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<nettime> Intermodal Value Flows in the Macroeconomy
Dmytri Kleiner on Tue, 1 May 2012 18:09:05 +0200 (CEST)


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<nettime> Intermodal Value Flows in the Macroeconomy


  IMPORTANT: Stammtisch will not be a Cafe Buchhandlung today, but
  rather at Cafe Kotti in Kruetzberg to be closer to the May 1st
  festivities

Intermodal Value Flows in the Macroeconomy

It's May 1st today, I'm sure that I could, rather than test your patience with yet more wonkish macroeconomic explorations, publish a more exiting and popular article today, celebrating the history of May Day, but I wont. I want to follow this macroeconomic line of thought through.

As I've argued previously, the history of May 1st demonstrates that that reform and revolution are hardly in conflict, and often go hand in hand. From the very beginning May Day has been coloured by the whole spectrum of the methods of class strugle, from demonstration of labour solidarity and effective organized campaigns that dramatically improved the working conditions of the world's workers, to demonstrations of uncontrollable rage and revolutionary uprisings that drew uncompromising lines in the sand resisting the endless encroachment of capitalism into our private and public lives, resisting the misery and alienation this creates.

Also, Telekommunisten was founded on May 1st, 2006, so it's also always an anniversary for us, this year is our 6th birthday.

In my last article I begin sketching out what I'm calling an intermodal macroeconomic model, hoping to understand what an revolutionary social transformation would look like from the economic perspective.

In this model, we have two economies, each representing a given Mode of Production, capitalism and communism.

We often say we live in a Capitalist society, but yet this does not mean that all forms of producing and sharing that occur within our society are Capitalist. This is more than evident when looking at social relations in family and personal life, in intentional communities of various kinds, within co-ops and other non-capitalist organizations, the charity and profit sectors, and, of course, the emerging world of peer-production including free software, free culture, etc. It's quite clear there is a lot more going on than just Capitalism.

When we say we live in a Capitalist society what we mean is that Capitalism is the dominant mode of production, and as such, it is able to apply the greatest amount of wealth towards it's own expansion and the enforcement of it's interests. As a result, our private and public institutions, including our law making and financial institutions are set up according to the interest of this dominant mode.

We can not change our society, neither the public or private institutions that make it up, nor the laws and financial constraints that are imposed without first building the capacity to overcome the capacity of those who resist such change.

Only when the commons based economy exceeds the market based economy can we achieve a society that is organized around the interests of creating wealth for the many instead of creating profit for the few.

Starting with the Kaleckian model, Y = Cw + Cp + I that introduces classes on the consumption side, by dividing consumption into consumption of workers (Cw) and consumption of capital (Cp), Kalecki is able to isolate profit as P = Cp + I. Reasoning that Cw = W, In other words, reasoning that worker's spend whatever they earn. This assumption is of course true within capitalism. However, if we understand that Capitalism itself, while dominant, exists among several other modes occurring simultaneously, we need to take this into a different direction.

If the commons-based economy must become the dominant economic mode, then instead of understanding the level of profit within the capitalist sector, we need look at relative growth between the capitalist and communist sector, in other words between the sectors that produce for private profit and the sectors that produce for public wealth, the predatory sector and the co-operative sector.

To do so, me move Kalecki's class division to the investment side, since with capitalism, workers spend everything they earn, but in the more complex social context that capitalism exists within worker's also invest. So our starting point becomes Y = C + Ip + Iw. With Ip representing Capital's capacity to invest, and Iw representing workers' capacity to invest, as result as both classes have the capacity to invest in production.

We now divide C, not on classes, but on mode, creating Cm and Cc, market based consumption that returns profit to it's investors privately, and Cc, commons based consumption that does not capture profit privately, and returns wealth to society collectively. This gives us Y = Cm + Cc + Iw + Ip.

This now allows to us divide these two sectors as Capitalism, Ym = Cm + Ip and Yp and Communism, Yc = Cc + Iw.

So, from a macroeconomic view, you could say that the revolutionary aspiration of May 1 is to make Yc > Ym, and thereby overcome the dominance of Capital on our society.

In order to understand how this might be possible, we need to look at the flows of value between the two modes.

We can not assume that workers will only invest in the commons and consume from it, nor can we assume that Capital will only consume and invest inversely.

We started to include this last week by drawing on the way import and export between nations is included in macroeconomic identities, adding "net imports" to the model, so to expand what we have above with N, Ym = Cm + Ip + Nm and Yc = Cc + Ow + Nc. Nm and Nc representing the net relative imports of each mode. Being net imports, Nm + Nc would equal zero as these would balance out by definition.

If, in balance, workers consumed the products of capitalist controlled production more than capitalists consumed the products of workers controlled production, then they would have a trade deficit with the capitalist sector and thus have relative reduced economic power as a result, capital would increase it's dominance, conversely, if worker's could create a intermodal trade surplus with capital, then then would decrease, and perhaps eventually overcome the dominance of capital.

Likewise, investment can also flow between the sectors, for instance workers buy shares on the stock market, and capitalists may, for instance, finance the development of free software.

It's hard to identify such intermodal capital flows as investment, since from a class perspective they don't directly reproduce the wealth that was used, as returns aren't recaptured according to the relative mode, thus such investment is not directly "valorized."

Production in capitalism is driven by exchange value, a capitalist commodity can not properly be considered produced until it consumed in such a way that creates more capital. As Capitalism is not directly concerned with producing things because they are useful, but because it is profitable. When the commodity is just given away the "productivity" of the producers who made it is calculated as zero, since zero capital was recaptured.

Therefore, I propose to call such capital flows "Sustentation," where value creation within one mode is sustained by inflows from another. Individual capitalists may benefit from such sustentation, and often do, such as the capital cost reduction that free software provides to business that use it. However despite the benefit to some specific businesses, such flows represent a drainage of capital from the point of view of the class as whole, as this expenditure is not directly valorized, and even replaces potential valorized consumption, such as expenditures on commercial software made unneeded by using free software.

Likewise, workers' using their retained earnings to buy stocks can be be understood as a similar sustentation. This drains wealth from the commons-based economy as to sustain capital finance, even though individual workers may privately benefit, by essentially becoming tiny capitalists.

We can add net sustentation to the model as follows. Ym = Cm + Ip + Nm + Sm and Yc = Cc + Iw + Nc + Sc.

Excluding taxation, which is not intermodal, so activity in both modes is subject to the same government, we have a complete macroeconomic picture of class struggle and can start discussing how venture communism, counterpolitics and insurectionist finance can be employed in the struggle.

But, that will need to wait until next week.

In the mean time you can join us at Cafe Kotti at 8pm or so: http://bit.ly/K04wqf

A shareable version of this text is available here: http://www.dmytri.info/intermodel-value-flows/


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