It’s really aggravating when someone can cogently express points that one has gnawed at inchoately for weeks. John Kay’s column in the Financial Times – The capitalists sold the mills and bought all our futures – is one such aggravation, and is superb.
Kay deals elegantly with Thomas Piketty’s analysis and the definition and calculation of wealth, or patrimoineas defined in the French edition of his book, Capital in the 21st Century. I have felt convinced that Piketty, like a good accountant, has underestimated the vast wealth of today’s capitalists, while he has conscientiously (“heroically” writes Kay) totted up all the tangible wealth that there is to count. But wealth, surely, is far more than just the ownership of tangible assets. It sure is, explains Kay:
If you want to measure the capital possessed by a nation, there are two ways of doing it. One is to travel the length and breadth of the country counting the houses, the bridges, the factories, shops and offices, and adding up their total value. The other is to knock on doors and ask people how rich they are. ….So there are two different concepts of national capital: physical assets and household wealth.”
Kay then explains that Apple, for example, has tangible wealth made up of “physical assets worth only about $15bn (and a $150bn mountain of cash).” (Is Apples’s ‘cash’ tangible?) However it has a market capitalisation of $500bn – a value based on “the anticipation of future profits.” In other words, its worth, its wealth, is not just those tangible $15bn worth of computers, phones, stores, tables, Apple t-shirts etc. and $150bn of cash. The company’s real worth is the anticipation of future rents that Apple (like Microsoft) will extract from customers, by virtue of their oligopolistic position in the computer operating system market. And that position has been obtained not just by technological advances or skilful salesmanship, but by virtue of great political power.
But the saving grace (if there is grace to be saved here) of both Apple and Microsoft is this: they make tangible things that can be bought and sold from stores, and that have use value – even while thousands of Congolese are killed in the struggle for the ‘conflict mineral’ Coltan, used in the iPhone; and even while these companies pour dozens of metric tonnes of toxic emissions into the atmosphere.
Bu what of the less visible men and women that sell debt? Or insurance? Or any other asset based on ‘financial engineering’ and that works to ransack and exploit “all our futures”? These are intangible ‘assets’ created without engaging either the Land or Labour (in the broadest senses). They are invisible assets that seek to effortlessly drain a stream of revenue – many decades into the future – from those who work for wages or incomes, or who pay taxes.
The individuals and corporations that own these assets exercise vast power – political, economic, social and market power. That dimension of their “wealth” cannot be counted and taxed, as Piketty proposes, but should never be ignored. However, like the slave-owners of old, today’s oligopolists face challenges too.
By effectively cannibalising the body that is the real economy – where people struggle to find decent, well-paid work, to generate profits and income and pay taxes with which debts and premiums can be paid – avaricious oligopolists threaten to kill the golden goose. They resemble nothing more than nineteenth century American slave-owners, who in efforts to increase competitiveness and save on costs, were tempted to starve their slaves almost to death. So surely, the day grows nearer when creditor-driven ‘globalisation’ first shrinks and then dries up peoples’ income, and the tax revenues needed to repay future debts? The logic of today’s capitalist system will then break down, as the system of slavery in the US eventually broke down.
The question John Kay does not address in his column is this: when will that day come? And what system will replace it?
This article first appeared at Prime Economics
Image credit: Autumn Cannibalism by Salvador Dali
Ann Petifor ways at the end of her piece “The question John Kay does not address in his column is this: when will that day come? And what system will replace it?”.
Should she not therefore have spent some effort to deal with these questions herself?
A heart breaking report on the BBC today that there are an estimated 13,000 slaves in the UK. Wish they had allowed comments and I would have said and yes and 30m wage slaves – working people like the billions around the World whose labour creates the wealth and makes societies work. The best thing I did in recent years was to attend a lecture by Dr Ha Joon Chang from Cambridge who said we should all read the financial pages of the newspapers to become economically aware citizens and I have done this ever since reading them in Fridays Guardian which I recommend- sometimes I read the free Times in some pubs but when you read about billions of profits I always think look what working people have achieved collectively before the capitalists legally nicked our surplus labour. I love the New Left Review and in this Wolgang Streeck argues that the rich and powerful haven’t a clue what to do about the global financial crisis and quantitative easing has only put off the crisis for a few years. I would also argue Neo-Liberalism has painted itself into a corner with its drive for cheap labour which restricts the ability of working people to purchase commodities. The solutions are global – global living wages, more democratic public ownership by country, taxing the rich, windfall taxes on big business to get our share of the wealth back – long-term productive investment to meet human global need – I always use a simple example – we could make toilets for the 2.5 billion in he World that don’t have access to them. I always like Ann’s posts but a minor point probably better not to use a picture of Dali – I think his work is rubbish – artists become famous once they get a name but I say this not because of my subjective taste but because he was pro-Franco.