From: Patrick Bond (pbond@MAIL.NGO.ZA)
Date: Sat Oct 21 2006 - 12:34:28 EDT
Jerry Levy wrote: > I don't think that the following summaries refer directly to the particular > issues I raised (rise in working-class savings; working-class credit card > indebtedness; pension and mutual funds owned by working-class families). > While there could be attempts to connect those issues to > the combination that you mention (especially to uneven/combined > development), where is the actual analysis that does this? > Right then, I have to go back to my doctoral dissertation (published in 1998 by Africa World Press, as *Uneven Zimbabwe: A Study of Finance, Development and Underdevelopment*), where there are some specific cites, especially of the three people - David Harvey, Michel Aglietta and Suzanne de Brunhoff - whom I understand to have done outstanding recent theoretical work on this (although people like the late Paul Sweezy, Gary Dymski, Robert Pollin, Doug Henwood and Tom Schlesinger - and probably others I haven't kept up on in the last decade or so - brought forward the US empirical analysis very rigorously): *** David Harvey (1982, 285; 1985b, 345) assists us by more clearly specifying “the contradiction between the financial system and its monetary basis,” in part through introducing finance to geography. He unveils a set of countervailing tendencies to crisis which were hitherto unexplored within the Marxist tradition: “Absorption of capital (and labour) surpluses through temporal and geographic displacement played key roles in the history of crisis resolution.” For Harvey, credit serves a temporal displacement function ─ a so-called “temporal fix” to overaccumulation ─ since finance not only speeds the turnover time of capital, as Marx observed, but also sends surplus capital into “the production of goods that have long term future uses in production or consumption.” This helps to displace crisis in the short-term, but exacerbates the overaccumulation problem down the road. There is also a “spatial fix” to overaccumulation: in serving a geographical displacement function (such as through foreign lending), finance can send “surplus money to another country to buy up surplus commodities.” This amounts to a short-term solution to overaccumulation which comes back to haunt the lending country when, in order to pay off the debt, the borrower must cut imports from, and increase exports to, the lender. The same principle works at other geographical scales. In sum, the tensions and contradictions in value production and realisation can only be resolved, says Harvey (1982, xvi), “at the price of internalising the contradictions within itself. Massive concentration of financial power, accompanied by the machinations of finance capital, can as easily destabilise as stabilise capitalism.” Harvey (1982, 283) thus highlights the constraints on the power of finance imposed by the full logic of the accumulation process, and “finance capital” is therefore seen, far more usefully, in terms of “the countervailing forces that simultaneously create and undermine the formation of coherent power blocs within the bourgeoisie.”... Whereas Neil Smith (1990), in his seminal study of Uneven Development, roots the equalisation and differentiation of capital (the fundamental motions of uneven development) in the emergence of a division of labour, Ernest Mandel (1968, 210) searched even further back, to “private production” among different producers within the same community. He insisted that “differences of aptitude between individuals, the differences of fertility between animals or soils, innumerable accidents of human life or the cycle of nature,” were responsible for uneven development in production. As a result, societies faced a choice: either engage in mutual aid (usually feasible in a society based on cooperation) to ensure the subsistence of an entire community, or save and lend money to those who need it (eventually gaining some rate of interest). The latter route led to the historical development of money and credit, Mandel posited, which in turn paved the way for full-fledged commerce and, ultimately, for capitalist relations of production and distribution. In this abstract version of the capitalist development process, finance as an accommodating feature of early stages of economic growth had the effect of ameliorating uneven development, particularly in equalising the rate of profit across firms and sectors. This could also, presumably, be the case in the sphere of reproduction, where the development of consumer and government credit markets offered finance the means to level certain reproductive relations. This phenomenon has been most important, of course, in advanced capitalist societies. When overaccumulation crisis is absent as a factor, then the inherent unevenness of the reproductive sphere ─ “disarticulated” development, as Alain de Janvry (1981) calls the differential production and consumption of durable goods along class lines ─ tends to be diminished by the role of credit in establishing what Michel Aglietta (1979, 232) terms a “consumption norm.” This sort of finance, Aglietta argues, also serves to level the unevenness of productive-reproductive processes because it “absorbs the divergence between the rhythm at which income is received and the rhythm at which it is spent, given the lumpiness of durable goods.” At the same time, the steady evolution of consumer savings and non-corporate contractual savings (pension and insurance funds), much of which is used to fund production, led finance “irrevocably into direct participation in determining the general strategy of accumulation.” Spiralling government debt adds to this process, since, according to Aglietta, even the federal debt of the major capitalist power, the United States, “has no chance of being reduced or even stabilised in the near future.” Astronomic growth in consumer credit ─ hire purchase, home mortgage bonds, car loans, credit for consumer durables, credit cards, etc. ─ after World War II reflected the mass consumption orientation of “Fordism” and the “intensive regime of accumulation.” What all of this implies is that under relatively good economic conditions ─ probably limited to the advanced capitalist countries ─ unevenness in the reproductive sphere can be ameliorated by finance, but the cost of this is growing indebtedness which in turn leaves the sphere of reproduction increasingly subject to the power of finance. In these theoretical arguments, in sum, the basis of finance-production-reproduction relations