Back in the day when children were not supposed to be bullied except by their parents, nor abused by anyone not an adult relation, save for the local pastor, priest, rabbi, and the occasional teacher, those practitioners of the fine art of trading financial instruments were fond of stating that there were three things children should not see being made– 1) sausage 2) other children 3) money in the stock market.
The stock market valuations of the four FANG companies, Facebook, Amazon, Netflix and Google (less well known as Alphabet) make that same point, more not less.
Since its debut as FANG, the acronym has been altered by some zealous types to FAANG, making space for the corporate hipster’s answer to Standard Oil, Apple, but the origin of the acronym is in those initial four companies. The combined stock market valuation of the four FANGS is about $1.65 trillion, or about 9 percent of the 2016 GDP of the United States.
Over the past 50 years, stock market valuations of the companies making up the S&P 500 have amounted to 57 percent of the US GDP. As of March, 2016, that ratio of stock market valuations to GDP had climbed to 99 percent. So, using old math, the four FANGS account for about 10 percent of the exchange value of the 500 largest corporations in the United States.
Stock market valuations do not figure into the calculations of GDP, so this ratio, this index measures something other than the specific contribution of the FANGS to the output of goods and services. And stock market valuations don’t necessarily correspond to operating revenues or operating earnings of the corporations. In 2016, revenues for the FANGS were approximately 1.4 percent of US GDP
As for earnings, operating earnings, FANG profit as a percentage of GDP doesn’t even move the needle, measuring only .22 percent of GDP.
The significance of the valuations of the FANGS is not in the expectations for “growth” of revenues and earnings. Wall Street professionals might tell you that, but then again Wall Street professionals will say anything to sell someone something. That’s marketing; that’s the market. Find the bigger fool and separate him/her from his/her money.
The significance of the valuation of the FANGS is not that it represents an “anomaly,” an exception, a “bubble,” which sooner or later will “burst.” Sooner or later, everybody dies. Sooner or later, it rains. Sooner or later, price and value intersect, but none of that tells us anything very interesting. The deviation between price and value, between valuation and revenue is the chronic condition of capital, the constant struggle to realize the surplus value as profit massively and quickly enough; the continuous disequilibrium that is produced by the distribution of surplus value through exchange; the distortion inherent in the struggle to achieve the “average” rate of profit. In that deviation, that struggle, that distortion, that chronic condition of capital is made acute; or….goes critical.
The FANGS are essentially means of communication, means of circulation, platforms for assembling, penetrating, assessing, targeting markets, and delivering commodities, even if only the image of commodities, via those platforms to those markets. We have a digital equivalent of railroads, telephones, trucks, logistics management, and…..advertising. Facebook, after all, is nothing but advertising, with participants being but the host species for the grafting of the adverts.
The significance of these platforms is, and is solely in, their ability to increase the turnovers of the products and services, the commodities, up for exchange. This increased velocity of turnover is a, if not the “prime” mover, in capitalist expansion. In the 19th century, railroads, canals, steamships, telegraphs, were those platforms, and by increasing the velocity of turnover, capitalism was able to pursue expanded reproduction, or accumulation. Then, expanded reproduction meant expanding the working class, expanding the numbers of necessary laborers compelled to submit to surplus labor time, to “give up” a surplus value in order to obtain a portion of the total value capable of sustaining their own reproduction.
That was then. The FANGs are now. The FANGS are the commercial expression of the “now” that’s been underway for 40 years or so where the accelerated rates of turnover are driven by and through the expulsion of labor-power from production in response to declines in and the attempts to restore profitability; where, and when, transferring the values embodied in the fixed assets requires the disproportional reduction in living labor.
The digital “platforms” adapted from the command and control technologies deployed in production bring to the turnover process the same devaluation of labor-power; the same reduction in wages, the same inequality of the compensation of research, engineering, design versus production labor that characterizes capitalism as a whole. We move from reducing the labor forces to reducing the labor hours to reducing the wage to increased use of temporary, part-time, labor; we move from the productivity of labor to casualized labor; we move from the increased rates of surplus value to the simulacrum of relative surplus value, accelerated turnover. We move from the tendency of the rate of profit to decline to capital’s answer to the tendency of the rate of profit to decline: the expansion of the working poor in the clothing factories of Bangladesh; in the no-contract, no protections steel workers in Korea; in the special enterprise zones of Asia; in the delivery services dependent upon providing a wage below the value of labor power. We move from Wal-Mart to the digital Wal-Mart of Amazon. We move from, for example, expanding public transportation networks in urban areas, and to Uber. The FANGs are so valued not because the technology represents a rupture, a radical departure in the conditions of accumulation, but rather because the FANGs commercialize all prior alterations in the conditions of accumulation.
The source of their (the four FANGS) surplus value is the same, and that source is the surplus value generated by the workers in the warehouses, the shipping centers, the server farms of the platform. The source of their money is in the revenue streams diverted through the markets of the FANGs and skimmed in thin, if not the thinnest, margins. The source of their money is in the portion of total surplus value diverted into and realized in the circulation process.
The inflated valuations of the FANGs represent nothing less than the future capitalism imagines for itself. That future is one where accumulation persists through the devaluation of labor-power; where capitalism accumulates by reproducing more and more of the population as superfluous to the production process, where transfer of wealth up the ladder presents itself as the “new” social democracy, where the gated neighborhood, the charter school, concierge-style medical care, car-hire are the “real” community of capital, built on a stream of 1s and 0s.
“Circulation sweats money from every pore,” wrote Marx 150 years ago, using a different platform, in Capital, Volume 1. It still does even if today it’s more spit than sweat; even if the money moves from “money of account” to bitcoin. Riding in on the back of the ass of precious metal, or in fiat, analog, digital, virtual forms, capital not only emerges covered in blood and filth, it reproduces the world in its own image.
July 10, 2017