EconoFiction

Bichler/Nitzans “Capital of Power”

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22 Jan , 2020  

At first glance, it seems that Deleuze’s concept of structure involves a complex form of the so-called creorder, a term that appears at the forefront of the methodological findings of the economists Bichler/Nitzan. (Cf. Bichler/Nitzan 2009) If the structure is updated in each of its moments in processes, then Bichler/Nitzan occupy this process with the term “creorder” (ibid. 2009: 19f.). They consider this to be a highly artificial term that is intended to indicate that a structure/order must permanently construct and reconstruct itself in (historical) time, just as a form must also be constantly transformed. According to Bichler/Nitzan, in the context of the Creorder, the meaning of the relationship between Heraclitic becoming and Parmenid being lies precisely in the fact that the fusion of verb and noun yields the term “Creorder”: “To have a history is to create order – a verb and a noun whose fusion yields the verb-noun creorder. (Ibid.: 305) On the one hand, the so-called creorder may be completely vertical or hierarchically ordered, as is the case in ultra-bureaucratic systems, for example, but on the other hand it may also be horizontal, as could be the case in radical democracies, or it may be located in between order and disorder. The fluctuations within the so-called creorders can be almost imperceptibly slow, until one finally gets the impression of a complete stability of order, or on the contrary, they can lead to rapid acceleration (increase of outputs per time unit) and growth excesses, which finally undermine order, whereby the respective transformative temporal patterns process continuously or discretely or in between, for example in the sense of a Dedekind operation. In this context, it is important to note, with Hartmut Rosa (Rosa 2005: 118), that this is not only produced, distributed and consumed ever more rapidly, but also more and more, whereby a progressive compression or scarcity of social and individual time resources only occurs when the growth rates of the production of goods, services, information, distances travelled etc. exceed the temporal acceleration rates of the processes corresponding to them, otherwise the technologically forced acceleration processes would tend to lead to the release of social time resources. And finally, one may imagine the temporal accelerations as well as the fluctuations in growth rates to be uniform or random, singular or multifactorial, but no matter what characteristic finally characterizes this kind of processual structural order, the so-called creorder always implies for Bichler/Nitzan a paradoxical duality, namely that of a dynamic creation of an inherently static structure (the paradox of a system/set that has the ability to relate to itself).

Now, most hierarchical systems do indeed seem to possess an extraordinarily high degree of stability, whereby, for example, their accelerative potential appears at least restricted or limited, whereby in economics, according to Bichler/Nitzan, this is done either through material limitations and/or symbolic restrictions, in and with which the permanent effort of the system is expressed to regulate or even eliminate all kinds of conflicts, class struggles and resistances, or at least to prevent an open outbreak of conflicts. According to Bichler/Nitzan, however, capitalism has decisively and substantially relaxed and flexibilized this kind of restriction by means of two forms of self-accelerating deterritorialization, which further dynamize all principles of movement and solidification (without ever being able to get rid of the fact of conflictuality; i.e, conflicts remain stored in the structure): a) through the permanent revolutionization of scientific and ideological ways of thinking and mentalities, in the course of processes of acceleration and growth and b) through processes of intensive monetary capitalization, which bring about the incessant translation of qualities into quantities with increasing speed of change (variable rhythms, sequences and metrics). And in this, capitalization proves to be the generative matrix of capitalism itself, enabling extreme acceleration and rapid growth of economic entities, factors which in turn must be related to each other if one wants to make powerful statements about the compression of economic time. In this context, capitalization today is a purely monetary oriented formation and calculation of (synthetic) capital, i.e., with the help of efficient mathematical calculations, power-oriented capitalists try to reduce the risky, in the future

to discount, calculate and realize expected profits. At first glance, it seems that this kind of conceptualization in Bichler/Nitzan corresponds to Deleuze’s attempt to incessantly shatter that objective illusion that forgets the process behind the structure. However, in Deleuze’s depictions, the structure itself possesses a real differential, the actualization of which, in turn, can still be found in the microparticles of social reality and its semioses and math.

