Raping the World to Feed the Bubble
- A Reply to Loren Goldner


Ecological devastation, decay of infrastructure, a widening gap between rich and poor, enormous global unemployment, intensification of work and falling wages, extreme exploitation spreading from the periphery to the center, a gigantic shift of wealth to the financial sector, bursting bubbles of fictitious wealth, war …these are some of the defining characteristics of our era. Understanding that these phenomena (and those worse, yet to come) are all connected by capitalism’s urge to survive will be essential for the struggles against them to find common cause and purpose. So it’s up to the pro-revolutionaries to analyze and explain the connections. Loren Goldner did so, in an article entitled “Fictitious Capital for Beginners: Imperialism, “Anti-Imperialism”, and the Continuing Relevance of Rosa Luxemburg”, that was, this past summer, debated on several internet discussion lists.

In his response to some critiques on the Libcom-list, Goldner summarized his position as follows:

“Boiled down to its simplest, my article says that capital accumulation, in the course of a cycle, necessarily generates titles to wealth (stocks, bonds, property deeds and leases, and more recently securitized mortgages, etc.), capitalized anticipations of income in excess of available surplus value, and that it makes up that gap with “loot”, i.e. goods, labor power, raw materials not paid for at their reproductive value, by running down (not reproducing) C (means of production and infrastructure) or V (labor power) past their point of depletion. When available surplus value and loot no longer suffice to support those paper claims, capitalism undergoes a deflationary crisis that wipes out claims (and ultimately real capital, and labor power) until those claims are once again in some [relation of] equilibrium with available surplus value. That’s exactly what we are seeing today. In a nutshell, in the era of the proliferation of fictitious capital, capitalist paper expands, while the material reproduction of society goes backwards.”

The text was discussed in IP as well. We agreed with much of Goldner’s analysis, but we also thought he made some mistakes which led him to some wrong conclusions. Sander wrote the following reply.

Fictitious Capital and Imperialism: Some Comments On Goldner’s Text

I liked this text because of its ambitious attempt to analyze the totality, in contrast to all the punctual observations on the internet lists that Loren animates. His engaging text makes important points but I also have some disagreements, both with its framework and with some of its conclusions.

Primitive accumulation?

LG can be a bit eclectic and sloppy in the use of theoretical concepts. I criticized him earlier for giving the concept of “unproductive labor” a different content than Marx while claiming to defend the same. Now he does it again with the concept “primitive accumulation”. For Marx, this is “nothing else than the historical process of divorcing the producer from the means of production. It appears as ‘primitive’ because it forms the pre-history of capital, and of the mode of production corresponding to capital” .(1) It is “an accumulation which is not the result of the capitalist mode of production but its point of departure” .(2) For the capitalist mode of production to begin, there must be capital, which can’t be the product of the not yet existing capitalist mode of production; therefore it must be accumulated from other sources. That capital must also be in a position to command productive forces, in the first place, workers. But workers imply the capitalist mode of production, which had yet to begin, so the proletariat had to be created. That meant the massive expropriation of independent producers, mostly, peasants. It is true that capital-formation based on plunder and theft of extra-capitalist areas and the forced proletarianization of independent producers did not stop once capitalism got out of the starting blocks but continues to our day - in that sense one can indeed speak of a “permanent primitive accumulation.” Rosa Luxemburg was one of the very few who tried to integrate that reality in an overall analysis of the historical development of capitalism’s contradictions. I agree this is necessary even though I think her attempt was flawed. Loren tries it also, in a way that is more different from Luxemburg than he acknowledges. For him, primitive accumulation is the looting that compensates for the lack of surplus value creation within capitalism. It is in his view especially important in our days, because “Keynesianism” has sabotaged the self-corrective mechanism of devalorization through crisis, thereby compounding the problem (lack of surplus value). But he defines primitive accumulation quite differently than Marx. For him, it’s all accumulation which results from exchanges of non-equivalents, including the looting of nature (which is not an exchange of value) and “running capital plant and infrastructure into the ground” (how this can be construed as an non-equivalent exchange or a source of extra-value I fail to see; it is, however, a form of devalorization), and including exchanges within the capitalist mode of production, such as paying wages below the value of labor power.

