6 As noted in footnote 15 in Chapter 12, unlike many radical political
economists
we do not consider rent and the earnings of unincorporated business as capitalist income.
Nitzan Bichler - 2012 - Capital as Power
In many ancient cultures, words were consid- ered the most potent force: God is commonly believed to have created the
The capitalist mode of power 265
world with his words, a feat of power that humans have since striven to emulate. Both in goal and structure, language was a precursor for all later technological developments.
The two archetypes
From this premise, Mumford differentiated between two qualitatively distinct technologies: one associated with the democratic outlook of Neolithic culture, the other with the power bias of 'civilized' society. In his opinion, their distinct paths stem from a different reaction to death. Neolithic tech- nology takes the biological route, seeking to enhance life while accepting the inevitability of death. Power technology, by contrast, uses mechanical force and violence in the vain hope of achieving immortality.
This qualitative distinction, of course, cannot be applied easily to actual societies, certainly not with any precision. Most social formations contain elements of both technologies, and few if any conform closely to either ideal type. But the distinction is nonetheless useful as a general myth, a basic framework for understanding the dual underpinnings of social organizations.
Neolithic culture
Neolithic culture does not see work as alienating labour, but rather as a communal process intertwined with the broader ecological system. Work is often backbreaking, but physical toil is compensated for by companionship, cooperation, song and rhyme, while aesthetic achievements are valued no less than abundance of yield. Indeed, many early feats of domestication - such as fertilization, the sacrifice of food for future growth, the harnessing of cattle and the use of a plough - were probably first practised as religious rituals. Feminine traits abound - from the lunar cycle linking cultivation to menstru- ation and sexuality, through the primary role of containers (pot, jar, house, village), to the careful cultivation of gardens and the patient rearing of chil- dren. Festivities, ceremonies and rituals revolve around the family, neigh- bours and community. Eating, drinking and sexual activity occupy a central place. There is no lifetime division of labour. Knowledge is rarely monopo- lized, and most types of work can be performed by all members of the community. Systemic gender inequality is uncommon. There are no social classes, and authority stems from age. Violence is limited and dictatorial power rarely tolerated. 1
Neolithic culture established the merit of morality, self-discipline, coop- eration and social order. It had shown the value of public goods and fore- thought. Most importantly, over time it has proven to be the most resilient
1 For more on the cooperative, life-loving aspects of Neolithic culture, worship and rituals, see Gimbutas (1982).
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form of social organization, always outlasting the far more energetic yet brittle power civilization.
These aspects of Neolithic culture, Mumford argued, did not disappear with the archaic village. As a form of social technology, they persist within modern society - sometimes visibly as in villages, communal organizations and even business companies, and at other times invisibly as resistance to the dictates of mechanical civilization.
Mumford also identified some significant shortcomings in Neolithic culture. The exclusive nature of small associations restricts human inter- action, the horizons are limited, and pettiness and suspicion prevent broader cooperation. And, indeed, after its initial burst of discoveries and inven- tions, Neolithic innovation died down and stagnation set in. Conservatism made Neolithic settlements vulnerable to external invasions, and when horse-mounted tribes, equipped with metals and weapons, moved in, many Neolithic communities succumbed and withered.
Power civilization
Against this backdrop of a peaceful if limited form of democratic organiza- tion rose the spectre of power civilization under the authoritarian rule of divine kingship. The first of these social amalgamations evolved in the great river deltas - from Egypt and Mesopotamia to the Indus Valley and China. According to Mumford, the unifying hallmark of these amalgamations was absolute power.
The need for such power was partly rooted in material circumstances. Physical surplus and the consequent amassment of material wealth for the first time had created the possibility of 'total loss'. The population was large and growing, segmented by an increasing division of labour and evermore interdependent. Under these conditions, flooding, drought and later total war could easily have spelled catastrophe, if not complete annihilation. Whereas Neolithic culture could flexibly respond to the first two and rarely faced the third, in the urban amalgamates of the deltas these threats had to be counter- acted resolutely and ruthlessly. And given the large scale of activity, such a response could be achieved only through the sanction of absolute authority.
But as Mumford argued, material considerations tell only part of the story; the other and perhaps more important part is symbolic. The rise of power civilization was accompanied by the appearance of the sky gods. Neolithic earth gods, attuned to the micro biological cycle of fertility and operating on a human scale, were no longer sufficient for the task at hand. For the kings, risk of disaster made failure increasingly unacceptable, thus amplifying the ever-present fear of death. Neolithic culture, humbled by its limited potential, had to accept mortality, but kings were no longer bound by Neolithic hori- zons. Control over growing resources and larger populations suggested to them - admittedly with some justification - that the 'skies were the limit'. Expanding insight into writing, mathematics and astronomy gave their task
The capitalist mode of power 267
cosmic proportions. But as Josephus Flavius wisely observed, 'The union of what is divine and what is mortal is disagreeable' (Koestler 1952: 237). So as earthly rationality grew hand in hand with supernatural irrationality, the king, dazzled by both his achievements and fears, was driven toward the ulti- mate feat of becoming an immortal sun god himself.
Power civilization appeared after rising agricultural yield for the first time had enabled a systematic generation of food surpluses. According to Mumford, it was probably at that point that hunting chiefs, who had earlier entertained symbiotic relationships with Neolithic settlements, first discov- ered the promise of forceful redistribution. Weapons, which had previously been used primarily against animals, were now increasingly applied against people, and total war became a permanent institutional feature.
Neolithic excavations offer little or no evidence of fortification or arma- ment. The first fortifications are associated with urban centres, while heaps of cracked sculls - early evidence of organized murder - do not appear until kingship. Neolithic art did not glorify warriors and leaders. It left us no wall paintings of massacres and prisoners. It never built tombs in which lesser mortals were sacrificed for the afterlife of rulers. These aesthetic manifesta- tions emerged only when humanity embarked on its 'civilized' power trip to control nature and, most importantly, people. 2
2 The contrast between the authoritarian drive of power civilization and the democratic impulse of Neolithic technology is well illustrated by the fundamental difference between the ancient royal scripts on the one hand and the alphabet on the other. The former were used in the hierarchical administration of taxation, material stocks and masses of human beings. But beyond their practical role, they also served as a means of instilling institutional privation, fear and awe. Their structures were exceedingly if not deliberately complicated. Egyptian hieroglyphics, Mesopotamian cuneiform and Chinese logography all have hundreds and often many thousands of symbols. Studying these scripts required many years of harsh schooling and systematic harassment that would put to shame even the best public schools of the British Empire (Kramer 1963). Their impenetrable structure helped sustain hierarchy and prevent entry. It made broad learning impossible, deterred innovation and fixed the cosmos against subversion. It was a technology of sabotage, par excellence.
The democratic invention of the alphabet destroyed this exclusivity and opened up a world of freedom. The first known alphabet was written on the walls of the turquoise mines of Serabit el-Khadim in the Sinai Peninsula, sometime during the fifteenth or fourteenth century BCE. The writers were probably the western-Semitic Apiru (or Amurru) who worked there as periodic zapping labour. Both the Bible and Egyptian evidence suggest that the royal administrators did not like these guest workers. Unlike the peasants of the Nile Valley, they were quasi-nomadic tribes who hadn't been civilized into complete docility. Perhaps in defiance of their employers who had cheated them, they invented a new script and used it to record their names and work days. This script, known as Proto-Sinaitric, simplified the Egyptian hieroglyphs, reducing them to only 40 symbols. Two hundred years later, Proto- Sinaitric became an alphabet with 24 symbols (Giveon 1978; Naveh 1987). In due course, this democratic act, having decimated the sabotage of exclusive reading and writing, would open the door to philosophy, history, science and democracy - feats of autonomy and creativity that were inconceivable in the early power civilizations.
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The mega-machine
According to Mumford, the first power machine was social. In attempting to emulate the perfect cosmic order so as to annul their own mortality, kings turned to design, assemble and operate a human mega-machine. Absolute con- trol of this mega-machine served as evidence of supernatural power, and the machine's most fantastic output - megalomaniacal graves - were supposed to open the gate to immortality.
The mega-machine of the early kingships typically comprised three prin- cipal components: a labour machine of peasant conscripts to erect public works; a military machine to impose internal discipline and engage in external war; and a bureaucratic machine to keep the accounts. Control was in the hands of a tight caste comprising the royal court and the high priesthood - the former maintaining a monopoly over physical force, the latter over knowledge and ideology. Division of labour and advanced specialization (Egyptian mining expeditions, for instance, had up to 50 different job descrip- tions), strict regimentation, uncompromising discipline and tough punish- ment turned the workers, soldiers and officials of these organizations into mere mechanical components. Initiative was all but forbidden and flexibility disallowed. Taken as whole, these organizations formed 'a combination of resistant parts, each specialized in function, operating under human control, to utilize energy and to perform work'. In short, they fulfilled all the requirements of Franz Reuleaux's classic definition of a machine (Mumford 1967: 191).