The economists Bichler/Nitzan have presented a controversial approach which, in contrast to labour value Marxism, which they wrongly identify with Marx’s theory, emphasises the complexity of the monetary calculation of the future by (dominant) financial capital (as power). According to Bichler/Nitzan, capital can by no means be understood primarily as a mode of production, consumption and circulation, but rather as a symbolic mode of quantifying monetary capital as power, a determining regime of dominant capitals perfectly capable of permanently defining, shaping and regulating the various attractors, trajectors and vectors of the system in terms of power politics. (Cf. Bichler/Nitzan 2009: 42ff.) In fact, Bichler/Nitzan see at the center of the current financial regime the dominant capitals, which they define as symbolic institutions of quantified and quantifying capital power by perpetually perpetuating the claim to power of the private owners of economic units in the processes of capitalization and discounting. We are dealing here with economically quantifiable entities whose logic is to be regarded as the expression and measure of social power. Bichler/Nitzan do not speak of capital affirming power or being influenced by power, of power increasing capital or, conversely, of capital increasing power; on the contrary, at this point one has to abandon the idea of an external relation between different entities, since this cannot grasp the problem of power. Consequently, Bichler/Nitzan do not speak of capital and power, but of capital as power. Accordingly, the complex codes of old societies, after having been destroyed in protracted political struggles, have been replaced by a universal axiomatic/logic, namely the power logic of capital itself, whose calculi were constructed from the outset not by those of subjective utility, nor by calculi of production or consumption, but purely and comprehensively by calculi of finance qua capitalization. (Ibid.: 158f.) According to Bitzler/Nitzan, the constantly changeable syntheses of financial quantities, one could even say the pure flows of finance, which are constituted, articulated and at the same time coded by capitalization (an axiomatizing performance of capitalization that puts the flow and code of money capital into a relationship), do not reflect the qualities of capitalist goods or the productivity of capital, but rather represent and condense the power of the dominant capitalist private owners, who, however, continuously shape, regulate and control the economic, political and cultural magma of society actively in their own interest with the help of their symbolic power politics. The logic of capitalization thereby incorporates an anonymous, differentiated and invisible “mechanism” by which and through which the dominant capital controls the entire society by exploiting its property rights – to put it in purely formal terms on a simple formula: capitalization for Bichler/Nitzan implies the calculated (discounted) present value of the risk-adjusted profits expected from an economic unit in the future. “Capitalization represents the discounting to present value of risk-adjusted expected future earnings (and each of its symbolic components – the expected future earnings, the risk that capitalists associate with these earnings, and the normal rate of return that they use to bring them to present value – is a manifestation of organized power)”(Bichler/Nitzan 2013)

Accordingly, the symbolism of capitalization implies the calculation of the essential components of capital, including the profits expected in the future and the risks that the capitalists associate with these imaginary profits, the average interest rates and, finally, the future returns in relation to the current capital gains, and all these components, more precisely the management and control of all these symbolic components, represent, for Bichler/Nitzan, manifestations of organized capitalist power in a very structural way.

The power of these economic units (commodity, company, etc.) expressed in quantifications or prices, which is achieved through capitalization and discounting, is decisive for Bichler/Nitzan in his analysis of the current financialization regimes. And the primacy of power that Bichler/Nitzan ascribes to capital is ultimately based, for the two authors, on the dispositif of private property, which implies both institutional exclusion and deprivation; the dispositif of private property contains both a positive and a negative component, and both together promote the possibility of legally and consistently demanding and receiving monetary amounts from those who are excluded or indebted, in order not to have to exercise the right by force. And all too clearly, the architectonics of power has a quantitative and a qualitative dimension: whereas the qualitative dimension includes factors such as institutions, macroeconomic evolution and social conflicts, with the help of which the dominant capitalists in particular shape, underpin and regulate the social order, i.e. through processes with which they shape the so-called social trajectories of the system in permanence in order to generate their incomes in relative security, the quantitative dimension includes, in addition to capitalization, processes of machinization, i.e. the functioning of the universal algorithm and object-oriented computer languages (binary code), which in turn drive and encode, integrate and condense the countless qualitative processes, and this takes place under the dominance of the transactions of monetary quantities flowing in computer networks. Finally, any monetary stream of expected profits is considered a parameter of capitalization, which today potentially permeates every aspect of the social field, no matter how singular – dominant companies capitalize human life, social networks, social habitats, bodies and genetic codes, affects, wars and much more, if they can generate income and returns.

