From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Tue Oct 02 2007 - 04:59:31 EDT
I agree that the information structures that constitute fiancial records have social power, but any complex system of social relations has to be embodied in data structures. Think of land ownership. It is nothing without either boundary stones or a land registry. Thus social relations are codified in and depend upon data structures. But I think you are comparing apples to oranges when you try to aggregate financial records with real capital, for several reasons: 1. In commodity exchange a conservation law holds, the sum of embodied labour/value does not rise in exchanges. 2. In financial transactions a conservation law still applies but it is a slightly different one. The conservation law here is that the net asset/liability position does not change when a debt is created, however, the sum of absolute values involved does rise ( ie the L1 norm ) changes. This is at the hart of the ability of the financial system to create new money. 3. There is a also a simple violation of conservative exchange in the form of interest payments. The stock of real capital can only be increased by labour being expended and embodied in a material product, the L1 norm of financial assets can be increased by a simple information processing operation. The labour required to process a new loan of 100,000 euro is the same as required to process a loan of 200,000 euro, there is thus no relationship between the labour required to process the information and the magnitude of the financial transaction. This is the basic reason why the L1 norm can rise so much relative to real capital. I am not sure what you mean when you say " As I see it, the modern "problem" of economic growth is NOT the lack of investment capital, but a SUPER-ABUNDANCE of capital, often owned by people who, globally speaking, do not use much of it to invest in real production that creates additional jobs or expands that production. " What do you mean by 'capital' in this sense. -----Original Message----- From: OPE-L [mailto:OPE-L@SUS.CSUCHICO.EDU] On Behalf Of Jurriaan Bendien Sent: 01 October 2007 22:52 To: OPE-L@SUS.CSUCHICO.EDU Subject: [OPE-L] That hissing? It's the sound of bubblenomics deflating Paul, I realise that assets less liabilities necessarily equals zero in a balance sheet, since the total liabilities state the funds applied for the investment in the total assets (source of funds as against use of funds). However, two things: (1) the liabilities include the equity owned in the enterprise (2) more importantly, the assets or alternatively the liabilities effectively constitute a legally enforcable claim to a revenue stream, which is the important thing from the point of view of understanding the accumulation process as a whole. This revenue stream does not sum to zero, it constitutes in aggregate a net positive income, as is partly acknowledged in conventional national accounts. I think Marx was well aware of all that, it is just that he believed that the conventional double-entry bookkeeping did not show the real economic and social relationships involved (which he proceeded to expound using a value analysis that is at the roots of all accounting and all price calculations). Consequently, if you really wanted to understand capital accumulation, you needed a different set of concepts, and a different procedure of grossing and netting stocks and flows. Moreover, Marx's focus was on the capitalist mode of production as a unity of the production and circulation, viewed as a process in perpetual motion. I am not sure if I fully agree that financial assets are "not values but information structures, sequences of records held on the hard disks of the banking system". It is certainly true that according to Marx, only the products of human labour have value in bourgeois society, but this already suggests an ambiguity, insofar as financial services can also be labour-services sold as a "financial product" (sold as a commodity, with a money-price that may be totally unrelated to the actual labour-time it takes to produce this "financial product" - we might however in principle be able to split out the fees or salaries charged for providing this service; and indeed in UNSNA-type product accounts, a portion of the positive net income of banks shows up as a "nominal bank charge" thought to constitute the value added of the banking industry). There are very few good value-analyses of the peculiarities of commodified services as contrasted with tangible goods. Furthermore, financial assets, as said, constitute legally enforcable claims to a revenue stream, i.e. a source of net income which depends on established property rights enforced by the state. This implies, I would say, that we are dealing with more than a mere "information structure" as a sort of technical instrument, we are dealing with a social power claiming new and existing wealth purely through a capitalisation of asset ownership. The tenor of your criticism seems to be that I am basically "comparing apples and pears". In a sense you are quite correct about that. But I was thinking of capital accumulation, and tried to find a measure of the broad proportions of capital tied up in physical assets versus capital tied up in financial assets, the point being that the majority of each of these assets generate a positive revenue stream, whether in the form of profit, rent, interest, capital gains, tax, seignorage or fees etc. Of course, in striking this ratio, I must be double-counting to a significant extent, insofar as the physical asset can give rise to a tradeable financial claim to that asset (and/or the income derived from it). A physical asset may be owned by a legal entity which is owned by another entity, which is owned by another entity which trades in that type of entity on the basis that it generates a revenue stream, and so forth and so on. Be that as it may, an astonishing quantity of world society's capital these days is tied up in a financial circuit that is semi-autonomous from real production, yet this capital provides a claim to a