No More Learning

For this reason, the endless debates from Luxemburg (1913) to Harvey (2004) - controversies over what constitutes 'real' accumulation, on how to differentiate it from 'rent seeking' and 'accumulation by dispossession', and on whether 'primitive accumulation' is necessary merely to kick-start capi- talism or in order to sustain it throughout - are much ado about nothing. These questions cannot be settled for the simple reason that accumulation does not have two faces. It has only one, and it is called capitalization. This process, although deeply intertwined with production, is a manifestation of power and only of power. And since we are dealing with power, the capitalist government (Marx's state) is embedded not only in the so-called 'primitive' forms of accumulation, but potentially in every single bit of it.
Government capitalized
And so, what began as a tentative and limited penetration of bourgeois principles into the feudal state ended up destroying that state to emerge, several centuries and numerous struggles later, as a full-fledged state of capital. And as capital grew into a state, the interaction between its organi- zational bodies of corporations and governments multiplied and intensified.
Over the past century, the government bond market has become the heart of modern finance. It provides the biggest and most liquid security market; it offers a vehicle for both fiscal and monetary policy; and it reflects, through its benchmark yield, the universal normal rate of return.
And that is just the start. Governments are engaged in numerous activities other than taxation - including military spending, subsidies, education, industrial policies, war making, tariffs, protection of private property, patents and copyrights, propaganda, labour laws, macroeconomic policies and policing, to name a few - and these activities all bear on the differential level and temporal pattern of capitalist income. In fact, it is hard to think of a single aspect of modern government that does not bear on the distribution of income in general and of capitalist income in particular, just as it is difficult to find a single corporation whose differential earnings are not affected by government power.
Given that these power features of government all influence differential capitalist earnings and risk, they are discounted, if only implicitly, into corpo- rate stock and bond prices. In other words, a significant proportion of all private property is, in fact, capitalized government power. Of course, the precise magnitude of this impact isn't written in the company books or declared in stock-market filings. But it can be illustrated easily with simple thought experiments.
Consider Microsoft once more. As we have seen, it doesn't matter whether Microsoft engineers 'produce' its software from scratch or 'borrow' it entirely from others, gratis. The owners of Microsoft can profit differentially from this software only insofar as they can prevent others from using it without pay. And this prevention depends crucially on the existence and enforcement of intellectual property rights - that is, on the extent to which Microsoft can harness the government apparatus to its own end. Now negate this ability and assume that the government no longer protects Microsoft's software. The most likely result is that Microsoft's earnings and capitalization will drop sharply if not collapse altogether. The magnitude of the drop represents the extent to which Microsoft capitalizes the government. 21
21 Not surprisingly, Microsoft earns most of its profits from sales in developed countries such as the United States, where software piracy can cost the trespasser up to five years in jail. Most developing countries have not yet perfected the penal system for such acts, and until they 'develop' in that direction, their governments' contribution to Microsoft's bottom line is likely to remain negligible.
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? 298 Bringing power back in
Similarly with so-called financial 'intermediaries' such as Deutsche Bank. The differential earnings of this group depend, among other things, on interest rate differentials and credit volumes - both of which emerge from a complex power interplay of government policy, cooperation and conflict among the leading financial intermediaries, the relative power of borrowers and the ebb and flow of risk perceptions. The government is deeply 'discounted' at every step of the way, and the extent of its capitalization can be readily if hypothetically assessed by contemplating what would happen if we were to obey the market fundamentalists and eliminate its involvement from any of those steps. . . .
Or consider DaimlerChrysler. The level and pattern of its differential earn- ings depend on its tacit and open collusion with the other seven auto titans. They also depend on the highway system provided by governments and the availability of alternative public transportation; they depend on environ- mental regulation or lack thereof; they depend on the ups and downs in the price of oil and hence on the global political economy of the Middle East; they depend on tax arrangements with various governments and on the use of transfer pricing; they depend on a sophisticated propaganda war that creates wants and shapes desires; they depend on the relative strength of DaimlerChrysler's labour unions; and so on. DaimlerChrysler's profits also hinge on its huge credit operations, and therefore on monetary policy; and they depend on the company's military business, and therefore on the global politics of armament budgets and the threat of inter- and intra-state conflict. Where exactly the government role begins and ends in this complex process of capitalization is difficult to tell, but the magnitude of this role would become immediately apparent if we removed or curtailed it.
A final example - the oil companies. Over the past four decades, the rela- tive profits of these companies have had little to do with variations in the production of oil - and almost everything to do with oil's relative price. 22 And the relative price of oil in turn has had little to do with 'supply and demand' or 'abstract labour' and everything to do with the global political economy in general and the political economy of the Middle East in particular. So here, too, profit and capitalization are matters of politics at large, which means that oil assets partly capitalize government power.
