The Enigma of Capital

“The Enigma of Capital and the Crises of Capitalism” is the title of a book by David Harvey. This book explains the intricate nature of capital in relation to what has brought our economy down to the present situation. Chapters of the book are divided into phases of capitalism starting with a brief anatomy of the events of 2006 (disruption) with a series of charts and graphs. It reflects different aspects of the economy from wages and salaries to home ownership to debt bubble, for different time ranges and for several countries in comparison with the US. It continues to explain how the capital is assembled, how it goes to work and to market, and how it evolves. Then, it describes the geography of capitalism and how it destructs the environment, and finally it ends with “what is to be done and who is going to do it”.

The history of capitalism in the United States is briefed from the Second World War on, and from the time that the US achieved its prominence in the world economy. Benefiting from the war in Europe and becoming the superpower after the war is the main subject of the discussion early in the book. “The last thirty years have seen a dramatic reconfiguration of the geography of production and the location of politico-economic power. At the end of the Second World War it was well understood that inter-capitalist competition and state protectionism had played an important role in the rivalries that had led to war. If peace and prosperity were to be achieved and maintained, then a more open and secure framework for international political negotiation and trade, a framework from which all could in principle benefit, had to be created. The leading capitalist power of the time, the United States, used its dominant position to help create, along with its main allies, a new framework for the global order. It sought decolonization and the dismantling of former empires (British, French, Dutch, etc.) and brokered the birth of the United Nations and the Bretton Woods Agreement of 1944 which defined rules of international trade. When the Cold War broke out, the US used its military might to offer (‘sell’) protection to all those who chose to align themselves with the non-communist world (page 31).” Becoming a superpower and assuming the protector of the capitalist world after the cold war is the role the US government upheld after the end of the war. The UN was established to express the voice of all those countries engaged in hype of the cold war. The propaganda that the US government, within and outside of the country, started was to promote the anti-communist slogan. Major European countries along with some large powers in Asia were given a veto power to shut down the voice of all smaller countries who may become (as they did) pawns in this dispute.

What a government should provide to the population of a community has been eroded throughout years. Education, housing, health, equal pay while providing jobs, utility, infrastructure, and a fair justice system is what one would expect form a governmental body. The relationship between the capital surplus and privatisation is disclosed in detail: “As more and more of the surplus created yesterday is converted into fresh capital today, so more and more of the money invested today comes from the profits procured yesterday. This would seem to render redundant the violent accumulation practiced in earlier times…. Both legal as well as illegal means – such as violence, criminality, fraud and predatory practices of the sort that have been uncovered in recent times… are employed. The legal means include privatization of what were once considered common property resources (like water and education), the use of the power of eminent domain to seize assets, widespread practices of takeover, mergers and the like that result in ‘asset stripping’, and reneging on, say, pension and health care obligations through bankruptcy proceedings (page 48,49).”

When sections of the society are divided into groups, it makes it easier to break them down. Whenever the economy is in a downturn, the government with the aid of the media and by passing various legislations creates a fragmented society based on ethnic, religion, sexual preference, and national identity. “All along, capitalists have sought to control labour by putting individual workers in competition with each other for the jobs on offer. To the degree that the potential labour force is gendered, racialised, ethnicised, tribalised or divided by language political and sexual orientation and religious beliefs, so these differences emerge as fundamental to the workings of the labour market. They become tools through which capitalists manage labour supplies in tandem with privileged sectors of the workforce who use racism and sexism to minimise competition. The history of primitive accumulation itself entailed the manufacture of claims of ‘natural’, and hence biologically based, superiorities that legitimised forms of hierarchical power and class domination in the face of religious or secular claims to equal status in the eyes of God or of the state (the US and French Revolutions). Throughout its history, capital has been in no way reluctant to exploit, if not promote, such fragmentations, even as workers themselves struggle to define collective means of action that all too often stop at the boundaries of ethnic, religious, racial or gender identities. Indeed, in the US in the 1950s and 1960s, labour organisations sought to curb competition in labour markets by imposing exclusions based on race and gender (page 61).” From the beginning of the 21^st century, we have witnessed an increase in homophobia among the US population. ‘Islamic terrorist’ slogan of the Bush era (where the government itself introduced terrorism in Islamic world) continued in past decade with an increase in ethnic clashes. The atrocities of American soldiers in Iraq, Afghanistan, Pakistan, and recently in South Yemen continues with some of the gross infringements of human decency under the pretense of a war. Water boarding and other tools of torture, dehumanizing Arabs and Moslems surfaces once in a while as the government claims them to be rare instances. However, we know that only rare instances were reported. In the US itself, and just this year, many incidents of racial, ethnic, and religious clashes have been reported. The faith of the Iraqi woman beaten to death in Los Angeles was over-shadowed by the killing of an African American in Florida. There are many more incidents of violence against gays and lesbians in several parts of the country. Statistical increase in the rate of violence against religious, sexual, and ethnic minorities was explained in another article titled “Racism/ Sexism/ Phobia”.

