From Socialist Voice, December 2009

Money producing money

Readers of Socialist Voice may be familiar with the oft-quoted formula presented by Marx, M–C–M, or money–commodity–money. This formula, for Marx, represented the basis upon which capital works, that is, accumulates itself. Money purchases commodities in the form of materials and labour, creating a product or service that is then sold, leaving profit—more money. Money, through the big C, is turned into even more money.
     This is the traditional Marxist understanding of the process of accumulation and has for many years satisfactorily explained the inner working of capitalism. There is, of course, far more to this understanding, including the all-important exploitation of labour power, from which profit is derived; but for this article the explanation above will suffice.
     Readers aware of this formula will then be interested in the following formula: M–M, or money–money. This formula was presented and articulated in a recent edition of Monthly Review in an article entitled “Monopoly-finance capital and the paradox of accumulation” by John Bellamy Foster and Robert W. McChesney. (The article can be read on line at www.monthlyreview. org/091001foster-mcchesney.php.)
     The writers argue that changes within the process of capital accumulation over the last few decades have given rise to a situation whereby money can be transformed into more money without any productive stage, the stage at which labour is employed. This process, called “financialisation,” is identified by the authors as the fourth definitive stage of accumulation within capitalism.
     Stage 1 was mercantilism, beginning in the sixteenth century and continuing up to the eighteenth century, with accumulation taking place primarily in commerce, agriculture, and mining.
     Stage 2, competitive capitalism, stemming from the Industrial Revolution, saw the accumulation of capital largely deriving from modern industry and large-scale infrastructural developments. Stage 3, called monopoly capitalism—best described by V. I. Lenin—is marked by the end of “free and fair” competition and by the huge growth and centralisation of capital in corporations.
     It is out of the stagnation of the 1970s—the lack of investment opportunity and return or, as Foster and McChesney put it, the worsening conditions for accumulation—that the turn to finance capital as the primary source of accumulation within capitalism took place. The writers argue that,
essentially, what occurred was this: unable to find an outlet for its growing surplus in the real economy, capital (via corporations and individual investors) poured its excess surplus/savings into finance, speculating in the increase in asset prices. Financial institutions, meanwhile, on their part, found new, innovative ways to accommodate this vast inflow of money capital and to leverage the financial superstructure of the economy up to ever greater heights with added borrowing—facilitated by all sorts of exotic financial instruments, such as derivatives, options, securitization, etc. Some growth of finance was, of course, required as capital became more mobile globally. This, too, acted as a catalyst, promoting the runaway growth of finance on a world scale.
     Leaving aside the huge impact this fundamental change in the method of capital accumulation has had on levels of employment, economic equality, and financial debt, which requires further analysis and expansion, for this article it is worth noting the change in formula this analysis presents, from M–C–M to M–M.
     So, it appears that it is no longer sufficient to talk merely of monopoly capitalism, as communist parties have done for the last century, but is more appropriate to understand struggle in the context of monopoly-finance capitalism. This appears to be the context in which establishment solutions are being conceived of and pursued.
Today’s neoliberal regime itself is best viewed as the political-policy counterpart of monopoly-finance capital. It is aimed at promoting more extreme forms of exploitation—both directly and through the restructuring of insurance and pension systems, which have now become major centers of financial power. Neoliberal accumulation strategies, which function with the aid of a “predator state,” are thus directed first and foremost at enhancing corporate profits in the face of stagnation, while providing further needed cash infusions into the financial sector. Everywhere, the advent of neoliberalism has meant an intensification of the class struggle, emanating from both corporations and the state. Far from being a restoration of traditional economic liberalism, neoliberalism is thus a product of big capital, big government, and big finance on an increasingly global scale.
     There is no doubt that the governments of the major countries are aiming at restoring growth and accumulation through financial services and finance capital. If successful, this is sure to mean further, more devastating crisis than we are now living through, with working people in a less well-off position to cope.
     Economic trajectories can, however, be altered by one thing: class struggle.
[GM]

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