Capitalism

→ View crises as surface eruptions of deep tectonic shifts in the spatiotemporal logic of capitalism

History of capitalism

 * The social, political, economic, cultural configuration of capital's hegemony has varied historically. From mercantilism through 19th century liberal capitalism towards the 20th century state-centric capitalism to contemporary neoliberal global capitalism
 * Capitalism can't be identified with any of its historical configurations. We need an understanding of capital as the core of social formation, separable from its various surface configurations

From feudalism to capitalism in the city
Florence around 1300 is one of the biggest cities in Europe with about 90.000 inhabitants. Big merchant houses emerge with chapters in Bruges, Palermo and Tunis, the most prominent of which are the Peruzzi → see also the [Medici], [Fugger], [Rothschild] and [Welser] families in Europe. Trade and barter were common in antiquity already but merchants don't strive to maximize profits. They prefer stable economic activity over highly profitable but risky activity. In China the dynasty of the Song-emperors marks an era of trade around 960 A.D. In the Year 1000, China even has the highest per-capita income in the world.

In the Middle East, the califs of Baghdad rule over a a big Muslim empire and pursuit of profit is not considered immoral there. Because the Venetian traders supplied the Byzantiane emperors in their wars with ships, they are granted privileges like exemption from duty. Business trips are risky (hire a ship, crew, buy goods, thieves, a storm can destroy all your investment!). Florence starts minting gold coins around 1250, the first real money in Europe, although the Chinese used paper money as early as 1000.

Business men become partners (commendas) for risky ventures and the roles in these partnerships are flexible: on the one hand you can provide credit, on the other you can be the voyager yourself. Thus, people are able to diversify risks by having their capital invested in different places and ventures. The cambiatori also start to provide credit and ask interests on it, thereby becoming the first bankers. They also give bank overdraft and enable delayed repayment of credits (e.g. due to bad crops). The church condemns interest (in their words usury). The Peruzzi were bankers of Florence, among the leading families of the city in the 14th century, before the rise to prominence of the Medici. By the 1330s, the Peruzzi bank was the second largest in Europe, with fifteen branches from the Middle East to London, all capitalized to the sum of more than 100,000 gold florins and manned by approximately 100 factors. Peruzzi capital had been amassed in the textile business that was the main engine of Florence's prosperity.

The dispossession of producers (peasants lose their land, see Enclosure movement) led to the commodification of labor-power. In the English countryside, tenant producers increasingly held their land (de jure or de facto) on ‘economic’ leases and paid ‘economic’ rents in cash or kind, not dictated by law or custom, but responsive instead to market conditions. Landlords suddenly depended for their wealth on the productivity, competitiveness and profitability of their tenants. It was in these circumstances that, for the first time in history, both producers and appropriators came to depend on the market for access to the conditions of their self-reproduction, and the relationship between them was mediated by the market. The Roman Empire and its imperial state apparatus were replaced in the remnants of the Western empire by what has been called ‘parcelized sovereignty’, a patchwork of jurisdictions in which state functions were vertically and horizontally fragmented. The right to private property developed in the ancient Roman empire. More particularly, the Roman state not only coexisted with, but strengthened, a landed aristocracy

History of the division of labor

 * In hunter and gatherer tribes, the division of labor is a biologically determined one (women gather, men hunt)
 * In ancient times: Plato has slaves who work for him so that he can become a philosopher by appropriating the surplus they produce; slavery is difficult to maintain for the slave owners because slaves are negligible in their work (since coerced to do it) and it's expensive to wage wars to get new slaves
 * Feudalism: children no longer belong to the feudal lord; peasants only work so much for the lord and in the remaining time cultivate their land for themselves; the institution of family and marriage is possible; they don't have ownership but instead only possession of their land - they can build a home and have possession of their land/home --> they have an interest to work hard to keep their land.