What is called energy crisis is the shortage of energy that is suggested to be replaced by agriculture. Notwithstanding an unequal distribution of food material globally, any substitution of oil product and by-product with agricultural materials (such as ethanol) will add to the shortage of food. It was predicted that in thirteen years the number of starving people will increase to 1.2 billion (page 80). It has always been clear that natural energy resources are limited and fossil fuel will end at some point. It is important to make a decision that would not create another dependency to a natural resource that damages our environment any further. The history of prediction of US oil reserve is briefed as below: “The idea of ‘peak oil’ goes back to 1956 when a geologist then working for Shell Oil, M. King Hubbert, predicted, on the basis of a formula linking rates of new discoveries and rates of exploitation, that oil production within the US would peak in the 1970s and then gradually contract. He lost his job at Shell but his predictions proved correct and since the 1970s the United States has daily become more and more dependent upon foreign oil as domestic sources have continued to decline. The US now imports close to $300-billion-worth of oil annually, which accounts for almost one third of a burgeoning foreign trade deficit that has to be covered by borrowing from the rest of the world at well over $2 billion per day (page 79).”

David Harvey makes a fair comparison on the pros and cons of capitalism: “The saga of capitalism is full of paradoxes, even as most forms of social theory - economic theory is particular – abstract entirely from consideration of them. On the negative side we have not only the periodic and often localised economic crises that have punctuated capitalism’s evolution, including inter-capitalist and inter-imperialist world wars, problems of environmental degradation, loss of biodiverse habitats, spiraling poverty among burgeoning populations, neocolonialism, serious crises in public health, alienations and social exclusions galore and the anxieties of insecurity, violence and unfulfilled desires. On the positive side some of us live in a world where standards of material living and well-being have never been higher, where travel and communications have been revolutionised and physical (though not social) spatial barriers to human interactions have been much reduced, where medical and biomedical understandings offer for many a longer life, where huge, sprawling and in many respects spectacular cities have been built, where knowledge proliferates, hope springs eternal and everything seems possible (from self-cloning to space travel) (page 120).” It is of course easy to count ills and health of capitalism as we can witness it. However, it is not clear if a socialist system would have advantages and disadvantages of its own, considering that we do not have any example of pure socialist societies (of course so called socialist countries such as Soviet Union or China cannot be exemplified). We can only foresee and hope that future socialist societies will not have any of the negative sides mentioned above, by example, and will strive to achieve all the aspects of the positive side. Since fairness and human equality is the landmark of socialism, it seems that none of the ills of capitalism will survive in a socialist society.

The disparity between different societies of the world is the subject of a one sentence paragraph in the book. The author is only naming areas of the world where humanity and justice are neglected. “The uneven geographical development that results is as infinitely varied as it is volatile: a deindustrialised city in northern China; a shrinking city in what was once East Germany; the booming industrial cities in the Pearl River delta; an IT concentration in Bangalore; a Special Economic Zone in India where dispossessed peasants revolt; indigenous populations under pressure in Amazonia or New Guinea; the affluent neighbourhoods in Greenwich, Connecticut (until recently, at least, hedge fund capital of the world); the conflict-ridden oil fields in the Ogoni region of Nigeria; the autonomous zones carved out by a militant movement such as the Zapatistas in Chiapas, Mexico; the vast soy bean production zones in Brazil, Paraguay and Argentina; the rural regions of Darfur or the Congo where civil wars relentlessly rage; the staid middle-class suburbs of London, Los Angeles or Munich; the shanty towns of South Africa; the garment factories of Sri Lanka or the call centres of Barbados and Bangalore ‘manned’ entirely by women; the new megacities in the Gulf States with their star-architect-designed buildings – all of this (and of course much more) when taken together constitutes a world of geographical difference that has been made by human action (page 148).” According to the ending words of this paragraph, it is not an accident that these areas are neglected, but human action has created these slums. The following paragraph (not quoted here) explains that “human action” does not mean that people living in those areas created their environment, but an intentional effort has been made by Multi-national Corporations in order to access cheap labor.

