Overproduction, Overcapitalization (1) By S. Artesian
11 July, 2013 — The Wolf Report: Nonconfidential analysis for the anti-investor
1. Anti-Executive Summary: Marx’s theory of revolution is not one that correlates the improving or worsening prospects for revolutionary overthrow with improving or worsening economic conditions. In this regard, Marx is neither a “crisis=revolution” advocate, nor a “growth=revolution” theorist.
In his A Contribution to the Critique of Political Economy, Marx offers his well-known, oft-cited, sometimes abused:
At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or–this merely expresses the same thing in legal terms–with the property relations within the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetter. Then begins an era of social revolution.
Marx’s critique being the analysis of the immanent limits to capital, the immanent tendencies for or toward the abolition of capital, and not the assertion of that imminent abolition, the conflict between means and relations must exist at the very origin of capital, must in fact be capital.
That conflict is inherent in the organization of labor as value, and value producing. The conflict exists in the organization of social labor, the labor power of class, expropriated, circumscribed by and as the private property of others.
The immanent conflict becomes manifest, becomes more than apparent, becomes acute as and at moments in the reproduction of capital. The moments can erupt during periods of expansion. The moments can occur as the legacy, the hangover of expansion. They can erupt as “civil protests” demanding “equality” “justice” “equity” against the very property relations integral to capital’s past; to the security of its property, to the conditions of labor, and made obsolete, an obstacle, a barrier to further reproduction by the expansion of capital itself.
For example, the civil rights struggle in the United States was precipitated by the disruption of plantation-share-cropper relations driven by the mechanization of Southern agriculture prior to, during, and after the Second World War.
Ultimately, necessarily, this conflict revealed itself as the conflict between labor and the conditions of labor by reaching into the heart of US industry with the organization of the Dodge Revolutionary Union Movement and the League of Revolutionary Black Workers.
The conflict can be made acute during periods of contraction, for example Spain in the 1930s; or in the overture to periods of contractions as in Spain, Portugal, Chile, Argentina in the mid-1970s.
Capital finds in all these cases an obstruction, a limit, in all that it has accomplished, and left undone in that accomplishment, just yesterday.
2. Interjection: Michael Heinrich in his highly publicized, and overrated, An Introduction to the Three Volumes of Karl Marx’s Capital argues:
Capital, self-valorizing value, has no intrinsic limits to valorization, and for that reason no rate of valorization, once reached, is sufficient.
Rarely has a researcher, scholar of Marx, expressed his misapprehension of Marx’s critique so concisely, which is the best thing I can say about Heinrich’s “introduction.”
In fact, Marx’s Capital might best be described as an inquiry into and an exploration of the intrinsic, inherent, multitudinous limits to valorization, a description that can also be applied to Marx’s Grundrisse, his Economic Manuscripts 1857-1864, and the notebooks Engels edited into volumes 2 and 3 etc. etc.
All of Marx’s critique of capital is a critique of both the ideology of capital, “political economy,” which sees capital as “natural,” without historical limit, and an exploration of the fragility of the material mechanism for the accumulation of capital, valorization, which is threatened on all sides from the inside.
If the law of value is nothing other than the relations between classes, the specific organization of labor as wage-labor, and it most assuredly is nothing other than that, then the intrinsic limit to valorization is derived from that law.
Private property in the means of production is the limit to valorization, a limit that cannot be overcome, no more than a human being can jump over his or her own head while holding onto both feet. End of Interjection.
3. Road Trip: In its various iterations, advanced, developed, less-developed, developing; in its conflicts, alliances, adaptations to, adoptions of the forms of private property exploiting labor socially, that is to say for reasons, purposes, other than subsistence on either the grand or petty scale, or both, capital embeds its unique requirements for its reproduction, which is the conversion of product into value through the transformation of surplus product by surplus value. Such transformation can only occur if (1) all products are superfluous and not products of direct consumption for the subsistence of the laborers and (2)the expropriation of all the products of the laborers is necessary for them to receive a value equivalent to the cost of their subsistence.
Whereas in other modes of production, in other than capitalist markets, commodities exchange as commodities, presenting an image of value, in capitalist markets, commodities are exchanged as representatives of capitals, as bearers of socially necessary labor time, where exchange, where the realization of the value, is a distribution, a parceling out of the whole.
Every category, and every moment of this process is the result of the self-reproduction of the first category, or principle, of capital: Surplus value can only be expropriated from labor, if the means of production are also be organized as commodities, as values, which achieve their realization in the extraction of higher rates of surplus value. The means of production can only realize their value through the appropriation of surplus value. Capital, that mode of production, is the accumulation of the means of production as expanded values.