But contrary to what LG seems to assume, the law of value does not imply an exchange of equivalents, only a tendency in that direction from which the law of value continuously offers escape to capitalists who lower the individual value of their commodity below its market value. The fact that surplus profits flow to the most productive capitals hardly needs to be explained by primitive accumulation. Furthermore, within economies, the movement of capital leads to a tendential equalization of the rate of profit so that the same quantity of advanced capital yields the same rate of profit, regardless of the specific quantity of value they produced. This certainly implies exchanges of unequal value. Finally, inequalities in supply and demand make market prices deviate from market values, again making the exchanges non-equivalent. This is especially true today. In a world of general overcapacity, there can be no equivalent exchange between commodities. On the market, surplus value flows in such a way that relative scarcity (artificially created or not) is rewarded with surplus-profit and that oversupply drives price below value.

Buying labor power under its value

In other words, equivalent exchanges are the rare exception, not the norm in capitalism. Capitalists have always manipulated the law of value when they could. In particular in regard to labor power: capitalists always try to buy it below its value and to create the conditions to make that possible. It was, and is, rarely sold at its value. Sometimes, it is sold above it (which doesn’t mean the worker is not exploited, only that he gets more than the equivalent of his labor power but still less than the value he created), but more often below it. The main factor that makes that possible is that the supply of labor power exceeds demand and the policies of the capitalist class are often aimed at maintaining this imbalance (immigration policies, etc). Other factors, in particular class consciousness, or the lack of it, also impact that rapport de force.

The urge to drive wages below value is constant but as always we must take the historical context into account. During formal domination and the first phase of the transition to real domination, the payment of wages below the value of labor power was the rule, rather than the exception. Paying labor power less than its reproductive value is by definition destructive, like over-cropping in agriculture. But that posed no problem as long as the supply of labor power was plentiful (which was achieved mainly through primitive accumulation, the forced conversion of peasants into proletarians) and as long as capital’s investment in it was small. But with the development of real domination, the labor process changed, so that over time, skilled labor power became increasingly important. That meant that capitalism couldn’t drive wages below value without destroying its own investment in the formation of the skilled worker. This, together with the development of the working class’ capacity to organize and defend its interests, resulted in a tendential equalization of wages and value of labor power, although, in conditions of crisis, which decreases demand for labor power, the tendency to push wages below value re-emerges. Of course, in areas that remained stuck in conditions of formal domination (precisely because of the transition to real domination globally and the resulting decadence of capitalism), where the emphasis of capitalist exploitation remained on absolute surplus value and the oversupply of (unskilled) labor was permanent, the tendency of wages to be pushed below value remained permanent too.

In this regard, some comrades raised the question, “how can one determine what the actual value of labor power is in a given context?” The value of labor power is determined, like that of any other commodity, by the socially necessary labor time (snlt) required to produce it. Therefore, the value of the labor power of a skilled worker is much higher than that of an unskilled worker, given all the snlt that went into his training. That value is transferred into the product of his labor, just like the value of the technology used in production. However, if there is no demand for his skills and the skilled worker is employed for unskilled labor, the value of his labor power devalorizes correspondingly. The amount of value that labor power creates has in itself no bearing on its value.

Secondly, the snlt needed to reproduce the commodity labor power is obviously much lower in underdeveloped countries, and therefore its value is too. Conditions of survival are more complex in a high tech society than in a low- tech environment. The difference is even greater when the workers are only “semi-proletarianized” and it’s considered a given that they grow part of the foodstuff they need on their own little plot of land, and that they get no health care and so on. So the same unskilled labor has a higher value in the former than in the latter. It needs to be emphasized that the difference is not entirely objective, that there is also a subjective quality to it, what Marx termed the “moral aspect” of the determination of the value of the worker’s labor power, beyond just the formation of the necessary skills (education, training, etc.) It entails the cost of production of the worker as a subject of capital, as subjected to the law of value, not through coercion or even the constraints of the need to earn a living, but in his/her consciousness, values, beliefs, culture – all of which constitute him/her as a subject (this is a complex of issues that Marxism has under-theorized, and that the concept of ideology, understood simply as false consciousness, is inadequate to comprehend). Historical legacy, class consciousness, culture (including propaganda for consumerism), religion, etc, also play a role in the constitution of what, in a given society, are considered “normal” means of subsistence (which is another illustration of the fallacy of a mechanistic separation of infrastructure and superstructure).

