The Implosion of Contemporary Capitalism

Samir Amin

• Publisher: Monthly Review Press
• Year: 2013
• Print ISBN: 9781583674208
• eBook ISBN: 9781583674222
• Topic: Economics
• Subtopic: Economic Policy
• Index: Economics

Renowned political economist Samir Amin, engaged in a unique lifelong effort both to narrate and affect the human condition on a global scale, brings his analysis up to the present—the world of 2013. The key events of our times—financial crisis, the emerging nations, globalization, financialization, political Islam, Euro–zone implosion—are related in a coherent, historically based, account.Changes in contemporary capitalism require an updating of definitions and analysis of social classes, class struggles, political parties, social movements and the ideological forms in which they express their modes of action in the transformation of societies. Amin meets this challenge and lays bare the reality of monopoly capitalism in its general, global form. Ultimately, Amin demonstrates that this system is not viable and that the implosion in progress is unavoidable. Whether humanity will rise to the challenge of building a more humane global order free of the contradictions of capital, however, is yet to be seen.

1. CAPITALISM IN THE AGE OF GENERALIZED MONOPOLIES

CONTEMPORARY CAPITALISM IS A CAPITALISM of generalized monopolies. By this I mean that monopolies are now no longer islands in a sea of other still relatively autonomous companies, but are constitutive of an integrated system. Therefore, these monopolies now tightly control all the systems of production. Small and medium enterprises, and even the large corporations that are not strictly speaking oligopolies, are locked in a network of control put in place by the monopolies. Their degree of autonomy has shrunk to the point that they are nothing more than subcontractors of the monopolies. This system of generalized monopolies is the product of a new phase of centralization of capital in the countries of the Triad—the United States, Western and Central Europe, and Japan—that took place during the 1980s and 1990s. The generalized monopolies now dominate the world economy. “Globalization” is the name they have given to the set of demands by which they exert their control over the productive systems of the periphery of global capitalism (the world beyond the partners of the Triad). It is nothing other than a new stage of imperialism.

This capitalism of generalized and globalized monopolies is a system that guarantees these monopolies a monopoly rent levied on the mass of surplus-value (transformed into profits) that capital extracts from the exploitation of labor. To the extent that these monopolies are operating in the peripheries of the global system, monopoly rent is imperialist rent. The process of capital accumulation, which defines capitalism in all its successive historical forms, is therefore driven by the maximization of monopoly/imperialist rent-seeking. This shift in the center of gravity of the accumulation of capital is the source of the continuous concentration of income and wealth to the benefit of the monopolies, largely monopolized by the oligarchies (plutocracies) that govern oligopolistic groups, at the expense of the remuneration of labor and even the remuneration of non-monopolistic capital.

This imbalance in continued growth is, in turn, the source of the financialization of the economic system. By this I mean that a growing portion of the surplus cannot be invested in the expansion and deepening of systems of production, and therefore the “financial investment” of this excessive surplus becomes the only option for continued accumulation under the control of the monopolies.

The implementation of specific systems by capital permits the financialization to operate in different ways:

1. Subjugation of the management of firms to the principle of “shareholder value”;

2. Substitution of pension systems funded by personal saving and capitalization (pension funds) for systems of pension distribution paid by current taxation (transfer payments);

3. Adoption of the principle of flexible exchange rates;

4. Abandonment of the principle of central banks determining the interest rate—the price of liquidity—and the transfer of this responsibility to the market.

Financialization has transferred the major responsibility for control of the reproduction of the system of accumulation to some thirty giant banks of the Triad. What are euphemistically called “markets” are nothing other than places where the strategies of these actors who dominate the economic scene are deployed. In turn, this financialization, which is responsible for the growth of inequality in income distribution (and fortunes), generates the growing surplus on which it feeds. The “financial investments,” or rather the investments in financial speculation, continue to grow at dizzying speeds, not commensurate with growth in GDP (which is therefore becoming largely fictitious) or with investment in real production. Among other things, the explosive growth of financial investment requires, and fuels, debt in all its forms, especially sovereign debt. When the governments in power claim to be pursuing the goal of debt reduction, they are deliberately lying. The strategy of financialized monopolies requires the growth in debt, which they seek rather than combat, as a way to absorb the surplus profit of monopolies. The austerity policies imposed to reduce debt have indeed resulted, as intended, in increasing its volume.

