The Year(s) In Review

 1. Lest we forget, 2019 and before, the year and the years prior to  the big fever and chills, weren’t particularly great for capitalism in general, or US capitalism in particular.  For that “thing” we call capitalism in general, “health” is most easily and transparently measured by the growth of world trade, and 2019 was a year of slight negative growth. Global trade,  having reached a mini-peak in 2014 measuring $39.42 trillion, declined in both 2015 and 2016 (so long Obama), turned up in 2017, exceeding the 2014 mini-peak in 2018 at $40.24 trillion (hello Donald) only to slip back below the 2014 mark in 2019.  

US GDP recorded  year to year growth in 2014 of 2.3 percent, then 2.7 percent in 2015, slowing to 1.7 percent in 2016 (good-bye Barack), 2.3 percent in 2017, 2.9 percent in 2018 (nearly 3 percent! America was almost great again) before slowing to 2.3 percent in 2019.  Then came 2020 and the big shutdown with GDP dropping 3.4 percent ( ciao, Donald!).

Then there’s real annual non-residential private fixed investment, that money embedded in those “things”– structures and equipment (and now ‘intellectual property products’ like software, r&d, and entertainment originals) that ownership places in opposition to living labor to make the relationship called capital; that property that swallows up labor-time and spits it back as value. There, by that measure, growth had slowed by half, with the rate of investment decelerating from 16 percent in the two year period 2010-2012 to 16 percent in the four year period 2012-2016.  

Annual investment in industrial equipment did not exceed the amount invested in 2007 until 2014, then fell back in both 2015 and 2016, the  years of the shadow recession.  

Amounts invested in 2018 grew 5 percent from 2017, only to slow to an expansion rate of 1 percent from 2018 to 2019.

Industrial production declined steadily for the year 2019.

Worst of all, annual corporate profits failed to exceed the 2014 mark and experienced real declines in 2015, and again in 2019 on a year-over-year basis.

The trend wasn’t comforting to those grifters, those self-and-others deluding scam artists who advertise themselves as the very image of wealth. The future was not bright enough to warrant sunglasses.  

2. We know the drill; the drill being a phase of downturn that’s part of cycle contained and coincident within the structural limits of accumulation.  After all the programs, rescues, buybacks, quantitative easing, it’s still capitalism and the cycle itself can still be tracked and measured, and even determined, by the investment and profitability of the petroleum extraction industry, namely oil, natural gas, and natural gas liquids. It’s not exactly a song, but it’s the same old, same old:

a)  excited by the high prices for oil, new technology, methodology, emerges for accessing previously inaccessible supplies of petroleum

b) smaller companies initiate the new methods and techniques. A market emerges not just for the final product, the commodity, for the petroleum, but for the technique itself.  The smaller companies benefit from access to funds, money-capital, finance, prior to proof that the methodology can sustain itself, and the industry, through achieving profitability.  Capital has no other choice.  We follow the  money; the money has to find the potential for value.

c) the rush is on as money-capital,  finance, piles in and piles on.  The money is converted into means of of production and labor power because that’s what finance demands.  The expanding means of production and coincident aggrandizement of labor-power can only realize themselves through their conversion both in production and in valorization into an expanding mass of commodities, the growing supply of the useful article that are also values, because that’s what capital does; was; is; will be.

d) the price of the enlarged mass of commodities, the increased value, initially inflates the markets as the demand for value overwhelms the usefulness of the commodities.  The increased mass of surplus value brought to the markets can only achieve tangibility if  the value embodied in the commodities, actually if the value embodied as a commodity, is realized in their successful exchange for money.  The transition problem of capitalism is the transition from particular value to universal equivalent.

e) the new technique achieves economies in the consumption of raw material, and the relative portion of living labor consumed.  Larger enterprises barge in.  Production reaches new highs. The price, the mechanism by which value is made manifest and allocated among the owners, blows up, blows out, maybe, and collapses definitely.   Happy days were here again, somewhere. 

f) capitalist production undermines capitalist profit.  Value begets devaluation.

e) we call the “begetting” overproduction.

