Another difficulty was how to
prioritize
different commitments.
Nitzan Bichler - 2012 - Capital as Power
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. Obviously, this conception of state is very different from conven- tional definitions. In common parlance, a state is a political entity that exer- cises sovereignty, backed by force, over a definite territory. 11 This political
11 In the pedantic words of Max Weber, 'A ruling organization will be called "political" insofar as its existence and order is continuously safeguarded within a given territorial area by the threat and application of physical force on the part of the administrative staff. A compulsory political organization with continuous operations will be called a "state" insofar as its administrative staff successfully upholds the claim to the monopoly of the legitimate use of physical force in the enforcement of its order' (Weber 1978, Vol. 1: 54).
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entity is both (1) an organization, typically consisting of government organs (the administration, bureaucracy, legal apparatus and the military/police), and (2) a set of institutions, legal and habitual, that enable the political entity to exercise its rule.
This definition may seem relatively unambiguous when applied to pre- capitalist centralized regimes, where the organizations and institutions of power were usually associated with and commonly fused in a single entity - 'estate', 'palace', 'king', 'emperor'. But with capitalism, this application is no longer straightforward. Capitalism alters the very nature and meaning of power - as a result of which the organs and institutions of power no longer reside in a single entity (let alone a 'political' one), the scholars no longer agree on what these organs and institutions are, and the capitalist state no longer fits into the conventional box. With this glaring exception, the definition ceases to be universal.
Our own notion of state as a mode of power is broader and more flexible. First, it transcends the analytical distinction between economics and politics. As noted, this distinction may be valid when viewed from below and at lower levels of abstraction, and in that sense it remains 'enfolded' in our explana- tion. But it could be very misleading when considered from above and in rela- tion to the overall architecture of power. The latter perspective no longer differentiates between 'economic power' and 'political power', between 'exploitation' and 'oppression', or between the 'power of the market' versus the 'power of the state'. Organized power can take different forms, central- ized or decentralized. But insofar as the overall structure is hierarchical, it constitutes a single nomos of power.
Second, the nomos of power is not fixed. It changes as the social order evolves, and it is occasionally replaced when a new mode of power emerges. In this sense, one cannot speak of 'the state' as an abstract form with an unchanging definition. The state is never an empty Newtonian container. Instead, it is a Leibnitzian-like space: an ever-changing, historically specific relational entity that both comprises and is shaped by the bodies that consti- tute it.
In contemporary capitalism, the key organizational bodies of the state are corporations and government organs. These are the concrete incarnations of the capitalist mode of power, and although separate they are deeply interre- lated. First, both bodies are conditioned by the same nomos of capitalized earnings and its associated rituals. Regardless of whether their departments overlap or exist at arm's length, regardless of whether their personnel are separate or share a revolving door, and regardless of whether they cooperate or bicker, they are both part and parcel of the same architecture of mecha- nized social power. Second, they presuppose each other: there are no capi- talist corporations without a capitalist government, and there is no capitalist government without corporate or proto-corporate organizations. And, third, by incessantly seeking to redistribute capitalized earnings, whether at cross purposes or in unison, corporations and governments end up shaping and
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reshaping the very patterns of power that define capitalism. In the final anal- ysis, there are no profit expectations without state prisons: at the zenith of its capitalist power, nineteenth-century Britain had more political prisoners than Tsarist Russia, just as the United States today boasts the world's largest inmate population.
We call this Leibnitzian-like space the state of capital. Mumford insight- fully saw the modern state as a resurrected mega-machine. But this mega- machine is historically unique. It is not a state in the abstract, but one that both consists of and is defined by capital as power.
The feudal mode of power
The above account of course is a stylized abstraction. To understand where the state of capital comes from historically and how it developed its unique features as a modern mega-machine, it is useful to take a step back and examine, if only briefly, some of its feudal roots.
This type of inquiry, to be certain, is hardly novel. The feudal origins of capitalism have received more than ample theoretical scrutiny, particularly from Marxists. There are even two famous controversies about the issue. The first, the 'Transition Debate', launched by Maurice Dobb (1946) and Paul Sweezy (1950), concerned the significance of 'production' versus 'circulation'. The second, the so-called 'Brenner Debate', beginning with the work of Robert Brenner (1977; 1978) and still going, focuses on the relative impor- tance of 'forces of production' as opposed to 'relations of production'. 12
However, the question these debates seek to answer is fundamentally different from our own: whereas they are concerned with the transition between modes of production, our own interest is the transition between modes of power. 13
The feudal state
Understood as a mode of power, the 'feudal state' consisted of a hierarchical network of voluntary military dependencies among free men. 14 This decen- tralized state was born out of the ruins of the Roman Empire. Lack of central authority and fracturing inheritances fostered something akin to a war of all against all and a heightened sense of insecurity. The initial response was
12 Key contributions to these two debates are included in Hilton (1978) and in Aston and Philpin (1985), respectively.
13 The analysis that follows focuses exclusively on Europe. However, it should be noted that a feudal mode of power developed in other places as well - including Medieval Japan, the Ottoman Empire and Ethiopia, among others - and with features that were often remark- ably similar to Europe's.
14 Our account in this and the following three sections draws mainly on the historical works of Bloch (1961), Ganshof (1964), Le Goff (1965; 1988), Lopez (1967), Pirenne (1937) and Tuchman (1978).
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the formation of armed gangs based on personal loyalty and mutual protec- tion. This arrangement later bloomed into a full-fledged system of intricate lord-vassal obligations.
The key hallmark of the feudal regime was violence. The lords despised work and creativity, which they viewed as infinitely inferior to their life of honour and exploit. The person and possessions of others were a means to an end. They were seen partly as a source of loot, but mostly as the target of differential sabotage:
The Bayeux Tapestry of the Queen Mathilda - that remarkable story in pictures from the end of the eleventh century, narrating the 1066 Norman conquest of England - shows us how, after the landing, a big feast was held and blessed by the hegemon, and how the war expedition was launched with the burning of a house. And, indeed, war in the Middle Ages was marked by systemic devastation. Its purpose was not so much to defeat the enemy militarily, as to undermine its economic and social power (by burning and destroying crops, houses and villages).
(Le Goff 1965: 29, emphasis added)
This inherent violence determined both the form and content of the feudal contract. Ceremonially, the legal bond (nexus iuris) between the lord and the vassal consisted of two acts: a fusion of their persons symbolized by the 'mixing of hands' (immixtio manuus), and an oath of fealty (sacramentum) which indicated that the vassal was giving himself voluntarily, as a free man. 15
Substantively, the bond was mostly negative, a sort of mutual insurance policy designed to reduce uncertainty. Each side promised not only to protect the other - but more importantly not to harm the other. 16
15 The 'mixing of hands' may have been the precursor of the bourgeois handshake, while violation of the vassal's oath of fealty (or 'foi'), developed into the English and French 'defiance' (Ganshof 1964: 26-27, 98-99).
16 In AD 802, the Carolingian emperor Charlemagne imposed on his subjects a new oath of fealty that added positive aspects to the existing negative ones. These negative features are highlighted by the emperor's decree, where he says that, from now on, the new oath is
'not as many have thought up to now, involving simply fidelity to the lord emperor as far as his life is concerned' - i. e. the obligation of refraining from any action against him which will put his life in danger - 'and the obligation of not introducing into his kingdom any enemy out of hostility toward him, and of declining to be part to the disloyalty toward him of others or keeping silent regarding such'.
(Quoted in Ganshof 1964: 34-35, emphases added) Another set of instructions from AD 1020 articulates this negativity in six different ways:
He who swears fealty to his lord should always have these six words present to his memory: 'safe and sound', sure, honest, useful, easy, possible. Safe and sound, because he must cause no injury to the body of his lord. Sure because he must not injure his lord by giving up his secrets or his castle, which are the guarantees of his security. Honest,
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In addition to not attacking his lord, the vassal was obliged to provide a certain quota of military services - so that the lord could protect himself as well as attack others. These services took various forms, but gradually they converged on the basic particle of feudal power: the fully-equipped knight.
In order for vassals to produce, train and supply knights on a permanent basis, they needed access to agricultural land and tillers, organized through the autarkic manorial system. And so, gradually, the homage between the lord and the vassal came together with the granting of a benefice, usually in the form of a landed fief, or 'feodum' - hence the term 'feudalism'.