It is this system—commonly called neoliberal, the system of generalized monopoly capitalism, globalized (imperialist) and financialized (of necessity for its own reproduction)—that is imploding before our eyes. This system, apparently unable to overcome its growing internal contradictions, is doomed to continue its wild ride. The crisis of the system is due to its own success. Indeed, so far the strategy deployed by monopolies has always produced the desired results: austerity plans and the so-called social (in fact antisocial) downsizing plans that are still being imposed, in spite of resistance and struggles. To this day the initiative remains in the hands of the monopolies, “the markets,” and their political servants—the governments that submit to the demands of the so-called “market.”

In this analytic perspective of monopoly-capitalism’s transformation, it seems necessary to reformulate the theory of surplus (a distinct concept from that of surplus-value) and, by extending its field of action to the global system, to unveil the nature of the monopoly rent/imperialist rent that has come to exert a unilateral dictatorship over the accumulation process on a world scale.

Beyond Surplus-Value: The Concept of Surplus

The surplus at issue is the result of growth in the productivity of social labor exceeding that of the price paid for labor power. Let us assume, for example, that the rate of growth in the productivity of social labor is about 4.5 percent per year, sufficient to double the net product over a period of about fifteen years, corresponding to an assumed average lifetime for capital equipment.

Let us assume that, in the long run, real wages would grow at a rate of about 2.5 percent per year to bring about an increase of 40 percent over a fifteen-year span. At the end of a half-century’s regular and continuous evolution of the system, the surplus (which defines the size of Department III relative to net revenue, itself the sum of wages, reinvested profits, and surplus) takes up two-thirds of the net product, roughly equivalent to GDP. The shift indicated here is approximately what happened during the twentieth century in the “developed” centers of world capitalism (the United States/Europe/Japan Triad).

Analysis of the components corresponding to the concept of surplus shows the diversity of the regulations governing their administration.

Corresponding approximately to Marx’s Departments I and II in the national accounts are the sectors defined respectively as “primary” (agricultural production and mining), “secondary” (manufacturing), and a portion of so-called tertiary activities that are hard to derive from statistics that were not designed for that purpose, even when the definition of their status is not itself confusing. To be held to participate—indirectly—in the output of Departments I and II are transportation of implements, raw materials, and finished products; trade in those products; and the cost of managing the financial institutions needed to service the two departments. What are not to be regarded as direct or indirect constitutive elements in their output, and therefore counted as elements of surplus, are government administration, public expenditures and transfer payments (for education, health, social security, pensions, and old-age benefits), services (advertising) corresponding to selling costs, and personal services paid for out of income (including housing). Whether the “services” at issue, lumped together in the national accounts under the title “tertiary activities” (with the possibility of distinguishing among them a new sector termed “quaternary”), are administered by public or private entities does not by itself qualify them as belonging to Department III: the surplus. The fact remains that the volume of tertiary activities in the developed countries of the center (as in many of the peripheral countries, though that question—a different one—does not concern us here) is much larger than that of the primary and secondary sector. Moreover, the sum of taxes and obligatory contributions in those countries by itself amounts to or exceeds 40 percent of their GDP. Talk by some fundamentalist right-wing ideologists calling for “reduction” of these fiscal extractions is purely demagogic: capitalism can no longer function in any other way. In reality, any possible decrease in the taxes paid by the “rich” must necessarily be made up by heavier taxation on the “poor.”

We can thus estimate without risk of major error that the surplus (Department III) accounts for half of GDP or, in other terms, has grown from 10 percent of GDP in the nineteenth century to 50 percent in the first decade of the twenty-first century. So if in Marx’s day an analysis of accumulation limited to consideration of Departments I and II made sense, that is no longer the case. The enrichment of Marxist thought by Baran, Sweezy, and Magdoff through their taking account of Department III and the linked concept of “surplus,” defined as we have recalled it, is for that reason decisive. I find it deplorable that this is still doubted by a majority of the analysts of contemporary Marxism.