4(a). Getting There: So much for the determinants of capital. Let’s get started on the good stuff, the negations of capital, which of course are those very same relations. Anyway, back in the day, the day being almost any day after JP Morgan was given $29 billion by the Fed to liquidate Bear Stearns and prior to September 15, 2008, those a step removed from Wall Street amused themselves by contrasting the dire condition of the “derivative economy” with the relative health of the “real economy.”
“Who cares,” they whistled walking by the Trinity Church graveyard in lower Manhattan, “if a hedge fund, or two, or an entire investment bank goes under? What harm can it do the real, productive, economy?”
Then Lehman Bros went down, AIG was effectively bought by the US government masquerading as the maiden in Maiden Lane, John Thain pulled a miracle “out of his arse” as bankers have been known to remark, by unloading Merrill Lynch, an entity of substantial negative net worth on Bank America for $29 a share. And the whistling stopped. It’s tough to put your lips together and blow when all you can do is suck.
Right bloody mess, it was. Still is. Some, crusty bastards– those with money safely invested in shotguns, canned goods, and Treasury notes–wagged a finger, telling all “We told you so” and welcomed the self-correcting invisible hand made visible, that would wipe out the phony, derivative, fictitious capital that was impairing productive capital. And then “we,” upright, responsible, god-fearing, flag-loving, industrious citizens would roll up our sleeves and with a hundred million invisible hands wave good-bye to the artificial financialized economy encumbering the real economy.
Didn’t exactly work out that way, did it? We saw that the “real economy,”productive capital” did not take advantage of this self-correction. We saw that the devaluation of the asset-backed securities could not be accomplished without the devaluation of the real assets behind those securities. We saw that the asset devaluation began before and initiated the collapse of the asset-backed securities, just as the asset inflation preceded the inflation of the asset-backed securities.
We also saw the loss of millions of jobs in the so-called real economy; the real decline in the volume and value of world trade in 2009; the lay-up of 10% of the world’s maritime fleet, and about 1/4 of the US railroads’ freight car stock.
We have also seen that when the so-called real capitalist economy moved off the bottom of this contraction, the movement is not predicated upon the removal of “fictitious capital” but is accompanied by new issues of the so-called “fictitious capital.”
We see that asset inflation does not, has not, cannot restore profitability, but that a certain uptick in profitability, based on reducing the value of the labor aggrandized in the production process, gets translated into asset inflation. Profit is like a pheromone to the traders, dealers, hawkers, in the financial markets, inspiring them to chase after that elusive object of their desire called “yield” via junk bonds, private equity buy-outs, and re-derived derivatives, inflating those assets.
We heard that the financial collapse, at one and the same time divorced from, immaterial to, and “beneficial” to the “real,” “productive” economy wasn’t completely beneficial to the real, productive economy. The financial collapse produced a “credit crunch.” The financial collapse produce a “crisis of confidence.” “Crisis of confidence” is the bourgeoisie’s, the social democrats’, the monetarists’, the free marketeers’, the state interventionists’, the bankers’, the parliamentarians’, the regulators’ “go-to” theory for everything and anything. The crisis of confidence inhibits “effective demand.” The crisis of confidence drives government to institute programs of excess austerity in order to restore confidence. The crisis of confidence causes banks not to lend. It causes corporations not to borrow. It cause everything bad the interferes with the normally balanced, pacific, mechanisms of accumulation.
The invisible hand requires a leap of faith. Smith, Ricardo, Kierkegaard meet Keynes, Minsky, and Billy Graham.
When things go crappers, it’s because the bourgeoisie are expressing “excessive exuberance;” because they are too confident. When things are still going crappers, it’s because there’s not enough confidence. “If we could just get this confidence thing right, we would conquer the business cycle,” spoke the economist confidently.
In the US, for the “real” “productive” capital, there was no credit crunch. US non-financial industries dramatically increased the their cash and cash-type assets on hand. US non-financial corporations did in fact borrow, although their cash and cash assets were at all time highs, issuing record amounts of corporate bonds, and even with the record issues, the corporations had enough cash on hand to meet all debt payments due for the next five years.
I don’t know about you but the way I figure it, confidence follows money. Make money, confidence goes up. Lose money, confidence goes down. At least that’s how it works for me.
4(b). (Hicks) “Vasquez!” (Vasquez) “Almost there!” (Aliens, 1986): With mercantile capitalism, “investment,” such as it is, follows trade. Investment, and as little as possible, is committed as a factor of trade. In industrial capitalism, trade follows investment. The capture of wealth is in the organization, control, and exploitation of labor, in the disposition over labor-time.
Industrial capital realizes that wealth, distributes it, apportions it, through the exchange of all expropriated values. The market for the commodity is other commodities. The market for capital is all capital.
Since 1990, the flow of outward directed (directed towards a country other than the “home” country)foreign direct investment has grown from about two trillion dollar to about twenty four trillion dollars. Industrial production, merchandise trade, and maritime transport of that trade have all moved in unison– not in lock step, but in unison.
