[PEN-L:8274] RE: Interest rates
At 06:26 PM 1/16/97 -0800, Doug Henwood wrote: At 6:05 PM 1/16/97, DICKENS, EDWIN (201)-408-3024 wrote: And to my mind the theory of interest rate determination is crucial to filling in that lacunae. OK, Tom - so what's the Dickens theory of interest rates? Doug I am sorry that this thread seems to be petering out (and that I missed some of it). I think we were touching on two important points. 1) Interest rates are determined by a struggle, not a "market" Since interest income derives from the division of surplus value (OK , profits for the so inclined), the interest rate emerges from the struggle between financial and "productive" (OK industrial, if you wish) capitals. This struggle is hardly the same as saying "supply and demand" in some sterile market context (not the way Marx thinks). The financial vs industrial face off is a starting point, not the ending point. I honestly don't see why Edwin Dickens chooses to see this point as a "nostrum" about supply and demand. Just because the starting point is simple does not make less profound. Marx is clear that the complex struggle that produces an interest rate can take place in three spheres: the money as a commodity sphere; the "productive" sphere, and most visibly in the interface between the first two (bank loans, etc). But whether its a three ring circus or not, this starting point does go directly directly to the "political" (socio-economic?) writings of Marx that Dickens says he wants to see linked . (In fact, Doug and Patrick illustrate the logical next step.) OK, Marx did not give general rules on how to link them. But that is simply because each socio-economic formation is specific and so there is no deterministic holy grail. While recognizing that these struggles are case specific, that in no way makes them less important or represents a lacunae. It is also true that Marx also didn't give many concrete examples in his own "political" writings - but so what. Thats what bright PhD students are for :) . 2) As Patrick Bond and Doug Henwood point out, maybe we used to be able to say that: the "financial circuit of capital vs. productive curcuit" was the same as saying in shorthand "Banks vs. Industry". The roles in the underlying economic process corresponded closely to the institutional entities. Hilferding's analysis (Banks structure Industry) may well have well been true in Germany *of his time*. Likewise, the analysis of the Japanese "overloan system" (large manufacturers raise money from the Bank of Japan through the city bank system, soldering open the financial/industrial circuit which then also permits enormous bubbles) today seems prescient. But as Doug points out, one of the major changes of our times - in North America - is the breakdown of the arrangement that financial and industrial institutions would each stick to their historical sphere, limiting their struggle to the interface between them. The one ring circus in now a full fledged three ring circus. But its not clear to me where this struggle will lead. If I understand Doug's brief comment right, he sees intermarriage as the outcome. Already? And on whose terms? Clearly the financial instructions have had the upper hand. It started with an increased share of surplus value from the "money as a commodity" sphere (going back to the petro-dollar days); was fed by larger and larger extractions of surplus value taken from the govt. sphere (per Doug on the bond mkt). The resultant political leverage has permitted them to: -have a preponderant voice in macro-policy, sustaining the advantage in the interface with the productive sphere. -gain a near stranglehold over intl eco policy (particularly for developing and ex-socialist countries) and exch. rate policy. -and to engage in breathtaking raids on the "productive" sphere, by commodifying control over industrial assets. Still, there are limits - i.e. I don't see too many financial institutions trying to get their funds into the actual curcuit of production with Hilferding like results. Doesn't this leave two possible outcomes (at this level of analysis; obviously there are many other possibilities when additional factors are considered: 1) it may be that the industrial entities will shift so much of their funds into the "money as commodity" sphere that they be indistinguishable from the financial entities (Doug's and Blairs leanings) and disinvestment in productive capital accelerates. 2) the cumulative effect of the effort in the productive sphere to restructure capital/wage relations in the productive curcuit really pays off and the financial/industrial pendulum swings the other way. Paul Altesman
[PEN-L:8274] RE: Interest rates
At 06:26 PM 1/16/97 -0800, Doug Henwood wrote: At 6:05 PM 1/16/97, DICKENS, EDWIN (201)-408-3024 wrote: And to my mind the theory of interest rate determination is crucial to filling in that lacunae. OK, Tom - so what's the Dickens theory of interest rates? Doug I am sorry that this thread seems to be petering out (and that I missed some of it). I think we were touching on two important points. 1) Interest rates are determined by a struggle, not a "market" Since interest income derives from the division of surplus value (OK , profits for the so inclined), the interest rate emerges from the struggle between financial and "productive" (OK industrial, if you wish) capitals. This struggle is hardly the same as saying "supply and demand" in some sterile market context (not the way Marx thinks). The financial vs industrial face off is a starting point, not the ending point. I honestly don't see why Edwin Dickens chooses to see this point as a "nostrum" about supply and demand. Just because the starting point is simple does not make less profound. Marx is clear that the complex struggle that produces an interest rate can take place in three spheres: the money as a commodity sphere; the "productive" sphere, and most visibly in the interface between the first two (bank loans, etc). But whether its a three ring circus or not, this starting point does go directly directly to the "political" (socio-economic?) writings of Marx that Dickens says he wants to see linked . (In fact, Doug and Patrick illustrate the logical next step.) OK, Marx did not give general rules on how to link them. But that is simply because each socio-economic formation is specific and so there is no deterministic holy grail. While recognizing that these struggles are case specific, that in no way makes them less important or represents a lacunae. It is also true that Marx also didn't give many concrete examples in his own "political" writings - but so what. Thats what bright PhD students are for :) . 2) As Patrick Bond and Doug Henwood point out, maybe we used to be able to say that: the "financial circuit of capital vs. productive curcuit" was the same as saying in shorthand "Banks vs. Industry". The roles in the underlying economic process corresponded closely to the institutional entities. Hilferding's analysis (Banks structure Industry) may well have well been true in Germany *of his time*. Likewise, the analysis of the Japanese "overloan system" (large manufacturers raise money from the Bank of Japan through the city bank system, soldering open the financial/industrial circuit which then also permits enormous bubbles) today seems prescient. But as Doug points out, one of the major changes of our times - in North America - is the breakdown of the arrangement that financial and industrial institutions would each stick to their historical sphere, limiting their struggle to the interface between them. The one ring circus in now a full fledged three ring circus. But its not clear to me where this struggle will lead. If I understand Doug's brief comment right, he sees intermarriage as the outcome. Already? And on whose terms? Clearly the financial instructions have had the upper hand. It started with an increased share of surplus value from the "money as a commodity" sphere (going back to the petro-dollar days); was fed by larger and larger extractions of surplus value taken from the govt. sphere (per Doug on the bond mkt). The resultant political leverage has permitted them to: -have a preponderant voice in macro-policy, sustaining the advantage in the interface with the productive sphere. -gain a near stranglehold over intl eco policy (particularly for developing and ex-socialist countries) and exch. rate policy. -and to engage in breathtaking raids on the "productive" sphere, by commodifying control over industrial assets. Still, there are limits - i.e. I don't see too many financial institutions trying to get their funds into the actual curcuit of production with Hilferding like results. Doesn't this leave two possible outcomes (at this level of analysis; obviously there are many other possibilities when additional factors are considered: 1) it may be that the industrial entities will shift so much of their funds into the "money as commodity" sphere that they be indistinguishable from the financial entities (Doug's and Blairs leanings) and disinvestment in productive capital accelerates. 2) the cumulative effect of the effort in the productive sphere to restructure capital/wage relations in the productive curcuit really pays off and the financial/industrial pendulum swings the other way. Paul Altesman