The cost of reproducing a single knight and his accessories was pretty hefty, requiring roughly 150 hectares of land according to some estimates. Based on this ratio, a fair-size fief of a count, made up of 200-250 agricultural communities, could supply no more than 150-200 mounted warriors. These modest numbers had an important implication: they meant that a larger army could be assembled only by networking the separate commitments of many different vassals (Le Goff 1965: 54-55).
This networking formed the basis of the 'feudal state'. The arrangement first emerged in the eighth century, when the Carolingian rulers, seeking to consolidate their power and increase obedience, sowed confiscated church lands as well as their allodial territories with royal vassals. The vassals, who in turn wished to reduce their own uncertainty and if possible leverage their power, further parcelled their fiefs to subordinate vassals, and so on. The end result was a dense network of mutual military obligations tied to agricultural manorial production, a standardized pattern of power that later spread throughout much of Europe.
It is not difficult to see here the principle that later informed both Hobbes's Leviathan and Locke's 'social contract': the individual being (vassal or bour- geois), torn between his desire for freedom (independence) and quest for secu- rity (to annul his fear of death), finds the compromise in merging himself with a larger mode of power (the feudal network or the sovereign state).
because he must do nothing to injure the rights of justice of his lord or such other preroga- tives as belong to his well-being. Useful because he must do no wrong to the possessions of his lord. Easy and possible, because he must not make difficult for his lord anything which the latter may wish to do, and because he must not make impossible to his lord that which the lord might otherwise accomplish. It is only right that the vassal should abstain from injuring his lord in any of these ways.
(Quoted in Ganshof 1964: 83, emphases added)
Even the 'positive' vow of protection was inherently negative, in that it was directed against everyone else. A French document from the thirteenth century recommends the following declaration by the vassal:
I promise this because you have granted to me and to my heirs such and such a prop- erty, as long as we shall remain your vassals, and also because you have promised to defend me and mine against every man.
? (Quoted in Ganshof 1964: 154, emphases added)
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During the Middle Ages, royal power, although often existing de jure, usually was conditional on and subsidiary to feudal obligations. In some places, such as France of the twelfth century, power was so diffused that the king, although claiming 'sovereignty', was no more than a glorified lord whose authority hardly extended beyond his own feudal domain. In other places, such as England after the Norman conquest of the eleventh century, power was highly centralized in the hands of the king. But that centralization was still feudal insofar as the entire country was the property of the king and every feudal agreement was supplemented by allegiance to the monarch (a duality that perhaps hastened the development of British capitalism).
There was an important novelty in this arrangement. In imperial struc- tures, power could expand in two ways: conquest and marriage. The 'feudal state' introduced a third alternative: voluntary military contract. Of course, because of their larger number, individual feudal lords could not match the power of emperors. But their added ability to cut and paste slices of power in a quasi-amicable way - a precursor for the capitalist buying and selling of vendible corporate 'shares' - made the structure of power more flexible, easier to realign, and perhaps less vulnerable to external blows. 17
The limits of feudal power
Feudal flexibility, though, had three hard limits. First, the feudal bond was personal and deeply religious. Its material aspects were merely instrumental. The primary purpose was the establishment of direct loyalty and mutual obli- gation between two people. Second, the bond was total. The lord exercised something akin to sovereignty over the very person of the vassal. And third, the contract was permanent. Save for instances in which the no-harm clauses were violated, the feudal link could not be unilaterally terminated. It ended only with the death of one of the sides.
Over time, these features started to strain the structure of feudal power. One problem was that the chain of personal commitments was highly unreliable.
17 Feudal remnants occasionally crop up in flattering reports on the amalgamating victories of present-day magnates. The following account of Woodbridge, the family investment arm of the Thomson family, is typical:
As president of Woodbridge . . . Mr Beattie, 48, is often described as the consigliere or e? minence grise of the family. . . . 'Woodbridge exists for one reason - to create value for its shareholders, who are all descendants of Roy Thomson. ' In the 30 years to 2005, he says, that value grew from $300m to $30bn.
But even when the unit of power is still clannish, in capitalism its methods of expansion are detached and impersonal:
. . . Thomson family members have been unsentimental traders of assets. . . having an uncanny sense of when an industry is on the turn.
? (Edgecliffe-Johnson 2008, emphases added)
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As a contract between two people, the feudal bond gave the lord direct power over his own vassals, but not over his vassals' vassals. Unlike a capitalist owner who has legal right and effective power over the corporation's entire chain of subsidiaries, the leverage of a feudal lord depended on the good will of his vassals, who, when called on for a military operation, might or might not bring along their own subcontractors. In places where the feudal links were complicated, the task of quickly assembling a large army became a real headache. In some cases, the large lords and kings found themselves at a significant disadvantage - for instance, against the easy-to-organize popular militias of the bourgs, or relative to the centralized and partly monetized armies of the English king.
Another difficulty was how to prioritize different commitments. The vassals, seeking to leverage their power and security, often allied themselves with more than one lord. These multiple commitments, though, were inher- ently contradictory. Unlike the capitalist limited-liability contract - which has a definite magnitude denominated in dollars and cents, and hence a pro-rated structure depending on the relative magnitude of the priced pledges - the feudal contact was total. The vassal was obliged to serve his lord completely and without reservation. Those with overlapping obligations could therefore face multiple claims from different lords, each demanding the very same services. As a result, there emerged various systems of 'rating' - some based on the size of the fief, others on the time it was granted, and still others on the relative position of the lord - all designed to somehow reconcile the overlapping obligations.
The most serious limit, though, was the non-alienated nature of the fief. The fief was the property of the lord. It was a unit of power 'granted' to the vassal so that he could serve his master personally. But given the personal nature of the service, the transfer was always 'temporary' and was annulled by death. In this sense, any attempt to parcel, transfer or sell the fief was a direct challenge to the very purpose of the feudal contract. Over time, though, the pressure to alienate the fief mounted - coming initially from vassals who sought to pass it on to their heirs, and subsequently from lords who were both lured by and forced into the new pecuniary logic of the bourg. The solution was found in the form of 'relief' - a sort of ransom paid by the heir to the lord for giving up the property. In the beginning the relief was arbitrary. But around the twelfth century in France there emerged something like a 'normal rate', whereby the lord would alienate the fief in return for a sum equal to the property's annual revenue (Ganshof 1964: 136-39).
The capitalization of feudal power
The weakening of the feudal mode of power was marked by the colours of capitalism. One important change was the inversion of the feudal contract. Originally, the fief was a means to an end. The vassal made an oath of fealty to the person of the lord, who in return gave him the fief so that he could fulfil
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that oath. But toward the second part of the Middle Ages, the order had changed, with the fealty and service becoming preconditioned on the granting of the fief. The fief was now increasingly a matter of 'real estate', and feudal relations gradually shifted from a personal to proprietary footing.
A parallel change was the increasing monetization of both sides of the feudal contract. In many cases, the fief itself took the form of a stipend, or feodum de bursa, whereby the vassal received a payment for his keep rather than a direct allocation of land. The same happened to the services. Although these assumed a variety of forms from the very start, initially the key service was military. However, from the eleventh century onward in England and somewhat later on the Continent, the significance of military services declined, giving way to pecuniary payments. In England, many of the lower vassals paid their services in scutage, or monetary substitute, while in four- teenth-century Flanders less than 20 per cent of the vassals of the count in the cha^tellenie of Bruges were required to perform military services (Ganshof 1964: 90-92).
Faubourg, bourg, bourgeoisie
The power architecture of capitalism was gradually penetrating and trans- forming the feudal mode of power. The beginning was rather humble. The process started during the eleventh and twelfth centuries with the twin expan- sion of the bourgs and the periodic 'fairs'. The original bourg was a feudal fortification, built by serfs for military purposes. By contrast, the fair was an extra-territorial 'free-trade zone'. Granted by the prince as a source of royal- ties, it was exempt from feudal law and was endowed with 'franchises' and 'liberties' available nowhere else. In due course, the periodic fair gave way to the faubourg, a permanent settlement of merchants that was physically attached but socially alien to the bourg. Gradually, the merchants began to fortify their own suburb and in many cases ended up absorbing the old feudal fortification. The logic of the new bourg - commercial, industrial and above all monetized and capitalized - was every bit different from the one it had swallowed.