So there is a big difference in the value of labor power in Switzerland and Swaziland. This has to be taken into account when comparing the value of the commodities these countries exchange. The goods of the first contain less direct labor but the value of that labor is much higher than in those of the second. That labor also yields more surplus value, because the intensity of the labor process is much higher. The more real domination internalizes the law of value in the production process, the more surplus value is squeezed from the same quantity of labor time.

When one takes those factors into account, the difference in value (c + v + sv) between the commodities of those two countries appears smaller than at first sight. There is still non-equivalent exchange, because there is non-equivalent exchange in the normal operation of the law of value. Higher productivity is rewarded by the market with surplus profit. And while within economies, and today to some extent in larger zones, the rate of profit tendentially equalizes and creates a homogenization of the conditions of production, internationally many obstacles prevent that, so that the advantage remains.

The exchange is made further unequal by the law of supply and demand: overproduced commodities are sold under their value. As we’ve seen, that was and is often the case for the commodity labor power and thus often also for the commodities made with that labor power (depending on whether the capitalist can pocket the difference or must pass it on to the buyer). Unskilled workers, in the US as well as in India, are paid under the value of their labor power, but in India they are the vast majority. The trade between developed and underdeveloped countries implies a transfer of sv to the former and yet historically that trade followed a declining trend. The more real domination developed, the more technified the capitalist world became, the higher the threshold for capital-formation became, the more difficult it became for the latter to produce commodities that fit in the modern global market.

Aside from the limitations imposed by a growing dependency on skilled labor, Fordism posed particular challenges to capitalists desire to push wages below value. The vertical company, the huge factory, the vulnerability of the assembly line to interruptions, the heavy cost of unused capacity, all shifted the balance of force in favor of the working class and helped to make the struggles of the late ‘60’s and ‘70’s possible. While, in contrast to certain Italian theorists, I don’t want to reduce the main events of the decades that followed (the accelerated development of information technology, the rise of a post-Fordist organization of the labor process, “globalization,” the recomposition of the working class, the decline of working class struggle…) to that single cause, I think the desire of the capitalist class to recreate conditions to drive wages under value played a big role in them.

For the accumulation of capital, two positive things happened. First, these trends allowed a commodification of all sorts of activities and services that were still outside the realm of capitalist production. This expansion of the law of value was inward (integrating everything in the fabric of the market) as well as outward (integrating the whole world into global production). This has fueled value creation. Secondly, the shift of production to underdeveloped countries did indeed restore conditions to drive wages below value and provided unprecedented opportunities to combine modern technology with low value-labor power. This has been good for profits. I see no reason to assume that this trend will end anytime soon. It should come as no surprise that in this “post-Fordist” era, the bulk of the production that has shifted to low value of labor-economies, is typically Fordist. Even in the heyday of Fordism, there were more “pre-Fordist” than Fordist companies. The terms do not describe a general state of the economy, but its tendency, the direction it’s moving in. The cutting edge of capitalist production is not in China and India but remains in the US, Western Europe and Japan. It is there that the post-Fordist economy takes shape. Its characteristics and implications still need to be analyzed in IP. We have different views as to what extent the post-Fordist economy is value-creating for global capital. We do agree that this cutting edge-position (which is not strictly economic), and the means of enforcement of monopoly-rights that come with it, yield surplus-profits, a transfer of value from the weaker competitors and consumers. I tend to think, more so than some others in IP, that a huge part of the labor in the post-Fordist economy is not productive, and that the product of the labor of another part tends, by its nature, to devalorize quickly. I think this accelerates the tendential fall of the general rate of profit and makes the compensation provided by globalization essential.


After trying to understand the non-equivalent trade in labor power in its historical context, we should look at primitive accumulation, the violent expropriation of pre-capitalist society, in the same way. Beyond its function in providing the building blocs for capitalism, this has happened throughout capitalism, in proud continuation of the plunder-traditions of ruling classes before it. However, over time, as the most easily plundered riches were hauled away and developed society itself moved along to more technified needs (no more need to harvest those rubber trees), its profitability decreased.

