Anti-Capitalist Chronicles: The Evolution of Capitalism

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This is David Harvey, and you're listening to  the Anti-Capitalist Chronicles, a podcast that   looks at capitalism through a Marxist lens. This  podcast is made possible by Democracy At Work. There's an interesting debate  going on in left circles   around the idea that capitalism  is no longer what it once was,   and that we are in a new kind of  capitalism. There's a tendency   to talk about this as the “New Feudalism,”  that the feudal world is being resurrected.   It's a strange debate because it's all about the  realm of ideas and what categories we superimpose   upon the world. My own tendency is to not get  engaged in that, but I'll get engaged in it at the   end of an analysis rather than at the very outset.  I don't want to say that I'm in favor of this   “neo-feudalistic” capitalism which  seems to be emerging, because   what we really need to do is to start with  the realities which are around us, and to   recognize that there are certain features in that  reality that need very much need to be analyzed. I have a simple data point. In the U.S,  the real return on equities– that is,   on the stock market – averaged 9.2 percent  a year between December, 1981, and December   2021. This 9.2 percent a year growth in  equities return far outstripped growth   in average real earnings of 0.5 percent a  year and overall GDP growth of 2.7 per year.   Now, if that is the reality of the situation,  the task of analysis is to find out   why is it that the return on  equities averages 9.2 percent,   whereas the growth in average real earnings is 0.5  percent a year, because clearly those people who   are invested in equities – that is, the top one  percent and top 10 percent of the population   – are going to come out of this [40]-year  period very, very well, whereas those who are   actually depending upon wages are not going to  come out of it well at all, and we're going to   get an enormous increase in inequality, of the  sort that we have seen over the last [40] years. The key factor is the growth in equities  and the growth in the stock market,   and this brings us to one of the key reasons why  some people talk about the “New Feudalism” or   the new “Neo-Feudal Capitalism.” It's because  when Marx was writing, industrial capitalism   of the Manchester sort was dominating the British  landscape, and it was generally held that there   was a struggle going on between the industrial  capitalists and the remnants of a feudal society.   In fact, that struggle against the power of the  landed aristocracy and the power of the usurer   meant that there was a  struggle against the rentier. The rentier is an interesting  figure, historically.   By the rentier, we mean somebody who actually  lives on unearned income. That is, they just sit   there and get a rate of return, like the people  who sit there getting a rate of return of 9.2   by investing in equities. They don't actually  do anything. They can just sit in the hammock. There was a wonderful ad for Lloyds Bank  in which a guy is lying in a hammock,   saying, “You know, some days I  recuperate. Other days, I speculate.”   I tried to use it in The Condition of  Postmodernity, and when Lloyds Bank   found out it was going to be in a rather  critical vein, they tried to stop me.   They said they would like to refuse permission  to use the ad. So the publisher and I wrote to   them and said, “Yes, we would be happy to remove  that ad from The Condition of Postmodernity, and   in so doing we would write across the page,  ‘There was once an ad for Lloyds Bank which   stated …..’ “ We never heard back from  Lloyds Bank again. I just left it as it was.  The point is that when we talk about rentier  incomes, we're talking about people who   are just living on unearned income, and the  unearned income can come from various sources.   It can come from the stock market. It  can come from savings. When I was born,   I was given a savings bank book,  and somebody put 50 pounds in it,   and over time I put a bit more in it, and it  ended up that when I was twenty years old, I had   about 150 pounds in it. During that time, it  earned two or three percent compound interest.   This is unearned income, so I was the beneficiary  of unearned income, but not by very much.   Some people lived off unearned  income. In a Jane Austen novel,   you'll find that a good match is somebody who has  an income of rents of £10,000 or £20,000 a year.   