In 2011, maritime transport accounted for 80% of world trade by volume, and 70% of world trade by value.
Rates, charges, hire costs, in the shipping industry were, and are, so low as to be unprofitable for most transport lines. The reason is that throughout the years of the Great Recession, beginning in 2008, the maritime fleet size grew at a rate that far exceeded the growth in trade. In 2011, the world maritime fleet capacity expanded 10% over the prior year. Freight volume expanded by less than half that amount. Since world trade in 2012 is estimated to have grown by less than 2% year-on-year, the shipping news has oscillated between bad and worse.
Throughout the “Great Recession, the maritime transport companies have continued to take delivery of vessels ordered in 2006, 2007, and 2008. The industry took delivery of more vessels with more capacity– identified as deadweight tonnage or DWT– in the two years 2010 and 2011 than any previous two years in its history.
Overall, world vessel DWT capacity increased 38 percent between 2008 and 2012. Bulk carrier (iron ore, coal, etc.) capacity grew 60 percent. Container shipping capacity grew 40 percent. The tanker fleet expanded to the point where hire rates in 2011 were at or near the rates at the bottom of the Great Recession in 2009.
Now this is not the devaluation of an “old industry” by a new industry; the devaluation of an “old fleet” by a new fleet, although there is certainly an element, a very small element of that going on, because there’s always an element of that going on in capital, in capitalist accumulation.
The average age of the world maritime fleet has been declining with the delivery of the new vessels, and currently, the age of vessels greater than 80,000 dwt is less than four years.
The overproduction of the maritime fleet has forced the daily hire rates below profitability; such overproduction is simply a different moment of the over-capitalization of the industry. Too much real capital, not fictitious capital, had been accumulated and reproduced through investment in expanding the fleet. This is the (attempted) revalorization of capital, without which it cannot survive as value, but with which it drives down its own profitability. The collapse in daily hire rates drives down the asset values “sunk”(you should pardon the expression) into the production of the ships themselves– into the accumulation of these means of production as expanded values.
Devaluation here is not the displacement of one capital by another, it is devaluation in accordance with the diminished profitability of capital.
5. There: Capital’s existence depends on its revalorization, which is the same thing as saying it depends on the recapitalization of surplus value. Once surplus value is realized it can be reabsorbed, redirected in a number of ways. It can be consumed as revenue, simply meeting the income requirement of its possessor(s), but this is but another iteration of subsistence. The portion consumed as revenue no longer engages, commands, possesses and dispossesses the laborer of labor-time, expressing that dispossession as value.
The recapitalization of surplus value, the revalorization of capital is the accumulation of the means of production as expanded values. I think I said that before, but it bears repeating. This drives the expansion of the fixed assets in the production process of capital. This fixed capital only transfers its value incrementally, and only by extinguishing its use value through numerous cycles of production, to the product or service. In this case, transportation is both product and service.
No capitalist realizes surplus value “independently.” At its core, capitalist production is production has no value, no useful value, to the owner. Its only value to the owner is solely its value in exchange.
To amplify the extraction of surplus value, each and every capitalist is compelled to alter the relation between the necessary labor time– that time in which the laborers reproduce the value equivalent to their own wage– and the surplus labor time, which is materialized as the commodity’s value.
While compelled to do this, capital can only do this effectively to the degree that the cost of production declines.
The reduced cost achieved by any particular capital belonging to any particular capitalist (corporate or individual) is the vector through which the individual capital can claim a greater portion of the total available surplus value thrown into the market by all capitals.
This circulation of isolated, or uneven, dis-uniform increased applications of fixed assets/reduced costs of production, reduces the average time necessary for the reproduction of the product or service.
Accumulating the means of production as expanded values requires expanded production in order circulate the increased ratio of surplus value. Unit value declines. Prices follow
Prices decline, transferring profits to the “new” “market leader.” Profits are leveled. Profitability as a portion of the total capital committed to the valorization process, declines.
This process lengthens the time of return for the value embodied in the fixed assets of the “older” capitals. As the prices decline, are forced to decline for those “older” capitals, the time to circulate the original value sunk into the means of production expands. As turnover time lengthens the rate of profitability declines. As the rate of profitability declines, the asset values in the production process are once again devalued.
We’ve arrived. Not all capitalists arrive at the same time, but all capital, sooner rather than later, gets there, because all capital pursues its revalorization the same way. All capital must accumulate the means of production as expanded values.
We get the sudden, extended, violent, widespread devaluation of all capitals.
Overcapitalization, overaccumulation, overproduction are all different expressions of the same face.
The decline in profitability, in the rate of profit, is so dreaded by capitalists because it is a summing up. The decline proclaims that the limits to valorization have been reached and the limits are capital.
We’re there. There’s nowhere to go.
July 11, 2013