There is still a debate over the question whether the last big wave of colonization (the “scramble for Africa” in the later 19th century) came up positive on a cost-benefit balance sheet for the countries undertaking these efforts. Most have concluded that it didn’t. It was already questioned in its time and became more so over time. And, how surprising: the more the costs of colonial plunder rose in relation to the benefits, the more society developed “a consciousness” about the immorality of colonialism.

What about capitalist slavery? Was that primitive accumulation? The overpowering and selling of people from pre-capitalist societies was. But once the slave is used for the production of commodities, he is no longer in pre-capitalism. He stands in a relation with capital, but not as the owner of the commodity labor power, but as a commodity himself. He’s not the same as a “free” proletarian, but is closer to him than to the slave of antiquity. He fulfills the same function for capital: creating value beyond the value required to reproduce his labor power. Unless that labor power is so easily replaced that paying for its reproduction is a waste of money, as King Leopold II thought while he wasted 10 million Congolese in the rubber plantations. What separates the capitalist slaves from the workers is in the first place a legal framework that defines them as a commodity. It’s of course a lot more than just laws. What distinguishes them further are other obstacles to acting on a class basis, like isolation. It’s not a coincidence that capitalist slavery has existed primarily and persists to our day in agriculture, where laborers are more easily isolated from each other than in industry. Also isolated and therefore more easily enslaved to our day are domestics and sex workers. The fact that I use the term “workers” indicates that I think they (usually) are proletarians. Their extreme exploitation does not make them any less so. That is what slavery is today: not the exploitation of non-capitalists, but extreme exploitation of proletarians. To keep certain sectors like the sex trade in a (semi-) illegal sphere, that maintains that isolation, is a source of extra-surplus value.

But while the globalization of the production process of capitalism includes forms of slave labor and creates new opportunities for it, it is precisely the demand for greater and greater productivity on the part of labor that sets limits to this phenomenon (the historical failures of Russian, German, and Japanese capitalism in the 1930’s and 1940’s, where forms of slave labor were widely used in public works projects and in war production (to compensate for the backwardness of these capitals relative to their imperialist rivals) is an historical confirmation of this).


Of course we agree with LG that crisis is a big incentive for capitalists to plunder and to push wages below value, but the degree to which they can do so depends a lot upon the historical context. Concerning his view of the cause of that crisis, Loren has less in common with Luxemburg than he seems to think. Despite the fact that he calls his disagreements with her “minor” and that we would say our disagreements with her economic theory are pretty serious, I think we are closer to her than he is, because we agree with her that the insufficiency of capitalism’s internally generated market is a fundamental obstacle to capitalist accumulation. But whereas Luxemburg saw this insufficiency as static, present in capitalism since its inception, we think that it is dynamic and that it develops as a result of real domination’s effect on value-creation (slowing the growth of exchange-value but accelerating the growth of use-values) and interacts with its other consequence, the tendential fall of the general rate of profit (tfrp). Capitalism becomes obsolete when capitalist wealth and real wealth no longer develop in harmony, when it becomes increasingly difficult and absurd to measure real wealth with abstract labor power. This contradiction manifests itself in the phase of production (in a relative decline of exchange value-creation) but also in the circulation of value (in a relative decline of productive demand). It seems undeniable to us that there are plenty of means of production available, technology as well as manpower, whose combined use would yield sv, and thus profit, if the (effective) demand for the additional use values they would produce, existed. LG, by contrast, doesn’t mention the market contradiction at all. Without explicitly saying so, he sees the tfrp as the primary cause of capitalist crisis. But his view is not the same as that of Grossman and Mattick, for whom the tfrp was a historical, long-term, trend. LG rather sees it like Andrew Kliman, who in his recent book (4) and other writings describes the tfrp as a cyclical phenomenon, in which devalorizing crises restore conditions for accumulation. The crisis erupts because the value that is produced tends to fall under the value of the capital advanced for production. Loren makes essentially the same point. He also states that this shrinkage of value-creation is accelerated by what he calls techno-depreciation (what Marx called moral depreciation), the premature obsolescence of means of production, discarded long before they have transferred all their value to new commodities. He emphasizes that the capitalization that takes place at the beginning of the cycle represents claims to future value that, as a result of that value loss, does not materialize and thus becomes in part fictitious. Because of the “Keynesian” (some would prefer “state-capitalist”) money- and debt-creating policies by which the capitalist class has prevented the crisis from doing its job since the 1970’s, the overhang of fictitious capital has grown enormously, and weighs heavily upon industrial capital. The only thing which has prevented the collapse has been the infusion of value through what he calls primitive accumulation, which in his inclusive definition, contrary to Luxemburg’s view, does not come from extra-capitalist sectors but from within capitalism.

