Fiat, Gold and Rent

The unsavory fruitcake being baked

and delivered at the 2012 Republican Party convention in Tampa Bay, Florida contains among others this choice golden nugget: The decision by this party to set up a commission to investigate the return of the US to the gold standard.

For classical Marxism, “money must be a commodity before it can become money”*. Traditionally this was accomplished by the production – for profit of course – of gold for sale as money.  This is the only instance where money appears for sale in a capitalist economy – otherwise money always buys, but is not sold as money.** That is possible because what is purchased by the central bank is the particular use value of gold as money, as is true with any other commodity exchange.*** But specie production is not the only way to accomplish money creation.  Under a capitalist fiat regime, it is not money that is created – what every “printing press” vulgarian thinks when they rail against the central bank – rather, it is capital in its commodity form, interest bearing money capital, that is created by fiat.  True, this is a fictitious capital, a pseudo-commodity, but the interest borne by it is very real in value terms.  That is because capital in commodity form typically enters the world as State debt in the form of a Treasury bond with a claim on the State tax revenues.  Tax revenues are a tributary revenue stream of value into the State Treasury, and a portion of this value stream is redistributed and transformed into interest (“yields”) on State bonds sold as the private property of capitalists.

Nevertheless this is merely an extension of part of the same tributary stream of value.  It is therefore properly classified as a form of rent.  Its structure is remarkably analogous to that of land rent: Its capitalization of rents into the form of a land price is a fictitious capital, but the land rents returned on investment in the land constitute a very real redistribution – a tributary stream – of value in the form of a private tax paid to the private proprietor of the land.  Logically it makes sense that a fictitious capital can find “valuation” only by “non-commodity production” means, by being the bearer of a tributary transformation of value.

Sociologically, it is the synthetic reproduction of the capital relation as a type of value relation, coming into the world attached to the umbilical cord of a nutrient-providing tributary rent transfer.  Historically, the shift from the gold standard to capitalist fiat is also a shift in emphasis from productive capitalism to rentier capitalism, something that should be no small irony for a school of economics whose guru once muttered something about “euthanasia of the rentier”.  Because far from being euthanized, rents have proliferated in the fiat currency era. Or has the epidemic of asset bubbles breaking out seemingly randomly everywhere, the proliferation of “rent trapping” cartels in (here speaking of the US) higher education, telecoms, health care – joining the traditional ones in housing, agriculture and mining – merely a coincidence, together with what goes under the rubric of “financialization”, “Wall Street hegemony” and “privatization”?

Thing is, Marx’s newborn baby not only remains dripping with blood from head to toe, but threatens to strangle itself with the umbilical cord that gives it life – or in an even more gruesome mixed metaphor, hoisted on its own life-giving petard.  But capitalism is a gruesome system, ain’t it.

The amusing thing is, the Republican Party has been the “rentier party” par excellence since the advent of Ronald Reagan.  Advocacy of the gold standard, severing a prime source of rents, shows that this Party has become the primary political sinkhole concentrating the main contradictions of US capitalism, producing the ideological wingnuttery that we find so entertaining.  This is a wing of the US bourgeoisie that, like the swathes of the US working class that it cons into voting for it, cannot recognize its real class interest.

The implications for a practical socialist program based upon the proper understanding of both profit, rent and the relation between the two and their joint contradictory relation to wages, is this:  Touch upon the rent question today, without counterpoising “unproductive” rent as a greater evil to “productive” profits, and watch the whole bourgeoisie – from Austrians to Keynesians – howl in pain as one voice!

*Quoted from “Michael Roberts Blog: blogging from a marxist economist”.  This article is a reply to Roberts.