Once again, not everything in this surplus is to be condemned as useless or parasitical. Far from it! On the contrary, growth in a large fraction of the expenditures linked to Department III is worthy of support. For a more advanced stage in the unfolding of human civilization, spending on such activities as education, health care, social security, and retirement—or even other socializing services linked to democratic forms of structuring alternatives to structuring by the market, such as public transport, housing, and others—would be summoned to take on even more importance. In contrast, some constitutive elements of Department III—like the “selling costs” that grew so fabulously during the twentieth century—are evidently of a parasitic nature and were viewed early on as such by some economists, like Joan Robinson, who were then minimized or disparaged by their profession. Some public expenditures (weapons) and some private (security guards, legal departments) likewise are parasitic. A fraction of Department III, to be sure, is (or should we say was?) made up of spending that benefits workers and complements their wages (health care, unemployment insurance, pensions). Just the same, these benefits, won by the working classes through intense struggle, have been called into question during the past three decades, some have been cut back severely, others have shifted from provision by a public authority based on the principle of social solidarity to private management supposedly “freely bargained for” on the basis of “individual rights.” This management technique, prevalent in the United States and expanding in Europe, opens supplementary and very lucrative areas for the investment of surplus.

The fact remains that in capitalism all these usages of the GDP—whether “useful” or not—fulfill the same function: to allow accumulation to continue despite the growing insufficiency of labor incomes. What is more, the permanent battle over transferring many fundamental elements of Department III from public to private management opens supplemental opportunities for capital to make a profit (and thereby increase the volume of surplus). Private medical care tells us that if the sick are to be treated it must above all be profitable—to private clinics, to laboratories, to pharmaceutical manufacturers, and to the insurers. My analysis of Department III of surplus absorption stands within the spirit of the pioneering work of Baran and Sweezy. The necessary conclusion is that a large proportion of the activities managed on those terms are parasitic and inflate the GDP, thus reducing drastically its significance as an indicator of the real wealth of a society.

Counterposed to this is the current fashion of considering the rapid growth of Department III as a sign of the transformation of capitalism, its passage from the Industrial Age into a new stage, the “Knowledge Economy.” Capital’s unending pursuit of realization would thus regain its legitimacy. The expression “knowledge capitalism” is itself an oxymoron. Tomorrow’s economy, the socialist economy, would indeed be a “knowledge economy,” but capitalism can never be such. To fantasize that the development of the productive forces is establishing—within capitalism—tomorrow’s economy, as the writings of Antonio Negri and his students would have us believe, has only a seeming validity. In reality, the realization of capital, necessarily based on the oppression of labor, wipes out the progressive aspect of this development. This annihilation is at the core of the development of Department III, designed to absorb the surplus inseparable from monopoly capitalism.

We must therefore avoid confounding today’s reality (capitalism) with a fantasy about the future (socialism). Socialism is not a more adequate form of capitalism, doing the same things but only better and with a fairer income distribution. However, its governing paradigm—socialization of management over direct production of use-values—thus comports exactly with a powerful development of some of the expenditures that currently, under capitalism, take part in its main function, surplus absorption.

In its globalized setup capitalism is inseparable from imperialist exploitation of its dominated peripheries by its dominant centers. Under monopoly capitalism this exploitation takes the form of monopoly rents (in ordinary language, the superprofits of multinational corporations) that are by and large imperialist rents.

The order of magnitude of the quantifiable fraction of the imperialist rent, the result of the differential in the prices of labor powers of equal productivity, is obviously large. In order to give a sense of that order of magnitude, we hypothesize a division of the world’s Gross Product in the ratio of two-thirds for the centers (20 percent of the world’s population) and one-third for the peripheries (80 percent of the population). We assume an annual rate of growth of Gross Product of 4.5 percent for both centers and peripheries, and a rate of growth of wages of 3.5 percent for the centers but total stagnation (zero growth) for peripheral wages. After fifteen years of development in this model we would arrive at the following result: the imperialist rent would be on the order of half the Gross Domestic Product of the peripheries, or 17 percent of the world’s Gross Product and 25 percent of the centers’ GDPs.

Of course, the volume of this imperialist rent is partially hidden by exchange rates. It is a question here of a well-known reality that introduces uncertainty into international comparisons—are GDP value-comparisons to be made in terms of market exchange rates or according to exchange rates reflecting purchasing-power parities? Moreover, the rent is not transferred as a net benefit to the centers. That the local ruling classes hold on to some of it is the condition for their agreement to “play the globalization game.” But the fact remains that the material benefits drawn from this rent, accruing not only to the profit of capital ruling on a world scale but equally to the profit of the centers’ opulent societies, are more than considerable.

