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The starting point is finance. As we shall see, Marx classified finance as ‘fictitious’ capital – in contrast to the ‘actual’ capital embedded in the means of production. This classification puts the world on its head. In fact, in the real world the quantum of capital exists as finance, and only as finance. This is the core of the capitalist regime.

empty explanations, but, on the contrary, by solving existing puzzles through the introduction of new puzzles. Werner Heisenberg tells of a conversation he had with Albert Einstein

in 1926 on this very inevitability:

I pointed out [to Einstein] that we cannot, in fact, observe such a path [of an electron in an atom]; what we actually record are frequencies of the light radiated by the atom, intensities and transition probabilities, but no actual path. And since it is but rational to introduce into a theory only such quantities as can be directly observed, the concept of electron paths ought not, in fact, to figure in the theory. To my astonishment, Einstein was not at all satisfied with this argument. He thought that every theory in fact contains unobservable quantities. The principle of employing only observable quantities simply cannot be consistently carried out. And when I objected that in this I had merely been applying the type of philosophy that he, too, had made the basis of his special theory of relativity, he answered simply: ‘Perhaps I did use such philosophy earlier, and also wrote it, but it is nonsense all the same’.

(Quoted in Weinberg 1992: 180) 8 Why write a book about capital?

The modern corporate owner does not view capital as comprising tangible and intangible artefacts such as machines, structures, raw materials, knowledge and goodwill. Instead, he or she is habituated to think of capital as equivalent to the corporation’s equity and debt. The universal creed of capitalism defines the magnitude of this equity and debt as capitalization: it is equal to the corporation’s expected future profit and interest payments, adjusted for risk and discounted to their present value.

Faith in the principle of capitalization now has more followers than all of the world’s religions combined. It is accepted everywhere – from New York and London to Beijing and Teheran. In fact, the belief has spread so widely that it is now used regularly to discount not only capitalist income, but also the income of wage earners, governments, and, indeed, society at large.

But as often happens with religion, the greater the belief the fewer the questions. And, indeed, those who obey capitalization are so conditioned that they rarely if ever enquire into its origin and implications. So maybe it isn’t too much to stop and ask: What exactly is the meaning of capitalization?

Where does it come from and why has it become so dominant? What are the forces that propel it, and how do they shape the broader process of capitalist development?

As this book will show, the elements of corporate capitalization – namely the firm’s expected earnings and their associated risk perceptions – represent neither the productivity of the owned artefacts nor the abstract labour socially necessary to produce them, but the power of a corporation’s owners.7 In the capitalist order, it is power that makes the owned artefacts valuable to begin with. Moreover, the power to generate earnings and limit risk goes far beyond the narrow spheres of ‘production’ and ‘markets’ to include the entire state structure of corporations and governments.

This perspective is unlike that of conventional political economy. Liberal ideology likes to present capital and state as hostile, while Marxists think of them as complementary. But in both approaches, the two entities – although related – are distinctly instituted and organized.

Our own view is very different. As we see it, the legal–organizational entity of the corporation and the network of institutions and organs that make up government are part and parcel of the same encompassing mode of power.

We call this mode of power the state of capital, and it is the ongoing transformation of this state of capital that constitutes the accumulation of capital.

The conventional creed incessantly fractures this encompassing process into a kaleidoscope of multiple interpretations. It conditions us to think of a bank as part of the ‘economy’, of the army as a component of ‘politics’ and of a television network as an aspect of ‘culture’. We expect the ‘sports’ section of the newspaper to be separate from the sections that deal with ‘international 7 For simplicity, we refer here to corporate capitalization only. Later in the book we treat capitalization more generally.

Why write a book about capital? 9 news’ and ‘education’. We split our life into distinct functions such as ‘family’, ‘work’, ‘consumption’ and ‘entertainment’. We put each entity in a different realm.

And yet, occasionally, a small miracle happens. Like in the opening of Maurice Ravel’s La Valse, where the dissociated, fragmented sounds gradually interlace and fuse into a single musical march-dance, our mind, in a flash of negation, unites the seemingly distinct social regions into a single hologram. Although often no more than a fuzzy silhouette, this hologram shows us the whole picture. The fractured human beings, the infinite threads that tie them to one another, the different ‘spheres’ between which they move – all those converge into one totalizing logic: the logic of capital.8 The reason that this logic is so totalizing can be sketched as follows. The capitalist mode of power is counted in prices, and capitalization, working through the ever more encompassing price system, is the algorithm that constantly restructures and reshapes this order. Capitalization discounts a particular trajectory of expected future earnings. For any group of capitalists – typically a corporation – the relative level and pattern of earnings denote differential power: the higher and more predictable these earnings are relative to those of other groups of companies, the greater the differential power of the corporation’s owners.





Note that this is not ‘economic power’. Neither is it ‘political power’ that somehow ‘distorts’ the economy. Instead, what we deal with here is organized power at large. Numerous power institutions and processes – from ideology, through culture, to organized violence, religion, the law, ethnicity, gender, international conflict, labour relations, manufacturing techniques 8 The yearning for a totalizing picture in the face of relentless disciplinary fracturing is

described in the childhood reminiscences of Arnold Toynbee:

When I was a child I used to stay from time to time in the house of a distinguished professor of one of the physical sciences. There was a study lined with bookshelves, and I remember how, between one visit and another, the books used to change. When first I knew the room, many shelves were filled with general literature, with general scientific works, and with general works on that branch in which my host was an expert. As the years passed, these shelves were invaded, one after another, by the relentless advance of half a dozen specialized periodicals – gaunt volumes in grim bindings, each containing many monographs by different hands. These volumes were not books in the literary sense of the word, for there was no unity in their contents and indeed no relation whatever between one monograph and another beyond the very feeble link of their all having something to do with the branch of science in question. The books retreated as the periodicals advanced. I afterwards rediscovered them in the attic, where the Poems of Shelley and The Origin of Species, thrown together in a common exile, shared shelves of a rougher workmanship with microbes kept in glass bottles. Each time I found the study a less agreeable room to look at and to live in than before. These periodicals were the industrial system ‘in book form’, with its division of labour and its sustained maximum output of articles manufactured from raw materials mechanically.