**For this theory of money, see Makoto Itoh and Costas Lapavitsas, Political Economy of Money and Finance (1999) and Lapavitsas, Social Foundations of Markets, Money and Credit (2003)

***See for starters Marx’s own classical treatment in “The Form of Value or Exchange Value”, pgs 47-70, Capital Vol I (1967), and also the interesting treatment in Itoh and Lapavitsas, ibid.  Itoh’s sensei Kouzo Uno put it quite succinctly when he stated that “The exchange value of a commodity or its value-form does not, as is often misconceived,  mean its exchange ratio with another commodity.  It is a unilateral expression of a commodity’s value by its owner in terms of the use value of another commodity that he wants.  A commodity must express its value in this peculiar fashion.” Uno, Principles of Political Economy,  pg. 5 (1964 English translation by Thomas T. Sekine; emphasis added).  Most peculiar of all, then, under a gold standard regime, must be the exchange-valorization of gold though its purchase by the central bank, whose “relative form of value” on offer is, what exactly?  It might be a convertible central banknote printed by the bank, which must be traded at a risk premium to the money commodity gold since it is, after all, a paper promissory note of the central bank. Or the central bank could exchange out of its stock of State Treasury bonds, with the yield playing the same role as the risk premium, except that it would constitute a rent tribute paid to the gold producing capitalist. In either case, the operation is entirely analogous to the creation of yield bearing fictitious capital in commodity form under a fiat (non-convertible) regime, and is the rational basis for the substitution of gold for fiat as “symbolic gold”.   But the essential point here is that, for the central bank, it is the particular use value of gold as money that is the means by which gold is “monetized”.  Not even gold is immediately money, and the quantity theory of money will find no refuge here, either.

Rent and the Crisis of U.S. Capitalist Production

“The old is dying and the new cannot be born: in the interregnum a great variety of morbid symptoms will appear.” Antonio Gramsci

The Crisis and Its Sources

Believe it or not, but Bloomberg does publish mildly interesting articles every once in a while, and by coincidence this one on the stagnation of U.S. manufacturing appeared last week (Carl Pope is a former chair of the Sierra Club):

America’s Dirty War Against Manufacturing

Put aside the author’s no doubt special pleading for low tax, unregulated “green and clean” manufacturing.  The fundamental point is correct, and supported by the statistical evidence: the bulk of manufacturing jobs have been lost “the old-fashioned way”, by the replacement of labor power by machines, and less so by the so-called neoliberal “wage arbitrage” of existing technique to low wage countries.  Remember this the next time a Democrat or an American trade union official starts into beating on “China” with their chauvinistic and implicitly racist demagoguery.  “The old-fashioned way” – in historical terms actually a new-fangled way of extracting a surplus product that emerged in force only in the mid-19th century – is what Marxism has called relative surplus value extraction, tending to raise the average organic composition of capital – the ratio of constant to variable capital, with “constant” representing the value of machinery, technique, raw materials, and manufactured means of production generally, and “variable” representing wages.   This raises the productivity – the volume of commodities a single capital can put out with a given variable capital – of those capitals who can successfully reduce their variable capital with new technique, thereby raising the rate and mass of their individual profit at the expense of their competitors.  It was counterposed by Marx to absolute surplus value extraction by means of lengthening the workday or workweek, and/or deepening the intensity of labor in any given work period.  This latter is the true “old-fashioned way” of the capitalist extraction of surplus value, and the predominant way of the capitalist mode of production throughout its history before the 19th century.

