- This topic has 0 replies, 1 voice, and was last updated January 17, 2021 at 1:51 pm by .
-
Topic
-
The following comments and queries by Mike Joffe appeared on the RWER Blog here. For some reason, the interface of RWER Blog refused my reply, so I’m offering it here, after Mike’s comments.
***
Mike Joffe (January 14, 2021 at 11:20 pm)
Thank you Jonathan. I have now read your book, albeit over-quickly, so may have missed something important. We agree that capital is power, although I don’t understand why you call it a “symbolic representation”, when it is more down-to-earth and practical than that. Also that traditional theories have failed to deal satisfactorily with this type of power, indeed more generally with economic power (I know you dislike this term). Thirdly, I agree that economists’ use of the term “capital” is confused, and the production function is a useless fiction.
My main problem is understanding how you understand the causal processes underlying major change (creative destruction). For example, the rise of Toyota since the 1950s, or of Walmart or Amazon. Or the rise of China to global domination in manufacturing since 1978. Starting on p325, you discuss “novelty”, but I am looking for causal processes that are recognizable in the real world. The succeeding discussion mentions various things (pp329-331, and elaborated on in later passages). They all relate to what an *existing* dominant capital can do to advance its relative position, in a way that fails to account for new entrants such as those just mentioned. And they seem to be concerned with the *size* of the future firm, not its competitiveness. Notably, you rather dismiss cost cutting as merely a move towards the average. Comparing your account with the history of capitalism, I find it unconvincing as a causal explanation of the major features. In particular, I think you seriously underplay the importance of productivity advantages of some firms over others, i.e. cost reduction; along with new/better products, this seems to me clearly the main driving force of capitalism since the industrial revolution.
More broadly, I find that in the latter part of the book, when you start focusing on power, the discussion is mainly at the macro level, even though you correctly insist that it is *relative* power that counts. This makes the description over-abstract, to my mind. One implication is that the focus on the whole system obscures the distinctions between (a) real-economy firms like those named above, (b) the financial sector, e.g. HSBC, private equity firms, etc, and (c) the state (in the usual sense) and government. (Note that the difference here between (a) and (b) is not between real and nominal, but between actually-existing different players in actual economies.) I would also say that they all have different *sources* of power. Separating them analytically means that one can then trace how they interact and intermingle, whereas you you just assert that they are inseparable parts of the overall system. This makes it doubly hard to see what you think what the causal forces are.
Reply by Jonathan Nitzan
Thank you Mike. You ask many nested questions. I hope I can clarify Shimshon’s and my opinion on some of these questions, however briefly.
1. CASP AS A SYMBOL
In its earthly manifestations, power is multifaceted with many different qualities. When differentially capitalized it appears as a pure number. This pure number — although very concrete and real — is a symbolic representation of these numerous qualities. In his paper ‘Autocatalitic Sprawl of Pseudorational Mastery‘, Ulf Martin calls capitalization an ‘operational symbol’ – a symbol that partly creates the reality it describes.
2. THE DRIVING FORCE OF CAPITALISM
From CasP’s viewpoint, the main driver of capitalism is differential accumulation – i.e., the quest for ever-rising-differential-capitalization-read-growing-power. We don’t dispute that cost cutting is ever-present and that it transforms capitalism continuously and significantly. Our claim, rather, is that, in and of itself, cost cutting is not a major driver of differential accumulation.
3. DIFFERENTIAL ACCUMULATION
As our chart at the top of this thread shows, over the past 70 years, the top 200 U.S.-incorporated firms saw their differential earnings before interest and taxes (EBIT) rise exponentially relative to the average firm at a mean annual rate of 4.1%. This differential increase was due mostly to M&A. So even though technical change is ever present, its effect on the differential growth of dominant capital is secondary (and, as I argue below, even this effect is mediated by power).
4. DIFFERENTIAL SIZE VERSUS COMPETITIVENESS
By differential size, we generally mean differential earnings or differential capitalization. Competitiveness usually denotes the ability to produce for less than others. From a CasP perspective, competitiveness is not an end, but a means to an end (the end being rising differential earnings or capitalization).
