capital as a symbolic representation of power

The secret to understanding accumulation, this book argues, lies not in the narrow confines of production and consumption, but in the broader processes and institutions of power. Capital, we claim, is neither a material object nor a social relationship embedded in material entities. It is not ‘augmented’ by power. It is, in itself, a symbolic representation of power.

Capital is finance

The starting point is finance. As we shall see, Marx classified finance as ‘fictitious’ capital – in contrast to the ‘actual’ capital embedded in the means of production. This classification puts the world on its head. In fact, in the real world the quantum of capital exists as finance, and only as finance. This is the core of the capitalist regime.

capitalization: expected profit

The modern corporate owner does not view capital as comprising tangible and intangible artefacts such as machines, structures, raw materials, knowledge and goodwill. Instead, he or she is habituated to think of capital as equivalent to the corporation’s equity and debt. The universal creed of capitalism defines the magnitude of this equity and debt as capitalization: it is equal to the corporation’s expected future profit and interest payments, adjusted for risk and discounted to their present value.

The religion of capitalization

Faith in the principle of capitalization now has more followers than all of the world’s religions combined. It is accepted everywhere – from New York and London to Beijing and Teheran. In fact, the belief has spread so widely that it is now used regularly to discount not only capitalist income, but also the income of wage earners, governments, and, indeed, society at large.

But as often happens with religion, the greater the belief the fewer the questions. And, indeed, those who obey capitalization are so conditioned that they rarely if ever enquire into its origin and implications. So maybe it isn’t too much to stop and ask: What exactly is the meaning of capitalization? Where does it come from and why has it become so dominant? What are the forces that propel it, and how do they shape the broader process of capitalist development?

the power of a corporation’s owners

As this book will show, the elements of corporate capitalization – namely the firm’s expected earnings and their associated risk perceptions – represent neither the productivity of the owned artefacts nor the abstract labour socially necessary to produce them, but the power of a corporation’s owners [7].

In the capitalist order, it is power that makes the owned artefacts valuable to begin with. Moreover, the power to generate earnings and limit risk goes far beyond the narrow spheres of ‘production’ and ‘markets’ to include the entire state structure of corporations and governments.

capital and state

This perspective is unlike that of conventional political economy. Liberal ideology likes to present capital and state as hostile, while Marxists think of them as complementary. But in both approaches, the two entities – although related – are distinctly instituted and organized.

Our own view is very different. As we see it, the legal–organizational entity of the corporation and the network of institutions and organs that make up government are part and parcel of the same encompassing mode of power. We call this mode of power the state of capital, and it is the ongoing transformation of this state of capital that constitutes the accumulation of capital.

The fragmentation of social sphere

The conventional creed incessantly fractures this encompassing process into a kaleidoscope of multiple interpretations. It conditions us to think of a bank as part of the ‘economy’, of the army as a component of ‘politics’ and of a television network as an aspect of ‘culture’. We expect the ‘sports’ section of the newspaper to be separate from the sections that deal with ‘international [p.9] news’ and ‘education’. We split our life into distinct functions such as ‘family’, ‘work’, ‘consumption’ and ‘entertainment’. We put each entity in a different realm.

And yet, occasionally, a small miracle happens. Like in the opening of Maurice Ravel’s La Valse, where the dissociated, fragmented sounds gradually interlace and fuse into a single musical march-dance, our mind, in a flash of negation, unites the seemingly distinct social regions into a single hologram. Although often no more than a fuzzy silhouette, this hologram shows us the whole picture. The fractured human beings, the infinite threads that tie them to one another, the different ‘spheres’ between which they move – all those converge into one totalizing logic: the logic of capital [8].

Discounting future earnings

The reason that this logic is so totalizing can be sketched as follows. The capitalist mode of power is counted in prices, and capitalization, working through the ever more encompassing price system, is the algorithm that constantly restructures and reshapes this order. Capitalization discounts a particular trajectory of expected future earnings. For any group of capitalists – typically a corporation – the relative level and pattern of earnings denote differential power: the higher and more predictable these earnings are relative to those of other groups of companies, the greater the differential power of the corporation’s owners.

Note that this is not ‘economic power’. Neither is it ‘political power’ that somehow ‘distorts’ the economy. Instead, what we deal with here is organized power at large. Numerous power institutions and processes – from ideology, through culture, to organized violence, religion, the law, ethnicity, gender, international conflict, labour relations, manufacturing techniques and accounting innovations – all bear on the differential level and volatility of earnings.

When these earnings and their volatility are discounted into capital values, the power institutions and processes that underlie them become part of capital. And since capital is a vendible commodity, available for purchase and sale on the stock and bond markets, its relative value represents the commodification of power.

From this viewpoint, we can no longer speak of ‘economic efficiency’ versus ‘political power’, or distinguish ‘economic exploitation’ from ‘political oppression’. Instead, there is a single process of capital accumulation/state formation, a process of restructuring by which power is accumulated as capital. To study the accumulation of capital is to study the formation and transformation of organized power under capitalism. This is the starting point of our book.

Footnotes

[7] For simplicity, we refer here to corporate capitalization only. Later in the book we treat capitalization more generally.

[8] The yearning for a totalizing picture in the face of relentless disciplinary fracturing is described in the childhood reminiscences of Arnold Toynbee: When I was a child I used to stay from time to time in the house of a distinguished professor of one of the physical sciences. There was a study lined with bookshelves, and I remember how, between one visit and another, the books used to change. When first I knew the room, many shelves were filled with general literature, with general scientific works, and with general works on that branch in which my host was an expert. As the years passed, these shelves were invaded, one after another, by the relentless advance of half a dozen specialized periodicals – gaunt volumes in grim bindings, each containing many monographs by different hands.

These volumes were not books in the literary sense of the word, for there was no unity in their contents and indeed no relation whatever between one monograph and another beyond the very feeble link of their all having something to do with the branch of science in question. The books retreated as the periodicals advanced. I afterwards rediscovered them in the attic, where the Poemsof Shelley and The Origin of Species, thrown together in a common exile, shared shelves of a rougher workmanship with microbes kept in glass bottles. Each time I found the study a less agreeable room to look at and to live in than before. These periodicals were the industrial system ‘in book form’, with its division of labour and its sustained maximum output of articles manufactured from raw materials mechanically. (Toynbee 1972: 30)