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A NEW POLITICAL ECONOMY: A THEORY OF THREE SOURCES OF VALUE (4): Ugly consequences of unchecked expansion of unjust capital
By Sherwin Lu
2019-11-01 11:39:13
Preceding installments of the series:
EDITOR’S NOTE:This is an installment continued from previous postings (see above). Written originally in Chinese in 2004, the application of the three-value theory to an analysis of reality in this section is still valid today, or even more so when the whole world is beginning to suffer from the unfolding general crisis of capitalism and from fear of the worst to come. Hope this writing can help promote the further awakening of all working people around the world.


IV. Ugly consequences of unchecked expansion of unjust capital
IV-1. Root cause for accelerating rich-poor polarization
As said before, unjust profits are essentially the result of privatization of the material and spiritual wealth which should belong to all humanity but are hidden in the means of production and in human labor If these profits, or part of them, are used by its usurpers for purchasing consumer goods, this would account for the obvious gap between their living standard and that of non-capitalist laborers. If these profits, or part of them, are used as new investments, then they will generate more unjust profits. This reminds people of the function of yeast: when it is mixed with a lump of flour dough, this whole lump of fermented dough will function as yeast; if we break this fermented dough into several smaller lumps and mix them separately with several lumps of dough, the latter lumps of dough will again become new lumps of yeast, the total size of all of which would be many times that of the original yeast… If the same process is repeated again and again with capital, it will be multiplied, like yeast, at the speed of geometrical progression… The initial polarization of society thus goes deeper and wider, twice, three times, four times,… without limit. Hence the formation of super-size financial groups, monopolistic giant companies, transnational corporations, all trying to expand infinitely at the expense of others…. This is the root cause of the never-stopping acceleration of polarization between the rich and the poor.
Furthermore, once capital grows into a super-size financial group, it will inevitably reach its hands into the realms of politics, media, education, publication, natural and social scientific research, popular culture, etc., and try to influence and manipulate with its money power the political process (even if a “democratic ” one) and public opinion (Sora 1998, Mokhiber and Weissman 1999, Carroll 2004), to pave the way for its expansion into and hegemonic control of the local region, the country and the world Domhoff 2002, Petras 2001. This is the ultimate root cause of all the ever-spreading and ever-aggravating chaos of today’s world. 
IV-2. Origin of world big capital
       In spite of the fact that world capitals, especially middle and small ones, have been and are still playing an indispensably important role in promoting innovation and developing production, world capital as a whole, especially the aggregation of the big ones, without sufficient restraint from the society, has become an overpowering hegemonic overlord, controlling all realms of social life in most areas of the world, destroying the ecological environment and threatening the survival of human civilization. This system of actual rule of society by capital is rightly named as “capitalism”.
       Due to its expansionist nature, capitalism quickly became a world phenomenon, once it was born in the West. All the natural resources in the world -- the land, the mines, the forests, the seas, etc. have come under scramble and pillage by the big capitalist powers. Among the most infamous historical events were: the Enclosure Movement in Britain; the forced occupation of vast areas of land in North America originally belonging to and inhabited by aboriginal Red Indians, first seized by European colonialist governments with bloody violence and then granted gratis to colonialist business corporations (Geisler and Daneker 2000, P. 69 and PP. 76-77 ); the trade in and enslavement of African Negros; the Opium War against China and the Eight Power Allied Force rampaging China; …This was how the earliest initial world capital was generated. And this kind of capital accumulation process has never stopped, which accounted for the two World Wars. In the initial period of world capital development, superabundant profits came mainly from the natural resources grabbed with force by the big capitalist powers plus the hard work of hundreds of millions of laborers. This is the initial basis for later development of those well-developed countries of today. (For a review of the earliest world expansion of Western capital, see Luxemburg 2003, PP. 307-447.) And this is a fact often “neglected” by some researchers of the West (for instance, Rosenberg and Birdzell 1986.)
Later on, with the unfolding of the Industrial Revolution, human collective wisdom as richly embodied in the widely used machines has also come to be converted to superabundant profits. The machine-destroying Luddites Movement in early 19th century Britain was the typical instance of a revolt (though in a negative way) against the injustice of capitalists usurping all the profits. Further on, due to the success of national liberation movements all over the world, an end has been put to the undisguised robbing by colonial powers of natural resources in colonized countries. With this change and also with the rapid development of industrial science and technology, the wide use of electricity, of electronics, and of digital techniques, resulting in much higher efficiency of social production, the major source of super-rich profits, or at least a great part of it, has been shifting from Nature-endowed values in natural resources to human collective wisdom as embodied in high tech.
