What we have is a good example that the mantra “My enemy's enemy is my friend”, is nonsense. The ruling class has two enemies. Its main enemy is the working-class, but, as Marx describes in Capital III, the basis of that is no longer that which it was in the early days of the monopoly of private capital. At that point, there was an objective contradiction between the interests of the private owners of industrial capital, and that of workers. The former sought to maximise surplus-value/profits, and that meant keeping wages to a minimum.
However, by the latter part of the 19th century, that condition had changed, and those private capitalist expropriators had themselves been expropriated by large-scale socialised capital. The private capitalists retreated to become owners of fictitious-capital, i.e. interest bearing capital, in the form of shares, bonds, and their derivatives. The contradiction was no longer between the ruling class and workers on the basis of the antagonism between profits and wages, but between the ruling class as owners of interest-bearing capital, and real industrial capital itself, i.e. between the maximisation of interest/dividends, and the maximisation of profit of enterprise.
“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.”
(Capital III, Chapter 23)
In other words, the interests of interest-bearing capital, are antagonistic to the interests of real, industrial capital. But, the expropriation of the expropriators, described by Marx, i.e. the expropriation of private capital by large-scale socialised capital, be it in the form of cooperatives or joint stock companies, and transformation of the ruling class into a class of coupon clippers, owners of fictitious capital/interest-bearing capital, means that this ruling class is imminently antagonistic to the capitalist system which created it!
Yet, this contradiction is also detailed by Marx, and shows the problem faced by the ruling class and its state, currently. The superficial appearance of this fictitious or interest-bearing capital, is that it produces interest, naturally, in the same way that a pear-tree produces pears. But, that is impossible, because interest is a deduction from profits, and profits are a function of surplus value, produced by labour.
“The idea of converting all the capital into money-capital, without there being people who buy and put to use means of production, which make up the total capital outside of a relatively small portion of it existing in money, is, of course, sheer nonsense. 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. But we repeat that it is a fact for the individual capitalist.”
(ibid)
This is the problem that the ruling class and its state has had to confront for the last 30 years, and particularly the last 15 years. As asset prices inflated, when money-capital did suffer a “frightful depreciation”, as its supply from surging profits in conditions of stagnation and intensive accumulation, meant that interest rates fell, so there comes a point, where, for some owners of money-capital, the fall in the yield/rate of interest, is not compensated by the rise in the mass of capital. That is apparent for someone who just, has, say £200,000 in a savings deposit. With a 10% rate of interest, they obtain interest of £20,000 a year, which may be enough for them to live on. As interest rates fall to 2%, their interest falls to just £4,000 a year, and not enough to live on. Hence the shift of such savings to the purchase of buy-to-let property, or alternatively to shares, in which the amount of dividends might rise, as company profits rise.
But, if we, then, take these shares, profits and dividends, if the same £200,000 is used to buy 200,000 shares of a company that produces £200,000 of profit, and pays out £20,000 in dividends that again is a 10% return. If, however, the profits rise to £300,000, and it pays out £30,000, but the price of the shares rises from £1 to £2, so that the 200,000 shares are now equal to £400,000, this £30,000 only represents a yield of 7.5%. To begin with, the person who only paid £1 for the shares will see their yield as being, now, 15%, but for anyone, now, coming to buy the shares, the yield will be just 7.5%. Indeed, the original purchaser will see that they have an asset with a current value of £400,000 that only produces a 7.5% yield, and compare that to the yield they could obtain elsewhere. As interest rates fall and asset prices rise, this becomes more acute. But, what Marx could not have foreseen was that, as this process unfolded, over the last 40 years, with a ruling class that now owns its wealth in the form of this interest-bearing capital, it would begin to focus on the total return, and specifically the capital gain, rather than on the actual revenues produced by the assets.
There is a limit to which the small scale owner of such assets can simply sell a portion of the assets they own so as to convert the capital gain into revenue, because, at some point, all of their assets are sold. But, the ruling class has such a large mass of such assets that, even with its extravagant consumption, it can fund that consumption by a combination of the revenues from them, with partial liquidation of assets to realise capital gains. But, that depends upon those capital gains continuing, i.e. on asset prices not crashing as happened in 1987, 1994, 2000, and 2008, and as Jim Rickards records, nearly happened in 1998, at the time of the collapse of LTCM. The ruling class has, therefore, used central banks to ensure that whenever such falls occur, liquidity is injected to purchase assets and raise their prices. But, that does nothing to increase the revenues produced by those assets, so that the yields on the assets fell further, as the asset price rose, even resulting in the ludicrous position of negative yields on assets.
To avoid that, the ruling class needed to avoid economic growth exceeding what could be funded without causing interest rates to rise, and asset prices to crash. Hence austerity, lockdowns and so on. But, despite its best efforts, it has failed to achieve that, in the long run. The interests of real industrial capital, is to minimise the amount paid out in interest/dividends, and so to maximise profit of enterprise, as the means to accumulate capital, and so, produce more profit. But, the immediate interest of the ruling class, is to maximise the amount of dividends/interest it receives, or else to maximise capital gains via perpetual rises in asset prices, which requires it to use its control over the state to hold back economic growth, and, thereby, interest rates!
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