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The Difference Between Capital And Capitalism- The Emergence Of Social Capital

My friend Sidney Gluck has asked me to distribute this for comment, discussion and consideration.
Alan L. Maki
The Difference Between Capital And Capitalism-
The Emergence Of Social Capital

By Sidney J. Gluck

The 21st century is witnessing an epochal change, something to be noted in the emergence of two economic poles—one dominated by Western capitalism and the other in the process of forming an association of former colonial countries in various levels and forms of economic development.   Socio-economic changes have taken place in history similarly, but not with such an explosive and defining character.  As an exception, capitalist colonial domination was part of its industrialization impinging on resources and cheap labor for greater personal gain.
There are now three forms of capital accumulation: privately owned industry, stocks, enterprises and financial capital; socially owned government accumulation utilized for industrial development, infrastructure, and forms of social obligations; and, social security wealth belonging to retired workers. Economic growth differs under the control of private and social forms of capital. The former is concerned with private individual accumulation. The latter is concerned with economic growth and improvement of the conditions of the working population, which creates the wealth in industrialized society.
The social security form of capital belongs to the people who have paid in during their productive years to support retirement and is a form of accumulation from their earnings placed in trust with the government for administration. For the past few years, this capital has been used and safely invested in the country and the proceeds added to the accumulation of the retirees.
The emergence of social capital reflects a major change in society, just as the emergence of private capital posited the change from feudalism to capitalism as an economic system and basis of social relations. The growth of social capital is inevitable as private capital ceases to expand domestic growth and job creation in developed Western countries, which comprise one third of the world’s population and where labor has succeeded through historic struggles to increase wages and living standards. Hence, industrial growth in developed countries has diminished or ceased. Investments have shifted to former colonial countries, including China, for the past thirty years, with incredible rates of accumulation reflected in the highest earnings of Wall Street despite the 2008 economic crisis, which ended for private capital in mid-2009 but persists in its fourth year with fifteen million still jobless and 17% poverty stricken.
At the turn of the century an organization was formed by Brazil, Russia, India and China, under the name BRIC and renamed BRICS after South Africa joined in 2005, with the intention of economic development without foreign private capital controls to counteract the negative effect of the Western capital invasion. This is indicative of the creation of a bipolar economic world. BRIC has now called a meeting in 2012 to organize trade and investment stimulating national economic growth with little emphasis on the military other than defense.
The epochal change we now witness diminishes the domination of private capital and opens the road to structuring harmonious societies that combine private and social capital to maintain and accelerate industrial development destined to create social security and sustain the working population, which, in any event, is the prime source of national wealth.
Wealth itself was generated by labor time in all forms of industrial production of commodities and salable structures, which ultimately exchange into the money form of accumulation in the marketplace leaving it to private finance to determine the direction of economic growth and avoid the consequences of economic crisis. A number of instances of government use of social capital in China are: loans to private corporations for the development of high-tech, the direct financing of necessary industries with low capital gains that assist major industrial and human needs such as energy, increased food production at affordable prices, increased minimum wages at a rate of 10% per annum until 2015 aimed at enhancing consumption to rebalance the loss of foreign markets to balance consumption at home to balance the loss of foreign exports, the enlargement of infrastructure and social services in the fields of education, health, etcetera and other social necessities.
One must acknowledge the fact that it is capitalism that developed industrial production, which is the basis for creating a society of plenty that could take care of all its population and eliminate exploitation.  Long before capitalism under tribal communal society there was no exploitation of man by man.   Elders ran a collective society, which lived off nature’s own production with little input of human labor other than gathering.  That changed when some clever individuals learned how to use the forces of nature itself to increase nature’s own production.  They ultimately enslaved others, creating class-dominated society.  This continued for centuries, developing into control of extended agriculture terrain and animal husbandry which became the main means for human sustenance and growth—this, under feudal serfdom.
During the feudal era, private ownership in many forms developed in early stages where individuals produced desirable items as commodities and ultimately exchanged them for money.  Individual production flourished and created a mass market.   Some clever individuals set up facilities inviting producers into a “factory” where they sold their products to the owners devoting sales time to additional production for mass marketing.  This relationship between owner and producers changed into another form of remuneration—that is, wages based on the total labor-time in the production process.  This was the beginning of the capitalist wage-labor industrial system, which then went through a number of changes ultimately culminating in mass production and monopolization. Today the further development of high-tech, which reduces the direct labor time content, is taking place in undeveloped countries with cheap labor to the neglect of increasing production in the home countries where their capital base had originated.  Thus, the wage-labor form of exploitation became the basis of industrialization and economic growth.
