© Gan Poe, 2004
gCapitalistich activities, such as the use of money, credit system, money-lenders, or inter-regional traders, have long been existed with the history of civilization. But the spread of the capitalistic system to whole societies and moreover to the world is a modern phenomenon. Robert Brenner states:
because both lords and peasants were in full possession of what they needed to maintain themselves as lords and peasants, they were free from the necessity to buy on the market what they needed to reproduce, thus freed from dependence on the market and the necessity to produce for exchange, and thus exempt from the requirement to sell their output competitively on the market.
In order for the capitalistic economic system to emerge, it had to forsake the archaic tradition, which had sustained the stable and fixed reciprocity. Things possessed by a community had an eternal attachment to the original community. Hence, if they exchanged such things, the attachment would continue even within the other community that received them. By mutually possessing goods, people build a consensual unity. This is different from the circulation of commodities in trading markets, where people do not have to be emotionally united with the person doing business with.
To ignore this community-based custom,sacred places were necessary. Because things given to these places became the possession of gods, previous owner-attachment disappeared. People could, then, exchange without concerns about community relations. In his Gifts, Marcel Mauss points out this fact. gPurchases must be made from the gods, who can set the price of thingsc the owner must epurchasef from the spirits the right to carry out certain actions on ehisf property.h The sacred possession enabled the emergence of secular markets and commodities.
Such gsacredh places were usually situated at the gin-betweenh of local communities, such as mountains, rivers, river banks and sea shores. In these places, the people expelled or estranged from communities gathered and passed by. It was this position – the potential to see the gdifferenceh between communities – that gave the first rise of money-trading. By standing in between, they became interchangeable between gsacredh (or gevilh) and gsecular,h between goutsidersh and ginsiders,h and between gstrangersh and gtraders.h There was no secret in the nature of such people. It was the gpositionh that gave them the characters. For example, Simmel states:
The role that the stranger plays within a social group directs him, from the outset, towards relations with the group that are mediated by money, above all because of the transportability and the extensive usefulness of money outside the boundaries of the groupc. The decisiveness of this relationship is demonstrated by its reversibility: not only is the trader a stranger, but the stranger is also disposed to become a trader.
The capitalist market economy developed from the external interstitial trades rather than inner local community exchanges of goods. Market is the system seeking profits by watching both internal and externalprice differences. It is similar to thestate system, which exists both externally and internally – for coercing external enemies (Carl Schmittfs friend-enemy theory and reaffirmed by Skocpol) and for setting internal order (Weberfs definition as monopoly of violence). Marx earlier mentions the point:
it is simply wrong to place exchange at the centre of communal society as the original, constituent element. It originally appears, rather, in the connection of the different communities with one another, not in the relations between the different members of a single community. Further, although money everywhere plays a role from very early on, it is nevertheless a predominant element, in antiquity, only within the confines of certain one-sidedly developed nations, trading nations.
The existence of the gsacred placesh – separated from particular communities – that forsook the community ownership led to the creation of markets. Then, the introduction of money as the tool of exchange was the essential cause for the long-distance trading.
Communal possession of products gives a sort of gmajestich attachments to the original producers. I have explained that gsacredh places in between communities could forsake such attachments. But we should not understand this in reverse. It was not the gsacredh-ness, but it was the gin-betweenh-ness that gave the places the gsacredh-ness. To step in the areas facing gothersh and outside a community, people inside required a leap risking a life – salto mortale. This uncertainty and unpredictability existing outside greciprocalh culture appeared in human minds as gsacredh – or what is the same, gevilh – gin-betweenh-ness as fetish. It was the same with money. It seems that the majestic beauty of gold or silver forsook the attachments. It was, however, the act of exchanges in the gin-betweenh areas that severed them. The position of money – the general equivalency of value – also made money as a majestic fetish.
