The Imperatives and “Logic” of Capitalism


by James M. Craven Blackfoot Name:Omahkohkiaayo i’poyi

copyright 2007


“With adequate profit, capital is very bold. A certain 10% [profit] will ensure its employment anywhere; 20% certain will produce eagerness; 50%, positive audacity; 100%will make it ready to trample on all human laws; 300%, and there is not a crime at which it will scruple, nor a risk it will not run, even to the chance of its owner being hanged.” (T.J. Dunning quoted by Karl Marx in Capital, Vol I, International Publishers, Moscow, 1967, p. 760)

Intro

Introduction/Overview

Relative to the previous system Feudalism, out of which capitalism emerged, and especially relative to pre-feudal systems, capitalism offered new, unique and unprecedented forms and levels of personal liberty.

Initially, it was a system in which “Dem dat gets could be dem dat gots” (hard work and initiative could turn a poor person into a rich one). It was a system generating maybe six positives for every one negative.

But as capitalism ripened, as all sorts of Social Darwinist forms of competition allowed predatory and ruthless capital to swallow-up smaller and less ruthless capital (economic centralization), it turned into a system where “Dem dat gots is dem dat gets” (those who have wealth can get more through simple compounding without lifting even one metaphorical finger of innovation or efficiency.

The Neoclassical Narrative

The so-called “Invisible Hand” of capitalism operates more and more like that of the hand of a physician when it has a rubber glove on it and a male patient is being told to bend over and/or cough.

The textbooks speak of three fundamental questions for capitalism and all systems with respect to production, techniques and distribution: What? How? For Whom? They say there are three mechanisms through which these questions are posed and answered: Tradition (Indigenous Societies); Command (Slavery, Feudalism and Socialism); Market (Capitalism). All social formations contain elements of past, present and future systems and all these mechanisms are used to varying degrees and ways.

Capitalism, is assumed to be the End of History. It is assumed that this system, with its celebration of the of the greedy, selfish, individualistic, competitive, rational , calculating and viciously competitive Gordon Gekkos (see the movie “Wall Street”) of the world, that manifest some supposed immutable “human nature”, was most natural and enduring as it is most in line with this asserted immutable “human nature”. Rather than trying to suppress “human nature”, capitalism recognizes, celebrates, reinforces and harnesses greed, selfishness and ultra-individualism of the greedy individual, and, via markets and other institutions and relations, turns it all into social outcomes and benefits for the many that the privately greedy, seeking only personal gain and power, did not even intend. It is the classic butcher, brewer and baker of Adam Smith.

Since it is assumed that all human beings, regardless of gender, age, culture, system or race are genetically hardwired for this immutable human nature, then their behaviors, intentions, interests will be quite predictable, measurable, and thus even subject to predictable incentives and disincentives. It is assumed: that the Macro is nothing more than the sum of the Micros–the whole is equal to the sum of its parts; that there are ultimate causes and effects of all phenomena; and that the economy can be analytically and practically separated from the politico-legal, socio-cultural and natural dimensions of society. No need, therefore, in addition to asking What?, How? and For whom? to also ask other questions like Who?, Where?, When? or Why? Humans are assumed to be the same everywhere and anytime and to be driven by this “human nature”—the ultimate Why? we do what we do. Human beings, as consumers, will attempt to use their given resources (income, time, information,) to maximize total utility. Producers, use their given resources (land, labor, capital, time, information, technology, entrepreneurship) to attempt to maximize total profits. Owners and investors seek to maximize real, after-tax risk-adjusted return on investment or ownership. Why resources are assumed to be given, and “given” by whom or what, is simply not discussed. Those of the Calvinist persuasion assume that resources are “given” via Preordination by God.

It is a nice and neat narrative. Just let markets do what markets do; keep government (made up also of greedy assholes no matter what cover they use for their own behaviors) at a minimum to that which is necessary to support and protect capitalism; and, out of private greed, selfishness etc, a greater good for the greatest number in the most efficient ways will result, and, will result far better than some social engineering and social consciousness could produce.

What do markets do? Better what are they in theory supposed to do in the course of posing and answering What? How? For Whom? Eight basic things:

1) COMMODIFICATION (turning idea or need into tangible product and effective supply for potential demand and demand for supply;

2)REDUCTION OF SEARCH, INFORMATION AND OTHER COSTS; when potential supply and demand hook up and know where to find each other in time and space;

3) PRICE DETERMINATION: Supply and Demand in various markets interact to determine prices of various potential inputs and outputs.