The fusion of rational insight and highly irrational aspirations resulted in a massive explosion of what political economists now call 'productivity'. Seen from a material standpoint, the technological achievements of the early mega- machine, particularly the construction of the pyramids, remained unparal- leled until our own epoch. But according to Mumford, the more significant contribution was the construction of the human mega-machine itself. It was here that the three basic principles of mechanization - complex coordination, de-humanization, and remote control - were first applied. In other words, the original object of mechanization was society itself. And in due course, just as the cosmic worldview was a necessary prerequisite for the adoption of universal weights, coins, the calendar and the clockwork, the human mega- machine became the ultimate model for subsequent non-human mechan- ization.
The mega-machine enabled human beings, for the first time, to transcend some of their own biological limitations. The principles of universality, order and predictability opened the door to a continuous expansion of knowledge. Urban amalgamations assembled by the first mega-machines opened new horizons for human interaction, triggering occasional flurries of creativity difficult to achieve in small and disjoined Neolithic settlements.
But the unleashing of such positive forces was neither the intended purpose nor the most important consequence of the mega-machine. According to
The capitalist mode of power 269
Mumford, the ultimate goal of human organization on a large scale was and remains negative: exerting social power for its own sake. The use of brute force is more than a means of exacting obedience; it is the very manifestation of a power civilization. Human sacrifice, although pre-dating kingship, became a central preoccupation of civilized societies, slowly becoming institutional- ized, perhaps unconsciously, in the form of war. In its extreme incarnation, argued Mumford, kingship was a 'man eating device', and the cannibalistic lust of earlier kings has repeatedly resurfaced in subsequent appearances of social mega-machines (1967: 184). Even today, monetized property (capital) and the death penalty (capital punishment) remain linked to the same root, caput.
To sum up, Mumford put the power orientation of the mega-machine model in sharp contrast to the democratic features of Neolithic society. With the mega-machine, Neolithic dispersion was replaced by power concentra- tion; ecological production by mechanization; lack of specialization by a life- long division of labour; limited local violence by the institutionalization of total war; cooperation by exploitation, forced labour and slavery; and egali- tarianism by a class structure.
The mega-machine resurrected: capital
Eventually, the early mega-machines of the great deltas crumbled under their own weight. For all their external might, they were internally vulnerable: de- humanization and obedience stifled initiative, while preoccupation with power and death were bound to undermine legitimacy. And when the 'myth of the machine' died - that is, when the power structure no longer fulfilled the Pharaoh's promise of 'life, prosperity and wealth' - the social pyramid was liable to falter.
But according to Mumford, the 'myth of the machine', much like Neolithic culture before it, has outlived its first historical incarnation, and in the sixteenth century centralized power once more emerged to control human consciousness. Nothing seemed to escape this renewed preoccupation with organized power. The most significant sign was the resurrection of the sky gods and the growing assimilation of Galileo's mechanical world picture. Every social innovation - from Venetian music and French diplomacy to Newtonian physics and Hobbesian politics - was marked by mechanical rationalism. And indeed, within only a few centuries, mechanization had once again taken command - so much so that in 1933 the entrance to the World's Fair at Chicago could proudly boast: 'Science explores: Technology executes: Man Conforms'. This announcement, together with the title of the fair - 'The Century of Progress' - attests to the extent to which the 'myth of the machine' has been restored (Mumford 1970: 213).
Extending Mumford, we argue that the new mega-machine has become much more powerful than the old - though for reasons that Mumford him- self did not explore. In his analysis, Mumford focused mainly on the newly
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resurrected institution of kingship and its successor, the sovereign state. But lurking within the cocoon of the state - and soon emerging to define the very meaning of the state - was a new and very specific logic that Mumford largely ignored: the nomos of capital.
In our view, capital fulfils all the characteristics of a mega-machine. Based on the universal ritual of capitalization and a fundamental belief in the 'normal rate of return', capital is a symbolic crystallization of power exercised over large-scale human organizations, typically by a small group of large absentee owners intertwined with key government officials.
The underlying driving force of large-scale capitalist organizations is not fundamentally different from that which propelled the rulers of earlier power regimes: they all seek to control nature and, ultimately, human beings. But the structures of these power regimes - their architectures, institutions and processes - are fundamentally different. These differences, we argue, make the capitalist mega-machine more potent than any of its real or imagined predecessors - more than Genghis Khan's rolling war machine, more than Orwell's party state, perhaps even more than Huxley's human reproduction line. There are several key reasons for this greatly enhanced power:
1 Universality. Although capital appears fractured by complex production chains and fragmented ownership stakes, in fact it is highly universal. The power symbols of earlier mega-machines were largely culture- specific, relying on the physical display of public works, armies, sacrifice, flags and emblems. Capital, by contrast, is reduced to one symbol: capi- talization. By the early twenty-first century, this symbol has been effec- tively abstracted down to electronic flickers, computer bits and bytes that make people the world over march to the invisible command of capital.
2 Cohesion. The unifying belief in the normal rate of return as the ultimate yardstick for social action is all embracing. It penetrates government, business, mass communication and culture, gradually taking over their very articulation and development. By providing a common language, this belief helps unite the various elites into a cohesive, if not seamless, ruling class of absentee owners, making opposition all the more difficult.
3 Expandability. Unlike the power of kings and sovereign governments, capital power is vendible. And the fact that capital can be bought and sold means that the power it represents can be expanded on an ever- increasing scale. For the first time in history, it seems that the sky is the limit. As Mr Collins, the oil magnate in Traven's The White Rose, puts it, 'There isn't any land anywhere in the world that I can't get if I want it . . . even if it's on Jupiter - I get it - as sure as death' (Traven 1929: 34).
4 Intensity. The focus on profit enables capitalists to deepen as well as broaden their power. The ancient mega-machine was a relatively well- defined organization. Power was exercised mostly over the organization itself and in that sense was 'organization augmenting': to have more of it
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required a bigger organization. The capitalist mega-machine is a much broader construct. It consists not of the corporation per se, but of the entire scope of capitalistic reproduction. As we elaborate in the final part of the book, control over this totality is proportionate to the various capitalized profit shares. A capitalist group can increase this share directly by expanding its own corporate organization; but it can also do so indirectly, by raising its profit per 'unit of organization' so as to become 'leaner and meaner'.
5 Absorptiveness. Any process of power that systematically affects the expected level and pattern of profit is quickly capitalized (non-systematic effects usually get classified as better-to-ignore 'extraordinary items'). The discounters are constantly on the lookout, scanning the power landscape. They look to see whether education increases the relative wages of women, whether environmental policies raise the effective penalty for polluters, whether the use of military force alters the price of raw materials, whether television makes workers easier to predict, whether religious missions pacify indigenous populations, whether economic policy redistributes income, whether elections alter taxation, and so on - all with the aim of assessing the impact of these processes on profitability. Any regular effect on profit is instantly discounted into present value, and the power process this effect emanates from hence- forth becomes part of capital.
6 Flexibility. By virtue of its universality, cohesion, expandability, intensity and absorptiveness, capital has become the most flexible power structure in history. Contrary to earlier mega-machines that depended mainly on punishment, oppression, violence and terror, capital relies also - and often far more so - on reward. This ability to use both carrot and stick makes capital suppler and therefore more resilient than either kingship or sovereign government. And even when this richer menu of power occa- sionally fails, giving rise to losses and bankruptcy, large-scale capitalist organizations are usually able to resurrect themselves through merger, restructuring and the securitization of debt. Indeed, this flexibility is what makes capital accumulation possible in the first place. This last point can hardly be overstated. If orthodox economics were right and capital was indeed a physical amalgamation of 'machines' or 'production lines', its immobility and rigidity would have made accumulation impossible. By contrast, if we treat capital as a human mega-machine, a structure of social control, capitalization and re-capitalization become possible as business organizations adapt to and change reality. Literally, capital can be accumulated only because it is not a physical entity.
To sum up: the myth of the mega-machine enables us to think of capital
not as a material-productive apparatus, but as a symbolic architecture of social power. Operating through the price system, this architecture quantifies
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and reduces qualitatively diverse power processes into the universal language of capitalization, and by so doing absorbs them into the process of accumu- lation. Very little remains out of reach: power that can be priced is power that can be capitalized.
Yet it is precisely this encompassing feature that makes the capitalist mega- machine difficult to reconcile with existing theories of society. For if capital tends to absorb and internalize other forms of organized power, how can we differentiate it - and, indeed, should we differentiate it - from bureaucratic organization in general and the state in particular?
Consequent to these ambiguities, the historical ascent of the capitalist mega-machine has been grossly misunderstood - often to the point of putting the whole process on its head. The first misunderstanding concerns the sepa- ration of accumulation from organization within the corporation. The second, broader misunderstanding involves the relationship between corpo- rations and capital on the one hand and governments and state on the other. We deal briefly with the former and then turn to the latter.
