Brexit Britain's Bridge To Nowhere - Part 22 of 27

In the NIC's, the rapid expansion of industrial capital, also, led to an inevitable rise of their own domestic markets, as former peasant producers became wage labourers. That expansion, also, meant an increase in the size of their own petty-bourgeoisie, of small producers and traders. Think about a new industrial estate, which draws to it a plethora of such people offering snacks from a van, and so on. But, in the NIC's, this increase in the size of the petty-bourgeoisie simply transferred former peasants and independent commodity producers, into it, representing no increase in the size of these intermediate classes. If it had any consequence, in that regard, it was, as Lenin, also, described in relation to Russia, that this petty-bourgeoisie is generally more literate and cultured, better educated than the peasantry, and that, in these conditions, a part of it is always falling into the ranks of the proletariat, and a much smaller part that become bourgeois themselves.  A look at the rise in global literacy rates, for example, illustrates this point.

By contrast, in the developed economies, the 50% increase in the mass of the petty-bourgeoisie, since the 1980's, came from a transfer, into their ranks, of former industrial workers, including some from the most cohesive, militant and organised sections, such as the miners, print workers and so on. The proportional rise in the social weight of the petty-bourgeoisie came from that, and the relative stagnation in the growth of large-scale, industrial capital, resulting from the process of deindustrialisation, globalisation of production, and the turn of the ruling class owners of fictitious-capital away from productive investment, as a source of their revenues, into financial and property speculation, gambling and rent-seeking. That was also reflected in the ideas of conservative social democratic parties and governments, which fostered the idea of gambling on lotteries, saw house price inflation as being a source of household wealth that could be tapped, and so on. By comparison, even the mildly progressive, social-democratic ideology of Harold Wilson, was reluctant, even, to accept the idea of introducing Premium Bonds.

It was this latter fact that, also, proved that the ruling-class could not escape the laws of capital, and the contradictions it faced. The rate of interest, or, as Marx defines it the market price of the use value of capital, i.e. its ability to produce the average rate of profit, is determined by the demand for money-capital (whether for real capital accumulation or not), as against the supply of money-capital (mostly from realised profits, but also from accumulated savings). In the 1980's, the microchip revolution massively increased the mass of profit, and rate of profit, as well as creating a huge release of capital.

For the reasons set out earlier, and elsewhere, one aspect of this release of capital is that a much smaller proportion of those realised profits were required both to reproduce existing capital, or for capital accumulation. Another aspect of that was that a part of that reproduction and accumulation of industrial capital, now, shifted to Asia and other NIC's. Money-capital from realised profits, thereby, flowed towards those NIC's, and away from developed economies. As noted earlier, it was that which led, when interest rates rose, to the Asian Currency Crisis.

But, why, then, given what has also been said, did these interest rates rise? On the one hand, the mass and rate of profit was high, and, although capital accumulation, in the NIC's, occurred at a rapid pace, it faced no problem of a shortage of labour. Similarly, in the developed economies, this fact of deindustrialisation and globalisation meant that increased, labour-intensive production took place in the NIC's, not in the developed economies. Together with the fact that all that labour saving technology, introduced from the 1980's onwards, had created a large, surplus population – some becoming under-employed, impoverished petty-bourgeois (my usual cultural 1980's reference for that being Only Fools and Horses, but I have recently been watching Minder on ITVX, created by Leon Griffiths, who had been a writer for The Daily Worker), some became precarious day labourers, others, unskilled retail workers etc., and others modern day serfs, dependent on a paternalistic, welfare state.

So, in the late 1990's, and early 2000's, the usual mechanism, described by Marx, in Capital III, of the relation between the accumulation of money-capital and the accumulation of real industrial capital, means there is no basis for a rise in the rate of interest. That mechanism, described by Marx is a function of the long-wave cycle. As the economy comes out of the period of stagnation/intensive accumulation, the demand for capital and labour expands. The existing excess supply of money-capital that causes interest rates to fall, and fuels speculation, dries up. It does not, at first, result in rising interest rates, but brings to an end their long secular downward trend.

“On the whole, then, the movement of loan capital, as expressed in the rate of interest, is in the opposite direction to that of industrial capital. The phase wherein a low rate of interest, but above the minimum, coincides with the "improvement" and growing confidence after a crisis, and particularly the phase wherein the rate of interest reaches its average level, exactly midway between its minimum and maximum, are the only two periods during which an abundance of loan capital is available simultaneously with a great expansion of industrial capital. But at the beginning of the industrial cycle, a low rate of interest coincides with a contraction, and at the end of the industrial cycle, a high rate of interest coincides with a superabundance of industrial capital. The low rate of interest that accompanies the "improvement" shows that the commercial credit requires bank credit only to a slight extent because it is still self-supporting.”

(Capital III, Chapter 30)

Back To Part 21

Forward To Part 23