Thursday, October 29, 2015

Understanding the forms of capital

KARL MARX          
By Malik Sekou OSEI

 Here we all must begin in a not so easy discussion and that can be rather complex that everyone may need to examine more than once. To the reader it’s important to pick volumes I, II, III of Capital by the thinker Karl Marx to approach a level of rigor beyond the American phenomenon of intellectual sloganeering. Also what will be needed is two other books, the first one is by Rudolf Hilferding and called Finance Capital (1910),  the second book is by Geoffrey Kay Development and Underdevelopment, A Marxist Analysis (1975).
Rudolf Hilferding.jpg

 Capital as a social relation is an energetic occurrence following a circuit of capital in which it takes on different forms at different points of the circuit and its development within history. If we can start with capital in the form of money (M), it is transformed into commodities (meaning of the production and labor power) to become then productive capital (P). The result of this process of production is commodity capital (C) which has to be actualized through sales and thus re-transformed into money capital. In that sense, capital assumes different forms, but M and C by themselves are lifeless; it makes more sense to talk of capital having specialized occupations and meanings within each stage of the circuit.

      Productive capital, (P) is a process. It is the factory or farm at work. In the case of a hypothetical and theoretic, simple capital system the enterprise that runs the factory may also have full control over dealing in commodities and money, but in reality these processes have been specialized functions and are distinct forms of capital. Merchant capital has the specialize function of dealing in commodities. It is typified by the great trading houses that make profits by buying and selling the raw materials for industry or by the many  multiple stores that trade in finished commodities (the C in the circuit), but there are a variety of intermediary forms. To the degree that banks simply deal in money (the M in the circuit) by exchanging it, they, too, are operating a type of merchant capital. However, the development of the monetary system in relation to these processes gives rises to CREDIT and the development of a different, specialized form of interests-bearing capital. Interests bearing capital is involved in the practice of lending money capital to industrial capital so that the initial M in the circuit of industrial capital is increased and expanded from that source.

    We have to go back to parts IV and V of Capital III. were involved with the specialized forms of capital. They are a significant component in authenticating and confirming Marx’s claim to be able to explain the complexities of the world from principles uncovered by examining highly abstract, general categories, for Marx reaches these chapters after having examined the nature of capital in its undifferentiated forms. In Capital I and II and the early parts of Capital III, Marx presented the laws of capital in general, and of much industrial capital in competition, and Marx believed that the specialized forms of capital could only be understood on the basis of these laws. In particular, the earlier analysis uncovers the way in which SURPLUS VALUE is produced and distributed between industrial capitals, whereas in parts IV, V and the VII of Capital III the question is how this surplus value is distributed in various types of revenue between different specialized form being industrial capital alone, to industrial capital plus merchant capital plus interest-bearing capital. And whereas in the earlier analysis surplus value takes the forms of PROFIT. Industrial capital receives only profit-of-enterprise while interest-bearing capital receives a portion of surplus value as interest and merchant capital also receives profits, commercial profit, which is a deduction from the total surplus value. The revenues received by merchant capital and interest-bearing capital and their separation from other forms of surplus value, merit further analysis.  
19th  century Europe

    Merchant capital, operating in the realm of circulation does not directly generate surplus value, but it does appropriate as profit some of the surplus value that is generated in the only place possible, the sphere of production in capitalist industry and agriculture. Merchant do more than simply buy commodities for resale; order to accomplish their role they also expend capital upon the labor power of shop-workers, clerks and so on. However, this labor is unproductive according to objective laws; it does not directly produce surplus value, although by reducing the cost of circulation below what they would have been if non-specialist industrial capitalist had undertaken it, it may indirectly contribute to it. Given that merchant capital does not generate surplus value in a process of production controlled by it, its profit is obtained from its dealing with industrial (and agriculture) capital. Merchants buy commodities from industry below their value and sell them at their value. The difference, which they appropriate, has a tendency to equal the general rate of profit; competition ensures that the rate of profit accruing to merchants on the capital they advance equals that accruing to industrialists on their capital, and each equals the total surplus value divided by the total of the (merchant and industrial) capital.

