Home > Uncategorized > Wealth that results only from a change in the exchange-value of some goods relative to others

Wealth that results only from a change in the exchange-value of some goods relative to others

from Andri Stahel and RWER issue 93

As will be argued, a great part – and increasingly so – of the capital gains result from an inflationary increase in the monetary value of given financial assets and not from productive employment of capital, generating both capital-income and new wealth on its wake. Thus, we overlook the effect of the different kinds of capital both in fostering or not overall economic activity and the effect of that which has been termed “financialisation” on the wealth-inequalities in our contemporary world. “A pattern of accumulation in which profits accrue primarily through financial channels rather than through trade and commodity production”, as defined by Greta Krippner following Arrighi (Arrighi 1994; Krippner 2005, p. 174).

While in the case of capital invested in productive and commercial activities we may observe a larger appropriation of newly created wealth by some in proportion to that gained by others, but still growing wealth for all in global terms; a completely different picture emerges when we look at the speculative financial gains obtained from buying and selling financial assets at a profit. Here, no new wealth is created and thus, at the aggregate level, we have a net transfer of the existing wealth to those who managed to effectively obtain speculative gains from their capital at the expenses of those who don’t and who do not possess speculatively invested savings.

A second aspect which is not considered by Piketty and by economists at large even when talking about “wealth distribution” issues has to do with the very definition of wealth and what we are talking about in the first place. read more

  1. Ken Zimmerman
    November 2, 2020 at 4:39 pm

    What Fernand Braudel wrote over 40 years ago seems relevant to consider once again today about the questions you and Piketty seek to answer.

    But there is another, shadowy zone, often hard to see for lack of adequate historical documents, lying underneath the market economy: this is that elementary basic activity which went on everywhere and the volume of which is truly fantastic. This rich zone, like a layer covering the earth, I have called for want of a better expression material life or material civilization. These are obviously ambiguous expressions. But I imagine that if my view of what happened in the past is accepted, as it seems to be nowadays by certain economists for what is happening in the present, a proper term will one day be found to describe this infra-economy, the informal other half of economic activity, the world of self-sufficiency and barter of goods and services within a very small radius.

    On the other hand, looking up instead of down from the vast plane of the market economy, one finds that active social hierarchies were constructed on top of it: they could manipulate exchange to their advantage and disturb the established order. In their desire to do so – which was not always consciously expressed – they created anomalies, ‘zones of turbulence’ and conducted their affairs in a very individual way. At this exalted level, a few wealthy merchants in eighteenth-century Amsterdam or sixteenth-century Genoa could throw whole sectors of the European or even world economy into confusion, from a distance. Certain groups of privileged actors were engaged in circuits and calculations that ordinary people knew nothing of. Foreign exchange for example, which was tied to distant trade movements and to the complicated arrangements for credit, was a sophisticated art, open only to a few initiates at most. To me, this second shadowy zone, hovering above the sunlit world of the market economy and constituting its upper limit so to speak, represents the favoured domain of capitalism, as we shall see. Without this zone, capitalism is unthinkable: this is where it takes up residence and prospers.

    This triple division, which I gradually saw forming itself before my eyes, as the elements of observation fell into place almost of themselves, is probably what my readers will find the most controversial aspect of this book. Does it not amount to making too rigid a distinction–indeed a term by term contrast–between the market economy and capitalism? I did not myself take up this position hurriedly or without hesitation. But in the end I accepted that the market economy had, between the fifteenth and eighteenth centuries and indeed even earlier, been a restrictive order, and that like all restrictive orders, whether social, political or cultural, it had created an opposition, counter-forces, both above and below itself. (Civilization and Capitalism 15th – 18th Century, Volume 1)

    Although somewhat changed in form and content since Braudel wrote these words, I believe the three planes he describes continue to exist today. And their existence helps answer the questions you consider after Piketty. The plane of self-sufficiency has shrunk in both size and impact. And its separation from the plane that stands above the market plane is now virtually unbridgeable. Plus, we need to recognize again, as Braudel and most historians/social scientists do that the economy is not an isolated area of life. But rather fully involved with all other aspects of human society. A broken economy places all of society at greater threat. As Jimmy Cagney remarks in Billy Wilder’s film, “One Two Three” (1961), America works because its only royalty are the likes of Count Basie and Duke Snyder and in America everyone owes everyone else. Neither is the situation any longer. And that is a problem for all of us in the world. A US of 300 million and a world of 6.3 billion permanently wealth deprived is simply not sustainable.

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