After speaking about geographical changes in length, environment is discussed, under a new chapter titled “Creative Destruction on the Land”. Ways of destruction of land by human activity is analyzed and the result is foreclosed: “The long history of creative destruction on the land has produced what is sometimes called ‘second nature’ – nature reshaped by human action. There is now very little, if anything, left of the ‘first nature’ that existed before humans came to populate the earth. Even in the remotest regions of the earth and in the most inhospitable environments, traces of human influence (from shifts in climatic regimes, traces of pesticides and in the qualities of the atmosphere and the water) bear the imprint of human influence. Over the last three centuries marked by the rise of capitalism, the rate and spread of creative destruction on the land has increased enormously (pages 184,185).” Speaking of destruction of environment in a capitalist society, developers use all sorts of tactics in order to clear the land and increase the area under development. When schemes are failed, force is used with the aid of the government. “Conversely, social solidarities are built within populations around entirely different values – those of history, culture, memory, religion and language – and these are often, recalcitrant and resistant to the pure mechanics of capital accumulation and market valuations, in spite of all the efforts of the promoters and image makers. It is interesting to note that a whole new field of consultancy, called ‘urban imagineering’, has been invented to try and bridge this gulf (page 193).”

A large part of the book is dedicated to geography, locally and internationally. There are places in the world that are strategically important. There are other places that may not be strategically crucial, but their natural resources are exploited. “Since 1945, the US has sought to dominate the Middle East, for that is where the global oil spigot lies. Whoever controls the global oil spigot controls the world. Its aim has been to prevent the formation of any independently powerful political force in the region and to protect the existence of a single world oil market denominated in dollars. This underpins the power of seignorage, the ability to print global money when in distress. The US has fought two Golf wars and extended its reach into Afghanistan and Pakistan. It perpetually threatens the one state, Iran, that has refused to accept US hegemony and that has sought to maintain its position as an independent political power, in spite of a lengthy US-backed war with Saddam’s Iraq in the 1980s. The extension of US control outwards from the core oil-producing states in Afghanistan and even into the heartland of central Asia bears all the marks of geopolitical pre-emption against Russian and Chinese aspirations (page 210).”

After explaining the financial catastrophe of recent years, economic theories published in the media are evaluated and validity of them is analyzed. “The rebound in stock market values from Shanghai and Tokyo to Frankfort, London and New York is a good sign, we are told, even as unemployment pretty much everywhere continues to rise. But notice the class bias in that measure. We are enjoined to rejoice in the rebound in stock values for the capitalists because it always precedes, it is said, a rebound in the ‘real economy’ where jobs for the workers are created and incomes earned. The fact that the last stock rebound in the United States after 2002 turned out to be a ‘jobless recovery’ appears to have been forgotten already. The Anglo-Saxon public in particular appears to be seriously afflicted with amnesia. It too easily forgets and forgives the transgressions of the capitalist class and the periodic disasters its actions precipitate. The capitalist media are happy to promote such amnesia (page 219).” Later, other theories are discussed and the trend of the economy in general is presented. Some of the aspects of the system that result in accumulation of wealth are disclosed. “The credit system has now become, however, the major modern lever for the extraction of wealth by finance capital from the rest of the population. All manner of predatory practices as well as legal (usurious interest rates on credit cards, foreclosures on businesses by the denial of liquidity at key moments, and the like) can be used to pursue tactics of dispossession that advantage the already rich and powerful. The wave of financialisation that occurred after the mid-1970s has been spectacular for its predatory style. Stock promotions and market manipulations; Ponzi schemes and corporate fraud; asset stripping through mergers and acquisitions; the promotion of levels of debt incumbency that reduce whole populations, even in the advanced capitalist countries, to debt peonage; dispossession of assets (the raiding of pension funds and their decimation by stock and corporate collapses) – all these features are central to what contemporary capitalism is about (page 245).”

Final chapter sums up what the mission of this book is all about, which sounds like a slogan, however powerful and profound: “To understand the political necessity of this requires first that the enigma of capital be unraveled. Once its mask is torn off and its mysteries have been laid bare, it is easier to see what has to be done and why, and how to set about doing it. Capitalism will never fall on its own. It will have to be pushed. The accumulation of capital will never cease. It will have to be stopped. The capitalist class will never willingly surrender its power. It will have to be dispossessed (Page 260).”