The problem that Mr Pope is pointing to, translated into Marxian terms, is quite real: the conditions of production in the United States work against advancing capitalist production along relative surplus value lines.  In other words, an “advanced capitalist” country where half the adult population believes a personal guardian angel watches over them, day in, day out, according to The Baylor Religion Survey (2008), may not be the most conducive to the advance of science and technology in production. These conditions are therefore both superstructural – involving the structures of the State, law, custom, ideology, culture – and infrastructural – this latter boiling down to the use of the land, water, air and ecosystem as a whole.  These two aspects are dialectically interrelated as a whole with their fulcrum in the State – this after all the final arbitrator both the of the use of infrastructure and preservation of the existing superstructure – and have as their antithesis the reproduction of labor power in the form of wage labor.  The question of all of these conditions for carrying on capitalist production in its specific “industrial” manufacturing sense are essentially those of the qualitative nature of the use values that comprise those conditions, and whose “solution”, should these conditions be a barrier to the advance of capitalist production –  is therefore not immediately reducible to applications of the law of (exchange) value, a.k.a. neoliberal “market solutions”. As will be seen, the neo-liberal approach has been leading to a very different and even opposed result.  The solution in historical fact requires the intervention of agencies operating outside the law of value:  either the existing State, in what Antonio Gramsci called “passive revolutions”, conservative reforms “from above”, or the intervention of the masses, and especially the subject of the capitalist mode of production and the law of value, the proletariat, in a social revolution.  Interventions from above and below occur simultaneously, of course, with the question being which class will get the upper hand. That is what the United States is facing today in the present crisis.  Ever since the Civil War – and beginning with that war – the U.S. ruling class has solved the problem of the conditions of capitalist production (whether or not the ruling participants understood what they were doing is besides the point here) through a series of conservative “passive revolutions” that run through the Progressive Era – rightly called the “Triumph of Conservatism” by Gabriel Kolko (1963), though not for the reasons he thought – and most of all, the New Deal era, the greatest conservative triumph of them all, as can be seen when we observe the social terrain at present.

To skip over the intermediate logic and state it in a nutshell:  The net result for the United States is a relatively inefficient reproduction of labor power.  The value components of that labor power, in the form of housing, transportation, processed foods, education and health care, are simply “too high”, that is, inefficiently produced, for the profitable investment of productive capital.  The law of value can only work here to lower the value of labor power in accordance with relative surplus value extraction by transforming these conditions, this ultimately meaning the transformation of the state itself.  But the ownership of these conditions of production and means of the reproduction of labor power – especially in the United States – has traditionally taken the form of private capitalist property – including as a special feature, private property owned by the now traditional  caste of rent-appropriating worker-landlord aristocracy of labor.  This generally constitutes essentially rent extracting capital subordinated to capitalist production as a whole – except when the further advance of the forces of capitalist production enter into contradiction with the existing superstructural / infrastructural conditions of production, as in the present crisis.  Then the “civil war” begins, as either rent appropriating capital resists the transformation of conditions of production that are its own conditions of existence, or else a sector of rent-appropriating capital finds a way to own conditions of production conducive to that further advance of the forces of production.  Note that by “rent appropriating capital” is not meant finance capital – as Marx delineates it in Vol III of Capital, interest on money capital per se is not “rent” (it is if the money capital is a mortgage, etc.), but a deduction from profits of enterprise.  Rather, in an explanation for the phenomenon that Giovanni Arrighi (The Long Twentieth Century, 1994) and other world systems theorists identified in their scheme as a terminal phase of the cyclical “rise and fall” of hegemonic capitalist states, finance capital – today’s evil “banksters” – only appears to rise to the fore under the conditions of the failure to resolve this fundamental contradiction between the forces and conditions of production. (See * below)  “Rent appropriating capital” is also to be counterposed to capital appropriating surplus values in the form of profits of enterprise, the “industrial capitalists” of Marx’s Capital, but be warned that this counterposition is an abstraction for analytical purposes; in reality individual capitalists invest in both forms of appropriation, and both are to be found in combination within “branches of industry”, so for example real estate obviously involves the appropriation of land rents by capitalist developers, but at the same time involves the production of commodities in the form of houses and commercial buildings.   And housing, needless to say, is intimately bound up in the conditions of the reproduction of labor power.

