Elon Musk is a rare breed. On the one hand, he is so rich that he can operate as a private capitalist in spheres where only socialised capital would normally be able to operate. It allowed him to use that money to set up, for example, Tesla and SPACEX, at a time when, socialised capitals were being used simply as cash cows for channelling dividends and capital gains to shareholders, rather than using profits for real investment in productive capital, particularly in new types of commodity. On the other hand, Musk too is a shareholder, and even he is led to operate his companies as socialised capitals, whilst acting in the way that all shareholders do, whose interests are fundamentally contradictory to the interests of socialised capital.
In Capital I, Chapter 35, Marx summarises the process of evolution of industrial capitalism, as first individual commodity producers, in the towns, undergo a process of differentiation, resulting from competition between them for market share. It is the application of The Law of Value, and from it develops new social forms, in the same way that the Law of Natural Selection explains the evolution of new biological species. The most efficient commodity producers prosper, and vice versa. Unlike, in previous times, when those who failed simply became serfs, servants, slaves or paupers, changed material conditions, in the large medieval towns, with sizeable markets, and more extensive commodity production, means that the more successful, independent producers were able to become capitalists. They took over the means of production of their failed neighbours, and employed them as wage workers. So capitalist production arises first as industrial production in the towns, in the 15th century, and expands from there.
The Law of Value continues to operate, and is manifest, via, competition, in driving production to become ever more efficient, as each producer, must seek to produce more use-values, each with a lower unit value, and that requires each to produce on a larger scale, so as to obtain economies of scale, and so as to justify the use of machinery, which replaces labour, revolutionising their production, and so massively reducing the individual value of their output below its market value, and giving them additional profits and competitive advantage. It increasingly drives out the remaining individual commodity producers, who become proletarianised, and then also drives out even the smaller capitalist producers, so that the size of capital required to produce at an efficient level grows ever larger.
There are always some new smaller private capitalists entering production, and, as Marx describes, some of them are members of existing capitalist families, who use their own private wealth to establish some new venture. Musk is similar to one of those, and we could think of Bill Gates as another such example. Other sources of such new private capitalists have been the former professional managers of large firms, who, Marx describes, in the 19th century, took the opportunity, in periods of vibrant economic growth, to branch out on their own, and establish new businesses. But, at the same time that a large number of these new creations are arising, the same law of value continues to operate in the background, and to destroy the least efficient, and to ensure the growth of the efficient, now not just from their own organic growth, but also from mergers and acquisitions of other companies.
Many are called, but few are chosen, and so, out of the thousands of new small businesses created every year, many fail within the same year, and around 75% fail within five years. In Britain, there are around 5 million small businesses, but they are never the same 5 million, from one year to another, because of this high rate of failure. They represent the large petty-bourgeois class that has grown larger since the 1980's, as the growth of large-scale British industrial capital was held back by the polices of deindustrialisation, and financialisation introduced by Thatcher and her heirs in the 1990's, and early 2000's, and as the shareholders controlling those large companies, used their position to divert profits and capital gains to themselves, and away from investment in production.
That petty-bourgeois class represents the remnants of the old monopoly of private capital, discussed by Marx, in Capital I, and is reactionary, precisely because it represents a stage of capitalist production that is already, now, a century out of date. They are mostly involved in those areas where large-scale capital has no interest. They are the domestic window cleaners, gardeners and so on, or else they survive only by exploiting their own and family labour more than would be the case if they were just a wage labourer, for example, the corner shop that stays open all day every day, and so on.
As a private capitalist, with tens of billions of Dollars, Musk is an anomaly, in being able to utilise his private wealth, in the same way that a 19th century private capitalist would do, to simply buy himself the required factories, equipment and labour-power, on a sufficient scale to operate efficiently, at least, in some new areas. Even, there, of course, he takes advantage to set up these businesses as limited companies, so that, unlike a private capitalist, his own private wealth is not at risk, if the business fails, unlike the corner shop owner, who must pay up for any debts and losses they incur.
As Marx described in Capital I, as production required capital on a scale larger than any of the private capitalist families could muster, that monopoly of private capital became a fetter on capitalist production itself, and had to be burst asunder for capitalist production to continue to develop. It was burst asunder by the development of large-scale socialised capital, of the replacement of ownership of industrial capital by private capitalists with the ownership of industrial capital by companies, which were themselves legal entities in their own right, whether they be joint stock companies or cooperatives, both forming, as Marx describes them, in Capital III, Chapter 27, the dissolution of capitalist property within the capitalist system itself, and as the transitional form of property between capitalism and socialism.
As socialised capitals, they do not suffer the limitation that the monopoly of private capital imposed on capitalist development. The capital belongs to “the company”, and not to any named individual or group of individuals. The company itself is a legal entity, but is personified, at any one time, by all the associated producers that comprise it, i.e. by all of its workers, including the managers, administrators, technicians and so on, required for its operation. To use the analogy used by Marx, the workers are like the musicians in an orchestra, and the professional managers are like its conductor. They are all necessary components, and all paid wages by the company. Its most obvious manifestation is in the form of the worker cooperative, where the managers are themselves appointed by the workers.
