Translated from the French by Tim Gupwell.

I have made the observation here that what leads us to desire change is never the projection of an idyllic image of a new future world to which we aspire, but rather the present moment in which we live become intolerable.

Irony plays a considerable role in history and it would be particularly pleasing if, where cold and objective reason has not been able to resolve the Greek situation at the heart of the Euro zone or of the conundrum of the Euro zone itself, indignation itself succeeds. Because if the recent remarks made by Mme. Lagarde are taking root in Greek minds, they are also blazing a path across the rest of Europe.

The diktats that the Troïka (European Union, Central European bank, and the IMF) are imposing on Athens are a technical jumble in which it is easy to get lost if one seeks to refute the arguments one by one, but that haughty and irritated declaration, oozing class arrogance, recalling the famous “let them eat cake” (as she had done before with “ri–lance”, hilarious attempt to coin a new word which unites the two concepts of rigour and reliance and which is still making us laugh), from a person whose revenue is not subject to tax, this latter revenue appearing to be extremely generous when we consider the 14 monumental blunders pronounced by its beneficiary over a period of only five years (catalogued by a fellow blogger), seems to have the potential to arouse the sort of refusal of the intolerable which seemed to have been lacking until now.


Guest post. Translated from the French by Tim Gupwell.

It’s already well established that Tepco, the operator of Fukushima, is in control of very little in the devastated nuclear plant. Not the ongoing, endemic contamination of the atmosphere and of the sea, not the status of nuclear fuel reduced to a state of three coriums which either can’t be localized or are stocked in pools from which they cannot be removed. Nor, even less so, the potential impact of new seismic shocks on the battered systems, including in the first instance that of Reactor N° 4’s cooling pool , a tremendous source of worry given the enormous mass of fuel it contains.

1535 fuel assemblies are stocked 30 metres (110 feet) above the ground in a structure which has had to be consolidated and which is open to the air, representing 85 times the quantity of Cesium-137 released during the explosion of the Chernobyl reactor…..Enough to render the whole of Japan uninhabitable and beyond, for it is on this kind of scale that the potential danger can be measured.

Fukushima poses problems that are currently impossible to resolve, unacknowledged only because of the conviction that even if the dismantling of the plant takes forty years, it will be seen through to the end. In reality, nothing is less certain. All this points to an improbable alternative: covering of all the installations by an immense sarcophagus, which will need continual cooling. An edifice in comparison with which Chernobyl’s –whose replacement site has just entered into construction – will pale into significance. With two slightly different requirements: that the basement floor on which the plant is constructed is able to support the weight, and that the leaks of water contaminated by these basements are stopped.

Simultaneously, the Fukushima catastrophe has just entered into a brand new phase. It started with the progressive halting for maintenance of the entire network of nuclear reactors, which still numbered 50 once Fukushima was discounted, the last one still in operation having ceased all activity on the 5th May. The reactors will now have to pass a double test; security tests which will always be suspected of partiality, and the test of public opinion as well as popular pressure on locally elected representatives.



Guest post. Translated from the French by Tim Gupwell.

The debate on growth which is starting to take shape has overshadowed an event which is less spectacular but just as decisive. It concerns the deleveraging of banks, which will have an influence on growth as it is accompanied by a reduction in credit for the economy. The higher the ratio, the less abundant will be the credit. Indeed, the finance ministers adopted last Wednesday a compromise with regard to the adaptation of the prudential regulations of Basel 3 into European law; a basis for the drafting up of a future directive entitled CRD4…..

The battle was fierce between the British and their allies on one side, and the French and Germans on the other. It was a matter of determining under what conditions the regulatory authorities of a country would be able to increase, for the benefit of the banks under their jurisdiction, the core ratio (which expresses the relationship between banks’ capital reserves and liabilities.) The former wanted to be free to do as they wished and to be able to increase it whenever they wanted, intending thereby to gain a competitive advantage, for such a type of supplementary constraint would also have to be respected by all the foreign subsidiaries of the banks present on their territory; in the European case less well placed to increase their capital, leading them inevitably to a reduction of their activities.

Michel Barnier, the European Commissioner, battled hard against a project threatening the single market in his opinion – if each country could independently decide their capital norms – whilst at the same time having to push for the compromise which it was vital to find in the current context. The French and German representatives for their part, by going head to head with the British, highlighted the weak position in which their banks find themselves, and which they still attempt to deny.

The agreement reached is expected to be finalized by the ministers of the 27 member states on the 15th May, but an even bigger mouthful to swallow is that of the norms for liquidities which measure the banks’ capacity to mobilize resources on a short-term basis in order to meet their obligations. A subject about which they are particularly sensitive in these times of the dysfunctional interbank market and tensions in the repo markets (the enormous market in which they borrow short term liquidities in return for the temporary assignment of their assets as collateral.)

