The question that keeps coming up in regard to our country’s oil policy is why? Why would policy makers want to remain dependent on oil when they know it’s contributing to climate change? Why would they risk destroying the water and the land when there are alternative sources of energy? And why the expensive militarization of the police against peaceful demonstrators? According to Jonathan Nitzan and Shimshon Bichler 1. [Jonathan Nitzan and Shimshon Bichler, The global Political Economy of Israel. Pluto Press, London, Stirling VA, 2002]↩ oil has become inseparable from the power structures of dominant capital. It is part of the process of ‘differential accumulation’ by which dominant capital controls everyone and everything else. What’s even more ominous is that it has formed an uneasy alliance with the arms trade.
Nitzan and Bichler disagree with the neoclassicists who say that capital is nothing more than material wealth. For them the power aspect of capital is a social dimension independent from tangible wealth. They redefine accumulation as a broader tension between productivity and power.
“In this sense, large-scale business enterprise is driven by the same principal force which animated all previous power civilizations – namely the quest to control nature and people.”
But it’s worse than that. Simple accumulation will not do the job. Real power is in differential accumulation, which is the rate of return relative to the average. In order to accumulate more than everyone else, dominant capital implements strategic sabotage against non-dominant capital. Various methods are used for this purpose. These are not corporate strategies, but social regimes. They may look different from the outside, for example when comparing the period in the United States when there was a thriving middle class to our time of the disappearing middle class, but they’re all based on the ‘needs’ of a narrow group. I’ll include a brief summary of the regimes because I think it’s important in light of the efforts by the Trump administration and others throughout U.S. history to blame the economy on migrants and minorities.
There are two main regimes: breadth and depth. In a breadth regime a firm augments the size of its organization by having more employees. In a depth regime it increases its elemental power, which means getting more profit per employee. Breadth is relatively more stable and easier to maintain, while depth involves social antagonism and is more likely to spin out of control.
Each regime can be subdivided into ‘internal’ and ‘external’ sub-routes. The following is a reproduction of a chart on page 49.
Regimes of Differential Accumulation
External: Green-field; Internal: Mergers & Acquisitions
External: Stagflation; Internal: Cost Cutting
Green-field investment is building new capacity and hiring new employees faster than the average in order to increase market share. This is considered ‘external’ because it involves hiring additional employees from outside the firm. Excessive green-field growth has certain disadvantages. It creates surpluses, downward pressure on prices, and a decrease in profit per employee. Mergers and acquisitions is the most potent form of differential accumulation. However it is limited by the availability of takeover targets and by social, political and technological barriers. M&A is considered ‘internal’ because it redistributes control over existing capacity and employment.
Cost cutting is internal because it redistributes income shares within a given price. Firms constantly practice cost cutting but it usually only helps them to meet the average rate rather than beat it, because of the difficulty of monopolizing new technology and controlling input prices.
Stagflation is an alternative regime to mergers and acquisitions. It is inflation practiced not by a single firm but by dominant capital, increasing its profit margin relative to non-dominant capital. Dominant capital can benefit from inflationary prices if it works in concert, while single sellers cannot. The result is a distribution of income to the bigger firms.
Ok so what does all this have to do with the pipeline conflicts in the United States? It’s shocking to see these things here because we don’t realize that for dominant capital there is no difference between the Middle East and North America. The Middle East conflicts were not outside of the system. They were part of the system.
“Interestingly, when we look at the history of the region from this particular perspective, the lines separating state from capital, foreign policy from corporate strategy, and territorial conquest from differential profit, no longer seem very solid. Many conventional wisdoms are put on their head. State policies, ostensibly aimed at advancing the national interest, often appear to undermine it; company officers and government officials, moving through a perpetually revolving door, sometimes simultaneously cater to several masters; arms races are fuelled for the sake of ‘stability’; and peace is avoided for being ‘too expensive’.”
Can this tell us anything about extreme militarization at Standing Rock? About 65 years ago the oil companies lost some of their control in the Middle East due to nationalism and industry competition. In the 1970s they formed a Weapondollar-Petrodollar Coalition with large U.S. and European-based manufacturing companies that were struggling with global competition. The strategy of the manufacturing part of this coalition was to turn to military contracts and arms exports. The strategy of Big Oil was to demand a strong state capable of protecting the dominant firms. Weapons, which used to be given as aid and controlled by the government’s foreign policy, became privatized and commercialized while oil became politicized.
It had already been observed by the late nineteenth century that war and capitalism were compatible. Their connection with wealth and income inequality was also known. The authors cite John Hobson’s ‘Imperialism’ (1902), on this point. Capitalism in the leading countries was moving from atomistic competition to concentration and monopoly, and tended to redistribute income from wages to profits, creating a problem of oversavings and underconsumption. This profit would normally have gone to green-field investment, but since people had less to spend there was less need for investment. That left imperialist expansion as the only outlet for excess savings. This doesn’t make much sense in the big picture since imperialism is a net loss to society. The explanation is that it made perfect sense to those who led the charge–a narrow coalition of arms producers, trading houses, the military and imperial apparatus, and the financiers. The financiers led the coalition in the late nineteenth century, enlisting key politicians and the possessing classes on the threat of redistribution at home, and they counted on the newspapers to provide the necessary atmosphere of nationalism and racism.
Marxist writers were influenced by Hobson although most of them rejected his belief that capitalism could be reformed. According to Rudulf Hilferding (1910) Finance Capital, an amalgamate of industry and finance controlled by the big banks, is a natural outcome of the monopoly stage of capitalism.
“The demand for an expansionary policy revolutionizes the whole world view of the bourgeoisie, which ceases to be peace-loving and humanitarian. The old free traders believed in free trade not only as the best economic policy but also as the beginning of an era of peace. Finance capital abandoned this belief long ago. It has no faith in the harmony of capitalist interests, and knows well that competition is becoming increasingly a political power struggle. The ideal of peace has lost its luster, and in place of the idea of humanity there emerges the glorification of the greatness of and power of the state…The ideal now is to secure for one’s own nation the domination of the world, an aspiration which is as unbounded as the capitalist lust for profit from which it springs…Since the subjection of foreign nations takes place by force – that is, in a perfectly natural way – it appears to the ruling nation that this domination is due to some special natural qualities, in short the garb of natural science, a justification for finance capital’s lust for power, which is thus shown to have the specificity and necessity of a natural phenomenon. An oligarchic ideal of domination has replaced the democratic ideal of equality.” (Hilferding 1910: 335) As cited by Nitzan and Bichler. (205)
Nitzan and Bichler occasionally use Marxist analyses, but they are critical of it when it falls short of explaining a given problem. What do they think about the possibility of salvaging capitalism? On page 65 they state:
“In summary, there is a long but crucial link leading from capitalism, to differential accumulation, to amalgamation, to capital mobility (Proposition 5). From this perspective, the present process of globalization is inherent in capitalist development and therefore not easily reversible without altering capitalism or moving away from it altogether. Moreover, contrary to popular perception, the underlying force here is not greater efficiency, but the control of efficiency, and the purpose is not aggregate but differential gain. Over time, particularly since the 1980s, foreign investment has come to rely less on green-field and more on cross-border mergers and acquisitions, as firms increasingly break through their national ‘envelope’. The big winners are the large ‘distributional coalitions’ of dominant capital. For society as a whole the picture is less cheerful, as the emphasis progressively shifts from green-field to amalgamation, causing growth to recede and stagnation to creep in (Proposition 3).” (For the list of 8 propositions, see pages 51-2.)