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Hi all,
As mentioned in a previous post, I’m just beginning to grapple with the CasP approach and am trying to read as much as possible on the topic. However, for various reasons, the time I can dedicate to this is limited at the moment. With this in mind, I was wondering if I could get your thoughts on some questions that have been troubling me (or if you could direct me to relevant chapters, pages etc.).
1. According to the CasP perspective, could we say that capitalism has a growth imperative?
2. If so, what are the main drivers of this imperative?
3. This question, which is specifically for Jonathan, concerns the following quote (from Capital as Power, 2009: p.232-233):
“In our view, Marx was correct to stress the dialectical imperative of technical change….Over the longer haul, capitalists indeed find themselves compelled – and in turn force their society – to constantly revolutionize the pattern of social reproduction. They continually ‘invest’ in having industry develop for them new methods and products and in expanding their capacity to produce them. Yet all of this they do in the expectation of adequate differential returns, and differential returns are possible only through restriction”
What drives this “dialectical imperative of technical change” and capitalists’ compulsion “to constantly revolutionize the pattern of social reproduction?”
4. Which aspects (if any) of Marx’s analysis can help us to better understand the above?
Thanks in advance.
Adam
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On this subject, you might want to read:
Blair Fix, 2017, ‘Energy and Institution Size‘.
Bichler & Nitzan, 2020, ‘Growing Through Sabotage: Energizing Hierarchical Power‘.
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The chart below, taken from our recent paper ‘The Limits of Capitalized Power. A 2020 U.S. Update‘, suggests that U.S. capitalists require not absolute, but strategic sabotage: not too cold, not too warm.
Like with Goldilocks, too much sabotage reduces their earnings share, but so does too little sabotage. The optimal level of sabotage — otherwise known as ‘business as usual’ — is what economists call the ‘natural rate of unemployment’.
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I would also review the works of Tim Di Muzio, who has done a lot of work regarding debt and money applying the prism of CasP.
http://bnarchives.yorku.ca/view/creators/Di_Muzio=3ATim=3A=3A.html
Most of the materials linked to above are free downloads. That said, I highly recommend the two books Debt as Power (with Richard Robbins) and The Tragedy of Human Development.
For me, capitalism has a growth imperative because of how modern money is created (by private banks extending credit subject to compounding interest). Compounding interest is built into the net present valuation process, i.e., CasP’s central ritual of “Capitalization,” which allows one to compare the value of stocks to the value of bonds (a more fundamental form of capital).
Similarly, again speaking solely for myself, I view “differential accumulation” as most fundamentally being about seeking a return on capital that exceeds the growth of the economy as measured by inflation (Piketty’s r>g). Sure, there is a strata of capitalists who care about beating each other (i.e., “the average”), but most are concerned with ensuring that what they have already accumulated does not evaporate with the passage of time (consider “the time value of money” and Prospect Theory), which is why fixed income financial assets, which focus on capital preservation, continue to exist.
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Thanks for this, Scot! Apologies for the late reply. I must have overlooked your message at the time. I just came across it now 🙂
Since I posted this question, I have actually managed to read most of Tim’s work – including the two books you recommended. I’ve found them to be really valuable resources. In my PhD research, I’m drawing quite heavily on Carbon Capitalism.
Your point about capitalists aiming to preserve their wealth by ensuring their return on capital exceeds inflation makes sense. Although would this not generally require them to also beat the average? If Jonathan Nitzan, Shimshon Bichler, and Blair Fix (e.g. https://economicsfromthetopdown.com/2021/11/24/the-truth-about-inflation/) are correct that inflation is driven by power struggles within dominant capital to raise prices faster than their peers, then doesn’t it follow that those whose accumulation exceeds this (average) rate of inflation will also beat the average in terms of differential earnings and capitalization?
Cheers,
Adam
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Your point about capitalists aiming to preserve their wealth by ensuring their return on capital exceeds inflation makes sense. Although would this not generally require them to also beat the average?
I think we need to distinguish between individuals and firms. They’re entirely different, and CasP focuses on firms (“dominant capital”), not individuals. As among individuals, some people just want to preserve capital and play it safe, some want to “beat the average,” and others try to balance between the two. The Capital Asset Pricing Model (“CAPM”), which is the basis of CasP’s insight regarding beating the average, was developed to provide a way for individual investors with different goals to understand which investment opportunities best suit their investment goals, which is often called a “risk profile.”
If Jonathan Nitzan, Shimshon Bichler, and Blair Fix (e.g. https://economicsfromthetopdown.com/2021/11/24/the-truth-about-inflation/) are correct that inflation is driven by power struggles within dominant capital to raise prices faster than their peers, then doesn’t it follow that those whose accumulation exceeds this (average) rate of inflation will also beat the average in terms of differential earnings and capitalization? Cheers, Adam
I think the assessment that inflation is driven by the desire to raise prices faster than peers is overly simplistic and incorrect. We need to think in terms of things like supply chains (or value chains) instead of just the prices end consumers see. Vendors, especially vendors to dominant capital, are generally loathe to raise their prices for fear of getting locked out of the next opportunity. That’s why prices are “sticky” or “inelastic.” To me, inflation like we are seeing today is combination of supply chain problems and the confidence of entire supply chains that their customers will have no issue absorbing the increased costs and passing them on (with additional markup) to the end customer.
An important lesson I learned at Intel was everybody in the supply chain for consumer product, e.g., a personal computer, is competing for its share of the total profit margin, and their relative power determines their share. Consumer products get priced based on what the marketing folks determine consumers will pay. One of the projects I worked on as an IP attorney for Intel was the Intel Web Pad, which was basically the iPad a decade before Apple launched it (but nowhere as cool or full featured). Intel scrapped the Web Pad because LCDs were too expensive at the time for any Web Pad maker from getting the profit margin needed to justify making the product. To be clear, Intel did not want to make and sell Web Pads itself; it wanted other companies to use its reference design and buy Intel chips to stuff them with. As a sophisticated end customer in its own right (Intel plays rough with its vendors), Intel realized it could not get the margins it wanted and leave enough for the maker of the Web Pad, and so the Web Pad was never commercialized.
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A few observations:
The Capital Asset Pricing Model (“CAPM”) […] is the basis of CasP’s insight regarding beating the average
I don’t think CasP derives anything from CAPM. In fact, in some sense, the two theories are opposite. CAPM is a neoclassical model that stipulates how passive investors (supposedly) pick the right combination of (presumably known) stock returns and risks. Our theory of differential accumulation tries to study how active capitalists change returns and risks (see Ch. 11 of Capital as Power).
I think the assessment that inflation is driven by the desire to raise prices faster than peers is overly simplistic and incorrect.
CasP does not say that capitalists “desire” to raise prices faster than average. Instead, it argues that capitalists seek to raise capitalized profit faster than average, and that, occasionally, when M&A decelerates, they are tempted to use stagflation to achieve it.
We need to think in terms of things like supply chains (or value chains) instead of just the prices end consumers see.
Correct. But this recommendation bursts into an open door.
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