Definition of capitalism
The state is integrally involved in the operation of capitalism (Pistor 2019). In this book, extending the discussion in Chapter 4, capitalism is understood to be a historically specific set of institutions which co-evolved with the nationstate (Davis 2015a). Hodgson (2015) has offered a list of key characteristics of capitalism. I would place particular emphasis on the motive of accumulation (Davis 2017c, 111—112). One important aspect of capitalism is the financial circuit, M — C — M’, the purpose of which is to use money to produce more money.This circuit includes an initial amount of money, either a previous
The economics of “autophagy " 87 surplus accumulation or credit, as well as a means of production and access to a wage labor force and a well-developed market which enables the realization of profit by sales revenue. As stressed by Marx (1967), these conditions were historically emergent, not universal.
Another important aspect is the production and transmission of value during the completion of the financial circuit, M — M’.Value is mobile throughout the process but stored or symbolized by the commodities themselves, a sum of money, as well as a means of production and the available wage labor force. A holistic view of capitalism would include all of these components, as well as the experienced population which is familiar with all of these aspects and recognizes their significance.
The “storage” of value in real objects, symbols of value like gold, or financial assets in the authorized language of commitment is understood by market participants.The value of the physical and financial assets of a company is reflected in its balance sheet, as a guide to its future profit expectations. The value of these assets can also change, given prospects of profitability, and can be “written down” if those prospects begin to look dim. This “language” of value is understood by all those who are preparing for a life in business or in the labor force and who may gain access to the means of life in this method.
Yet symbols of value are considered “fictitious” by Smith, Marx, and Polanyi, as if this genre is misleading and deceptive, not only variable. This sense of incredulity is based on the process of symbolization and constant motion of “value” and the tendency to always question its stability given the flux of the market. Such instability and insecurity have had an impact on personality, with the first widespread use of financial markets (Pocock 1975).
Given the bureaucratization of state finance and the corporate labor force, the use of “categories” of persons is also significant. It is on the basis of certain categories of eligibility that persons are given access to employment and credit by these perhaps arbitrary, if not impossible, judgments of future performance. Such performance depends on the incumbent and her characteristics, as well as the unknown conditions of future markets.
Although the financial circuit operates with words and symbols, it also mobilizes real things, such as raw materials and commodity production.The financial circuit is a “hybrid” (Latour 1993) consisting of symbols, human actions, and concrete materials.
In the left circle, A, are life processes such as species reproduction and global biogeochemical cycles which maintain nutrient flows. In the right circle, B, are financial flows, with the circular flow of production and consumption. The interface between the two processes consists of human labor and raw materials extraction from A to B, and the deposition of waste from B to A. The financial circuit in A operates as if there were no connection of the economy to the natural cycles, an assumption which is increasingly in error as global population and economic production expands.
Capitalism appears to exist on two levels, exchange value vs. use value, in Marxian terms, or market price vs. utility in mainstream economic terms.These
Figure 5.1 Double Circuits: Ecological and Financial
two levels are both within the economic sphere, B, with humankind as its instrument and its focus. On the other hand, in A there are the biogeochemical and life processes in the sphere of life, which participate in global energy and material transformations on a different time and geographic scale.
There is a form of double vision as a result. For day-to-day existence, one could presume that the economic sphere, B, is most important to obtain the necessities. On the other hand, one could hardly argue that human life could proceed without moderate temperatures suited to the limits of the human body, or adequate oxygen, clean water, and nutrition on a daily basis. Yet somehow the ecological sphere. A, seems less important and urgent, given the imperatives of financial flows.
In the right circle, B, money appears to grow by itself, M — M’, while actually the “resources” for that growth are drawn from the living systems in A. This expansion of money, M — M’, is necessary for the integrity of the financial system, for the repayment of debt with interest. The “dependence” of the financial system on the living systems is invisible and allows a form of autophagy. That is, for money to “grow,” resources are drawn from the living systems and may not be replaced. The assumption of wages that cover the costs of reproduction is found in Marx as well as Gauthier (1982, 51) but depends on the bargaining power of labor and the “historical and moral element” (Marx 1967, Vol. I, Chapter 6, 170— 171).The necessary investments in public goods like transportation, communication, waste disposal, environmental restoration, and human education are the responsibility of the state and are considered a burden on the taxpayer and a drain on profits rather than essential for the reproduction of the system as a whole. There is no explicit, consensus accounting system for “natural” or “human” capital (Stiglitz, Sen, and Fitoussi 2010) and no comprehensive mechanism for identifying externalities. Methods of calculating present discounted value tend to discount the future and to underestimate the value of environmental investments (Nordhaus 2013; Stern 2015).
In spite of the appearance of two worlds, financial and real, there is only one earth. For one to grow automatically, the other must shrink. With financial systems capable of compound growth (Harvey 2014, 222—245), the offsetting depletion would also be exponential. Financial incentives are said to improve innovation and productivity but may also deplete environmental resources and distort social systems.