Despite the lack of an historical framework (for LG, crisis in the early 19th century seems not essentially different from crisis today, except for today’s fictitious capital-bubble), there is a lot we can agree upon. The relative decline of value creation in developed capitalist production is real, as is the accelerating effect of moral depreciation (enhanced by the increased rate of technological innovation), and the dangerous growth of the credit bubble, which is indeed larger than ever. I also agree that the increased access to low value-labor power and its impact on the rapport de forces between the classes and thus on wages explain why this house of cards hasn’t collapsed yet, as well as with his expectation that this compensating effect will, in the (not that much?) longer run, no longer suffice to prevent this collapse.

I want to be clear that when I use this word, I don’t mean a collapse of the capitalist system, not even an automatic improvement of the conditions for revolutionary class struggle. There is, as we well know, a capitalist response to such an economic collapse, and the power of capital’s subjectification of the mass of the population, and the power of nationalism and xenophobia, demonstrated so many times over the past century, is a warning that we need to take seriously. What I mean by “collapse” is a giant wave of massive devalorization, breaking the global chain of transactions at countless places, leading to global disruptions of trade and production. It is the inevitable phase of destruction of value imposed by the inner logic of the system, which today is a threat to the survival of our species. What Loren points out, albeit still in a tentative way, is a very important insight: this devalorization has already begun. The rapacious way in which capitalism consumes resources (both constant and variable capital) because of a tendentially aggravating scarcity of profit, shows its willingness to destroy productive forces, its refusal to invest in their renewal, in the future. This tendency shows how the inner logic of the value system is translated into the practice of capitalism

Imperialism today

Where we differ with LG is on how this has impacted the rapport de forces between the different capitalist countries and possibly also on how close such a collapse is (but nobody can know that anyway). Part of the reason for that difference may be that in the economic changes of the last 30 years, LG seems to see only the hollowing out of (Fordist) industry in the developed countries and their shift to Asia, and not a major restructuring of the production process that has both created new avenues for value creation and reinforced the commanding cutting edge position of the traditional leading countries over the global economy. As a result, he is too “bearish” on the US and too “bullish” on Asia.

After pointing to the global presence and power of the US military, after claiming that mostly American multinationals constitute the lion’s share of world production and after noting the US’ dominance over international institutions, LG states “we see US world hegemony disintegrating faster than we generally imagined possible (almost recalling the speed of the collapse of the Soviet bloc).” Where is the evidence for this claim? It is true that the US is facing enormous obstacles, but they threaten the capitalist accumulation process as a whole, not the leadership position of US capital, despite setbacks in Iraq and other places (see Mac Intosh’s articles in IP# 42 and 47 on this subject).

This August, the International Labor Organisation (a UN-branch) published a report on productivity in 2006 according to which it is again the highest in the US, followed by the Western European countries. While it is true that such figures, which are arrived at by dividing the country's gross domestic product by the number of people employed, do not tell us where most value is created, they do tell us something about where most profits are made, where the cutting edge is. Which is one reason why the US keeps attracting most of the net-savings of the world (the other is: power is an aphrodisiac).