Owners and technocrats
Begin with the inner compass of the corporate unit. As we saw in Chapter 4, the Weberians latched onto social mechanization as evidence that 'capital' - an entity that they erroneously equated with machines and productive artefacts - was actually on the decline, and that class analysis therefore had become irrelevant if not totally misleading.
For John Kenneth Galbraith (1967; 1983), a famous voice of this school, mechanization spelled the ascent of a new social strata: the 'technostructure'. Following the conventional creed, his starting assumption was that 'property' applies only to capital goods as distinct from organizations: the capitalist proprietors still own the physical productive apparatus, but not the organiza- tion and management of knowledge. And since in his view production has grown more dependent on the latter relative to the former, it follows that property owners must have lost their primacy to corporate technocrats and government regulators. Galbraith himself provided no evidence that this transformation had indeed occurred - although, following The Modern Corporation and Private Property by Berle and Means (1932) and The Managerial Revolution by Burnham (1941), he was not alone in inferring that ownership was becoming increasingly separate from control.
Despite their popularity, though, the 'separation thesis' and the conse- quent belief that capital was on the decline were founded on pretty shaky grounds. As Maurice Zeitlin (1974) convincingly showed, the direct evidence, including in Berle and Means's own study, was dubious from the very start: the separation of ownership from control was never much more than a 'pseu- dofact'. Neither the earlier data nor those furnished by subsequent attempts, he argued, showed that such separation had actually taken place, a claim that
The capitalist mode of power 273
has since been corroborated by numerous writers. 3 Other, less hostile critiques, like those of Baran and Sweezy (1966) and more recently Screpanti (1999), accepted that ownership was increasingly separate from day-to-day control. But in their view, this separation only subjugated executives to the rigid dictates of accumulation, turning the corporation into an even more effective 'profit machine'. 4
This last point is certainly confirmed by the evidence. As we shall see later in the chapter, when the European bourgeoisie took the lead from the declining feudal nobility, its ascent was manifested through a marked redistribution from landed income to pecuniary return on investment. If capitalists were indeed losing ground to the technostructure as Galbraith and others have argued, we would expect to see a similar redistribution - this time from profit and interest to the salaries of technocrats and professionals. And yet this redistribution never happened. Indeed, judging by the facts, capital seems to have grown stronger, not weaker.
Figure 13. 1 pertains to the United States, for which there are systematic historical data going back to the late 1920s. The series in the chart shows the income share of capitalists, measured by the proportion of pre-tax profit and interest in national income. The historical picture painted here is unambig- uous. First, we can see that the income share of capitalists has trended upward, from an average of 12 per cent in the 1930s to 16 per cent recently. 5 Second, the chart shows that the volatility of the income share, indicated by the narrowing distance between the upper and lower dotted lines, has declined. Given that capitalization is boosted by higher earnings and lower risk, the combination of these two processes attests to the extent to which the mega-machine of capital has strengthened its grip over society. 6
3 According to Zeitlin, Berle and Means used an excessively high ownership cut-off point. They considered as managerial a corporation whose lead owner has less than a 20 per cent equity stake, while in fact effective control often can be exercised with as little as 10 or 5 per cent. They then went on to make a bad situation worse by overstating the number of firms that actually fulfilled this already loose criterion.
4 For more analyses of the 'separation thesis' and evidence on ownership and control, see Moore (1983), Scott (1997), La Porta et al. (1999) and Morck (2005).
5 The share of after-tax profit and interest in national income followed a similar trajectory. After the Second World War, sharp increases in corporate taxation reduced this share, which fell to 6 per cent in the mid-1940s. Subsequently, though, the effective tax rate drifted down- wards - a reduction that helped the corporate share of after-tax national income reach nearly 15 per cent by the mid-2000s.
6 As noted in footnote 15 in Chapter 12, unlike many radical political economists we do not consider rent and the earnings of unincorporated business as capitalist income. The US national-income share of these two components has declined from 20 per cent in the late 1920s to 10 per cent presently, causing the overall share of non-labour income to fall from 37 per cent to 27 per cent. This drop gives the impression that capital has been losing ground, while in fact the very opposite is true.
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20
18
16
14
12
10
8 6 4
1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
Figure 13. 1 Capital's share of income in the United States
Source: U. S. Department of Commerce through Global Insight (series codes: ZBECON for
pre-tax corporate profit; INTNETAMISC for interest; YN for national income).
Evidently, then, knowledge of production techniques is not a prerequisite for exacting obedience. In the final analysis, it is not the engineers and bureaucrats, but the capitalists who are in the driver seat. The ultimate drive of their corporate organizations is not 'continuity', 'security', or 'sales growth' as the managerialists would have us believe, but accumulation. And whether the capitalists are absent or present, the logic of their mega-machine seems to enforce this accumulation on society with increasing mechanical exactitude.
State and capital
Still, even with this evidence, students of capital have remained uncertain about how to link it to power. The main reason is simple enough. As Marx pointed out, historically, the regime of capital emerged together with the nation-state. Yet, as we have seen earlier in the book, theoretically, this joint emergence was fractured from the very start. The conventional bifurcation of 'politics' and 'economics' associated capital with production, leaving the state, and power more broadly, at the mercy of political scientists. Therefore,
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it seems that in order to understand capital as power we need not only to debunk the economists, but also to question what the pundits tell us about the state.
Now, state theory is wide-ranging and complex - but then it is worth noting that its intricacies are a fairly new phenomenon, and that the exces- sivly complex and indecipherable texts probably owe more to the post-war explosion of research budgets and the mass media than to the inherent diffi- culty of the subject matter itself. Our purpose here, therefore, is to simplify. Rather than provide yet another scholastic account, we offer an alternative outline of how one may think about the issue.
The need for such alternative thinking is evident, if only indirectly, from the growing unease of state theorists themselves. Over the past couple of decades, the very association of states with command and power on the one hand, and markets with production and well-being on the other, has become increasingly difficult to defend. 7 There have been several attempts to fix the problem, including revising the meaning of the two concepts, altering their relative importance and historicizing their co-development. But as the following illustrations suggest, none of these solutions touches the real problem.
Metamorphosis
The revisionist method is typified by the writings of leading US realist Robert Gilpin. During the 1970s, when statism was riding high in the halls of academia, Gilpin distinguished state and markets based on their goals. The former, he said, is seeking power, the latter wealth (Gilpin 1975). By the late 1980s, however, when governments no longer seemed omnipotent, he changed his mind. His new position was that state and markets share the dual goal of power and wealth, and that the difference between them is mainly the means they use to achieve this goal (Gilpin 1987).
This is a major shift for a leading state theorist to make, so one may wonder what prompted it. One possible answer is that, between the first and second edition of his book, states and markets had gone through a metamorphosis and that Gilpin was only reporting this change. Another plausible explanation is that Gilpin made a mistake in the first edition and corrected it in the second. And then there is the third possibility - that Gilpin has changed his mind simply because he doesn't know how to differentiate the two institutions.
Reordering
An easier and much more popular solution, particularly among liberals, is to rearrange the order of significance. According to this creed, 'globalization'
7 The literature on state and society often refers to 'capital' and 'market' as if they were synonymous. Although the two concepts are fundamentally different, we follow this conven- tion here for the sake of simplicity.
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has reshuffled the power cards, putting markets on top of states. This perspec- tive is forcefully advanced by Susan Strange in her aptly titled book, The Retreat of the State:
The argument put forward is that the impersonal forces of world markets, integrated over the postwar period more by private enterprise in finance, industry and trade than by the cooperative decisions of govern- ments, are now more powerful than the states to whom ultimate political authority over society and economy is supposed to belong. Where states were once the masters of markets, now it is the markets which, on many crucial issues, are the masters over the governments of states.
(Strange 1996: 4)
Of course, reordering cuts both ways, and, indeed, not everyone thinks that the state is in retreat. Weiss (1998) and Hirst and Thompson (1999), for example, argue that the belief that states are capitulating in the face of capital mobility and transnational corporations is factually unfounded - if only because, in their opinion, capital mobility is lower now than a century ago and the large corporations are not nearly as transnational as the 'globaliza- tionists' would have us believe. Others, like Helleiner (1994), claim that globalization and deregulation, insofar as they exist, do not attest to the victory of the market - primarily because, in his view, these processes result from the deliberate (and reversible) decisions of state officials.
Contradictory interdependency
Perhaps the most interesting analyses of these questions are offered by Marxists. As we have seen in Chapter 4, Marxists see the state not as separate from, but as embedded in society. Furthermore, given the capitalist nature of this society, the state, almost by necessity, has a pro-capitalist bias. Beyond this point, however, there is significant disagreement. There is dispute over the extent to which state officials are autonomous from the overall logic of accumulation and the pressures exerted by particular interest groups; over whether the state is 'predatory' or 'developmental'; over whether the capital that the state regulates is productive and useful or speculative and wasteful; and, finally, over the degree to which these characteristics are inherent or change over time.
