My ninth lecture: labour and capital, talking about the distribution of newly created wealth, the way to conceptualise this, the political stances deriving from this and the light these shed on ethical perspectives about economic and financial issues.
Translated from the French by Tim Gupwell.
In our capitalist system, the « advances » which are consented to by some, the holders of capital or « capitalists », in order to render a production process possible or to allow a consumer to consume are remunerated by interest payments. In my book Le prix (2010), I showed, using examples of “separate systems” in Africa or in Europe, how this system of interest must have appeared: interest being originally conceived as part of a newly created wealth, attributed to one of the partners who had contributed to its creation. The enduring dimension of this original logic in the current form of the capital system is the fact that each time interest has to be paid out, new wealth will have been, or will have to be, created in one way or another, in order to be the source of it. This aspect of the problem usually remains unnoticed but its implications are dramatic because they ensure that the capitalist system is, in economic terms, a dead-end.
We have treated the non-renewable resources of the planet on which we live as a “godsend” in Proudhon’s sense, as a “gift from Heaven” to share amongst ourselves, following the dividing lines traced out by the principles of private property. The non-renewable character of some of these “gifts from Heaven” has remained unseen for as long as the Earth has seemed to us to be infinite. Today, the Earth appears to us to be far too small when we take into consideration our insatiable appetites.
The exhaustion of the planet resulting from our activity is what is discreetly termed negative external factors, which are, moreover – just like godsends – loftily ignored in the calculation of the Gross Domestic Product. “Growth”, or in other words a rising GDP, implies therefore the irreversible destruction of the planet and, as capitalism requires this same growth (so that the interest can be paid), the fact that the logic of capitalism implicitly contains the destruction of the planet, assumes the value of a theorem.
An English translation of my post QUESTIONS À RÉSOUDRE (I) TOUS CEUX QUI SONT RÉMUNÉRÉS LE MÉRITENT-ILS VRAIMENT?
There is a question that neeeds to be answered at all costs; 19th century thinkers have devoted much thought towards its solution. Here it is: when we consider rent obtained by a landowner or by the owner of mineral ore extracted from the ground, interest obtained by the owner of capital also known as capitalist, the profit gained by an industrialist or entrepreneur, and the wages paid to a worker, is one of these incomes unjustified and thereby undeserved?
The only point of agreement reached so far is the following: wage-earners truly deserve their earnings, without a shred of a doubt in any case for that part of those wages needed for mere survival. Workers provide their labour and it goes without saying that they should for their own good turn up at work the following day; they therefore deserve without any dispute wages sufficient to survive until tomorrow. For all other types of earnings unfortunately, the answer to that question remains desperately out of reach.
Karl Marx (1818-1883) took up this question from the same point of view as David Ricardo (1772-1823). He simplified the problem radically by asserting that the only justified income are wages: value is created by work and by work only, therefore any other income allocated to other interested parties, such as land owners, “capitalists” as holders of capital, or industrialists as entrepreneurs is undeserved. Marx calls “spoliation” any payment to participants other than workers.
Other 19th century authors, essentially socialist and anarchist thinkers such as Sismondi (1773-1842) or Proudhon (1809-1865), following on the tracks of 18th century economists such as Richard Cantillon (1680s-1734), François Quesnay (1694-1774), or Adam Smith (1723-1790), were of a different opinion. For them several types of advances participate in the production process and each of them deserves as its reward a part of the newly created wealth (*). Thus income ensuing from property rights was according to some authors a reward for work previously performed – sometimes several centuries prior – by some forefather of the current beneficiary; profit accruing to the entrepreneur was a reward for management and supervision of the production process; lastly, interests and dividends collected by the capitalist were compensation for relinquishing control of the loan amount until later.
A solution to such a baffling conundrum remains far from obvious: newly created wealth obviously results from the combination of a number of elements but how can one assess the true contribution of every one of them? The only sure thing is that lacking an unambiguous answer to this question, throughout the ages and until now only the power balance between parties has determined how much every party ends up getting at the end of the day.
(to be continued…)
(*) See for example what I have to say about the splitting of “parts” in the case of an african dugout canoe used for sea fishing in Le prix 2010 : 145-149
It Is Time to Restructure Capitalism
Is there anything more depressing than the spectacle of the short-term remedies that are being applied at present with a view to saving the capitalist system, in the absence of determination to do what would actually be necessary to achieve that objective?
Look at what is happening in Greece, where the Troika (the European Union, the European Central Bank and the International Monetary Fund) is endeavouring to impose on the Greek Government measures which everyone knows to be unworkable. And what will be achieved if agreement is reached? A reduction of that country’s sovereign debt to 120% of its GDP by… 2020!
Even if in the coming days a formula were to be arrived at for a partial default of Greek sovereign debt which might be tolerable for the Greek people, Portugal and Ireland would step into the breach and immediately lay claim to the same benefits for themselves, which it would be beyond the capacity of the Eurozone to provide, repeating ad nauseam as it does that the solution which it is aiming for in Greece will have to be an exception, come what may. And, as everyone knows, the Greek problem all by itself is already ‘systemic’, i.e. capable of bringing about the collapse of the Eurozone. (This was not the case when warning signs first appeared at the beginning of 2010… but it is now in consequence of the failure to take action in time!)
On August 2nd the United States raised its debt ceiling to $14.3 thousand billion. One need hardly make the point that dollar bills for this sum of money, if stacked up, would cover the distance from the Earth to the Moon by a factor of X, as it should be apparent that this hole will not be filled up all by itself no matter what improvement may occur in that country’s economy.
The squaring of the circle that economic recovery represents, combined as it is with austerity, is but one insoluble problem among a host of others at the heart of the capitalist system.