So unearned income was a big issue, and when  Marx was writing there was a residual of the   unearned income, who are people living off state  rents, or they were living off the church. There   were a whole bunch of people who were generally  considered to be parasitic in relation to the   production of value. They were sucking the wealth  out of the people who were really doing the hard   work. This, of course, was both capitalists and  workers, and it's interesting that Saint-Simon,   back in the late 18th century, came up with a  theory of society which differentiated between   the parasitic classes. which were the church and  the state and the landlords and all the rest, and   the productive classes. The productive classes  were the capitalists and the workers together. The rentier is an important figure in the 18th  century and continued in the 19th century to   be an important figure, but generally speaking,  public policy was being pushed by the industrial   capitalists to make sure that the rentier classes  were less and less significant, and at the same   time to define productive uses, significant uses,  of the particular forms of distribution which the   rentiers were utilizing. For example, taxation can  be used two ways by the state. It can be used to   support the lifestyle of the rich folk. It can  be used to build monuments for the rich folk,   or it can be used to build social housing for the  poor, affordable housing, and things of this sort. At a certain point in the 19th century,  the question of what the state should do,   what financiers should do [was asked], and  generally speaking the argument was that   merchant capitalists had a role to play. They  should help the industrial capitalists sell   their product. The finance capitalist had a role  to play – that is, it would help the industrial   capitalists deal with differential turnover  times, long-term investments in fixed capital,   or those kinds of things, and the state would have  productive things to do. There are some aspects of   state incomes and state revenues which have  productive utilizations. Marx tended not to   call these “productive” in the sense that they  actually created value, but he called them the   necessary costs for the full array of a capitalist  system, the necessary costs that needed to be   taken care of. Each one of these factions, like  finance capital, landed capital, and so on have   had a role to play in support of industrial  capitalists which were dominant during the period. There was a political struggle, also,  amongst the economists. The Ricardo School   was very antagonistic to the rentier incomes,  and all the way down to Keynes in the 1930s,   where Keynes talked about looking forward  to the day when there would be a euthanasia   of the rentier, that is a euthanasia of  what Keyne's called the “coupon clippers,”   people who clip coupons from the stocks and  shares and then got their money that way. The history of the rentier is important, and  the rentier was much maligned in economic theory   by the Ricardians in the 19th century  and was much maligned politically.   [There was a realization that] we have productive  ways in which these factions of capital at some   point or other turn into separate classes, so  we would talk about a merchant capitalist class,   or a finance and money capitalist class, which  were subservient to industrial capital. The model   of capital with which Marx was working was from  the Manchester cotton factories and industrial   capitalists. The other factors or forms of capital  assisted in the task of the production of value   and surplus value, by helping with the circulation  of capital, helping with the investment flows,   helping with the turnover times of capital  and fixed capital investment and so on. This is the model that you would get from the  way Marx was writing about it, but even when Marx   was writing about it, it became clear to him that  some of these issues were rather more complicated.   He was particularly taken  up with the way in which,   in Second Empire Paris, the financial systems were  doing two things. One was that they were actually   channeling money and surplus value, sucking  value, out of the productive sector to support   the lifestyles of the financiers and the bankers,  so that was a parasitic side, but then there   was the other side, which was that money in the  productive sector was being put together in ways   which could then return into the productive  sector to launch bigger and bigger projects.   The capitalists could borrow large sums of  money to set up very large conglomerate forms of   capitalist production. To do that, they needed  to have capital assembled, so the financiers   therefore have a sort of dual character.  One is positive and the other is negative. Marx talked about financiers in Second Empire  Paris and said they had the “charming character   of swindler and prophet”. They were actually  helping to shape the future of capital by   assembling massive amounts of money for  reinvestment, and that reinvestment was   then reshaping the circulation of capital. So  they played a constructive role in relation   to capital accumulation, but they also played a  parasitic and swindler role. They were engaging   in speculation and things of that sort. In Second Empire Paris, the city was rebuilt   essentially on borrowed money, and the  money was borrowed by the builders and   the construction agents and all the  rest. They built the new boulevards.   