Underlying these numerous interpretations, though, the basic bifurcation remains. No matter how much the two entities change and regardless of their many interactions, capital stays anchored in production and the state in power. The former generates surplus through economic exploitation, the latter regulates accumulation through political oppression.
One of the more sophisticated attempts to transcend this static duality is offered by the work of Giovanni Arrighi and his co-writers on the joint evolu- tion of state and business from the Venetian city states till the present (for
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example, Arrighi 1993, 1994; Arrighi and Silver 1999). Combining the neo- Leninist tradition of Magdoff (1969) and others with a world-systems perspective, Arrighi et al. suggest that, over the past half-millennium, the emphasis if not locus of power has gradually shifted from organizations bounded by territory, primarily states, to ones defined by virtual command over scarce resources, mainly business entities. The shift itself has been highly dialectical. According to Arrighi, Barr and Hisaeda, there is a basic 'contra- dictory interdependency' (our term) between the two entities, with business agencies, because of their non-territorial nature, growing 'ever more depen- dent on, but also ever more subversive of, the power of the hegemonic state' (1999: 98).
During the seventeenth and eighteenth centuries, the joint-stock compa- nies, chartered first by Holland and later by England, were still half govern- mental, half business organizations, acting simultaneously both as state and as capital. By the nineteenth century, however, the substitution of British for Dutch hegemony, together with the emerging domination of British manu- facturers, established a more efficient division of labour between territorial and resource-based power. The new firms, relieved from the burden of formal government, were now free to exploit their economic prowess. But that relief only made them dependent on state power for protection and expansion. Furthermore, their competitive organization did little to enhance the state power on which they relied, and when larger business amalgamates began to emerge in Germany and the United States, the British-based system was superseded. By the early twentieth century, a new, American-based forma- tion of state and business gained dominance - although, according to Arrighi, the contradictory interdependency of this new formation is even more pronounced than that of its predecessors. US-based multinational compa- nies, while relying on American state power to keep the world open for (their) business, are actively subverting that very power. The global accumulation of these corporations, particularly in the area of financial intermediation and capital flows, have worked to destabilize the post-war economic order created by US hegemony, and by so doing have undermined the very basis of their prosperity.
The long history of this contradictory interdependency, Arrighi argues, could be useful in understanding 'epochal leaps' in the underlying nature of both state and business. Initially, a new hegemonic state typically supports and promotes its own business institutions. Eventually, however the hege- mon's power and the monopolistic profit of its companies attract outside contenders and generate internal inequities and strife. In parallel, business concerns seeking to break their spatial barriers increasingly 'subvert' the terri- torial power on which they rely. Historically, the consequence of these mount- ing contradictions has been global instability and, eventually, 'systemic chaos'. The resolution of this systemic chaos, at least so far, has always involved the emergence of a new hegemon - although, according to Arrighi, that latter aspect was less important. The more crucial feature of the transition was the
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emergence of a qualitatively new state-business formation, one that helped resolve the earlier contradictions and that over the past few hundred years worked to shift the focus of power from territoriality to accumulation.
The argument is intriguing, and it certainly takes us further than most accounts in trying to understand the historical interaction of state and busi- ness. And yet, even here, the duality persists. State and business, although constantly changing through mutual interaction, are still seen as fundamen- tally distinct, and it is this basic distinction that we need to rethink.
In what follows, we argue that capital and state do not stand against or function together with each other. They do not complement or undermine one another. They neither interact nor interplay. And the reason is simple: they are no longer separate. Capital itself has become an emergent form of state: the state of capital.
Notions of space
Cosmic space
The troubled relationship between state and capital could be conceived, meta- phorically, by thinking about the notion of space. In his Foreword to Max Jammer's Concepts of Space (1954: xi-xv), Albert Einstein contrasts two interpretations of the concept: (1) space as the container of all material objects, and (2) space as the positional quality of the world of material objects. The two views are radically different in origin and implications. 8
The container concept, associated with Democritus, Plato, Descartes and, eventually, Galileo and Newton, assumes that space exists independently of what it contains, and that space is absolute rather than relative; in other words, that space acts on its contents (as an inertial system, for instance) but the contents do not react back on space. By contrast, the positional concept, traceable to Aristotle and Spinoza and developed by Leibnitz and Huygens, interprets space not as independent of the things, but rather as the order of the things. This type of space is defined by the very relations of the entities that 'make it'. The first interpretation sees space itself as inherently 'empty'. In the second interpretation 'empty space' is an oxymoron.
According to Einstein, Newton won the day largely because of the mathe- matics: his container concept could be described with available Euclidean geometry, while Leibnitz's relational concept could not. In due course, though, Newton's perspective has proven inferior, or at least insufficient. The development of electromagnetism and field theory on the one hand, and of non-Euclidean geometry on the other, paved the way for Einstein's notion of a four-dimension space-time - a Leibnitz-like framework in which gravity and curvature are two sides of the same thing. In this ontology, to know the rela- tional properties of bodies is to know the shape of their space - and vice versa.
? 8 Our account in this sub-section draws on the analysis of Agassi (1969).
Social space
The space of mainstream political economy is much like a Newtonian container. 9 But unlike in physics, this container is forever partial. In the liberal version, the container is market-space. Its particles - the utility maxi- mizing investors-consumers - act and react on one another according to the rules of the market, but they have no bearing on the rules as such. These rules are eternally fixed, making market space independent and absolute.
Unfortunately, liberal society also has non-economic entities, organiza- tions and institutions, the most important of which is the state (or the govern- ment). Unlike the individual investor-consumer, these latter entities often are very large, sometimes irrational and often disobedient of market rules. And since market-space is by definition independent and absolute, there is no way to incorporate these non-economic entities into its logic. They remain 'exogenous'.
This fact makes market-space inherently partial. And since the external units cannot be wished away, even by liberals, the only solution is for market- space itself to inflate and deflate in response to their varying pressures. This is why liberals tell us that when politicians 'intervene' the market has to 'contract', and when the market expands the state must 'retreat'.
The realist container is more or less a mirror image of the liberal. Instead of a market-space populated by calculating utility seekers, we have state- space swarming with equally rational power-mongers. 10 Realist actors struggle over power resources and capabilities, and the state is the arena in which they carry out their Hobbesian all-out wars. In some editions the state itself becomes an actor - fighting against other states on the global stage or against other social actors in the national arena. But in all versions the space rules are eternally fixed. To be included in this space you have to seek and use power. If you are after something else - say wealth for 'its own sake' - you have to remain in 'outer' space.
As we have seen, some writers, such as Gilpin, try to bend the rules by describing states and markets as seekers of power as well as augmenters of wealth. But this solution breaks down on its own implicit assumption - namely, that wealth and power are distinct to begin with. Since the produc- tion of utility presupposes the harmonious equilibration of perfectly competitive production and consumption, it follows that wealth can never be created in the Mad-Max violence of state-space. In the end, the market must remains outside of state-space. If the former inflates, the latter must deflate, and vice versa.
9 Note that we refer here to the space of political economy, not to the treatment of space by political economists. The latter issue, popular among postmodernists, has no bearing on our discussion here.
10 Note that, with 'economic imperialism', power could be defined as a form of utility, making realism a subset of liberalism. For argument's sake, we don't press this dilution here.
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The Marxist framework is very different from both the liberal and realist. Instead of market-space or state-space, it articulates production-space. And this space, at least in its abstract articulation, is Leibnitzian rather than Newtonian. When Marx speaks about a 'mode of production', he has in mind a totalizing system that determines individual action while simultaneously being shaped and reshaped by that action. This production-space is not eternal, but rather historical and dialectical. In the capitalist epoch, the main logic of this space is surplus value and the drive for accumulation. This logic incorporates both the economic processes of production and the political institutions of power and state, and it constantly changes. Energized by its internal relations, the capitalist production-space is ever evolving until it eventually crumbles under the weight of its inner contradictions.
And yet, when we get to the details, the devil appears and the Leibnitzian metaphor breaks down. As we have seen earlier in the book, although Marx was striving for an encompassing explanation, his theory of value and accu- mulation remained locked in the Newtonian mechanics of productive labour. This narrow emphasis may have seemed sufficient in the mid-nineteenth century. But as the world changed, the concept of productive labour proved too narrow and, ultimately, impossible to accept. Inevitably, Marxists found themselves having to separate production from power, economics from poli- tics and capital from state. The unit and logic of their economic accumulation could no longer be reconciled with the broader power aspects of capitalism. And as the schism widened, the totalizing Leibnitzian-like space was fractured.
State as a mode of power
In our view, hierarchical social orders are better understood not as modes of production, but as modes of power. Every mode of power, whether based on slavery, feudalism or capitalization, has its own particular configuration. Each of these configurations obviously depends on production, narrowly under- stood. But production as such is merely part of the story of power. Beyond providing the material preconditions for social life, its significance for under- standing the hierarchical structure of society lies not in its efficiency or ineffi- ciency per se, but in the way that efficiency or inefficiency bears on power.
