Why Capital is Overvalued

[Rakesh Bhandari]

Not only does the credit system make the overvaluation of capital possible,
it is the crucial underpinning for the rapid development of the productive
forces. Hayek would sacrifice that impetuous development for putting credit
on a leash. Schumpeter was not that much of a reactionary; indeed he
realized that full employment equilibrium could only be realized if credit
were overextended and capital overvalued. But he had some sense of the real
contradictions of capitalist production.

At any rate, we need to study the credit system to develop a theoretical
answer to Max's most important query.

Now in the case of America, 1999, there is tremendous overvaluation because
capital has no elsewhere to go, driving asset prices up--as Moseley has
demonstrated in his contribution to the latest *Capital and Class*.

The main point in the present context is that "assets" are overvalued
because of the labor theory of value. To say that capital flows here
because of unlimited investment possibilities flatly contradicts and is
incompatible with any labour theory of value. Investment of capital demands
surplus values. But surplus vlaue is labour and in any given country labour
is of a given magnitude. From a given working population only a definite
mass of surplus value is extortable. To suppose that capital can expand
without limits--the supposition functionally built into the 9500 Dow--is to
suppose that surplus value can likewise expand without limits, and thus
independently of the size of the working population. This means that
surplus value does not depend on labor.

See Grossmann's magnum opus, p. 181.

yours, rakesh