significant portion of the output of that production. That is what I intended to highlight with another statistic, contrasting that with myopic views of the scope of capital accumulation, but I admit there are also better ways to do it. The IMF figure is for total "tradeable US financial assets" and not total US financial assets. The overall implication is that a greater proportion of the mass of surplus-value is appropriated in the form of interest, rent, capital gains of various types, and fees, which in turn has other sorts of implications I cannot delve into now. As I see it, the modern "problem" of economic growth is NOT the lack of investment capital, but a SUPER-ABUNDANCE of capital, often owned by people who, globally speaking, do not use much of it to invest in real production that creates additional jobs or expands that production. The main reasons for this, briefly, seem to be (1) considerations of comparative risk, (2) stagnating, declining or sluggishly growing real wages plus gigantic income inequalities, and thus a very severe maldistribution of income from the point of view of the monetarily effective demand necessary for cumulative economic growth (3) perhaps most importantly, higher returns from placements in activities or assets other than real production. At least four additional factors that many authors note are (4) a modern emphasis on gaining the maximum profit in the short-term, whereas cumulative economic growth requires long-term financial commitments (in third world countries, the focus is often especially on the problems of developing the country's social and physical infrastructure). Part of the "risk problem" of large-scale, long-term investments is that there are very few things you can invest in these days other than government bonds for which you can guarantee that they will not fluctuate significantly in value through time, not in the least because currencies can fluctuate strongly according to speculative cross-border flows. (5) the fact that the physical essentials necessary to sustain the life of the world population at its present level or a slightly higher level can actually be produced by a smaller and smaller fraction of the world's growing workforce. (6) a new ideological emphasis on ecological pessimism, according to which "we all" ought to make do with less material wealth for the sake of the health of the planet, which paradoxically can make the case for developing old and new industries benefiting poor people a very RADICAL stance. (7) Problems that have to do with establishing and maintaining effective management and effective social organisation of enterprises, involving among other things increased job mobility, criminal or grey transactions, and a lack of consensual norms and values (it becomes more difficult for elites to "unite" the people for a specific purpose, whether politically or managerially, resulting in recurrent leadership crises or continual "refocusing"). In themselves, these kinds of observations are not spectacular news, they are only of new interest in the context of an analysis which comprehensively integrates a mass of different trends, giving them their appropriate place in a durable theory of the development of modern society and what the human meaning of that is, qualitatively and quantitatively, without venting new myths or anxieties or vulgar pomo metaphors. The national accounting system now in use was developed in the 1930s and finalised in the 1950s, with only relatively small conceptual modifications since then. But in half a century, the very ways of doing business have changed enormously and therefore some macro-economic categories which might have seemed perfectly valid and exhaustive in scope back then, become highly questionable now. In my previous posts on various lists I have tried to illustrate this in some more depth with specific examples, i.e. how the official aggregates and classifications cited in the media now provide a significantly distorted picture of what really is happening in terms of wealth-creation, income distribution and capital accumulation. I am not saying the aggregates are completely useless, but that they have to be read with many qualifications nowadays. From the point of view of my own analysis, I frankly do not understand why many Marxists persist in taking these categories of a past epoch for granted, rather than criticising them scientifically and devising new alternative measures (some authors including yourself however do do this). I have not elaborated all this and more in a book which tells a substantive story about what I learnt from the 1980s onwards, because my career as social scientist failed due to love problems, some mistaken decision-making or indecision etc. You simply have to be able to patiently work through a very large mass of data and literature to make all the arguments exact, effective, complete, and irrefutable, and meanwhile you have to make an independent living somehow, whatever your mental state might happen to be, or however harassed you might feel at times. I have also worked through many thousands of documents in the last 8 years but that is more in the context of my job as archivist/documentalist, and often quite unrelated to my social scientific inquiries which I had intended to pursue further. You get challenged to see if you know anything, and you write a bit in your spare time to say what you think and argue it out, but you don't get any big job done. Well, maybe when I retire, I cannot really say now how my life might pan out yet. And if you wonder about whether your inquiries are worthwhile anyway, you don't get very far either. My last posts were rather too negative I think, and seen as I have just started a new job, I cannot post a lot of new stuff now anyway. However, like Ajit I went on holiday to shake off some fatigue (for a week in Sicily, in my case) and I attach two of my snapshots which I consider among my best on this trip (the highest point in the trip, was going to the top of the Etna volcano). Jurriaan
This archive was generated by hypermail 2.1.5 : Wed Oct 31 2007 - 00:00:17 EDT