We propose to think of the mode of power of a society as the 'state' of that society.
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world with his words, a feat of power that humans have since striven to emulate. Both in goal and structure, language was a precursor for all later technological developments.
The two archetypes
From this premise, Mumford differentiated between two qualitatively distinct technologies: one associated with the democratic outlook of Neolithic culture, the other with the power bias of 'civilized' society. In his opinion, their distinct paths stem from a different reaction to death. Neolithic tech- nology takes the biological route, seeking to enhance life while accepting the inevitability of death. Power technology, by contrast, uses mechanical force and violence in the vain hope of achieving immortality.
This qualitative distinction, of course, cannot be applied easily to actual societies, certainly not with any precision. Most social formations contain elements of both technologies, and few if any conform closely to either ideal type. But the distinction is nonetheless useful as a general myth, a basic framework for understanding the dual underpinnings of social organizations.
Neolithic culture
Neolithic culture does not see work as alienating labour, but rather as a communal process intertwined with the broader ecological system. Work is often backbreaking, but physical toil is compensated for by companionship, cooperation, song and rhyme, while aesthetic achievements are valued no less than abundance of yield. Indeed, many early feats of domestication - such as fertilization, the sacrifice of food for future growth, the harnessing of cattle and the use of a plough - were probably first practised as religious rituals. Feminine traits abound - from the lunar cycle linking cultivation to menstru- ation and sexuality, through the primary role of containers (pot, jar, house, village), to the careful cultivation of gardens and the patient rearing of chil- dren. Festivities, ceremonies and rituals revolve around the family, neigh- bours and community. Eating, drinking and sexual activity occupy a central place. There is no lifetime division of labour. Knowledge is rarely monopo- lized, and most types of work can be performed by all members of the community. Systemic gender inequality is uncommon. There are no social classes, and authority stems from age. Violence is limited and dictatorial power rarely tolerated. 1
Neolithic culture established the merit of morality, self-discipline, coop- eration and social order. It had shown the value of public goods and fore- thought. Most importantly, over time it has proven to be the most resilient
1 For more on the cooperative, life-loving aspects of Neolithic culture, worship and rituals, see Gimbutas (1982).
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form of social organization, always outlasting the far more energetic yet brittle power civilization.
These aspects of Neolithic culture, Mumford argued, did not disappear with the archaic village. As a form of social technology, they persist within modern society - sometimes visibly as in villages, communal organizations and even business companies, and at other times invisibly as resistance to the dictates of mechanical civilization.
Mumford also identified some significant shortcomings in Neolithic culture. The exclusive nature of small associations restricts human inter- action, the horizons are limited, and pettiness and suspicion prevent broader cooperation. And, indeed, after its initial burst of discoveries and inven- tions, Neolithic innovation died down and stagnation set in. Conservatism made Neolithic settlements vulnerable to external invasions, and when horse-mounted tribes, equipped with metals and weapons, moved in, many Neolithic communities succumbed and withered.
Power civilization
Against this backdrop of a peaceful if limited form of democratic organiza- tion rose the spectre of power civilization under the authoritarian rule of divine kingship. The first of these social amalgamations evolved in the great river deltas - from Egypt and Mesopotamia to the Indus Valley and China. According to Mumford, the unifying hallmark of these amalgamations was absolute power.
The need for such power was partly rooted in material circumstances. Physical surplus and the consequent amassment of material wealth for the first time had created the possibility of 'total loss'. The population was large and growing, segmented by an increasing division of labour and evermore interdependent. Under these conditions, flooding, drought and later total war could easily have spelled catastrophe, if not complete annihilation. Whereas Neolithic culture could flexibly respond to the first two and rarely faced the third, in the urban amalgamates of the deltas these threats had to be counter- acted resolutely and ruthlessly. And given the large scale of activity, such a response could be achieved only through the sanction of absolute authority.
But as Mumford argued, material considerations tell only part of the story; the other and perhaps more important part is symbolic. The rise of power civilization was accompanied by the appearance of the sky gods. Neolithic earth gods, attuned to the micro biological cycle of fertility and operating on a human scale, were no longer sufficient for the task at hand. For the kings, risk of disaster made failure increasingly unacceptable, thus amplifying the ever-present fear of death. Neolithic culture, humbled by its limited potential, had to accept mortality, but kings were no longer bound by Neolithic hori- zons. Control over growing resources and larger populations suggested to them - admittedly with some justification - that the 'skies were the limit'. Expanding insight into writing, mathematics and astronomy gave their task
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cosmic proportions. But as Josephus Flavius wisely observed, 'The union of what is divine and what is mortal is disagreeable' (Koestler 1952: 237). So as earthly rationality grew hand in hand with supernatural irrationality, the king, dazzled by both his achievements and fears, was driven toward the ulti- mate feat of becoming an immortal sun god himself.
Power civilization appeared after rising agricultural yield for the first time had enabled a systematic generation of food surpluses. According to Mumford, it was probably at that point that hunting chiefs, who had earlier entertained symbiotic relationships with Neolithic settlements, first discov- ered the promise of forceful redistribution. Weapons, which had previously been used primarily against animals, were now increasingly applied against people, and total war became a permanent institutional feature.
Neolithic excavations offer little or no evidence of fortification or arma- ment. The first fortifications are associated with urban centres, while heaps of cracked sculls - early evidence of organized murder - do not appear until kingship. Neolithic art did not glorify warriors and leaders. It left us no wall paintings of massacres and prisoners. It never built tombs in which lesser mortals were sacrificed for the afterlife of rulers. These aesthetic manifesta- tions emerged only when humanity embarked on its 'civilized' power trip to control nature and, most importantly, people. 2
2 The contrast between the authoritarian drive of power civilization and the democratic impulse of Neolithic technology is well illustrated by the fundamental difference between the ancient royal scripts on the one hand and the alphabet on the other. The former were used in the hierarchical administration of taxation, material stocks and masses of human beings. But beyond their practical role, they also served as a means of instilling institutional privation, fear and awe. Their structures were exceedingly if not deliberately complicated. Egyptian hieroglyphics, Mesopotamian cuneiform and Chinese logography all have hundreds and often many thousands of symbols. Studying these scripts required many years of harsh schooling and systematic harassment that would put to shame even the best public schools of the British Empire (Kramer 1963). Their impenetrable structure helped sustain hierarchy and prevent entry. It made broad learning impossible, deterred innovation and fixed the cosmos against subversion. It was a technology of sabotage, par excellence.
The democratic invention of the alphabet destroyed this exclusivity and opened up a world of freedom. The first known alphabet was written on the walls of the turquoise mines of Serabit el-Khadim in the Sinai Peninsula, sometime during the fifteenth or fourteenth century BCE. The writers were probably the western-Semitic Apiru (or Amurru) who worked there as periodic zapping labour. Both the Bible and Egyptian evidence suggest that the royal administrators did not like these guest workers. Unlike the peasants of the Nile Valley, they were quasi-nomadic tribes who hadn't been civilized into complete docility. Perhaps in defiance of their employers who had cheated them, they invented a new script and used it to record their names and work days. This script, known as Proto-Sinaitric, simplified the Egyptian hieroglyphs, reducing them to only 40 symbols. Two hundred years later, Proto- Sinaitric became an alphabet with 24 symbols (Giveon 1978; Naveh 1987). In due course, this democratic act, having decimated the sabotage of exclusive reading and writing, would open the door to philosophy, history, science and democracy - feats of autonomy and creativity that were inconceivable in the early power civilizations.
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The mega-machine
According to Mumford, the first power machine was social. In attempting to emulate the perfect cosmic order so as to annul their own mortality, kings turned to design, assemble and operate a human mega-machine. Absolute con- trol of this mega-machine served as evidence of supernatural power, and the machine's most fantastic output - megalomaniacal graves - were supposed to open the gate to immortality.
The mega-machine of the early kingships typically comprised three prin- cipal components: a labour machine of peasant conscripts to erect public works; a military machine to impose internal discipline and engage in external war; and a bureaucratic machine to keep the accounts. Control was in the hands of a tight caste comprising the royal court and the high priesthood - the former maintaining a monopoly over physical force, the latter over knowledge and ideology. Division of labour and advanced specialization (Egyptian mining expeditions, for instance, had up to 50 different job descrip- tions), strict regimentation, uncompromising discipline and tough punish- ment turned the workers, soldiers and officials of these organizations into mere mechanical components. Initiative was all but forbidden and flexibility disallowed. Taken as whole, these organizations formed 'a combination of resistant parts, each specialized in function, operating under human control, to utilize energy and to perform work'. In short, they fulfilled all the requirements of Franz Reuleaux's classic definition of a machine (Mumford 1967: 191).