When, on September 25th 2008, in his Toulon address, Mr Sarkozy drew attention to the need to restructure the capitalist system, it is a pity that the means to undertake this indispensable task were not immediately made available. Precisely because it is a very ambitious project, it was perverse to leave it to individual initiative to carry it through. A council of distinguished individuals – preferably international – should have been convened without delay, and adequate means should have been put at their disposal to draw up the measures which are required.
More than three years have passed since the Toulon address and, apart from rather disorganized anti-capitalist protests in various parts of the world, individual initiatives aimed at restructuring capitalism have proved inadequate. Valuable time has thus been lost, but it is not too late, the problems with which we are faced, and which have become more serious everywhere, having become clearer in consequence of this.
Let us demand that the powers that be immediately engage in a debate on the restructuring of capitalism and that unchallengeable authorities on financial, economic and moral questions be brought together (rather than economic and financial ‘experts’ who are associated with an accumulation of embarrassing failures) and that they be given the task of drawing up a schedule for this (addressing structural and institutional questions, of course, as distinct from short-term tactics aimed at nothing more than gaining time in the face of a collapse which has become unavoidable). Let us entrust to these people the task of restructuring capitalism and, if they conclude that this is not feasible, let them provide us with a plan for creating a system to replace it.
For those of you who read Dutch: an interview I had with Caroline de Gruyter, of the renowned financial daily NRC Handelsblad.
I was asked to make the introductory speech at the Conference “Heurs et malheurs du capitalisme”, which took place at Université Blaise Pascal in Clermont-Ferrand on February 4th. Bénédicte has been so kind as to translate the written version of my speech.
Capitalism’s highs and lows? When we talk these days of its highs, it is because its lows are so much – uncomfortably much – on our mind.
But what exactly do we mean when we refer to “capitalism”? Many authors merely consider that capitalism is “any aspect of our current economic system”. For example, they mistake capitalism for the market economy. Markets are a system of distribution and circulation of products, operated by merchants, and resting on mercantile profit. It may exist in economic systems that are in no way capitalistic: feudalism, for instance. Other authors mistake capitalism for liberalism, a political doctrine that, according to its proponents, seeks to optimize the role played by the state in our societies, but actually aims at reducing the role of the state as much as can be.
Of course, today’s economic system combines capitalism, market economy and liberalism. Nevertheless capitalism has some specifics: it is an economic system dominated by the capitalist, i.e. the holder of capital. The capitalist is that person who temporarily parts from his or her capital at a price: the payment of interest at periodic intervals, taking place until the loan’s “maturity” has been reached: the contractually determined time of refund.
A couple of weeks ago, my new book Le capitalisme à l’agonie came out, published by Fayard in Paris. Bénédicte has been so kind as to translate the summary I wrote for its backcover.
Le capitalisme à l’agonie (Fayard 2011). Summary
In 1989, at the fall of the Berlin Wall, capitalism was triumphant. Deprived by now of any enemies, it had ceased to be just one economic system among others to become the single form under which an economic system could possibly exist. In 2007, a mere eighteen years later, that is for all purposes simultaneously on the timescale of human history, it would itself be carried away by the maelstrom of its upcoming destruction. Capitalism has now reached the point of death. What could possibly have happened?
Looking back, the eighteen years separating the fall of the Soviet-type state capitalism and the fall of the Western market capitalism will seem trivial The explanations offered for a supposedly intrinsic superiority of the one system which outlasted its rival by a short interval only will seem trivial as well. History will remember the irony of this conjunction.
Despite having hardly been mentioned at all, one hypothesis by now stands out: could it be that capitalism and communism were struck down by the very same ailment? Complexity would then be the cause: the make-up of human societies is bound to reach a threshold in complexity beyond which instability gets the upper hand and fragility having become overwhelming, the system heads for disaster.
An alternative explanation is that in order to thrive, capitalism was in need of a powerful enemy to oppose. This enemy, far from being a threat to capitalism turned out to be in actuality its unexpected support. The option was open to citizens of democracies to turn their vote to such an alternative and this by itself was enough to force capitalism’s beneficiaries to keep its functioning within the borders of common decency. Once such an alternative option had vanished, capitalism’s beneficiaries did not refrain from trying de develop its market mentality even further, destabilizing by this the entire system and leading it straight to its downfall.
There is one more possible explanation: that due to the payment of interests by those who have no option but to borrow when trying to meet their productive or consumptive aims, capitalism would inevitably fuel a concentration of wealth such that the whole system would break down sooner or later.
Between these various hypotheses, there is no need for choosing though: the three of them are jointly true, each in its own particular manner and their combined implications characterise the first decade of the twenty-first century. This getting together of lethal factors explains why we are not currently experiencing any of the crises of capitalism which have become habitual in the two most recent centuries but truly, its last gasp.
We are examining in the book the various moments of a time when a behemoth mechanism, first slows down, then stops.
This novel feature of a lack of any serious competitor for capitalism prevents us from seeing with any clarity what is coming next. To enlighten us, we need to focus on what we mean by happiness, the kind of happiness we are wishing our children, our children’s children and ourselves. We need also to scrutinize the contradiction existing between two of our main concerns neither of which we are prepared to sacrifice: ethics, the moral life, and private property, the right of owning, without such possession being ever legitimately questioned. We analyse the quandary of a world where labour is becoming rare but where the income it provides remains indispensible for the large majority.
Some luminaries of human thought did guess that our species would one day be faced with questions which if not unsolvable, require however that we initiate a move as radical as that which led us from the Paleolithic to the Neolithic era, or from agrarian to industrial societies. We will summon to this aim the ground breaking pondering of Robespierre, Saint-Just, Hegel, Marx, Lévy-Bruhl, Freud and Keynes in particular.