Dear Psychohistory Organization Group Members,

Pasted-in below is Part 2. of the synthesis of Capitalist Crisis Theory whose overall title is --

MALADY AND REMEDY: WHAT'S WRONG, AND WHAT TO DO ABOUT IT

-- encompassing the following sub-titled sub-parts --

The Genesis of the Core Plutocracy's 'Capitalist Anti-Capitalism'

Hypothesis I: The Two Phases of the History of the Global System of Capital

-- and available, in full, via the following URL --

www.equitism.org . . .



The Genesis of the Core Plutocracy's 'Capitalist Anti-Capitalism'

The competition among capitals — plus, the struggle of the owners of capital to subjugate "their" labor force — stimulate technological advances in the methodologies and instrumentalities of capital-based commodity production.

The effect of these advances is to raise productivity.

Productivity is raised:

* by producing more units of commodity-output in less time;

and/or

* with the productive-consumption-of less/less-costly units of direct-labor;

and/or

* with the productive-consumption-of less/less-costly units of other inputs;

and thus, for any one, or for any combination of the above, at a lower cost per unit-of-output.

This creates opportunities, e.g., to sell that output:

* with a higher profit-margin at the same price as the less
technically advanced competition is charging;

or

* to undersell that competition on price at the same profit-margin which that competition was garnering.

The actualization of such opportunities results in that competition dying off, in that competition being absorbed into and/or being dissolved by the higher-productivity competitor, or in that competition adopting the same or a better technological advance.

This latter option assumes that those competitor-firms can so adopt, without going bankrupt, due to the incremental costs, incurred by them, for this adoption.

These advances become increasingly threatening to the wealth-binding and power-binding monetary-value-content of the hyper-concentrated capital-holdings of this plutocracy, as the balance of their capital-investment expenditures shifts relatively, but increasingly, toward "plant and equipment" expenditures, over-and-above wages-and-salaries expenditures, or living human-labor power expenditures.

These capital, plant, and equipment holdings of the plutocracy accumulate partly in the forms of directly-owned "plant and equipment" capital-assets, but also partly in the form of "capital equity stock" capital-assets, "corporate bond" capital-assets, "long term bank loan" capital-assets, etc., which simply represent the plutocracy's indirect
ownership of such "plant and equipment" capital-assets.

This threat grows, as the proportion of wealth held by the plutocracy in these forms grows, and as the rate of technological advance accelerates in response to the profit-stimuli cited above, with advancing accumulation of capital-asset value.

As these technology-forms, incented by the capitals-system, advance, an ever-greater relative proportion of the physical mass of the physical assets used in plutocracy-owned industrial production takes these "plant and equipment" forms, vis-á-vis, the forms of the living human "socio-biomass" of the human work force.

Likewise, the monetary-value-mass of such "plant and equipment" — and the monetary-value-mass of its per-unit-of-output charges for "wear and tear", or "physical", depreciation-expense, included in the prices
of the plutocracy's sold output — increasingly exceeds the
monetary-value-mass of the wage-and-salary expenses also included in those prices.

This threat to the plutocracy's money-power grows because
technological advances — concretized by competitors — increasingly tend to evaporate and vanish the capital-value of the plutocracy's "plant and equipment" holdings, due to technological, obsolescence depreciation.

Thus, the vulnerability of plutocracy-owned capital-assets to technological, obsolescence depreciation accelerates as that plutocracy's "plant and equipment" capital, and as capital's technology, both accumulate together.

Later, lower purchase-cost vintages, and/or technologically-superior vintages, of capital-value — newly-incarnated in such advantaged "plant and equipment" capital — massacre the capital-value of earlier,
higher-cost, and/or technologically-inferior vintages.

As the rate of technological innovation accelerates, these later vintages perform this massacre long before those earlier capital-value vintages — now relatively disadvantaged — can be "amortized", via "normal", physical "wear and tear" depreciation-charges recouped from
sales of their output.

That is, eventually, as capital-value accumulation progresses, the average period between technological advances in machinery-design becomes shorter than the average period of physical wear-and-tear depreciation of that machinery, as a result of the accelerating rate of technological change.

Thereafter, competing new vintages perform this monetary-value massacre on the obsolete vintages long before the capital-value of the obsolete vintages can be recovered, together with an adequate, positive "return on" their investment.

That recovery of value would have been achieved only if the output of these capital-value production-assets were successfully sold at prices which covered this physically "used up" capital-value.