The position of general equivalent of value bestowed money the social roles of the value indicator and also the storage of value. Now as the sole indicator of value, any other commodities could not realize their own values without being equivalent to money. This is the source of money fetishism. Gold or silver was widely used as money – the world money. The character of money – general equivalency of value – calls for the ability to be mathematically divided and to be stored without changing its quantity and quality. Gold was by accident the most suitable for such a purpose. Now money became gold.
The next step was the reverse of this process. As long as money was considered majestic, people stored them in safe, because its possession itself was precious. They were money-hoarders. That means, they did neither invest money for the future gains nor circulate it within society in order to maximize profits. The modern economy started when money lost its gmajesty,h and people attempted to gthrow awayh their money for investments. The development of commercial credit – the economization of circulating money – was influential for this process. The intercity network of merchants produced the necessity of such credits. They were the promises to pay money at the stated date. Before, the thing with use value was used as money. The credit system introduced only gpromisesh of such use value.
Because of its mobility, money can be invested freely in both geographically and temporally distant places. For example, one can purchase goods where they are cheap and sell them by higher prices elsewhere. This separation of buying and selling is the source of surplus. Rather than focusing on one single market exchange (often static), political economy emphasizes this dynamic process of transfer of capital (Money-Commodity-Money plus surplus value) – not one exchange, but twice as a set. Robert Heilbroner states:
What is capital, then, if it is not just production goods or money? The initial answer, familiar to students of Marx but usually strange to others, is that capital is either of these things when it is used to set into motion a process of continuous transformation of capital-as-money into capital-as-commodities, followed by a retransformation of capital-as-commodities into capital-as-more-money. This is the famous M-C-Mf formula by which Marx schematized the repetitive, expansive metamorphosis through which gcapitalh manifests itself. 
3. Merchant capital and loaning capital
The development of interstices markets and the use of money resulted in the proliferation of capitalistic trades (M-C-Mf). I have stated that, contrast to money-hoarders, capitalists gthrow awayh money for investments. But what does it exactly mean? In fact, the formula gMoney-Commodity-Moneyh is already an inversion – the reversed formula. Social phenomena often appear reversed from the essential form. It is impossible for anybody to start exchanges from money. For all producers except gold miners, exchange always starts with a commodity (precisely a product, because any products cannot be gcommoditiesh before being exchanged). The correct formula is, therefore, Commodity-Money-Commodity. But, why, from the viewpoint of capitalists, does money appear as the beginning of exchanges? It is because of the position of general equivalent of value. As the sole indicator of value, people see value always from the side of money. Money becomes the center of the movement. In capitalism, therefore, the formula of exchange is M-C-M. This inversion indicates three important points for us here – potential of surplus value, debt first, and the money commodity.
First: the potential of surplus value. The mobility and storability of value enables the separation of purchase and sales. If one sells higher than the price they bought, surplus emerges. For example, the same product can be priced different in different countries. If one imports products to sell with a high price, there emerges surplus value. This formula M-C-Mf (Money +Surplus Value), therefore, essentially signifies merchant capital. The core of capitalism is merchant capital. To gain surplus value is to manipulate price differences.
The second result of the reversed formula M-C-M is the position of debts any capitalists must go through. This formula tells that the first exchange (M-C) – purchasing commodity with money – cannot carry out without having money beforehand. Essentially, the only possible method to have money beforehand is to rent from others. Of course, any capitalists can purchase only with the money they have. But before completing the second exchange, the money used for the first remains in the debt section of their accounts. To begin with, theoretically speaking, how did the gfirsth capitalist get money? Without debts, the formula M-C-M cannot commence. If capitalists cannot complete the second exchange (C-M), they cannot return the debt they first ran into. This is the case of bankruptcy. Capitalism compels a debt position – speculation for the future.