They built the new train systems. The financiers  were engaging in a lot of very important   investments in the built environment. The  rebuilding of Paris brought full employment and   new lifestyles into being, so this is why Marx  talks about them as a “prophet of the future''   because they are actually creating the future  world through the nature of their investments. The problem was that they not only were doing  that, but they were also swindling everybody and   gaining immense well-being for themselves at the  same time as they were pretending that they were   being very ascetic and not consuming. They had  this theory of –I don't know exactly what we would   call it – a kind of abstinence, that they were  abstaining in order to make these big investments.   Marx has a funny line about that. He says that  they emphasize abstinence so much, you expect   to see them “begging on the pavement” because they  haven't done any of the investment for themselves. Even during Marx's period, as he gets into  Volume Three of Capital, he starts to talk about   the financial classes, and  what the financial classes do   and how important they are for the circulation  of capital and the reinvestment of capital,   how they play that constructive role in  relationship to production, but they also play   this non-constructive and parasitic role.  This was something that Marx was already   recognizing, that you had to have  financiers. It wasn't just a parasitic thing   entirely. You had to have financiers, because  capital couldn't function without them. So one of the things that Marx is very concerned  about is, why is it that you need to assemble   capital in the way you do in order to gauge  an investment? This is why the stock market   becomes important. The creation of the  stock market was one of the ways in which   people could invest in the future, and this is  where the major returns come from. The creation   of the future also becomes a speculative act, and  Marx starts to recognize that even in his time   this sort of thing was going on, and it needed  to be understood and it needed to be analyzed. And he had to recognize that there were  certain social relations going on between   finance capitalists and industrial capitalists.  He pointed out that the relationship between   them almost rendered what the worker  was doing irrelevant. There was a kind   of factional fight going on between the  industrial capitalists and the finance   capitalists. The same thing would be true of  the merchant capitalists. Marx at that time   thought that the finance capitalists and  the merchant capitalists were subservient   to industrial capital, that they were  the servants of industrial capitalism,   but what this statement suggests is that since  1980, one of the things that's happened is that   the relationship has been inverted – that in fact,  what we've seen since the 1980s is that because of   the way in which the neoliberal door was opened  to all kinds of financial operations and so on,   we find a situation, in which more often than  not, finance capital becomes the master not   the servant. It is even the case that in certain  situations, merchant capital becomes the master. Consider, for example, the big merchant capitalist  firms which have grown up very strongly since   1980 – Walmart, Ikea and the like. They all are  selling things, and they are merchant capitalist   firms, and they actually can put pressure on  industrial capital. In other words, it's no longer   a situation where the industrial capitalists are  telling the merchant capitalist the conditions   of sale. The merchant capitalists are actually  ordering things from the industrial capitalists,   and are paying the industrial capitalists as  little as they need to, in order to maximize their   own profits. What you find is something which  is called monopsony. Monopsony is a situation   where you have one consumer, and the one consumer  can dictate conditions to multiple producers.   It's not the case with Walmart that there is only  one consumer, but Walmart is one very, very large   consumer, and it certainly dictates prices,  and dictates qualities, and dictates quantities   to its suppliers, and its suppliers are  essentially doing the behest of Walmart.   The same would be true even in many of the textile  companies, the sort of organizations like the big   merchant capitalists in the textile  industry, like Gap and Banana Republic.   You'll find that they're the ones who are  dictating terms to the industrialists. So there's been a switch, and Marx did not  anticipate that. As there was a switch,   this means that the power center of capital shifts  from industrial capitalism to merchant capitalism   in many instances, or depending upon the sector,  to finance capitalism and finance, so these forms   of capital become much stronger and much more  dominant. Because they become much more dominant,   they are not necessarily concerned with the  production of surplus value. The production   of surplus value is a collateral thing as far as  they're concerned. If, for example, financiers   can earn more money by speculating in art, or  speculating in property rights or in oil wells   or separate property rights in land – if you can  get a higher rate of return from doing that than   you can from investing in steel production, then  you don't bother to invest in steel production.   