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Thomas Piketty – The Adam Smith of the Twenty-First Century?

 

The essential achievement of Capital in Twenty-First Century is that it represents a revival of political economy, in the classical sense, on a global scale.

In Piketty’s book, economics is initially regarded as a social science and, in the end, as a moral, philosophical and political science. Here, we are placed in the tradition of Aristotle, Thomas Aquinas, Adam Smith and Karl Marx. In this manner, Piketty utilizes an economic perspective and reconstructs the unity in the practical sciences, at the same time as he recognizes that each of the different human sciences has its special perspective.

Piketty’s book could be regarded as a revival of Adam Smith’s main work, The Wealth of Nations (1776) in which the modern political economy was grounded. Later on, economics became an independent and specialized social science that lost its relation to the other social sciences. This has especially been the case in the period after the Second World War, when economics increasingly became an exercise in mathematical calculation, a mathematical modeling technique that totally lost its connection to the other social sciences. During the same period, the global economy has been developed on an unprecedented scale. Consequently, it has become difficult to discuss global society within the perspective that signified the classical political economy.

On one hand, we had the dominating economy, where it was possible to make some mathematical calculation about specific economic topics without any relation to a broader social scientific, political, and moral understanding of the significance of the economy for society and its environments.

On the other hand, we had the social sciences, sociology, political sciences, law, humanities, historical sciences and, finally, the moral sciences in their broadest sense. These sciences could criticize the economically driven uniform creations of global society, but they were not able to substitute the economic perspective and therefore, in the end, their impact was relatively limited.

Consequently, economics had become the triumphant sovereign perspective for understanding the transformation of modern global society. Given this background, it cannot be underestimated that Piketty reintroduces the classical political economic perspective in economics and on today’s global society. This is the essential significance of Piketty’s book. It has created anew a platform for a discussion of essential topics of classical political economy.

In this context, it should be emphasized that the global perspective is the central perspective in Piketty’s book. He recognizes that the economy has transformed the world into a global world. It is from this perspective that he tries to understand the transformation of the nation states in the world. By so doing, Piketty gives an articulate understanding of how the economy may be able to transform global society in the twenty-first century. In this context, the long historical perspective from the past to the future becomes essential. Piketty’s description could be called a historical analysis of the transformation of modern society from the origins of capitalism in the 18th century until the global perspective of the 21st century.

In the following, we would like to present some of the essential topics of Capital in Twenty-First Century, and in conclusion pose some questions for a further discussion of Piketty’s book.

 

 

I.The Fundamental Arguments in Piketty’s Capital in Twenty-First Century

 

Part 1: Income Capital and Inequality

In the introduction and part One of Capital in Twenty-First Century, Piketty poses some of the fundamental questions of political economy: What is capital? How is the wealth in the world distributed? Has wealth increased so that there is more equality or is the situation of wealth the same in the world? Piketty looks at the relation between income and capital, and argues that capital still has paramount significance for income today and that this implies reproduction of inequality. Therefore, according to Piketty, it is still capital and not work that is the basis for income in society.

Piketty gives the following important definition of capital: ”The first fundamental law of capitalism is ? = r x ?, where r is the return on capital. This links the capital stock to the flow of income from capital. The capital/income ratio ? is related in a simple way to the share of income from national income, denoted ?. The formula is ? = r x ?. For example if ? = 600% and r = 5%, then ? = r x ? = 30 %. “The return on capital is the central law of capitalism. Return on capital is a broader notion than the rate of profit and the rate of interest while incorporating them both” (Piketty 2014: 52)

For example, the housing market in Paris shows how an old relation between ownership, rent, and capital is still reproduced. It was also like this in the 20th-century and 19th-century novels that just took the capital income on real estate or other capitals for granted. We can see this in the novels of Balzac or Jane Austen. The author makes many references to the description of money and wealth of characters in novels. He argues that this helps us to understand the perception of wealth and inequality, but it also shows the changes from the 19th to the 20th century, because Jane Austin and Balzac can easily use money to describe the wealth of their characters in the sense that Austin’s characters earn approximately 1,000 pounds when they are rich, and 30 pounds on average a year just to live. Balzac talks about 10,000-20,000 francs on average to live well (Piketty 2014: 105 f.). This reference to literature to understand economics is an important contribution to the creation of a methodology of economics beyond the exclusive formal references to mathematics.

In the book, the growing inequality in the world is analyzed in terms of world regions. If we compare the numbers of population with input-output of capital/production in different parts of the world, we cannot really document a convergence of equality between the parts of the world even if the number of people and total output in Europe and America has decreased. Due to the increase of population in Asia and Africa, inequality between the regions still becomes bigger (Piketty 2014: 60-61).

Piketty says: “To sum up, global inequality ranges from regions in which the per capita income is on the order of 150-250 Euros per month (Sub-Saharan Africa, India) to regions where it is as high as 2,500 Euros to 3,000 Euros per month (Western Europe, North America, Japan) that is ten to twenty times higher. The global average, which is roughly equal to the Chinese average, is around 600-800 Euro per month.” (Piketty 2014: 64)

But these figures have to be corrected with regard to differences in purchasing power and exchange rates in different regions. So there may be important regional differences to take into account. We still see a situation where the rich countries have a higher income of their domestic product because they invest more abroad, and own more than their domestic product abroad. This is particularly true of Africa where foreign investors akin to the old colonial days still own more than 20% of the country’s capital producing units. So the rich countries earn money on capital ownership in the poor countries.

One possible conclusion from this is the following: That the rich countries still own a large part of the poor countries could be regarded both as good and bad. It can facilitate access to the international economy and growth, but it can also be a danger to development and self-determination, in consideration of marginal utility theory, meaning that the poor countries do not equally get access to their goods like the rich countries, who get increased wealth but do not need it as much as the poor countries.

The book discusses the law of cumulative growth. There is a close link between demographic growth and economic growth. Capital ownership structure has a close influence on this relation: “The central thesis of this book is that an apparent small gap between return on capital and rate of growth can in the long run have powerful and destabilizing effects on the structure and dynamics of social inequality. In a sense everything follows from the laws of cumulative growth and cumulative returns” (Piketty 2014: 77).

According to the law of cumulative growth in demography, we were 600,000,000 in year 1700, now we are 7 billons, and if this continues with cumulative growth dependent on life expectancy and birth rate in year 2300, we may be 70 billion. The accumulation of people in the developing world, and the stagnation of people in the developed world will lead to greater inequality due to the inequality of capital income in the developed and the developing world. The people in the regions with little demographic growth will become richer because of their increased capital income. On the other hand there is no doubt that growth has been extremely important for the developing countries. We have now moved from a life expectancy of 40 in the 18th Century to 80 in the 21st century, and today it has become normal to have access to health care and cultural goods. But can we sustain this kind of growth?

When we look at growth in the 20th century we see that rapid growth only happened in Europe in the glorious period between 1945 and 1970. This was due to the fact that Europe was far behind the US and could reach the US quickly during that period. After that period, growth has been slower, close to an average of 1.5 % annually. In fact, liberalization policies in the 1980s did not change this, and there is no evidence that state intervention really caused harm to growth. However, it is difficult to foresee growth and we cannot predict how growth will increase in the future and growth may also decrease in the 21st century.

Piketty talks about the “double bell curve of global growth”: “To recapitulate, global growth over the past three centuries can be pictured as a bell curve with a very high peak. In regard to both population growth and per capita output, the pace gradually accelerated over the course of the eighteenth and nineteenth centuries, and especially the twentieth, and is now most likely returning to much lower levels for the reminder of the twenty-first century” (Piketty: 2014: 99).

 

 

Part 2: The Economic Dynamics of Inequality

In part two of Capital in Twenty-First Century, the dynamics of capital/income ratio over time are analyzed. Piketty argues that the present state of inequality in the 21st century in Europe is just a return to the situation of the 19th century, which was interrupted by the public policies following the Second World War. Starting with the references to Balzac and Jane Austen, where the unequal distribution of wealth in 19th-century society is clear, Piketty analyzes the distribution of wealth in western societies today. He shows that a small group of people owns virtually most of the wealth, while millions of people have a very limited relation to capital. Piketty shows that the richest 10 % owns 60 % of the wealth, while the remaining 90 % owns very little and of only 40 % of the wealth (Piketty 2014: 259). They own so little that capital for them is a very abstract concept. The growth of the middle class in the 20th century was the social invention that contributed to hide these differences in wealth from view and, possibly, from memory.

 

 

Part 3: What was the Justification of Inequality?

In the third part of Capital in Twenty-First Century, Piketty questions the justification of this inequality. We can call it a hyper-patrimonial society, that is, a society based on inherited wealth. This was the case in Europe. In the US there was hyper-meritocratic society, a society of super-managers, but this distinction does not hold. Piketty does not only make the mathematical measures of inequality by Gini and Pareto, but he also uses real examples from life to illustrate inequality. However, if we look at the numbers, the fall in inequality in the 20th century is due to the collapse of rentiers and high income from capital, at least this is the case in France (Piketty 2014: 274). But, we have gone from a society of rentiers to a society of managers (Piketty 2014: 278), where the managers today are the ones with the high income. After ’68, a minimum wage was introduced in France and this increased equality, but from the 1980s this trend did not continue so strongly and from the 1990s super-salaries was introduced to top managers. In the US, the numbers of rentiers in the beginning of the 20th century were lower than in Europe, but they existed. The US were even more egalitarian than France between the 1950s and 1980s. However, since then inequality has exploded and contributed to the instability of the US economy and led to the financial crisis. The highly paid superstar managers in the US have recently contributed to the increase of inequality.

How should we understand wage difference and inequality? Education plays a key role. In particular, minimal wages are important to avoid inequality in combination with investment in education. But the race between technology and wages cannot explain the increase of top-income in the US since the 1980s.

In the beginning of the 20th century, inequality in Europe was bigger than in the US, even in the Scandinavian countries, including Denmark. The top incomes in Germany increased during the Nazi-period 1933-1938, and later in the 1950s. We can also document rising inequality in salaries in the developing world, particularly in China, after the changes to a capitalist system in the 1980s.

Piketty has also studied inequality of capital ownership. In France a tax on estate and gifts was established in 1791, and this gives us a historical picture of wealth distribution since that time. In fact, we can document hyper concentration of wealth during the Belle Epoque in France, and we can also document hyper-concentration of wealth in Europe in the 19th century, particularly in societies prior to the First World War. The society of rentiers flourished during “la belle époque”. It seems that the return on capital is greater than the growth rates in such “inheritance societies”.

Inequality remains very big: “To recap: the inequality r > g (return on capital is bigger than growth) is a contingent historical proposition, which is true in some periods and political contexts and not true in others. From a strictly logical point of view it is perfectly possible to imagine a society in which the growth rate is greater than the return on capital – even in the absence of state intervention” (Piketty 2014: 358). This is a historical relation that changes in different historical periods. The fundamental inequality r > g can explain the failure of the French revolution (Piketty 2014: 365). The concentration of wealth today, though markedly lower than in 1900-1910, remains extremely high (Piketty 2014: 375), and taxation may not change this fact.

Piketty says: “To sum up: the fact that wealth is noticeably less concentrated in Europe today than it was then in the Belle Epoque is largely a consequence of accidental events (the shocks of 1914-1945) and specific institutions such as taxation of capital and its income. If those institutions were ultimately destroyed, there would be a risk of seeing inequalities of wealth close to those observed in the past or, under certain conditions, even higher. Nothing is certain: inequality can move in either direction. Hence I must now look at the dynamics of inheritance and at the global dynamics of wealth. One conclusion is already quite clear, however: it is an illusion to think that something about the nature of modern growth or the laws of the market economy ensures that inequality of wealth will decrease and harmonious stability will be achieved” (Piketty 2014: 376).