This necessity of debt is related to the third point of the inversion. Money is now the general indicator that it evaluates even the use value of money itself. Loaning is the commodification of money itself. The use value of the money commodity is to yield surplus when it accomplishes the formula M-C-Mf. If in society this inversed formula is generally completed, the rate of average profits emerges. This rate is the use value of the money commodity. This commodity is different from the money used for payment, even though materially the same. The money commodity is attached with interests; money used for payment or circulation is not. In payment, money is given away to the other as the equivalent; loaned money must be returned to the loaner with contracted interests. It is because, in the sales of the money commodity, it is not the money that was sold, but the gcapitalh that would potentially yield surplus that was loaned. In other words, what was sold is not the money, but the money commodity; and the functional capital who was loaned must return the equivalent of the commodity – this is the loaned money plus interests. Money-Lenders sustain the ownership of the money that was loaned, even if this money can be freely used by the functional capital. This is the reason why this amount of money will be returned to the money-lenders. The functional capital cannot own the money; what it owns is the potential to gain surplus – the potential of capital to produce surplus value. In exchange of possessing this potential, the functional capital returns with interests as equivalent.
Now, from the viewpoint of the money-lender, the gfurther reversedh formula – M-Mf – emerges. The money commodity itself bears its children. It is gfurther reversed,h because the surplus value (interest) the loaner gains is based on the functional capitalistsf actions of M-C-Mf. But the position of ggeneral equivalent of valueh inevitably brings us to this highly reversed formula. This position often appears as the center – the pivotal role – of all social relations. This is the reason why capitalist relations produce constant inversions. Now, the functional capitalists who have to be in debt every time they travel M-C-Mf discover the best (or worst) partner – usurer.
These analyses of the three points will explain the next finding by Marx:
cthe Middle Ages had handed down two distinct forms of capital, which ripened in the most varied economic formations of society, and which, before the era of the capitalist mode of production, nevertheless functioned as capital – usurerfs capital and merchantfs capital.
Merchant capital and usurer capital are, therefore, the bases of capitalism. Industrial capital cannot sustain itself without these two predecessors. The final inversed formula M-Mf now, because they have to return with interests, compels merchants and other smaller producers to accumulate surplus value. Contrary to the modern interest-bearing capital, which demands only a part of surplus, usurers attempt to swallow up the entire profits. They try not to nurture industries but appropriate them. In Marxfs explanation:
In the form of interest, the usurer can in this case swallow up everything in excess of the producersf most essential means of subsistence, the amount that later becomes wages (the usurerfs interest being the part that later appears as profit and ground-rent), and it is therefore quite absurd to compare the level of this interest, in which all surplus-value save that which accrues to the state is appropriated, with the level of the modern interest rate, where interest, at least the normal interest, forms only one part of this surplus-value. This is to forget that the wage-labourer produces and yields to the capitalist who employs him profit, interest and ground-rent, in short the entire surplus-value.
Marx indicates here that the relation between premodern debtors and usurers are similar in quantity to that between workers and the entire modern capitalists: all capitals including industrial, monetary and landowners. Todayfs capitalists as a whole are usurers for workers. To be sure, they are not exactly the same in quality. Usurers, for example, had the following negative effects on society:
cwhere capital therefore does not directly subordinate labour, and thus does not confront it as industrial capital – this usurerfs capital impoverishes the mode of production, cripples the productive forces instead of developing them, and simultaneously perpetuates these lamentable conditions in which the social productivity of labour is not developed even at the cost of the worker himself, as it is in capitalist production.
Usury thus works on the one hand to undermine and destroy ancient and feudal wealth, and ancient and feudal property. On the other hand it undermines and ruins small peasant and petty-bourgeois production, in short all forms in which the producer still appears as the owner of his means of production.
In this sense, the emergence of todayfs capitalist system was the result of counter-movements from the victims of usurers. In order to sustain their businesses, merchants – also industrialists, landowners and the state – attempted to establish their own financial system that functions with low interest-rate. Merchant credit was one successful method to economize the means of payment – or the money they have to rent from usurers. But merchant credit cannot provide the service for the sudden need of greal moneyh for payment and also for the huge loans. Renowned trading cities invented gcredit associations,h which were formed by united merchants. Their ability to loan with lower interests than usurers helped not only capitalists but also the states. Again from Marx:
The credit associations set up in the twelfth and fourteenth centuries in Venice and Genoa arose from the need of the sea trade and the wholesale trade based on it to emancipate themselves from the rule of old-fashioned usury and from the monopolizing of money-dealing. If the banks proper that were founded in these urban republics were at the same time institutions for public credit, from which the state received advances against taxes anticipated, it should not be forgotten that the merchants who formed these associations were themselves the most prominent people in those states and were equally interested in emancipating both their government and themselves from usury, while at the same time subordinating the state more securely to themselves.
