[S4 E08] New
In this episode of David Harvey's Anti-Capitalist Chronicles, Prof. Harvey offers his perspective on two questions being debated in leftist circles: are we entering a new kind of capitalism? Is the current capitalism a type of new feudalism? In order to approach these questions, Harvey looks to capitalism’s past and present—at the rentier class, evolving roles and relationships between industrial, market, and finance capitalists, the creation of the stock market, monopsonies, and more. Capitalism is in constant flux and always evolving. Instead of wondering if we are entering a new feudalism or not, Harvey argues we must analyze the current, unique conditions and then consider how we can be anti-capitalist towards this contemporary type of capitalism.
Transcript has been edited for clarity
This is David Harvey, and you're listening to the Anti-Capitalist Chronicles, a podcast that looks at capitalism through a Marxist lens. This podcast is made possible by Democracy At Work.
There's an interesting debate going on in left circles around the idea that capitalism is no longer what it once was, and that we are in a new kind of capitalism. There's a tendency to talk about this as the “New Feudalism,” that the feudal world is being resurrected. It's a strange debate because it's all about the realm of ideas and what categories we superimpose upon the world. My own tendency is to not get engaged in that, but I'll get engaged in it at the end of an analysis rather than at the very outset. I don't want to say that I'm in favor of this “neo-feudalistic” capitalism which seems to be emerging, because what we really need to do is to start with the realities which are around us, and to recognize that there are certain features in that reality that need very much need to be analyzed.
I have a simple data point. In the U.S, the real return on equities– that is, on the stock market – averaged 9.2 percent a year between December, 1981, and December 2021. This 9.2 percent a year growth in equities return far outstripped growth in average real earnings of 0.5 percent a year and overall GDP growth of 2.7 per year. Now, if that is the reality of the situation, the task of analysis is to find out why is it that the return on equities averages 9.2 percent, whereas the growth in average real earnings is 0.5 percent a year, because clearly those people who are invested in equities – that is, the top one percent and top 10 percent of the population – are going to come out of this -year period very, very well, whereas those who are actually depending upon wages are not going to come out of it well at all, and we're going to get an enormous increase in inequality, of the sort that we have seen over the last  years.
The key factor is the growth in equities and the growth in the stock market, and this brings us to one of the key reasons why some people talk about the “New Feudalism” or the new “Neo-Feudal Capitalism.” It's because when Marx was writing, industrial capitalism of the Manchester sort was dominating the British landscape, and it was generally held that there was a struggle going on between the industrial capitalists and the remnants of a feudal society. In fact, that struggle against the power of the landed aristocracy and the power of the usurer meant that there was a struggle against the rentier.
The rentier is an interesting figure, historically. By the rentier, we mean somebody who actually lives on unearned income. That is, they just sit there and get a rate of return, like the people who sit there getting a rate of return of 9.2 by investing in equities. They don't actually do anything. They can just sit in the hammock.
There was a wonderful ad for Lloyds Bank in which a guy is lying in a hammock, saying, “You know, some days I recuperate. Other days, I speculate.” I tried to use it in The Condition of Postmodernity, and when Lloyds Bank found out it was going to be in a rather critical vein, they tried to stop me. They said they would like to refuse permission to use the ad. So the publisher and I wrote to them and said, “Yes, we would be happy to remove that ad from The Condition of Postmodernity, and in so doing we would write across the page, ‘There was once an ad for Lloyds Bank which stated …..’ “ We never heard back from Lloyds Bank again. I just left it as it was.
The point is that when we talk about rentier incomes, we're talking about people who are just living on unearned income, and the unearned income can come from various sources. It can come from the stock market. It can come from savings. When I was born, I was given a savings bank book, and somebody put 50 pounds in it, and over time I put a bit more in it, and it ended up that when I was twenty years old, I had about 150 pounds in it. During that time, it earned two or three percent compound interest. This is unearned income, so I was the beneficiary of unearned income, but not by very much. Some people lived off unearned income. In a Jane Austen novel, you'll find that a good match is somebody who has an income of rents of £10,000 or £20,000 a year. So unearned income was a big issue, and when Marx was writing there was a residual of the unearned income, who are people living off state rents, or they were living off the church. There were a whole bunch of people who were generally considered to be parasitic in relation to the production of value. They were sucking the wealth out of the people who were really doing the hard work. This, of course, was both capitalists and workers, and it's interesting that Saint-Simon, back in the late 18th century, came up with a theory of society which differentiated between the parasitic classes. which were the church and the state and the landlords and all the rest, and the productive classes. The productive classes were the capitalists and the workers together.