The Janus-face of Rentier Capital

Returning to the question of finance capital and the “rentier”, the resolution of the crisis even in its conservative Gramscian form thus typically involves the temporary euthanasia of the Keynesian “rentier” as interest earning financier, but not necessarily the real capitalist rentier-owner of the conditions of production and the reproduction of labor power.  A sector of these capitalist rent appropriators – or the state itself – might acquire as conditions  of production property conducive to the advance of the forces of production.  This can occur in two ways:  First, in the discovery of new lands and new natural resources, and here the history of the United States itself is very suggestive as a clue to the seeming “good luck” of the U.S. ruling classes in repeatedly surmounting capitalist crises, but more generally this is the material content of modern imperialism; the second way takes the form  of so-called “intellectual property” – patents, trademarks, copyrights, licenses etc. – that emerge directly out of the technical advance of the productive forces as newly discovered, naturally occurring use values.  Hence these two different forms have essentially the same root: the scientific discovery and technical exploitation of new, hitherto unknown, naturally occurring use values.  These are all “new frontiers” in use value, whether they be continents or DNA, and are the materiality of the so-called “primitive accumulation”, which should therefore not be seen as a stage in pre- or transitional capitalist time, but as an inherent and continuous feature of the capitalist mode of production as, in modern times,  the dominant organizing mode of a social formation, the capitalist system as a whole, capitalist “society”.

That is the secret of the U.S.A.’s long success in surmounting capitalist crises with conservative reform.  So long as “the pioneering country” could discover and exploit “new frontiers” – we see now what John F Kennedy was referring to – of sufficient mass and economic weight, then already existing sources of rents could either be left intact, if their owners were big and influential enough, as were the 19th century railroad operators, mineral extractors such as the Rockefellers, or urban real estate moguls, who therefore comprised the historical social foundations of the present U.S. bourgeoisie  – or they could be gradually squeezed out of existence, as were the small farmer-landowners of the 19th century rural U.S.A., not without a sharp political struggle in this case, though, and not without being replaced en masse by their metropolitan worker-landowner counterpart in the mid-20th century.  In either case the result is the conservative advance of the capitalist mode of production, with “progress” as a subordinate aspect limited to the advance of relative surplus value extraction.  This is the slight detail that the classical CPUSA (the old “pro-Moscow” Communist Party, U.S.A.) analysis of the existence of a “progressive wing” of the bourgeoisie in the U.S.A. missed, indeed standing the whole perspective on its head.

However if rents are already a lucrative source of surplus value distributions derived from the ownership of existing use values in established industries, and if these existing rents are of a mass and rate that outweigh that which may be discovered and exploited on the “frontier” – and recall that Marx showed in Vol III with “differential rent II” that increased capital investment (in the single case of agricultural land) will also increase existing (land) rents on already cultivated land without “expanding the frontier” of cultivable land –  then the prospects increase for conservative reaction, not reform.  Here rent appropriation is purely parasitic, and becomes an absolute barrier to the advance of the productive forces.  Indeed this more precisely defines the particular terrain upon which acts the classic general Marxian formula of the contradiction between the forces and relations of production.  For while capitalist production of surplus value and its appropriation as profits of enterprise is entirely subject to the law of value, its appropriation as rent is not entirely a determination of that law, but, given its essence as tribute, is subject also to so-called superstructural determinations as its own conditions of existence, as Samir Amin correctly notes in regards to the possibility of absolute rent in The Law of Worldwide Value (2010) – and as opposed to David Harvey in The Enigma of Capital (2010), who thinks absolute rent “doesn’t work” as a concept, an odd conclusion from historical geographer with a focus on the uses of “space”, particularly as differential rents can’t “work” either without the existence of absolute rent at the margin, since zero-rent assets cannot be a basis for a rentier bourgeoisie.

The Emergence of the Third Great Crisis in U.S. History

Thus the response to the economic crisis that broke out in the U.S. in the 1970’s marked an important departure from the long history of conservative reform.  With the accession of Reaganism and the so-called “neo-liberalism”, a consolidated rent appropriating and rent seeking bourgeoisie moved from being a developmental junior partner in the New Deal ruling class coalition to a predominant position within its class on the asset basis of the massive success of the same New Deal developmental strategy in the postwar.  This bloc now outweighs the countervailing bloc residing on the new frontiers of rent appropriation, reversing the historic dynamic of rent-seeking in the U.S.A. in this regard. Here began an era of conservative reaction whose significant precedents in U.S. history are those of the ascendancy of the cotton slavocracy in the antebellum era, and the pre-revolutionary crisis that gave birth to the United States itself in the late 18th century, these both also being eras of political reaction resting upon an essentially rent extractive political economy, depending on how one does the analysis. (See ** below)

