Natural and Artificial Capital Contrasted (With Apologies to Thomas Hodgskin)

Since the beginnings of class society and of the state (which are very much interconnected), the state has served as the political means to wealth for the privileged classes. That is, the state has served as an armed extension of the will of the privileged classes, by which they coercively extract wealth from the producing classes.

In every instance, the general principle has been to erect toll-gates between labor and skill, on the one hand, and the ability to apply them to the natural world to meet one’s subsistence needs, on the other. Such toll-gates (as Henry George Jr. put it, “property in access to natural opportunities) enable the parasitic classes to collect tribute for the right to produce. By means of artificial property rights — i.e., property in access to natural opportunities to produce — labor is compelled, in return for the right to feed itself, to work hard enough to feed a stratum of parasites in addition to itself. Or as the old Wobbly song goes, “We Have Fed You All For a Thousand Years.”

Over the past five thousand years or so, the coercive means by which wealth is extracted from the producers have become progressively more and more indirect.

For most of history, privileged classes extracted wealth through direct control of the physical means of production. In the earliest stage, this entailed forcible appropriation of the land itself, so that the peasantry might be compelled to produce a surplus for landlords, temple priesthoods and royal houses.

In the secondary stage, which began a few centuries ago, wealth extraction shifted to direct control of the means of industrial production. But in this stage direct control of the means of production had to be supplemented with other, indirect means, to secure that control.

Control of industrial capital followed in part, as with agrarian landlordism, from actual physical possession of the means of production. Because factory production machinery was expensive, and most investment capital had been concentrated (by previous robberies) in the hands of a small plutocratic class, capitalists for the most part had physical control of access to opportunities for industrial production.

But in an age where the primary physical means of production were — unlike land — reproducible, a monopoly on direct physical control had to be maintained by other, less direct means. One was a legacy benefit of several centuries of land expropriation in Britain — first home of the Industrial Revolution — by which the peasantry had been evicted from the land and transformed into a propertyless proletariat forced to sell its labor in the wage market. Another was assorted state measures to promote the most capital-intensive forms of production, in order to artificially raise the cost of entering the market. Yet another was to confer on the monied classes a monopoly on the power to aggregate capital and finance new enterprises, and thereby impede the creation of cooperative credit mechanisms by labor. And in the last resort there was always direct legislative prohibition against free association and free travel by workers (the Laws of Settlement, Combination Laws, Riot Act, laws against friendly societies, etc.).

Nevertheless, to a large extent the ruling classes’ control of access to production opportunities depended on the physical scarcity and cost of means of production, combined with their coercive appropriation of physical occupancy.

This has fundamentally changed in the past few decades, as the physical means of production themselves have become increasingly cheap and abundant. The fundamental source of rents to the propertied classes, in today’s economy, is regulating access to opportunities to produce using physical goods that would naturally be widely accessible by ordinary producers.

To the lords of artificial scarcity, who derive their income from impeding producers’ ability to produce, natural abundance is a danger. There is no greater threat to their unearned rents than the increasing efficiency, falling costs and reduced labor time resulting from technological progress, and the socialization of these benefits through the competitive market mechanism. Their response to this threat is to criminalize market competition, and monkey-wrench the efficiencies of technological progress.

When Moore’s law and the zero marginal cost of digital information threaten the profits of the proprietary content industries, they respond with DRM and criminalizing the technical means of circumvention. When new industrial machinery reduces the capital and labor cost of production and offers a utopia of low-cost goods and leisure for the working class, the capitalists respond with patents in order to enclose those efficiencies as a source of rents for themselves. Ebook sellers program library copies to self-destruct after twenty readings, so they’ll wear out like paper books. Monsanto genetically engineers seeds to produce sterile offspring, so farmers will have to buy expensive seed from them each year.

The motto of the capitalist is, to reap where one did not sow, to eat the fruit of vines one did not plant, and to drink from wells one did not dig. As Peter Frase argues (“Sowing Scarcity,” The New Inquiry, Dec. 12, 2012).

“Even if scarcity becomes a diminishing element of the human condition, it remains an essential condition for capitalism, both for its functioning and its cultural legitimacy…. When scarce goods need to be rationed, the price mechanism is the most efficient way to do so, if not always the most just. But things change when scarcity is transparently an imposition of the state rather than a fact of nature…”

A great deal of “capital” is an artificial ownership right in access to opportunities for production: a legal right to restrict working people from using their own labor and tools to create value without someone else’s permission. This is true of the corporation itself: Management of the large corporation, at a time when human capital (skills, distributed knowledge, and social relationships between producers) is replacing physical capital as the primary source of book value for the firm, is a “property right” in appropriating wealth from those who actually create it. Chris Dillow (“Inequality: Power vs. Human Capital,” Stumbling and Mumbling, Dec. 15, 2012),  argues that the

“obvious possible reason for the lack of link between human capital and income equality is simply that inequality reflects not differences in productivity but differences in power which themselves arise from institutional differences. Inequality is higher in south America than in Japan or South Korea simply because south America has extractive institutions which enable a small minority to exploit the masses, whereas Japan and South Korea do not [or rather, do not to the same extent]….

“Inequality, then, is better explained by power than by human capital or marginal productivity.”

Most “property” under capitalism is a property in the right to appropriate some share of the surplus social product based on one’s power.

In places like the U.S., Europe and Japan — where, to repeat, the majority of many firms’ book value comes from human capital — the firm is, for all intents, the workers. In many cases it is entirely possible, in purely technical terms, for the work force to walk out, take the real firm with them, and leave nothing of the official firm but an empty building and a name on a shingle.

Copyrights, patents, trademarks, and non-competition agreements — restrictions on paper, enforced by the state — are one barrier to doing so. State-enforced monopolies on the aggregation of capital and barriers to the cooperative provision of credit also impede the accumulation of the modest amounts of capital — money that is repaid out of workers’ labor in a short time in any case — needed for the transition to cooperative production.

Throughout history, one parasitic class after another — landlords, capitalists, usurers, state bureaucrats, owners of “intellectual property” — has, in effect, set itself up as gatekeeper and collected tolls on the right to feed oneself and to trade peacefully with one’s fellow producers.

And in so doing, it has found the state an indispensable tool.

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