For Bichler/Nitzan, the dominant capitals with their hyper-active strategists constantly conjure up future events, developments and scenarios, and this is always done with the perspective of “safe” calculation of future money capital flows. But in a certain sense, for Bichler/Nitzan, too, capital has always had its future behind it, or it has to go backwards into the future, so to speak, because it does not know 100% what it is getting into with its calculations – caught completely in the forced corset of capitalization – and does not know where the journey is going and how deep one can actually fall, although this has happened a thousand times before. And all this happens precisely by taking current money capital, the sum of which one knows, as a (past) reference point to extrapolate future amounts and profits (which one does not know), trying to discount expected future profits to current money sums, while a (fictitious) benchmark provides the right “level” for the growth of profits. And this is true for time clusters over longer periods, where these processes represent something like the principal movement of the differential and financial accumulation of capital. In other words, capitalization includes, from the formal-economic point of view, a technology of calculating the (“discounted”) present value of the expected future income derived from an economic unit (money, commodity, enterprise, etc.), and this in turn documents the power to be realized and realized in prices, the claim to power of the owners of dominant capital over other social actors. For Bichler/Nitzan sui generis, the concepts of capitalization and discounting apply as expression and measure of capitalist power. (Bichler/Nitzan 2009: 183f.)

In elaborating their concept of capitalization, Bichler/Nitzan make a further necessary definition, which however challenges an even more precise analysis of capitalist profits: According to this definition, the expected future profits (present future) expected at a given point in time (ex ante) must be compared with the profits that have become current and are only considered known ex post and on which one has speculated (future present). These two profit streams prove to be identical at best. Bichler/Nitzan write: “By definition, ex ante expected future earnings are equal to the ex post product of actual future […]”(Ibid.: 188) And this relation is what Bichler/Nitzan call the hype coefficient. By definition, Bichler/Nitzan specify that a (variable) relation between the ex ante expected future returns and the actual flows.

As we shall see, this formalization resembles the distinction that Elena Esposito makes in her analyses of financial derivatives as the difference between the present future (expected future) and the future present (future that actually occurs). According to Bichler/Nitzan, the following equation can now be applied:

(Kt=capitalization in time) Kt = EE = E × H, where (EE) stands for the expected future profits, (E) for the current level of profits and (H) for the hype coefficient (H=EE/E).(Ibid.: 189)

While the so-called material capital in its one-dimensionality remains more and more related to the past, to the capital stock and the past monetary amounts corrected by write-offs, the multidimensional monetary capitalization proves to be purely future-oriented. Capitalisation is thus characterised by four essential parameters/variables: a) current stock of profits, each of which already originates from speculation with the future, b) hype coefficient, c) expected future profits, d) the so-called risk coefficient (ibid.: 183ff.). According to Bichler/Nitzan, the interplay of these elementary symbolic variables of capitalization condenses, condenses and represents the power of the dominant capital, indeed it indicates capital as power, whereby financialization and the capitalization on which it is based form the actual movement of capitalist economy from the outset. According to the above equation, the capitalization of an asset/assets or a share of assets depends very much on two factors that define the profits/returns: a) the current assets, which can always only be determined ex post, and which always result from the management of the future The returns on these assets are unknown at the time when the assets are capitalised, but they become known with and in the time when income and profits are fixed, recorded and announced, b) the hype coefficient, which encompasses the collective error of capitalists as a class and already occurs at the time when assets are priced out (on the basis of ex ante expectations), whereby one can of course only determine ex post whether the expectations have been realised or not, i.e, this error is potentially present at the time when prices are assigned to the assets in question, but only comes to light when profits are fixed or announced. If the hype coefficient is expressed in a number, it articulates the question of whether capitalists have been overly optimistic or overly pessimistic about their future profits: If the expectations were overly optimistic, then a hype coefficient greater than 1 is to be assumed; if they were overly pessimistic, then it is to be set less than 1; only if the capitalists’ projections were perfectly correct, then the hype coefficient is to be set equal to 1. (Ibid.: 188f.) What is at stake here is not a particular entity or the strategies of individual capitals, but something like the universal value of an entity defined by a capitalized and capitalizable asset.