The conclusion then is pretty clear. If capital is a material-economic substance, then the most we can say is that the government does or does not 'affect' its accumulation. But if assets represent capitalized power, then capital must be seen as incorporating government power. In that sense, the government has become part of capital.
22 There is a very tight correlation between the global profit share of the oil companies on the one hand and the dollar price of crude oil deflated by the US CPI on the other. The correlation coefficient, using monthly series, measures 0. 8 out of 1 since 1974, and 0. 92 since 1979 (Nitzan and Bichler 2006b: 72). There is virtually no correlation between oil profit and the volume of oil output.
? The state of capital
Now, so far we have dealt with the degree to which the government has been capitalized by corporations. But that is only part of the process through which capital becomes a state. The other part concerns the extent to which the various organs of government have been conditioned, habituated and shaped by the logic of capital. We flesh out this question with a series of illus- trations.
Who are the regulators?
By the late 2000s, the changing ecology finally made the headline news and 'environmental friendliness' became a prerequisite for making money, so Wal-Mart decided to go green. Given the company's reputation as an indif- ferent if not predatory giant, this publicized shift toward 'social responsi- bility' has taken many leftists and environmentalists by surprise. But the move also revealed another aspect that few paid attention to: it illustrated how Wal-Mart has become a de facto regulator:
Because of Wal-Mart's sheer size and market share, most of its rivals have no choice but to follow its lead - and the company has found itself setting standards beyond those that regulators require. 'They have so much market power that they could drive environmental change through 50,000 companies, something that Congress and the Bush administra- tion has refused to do', says Michael Marx of Corporate Ethics International. . . .
(Bichall 2007)
And since Wal-Mart now acts as a government, so to speak, it seems only appropriate that it should also be lobbied:
Wal-Mart says it consults with suppliers on standards. But its efforts to set higher environmental goals than those legally required mean that the retailer is attracting the kind of lobbying that would have previously been directed at central government, from both environmentalists and from industry.
(Ibid. )
This example of private regulation is by no means exceptional. It keeps popping up in many different areas - from the setting of accounting standards and the determination of monetary policy, to military spending and the waging of war, to the commercialization of legal arbitration and the choice of pharmaceutical practices - all instances in which corporations act as regula- tors of the capitalist environment in which they operate.
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300 Bringing power back in
Sovereign owners?
The second example concerns the modus operandi of government finance. Traditionally, capitalist governments treated their foreign reserves as a buffer for securing imports and protecting the currency. Consequently, the extra money was usually 'parked' in liquid foreign government bonds. This situa- tion started to change in the 1980s. Massive shifts in the global distribution of income gave rise to a significant concentration of foreign currency assets - first in the hands of oil-producing countries, and more recently also in the coffers of Asian governments. These piles of cash made the lure of capital too difficult to resist, as a result of which many governments started to invest their holdings through a new institution: the 'sovereign wealth fund'.
By 2006, sovereign wealth funds had amassed assets estimated at $2. 5 tril- lion - representing 10 per cent of all institutionally held investments in the world and nearly 1. 5 per cent of all global financial assets. The size of these funds has been growing in leaps and bounds, and at current growth rates it is expected to reach $12 trillion in 2015 - exceeding the sum total of global reserves by as much as 50 per cent (Farrell et al. 2007: 11; Jen 2007; Farrell et al. 2008: 10).
So far, much of the discourse surrounding this growth has focused on its threat to 'free markets' and the 'national interest' (particularly that of the United States, the world's largest importer of capital). The sovereign owners of these funds, the pundits explain, are inherently anti-market (the liberal fear) and potentially hostile (the realist unease), so thwarting this new form of 'government intervention' must be good for both freedom and country.
But this logic can easily be turned on its head. By setting up and managing sovereign wealth funds, governments are further integrating, if not locking themselves, into the larger architecture of capitalist power. This submission is succinctly summarized, however unintentionally, by Yousef al Otaiba, director of international affairs for the government of Abu Dhabi:
The success in generating and wisely applying financial returns for the public good is directly linked to a clear set of principles that has guided Abu Dhabi's investment organizations. Most basic are the focus on maximizing risk-adjusted returns, relative to well-established market indices; taking a long-term view; avoiding leverage; and investing in a well-diversified portfolio across asset classes, geographies and sectors. Furthermore, the leading investment organization, the Abu Dhabi Investment Authority (ADIA), has operated predominately as a passive investor, with the overwhelming share of its portfolio consisting of minority stakes in companies that have included no control rights, no board seats and no involvement in the management or direction of the receiving companies. . . . It is important to be absolutely clear that the Abu Dhabi government has never and will never use its investment organi- zations or individual investments as a foreign-policy tool.