The dual economy
The capitalist bourg introduced a totally novel mode of power. Its manufac- turing sector, having developed as early as the eleventh and twelfth centuries, had many structural features we now take for granted. One of these was a prototype of the 'dual economy', (a term coined centuries later by Averitt 1968 to describe the bifurcated structure of the modern US business sector). On the one hand, there was the 'small economy', comprising associations of masters, apprentices and hired workers that supplied mainly the local market. On the other hand, there was the 'big economy' of large merchants and producers who controlled the long-term trade. The latter constituted a closely knit oligarchy, and it colluded heavily - both inside the bourg and with the
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oligarchies of other bourgs (with the most conspicuous example of the latter collusion being the Hanseatic League of London).
In parallel, there developed in the bourgs a proto-proletariat of unskilled workers, made mostly of propertyless incomers from the countryside, often known as the 'blue nails'. The oligarchy treated the workers and artisans with indifference - that is, as long as they remained docile. When they revolted (the first known strikes took place in Flanders during the thirteenth century) the retaliation - often coordinated within and between the bourgs - was usually swift and violent. In England of the fourteenth century, more than four hundred years before the Speenhamland Act, the King and Parliament were already passing decrees and legislation that made labour mandatory and idle- ness illegal (Pirenne 1937: 178-91; Lopez 1967: 278-80; Tuchman 1978: 120). In this sense, the capitalist class struggle, from its very inception, was never merely an 'industrial dispute'. It was a broad power conflict embedded in a newly emergent form of state.
Private and public
Another important innovation was the bourgeois link between the 'public' and the 'private'. This institutional structure, like many others, developed almost unintentionally. The new dwellers of the bourg needed to defend and fortify their private warehouses and workshops against the external hazard of the feudal space. The protection itself, though, was inherently public. By fusing the two, the bourgeoisie invented 'public finance' - a concerted effort to advance their coinciding private interests through proportional taxation.
The resulting fiscal system was completely antithetical to the feudal logic. First, contrary to feudal taxes that were inherently penal and served the indi- vidual lord only, bourgeois taxes were directly linked to the 'public interest' - that is, to the collective interest of capitalists. Second, since the public consisted of the private taxpayers, it made sense to make payment propor- tionate to the individual's interest - i. e. to his income. Finally, taxation presumed and implied representation - and indeed, in the bourgs of the elev- enth century there emerged, along with public works, bodies of elected or representative councils (Pirenne 1937: 178-91). In other words, from the very beginning, private capitalist bodies and capitalist government assumed one another and were symbiotically intertwined.
Liberty as differential power
Beyond these innovations, though, the bourgeoisie, at least initially, tended to view its project not as a comprehensive alternative to the feudal state, but rather as an exception to that state. Inside the bourg there was 'democracy of the privileged' - a close correspondence, if not an identity, between 'political administration' and 'economic management', both controlled by the moneyed aristocracy. The space outside the bourg, though, was accepted as a different
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mode of power. Although this space was generally hostile to the bourg, the bourgeoisie neither denied nor challenged it.
Matters of jurisprudence and religion, as well as the acts of peace and war, were fully accepted as the prerogatives of church, king and lord. Indeed, the bourgeoisie was usually more than keen on emulating the authority and privi- lege of the territorial princes - by seeking noble status, by giving gifts to the clergy and by lending money to the duke in need. All in all, the 'state' was viewed as an external moral-legal entity, distinct from and superior to the city, which was merely an 'economic' body (Lopez 1967: 267-68). This was the basic duality that Hegel identified in his Philosophy of Right (1821) - a duality that Marx rightly criticized but could 'solve' only by turning it into an inherent contradiction between 'political universality' and 'economic alienation'.
At the beginning of its journey, then, the bourgeoisie merely tried to fit into and advance within the structure of feudal power. Its tactics were simple. The nobility benefited from forceful confiscation through territorial sabotage - hazards that the bourgeoisie sought to bypass through exemptions and immunities. 18 These exceptions and immunities, though, were always in the plural. They represented particular 'liberties' and 'franchises', and therefore advantages held relative to and against others.
There was nothing exceptional about this differential quest. The notion of universal liberty was totally foreign to the feudal world. In the Middle Ages liberty meant sovereignty, and therefore force and authority over others. Only God was totally free. Everyone else, including the king, was a vassal, and therefore partly dominated. Even the term 'knight', a symbol of power, comes from the German knecht, meaning 'subjugated', a connotation that can also be found in the words Samurai (servant) and Mamluk (slave soldier). All were merely extensions, or 'arms', of a ruler - hence the term 'army'.
For this reason, 'liberty' at that period - whether bourgeois or feudal - could only be understood as a status of power. (1) It denoted negation: it was the right not to pay, not to work, not to obey. (2) It was dynamic and relative: it changed over time in relation to other people. And (3) it was anchored in sabotage: it marked one's place in the hierarchy of damage, with the right to inflict it on some and the obligation to accept it from others. In this sense, the expansion of bourgeois liberties was synonymous, both conceptually and historically, with the growth of the bourgeoisie's differential power.
War and inflation
As the leverage of the bourgeoisie increased, its own mode of power started to penetrate and gradually replace the feudal state. The bourgs were able to wrestle increasing territorial and legal independence from feudal institutions,
18 The extent of territorial sabotage is illustrated by the fact that even as late as the end of the fifteenth century, there were still 64 feudal tolls on the Rhine, 35 on the Elbe and 77 on the Danube in lower Austria (Pirenne 1937: 88).
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forcing the Church and lords to sign 'peace accords' for prolonged periods. In France during the eleventh century, many of the new bourgs were labelled communia pro paca, or 'communes for peace' (Le Goff 1965: 66). Yet much of the headway of the bourgeoisie was achieved directly and indirectly through war.
The indirect impact of war was to devastate the nobility, with more than a little help from the bourgeoisie. Changes in the nature of warfare, particularly since the thirteenth century, undermined the advantages of feudal military subcontracting. Improved fortifications, new and highly lethal arching tech- nologies and the growing efficiency of infantry relative to mounted knights presented feudal armies with serious challenges. Moreover, lacking the accounting and logistical skills of the bourgs, the lords found it difficult to organize, feed and discipline large forces of heterogeneous knights. But the most serious challenge was soaring cost. In the five years between the English invasions of 1346 and 1351, the French King witnessed the price of hiring knights and their accessories practically double (Tuchman 1978: compare pages 84 and 128). War had become so expensive that even the richest of kings found it difficult to finance it. Consequently, observed Robert Lopez, '[f]ortunate indeed were those kings who succeeded in maintaining the peace' (1967: 333).
Underlying the mounting cost of war was a new weapon of mass destruc- tion: inflation. The expansion of the bourgs and their growing consumption of agricultural produce were accompanied by the spread of the monetary standard and the penetration of prices into the feudal heartland. This process marked the beginning of an invisible revolution - a transformation that shifted the emphasis from the bartered knight of the manor to the cash-paid soldier of the bourg, bankrupted the lords and altered the very nature and form of social power.
The nobility and clergy, locked into an antiquated system of barter and fixed income, found themselves at the greatest disadvantage. Most did not grasp the pricing mechanism and were utterly clueless about inflation. Abbot Gille li Muisis of Tourna summed the bewilderment in a famous fourteenth- century verse:
Money and currency are very strange things.
They keep on going up and down and no one knows why; If you want to win, you lose, however hard you try.
(Quoted in Tuchman 1978: 130)
Feudal rents were fixed by custom and habit, but the prices the nobility had to pay - particularly for luxuries and weaponry - soared. The consequences were devastating. From the thirteenth century onward, lords were forced into borrowing, then into mortgaging their property, and eventually into 'releasing' their serfs and selling their lands altogether (Pirenne 1937: Ch. III, Section II; Le Goff 1965: 167).
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The monarchs were generally more astute. Some of them understood, instinctively if not theoretically, that money represented a new order of power and that any shock to that order could be leveraged for differential ends. And the brightest of the lot went on to invent various techniques of sabotage to serve their own ends. One of the more sophisticated methods was to threaten debasement - and then blackmail those who stood to lose the most from such an act in return for putting it on hold (Lopez 1967: 333). Centuries later, the financiers of the Weimar Republic would use a variant of this technique with their foreign creditors - threatening to inflate the currency in order to avoid having to pay war reparations.