IV-3. Re-colonization of today’s world
Since U.S. and European countries, bewitched by the liberalist theory of an omnipotent market, relinquished government control of their money markets in 1970s, transnational corporations acquired the freedom to break through the limit of national boundaries and rampage the world market, engulfing foreign competitors and fattening themselves on cheap human resources of the developing countries and further expanding the rich-poor polarization from within each country to a global scale. For instance, a report about how IT giants have profited from sweat-shops in developing countries, which was written by CAFOD, a British non-profit Catholic organization and posted on http://gb.home.sina.com on January 28, 2004, reveals that workers in Mexico, China and Thailand making computer parts for companies like IBM, Dell, HP were working under unsafe conditions for long hours but paid below-minimum wages without medical, unemployment and retirement benefits, all standards falling short of UN requirements. According to another article on the same website, since 1980s, U.S. companies have started an “Enclosure-of-Knowledge Movement” by applying for patent rights and registering trademarks in various countries. Large numbers of factories have moved out of the US, leaving an “empty shell” for US manufacturing industry. Trade in intellectual property rights has become a key link for U.S. economic interests. (Li Xin Liu Lei 2004.) Also, according to another internet report, a book entitled “Hungry Companies” (back-translated from a Chinese version) written by a German biologist and published in 2003 reveals that transnational biotech companies are trying to monopolize global food chains through the cultivation of transgenic plants. Their control over us, it says, may be even more thorough and more overwhelming than the control of India by the East Indian Company in the past. They are trying to re-colonize all the spaces which were once colonized before, and also to colonize multitudes of new spaces which were not possibly colonized before for lack of technical or legal conditions, including our bodies, minds, and all the fruits of human tradition and human creation. (http://www.sina.com.cn/ April 1, 2004.)
If transnational industrial capital, while robbing common wealth belonging to the whole mankind, is still playing a somewhat positive role in promoting material production (although not enough to offset its sins), transnational financial capital, which has cut its relation with material spheres of social economy, reaps super-rich profits by speculating on discrepancies and fluctuations in interest and exchange rates between different countries and between different times (Wang 2002; Martin etc. 2001, P. 68-75), resulting in undermining a balanced development of economy in various countries and regions. It has become the “AIDS virus” (a quote from the former French President Hirac, see Martin 2001, P. 66), doing a thousand of harms and no good to world economy. 
IV-4. Two-way expanded continuation of rich-poor polarization
       Transnational capital interests, by manipulating the political processes of their home countries in the direction of serving their interests on the one hand and trying every means to circumvent their governments’ balancing restrictions which are designed to maintain social political stability on the other, have become forces not governed by any social communities. (Martin 2001, P.65). They also take advantage of competitions and conflicts between different countries to force tax deductions or waiving, or even price support on their governments to exploit more from people of their own and all other countries, even at the expense of the ecosphere and of later generations of all humanity. (Martin 2001, P.291.)
       While moving capital out of their home countries, evading taxes, and forcing social democrats to retreat from their welfare state policies by reducing workers’ benefits and even cutting educational expenses, thus destroying the lifeline of many of their fellow countrymen, those transnational corporations are trying doubly hard to squeeze every penny out of other countries so that they can spare part of their exploits from abroad to support a minimum welfare budget at home to keep the rich-poor conflicts there at a controllable level so as to secure the bases for world capitalism. Therefore, the rich-poor gap on the global level is a double expansion of the capital-labor gap in their home countries, an expansion both in scale and in depth. According to UN statistics of the year 1994, as compared with that of 1960, “the gap between the richest countries and the poorest 5% ones of the world had been doubled.” In 1994, the 20% welfare beneficiaries of the world consumed 85% of the wood, 75% of the processed metals, and 70% of the energy consumed by the whole world (Martin 2001, P.42). UN 1996 statistics shows that “the 358 richest billionaires possessed that year the equivalent of what was owned by 2.5 billion people, i.e., almost half of the world’s population” while “the debts owed by the developing countries had doubled that of ten years ago”. (Martin 2001, P.33-34.) The UN “Report on the World Social Situation 2005” entitled “The Inequality Predicament” again reveals that “Eighty per cent of the world’s gross domestic product belongs to the 1 billion people living in the developed world; the remaining 20 per cent is shared by the 5 billion people living in developing countries.” (U.N., 2005.) The world was even more unequal than ten years ago. This is what the world’s big capitals have been owing to the people of the world during the past, especially the recent two, centuries. 