General characteristics

 * A system of productive relations that are subject to 'imperatives' (as opposed to an economy of 'opportunities' in other systems): This system revolves around three key elements
 * Individual private property (A change in property relations is premised on a change in social relations)& partly decentralized decision making structures in the economy
 * Generalized commodification of resources (commidty = stuff produced for the market) and the coordination of economic actors via (and full dependence on) the market-place & prices (i.e. wage for labor) + production for the sake of exchange(-value)
 * The existence of capital (and its profit-maximization) as opposed to a mere lump-sum of money as well as the availability and use of credit
 * Different social relations of production (as opposed to market society): one faction has only labor-power to sell
 * The sequence is the following: private ownership of the means of production leads to the commodification of labor-power because peasants cannot survive without access to the means of production and so have to sell their labor-power as a commodity with a price in the market. As opposed to feudalism, under which the feudal lord can rules over the persons, in capitalism the capitalist only rules only over the labor-power. The output of the production process is not property of the laborer but of the owner (i.e. the capitalist). In order for the products (commodities, labor-power included) to be sold, the market creates a mechanism of exchange, in which equals exchange equal goods
 * The operative logic of capitalism is the maximization of profit (and not the maximization of opulence of the feudal lord) via the production of surplus value, based on an ever-expanding commodification of land, labor, money, knowledge (and more recently risk, data etc.)
 * Primarily a class and not market system - markets existed also in feudalism but there was not generalized market for labor-power or capital. Instead feudal markets were largely populated by merchants who buy cheap and sell dear.

Inescapable imperatives
Production
 * Production occurs on the basis of commodities (commodity form is the dominant form) whereby both labor-power and money have also become a commodity that can be bought in markets.
 * Production is not simply reproduction of existing value but geared towards the enlargement of value through an increasing surplus value
 * Production is done by the combination of labor-power and MoP in the production process, producing commodities that embody a surplus, but where the direct producers (labor) doesn't own the produce. Rather, the property rights to the produce (hence of both value and surplus value, too) belong to the capitalist who pays a wage to labor.
 * Production is for exchange rather than use of the commodity. The product must be useful for someone (consumers) but it is not produced because it satisfies needs but because it brings money when sold (exchange-value is what capitalists have in mind)

Market dependency
 * The capitalist market reduces quality to quantity, makes human labor power a commodity and ensures that the exchange value of a commodity dominates its individual use value
 * Virtually all goods and services are produced for, and obtained from, the market
 * Direct producers are dependent on the market for survival: access to the means of production/means of labor is mediated by the market
 * Workers gain access only by selling labor in exchange for a wage
 * The capitalist appropriator also depends on the market for survival/self-expansion of capital, being obliged to enter the market both for access to labour and for the means of realizing the profits derived from it
 * From peasant markets (producers own/securely possess the means of production like land and sell surpluses as a supplement to their own production for subsistence) to a market system (in which virtually all commodities are produced for the market and where all factors of production, including land and labour, are treated as commodities)
 * Transformation of agrarian relations (i.e. food production): capitalist imperative impose themselves on agricultural production by subjecting producers to market imperatives
 * Commodification of everything: all commodities are produced for the market and all factors of production, including labor and land, are treated as commodities

Competition
 * Competition: Capitalists can make profit only if they succeed in selling their goods and services (for less than production costs) on the market → making profit is uncertain
 * Capitalists must compete with other capitalists in the same market. Competition is, in fact, the driving force of capitalism – even if capitalists often do their best to avoid it, for example by means of monopolies
 * Mindset: one the one hand boldness in quest for profits, on the other hand calculations to control risks
 * Even modest capitalists are subject to price competition
 * Capitalism is not just the removal of economic blockages, it’s the introduction of compulsion to transform forces of production  i.e. economically speaking, capitalists are free to move & obliged to do so

Profit-maximization/surplus value extraction
 * During the early times, profits were made by long-distance trade (i.e. buying cheap abroad, selling expensively at home --> arbitrage). Thus, no need to transform production or integrate markets
 * The need to adopt ‘maximizing’ strategies is a basic feature of the system
 * Need to improve labor productivity
 * Exploitation of natural resources
 * The only controllable thing in the cost-price ratio is the costs (of labor), i.e. capitalists try to cut costs to ensure profit (especially by transforming the methods of production) → constant improvements in labour productivity, to find the organizational and technical means of extracting as much surplus as possible from workers
 * Capitalist markets are driven by imperatives, non-capitalist markets by opportunity. e.g. where declining demand or falling prices typically compel a capitalist producer to cut the costs of production in order to survive in a competitive market, the producer responding to market opportunities would tend to reduce/withdraw from production when opportunities declined (i.e. prices fell)
 * Capitalist development requires is a mode of appropriation that must extract maximum surplus from direct producers, but can do so only by encouraging or compelling producers to increase their labour productivity and by enhancing rather than impeding the development of the productive forces
 * Only in capitalism, strategies for survival are identical with strategies for competitive production and maximizing profit (at least for producers). Capitalists have no guarantee of ‘realization’ in advance - they must adopt strategies that will optimize the price/cost ratio, and their only available strategy is to reduce costs by enhancing labour productivity, to achieve the maximization of surplus value.
 * Capital has one feature that was universal in all production and one feature particular to capitalism. That specific quality was the power of capital to yield profits to a special social class. Only in capitalism were "instruments of production" and "stored-up labour" the source of the income and power of the dominant social class
 * Capitalist producers, however, strive for increasing labour productivity at lower cost, especially by transforming the methods of production
 * Even exploitation of surplus has traditionally not transformed the methods of production (formerly achieved through military force). Indeed, the effect of exploitation has typically been to impede such transformations of the productive forces. Coercive ‘extra-economic’ modes of surplus extraction have lacked the incentive to promote the development of the productive forces

