That capital theorists remain so hooked on production and consumption is all the more perplexing given that capitalists themselves are not. Whereas political economists are focused on capital goods, capitalists think of capitalization. The theorists, both mainstream and critical, are nonchalant about this difference.

Capitalization, they say, is merely a ‘nominal’ reflection – sometimes accurate, other times distorted – of the ‘real’ economy. Capitalists certainly care about their money assets, but the only way to understand the accumulation of such assets is by theorizing their material underpinnings.

Chapter 9

Well, it turns out that this isn’t really the case. Chapter 9 begins our exploration of capitalization, tracing its evolution from its modest beginning in the fourteenth century to its world dominance in the twenty-first. It shows that capitalization not only predates ‘industrialization’ by a few hundred years, but also that it is far more encompassing than is typically assumed – so encompassing, in fact, that in our own day and age it has penetrated every [p. 14] corner of society and absorbed many of its power processes.

Chapter 10 - ‘nominal’ vs ‘real’

Production, narrowly defined, has become merely one of the many faces of capitalization. But if production is only one aspect of capitalization, how can it serve to explain it? The answer is that it doesn’t. Chapter 10 contrasts the ‘nominal’ process of capitalization with the so-called ‘real’ augmentation of capital goods. It demonstrates that the money value of ‘capital goods’ is a very small fraction of the overall value of capitalization, and that their ratio varies widely over time. But most disturbingly, it shows that the rates of growth of the two magnitudes move in opposite directions: when the growth of the ‘capital stock’ accelerates, the growth of capitalization decelerates and vice versa!

Faced with these facts of life, particularly the last one, the theorists must make a choice: stick with the so-called ‘real economy’ and treat capitalization as a distorted mirror if not a mere fiction; or stay focused on what drives the capitalists and try to develop a social theory of capitalization that transcends the fetish of material production and capital goods. Most political economists have taken the first route. We choose the second.

Chapter 11 unzips the capitalization process. We identify the different ‘elementary particles’ that make up the capitalization formula, examine their actual and ideological histories, dissect their properties and study their interrelations. This analysis provides a broad framework on which we can build an alternative theory of capital as power.

Lineages

Before outlining this theory, though, a few words about origins and influences. Although critical of Karl Marx’s theory of value, we are deeply influenced by his general approach, primarily his notion of capitalism as the politicalregime of capital. In the twentieth century, Marx’s followers have modified and adapted his insights to the changing nature of capitalism, and debating their theories has helped us shape our own.

In addition to Marx and his followers, we draw on the largely neglected if not forgotten writings of Thorstein Veblen, Lewis Mumford and Michal Kalecki. Veblen was perhaps the first thinker to seriously consider absentee ownership, finance and credit as the central power mechanisms of capitalism. He was also the first to ponder the implications of power – or ‘sabotage’, as he called it – for the concept of capital.

Mumford, who was a student and colleague of Veblen, provided a unique history of technology as power. The first machines, he argued, were social rather than material. They made their initial appearance in the ancient delta civilizations in the form of a mechanized social order – the mega-machine. According to Mumford, the social mega-machine provided the model for all subsequent material and social mechanization – a claim with far-reaching consequences for the study of capitalism.

Kalecki, one of the founders of neo-Marxian economics, developed novel [p. 15] research methods, both theoretical and empirical. Of these, perhaps the most innovative is the notion of the ‘degree of monopoly’: the idea that the distribution of income is not merely the consequence of economic power, but its very definition.

Taken together, these views – particularly Marx’s emphasis on the political regime of capital, Veblen’s linking of financial capitalization and industrial sabotage, Mumford’s notion of social organization as a power machine and Kalecki’s distributive measurement of power – constitute our starting point. We use them, critically if we can, as stepping stones for our own theory of capital.

However, these influences do not make us members of any ‘school’. Although we have been inspired by Veblen, we consider ourselves neither Veblenians nor institutionalists. Similarly with Marx. Our critique of his schema – particularly his labour theory of value and his notion of surplus value – ‘disqualifies’ us from being Marxist. That said, though, the general thrust of our project is very much in line with Marx’s. Like Marx, we too try to confront the concrete capitalist reality; to examine its actual gyrations, ideologies and justifications; and, above all, to decipher its central architecture: the accumulation of capital. In our opinion – again in line with Marx’s – investigating the capitalist reality is the first prerequisite for changing it.

Needless to say, this type of analysis is antithetical – in method, spirit and aim – to the institutionalism and system approach of Max Weber and Talcott Parsons. It also has nothing to do with the so-called ‘new institutionalism’ of Ronald Coase, Douglas North and Oliver Williamson. The latter school subjugates the logic of organizations and institutions to the marginal calculus of neoclassical utility. The very idea would have made Veblen flip in his grave.