You don't bother to invest in production in the  ordinary sense of the term at all. You start to   invest in weird forms of production, particularly  the production of spectacle. The financiers right   now are heavily into sponsoring soccer leagues and  soccer clubs, paying multi-million pound salaries   to their players, having fantastic  television contracts and so on. This has been going on since the 1980s. There's  been a switch. When I say there's been a switch,   it depends upon the nature of the sector.  There are some sectors where monopsony power   has become very significant – monopsony power  in relation to agriculture, for example. You   have a multinational like Mccain from Canada that  [makes] all the frozen french fries. They go out,   find farmers, and contract with farmers to produce  the potatoes. They give the farmers the seed.   The farmers plant the seed and then Mccain takes  what it wants of the potatoes, and whatever   is left over is for the farmer to sell  separately. This is contract farming, and is   most farming now. All of those cans you see of  peas, cans of beans, cans of Goya and so on,   they essentially have monopsony power in relation  to all the agriculturalists who are producing   the potatoes and the peas and the  beans and the tomatoes and so on. So what you have is a very different situation  from the situation Marx was talking about where   value being produced on the land was actually  being produced by the farmer, and done in such   a way that the farmer would then sell it. Now,  the farmer is actually doing it on contract,   and in a sense the farmer has  become an indentured worker   for the canning companies.  The same is true in textiles.   In some other areas, however, the producers still  have a certain amount of power. In automobiles,   for example, the auto companies are big companies.  They still maintain a good deal of power, although   they still need to have a marketing organization,  like General Motors has General Motors Acceptance   Corporation, which finances the purchase of  automobiles. So you've got General Motors   producing the automobiles and you've got General  Motors Acceptance Company which is financing their   purchase. General Motors Acceptance Company became  so large that when the crisis struck in 2008,   you find immediately that the money needed to  buy the commodity is going to have to come from   General Motors Acceptance Corporation. These are  the sorts of arrangements which have come up now. Why would we want to say that this is a new form  of capitalism? I've always thought of capitalism   as being something that's fluid, something  that's always in motion, something that can   be best thought of as a totality, and understood  as a totality, which is in constant evolution.  Therefore, the form of capital today is going to  be very different from the one which existed in   the 1960s which is very different from the one in  the 1930s. It's not as if once upon a time there   was capital, and now it's evolved into something  else. There's a whole history of evolutionary   structure within capital. It's constantly growing.  It's constantly morphing into something different.   It's very fluid. The class relations within  it are shifting. The balance of forces within   it is constantly shifting. The power of the  state in relationship to what is going on,   the power of finance, the power of the  merchants, the power of the landed aristocrats   and so on – those are all shifting. Therefore, I  would say that capital is a system in evolution,   and as it evolves, so it is transformed. The class  relation internally between all forms of capital   and labor and class relation and the form of the  state – all those things are constantly evolving.   Therefore, I would not say that it is going back  to something called feudalism. It's not, but on   the other hand it is going forward into something  that is rather different. That something which is   rather different is indeed a situation in which  the finance side of it has become very dominant. Now if finance becomes dominant, then [Marx]  says you're dealing with a form of capital   which is very special. Money capital is the only  form of capital that can increase without limit. And here, too, there is a falling and rising mass  of output, but there's a certain mass in terms of   actual things which is difficult to supersede.  That's not true of money. We've found that the   money side of things is becoming more and more  detached from the rest, and we are therefore   finding a monetarized form of capital which  is becoming more and more significant. One of the things that says is that profit  making is no longer going to be confined to   parallels with surplus value production. Profit  making is going to become something which is   about financial operations in and of themselves,  and that profit making which can come from, say,   housing development is going to be caught  up in a closed circle. The production of   housing can be financed by a developer. At  the same time, the purchase of the housing   can be financed. So the financier is going to  operate both in terms of supply and demand. Having supply and demand dominated by  capital is not unusual in capitalism.   