(al Otaiba 2008, emphases added)
The capitalist mode of power 301
The last promise in this quote should be taken with a grain of salt. As things stand, there is (still) no means of preventing governments from using their assets in line with their policy goals. But given the increasingly capitalist bent of these new sovereign owners of wealth, it is not clear how their investment and divestment decisions would differ from the business-as-usual policies of ExxonMobil, Bechtel or Samsung.
Whose policy?
And since we talk about foreign policy, what should we make of the recent US invasion of Iraq? Was this policy move taken in the national interest, in the name of business, or perhaps both?
Conventional opinions on this question vary widely, so perhaps we should briefly reiterate the underlying assumptions. At one extreme we have the realist position, according to which the state, understood as an independent entity represented by its 'officials' (i. e. the government apparatus), seeks to defend the 'national interest' against the interest of other nations. At the other extreme, we have the structural Marxist position that sees the state, in the 'last instance', as subservient to the 'logic of accumulation'. And on the face of it both views ring true. There is little doubt that George Bush Jr. and his administration believed that they represented the 'national interest' of the United States. But it is also fairly obvious that this same administration, whatever its formal leeway, could not have deviated too much from the underlying dictates of profit and accumulation.
And that is precisely the problem. As stated above, the realist and struc- tural Marxist views are mutually consistent. And if they can coexist, how can we tell whether the US government launched the attack on Iraq in order to serve its vital national interests or to protect the capitalist order? Is it possible that the attack was meant to serve both goals, or is one cause more important than the other? Can we even tell them apart?
Moreover, is the relative significance of these goals fixed, or does it change over time? Considering the past fifty years, could we say, for example, that the 'national interest' has grown less imposing relative to the 'logic of accu- mulation', or has it been the other way around? Perhaps the underlying logics of the national interest and accumulation have both changed?
Whose interests?
These, undoubtedly, are big questions. To answer them, we have to take the following steps. First, we need to specify clearly the 'logic of state power' and the 'logic of accumulation', including the categories and units in which they are articulated and observed. Second, we need to identify conflicts between these logics. And third, we need to examine how these conflicts pan out comparatively and historically. Based on such an investigation, we can then choose the logic that gives the most consistent, robust and predictive picture.
302 Bringing power back in
Clearly, so far the debate hasn't taken this route. Worse still, it seems that both sides - the realists and the structural Marxists - have preferred to frame their positions in irrefutable terms. Stephen Krasner, an advocate of the realist view, interprets the 'national interest' not as the sum of individual interests, but rather as the overall interest of the nation. In his words, it is not the 'utility of the community' that matters, but the 'utility for the community' as deter- mined by its central decision makers (Krasner 1978: 12, original emphases). In practice, though, the 'decision makers' (read government officials) themselves rarely agree on the matter, so it is up to the researcher - Krasner in this case - to make the decision for them. And the way this interest is phrased is often so loose that it can be made consistent with virtually any line of action. According to this template, the 2003 US invasion of Iraq was motivated (depending on the theorist) by the quest for raw materials, by the need to spread capitalist ideology, by the desire to tame the barbarians, by the aspiration to thwart Europe and Asia, by the desire to have Bush Jr. re-elected, or simply by a miscalculation - all in the name of the national interest. Go prove otherwise.
Unfortunately, structural Marxists do not always fare much better in specifying the 'logic of accumulation' and the 'interest of capitalists', let alone in assessing the degree to which this logic and interest dominate the state. In the 1960s, the welfare state served the long-term interest of capitalism; in the 1980s, the welfare state's demise better served that same interest. In the 1980s and 1990s, capitalists wanted a new world order of peace; now they suddenly want Empire. In the 1970s and 1980s the US government tried to serve its 'own' capitalists by conspiring with OPEC to raise oil prices; in the early 2000s it tried to cater to their 'global' interests by invading the Middle East in order to lower oil prices (and when, in the late 2000s the price of oil reached the stratosphere, it was obviously in the interest of the oil companies and the speculators).
These claims may or may not be true. But their validity can be judged only if we first specify exactly what we mean by the 'interest of capitalists' and the 'logic of accumulation'. Only then can we begin to judge whether government organizations and institutions are autonomous from or subservient to these interests and logic, or perhaps somewhere in between.
What is to be done?
The final part of the book outlines the power logic of capitalism and the interest of the dominant owners as we see them. In doing so, this part also illustrates some key features of the historical development of capital accumu- lation. The quantitative patterns it outlines delineate the boundaries of capi- talist politics. These boundaries point to the central political processes, broadly defined, that determine the course of accumulation. They also provide a basis for assessing the extent to which government policies have been 'discounted' into capital on the one hand and the degree to which the capitalist mega-machine may have become a form of state on the other.
