[OPE-L] That hissing? It's the sound of bubblenomics deflating

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Mon Oct 01 2007 - 17:51:56 EDT


I realise that assets less liabilities necessarily equals zero in a balance
sheet, since the total liabilities state the funds applied for the
investment in the total assets (source of funds as against use of funds).
However, two things: (1) the liabilities include the equity owned in the
enterprise (2) more importantly, the assets or alternatively the liabilities
effectively constitute a legally enforcable claim to a revenue stream, which
is the important thing from the point of view of understanding the
accumulation process as a whole. This revenue stream does not sum to zero,
it constitutes in aggregate a net positive income, as is partly acknowledged
in conventional national accounts.

I think Marx was well aware of all that, it is just that he believed that
the conventional double-entry bookkeeping did not show the real economic and
social relationships involved (which he proceeded to expound using a value
analysis that is at the roots of all accounting and all price calculations).
Consequently, if you really wanted to understand capital accumulation, you
needed a different set of concepts, and a different procedure of grossing
and netting stocks and flows. Moreover, Marx's focus was on the capitalist
mode of production as a unity of the production and circulation, viewed as a
process in perpetual motion.

I am not sure if I fully agree that financial assets are "not values but
information structures, sequences of records held on the hard disks of the
banking system".

It is certainly true that according to Marx, only the products of human
labour have value in bourgeois society, but this already suggests an
ambiguity, insofar as financial services can also be labour-services sold as
a "financial product" (sold as a commodity, with a money-price that may be
totally unrelated to the actual labour-time it takes to produce this
"financial product" - we might however in principle be able to split out the
fees or salaries charged for providing this service; and indeed in
UNSNA-type product accounts, a portion of the positive net income of banks
shows up as a "nominal bank charge" thought to constitute the value added of
the banking industry). There are very few good value-analyses of the
peculiarities of commodified services as contrasted with tangible goods.

Furthermore, financial assets, as said, constitute legally enforcable claims
to a revenue stream, i.e. a source of net income which depends on
established property rights enforced by the state. This implies, I would
say, that we are dealing with more than a mere "information structure" as a
sort of technical instrument, we are dealing with a social power claiming
new and existing wealth purely through a capitalisation of asset ownership.

The tenor of your criticism seems to be that I am basically "comparing
apples and pears". In a sense you are quite correct about that. But I was
thinking of capital accumulation, and tried to find a measure of the broad
proportions of capital tied up in physical assets versus capital tied up in
financial assets, the point being that the majority of each of these assets
generate a positive revenue stream, whether in the form of profit, rent,
interest, capital gains, tax, seignorage or fees etc. Of course, in striking
this ratio, I must be double-counting to a significant extent, insofar as
the physical asset can give rise to a tradeable financial claim to that
asset (and/or the income derived from it). A physical asset may be owned by
a legal entity which is owned by another entity, which is owned by another
entity which trades in that type of entity on the basis that it generates a
revenue stream, and so forth and so on.

Be that as it may, an astonishing quantity of world society's capital these
days is tied up in a financial circuit that is semi-autonomous from real
production, yet this capital provides a claim to a significant portion of
the output of that production. That is what I intended to highlight with
another statistic, contrasting that with myopic views of the scope of
capital accumulation, but I admit there are also better ways to do it. The
IMF figure is for total "tradeable US financial assets" and not total US
financial assets. The overall implication is that a greater proportion of
the mass of surplus-value is appropriated in the form of interest, rent,
capital gains of various types, and fees, which in turn has other sorts of
implications I cannot delve into now.

As I see it, the modern "problem" of economic growth is NOT the lack of
investment capital, but a SUPER-ABUNDANCE of capital, often owned by people
who, globally speaking, do not use much of it to invest in real production
that creates additional jobs or expands that production. The main reasons
for this, briefly, seem to be (1) considerations of comparative risk, (2)
stagnating, declining or sluggishly growing real wages plus gigantic income
inequalities, and thus a very severe maldistribution of income from the
point of view of the monetarily effective demand necessary for cumulative
economic growth (3) perhaps most importantly, higher returns from placements
in activities or assets other than real production.

At least four additional factors that many authors note are (4) a modern
emphasis on gaining the maximum profit in the short-term, whereas cumulative
economic growth requires long-term financial commitments (in third world
countries, the focus is often especially on the problems of developing the
country's social and physical infrastructure). Part of the "risk problem" of
large-scale, long-term investments is that there are very few things you can
invest in these days other than government bonds for which you can guarantee
that they will not fluctuate significantly in value through time, not in the
least because currencies can fluctuate strongly according to speculative
cross-border flows. (5) the fact that the physical essentials necessary to
sustain the life of the world population at its present level or a slightly
higher level can actually be produced by a smaller and smaller fraction of
the world's growing workforce. (6) a new ideological emphasis on ecological
pessimism, according to which "we all" ought to make do with less material
wealth for the sake of the health of the planet, which paradoxically can
make the case for developing old and new industries benefiting poor people a
very RADICAL stance. (7) Problems that have to do with establishing and
maintaining effective management and effective social organisation of
enterprises, involving among other things increased job mobility, criminal
or grey transactions, and a lack of consensual norms and values (it becomes
more difficult for elites to "unite" the people for a specific purpose,
whether politically or managerially, resulting in recurrent leadership
crises or continual "refocusing").

In themselves, these kinds of observations are not spectacular news, they
are only of new interest in the context of an analysis which comprehensively
integrates a mass of different trends, giving them their appropriate place
in a durable theory of the development of modern society and what the human
meaning of that is, qualitatively and quantitatively, without venting new
myths or anxieties or vulgar pomo metaphors.

The national accounting system now in use was developed in the 1930s and
finalised in the 1950s, with only relatively small conceptual modifications
since then. But in half a century, the very ways of doing business have
changed enormously and therefore some macro-economic categories which might
have seemed perfectly valid and exhaustive in scope back then, become highly
questionable now. In my previous posts on various lists I have tried to
illustrate this in some more depth with specific examples, i.e. how the
official aggregates and classifications cited in the media now provide a
significantly distorted picture of what really is happening in terms of
wealth-creation, income distribution and capital accumulation. I am not
saying the aggregates are completely useless, but that they have to be read
with many qualifications nowadays. From the point of view of my own
analysis, I frankly do not understand why many Marxists persist in taking
these categories of a past epoch for granted, rather than criticising them
scientifically and devising new alternative measures (some authors including
yourself however do do this).

I have not elaborated all this and more in a book which tells a substantive
story about what I learnt from the 1980s onwards, because my career as
social scientist failed due to love problems, some mistaken decision-making
or indecision etc. You simply have to be able to patiently work through a
very large mass of data and literature to make all the arguments exact,
effective, complete, and irrefutable, and meanwhile you have to make an
independent living somehow, whatever your mental state might happen to be,
or however harassed you might feel at times. I have also worked through many
thousands of documents in the last 8 years but that is more in the context
of my job as archivist/documentalist, and often quite unrelated to my social
scientific inquiries which I  had intended to pursue further. You get
challenged to see if you know anything, and you write a bit in your spare
time to say what you think and argue it out, but you don't get any big job
done. Well, maybe when I retire, I cannot really say now how my life might
pan out yet. And if you wonder about whether your inquiries are worthwhile
anyway, you don't get very far either.

My last posts were rather too negative I think, and seen as I have just
started a new job, I cannot post a lot of new stuff now anyway. However,
like Ajit I went on holiday to shake off some fatigue (for a week in Sicily,
in my case) and I attach two of my snapshots which I consider among my best
on this trip (the highest point in the trip, was going to the top of the
Etna volcano).


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