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"As Morton points out, in the age of ecology there is no clean transaction you can walk away from. The fact that everything is connected isn’t something you can turn off when it’s inconvenient. There’s always something still owed, a remaining debt. Morton describes this as the viscous quality of the hyperobject, the more you know about it the more it sticks to you. And as Graeber shows, capital fails to capture the full extent of a transaction because it doesn’t fully represent the object. In the social context of the transaction, there’s always a remainder, the market never fully clears. At the level of capital and pricing, the numbers always add up, but the object of the transaction is broadcasting on multiple frequencies. And if you hold the concept of capital in abeyance for just a moment, you’ll find there were many more parties to the transaction than you had assumed, and if you listen closely, you can hear that the non-human has continued its relationship with you. "
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One of the laugh lines in Morton’s talk is “anything you can do I can do meta.” The idea behind this quip is to characterize the move to “undermine,” or in Graham Harman’s phrase, to “overmine” an opponent’s position. Either some atom is the basic building block to which all things can be reduced; or some system is the foundation from which all things extend. Generally what is taught in the Academy are the particulars around these atoms and systems. In his talk, Morton reviews the historical progression of these “particulars” in an effort to get to the present ecological moment. The strange thing about Morton’s talk is that he’s not trying to lay out a new complex conceptual framework that wraps up everything that precedes it. Instead he brings up a series of examples of the rift between appearance and essence—the remainder that each of these conceptual transactions always generates as it tries to snugly fit around the contours of the real. For students trained in memorizing and recapitulating particulars, the process of discarding conceptual frameworks to see more clearly must seem counter intuitive. In a line of thought that operates in a space without a center or edges, sometimes it’s difficult to know when it’s arrived at it’s topic. And further, once there, what is the listener meant to take away? What kind of transaction is this?
"Interchangeability of parts breaks the coupling between scaling and manufacturing capacity by substituting supply-chain limits for manufacturing limits. For a rifle, you can build up a stockpile of spare parts in peace time, and deliver an uninterrupted supply of parts to match the breakdown rate. There is no need to predict which part might break down in order to meaningfully anticipate and prepare. You can also distribute production optimally (close to raw material sources or low-cost talent for instance), since there is no need to locate craftsmen near the point-of-use.
So when interchangeability was finally achieved and had diffused through the economy as standard practice (a process that took about 65 years), demand-management complexity moved to the supply chain, and most problems could be solved by distributing inventories appropriately."
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Both Moore’s Law and Hall’s Law in the speculative form that I have proposed, are exponential trajectories. These trajectories generally emerge when some sort of runaway positive-feedback process is unleashed, through the breaking of some boundary constraint (the term break boundary is due to Marshall McLuhan).
The positive-feedback part is critical (if you know some math, you can guess why: a “doubling” law in a difference/differential equation form has to be at least a first-order process; something like compound interest, if you don’t know what the math terms mean).
Loosely speaking, this implies a technological process that can be applied to itself, improving it. Better machines with interchangeable parts also means better machine tools that are themselves made with interchangeable parts and therefore can run continuously at higher speeds, with low downtime. Computers can be used to design more complex computers. This is not true of all technological processes. Better plastics do not improve your ability to make new plastics, for instance, since they do not play much of a role in their own manufacturing processes.
This is the inner, technological positive-feedback loop (think of an entire technology sector engaging in a sort of 10,000 hours of deliberate practice; a major sign is that the most talented people turn to tool-building: Blanchard and Hall for Hall’s Law, people like the late Dennis Ritchie and Linus Torvalds for Moore’s Law).
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But the technological positive-feedback loop requires an outer financial positive-feedback loop around it to fuel it. You need conditions where the second million is easier to make than the first million.
This means tycoons who spot some vast new opportunity and play land-grabbing games on a massive scale.
Both Hall’s Law and Moore’s Law led to wholesale management and financial innovation by precisely such new tycoons.
For Hall’s Law, the process started with Cornelius Vanderbilt, the hero of A. J. Stiles’ excellent The First Tycoon, who figured out how to tame the strange new beast, the post-East-India-Company corporation and in the process sidelined old money.
It is revealing that Vanderbilt was blooded in business through a major legal battle for steamboat water rights: Gibbons vs. Ogden (1824) that helped define the relationship of corporations to the rest of society. From there, he went from strength to strength, inventing new business and financial thinking along the way. Only in his old age did he finally meet his match: Jay Gould, who would go on to become the archetypal Robber Baron, taking over most of Vanderbilt’s empire from his not-so-talented children.
Vanderbilt was something of a transition figure. He straddled both management and finance, and old and new economies: he was a cross between an old-economy merchant-pirate in the Robert Clive mold (he ran a small war in Nicaragua for instance) and a new-economy corporate tycoon. He transcended the categories that he helped solidify, which helped define the next generation of tycoons.
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"Until the 2000s, in every economic expansion, labor got the bulk of the increase in GDP, typically over 60%, via more jobs and increased pay. Post 2000, there was an astonishing change, a shift from labor share, which fell to below 30%, and a massive increase in corporate profits. In other words, there was huge shift away from labor to capital. This has little to do with globalization and much to do with the weakened bargaining power of US workers. As much as it has become fashionable to look down on unions (and their corruption and short-sightedness hasn’t helped), having well paid blue collar workers helped the negotiating position of non-unionized white collar employees."