4) INFORMATION AND SIGNALING SYSTEMS: prices give information and signals in time and space and allow calculating profit and utility potentials. These shape the decisions of WHAT to produce and consume with GIVEN resources.

5) ALLOCATIONS OF RESOURCES: The WHAT? shapes the HOW? to produce and distribute; lowest possible total cost for given potential total revenue in production, lowest possible total expenditure for given potential total utility in consumption;

6) RATIONING: The FOR WHOM? Who gets the goodies, is based on effective demand, purchasing power and profit potential.

7) CLEARING SHORTAGES AND SURPLUSES: shortages cause prices to rise, causing decreases in quantities demanded and increases in quantities supplies and less and less shortages; surpluses cause prices to fall, causing increases in quantities demanded and decreases in quantities supplied, and less and less surpluses;

8) BACK TO NUMBER 1 COMMODIFICATION: processes 1-7 give critical information on how the commodities are going over and help to further refine and differentiate products to create new markets and draw in new customers into existing markets.

But capitalism is like Dr. Jekyll and Mr. Hyde. The same core imperatives of Effective Competition, Realization of Maximum Possible Real, After-Tax, Risk-Adjusted Total Surplus Value, Accumulation of Capital and Maximization of Productivity, that shape the core “logic”, that then shapes the dynamics and trajectories of capitalism, can produce some good and/or threats to the very survival of the whole planet and all species on it.

The Core Imperatives of Capitalism

In order to have any chance for REALIZATION OF MAXIMUM POSSIBLE TOTAL, REAL, AFTER-TAX, RISK-ADJUSTED SURPLUS VALUE, each capital MUST: continually attempt to do that which is necessary for EFFECTIVE COMPETITION against other capitals. Effective Competition means turning sales into more sales as well as turning sales into customers and customers into more sales. That means increasing market share (economic concentration) presence and name which leads to more market power.

If someone runs in the park alone, and cuts some time off a run over a given distance, that is progress. But if someone is in a race, where one person’s fast may be another’s slow, then performance is always relative–to what one’s competitors are doing.

Effective Commpetition means Ecnomic Concentration: fewer and fewer firms or capitals, controlling larger and larger market shares. Market shares bring market exposure, name and power and vice versa. Profits for Power and power for profits. Effective Competition means not only competing, it means winning. Dialectically, competition among the unequally endowed can only bring about anti-competition (Economic Concentration) and eventual Big Fish Swallowing Small Fish (Economic Centralization). And of course, Economic Concentration and Economic Centralization mutually feed and reinforce each other.

In order to have any chance at EFFECTIVE COMPETITION , each capital MUST continually do that which is necessary for MAXIMIZATION OF PRODUCTIVITY. In order to profitably lower prices to be competitive, total costs must be reduced as much as possible. Output must be maximized relative to input, total costs lowered relative to projected total revenues. This means at a mimimum, Technical Efficiency (maximum output/input or minimum input/output) and Economic Efficiency or producing given estimated total revenues at lowest possible total costs.

In order to have any chance at MAXIMIZATION OF PRODUCTIVITY each capital MUST continually plan and carry out ACCUMULATION OF CAPITAL. This means not only widening and deepening the productive base (capital) of the enterprise, it also means expanded reproduction of the basic sociocultural, economic and politico-legal relations that are embodied in privately owned, concentrated, centralized and profit maximizing capital as well as capitalism as a whole system.

And finally, in order to have the creditworthiness and/or retained earnings necessary for ACCUMULATION OF CAPITAL, each capital MUST continually attempt REALIZATION OF MAXIMUM POSSIBLE REAL, AFTER-TAX, RISK ADJUSTED TOTAL SURPLUS VALUE

Derivative Imperatives of Capitalism

I. From the imperative to actually Realize Maximum Possible Real, Risk-adjusted Surplus Value, certain other derivative imperatives follow:

a) Because “Realization” means actual tangible returns, after accounts receivable have been cleared and accounts payable paid, then it becomes an imperative and matter of how to most efficiently clear accounts receivable that were often necessary to make the sale.

b) The imperative to extend credit and to manipulate consumers to carry large debt loads, in order to increase sales, may, and often does, conflict with the imperative to clear those accounts receivable in the shortest possible time with the least amount of discounting of the original debt in the event of defaults.

c) On the other hand, the imperative to clear accounts receivable in the shortest possible time, may, and often does, conflict with the imperative to sell off defaults with the least amount of discounting from the original value of the debt.