Accumulation
 * Money itself becomes a commodity

Change in social relations
 * Each particular mode of production has its particular forms of property, and these forms of property determine distribution.
 * Re-arranging/organizing the relations of production (i.e. the relation between capital & labor), the relations of exchange and distribution
 * Change the way people pursue economic activity: beyond mere subsistence/survival or the satisfaction of material needs, the goal is an abstract one: profit & the more-than-before
 * Social arrangements and the production of basic human needs were so fundamentally transformed as to impose compulsions and necessities unlike any that had governed human social life before
 * The effect of neo-liberal global capitalism is different for various segments of population and geographies

Extraction of surplus

 * Workers are not cheated on by capitalists in the market - equal values are exchanged when labor-power is bought - but in production they produce more in value terms than what is their wage
 * Through direct and non-direct (equity) ownership of foreign enterprises (which presupposes liberalization of capital markets, reduction of capital controls, IPOs etc.)
 * Through intellectual property rights (e.g. Indonesian factory not owned by Nike producing Nike shoes yet forced to pay for intellectual property, also known as 'jobless growth' in the locations where the corporation is headquartered)
 * Through trade barriers imbalances and dumping/unfair terms of trade
 * Profits come from workers’ living labor, so increasing productivity is not aimed at improving living standards, but rather at lowering the relative wage — that is, the difference between the value produced and the value retained by the workers

Theorizing capitalism

 * Contingency can occur at some level of abstraction and disappear at another: looking at the contingent effect of capitalism belies the fundamental effects of capital's dynamics in changing social order at a higher level of abstraction
 * Periodizing capitalism by looking at how the economy is restructured (how surplus is produced and distributed); how economic reproduction is embedded in social reproduction

Neoliberalism

 * The term "is too often used as a catch-all shorthand for the horrors associated with globalization and recurring financial crises".
 * Key events: Nixon Shock (1971); Volcker Shock (1979-1982); Reagan vs. air traffic controlers (1981) + Reagan's tax cuts; OPEC oil price hike
 * A key difference between liberal and neoliberal practice: under the former, lenders take the losses that arise from bad investment decisions, while under the latter the borrowers are forced by state and international powers to take on board the cost of debt repayment no matter what the consequences for the livelihood and well-being of the local population.
 * Neoliberals talk the language of money: of possibility (to buy anythings, become anything) and aspiration (for money accumulation, the sky is the limit)
 * In neoliberarlism, the state reacts on the criminality caused by social spending cuts with more dire punishment. A punitive state has replaced the welfare state. Previously state provision (energy, education, penal system), many task are now privatised and hence commodified. The concommitant loss of power of the democratially legitimized state is matched by an increase in power of private investors who are exempt from any check of power
 * The role of government is to create a good business climate rather than look to the needs and well-being of the population at large.
 * Why the Neoliberal turn? Prevent a return to the catastrophic conditions that had so threatened the capitalist order in the great slump of the 1930s; prevent inter-state geopolitical rivalries; ensure domestic peace and tranquillity, some sort of class compromise between capital and labour
 * Embedded liberalism: commitment to full employment, economic growth, welfare of citizens, state intervention to dampen business cycle, industrial policy, social wage → The neoliberal project is to disembed capital from these constraints. Restraints were tolerable so long as the pie was increasing but when growth collapsed in the 1970s, when real interest rates went negative and paltry dividends and profits were the norm (asset values collapsed), then upper classes everywhere felt threatened
 * In part, embedded liberalism's success depended on the largesse of the US in being prepared to run deficits with the rest of the world and to absorb any excess product within its borders.
 * Neoliberalization has not been very effective in revitalizing global capital accumulation, but it has succeeded remarkably well in restoring, or in some instances (as in Russia and China) creating, the power of an economic elite.
 * Neoliberalism in scholarship, ideology and policy practice can but don't need to overlap
 * Washington Consensus as putting into a formal orthodoxy what previously was tried out only here and there (e.g. Chile)
 * What the Latin-American lost decade demonstrated, however, was a key difference between liberal and neoliberal practice: under the former, lenders take the losses that arise from bad investment decisions, while under the latter the borrowers are forced by state and international powers to take on board the cost of debt repayment no matter what the consequences for the livelihood and well-being of the local population