Continue reading THE REGULATORS’ INDIGESTIBLE COOKERY, by François Leclerc


An English translation by Bernard Bouvet of the post  “QUESTIONS À RÉSOUDRE (VI) DILEMMES DE LA PROPRIÉTÉ PRIVÉE”.

Private property, as we saw previously, allows you or I to selfishly take advantage of our planet’s generosity towards us and claim ownership of what she bears within her or what she produces spontaneously thanks to the sun, the wind, the rain, and derive a rent from it.

The impact of such an institution is quite obviously unfair. The French Revolution, nonetheless, stopped at its edge. The 1789 Declaration of the Rights of Man and of the Citizen even affirms: “Property being an inviolable and sacred right, no one can be deprived of private usage, if it is not when the public necessity, legally noted, evidently requires it, and under the condition of a just and prior indemnity.”

Gide and Rist comment on the revolutionaries’ attitude in this regard: “The Revolution removed the benefits of caste; it abolished primogeniture (the rights of the first born) which consecrated the children’s’ inequality within the family. But it upheld individual property rights – property rights which confer the most unjust of privileges, the right for the owner to “levy a premium on another’s labour”” (1909 : 247).

What justifies that tolerance towards private property, when no principles can and when its inherited redistribution becomes arbitrary after a few generations?

Private property, according to its proponents, at the very front the Physiocrats such as Richard Cantillon (1680-1734), François Quesnay (1694-1774), or Turgot (1727-1781), stimulates production and wealth creation.

Private property, supposedly, optimally brings out the best in people, first to their own benefit, but above all, in their view, to the benefit of their own children. This the prodding force: the care of their offspring is the motivation that is proposed that brings out the best in people.

But right then the Saint-Simonians protest: admitting that private property permits, to a certain extent, a production’s optimisation thanks to the motivation it provides, inheritance, as far as it is concerned, is counterproductive: the benefits of being productive are undermined if property is transmitted according to the “randomness of birth.”

On this topic Gide and Rist remark with a kind of fatalism: “One can justify inheritance only if one sees it as a strong excitant for the fathers to accumulate capital, – or again, for lack of a rational method, one cannot argue against randomness of birth any more than any other distribution’s method.” 190 251)

Private property officialises the spoliation of the community. Inheritance exaggerates its arbitrariness. Attempts to abolished it have so far proved at best inconclusive, at worst disastrous. Mother Earth has shown tremendous patience until now towards such little idiosyncrasies, but certainly the time is approaching when she will judge enough has been given.


March 7th, 2012 by Paul Jorion | Print HOW IS THE AMOUNT OF SURPLUS VALUE DETERMINED

An English translation by Jean-Loup Komarower of the post QUESTIONS À RÉSOUDRE (V) COMMENT SE DÉTERMINE LE SURPLUS

A set of inputs contribute to the production process: the labour provided by workers, the raw materials used, capital investment. A surplus value arises from this operation, mostly thanks to world ebullition under its two aspects: on the one hand, sun, rain, wind, mineral resources, fossil energy, and on the other hand the collective effect or “benefit from coordination” that was brought to our attention by Proudhon. By taking advantage of the institution of private property, a few of the stakeholders are able to immediately assert their rights to these different components of ebullition on the strength of a title.

What characterizes the created surplus value? It is made up from the difference between sale price and costs. The “sale price” is obtained on the primary market: when the merchandise is sold for the first time, either directly to a consumer, or more commonly nowadays to an intermediary. Computation of the costs depends on whether one considers a specific type of contributions to be “essential” in nature –because these contribution are considered to be indispensable and therefore to hold an “objective” value – or whether, on the contrary, one considers as arbitrary the value allocated to this type of contributions because they are in fact without authentic impact on the production process. Let’s quote here Proudhon’s words in a letter addressed to Madame d’Agoult about his father and the manner in which the latter disregarded profit: “Do you happen to know, madam, what my father was ? Well, he was just an honest brewer whom you could never persuade to make money by selling above cost price. Such gains, he thought, were immoral. ‘ My beer,’ he would always remark, ‘costs me so much, including my salary. I cannot sell it for more.’ What was the result ? My dear father always lived in poverty and died a poor man, leaving poor children behind him” (Correspondance, vol. ii, p. 239; quoted by Gide and Rist 1913 : 293).

A contribution that is recompensed, but is not “essential” will be rewarded during redistribution of the created wealth on the strength of a favourable power balance that imposes its recognition. Thus the coordination and control emanating from the company manager may be considered more as impediments than advantages due to the resentment they cause –which would tend to be confirmed by the experience of companies with weak or even non-existent hierarchies.

