Feb 272012
 
 February 27, 2012  Posted by at 6:34 am Finance
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone

I'm not a big fan of venting opinions on the topic "capitalism", since I think it's a very poorly defined term, i.e. many people have many different ideas about what it really means. But the report below certainly deserves attention, in my view, if only as a driver of discussion. Do read the whole report, I'd suggest (click on the article title).

 

This is a revised transcript of a presentation by Jonathan Nitzan at the 2nd Annual Conference of the Forum on Capital as Power, The Capitalist Mode of Power: Past, Present, Future, October 20-21, 2011, York University, Toronto.

 

The Asymptotes of Power
by Shimshon Bichler and Jonathan Nitzan

Today’s talk has, like the one I gave last year, presented my joint work with Bichler on the present crisis. Last year, I argued that this crisis is a systemic one, and that capitalists were struck by systemic fear ?– a primordial consternation for the very existence of their system. My purpose today has been to explain why.

In order to do so, I have set aside the liberal-democratic façade that economists label ‘the economy’ and instead concentrated on the nested hierarchies of organized power. The nominal quantity of capital, I’ve argued, represents not material consumption and production, but commodified power. In modern capitalism, the quantities of capitalist power are expressed distributionally, as differential ratios of nominal dollar magnitudes. And the key to understanding capital as power is to decipher the connection between the qualitative processes of power on the one hand, and the nominal distributional quantities that these processes engender on the other.

I have dissected, step by step, the national income accounts of the United States, from the most general categories down to the net profits of the country’s largest corporations. I have shown that, from the viewpoint of the leading corporations, most of the redistributional processes – from the aggregate to the disaggregate – are close to being exhausted. By the end of the twentieth century, the largest U.S. corporations, approximated by the Top 0.01%, have reached an unprecedented situation: their net profit share of national income hovers around record highs, and it seems that this share cannot be increased much further under the current political-economic regime.

This asymptotic situation, Bichler and I believe, explains why leading capitalists have been struck by systemic fear. Peering into the future, they realize that the only way to further increase their distributional power is to apply an even greater dose of violence. Yet, given the high level of force already being exerted, and given that the exertion of even greater force may bring about heightened resistance, capitalists are increasingly fearful of the backlash they are about to unleash. The closer they get to the asymptote, the bleaker the future they see.

It is of course true that no one knows exactly where the asymptote lies, at least not before it is reached. But the fact that, over the past decade, capitalists have been pricing down their assets while their profit share of income hovers around record highs suggests that, in their minds, the asymptote is nigh.

How much more force and violence are needed to keep the current capitalist regime going? This of course is a subject in and of itself. But given its crucial importance, I think it is worth at least a brief, closing illustration.

One important manifestation of the distributional processes we have explored today is illustrated in Figure 16. The figure shows the income share of the top 10 per cent of the U.S. population (note that, unlike the income share of corporate profit that focuses on organizations, this measure focuses on individuals). The shaded areas denote two historical extremes, periods in which the income share of the top 10 per cent of the population exceeded 45 per cent.

 

 

 

 

During the 1930s and 1940s, this level proved to be the asymptote of capitalist power: it triggered a systemic crisis, the complete creordering of the U.S. political economy, and a sharp decline in capitalist power, as indicated by the large drop in inequality. The present situation is remarkably similar – and, in our view, so are the challenges to the ruling class.

In order to have reached the peak level of power it currently enjoys, the ruling class has had to inflict growing threats, sabotage and pain on the underlying population. One key manifestation of this infliction is illustrated in our last chart, Figure 17.

 

 

 

 

The chart reproduces the distributional measure from Figure 16 (left scale) and contrasts it with the ratio between the adult correctional population and the labour force (right scale). The correctional population here includes the number of adults in prison, in jail, on probation and on parole.

As we can see, since the 1940s this ratio has been tightly and positively correlated with the distributional power of the ruling class: the greater the power indicated by the income share of the top 10 per cent of the population, the larger the dose of violence proxied by the correctional population. Presently, the number of ‘corrected’ adults is equivalent to nearly 5 per cent of the U.S. labour force. This is the largest proportion in the world, as well as in the history of the United States.

Although there are no hard and fast rules here, it is doubtful that this massive punishment can be increased much further without highly destabilizing consequences. With the underlying magma visibly shifting, the shadow of the asymptote cannot be clearer.

 

 

 

Home Forums The Asymptotes of Power

This topic contains 0 replies, has 0 voices, and was last updated by  Raúl Ilargi Meijer 2 years, 9 months ago.