Neoliberal Theory

 * Hayek: Liberty is not an end in itself. Like democracy, it is a functionally useful way to produce a larger systemic stability and higher level of productivity. That is, (cf. his book "The final conceit") capitalism is better than socialism not because it gives more freedom but because it allows more human life on the earth. The calculus of cost is a calculus of life. Being guided by prices is freedom.
 * The founding figures of neoliberal thought took political ideals of human dignity and individual freedom (corporations being defined as individuals before the law) as fundamental, as ‘the central values of civilization’. Any political movement that holds individual freedoms to be sacrosanct is vulnerable to incorporation into the neoliberal fold - by capturing ideals of individual freedom and turning them against the interventionist and regulatory practices of the state, capitalist class interests could hope to protect and even restore their position.
 * Planning and control are being attacked as a denial of freedom. Free enterprise and private ownership are declared to be essentials of freedom. The idea of freedom ‘thus degenerates into a mere advocacy of free enterprise’, which means ‘the fullness of freedom for those whose income, leisure and security need no enhancing, and a mere pittance of liberty for the people, who may in vain attempt to make use of their democratic rights to gain shelter from the power of the owners of property’
 * Neo-liberalism would accept the nineteenth century liberal emphasis on the fundamental importance of the individual, but it would substitute for the nineteenth century goal of laissez-faire as a means to this end, the goal of the competitive order", which requires limited state intervention to "police the system, establish conditions favorable to competition and prevent monopoly, provide a stable monetary framework, and relieve acute misery and distress
 * Privatization of the public sphere, deregulation of the corporate sector, and the lowering of income and corporate taxes, paid for with cuts to public spending
 * Extension of competitive markets into all areas of life, including the economy, politics and society.
 * Interpret neoliberalization either as a utopian project to realize a theoretical design for the reorganization of international capitalism or as a political project to re-establish the conditions for capital accumulation and to restore the power of economic elites.
 * When neoliberal principles clash with the need to restore or sustain elite power, then the principles are either abandoned or become so twisted as to be unrecognizable.
 * The assumption that individual freedoms are guaranteed by freedom of the market and of trade is a cardinal feature of neoliberal thinking, and it has long dominated the US stance towards the rest of the world
 * Reverse nationalizations and privatized public assets, open up natural resources to private and unregulated exploitation, privatize social security, and facilitate foreign direct investment and freer trade; export-led growth was favoured over import substitution
 * Shelter the market from political interference (state, unions) and deal with the problem of democracy/universal suffrage
 * Neoliberals did not buy into economics because they believed the markets are neither knowable nor manageble
 * Benefits of free flows of (especially finance) capital is not the direct material benefits but the limits it imposes on the autonomy of national governments - Hayek & van Mises praised democracy for its ability to transition peacefully from one system of power to another but saw a necessity to constitutionally constrain the power of majoritarian rule to not infringe on free trade and markets. They liked the idea of competitive determination of politics/political fragmentation (let's see how capital decides to allocate when taxes are high vs. low


 * A state apparatus whose fundamental mission was to facilitate conditions for profitable capital accumulation on the part of both domestic and foreign capital
 * The Neoliberal theoretical framework is not, as several commentators have pointed out, entirely coherent. The scientific rigour of its neoclassical economics does not sit easily with its political commitment to ideals of individual freedom, nor does its supposed distrust of all state power fit with the need for a strong and if necessary coercive state that will defend the rights of private property, individual liberties, and entrepreneurial freedoms.
 * "‘Economics are the method but the object is to change the soul." (Thatcher)
 * Neoliberal theory conveniently holds that unemployment is always voluntary. Labour, the argument goes, has a ‘reserve price’ below which it prefers not to work. Unemployment arises because the reserve price of labour is too high