Piketty studies capital accumulation in the long run. Referring to Balzac he asks whether study and hard work or marriage with a rich person or inheritance leads to wealth. He looks at the annual flow of inheritances in the long run, and he can document that “the inheritance flow accounts for 20-25% of annual income every year in the nineteenth century with a slight upward trend toward the end of the century” (Piketty 2014: 379). From 1910 until 1920 it diminished, and from 1920 until 1980 it was rather low (from 10% to 4% to 7%). From the 1980s it began to rise again, and in the year 2010 it seems to be 12% (Piketty 2014: 380). The baby boomers had very little inheritance, but the children born in the 1970s and 1980s have already inherited. For them the decision to buy a house may have been dependent on this (Piketty 2014: 381).

Decreasing mortality rates do not necessarily influence the transmission of gifts as inheritance. Inheritance is also realized through the transmission of gifts. Inheritance occurs later in aging societies but is still very important. In the aging society there is a growing importance of inheritance and gifts are given approximately ten years before the death of the donor. Gradual increase of gift giving between generations contributes to enforce this trend (Piketty 2014: 393). In an aging society people also inherit a larger amount. If we look at the distribution of inherited wealth since 1790, we can see that 25 % of income comes from heritage while 75 % from work. But this is very unequally distributed. This explains the young man Rastignac’s dilemma, that is, rich people were a very little group so it is difficult to find a rich girl, so it may be better to work to get a decent salary (to be or not to be!).

Inheritance represents one quarter of total lifetime resources of cohorts born in 1970 or later. So we are moving towards the society of petits rentiers (Piketty 2014: 418). The fact of living of money from the past will increase. This is the case with the movie Dirty Sexy Money. In France today we see the reemergence of inherited wealth – and not only wealth achieved by hard work, education or merit. This is the case even though the words rents and rentiers took on very pejorative connotations in the 20th century. In the book the concepts are used in their descriptive sense. Capitalism remains a society of rentiers even though it has become more democratic. The return of inherited wealth seems to be a global phenomenon. This is the case not only in Europe and the United States, but globally as well. We can see this among others with the increase in global billionaires.

The wealthiest 0.1 % on the planet, some 4-5 million out of an adult population of 4-5 billion apparently possess fortunes in the order of 10 million Euros on average, nearly 200 times of the average global wealth. The wealthiest 45 million possess 3 million euros on average (Piketty 2014: 438). Liliane Bettencourt, the heiress of L’Oreal had a fortune that increased from 2 billion to 25 billion dollars from 1990 to 2010. This was a little less than Bill Gates and more than Steve Jobs (Piketty 2014: 440). However, the entrepreneurial argument cannot justify such differences in wealth. Is the inequality of the fortunes justified? Moreover, Piketty discusses the Sovereign Funds of the Oil states like Norway, Abu Dhabi, Saudi Arabia and other gulf states. What about all the people who worked very hard in the businesses? Maybe we need a progressive fiscal tax on capital!

 

 

Part 4: Regulation of Capital in Twenty-First Century

In part four of the book, Piketty deals with this question about regulation of capital in the Twenty-First Century. Can we imagine political institutions that contribute to the regulation of these issues?

Piketty thinks that a progressive tax on capital is the way to solve the challenges of the 21st century. Piketty argues for greater state intervention in the economy. He looks at different solutions to inequality problems in relation to university systems, pension systems, tax systems etc. Then he argues that we need to rethink the progressive income tax and introduce a global tax on capital in chapters 14 and 15 of the book. It is argued that estates must be more heavily taxed than income.

Piketty argues that it was war, not democracy that gave us progressive taxation. We need to rethink income tax in a more egalitarian way in the globalized economy. However, a global tax on capital is a utopian idea. It is difficult to impose a tax on global wealth. A simpler solution could be automatic transmission of banking information.

There is a contributive and intensive justification for capital tax. The three types of tax on income, on capital, and on inheritance complement each other.

Piketty proposes also a European wealth tax enforced by European institutions and the European central bank. A tax on capital is a better and less totalitarian solution than a centrally planned economy. Piketty says: “To sum up: the capital tax is a new idea, which needs to be adapted to the globalized patrimonial capitalism of the twenty-first century. The designers of the tax must consider what tax schedule is appropriate, how the value of taxable assets should be assessed, and how information about asset ownership should be supplied automatically by banks and shared internationally so that the tax authorities need not rely on taxpayers to declare their own asset holdings” (Piketty 2014: 534).

The tax on private capital is the most efficient solution to reduce public debts. This is a way to solve the problems of the current crisis in many states. It is presupposed that this would be the solution for the European Union.

 

 

II. Some Essential Questions for a Further Discussion of Capital in Twenty-First Century

Instead of moving towards a society of equal chances and resources, we face a society with increased inequality. In this sense, Piketty’s book represents an important challenge to mainstream ethics and political philosophy.

However, we can still point to a number of important questions that remain after this discussion of Piketty’s work. In particular, it would be possible to address the following questions to Piketty’s work:

1. Are Marx and Piketty right when they argue that capital will be the basis for income rather than work in the long run, or do they forget that value-creation through work will still makes work very important?

2. How should we evaluate the dangers to democracy of increased individual wealth? Should we argue that this is not only a challenge to equality, but also to political freedom and social cohesion in democratic societies?

3. Does the law of accumulative growth work? The belief in the existence of such an economic law seems to be the fundamental presupposition of the work of Piketty.

4. How should we evaluate the use of literary examples in Piketty? They seem to be very important. But can we give them an essential significance for economic theory?

5. Is Piketty right in saying that, due to capital ownership, the developing world is still owned by the developed world?

6. Is it really true that we live in a hyper-patrimonial society where richness and wealth are based on inheritance and rentiers after all? It seems that this is the case, and that it is an illusion to believe that we live in a kind of democracy with equal conditions for everyone – given for example the fact that most students at Harvard have parents who belong to the richest 2% in the US.

7. What should we say about the idea that it was accidental that there was equality in the 20th century due to the world wars. How do we ensure equality in the future, without wars?

8. What about Piketty’s analysis that we live in a society where people get 25% of their life income from inheritance, and that this will also be the case in an aging society because even though inheritance will only come later, it will still be a general part of society’s function? Is that not contradictory to the idea that older people today want to spend their money rather than to give it to their children? Maybe Piketty underestimates the egoism of the ‘68 generation?

9. Is the idea of a global tax on capital income the way to proceed? If it is only possible at the EU-level, what does it mean for the national tax systems?

10. What will happen if we do not have such a tax in the future – will we, as Piketty suggests, experience further increase of inequality throughout the world?

These questions do not exclude the significance of Piketty’s research. As mentioned in the introduction, the essential achievement of Piketty’s book is that this book represents a revival of political economy, scaled for global society, in the classical sense. Economics is placed as a social science and a humanistic science, and in the end as a moral and political science. In this manner Piketty utilizes an economic perspective and reconstructs the unity in the practical sciences. At the same time as he recognizes that each of the different human sciences has its special perspective.

Piketty’s reconstruction could be called a historical analysis of the transformation of modern society from the origin of capitalism in the 18th century till the global perspective in the twenty-first century. In conclusion, Piketty revives the political-economic project of Adam Smith and Piketty’s work has already had an impact comparable to that of Adam Smith during the 1770s. Therefore, it would be fair to see Piketty as the Adam Smith of the Twenty-First Century.

 

Reference Piketty, Thomas (2014), Capital in the Twenty-First Century, The Belknap Press of Harvard University Press, Cambridge, Massachusetts and London.

 

 

Responsibility and Capitalism. A Phenomenological Way to Approach the Economic Crisis

1. Capitalism as the economic expression of onto-theology

 

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages[2].

 

The words of Adam Smith, originally used to justify liberalist economy, presently sound like an act of accusation. Classic capitalism encourages pure egotism, relying on an ‘invisible hand’[3], which should promote the public interest together with the individual one. However, the hand of the market is not invisible, is pitiless. Capitalism in nothing but a pursuit of money, of more and more money. Then, as time goes by, wealth accrues in the hands of fewer and fewer people[4]. Marx already predicted the concentration of capital as a necessary consequence of free competition. However, he could not predict the birth of financial capitalism. Neo-liberalism spread over Western countries, leading to financialization, that is ‘the increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies’[5].

 

 

While classic capitalism links money to production, financial capitalism is based on uncertainty[6]. Money increases or decreases according to the Stock Exchange prices. Since they are unpredictable, people could gain or lose fortunes in a day: a risky investment is nothing but gambling. In this way, the concentration of capital in a few hands comes faster. Those who are not successful go broke and damage other people: bankers and brokers lose the money of whole companies and families, shopkeepers and businessmen close their activities and dismiss people who work for them. There are not only employers and workers who pay the price, but also small capitalists. Unemployment increases and consumes decrease. In this way, even production decreases and the system itself collapses.

 

This is a devastating situation, depending not so much on the structure of the system, as on its moving principle. Capitalism, in its classic definition, should stimulate production and consuming, appealing to individual interest. But the course of egotism is one-way: it aims to individual affluence, regardless of its impact on the others.

 

Capitalist economic systems are characterized by the private ownership of property and the consensual exchange of goods and services in a free market.[7]

 

According to this recent definition, common both to classic and financial capitalism, egotism reveals to be their driving force. The expression ‘private ownership’ refers to individual possession and power, while ‘free market’ indicates liberty of action.

 

Philosophically speaking, capitalism is nothing but the economic expression of onto-theology. Exactly like the Ego of Western philosophy[8], it is regardless of the Other. The theoretical I subjects everything to its structures and the practical I cares only about its freedom. In the economic case, the Ego subdues the Other to the main category of capitalism, that is profit. The practical consequence of this philosophical statement is that an indiscriminate pursuit of money causes the exploitation of environment, animals and people. The Ego prevails on the Other, but would be powerless without Him. Profit has to be made at the expense of somebody, who cannot be too weak, otherwise he will die or become a slave. The free market disappears without a certain balance: money can circulate only among people who produce, work, and consume. This is why, if the Ego takes too much power, then will lose everything.

 

The current economic crisis could be seen as a critical moment when, philosophically speaking, the I is capable of annihilating the Other. The next step would be the following: a few people with a high concentration of money, laying down the law to the majority and spoiling the environment of its resources.

 

There are two solutions to avoid this disaster: the first is destroying capitalism and adopting another economic model, communism for instance; the second is putting limits to capitalism itself. The former corresponds, in philosophy, to the annihilation of both the I and the Other, and to the birth of an anonymous subject; the latter would be the introduction of a different relation between identity and alterity, that is responsibility. If neglecting ethics is destroying capitalism, adopting ethics will save it.

 

 

2. A general lack of ethics

 

The present economic crisis is the symptom of a disease. Capitalism could be seen as a living organism, whose childhood, adolescence and youth were quite healthy. Some temporary illnesses, as the crisis of 1929 and the post-war situation, did not destroy it. Capitalism is, at the moment, in its maturity. After a fast and flourishing growth, it took a definite shape: at the top there are the investors (individuals, private and public institutions), who finance with their money the whole system; they fund producers and providers of services, who distribute their products and services through mediators and sellers; in order to produce, sell and put in operation, a great amount of manpower (workers and employees) is necessary; at the end, there are the consumers, who buy products and services. Every element of capitalism has to work correctly, like the organs in a living system. If one of them has problems, it affects the other elements and the system collapses.