For Bichler/Nitzan sui generis, uncertainty in capitalism is hidden in the discount-interest-rate scheme. (Ibid.: 196f.) (The discount is considered a form of interest. Whereas interest is always drawn retroactively, the discount is deducted ex ante from the so-called nominal value of a claim that is due within a certain period of time. It is to be calculated as a percentage of the nominal value related to one year). Bichler/Nitzan extend the derivation of the capitalisation formula with the definition of profitability (r), the ratio between the quantity (E) (earnings/profits) and (K) (K is here considered to be the dollar value of the invested capital):

r = E/K applies. (Ibid.: 197)

It is easy to see that this is an equation, an unknown and a solution. By a simple rearrangement of the variables of the equation, one achieves the following: If the profitability is calculated on the (known) basis of the profits and the original investment, then the investment can be calculated as the relation of profits and interest rate, so that one obtains the following formula: K = E/r. (ibid.)

The result appears as a formula which, according to Bichler/Nitzan, articulates and compresses exactly those social and economic practices with which the capitalists as a class have made and still make most of their price fixations since the 14th century. Mathematically, the two equations above seem identical, if not circular (see the Cambridge controversy), but in economic reality they contain a considerable

there is a considerable difference: while the first equation contains an ex post representation – it leads to the calculation of the interest rate, where the original investment and the resulting profits are known – the second equation implies an ex ante valuation: with it it it seems possible to calculate the value of the monetary capital in terms of future profits; these are unknown profits, just as the capitalists know nothing about the interest rate that may represent these profits. Therefore, at this point one is confronted with the impossible task of solving an equation with three unknowns, although this procedure hardly seems to have been a problem for capital in real-historical practice, because the capitalists as a class have (and still do) conjured up the familiarity of two quantities in order to finally calculate a third, an unknown quantity. But of course the question immediately arises as to how this is actually practiced and what this process means for the differential accumulation of capital (ibid.: 196f., 383f.): the fundamental problem is the prediction of future profits, whereby calculations prove to be wrong per se due to uncertainty, but the errors implied by this do not prove to be infinitely wrong either, according to Bichler/Nitzan, because over a sufficiently long period of time the calculations actually seem to oscillate closely around the curves of currently given values and figures. This results both from empirical analyses and from the insight adopted from chaos theory that over longer periods of time the results of games such as roulette have a certain mathematical descriptiveness. Also the interest rate/discount rate (rate at which it is fixed what a fortune of profits should really yield in the future) can be assumed to have a certain constancy and stability. If the interest rate reflects, among other things, the confidence that capitalists have in their own predictions and calculations, it is easy to conclude: the greater the uncertainty, the higher the interest rate must be. (Ibid.: 196f.) In the context of internal accounting, economists often state the fundamental difference between equity and debt as a question of confidence. And in economic reality, the degree of trust between the various owners of monetary capital depends largely on the “normalization” of their power. What explicitly counts with regard to the quantifiable calculation of power is the future-oriented possibility of the capitalization of money capital on the money and capital markets. If the past represents the realization of an expected profit, then the future represents the promise of a profit. And in this context, entries in double-entry bookkeeping appear as looking backwards, so to speak, and therefore as relatively insignificant, whereas capitalization, on the other hand, can be understood as a symbolic valuation/estimation or calculation of the future, which, moreover, by definition cannot circulate. More than that, if one calculates the risk-adjusted and discounted value of future profits, there is no, and if at all, a rather negative relation to the costs of the assets currently circulating.

However, some caution must be exercised in this kind of identification of quantifying capital and power, and this especially with regard to the Marx criticism made by Bichler/Nitzan (Marx allegedly neglected the aspect of power in addition to a false division of capital into real and financial capital), especially when the two authors attribute an incredible “scientific story” (ibid.: 313) to that identity of capital and power which they themselves call “figurative identity”. To illustrate this with a simple example: If in a country the market capitalization of a dominant company is 1000 times greater than the average market capitalization of the medium and small companies, then the owners of the dominant company in the sense of absentee ownership (separation between ownership and company management) also possess 1000 times more power than those of the medium and small companies, according to Bichler/Nitzan. (Cf. Kliman 2011b: 67) Why, and this is what Marxist economist Andrew Kliman also asks in his criticism of Bichler/Nitzan’s concept, why in heaven’s name 1000 times as powerful and not 100 or 2000 times as powerful? (Ibid.) For Kliman the matter is clear, Bichler/Nitzan get rid of the problem by describing power exclusively with the categories and models of market capitalization (of the dominant companies).