The company obtains the funds required for its operations from its own profits, from money loaned by its members, from loans from banks, as well as from capital markets, via the issuing of shares, bonds, debentures and so on. Because, the money from these loans can now come from society as a whole, the old restrictions imposed by the monopoly of private capital are swept away, as these vast sums of potential money-capital can now be mobilised to provide investment of productive-capital on a mammoth scale.
Every company that does not need all of its profits to finance its own expansion, can put that money into the capital markets, so that it is available to other companies whose current profits are not sufficient to cover their needs for investment; every former private capitalist who retires from business, can put the proceeds of the sale of that business into those markets, and live off the interest; every worker whose wages need to be saved so as to cover future purchases, and eventualities, saves money whose small amounts, individually, are amassed into huge sums, by the banks, when they aggregate them across millions of workers.
But, it is obvious that those who simply loan money to a company are not, thereby, the owners of that company, any more than a bank that lends money to someone to buy a house, is then the owner of the house, or which lends money to a small business to buy a machine is the owner of the machine. The lender is the owner of the money they lend, nothing more, entitling them to it being returned at the end of the loan period. The interest they obtain on that loan is, then, the price they obtain for having sold that money-capital for a specified period, in other words, to have given up possession of it, and handed over its use-value (the ability to produce the average rate of profit) to the borrower. In fact, its precisely for that reason that, where the borrower has bought that use-value, it is they that has the right of ownership and control over it, for the specified period, and not the lender.
Its the same as with labour-power. The wage worker sells their labour-power, as a commodity, to the capitalist for a specified period of time, and obtains the value of their labour-power, as a wage, in return. Having bought it for that time, the capitalist owns it, and has the right of disposal over it. The capitalist has not bought the worker, who has the right to sell their labour-power elsewhere, or to use their time as they choose, outside the contracted period. It is what distinguishes the free wage-worker from the slave or serf.
If a seller of umbrellas, takes the money from a buyer, the buyer of the umbrella does not expect the seller to continue to exercise a right of ownership over it, and the buyer of capital, in exchange for interest/dividends, should no more expect the seller of that capital to demand continued ownership rights over it, either.
In the case of a worker cooperative that is obvious. As Marx set out in his advice to the First International, in such a cooperative, it would be acceptable for the cooperative to take loans from some of its members, in return for a small rate of interest, but such loans would give the individual workers no additional rights of control as against any of the other workers. Control rests with the associated producers, each of whom gets a single vote. The same should be true of all other forms of socialised capital, be it private limited companies, public limited companies, multinational corporations, or consumer cooperatives.
The shareholders, in each case, are merely lenders of money-capital to the company, and nothing more. They have given up ownership of their money, sold it for a specified period, to the company, in exchange for a payment of interest/dividends. What that rate of interest is, should, at any time, be determined by the market, by the interplay of demand and supply for money-capital, and not by the lenders themselves dictating how much they will appropriate from a capital they do not own.
They are able to do that, currently, simply because existing laws, passed in the interests of the ruling class, that owns the majority of these shares, and controls all of them, by various intermediaries, have given shareholders the right to appoint company boards, and to vote over the use of socialised capital they do not own. It is as though the law gives the seller of umbrellas the right to decide to still use the umbrella themselves, even though they have been paid for it! That is why, those shareholders, over the last 30 plus years, have been able to continually increase the proportion of profits used to pay out dividends, rather than be used to invest in capital accumulation. Its why the executives they appoint to look after their interests as shareholders, rather than the interests of the company, have used profits to buy back shares, so as to push up share prices, rather than use the profits for capital accumulation, and even to borrow money via the issuing of bonds, for that same purpose.
This is what Marx set out in describing the antagonistic and contradictory interests of these money-lending capitalists as against industrial capital. But, there are limits to all that. At a certain point, the amount paid out in dividends would equal the amount of profit. Already, former Bank of England Chief Economist, Andy Haldane, pointed out that where dividends accounted for 10% of profits in the 1970's, today, they account for 70%. And, if no profit was accumulated as capital, so that capital ceased to expand, then profits too would cease to expand, so that to increase dividends any further would mean physically asset stripping the economy, converting capital itself into revenue, and so shrinking capital. It would be extended negative reproduction. This limitation on a continued increase in dividends (and the same applies to rents) is what leads lenders (of money-capital and land) to become more concerned with capital gains, obtained by ever inflating prices of their assets, and to obtain revenue, by converting a portion of those capital gains into revenues.