In China and the other Asian countries that have been growing strongly in recent years (though not as strongly as LG believes – he takes the Chinese growth figures at face value, while many think they should be halved), productivity has doubled in the last decade, but it is still only one fifth of that of the US. It’s true that the difference would be smaller if only industry would be compared; it is so lopsided because of the huge gap in agricultural productivity. But agriculture remains the main occupation in those countries. It’s a persistent myth that China, India, etc, are “catching up” with developed capitals, like Germany and the US did in the second half of the 19th century. In the latter countries, in the context of capitalism’s ascendancy, the domestic means of production grew hand in hand with the domestic market, protected from foreign competition, but happily financed by foreign capital, especially British, because these lesser developed countries had a higher rate of profit (because of the lower organic composition of their capital (occ): less constant capital, more surplus value creating labor power), so that capitalizing their development yielded a higher return than investing domestically (more on this in my text in IP 37). The development of China and other Asian countries today, by contrast, is the result of the internationalization of the capitalist production process and is conditioned by the need to fit in the new global division of labor, made possible by a convergence of political and technological developments at the end of the 20th century. Not domestic development but export to the developed countries is the motor and the low value of its labor power is the reason why it happens. Such a huge shift of value creation does have a multiplier-effect on the rest of the economy in those “emerging” countries. They become richer, capable of crossing thresholds of capital-formation that, until not so long ago, they could only dream of. They become increasingly savvy in their knowledge of the global market. More than 500 Chinese companies have branches in California alone. Even India, number 124 in the world according to UN development criteria, now has first- rate global companies, powerful multinationals, such as Reliance and Tata. But guess what: the bulk of their investment doesn’t go to India, but to Europe and other areas. India has some islands of development in a sea of stagnation. The IT-sector, so much in the news lately, employs less than 2 million people in a country of 1.1 billion, most of them living in poverty. Why do the Indian multinationals not focus on domestic development? Because it’s not profitable. The stronger they become, the more they move away from India.

China is stuck

Mutatis mutandis, we see the same in China. There it’s more than islands, the entire coastal area, home to a quarter billion people, has drastically changed. But behind it lies a vast, mostly rural, hinterland, where the majority of Chinese live. With 2 trillion dollars in the bank, why does China not massively invest in its development? Because, from a capitalist point of view, that would be just a waste of money. But there’s more to it than a lack of profitability. It’s also the fear of too much transformation. If those countries invested massively in their hinterlands to homogenize conditions, they would risk serious threats. First, there is the threat of mass unemployment if agriculture were to shift to more productive, capital-intensive, exploitation. Second, there is the inevitability of a rising value of labor power if a homogenization of conditions transforms society as a whole, redefines needs and thus reproduction costs. And a low value of labor power is precisely the reason why they are where they are in the global assembly line. “Wages are on the rise in China”, reported the New York Times on August 29. The reason is not scarcity of labor power - there are more than a hundred million (internal) immigrants floating from city to city in search of jobs- but the fact that life in coastal China is changing and the survival conditions too, and the experience of the workers, the development of their hopes and expectations, as well. To be sure, wages are still very low in China. According to the NYT, “roughly $1 an hour for better-paid workers near the coast, compared with as little as 50 cents early this decade”. Still, it is a trend that must be reined in because countries with even lower value structures are breathing down China’s neck. A third reason is that this spending would be inflationary. For instance, raising the overall level of education and health care would be largely unproductive for capital while such a massive investment would infuse a lot of money into the economy, without a corresponding capital formation. Countries like China, where there is a wide gap between a highly productive export sector and a low occ, low productivity, rest of the economy, are already particularly vulnerable to inflation. The bulk of its profits come from its export sector but when this sector spends its profits in the rest of the domestic economy, inevitably “too much money chasing not enough goods” scenarios unfold, hence inflation, speculation, etc. To avoid that, the Chinese state tightly controls the export sector and forces it to keep most of its dollar earnings in the banks.

So China is stuck. It has an ever-larger pot of dollars but it can’t spend that capital freely on its national development.(5) Meanwhile, the purchasing power of that capital is eroding because the relentless debt-creation of the US inevitably leads to a declining dollar. It cannot seriously diversify – trade its dollar holdings for euros or other assets -- because that would accelerate the slide of the dollar. This would be disastrous for China, because it would cut deeply into its foreign reserves, it would make its exports to the US more expensive and thus less competitive, and it would cause a general confusion that would contract international trade. It is in China’s vital interest to avoid this, therefore, the general answer to LG’s question, “how much longer will the Chinese, the Koreans, the Japanese, the Middle Eastern oil sheiks, the Russians, the Venezuelans and the Medellin drug cartel – all major holders of dollars -- be willing to hold onto a depreciating asset?” is basically (although there are obviously some differences in the positions and options of the different players LG mentions), as long as its depreciation does not become so uncontrolled that global panic sets in.