IV-5. Ultimate root cause of all the chaos of today’s world
       By possessing a major part of the world’s economic wealth and with it dominating over other countries’ and the world’s political and cultural affairs, world big capital is pushing more and more people towards poverty, frustration, and despair, thus continuously creating and developing sinister conditions for all kinds of social disturbances. The above-mentioned UN report points out: ”The violence associated with national and international acts of terrorism should be viewed in the context of social inequality and disintegration. In situations in which inequalities are extreme and there is competition over scarce resources, the likelihood of social disintegration and violence increases.” (U.N., 2005.) But those intellectual elites under the influence of big capital are trying to deceive, stupefy and control people with capitalist ideology. For instance, the so-called “clash of civilizations” dogma, irrespective of its proponents’ or believers’ motivation, is in fact a camouflage over the major and basic conflicts in the economic, political and cultural situation of today’s world, keeping many people from seeing the truth. Since the end of the cold war, racial conflicts, separatism, exclusionism, ideological extremism whether or not in the name of religion, abuse of violence, terrorism, etc. have been spreading rapidly everywhere like pandemics beyond control. The so-called “doctrine of civilization conflicts”, is not only unhelpful for the solution of all those problems, but on the contrary serve to add fuel to the flames. Also, capitalist ideology cuts off the connection between politics and economy, advocate political democracy without economic democracy, i.e., formal democracy without substance, and, in the name of promoting such democracy, stage new crusades -- actually interfere in other countries’ internal affairs in order to expand big capital’s hegemonic power over the world and rake in more economic benefits for itself.
IV-6. Capital ownership vs. social production: a basic contradiction
       As a Chinese saying goes, when a thing reaches its extreme, it reverses its course. Today’s globalization of world economy, which is actually a globalization attempted by the world capitalist economy, while aggravating and deepening the rich-poor gap in most countries and on the world scale, is also speeding up the awakening of the people of the world, opening up the eyes of more and more people in both poor and rich countries to the historic limitation of capitalism. If, before the start of globalization, many people tended to stop their sight at the superficial glamour of prosperity and strength of the developed countries, failing to see through the evil source behind it, i.e., the big capital’s plundering of the people of the world, including those of their own countries, the ever sharpening of economic, political, and cultural conflicts on a world scale, which comes with the ongoing of globalization, has been bringing the deep-down immanent contradiction in the capitalist system to an ever more sharp and poignant relief before all the peoples of the world.
Take the United States for instance. The rich-poor gap in this currently richest country has developed to an unprecedented sharpness. According to a Reuter’s August 26, 2004 report posted on Yahoo news website, that year’s US government statistics shows: In spite of the fact that US economy had been recovering since 2003, the US population below the poverty line had gone up from 12.1% in 2002 to 12.5%, an increase of 1.3 million pushing the total to 36 million. If we look back to the year 1996, one of better economic situation, and take California the “Golden State” for instance, expenses for jail maintenance surpassed those for school education. Nationwide, “over 10% of the whole US population were living in heavily-guarded huge buildings”, and “the rich people’s total cost for maintaining private armed bodyguards were twice as much as that paid by the country for maintaining the police force.” (Martin 2001, P.13.) No wonder Senator Kerry, when campaigning for president in 2004, mocked at the Republicans by saying that the country under the latter’s rule had split into “two Americas”, one for the rich and the other for the poor. At the same time, US military expenses, and budget deficit, have been soaring to astronomical numbers. US international relations are having a hard time. Its reputation is fading. External and internal conflicts are intertwined and mutually aggravated. That is why, even in US, the stronghold of world capitalism, and in the recent decades when world socialism has been at the lowest tide, academic criticisms of the capitalist system and explorations for non-capitalist way out have been persistent. (For examples, Schumacher 1973, Bowles and Gintis 1986, Brockway 1986, Dore 1987, Bardhan and Roemer 1993, Roemer 1994, Cohen 1995, Wuthnow 1995, Dugger 1996, Daly 1996, Ollman 1998, Blair and Roe 1999, Baiman, Boushey and Saunders 2000, Dow 2003.) The works listed here is only a small part of the whole literature. But most of the criticisms and explorations are made from the abstract value standard of “equality” and go no further than surface-level inequalities, stopping short at the root cause, i.e., the unchecked and unjust expansion of capital protected by the capital ownership of means of production.