3. The latest cycle, the one that says “here I am, there I go, repeat” saw the “upswing” in growth and profitability in the petroleum sector, rode in on the “rebound” from the collapse in investment and exploration after 2008.  For each year 2010-2014 amounts budgeted for development and exploration increased so that the 2014 amounts were 80 percent greater than the 2010 amounts.

It paid off.  Almost.  On the shoulders of high market prices from January to September of 2014 petroleum producers  accrued cash from operations that was $16 billion higher than the mark for 2013, but less than the flows for 2011 and 2012.  More importantly, cash from operations remained significantly below the peak achieved in 2008.

The upturn became the basis for the continued increase in capital expenditures, dividends and share repurchases.  These expenditures exceeded that 2014 cash flow by a cool $110 billion, following the pattern stretching back to at least 2007, BUT, the gap between cash flow from operations and cash expenditures for investments and buybacks widened significantly after 2011

2015— Crude oil prices declined by half from the previous year’s average.  Can you guess what happened next?  

If you said there was the largest write-down in the value of proven reserves, since reserves are an economic and not a geologic category, you are right.  

If you said  cash flows declined 30 percent year over year, you are right. 

If  you said capital expenditures sank below the 2009 recession mark, you are right and you’re close to winning the Jeep Wrangler, the trip to Bermuda, and a year’s supply of Blue Buffalo dog food.

If you said oil and natural gas production declined, ohh….too bad, you’re wrong, as oil production increased 6.4 percent and natural gas production increased a modest .8 percent. Nothing breeds overproduction like overproduction.  It’s immanent; intrinsic; inherent; structural. The point of capitalism, after all,  is to convert an expanded mass, in both value and technical compositions, of the means of production, into an expanding mass of exchangeable values.  That’s all that accumulation of capital is.  

You lose the Wrangler and the trip to Bermuda, but you can keep the dog food.  Thanks for playing.

2016— Oil prices declined another 15 percent from the 2015 average.  Capital expenditure declined another 25  percent.  The producers finally got the news.  Both oil and natural gas production declined, the first annual decline for both over a decade.

Globally, capital expenditures declined by 30 percent, pulling the total of S&P 500 global capital expenditures down by 17 percent.

2018–Crude prices averaged $71.69 per barrel, a 35 percent increase from 2017.  Oil and natural gas production increased a combined 2 percent.  Additions to proven reserves brought them to the highest levels in a decade.  Reserves, after all, are an economic, not a geological category.

Capital expenditures increased 15 percent from 2017. The cash from operations increased $116 billion or a tidy 27 percent and was used to reduce the debt load by $60 billion.  

2019–Crude prices dropped 11 percent in the year, but combined production increased another 2 percent.  . 

Overall, return on equity in the US manufacturing sector has gradually, but steadily declined from 17 percent in 2011 to 13 percent in 2019.  

Overall, return on equity in the energy sector fell from 17 percent in 2011 to  a negative 10 percent in 2015, recovering to a positive 10 percent in 2018 before falling to 6 percent in 2019.  It’s enough to make a grown Tillerson cry.

2021–In the second quarter 2021, crude oil prices were double the 2Q 2020 prices. Oil production, however, declined 3 percent year over year, while gas production was unchanged leading to…..cash from operations reaching $138 billion.  Investments declined by $53 billion during the same year to year period.  Always behind the curve, that’s our bourgeoisie.

(all numbers taken for the  US Energy Information Agency’s Financial Review of the Global Oil and Natural Gas Industry, 2014-2Q2021; )

And there you have it, the connections between profit, profitability, investment, production, overproduction, and inflation for the most “capital-intensive” sector of capitalist production.

4. Marx’s grappling with capital begins with the recognition that the origin of “modern” capitalism is a specific social relation of production, where ability to labor is presented both concretely, in the particular as useful, and abstractly as value. We move  with Marx from the concrete production of linen, flax –use values–, to the process that makes them all exchangeable values.  We move further along until finally the commodity as a particular form circumscribing use with exchange disappears in a universe that is held together, or spins apart, through the reproduction of value. 