But the biggest winner was the bourgeoisie. Situated at the epicentre of the price mechanism, it not only set most of the prices but also understood the inflationary mechanism better than everyone else. This strategic position enabled the early bourgeoisie to profit from the process relative to others and to amass huge fortunes. 19 And that was merely the beginning. As we shall see in Part V, the techniques that were developed during that period, perfected and extended by subsequent generations of capitalists, turned inflation into one of the principal axes of the capitalist mode of power.
War and credit
By the fourteenth century, the European social landscape was in the midst of a massive transformation from a feudal to a capitalist mode of power. This transformation entailed many different developments and innovations, but there was one invention that literally encompassed them all: credit. From its very beginning, credit was a matter of organized power. Its inception was intimately connected to war: it emerged as a negation of feudal sabotage, and it eventually developed to engulf and internalize that sabotage and more.
Bypassing power: private instruments
As noted, the bourgeoisie sought to negate the territorial barriers of feudal sabotage by seeking direct territorial exemptions, immunities and liberties. But the most effective means of bypassing feudal power was trans-territorial: the virtual financial instrument. In its attempt to evade feudal violence, the bourgeoisie went on to develop the letter of credit, bill of exchange and
19 To put the magnitudes of these fortunes in context, consider that in 1348, Pope Clement VI paid 80,000 florins to buy Avignon from the Queen of Naples, and that a year later the King of France purchased Monpellier for 133,000 florins. By comparison, the annual turnover of the Bardi company of Florence stood at 875,000 florins. Similarly, when Riniero Zeon, Doge of Venice, died in 1268, his estate was estimated at 50,000 Venetian pounds. This sum was equivalent to a mere one year's worth of output coming from the alum mines of Benetetto Zaccaria, a Genoese merchant whose portfolio included many such lucrative properties (Lopez 1967: 297).
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maritime insurance, along with the proto-corporate commenda and com- pagnia that were already mentioned in Chapter 12.
These developments came hand in hand with the growth of urban educa- tion - an alternative to the feudal monastery and a precursor of public schooling. By the thirteenth century, most Italian merchants were literate, knew some mathematics, used bookkeeping and often spoke foreign languages (Pirenne 1937: 122-25). This education enabled the bourgeoisie to further improve its credit institutions and organizations, putting the illiterate nobility at an ever-growing disadvantage.
Gradually, as the financial instruments diversified and the transactions multiplied, each type became associated with its own 'benchmark' and 'normal rate of return'. Ironically, the most vibrant private market was real estate, the original source of feudal power. The rising merchants were busy buying the dwindling territorial properties of their increasingly indebted enemies, and by so doing further hastened their demise. The institution of the mortgage - originally a bypass of the Church opposition to interest - gave rise to an urban market that traded in rents and sold asset-backed securities. The bougs started raising money by selling perpetuities backed by the real- estate collaterals. In the thirteenth century, Genoa recognized the vendibility of such contracts, leading to the creation the Bank of St. George, a precursor of the modern mortgage bank (Pirenne 1937: 137-39).
Absorbing power: state finance
But the magnitude of private credit paled in comparison to the size of state finance. Wars, whose cost soared in tandem with their material scope and unit price, were the most financially demanding expenses. Changing military technologies, beginning with the crusades and continuing with the Hundred Years War, made it increasingly necessary to rely on hired armies that needed to be paid in cash. There were two ways to raise the money - taxes and borrowing - but it was their combination that proved the most effective.
The first to brave this new form of war finance were the Lombardian city states. They issued tax-backed bonds, using the proceeds to pay for soldiers and weapons that waged increasingly successful campaigns against barter- backed knights. The territorial princes and kings were initially hostile to this new arrangement. But having witnessed the lethal force of the new pecuniary militias unleashed on their increasingly expensive knights, they found the temptation of fight-now-pay-later difficult to resist. Gradually, they began to borrow the methods and money of the bourgeoisie, with the result being a growing interdependency - and eventually a bondage - between the territo- rial sovereign and the exterritorial capitalists. In due course, this alliance would develop into a new mode of power, a social space we now call the 'capitalist nation-state'.
Let's examine this process a bit more closely, beginning with taxation. The collection of ad hoc levies and duties was not only unpopular, but also grossly
The capitalist mode of power 293
inefficient and extremely time consuming. Therefore, in the interest of expe- diency, the kings often took a shortcut, announcing a convenient 'state of emergency':
The monarchy, when it took over the reins of national life, ought to have resurrected a regular income tax system, the fundamental basis of both Roman and modern finance. . . . But the 13th century was not ripe for such radical reform. The King would merely ask his subjects for 'help' in times of crisis. Philip 'the Fair' acted in such a way as to keep a 'crisis' going, almost without interruption, and his successors improved even more on these methods.
(Lopez 1967: 334)
The bourgeoisie was forced to foot a growing part of the bill; but by now it was already too powerful to give something for nothing. In return for taxa- tion it demanded representation - this time on a 'national' scale.
Government taxes, though, constituted only one aspect of the new deal. The other aspect was private credit, and the two got inextricably bound up. Facing the prospect of war, the king, even if fiscally solvent, was often finan- cially illiquid. Taxes could be collected in the future, but the need for cash was immediate. His solution was to turn to haute finance with its easily accessible stash of money. For the financier, the request offered a huge investment opportunity: a royal promise to augment his capital with future taxes.
Initially, the arrangement was fraught with peril, and although both sides resorted to it with much enthusiasm and growing frequency, often they got burned. During the Hundred Years War, for example, Kind Edward of England financed his invasion of France with an estimated 1 to 1. 5 million gold florins borrowed from the Florentine banks of Bardi and Peruzzi and backed by an expected wool tax. The tax revenues, though, proved disappointing, and the two banks, unable to collect their loans, crashed, creating a chain reaction of bankruptcies throughout Northern Italy (Tuchman 1978: 81).
But time heals, and by the early nineteenth century war finance had already been perfected into business as usual. A typical illustration follows. During the Napoleonic Wars, an English expeditionary force, headed by the Duke of Wellington, got stuck in Portugal, besieged by a 'terrible need of funds'. Wellington borrowed money from shabby continental banks against massively discounted British government bonds, but the money was like a drop in the bucket. Unpaid soldiers resorted to looting; wounded officers had to sell their clothes to secure medical attention; and with its wallet empty, the army's attempt to have the local population turn against French rule was going nowhere.
Wellington was ready to give up the fight, but then, just as all seemed lost, the Rothschilds came to the rescue. Earlier on they had collected many of Wellington's discounted British government bills at a fraction of their book
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value, and they now cashed them at an enormous profit in London. In addi- tion, they also bought some ? 800,000 worth of gold at bargain prices from the East India Company - bullion that they were more than willing to sell back at 'fair value' to the needy British government. The Rothschilds also took it upon themselves, again for a proper fee, to transfer this money from England to the Continent, and they continued to do so for a number of years, funnel- ling as much as ? 20 million to the British troops. The transfers were even encouraged by the French authorities, who were misled to believe that the money represented private capital flight in expectation of British devalua- tion. . . . (Elon 1996: 166-71).
And so, almost seamlessly, war and organized violence - nominally the archenemies of the 'free market' - had been absorbed into capital. On the one hand the capitalists used inflation to destroy the military power of the nobility, while on the other hand they financed 'national' wars to multiply their capitalization many times over. And war was merely the beginning of this public-private bondage. In due course, capital has been able to inter- nalize not only organized violence, but every systematic aspect of government power.
The genesis of capital as power
Let's take stock of some of our claims so far. In Chapters 9 to 11, we have seen that, by discounting risk-adjusted expected earnings, capitalization has gradually come to encompass and commodify our social world, creating a unified quantitative architecture of historically unprecedented complexity. Then in Chapter 12, we have demonstrated that both the level and pattern of capitalist earnings are a matter of strategic sabotage, and therefore that the capitalization of earnings represents the commodification of power. Finally, in this chapter we argue that the commodified power of capital has increas- ingly taken over and absorbed other forms of organized power; that over time this takeover and absorption have come to define the mode of power of society, gradually turning capital itself into a state; and that this Leibnitzian transformation is not a recent phenomenon, but one that started with the very inception of bourgeois discounting in Italy of the fourteenth century.
The government bond
Symbolically, the earliest manifestation of the state of capital is the govern- ment bond. This financial instrument marks the first systematic capitalization of power, namely, the power of government to tax. And since this power is backed by institutionalized force, the government bond represents a share in the organized violence of society.
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.