In addition to the quantifiable advantages linked to differential pricing of labor powers, there are others, nonquantifiable but no less crucial, based on exclusive access to the planet’s material resources, on technological monopolies, and on control over the globalized financial system.

The share of imperialist rent transferred from the peripheries to the centers accentuates in its turn the global disequilibrium pointed out by Baran and forms an additional factor swelling the surplus to be absorbed. The contrast to be observed during the present phase of the crisis, between weak growth in the centers (United States, Europe, Japan) and rapid growth in the developing countries of the periphery, is to be understood only in terms of an overall analysis linking how surplus is absorbed to the extraction of imperialist rent.

Simple Labor, Complex Labor, Abstract Labor

The unit of abstract labor, whether an hour or a year of abstract social labor, is a composite unit combining units of simple (unskilled) and complex (skilled) labor in some given proportion.

Let us choose a sample of one hundred workers distributed among the different categories of (differently skilled) workers in exactly similar proportions to their distribution in the overall society (whose labor force, for example, might number thirty million). In the following simplified analysis we take account of only two categories of labor: (1) Simple labor involves only 60 percent of the sample (sixty workers); (2) complex labor involves 40 percent of the sample (forty workers).

We assume that each year the workers in the sample provide the same annual number of labor hours—say, 8 hours per day and 220 days per year. Thus in each year a simple (unskilled) worker contributes one year of simple labor to the collective social labor, while a skilled worker provides a contribution to one year of complex labor. We abstract from the cost of training simple workers because this training is that which is provided to all citizens. Contrariwise, we take into consideration the cost of supplementary training for skilled workers. The latter, for example, would extend for ten years and for each of those years would cost, for each worker involved, the equivalent of two years of social labor to cover the cost of teachers, training equipment, and the student’s living expenses.

Whereas the unskilled worker would work for thirty years, the skilled one would work for only twenty years, having devoted the first ten years to being trained. The cost of this training (twenty years of social labor) would be recovered over twenty years of this labor through the valorization of complex labor. In other words, the unit of complex labor (an hour or a year) would be worth two units of simple labor.

It follows that 60 percent of a composite unit of abstract labor would consist of the equivalent of one unit of simple labor, and 40 percent of the equivalent of one unit of complex labor (worth two units of simple labor). In other words, one unit of abstract labor provided by the labor collective is worth 1.4 units of simple labor.

I call attention to the following points:

1. The value of a commodity is to be measured according to the quantity of abstract labor required for its production because none of the workers work in isolation; he is nothing apart from the team in which he is a part. Production is collective, and the productivity of labor is that of the social labor collective, not that of team members taken separately one from the other.

2. I have not introduced into my argument the scale of real wages received by each category of workers, only the cost of their training, which is the sole “price” paid by the society to dispose of the labor force appropriate to its productions.

Production of Surplus-Value, Consumption of Surplus-Value

The value of the team’s annual production and the measure of the extraction of a surplus-value on this occasion are calculated in quantities of abstract labor.

Under point 1, and for our team of 100 workers, we assume that the real wage given to each skilled worker is double that of a simple worker, this relationship being that of the value of an hour of complex labor to that of an hour of simple labor. It is easy to recognize that the wage for a skilled worker is double that for an unskilled worker, as the former contributes twice as much to the value of the product as does the latter. Both equally contribute to the extraction of surplus-value, in the same proportion. The rate of surplus-value here is 100 percent. For an hour of labor provided by a simple worker, he receives a wage allowing him to buy consumption goods whose value is equal to one half-hour of abstract labor. Each labor-hour provided by a skilled worker is worth twice as much and likewise his wage is twice as large, allowing him to buy consumption goods whose value is equal to one hour of abstract labor.

We now take a wage-scale different from that which would imply an equality between the wage and the contribution to the formation of value. In this second hypothesis the wage retained by a skilled worker is four times (rather than double) that of a simple worker. Under this hypothesis, then, we recognize that only unskilled workers contribute to the formation of surplus-value; the skilled workers “devour” the surplus-value to whose formation they contribute.

It then is quite clear that if the wag...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• Preface
• 1. Capitalism in the Age of Generalized Monopolies
• 2. The South: Emerging Countries and Lumpen-Development
• 3. China: The Emerging Country
• 4. Implosion of the European System
• 5. The Socialist Alternative: Challenges for the Radical Left
• Conclusion
• Index