“What is the basis of capitalism”

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diamantis's picture
diamantis
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Jun 10 2010 09:22
“What is the basis of capitalism”

The basis of capitalism, is the abstract, vague, ambiguous and therefore unnatural, pretentious, artificial of the correspondence between bank accounts and cards and money, and then that between money and precious metals (especially gold), which creates the autonomy of capitalism as it leads in a hypnotic, consuming behaviour.

Thrashing_chomsky
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Jun 10 2010 09:51

No.

Schwarz's picture
Schwarz
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Jun 10 2010 17:05

FALSE.

Boris Badenov
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Jun 10 2010 17:09

I agree. The basis of capitalism is fat, greedy bankers. Also the super-rich.

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Steven.
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Jun 10 2010 23:15

not at all. What is the purpose of this post?

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gram negative
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Jun 11 2010 00:14

commodity and fiat money, credit, consumption, and banking all predate capital, and while they may be necessary for the existence of capital they are obviously not sufficient

slothjabber
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Jun 11 2010 09:56

They may predate capitalism as a system, but they don't predate capital. Capital predates money; money has only existed for 2,500 years and there has been barter-trade since 'long' (vague word there but to be honest how long us unknowable) before that. I'd say probably 6,000 years before that.

Capital also predates commodities; commodities are produced for a market, and without money, markets are again only barter-markets; and the earliest barter-markets, logically, were for the exchange of surpluses, not commodities (of course logic may be wrong, but I doubt it).

Banking can't predate capital; banking exists because of surplus capital.

Credit... hmmm. Reciprocal exchange can be seen as a form of credit and that may predate capital, I don't really know how to test that as a theory.

But 'capital' has surely existed at least since the earliest long-range exchange/distribution networks were set up... perhaps 7,000 years ago? Maybe even longer ago than that.

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Jun 11 2010 10:54
slothjabber wrote:
Capital predates money; money has only existed for 2,500 years and there has been barter-trade since 'long'

Capital is self-valorising value – what does that have to do with barter? Also, capital presupposes the existence of money (as a means of the general expression of value) as well as commodity production.

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Jun 11 2010 11:16

i'd just assumed they were using a definition of 'capital' which was very different to common accepted usage here

how capital, as a process/social relation existed prior to all of these things i've no idea - especially as you say it depends upon them for its existence - fair enough saying that commodity production and exchange, markets etc.. existed for ages before capital but to say the other way round is bizarre

what do you mean by capital slothjabber?

slothjabber
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Jun 11 2010 14:00

I never said that 'capital' depended for these things on its existence, I said that 'capitalism' (generalised wage labour and commodity production) came after them.

OK; from wiki - going for 'Capital (economics)' as a basic definition:

"In economics, capital, capital goods, or real capital are factors of production used to create goods or services that are not themselves significantly consumed (though they may depreciate) in the production process. Capital goods may be acquired with money or financial capital.

In finance and accounting, capital generally refers to saved-up financial wealth, especially that used to start or maintain a business. A financial concept of capital is adopted by most entities in preparing their financial reports. Under a financial concept of capital, such as invested money or invested purchasing power, capital is synonymous with the net assets or equity of the entity. Under a physical concept of capital, such as operating capability, capital is regarded as the productive capacity of the entity based on, for example, units of output per day.[1]Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power. [2] There are thus three concepts of capital maintenance in terms of International Financial Reporting Standards (IFRS): (1) Physical capital maintenance (2) Financial capital maintenance in nominal monetary units (3) Financial capital maintenance in units of constant purchasing power.[3]..."

So much for the definition. On to an historical demonstration:

Boats, for example, in that they may be (and as far as we can tell generally were in prehistory) used to transport goods (which probably aren't yet commodities) represent both social labour expended on the environment to change it (trees, cut down and fashioned by people); and also a depreciating but non-consumable good. And also they transport the goods I already mentioned, meaning that they're an intrinsic part of the 'valourisation' process (no swapping your axe-heads for reindeer skins if you can't reach the reindeer-herder's lands); and also they (the boats) in themselves can be swapped for something if the sailors decide to do something else at some point.

So for all these reasons (stored human endevour; non-consumable good used in valourisation process; use-value-with-exchange-value) boats represent capital, even as far back as the Neolithic or earlier.