    That consideration of commercial profit ignores the deduction of interest; and the nature of interest-bearing capital, too, is considered by concentrating on its relation to industrial capital alone. Interest is paid by industrial capitalize out of their profits, and what remains is profits-of-enterprise, a proportion of the total. Marx considered that the proportions which result from this division are a matter of “accidental” forces of demand and supply, so that no general principles determining the rate of interest (or rate of profit-of-enterprise) could be postulated except as the general limits to the range of values it could take. .
    The final type of revenue which derives from surplus value is RENT, but this return to land ownership is not the same as a return on a specialized form of capital.

    The specialized forms of capital are more than simply the basis for the division of surplus value into different types of revenue, for the development of each has an important historical impact. Although merchant capital depends on industrial capital for the source of its profits, it arose in an early form before industrial capital. Indeed, the role of trade and plunder in the rise of capitalism, the process of PRIMITIVE ACCUMULATION, means the merchant capital was crucial for amassing the resources and stimulating the growth of social relations that were necessary for capitalism. The early monopolists trading companies were its typical representatives in this respect. However, although merchant capital laid the origins of capitalism in Europe, it has been argued that its predominance in Europe’s relation to the so-called third world blocked the ability of the countries of Africa, Asia, and Latin America to undertake capitalist development. In the work of Geoffrey Kay, in his book Development and Underdevelopment (1975) he argues that merchant capital within Europe lost its independence as industrial capitalism developed, and therefore did not hinder the development of the latter, the rise of a class making profits through organizing production. In many countries of the Third World however, merchant capital has continued to predominate, at least until recently, and to exercise a rather deal of independence in pursuing profits through trading rather than developing capitalist production. Geoffrey Kay argues this independence has had a paradoxical character at least since the mid-nineteenth century when it gained and lost its independence. Independence was retained in the sense that it was the only form of capital in the underdeveloped countries, but since, in the world as a whole, it coexisted with industrial capital it had to modify its actions to act partially as an agent. It had to trade in the later in the Third World. As an agent it had to trade in the manner required by industrial capitalism (shipping raw materials and food to the capitalist countries and selling their manufactured goods in captive 3rd World Markets), and only influenced local production in the minimal manner necessary to serve Europe’s need for raw materials and food.

European imperialism and the suppression of 3rd World economic
development laid the political foundation for contemporary capitalism.

    Interest-bearing capital’s role in history was recognized and acknowledged by Karl Marx in terms of the effect of the credit system on the centralization of capital and mainly on the founding and quick development of JOINT-STOCK COMPANIES. These developments were seen as exhibiting a new step and as having an important and noteworthy consequence.  This is to give rise to the responding and thwarting tendencies to the FALLING RATE OF PROFIT, since those who advance capital to the joint-stock companies are believed to accept a lower return as a result of the control of interests as a form of surplus value. And they give rise to a change in class configuration as the actually operational capitalist is distinguished from owners of the capital which the industry uses. Interests-bearing capital, however, does not lie in repose unchanged once it arises; it develops more complex characteristic and Hilferding back in 1910 laid out in his book called Finance Capital  the other factor that he identified as the transformation into FINANCE CAPITAL as especially complex, but through it all there is a needed rigor of understanding beyond protest slogans.

   This discussion has never been easy and too many approach this river without the ability to swim and they drown by their lack of training and rigor. I have suggested the review of three important works that lay foundations for study.

     Right now it is important to understand, living in the imperialistic epoch, the different forms of capital and their functions and the maintenance and power of an economic system that thrives on the spread of material underdevelopment and human suffering and which fosters a culture of urban degeneracy, of urban rugged individualism and information ignorance as the norm. Our intelligentsia, meanwhile, postures in performance only to entertain everyone to death.

For History is on our side, but, not time.   

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