 

Capitalism is presently affected by a disease and is in great danger. The most acute stage passed away, but the organism is not regaining its health. First of all, it is necessary to identify the illness and the affected parts of the organism. Fortunately, the diagnosis is not difficult: the crisis started from financial institutions and companies (Lehman Brothers and Bernard Madoff Investment Securities, for instance). Their collapse created a sudden lack of money and damaged producers, providers and money savers in general. In this way, there were indirectly affected also mediators, sellers, workers and employees, who saw their revenues decreasing or vanishing. And, since every member of the system is a consumer, products and services were bought to a lesser extent. The crisis of consumption caused, on the other hand, a new crisis of production and service-providing[9]. It is a vicious circle generating a gap between the majority of people, who progressively lose their wealth, and a few people, who hold money and power. This gap already exists, but is becoming greater and greater.

 

The crisis is due, primarily, to the heads of financial capitalism, but it would be a mistake to blame only them. There are also other people who are responsible in a similar way, people who hold a great amount of money and power: executives and owners of national and multinational companies, big traders and mediators. In Italy it happened, for instance, that Calisto Tanzi, President of the food company Parmalat, was guilty of bankruptcy fraud and criminal association. His immoral policy, nourished by the connivance of some politicians and bankers, led to the ruin of a great number of investors. The bankruptcy happened in 2003, four years before the collapse of the subprime mortgage market in the United States. Then the current crisis came, as a product of a diffused malpractice. When powerful people do not behave in a responsible way, they create a great damage to society. The crisis is not the disease of capitalism, but a serious symptom of it: the disease is what produced the crisis itself, that is a general lack of ethics.

 

Before giving a definition of what ‘lack of ethics’ means, it is necessary to define ethics itself. Capitalism is seen, in this paper, as the economic expression of the Ego of onto-theology. According to Levinas, the guiding principles of the Western I are intentionality and freedom: the former is a grasp of what is external to the subject; the latter is the ability to act through free will. Levinas takes position against Husserl, the father of phenomenology and of conscience as intentionality[10]. Even if his criticism could be considered exaggerated (Husserl had no intention to theorize a ‘tyrannical subject’[11]), the author of ‘Totality and Infinity’ is extraordinary in delineating ethics.

 

Morality is not added to the preoccupations of the I, so as to order them or to have them judged; it calls in question, and puts at a distance from itself, the I itself […]. The “vision” of the face as face is a certain mode of sojourning in a home, or […] a certain form of economic life. No human or interhuman relationship can be enacted outside of economy; no face can be approached with empty hands and closed home. Recollection in a home open to the Other –hospitality – is the concrete and initial fact of human recollection and separation[12].

 

Levinas points out the ‘separation’ between the Ego and the Other: the latter is not an alter-ego, another subject, but someone radically different. The other person is irreducible to the Ego. Notwithstanding this separation, there is an original relation between them: the subject approaches the other person in a particular ‘economic’ way. Since ‘economy’ means ‘management of a household’ (from the Greek words oikos, ‘house’, and nomos, ‘law’ or ‘rule’), every relation with something or somebody has to do with interiority. While the objects are included in the domestic dimension of the subject (as nourishment, tools or furniture), the other person cannot be grasped. The interhuman relationship is hospitality, is opening one own’s doors to the other.

 

According to Levinas, ethics is not only reception, but also responsibility. The identity of the subject is orientated to the alterity of the other, ‘without a prior commitment’[13]. Responsibility precedes freedom, it is independent from every choice. One is responsible of the other ‘despite oneself’[14], thus nobody can avoid responsibility.

 

From the economic point of view, it is a very important principle: it is not based on what one ‘chooses’ to do, but on what one ‘is’. Applying Levinas’ statements to capitalism, one could say the following: if one ‘is’ richer and more powerful, then one ‘will be’ more responsible, despite one’s choices. It does not mean that freedom is not important, but that responsibility founds freedom. Responsibility is the moving principle of ethics, while freedom is what makes it concrete. Behaviour depends on free will, which acts ‘according to’ or ‘against’ responsibility. This is the reason why a single action or a whole behaviour is responsible or irresponsible. Shortly, if ethics is based on responsibility, then moral activity will be responsible and immoral activity irresponsible.

 

Adapting Levinas’ phenomenology to economic analysis, one could state the following: intentionality and freedom exactly correspond to the ‘private ownership’ and ‘free market’ of capitalism. They are based on egotism and on an instrumental relation to the other. If egotism coincides, in capitalism, with obtaining profit, the other will be seen as a mean to make money. This relation to the other is absolutely unethical. Ethics, instead, is moved by responsibility and sees the other as the main addressee of action.

 

However, Levinas’ thought is too radical to be concretely applied: according to him, the subject should give itself unconditionally, because it is guilty from time immemorial[15]. Levinas’ ethics is oriented to non-reciprocity and, economically speaking, it is inapplicable. In order to move the market, a balance between one’s needs and the others’ needs is necessary. It would be better, in this case, to follow Ricoeur’s reciprocal ethics: one should see ‘oneself as another’, that is an intimate implication of otherness in identity[16]. Ethics requires both an original relation to the other (Levinas) and a practical bi-directional attitude (Ricoeur).  

 

The Golden Rule and the imperative of the respect owed to persons do not simply have the same field of exercise, they also have the same aim: to establish reciprocity wherever there is a lack of reciprocity[17].

 

The keyword is ‘respect’: respect of every person as the aim of morality, respect of oneself and the other in the same amount (it recalls the Christian principle ‘love your neighbour as yourself’[18]). ‘Reciprocal’ does not mean ‘claiming something in exchange’, since the logic of ‘exchange’ is based on egotism. Reciprocity is seen as a bi-directional respect, towards oneself and towards the other.

 

At this point, if ethical behaviour is respectful, unethical behaviour will be disrespectful. Unethical behaviour could be defined as a certain number of actions, fulfilling one’s aims and directly damaging (or putting in danger) the other. ‘Directly’ means that there could also be indirect consequences of one’s own action, not imputable to the agent. Unethical behaviour means betraying one’s responsibility towards the other. Phenomenology usually considers the other as ‘the other person’, but human actions do not effect only people. The other could be a human being, as well as an animal or the environment. They cannot do anything ‘in exchange’, but it does not matter, since reciprocity, in this case, does not involve exchange.

 

A concrete example of what unethical behaviour means is given by various bankers in the United States and United Kingdom. During the economic crisis, they violated ethics in this way: through ‘deception’ and ‘half truths given to authorities’ (lying), ‘violation of securities legislation’ and ‘allegations of fraud’, ‘misleading balance sheets’, promoting an ‘excessive bonus culture’, ‘ignoring internal corporate risk controls’, ‘conflict of interest’, ‘undue short-terminism’, ‘excessive risk-taking’, ‘callousness towards impoverished home owners’, ‘over-concentration of economic power by large banks’[19].

 

These actions are directly imputable to bankers, who violated both ethics and law. In this way, they caused a great damage to society, especially when financial institutions collapsed. Having an over-concentration of economic power gave an enormous amount of responsibility to the bankers, who used it, paradoxically, to escape responsibility itself.

 

Marx thought that the crisis of capitalism depended on over-production and concentration of money in a few hands[20]. The evolution of capitalism through financialization, together with globalization, changed the economic situation. The current crisis is not due to over-production, but to an indiscriminate pursuit of money. Capitalism is in danger not for its dialectical movement, but for a lack of ethics. The moving principle of ethics is responsibility, so ‘lack of ethics’ means ‘violation of responsibility’. Moreover, everyone is responsible of oneself and other people, and more power means more responsibility. For this reason, a lack of ethics is worst in powerful people than in common ones, because the consequences are more serious. An ethical revolution is then necessary and has to involve, primarily, the higher levels of the economic system.

 

 

3. A Phenomenological perspective on ethical revolution

 

An ethical revolution could be considered from several points of view. In this paper, a phenomenological perspective is adopted. ‘Phenomenology’ is here considered as an equivalent of ‘egology’: everything is considered, perceived, and felt ‘in first person’, from the point of view of the subject. On the ethical side, it has some interesting consequences. First of all, phenomenology claims an original responsibility towards the other.

 

The knot tied in subjectivity, which when subjectivity becomes a consciousness of being is still attested to in questioning, signifies an allegiance of the same to the other, imposed before any exhibition of the other, preliminary to all consciousness […]. This allegiance will be described as responsibility of the same for the other, as a response to his proximity before any question[21].

 

Ethics does not ‘proceed’ from consciousness, but ‘precedes’ it. The human subject has a moral character, so that he cannot avoid responsibility. The latter is part of his ontological (Levinas writes ‘pre-ontological’[22]) constitution. The subject is introduced, from its birth, in a relational world. When it lives distant from people, it is related with animals and nature. Loneliness is nothing but an abstraction. Using Sartre’s words, ‘the fact of the other is incontestable and touches me to the heart’[23]. Human beings are then relational (not only social) beings. The way in which they interact is based on responsibility. From the economic point of view, it is very important, because it implies the following: no one can avoid responsibility towards the other. An economic subject is responsible of the strategy chosen, of its application, and of its consequences. Violating responsibility implies paying for one’s own mistakes.

 

A second consequence of a phenomenological perspective is the singularity of both the ego and the other. Every subject has a common core[24], typical of human knowledge, perception, and feeling, but a concrete ego is absolutely unique. Moreover, it relates to an other who is absolutely unique as well.

 

Reason presupposes these singularities or particularities, not as individuals open to conceptualization, or divesting themselves of their particularity so as to find themselves to be identical, but precisely as interlocutors, irreplaceable beings, unique in their genus, faces[25].

 

Ethics refers to singular beings, either subjects and addressees. Every ego is different and relates to a different other. From the ethical point of view, no one can be replaced in assuming responsibility. Every person, here and now, is called to an original relation to the other. This relation does not consist in universal principles, belonging to universal subjects, and applied to universal addressees. Phenomenology does not theorize either norms, or rules. It does not matter ‘what’ the subject does (‘this act’, ‘that act’), but ‘how’ it does it (‘respecting’ or ‘not respecting’ the other). An ethical behaviour is that which follows one’s original responsibility towards one’s concrete neighbour.

 

In capitalism, it means that every single member of the system (executive, trader, worker, employee, customer) is not responsible for what the others do, but for what he or she does. The amount of responsibility is greater according to the amount of money and power one has. If, for instance, an employee behaves in a bad way towards a customer, he or she will have to pay for his or her single action. If an executive adopts an irresponsible strategy, he or she will have to pay not only for the action, but also for all that follows. In the case of people with great power, a single mistake has many consequences and involves many people.

 

Thirdly, phenomenology avoids two kinds of danger: anonymity and alienation. The uniqueness of both the ego and the other preserves them from the tyranny of universality. From the philosophical point of view, the singular avoids a subordination to the Same (or Being, or Spirit)[26]. In economy, it gets away from Hegel’s ethical State and Marx’s socialism. The difference between the former and the latter is that Idealism maintains private property, while communism abolishes it. In both cases, the ‘good’ of individuals is established by State institutions, which manipulate everything, from the economy to private life[27]. Equality is guaranteed, but at the price of making individuals anonymous beings.

 

Phenomenology also helps against alienation. In this case, it is better to adopt Ricoeur’s version: the thought of Husserl is inclined to alienate the other (‘all that which holds for myself holds, as I know, for all other human beings’[28]), while Levinas risks to alienate the subject (‘the-one-for-the-other goes to the extent of the-one-being-hostage-for-the-other[29]). According to Ricoeur, oneself is seen as another, implying respect on both sides.

