Capital Accumulation - New Developments in Capital Accumulation

New Developments in Capital Accumulation

New trends in capital accumulation include:

• financialisation (the extraordinarily strong growth of the international financial markets. This is trade in financial claims to current and future income. As a corollary, the proportion of national income which consists of interest income and rentier income increases. The International Swaps and Derivatives Association reported in September 2006 that the outstanding nominal value of swaps and derivatives at the end of June 2006 was $283 trillion- nearly ten times the combined GDP of the US, Canada, the EU, Japan, and China; or ten times the value of total US home equity (each being valued at about $34 trillion). According to Standard & Poor's, world stock market capitalization is about $41 trillion. Of total swaps and derivatives, some $26 trillion was in the fastest growing area, credit default swaps.
• Modern information technology makes it possible to engage in very complex investment projects and shift funds extremely quickly from one placement to another in space and time. This increases the rotation speed of capital and raises the profit rate, but can also increase potential financial risks.
• the growing controversies about intellectual property rights and the protection (or security) of ideas which can make money for the owner. Increasingly, the basic conditions necessary for a good, service or idea to become a tradeable commodity are theoretically defined.
• ongoing privatisation of assets which were previously under public ownership. The IMF estimates suggest that in two decades since 1985 more than $2 trillion US dollars (in 2005 values) worth of state assets were privatised worldwide. Typically, these assets also rise sharply in value within a few years, because they involve enterprises occupying monopoly positions (e.g., utilities) which thus provide guaranteed profits. If profits dry up in the private sector, capitalists acquire public assets paid for by all citizens, with the argument that if they run them, supply will be more efficient.
• The enormous increase in capital gains from rising property values in the richer countries, especially in the |housing market. US tax data for fiscal 2000 showed that realised capital gains in the USA peaked at an estimated $644.3 billion worth of income while US GDP in 2000 was at US$9,817.0 billion, in other words realised capital gains assessed for tax purposes were equal to 6.5% of GDP at that point (total capital gains would be larger). Yet GDP, being a measure of value added in production, does not even include this "hidden" personal and business income.
• A growing proportion of capital assets which is not productively invested (overcapitalisation), together with an increase in the amount of consumer debt and liabilities. Some observers see the cause as being an increase in the gap between rich and poor, which causes only sluggish demand growth. "Debt management" has become a distinct and profitable business.
• The crisis of numerous pension funds providing a large amount of investment capital, which are alleged to be badly managed.
• An international "competition of currency values" strongly influenced by speculative capital, which has a big effect on the pattern of international trade. The magnitudes involved can be gauged, e.g., from the currency conversion ratios used to establish purchasing power parity (PPP). For example, India's GDP valued at PPP becomes five times larger. This tends to stimulate counter-trade.
• The acceleration of the concentration and centralisation of capital internationally in very large corporations. The Fortune Magazine "Global 500" largest corporations in 2004 employed more people than the whole workforce of Germany. The after-tax profit volume of the Fortune Global 500 was said to be $731 billion, the combined asset value was $60.8 trillion, gross income (revenues) $14.8 trillion, and stockholders equity $6.8 trillion. For comparison, world GDP in 2004 was valued at $40.9 trillion (World Bank).
• The Merrill lynch/CapGemini World Wealth Report 2005 covering High Net Worth Individuals (HNWI) claims the fortunes of the world's millionaires and billionaires grew strongly in 2004, increasing by 8.2% to US$30.8 trillion in one year. Driven by North America & Asia–Pacific, this represents "the highest growth of HNWI wealth in more than three years".
• Dollarisation - more US currency now circulates outside the US than inside it, and some countries such as Ecuador and El Salvador have adopted the US dollar as national currency. "Dollar hegemony" is maintained by large Asian, Arab and European investments in the United States.
• the tendency for corporate investment to orient towards activities which secure good short-term returns for shareholders. This is called "value-based management". Most corporate executive officers (CEO's) cite profitability as their prime concern.
• an increasing preoccupation with the conditions for extending credit, and with all sorts of risk factors. World markets are increasingly sensitive to events and disturbances which might cause social instability or panics.
• the declining overall significance of business start-ups, in the sense of enterprises creating new products and services, rather than being just tax-shelters or secondary employment (whether this is a permanent trend remains to be seen).
• the growth of criminal (or illegal) accumulation as measured by crime reports, including business crime and corruption such as fraud, embezzlement, money laundering, insider trading, smurfing and theft, but also prostitution, forced labour, slavery, war plunder etc. The volume of illegal international transactions is now said to be around $1 trillion a year, equal to the GDP of Spain or Canada. National Geographic has reported there are about 27 million slaves in the world. International Labour Organization estimates of forced labor are a little over a dozen million. There are possibly 70 million people involved around the world in prostitution of one form or another. But there are many more, employed or unemployed, in "intermediate" positions. Traditional sociological categories may not describe their situation accurately, but a growing "underclass" (which may not be an accurate label) is a policy concern for many governments.
• the most ignored aspect is the changing structure of the international workforce in its totality, specifically the number employed by specific employment status and by income, in different sectors. But just as Marx's Law of Accumulation predicted, the working class has grown enormously within 2 centuries. Deon Filmer estimated that 2,474 million people participated in the worldwide non-domestic labour force in the mid-1990s. Of these around a fifth, 379 million people, worked in industry, 800 million in services, and 1,074 million in agriculture. The majority of workers in industry and services were wage & salary earners - 58 percent of the industrial workforce and 65 percent of the services workforce. But a big portion were self-employed or involved in family labour. Filmer suggests the total of employees worldwide in the 1990s was about 880 million, compared with around a billion working on own account on the land (mainly peasants), and some 480 million working on own account in industry and services.
• tax havens. Hides 8 trillion.