Adam Smith, in his “Wealth of Nations” did not deal with the exploitation developed with factory industrial production nor did he recognize the danger of economic crisis resulting from relative overproduction affecting market conditions. Troubled by the tendency towards crisis, he wrote a second book in which he expressed the feeling that “an invisible hand” corrects the economic crises in the system with no indication of relative overproduction and market disruption. The quantification of labor-time is basically the value of a commodity because the monetary payment to the laborer is only a part of the values created.  The total labor-time is realized in the market in the form of money, and that is where the accumulation of wealth begins, since the money becomes a form of capital and can be re-injected into a growing economy and can increase financial private wealth accumulation in the market place.   It was not until 1857 when Karl Marx published his first volume of Capital establishing classical economics which clearly indicated the source of wealth in labor time and the tendency of interruption of the process in periodic overproduction relieved by a shutdowns and economic crisis. Thirty years later, British economists supplanted this with neo-Classical Economics, which posited the market exchange as the source of wealth. The market is merely the area into which the inherent wealth in the commodity is exchanged for its value in money resulting in capital accumulation.
Capitalists compete but also monopolize, circumvent competition, control prices and wage-labor relationships.  Monopolization leads to a higher level of capital investment magnifying exploitation.  Ultimately, financial capital dominates the system and withdraws support for industrial capital in countries with high labor costs. The USA is an example for the last 30 years. Today there is not enough industry to absorb the available work force without expansion, which might have to take place with government assistance. Finance capital investment in low labor cost countries generally includes high tech which adds profit because it requires a small labor force further increasing profits.
The present economic crisis in the USA is an excellent example of the fact that the capitalist class itself has split into two functions—financial and industrial—with finance, the dominant factor, resulting in a cessation of industrial growth, neglect of existing industries and the continuation of an economic crisis for workers and the middle class.  Investments overseas have created more profits in 2010 than in the history of Capitalism.   True, industrial capital seeks a profit and wealth accumulation, but at least jobs are created contributing to national economic development and adding to the level of consumption.
Financial capital has dominated the capitalist system in the United States since the election of Regan in 1980, abandoning national industrial growth.  In a historical sense, it has lost its right to run society.  In fact, the Glass-Steagle Act, which regulated finance capital, was eliminated before the turn of the century.  It is the real enemy to change, standing in the way of mass industrial development in total disregard of human conditions.  Interestingly, financial capital itself in Western Europe is in trouble.  The German capitalist class is an exception in its sense of history and its adaptation to change. When it took political power in the early 1870’s, it established the Welfare State to protect itself under capitalism; it has maintained a multi-party political system, representing various economic sectors.   Furthermore, sensing world changes among former under-developed countries, they have established economic relationships with emerging countries, especially with China, welcoming Chinese capital investments in their own country and establishing mutual trade relations.
The German capitalist class recognizes the development of a bipolar world and is adjusting itself to participate in the changing international economic relations.  Germany recognizes the growth potential of an organization named BRICS, which is planning an international meeting of former undeveloped countries in the spring of 2012 to foster economic unity, working with each other in trade and investment and no military involvements.  This is a second pole in a bipolar world that is growing, notwithstanding denigration in the Western press, with the prospect of raising material investment and trade to stimulate living standards for where two-thirds of the world population resides.
Obviously, the world is changing in a positive direction.  The only thing that would stop it is a war.  There is only one country conducting military maneuvers and occupations on a global scale.  Sorrowfully, it is the USA, which is not being supported by Western European nations as exemplified in the so-called NATO bombing in Libya which left the USA holding 75% of the bag for an operation in this guise. The New York Times wrote about that, and they agree.  Just think about how federal money (which is social capital), now spent for destruction, could be used to revive industries and create jobs, which will then reduce the denigration of life in a humanist approach to improving living standards.  Such a saving of capital by the federal government, as a result of reducing the Pentagon budget and the conduct of wars, can become accumulated social capital to be deployed in high-tech as well as protecting the country, its terrain, services, and people.  Private capital can still be involved profitably, along with social capital and grow the economy to take care of the whole population.
