The title of this note is from today's "It's the Economy" feature by Adam Davidson in the print version of the Sunday Times magazine.
In the online version that title is replaced with the less provocative "What Does Wall Street Do For You?" --a title which is actually more accurate, as Davidson's main contention is that we CAN'T do without Wall Street because of what it does for us.
(http://www.nytimes.com/2012/01/15/magazine/what-does-wall-street-do-for-you.html?_r=1&ref=magazine)
Davidson ends his column by admitting that there is no way regulation can rein in Wall Street's crimes and excesses, yet he still believes its virtues outweigh its vices.
Certainly with a government run by and for the ruling class, he's right on the limits of regulation. But that's another, and less fundamental point.
For Davidson mentions in passing one function of capital -- in fact it's central function -- which if analyzed correctly shows that we can and MUST do without Wall Street.
Davidson notes the role of Wall Street in what we Marxists call the sphere of circulation, i.e. as a channel to redistribute money from those that have it to those that don't. Davidson portrays this as benefiting the middle class and even the poor who otherwise couldn't make purchases they need and want. Naturally he says nothing about the role of expanded credit in propping up a system that would otherwise have long ago fallen from the weight of its falling profit rates and the resulting collapse of its markets (see Mandel's "Late Capitalism" on the role of credit in postponing and exacerbating inevitable crises).
But what's more important is how credit, thanks to the financial institutions through which it flows, performs the redistributive function Davidson correctly notes --although it does so not primarily from rich to poor, but rather from workers to capitalists, and then among the capitalists in a newly socialized form.
That is, the capital flowing through the system originates in surplus value extracted from the workers. Once so extracted, banks and other institutions gather that capital in pools far bigger than the capital of any of the individual capitalists from which it originated. And in so doing banks make available funds for investments far greater than would be possible if a capitalist could draw only upon his own accumulated wealth.
Capital, in other words, is objectively socialized: socialized in its technical function, but only objectively because it is still privately owned. (This is parallel to the objective socialization of manufacturing and services within corporations.) For a description of this feature of credit, see:
Capital, Vol. 3, Chapter 27. The Role of Credit in Capitalist Production
Why does this matter for workers, especially those who have rallied to the call to "Occupy Wall Street"? Because this objective socialization presents the possibility of such an occupation in the most literal sense, that is, of seizing those banks and other corporations whose technical functions are carried out in a socialized manner and, by taking them out of the hands of private owners, putting the accumulated riches stolen from us at the service of society as a whole, a society which for the first time can vote freely on what to do with these riches.
We can be sure, of course, that once having a democratic say over such expenditures that workers will vote to fund essential needs such as food, housing, education, child care, culture, etc., and not war and luxuries for the idle few.
PS: I must note in passing that the analysis of credit and banks above is at odds with that of David Graeber in his book "Debt: The First 5,000 Years." Or more precisely, not at odds but rather irrelevant to Graeber's schema. Graeber says nothing about the origin of the bankers' wealth in the surplus value produced by workers, focusing only on various debts owed. Nor does he say anything about the possibility of seizing the banks. In fact, the implication of his one concrete suggestion, to declare a "Jubilee" and cancel debt, is that after such a cancellation the system will go on exactly as before, with new debts slowly accumulating until once again somewhere down the road it becomes time for another Jubilee.
Given Graeber's prominence in the Occupy movement (earned in great part by his selfless and courageous activism), these lacunae in his analyses are especially unfortunate -- and go a long way in explaining the reliance upon similarly short-sighted "solutions" among many Occupiers, who call for withdrawing money from the banks and putting them in credit unions or "alternative" banks -- while leaving the great capitalist financial institutions alone.
> The article above was written by Andrew Pollack.
2 comments:
I'm kind of more about burning banks than seizing them myself. But I certainly won't stand in your way if you want to seize them!
An interesting article. I also enjoyed the link to the NYT piece.
Marxists don’t understand the most important feature of any economy. The purpose of an economy (socialist or capitalist) is to provide consumers with more and better products at lower prices. The ability of an economy to do that well determines our standard of living. By that measure the US economy is vastly superior to the North Korean economy.
Marxists miss this point entirely, and cast economics exclusively as some conflict between labor and capital. This dispute exists, but it is totally secondary. The Marxist assumption that all value accrues from labor is a completely arbitrary assumption. One could just as easily or consistently argue that all value comes from capital. In fact, both labor and capital are necessary factors of production, required to run an economy. Divvying up the relative importance of one over the other is a silly game that can’t be decided anyway.
So now the purpose of credit markets can be explained in one simple sentence: liquid credit markets lower prices for consumers. How that happens is a bit complicated, but that it happens is easy to see. Places which have no functioning credit markets (North Korea), or where the markets have fallen apart (Greece, or US home mortgages) also have low and/or sharply declining standards of living.
A simple example may illustrate how credit markets serve consumers. Farmers who can’t get credit will go bankrupt after one bad harvest (unless they are very well capitalized). If most farmers go bankrupt then only a few farmers will remain. Fewer farmers means less product and/or monopoly pricing, which in turn implies higher prices. Consumers suffer.
Farmers also depend on derivatives markets, such as at the Chicago Mercantile Exchange. A farmer can borrow at much cheaper rates with secure collateral. Secure collateral can be had by selling futures - that is the farmer is now guaranteed a fixed price for grain, regardless of market fluctuations. Likewise, the buyer of the future contract (your local bakery) now has guaranteed delivery at a fixed price and can plan accordingly. Even allowing that the middleman (the futures trader) has to make a profit, the consumer gets a substantially lower price at the end.
Another benefit of commodity future markets is it enables a global market without having to ship grain back and forth across the ocean all the time. Only the final contracts need to be settled - not all the intermediate trades. Big markets (i.e., global) will always give consumers a cheaper price than small, local markets.
Food prices would skyrocket if agricultural derivative markets failed.
Obviously I think Pollack’s article is wrong, but I also think Davidson’s NYT piece doesn’t explain things very well, either. I hope this comment clarifies.
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