 

This ethical principle is necessary to heal the plague of capitalism, that is the alienation of a part of the system. Marx thinks that there are only two classes, oppressors and oppressed. The former are capitalists, the latter proletarians. Workers are alienated by owners of companies, who make profit with the exploitation of proletarian labour[30]. However, financial capitalism is characterized by a more complex structure. Alienation usually concerns the parts of the system who own less money: workers, employees and small businessmen, for instance. Phenomenology leads, in its ethical and reciprocal form, to a balance between stronger and weaker members of the system.

 

Ethical capitalism, that is capitalism passing through ethical revolution, is a third way between communism and classic/financial capitalism. The former reduces all subjects to anonymity, the latter is a source of alienation. Phenomenology theorizes uniqueness (Levinas) and reciprocity (Ricoeur) between the ego and the other.

 

Fourthly, a phenomenological perspective warns against a pseudo-ethical behaviour. ‘Being ethical’ does not mean ‘having an ethical coat’. There are companies who put ‘something ethical’ in their product or in their policy, in order to attract investor, partners or customers. For example, an enterprise produces part of its eggs, breeding hens in open air. In this way, it attracts people who are sensitive to the living condition of animals. These customers will pay a higher price to buy this kind of eggs. However, there are also people who are content if hens are not in cages, even if they are bred indoor. And there are customers who do not care about animal conditions, but only about price. The latter will buy eggs produced by hens bred in batteries. This is exactly the case of the Italian company AIA:[31] its executives understood that better conditions for animals attract more customers. But the company is not moved by ethical reasons, otherwise it would limit the whole production to free-range eggs. Companies like AIA purely act for profit.

 

If the purpose of a behaviour is other than ethical, such a behaviour will be not really ethical. However, a moral appearance is useful to make money: being good pays. An ethical film enhances profit, even if the substance is unethical. First of all, not all the people are sensitive to moral behaviour, because most of them rather prefer to avoid an immoral behaviour. Secondly, they pay willingly an higher price up to a certain threshold (30%, 50% of sustainable production, for instance). This threshold is not clearly determinable and is different case by case.[32] This is why companies do something ethical, as much as it does not hinder profit.

 

Phenomenology rejects such a kind of behaviour. ‘Being ethical’ means ‘acting responsibly’. When a company follows a moral conduct, it does not limit itself to some good actions. Ethics is neither charitable, nor instrumental. An ethical producer of eggs, for instance, breeds chicken in open air, provides them with healthy food, leaves them space enough to live comfortably, heals them when they are sick, avoids to raise too many hens if good conditions cannot be guaranteed. This kind of behaviour is ethical because it respects both customers and animals: it provides buyers with eggs of the best quality and, at the same time, allows chicken to have a good life. This kind of behaviour is, philosophically speaking, oriented towards the other.

 

If moral behaviour is, on the contrary, money-oriented, it will not be moral at all. Since current capitalism aims to profit, it meets ethics only by accident. Ethics is usually a limitation to profit: the “obsessive materialism which capitalist economy promote is one of the weaknesses of capitalism when it is considered from an ethical point of view”[33]. An ethical behaviour is not necessarily ascetical and includes material goods and pleasures: in order to avoid alienation, the ego has to preserve itself. Capitalism does not purely promote self-preservation, but an indiscriminate pursuit of materialism. As the economic expression of onto-theology, capitalism is ruled by egotism.

 

Phenomenology goes beyond the tyranny of the Same, of the universal subject, of indiscriminate property and freedom. Stating the importance of ethics, of original responsibility, of uniqueness, phenomenology does not destroy the subject, but makes it ‘singular’. Definitely, it has to renounce to its tyrannical power, but not to itself. What is here suggested is not to alienate the ego in behalf of the other. Building one’s own identity is necessary to self-preservation and, moreover, to have ‘something to give’. If the subject is alienated, it cannot offer anything to the other. Ethics should not imply a fission of one’s identity[34], but an equilibrated inclination to giving.

 

The economic consequence of such a perspective is not the end of capitalism. If capitalism is based on egotism and egotism is ‘partially’ preserved by phenomenology, then capitalism will be ‘partially’ preserved by phenomenology. Phenomenology does not accept capitalism in its current form, because it is ‘wholly’ based on egotism, that is indiscriminate freedom and property. However, it accepts a different form of capitalism, which is only ‘partially’ ruled by egotism. This new kind of system is called ‘ethical capitalism’ and is based on respectful freedom and property.

 

Defining what is and what is not ‘respectful’ is the most difficult task to accomplish, due to the open character of phenomenology. Phenomenology is not a normative system, but a perspective. For this reason, it does not suggest a precise behaviour, but a different way to approach the world. Classic and financial capitalism are based on individual interest; ethical capitalism is based on responsibility. One’s freedom and property are not destroyed or ‘limited’ by the other’s freedom and property. One’s freedom and property is directed both to self-preservation and preservation of the other, that is the environment and its inhabitants. Ethical capitalism is not self-oriented, but other-oriented: it is directed both to the other and to the self as another. Responsibility is opposed to alienation, because it is bi-directional. This is why a responsible behaviour, on large scale, could save capitalism from its gaps and from its ruin.

 


[1] Cf. Hein, E., The Macroeconomics of Finance-dominated Capitalism and its Crisis, Cheltenham: Edward Elgar Publishing, 2012, p. 1.

[2] Smith, A., The Glasgow edition of the Works and Correspondence of Adam Smith, vol. 2a, edited by R.H. Cambell and A.S. Skinner, Oxford: Claredon Press, 1976, pp. 26–7.

[3] Cf. ibid.,  p. 456.

[4] ‘It is concentration of capitals already formed, destruction of their individual independence, expropriation of capitalist by capitalist, transformation of many small into few large capitals’ (Marx, K., Capital [Cap.], Volume 1, London: Lawrence and Wishart, 1954, p. 586).

[5] Epstein, G. A., ‘Introduction: Financialization and the World Economy’, in Epstein, G. A. (ed.), Financialization and the World Economy, Cheltenham: Edward Elgar Publishing, 2005, p. 3.

[6] In 1938, George Edwards already individuated finance as an element of instability: the current form of capitalism converts real equity in financial one. Edwards was even afraid of a conspiracy by financial institutions. See Edwards, G. W., The Evolution of Finance Capitalism, London: Longmans Green, 1938.

[7] Bishop, J. D., ‘Ethics and Capitalism. A Guide to the Issues’, in Bishop, J. D. (ed.), Ethics and Capitalism, University of Toronto Press Incorporated: Toronto-Buffalo-London, 2000, p. 4.

[8] ‘Ontology as first philosophy is a philosophy of power’ (Levinas E., Totality and Infinity: an Essay on Exteriority [TI], Duquesne: Pittsburgh, 1969, p. 9).

[9] For a specific description of this mechanisms, see Hein 2012.

[10] Levinas criticizes the thought of Husserl in several writings. Cf., for example, TI, pp. 109-110, 121-126; Id., Otherwise Than Being or Beyond Essence [OB], Dordrecht: Kluwer, 1981, pp. 8, 33, 63-66; Id., Discovering Essence With Husserl, Evanston: Northwestern University Press, 1998, pp. 74-75, 124-126, 176-177.

[11] Husserl considers the Other as an Ego-subject, but neither identical, nor subject to the Ego. ‘Each has its place from which he sees the physical things present; and, accordingly, each has different physical-things appearances. Also, for each of the fields of actual perception, actual memory, etc., are different, leaving aside the fact that intersubjectively common objects of consciousness in those field are intended to as to having different modes, different manners of apprehension, different degrees of clarity, and so forth’ (Husserl, E., Ideas Pertaining to a Pure Phenomenology and to a Phenomenological Philosophy, First Book  [Ideas I], The Hague: Martinus Nijhoff, 1982, pp. 55-56).

[12] TI, p. 172.

[13] OB, p. 153.

[14] Ibid., pp. 51, 54-56, 74.

[15] Ibid., pp. 26, 51, 87.

[16] Cf. Ricoeur, P., Oneself as Another, University of Chicago Press: Chicago, 1992, p. 3.

[17] Ibid., p. 225.

[18] Matthew 22:39; Mark 12:31; Luke 10:27.

[19] Thomas, R., ‘Ethics – or the Lack of Ethis – in the Global Financial Crisis 2007-2010’, in Rosamund M. Thomas (ed.), Business Ethics, Cambridge: Ethics International Press, 2011, p. 75.

[20] Cf. Cap., p. 587.

[21] OB, pp. 25-26.

[22] Ibid., pp. 43-44, 78.

[23] Sartre, J.-P-, Being and Nothingness. An Essay on Phenomenological Ontology, New York: Philosophical Library, 1956, p. 367. Even if Sartre is better known as an existentialist, Being and Nothingness can be considered as a phenomenological masterwork. Anyway, the constitutive inter-subjectivity of human beings was first stated by Heidegger, according to which ‘being-in-the-world’ (in-der-Welt-sein) is also ‘being-with’ (Mit-sein). Cf. Heidegger, M., Being and Time, State University of New York Press: Albany, 1996, p. 112.

[24] The phenomenological epoché, theorized by Husserl, searches for a pure consciousness, abstracting from the concrete Ego-subjects. ‘It therefore remains as the “phenomenological residuum,” as a region of being which is of essential necessity quite unique and which can indeed become the field of a science of a novel kind: phenomenology’ (Ideas I, pp. 65-66).

[25] TI, p. 252.

[26] Cf. TI, pp. 46-47, 143, 269-271.

[27] Cf. Hegel, G. W. F., Elements of the Philosophy of Right, Cambridge: Cambridge University Press, 1991, §§ 257-258; Marx, K.- Engels, F., The Communist Manifesto [Manifesto], New York: Russell and Russell, 1963, Chap. 2. According to Hegel, the State is the reality of reason and will, which coincides with individual freedom. According to Marx, communism implies centralization of credit, means of communication, production and education in the hands of the State. Both authors theorize, in order to guarantee equality, a strong Statism.

[28] Ideas I, p. 55.

[29] OB, p. 141.

[30] Cf. Manifesto, pp. 25-26; Marx, K., Economic and Philosophic Manuscripts of 1844, New York: International Publishers, 1964, pp. 108-111.

[31] Products numbered B5110, for instance, come from hens farming to barn, while B5114 are free-range eggs. The other products come from hens bred in batteries. This is why, in 2001, AIA was condemned by the Italian Antitrust. The company showed on its egg-packages images of hens eating on lawns and the proposition ‘uova fresche allevate a terra’ (‘fresh eggs bred ashore’). It could led customers to think that they were free-range eggs, while hens were crowded into big barns (intensive livestock farming).

[32] Cf. Trudel, R.- Cotte, J., ‘Does It Pay To Be Good?’, MIT Sloan Management Review, vol. 50, 2, 2009, pp. 66-68.

[33] Groarke, L., ‘Can Capitalism Save Itself? Some Ruminations on the Fate of Capitalism’, in Bishop 2000, p. 204.

[34] Cf. OB, pp. 49, 104, 141, 180, 185. 

 

Ingerid S Straume and J F Humphrey (eds.), Depoliticization: The Political Imaginary of Global Capitalism (Malmö: NSU Press, 2011)

This split, so the thesis goes, aims to stifle any truly creative political critique of our institutions, thereby avoiding genuine structural changes that might hurt private capital’s interests. In this view, ‘depoliticization’ is the diminishing of any public capacity to imagine, create or deploy new forms, such that the depoliticizing political-economy split is an inherently anti-democratic defence of capitalism.