In fact, Karl Marx observed, after noting class differences in France, “the Bourgeoisie will continue for a long time after the establishment of a socialist economy”, appreciating the creativity of private capital.  The Chinese put it a different way: “the creation of a Harmonious Society” combining private capital with government social capital in economic growth for the sake of improving the condition of the entire population.  Hence, one might say that the continued growth of industries will depend upon national economic planning rather than individual capitalist enterprises and politics.  This is an economy buttressed with government and private finance guided by a national growth plan.  Furthermore, government-financed loans to private enterprises, oftentimes in joint-ventures, solidifies growth and achieves the national plan; but this could not happen with the dominance of private capital since the plan would have to be based on national requirement rather than private interests with necessary compromises but socially and financially successful.
China is on that road, though it faces many contradictions in a society still plagued by feudal relations and the contradiction of wage-labor relationships with an overall vision of building the first high-tech industrial economy in the world under national planning.  Do they have problems?   More contradictions than any other country ever—because their population is fraught with multiple human natures reflecting productive relationships of different eras being molded into harmony, a process which is not an easy task.  We are now observing higher levels of contradiction in the development of democracy in China which ultimately, based on the majority, would be the wage working sector as it develops a massive unity supporting a government that continues to develop the country without private capital domination. We should take our hats off to the successful Chinese leadership especially under Hu Jintao and Wen Jiabao, the former concentrating on guiding peaceful foreign relationships and the latter dealing with domestic questions, and both, leading the development of the next five-year plan which never has, nor will include the development of armed forces other than defensive necessities, because everybody knows where the threat comes from…and it is not the European countries.
By 2016 China has projected that their national production will equal that of the USA and then, surpass it.  When one considers the fact that the Chinese are spending 90 billion USD per year for defensive military, one cannot help but realize how much social capital, that would be consumed in building offensive military forces, is being saved and used for socially productive purposes.   This is a good example of why they were able to grow so rapidly and became the second largest economy in the world and destined to become the largest by mid-century, by tripling production to satisfy their population of 1.3 billion and growing.  One must note this is the development of a harmonious society—by combining the use of private and social capital to achieve a centralized national plan.
Capital and Capitalism as categories are now historically different. “Capitalism” as a system developed capital as a form of money hoard used for continued exploitation and private accumulation.  Accumulation of capital has divided in two forms with different social contents.
The Chinese political system welcomes private capital investment in its multi-capital system but demands that private capital is invited to function together with social capital as part of, but not in control of, the national plan.  Thus, social capital is now invested by the Chinese government as well as by Chinese individuals.  That is a new production relation and historic contribution to humanity.  In the last analysis, based on its ability to produce, this structure of capital investment will ultimately lead into a kind of high-level tribal existence, sans class aspects, with productive output reaching a level filling the needs of all.  Let us call THAT Communism! “Socialism” is a historically necessary transitional stage to the ultimate state. To quote Karl Marx, the essence of socialism is reflected in his words: “from each according to ABILITY, to each according to CONTRIBUTION”.
This Marxist conception of economic and social development was based upon the bourgeoisie continuing and even growing, within a harmonious society and overall economic plans not in the hands of but requiring, private capitalists who must adjust to the laws of humanistic social development as the objective of industrialization.   Beyond that, Marx described the ultimate productive and social relations as “from each according to ABILITY, to each according to NEED”—which might be called a humanity and planet protecting industrial system without class antagonisms.
In the turn of the 21st century we are witnessing a movement in that direction, essentially an economic development to achieve humanism and social justice—an idea first created by Jesus and followed throughout centuries of religious sentiment, which, in the latter part of the 18th century in England, saw the first expression of the idea of socialism when religious movements (not the religious institutions) demanded of the new government that they add “a bit of socialism” giving the vote to men (today we include women).
The lesson is—“capital” itself is not the enemy.   Capital now exists in two forms—private and social.  Private capital is welcomed since it carries with it knowledge of industrialization that is the heart of building a society under present forces of production.  Therefore, the real lesson is building industries with full advantage of ability for NATIONAL development.  Private accumulation is respected, provided it obeys the law and stays subordinate to a new form of democratic political structure yet in the making.   Private capital accumulation must be guided and combined in a new socio-economic relationship; otherwise we will have nothing but continuing economic crisis and the kind of anti-social decline we are witnessing today.
In the vernacular -Bless Occupy Wall Street- as Jesus the humanist might have done, having given his life to eliminate man’s inhumanity to man.  Historic change has created a positive direction for economic and social development, applying the humanism of religious sentiments with the addition of Marx’s economic vision so that politics will follow the social needs of humanity for true economic and political democracy and freedom.
March 15, 2012

Sidney J. Gluck
18 E. 16th street, New York, NY 10003

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Alan Maki

Alan Maki