The reactionary political bloc that has arisen not only seeks to preserve the existing infrastructural-superstructural basis for rents, but also deepen that basis particularly within the conditions for the reproduction of U.S. labor power, particularly given the political weakness of the U.S. working class that makes it a fairly easy target.  It should be added here in passing that this bloc is also adamantly opposed to raising the level of the chief alternative and “competitor” to the tributary form of rents, that being tribute in the form of taxes.  This opposition thus acts as a major brake on the transformation of the superstructural-infrastructural conditions for the expansion of capitalist production. Rent seeking has acted to raise the value of labor power in the U.S., reversing the historic situation of U.S. labor while eliminating the original basis for the development of a rentier bourgeoisie.  Traditionally U.S. labor power sold at wages above its value;  rentier capitals “strip mine” this difference by diverting “surplus wages” (this in itself distribution from the total surplus value, it should be added) into rents via private property in the conditions for the reproduction of labor power.  Rentier capital can also raise the value composition of labor power by expanding private property into previously public or commonly held property domains, this being the essence of the so-called “privatization” closely associated with “neo-liberalism”.  Should wages then fall for any reason – and as will be seen, there are reasons specific to the process described here that can cause wages to fall –  it is possible to enter into the situation where labor power sells below its value:  the situation U.S. labor faces today, managed until now by increasing indebtedness or strip mining worker-homeowner assets.  (The extreme limiting case here is of course slavery, where wages = zero) These are only temporary expedients, and the tendency here is to raise the relative wage level even as wages lag the value of labor power.

This may seem counter-intuitive, but this is a tendency, in reality the stage is set for the phenomena described by Mr. Pope.  Capitalist production will react in three ways: 1) by shrinking the active labor force employed in manufacturing with the substitution of automation; 2) by failing to invest in new industries, including especially those that could transform the conditions of capitalist production, particularly those involved in the reproduction of labor power, as this collides directly with the interests of rentier capital, in both that this would require raising taxes to fund state sponsorship of such “improvements”, and lower the value and potentially wages of labor power, in both cases reducing the space for rentier “strip mining” of labor power or surplus wages (should lowering the value of labor power return wages to above value); and 3) through wage arbitrage to low wage countries like China, etc.  In all three cases unemployment will tend to rise and wages fall, exacerbating the contradiction between rent-seeking and the falling value and price of labor power.  Added to this list is another kind of response by capitalists who lack the capital to substitute labor power with automation: the resort to absolute surplus value extraction by extension of the work week or day, or intensification of labor, of those workers that remain employed, in an effort to stay in business.  This last is quite rampant in the “advanced capitalist” United States, a country that sports one of the longest work weeks in the imperialist bloc of countries, a traditional sign of a backwards, underdeveloped country and a sure indicator that wages have indeed fallen below the value of labor power as workers strain to make ends meet. Here we can identify an important dialectical relationship between an entrenched and parasitic rentier capital, and either the secular growth of unemployment or the shift from relative to absolute surplus value extraction within a country. This contradiction has arrived today at the point of a potential social explosion, indeed the sparks fly as these words are written.

Prospects in the Present Crisis

The response of rent-seeking capital has hardly been to meekly admit, “Yes, we demand too much; We are sorry for provoking this crisis!”; rather, it has been to redouble efforts to expand rent extraction, to deepen privatization, directly in the face of a rising mass opposition as well as in the face of friction not only from manufacturing capital a la Pope, but also from would be rentiers out on the “frontier”, whose future prospects depend on the qualitative technical advance of capitalist production.  Hence the almost universal “Austerian”, and decidedly not Keynesian, response not only of the U.S. bourgeoisie, but of the global imperialist bourgeoisie who survive under its rule.  We’ve just seen an instance of conflict between capitalists over the SOPA/PIPA measures, replete on one side with all the pseudo-populist rhetoric the U.S. bourgeoisie has practiced since its inception.  As an aside, this event also reminds us that the U.S. Congress itself, as a “superstructural” institution of state, has long been a key vehicle for the pursuit of rents, ever since its founding act by its immediate predecessor, the Convention Congress, in the Northwest Ordinance of 1787. The Congress not only comprises an inordinate number of actual rentiers in its membership, but is also the vehicle of choice for upward climbing, would-be rentiers, this being a specialty of membership in the Democratic Party in particular – Barak Obama and the Clintons being its shining exemplars – and also explains the universal and uniform hostility of Democratic Mayors, no matter how “liberal” or “progressive” they claimed to be, to the Occupy movement, with its tactics seen as an immediate threat to local property values, that is, rents.  Thus there is a “natural” affinity for rent seeking built into the foundations of political power in the U.S.A.

