The Political Economy of Capitalism
By Keith Keller at Sep 06, 2012
We live in a world of global capitalism. The nature of capitalism seems not to be well understood except, perhaps, by the capitalists themselves, and then only intuitively. There is a fundamental misconception about the nature of the political economy whereby the political system and the economic system are treated as distinct and separate from each other. The reality is that both are but different aspects of the same system of social organization which relies primarily upon money as the primary instrument of social control, the other aspects largely commodified and in the service of capital. Capital refers to money-power and is the driving force behind individual and group power-seeking based upon capital accumulation. Insofar as power is relative, the emphasis is upon differential capital accumulation. It is a big topic requiring me to greatly simplify.
The essence of capitalism is the rule of capital, that is the rule of money, more precisely the rule of those who posses, control and/or direct the flow of money. Private individuals and organizations (the rich, the corporations, the financial institutions) effectively manage society seeking to expand organizational power through capital accumulation. Government functions as the essential bureaucratic component of capitalist control, providing infrastructure and order, and seeing to the availability of raw materials and markets. At the national level, government provides massive subsidies to corporate profit-seeking, currently under the umbrella of the Pentagon system of military Keynesianism whereby the government is the corporate sector’s biggest customer. Without this or some other massive government spending, the system, as currently configured, would collapse due to lack of effective demand.
At the international level, the U.S. functions as a global hegemon, organizing and protecting global capitalism, insuring raw materials and markets, and attacking challenges to the system. This involves an expanding matrix of global financial control. Global finance, led by Wall Street, is the central nervous system of global capitalism. Central to global finance is the U.S. Treasury bond market, the largest, deepest and most liquid financial market, and the U.S. Federal Reserve which functions as a de facto global central bank. Insofar as the various high-level managers of capitalism share similar perspectives harmonized through various organizational linkages and interactions, the system as a whole has a certain organic tendency to adapt and grow. Currently, the global economy is experiencing a period of financialization whereby the financial instruments themselves are a primary source of speculation and profit unrelated to real economy goods and services. It is a process whereby the guardians of money-power increase their power through predictable financial gamesmanship.
The use of money as an instrument of power and control is achieved through the use of extensive market dependency. Indeed, increasing the breadth and depth of the market has been a primary objective of capitalism throughout, globalization the latest and ultimate example of monetary conquest. The modification of behavior to obtain money (working for wages) to acquire the essentials of life, luxuries and social power is seen as natural, its coercive nature camouflaged. In addition, the use of nominally democratic forms gives the illusion of democracy and citizen control.
The effectiveness of capitalism as a system of social organization and control derives in large part from its unique ability to monetize power. In capitalism, money is power, economic power in fluid form, the primary instrument of social control. Other means of social control can be readily obtained by those with financial resources, but not by those without. Also, unlike monarchy where nobility is determined by birth and is relatively static, money-power provides the potential for acquiring significant social power by working within the system, mostly a myth but an effective one.
A key component of capitalism as a system of social control is the fluidity of money-power, the ability to rapidly and effectively empower that which works, and to dis-empower that which doesn’t. This, in turn, rewards those who are able to anticipate the needs and wants of their funders, and to modify their behavior accordingly on their own volition. Corporate managers, for example, are expected to tend to business and to accumulate capital on their own initiative; those that do are rewarded, those that don’t are replaced.
In order to appreciate the effectiveness of capitalism as a system of social control, it is necessary to understand two things. First, and critically important, is the degree to which our modern and complex society is organized around monetary control and is utterly dependent upon the monetary delegation of authority (funding) to allow economic transactions to occur. A lot of money can buy a lot of goods, services and influence, a lack of money a sign of weakness. As such, most are inclined to naturally behave in such a way as to acquire systemic power, to obtain money or credit (debt money). Money is the basis for most socio-economic activity, hence, our society is dependent upon the financial system to function, and would collapse without it. In the long run money overwhelms most opposition. Money endures.
The second critically important thing to keep in mind is that to change our society from the way it is to the way it ought to be, we need to change the financial system and redirect the flow of money. Money powers and guides the workings of our highly monetized society. He who has the gold rules. The increased concentration of wealth of the elites effectively translates into increased elite power and reduced power for the majority. Vast concentrations of wealth are inherently oligarchic. We have entered a period of vastly increased elite power. Progressive social change absolutely requires public control of the financial system along with a massive downward redistribution of wealth. This would also benefit the real economy which is starved for funds due to wildly excessive concentrations of wealth leading to systemic imbalance and financial gamesmanship.
Capitalism has entered a new phase with globalization. Thanks to computers, telecommunications and ‘trade’/financial agreements and organizations, capital (money power) roams the planet imposing its will. Nations and communities dependent upon the global market and global finance are subject to the whims of keystroke tyrants located far away. The bond traders who inflate Third World economies with rapid, unregulated capital inflows, then instigate capital flight causing insolvencies and bankruptcies, sound businesses destroyed financially then acquired for pennies on the dollar. This crumbling of national barriers to economic/financial penetration is extremely significant, countries locked into a matrix of economic and financial control, national and local independence a fading memory, the possibilities for successful revolt increasingly remote.
One aspect of all of this inadequately noticed is the degree to which the economically powerful can foment dissent in target nations simply by funding dissenters. Prior to globalization, back when there were significant national barriers to financial penetration, nation-states, particularly powerful ones, had a certain degree of independence from financial control, their political system potentially responsive to democratic input. Nowadays, the nation-states, particularly the weaker ones, are in danger of being taken over by the global financial elites through privatization, and/or being destabilized by well-funded opposition groups, present in any society, but frequently weak without outside support. The economically powerful nations are relatively immune to externally induced revolts insofar as a much greater level of financial penetration would be required to seriously threaten internal cohesion supported by vast wealth. Even the most powerful nations, however, are vulnerable to financial pressure exerted through the private global financial system.
What this means and where this is heading is that nowadays the global financial system, run by the financial elites of the most powerful nation-states, particularly the U.S., establishes the overarching framework of order and general guidelines within which the corporations and lesser elites pursue their power-seeking objectives. It is an integrated system of capitalist logic where money-power (capital) imposes its will via market mechanisms backed by military force. It is a system which absorbs (co-opts) dissent, and which maintains power and privilege in dynamic power-seeking (differential capital accumulation), rather than ideologically justified bureaucracy (Marxism). It is a highly resilient system with built-in defense mechanisms insofar as opposition is dependent upon obtaining funding within the system itself. Its weakness is its propensity to over-concentrate capital which results in market dynamism being replaced by oligarchic rigidity, economic inefficiency and mass misery. Furthermore, the reliance on debt-money along with unsustainable compound interest is driving the system toward financial collapse, a problem that is not being acknowledged much less dealt with. Finally, monetary power-seeking ignores environmental limits and constraints, and is inducing a likely environmental collapse of catastrophic proportions, or perhaps nuclear warfare.