Part V
Accumulation of power
14 Differential accumulation and dominant capital
ad omnia et contra universos hominess - in all matters and against all men --An eleventh-century count pledging to serve his lord. Quoted in Franc? ois Louis Ganshof's Feudalism
Creorder
Creating order
Historical society is a creorder. At every passing moment, it is both Parmenidean and Heraclitean: a state in process, a construct reconstructed, a form transformed. To have a history is to create order - a verb and a noun whose fusion yields the verb-noun creorder.
A creorder can be hierarchical as in dictatorship or tight bureaucracy, horizontal as in direct democracy, or something in between. Its pace of change can be imperceptibly slow - as it was in many ancient tyrannies - yielding the impression of complete stability; or it can be so fast as to under- mine any semblance of structure, as it often is in capitalism. Its transformative pattern can be continuous or discrete, uniform or erratic, singular or multi- faceted. But whatever its particular properties, it is always a paradoxical duality - a dynamic creation of a static order.
Democratic creorders - of which the most notable example is the demos kratia of Ancient Athens - are relatively few and far between, so it is difficult to generalize about them. But given that such societies are to some extent free to create their own fate, they can choose to do so rapidly or slowly.
A power creorder doesn't have that choice. Power means the ability to impose order, and imposition presupposes resistance - resistance from those on whom order is imposed and from others who wish to impose their own. This ever-present tension between force and counter-force makes a power creorder inherently unstable. Slack on one side unleashes pressure from another, a greater force in one direction trumps over a weaker force in the other. And since to overcome resistance is to create a new order, the very presence of power spells a built-in pressure for change.
306 Accumulation of power
Historically, however, this pressure tended to remain latent. Judged by contemporary standards, most hierarchical regimes seem highly stable, if not entirely static. Although dynamic in potential, the pace of their creorder was usually restricted. It was capped by material limitations and symbolic inhibi- tions, and it often slowed to a halt by the very success of rulers in eliminating opposition. Regimes with 'surplus' energy usually spent it on conquering and subjugating other societies.
In capitalism, these internal limitations are greatly loosened by two unprecedented developments: (1) a permanent revolution of the scientific- ideological mindset that enables rapid material and societal transformations; and (2) a relentless process of pecuniary capitalization that translates and reduces these heterogeneous transformations of quality into universal changes in quantity.
Mediated through the market, the convergence of these processes enables capitalists to creorder in ways that no other ruling class has ever been able to. At the most basic level, it allows owners to lever technical change - rather than techniques per se - as a tool of power. At a higher level it lets them use the monetary symbols of prices and inflation to restructure power. And at a still higher level, and perhaps most importantly, it permits them to reorganize power directly, by buying and selling vendible ownership claims. In this sense, the capitalist market, with its universalizing price architecture and encom- passing discounting, is not a diffusion of power but the very precondition of power.
The power role of the market
The power role of the market cannot be overemphasized - particularly since, as we have seen throughout the book, most observers deny it and many invert it altogether. Analytically, the inversion proceeds in three simple steps. It begins by defining the market as a voluntary, self-regulating mechanism. It continues by observing that such a mechanism leaves no room for the imposi- tion of power. And it ends by concluding that power and market must be antithetical, and that they can coexist only insofar as the former 'manipulates' and 'distorts' the latter.
An example of this inversion is Fernand Braudel's historical work Civilization & Capitalism (1985). According to Braudel, capitalism negates the market. In his words, there is a conflict between a self-regulating 'market economy' on the one hand, and an anti-market 'capitalist' zone where social hierarchies 'manipulate exchange to their advantage' on the other (Braudel 1977; 1985, Vol. 1: 23-24 and Vol. 2: 229-30). A similar sentiment is expressed by Cornelius Castoriadis, when he proclaims that 'where there is capitalism, there is no market; and where there is a market, there cannot be capitalism' (1990: 227).
The root of the error here lies right at the assumptions. Capitalism cannot negate the market because it requires the market. Without a market, there can
Differential accumulation and dominant capital 307
be no commodification, and without commodification there can be no capi- talization, no accumulation and no capitalism. And the market can fulfil this role precisely because it is never self-regulating (and since it is never self- regulating, there is nothing to 'manipulate' or 'distort' in the first place). Price is not a utilitarian-productive quantity, but a power magnitude, and the market is the very institution through which this power is quantified. Without this market mediation of power, there can be no profit and, again, no capital- ization, no accumulation and no capitalism.