Loren writes that those 2 trillion dollars in the bank of China are mere “little green pieces of paper” exchanged for real Chinese goods. They are of course more than that; otherwise their devaluation would not be a threat to China. As Loren notes, Japan suffered greatly when the devaluation of the dollar slashed its dollar-hoard. Yet when the Japanese bubble burst, its huge dollar-reserve was essential to rein in the downward spiral. It is true that, for decades now, the supply of dollars (currency and debt) has been growing ever more quickly than the value-creation it capitalizes and the value it circulates, so that a growing part of it has become fictitious from a value point of view. But that part is not greater or smaller depending on whether the dollar is in a Chinese bank or an American pocket. The mortgage-crisis in the US has hurt Chinese investors too. The growth of the dollar bubble is a problem for capital as a whole, given the entrenched position of the dollar as the international means of payment and reserve. Every country has dollars and would be hurt by their devaluation; everyone is hurt by its uncertain future. When the dollar sinks, when US stocks and other assets deflate, other countries do not profit but are dragged along.

While it’s true that in the past (such as in 1985) the US forced a dollar devaluation upon its main trading partners (not so much to devalue its debt as to improve its competitive position on the world market), the present slide is not engineered to stick it to the Chinese, but is the inevitable weakening of a wave of asset-inflation which continued improbably long. As Loren notes, this asset-inflation went hand in hand with an ever- greater allocation of value to the unproductive FIRE (Finances, Insurance, Real Estate) sector, which further undermined value-creation. This asset-inflation, which was both a result and a cause of the widening gap between rich and poor, was not limited to the US but the dollar bubble was at the center of it all. It kept inflating for so long because the US, in terms of safety, stability, power and profitability seemed to owners of capital, in America as well as elsewhere, the best place to escape the threat of devalorization that hangs as a sword of Damocles over the entire world economy. This assumption is gravely challenged now. But the lack of any realistic alternative, for all players concerned, is sobering and paralyzing.

The relation between the US and China, and more generally between hegemonic America and other powers, is symbiotic and antagonistic at the same time. Seeing only one aspect, inevitably leads to wrong conclusions. The symbiotism has certainly increased and has imposed new limits on imperialism, while other changes (the overstretching of America’s imperial “duties” and others) created new opportunities. But the context can change and the present financial turmoil may be a harbinger of that change. In a world sliding towards global collapse, in a debate such as the one within the Chinese ruling class that Mac Intosh described in IP 46 (6) , the cost-benefit analysis might look differently.


September 2007


1. Marx, Capital, Volume 1, p.875 (Penguin ed.).

2. Ibid, p.873.

3. I simplify a bit. This is a very complex issue, which I tried to analyze in my text on the law of value on the world market (IP 37). Not entirely successfully, I admit. I plan to post another text on this question on IP’s website.

4. Andrew Kliman, Reclaiming Marx’s Capital: A Refutation of the Myth of Inconsistency, Lexington Books, 2007.

5. This amounts to forced saving. In order to claim a larger role in the global chain of production, countries such as China have no choice but to hoard a disproportion ally large part of their earnings and to use that capital to finance spending by the developed world, primarily the US, which has the lowest savings rate in the world. According to Morgan Stanley economist Stephen Roach, “There can be no mistaking the dramatic shift in the mix of global saving in recent years. A particularly stunning change has occurred in just the past decade. According to IMF statistics, in 1996 the advanced countries of the developed world accounted for 78% of total global saving. By 2006, that share had fallen to 65%. Over the same decade, the developing world’s share of global saving has risen from 22% in 1996 to 36% in 2006. Put another way, the rich countries of the developed world – which made up 80% of world GDP in 1996 – accounted for just 43% of the cumulative increase in global saving over the past decade. By contrast, the poor countries of the developing world – which made up only 19% of world GDP in 1996 – accounted for fully 58% of the cumulative increase in global saving over the 1996 to 2006 period, or approximately three times their weight in the world economy. This wealth transfer from the poor to the rich – the exact opposite of that which occurred in the first globalization of the early 20th century – is one of the most extraordinary developments in the modern history of the global economy.” Still, Chinese capital is quietly increasing its purchases of assets in the US –a trend which, when it gains critical weight, is likely to increase inter-imperialist tensions.

6. On whether to challenge American dominance in East Asia or not, see IP 47, p7-8)
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