A financial adviser in Boise, Idaho, asked me to make plain the following sentence in my post, “Bezos and Moon colonies“: “If productivity (the endlessly accelerating generation of stuff, or, to use the German word for matter, stoff) was at the core of capitalism, then it would have passed into the region of shades, bones, and dust-to-dust long ago (around the 1930s).” What perplexed the financial advisor is this strange passing “into the region of shades and bones long ago.” Exactly could, in the 1930s, effect the demise of capitalism? The financial advisor: “Very interesting article, but I can’t quite fit this sentence together.”
Here is my answer. During the decade that followed the Crash of 1929, a period called the Great Depression, it became clear to a number of economists, who broke from orthodox economics (one of whom was John Maynard Keynes, the leading figure of the Cambridge school in the UK) because they felt that a distinction had to be made between wealth as value and wealth as things (or goods). Why? Because the Depression was not about a lack of capacity (the means to produce goods), but the scarcity of capital (investment in the production of goods). Now what does this mean?
What we find in each of the three main capitalist moments in history (the Dutch moment, the UK moment, and the US moment—we are currently transitioning into the Chinese moment), are roughly three stages. There is the stage of accumulation (the national moment), then the stage of monopolization (the imperial moment), and, finally, the stage of financialization (the astral moment, or what the French philosopher Jean Baudrillard called transeconomics—”masses of floating money whirling about the Earth in an orbital rondo”).
The first important thing to understand is that a crisis of profitability is what moves the market economy from one stage to the next. Next is that all three stages are present in each stage. Meaning, a stage that is displaced does not vanish or become extinct; it is still present in the new regime, but is also reformed to operate under the conditions of the new regime. For example, industrial production, the capital that dominates the accumulation stage, becomes financialized when absorbed by the financial stage. A real-world example of this is how, in the years leading to the crash of 2008, the finance side of General Motors became more profitable than its production side. Another example is how Trump wants to revert the US’s financial moment to its national one, which is defined by high tariffs and the protection of national industries.
Now here is the thing: A capitalist economy does not really need to leave the first stage of development. It can easily remain simply about making stuff. But it just so happens that the end of capitalist accumulation is also the extinction of capitalism itself, because capital growth (or the marginal efficiency of capital, if we use the language of orthodox economics) in a stoff-saturated society is terribly (indeed dangerously) slow. Some have defined this crisis of low to no returns on investments as that of overproduction or oversupply or (in the words of the major American Keynesian of the Depression era, Alvin Hansen ), secular stagnation. A number of American Marxists, led by American economist Paul Sweezy (a student of another prominent Depression-era economist, Joseph Schumpeter), applied secular stagnation on the decade-long slump that began in the late 1960s. More recently, it was adopted by neo-Keynesian economist Larry Summers to explain the slow recovery that followed the crash of 2008.
Though I agree with stagnation theorists, I think they miss an important element of capital accumulation, which is time. This dimension is very complicated and constitutes Moishe Postone’s main contribution to the critical theory of capitalist social form. Because I have explained this theory in a post about UFOs, I will say make another point about time and money in a market economy.
What happens when a society has the capacity to fulfill most of its basic and luxury needs? It is the moment when the time of production meets the time consumption. This is actually what neoclassicals define as a market’s equilibrium, the point when the supply curve crosses the demand curve. But the intersection, which neoclassical economists view as a kind of heaven on earth, is actually nothing but hell for capitalism. The last thing this system wants is the synchronization of what is made and what is consumed. Such a state will only lead to the very condition capitalism fights hard to escape: slow to no growth. Capitalism can only work if it grows forever, and this growth always needs lots of time. In the period of accumulation, this is the time to meet all the pressing needs of a population. A real-world example of this is the ascendancy of Chinese capitalism and its three-decade-long high growth rates (between 7 and 11 percent). Soon, this time of accumulation will meet its end on the supply and demand curve. Growth rates will then collapse into that point on the graph. The economy will have to enter its international moment, which, with China, is exemplified by its One Belt One Road project.
The move to imperial capitalism creates more time by shifting production from national to international (the imperial moment). Eventually, however, this solution also runs out of time, and capitalism is growing slowly or not at all. At this moment, the economy resorts to science fiction. It liberates time from national and international space and claims a large part of its profits from a future that’s imagined to be connected with the confidence of the present economy. This is called financialization. And the more it grows, so does the future time it must claim. And it only needs a small rate of present growth (2 percent) for the future to grow at a rate that is more profitable (7 percent).
I hope this answered the questions of our financier in Boise, Idaho.