And there's more. The market doesn't merely enable capitalist power, it totally transforms it. And it achieves this transformation by making the capi- talist mega-machine modular. The blueprint of this new machine, unlike those of earlier models, is very short. Its essential component is the capitalization/ accumulation formula. The formula is special in that it doesn't specify what the mega-machine should look like. Instead, it stipulates a 'generative order', a fractal-like algorithm that allows capitalists to reconstruct and reshape their mega-machine in innumerable ways. The algorithm itself changes so slowly that it seems practically 'fixed' (the basic principle of capitalization hasn't changed much over the past half-millennium). But the historical paths and outcomes generated by this algorithm are very much open-ended, and it is this latter flexibility that makes the capitalist creorder so dynamic. 1
How to measure accumulation?
So let's start with capitalization, the 'raw material' of accumulation. In its immediate appearance, capitalization is just a number, a quantity of dollars and cents.
On its own, it can tell us nothing about power, or about anything else for that matter. To gain a meaning, it has to be benchmarked.
'Real' benchmarking?
Begin with the yardsticks that don't stick. For most economists, the proper benchmark is a price index. Capitalization, like any other 'economic' entity, acquires its meaning when expressed in 'real terms'; and the way to determine this 'real' quantity is to divide the dollar value of capitalization by its unit price. Accumulation is the rate of growth of this 'real' ratio.
Unfortunately, this procedure won't do. As we have seen, the category of 'real capital' is logically impossible and empirically embarrassing. Capital- ization has no material units to measure its quantity (and without a quantity
1 According to David Bohm (Bohm 1980; Bohm and Peat 1987), there is no 'ultimate' generative order. Instead, there is an infinite 'enfoldment', a never-ending 'order of orders' that slowly unfolds with greater hindsight and insight. From this viewpoint, Marx's capitalism is enfolded, along with several other modes of production, within the higher generative order of 'dialectical materialism'. Perhaps with enough hindsight it will be possible at some point to nest capitalization within a higher generative order of power.
? 308 Accumulation of power
there is no definite unit to price); the replacement cost of material artefacts owned by capitalists usually is a small fraction of their overall capitalization; and, as a coup de gra^ce, over time this replacement cost tends to oscillate inversely with capitalization.
A popular escape route is to express 'real' capital in terms of purchasing power. According to this logic, capitalists, like all economic 'agents', are in hot pursuit of hedonic pleasure. All they seek is consumption - immediate or postponed - and the more the better. In this context, the thing to do is benchmark capitalization not against its own elusive price, but relative to the price of consumer goods and services. Simply divide the dollar value of capitalization by the CPI and you are done.
But this procedure isn't simple either. Capitalists of course are concerned with consumption. Yet, beyond a certain level of riches, their consumption is only marginally affected by their accumulation. And if only a fraction of their fortune is earmarked for consumption, what should the remainder be benchmarked against?
Moreover, it turns out that even the proportion that does get consumed is rather tricky to deflate. In liberal tracts consumption is a hedonic affair between a person and the things he or she consumes. Not so for accumula- tion-induced consumption. Here, the relationship is inter-personal. The goal is not to achieve hedonic pleasure but to establish differential status: to demonstrate that the consumer can afford something that others cannot. Veblen (1899b) labelled this demonstration 'conspicuous consumption'.
This new emphasis puts the standard deflating method on its head. From a nai? ve utilitarian perspective, higher prices for consumer goods and services imply lower purchasing power and therefore a smaller 'real capital'. For the conspicuous consumer, though, the exact opposite is true: since higher prices bestow a higher differential status, they generate greater utility and therefore imply a larger 'real capital'. 2
2 One of the most conspicuous acts of consumption is the acquisition of an entire territory. Capitalists cannot yet apply this act to sovereign countries, but they have been practising on islands. According to the subtly titled Financial Times supplement How to Spend It, 'the demand for islands has never been higher, and although the chief driver of this rarefied market remains prestige, other factors now fuel the passion for a personal domain surrounded by sea' (Freedman 2007). One popular consideration, says Fahran Viladi, owner of the world's leading island estate agency, is the direction of the wind, in case a nuclear attack annihilates the nearby mainland. Another is elevation - so that the consumer can safely escape the immanent rising of the seas as the poles melt. But even these considerations are part of the show off: 'It's not the price - because those who can afford it tend not to worry about money - it's the fact there's such a limited supply'. And sure enough, 'private islands tended to outperform the mainstream property market'. So, in the end, conspicuous consumption is nothing more than glorified investment; but, then, since investment cannot have a 'real' quantity, our measurement odyssey ends up right where it started. . . .