The capitalist mode of power 279
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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. Obviously, this conception of state is very different from conven- tional definitions. In common parlance, a state is a political entity that exer- cises sovereignty, backed by force, over a definite territory. 11 This political
11 In the pedantic words of Max Weber, 'A ruling organization will be called "political" insofar as its existence and order is continuously safeguarded within a given territorial area by the threat and application of physical force on the part of the administrative staff. A compulsory political organization with continuous operations will be called a "state" insofar as its administrative staff successfully upholds the claim to the monopoly of the legitimate use of physical force in the enforcement of its order' (Weber 1978, Vol. 1: 54).
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entity is both (1) an organization, typically consisting of government organs (the administration, bureaucracy, legal apparatus and the military/police), and (2) a set of institutions, legal and habitual, that enable the political entity to exercise its rule.
This definition may seem relatively unambiguous when applied to pre- capitalist centralized regimes, where the organizations and institutions of power were usually associated with and commonly fused in a single entity - 'estate', 'palace', 'king', 'emperor'. But with capitalism, this application is no longer straightforward. Capitalism alters the very nature and meaning of power - as a result of which the organs and institutions of power no longer reside in a single entity (let alone a 'political' one), the scholars no longer agree on what these organs and institutions are, and the capitalist state no longer fits into the conventional box. With this glaring exception, the definition ceases to be universal.
Our own notion of state as a mode of power is broader and more flexible. First, it transcends the analytical distinction between economics and politics. As noted, this distinction may be valid when viewed from below and at lower levels of abstraction, and in that sense it remains 'enfolded' in our explana- tion. But it could be very misleading when considered from above and in rela- tion to the overall architecture of power. The latter perspective no longer differentiates between 'economic power' and 'political power', between 'exploitation' and 'oppression', or between the 'power of the market' versus the 'power of the state'. Organized power can take different forms, central- ized or decentralized. But insofar as the overall structure is hierarchical, it constitutes a single nomos of power.
Second, the nomos of power is not fixed. It changes as the social order evolves, and it is occasionally replaced when a new mode of power emerges. In this sense, one cannot speak of 'the state' as an abstract form with an unchanging definition. The state is never an empty Newtonian container. Instead, it is a Leibnitzian-like space: an ever-changing, historically specific relational entity that both comprises and is shaped by the bodies that consti- tute it.
In contemporary capitalism, the key organizational bodies of the state are corporations and government organs. These are the concrete incarnations of the capitalist mode of power, and although separate they are deeply interre- lated. First, both bodies are conditioned by the same nomos of capitalized earnings and its associated rituals. Regardless of whether their departments overlap or exist at arm's length, regardless of whether their personnel are separate or share a revolving door, and regardless of whether they cooperate or bicker, they are both part and parcel of the same architecture of mecha- nized social power. Second, they presuppose each other: there are no capi- talist corporations without a capitalist government, and there is no capitalist government without corporate or proto-corporate organizations. And, third, by incessantly seeking to redistribute capitalized earnings, whether at cross purposes or in unison, corporations and governments end up shaping and
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reshaping the very patterns of power that define capitalism. In the final anal- ysis, there are no profit expectations without state prisons: at the zenith of its capitalist power, nineteenth-century Britain had more political prisoners than Tsarist Russia, just as the United States today boasts the world's largest inmate population.
We call this Leibnitzian-like space the state of capital. Mumford insight- fully saw the modern state as a resurrected mega-machine. But this mega- machine is historically unique. It is not a state in the abstract, but one that both consists of and is defined by capital as power.
The feudal mode of power
The above account of course is a stylized abstraction. To understand where the state of capital comes from historically and how it developed its unique features as a modern mega-machine, it is useful to take a step back and examine, if only briefly, some of its feudal roots.
This type of inquiry, to be certain, is hardly novel. The feudal origins of capitalism have received more than ample theoretical scrutiny, particularly from Marxists. There are even two famous controversies about the issue. The first, the 'Transition Debate', launched by Maurice Dobb (1946) and Paul Sweezy (1950), concerned the significance of 'production' versus 'circulation'. The second, the so-called 'Brenner Debate', beginning with the work of Robert Brenner (1977; 1978) and still going, focuses on the relative impor- tance of 'forces of production' as opposed to 'relations of production'. 12
However, the question these debates seek to answer is fundamentally different from our own: whereas they are concerned with the transition between modes of production, our own interest is the transition between modes of power. 13
The feudal state
Understood as a mode of power, the 'feudal state' consisted of a hierarchical network of voluntary military dependencies among free men. 14 This decen- tralized state was born out of the ruins of the Roman Empire. Lack of central authority and fracturing inheritances fostered something akin to a war of all against all and a heightened sense of insecurity. The initial response was
12 Key contributions to these two debates are included in Hilton (1978) and in Aston and Philpin (1985), respectively.
13 The analysis that follows focuses exclusively on Europe. However, it should be noted that a feudal mode of power developed in other places as well - including Medieval Japan, the Ottoman Empire and Ethiopia, among others - and with features that were often remark- ably similar to Europe's.
14 Our account in this and the following three sections draws mainly on the historical works of Bloch (1961), Ganshof (1964), Le Goff (1965; 1988), Lopez (1967), Pirenne (1937) and Tuchman (1978).
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the formation of armed gangs based on personal loyalty and mutual protec- tion. This arrangement later bloomed into a full-fledged system of intricate lord-vassal obligations.
The key hallmark of the feudal regime was violence. The lords despised work and creativity, which they viewed as infinitely inferior to their life of honour and exploit. The person and possessions of others were a means to an end. They were seen partly as a source of loot, but mostly as the target of differential sabotage:
The Bayeux Tapestry of the Queen Mathilda - that remarkable story in pictures from the end of the eleventh century, narrating the 1066 Norman conquest of England - shows us how, after the landing, a big feast was held and blessed by the hegemon, and how the war expedition was launched with the burning of a house. And, indeed, war in the Middle Ages was marked by systemic devastation. Its purpose was not so much to defeat the enemy militarily, as to undermine its economic and social power (by burning and destroying crops, houses and villages).
(Le Goff 1965: 29, emphasis added)
This inherent violence determined both the form and content of the feudal contract. Ceremonially, the legal bond (nexus iuris) between the lord and the vassal consisted of two acts: a fusion of their persons symbolized by the 'mixing of hands' (immixtio manuus), and an oath of fealty (sacramentum) which indicated that the vassal was giving himself voluntarily, as a free man. 15
Substantively, the bond was mostly negative, a sort of mutual insurance policy designed to reduce uncertainty. Each side promised not only to protect the other - but more importantly not to harm the other. 16
15 The 'mixing of hands' may have been the precursor of the bourgeois handshake, while violation of the vassal's oath of fealty (or 'foi'), developed into the English and French 'defiance' (Ganshof 1964: 26-27, 98-99).
16 In AD 802, the Carolingian emperor Charlemagne imposed on his subjects a new oath of fealty that added positive aspects to the existing negative ones. These negative features are highlighted by the emperor's decree, where he says that, from now on, the new oath is
'not as many have thought up to now, involving simply fidelity to the lord emperor as far as his life is concerned' - i. e. the obligation of refraining from any action against him which will put his life in danger - 'and the obligation of not introducing into his kingdom any enemy out of hostility toward him, and of declining to be part to the disloyalty toward him of others or keeping silent regarding such'.
(Quoted in Ganshof 1964: 34-35, emphases added) Another set of instructions from AD 1020 articulates this negativity in six different ways:
He who swears fealty to his lord should always have these six words present to his memory: 'safe and sound', sure, honest, useful, easy, possible. Safe and sound, because he must cause no injury to the body of his lord. Sure because he must not injure his lord by giving up his secrets or his castle, which are the guarantees of his security. Honest,
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In addition to not attacking his lord, the vassal was obliged to provide a certain quota of military services - so that the lord could protect himself as well as attack others. These services took various forms, but gradually they converged on the basic particle of feudal power: the fully-equipped knight.
In order for vassals to produce, train and supply knights on a permanent basis, they needed access to agricultural land and tillers, organized through the autarkic manorial system. And so, gradually, the homage between the lord and the vassal came together with the granting of a benefice, usually in the form of a landed fief, or 'feodum' - hence the term 'feudalism'.