The rentier is an important figure in the 18th century and continued in the 19th century to be an important figure, but generally speaking, public policy was being pushed by the industrial capitalists to make sure that the rentier classes were less and less significant, and at the same time to define productive uses, significant uses, of the particular forms of distribution which the rentiers were utilizing. For example, taxation can be used two ways by the state. It can be used to support the lifestyle of the rich folk. It can be used to build monuments for the rich folk, or it can be used to build social housing for the poor, affordable housing, and things of this sort.
At a certain point in the 19th century, the question of what the state should do, what financiers should do [was asked], and generally speaking the argument was that merchant capitalists had a role to play. They should help the industrial capitalists sell their product. The finance capitalist had a role to play – that is, it would help the industrial capitalists deal with differential turnover times, long-term investments in fixed capital, or those kinds of things, and the state would have productive things to do. There are some aspects of state incomes and state revenues which have productive utilizations. Marx tended not to call these “productive” in the sense that they actually created value, but he called them the necessary costs for the full array of a capitalist system, the necessary costs that needed to be taken care of. Each one of these factions, like finance capital, landed capital, and so on have had a role to play in support of industrial capitalists which were dominant during the period.
There was a political struggle, also, amongst the economists. The Ricardo School was very antagonistic to the rentier incomes, and all the way down to Keynes in the 1930s, where Keynes talked about looking forward to the day when there would be a euthanasia of the rentier, that is a euthanasia of what Keynes called the “coupon clippers,” people who clip coupons from the stocks and shares and then got their money that way.
The history of the rentier is important, and the rentier was much maligned in economic theory by the Ricardians in the 19th century and was much maligned politically. [There was a realization that] we have productive ways in which these factions of capital at some point or other turn into separate classes, so we would talk about a merchant capitalist class, or a finance and money capitalist class, which were subservient to industrial capital. The model of capital with which Marx was working was from the Manchester cotton factories and industrial capitalists. The other factors or forms of capital assisted in the task of the production of value and surplus value, by helping with the circulation of capital, helping with the investment flows, helping with the turnover times of capital and fixed capital investment and so on.
This is the model that you would get from the way Marx was writing about it, but even when Marx was writing about it, it became clear to him that some of these issues were rather more complicated. He was particularly taken up with the way in which, in Second Empire Paris, the financial systems were doing two things. One was that they were actually channeling money and surplus value, sucking value, out of the productive sector to support the lifestyles of the financiers and the bankers, so that was a parasitic side, but then there was the other side, which was that money in the productive sector was being put together in ways which could then return into the productive sector to launch bigger and bigger projects. The capitalists could borrow large sums of money to set up very large conglomerate forms of capitalist production. To do that, they needed to have capital assembled, so the financiers therefore have a sort of dual character. One is positive and the other is negative.
Marx talked about financiers in Second Empire Paris and said they had the “charming character of swindler and prophet”. They were actually helping to shape the future of capital by assembling massive amounts of money for reinvestment, and that reinvestment was then reshaping the circulation of capital. So they played a constructive role in relation to capital accumulation, but they also played a parasitic and swindler role. They were engaging in speculation and things of that sort.
In Second Empire Paris, the city was rebuilt essentially on borrowed money, and the money was borrowed by the builders and the construction agents and all the rest. They built the new boulevards. They built the new train systems. The financiers were engaging in a lot of very important investments in the built environment. The rebuilding of Paris brought full employment and new lifestyles into being, so this is why Marx talks about them as a “prophet of the future'' because they are actually creating the future world through the nature of their investments.
The problem was that they not only were doing that, but they were also swindling everybody and gaining immense well-being for themselves at the same time as they were pretending that they were being very ascetic and not consuming. They had this theory of –I don't know exactly what we would call it – a kind of abstinence, that they were abstaining in order to make these big investments. Marx has a funny line about that. He says that they emphasize abstinence so much, you expect to see them “begging on the pavement” because they haven't done any of the investment for themselves.
Even during Marx's period, as he gets into Volume Three of Capital, he starts to talk about the financial classes, and what the financial classes do and how important they are for the circulation of capital and the reinvestment of capital, how they play that constructive role in relationship to production, but they also play this non-constructive and parasitic role. This was something that Marx was already recognizing, that you had to have financiers. It wasn't just a parasitic thing entirely. You had to have financiers, because capital couldn't function without them.