Marx talks about this, and says that's the problem  with labor. Everyone likes to think that the   supply and demand for labor is like  between two autonomous and independent   factors of production. Marx points out in Capital  that it's not, because capital can produce surplus   labor by technological innovation. Capital  can also do it by mobilizing the industrial   reserve army. As Marx says, capital operates  on both the supply and the demand for labor,   so what appears to be in capitalistic  economics [two] independent, autonomous   factors of production, which are brought in  collision with each other, but no. Marx says   capital controls both the  supply and the demand for labor. It also supplies both the demand for housing  at the same time as it orchestrates the   supply of housing, so the fact that capital can  operate on both sides is not an unusual feature   for a capitalist mode of production. The degree  that it does so produces some peculiarities within   the capitalist mode of production, which actually  become rather crisis-prone. This takes me back   to the crisis tendencies that arose in  2007-2008. One of the things that I said   in The New Imperialism was that there was a  phenomena going on which was “accumulation by  dispossession.” This accumulation by dispossession  was just as important as the production of surplus   value. The way in which capital was evolving  during the 1980s and 90s was a situation in which   the balance of power between finance capital  and industrial capital and merchant capital   was shifting. Therefore, there were different sets  of possibilities available for capital to engage   in profitable activities, and one of those means  was the business of accumulation by dispossession. In this argument about the new feudalism,  accumulation by dispossession gets a little   bit mixed up. Many people cite it as just  primitive accumulation, which was what got us   out of feudalism. My answer is that accumulation  of dispossession has a particular kind of history,   and we therefore need to take account of  how this works, and how this then leads to   the capacity of large segments of capital  to operate in such a way that while   their activities are not entirely  unearned, they are only slightly involved. Let me give you, by way of conclusion, an  extended example of this. In 2007 to 2008,   we had the crisis in the housing sector. Seven  or eight million households lost their houses   to foreclosure. Their houses had a certain value.  Even if they could sell them and get some equity,   the housing market collapsed so they couldn't sell  them, and if they could sell them, the price was   so low that it wasn't worth it. Many people just  walked out of their houses and left the keys.   In other instances, some people who had  been paying their mortgage regularly   were illegally foreclosed upon. So a huge  foreclosure takes place and there are   seven or eight million houses out there which  were in the hands of the banks. The banks are   foreclosed on them, so they're all held by the  banks. Some of the banks held so many houses,   and the houses were worth so little in the  middle of the crisis, that the banks were   themselves in a lot of trouble. Some of the  banks had to file for bankruptcy because they   had this dead weight of all of these houses  which were worthless in their portfolio. Let's take the case where the banks had  them and didn't file for bankruptcy.   The banks have all of these houses worth  very little, even though the nominal value   which had been there before the crisis  was still stated on the books, but it   was unrealizable. Along comes a private equity  company, Backstone, and it says to the banks,   we will take those houses off your hands for  a discounted price. To do this, they need to   borrow a lot of money. They borrow a lot of money  from institutions – from insurance companies, from   finance capitalists, and all the rest. Blackstone  borrows a lot of money and goes to a bank and says   “We have the money now. We can give you  the value of the housing, which is say   30 percent of its market value, and we take it off  your hands.” The banks say, “Thank you very much.   