An additional difficulty however makes this question nearly insoluble: the power balance between the parties will contribute by its own existence to the notion formed by the parties involved (investors, managers, employees) of whether a specific type of contribution deserves remuneration or not.

Lastly, there is yet another dimension to this difficulty: the sale price similarly has no hard, objective evaluation. It is determined in a universe of competition between producers, where items sell or do not sell at some specific price, depending on the presence on the market of equivalent items between which potential buyers can choose.

The difference between sale price and cost of merchandise, which defines the surplus value created during production depends therefore on competition between producers of similar merchandise. Once that difference between sale price and cost has been established on a primary market, it becomes the focus of a contest between groups of stakeholders who can claim a part of that surplus value. Each group puts forward the “essentiality” of its own contribution in order to pretend that its value corresponds to the hard reality of the cost of its input, rather than to the market vagaries of the difference between costs and sale price.

Gide, Charles and Charles Rist, A history of economic doctrines from the time of the physiocrats to the present day, Richard R. translator, Boston : D. C. Heath, 2nd edition 1913


An English translation by Jean-Loup Komarower of the post « ÉBULLITION DU MONDE » ET PROPRIÉTÉ PRIVÉE

Two questions have to be resolved initially: is new wealth created in the production of goods and services and if it is, how can its amount and value be determined? In addition, are the opposing parties that in our contemporary world share the newly created wealth all justified in getting a share and if they do, where do they derive this right and what is the conceptual foundation of this right?

We have the first part of an answer: wealth is necessarily created in the production process since it is subsequently consumed.

So far everyone agrees. We also note that several individual human efforts combine but we cannot be sure that some of these have not been contributed in vain. Those perhaps wasteful efforts belong to a type of activity that is useless in order to obtain the observed result, but however useful for the purpose of being rewarded via remuneration.

We also note the contribution of natural resources, such as raw material or energy that can be obtained without work or with minimal work, or readily available resources as for example sunshine, rain or wind.

This capacity of the world to contribute wealth “naturally” is what Georges Bataille called world ebullition in “La part maudite” (1949), translated by Robert Hurley as “The Accursed Share” (1991).

Naturally occurring raw materials like oil or mineral ores are different from sunshine, rain or wind in that they are not renewable, as they are of fossil or purely geological origin, resulting from a lengthy sedimentation process or from the process of formation of our planet by accretion of cosmic matter.

We have however found the way to appropriate this “spontaneous” ebullition of the world by means of the institution of private property. It allows the owner to claim a share of the newly created wealth simply by virtue of a title, a declaration guaranteed by the legal instrumentalities of the community, its judiciary and police force, stating that this part of the ebullition is not simply coming from “the world” but indeed belongs to him or to her.

(to be continued…)


An English translation by Jean-Loup Komarower of the post QUESTIONS À RÉSOUDRE (II) LE PROFIT, SOURCE DE TOUS NOS MAUX

Robert Owen (1771-1858) was a Welsh social reformer, one of the founders of the cooperative movement. As a very early socialist who was blamed for being strictly speaking a “communist”, he considered profit as the source of all our ills. Owen asserted that profit is pure spoliation: workers were robbed of a benefit that should be theirs. Because profit skims part of the value produced by the worker’s labour, it becomes impossible for the latter to be a consumer of the same quantity of goods that he or she has produced. Owen saw profit as purely parasitic. However, if that was truly the case, as a potential opponent may argue, a situation of perfect, unbiased competition should quickly settle the score and reduce profit to zero. Not so, replies Owen: the word “competition” only describes the kind of war being fought, whereas the word “profit” refers to the type of booty. Since profit cannot be justified in any way, it has to be eliminated.

Does it make sense to eliminate profit as Owen advocates? Gide and Rist offer an excellent analysis of this question:

On the other hand there is this objection:

Whenever profit forms part of the cost of production it is impossible to distinguish it from interest. In that case it is true that even perfect competition would not do away with profit, since it will only reduce the price to the level of cost of production. In that case profit cannot be said to be either unjust or parasitic for the product is sold exactly for what it cost.

When profit does not enter into cost of production there is no possibility in confusing it with interest. It is simply the difference between the sale price and the cost of replacing the article. In this it is certainly parasitic, and would disappear under a régime of perfect competition, which must to some extent destroy the monopoly upon which such profit rests (Gide and Rist 1913 : 240).

Can this question be definitely resolved: is profit derived by industrialists and entrepreneurs a reward for service genuinely provided?

(to be continued…)

Gide, Charles and Charles Rist, A history of economic doctrines from the time of the physiocrats to the present day, Richard R. translator, Boston : D. C. Heath, 2nd edition 1913