Examining the obscured substance of value, Marx moves the critique from capital as a relation of production, which it remains, to capital as a mode of production, which it becomes; from capital as private property, which it remains, to capital as the accumulation of social labor, which it becomes; from capital as an economic factor, which it remains, to capital as a force of social reproduction, which it becomes.  

It is this “abstraction,”  this particular universality puffed up by the mathematics of ratios, percentages, fractions that describes the entire movement of capital from purchase to profit, from advance to realization,  from money to more money.

So we get from Marx the emphasis on, and deep exploration of, the average, the mean composition of capital,  the average profit, the general rate of profit, the socially necessary, which itself is a weighted average of all the production in any and all branches. 

It, the mean, the average, the general gives the bourgeoisie a class interest, a solidarity in exploiting labor, a community built upon appropriating labor-time.  Whether or not it, the mean, the average, or the general, exists as something other than a mathematical abstraction, or a commercial aspiration, is a different question.

The capitalists, as individuals, never see surplus value as the source of profit; only see the spread between cost and price; scramble forever in search of an increment of extra profit; are convinced the increment of profit they do obtain reflects the value they, as individuals, bring to market.

The capitalist class knows that any profit reflects a distribution, an allocation, from all the value aggrandized through production and brought to market;  that price, value mediated by money, is the mechanism for this distribution, and that “extra profit” disappears as capital expands, as profit is recapitalized. 

As profit disappears, the capitalists, as individuals, reinforce their attacks on costs–the time of labor. The capitalist class, blind to surplus value, never recognizes that this reduction does not diminish the time necessary for the reproduction of the workers as workers  disproportionately to the reduction in hours.  While the mass of necessary labor hours may fall, the ratio of necessary labor to the total working hours remains unchanged.  Reducing labor hours reduces the mass of profit without increasing its rate, regardless of the money saved, or the “capital released.”  

The accumulation of capital requires an increase in capitalized surplus value.

Without that, recovery takes on all the characteristics of contraction. 

What’s left for the bourgeoisie is exactly what’s left:  transferring wealth up the social ladder: trade wars;  disruption of the “order” of accumulation; the Brownian Motion of a thousand and one reactionary groups sworn to the preservation of the small property that swirls  toward obliteration along the rim of the black hole of anti-value.  

This may not be what they meant by “event horizon,” but it is what we get.

5. Despite the homage paid by the bourgeoisie to the myth of the intrepid entrepreneur,  capitalism isn’t very kind to these crusader-heroes of the free markets.   Doesn’t mean capitalism doesn’t need the entrepreneur– big capital needs small capital like big fish need small fish; does mean that the need is not for the success of small capital. 

Within two years of establishment, 20 percent of small enterprises have failed; the mortality climbs to 50 percent after five years, and continues downward to approach 80 percent over a further fifteen years.

The number of jobs created in the first year of these enterprises peaked in 1999 and plummeted 33 percent through the recessions of 2001-2003, and 2008-2009, increasing modestly through 2015. 

The number of annual start-up  enterprises increased between 1994-2001, fell in the ensuing recession recovered to reach a new peak in 2006 before plummeting in the recession of 2008-2009.  Then  in 2011 the  number of annual start-ups started to climb again.

Five years after that upturn, we get 2016. Half the 2011 enterprises had collapsed. Forgotten, but not gone as big capital mobilized and paid stoked the political expression of this “entrepreneurial”  frustration through the Tea Party and similar organizations.

What’s the result?  We get the furious entitled; the resentful privileged; atomized, but compacted; fragmented but compressed; proclaiming “individual freedom” while practicing social repression; pledging allegiance to the flag and the bible because their dollars belong to the banks.  

Who better to play upon this bitter wave of fury from those lining up to be capital’s hot lunch than Donald Trump?  Who embodies resentment and privilege, fury and entitlement better than he? 

Nine years after the upturn, the killing floors of advanced capitalism are swamped with the husks of start-ups.

We get January 6, 2021. 

S.Artesian

January 1, 2022

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