Reply to Enrique's query

Rakesh Bhandari bhandari at phoenix.Princeton.EDU
Thu Mar 4 22:24:09 PST 1999


In the quote that I submitted out of context from the website www.geocities.com/CapitolHill/Lobby/2379/liquid.htm it seems to me that Goldner is talking about the lines of credit that firms are able to access even when they are sitting on mountains of 'antiquated' physical capital. If that capital is devalorised and the banks busted as a result, the state then socializes the losses. The point seems similar to Brenner's analysis of why excess capacity is not easily liquidated and similar to Doug's comments on the socialisation of losses in his book.

Maybe this further excerpt from the web site clarifies ________________________ "Valorization", on the surface, means that individual capitalists "throw" money M into investment with the expectation that, over time, it will return to them as expanded money M'. As long as adequate surplus value is available to sustain expected rates of return as profit, interest and ground rent, "valorization" continues. When it is not available, there is crisis, and paper claims to wealth are destroyed or devalued. When a new equilibrium is established between profit, interest and ground rent on one side, and available surplus value on the other-- whatever the interim material cost to society, in depression, war, immiseration, disease, shortened longevity-- a new cycle can begin. "On the surface", then, a crisis such as the current one occurs because the totality of existing claims to profit, interest and ground rent cannot be "valorized" through the existing available surplus value: they are FICTIONS which must be destroyed by "devalorization". That is what, in a first approximation, a "world financial meltdown" entails.

We see these fictions-- ficticious capital-- today in the vast "non-operating assets" of the Japanese banks, the unpayable external debts of Thailand, Indonesia, Russia, South Korea, Mexico, and Brazil; in the suddenly insolvent "hedge funds" such as Long Term Capital Management, whose liquidation would have reverberated through more than $1 trillion in assets; in still unliquidated real estate assets in Japan, China, Hong Kong, the U.S. and Europe; in the multi-trillion dollar holdings of U.S. Treasury bills, to a large extent by foreigners; and the servicing of the U.S. government debt, Third World debt, corporate debt, and consumer debt at every level of society. We see them, finally, (and perhaps in the long run most importantly) in fixed capital plant rendered worthless by technical innovation or by vast overcapacity in its sector. All these claims on wealth must be valorized through available surplus value or destroyed (and trillions have already been destroyed). But devalorization is not merely a brutal, anarchic and wasteful accounting procedure: capitalists attempt in every possible way to foist the costs of maintaining threatened existing values onto the working class in an attack on the total social wage. Keynes long ago remarked that workers would more willingly accept an erosion of pay through inflation and taxation than a direct pay cut from their employer, and from the 1960's onward the system applied this insight with a vengeance. When, for example, the U.S. government "nationalizes" bad bank loans to Brazil and Mexico (as it did in 1982), or the tens of billions of losses of the savings and loan debacle (as it did in 1991), all working people are taxed to pay off these new additions to the national debt, as they are taxed to pay the 15% of government expenditure which now goes merely to servicing that debt. When the IMF "rescue" team tells Indonesia to engage in a national fire sale, its only concern is that Indonesia keep up payments on its debts, not what will happen to ordinary Indonesians in the process.



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