       In a word, absolute power (economic as well as political) leads to absolute corruption. The capital ownership of the means of production has been indulgent towards capital’s natural greediness, which leads it astray from operating in the direction most favorable to the development of human society. With its self-expansion unchecked, capital is now doing more harm than good to humanity as a whole and, if allowed to have its way uncurbed, is threatening to ruin human civilization sooner or later. In the last analysis, it is rather the capitalist ownership system, or in Marx’s terms, the basic contradiction between the private ownership of means of production and the social nature of production, than capital per se, not to say those hard-working entrepreneurs, who is to blame for the problems of today’s world. To bring order out of the chaos, the first thing to do is to change the private ownership system into one which matches the truth about the three sources of value of social products and to establish a political and legal system compatible with it. Only thus can capital, as well as labor, management, and market, function in the best interest of human society. For a suggestion about a new ownership system based on the three-source value theory see forthcoming installments.
(To be continued)

Baiman, Ron, Heather Boushey, and Dawn Saunders, eds., 2000, Political economy and contemporary capitalism: Radical perspectives on economic theory and policy, M. E. Sharpe.
Bardhan, Pranab K. and John E. Roemer, eds., 1993, Market socialism: The current debate,
Oxford University Press, New York.
Blair, Margaret M. and Mark J. Roe, eds., 1999, Employees and corporate governance, Brooking Institution Press, Washington, D.C..
Bowles, Samuel and Herbert Gintis, 1986, Democracy and capitalism: Property , community, and the contradictions of modern social thought, Basic Books, New York.
Brockway, George P., 1986, The end of economic man: Principles of any future economics, Cornelia and Michael Bessie Books.
Carroll, William K., 2004, Corporate power in a globalizing world: A study in elite social organization, Oxford University Press, Canada.
Cohen, Daniel, 1995, The misfortunes of prosperity: An introduction to modern political economy, The MIT Press.
Daly, Herman E., 1996, Beyond growth, Boston, Mass., Beacon Press.
Domhoff, G. William, 2002, Who rules america? Power and politics, 4thed., New York, San Francisco, etc.: McGraw Hill.
Dore, Ronald, 1987, Taking Japan seriously: A Confucian perspective on leading economic issues, Stanford University Press.
Dow, Gregory K. , 2003, Governing the firm: Workers’ control in theory and practice, Cambridge University Press.
Dugger, William M., ed., 1996, Inequality: Radical institutionalist views on race, gender, class, and nation, Greenwood Press.
Geisler, Charles and Gail Daneker, eds., 2000, Property and values: Alternatives to public and private ownership, Island Press, Washington, D.C..
Li Xin Liu Lei, 2004, “Yi zhishi chanquan wei ming de zhongguo luanjian heshi ‘quandi’ guoji” (“When will Chinese software ‘enclose’ internationally in the name of intellectual property rights”), http://www.sina.com.cn/, March 5.
Luxemburg, Rosa , 2003, The accumulation of capital, Routledge.
Martin, Hans-Peter etc. (German), 2001, “Quanqiuhua De Xianjing: Dui Minzhu He Fuli De Jingong” (“Globalization a falltrap: Attacks on democracy and welfare”, translated from Chinese), Chinese version, trans. By Zhang Shipeng, Central Compilation and Translation Publishing House, China.
Mokhiber, Russell, and Robert Weissman, 1999, Corporate predators: The hunt for Mega-profits and the attack on democracy, Monroe, Maine: Common Courage Press.
Ollman, Bertell, ed., 1998, Market socialism: The debate among socialists, Routledge.
Roemer, John E., 1994, Egalitarian perspectives: Essays in philosophical economics, Cambridge university Press.
Rosenberg, Nathan and L. E. Birdzell, Jr., 1986, How the west grew rich: The economic transformation of the industrial world, Basic Books, New York.
Schumacher, E.F. , 1973, Small is beautiful: Economics as if people mattered, Harper perennial.
U.N., 2005, Report on the World Social Situation, http://www.un.org/esa/desa/desaNews/desa95.html
Sora, Joseph, ed., 1998, Corporate power in the United States, New York: The H. W. Wilson Co..
Wang, Jian, 2002, “Shjie Zibenzhuyi de Xin Jieduan Yu Huobi Zhidu Weiji” (“A new phase of world capitalism and crisis in the monitory institution”), http://www.macrochina.com.cn/info.shtml March 5.
Wuthnow, Robert, ed., 1995, Rethinking materialism: Perspectives on the spiritual dimension of economic behavior, William B. Eerdmans Publishing Company, Grand Rapids, Michigan.
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