II. From the Imperative of Accumulation of Capital, which means not only expanded reproduction (widening and deepening) the productive forces (physical and human capital), but, also, expanded reproduction of the basic relations, institutions and values (social capital) of capitalism itself, certain derivative imperatives follow:

a) The imperative for continual invention, innovation and transformation of technology and productive forces;

b) The imperative for continual transformation and effective indoctrination of core values, institutions, relations and acceptance of capitalism as a whole system;

c) The imperative for continual transformation of forms and levels of divisions of labor and specialization;

d) The imperative to find and secure relatively cheap forms and levels of physical and human capital, labor-power, land, information etc;

e) The imperative to find new palliatives, sedatives, opiates incentives, etc to dull resistance and increase buy-in to the system itself;

f) The imperative for new social Structures of Accumulation as the basic contradiction between existing relations of production of capitalism versus further development of the productive forces of capitalism intensifies;

III. The imperative for Maximization of Productivity which means at a minimum, Technical Efficiency (maximum output/input; minimum input/output) and Economic Efficiency (producing at lowest Total Cost) give rise to derivative imperatives:

a) Increasing Socialization of Costs and Risks of Returns that are Increasingly Privatized, Concentrated and Centralized;

b) Union Busting

c) Downsizing and Outsourcing

d) Vertical/Horizontal/Conglomerate Integration

e) Support of anti-union and anti-communist dictatorships abroad;

f) wars and covert operations to secure cheap critical resources and inputs globally;

g) Environmental Devastation;

h) Under-assessment and avoidance of paying true costs coupled with over-assessment and hoarding/centralization of true benefits;

IV. The imperative for Effective Competition gives rise to derivative imperatives:

a) Consumer fraud, predatory pricing, industrial espionage;

b) hiding true costs and exxagerating purported benefits in marketing;

c) Rent seeking;

d) Asymmetric market power, information, control and responsivity;

e) Economic Concentration and Centralization;

f) Asymmetric access to political power and influence;

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About jimcraven10

About jimcraven10 1. Citizenship: Blackfoot, U.S. and Canadian; 2. Position: tenured Professor of Economics and Geography; Dept. Head, Economics; 3. Teaching, Consulting and Research experience: approx 40 + years all levels high school to post-doctoral U.S. Canada, Europe, China, India, Puerto Rico and parts of E. Asia; 4. Work past and present: U.S. Army 1963-66; Member: Veterans for Peace; former VVAW; Veterans for 9-11 Truth; Scholars for 9-11 Truth; Pilots for 9-11 Truth; World Association for Political Economy; Editorial Board International Critical Thought; 4.. U.S. Commercial-Instrument Pilot ; FAA Licensed Ground Instructor (Basic, Advanced, Instrument and Simulators); 5. Research Areas and Publications: International law (on genocide, rights of nations, war and war crimes); Imperialism (nature, history, logic, trajectories, mechanisms and effects); Economic Geography (time and space modeling in political economy; globalization--logic and effects; Political Economy and Geography of Imperialism); Indigenous versus non-Indigenous Law; Political Economy of Socialism and Socialist Construction; 6. Member, Editorial Board, "International Critical Thought" published by the Chinese Academy of Social Sciences; International Advisory Board and Columnist 4th Media Group, http://www.4thMedia.org (Beijing); 7. Other Websites publications at http://www.aradicalblackfoot.blogspot.com; wwwthesixthestate.blogspot.com;https://jimcraven10.wordpress.com; 8.Biography available in: Marquis Who’s Who: in the World (16th-18th; 20th; 22nd -31st (2014) Editions); Who’s Who in America (51st-61st;63rd-68th(2014) Editions); Who’s Who in the West (24th- 27th Editions);Who’s Who in Science and Engineering (3rd to 6th, 8th, 11th (2011-2012) Editions); Who’s Who in Finance and Industry (29th to 37th Editions); Who’s Who in American Education (6th Edition). ------------------- There are times when you have to obey a call which is the highest of all, i.e. the voice of conscience even though such obedience may cost many a bitter tear, and even more, separation from friends, from family, from the state, to which you may belong, from all that you have held as dear as life itself. For this obedience is the law of our being. ~ Mahatma Gandhi
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