Specificities of Neoliberalism

 * Neoliberalism is distinct from liberalism insofar as it does not advocate laissez-faire economic policy but instead is highly constructivist and advocates a strong state to bring about market-like reforms in every aspect of society
 * MNCs rule
 * Rolling back not of the state but of (health & welfare) policies, labor movements (trade unions), and (social democratic) parties
 * To the degree that organized labour has managed to maintain or acquire (in the case of South Korea) a powerful presence, neoliberalization has faced strong and in some instances insurmountable barriers. Weakening (as in Britain and the US), bypassing (as in Sweden), or violently destroying (as in Chile) the powers of organized labour is a necessary precondition for neoliberalization.
 * Neoliberalism: the increasing presence of finance in the economic and social reproduction; financialization as the basis on which economic and social restructuring takes place; neoliberalism as about keeping financialization going rather than freeing markets
 * A new expansion in time and space of the market (e.g. expansion of trading hours)
 * The emphasis on property, in classic and market liberalism, has been replaced by an emphasis on contract. Entrepreneurs sometimes own no fixed assets, and lease the means of production
 * Contract maximalisation is typically neoliberal: the privatisation of the British railway network, formerly run by one state-owned company, led to 30 000 new contracts. Most of these were probably generated by splitting services, which could have been included in block contracts
 * The contract period is reduced, especially on the labour market, and so the frequency of contract is increased. This flexibilisation means a qualitatively different working life: many more job applications, spread throughout the working life
 * Market forces are also intensified by intensifying assessment (e.g. quarterly corporate assessment instead of annual; continuous assessment of financial products)
 * New transaction-intensive markets are created on the model of the stock exchanges - electricity exchanges, telephone-minute exchanges. Typical for neoliberalism: there is no relationship between the growth in the number of transactions, and the underlying production
 * Artificial transactions are created, to increase the number and intensity of transactions. Large-scale derivative trading is a typically neoliberal phenomenon, although financial derivatives have existed for centuries. It is possible to trade options on shares: but it is also possible to create options on these options. This accumulation of transaction on transaction, is characteristic of neoliberalism
 * Because of contract expansionism, transaction costs play an increasing role in the neoliberal economy
 * The speed of trading has increased. It is this increased speed which has led to the huge nominal trading volumes on the international currency markets, many times the Gross World Product on a yearly basis.
 * The creation of sub-markets, typically within an enterprise. Sub-contracting is itself an old market practice, but was usually outside the firm. It is now standard practice for large companies to create competition among their constituent units
 * Competition for inward investment. This competition is often seen by activists as the core doctrine of neoliberalism, especially since the neo-mercantilist policies are easy to understand and very unpopular: wage cuts, less money for public services, less tax on the rich
 * For neoliberals it is not sufficient that there is a market: there must be nothing which is not market
 * There is no distinction between a market economy and a market society in neoliberalism
 * With the transition from feudalism to capitalism, power (and hence the enemy) became more invisible, losing a subject/face, i.e. the market. Neoliberlism has perfected this project and made power completely invisible, there is no concrete oppressor anymore. Hence, we cannot develop resistance anymore
 * While in feudalism, the elite first dispossessed people and then adapted the legal framework accordingly, the Neoliberal strategy is to make the laws in the first place (the EU as the institutionalized mechanism to preferentially treat the economy)
 * Neoliberalism is all about the diffusion of responsibility (there is no culprit - it was a financial crisis and not a crime of capitalists) → plausible deniability
 * Neoliberalism separates humans from their social and environmental context - individuals as atomised entrepreneurs
 * Neoliberalismis a doctrine of dealing with consequences

Ordoliberalism

 * The idea is that after WW2, you need something to protect the capture of the state both by the left and right and maybe you need a once-off executive step from above (i.e. quasi-authoritarian decree) to separate the economy from the state and the public from the private.
 * Deep disagreements in the group of the Walter Lippmann Colloquium separated "true (third way) neoliberals" around Rüstow and Lippmann on the one hand and old school liberals around Mises and Hayek on the other. The first group wanted a strong state to supervise, while the second insisted that the only legitimate role for the state was to abolish barriers to market entry
 * Not a polemic but scientific term and school of thought: interdisciplinary, focusing on society as a whole (cf. contrast Thatcher's 'There is no society')
 * State not only creates conditions for freedom and competition but also maintains it - crucially, it is recognized that markets must be protected through institutions (antitrust)
 * Germany was until 1945 dominated by cartels and monopolies so proposing to curb that was revolutionary
 * Rüstow: we need a strong state that can counter the interest groups/lobbyists (Liberaler Interventionismus)
 * After laissez-faire - and realizing that laissez-faire is actually planned
 * Laissez-faire too unprotected against monopoly and rent-seekers
 * Polanyi: the problem is laissez-faire vs. ordoliberals who see the problem in social resistance to price mechanism
 * Böhm: central is a stable currency
 * Ordoliberals: the market is not free
 * A restraining economic constitution that limits political discretion
 * State only for defining the structural framework
 * Ordoliberalism is more about a language of justification and means for linking policy to intuitions

Further materials

 * edX Course on the History of American Capitalism
 * The global race to the bottom