"Marcuse was powerfully struck by the fact that in a mature capitalist society, workers seem to internalize psychologically the demands of their bosses, treating the repression of their natural instincts in the factory or shop or office as signs of virtue rather than as painful constraints necessitated by the fact that they have been deprived of access to and ownership of the means of production."
"But the bigger issue is what will happen to debt? Credit is the lifeblood of any economy, and blind governments have allowed credit itself to be debauched, all in the name of the absurd ideology of “free markets”. And the absurd notion that capital (that is agreements) is scarce."
"Can capitalism work in the interests of working people? Mervyn King has, inadvertently, revived this old question*. Last night, he pointed to falling real wages and said:
The squeeze in living standards is the inevitable price to pay for the financial crisis and subsequent rebalancing of the world and UK economies.
But this just raises the question: why must the squeeze be upon workers in the form of falling wages, rather than capitalists in the form of lower profits? As Duncan says, the question of who pays that bill is a political choice."
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The statist answer is to engineer a higher share of wages in GDP. The hope is that this would increase aggregate demand, not just by raising consumer spending, but by encouraging investment insofar as it raises demand expectations.
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There is, though, a non-statist possibility - to transfer ownership from capitalists to workers. This would have two virtues.
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Review of:
The Enigma of Capital: And the Crises of Capitalism by David Harvey
A Companion to Marx’s ‘Capital’ by David Harvey
Plus comments on The Limits of Capital
in list: Economic Crisis
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Over recent decades, the landmarks of Marxian economic thinking include Ernest Mandel’s Late Capitalism (1972), David Harvey’s Limits to Capital (1982), Giovanni Arrighi’s Long 20th Century (1994) and Robert Brenner’s Economics of Global Turbulence (2006), all expressly concerned with the grinding tectonics and punctual quakes of capitalist crisis. Yet little trace of this literature, by Marx or his successors, has surfaced even among the more open-minded practitioners of what might be called the bourgeois theorisation of the current crisis.
"Karl Marx was very interested in capital -- an abstract concept referring to society's wealth. And he was interested in the persons who owned and controlled capital -- the capitalists. But the primary focus of his lifelong analysis was upon one particular species of capital, what he referred to as "industrial capital." This is the form of wealth involved in the production process -- factories, mines, railroads. He had less to say about the aspect of capital that designated the exchange process -- what he referred to as "merchant capital" and finance capital. This selective focus reflected one of Marx's main historical opinions -- the idea that history moves forward through the development of the "productive forces," and that industrial capitalists (as well as the industrial proletariat) are the agents of this kind of economic change. "
The Big Lie of the current economic debate is that we just went through a “hundred year flood”–that this was all caused by the Sub Prime mortgage crisis. But the problems of stagnation and capacity utilization have been increasing since 1975 when overall capacity utilization was at 86%. It hasn’t been above 82% since 1995 and today it is below 77%. But the larger problem has been that we have misallocated our capital since the problems of economic stagnation first raised their head in the mid 1970’s.
in list: Economic Crisis
Long essay on banking and capital intermediation.
in list: Economic Crisis
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So how does the financial sector seem to offer risk-free assets against risky projects? I think "constructive ambiguity" is the right phrase. The government provides subsidies in the form of literally priceless deposit and liquidity backstops, but those are explicitly limited. Banks work to diligently to increase both the level of insurance and degree to which assets are perceived to be insured by becoming so large that social costs of a bank default on even notionally risky assets are thought to exceed the costs to government of paying out on insurance policies to which it never agreed. Even a very careful observer cannot tell a priori whether many assets offered are genuinely riskless or not, that is to what degree the risk-free status of bank assets is due to subsidy, and to what degree to subterfuge. But there is an ingenious tinkerbell aspect to the risk status of bank assets: If, with a bit of subterfuge, risky assets can be sold as riskless assets, then the social costs of default rise, since asset holders will not have privately managed the risk that the asset might fail. The increase in social costs created by a mischaracterization of a risky asset as riskless, however, alters the likelihood that an asset will be de facto insured. There is a game theoretic equilibrium, that works to the advantage of intermediaries and their customers on both sides of the funding stream, whereby banks offer assets in large quantities as though they are risk-free, and investors accept and treat those assets as risk-free, and by believing together in what is formally not true, they create costs to the sovereign so large if it is not true that the sovereign makes it true. This is an equilibrium, a predictable outcome, not an aberration. And it does happen all the time.
Banking-as-we-know-it is just a form of publicly subsidized private capital formation. I have no problem with subsidizing private capital formation, even with ceding much of the upside to entrepreneurial investors while taxpayers absorb much of the downside when things go wrong. But once we acknowledge the very large public subsidy in banking, it becomes possible to acknowledge other, perhaps less disaster-prone arrangements by which a nation might encourage private capital formation at lower social and financial cost.
in list: Economic Crisis
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