The Capital Conundrum

While much is up for debate about the capitalistic system, we are assured of one fundamental truth: the worker cannot purchase his own product. At the end of the day, he comes up short.

In fact, the driving motivator of the capital system, second only to the search for ever increasing monopoly profit, is the search for someone, anyone, to buy the results of production. For if the worker who produces the product can’t buy the product, who will?

It has been suggested that the capitalist system is simply a re branded version of the Monarchial system, with the serfs toiling away in the third world while the noble Euros and Americans divvy up and devour the produce. While this is a decent observation, it misses a fundamental point. The physical product of monopoly capital is primarily infinite multiples of run of the mill consumer items. While the system copiously rewards its controllers with great wealth, the system cannot operate without the worker, not only to toil but to buy.

How can this be achieved when labor cost of the finished product can run as low as ten percent and seldom over thirty percent of the product’s selling price? How to do this when American corporate industry profits seldom run below fifty percent of selling price? How to do this when the bulk of profits are recapitalized, driven back into the process with the intent of increasing production efficiency, increasing profits and in the process further lowering the ability of the worker/consumer to purchase and consume?

The initial answer came unwittingly from Monopoly Capital itself in the form of price competition. While the wage was always suppressed below market value, the product pricing was initially subject to market competition. This had the effect of nullifying some of the wage loss and allowing the worker to at least purchase what was minimally necessary and alleviate inventory accumulation.

But by the twenties, price competition had been eliminated in many sectors through collusive industry cooperation and government intervention. Counteracting this trend was union progress which had increased purchasing ability for those protected by unions.

Still there was a great capital surplus, much of which was invested in stock paper Ponzi schemes. When the house called in the chips and the economy sank, the days of Monopoly Capital seemed numbered.

While infinite war spending was credited for pulling the nation out of the depression, two factors continued the expansion and fed the capital machine; the advent of large scale social spending and the long term decline of oil prices that lasted through the mid seventies. Social spending allowed many to purchase goods that were unaffordable left to their own devices. The sustained fall of the price of oil allowed industry to base profits on energy consumption and forego for a time dismantling the labor pool. The massive energy subsidies and incentives provided by the government helped push industry in this direction.

The reversal of oil prices in the mid seventies changed the game. Capital went on the warpath to raise profits by scaling down labor costs. Reaganomics, the revival of the robber baron mentality, exacerbated the perennial problem of monopoly capital, finding consumers who can afford to purchase the product, by concentrating ever increasing capital in the hands of the capitalists.

Debt became the “modern” solution; both government and personal debt. Debt enables the purchase of what is unaffordable now with the notion it will become affordable in the future. To the wage earner, it is similar to the pension, the promise that his inadequate wage will be made whole again at some future point. Debt is a justification of monopoly pricing.

But, the capital machine is always trying to consume itself. It strives to profit not only from the productive output of industry but also from the non productive output of its financial arm. Laws require debt to be repaid with interest, whether the result of investment is profit or loss.

And the flow of non productive interest is almost always from the capital poor class to the capital rich class, further undermining the balance. Even when the capital rich class stumbles and falls over one of their harebrained alchemy schemes to magically produce capital from capital, the state refuses to allow the inevitable capital losses to tip the scales back a bit and intervenes with socialized loss insurance known as “bailouts”.

Such is the “capital conundrum”: the continuing effort of Monopoly Capital to undermine its own stability by depriving the wage class of the ability to purchase its own product.

The interesting paradox is that while the primary inclination of the controlled system is to concentrate capital and ultimately starve itself by withdrawing too much from the labor side of the production mode, the solution, diverting capital back to the labor/consumer force, if left to its own natural course, eventually has the reverse effect but the same outcome: dispersion of capital and the disintegration of monopoly capital.

It seems the long term outlook for Monopoly Capital, no matter how you look at it, is not so good. What a shame!

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Markets Not Capitalism
The Anatomy of Escape
Organization Theory