The cost of reproducing a single knight and his accessories was pretty hefty, requiring roughly 150 hectares of land according to some estimates. Based on this ratio, a fair-size fief of a count, made up of 200-250 agricultural communities, could supply no more than 150-200 mounted warriors. These modest numbers had an important implication: they meant that a larger army could be assembled only by networking the separate commitments of many different vassals (Le Goff 1965: 54-55).
This networking formed the basis of the 'feudal state'. The arrangement first emerged in the eighth century, when the Carolingian rulers, seeking to consolidate their power and increase obedience, sowed confiscated church lands as well as their allodial territories with royal vassals. The vassals, who in turn wished to reduce their own uncertainty and if possible leverage their power, further parcelled their fiefs to subordinate vassals, and so on. The end result was a dense network of mutual military obligations tied to agricultural manorial production, a standardized pattern of power that later spread throughout much of Europe.
It is not difficult to see here the principle that later informed both Hobbes's Leviathan and Locke's 'social contract': the individual being (vassal or bour- geois), torn between his desire for freedom (independence) and quest for secu- rity (to annul his fear of death), finds the compromise in merging himself with a larger mode of power (the feudal network or the sovereign state).
because he must do nothing to injure the rights of justice of his lord or such other preroga- tives as belong to his well-being. Useful because he must do no wrong to the possessions of his lord. Easy and possible, because he must not make difficult for his lord anything which the latter may wish to do, and because he must not make impossible to his lord that which the lord might otherwise accomplish. It is only right that the vassal should abstain from injuring his lord in any of these ways.
(Quoted in Ganshof 1964: 83, emphases added)
Even the 'positive' vow of protection was inherently negative, in that it was directed against everyone else. A French document from the thirteenth century recommends the following declaration by the vassal:
I promise this because you have granted to me and to my heirs such and such a prop- erty, as long as we shall remain your vassals, and also because you have promised to defend me and mine against every man.
? (Quoted in Ganshof 1964: 154, emphases added)
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During the Middle Ages, royal power, although often existing de jure, usually was conditional on and subsidiary to feudal obligations. In some places, such as France of the twelfth century, power was so diffused that the king, although claiming 'sovereignty', was no more than a glorified lord whose authority hardly extended beyond his own feudal domain. In other places, such as England after the Norman conquest of the eleventh century, power was highly centralized in the hands of the king. But that centralization was still feudal insofar as the entire country was the property of the king and every feudal agreement was supplemented by allegiance to the monarch (a duality that perhaps hastened the development of British capitalism).
There was an important novelty in this arrangement. In imperial struc- tures, power could expand in two ways: conquest and marriage. The 'feudal state' introduced a third alternative: voluntary military contract. Of course, because of their larger number, individual feudal lords could not match the power of emperors. But their added ability to cut and paste slices of power in a quasi-amicable way - a precursor for the capitalist buying and selling of vendible corporate 'shares' - made the structure of power more flexible, easier to realign, and perhaps less vulnerable to external blows. 17
The limits of feudal power
Feudal flexibility, though, had three hard limits. First, the feudal bond was personal and deeply religious. Its material aspects were merely instrumental. The primary purpose was the establishment of direct loyalty and mutual obli- gation between two people. Second, the bond was total. The lord exercised something akin to sovereignty over the very person of the vassal. And third, the contract was permanent. Save for instances in which the no-harm clauses were violated, the feudal link could not be unilaterally terminated. It ended only with the death of one of the sides.
Over time, these features started to strain the structure of feudal power. One problem was that the chain of personal commitments was highly unreliable.
17 Feudal remnants occasionally crop up in flattering reports on the amalgamating victories of present-day magnates. The following account of Woodbridge, the family investment arm of the Thomson family, is typical:
As president of Woodbridge . . . Mr Beattie, 48, is often described as the consigliere or e? minence grise of the family. . . . 'Woodbridge exists for one reason - to create value for its shareholders, who are all descendants of Roy Thomson. ' In the 30 years to 2005, he says, that value grew from $300m to $30bn.
But even when the unit of power is still clannish, in capitalism its methods of expansion are detached and impersonal:
. . . Thomson family members have been unsentimental traders of assets. . . having an uncanny sense of when an industry is on the turn.
? (Edgecliffe-Johnson 2008, emphases added)
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As a contract between two people, the feudal bond gave the lord direct power over his own vassals, but not over his vassals' vassals. Unlike a capitalist owner who has legal right and effective power over the corporation's entire chain of subsidiaries, the leverage of a feudal lord depended on the good will of his vassals, who, when called on for a military operation, might or might not bring along their own subcontractors. In places where the feudal links were complicated, the task of quickly assembling a large army became a real headache. In some cases, the large lords and kings found themselves at a significant disadvantage - for instance, against the easy-to-organize popular militias of the bourgs, or relative to the centralized and partly monetized armies of the English king.
Another difficulty was how to prioritize different commitments. The vassals, seeking to leverage their power and security, often allied themselves with more than one lord. These multiple commitments, though, were inher- ently contradictory. Unlike the capitalist limited-liability contract - which has a definite magnitude denominated in dollars and cents, and hence a pro-rated structure depending on the relative magnitude of the priced pledges - the feudal contact was total. The vassal was obliged to serve his lord completely and without reservation. Those with overlapping obligations could therefore face multiple claims from different lords, each demanding the very same services. As a result, there emerged various systems of 'rating' - some based on the size of the fief, others on the time it was granted, and still others on the relative position of the lord - all designed to somehow reconcile the overlapping obligations.
The most serious limit, though, was the non-alienated nature of the fief. The fief was the property of the lord. It was a unit of power 'granted' to the vassal so that he could serve his master personally. But given the personal nature of the service, the transfer was always 'temporary' and was annulled by death. In this sense, any attempt to parcel, transfer or sell the fief was a direct challenge to the very purpose of the feudal contract. Over time, though, the pressure to alienate the fief mounted - coming initially from vassals who sought to pass it on to their heirs, and subsequently from lords who were both lured by and forced into the new pecuniary logic of the bourg. The solution was found in the form of 'relief' - a sort of ransom paid by the heir to the lord for giving up the property. In the beginning the relief was arbitrary. But around the twelfth century in France there emerged something like a 'normal rate', whereby the lord would alienate the fief in return for a sum equal to the property's annual revenue (Ganshof 1964: 136-39).
The capitalization of feudal power
The weakening of the feudal mode of power was marked by the colours of capitalism. One important change was the inversion of the feudal contract. Originally, the fief was a means to an end. The vassal made an oath of fealty to the person of the lord, who in return gave him the fief so that he could fulfil
The capitalist mode of power 287
that oath. But toward the second part of the Middle Ages, the order had changed, with the fealty and service becoming preconditioned on the granting of the fief. The fief was now increasingly a matter of 'real estate', and feudal relations gradually shifted from a personal to proprietary footing.
A parallel change was the increasing monetization of both sides of the feudal contract. In many cases, the fief itself took the form of a stipend, or feodum de bursa, whereby the vassal received a payment for his keep rather than a direct allocation of land. The same happened to the services. Although these assumed a variety of forms from the very start, initially the key service was military. However, from the eleventh century onward in England and somewhat later on the Continent, the significance of military services declined, giving way to pecuniary payments. In England, many of the lower vassals paid their services in scutage, or monetary substitute, while in four- teenth-century Flanders less than 20 per cent of the vassals of the count in the cha^tellenie of Bruges were required to perform military services (Ganshof 1964: 90-92).
Faubourg, bourg, bourgeoisie
The power architecture of capitalism was gradually penetrating and trans- forming the feudal mode of power. The beginning was rather humble. The process started during the eleventh and twelfth centuries with the twin expan- sion of the bourgs and the periodic 'fairs'. The original bourg was a feudal fortification, built by serfs for military purposes. By contrast, the fair was an extra-territorial 'free-trade zone'. Granted by the prince as a source of royal- ties, it was exempt from feudal law and was endowed with 'franchises' and 'liberties' available nowhere else. In due course, the periodic fair gave way to the faubourg, a permanent settlement of merchants that was physically attached but socially alien to the bourg. Gradually, the merchants began to fortify their own suburb and in many cases ended up absorbing the old feudal fortification. The logic of the new bourg - commercial, industrial and above all monetized and capitalized - was every bit different from the one it had swallowed.