The continued expansion and deepening of rent appropriations within the existing conditions of capitalist production, under the aegis of the present reactionary political bloc cannot, generally speaking, continue forever without hypothetically strangling capitalist production tout court in the U.S.A.  That can’t happen in practice, as this would kill the proverbial goose laying the golden eggs, for under modern capitalist conditions, the mass of surplus value derives from the capitalist exploitation of wage labor in the production of commodities, and all rents are ultimately only a distribution (“tribute”) out of this same mass of surplus value.  Rents depend on and are derivative of profits of enterprise in the final analysis.  But over the last 30 years the “Reaganite” bloc has succeeded in retarding the advance of the productive forces in the United States, relative to its foreign competitors.  This process has been further overdetermined in the U.S. case by the special role of this state as the sole guarantor of the security of the imperialist bloc of countries around the globe, a vast superstructure that while benefiting both profits of enterprise and rents, in the balance tends to favor the expansion of the latter, as does any superstructure.  Finally under this same global umbrella, rentier capital in the U.S. will naturally gravitate towards its counterparts abroad, most notably those to be found in the Persian Gulf, this reinforcing its social power at home; but this can also evolve into its “opposite” should rents fall into the hands of states not well-integrated into the imperialist system, such as Venezuela, Iran or Russia, or with Libya before Qaddafi  began his rapprochement with imperialism in the early 2000’s.

We truly have an immense contradiction unfolding before us; stating it in this way also renders more concrete and precise the well-known expression made by Marx concerning how the ultimate barrier to capital is capital itself.  Marx assumed in his time that this would lead to the “negation of capital from within capital itself”, immediately through the internal alteration of the form of capital to facilitate continuing accumulation, ultimately with the realization of social labor through social revolution.  In reality, capital accumulation as a barrier to the advance of the forces of production emerges through the fundamental social relation of capitalist society, that of private property in the conditions of capitalist production, previously accumulated rent yielding assets that are distributions out of the total surplus value extracted from labor power by productive capitals.  When the weight and mass of the rent yielding capital invested in the conditions of capitalist production, including the reproduction of labor power, reach a level where these can affect the historical trajectory of the whole social formation, we then have the more concrete realization of the generalization of the social relations of production as a “fetter”, as well as a more concrete formulation of exactly how capital “negates itself from within itself”.  Capital is not negated simply within production, but within the reproduction of the conditions of capitalist production. For if the economic and social weight of already existing rent capital can be translated into political power and overbalance both the development of productive capital and the prospects for future rents by would-be “frontier” rentier capitalists, prospects that depend upon the technical advance of the productive forces, then the expansion of the scope of capitalist production and development  of the productive forces will tend to stall, economic and social stagnation will set in, and an intractable political crisis of the sort we now see in the U.S., will emerge.  Under such conditions of relative paralysis, “finance capital” will appear to emerge to the forefront as the leading capitalist sector, but this is a “leading role” by default in a vacuum.   This analysis reveals that finance capital is not the decisive factor in the crisis.  It is rather the very large accumulation of rent capital already invested in the conditions of production in the U.S. – well understood by all to be a historically gigantic accumulation of such capital since the postwar in particular – that is the decisive source of the present crisis.  This analysis further shows that the resolution will not be found in the tradition of “conservative reform” in the U.S. since the Civil War, but rather shows that the present crisis possess the severity of that of the Antebellum U.S.A.  Even more severe than that, though, given the special overdetermination of the U.S. as the sole guarantor of imperialism, giving this crisis of U.S. capitalism a global scope, an additional global crisis of capitalism that redounds again upon U.S. society.