Viewing 8 posts - 1 through 8 (of 8 total)
Author Posts
Author Posts
February 27, 2012 at 6:34 am #8611

Raúl Ilargi Meijer

I'm not a big fan of venting opinions on the topic "capitalism", since I think it's a very poorly defined term, i.e. many people hav
[See the full post at: The Asymptotes of Power]

February 27, 2012 at 7:39 am #1032

Trichter

Very useful discussion of the topic; far more powerful than a focus primarily on demand and supply, consumption and production as key drivers. Thanks for the succinct version.

February 27, 2012 at 8:06 am #1033

Dig Dirt

The analysis is very convincing. It would suggest a tumultuous 5 or 10 years. In line with TAE’s articles about centralized control putting more pressure on the periphery one would hope this ‘tops out’ at some point too.

February 27, 2012 at 12:26 pm #1035

scandia

And this concept of asymptotic illuminates the cause of deceit and fraud in gov’t, desperate acts to maintain control. Current examples in Canada are calling citizens pornographers and the evidence that the Conservative Party used robocalls to misdirect voters from their pollling stations thereby stealing their majority in the House.
Needed my dictionary on this one. ” The shadow of the asymptote” …Can’t wait to drop that phrase into a conversation. The shadow knows…:)

February 28, 2012 at 12:00 am #1058

ashvin

This was indeed a fascinating and very thorough analysis. The idea of analyzing capitalism/capital as a mode of power, measured quantitatively in terms of differential relationships between classes, is very much in line with TAE’s perspective. A spectacular find by Ilargi.

The conclusion at the end begins to get into the issue of what capitalist elites will have to do to overcome their asymptotic levels of power, and the option that stands out above all else is neo-feudal slavery. It is no coincidence that systems of slavery for African-Americans only really began to wind down in the 1930-50 period, with the last great systemic crisis. I’d like to re-post that part of the report just to emphasize the point as much as possible!

How much more force and violence are needed to keep the current capitalist regime going? This of course is a subject in and of itself. But given its crucial importance, I think it is worth at least a brief, closing illustration.

During the 1930s and 1940s, this level proved to be the asymptote of capitalist power: it triggered a systemic crisis, the complete creordering of the U.S. political economy, and a sharp decline in capitalist power, as indicated by the large drop in inequality. The present situation is remarkably similar – and, in our view, so are the challenges to the ruling class.

In order to have reached the peak level of power it currently enjoys, the ruling class has had to inflict growing threats, sabotage and pain on the underlying population. One key manifestation of this infliction is illustrated in our last chart, Figure 17.

The chart reproduces the distributional measure from Figure 16 (left scale) and contrasts it with the ratio between the adult correctional population and the labour force (right scale). The correctional population here includes the number of adults in prison, in jail, on probation and on parole.

As we can see, since the 1940s this ratio has been tightly and positively correlated with the distributional power of the ruling class: the greater the power indicated by the income share of the top 10 per cent of the population, the larger the dose of violence proxied by the correctional population. Presently, the number of ‘corrected’ adults is equivalent to nearly 5 per cent of the U.S. labour force. This is the largest proportion in the world, as well as in the history of the United States.

Although there are no hard and fast rules here, it is doubtful that this massive punishment can be increased much further without highly destabilizing consequences.

I do share a certain ambivalence with the authors here about how much farther the process of enslavement can go, but obviously I think there are many ways in which it can be extended further without completely “destabilizing” the elites’ power base. Similar processes of mass enslavement have occurred throughout history, which includes recent history for many poorer parts of the world. The way to increase the system of “massive punishment” is to re-define the legal boundaries of punishment at the federal and state levels, especially with respect to debtors (private and public, real or imagined), and that process is already well underway.

February 28, 2012 at 4:33 am #1064

SteveB

“The present situation is remarkably similar – and, in our view, so are the challenges to the ruling class.”

Interesting use of the term “challenges”. It’s not used in the sense of an external challenge to, but more in the sense of obstacles to success. I find it interesting that it’s framed that way rather than from an objective perspective or that of the non-elite.

February 28, 2012 at 4:48 am #1065

SteveB

Maybe a better way of putting my previous comment would be that “challenges to the ruling class” might more accurately be worded as “challenges for the ruling class”.

On another subject, I wonder if Bichler and Nitzan have an undivulged basis for the claim that approaching the asymptote of capitalist power in the 1930s and 1940s triggered a systemic crisis, or if that’s an unsubstantiated interpretation of the correlation.

February 29, 2012 at 6:12 am #1110

Patrick

I have often seen the correlation between income inequality and collapse/depression referred to, both in terms of the 30s and comparing the 30s to the present. But I have never seen such a fascinating and compelling explanation of the root cause. That correlation between the prison population and upper 10% share of income is really disturbing.

Viewing 8 posts - 1 through 8 (of 8 total)

You must be logged in to reply to this topic.