Saturday, 16 July 2016

Commercial Capital and 'Finance'

This note is to record an interesting comment on my new book, The City, and my recent blog post 'Value Theory, Finance & Imperialism' on 3 July 2016, and to give my reply that may otherwise be somewhat hidden at the end of that article.


Comment from 'Kumiko':
You are on the right track generally as far as the theoretical framework goes. But I'd note that in Vol II, where the analytical assumption of the identity of individual with total social capital is still in place, Marx 1) divides the total productive capital into productive-, commodity-, and money-capital circuits, and regards each independently. Here Marx arrives at the conclusion that the commodity-capital circuit can be excluded from further consideration for the purpose of the analysis, that purpose being the determinations of the sources and destinations of surplus value, the source being found in production, the destination necessarily being found in money under capitalism. But Marx also notes the peculiarity of the commodity-capital circuit in that it is the only circuit of the three to both begin and end "bearing" surplus value. In practice that could give rise to various interesting arbitrage possibilities for independent commerce, once the assumption of identity is dropped.
And that brings me to Vol III Part IV. This is limited to the regard of commercial capital in independent form. Note also Marx's assumption that independent commercial capital is scheduled for extinction in the course of the development of capitalist industrial production. This may be true enough, but the question begged here concerns the *combined* forms of industrial, commercial and financial capital, these being the common social aliases for the three circuits mentioned above. You are correct to dismiss the traditional counter-position of "industry" with "finance" as if these still exist only in independent form. Further, one could go on to critique the classical Hilferding formula for "finance capital" that combines banking with industrial capital as perhaps only applicable to Germany in a certain historical period, as only a specific combination of the three circuits. Even if we agree that modern capital nearly always appears in combined form, we could go on to question the "balance" in the combination of the three circuits, where one or another "dominant", with that dominance also fluctuating with the other circuits over the course of history. And finally we can also question the "inevitability" of the rise to "dominance" of industrial capital, particularly in the three different cases of the United States, Britain and France. Otherwise we would not be speaking of "deindustrialization" today.
My reply:
I agree with your remarks more than might appear at first sight. My focus in the book (and the logic of the book’s exposition as outlined in this blog post) was on how to understand ‘finance’ in a value framework. I saw this as necessary, given the prevalence of shallow, ‘radical’ critiques of finance that usually boiled down to a call for a regulated capitalism. In other words, I wanted to explain how to understand the evolution of the form of value and the key role of finance in the imperialist world economy. This was the subject of my PhD thesis, from which the book, after much rewriting and updating, was derived.
In the book, I do have a critique Hilferding’s concept of ‘finance capital’, both as being too Germany-centric and as a one-sided, nationally-based understanding of how the form of value evolves. I argue instead to analyse how finance develops in the world economy, in particular the role of financial securities and the banking system, to get a clearer view of how the world works.
I take your point that the ‘commercial capital’ aspect of modern capitalism is also a critical one. My priority in the book was different, but it has been on my mind for a while now that commercial capital deserves more attention. For example, major corporations like Apple, Google, Facebook and Amazon are more in the commercial than the industrial sphere. Most of their activities are buying/selling what other companies produce, or getting advertising revenues from these sales. This is also linked to the financial and market power they are able to use. William Milberg and others have looked at this from a ‘value chains’ perspective; John Smith, in his new book Imperialism in the 21st Century, explains well how this amounts to ‘value capture’ in his focus on the globalisation of production.
The latter point also brings out how commercial capital still depends upon production, and how production companies can turn themselves into more commercial ones by getting others to do the producing in markets that are dominated by the powerful corporations. Even in the late 19th century, Britain was more the ‘warehouse of the world’ than the workshop of the world, with huge revenues from maritime transport, shipping, insurance, trade finance, etc, adding to those from its foreign investments.
Does that show how industry was not the ‘dominant’ force in capital accumulation? Not really. Industry (which Marx considered the main form of productive capital) conditioned the developing role of commerce and finance from at least the early 19th century, moulding it into a form that would suit industrial capital. However, it is true that other developments need to be considered. Marx was wrong if he thought that industry had to be the dominant form of capitalist enterprise, but this does not necessarily follow from the logic of his argument if one allows for the development of the world economy, which he had not fully analysed.
While a huge commercial capital sector (or financial sector) could not exist within a single economy taken out of its relationship with others, it is a different question when a small number of powerful capitalist countries dominate the world economy. Britain, for example, could have an outsized commercial/financial sector because Britain dominated world trade and its surplus value was sourced worldwide, not just from within the national economy. This example can be used to understand what has happened today, where domination of world commerce and finance benefits particular countries that, in value terms, produce relatively little themselves. This is explained more fully in my book regarding finance; analogously this is true of commerce as well today, when others do the producing.

Tony Norfield, 16 July 2016

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