We really are very appreciative of that.” Then the  state comes in and says to the bank, “We will make   up the difference between what Blackstone paid to  you and what the nominal value would have been,   so if Blackstone paid 30 percent we will pay 70  percent.” The banks were bailed out because they   got 30 percent from Blackstone and 70 percent  from the federal government, so they eventually   got the full value of the house. The banks  survived. Some of the banks filed for bankruptcy,   and when this was found out, people went in  and took over the bank, and then played this   game and got all this money from the federal  government. So the banks came out of this fine. What did Blackstone do? Blackstone was sitting  on a massive housing supply. They start to turn   it into rental housing and it does extremely  well. Given that they had only paid 30 or 40   percent of the housing value, they could get most  of the money back that it had paid to the banks   in a very short period of time. This is, in  effect, the transfer of wealth from the original   homeowners to Blackstone, with the federal  government bringing in more support.   Blackstone then becomes one of the  biggest companies in the world.   Because it’s the biggest landlord in the United  States, it has a huge portfolio, and becomes   hugely profitable. Now it's investing  in all kinds of things. It's taking over   industrial parks in China, and industrial parks in   Australia, doing housing and rental  housing and the rest – kind of astonishing. Stephen Schwarzman, the CEO of Blackstone,  becomes one of the richest people in the world.   He gives a huge amount of money  to Oxford University and MIT to   teach the humanities better. At the  same time, Schwartzman is a great   supporter of Donald Trump and joins with several  of the other mega[rich], so an oligarchy forms   and it's done by these financial games.  Blackstone gets borrowed money, pays back   the borrowed money to whoever lent it and now  they’ve got all this equity in housing worldwide.   The value of the company is now – I don't  know, I should check what the value is –   but it's certainly up there in the trillion  dollars or more [$915.5 billion as of 2022]. This is the sort of thing that people do. You see  this with Elon Musk and his attempt to take over   Twitter. He wasn't necessarily taking it over with  his own money. He went somewhere and said let me   borrow 25 billion dollars or whatever it was that  he's paying for it. The rich folk can get it.   We're living in a society where these kinds  of things are going on. That is the evolution   that's come about, in part for one very simple  reason: that money is the only form of capital   that knows no limit. Money is not actually under  the control of anybody. Money is created by people   engaging in trade and engaging in exchange. So,  in a sense, you make the money as you go along.   All the Federal Reserve can do is to check on  the money that's been made and try to make sure   it's qualitatively okay, and it can support  creating more money by quantitative easing. I don't think this is a new feudalism.  It's certainly a new form of capitalism.   I think the two areas which are  defining the new form of capitalism are   one, the financial side, and the other  is the artificial intelligence side,   and what is going on with the creation of  these new platforms, and with the fangs   the Apples and the Googles and the Amazons and so  on. We've got a new kind of capitalism, which is   evolving. It is evolving for certain reasons,  in certain kinds of directions, and the big   problem I think for us is, how do we start to be  anti-capitalist towards this kind of capitalism? Being anti-capitalistic when Marx was  writing – I won't say it was simple,   but at least it was clear who the enemy was, where  the enemy was, and what should be done about it.   You could organize a strike against General Motors  in the 1930s. Right now these are things which are   very difficult to organize. We've got massive  companies out there. How artificial intelligence   is going to work is an open question. One  of the other big things is this increasing   quantity of finance capital, which I think  is extremely dangerous. It seems to me   that the whole world is operating on one  large Ponzi scheme, because for every phase of   increasing the debt and increasing finance and  the rest of it, you get a phase of increase of   specie, and as a result you're flooding  the world with amounts of money. The   oligarchic possibilities are  really dangerous for the future. Thank you for joining me today. You've been  listening to David Harvey's Anti-Capitalist   Chronicles, a Democracy At Work  production. A special thank you   to the wonderful Patreon community  for supporting this project.
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Channel: Democracy At Work
Views: 9,029
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Keywords: Richard Wolff, democracy, work, labor, economy, economics, inequality, justice, capitalism, capital, socialism, wealth, income, wages, poverty, yt:cc=on, David Harvey, Marx, feudalism, feudo-capitalism, rentiers, merchants, merchant capitalism, finance, finance capitalism, industry, production, David Ricardo, wealthy, equities, stock market, real wages, housing, Blackstone
Id: 5r-bk72BTCQ
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Length: 42min 6sec (2526 seconds)
Published: Thu Jun 02 2022
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