For example, discussion on who should bear the cost of the economic crisis is depoliticised. In business, transnational corporations wriggle out of any democratic scrutiny exercised in national interests. In law, institutions and rights become fixed in a way that can tend to immobilise political thought and action. In the symbolic field, undermining everything, the capacity to think or posit new institutional forms is deadened by fear and indifference.

In this way, runs the thesis, global capitalism feeds on depoliticization, so capitalists promulgate it until the freedom and autonomy of a political life is no longer possible. This authoritarian state is, the book suggests, the inevitable and imminent outcome. However, this is not so much a warning about fascism’s resurgence. Rather it is an intricate, provocative and mostly quite convincing theoretical elucidation of the subtle, sub-conscious architecture on which the current drift towards authoritarianism is constructed. The benefit of this work lies in the way it points out opportunities for a redesign: reconnecting politics with economy – politicising the debate, imagining and implementing new forms – becomes a key objective with a new and significant value.

Depoliticization assembles its tally of authors from five countries, representing over a dozen disciplines spanning economics, history and philosophy as well as political and social theory. There is a preponderance of Scandinavian contributors, but nevertheless the stated intention is to urge more transnational debate on our (perhaps Western) political fate and legacy.

In accordance with its central theme, the essays are organised in two parts: Economy and Politics. Opening with Straume’s more in-depth look at how the depoliticizing political-economy split leads to personal suffering (principally, it detaches us from reality and creativity), part one goes on to dissect capitalism’s ‘economic logic’. Arnason cites Baechler, Wallerstein, Boltanski and Chiapello to expose not only the irrational ‘spirit’ that underpins its multiple manifestations, but also and critically, the social-historical context that spawns it all. D T Cochrane’s ‘power theory’ harmonises Thorstein Veblen and Castoriadis in order to critique Marx’s Labour Theory of Value and pin down capitalism as ‘the valuation of control’. According to Lundkvist, this control commodity is used unaccountably by an oligarchy of transnational corporations to choke off market competition. Their strategically managed alliances and mergers give the lie to any notion of a ‘global free market’. Instead they spiral inexorably towards a ‘capitalist planned economy’. J F Humphrey rounds off part one by connecting the discussion to the current economic crisis. He draws out from Marx how money transforms from a means of exchange to become the ultimate commodity: production determines distribution, exchange and consumption, such that what is produced has no (social) value other than to satisfy the need for accumulation; or as Cochrane might say, control.

Blinkenberg builds on this in part two, working from Jacques Rancière’s argument that money as power requires the exclusion of ‘virtue’ (or perhaps ‘social value’). Rather, an ‘authoritative allocation of values’ ascribes virtue in order to legitimise acceptable political actors. Here depoliticization is a method of ‘value-neutral’ policing that safeguards the hierarchical distribution of power against democratic egalitarianism. Changing the hierarchy’s regimes for ‘truth-production’ by disclosing the function of truth, is what Foucault sees as the purpose of intellectual and political action, according to Jacobsen. Yet relativism, Foucault’s ‘tyranny of perspectives’, means that any claim to objective truth always proceeds from an infinite regression of fundamental hegemonic discourses, dissolving objectivity. Such impotence is perhaps made manifest in Europe’s Kafkaesque language shift from ‘pedagogy’ and ‘education’ to ‘learning’, as argued by Straume. Commodified and assessed by endlessly uncertain tribunals, ‘learning’ comes packed with a capitalist payload of quantitative, computable subtexts: competition, employment, product and again control are deemed virtuous for the ‘entrepreneurial citizen’. The lost ethos of autonomous critique, inspired by love in Castoriadis’ pedagogic scheme, is de-valued, de-personalised and effectively de-commissioned. Finally, Nilsen’s analysis of Stanley Kubrick’s Eyes Wide Shut illustrates the outcome of extreme wealth inequality and a switch from ‘productive capitalism’ (growth) to ‘finance capitalism’ (no growth). This is demonstrably a grand repetition of deteriorating trust, consciousness and intelligence that sets up the apparently imminent, unavoidable descent into despotism and dictatorship.

But democracy’s shallow grave may not be dug yet. If you’re prepared to bury your head in the text and not the ground, you can find some genuinely useful arguments here.  For example, Cochrane’s frankly excellent reading of capitalism as ‘the valuation of control’ provides a strong theoretical case for competing to command assets socially. Similarly Straume’s first essay shows that depoliticization rests on the inability to provide ‘sufficiently robust meaning’, such that teaching critical thinking to every citizen becomes a political as well as an educational mission.

‘Depoliticization’ is not directly addressed in every essay; for some it remains at the side. However, the papers overlap each other well enough to be stitched together with a good narrative, and so the eight authors cover the theme well. Collectively, they delve deep into capitalism’s depoliticizing traits, often working at the level of language and meaning. There are some quite fascinating technical constructions offered in explanation of unconscious or unobvious shifts, such as: controlled ‘free markets’; consumption determined by production; or money, power and control commodified for accumulation. There are also references to more popular economics (Stiglitz and Soros for example) and the odd graph (not listed in the contents) to explain relevant numeric data.

Given their intensity and density, some of the essays are wonderfully clear although in at least two, the author’s purpose or line of thought becomes obscured; whether by poor writing or poor translation is unclear. More of a practical problem was the lack of an index; while the use of footnotes rather than endnotes means locating a cited source requires endless flicking.

But the only real issue was in terms of a personal take on ideas. For me the capitalist paradigm of ‘growth’ appears to be accepted without question, despite its physical impossibility. Moreover, there was a tendency to dismiss ‘logic’ or ‘evidence’ too readily, while quantity always seemed subordinate to quality. I would have liked to have seen these points more clearly and fully discussed, not lost in the background as ‘value-neutral’ givens. But then, this is not so much a criticism of the work as a rejoinder to the discussion; which the authors would surely welcome.

The Transcendental Character of Money: An Exposition of Marx’s Argument in the Grundrisse

Introduction

The recent economic crisis has certainly raised a number of questions about the conception of free markets and the neoconservative economic theories on which the capitalist nations have relied. Free marketeers like former Federal Reserve Chairman, Alan Greenspan, have acknowledged that unregulated markets have enormous costs and in the end could be damaging to the welfare of our citizens, the financial health of our economic institutions, and to the fiscal strength of our nation states.[1] In a National Public Radio interview, Greenspan even went so far as to call this crisis a “credit tsunami,” admitting that “the free market ideology may be flawed.”[2] Still, despite this painful admission, Greenspan had very few suggestions for regulating or correcting the failures of the free-market system.[3] Other observers of global capitalism have been concerned for some time about the boding dangers of the free market system. John McMurtry, for example, who locates the origins of capitalism in the work of John Locke and Adam Smith reminds us that both of these thinkers developed their economic theories out of their ethical philosophies. But how has economic thought moved so far from ethical and moral considerations? Presumably, the free market was justified because it led to human happiness. As Mary Rawson states in her review of McMurtry’s Unequal Freedoms: The Global Market as an Ethical System, the question is: “If the market system was to bring a better life to all, why can we find everywhere armaments, killing fields, malnutrition, brown water, and the disappearance of species? Why do we find, not life, but death?”[4] Citing Robert Lane’s The Loss of Happiness in Market Democracies, McMurtry argues that, although most current economic theory would not agree, “human satisfaction actually declines as income and commodity consumption rise beyond need.”[5] Furthermore, since our government leaders are tied to large corporate interests, the public interest is completely ignored.

As Governments decline into ‘the best democracies that money can buy’ there is no public authority left to protect the common interest. Our political leaders assume market growth is essential to society’s development. So public welfare is sacrificed to ‘more global market competiveness’ – and more life-system depredation. To name the causal links remains taboo.[6]

Additionally, recent economic theory has claimed that the market is “objective,” “value-free.” Some have complained that we have made the market into a god. As George Soros argues, however, “by claiming to be value free, market fundamentalism has actually undermined moral values.”[7]

In February, 2009, George Soros, founder of Soros Fund Management LLC and a philanthropist, claimed that the current global economic problems, sparked by the mortgage crisis, have “damaged the financial system itself.”[8] Extremely pessimistic about the success of the Obama administration’s attempts to respond to the crisis, by October, 2009, he cautioned his audience that the recovery from the current crisis “may run out of steam”; and he feared a “double-dip” in 2010 or 2011.[9] While he distinguishes the current crisis from the collapse of the Japanese economy because the current problems are not confined to one country, Soros distinguishes it from the “Great Depression” because the world economic system has not been allowed to collapse completely; it has been propped up by various national governments. Soros predicts that a “new world order … will eventually emerge” and it “will not be dominated by the United States to the same extent as the old one.”[10] Summing up his position, Soros maintains that “a global economy demands global regulations. … Regulations must be global in scope.” Echoing these concerns, Joseph Stiglitz asserts that “the truth is, most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal.”[11]

Obviously, those who have suffered from this crisis are angry; many want to know: Who is going to jail? For how long? And when? While those who have been personally affected by this recession have suffered loss of jobs and homes with foreclosures, taxpayers have been bailing out the large Western banks that, according to John Lanchester, have been allowed to become “Too Big to Fail.”[12] Indeed, this was “the most important lesson” of the failure of Lehman Brothers – these institutions are “Too Big to Fail.” Truly, we are living with a “monstrous hybrid,” Lanchester continues, “in which bank profits are privately owned, but are made possible thanks to an unlimited guarantee against losses, provided by the taxpayer.” He agrees with German Chancellor Angela Merkel, “No bank should be allowed to become so big that it can blackmail governments.”[13] If capitalism is about assuming risk, i.e., “about ‘creative destruction,’ and the freedom to fail,” then we no longer have free market capitalism, but an economy dominated by the “banksters”; or, to speak precisely, Lanchester concludes “the most accurate term would be ‘bankocracy.’”

Others argue that the recent crisis is not an exception to the rule, but that these kinds of crises are endemic to the nature of capitalism; they belong to the logic of the capitalist system because once a means of exchange, money, when it becomes capital, becomes an end in itself. In other words, the economic system no longer serves to produce various products required to make human beings happy, but the system serves to produce one commodity, i.e., capital, and the problem for the corporations and the banks is how to produce, control, and accumulate capital. There are two questions here. The first is the historical question: when in the development of the capitalist economic system was there a concentration of production and the emergence of monopolies that led to the enormous accumulation of capital in the hands of a few large banking concerns? Citing the German economist, Otto Jeidels’ Relation of the German Big Banks to Industry with Special Reference to the Iron Industry, (Leipzig, 1905), V. I. Lenin answers this question: “Thus, the twentieth century marks the turning-point from the old capitalism to the new, from the domination of capital in general to the domination of finance capital.”[14] Clearly others would answer this question differently; most would probably go back to the beginning of the twentieth century, but would look more specifically to contemporary problems relevant to the current capitalist system. This paper, however, is not concerned with these historical questions; rather, this essay is concerned with a second question: how, according to the logic of capitalism did money which served as a means of exchange become capital? My paper will address this question by examining Karl Marx’ argument in the Grundrisse.