In the eighteenth century, the absolute states collaborating with merchant capitalists took advantage of their newly obtained legal power and ordered the general reduction of interest rates:
Right through the eighteenth century we hear the cry for a compulsory reduction in the interest rate, with reference being made to Holland, and legislation proceeds in the same direction; the aim being to subordinate interest-bearing capital to commercial and industrial capital, instead of vice versa.
Interest rates have then become merely the part of the average profit rate. Surplus value gained from the capitalist M-C-Mf formula is now peacefully divided among industrial and/or merchant capitals, interest-bearing capitals and landowners. The surplus is constantly reinvested for the growth of social productions. Banks become the central safe of the social surplus. Credited to the money they accumulate, bank notes are widely used as the alternative to the grealh money. Today, bank notes are the ginvertedh form of money. The relation between bank notes and gold money is no longer visible, but only an ideal one. These shifts resulted in the creation of gthe modern banking system, which on the one hand robs usurerfs capital of its monopoly, since it concentrates all dormant money reserves together and places them on the money market, while on the other hand restricting the monopoly of the precious metals themselves by creating credit money.h
Social phenomena appearing to our eyes are often the greverseh of the essential relation or the form of exchange. I have explained that capitalism is the result of such multiple inversions of the form of value – fetishism is the mechanism to idealize a material, whose attraction merely comes from the position they perform in social relations, and not the material itself.
I will discuss the nature of capitalism much more in detail in the following chapter. In this section, I have to focus on its relation with other two types of exchanges – the nation and the state; because capitalism does not and cannot make everything under its sway. They leave some non-capitalistic systems and attempt to gain much wider surplus from them. Nature offers raw materials. Women or familial reciprocity bear and raise new laborers. And authoritarian or warlordsf controls of the Third World continuously provide cheap labors and raw materials.
The Nation For and Against the Capitalist-State
1. New Order of the Moral Economy – Docile Body Workers
The Italian Marxist, Antonio Gramsci developed the concept of hegemony. He pointed to practical social institutions that act as tools of maintaining the interests of ruling classes.
every State is ethical in as much as one of its most important functions is to raise the great mass of the population to a particular cultural and moral level, a level (or type) which corresponds to the needs of the productive forces for development, and hence to the interests of the ruling classes. The school as a positive educative function, and the courts as a repressive and negative educative function, are the most important State activities in this sense: but, in reality, a multitude of other so-called private initiatives and activities tend to the same end—initiatives and activities which form the apparatus of the political and cultural hegemony of the ruling classes.
Gramsci believed that this hegemony was the main reason why socialism had failed in the western Europe. According to the theories developed by Raymond Williams or William Roseverry,his theory of hegemony have following several features: (1) micro-function of power institutions; (2) plural powers within a nation-state bloc; (3) power struggles between cores and peripheries; (4) focuses on cultural or social institutions. Michel Foucaultfs understanding of power, as the disciplinary tool at local and decentralized points indicates similar points.
But the interest of Gramsci was not obviously limited to intellectual dilettanti. He was intending to raise the question of gimpossibilityh of communist revolution. The hegemony controlled by dominant classes and the state made it impossible. However, from this strategic viewpoint, it seems that he still held on to the dream of violent revolution, because the focus on cultural or social hegemony had a presupposition that, once such institutions (false consciousness or reification) were criticized and discarded, workers would come to the true understanding. Then, workers would start the final revolution. This theory lacked the scientific examination of political economy – the monetary form and capitalism – and sociology of the nation-state.