Once the average '''technological life''' of such "plant and
equipment" capital becomes shorter than the average '''physical life''' of that "plant and equipment" capital, this recovery fails, and "return on" investment becomes "loss on" investment.

Concomitantly, the preponderance of industrial operating-capital invested shifts, from taking the form of wages-and-salaries, to taking the form of capital "plant and equipment".

This shift in the preponderance of the monetary-value of capital investment from the wages-and-salaries side to the "plant and equipment" side, is itself a reflection of the technological gains in productivity that have been achieved.

Consider what happens, once this preponderance shift has occurred at the level of a given industry as-a-whole.

Competitive installation of new capital "plant and equipment", that is yet more productive still, tends to induce a monetary-value loss to capital, due to technological, obsolescence depreciation.

It also tends to induce monetary-value gains to capital, due to the per-unit-of-output savings of wages-and-salaries, and/or due to the per-unit-of-output savings of raw-and-auxiliary-materials' costs, that may result from this increased productivity.

However, once this preponderance shift has occurred, those
technological, obsolescence depreciation losses tend to exceed those gains due to savings.

Thus, the net effect, at the industry level, of these countervailing gains-and-losses, both triggered by the same act of competitive installation of technologically-superior "plant and equipment", by competitors, is negative — is a negative profit overall [i.e., a net loss], and/or a negative increment to '''capital-value accumulation'''/"retained earnings" [i.e., a net reduction to accumulated capital-value].

For example, the invention and implementation of fusion-power reactors, say, ones fueled by water, would more-or-less rapidly technologically-depreciate, to near-zero, the entire oil "plant and equipment" capital-assets owned by the global petroleum/finance
plutocracy, were that plutocracy ever to permit such a technological advance to "see the light of day".


Hypothesis I: The Two Phases of the History of the Global System of Capital

A reversal, an historical turning point, eventually arises for the global capitals-system as a whole — a turning point from the progressive to the increasingly retrogressive reign of the global system of capitals, and of the capital-based plutocracy.

This turning point arrives when the transient capital-value gains to that plutocracy, no longer exceed, "in the net", on average, the capital-value losses to that plutocracy, such that both the gains and the losses are due to a single causative process: "the growth of the social forces of production", i.e., the growth of productivity.

The gains result from temporary increments to the plutocracy's profitability, due to reductions in the costs (per unit of the commodity-output), of the labor, and of the other ingredients, required for the production of that commodity-output.

These cost reductions express technological productivity gains in monetary terms.

These gains accrue to the plutocracy via installed advances in technological productivity, embodied in their newer vintages of capital "plant and equipment".

These losses arise due to the exposure of the plutocracy's businesses to their competitors' installations of superior new vintages of productivity-advancing capital "plant and equipment".

These resulting increments to the plutocracy's losses, arise due to the competition-enforced "premature" scrapping of the plutocracy's older-vintage capital "plant and equipment" assets.

These losses result from scrapping capital "plant and equipment" assets before the normal time-span of their "wear and tear" depreciation, or physical depreciation, has ensued.

Thus, these losses arise due to the scrapping of "plant and equipment" assets, before the cost of those capital-assets has been "amortized" and recovered via the depreciation charges included in the prices of their sold commodity output.

Therefore, all these losses result from the
technological-depreciation, or productivity-gain-induced depreciation, of such of the plutocracy's capital "plant and equipment" assets as are confronted with competitor-installation of superior vintages of capital "plant and equipment" assets.

This is especially true in the case of the installation of superior such later vintages by new entrant competitors, who do not share the legacy of that the older entrants may share, of, for example, 50-year loans taken out to finance the purchase of the earlier, now-inferior vintages.

The "old entrant" competitors must still bear the costs of paying the contractual debt-service on those old-vintages' loans, despite the fact that those old vintages have been taken out of service and scrapped.

The "old entrant" competitors must also bear the costs of paying the contractual debt-service on any loans needed to finance their purchase of the new vintages, which these "old entrants" are forced to install by competition from the new entrants, who launched with the newest vintage "plant and equipment".

Thus, the profitability potential, and the '''competitivity''', of the "old entrants" is impaired relative to that of new entrant(s), even after the "old entrants" have scrapped the old-vintage equipment, and installed the new.

The plutocracy comprises, by definition, the owners of the most concentrated, most consolidated, most centralized portion of core industrial and financial capital-assets.