The market capitalization of a dominant company, which is 1000 times greater than the average of the companies, however, as Kliman rightly points out, gives its owners or shareholders far less power than the owners of the companies with average market capitalization. There is also the danger here of transforming the relational relationship of power and its intrinsic relations of forces, as worked out by Foucault, into the description of a container that represents power, which one fills, as it were, with variously powerful capitals, in order to arrive at a description of capital as power; this would then be equivalent to the reintroduction of an old ontology, which one in turn liquefies by citing a statement that says: the power of power is the power or the capital of capital is capital. Kliman sums up at this point that the identification of capital and power is certainly not correct, but as Bichler/Nitzan themselves would admit, this is only a “figurative identity”. (Bichler/Nitzan 2013)

For Bichler/Nitzan, term earnings volatility does not automatically imply the prospect of pole position in the markets. Indeed, according to the two authors, the problem of volatility should be immediately linked to the problem of power. The goal of all capitalization strategies of dominant capital is not primarily geared to higher income per se, but rather demands above all the attainment of a larger share of the mass of the total profits of an economy. According to Bichler/Nitzan, many of today’s dominant owners are not particularly broadly diversified in their portfolios; instead, they pursue a highly focused policy – and in contrast to the so-called passive, reflexive individuals who populate the CAPM markets of financial mathematicians, one should imagine these kinds of owners as hyperactive and exploiting resources of all kinds, because they never accept profit opportunities as just given, but try to actively create them, they even fight obsessively for higher profits within the framework of a differential accumulation (beat-the-other) and as a result they always try to tame volatility and its extreme asymptotic swings, at least for themselves.

These processes are now also taking place within the framework of so-called market states, which are completely focused on their competitiveness on the world market and have to fear other market states as their enemies, and are therefore also constantly concerned about weakening their competitors. And power-obsessed owners of money capital not only accept the risk, but actively design and shape it, which would relativize the imagined close relationship between profit volatility and profit growth. Instead, at least according to Bichler/Nitzan, with some dominant capital fractions the concentration of all economic processes on the problem of profit growth in the context of the elimination of competitors would turn into a pure obsession, and this entirely in the sense of power-oriented control, calculability and differential computation of money capital flows. Bichler/Nitzan thus describe organized capitalist power as an attempt to permanently advance the active design of economic processes that serve to translate undefined uncertainty into quantifiable risks. Uncertainty arises here not only because of the paradoxes of capitalist future management addressed by Esposito, but also precisely because of the conflictual logic of differential accumulation, which is dominated by the large capitals. At the same time, according to Bichler/Nitzan, these quantifiable power games with their entropic tendencies always imply order, as the “measure”, so to speak, that defines the extent to which uncertainty can be kept within limits. Bichler/Nitzan write: “Partly objective, partly inter-subjective, this degree is captured inversely by the ‘risk coefficient'” (Bichler/Nitzan 2009: 210)

While the risk premium is defined as the designated return in terms of current volatility, the risk coefficient is about the confidence that capitalists and their various factions have in their own predictions. Of course there is now a relationship between volatility and confidence, but the correspondence is by no means easy to understand: For volatility in itself does not generate uncertainty; rather, it is specifically power-oriented temporal patterns of volatility that constantly produce uncertainty. Bichler/Nitzan add another aspect to their economically based power analyses: while in financial theory one believes that the affirmation