(Toynbee 1972: 30) 10 Why write a book about capital?

and accounting innovations – all bear on the differential level and volatility of earnings. When these earnings and their volatility are discounted into capital values, the power institutions and processes that underlie them become part of capital. And since capital is a vendible commodity, available for purchase and sale on the stock and bond markets, its relative value represents the commodification of power.

From this viewpoint, we can no longer speak of ‘economic efficiency’ versus ‘political power’, or distinguish ‘economic exploitation’ from ‘political oppression’. Instead, there is a single process of capital accumulation/state formation, a process of restructuring by which power is accumulated as capital. To study the accumulation of capital is to study the formation and transformation of organized power under capitalism. This is the starting point of our book.

A brief synopsis The book itself consists of five parts. Part I situates the emergence of capital within the broader development of political economy. Part II dissects the liberal and Marxist conceptions of capital. Part III explains why theorists of capital have been barking up the wrong tree, trying to equate accumulation with machines and production instead of capitalization and finance. Part IV lays the foundations for an alternative theory of accumulation based on power. And Part V articulates our own theory of capital as power.

On the face of it, this layout may seem to separate neatly our ‘critique’ of existing theories in the first three parts of the book from the ‘gist’ of our story in the last two. But don’t be tempted to take a shortcut and jump over Rhodes. Substantively, there is no split in the book. The early parts of the book are crucial to the dialectical development of our argument, and unless you read them you won’t understand what follows.

The sections below highlight the key themes of each of these parts, listing some of the questions we ask and sketching the paths we follow as we research the answers. We write them less as a summary and more as an appetizer. Hopefully, they will lure you to read the whole book.

Part I: dilemmas of political economy The first part introduces some of the key dilemmas of political economy.

Chapter 2 identifies the two central dualities of political economy: (1) the separation between politics and economics, and (2) the further distinction, within economics, between the real and the nominal. These bifurcations, accepted by both liberals and Marxists, define what political economy does – and what it cannot do. And the most important handicap they impose is the inability to deal with power.

The dualities themselves are hardly accidental. As Chapter 3 explains, they were part and parcel of a triple revolution that swept eighteenth-century Why write a book about capital? 11 Europe: the ascent of modern science, the emergence of liberal politics and the rise of capital accumulation. This triple revolution undermined the religious–authoritarian cosmos. The hierarchical rule of God and his ordained subcontractors was replaced by a flat law of nature, a secular–universal mechanism that regulated and equilibrated both heaven and earth. This new worldview made the ‘economy’ a natural process, independent of the ‘politics’ of king and church; and it made the ‘nominal’ incomes of the different classes a consequence of ‘real’ production and consumption rather than naked power and sanctified violence.

But whereas the dualities undermined the power of the ancien régime, they were far less effective in concealing (or revealing) the power of capital.

Initially, the problem didn’t seem serious enough, and most political economists were totally oblivious to its consequences. The liberals were all too happy to emphasize the liberating aspects of the market and its separation from state, and they therefore had no reason to drag capitalist power into the open. By contrast, the Marxists emphasized the exploitative and oppressive nature of the system; but having banked on the economy’s historical laws of motion to dialectically implode the system from within, they, too, felt no need to complicate the picture with the voluntarist indeterminacies of power. And so ‘politics’ remained happily separate from ‘economics’ and the ‘nominal’ distinct from the ‘real’.

But that situation started to change in the late nineteenth and early twentieth centuries. First, the growth of large units – big business, large government and organized labour – upset the presumed automaticity and self-regulating tendencies of capitalism. Second, there emerged a whole slew of new power processes – from militarization and imperialism, to finance and inflation, to collectivism and fascism, culture and mass psychology, industrial regulation, monopoly and macroeconomic stabilization – developments that no longer fit the equilibrium theories of mechanical liberalism and the historical inevitabilities of dialectical Marxism. And third, political economists started to empirically quantify accumulation – only to find that, in the absence of equilibrium and the presence of power, capital no longer has an ‘objective’ magnitude.

Chapter 4 examines the different ways in which political economists attempted to tackle the problem. The solutions are very different, but they all have one thing in common: they try to have their cake and eat it too. The liberals do so by elimination. They break their economy into two separate domains: ‘micro’ and ‘macro’. The micro sphere is drained of all power, creating a showcase where the laws of economics function smoothly and automatically. Some of the drained power is classified as ‘imperfections’ and tacked on to textbooks as better-to-skip chapters. But the bulk of it – particularly the power of ‘government intervention’ – is exported to the macro field, where ‘distortions’ reign supreme. This solution helps keep the pristine simplicity of liberal theory intact – but at a rapidly mounting cost. Power is now recognized as an unfortunate yet permanent feature of the actual 12 Why write a book about capital?

economy. And as the power-free models start to fail, liberal economists find themselves increasingly reliant on ‘extra-economic shocks’, ‘selfish unions’ and ‘short-sighted politicians’ to explain what their eternal theories cannot.



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