The fusion of rational insight and highly irrational aspirations resulted in a massive explosion of what political economists now call 'productivity'. Seen from a material standpoint, the technological achievements of the early mega- machine, particularly the construction of the pyramids, remained unparal- leled until our own epoch. But according to Mumford, the more significant contribution was the construction of the human mega-machine itself. It was here that the three basic principles of mechanization - complex coordination, de-humanization, and remote control - were first applied. In other words, the original object of mechanization was society itself. And in due course, just as the cosmic worldview was a necessary prerequisite for the adoption of universal weights, coins, the calendar and the clockwork, the human mega- machine became the ultimate model for subsequent non-human mechan- ization.
The mega-machine enabled human beings, for the first time, to transcend some of their own biological limitations. The principles of universality, order and predictability opened the door to a continuous expansion of knowledge. Urban amalgamations assembled by the first mega-machines opened new horizons for human interaction, triggering occasional flurries of creativity difficult to achieve in small and disjoined Neolithic settlements.
But the unleashing of such positive forces was neither the intended purpose nor the most important consequence of the mega-machine. According to
The capitalist mode of power 269
Mumford, the ultimate goal of human organization on a large scale was and remains negative: exerting social power for its own sake. The use of brute force is more than a means of exacting obedience; it is the very manifestation of a power civilization. Human sacrifice, although pre-dating kingship, became a central preoccupation of civilized societies, slowly becoming institutional- ized, perhaps unconsciously, in the form of war. In its extreme incarnation, argued Mumford, kingship was a 'man eating device', and the cannibalistic lust of earlier kings has repeatedly resurfaced in subsequent appearances of social mega-machines (1967: 184). Even today, monetized property (capital) and the death penalty (capital punishment) remain linked to the same root, caput.
To sum up, Mumford put the power orientation of the mega-machine model in sharp contrast to the democratic features of Neolithic society. With the mega-machine, Neolithic dispersion was replaced by power concentra- tion; ecological production by mechanization; lack of specialization by a life- long division of labour; limited local violence by the institutionalization of total war; cooperation by exploitation, forced labour and slavery; and egali- tarianism by a class structure.
The mega-machine resurrected: capital
Eventually, the early mega-machines of the great deltas crumbled under their own weight. For all their external might, they were internally vulnerable: de- humanization and obedience stifled initiative, while preoccupation with power and death were bound to undermine legitimacy. And when the 'myth of the machine' died - that is, when the power structure no longer fulfilled the Pharaoh's promise of 'life, prosperity and wealth' - the social pyramid was liable to falter.
But according to Mumford, the 'myth of the machine', much like Neolithic culture before it, has outlived its first historical incarnation, and in the sixteenth century centralized power once more emerged to control human consciousness. Nothing seemed to escape this renewed preoccupation with organized power. The most significant sign was the resurrection of the sky gods and the growing assimilation of Galileo's mechanical world picture. Every social innovation - from Venetian music and French diplomacy to Newtonian physics and Hobbesian politics - was marked by mechanical rationalism. And indeed, within only a few centuries, mechanization had once again taken command - so much so that in 1933 the entrance to the World's Fair at Chicago could proudly boast: 'Science explores: Technology executes: Man Conforms'. This announcement, together with the title of the fair - 'The Century of Progress' - attests to the extent to which the 'myth of the machine' has been restored (Mumford 1970: 213).
Extending Mumford, we argue that the new mega-machine has become much more powerful than the old - though for reasons that Mumford him- self did not explore. In his analysis, Mumford focused mainly on the newly
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resurrected institution of kingship and its successor, the sovereign state. But lurking within the cocoon of the state - and soon emerging to define the very meaning of the state - was a new and very specific logic that Mumford largely ignored: the nomos of capital.
In our view, capital fulfils all the characteristics of a mega-machine. Based on the universal ritual of capitalization and a fundamental belief in the 'normal rate of return', capital is a symbolic crystallization of power exercised over large-scale human organizations, typically by a small group of large absentee owners intertwined with key government officials.
The underlying driving force of large-scale capitalist organizations is not fundamentally different from that which propelled the rulers of earlier power regimes: they all seek to control nature and, ultimately, human beings. But the structures of these power regimes - their architectures, institutions and processes - are fundamentally different. These differences, we argue, make the capitalist mega-machine more potent than any of its real or imagined predecessors - more than Genghis Khan's rolling war machine, more than Orwell's party state, perhaps even more than Huxley's human reproduction line. There are several key reasons for this greatly enhanced power:
1 Universality. Although capital appears fractured by complex production chains and fragmented ownership stakes, in fact it is highly universal. The power symbols of earlier mega-machines were largely culture- specific, relying on the physical display of public works, armies, sacrifice, flags and emblems. Capital, by contrast, is reduced to one symbol: capi- talization. By the early twenty-first century, this symbol has been effec- tively abstracted down to electronic flickers, computer bits and bytes that make people the world over march to the invisible command of capital.
2 Cohesion. The unifying belief in the normal rate of return as the ultimate yardstick for social action is all embracing. It penetrates government, business, mass communication and culture, gradually taking over their very articulation and development. By providing a common language, this belief helps unite the various elites into a cohesive, if not seamless, ruling class of absentee owners, making opposition all the more difficult.
3 Expandability. Unlike the power of kings and sovereign governments, capital power is vendible. And the fact that capital can be bought and sold means that the power it represents can be expanded on an ever- increasing scale. For the first time in history, it seems that the sky is the limit. As Mr Collins, the oil magnate in Traven's The White Rose, puts it, 'There isn't any land anywhere in the world that I can't get if I want it . . . even if it's on Jupiter - I get it - as sure as death' (Traven 1929: 34).
4 Intensity. The focus on profit enables capitalists to deepen as well as broaden their power. The ancient mega-machine was a relatively well- defined organization. Power was exercised mostly over the organization itself and in that sense was 'organization augmenting': to have more of it
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required a bigger organization. The capitalist mega-machine is a much broader construct. It consists not of the corporation per se, but of the entire scope of capitalistic reproduction. As we elaborate in the final part of the book, control over this totality is proportionate to the various capitalized profit shares. A capitalist group can increase this share directly by expanding its own corporate organization; but it can also do so indirectly, by raising its profit per 'unit of organization' so as to become 'leaner and meaner'.
5 Absorptiveness. Any process of power that systematically affects the expected level and pattern of profit is quickly capitalized (non-systematic effects usually get classified as better-to-ignore 'extraordinary items'). The discounters are constantly on the lookout, scanning the power landscape. They look to see whether education increases the relative wages of women, whether environmental policies raise the effective penalty for polluters, whether the use of military force alters the price of raw materials, whether television makes workers easier to predict, whether religious missions pacify indigenous populations, whether economic policy redistributes income, whether elections alter taxation, and so on - all with the aim of assessing the impact of these processes on profitability. Any regular effect on profit is instantly discounted into present value, and the power process this effect emanates from hence- forth becomes part of capital.
6 Flexibility. By virtue of its universality, cohesion, expandability, intensity and absorptiveness, capital has become the most flexible power structure in history. Contrary to earlier mega-machines that depended mainly on punishment, oppression, violence and terror, capital relies also - and often far more so - on reward. This ability to use both carrot and stick makes capital suppler and therefore more resilient than either kingship or sovereign government. And even when this richer menu of power occa- sionally fails, giving rise to losses and bankruptcy, large-scale capitalist organizations are usually able to resurrect themselves through merger, restructuring and the securitization of debt. Indeed, this flexibility is what makes capital accumulation possible in the first place. This last point can hardly be overstated. If orthodox economics were right and capital was indeed a physical amalgamation of 'machines' or 'production lines', its immobility and rigidity would have made accumulation impossible. By contrast, if we treat capital as a human mega-machine, a structure of social control, capitalization and re-capitalization become possible as business organizations adapt to and change reality. Literally, capital can be accumulated only because it is not a physical entity.
To sum up: the myth of the mega-machine enables us to think of capital
not as a material-productive apparatus, but as a symbolic architecture of social power. Operating through the price system, this architecture quantifies
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and reduces qualitatively diverse power processes into the universal language of capitalization, and by so doing absorbs them into the process of accumu- lation. Very little remains out of reach: power that can be priced is power that can be capitalized.
Yet it is precisely this encompassing feature that makes the capitalist mega- machine difficult to reconcile with existing theories of society. For if capital tends to absorb and internalize other forms of organized power, how can we differentiate it - and, indeed, should we differentiate it - from bureaucratic organization in general and the state in particular?
Consequent to these ambiguities, the historical ascent of the capitalist mega-machine has been grossly misunderstood - often to the point of putting the whole process on its head. The first misunderstanding concerns the sepa- ration of accumulation from organization within the corporation. The second, broader misunderstanding involves the relationship between corpo- rations and capital on the one hand and governments and state on the other. We deal briefly with the former and then turn to the latter.
Owners and technocrats
Begin with the inner compass of the corporate unit. As we saw in Chapter 4, the Weberians latched onto social mechanization as evidence that 'capital' - an entity that they erroneously equated with machines and productive artefacts - was actually on the decline, and that class analysis therefore had become irrelevant if not totally misleading.