So one of the things that Marx is very concerned about is, why is it that you need to assemble capital in the way you do in order to gauge an investment? This is why the stock market becomes important. The creation of the stock market was one of the ways in which people could invest in the future, and this is where the major returns come from. The creation of the future also becomes a speculative act, and Marx starts to recognize that even in his time this sort of thing was going on, and it needed to be understood and it needed to be analyzed.
And he had to recognize that there were certain social relations going on between finance capitalists and industrial capitalists. He pointed out that the relationship between them almost rendered what the worker was doing irrelevant. There was a kind of factional fight going on between the industrial capitalists and the finance capitalists. The same thing would be true of the merchant capitalists. Marx at that time thought that the finance capitalists and the merchant capitalists were subservient to industrial capital, that they were the servants of industrial capitalism, but what this statement suggests is that since 1980, one of the things that's happened is that the relationship has been inverted – that in fact, what we've seen since the 1980s is that because of the way in which the neoliberal door was opened to all kinds of financial operations and so on, we find a situation, in which more often than not, finance capital becomes the master not the servant. It is even the case that in certain situations, merchant capital becomes the master.
Consider, for example, the big merchant capitalist firms which have grown up very strongly since 1980 – Walmart, Ikea and the like. They all are selling things, and they are merchant capitalist firms, and they actually can put pressure on industrial capital. In other words, it's no longer a situation where the industrial capitalists are telling the merchant capitalist the conditions of sale. The merchant capitalists are actually ordering things from the industrial capitalists, and are paying the industrial capitalists as little as they need to, in order to maximize their own profits. What you find is something which is called monopsony. Monopsony is a situation where you have one consumer, and the one consumer can dictate conditions to multiple producers. It's not the case with Walmart that there is only one consumer, but Walmart is one very, very large consumer, and it certainly dictates prices, and dictates qualities, and dictates quantities to its suppliers, and its suppliers are essentially doing the behest of Walmart. The same would be true even in many of the textile companies, the sort of organizations like the big merchant capitalists in the textile industry, like Gap and Banana Republic. You'll find that they're the ones who are dictating terms to the industrialists.
So there's been a switch, and Marx did not anticipate that. As there was a switch, this means that the power center of capital shifts from industrial capitalism to merchant capitalism in many instances, or depending upon the sector, to finance capitalism and finance, so these forms of capital become much stronger and much more dominant. Because they become much more dominant, they are not necessarily concerned with the production of surplus value. The production of surplus value is a collateral thing as far as they're concerned. If, for example, financiers can earn more money by speculating in art, or speculating in property rights or in oil wells or separate property rights in land – if you can get a higher rate of return from doing that than you can from investing in steel production, then you don't bother to invest in steel production. You don't bother to invest in production in the ordinary sense of the term at all. You start to invest in weird forms of production, particularly the production of spectacle. The financiers right now are heavily into sponsoring soccer leagues and soccer clubs, paying multi-million pound salaries to their players, having fantastic television contracts and so on.
This has been going on since the 1980s. There's been a switch. When I say there's been a switch, it depends upon the nature of the sector. There are some sectors where monopsony power has become very significant – monopsony power in relation to agriculture, for example. You have a multinational like McCain from Canada that [makes] all the frozen french fries. They go out, find farmers, and contract with farmers to produce the potatoes. They give the farmers the seed. The farmers plant the seed and then Mccain takes what it wants of the potatoes, and whatever is left over is for the farmer to sell separately. This is contract farming, and is most farming now. All of those cans you see of peas, cans of beans, cans of Goya and so on, they essentially have monopsony power in relation to all the agriculturalists who are producing the potatoes and the peas and the beans and the tomatoes and so on.
So what you have is a very different situation from the situation Marx was talking about where value being produced on the land was actually being produced by the farmer, and done in such a way that the farmer would then sell it. Now, the farmer is actually doing it on contract, and in a sense the farmer has become an indentured worker for the canning companies. The same is true in textiles. In some other areas, however, the producers still have a certain amount of power. In automobiles, for example, the auto companies are big companies. They still maintain a good deal of power, although they still need to have a marketing organization, like General Motors has General Motors Acceptance Corporation, which finances the purchase of automobiles. So you've got General Motors producing the automobiles and you've got General Motors Acceptance Company which is financing their purchase. General Motors Acceptance Company became so large that when the crisis struck in 2008, you find immediately that the money needed to buy the commodity is going to have to come from General Motors Acceptance Corporation. These are the sorts of arrangements which have come up now.
