Capital, the State, and the Monetary Mode of Power: A Review of Nitzan and Bichler's Capital as Power

Abstract

In their recent book Capital as Power, Jonathan Nitzan & Shimshon Bichler depict capitalism as a mode of power rather than a mode of production, in which political and economic power are no longer distinct. In addition, they argue, contrary to neoclassical theory, that capital has nothing to do with productivity but instead represents power. I make three broad criticisms: first, their elimination of the distinction between economics and politics renders any empirical test of their ostensible integration impossible; second, they do not adequately define their main concepts, including capital, capitalization, capitalism, and power; and third, they do not acknowledge the possibility that the patterns they attribute to power may in fact be self-organized. This paper argues that money is a claim to wealth, not wealth itself, that it measures and distributes the power of payment, and that payments redistribute the power of ownership, including the ownership of money. Finally, I suggest that, in light of the global debt crisis, a theory of capital-as-power should examine the power of finance, which entails the privatization and concentration of the power to create money as debt.

Notes

¹Except where otherwise indicated, the quotations in this article are from J. Nitzan & S. Bichler, Capital as Power: A Study of Order and Creorder (London: Routledge, 2009).

²The Triple Helix model is one possibility for empirically measuring the degree of institutional integration (e.g. industry, government, university) and/or the degree of functional integration (e.g. economy, polity, technology) that has been proposed by Loet Leydesdorff using non-parametric entropy statistics (see Leydesdorff 2006).

³The difference between a reward and a punishment is of course not always clear. The power to influence others with monetary inducements (e.g. a salary) can become, over time, a coercive power insofar as compliance is secured by threatening its removal. Rewards and punishments, then, are always relative to expectations (Wrong, 1968).

⁴Unlike the Marxian counterfactual, however, which stipulates profit share of total income as a quantitative measure of the divergence between actual and ideal conditions, the neoclassical counterfactual is speculative and uncertain, simply because it is impossible to determine what prices would be in this counterfactual world.

⁵Recent interpretations of Marx's Capital have defended Marx's determination of value by labor time (see, for example, Kliman, 2007), and although proponents of the so-called Temporal Single System Interpretation (TSSI) have demonstrated the possibility of formulating a Marxian theory that is internally consistent, they do so by abandoning any attempt to predict or determine relative prices, even in principle. In this interpretation total value is equivalent by definition to the total aggregate of prices. The price of any given commodity is a monetary expression of labor time representing some fraction of the total expenditure of society's labor output. How much labor time any particular commodity will represent (i.e. its price) is, however, totally indeterminate. For Nitzan & Bichler, the TSSI is untenable on the grounds that: (1) values are unobservable and not something that capitalists pay attention to anyway; and (2) values cannot possibly predict the relative distribution of prices, but can only account for them after the fact.

⁶A system is complex if we can entertain different models of it, which is equivalent to saying that we can observe it in non-equivalent ways. Complexity, however, is a property of an observer (Rasch, 2000). Because we can consider a mental model or abstraction of a system a ‘sub-system’, or partial perspective, of the system as a whole, it follows that: a system is complex to the extent that we can discern many distinct subsystems of it (cf. Rosen, 1984). Alternatively we can call something complex whenever it is no longer possible to relate every element to every other element in every conceivable way at the same time, and therefore, when it has more possibilities that it can actualize at any given moment. Any theory capable of encompassing complexity must therefore not only acknowledge but also explain how social phenomena can be observed from different frames of reference. Prices as communicative media, for instance, are efficacious precisely as a means of reducing the complexity, or contingency, inherent in any transaction, i.e. as a way of standardizing them. What the transaction means to participants and observers, however, is ultimately irreducible to the transaction occurring between them.

⁷Power has been variously defined as: the capacity to intentionally influence others (Wrong, 1968); the production of intended effects (Russell, 1986); the control of behavior (Dahl, 1986); the capacity to attain one's will despite resistance (Weber, 1986); a capacity to attain system goals (Parsons, 1986); a capacity to attain collective goals (Arendt, 1986); the capacity of a class to realize its specific objective interests (Poulantzas, 1986); influence contrary to another's objective interests (Lukes, 1974); a catalyst effecting unlikely probability distributions via a symbolic code (Luhmann, 1979); and a fluid-like force, coterminous with knowledge, producing subjects (Foucault, 1980).

⁸This is because an original cause can generate conditions that independently sustain the effect. The reason English did not decline as a world language with the decline of the British Empire is that the global influence of the United States grew.

⁹Foster et al. (2011) provide data that is remarkably consistent with that of Nitzan & Bichler. For example, they find rising trends for the following: the revenue of the top 200 US corporations as a share of total business revenue in the US from 1950 − 2008; gross profits of the top 200 US corporations as a share of total gross profits; the net value of acquisitions of the top 500 global corporations as a share of world income; and total revenues of top 500 global corporations as a share of world income.

¹⁰Agent-based computational models explain social phenomena by generating them from the bottom-up. They simulate the local interactions of heterogeneous actors who influence one another, are capable of learning, and who do not possess perfect knowledge and foresight. Generative models thus avoid the inappropriate counterfactual conditions presumed by rational choice theory, as well as those posited in most interpretations of equation-based models such as regressions and systems of simultaneous equations, including the assumption that causality is unidirectional, causal factors operate independently of each other, and effects are linear and/or instantaneous.

¹¹One must, however, distinguish between ‘theoretical metallism’ and ‘practical metallism.’ Theoretical metallism ‘is the belief that money's origins and value is to be found in the “intrinsic” exchange value of precious metal of which it is made or represents’, whereas practical metallism acknowledges only that anchoring value in physical substances helps to naturalize and hence stabilize the social relations constituting credit and money (Ingham, 2004b, p. 213).

¹²In the United States, revenue not derived from taxation must be borrowed from purchasers of US securities. A major domestic purchaser of these securities is the Federal Reserve Bank, which exercises a legal right that the Treasury cannot, namely, the power to create money from nothing. Even in countries where Banks do possess the legal power to spend money into circulation directly, such as the Bank of England, well over 90% of the total money supply is created by private banks through the extension of credit.

¹³The concentration of the power to create credit money need not, at least in principle, generate a corresponding concentration of wealth and income, so long as the interest payments are distributed or re-circulated (i.e. spent rather than loaned or withheld) in such a way that they can be earned as future income. In the past few decades in the United States, however, the dramatic rise in inequality of wealth and income taking place concurrently with an unprecedented boom in financial lending, profits, and debt of all kinds, indicate that a ‘fair’ or equitable recycling of interest in the form of earned income has not taken place. Moreover, because material wealth does not itself grow exponentially, the imposition of compound interest is necessarily redistributive.

¹⁴By 2004, financial profits accounted for 40% of all US corporate profits. Financial debt eclipsed non-financial debt by 1993, and rose from 15% of GDP in 1976 to over 118% of GDP by 2008. Finally, financial borrowing as a percentage of total borrowing has risen dramatically, constituting well over 90% of total borrowing from 1998 to 2000. The connection between these trends and most financial crises is examined in Bradford (2010).