The dual economy
The capitalist bourg introduced a totally novel mode of power. Its manufac- turing sector, having developed as early as the eleventh and twelfth centuries, had many structural features we now take for granted. One of these was a prototype of the 'dual economy', (a term coined centuries later by Averitt 1968 to describe the bifurcated structure of the modern US business sector). On the one hand, there was the 'small economy', comprising associations of masters, apprentices and hired workers that supplied mainly the local market. On the other hand, there was the 'big economy' of large merchants and producers who controlled the long-term trade. The latter constituted a closely knit oligarchy, and it colluded heavily - both inside the bourg and with the
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oligarchies of other bourgs (with the most conspicuous example of the latter collusion being the Hanseatic League of London).
In parallel, there developed in the bourgs a proto-proletariat of unskilled workers, made mostly of propertyless incomers from the countryside, often known as the 'blue nails'. The oligarchy treated the workers and artisans with indifference - that is, as long as they remained docile. When they revolted (the first known strikes took place in Flanders during the thirteenth century) the retaliation - often coordinated within and between the bourgs - was usually swift and violent. In England of the fourteenth century, more than four hundred years before the Speenhamland Act, the King and Parliament were already passing decrees and legislation that made labour mandatory and idle- ness illegal (Pirenne 1937: 178-91; Lopez 1967: 278-80; Tuchman 1978: 120). In this sense, the capitalist class struggle, from its very inception, was never merely an 'industrial dispute'. It was a broad power conflict embedded in a newly emergent form of state.
Private and public
Another important innovation was the bourgeois link between the 'public' and the 'private'. This institutional structure, like many others, developed almost unintentionally. The new dwellers of the bourg needed to defend and fortify their private warehouses and workshops against the external hazard of the feudal space. The protection itself, though, was inherently public. By fusing the two, the bourgeoisie invented 'public finance' - a concerted effort to advance their coinciding private interests through proportional taxation.
The resulting fiscal system was completely antithetical to the feudal logic. First, contrary to feudal taxes that were inherently penal and served the indi- vidual lord only, bourgeois taxes were directly linked to the 'public interest' - that is, to the collective interest of capitalists. Second, since the public consisted of the private taxpayers, it made sense to make payment propor- tionate to the individual's interest - i. e. to his income. Finally, taxation presumed and implied representation - and indeed, in the bourgs of the elev- enth century there emerged, along with public works, bodies of elected or representative councils (Pirenne 1937: 178-91). In other words, from the very beginning, private capitalist bodies and capitalist government assumed one another and were symbiotically intertwined.
Liberty as differential power
Beyond these innovations, though, the bourgeoisie, at least initially, tended to view its project not as a comprehensive alternative to the feudal state, but rather as an exception to that state. Inside the bourg there was 'democracy of the privileged' - a close correspondence, if not an identity, between 'political administration' and 'economic management', both controlled by the moneyed aristocracy. The space outside the bourg, though, was accepted as a different
The capitalist mode of power 289
mode of power. Although this space was generally hostile to the bourg, the bourgeoisie neither denied nor challenged it.
Matters of jurisprudence and religion, as well as the acts of peace and war, were fully accepted as the prerogatives of church, king and lord. Indeed, the bourgeoisie was usually more than keen on emulating the authority and privi- lege of the territorial princes - by seeking noble status, by giving gifts to the clergy and by lending money to the duke in need. All in all, the 'state' was viewed as an external moral-legal entity, distinct from and superior to the city, which was merely an 'economic' body (Lopez 1967: 267-68). This was the basic duality that Hegel identified in his Philosophy of Right (1821) - a duality that Marx rightly criticized but could 'solve' only by turning it into an inherent contradiction between 'political universality' and 'economic alienation'.
At the beginning of its journey, then, the bourgeoisie merely tried to fit into and advance within the structure of feudal power. Its tactics were simple. The nobility benefited from forceful confiscation through territorial sabotage - hazards that the bourgeoisie sought to bypass through exemptions and immunities. 18 These exceptions and immunities, though, were always in the plural. They represented particular 'liberties' and 'franchises', and therefore advantages held relative to and against others.
There was nothing exceptional about this differential quest. The notion of universal liberty was totally foreign to the feudal world. In the Middle Ages liberty meant sovereignty, and therefore force and authority over others. Only God was totally free. Everyone else, including the king, was a vassal, and therefore partly dominated. Even the term 'knight', a symbol of power, comes from the German knecht, meaning 'subjugated', a connotation that can also be found in the words Samurai (servant) and Mamluk (slave soldier). All were merely extensions, or 'arms', of a ruler - hence the term 'army'.
For this reason, 'liberty' at that period - whether bourgeois or feudal - could only be understood as a status of power. (1) It denoted negation: it was the right not to pay, not to work, not to obey. (2) It was dynamic and relative: it changed over time in relation to other people. And (3) it was anchored in sabotage: it marked one's place in the hierarchy of damage, with the right to inflict it on some and the obligation to accept it from others. In this sense, the expansion of bourgeois liberties was synonymous, both conceptually and historically, with the growth of the bourgeoisie's differential power.
War and inflation
As the leverage of the bourgeoisie increased, its own mode of power started to penetrate and gradually replace the feudal state. The bourgs were able to wrestle increasing territorial and legal independence from feudal institutions,
18 The extent of territorial sabotage is illustrated by the fact that even as late as the end of the fifteenth century, there were still 64 feudal tolls on the Rhine, 35 on the Elbe and 77 on the Danube in lower Austria (Pirenne 1937: 88).
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forcing the Church and lords to sign 'peace accords' for prolonged periods. In France during the eleventh century, many of the new bourgs were labelled communia pro paca, or 'communes for peace' (Le Goff 1965: 66). Yet much of the headway of the bourgeoisie was achieved directly and indirectly through war.
The indirect impact of war was to devastate the nobility, with more than a little help from the bourgeoisie. Changes in the nature of warfare, particularly since the thirteenth century, undermined the advantages of feudal military subcontracting. Improved fortifications, new and highly lethal arching tech- nologies and the growing efficiency of infantry relative to mounted knights presented feudal armies with serious challenges. Moreover, lacking the accounting and logistical skills of the bourgs, the lords found it difficult to organize, feed and discipline large forces of heterogeneous knights. But the most serious challenge was soaring cost. In the five years between the English invasions of 1346 and 1351, the French King witnessed the price of hiring knights and their accessories practically double (Tuchman 1978: compare pages 84 and 128). War had become so expensive that even the richest of kings found it difficult to finance it. Consequently, observed Robert Lopez, '[f]ortunate indeed were those kings who succeeded in maintaining the peace' (1967: 333).
Underlying the mounting cost of war was a new weapon of mass destruc- tion: inflation. The expansion of the bourgs and their growing consumption of agricultural produce were accompanied by the spread of the monetary standard and the penetration of prices into the feudal heartland. This process marked the beginning of an invisible revolution - a transformation that shifted the emphasis from the bartered knight of the manor to the cash-paid soldier of the bourg, bankrupted the lords and altered the very nature and form of social power.
The nobility and clergy, locked into an antiquated system of barter and fixed income, found themselves at the greatest disadvantage. Most did not grasp the pricing mechanism and were utterly clueless about inflation. Abbot Gille li Muisis of Tourna summed the bewilderment in a famous fourteenth- century verse:
Money and currency are very strange things.
They keep on going up and down and no one knows why; If you want to win, you lose, however hard you try.
(Quoted in Tuchman 1978: 130)
Feudal rents were fixed by custom and habit, but the prices the nobility had to pay - particularly for luxuries and weaponry - soared. The consequences were devastating. From the thirteenth century onward, lords were forced into borrowing, then into mortgaging their property, and eventually into 'releasing' their serfs and selling their lands altogether (Pirenne 1937: Ch. III, Section II; Le Goff 1965: 167).
The capitalist mode of power 291
The monarchs were generally more astute. Some of them understood, instinctively if not theoretically, that money represented a new order of power and that any shock to that order could be leveraged for differential ends. And the brightest of the lot went on to invent various techniques of sabotage to serve their own ends. One of the more sophisticated methods was to threaten debasement - and then blackmail those who stood to lose the most from such an act in return for putting it on hold (Lopez 1967: 333). Centuries later, the financiers of the Weimar Republic would use a variant of this technique with their foreign creditors - threatening to inflate the currency in order to avoid having to pay war reparations.