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Jun 11 2010 14:10

admin: no flaming.

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Jun 11 2010 19:00

Slothjabber, OK, I thought you were using the category of "capital" in Marx's sense. If capital = "means of production", then yes, as a flint tool it predates pretty much everything in human history. The usefulness of such a concept of capital is a different question...

slothjabber
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Jun 11 2010 20:08

Flint (or other stone) tools wear out or chip, but cannot be repaired except by further wearing them out - they get smaller each time you sharpen them. So while you could regard that as depreciation, I rather see it as a slow consumption of use-value. I'm prepared to be challenged that I think 'capital' only goes back to 5000BC and will if pushed have to admit it may 2.6 million years or maybe more (the earliest known tools and the beginning of prehistory).

Either way it predates banking.

I thought 'capital' to Marx mean variable capital and fixed capital; as variable capital at periods before money presumably has a nominal value of zero, all capital must mean fixed capital, hence the discussion about boats.

Am I missing something?

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Jun 11 2010 20:42

Slothjabber, a steam engine – or a boat – wear out as well (both physically and "morally"), up to the point where they have to be replaced completely.

Slothjabber wrote:
I thought 'capital' to Marx mean variable capital and fixed capital; as variable capital at periods before money presumably has a nominal value of zero, all capital must mean fixed capital, hence the discussion about boats.

I think such a definition of capital would be too narrow (and the three volumes would have been a lot shorter smile). Capital for Marx is a specific social relation which cannot be reduced to things even though it is mediated by things. The most general definition of capital in this sense is "self-valorizing value" ("M - C - M'"), i.e. a sum of money which is not exchanged for a commodity to consume its use-value (as in "C - M - C"), but only to sell it later to gain more money (M'). The social relation part is of course the part that behind the C's and M's, there are their owners, producers and their labor. This general definition also corresponds to the forms of capital which (by centuries) predate capitalism, like merchant capital or banking capital or usury. However, it is not the same as barter or tools.

Variable and constant capital are concepts related to Marx's discussion of industrial capital (producing stuff), where Marx shows how these parts of advanced capital contribute to the value of the produced commodity (variable capital leads to new value being created through labor, while the value of constant capital is just transferred onto the final commodity).

(I hope I got it right, I'm tired and have apparently lost any ability to write clearly in English tonight.)

Oh and "fixed capital" is a concept introduced only in Vol. 2 and goes with "circulating capital". Someone else will have to explain though. I have yet to read the second book.

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Jun 11 2010 20:41

sorry, i used capital in the sense of capitalist social organization of production, which is what i assumed the op was referring to with capitalism. it is a usage that i have seen before but i will drop it if it is confusing or misleading.

slothjabber
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Jun 11 2010 21:36

Naughtonomist - if by 'capital' you mean what I'd understand as 'capitalism' then I think probably I don't disagree with you at all. As in 'labour versus capital' etc. As everyone prior to you had used the term 'capitalism' I thought you were making a distinction and talking about 'capital as expended labour for the purposes of expanded production'. So really just a misunderstanding.

Jura - somewhere in the aether is a joke about an axe: "it's a hundred years old, and it's only had three new heads and five new handles". Hence boats (which in theory are infinitely repairable until it's not the same boat any more... not sure why old boats are 'immoral' though...), and the discussion about stone tools being 'consumed'.

I don't get how investment in valourisation isn't capital. If a company or an individual buys a boat (or builds it) and fills it with stuff and sails it somewhere (the East India Company, an oil company, a post-500BC Greek trader) because they are somewhere where they can get tea, crude oil, or olives, and they can take that produce (not necessarliy commodities because possibly not produced for the purpose of making profit, at least in the case of the olives they may just be an opportunistic surplus), and sails back from that place with the products of there to bring here, then, would you agree that our various shippers have made a capital investment in their ship?

If you do agree, how is that different to a pre-500BC Greek trader (possibly even the same person), who visits the same 'markets' (or exchange-centres if you like) in the years before the adoption of coinage, and exchanges the same products, only for other goods instead of coin?

So our hypothetical trader can take olives from point A to point B, swap his olives for wine, and sail back to A; or he can sail from A to B, swap his olives for a pre-set type of silver token, swap the silver tokens for wine, and sail back to A.