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It's all relative
The most important critique against 'real' measures of accumulation, how- ever, is that they are irrelevant. Accumulation is not about physical objects or the hedonic pleasure of capitalists. It is about power. And power is not absolute, it is relative. It acquires its meaning only when gauged against other powers.
Of course, the differential nature of power isn't unique to capitalism. Chieftains gauged their power against other chieftains, lords against other lords, kings against other kings, nation-states against other nation-states. But in these regimes, the comparisons were largely subjective and their social significance more limited. It is only in capitalism, where power is translated into the universal units of capitalization, that the differential nature of power really takes centre stage.
Neoclassicists never tire of preaching the imperative of maximizing profit and wealth, although they rarely if ever explain what 'maximization' means in practice or how it can be achieved in reality. 3 And not that they should bother - for in the real world of capital, the reference points are all relative.
A capitalist investing in Canadian 10-year bonds typically tries to beat the Scotia McLeod 10-year benchmark; an owner of emerging-market equities tries to beat the IFC benchmark; investors in global commodities try to beat the Reuters/Jefferies CRB Commodity Index; owners of large US corpor- ations try to beat the S&P 500; and so on. Every investment is stacked against its own group benchmark - and, in the abstract, against the global bench- mark.
Modern-day capitalists have long abandoned the vain search for Archimedean absolutes for readily observable Newtonian differentials. And it is not as if they had a choice. The shifting sands of the capitalist creorder leave no absolute yardstick standing. 'All that is solid melts into air, all that is holy is profaned', observed Marx and Engels (1848: 63). The only thing capi- talists can relate to are the broad processes themselves: they assess their own performance by comparing it to the performance of others.
In this quest, the goal is not to maximize but to exceed, not to meet but to beat. To achieve a 5 per-cent profit growth during recession is success; to gain 15 per cent when others make 30 is failure. Even declining profit can be a triumph, provided it 'outperforms' the average:
3 We have already seen in Chapter 12 that actual pricing methods have little to do with 'maximization'. Neoclassicists love to ignore these inconvenient facts - only that the situ- ation is hardly any better in their 'pure' theory. As it turns out, neoclassical profits can be 'maximized' only in the hypothetical cases of perfect competition and monopoly - but not anywhere in between. The problem, first identified by Cournot (1838), is one of oligopo- listic interdependence, which, in its unrestricted form (that is, without the game theorists), makes maximum profit indeterminate even in the mind of the economist (see footnote 4 in Chapter 5).
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Accumulation of power
In normal circumstances, the results issued by Mr Dimon's firm [JPMorgan Chase] on Thursday - a halving in second-quarter profits, and a bleak outlook for the rest of the year - would have sent investors rushing for the exit. But, with fund managers' nerves jangled by almost a year of credit-related bad news, JPMorgan's ability to outperform most of its rivals and beat analysts' predictions was enough to send its shares 11 per cent higher at midday in New York.
(Guerrera 2008)
Maximizing profit for absolute accumulation is bordering on the occult. The only real thing is differential accumulation. 4
Unlike the impossible absolute and elusive maximum, the 'normal' and 'average' are everywhere. Numerous organs of the state of capital - from the news media listings of Fortune, Business Week, Far Eastern Economic Review, Euromoney, Financial Times and Forbes, to the private databases of Bloom- berg, Compustat, Datastream and Global Insight, to national and interna- tional organizations - keep churning new benchmarks at a neck-breaking pace. Soon enough, they'll have us swamped with more benchmarks than assets.
Every business and economic category is averaged across the world and over time. Indeed, so real is the zeal that even future projections of these magnitudes are now benchmarked against their own so-called 'consensus forecast'. The benchmarks are classified by every imaginable criterion, sepa- rately and in combination - including size, nationality, sector, duration, risk, liquidity and 'investability', among others. Indeed, the notion of 'normality' as a benchmark for action and achievement has been so thoroughly accepted that it now dominates numerous non-business spheres, from education and the arts to sports and foreign relations. To be real is to be relative.
Differential capitalization and differential accumulation
The capitalist creorder
The logic of this relative architecture was spelled out by the eighteenth- century invention of the metric system. The system was purposefully linked to the magnitude of the planet (setting the metre equal to 1/40,000,000th of the earth's circumference). This anchor, hoped its inventors, would be the benchmark for the measure of all things. '[A] meter based on the size of the
4 Peter Martin, a Financial Times columnist, is clearly sailing against the wind when he calls on fund managers to abandon their 'fetish' for relative performance in favour of absolute returns (Martin 1999). Some hedge funds have tried to do just that - i. e. achieve a pre-deter- mined rate of return - but as another Financial Times commentator explains, their strategy is tantamount to having their cake and eating it too. In the end, 'absolute return strategies' are attractive only insofar as they manage to beat the average. . . (Anonymous 2002).
