Finance Capitalism

Recently the "globalization" theorists have begun to target "finance capital" as the root of all evils. In the glossy newsletter that I received recently from the Forum on Globalization, David Korten, the group's executive director and author of "When Corporations Ruled the World", makes the case that "finance capital" has to be resisted. This "finance capital" has no sense of duty; it just goes where profits are to be made. Implicit in Korten's article is the belief that industrial capital is warm and fuzzy, while the world of banks and brokerage houses is cold and hard-edged. A group of speakers spoke yesterday on the topic at a meeting sponsored by the New York chapter of URPE (Union of Radical Political Economists) and held at the Brecht Forum. What came out of the presentations was a case for having an understanding of capitalism as a system, in which industrial, commercial or financial capital are integrated. This was Marx's own view and holds up pretty well today, judging by the article in the current New Yorker which everybody should track down.

The first speaker was Chris Rude, who used to work for the Federal Reserve Bank. He made the point that all currencies are local. The foreign exchange market which has become a symbol in the eyes of some as proof of globalization is nothing but the coming together of local currencies, which often clash with each other. Currencies are nothing but the reflection of the value of national capitals. When a currency is devalued, what is being devalued actually is the underlying industrial and commercial worth of a nation. When the Mexican peso was devalued, this was a judgement by the investment community that Mexican capitalism was slumping. This is the source of the financial crisis in Southeast Asia today and reflects doubts about the viability of Japanese capitalism, which these economies are tied into.

The next speaker was Randy Martin, who teaches at Pratt University in New York and is on the Board of Directors of the Brecht Forum. He said that there is tendency on the part of the left, particularly the "globalization" current, to dichotomize industrial and financial capital. Industrial capital = the productive, the local and the real, while financial capital = the unproductive, the global and the fictitious. Randy punctured this view with a passages from Capital that make the point that financial capital is part of the overall chain of commodity exchange and the accumulation of capital. If you limit yourself to volume one of Capital, you will tend to miss this aspect of Marx's theory.

(I found Randy's presentation rather stirring. I resolved to re-read volume one of Capital which I haven't looked at since 1969 and then go on to v. 2 and 3. During the discussion period, I made the point that is not just leftists who are making this false dichotomy between a "good" industrial capital and a "bad" financial capital. I mentioned Rakesh's citation of the German ultra-rightist Stoecker who made the same distinction in the late 1800s. This ideology helped to shape the program of the Nazi party, which took it one step further and made a false connection between finance capital and the Jews. Today, the Prime Minister of Malaysia is drawing from the same poisoned well as he blames the woes of his country on the Jewish machinations of George Soros.)

After a lunch break, Anwar Sheikh spoke. He made the case for the existence of a "communistic" association of the capitalist class. He used the term ironically to indicate that there is a commonality of interests in the various components of capital. What explains the commonality is the law of the equalization of profit rates. Investment will flow to commercial, financial or industrial capital on the basis of expected yields. The credit system facilitates these flows since it operates on the basis of future rewards and is itself composed of the accumulate capital returns of historic investment. He used charts and graphs that showed the tendency of financial, commercial and industrial profit rates to be consistent with each other over a 40 year period. No sector is privileged. He also made the point that the power of the capitalist system is exaggerated by the left. It is important to remember that since nobody is control of the capitalist system, it will work against its own long-term viability. He presented a rather dramatic chart that showed the profit rate has been declining steadily over the past 40 years as well. The only upturn occurred in 1982 when an attack on labor was first unleashed, coinciding with the airline controllers strike.

The next speaker was Doug Henwood who provided a historical account of how corporations and central banks were invented as a response to the needs of capital accumulation. He said that one school of thought, including Gabriel Kolko, views these institutions as signs of clashing interests between the Eastern states and the Western frontier. A more scientific understanding would be based on the insight that capital creates these institutions so as to better regulate its own functioning. In any case, they serve as a form of social control. Doug began his presentation with a howl of pain prompted by the attack by the Workers Vanguard on "Wall Street", which they claim fetishizes financial capital. Robert Malecki, late of PEN-L and the intelligent universe, has announced that the review will appear on his Cockroach web page.

The final speaker was Pat Bond of PEN-L who was on a visit to the United States. I was pleased to meet Pat in person, a most intelligent and winsome young man with good manners. We chatted about South Africa and a few other matters during the lunch break. I invited him to partake of the Marxism-International mailing-list which has recently expelled Jerry Levy and shows signs of rapidly improving health. Pat spoke about the ties between local struggles and global capital in South Africa. A movement is developing to repudiate the debts to western banks that were amassed under the illegal apartheid state. For information on the campaign, check www.aidc.org.za.

Louis Proyect