How does the existence of silver tokens at point B change the nature of his investment in his transportation at A?

Oh, I might have meant 'constant' capital not 'fixed' capital.

dave c
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Jun 11 2010 22:17

Marx talks about this topic all through his economic writings, but there is a good discussion here in particular:

Marx wrote:
A chair with four legs and a velvet cover represents a throne in certain situations; but this chair, a thing that is there for people to sit upon, is not a throne by the nature of its use value. The most essential factor of the labour process is the worker himself, and in the ancient production process this worker was a slave. It does not follow from this that the worker is by nature a slave (although Aristotle is not very far removed from holding this opinion), any more than it follows that spindles and cotton are by their nature capital because they are at present consumed in the labour process by wage labourers. The stupidity of this procedure, whereby a definite social relation of production, which is expressed in things, is taken as the material and natural quality of these things, strikes us forcibly when we open the nearest textbook of political economy, and read on the very first page that the elements of the production process, reduced to their most general form, are land, capital and labour. (http://www.marxists.org/archive/marx/works/1864/economic/ch02a.htm)

Marx goes on further if you follow the link. Not that you can't define things differently of course. But Marx is clear about his reasons.

RedHughs
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Jun 11 2010 22:31

If capital is merely a condensed surplus of labor, then Slothjabber is correct.

If we say that capital is a condensed surplus of labor which is exploited in the context of universal wage labor then we have a definition which more or less encompasses the modern world but not feudal or other archaic tradition.

If capital is a condensed surplus of labor which is exploited with the prevailing operation of a market, the production of surplus and an average rate of profit, then only the operations of private capitalism are really included. If we're really rigid about this, we could arrive at a Stalinist or social democratic position (certainly the former Soviet Union would not be included here - the Ruthless Criticism folks take this very logically-consistent-but-not-terribly-useful-for-revolutionaries position).

Now:

Derek Sayer wrote:
One feature of Marx’s 1859 Preface has been remarked upon rather less often than it perhaps ought to be. The key concepts he employs there – forces and relations of production, economic structure and superstructure – are, for the most part, either left altogether undefined in the text itself, or else defined circularly, in terms of one another.

I'd see Sayer as leading up to the excellent point that Marx saw the capitalist system as not something to be codified by definitions but rather as a historical process whose movement defined it.

Thus, I don't think we can define capitalism by the production relations existing in one location. Rather, one must look at the prevailing world system. In 1970, the Soviet Union was part of the prevailing world system regardless of the non-existence of a mechanism for the equalization of profits within it. Thus it's entirely reasonable to include it within world capitalism.

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Jun 11 2010 22:27

Capital certainly existed before capitalism as has been pointed out here, in the sense of accumulated goods or authorized claims to goods in the form of money. But capital has a particular meaning in a historical capitalist system, and it's a pretty straight forward one, namely that capital comes to be used for the purpose of self-expansion. When over time the accumulation of capital and its reinvestment with the purpose of gaining still more capital becomes the priority that regularly takes precedence over other competing priorities then we can properly say we a dealing with a capitalist system.

slothjabber
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Jun 12 2010 20:06

I agree; and small traders have been doing that for a very long time. Greek shipwrecks from before the introduction of coinage demonstrate that there was a thriving local trade around the Aegean in the 7th century BC in the absence of money but the presence of 'markets' (though what the mechanism of exchange was I don't know and I doubt anyone else does either; it may have been state-sponsored price controls, but it may have been a 'free barter-market').

Either way, traders were transporting goods (either actual commodities, or opportunistic surpluses) to and from exchange centres in the hope of making enough 'profit' (again, a somewhat problematic concept without money but I hope not an unsolubale one) to live on. In doing so they 'invested' (ditto the dodgeyness) in their means of doing so, to whit ships. Thus, they used excess wealth (in the form of goods) to exchange for goods and services (boatbuilders, sailcloth, rope) to increase their ability to realise this surplus. I must be really dense here because I can't for the life of me see why that isn't capital investment in expanded production, even without generalised commodity production, wage labour and money-exchange.

