Floyd Norris: Has capital lost clout in world?
http://www.iht.com/articles/2005/03/24/business/norris25.html
This analysis in the International Herald Tribune, is in my opinion fully compatible with a marxist analysis.
He correctly points out
"Why is there too much capital? One answer is that central banks reacted to the bursting of the technology bubble by cutting interest rates by too much for too long. The resulting liquidity might in other times have sent inflation soaring"
His explanation however is that what prevented it from being inflationary is the great increase in Chinese productivity, which has a global impact.
I would however stress that this abundance of cheap liquidity by central banks, was in fact a very powerful Keynesian type counter-cyclical maintenance of purchasing power and it avoided having an open inflationary impact because it maintained the circulation of goods and services in the economies of the metropolitan countries at a far higher level than would have been the case if the capitalist cycle had been allowed to run its course and produce the financial and then the economic crisis that would otherwise have occurred.
But on a world scale what happened was a proportional discounting and therefore *destruction* of the exchange value of existing capital by the dilution of total world capital by the creation of cheap credit by the central banks.
This has maintained the circulation of commodities and commodity services at a global level at the price of discounting old capital by stealth.
This means that globally the oversupply of capital has exerted itself once again, but in a new form (remember that in classical dogmatic interpretations of marxist economics, financial crises always start with an oversupply of capital - relative to the purchasing power of the masses - leading to a drastic fall in the rate of profit, leading to a scarcity of credit for new capital, and a general economic crisis that in turn leads to an intensified collapse of the exchange value of existing capital.Remember that the marxist analysis of unmodified crisis is that the capitalist system recovers from them only by a destruction of a proportion of existing capital. This is what is happening now through the hidden inflation of total global exchange value through the cheap credit policies of central banks.)
*Within* the now integrated global economy, there are important shifts between different capitals and different economies. The USA in particular has bought the illusion of consumer prosperity while considerably weakening the position of the dollar as a vast mass of capital in contrast to the Chinse renminbi.
The article by Floyd Norris does not make any mention of the interesting phenomenon certainly in the USA and the UK when the government overspent in order to maintain circulation of the economy, of the sharp rise in property values, as a large section of the population with some savings switched from shares to property as a store of value.
So the capitalist system is once again reproducting itself, but now on a more integrated world level than every before, and with the help of Keyesian counter-cyclical policies.
The marxian law of value continues to rule in its dialectical way!
We must merely try to lay bear what is happening before our very eyes, and add a little class struggle.
Chris Burford London economic autodidact.