Nevertheless, Foucaultfs assertion that power actually gproduces,h contrary to the traditional understanding of power as negative, such as excluding, repressing, censoring or concealing at least explains how the state gproduce bodies that were both docile and capable.h There are, however, two points I have to add. First, it was not only the state (or ruling capitalists) that wanted to produce docile and capable workers. It was the nation that demanded the gmoralityh – the anesthetization of the act of repressing natural instincts for private pleasures for the sake of collective unity, reciprocity. Rather than the state, the nation is the Foucaultian gPanopticonh – self-inspectors. The second point to add to the Foucalutfs theory is that power certainly produces, but it still does repress and conceal. As Karatani emphasizes, especially at the time of crisis (such as economic crisis, war or terrorist attack), power emerges at the central, and it excludes, represses, censors and sustains its power by concealing information (or by pretending as if it has concrete information). The ignorance of this fact, hence, his proposition of local activism was destined to be feeble in front of the central power – the capitalist-nation-state. As Karl Schmitt claimed, the statefs power strongly emerges when the friend-enemy situation with other states gains popular attentions.
2. Curing the Speculative Capitalism
The moral nation – docile and capable – certainly contributes to the interests of the capitalist-state. But, this fact does not mean that the revolt from the nation against the others is impossible. In fact, in the peacetime, national citizens often view the members of the state ironically. Bureaucracy and politicians are established as pejorative terms. Historically in Europe, anti-bureaucracy and anti-financial capitalism led to the anti-Semitism, because Jews were considered to form such groups of people.
So-called classical economists, such as Adam Smith or Riccardo, or even John Locke, considered money as the mere indicator of exchange value, and placed the production by human labor at the center of value-making. It is merely the ignorance of how industrial capital had been started by merchant or monetary capitals. Besides, value in general is never realized without money. Such production-centrism will lead to nationalism – as the very title of Adam Smithfs book tells: the wealth of a nation. Economic depressions or serious recessions usually start because of capitalismfs inevitable tendency for heated speculative investments. Nationalist sentiments become strongduring such crises. They often emphasize the importance of the grealh productions and natural environments. Production-centrism is a form of nationalism. At the same time, the nation and the state regulate the speculative capitalism – which would produce grave social disruption – by idealizing gmoralh engagements in the production of grealh wealth and lands.
The Impossibility of the Capitalist-Nation-State Trinity:
The Third World
The state, capitalism and the nation are based on each different mode of exchange. However, in the developed gcivilh society, the disruption among their distinct interests will be soon mended and form a new stage of the capitalist-nation-state.
The situation is a little different in the so-called Third World. First of all, the capitalist-states of industrialized countries often intervene with policies in these states, whether physically, financially or diplomatically. Second, as a result, in these countries the trinity of the capitalist-nation-state has not been established enough. Interests of each domain have often collided with each other. For example, landowners (war lords) prefer open international markets in order to gain cheaper commodities and sell their agricultural products. On the other hand, emergent industrial capitals (feeble in international competition) are in favor of import restrictions. Thus, since the development of industrial capital can be the political threats to landowners who have presided politics, here capitalists and the state became antagonistic each other.
The states in the Third Worldoften appear as the mediators of foreign colonialists and internal landowners, risking the development of financial and industrial capitalists and the community life of people. The antagonism among three institutions of exchange often undermines the social security in those countries. Under such social circumstances, the uncertainty for the future prevails. It becomes highly difficult for capitalists to invest for the future. Capitalists cannot industrialize themselves, the state is constantly under the pressure of coup-dfétat or foreign attacks, and the nation stays under poverty and injustice.
Alice Amsden tells about the involvements of the developed country as follows:
Land taxes, payable in cash, either reduced the peasants to landless proletarians or required them to produce export crops, with little surplus to diversify in the event of unfavorable terms of trade. Free trade itself destroyed domestic manufactures, made it unprofitable to invest in anything other than export crops and impeded the growth of capitalist classes that could have challenged foreign domination. cPeasants who entered the money economy became vulnerable to international commodity price fluctuations. Foreigners, acting as monopolistic middlemen, gained the upper hand and reinvested the surplus elsewhere. Local moneylenders, who controlled credit, foreclosed on indebted peasants where land had become alienable. Railways and other infrastructure supported external rather than internal exchange, thereby discouraging domestic manufactures.