But the biggest winner was the bourgeoisie. Situated at the epicentre of the price mechanism, it not only set most of the prices but also understood the inflationary mechanism better than everyone else. This strategic position enabled the early bourgeoisie to profit from the process relative to others and to amass huge fortunes. 19 And that was merely the beginning. As we shall see in Part V, the techniques that were developed during that period, perfected and extended by subsequent generations of capitalists, turned inflation into one of the principal axes of the capitalist mode of power.
War and credit
By the fourteenth century, the European social landscape was in the midst of a massive transformation from a feudal to a capitalist mode of power. This transformation entailed many different developments and innovations, but there was one invention that literally encompassed them all: credit. From its very beginning, credit was a matter of organized power. Its inception was intimately connected to war: it emerged as a negation of feudal sabotage, and it eventually developed to engulf and internalize that sabotage and more.
Bypassing power: private instruments
As noted, the bourgeoisie sought to negate the territorial barriers of feudal sabotage by seeking direct territorial exemptions, immunities and liberties. But the most effective means of bypassing feudal power was trans-territorial: the virtual financial instrument. In its attempt to evade feudal violence, the bourgeoisie went on to develop the letter of credit, bill of exchange and
19 To put the magnitudes of these fortunes in context, consider that in 1348, Pope Clement VI paid 80,000 florins to buy Avignon from the Queen of Naples, and that a year later the King of France purchased Monpellier for 133,000 florins. By comparison, the annual turnover of the Bardi company of Florence stood at 875,000 florins. Similarly, when Riniero Zeon, Doge of Venice, died in 1268, his estate was estimated at 50,000 Venetian pounds. This sum was equivalent to a mere one year's worth of output coming from the alum mines of Benetetto Zaccaria, a Genoese merchant whose portfolio included many such lucrative properties (Lopez 1967: 297).
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maritime insurance, along with the proto-corporate commenda and com- pagnia that were already mentioned in Chapter 12.
These developments came hand in hand with the growth of urban educa- tion - an alternative to the feudal monastery and a precursor of public schooling. By the thirteenth century, most Italian merchants were literate, knew some mathematics, used bookkeeping and often spoke foreign languages (Pirenne 1937: 122-25). This education enabled the bourgeoisie to further improve its credit institutions and organizations, putting the illiterate nobility at an ever-growing disadvantage.
Gradually, as the financial instruments diversified and the transactions multiplied, each type became associated with its own 'benchmark' and 'normal rate of return'. Ironically, the most vibrant private market was real estate, the original source of feudal power. The rising merchants were busy buying the dwindling territorial properties of their increasingly indebted enemies, and by so doing further hastened their demise. The institution of the mortgage - originally a bypass of the Church opposition to interest - gave rise to an urban market that traded in rents and sold asset-backed securities. The bougs started raising money by selling perpetuities backed by the real- estate collaterals. In the thirteenth century, Genoa recognized the vendibility of such contracts, leading to the creation the Bank of St. George, a precursor of the modern mortgage bank (Pirenne 1937: 137-39).
Absorbing power: state finance
But the magnitude of private credit paled in comparison to the size of state finance. Wars, whose cost soared in tandem with their material scope and unit price, were the most financially demanding expenses. Changing military technologies, beginning with the crusades and continuing with the Hundred Years War, made it increasingly necessary to rely on hired armies that needed to be paid in cash. There were two ways to raise the money - taxes and borrowing - but it was their combination that proved the most effective.
The first to brave this new form of war finance were the Lombardian city states. They issued tax-backed bonds, using the proceeds to pay for soldiers and weapons that waged increasingly successful campaigns against barter- backed knights. The territorial princes and kings were initially hostile to this new arrangement. But having witnessed the lethal force of the new pecuniary militias unleashed on their increasingly expensive knights, they found the temptation of fight-now-pay-later difficult to resist. Gradually, they began to borrow the methods and money of the bourgeoisie, with the result being a growing interdependency - and eventually a bondage - between the territo- rial sovereign and the exterritorial capitalists. In due course, this alliance would develop into a new mode of power, a social space we now call the 'capitalist nation-state'.
Let's examine this process a bit more closely, beginning with taxation. The collection of ad hoc levies and duties was not only unpopular, but also grossly
The capitalist mode of power 293
inefficient and extremely time consuming. Therefore, in the interest of expe- diency, the kings often took a shortcut, announcing a convenient 'state of emergency':
The monarchy, when it took over the reins of national life, ought to have resurrected a regular income tax system, the fundamental basis of both Roman and modern finance. . . . But the 13th century was not ripe for such radical reform. The King would merely ask his subjects for 'help' in times of crisis. Philip 'the Fair' acted in such a way as to keep a 'crisis' going, almost without interruption, and his successors improved even more on these methods.
(Lopez 1967: 334)
The bourgeoisie was forced to foot a growing part of the bill; but by now it was already too powerful to give something for nothing. In return for taxa- tion it demanded representation - this time on a 'national' scale.
Government taxes, though, constituted only one aspect of the new deal. The other aspect was private credit, and the two got inextricably bound up. Facing the prospect of war, the king, even if fiscally solvent, was often finan- cially illiquid. Taxes could be collected in the future, but the need for cash was immediate. His solution was to turn to haute finance with its easily accessible stash of money. For the financier, the request offered a huge investment opportunity: a royal promise to augment his capital with future taxes.
Initially, the arrangement was fraught with peril, and although both sides resorted to it with much enthusiasm and growing frequency, often they got burned. During the Hundred Years War, for example, Kind Edward of England financed his invasion of France with an estimated 1 to 1. 5 million gold florins borrowed from the Florentine banks of Bardi and Peruzzi and backed by an expected wool tax. The tax revenues, though, proved disappointing, and the two banks, unable to collect their loans, crashed, creating a chain reaction of bankruptcies throughout Northern Italy (Tuchman 1978: 81).
But time heals, and by the early nineteenth century war finance had already been perfected into business as usual. A typical illustration follows. During the Napoleonic Wars, an English expeditionary force, headed by the Duke of Wellington, got stuck in Portugal, besieged by a 'terrible need of funds'. Wellington borrowed money from shabby continental banks against massively discounted British government bonds, but the money was like a drop in the bucket. Unpaid soldiers resorted to looting; wounded officers had to sell their clothes to secure medical attention; and with its wallet empty, the army's attempt to have the local population turn against French rule was going nowhere.
Wellington was ready to give up the fight, but then, just as all seemed lost, the Rothschilds came to the rescue. Earlier on they had collected many of Wellington's discounted British government bills at a fraction of their book
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value, and they now cashed them at an enormous profit in London. In addi- tion, they also bought some ? 800,000 worth of gold at bargain prices from the East India Company - bullion that they were more than willing to sell back at 'fair value' to the needy British government. The Rothschilds also took it upon themselves, again for a proper fee, to transfer this money from England to the Continent, and they continued to do so for a number of years, funnel- ling as much as ? 20 million to the British troops. The transfers were even encouraged by the French authorities, who were misled to believe that the money represented private capital flight in expectation of British devalua- tion. . . . (Elon 1996: 166-71).
And so, almost seamlessly, war and organized violence - nominally the archenemies of the 'free market' - had been absorbed into capital. On the one hand the capitalists used inflation to destroy the military power of the nobility, while on the other hand they financed 'national' wars to multiply their capitalization many times over. And war was merely the beginning of this public-private bondage. In due course, capital has been able to inter- nalize not only organized violence, but every systematic aspect of government power.
The genesis of capital as power
Let's take stock of some of our claims so far. In Chapters 9 to 11, we have seen that, by discounting risk-adjusted expected earnings, capitalization has gradually come to encompass and commodify our social world, creating a unified quantitative architecture of historically unprecedented complexity. Then in Chapter 12, we have demonstrated that both the level and pattern of capitalist earnings are a matter of strategic sabotage, and therefore that the capitalization of earnings represents the commodification of power. Finally, in this chapter we argue that the commodified power of capital has increas- ingly taken over and absorbed other forms of organized power; that over time this takeover and absorption have come to define the mode of power of society, gradually turning capital itself into a state; and that this Leibnitzian transformation is not a recent phenomenon, but one that started with the very inception of bourgeois discounting in Italy of the fourteenth century.
The government bond
Symbolically, the earliest manifestation of the state of capital is the govern- ment bond. This financial instrument marks the first systematic capitalization of power, namely, the power of government to tax. And since this power is backed by institutionalized force, the government bond represents a share in the organized violence of society.
