Vampire Capital

It bothers me as a general matter that so much of our discourse about the economy can proceed as if capitalism distributes things according to variations in work and contribution, or in short desert. It bothers me both because it is wrong and also because it is clearly wrong in ways that have been known for centuries, but which no major commentator is interested in talking about.

When faced with such nonsense, it should be simple enough to point out that 30% of the national output each year goes to owners of capital that did not produce it. You can quibble over whether we should describe that 30% as having actually been produced by workers (Marx’s view) or as having been produced by the capital itself (the more conventional view), but there is no quibbling over the fact that the capitalists did not produce it. The marginal productivity of capital is not the marginal productivity of its owners, a fact made even more compelling (and dangerous) by the fact that “ownership” is a purely legal construct.

What’s more, if you understand the process of compounding capital accumulation, it could not be more obvious that capitalists are receiving distributions from production that they have absolutely nothing to do with. The production of a unit of capital (say a machine) is, in the first instance, a creation of labor. And from a basic desert view, we would say its producer has a right to it. But from that point on, the production of the capital itself, and the capital income that flows from that production, is not the creation of the capitalist’s labor and the capitalist cannot seriously maintain they are the producer of it. This is, technically, where the desert chain first breaks down.

But even if you thought, as might be reasonable to some, that someone who physically makes a machine is owed both the machine itself and the future income flowing to it, this would never be able to explain how compounding capital income is justified. If a person who physically makes a machine takes the capital income from the machine and then pays someone else to make more machines from which he also then takes the capital income, the capital income from the second-order machines cannot be justified at all. Unlike the initial machine from which he derived capital income, he did not make the second-order machines. What he is doing at that point is leveraging capital income to capture capital produced by other workers, the capital income from which he will then use to capture even more capital produced by other workers, and so on. As this cycle progresses on, we find ourselves with a guy that is living on rents from rents from rents from rents.

Karl Marx is 100% correct on the merits when he famously described this sort of capital accumulation as such: “Capital is dead labour, that, vampire-like, only lives by sucking living labour, and lives the more, the more labour it sucks.” That is simply a factual empirical claim. There is nothing to quibble about on this. It’s not even a philosophical point. It’s just a correct observation about the mechanics of capital accumulation.

I realize that hegemony is a hell of a drug and, as Marx himself points out, legitimating ideologies form up around whatever the economic system happens to be at any given time. But really this desert style of argument is not something people should be entertaining at all. The fact that capitalism does not distribute out according to desert was like 95% of the whole Marxist point! The pro-capitalist response is supposed to be that, for instrumental utilitarian reasons, it’s OK to essentially tax 30% of the national product and hand it over almost entirely the wealthiest 10%. That’s supposed to be a compelling argument, so why can’t we all stay in our lanes on this?

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