plans and need to accumulate capital, in order to try to win their share of rapidly growing markets, but this low absolute level, is precisely the basis upon which the movements represent huge proportional increases in rates, and it is these proportional movements that are decisive when it comes to the capitalised values of revenues, in determining the prices of assets.
This now looks like the end game. The reality of Omicron will become manifest in the next few weeks as all of the hyperbola about high levels of infection is blown away like so much froth, as it becomes obvious that even high levels of infection have not translated into significant levels of hospitalisation or death. Many of the government scientists and advisors will have discredited themselves, and unfortunately will have played into the hands of the climate deniers, anti-vaxxers and others along the way. This was probably the last chance of holding the line against reopening economies they had, so as to hold back economic growth, and the consequent rise in asset prices. The crash in those asset prices is now just a question of time.
No comments:
Post a Comment