The consequence of continued increases in asset prices, when revenues from those assets (interest/dividends and rents) stop rising so fast is that yields fall. Its those conditions which mean that sudden crashes in financial and property assets are likely, and it has only been the action of central banks, in printing money tokens, which they have used to buy up those assets that has enabled both asset prices to continue to rise, and to be inflated once more, each time bubbles have burst. As Marx points out, at a certain point if money keeps simply being used as interest-bearing capital rather than as industrial capital, the yield on it drops to a level where its owners see the benefit of using it directly themselves as industrial capital. Again, that is where Musk, with his vast wealth, can use it to simply accumulate industrial capital itself, rather than to buy shares and so on.
Let me give a real life example from the extreme other end of the spectrum. In the 1980's, like many other workers, I found myself the victim of Thatcher's economic policies, and on the dole. Like many of them also, alternating between unemployment and precarious, part-time and temporary employment, I decided to become self-employed, which I did for several years. As with Engels, it enabled me to see these relations from the inside. The basic economics were as follows. I had fixed capital of around £5,000 consisting of computer and office equipment and vehicles. In addition, my circulating constant capital, at its highest level, amounted to around £500 per week for materials, and around £100 per week for fuel and other expenses. As with most self-employed people, I did not assign an actual wage to myself, but a reasonable figure for that, at the time, would have been a further £200.
Turnover amounted to around £1,000 per week, so that profit amounted to around £200 per week, or a rate of profit/profit margin of 25%. In terms of an annual rate of profit, however, that was £10,000/(£5,000 + £800) = 172%. In other words, the capital actually advanced, was the £5,000 of fixed capital, plus the £800 required to buy materials and fuel, and to cover wages for a week, because, I turned over this circulating capital each week, meaning that, at the start of week 2, it was already reproduced in the takings from the previous week. By comparison, if I had taken this £5,800 and put it in a high yielding deposit account, at the time, I might have made, perhaps, 10% interest on it, equal to £580 of interest, as against the £10,000 of profit.
So, the incentive for someone like Musk, faced with a choice of buying more shares, or bonds, which might yield say 5%, or using his money to buy a factory, equipment, materials and labour-power to start a space technology company, which returns, say, even just 30% annual rate of profit on that investment, profit which, because it is his private capital, is all his, becomes a no-brainer. This also illustrates again the difference between private capital and socialised capital. All of the capital that I employed as a self-employed person, belonged privately to me. If I wanted to use a vehicle, a piece of office equipment, or any of the materials for my own personal use, I was free to do so. That is not the case with socialised capital. It is not the personal property either of shareholders, or of the associated producers within the company.
The thing that stops the Musk's of the world from converting, on a large-scale, back into private capitalists, so as to obtain these much higher returns of profit, as against yield on shares, is that they have been guaranteed even larger returns as capital gains from ever increasing asset prices, resulting from central bank policies of money printing, and QE. But, whilst the Musk's continue to bid up asset prices by using their private wealth for the purchase of paper assets rather than investment in real capital, they continue to want to exercise control, as shareholders, over the socialised capital they do not own. And, its here that Musk clearly demonstrates why that should not be.
Its not long ago that Musk not only put billions of Dollars of his own wealth into Bitcoin, but also had Tesla buy Bitcoin, and agree to accept it in payment for cars. If Musk wants to waste his own money gambling on worthless cryptocurrencies that is his own concern, but that is not the case with the companies of which he is merely a shareholder, and where, also, it is the livelihoods of thousands of workers at stake. From the time he made that decision, Bitcoin has again lost more than half its value, as it descends towards its true value of zero. And, the latest pronouncement is similar. Musk has declared that he has a “very bad feeling” about the economy, and wants to cut his workforce by 10%.
In fact, his Tesla factory, in China, as the ridiculous lockdowns there have been lifted, has just trebled its output! What Musk really means is that, as a shareholder, he sees labour shortages across the globe, which, combined with sharply rising inflation, means that wages are rising, and workers, as with the LA Dockers, are going to be demanding even higher wages, shorter hours and better conditions. It means that interest rates are going to be rising, as profits have to be used to finance those wages, and increased capital accumulation, as those increased wages create additional demand for products and services, rather than to pay out dividends, and so the only way that those interest rates can rise is if asset prices fall. What Musk is concerned about is that any such fall in asset prices is going to put a huge dent in his paper wealth tied up in those millions of shares, bonds and other assets, whose prices have been inflated astronomically over the last 30 years.
What Musk is reflecting is the same concern as the other speculators who see that spectre haunting them of rising inflation, wages, and interest rates, and cratering asset prices, and so a desire to try to prevent it. They want a recession, or at least they want workers to believe that a recession is at hand, so that they will moderate their wage demands, and slow down their consumption, so as to slow economic growth, in order that central banks will pause their tightening policies, and facilitate another rise in asset prices. It is a moderated version of the measures taken by the Chinese state to physically slow the economy by repeated and ridiculous imposition of lockdowns on its citizens on the basis of its zero-Covid policy.
All of that is done in the interests of protecting the narrow interests of the top 0.01% at the expense of the rest of society, and shows why it is time that their control over companies should be ended, and replaced by democratic control by their employees.
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