Central banks have printed money tokens to inflate the prices of assets, which today is the form in which the top 0.01% hold their wealth. Alongside it, governments have implemented measures of fiscal austerity, to hold back economic growth, and, thereby, hold back the demand for money-capital, which would cause interest rates to rise, and asset prices to crash.
Shareholders who exercise control over the large-scale socialised capital they do not own, have been able to protect their paper wealth, in such conditions, by using profits to buy back shares, issuing bonds, bought by accommodating central banks, so as to use the proceeds to buy back shares, so inflating their price.
But, that also leads to enhanced contradictions and costs, in the longer term. It meant a slower growth of economies, and accumulation of capital, but, then, capitalists in developing economies were presented with an opening to fill that gap. The rapid growth and accumulation of capital in China, has been an obvious case in point. But, even in the developed economies, it meant that a greater opening for smaller private capitals was created, and, with reactionary, conservative parties increasingly dominated by the interests of those small capitalists, policies were introduced that further facilitated them. The private owner of a small business, be it a window cleaner or gardener, or be it a small engineering firm, is not like a shareholder. Their revenues, and their wealth depends, directly, upon the profitability of their business, and not on the paper market value of shares, or the interest on loaned money-capital. That profitability, in turn, depends upon them being able to win market share. It depends on them investing in real productive-capital, and being able to undercut their competitors, as well as being able to produce and sell more.
Often, these companies have been the ones that could not easily raise capital, because banks were more interested in lending money for speculation in property, by lending to buy-to-let landlords and so on. In conditions in which fiscal austerity slowed economic growth, and excess liquidity diverted money into the purchase of assets rather than consumption, the scope for rapid expansion of these smaller firms was limited. But, now, liquidity is gushing into consumption. At the same time, interest rates are rising, and that means an inevitable fall in asset prices. It creates the conditions in which these smaller private capitals can grow rapidly, especially where they can accumulate circulating capital on the basis of commercial credit. The larger, socialised capitals, therefore, are in danger that they can be squeezed by large, new socialised capitals based in developing, and newly industrialised economies, on a global scale, and by a rapid growth of smaller capitals, in some spheres, in their own domestic markets.
Of course, Roberts is right that, frequently, the big monopolies will respond to such conditions by simply using the power of their balance sheets to buy up any domestic competition, from rapidly growing smaller firms. But, all of this means that there is an unavoidable shift away from simply using profits to buy back shares, and inflate asset prices, into the use of profits to invest in real capital accumulation, either via organic growth, or via acquisition. It necessitates a higher rate of economic expansion, and an increased demand for money-capital, as against its supply, necessitating higher rates of interest – whatever central banks might do in relation to their policy rates – and a consequent fall in asset prices.
As Marx notes, and Lenin, in his analysis of the development of capitalism in Russia, sets out, the determining characteristic of all commodity producing economies is competition, and capitalism as the most mature form of commodity producing economy is also so characterised, and determined even when that competition takes the form of monopolistic competition. Marx notes,
“Socialists know well enough that present-day society is founded on competition...
In actual fact, society, association are denominations which can be given to every society, to feudal society as well as to bourgeois society which is association founded on competition...
It must be carefully noted that competition always becomes the more destructive for bourgeois relations in proportion as it urges on a feverish creation of new productive forces, that is, of the material conditions of a new society. In this respect at least, the bad side of competition would have its good points...
In practical life we find not only competition, monopoly and the antagonism between them, but also the synthesis of the two, which is not a formula, but a movement. Monopoly produces competition, competition produces monopoly. Monopolists are made from competition; competitors become monopolists. If the monopolists restrict their mutual competition by means of partial associations, competition increases among the workers; and the more the mass of the proletarians grows as against the monopolists of one nation, the more desperate competition becomes between the monopolists of different nations. The synthesis is of such a character that monopoly can only maintain itself by continually entering into the struggle of competition.”
(The Poverty of Philosophy, Chapter 2)
What lies ahead is not the perennially predicted economic catastrophe suggested by Roberts, but a financial crisis that central banks will not be able to cut short by yet more money printing. It will be a financial crisis that will, in fact, create the conditions, in which the economic expansion that has so far been artificially constrained, by central banks and states, will be unleashed. It will surpass all previous economic expansions in its vigour.
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