For John Kenneth Galbraith (1967; 1983), a famous voice of this school, mechanization spelled the ascent of a new social strata: the 'technostructure'. Following the conventional creed, his starting assumption was that 'property' applies only to capital goods as distinct from organizations: the capitalist proprietors still own the physical productive apparatus, but not the organiza- tion and management of knowledge. And since in his view production has grown more dependent on the latter relative to the former, it follows that property owners must have lost their primacy to corporate technocrats and government regulators. Galbraith himself provided no evidence that this transformation had indeed occurred - although, following The Modern Corporation and Private Property by Berle and Means (1932) and The Managerial Revolution by Burnham (1941), he was not alone in inferring that ownership was becoming increasingly separate from control.
Despite their popularity, though, the 'separation thesis' and the conse- quent belief that capital was on the decline were founded on pretty shaky grounds. As Maurice Zeitlin (1974) convincingly showed, the direct evidence, including in Berle and Means's own study, was dubious from the very start: the separation of ownership from control was never much more than a 'pseu- dofact'. Neither the earlier data nor those furnished by subsequent attempts, he argued, showed that such separation had actually taken place, a claim that
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has since been corroborated by numerous writers. 3 Other, less hostile critiques, like those of Baran and Sweezy (1966) and more recently Screpanti (1999), accepted that ownership was increasingly separate from day-to-day control. But in their view, this separation only subjugated executives to the rigid dictates of accumulation, turning the corporation into an even more effective 'profit machine'. 4
This last point is certainly confirmed by the evidence. As we shall see later in the chapter, when the European bourgeoisie took the lead from the declining feudal nobility, its ascent was manifested through a marked redistribution from landed income to pecuniary return on investment. If capitalists were indeed losing ground to the technostructure as Galbraith and others have argued, we would expect to see a similar redistribution - this time from profit and interest to the salaries of technocrats and professionals. And yet this redistribution never happened. Indeed, judging by the facts, capital seems to have grown stronger, not weaker.
Figure 13. 1 pertains to the United States, for which there are systematic historical data going back to the late 1920s. The series in the chart shows the income share of capitalists, measured by the proportion of pre-tax profit and interest in national income. The historical picture painted here is unambig- uous. First, we can see that the income share of capitalists has trended upward, from an average of 12 per cent in the 1930s to 16 per cent recently. 5 Second, the chart shows that the volatility of the income share, indicated by the narrowing distance between the upper and lower dotted lines, has declined. Given that capitalization is boosted by higher earnings and lower risk, the combination of these two processes attests to the extent to which the mega-machine of capital has strengthened its grip over society. 6
3 According to Zeitlin, Berle and Means used an excessively high ownership cut-off point. They considered as managerial a corporation whose lead owner has less than a 20 per cent equity stake, while in fact effective control often can be exercised with as little as 10 or 5 per cent. They then went on to make a bad situation worse by overstating the number of firms that actually fulfilled this already loose criterion.
4 For more analyses of the 'separation thesis' and evidence on ownership and control, see Moore (1983), Scott (1997), La Porta et al. (1999) and Morck (2005).
5 The share of after-tax profit and interest in national income followed a similar trajectory. After the Second World War, sharp increases in corporate taxation reduced this share, which fell to 6 per cent in the mid-1940s. Subsequently, though, the effective tax rate drifted down- wards - a reduction that helped the corporate share of after-tax national income reach nearly 15 per cent by the mid-2000s.
6 As noted in footnote 15 in Chapter 12, unlike many radical political economists we do not consider rent and the earnings of unincorporated business as capitalist income. The US national-income share of these two components has declined from 20 per cent in the late 1920s to 10 per cent presently, causing the overall share of non-labour income to fall from 37 per cent to 27 per cent. This drop gives the impression that capital has been losing ground, while in fact the very opposite is true.
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20
18
16
14
12
10
8 6 4
1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
Figure 13. 1 Capital's share of income in the United States
Source: U. S. Department of Commerce through Global Insight (series codes: ZBECON for
pre-tax corporate profit; INTNETAMISC for interest; YN for national income).
Evidently, then, knowledge of production techniques is not a prerequisite for exacting obedience. In the final analysis, it is not the engineers and bureaucrats, but the capitalists who are in the driver seat. The ultimate drive of their corporate organizations is not 'continuity', 'security', or 'sales growth' as the managerialists would have us believe, but accumulation. And whether the capitalists are absent or present, the logic of their mega-machine seems to enforce this accumulation on society with increasing mechanical exactitude.
State and capital
Still, even with this evidence, students of capital have remained uncertain about how to link it to power. The main reason is simple enough. As Marx pointed out, historically, the regime of capital emerged together with the nation-state. Yet, as we have seen earlier in the book, theoretically, this joint emergence was fractured from the very start. The conventional bifurcation of 'politics' and 'economics' associated capital with production, leaving the state, and power more broadly, at the mercy of political scientists. Therefore,
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it seems that in order to understand capital as power we need not only to debunk the economists, but also to question what the pundits tell us about the state.
Now, state theory is wide-ranging and complex - but then it is worth noting that its intricacies are a fairly new phenomenon, and that the exces- sivly complex and indecipherable texts probably owe more to the post-war explosion of research budgets and the mass media than to the inherent diffi- culty of the subject matter itself. Our purpose here, therefore, is to simplify. Rather than provide yet another scholastic account, we offer an alternative outline of how one may think about the issue.
The need for such alternative thinking is evident, if only indirectly, from the growing unease of state theorists themselves. Over the past couple of decades, the very association of states with command and power on the one hand, and markets with production and well-being on the other, has become increasingly difficult to defend. 7 There have been several attempts to fix the problem, including revising the meaning of the two concepts, altering their relative importance and historicizing their co-development. But as the following illustrations suggest, none of these solutions touches the real problem.
Metamorphosis
The revisionist method is typified by the writings of leading US realist Robert Gilpin. During the 1970s, when statism was riding high in the halls of academia, Gilpin distinguished state and markets based on their goals. The former, he said, is seeking power, the latter wealth (Gilpin 1975). By the late 1980s, however, when governments no longer seemed omnipotent, he changed his mind. His new position was that state and markets share the dual goal of power and wealth, and that the difference between them is mainly the means they use to achieve this goal (Gilpin 1987).
This is a major shift for a leading state theorist to make, so one may wonder what prompted it. One possible answer is that, between the first and second edition of his book, states and markets had gone through a metamorphosis and that Gilpin was only reporting this change. Another plausible explanation is that Gilpin made a mistake in the first edition and corrected it in the second. And then there is the third possibility - that Gilpin has changed his mind simply because he doesn't know how to differentiate the two institutions.
Reordering
An easier and much more popular solution, particularly among liberals, is to rearrange the order of significance. According to this creed, 'globalization'
7 The literature on state and society often refers to 'capital' and 'market' as if they were synonymous. Although the two concepts are fundamentally different, we follow this conven- tion here for the sake of simplicity.
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has reshuffled the power cards, putting markets on top of states. This perspec- tive is forcefully advanced by Susan Strange in her aptly titled book, The Retreat of the State:
The argument put forward is that the impersonal forces of world markets, integrated over the postwar period more by private enterprise in finance, industry and trade than by the cooperative decisions of govern- ments, are now more powerful than the states to whom ultimate political authority over society and economy is supposed to belong. Where states were once the masters of markets, now it is the markets which, on many crucial issues, are the masters over the governments of states.
(Strange 1996: 4)
Of course, reordering cuts both ways, and, indeed, not everyone thinks that the state is in retreat. Weiss (1998) and Hirst and Thompson (1999), for example, argue that the belief that states are capitulating in the face of capital mobility and transnational corporations is factually unfounded - if only because, in their opinion, capital mobility is lower now than a century ago and the large corporations are not nearly as transnational as the 'globaliza- tionists' would have us believe. Others, like Helleiner (1994), claim that globalization and deregulation, insofar as they exist, do not attest to the victory of the market - primarily because, in his view, these processes result from the deliberate (and reversible) decisions of state officials.
Contradictory interdependency
Perhaps the most interesting analyses of these questions are offered by Marxists. As we have seen in Chapter 4, Marxists see the state not as separate from, but as embedded in society. Furthermore, given the capitalist nature of this society, the state, almost by necessity, has a pro-capitalist bias. Beyond this point, however, there is significant disagreement. There is dispute over the extent to which state officials are autonomous from the overall logic of accumulation and the pressures exerted by particular interest groups; over whether the state is 'predatory' or 'developmental'; over whether the capital that the state regulates is productive and useful or speculative and wasteful; and, finally, over the degree to which these characteristics are inherent or change over time.
Underlying these numerous interpretations, though, the basic bifurcation remains. No matter how much the two entities change and regardless of their many interactions, capital stays anchored in production and the state in power. The former generates surplus through economic exploitation, the latter regulates accumulation through political oppression.