*Aside: This is not intended as a substitute for the classical Marxian formulation of the contradiction between the forces and relations of production. Rather, addressing the connection between forces and relations at this level of abstraction, the forces of production also comprise a certain set of the relations of production, what Michael Buroway (Manufacturing Consent, Burawoy, 1979) called “the relations in production” but which I prefer to call the relations of production embodied in the technical composition of capital that defines the combination of the use values that comprise capital, a set of relations whose analysis stands outside that of the law of value, which is why Marx abstracted from this entire sphere of social relations in Capital, and therefore unfortunately for this same reason Marxists have failed to analyze the reproduction of labor power under the capitalist wage labor regime beginning from its own real basis, which is not that of exchange but use value – if this last were not real and true there would be no basis for positing an independent basis for the intervention of the proletariat in history, much less a real basis for socialism.

The more traditional dialectical presentation of the forces and relations of production is to emphasize their real unity, and therefore the interpenetration of both across what is in reality a purely analytical divide.  The forces of production can also have their superstructural aspect in the development of science and technology outside the law of value, through sponsorship by the State or even private universities and foundations, and therefore are not purely consigned to the economic basis of society.

**An analysis that, while of great importance to understanding the main contours of the first half of the 19th century U.S.A., and indeed earlier in the colonial era, introduces into the presentation here concepts of now largely antiquated relations and forces of production, such as slavery and merchant capital, complicating and interfering with the focus intended here. Not only would we have to enter into the established controversy about whether plantation slavery in the U.S.A. was “capitalist” or not, but we would have to introduce another theoretical discussion that may be even more controversial:  a relation between merchant capital and rent that sees plantation slavery as a rent-appropriating operation, and not as profits-appropriation, not as modern “industrial” capital.

To be brief, we agree here with Jarius Banaji, and not with Eugene Genovese nor the Political Marxists such as Charles Post et al, that plantation slavery was a type of non-wage labor “capitalism” to the extent that an accumulation of capital was its object.  At the same time the plantation slave-owner was essentially a type of merchant capitalist, and his “profits” actually rents, as merchants throughout history were wont to represent their capital gains as “profits” without need for concern for the sources of surplus value. In general, merchant profits are an arbitrage across the differential development of the productive forces such that the merchant can sell commodities above their value (and purchase below value), appropriating the surplus profits.  (See Ernest Mandel, Marxist Economic Theory (1968), pg. 182, “Trade, outcome of uneven economic development”) Surplus profits are always potential rents, for example a modern industrial capital with a higher than average productivity (as Marx defined it in the first books of Vol III) can appropriate surplus profits, but these might have to be in turn paid out to the holder of a patent or license on the capital’s technical composition that is the source of that superior productivity, say to a James Watt, or Thomas Edison, or mining an even more parasitic vein, a Larry Ellison.  This also apples to the case at hand: when commodities, including labor power, are bought below, and sold above, their value.  The key factor in pre-modern times was the general subordination of merchant capital to tributary mode(s) of production, such that the mercantile appropriation of the surplus product in value form was a phase of the broader stream of tributary appropriation.  It is the reverse of the present status of rent as a value form subordinated to profit by the dominance of the law of value, and plantation slavery was an already anachronistic remnant of this former pre-modern relation.

Likewise, merchant capital is quite interchangeable with landed property in the pre-modern era.  There was nothing in theory preventing landed property appropriating rents in money form from converting this into a merchant capital.  Likewise there was nothing preventing a merchant from converting their money capital into landed property, as merchants often had to given the general  underdevelopment of the capitalist mode of production in pre-modern times, restricting outlets for further investment to landownership or the plundering piracy also historically closely associated with mercantile capital.