Written during the winter of 1857-58, the Grundrisse[15] was authored by Karl Marx between the 1848 publication of the Manifesto of the Communist Party and the 1867 publication of the first volume of Capital. The text is a series of seven notebooks in which Marx strives to gain conceptual clarity on a number of fundamental economic concepts, including production, distribution, exchange, consumption, and money. Although the Grundrisse was not published during his own lifetime ? indeed, the work was not even published in the nineteenth century[16] ? this work is essential for our understanding of the nineteenth century, because in it Marx articulates one of the most important transitions for modern bourgeois capitalism, namely, the transition from money as a medium of exchange to money as a commodity. In this paper, I shall examine Marx’s argument for this transition under the heading of the transcendental character of money. To achieve this end, I have divided my discussion into three parts. The first part is a brief consideration of what Marx calls “the scientifically correct method” of political economy (Grundrisse 100). Before exploring the concept of production in general, I shall consider how Marx justifies beginning his reflection with this concept. Then, I shall reconstruct the way in which Marx understands the concepts of production, distribution, exchange, and consumption in his “Introduction” to the Grundrisse.[17] Finally, I intend to identify the conceptual moments of money as it moves from a mere medium of exchange to a commodity necessary for the productive process.

“The Method of Political Economy”[18]

Reflecting on the method of political economy, Marx distinguishes two approaches to this science: the historical method of the seventeenth century political economists and “the scientifically correct method,” i.e., “the theoretical method.” Marx criticizes seventeenth century political economists for beginning scientific reflection with an indeterminate abstraction like “population.” For if we begin with population, we must “move analytically towards ever more simple concepts [Begriff], from the imagined concrete towards ever thinner abstractions until [we reach] the simplest determinations.” In other words, if we begin with population, we shall have to consider the classes that constitute the given population. But according to Marx, the concept of “classes” has no content unless we understand “the elements on which they rest” such as “wage, labor, capital, etc.” And since “these concepts in turn presuppose exchange, division of labor, prices, etc.,” those political economists who start with the concept of “population,” make the mistake of beginning with “a chaotic conception [Vorstellung] of the whole.”

Rejecting this confused approach, Marx claims that “the scientifically correct method” of political economy is one that begins by sorting out “a small number of determinant, abstract, general relations” ? and here Marx is thinking of “labor, money, value, etc.” ? which he calls “the simplest determinations” (Grundrisse 100 and 101). These determinations, however, are not yet concrete. Once “these individual moments [have] been more or less firmly established and abstracted,” Marx writes, “there [begin] the economic systems, which [ascend] from the simple relations, such as labor, division of labor, need, exchange value, to the level of the state, exchange between nations and the world market” (Grundrisse 100-01). This is not the mistaken historical method of the seventeenth century political economists that begins with the “imagined concrete” (e.g., population); rather, according to the scientifically correct method, the concrete is something to be attained. “The concrete,” Marx argues,

is concrete because it is the concentration of many determinations, hence unity of the diverse. It appears in the process of thinking, therefore, as a process of concentration, as a result, not as a point of departure, even though it is the point of departure in reality and hence also the point of departure for observation [Anshauung] and conception.[19]

Reality is not transparent to the understanding; it is not immediately accessible to political economists. To attempt to comprehend reality in terms of the most immediate determinations only serves to confuse; reality is over-determined, i.e., as having so many determinations that we cannot sort them all out in theoretical discourse. Instead, reality must be understood. Beginning with the simplest determinations, the political economist brings to conceptual clarity chaotic conceptions by identifying “a small number of determinant, abstract, general relations” which “lead towards a reproduction of the concrete by way of thought” (Grundrisse 100 and 101). Hence, political economists do not produce reality as the product of thought; rather, they proceed correctly by conceptualizing reality in thought.

Reconstruction of Production, Distribution, Exchange, and Consumption

Production in General

Marx employs this scientifically correct method in his own work when he takes up the concept of “production” (Grundrisse 85-88). In any reflection on production, we always refer to “production at a definite stage of social development — production by social individuals” (Grundrisse 85). Because of this, Marx argues, there would seem to be two possible ways to speak of production. If we are to “talk about production at all we must either pursue the process of historic development through its different phases, or declare beforehand that we are dealing with a specific historic epoch such as[,] e.g.[,] modern bourgeois production.” But to start in this manner would once again lead us down the thorny path of the historical method; beginning with “the chaotic conception of the whole,” we would have to search for the simplest determinations that constitute production.

Alternatively, Marx suggests that we can begin with “a rational abstraction,” i.e., “production in general” because “all epochs of production have certain common traits, common characteristics.” The difficulty, however, is that production as it appears has many determinations. In fact, it could be characterized in its specificity as being over-determined. Furthermore, not all of these determinations belong to every epoch as identifiable moments. “Some determinations belong to all epochs, others only to a few. [Some] determinations will be shared by the most modern epoch and the most ancient.” If we are to develop this kind of theoretical discourse, Marx argues, we must allow certain determinations to be stripped away and removed from this process of abstraction, the residuum, albeit an abstraction will not be an indeterminate abstraction; rather, it will be a concrete abstraction. And the scientifically correct method demands that we begin our theoretical reflection with a concrete abstraction, i.e., a concept of production which includes just those clearly articulated, essential moments that all specific instances of production have in common. Consequently, we shall begin the present discussion with the concrete abstraction of production in general.

If we simply consider the concept of production in general, it appears in the first instance to be the making of products. In production, human beings appropriate nature “within and through a specific form of society” (Grundrisse 87).[20] Production in its immediacy, however, assumes the three following moments: 1) human activity, i.e., work; 2) the subject of the work, i.e., the material worked on, and 3) the instruments through which the work is accomplished, i.e., the instruments of production.[21] Moreover, the products of production belong to someone; they are property which fulfill human needs. “An appropriation which does not make something into property,” Marx writes, “is a contradictio in subjecto” (Grundrisse 88).[22] “In production the members of society appropriate (create, shape) the products of nature in accord with human needs”; Marx calls this “the obvious” or “trite notion” of production. Furthermore, “production, distribution, exchange, and consumption,” according to Marx, “form a regular syllogism: production is the generality, distribution and exchange the particularity, and consumption the singularity in which the whole is joined together” (Grundrisse 89). However, this does not mean that “production, distribution, exchange, and consumption are identical, but that they all form the members of a totality, distinctions within a unity. Production predominates not only over itself, in the antithetical definition of production, but over the other moments as well” (Grundrisse 99). What then is the relationship of each of these determinations ? distribution, exchange, and consumption ? to production?

“Consumption and Production”[23]

Marx distinguishes three “identities between consumption and production” (Grundrisse 92): (1) “Production is consumption, consumption is production.” And he calls this first identity “immediate identity”;[24] (2) Production “appears as a means for” consumption and consumption “appears as a means for” production. [25] (3) “Each of them … creates the other in completing itself, and creates itself as the other.” [26] Marx does not name the last two mentioned identities. In keeping with the Hegelian vocabulary he employs here, however, I shall refer to the second and third identities as mediate identity and self-mediated identity, respectively. Let us consider each of these identities in turn.

The Immediate Identity of Production and Consumption

“(1) Immediate identity: Production is consumption, consumption is production.”[27] Production which appears immediately as consumption, Marx maintains, is “twofold consumption”; it is both “subjective and objective” (Grundrisse 90). It is subjective because the producer “develops his abilities in production”; it is objective because the producer also “expends” these abilities ? “uses them up in the act of production.” In producing the product, “the means of production” are consumed; they “become worn out through use” in the productive process. To illustrate his point, Marx appeals to the image of combustion. While fire and heat are produced in combustion, the material that supports combustion is consumed. Similarly, in production “the raw material” surrenders “its natural form and composition by being used up.” “The act of production,” Marx argues, “is therefore in all its moments also an act of consumption. Production as directly identical with consumption, and consumption as directly coincident with production, is termed … productive consumption.”

At the same time, “consumption is also immediately production.” Drawing an image from nature, Marx argues that just as a plant produces itself by consuming certain nutriments, so too a “human being produces his [or her] own body” by consuming nourishment. And this, Marx continues, “is true of every kind of consumption which in one way or another produces human beings in some particular aspect” (Grundrisse 90-91). Consumption that is immediately production, according to Marx, is “consumptive production” (Grundrisse 91). Consumptive production, however, is “secondary” because it involves the “destruction of the prior product” in the productive process. In production, “the producer objectified himself”; in consumption “the object he created personifies itself.” Hence, productive consumption is to be distinguished from “production proper.” For although production is immediately consumption and consumption is immediately production, their “immediate duality” remains unaltered; each process retains its unique character and is independent of the other.

The Mediate Identity of Production and Consumption

“(2) [In the sense] that one appears as a means for the other, is mediated by the other.”[28] According to Marx, a “mediating movement” occurs between the two processes ? production and consumption. These two processes are “related to” and “indispensable to one another”; Marx insists on “their mutual dependence” that “still leaves them external to each other” (Grundrisse 93). Each process is “a means for the other” ? each “is mediated by the other.” “Consumption,” Marx argues, “mediates production” because “it alone creates for the products the subject for whom they are products” (Grundrisse 91). “Without production, no consumption; but also, without consumption, no production; since production would then be purposeless.” Indeed, “consumption,” Marx argues, produces production in two ways. First, consumption produces production because it is only by being consumed that a product “becomes a real product.” A product achieves its “‘last finish’ in consumption.” A product that is not consumed is not actually a product at all; it is only potentially a product. For example, “a railway on which no trains run, hence which is not used up, not consumed,” Marx insists, “is a railway only ??????? [potentially], and not in reality.” This means that a product is quite different from a natural object. While a natural object simply is what it is, the product “becomes a product only through consumption.” “Only by decomposing the product,” Marx maintains, “does consumption give the product the finishing touch; for the product is production not as objectified activity, but rather only as object for the active subject.”

Second, consumption produces production “because consumption creates the need for new production, that is it creates the ideal, internally impelling cause for production which is its presupposition.” In other words, consumption produces production by creating “need” that will be satisfied by production. As the object of production, however, need is not external to the productive process; rather, need is understood “as internal object of production, as aim”; the goal of production is to fulfill need created by consumption. Hence, according to Marx, consumption is understood as “the aim of production”; consumption motivates production by creating “the object which is active in production as its determinant aim” (Grundrisse 93 and 91). If it is true that production “offers consumption its external object,” then it is equally true, Marx contends

that consumption ideally posits the object of production as an internal image, as a need, as drive and as purpose. It creates the objects of production in a still subjective form. No production without a need. But consumption reproduces the need (Grundrisse 92).

At the same time, Marx identifies three ways that production mediates the process of consumption. First, production “produces the object of consumption.” In production, products are produced for no other reason than to be consumed; “production creates the material, as external object, for consumption” (Grundrisse 93). Without an object to be consumed, consumption would not be consumption at all. It is by supplying the material to be consumed that “production produces consumption” (Grundrisse 92).

Second, production produces “the manner of consumption.” Previously, we observed that only in consumption does the product achieve its final finish. Similarly, production does not merely create a product for consumption; rather, it “also gives consumption its specificity, its character, its finish.” Production does not create any object or “an object in general.” In the productive process, specific objects are produced. Because production produces the product, and because the product is the product that it is, i.e., a specific product, production also produces the way in which the product is to be consumed. Hence, “the object,” Marx argues, “is not an object in general, but a specific object which must be consumed in a specific manner.” Marx appeals to an example of satisfying one’s hunger. The need to gratify our hunger is the same in any context. After all, “hunger is hunger.” But there is a difference between our “bolt[ing] down raw meat with the aid of hand, nail, and tooth,” and our satisfying our hunger “by cooked meat eaten with a knife and fork.” Since production produces a specific product, and since production produces the manner in which the product is to be consumed, Marx argues that “production thus creates the consumer.”