is one of amelioration; credit levels natural differences. Finance has the opposite effect on uneven development under other conditions, however. It is only when we look beyond accommodating features of finance, and instead to the control and speculative functions, that we understand the roles of finance (as both cause and effect) in the uneven development of capitalism. To some degree, uneven sectoral development is most directly a function of imbalances in production between capital goods and consumer goods, and here the role of finance is by no means ameliorative. Such problems have “all kinds of manifestations in shifting investment flows from productive to speculative outlets,” according to Aglietta (1979, 359). For example, the increased turnover of short-term stocks of capital goods during the boom phase leads to ever-shorter terms for credit. More generally, Aglietta argues, “Uneven development creates artificial differences in the apparent financial results of firms, which are realised only on credit. These differences favour speculative gains on the financial market.” These rather different financial effects can be postulated at the level of abstract theory, but Aglietta also documents how uneven sectoral development reached crisis proportions in the 1920s, leading to financial chaos from 1929-33 and the Great Depression. However, in considering the post-war era, Aglietta (1979, 378) invoked the spirit of Hilferding, in suggesting that finance can stabilise itself. The devaluation of money (inflation) and deflation of debt (write-downs in selected sectors) together permit a “threshold of resistance” to crisis: “What is important to note here is that the entire structure of modern capitalism functions in such a way as to avoid this phase degenerating into financial panic.” Indeed the general message from Aglietta’s “Regulation School” of political economy is that the development of a “mode of regulation” to serve particular “regimes of accumulation” makes finance and uneven development a much less explosive combination. If, however, the intrinsic unevenness within and between finance, production and reproduction is not observable on the surface ─ thanks, temporarily, to successful strategies of regulation ─ that does not mean that overaccumulation crisis has been resolved, nor that we can dismiss theoretically-derived tendencies towards sectoral unevenness which ultimately manifest themselves in financial crisis. As argued above, the role for finance in accommodating production evolves into a much more contradictory function under conditions of overaccumulation crisis. It is here that finance accentuates other processes of uneven development in the productive circuit of capital. *** de Brunhoff (1978, 61) draws the regulatory functions of both labour and money into the ambit of state policy: Public management of labour-power contributes to the reproduction of its value, which is something required by capital, but not guaranteed by capital itself. As for the reproduction of money as a general equivalent, this calls for state management of central bank money as the national currency lying “between” private bank money and international money. The circuit M-C-M’, which represents the valorisation of money capital, M, in circulation, cannot reproduce itself without these non-capitalist supports. *** Where did Hilferding go wrong in miscalculating the power of “finance capital”? As a semantic construct, “finance capital” has, so far, been quarantined in quotation marks for a specific reason: to emphasise that its interpretation is a matter of protracted debate. As van der Pijl (1984, 7) puts it, “the reality it conveys about the new empirical structure of capital does not obliterate the need for distinguishing the functional, `original’ fractions.” But other criticisms have been levelled against Hilferding’s profoundly institutional approach to finance. According to Suzanne de Brunhoff (1976, xiv), Hilferding makes a critical mistake that leads him to dissociate money and the credit system (“money as an instrument of hoarding” is ignored, she complains). “This dissociation has probably been one of the reasons for the overestimation of the role of `finance capital.’“ Further objections emerge to the internal logic of Hilferding’s “finance capital,” as well as to its contemporary relevance. The first line of argument highlights the historical datedness of the concept, since banking capital was, during Hilferding’s time, used nearly exclusively for financing the purchase of means of production (M-MP) and only rarely for purchasing labour power (M-L) (a function reserved for cash). Hilferding (1981, 70) observed a rising capital/labour ratio and concluded that “the growth of M-MP outpaces the growth of M-L, with the resulting more rapid increase in the use of credit compared with the use of cash.” In the post-depression era, however, an enormous amount of finance was originally drawn from and allocated to M-L, in part through related processes such as pension and insurance funds, consumer credit and government debt. Credit has now become a means of purchasing and reproducing labour power, in addition to its original role in arranging the purchase of means of production (as de Brunhoff  has pointed out). Hence it would appear that Hilferding’s reliance upon the rising organic composition of capital to explain the build-up of debt in the economy, and then to gauge the relative strength of the “finance capital” power bloc, is an insufficient (even if it remains a necessary) component of economic analysis. It would appear too that without analysis of government and consumer debt, Hilferding’s “finance capital” concept misses other insights about the influence of finance upon accumulation. One is the rise of labour’s “social wage” as a result of access to credit, which is partly responsible for establishing a privileged consuming stratum of workers. Another is the ability of the credit system to maintain “effective demand” (buying power) in the economy, partly through government and consumer debt, thus avoiding crises of “underconsumption” but putting off until later the unavoidable need to repay the debt. Notwithstanding the subsequent hegemony of conservative policy, these credit-related functions remain vital components of economic management in advanced capitalist economies, and they point to the need for more sensitivity to the meanderings of capital accumulation than that offered by a “finance capital” power bloc concept.
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