One of the more sophisticated attempts to transcend this static duality is offered by the work of Giovanni Arrighi and his co-writers on the joint evolu- tion of state and business from the Venetian city states till the present (for
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example, Arrighi 1993, 1994; Arrighi and Silver 1999). Combining the neo- Leninist tradition of Magdoff (1969) and others with a world-systems perspective, Arrighi et al. suggest that, over the past half-millennium, the emphasis if not locus of power has gradually shifted from organizations bounded by territory, primarily states, to ones defined by virtual command over scarce resources, mainly business entities. The shift itself has been highly dialectical. According to Arrighi, Barr and Hisaeda, there is a basic 'contra- dictory interdependency' (our term) between the two entities, with business agencies, because of their non-territorial nature, growing 'ever more depen- dent on, but also ever more subversive of, the power of the hegemonic state' (1999: 98).
During the seventeenth and eighteenth centuries, the joint-stock compa- nies, chartered first by Holland and later by England, were still half govern- mental, half business organizations, acting simultaneously both as state and as capital. By the nineteenth century, however, the substitution of British for Dutch hegemony, together with the emerging domination of British manu- facturers, established a more efficient division of labour between territorial and resource-based power. The new firms, relieved from the burden of formal government, were now free to exploit their economic prowess. But that relief only made them dependent on state power for protection and expansion. Furthermore, their competitive organization did little to enhance the state power on which they relied, and when larger business amalgamates began to emerge in Germany and the United States, the British-based system was superseded. By the early twentieth century, a new, American-based forma- tion of state and business gained dominance - although, according to Arrighi, the contradictory interdependency of this new formation is even more pronounced than that of its predecessors. US-based multinational compa- nies, while relying on American state power to keep the world open for (their) business, are actively subverting that very power. The global accumulation of these corporations, particularly in the area of financial intermediation and capital flows, have worked to destabilize the post-war economic order created by US hegemony, and by so doing have undermined the very basis of their prosperity.
The long history of this contradictory interdependency, Arrighi argues, could be useful in understanding 'epochal leaps' in the underlying nature of both state and business. Initially, a new hegemonic state typically supports and promotes its own business institutions. Eventually, however the hege- mon's power and the monopolistic profit of its companies attract outside contenders and generate internal inequities and strife. In parallel, business concerns seeking to break their spatial barriers increasingly 'subvert' the terri- torial power on which they rely. Historically, the consequence of these mount- ing contradictions has been global instability and, eventually, 'systemic chaos'. The resolution of this systemic chaos, at least so far, has always involved the emergence of a new hegemon - although, according to Arrighi, that latter aspect was less important. The more crucial feature of the transition was the
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emergence of a qualitatively new state-business formation, one that helped resolve the earlier contradictions and that over the past few hundred years worked to shift the focus of power from territoriality to accumulation.
The argument is intriguing, and it certainly takes us further than most accounts in trying to understand the historical interaction of state and busi- ness. And yet, even here, the duality persists. State and business, although constantly changing through mutual interaction, are still seen as fundamen- tally distinct, and it is this basic distinction that we need to rethink.
In what follows, we argue that capital and state do not stand against or function together with each other. They do not complement or undermine one another. They neither interact nor interplay. And the reason is simple: they are no longer separate. Capital itself has become an emergent form of state: the state of capital.
Notions of space
Cosmic space
The troubled relationship between state and capital could be conceived, meta- phorically, by thinking about the notion of space. In his Foreword to Max Jammer's Concepts of Space (1954: xi-xv), Albert Einstein contrasts two interpretations of the concept: (1) space as the container of all material objects, and (2) space as the positional quality of the world of material objects. The two views are radically different in origin and implications. 8
The container concept, associated with Democritus, Plato, Descartes and, eventually, Galileo and Newton, assumes that space exists independently of what it contains, and that space is absolute rather than relative; in other words, that space acts on its contents (as an inertial system, for instance) but the contents do not react back on space. By contrast, the positional concept, traceable to Aristotle and Spinoza and developed by Leibnitz and Huygens, interprets space not as independent of the things, but rather as the order of the things. This type of space is defined by the very relations of the entities that 'make it'. The first interpretation sees space itself as inherently 'empty'. In the second interpretation 'empty space' is an oxymoron.
According to Einstein, Newton won the day largely because of the mathe- matics: his container concept could be described with available Euclidean geometry, while Leibnitz's relational concept could not. In due course, though, Newton's perspective has proven inferior, or at least insufficient. The development of electromagnetism and field theory on the one hand, and of non-Euclidean geometry on the other, paved the way for Einstein's notion of a four-dimension space-time - a Leibnitz-like framework in which gravity and curvature are two sides of the same thing. In this ontology, to know the rela- tional properties of bodies is to know the shape of their space - and vice versa.
? 8 Our account in this sub-section draws on the analysis of Agassi (1969).
Social space
The space of mainstream political economy is much like a Newtonian container. 9 But unlike in physics, this container is forever partial. In the liberal version, the container is market-space. Its particles - the utility maxi- mizing investors-consumers - act and react on one another according to the rules of the market, but they have no bearing on the rules as such. These rules are eternally fixed, making market space independent and absolute.
Unfortunately, liberal society also has non-economic entities, organiza- tions and institutions, the most important of which is the state (or the govern- ment). Unlike the individual investor-consumer, these latter entities often are very large, sometimes irrational and often disobedient of market rules. And since market-space is by definition independent and absolute, there is no way to incorporate these non-economic entities into its logic. They remain 'exogenous'.
This fact makes market-space inherently partial. And since the external units cannot be wished away, even by liberals, the only solution is for market- space itself to inflate and deflate in response to their varying pressures. This is why liberals tell us that when politicians 'intervene' the market has to 'contract', and when the market expands the state must 'retreat'.
The realist container is more or less a mirror image of the liberal. Instead of a market-space populated by calculating utility seekers, we have state- space swarming with equally rational power-mongers. 10 Realist actors struggle over power resources and capabilities, and the state is the arena in which they carry out their Hobbesian all-out wars. In some editions the state itself becomes an actor - fighting against other states on the global stage or against other social actors in the national arena. But in all versions the space rules are eternally fixed. To be included in this space you have to seek and use power. If you are after something else - say wealth for 'its own sake' - you have to remain in 'outer' space.
As we have seen, some writers, such as Gilpin, try to bend the rules by describing states and markets as seekers of power as well as augmenters of wealth. But this solution breaks down on its own implicit assumption - namely, that wealth and power are distinct to begin with. Since the produc- tion of utility presupposes the harmonious equilibration of perfectly competitive production and consumption, it follows that wealth can never be created in the Mad-Max violence of state-space. In the end, the market must remains outside of state-space. If the former inflates, the latter must deflate, and vice versa.
9 Note that we refer here to the space of political economy, not to the treatment of space by political economists. The latter issue, popular among postmodernists, has no bearing on our discussion here.
10 Note that, with 'economic imperialism', power could be defined as a form of utility, making realism a subset of liberalism. For argument's sake, we don't press this dilution here.
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The Marxist framework is very different from both the liberal and realist. Instead of market-space or state-space, it articulates production-space. And this space, at least in its abstract articulation, is Leibnitzian rather than Newtonian. When Marx speaks about a 'mode of production', he has in mind a totalizing system that determines individual action while simultaneously being shaped and reshaped by that action. This production-space is not eternal, but rather historical and dialectical. In the capitalist epoch, the main logic of this space is surplus value and the drive for accumulation. This logic incorporates both the economic processes of production and the political institutions of power and state, and it constantly changes. Energized by its internal relations, the capitalist production-space is ever evolving until it eventually crumbles under the weight of its inner contradictions.
And yet, when we get to the details, the devil appears and the Leibnitzian metaphor breaks down. As we have seen earlier in the book, although Marx was striving for an encompassing explanation, his theory of value and accu- mulation remained locked in the Newtonian mechanics of productive labour. This narrow emphasis may have seemed sufficient in the mid-nineteenth century. But as the world changed, the concept of productive labour proved too narrow and, ultimately, impossible to accept. Inevitably, Marxists found themselves having to separate production from power, economics from poli- tics and capital from state. The unit and logic of their economic accumulation could no longer be reconciled with the broader power aspects of capitalism. And as the schism widened, the totalizing Leibnitzian-like space was fractured.
State as a mode of power
In our view, hierarchical social orders are better understood not as modes of production, but as modes of power. Every mode of power, whether based on slavery, feudalism or capitalization, has its own particular configuration. Each of these configurations obviously depends on production, narrowly under- stood. But production as such is merely part of the story of power. Beyond providing the material preconditions for social life, its significance for under- standing the hierarchical structure of society lies not in its efficiency or ineffi- ciency per se, but in the way that efficiency or inefficiency bears on power.
We propose to think of the mode of power of a society as the 'state' of that society.