5. COMPETITIVENESS AND POWER
Some firms control better production methods and/or command cheaper inputs – control and command that allow them to produce for less and — all else remaining the same — to earn more profit. But according to CasP, this path depends crucially on exclusionary power. It depends on (1) the power to prevent others from using the same production techniques or knowledge more generally; and (2) the power to prevent others from enjoying the same cheaper inputs. In the absence of these two forms of power, ‘competitiveness’ disappears. Most firms try to improve their techniques and cheapen their inputs; but most fail to do so differentially – i.e., faster than the average – for an extended period. In this differential sense, they are running on empty. Some succeed, of course — but according to CasP, their success depends not on the actual technology/cheaper inputs as such, but on various forms of exclusionary power that prevent others from using this technology and cheaper inputs.
6. NEW ENTRANTS
Dominant capital is constantly invaded by new entrants. Most of these new entrants are amalgams of existing firms created through M&A (roughly half of the total in recent years, according to Stangler and Arbesman’s 2012 paper ‘What Does Fortune 500 Turnover Mean?’). But some entrants are emergent. Rapidly growing emergent firms often boast their productive ingenuity and cost cutting; but in most cases, their ability to have their earnings and capitalization grow differentially rests on excluding others from their so-called propriety knowledge and from their preferential relations with other companies, suppliers, government fixes, subsidies and tax incentives, among other forms of power. In other words, the key issue is power. To see that this is the case, imagine what would happen to the earnings and capitalization of the FAANG group (Facebook, Amazon, Apple, Netflix and Google) had they been forced to make their propriety knowledge totally public, to forego their collusion with other companies and preferential relations with buyers, suppliers and governments, and to lessen their reign on ideology, surveillance and mass conditioning. In this vein, the cost advantage of Chinese-based firms relies on excluding non-Chinese firms from producing there and from enjoying the assistance/protection of the Chinese government. If this exclusion/assistance/protection were to be removed, the so-called cost advantage of Chinese-based firms would evaporate with them. So here too, cheaper cost is a matter of power.
7. CAUSALITY
According to CasP, the main causal drive in capitalism is the quest for differential accumulation, which, in the long run, is achieved through either ‘breadth’ (rising differential employment) or ‘depth’ (rising differential profit per employee) — processes that apply to capitalists, firms, groups of firms, and the political economy as a whole (see Ch. 15 in Capital as Power). The absence of both breadth and depth usually results in differential decumulation. All capitalist organizations participate in this process, but only some can achieve it, by definition. Those that succeed become part of ‘dominant capital’, so its components gradually change; those that fail are taken over or drop from that group. The concrete unfolding of this power process is not pre-determined – or, at least we don’t think it is. But the very existence of this process and its centrality for understanding capitalism seem to us rather obvious.
8. A SAMPLE OF CASP ‘CASE STUDIES’
You’ve asked for ‘micro’ examples of CasP. Here are a few.
Armament, oil companies and ‘energy conflicts’: http://bnarchives.yorku.ca/8/ (Ch. 5)
Chaebol: http://bnarchives.yorku.ca/491/
Conspicuous consumption: http://bnarchives.yorku.ca/433/
Corporate debt: http://bnarchives.yorku.ca/668/
Corporate taxes: http://bnarchives.yorku.ca/637/
Diamonds: http://bnarchives.yorku.ca/469/
Food: http://bnarchives.yorku.ca/523/
Grain companies: http://bnarchives.yorku.ca/359/
Hierarchy and energy: http://bnarchives.yorku.ca/500/
Hierarchy and income distribution: http://bnarchives.yorku.ca/653/
Hollywood: http://bnarchives.yorku.ca/362/
Global political restructuring: http://bnarchives.yorku.ca/4/
Public debt: http://bnarchives.yorku.ca/481/
Walmart: http://bnarchives.yorku.ca/394/
- You must be logged in to reply to this topic.