The Finance Capital and Plunder of Social assets

The extend and reach of finance capital of his time, analysed by the great Marxist V I Lenin, was limited to a hand full of most advanced nations of the west, the Britain, France, Germany, Itally, Japan and the US. The 20th century saw the spread of finance capital world over, now not limited to west, but spread to east, south and north of the globe. But for this difference, the Leninist analysis of finance capital holds good even today.

Sorry for the extensive quote from Lenin. “The enormous dimensions of finance capital concentrated in a few hands and creating an extraordinarily dense and widespread network of relationships and connections which subordinates not only the small and medium, but also the very small capitalists and small masters, on the one hand, and the increasingly intense struggle waged against other national state groups of financiers for the division of the world and domination over other countries, on the other hand, cause the propertied classes to go over entirely to the side of imperialism. “General” enthusiasm over the prospects of imperialism, furious defence of it and painting it in the brightest colours—such are the signs of the times. Imperialist ideology also penetrates the working class. No Chinese Wall separates it from the other classes. The leaders of the present-day, so-called, “Social-Democratic” Party of Germany are justly called “social-imperialists”, that is, socialists in words and imperialists in deeds; but as early as 1902, Hobson noted the existence in Britain of “Fabian imperialists” who belonged to the opportunist Fabian Society.”

Can we blame any body (in India) for their worship of Imperialism, furious defense of it and painting it in the brightest colours, had it been the case a century back, as it was meticulously portrayed as above, by Lenin, of his time.

Finance Capital by definition is Monopoly of Capital held by Financial institutions to be invested for production. Historically, it is formed by the merger of Industrial Capital and Banking Capital. With the evolution of finance capital, share market establish the link between finance and production sectors.

Production and distribution are planned in meticulous details within each enterprise. Consumption is prompted and promoted for profit. There is no means for planning of total production and distribution in a capitalist economy. Such being the case, contradictions arise within production and within distribution sectors creating total chaos. Contradiction arise among the production, distribution and consumption areas as well. Compartmentalisation of various processes within each sector also creates chaos and disharmony in the whole system. Production is totally alienated from finance, while both are planned meticulously. Finance itself seeks to establish itself as an area of production by generating various forms of virtual money, financial instruments, called derivatives. Share market too is being sought to exert itself and establish hegemony. Notwithstanding the primacy of productive sector, each of the sectors production, finance and share market seek to establish its hegemony over others. In their pursuit of primacy, both finance and share market try to replicate the processes of production, distribution and consumption. New and varied products of financial instruments called derivatives are brought in and traded. Trading in Futures, of all the products in all the three sectors itself try to replicate the real process of material life, the production, distribution and consumption. This fraudulant assertion of finance and share over the production of real life necessities mark the present epoch.

Every aspect of social life is vitiated by these aberrations. Fraud is committed on the society. With the hegemony of finance capital over production in the capitalist economy, production is weakened and retarded. The productive sector has already been facing the perennial problem of over production due to declining market because of siphoning away of the wealth, marginalising vast majority of the consumers and consequent decline in trade. This crisis in productive sector cannot be solved by increasing trading in financial or share market products. But this exactly is being tried and resorted to.

With this, the crisis sets in. Instead of finding ways to solve the crisis, what is tried at is to aggravate it by resorting to the same process which caused the crisis.

The crisis is that of over production caused not due to lack of demand but due to lack of purchasing power of the people due to their marginalisation. The immediate effect on the finance and share sectors are decline in activities and profit. While in the productive sector thinning of productive forces and poverty of the masses. In pursuit of the solution to the problems of each sector, they act in isolation.

Finance sector try to increase its activities by generating new and varied products of financial instruments called derivatives. They start sale and resale of these derivatives. Future sale also is resorted to there replicating the real life production sector.

The same way share market also resorts to these very same tactics, generate trading activities there itself, including future trading of shares.

Both the above virtual production, trade and consumption are added to the real world production figures to arrive at various economic parameters. The widely trumpeted growth in trade, GDP, Govt revenue, corporate profit etc are brought about by such a misrepresentation of facts. This may be sufficient to eye wash the people for a short while. But this will not solve the problem of real world economy, which produce for the real consumption of the people.

Take the case of corporate profit. What is profit for capital in its own definition ? It has to be the return on investment. But does all the capital be deployed or invested in any real world process of production or distribution or consumption ? No. So much capital lie idle.

With the finance capital and share market regime, the entire capital with these institutions demand return, irrespective of whether it generate surplus or not. This cannot be denied. If denied, there is crisis in that sector. In order to cover up the shortage of profit or to cover up the loss, accounts are manipulated. Increase assets. The new generation industry, especially the IT, invented a new form of asset, the intangible assets in their software. In fact this concept was available with the practice of doctors, lawyers and such other professionals. But those were limited to concepts that increase the worth. That is brought to the balance sheet now. This works with its balance sheet in increasing profit.

The same method started to be adopted by the other industries in a slightly different manner. They too increase the value of assets by updating it to current market value. But physical increase of asset is an entirely different aspect. Material assets, land, building, machinery, bank deposits, inventory, work in progress, products in distribution line and the like cannot be generated out of thin air. Naturally, those industries, with the support of the state and in connivance with all those interested in the continuance of the capitalist system, started bringing in additional assets by way of state subsidy (Tax exemption will have the same effect by reducing the expenditure), land and infrastructure provided by the state, natural resources provided by the state, new hard finandce transferred by the Govt by way of financial institutions, public sector enterprises etc. These transfers, ofcourse, expand the market operated by every sector of industry. But, these transfers doesnot increase the over all market, over all asset or over all profit.

But, this fraudulent jugglery in accounts and records worsen the crisis of declining profit. As the time pass, finance capital record exorbitant growth, without corresponding growth in consumption or profit. The next term, increased capital demand increased profit. In the back ground of financial melt down in the advanced nations and consequent and general shrinkage of trade production, distribution, consumption cycle is disrupted. Profit is not forthcoming as earlier. That in turn, demands increased acquisition of assets to retain the profit rate in the balance sheet to retain the confidence of share market. Naturally, more such plunder. This is the real reason behind the primitive capital accumulation process resorted to world over. This is the real reason why the ruling class stick to the position that the plunder of public asset is not a corruption at all. Without loot of public assets and natural resources and without marginalisation of the vast mass of the people capitalism cannot sustain even for a moment.

Loot of public assets is the root of corruption. Bribe is only an attendant benefit granted to the deprived ones like Raja (Only in name). The real Rajahs like Chidambaram, no direct bribe is required. He and people like him have got stakes in almost all sectors of Industry or areas of social life. They will be benefited by the very transfer of public asset. Hence the decision to sell the spectrum at throw away prices. Please note that, despite these many reported corruptions, those heading the Govt do not, atleast, declare that we will stop the loot of public assets. They cannot stop corruption other than at the cost of their existence as owners of finance capital. Nor have they got the right to stop it because they act on behalf of the finance capital itself.

Joseph Thomas

Appropriate Technology Promotion Society./28-09-2011