Capital as Power in the 21st Century: A Rethinking of Capitalism

Challenging Traditional Economic Views

The traditional view of capitalism as a system of production and consumption is being challenged by a new framework: Capital as Power (CasP). This groundbreaking approach, developed by Jonathan Nitzan and Shimshon Bichler, argues that capitalism is fundamentally a mode of power, with capital itself representing a symbolic quantification of that power. This perspective shifts the focus from economic metrics like growth and productivity to the dynamics of power and how it shapes social, political, and economic hierarchies.

The Pervasiveness of Power

Power dynamics are deeply embedded within capitalism. Robert Heilbroner, in his book *Behind the Veil of Economics*, highlighted the subtle yet pervasive coercion inherent in the capitalist system. Unlike feudalism's overt use of force, capitalism's power lies in the control of resources essential for survival, effectively compelling individuals to sell their labor.

This power extends far beyond the individual worker-employer relationship. Massive, state-backed corporations wield immense influence, as evidenced by their increasing market share and control over intangible assets like intellectual property. Governments themselves, while often touted as separate entities, are deeply intertwined with these power structures, playing a key role in regulating and shaping economic activity.

Mikhail Kalecki’s prescient 1944 essay identified the inherent tension between full employment and capitalist power. He argued that capitalists prioritize control over workers and social stratification—maintained through a reserve army of unemployed—even if it means forgoing potential profits from a fully employed workforce.

The Limitations of Traditional Political Economy

Why is power often overlooked in traditional economic analyses? One reason is the historical baggage of prioritizing individual utility (in neoclassical economics) and productive labor (in Marxist economics). These pre-existing frameworks leave little room for a central focus on power. More importantly, integrating power dynamics into these theories causes them to break down. The reliance on perfect competition to explain price formation falls apart in the face of monopolies, government intervention, and other forms of power exertion.

The Illusion of Value

Traditional political economy rests on theories of value, whether based on utility or labor. However, these "real quantities," as Nitzan describes them, are ultimately unmeasurable and serve as little more than theoretical constructs. The circular logic of imputing these values from prices and then using them to explain those same prices highlights the tautological nature of such arguments.

Capital as Power: A New Perspective

CasP offers a compelling alternative by anchoring prices not in the inherent qualities of commodities but in the power relations between their owners.

“According to CasP, in capitalism, the relative price of a commodity represents the organized power of the commodity owners relative to the organized power of other owners.” - Jonathan Nitzan

This perspective redefines capital not as means of production, but as capitalized power, demonstrated through market capitalization. This challenges the traditional emphasis on “real” capital stock, which is backward-looking and tied to past profits. Market capitalization, on the other hand, is forward-looking, reflecting expectations and the power to shape future outcomes.

The Role of Sabotage

Drawing on Veblen’s distinction between "industry" (collaborative production) and "business" (power and control), CasP argues that business operates by strategically sabotaging industry. This sabotage takes many forms, from war and engineered scarcity to intellectual property regimes and planned obsolescence, all aimed at boosting differential accumulation—increasing one's capitalization relative to others.

The Rise of Dominant Capital

The pursuit of differential accumulation has led to the emergence of "dominant capital"—tightly knit networks of corporations and state organs that increasingly control the capitalist landscape. This shift has fundamentally altered capitalism's modus operandi, moving from a focus on growth and price stability to one of mergers, acquisitions, and strategically managed inflation.

The Larger Use of Credit

The increasing importance of credit has played a crucial role in facilitating this transformation. By making capital easily tradable, credit enables mergers and acquisitions, privatizes money creation, and compels dominant capital to orchestrate inflation to validate their ever-expanding financial claims.

Hierarchy and the Future of Capitalism

While capitalism has demonstrated a remarkable capacity for adaptation, its inherent power dynamics and reliance on sabotage raise crucial questions about its long-term sustainability. The rise of dominant capital and its increasing disregard for the public good signal a potential reversion to more despotic forms of hierarchy.

The future trajectory of capitalism hinges on the complex interplay of power within and between dominant capital and the broader population. The possibility of ecological collapse or other forms of systemic breakdown necessitates a critical examination of potential alternatives and strategies for navigating the challenges of the 21st century.