Finally, production produces “the motive of consumption.” Motivated by need, production creates the material to satisfy need. But production also “supplies a need for the material.” As it first appears, consumption exists in its immediacy ? “a state of natural crudity.” However, consumption is “mediated as a need for the object” produced by production. Hence, production not only creates the material object for consumption, and it not only creates the manner in which the material object is to be consumed, but it also creates the need for the material object. In other words, production creates “the perception” of need. Borrowing an example from the arts, Marx maintains that in this there is no difference between an “object of art” and any other product. For just as an artifact produces “a public which is sensitive to art and enjoys beauty,” so too, in the creation of every other product, production produces a perceived need. “Production thus not only creates an object for the subject, but also a subject for the object,” i.e., the consumer.

The Self-Mediating Identity of Production and Consumption

In addition to the two previous identities ? the immediate identity of production and consumption and the mediate identity of production and consumption ? production produces consumption and consumption produces production, and in so doing “each of them … creates the other in completing itself as other” (Grundrisse 93). For its part, consumption creates production because in consumption the product is consumed. If the product were not consumed, it would not be what it is, namely, a product. In the activity of the product being consumed, consumption not only brings the product to completion, but it also produces the need for production and re-production. Insofar as the process of consumption brings the product to completion, and insofar as the process of consumption produces the inclination for production and reproduction, consumption completes the process of production by producing the producer. “Consumption,” Marx argues,

accomplishes the act of production only in completing the product as product by dissolving it, by consuming its independently material form, by raising the inclination developed in the first act of production, through the need for repetition, to its finished form; it is thus not only the concluding act which the product becomes product, but also that in which the producer becomes producer (Grundrisse 93).

Hence, consumption creates production by bringing itself to completion; and in this way consumption is distinguished from production.

For its part, production completes the productive process by producing consumption. Insofar as production produces both “an object for the subject” and “a subject for the object,” production creates consumption

(1) by creating the material for it; (2) by determining the manner of consumption; and (3) by creating the products initially posited by it as objects, in the form of a need felt by the consumer. It thus produces the object of consumption, the manner of consumption and the motive of consumption (Grundrisse 92).

Furthermore, besides producing the material or object, the manner, and the motive for consumption, “production produces consumption … by creating the stimulus of consumption, the ability to consume, as a need” (Grundrisse 93). In other words, when Marx writes that production produces the subject for the object of consumption (Grundrisse 92), he means that production not only produces the product that is to be consumed, but it also produces the consumer that needs the product (Grundrisse 92 and 93). Production thus creates consumption by bringing itself to completion; and in this way production is distinguished from consumption.

Marx, however, stresses that while each of these moments ? production and consumption ? “creates the other in completing itself, and creates itself as the other,” still the moments articulated here belong to production in general. Production and consumption “appear as moments of a single act” (Grundrisse 94). In other words, production must be understood as “one process” to which all of the identities and the moments constituting them belong. Hence, production in general is the “predominant moment.”

With a single subject, production and consumption appear as moments of a single act. The important thing to emphasize here is only that … they [production and consumption] appear in any case as moments of one process, in which production is the real point of departure and hence also the predominant moment. Consumption as urgency, as need, is itself an intrinsic moment of productive activity. But the latter is the point of departure for realization and hence also its predominant moment: it is the act through which the whole process again runs its course. The individual produces an object and, by consuming it, returns to himself, but returns as a productive and self-reproducing individual. Consumption thus appears as a moment of production. (Grundrisse, 94)

“Distribution and Production”[29]

Marx begins his discussion of distribution with the following question: “Does distribution stand at the side of and outside production as an autonomous sphere?” Although he will answer this question in the negative, by arguing that production does indeed include distribution, there are a number of reasons to think that distribution does not belong to the sphere of production. From the standpoint of the individual, distribution seems to be prior to production because it establishes his or her place in the process of production. According to this point of view, Marx writes, “distribution appears as a social law” because it fixes the individual’s place in the social system, i.e., “the system of production” (Grundrisse 96). Since the individual’s place within this system is determined prior to his or her participation in the process of production, it would stand to reason that distribution does not belong to the sphere of production; rather, distribution would seem to precede production. “To the single individual,” Marx argues,

distribution appears as a social law which determines his [or her] position within the system of production within which he [or she] produces, and which therefore precedes production. The individual comes into the world possessing neither capital nor land. Social distribution assigns him [or her] at birth to wage labor. But this situation of being assigned is itself a consequence of the existence of capital and landed property as independent agents of production (Grundrisse 96).

The individual comes into this world without capital or land; he or she possesses only his or her own body which may be sold in the form of the individual’s labor power for wages. But Marx emphasizes that it is the mode of production that determines the individual’s place in the system of production. Hence, distribution is not an autonomous sphere existing outside of production; rather, distribution belongs to the sphere of production.

From the standpoint of whole societies, Marx mentions four historical examples that provide reasons to think that distribution precedes production, i.e., “that distribution is not structured and determined by production, but rather the opposite, production by distribution.” When one nation or people, for example, conquers another and divides the land among themselves, they force a certain mode of “distribution and form of property in land” on those who have been defeated; thus, production would seem to be determined by distribution. Again, if a conquering nation enslaves those it has defeated, and if, as a result, production were founded on slave labor, distribution would appear to be both prior to production and to determine the mode of production. Or, in the case of a revolution when a people revolts against the land owners or the landed gentry and redistributes the land by dividing their holdings into smaller tracts of land, distribution would appear to change the features of production. Similarly, in a caste system in which a legal system distributes, as a result of “a hereditary privilege,” property to some, land to others, and still others are restricted to the caste of laborers, distribution would seem to be prior to production, to determine production, and, hence, to stand outside of production as an entirely autonomous sphere.

Marx, however, rejects the notion that distribution belongs to an autonomous sphere; rather, he argues that “in all cases, the mode of production … is decisive” (Grundrisse 97). While the process of production involves appropriation, i.e., involves making something into property, “the producer’s relation to the product, once the latter is finished, is an external one”; in other words, the producer does not take possession of the product immediately (Grundrisse 94). In production, the producer does not intend the immediate appropriation of the products; the producer does not produce products for his or her own personal consumption. Rather, the producer can only take possession of the product insofar as the product is distributed to others. Distribution depends on the producer’s relation to other individuals. Hence, distribution, Marx argues, like consumption, belongs to the sphere of production.

Distribution steps between the producers and the products, hence between production and consumption, to determine in accordance with social laws what the producers share will be in the world of products (Grundrisse 94).

At the most immediate level distribution and production appear independently of one another. Distribution seems to be the mere distribution of products according to certain social laws which first appear as natural laws. However, “this distribution of products” is a moment in production realized as:

  1. “the distribution of the instruments of production, and …
  2. “the distribution of members of society among the different kinds of production” (Grundrisse 96).

For its part, production produces distribution, and different modes of production require different forms of distribution. “The structure [Gliederung] of distribution,” Marx writes,

is completely determined by the structure of production. Distribution is itself a product of production, not only in its object, in that only the results of production can be distributed, but also in its form, in that the specific kind of participation in production determines specific forms of distribution, i.e., the pattern of participation in distribution (Grundrisse 95).

In other words, while the structure of distribution appears as the naturally determined distribution of products, actually, the distribution of products is the result of this structure of distribution which is in turn the result of production as it changes the natural determinants to “historic determinants.” “At the very beginning,” Marx continues,

these may appear as spontaneous, natural. But by the process of production itself they are transformed from natural into historic determinants, and if they appear to one epoch as natural presuppositions of production, they were its historic product for another (Grundrisse 97).

Thus, distribution, belongs to the sphere of production and Marx calls it “production-determined distribution”; as production-determined distribution, distribution appears as one moment of production.

“Exchange and Production” [30]

Exchange appears as a moment mediating “production with its production-determined distribution on one side and consumption on the other …” (Grundrisse 99). Because of this mediation, exchange makes a threefold appearance, each level of which is either determined by or appears in the sphere of production:

  1. It is within production “that exchange of activities and abilities [division of labour] takes place” (Grundrisse 99]. This moment of exchange is the essential constitutive moment of production.
  2. Exchange as the “means” of bringing a product to its concrete reality, i.e., exchange preparing the product for consumption, is also determined by production. It is exchange that brings the product to consumption wherein the product is completed. In other words, production determines the way in which consumption receives its object by means of exchange (Grundrisse 99).
  3. The form of exchange, i.e., the way in which exchange is organized “between dealers and dealers …,” is “itself a producing activity” while at the same time being “entirely determined by production …,” i.e., the mode of production (Grundrisse 99). In other words, the organization of exchange which is determined by production determines the intensity and extensity of exchange. And, only in this last instance “where the product is exchanged directly for consumption” does exchange begin to appear separately from production (Grundrisse 99).

Thus, exchange, like distribution and consumption, appears not as an autonomous activity, but “as either directly comprised in production or determined by it.” Each of these concepts: production, distribution, exchange, and consumption, exists as moments within a complex whole where each mediates and is mediated by the others, but the determinate concept is that of production in general. Thus, distribution, exchange, and consumption always return us to production.

The Transition of Money as Exchange to Money as Commodity

Thus far, I have sketched out the concepts Marx presents in the “Introduction” to the Grundrisse (85-100). The question that must now be answered is: what are the conceptual moments of money as it moves from a mere medium of exchange to a commodity necessary for the productive process? Marx provides us with a clue to answer this question when he writes “circulation itself [is] merely a specific moment of exchange, or [it is] also exchange regarded in its totality” (Grundrisse, 98). One of the specific moments of circulation, however, is money that in turn exists in its concreteness in so far as it is seen in its determinate nature, i.e., as having certain specifiable determinations. Money can be understood to have the four following moments:

The properties of money as (1) measure of commodity exchange; (2) medium of exchange; (3) representative of commodities (hence object of contracts); (4) general commodity alongside the particular commodities, all simply follow from its character as exchange value separated from commodities themselves and objectified (Grundrisse 146).

Money as the “measure of commodity exchange.” If commodity A and commodity B are to be exchanged, then there must be an existent measure or standard to which both A and B may be related or compared in order to determine the feasibility of exchanging A for B. This process of quantification takes place in thought as “both commodities to be exchanged are transformed … into exchange values and are thus reciprocally compared” (Grundrisse 144).

Money as the “medium of exchange” (Grundrisse 146). Money takes on a character of its own independent of the products to be exchanged. In other words, in order to obtain commodity B, we no longer need to exchange commodity A for commodity B. All that need be done is to exchange a socially determined representation, i.e., exchange value, which, as it is attached to commodities A and B, appears as the price of these commodities, for commodity B. This socially determined representation, i.e., symbol (money as it appears as coin or paper) of the price of commodity B, may be obtained by exchanging commodity A for money. Thus, at this moment money mediates exchange because money may be exchanged for commodities, or commodities may be exchanged for money.

Money as the “representative of commodities.” Money comes to represent commodities as it attains a character of its own. When this happens it is no longer necessary to think in terms of exchanging one commodity for another, i.e., exchanging commodity A for commodity B. At this moment it is simply possible to purchase either commodity A or commodity B, or both commodities A and B for that matter, with a socially determined amount of money. Or looking at this purchasing process from another point of view, it is possible to sell commodities A and B for a certain amount of money. Hence, commodities are said to have an exchange value that appears as a price in terms of a specific quantity of money. At the same time, money has an exchange value that appears as a price in terms of commodities. In short, a commodity is said to have a price that is attached to the commodity in terms of money.

Money as a “general commodity along side particular commodities” (Grundrisse 146). Thus, as money takes on a character of its own, it becomes an object, i.e., a thing-in-itself. It becomes completely separated from specific commodities while taking on the characteristics of a commodity. It is in its commodity character that money is borrowed and lent, and generates interest. Hence, money has the capacity to produce money and money qua commodity takes on the character of capital.