Why would we want to say that this is a new form of capitalism? I've always thought of capitalism as being something that's fluid, something that's always in motion, something that can be best thought of as a totality, and understood as a totality, which is in constant evolution.
Therefore, the form of capital today is going to be very different from the one which existed in the 1960s which is very different from the one in the 1930s. It's not as if once upon a time there was capital, and now it's evolved into something else. There's a whole history of evolutionary structure within capital. It's constantly growing. It's constantly morphing into something different. It's very fluid. The class relations within it are shifting. The balance of forces within it is constantly shifting. The power of the state in relationship to what is going on, the power of finance, the power of the merchants, the power of the landed aristocrats and so on – those are all shifting. Therefore, I would say that capital is a system in evolution, and as it evolves, so it is transformed. The class relation internally between all forms of capital and labor and class relation and the form of the state – all those things are constantly evolving. Therefore, I would not say that it is going back to something called feudalism. It's not, but on the other hand it is going forward into something that is rather different. That something which is rather different is indeed a situation in which the finance side of it has become very dominant.
Now if finance becomes dominant, then [Marx] says you're dealing with a form of capital which is very special. Money capital is the only form of capital that can increase without limit.
And here, too, there is a falling and rising mass of output, but there's a certain mass in terms of actual things which is difficult to supersede. That's not true of money. We've found that the money side of things is becoming more and more detached from the rest, and we are therefore finding a monetarized form of capital which is becoming more and more significant.
One of the things that says is that profit making is no longer going to be confined to parallels with surplus value production. Profit making is going to become something which is about financial operations in and of themselves, and that profit making which can come from, say, housing development is going to be caught up in a closed circle. The production of housing can be financed by a developer. At the same time, the purchase of the housing can be financed. So the financier is going to operate both in terms of supply and demand.
Having supply and demand dominated by capital is not unusual in capitalism. Marx talks about this, and says that's the problem with labor. Everyone likes to think that the supply and demand for labor is like between two autonomous and independent factors of production. Marx points out in Capital that it's not, because capital can produce surplus labor by technological innovation. Capital can also do it by mobilizing the industrial reserve army. As Marx says, capital operates on both the supply and the demand for labor, so what appears to be in capitalistic economics [two] independent, autonomous factors of production, which are brought in collision with each other, but no. Marx says capital controls both the supply and the demand for labor.
It also supplies both the demand for housing at the same time as it orchestrates the supply of housing, so the fact that capital can operate on both sides is not an unusual feature for a capitalist mode of production. The degree that it does so produces some peculiarities within the capitalist mode of production, which actually become rather crisis-prone. This takes me back to the crisis tendencies that arose in 2007-2008. One of the things that I said in The New Imperialism was that there was a phenomena going on which was “accumulation by
dispossession.” This accumulation by dispossession was just as important as the production of surplus value. The way in which capital was evolving during the 1980s and 90s was a situation in which the balance of power between finance capital and industrial capital and merchant capital was shifting. Therefore, there were different sets of possibilities available for capital to engage in profitable activities, and one of those means was the business of accumulation by dispossession.
In this argument about the new feudalism, accumulation by dispossession gets a little bit mixed up. Many people cite it as just primitive accumulation, which was what got us out of feudalism. My answer is that accumulation of dispossession has a particular kind of history, and we therefore need to take account of how this works, and how this then leads to the capacity of large segments of capital to operate in such a way that while their activities are not entirely unearned, they are only slightly involved.
Let me give you, by way of conclusion, an extended example of this. In 2007 to 2008, we had the crisis in the housing sector. Seven or eight million households lost their houses to foreclosure. Their houses had a certain value. Even if they could sell them and get some equity, the housing market collapsed so they couldn't sell them, and if they could sell them, the price was so low that it wasn't worth it. Many people just walked out of their houses and left the keys. In other instances, some people who had been paying their mortgage regularly were illegally foreclosed upon. So a huge foreclosure takes place and there are seven or eight million houses out there which were in the hands of the banks. The banks are foreclosed on them, so they're all held by the banks. Some of the banks held so many houses, and the houses were worth so little in the middle of the crisis, that the banks were themselves in a lot of trouble. Some of the banks had to file for bankruptcy because they had this dead weight of all of these houses which were worthless in their portfolio.