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earth', marvelled Pierre-Simon Laplace, 'would entitle even the most humble landowner to say: "The field that nourishes my children is a known portion of the globe; and so, in proportion, am I a co-owner of the World"' (quoted in Alder 2002: 90).
Capitalization enables a similar partition of ownership - only in ways that are infinitely more complex and fluid than anything Laplace could have imag- ined, and not nearly as congenial or assuring. This latter partition is counted not in metres but in money prices, and it parcels the control not only of land but potentially of every aspect of human society. It is the mapping of capi- talist power at large.
Of course, not all power gets capitalized - but then all capitalization is power. And as more and more forms of power get capitalized, capitalization becomes the overarching architecture of power. This view helps us transcend the conventional separation between power and capital. From the hierar- chical perspective of Marx, the engine is productive capital. This is the basis on which the entire social structure of power gets built. The Weberians flatten the picture, arguing that control over the means of production is merely one of many different types of authority. 5 Our own framework fuses the two logics. Capital is still the starting point, as Marx correctly insisted. And ownership of the means of production indeed is merely one form of power, as the Weberians argue. But capital is not means of production; it is a mode of power. And although there are many different forms of authority and power, in principle they can all be subsumed by capital.
In this way, the structure of ownership encompasses and reflects the entire gamut of capitalized power. In Chapter 13 we described this mode of power as the 'state of capital', a mega-machine that comprises both corporations and government organs. The cogs of this mega-machine consist of factory workers, corporate accountants and chief executives, along with government employees, bureaucrats and top officials. All are part of the same process of capitalization and accumulation, and in that sense all are integrated into the same map of ownership.
In this framework, the total dollar value of capitalization maps the power that capitalists exert over society. Any given fraction of this totality denotes a corresponding, undifferentiated share of that power. Individual or groups of capitalists secure their claims through particular organizations, institutions and processes, so the content of their power is always qualitatively unique. But because this power is exercised over society as a whole, its form can be quantified in universal monetary units; that is, as claims on the entire process
5 'Control over the means of production is but a special case of authority, and the connection of control with legal property an incidental phenomenon of the industrializing societies of Europe and the United States. Classes are tied neither to private property nor to industry or economic structures in general, but as an element of social structure and a factor affecting change they are as universal as their determinant, namely, authority and its distribution itself' (Dahrendorf 1959: 136-37).
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of social restructuring. This universality enables capitalists to gauge their power based on their relative stakes: an owner with 1 per cent of the total has twice the power of one with only 0. 5 per cent and half that of another with 2 per cent.
But capitalism isn't simply an order; it is a creorder. It involves the ongoing imposition of power and therefore the dynamic transformation of society. In this process the key is differential accumulation: the goal is not merely to retain one's relative capitalization but to increase it. And since relative capi- talization represents power, increases in relative capitalization represent the augmentation of power. The accumulation of capital and the changing power of capitalists to transform society become two sides of the same creorder.
This notion of capital as power and accumulation as changes in power stands in sharp contrast to received convention. Political economy keeps the two sets of concepts strictly distinct, and even the most astute observers can do no more than 'link' them. When Bowles, Gordon and Weisskopf (1986; 1990) offer to weigh capitalist power relative to that of workers, foreign suppliers and the country's citizenry, they take capital as a given - and then treat it as a 'source' of power. A similar distinction underlies Doug Henwood's assessment of the growing concentration of wealth. This concen- tration, he writes, yields 'extraordinary social power - the power to buy poli- ticians, pundits, and professors, and to dictate both public and corporate policy' (1997: 4). In this sequence, capitalists first accumulate 'wealth' and then use this wealth to acquire 'power'. The two categories, although inti- mately linked, are nonetheless separate.
The figurative identity
In our framework, capital accumulation and the changing power of capital- ists are one and the same. But this 'identity' is only figurative. It consists of converting quality into quantity, of translating and reducing the heter- ogeneous processes of capitalist power into the universal units of differential capitalization. And this conversion obviously is not an objective process.
First, the relative magnitude of capitalization, although readily observ- able, is based on the inter-subjective conventions of the capitalist nomos. Second, this relative magnitude cannot be inferred simply by observing the power aspects of the capitalist scene. The fact that a certain corporation was granted a patent, that it had the government move to its side, that it introduced a new technique, or that it acquired a competitor, cannot, in and of itself, tell us much about that company's rate of differential accu- mulation.