By virtue of its property as the general commodity in relation to all others, as the embodiment of the exchange value of the other commodities, money at the same time becomes the realized and always realizable form of capital; the form of capital’s appearance which is always valid (Grundrisse 146).

Therefore, money in its four moments appears as a process in which the exchange value of a product qua commodity “obtains a material existence separate from the commodity” and in so doing becomes a commodity itself (Grundrisse 145); money is produced not for its use value, but for its exchange value.

At the same time, certain contradictions corresponding to this fourfold development arise.

Firstly: The simple fact that the commodity exists doubly, in one aspect as a specific product whose natural form of existence ideally contains (latently contains) its exchange value, and in the other aspect as manifest exchange value (money), in which all connection with the natural form of the product is stripped away again – this double, differentiated existence must develop into a difference, and the difference into antithesis and contraction. The same contradiction between the particular nature of the commodity as product and its general nature as exchange value, which created the necessity of positing it doubly, as this particular commodity on one side and as money on the other – this contradiction between the commodity’s particular natural qualities and its general social qualities contains from the beginning the possibility that these two separated forms in which the commodity exists are not convertible into one another (Grundrisse 147).

In other words, the commodity exists qua commodity and qua money. In that money has now attained a character of its own, it exists independently of the commodity. At the same time the commodity exists independently of money. As money comes to exist independently of the commodity, the commodity is no longer necessarily exchangeable for money because, as Marx writes, “the exchangeability … is abandoned to the mercy of external conditions … which may or may not be present.” Thus, exchangeability becomes “something different from and alien to the commodity, with which it first has to be brought into equation, to which it is therefore at the beginning unequal; while the equation itself becomes dependent on external conditions, hence a matter of chance” (Grundrisse 148).

Secondly: Just as the exchange value of the commodity leads a double existence, as the particular commodity and as money, so does the act of exchange split into two mutually independent acts: exchange of commodities for money, exchange of money for commodities: purchase and sale (Grundrisse 148).

There is no necessary correspondence between purchase and sale which often appear “temporally and spatially separate” and for this reason their “immediate identity ceases.”

Thirdly: With the separation of purchase and sale, with the splitting of exchange into two spatially and temporally independent acts there further emerges another new relation.

Just as exchange itself splits apart into two mutually independent cts, so does the overall movement of exchange itself become separate from the exchanges, the producers of commodities. Exchange for the sake of exchange separates off from exchange for the sake of commodities (Grundrisse 148).

Exchange for the sake of exchange, according to Marx, is commerce. The purpose of exchange is the object for which the exchange exists, but “the purpose of commerce is not consumption, directly, but the gaining of money, of exchange values” (Grundrisse, 149).

Fourthly: Just as exchange value, in the form of money, takes its place as the general commodity alongside all particular commodities, so does exchange value as money therefore at the same time take its place as a particular commodity (since it has a particular existence) alongside all other commodities (Grundrisse 150).

In other words, money, as it comes to exist independently of commodities, becomes a commodity itself. On the one hand, money is a commodity just like any other commodity. But on the other hand, it is different from other commodities: “it is not only the general exchange value, but at the same time a particular exchange value alongside other exchange values” (Grundrisse 151). Therefore, money exists in contradiction with itself. But “money does not create these antitheses and contradictions; it is, rather, the development of these contradictions and antitheses which creates the seemingly transcendental power of money” (Grundrisse 146).

In conclusion, money is a specific moment of circulation which in turn is “a specific moment of exchange, or … exchange regarded in its totality” (Grundrisse 98). From the point of view of production, we see that production no longer produces products for consumption, i.e., products that are to be complete in consumption, but rather, production produces exchange values. Consumption seems to slide out of the picture. Production comes to be determined by exchange values as money which first appeared as a means of exchange comes to be the end of exchange (Grundrisse 146 and 151).




[1]See, for example, Edmund L. Andrews, “Greenspan Concedes Error on Regulation,” New York Times, , October 23, 2008 (http://www.nytimes.com/2008/10/24/business/economy/24panel.html).

Almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.

“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he [Greenspan] told the House Committee on Oversight and Government Reform.

[2] See Brian Naylor’s October 24, 2008 interview with Alan Greenspan, “Greenspan Admits Free Market Ideology Flawed,” in which Greenspan said, “We are in the midst of a once-in-century credit tsunami. Central banks and governments are being required to take unprecedented measures.” (Transcript at http://www.npr.org/templates/story/story.php?storyId=96070766).

[3] Edmund L. Andrews, notes “despite his [Greenspan’s] chagrin over the mortgage mess, the former Fed chairman proposed only one specific regulation: that companies selling mortgage-backed securities be required to hold a significant number themselves.” At the same time in the same article, Greenspan expresses his continued belief in the market: “Whatever regulatory changes are made, they will pale in comparison to the change already evident in today’s markets … . Those markets for an indefinite future will be far more restrained than would any currently contemplated new regulatory regime.” “Greenspan Concedes Error on Regulation,” New York Times, October 23, 2008 (http://www.nytimes.com/2008/10/24/business/economy/24panel.html).  

[4] Mary Rawson. “Review of Unequal Freedoms: The Global Market as an Ethical System, by John McMurtry, Toronto: Garamond Press, (1998). Peace Magazine 15, 3, p. 31 (http://www.peacemagazine.org/archive/v15n3;31.htm).

[5] John McMurtry. “Myths of the Global Market.” New Internationalist, issue 301 (June 2007) (http://www.newint.org/columns/essays/2007/06/01/essay/).

[6] John McMurtry. “Myths of the Global Market.” New Internationalist, issue 301 (June 2007) (http://www.newint.org/columns/essays/2007/06/01/essay/). One cannot help thinking of the recent United State Supreme Court ruling that gave corporations the right to contribute unlimited funds to political campaigns; thus the pseudo-democracy has officially become a plutocracy.

[7] George Soros. “The Way Forward,” Financial Times. October 30, 2009. (http://www.ft.com/cms/668e074a-bf24-11de-a696-00144feab49a.html?_i_referralObject=11135588&fromSearch=n).

[8] Walid el-Gabry. “Soros Says Crisis Signals End of a Free-Market Model (Update 2),” Bloomberg.com, (February 23, 2009). (http://www.bloomber.com/apps/news?pid=20670001&sid=aI1pruXkjr0s).

[9] George Soros. “The Way Forward,” Financial Times. October 30, 2009. (http://www.ft.com/cms/668e074a-bf24-11de-a696-00144feab49a.html?_i_referralObject=11135588&fromSearch=n). “I regret to tell you that the recovery is liable to run out of steam and may even be followed by a ‘double-dip’ although I am not sure whether it will occur in 2010 or 2011.”

[10] George Soros. “The Way Forward,” Financial Times. October 30, 2009. (http://www.ft.com/cms/668e074a-bf24-11de-a696-00144feab49a.html?_i_referralObject=11135588&fromSearch=n).

[11] Sean O’Grady. “The Money Man: Super-economist Joseph Stiglitz on How to Fix the Recession,” The Independent, (February 9, 2010) (Http://license.icopyright.net/user/viewFreeUse.act?fuid-NzA3MDM4NQ%3D%3D).

[12] John Lanchester, “Bankocracy,” London Review of Books, 31, 21 (November 5, 2009): 35-36. (http://www.lrb.co.uk/v31/n21/john-lanchester/bankocracy/print).

[13] John Lanchester, “Bankocracy,” London Review of Books, 31, 21 (November 5, 2009): 35-36. (http://www.lrb.co.uk/v31/n21/john-lanchester/bankocracy/print). Lanchester cites Merkel comments after her fall, 2009, meeting with the French president Nicolas Sarkozy.

[14] V. I. Lenin, Imperialism, the Highest Stage of Capitalism in: Selected Works, Moscow: Progress Publishers, 1963. (http://www.marxists.org/archive/lenin/works/1916/imp-hsc/).

[15]Karl Marx, 1973. Grundrisse: Foundations of the Critique of Political Economy, translated with a forward by Martin Nicolaus, New York: Vintage Books. For the particulars regarding the writing and publication of the Grundrisse, see Martin Nicolaus, “Forward,” 7-66.

[16]Martin Nicolaus, 1973. “Forward,” in: Karl Marx, Grundrisse, n. 1, p. 7. Nicolaus reports that a limited edition consisting of two volumes (one published in 1939, the other, in 1941) was published in the twentieth century.

[17]Marx, 1973. The General Relation of Production to Distribution, Exchange, Consumption. In Grundrisse, 88-100.

[18]Marx, 1973. The Method of Political Economy. In Grundrisse, 100?08.

[19]Marx, 1973. Grundrisse, 101.

[20]Marx, 1973. Grundrisse, 87. Compare Capital, I, pp. 177-78.

[21]Marx, 1973. Grundrisse, 87. In Capital, I, Marx calls these “the elementary factors of the labour process” (Capital, I, p. 178).

[22]Since production (i.e. bourgeois production) involves property, since property assumes a distinction between “mine” and “thine,” and since there is a need for a mechanism whereby “mine” can be made “thine,” according to Marx, bourgeois economists have assumed that the introduction of property demands certain specific legislative and juridical frameworks to protect private property. But “history,” Marx notes, “shows common property (e.g.[,] in India, among the Slavs, the early Celts, etc.) to be the more original form, a form which long continues to play a significant role in the shape of communal property” (Grundrisse, 88; italics added.) Furthermore, Marx argues, “every form of production creates its own legal relations, form of government, etc.” (Grundrisse, 88). “All the bourgeois economists are aware of,” he writes,

is that production can be carried on better under the modern police than[,] e.g.[,] on the principle of might makes right. They forget only that his principle is also a legal relation, and that the right of the stronger prevails in their “constitutional republics” as well, only in another form (Grundrisse, 88).

[23]Marx, 1973. Grundrisse, 90-94.

[24]Marx, 1973. Grundrisse, 93.

(1) Immediate identity: Production is consumption, consumption is production. Consumptive production. Productive consumption. The political economists call both productive consumption. But then make a further distinction. The first figures as reproduction, the second as productive consumption. All investigations into the first concern productive or unproductive labour; investigations into the second concern productive or non-productive consumption.

[25]Marx, 1973. Grundrisse, 93.

(2) [In the sense] that one appears as a means for the other, is mediated by the other: this is expressed as their mutual dependence; a movement which relates them to one another, makes them appear indispensable to one another, but still leaves them external to each other. Production creates the material, as external object, for consumption; consumption creates the need, as internal object, as aim, for production. Without production not consumption; without consumption no production. [This identity] figures in economics in many different forms.

[26]Marx, 1973. Grundrisse, 93.

(3) Not only is production immediately consumption and consumption immediately production, not only is production a means for consumption and consumption the aim of production, i.e. each supplies the other its object (production supplying the external object of consumption, consumption the conceived object of production); but also , each of them, apart from being immediately the other, and apart from mediating the other, in addition to this creates the other in completing itself, and creates itself as the other. Consumption accomplishes the act of production only in completing the product as product by dissolving it, by consuming its independently material form, by raising the inclination developed in the first act of production, through the need for repetition, to its finished form; it is thus not only the concluding act in which the product becomes product, but also production produces consumption by creating the specific manner of consumption; and, further, by creating the stimulus of consumption, the ability to consume, as a need. This last identity, as determined under (3), [is] frequently cited in economics in the relation of demand and supply, of objects and needs, of socially created and natural needs.

[27]Marx, 1973. Grundrisse, 93.

[28]Marx, 1973. Grundrisse, 93.

[29]Marx, 1973. Grundrisse, 94-98.

[30]Marx, 1973. Grundrisse, 98-100.