Foreign involvements often have negative impacts on the conditions of the Third World countries. As exemplified by several Asian countries, however, with the support of strong governments (usually authoritarian), foreign investments could reorganize social structures (almost violently) and in the long run contribute to the economic developments of the Third World nations. It is certainly not gethicalh in short terms, but often such an authoritarian power is necessary to repress the powers of traditional local lords. Such a situation also often appeared in the developed countries in the form of the absolutism. The problem is that, however, because the industries of these Third World countries are usually dependent strongly on export-incentives to the developed countries, the economic condition of the importing nations will significantly influence their society. The solution of these issues remains hard. Basically, unless the society of the developed countries does not transform into a more gassociationalh one, the potential of healthy developments of the Third World will stay limited.
Association and Federalism
In the end of this chapter, an important question arises. If it is true that the modern society is the outcome of Polanyifs three basic types of exchanges; if therefore, the solid combination of the capitalism-nation-state is the inevitable result, is this a new type of determinism? Is there no chance of the alternative?
To this question, I am highly skeptical of giving any straightforward answers. After all, we have already witnessed enormous amounts of catastrophes the so-called socialism has brought about. We have to be careful of considering easy alternatives. It would rather be the social tragedies that are caused by the capitalism-nation-state that would lead us to alternatives. For example, the concept of the United Nations was old and had remained unrealistic. Only after the grave experiences of two World Wars, such an idea was partly realized. Immanuel Kant refers to the gantagonismh inherent in human relations for its potential to rationalize the society:
The means which nature employs to bring about the development of innate capacities is that of antagonism within society, in so far as this antagonism becomes in the long run the cause of a law-governed social order. By antagonism, I mean in this context the unsocial sociability of men, that is, their tendency to come together in society, coupled, however, with a continual resistance which constantly threatens to break this society up. c It is this very resistance which awakens all manfs powers and induces him to overcome his tendency to laziness. Through the desire for honour, power or property, it drives him to seek status among his fellows, whom he cannot bear yet cannot bear to leave. c a beginning is made towards establishing a way of thinking which can with time transform the primitive natural capacity for moral discrimination into definite practical principles; and thus a pathologically enforced social union is transformed into a moral whole. c the sources of the very unsociableness and continual resistance which cause so many evils, at the same time encourage man towards new exertions of his powers and thus towards further development of his natural capacities.
Under capitalism, the harsh separation between the wealth and the poor or the treatment of workers merely as the tools for capitalistsf accumulation of surplus will force us to rethink of the system. People will see no other way but seeking for the alternative system of arranging talents and profits. In the face of violent wars as the result of the statesf expansionism, great efforts to unite the world more pacifically will start. This will lead to associational societies or the federalism based on self-governments.
It is true that proposing such alternatives sounds a little naïve. Nevertheless, harsh tragedies we face globally in each day would eventually transform the world into an associational one. As Kant said, it is the antagonism among people that would force us to the alternative. But at the same time, despite the antagonism induced by the capitalist-nation-state, it is also true that this coalition has created and is creating the potential for associational exchanges.
But such changes occur merely gradually and only by peoplefs efforts in each micro level. In this paper, I will present one of such micro efforts. Before then, however, we have to continue the examination of the capitalism-nation-state in a micro level; because it is necessary to understand particular issues we face when attempting a gradual and micro change. I will focus on the system of capitalism in the next chapter, for the research topic is an example to transform the capitalist type of exchange into a more associational one.
 173: Brenner, Robert, gFeudalismh inEatwell, John, Murray Milgate, and Peter Newman, eds., ( 1990), Marxian Economics, New York: W.W. Norton.