The way to understand this figurative identity is speculatively. Force is nothing apart from its effect, tell us Hegel and Marcuse; it is always a corre- spondence between form and content, quantity and quality. Therefore, the way to give capital meaning is by contrasting these two aspects, by juxta- posing the quantitative patterns of differential accumulation, on the one
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hand, with the qualitative power institutions, organizations and processes that underlie this accumulation, on the other. 6
Clearly, any such attempt to jump from qualities to quantities cannot claim the rigour of natural science. But, then, we have seen what happened to liberal and Marxist analyses when they tried to imitate this rigour. They pretended that there is a strict quantitative correspondence between prices, production and accumulation on the one hand and utility and labour values on the other, and then fell flat on their faces when they tried to demonstrate this correspondence.
Capitalists constantly try to force life into a box, to harness creativity, to convert quality into quantity. This is the nature of their power. But they can achieve this conversion only speculatively and inter-subjectively, and there is no point in pretending otherwise. The task is to try to understand this specu- lative translation. And, in our opinion, the only way to do so is by telling a 'scientific story' - a systematic historical analysis that convincingly ties the quantities and qualities of capitalist power.
With these considerations in mind, we propose the following working defi- nition of accumulation:
? From a static perspective, the differential power possessed by a particular group of owners is measured by its differential capitalization (DK); that is, by comparing the group's combined capitalization to that of the average capital unit. If this average is $5 million, a capital worth $5 billion represents a DK of 1,000. This magnitude means that, as a group, the owners of that capital are 1,000 times more powerful than the owners of an average capital.
? From a dynamic viewpoint, the change in differential power is measured by the rate of differential accumulation (DA), defined as the rate of change of DK. To achieve differential accumulation, owners need to have their own capitalization grow faster than the average capitalization. Positive, zero or negative rates of DA imply rising, unchanging or falling differen- tial power, respectively.
? From a power stance, only capitalists with a positive DA are said to accu- mulate. These differential accumulators should be the centre of analysis.
The universe of owners
Who are the differential accumulators? To contextualize the answer, let's backtrack and first consider the universe of owners. In principle, anyone who
6 In this sense, our logic here is similar to Kalecki's 'degree of monopoly' (1943a), an already mentioned proxy that measures the consequence for relative profit margins of monopolistic institutions and forces. Our own notion here differs from Kalecki's, first, in that it focuses on capitalization rather than merely on profit margins, and second, in that it relates not to the narrow economic question of monopoly vs competition, but to the entire dynamics of capitalist power.
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owns a capitalized asset can be thought of as a 'capitalist' to that extent. And since capitalization has penetrated nearly every corner of society, there are plenty of such 'capitalists' around. For our purpose, though, this formal generalization is overstretched and misleading.
We can think of two types of assets: those that are held for use and those that are held for accumulation. The vast majority of owners hold the first type. They own articles that they use, such as their family home, vehicle and other 'big-ticket' items; and they own assets that they intend to use - primarily savings and pensions. The aggregate magnitude of these assets could be substantial, but their individual size tends to be small. Most importantly, these assets give their owners little or no control over other people.
A small minority of owners holds the second type of assets. These assets are financial instruments, consisting mostly of equity and debt claims on corporations and governments. They are held not for use, but for accumula- tion. Their overall magnitude is large and so is their individual size. And, most importantly, they give their owners direct and indirect control over other people. 7
This classification narrows our search. It is obvious that the first group of people - namely, most of humanity - is pretty much out of the accumulation race. The vast majority of the population is simply trying to make ends meet - and, if they are lucky, also to save a bit for emergency and old age. Since they do not pursue power, they offer no reference point to accumulators and hence do not figure in the benchmark.
The relevant universe for differential accumulation comprises the second group: the owners of financial instruments. They are the capitalists. In our discussion, though, we focus not on individual owners, but on groups of owners. The reason is that the vendibility of capital creates centrifugal as well as centripetal forces, and the centrifugal forces limit the power of any single capitalist. In counteracting this effect, the elementary solution is the corpora- tion, and, eventually, the corporate-government coalition (overt or covert). For this reason we concur with Veblen that the corporation itself, regardless of who runs it, was historically necessary for the survival of capitalism. Without this institution, which for Marx signalled the immanent 'abolition of capital as private property within the framework of capitalist production itself' (1909, Vol. 3: 516), the centrifugal forces of competition and excess capacity would probably have killed the bourgeois order long ago. Hence, any analysis of contemporary capitalism must have the corporation as a central building block.
7 The two ownership groups overlap. The first may own some financial assets, while the second owns assets for use. But the overlaps are sufficiently small to be safely ignored. Even in the so-called 'people's capitalism' of the United States, most family holdings of stocks and bonds do not exceed a few thousand dollars. And although many of the big holders of finan- cial instruments have a lavish lifestyle, the assets they own for use tend to be small relative to those they hold for accumulation.
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