of higher risk is always rewarded with a higher risk premium, which also appears to imply a high volatility of profits, empirical analysis shows that, for example, at certain temporal intervals, General Electric’s profits increased ten times more than General Motors’, but the volatility of GE’s profit growth was actually lower than GM’s (ibid.260f.) It seems that the empirical analysis in this case beats the hypothesis of an idealistic theory, because the factor of volatility proves to be secondary to that of profit in this case. And in this context, it would then also be necessary to ask how such economic conglomerates such as BMW, General Electric, DaimlerChrysler or Philip Morris can be classified at all, since these companies today operate in the most diverse sectors of the entire business spectrum, ranging from financial intermediation to the trade in raw materials and their processing to entertainment, marketing and distribution. The diversification of these groups seems so extensive that we are dealing with a general economic problem. According to Bichler/Nitzan, production always implies a kind of “socio-hologramic activity”, and it is carried out by an integrated sector of industry, whereas in contrast the large corporations are financialised structures/entities – BMW, for example, would not need to produce any cars at all, the company would only have to control the production of the cars. Similarly, corporations such as Mitsubishi Trading or Deutsche Bank, with their power to integrate various forms of power, control key aspects of automobile production and only this control allows them to demand “undifferentiated parts of the total societal profit”. This way of classifying companies is thus not only based on establishing a relation to production, but on an analysis along the broader line of monetarily quantified power, of which production is only one aspect (ibid.262) With their distinction, based on Thorstein Veblen, between industry – the production of articles of daily use for human needs – and the so-called business, the trade of monetary values with the sole aim of increasing these monetary values, for Bichler/Nitzan business not only functions independently of industry, but in part even hinders its production processes. When Bichler/Nitzan argue that today it is not industry in the Veblenian sense, but precisely business that represents the essence of postmodern capital, and this in complete contradiction to the assumptions of neoclassical and Marxist theory, then on the one hand they may be right in their criticism of certain theoretical approaches (neoclassicism and dogmatic Marxism), but on the other hand, by concentrating on power-theoretical aspects, the authors themselves only reiterate the duality of real and nominal economy, which they, for example, call the “duality of power”. Marx, for example.

Although Bichler/Nitzan constantly point out that Marxism and Marx himself made a separation of real and nominal capital in principle and not just analytically, they themselves make a genuine division in advance of their analyses: Firstly, they mention the so-called creative/productive capital, which the American economist Thorstein Veblen, to whom they refer, called “industry”; secondly, they introduce an area of economized power, which in the current capitalist epoch is characterized by the naked form of business and sabotage, the so-called strategic sabotage, the very conscious rejection of social innovations and inventions purely for the sake of maintaining power. For both Veblen and Bichler/Nitzan, industry is to be understood as collective knowledge, which in Marx’s sense roughly corresponds to the General Intellect, which is highly cooperative, integrating and synchronizing production processes, while in contrast, the so-called Business does not function collectively and collectively at all, at least according to Bichler/Nitzan, but rather works under the dominance of the large capital with systemic prevention and legal restriction qua private property, operates with strategic sabotage, which permanently shakes or upsets social democratization, innovative resonances and social conditions, in that dissonances are installed as the power of the dominant capital and thus processes of oligopolisation are driven forward, which in most cases leads to non-linear relations between industrial capital and the so-called financial business.

. Bichler/Nitzan make a further dualization with Mumford’s distinction between democratic technologies and power technologies, whereby with regard to the latter they speak of a mega-machine of capital controlled by the capitalization mode. The two authors concentrate their approach primarily on aspects of capital power over … (transitive power, the influence of actor A on the actions of actor B): over employees, over other capitals or companies, etc., while forms of intransitive self-referential power or Foucault’s bio-power are hardly mentioned, which only generate the social period and the respective reference points for actions, struggles and mutual influence.

literature:
Bichler, Shimshon/Nitzan, Jonathan (2009): Capital as Power. A Study of order and creoder. Florence.

  • (2013): Differential Accumulation. In: http://bnarchives.yorku.ca/323/03/20121200_bn_da_ft_lexicon_web.htm
    Kliman, Andrew (2006): Reclaiming Marx’s “Capital”: A Refutation of the Myth of Inconsistency. Lanham.
  • (2011a): The Failure of Capitalist production: Underlying Causes of the Great Recession. London.
  • (2011b): Value and Crisis: Bichler & Nitzan versus Marx. In: Journal of Critical Globalisation Study. In:
    http://www.marxisthumanistinitiative.org/wp-content/uploads/2011/07/Value-and-Crisis-BN-vs.-Mx-WSS.pdf
    Rosa, Hartmut (2005): Acceleration. The change of time structures in modernity. Frankfurt/M.

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