Let's take the case where the banks had them and didn't file for bankruptcy. The banks have all of these houses worth very little, even though the nominal value which had been there before the crisis was still stated on the books, but it was unrealizable. Along comes a private equity company, Backstone, and it says to the banks, we will take those houses off your hands for a discounted price. To do this, they need to borrow a lot of money. They borrow a lot of money from institutions – from insurance companies, from finance capitalists, and all the rest. Blackstone borrows a lot of money and goes to a bank and says “We have the money now. We can give you the value of the housing, which is say 30 percent of its market value, and we take it off your hands.” The banks say, “Thank you very much. We really are very appreciative of
that.” Then the state comes in and says to the bank, “We will make up the difference between what Blackstone paid to you and what the nominal value would have been, so if Blackstone paid 30 percent we will pay 70 percent.” The banks were bailed out because they got 30 percent from
Blackstone and 70 percent from the federal government, so they eventually got the full value of the house. The banks survived. Some of the banks filed for bankruptcy, and when this was found out, people went in and took over the bank, and then played this game and got all this money from the federal government. So the banks came out of this fine.
What did Blackstone do? Blackstone was sitting on a massive housing supply. They start to turn it into rental housing and it does extremely well. Given that they had only paid 30 or 40 percent of the housing value, they could get most of the money back that it had paid to the banks in a very short period of time. This is, in effect, the transfer of wealth from the original homeowners to Blackstone, with the federal government bringing in more support. Blackstone then becomes one of the biggest companies in the world. Because it’s the biggest landlord in the United States, it has a huge portfolio, and becomes hugely profitable. Now it's investing in all kinds of things. It's taking over industrial parks in China, and industrial parks in Australia, doing housing and rental housing and the rest – kind of astonishing.
Stephen Schwarzman, the CEO of Blackstone, becomes one of the richest people in the world. He gives a huge amount of money to Oxford University and MIT to teach the humanities better. At the same time, Schwartzman is a great supporter of Donald Trump and joins with several of the other mega[rich], so an oligarchy forms and it's done by these financial games. Blackstone gets borrowed money, pays back the borrowed money to whoever lent it and now they’ve got all this equity in housing worldwide. The value of the company is now – I don't know, I should check what the value is – but it's certainly up there in the trillion dollars or more [$915.5 billion as of 2022].
This is the sort of thing that people do. You see this with Elon Musk and his attempt to take over Twitter. He wasn't necessarily taking it over with his own money. He went somewhere and said let me borrow 25 billion dollars or whatever it was that he's paying for it. The rich folk can get it.
We're living in a society where these kinds of things are going on. That is the evolution that's come about, in part for one very simple reason: that money is the only form of capital that knows no limit. Money is not actually under the control of anybody. Money is created by people engaging in trade and engaging in exchange. So, in a sense, you make the money as you go along. All the Federal Reserve can do is to check on the money that's been made and try to make sure it's qualitatively okay, and it can support creating more money by quantitative easing.
I don't think this is a new feudalism. It's certainly a new form of capitalism. I think the two areas which are defining the new form of capitalism are one, the financial side, and the other is the artificial intelligence side, and what is going on with the creation of these new platforms, and with the fangs the Apples and the Googles and the Amazons and so on. We've got a new kind of capitalism, which is evolving. It is evolving for certain reasons, in certain kinds of directions, and the big problem I think for us is, how do we start to be anti-capitalist towards this kind of capitalism?
Being anti-capitalistic when Marx was writing – I won't say it was simple, but at least it was clear who the enemy was, where the enemy was, and what should be done about it. You could organize a strike against General Motors in the 1930s. Right now these are things which are very difficult to organize. We've got massive companies out there. How artificial intelligence is going to work is an open question. One of the other big things is this increasing quantity of finance capital, which I think is extremely dangerous. It seems to me that the whole world is operating on one large Ponzi scheme, because for every phase of increasing the debt and increasing finance and the rest of it, you get a phase of increase of specie, and as a result you're flooding the world with amounts of money. The oligarchic possibilities are really dangerous for the future.
Thank you for joining me today. You've been listening to David Harvey's Anti-Capitalist Chronicles, a Democracy At Work production. A special thank you to the wonderful Patreon community for supporting this project.
Transcript by Cindy Mitlo
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