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Jun 12 2010 22:37

But in pre-capitalist society one or more links in the circuit of production was usually "blocked": There was often direct interference in the circuit of production by those with the power to do so; or there was one or more element missing or difficult to obtain within the circuit - for example, some element at the point of exchange, production, distribution, or investment. It's not enough to say that one or another process is exhibited - such as capital investment, or markets, or whatever - but we have to look instead for the emergence of production processes linked together in complex, freely circulating commodity chains. When this happens we see the emergence of a high rate of accumulation not merely within some particular segment of society but within the capitalist class as a whole.

slothjabber
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Jun 12 2010 22:49

Again, I agree; I'm not saying that we have a capitalist economy in the Aegean even after money and markets as we understand them and (small-scale) commodity production; because a capitalist economy is the generalisation of capitalism (wage labour, commodity production).

But we have the elements of a capitalist economy, in small pockets, among some people, embryonic capitalism I'd argue, certainly from 500BC but as there's no meaningful disticntion between social and 'economic' organisation either side of the 500BC introduction of coinage, I'd argue that we can also see embryonic capitalism before the introduction of coinage - social investment in expanded re-production via differential exchange in long-distance networks (or, capital investment in trade).

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Jun 13 2010 07:33

Sloth, sorry, it seemed to me you implied that "means of production" or means of transport any tools in themselves were capital, regardless of the wider social context. The last example of the traders is of course merchant capital.

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Jun 13 2010 08:41

slothjabber, your trader accrues 'profits' because of unequal exchange, not because of exploitation, so this cannot be capitalism. i may be wrong about this given my scanty knowledge regarding the context, but could you possibly post your source - if anything for my own selfish use, since it is very interesting

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Jun 13 2010 08:59

naughtonomist, slothjabber is talking about capital, not capitalism. buying cheap and selling dear is the basis of merchant capital.

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gram negative
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Jun 13 2010 09:16

you are right, i misread that in the context of slothjabber's 'elements of a capitalist economy'.

slothjabber
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Jun 13 2010 11:09

I'm glad we've cleared that up! I think at least we all have a better idea what each of us is talking about.

Sources for the differences and similarities between 'trading ventures' in the Aegean on either side of the 500BC introduction of coinage can be found by comparing two Aegean shipwrecks reported in the Journal of American Archaeology:

Carlson, D. N. 2003. The Classical Greek Shipwreck at Tektaş Burnu, Turkey. In American Journal of Archaeology 107, 581-600.

Greene, E.S., Lawall, M.L. & Polzer, M.E. 2008. Inconspicuous Consumption: the sixth-century BCE shipwreck at Pabuç Burnu, Turkey. In American Journal of Archaeology 112, 685-712.

These show that essentially similar ship were transporting essentially similar goods to the same places before and after the development of coinage, which happened after the Pabuç Burnu and before the Tektaş Burnu wrecks. Thus as we might have expected we can reasonably assume that coins facilitated existing 'trade' rather than creating it.

I say 'development' rather than 'introduction' here because it's likely that coinage was actually invented to pay tribute/taxes rather than to facilitate trade. The usefulness of fixed currency probably quickly became obvious, but many early coinage systems consisted of massive denominations - essentially 'you couldn't buy a cow, but you could buy a county'. I don't know enough about early Greek coinage to comment on that however; but it is certainly true in Britain for instance, which had gold coins copied from Greek originals - presumed to be for paying tributes or as loyalty-gifts from important rulers - for a long period before 'small change' came along.

This by the way gives us an 'economic' model of a redistributive economy using coins but with little evidence of the 'small trader' that I'm positing for Greece - it's likely that it was more like a command economy in some ways with a degree of 'state'-controlled redistribution.

Hmm, 'Stalinism and the British Iron Age'... there's an archaeology book that doesn't need to be written.

On the subject of whether profit came from exploitation or just differential pricing, yes I'd agree the 'economic incentive' would come from differential pricing, but also there is I think an element of exploitation too - the Greeks did have artisanal workshops with slave labour but also free, waged workers - these workshops and more 'commercial' businesses must surely be regarded as 'proto-capitalist', producing commodities for a market?

But I do think especially in the earlier periods this free element of the working population must have been very small, and most production will have been by free peasants (or 'citizen farmers' perhaps).