Their continual exposure to competition from technologically superior "plant and equipment", installed by rivals, and/or by new entrants, and the net losses to their fixed capital, and to their profit-returns on that fixed capital, that such exposure increasingly entails, after this historical turning point, increasingly threatens the economic basis — the predominant capital-ownership basis, and the predominant
money control basis — of the socio-political power of this plutocracy.

This turning point can be characterized as that of a turn or shift in the ratio of the capital-value of "fixed capital" ("plant and equipment", which is exposed to capital losses due to 'techno-depreciation') divided by the capital-value of "circulating capital".

"Circulating capital" includes:

* the physical, wear and tear "depreciation" charges;
* the wages costs; and,
* the other "ingredients costs" or "inputs costs".

These "circulate" in the commodity output offered, on the market, for sale.

This output, "circulating capital", also thus embodies the
"gains" to profitability, as "savings" to "input costs", due to technological productivity gains.

This ratio turns or shifts from magnitudes which are less than 1 (i.e., with circulating capital value, in the denominator, preponderating), to magnitudes which are greater than 1 (i.e., with fixed capital value, in the numerator, preponderating), for world-market-system core industrial capital.

This process of competition-enforced, productivity-gain-induced, net-loss depreciation — of "obsolescence depreciation", "moral depreciation", "technological depreciation", or 'techno-depreciation',
for short — can generate (1) competition-driven 'techno-deflation' of the prices of the plutocracy's commodity output, and also (2) aperiodic write-downs of the "book-value(s)" of these capital-assets.

Hence also, the latter, can generate aperiodic loss-charges against the plutocracy's "retained earnings".

Both of these effects reduce the rate-of-return on the "historical or "original" value of the plutocracy's past, "sunk" capital investments, as a visible, "secular" trend over time.

Indeed, the accelerating growth of technological productivity did just that, in the U. S., in the immediate post-Civil War period, in the ~35-year 'Long Techno-Deflation', from 1865 to about 1900, i.e., in
the period leading up to the "Great Panic" of 1907, followed by the imposition, by the plutocracy, of the "Federal Reserve System", and of the Federal Income Tax, in 1913, and the first world-wide war, starting in 1914.

For example, note the levels of prices and inflation from 1665 to 2005 in the GRAPH below [e2]:

GRAPH: price levels and inflation
[not reproduced in this post]

After the "turning point" as defined above — i.e., once fixed capital "outweighs" living human labor-power in the plutocracy's core industrial production mix — these processes will generate a generally-declining trend in the return on the plutocracy's core industrial capital investments.

This declining trend arises, because the exposure to
'techno-depreciation' losses of the plutocracy's core industrial "plant and equipment", exceeds the potential profitability gains, both these losses and these gains being produced by a single cause: productivity increase.

This declining trend will continue for as long as that plutocracy permits such competition to operate somewhat freely, or, for as long as that plutocracy lacks the accumulated, concentrated capital-money-based political power necessary to successfully contrive to constrain such competition.

Extensive extracts from the writings of many observers of
political-economy, describing this dynamic of 'techno-depreciation', have been collected in one document. [e3]

We will cite, here, only two examples, not included in those extracts, to epitomize the flavor of those other expert observers' observations:

* Example A:

From Charles Babbage's (circa 1832) book, On The Economy of
Machinery and Manufactures. Even in the early-to-mid 1800s, in the U.K.'s machine-based manufacturing:

"The improvement which took place not long ago in frames for
making patent-net was so great, that a machine, in good repair, which had cost £1200, sold a few years later for £60. During the great speculations in that trade, the improvements succeeded each other so rapidly, that machines which had never been finished were abandoned in the hands of their makers, because new improvements had superseded their utility." [e4]

* Example B:

From Harold Livesay's book, Andrew Carnegie and the Rise of Big Business. In the late 1800s, around 1888, in the U. S. steel industry:

"Carnegie ... [gave] his staff standing orders to replace
obsolete machinery.... Bill Jones complied enthusiastically and soon had a renowned dump full of outmoded though not outworn machinery....Carnegie once ordered Charles Schwab to rip out and rebuild a three-month-old rolling mill when Schwab said he had discovered a better design." [e5]

As noted already in Hypothesis I, lodged above, such declining profitability, tied to declining prices of general industrial output, occurred, for example, in the U. S., in the late 1800s, leading up to the imposition, by the plutocracy, of the Federal Income Tax system, and of the Federal Reserve System, in 1913, and of World War I, in 1914.