Suddenly, back to blogging again. Good feeling.

Can There be Superior Forms Better Suited to Capital?

This is a question I have been thinking for a while by combining reflections from evolutionary biology and thoughts on the genetic code of capital coming from my PhD thesis. Genetic code is a fancy term I like but tells little about the complexity of capital relation in the way gene itself tells little about what life is. As Evelyn Fox Keller and Lewis Wolpert show separately, in explaining the complex relations between the gene, cell and their environment, the gene can no longer be thought independent of processes determining the the intra-cell and inter-cell organizations. The question is about how multiple players (perhaps actants in Levi Bryant’s terms) including regulative sequences, products of structural and regulative genes and complex signal network of the cell come together to give way to a reliable and well-functioning whole. The same applies to capital relation. The secret code of capital does not lie in one single causal factor such as ‘profit’ or ‘wage labour’ or ‘exploitation’ or ‘market’. We need to look at how all those elements come together to give way to the specific relation of capital.

But back to this question of ‘superior form’. Again, I am aware of how confusing the term is. On the one hand, we know that capital relation is INDIFFERENT to the variety of forms it may take and use/rely on. It can take the form of what Sharad Chari calls ‘fraternal capitalism’ with the toil of immensely hardworking laborers who accumulate capital; it can make sharecropping, slave labour, bonded labour or salaries as different types of wage-labour relation as Jairus Banaji shows; it can apply to both petty commodity producers and large industrialized enterprises as Henry Bernstein demonstrates. So even in its most advanced period, we can observe slave labour, PCPs…etc. as capitalist forms which survive not simply to reproduce capitalism, but to respond to several contradictory tendencies within capitalism which do not need to be related to the reproduction of capital per se. So, a homogeneous, unified tendency of capitalism does simply not exist.

But then, what are the limits of this indifference when looked from the very long-term, historical perspective? In other words, could some forms emerge in capitalism which would make some others unable to survive? And under which conditions? And more substantially, if this is the case, can those forms tell us something about the specific genetic code of capital? By ‘superior forms’ I do not mean a pre-determined, essentialist form which looks functional retrospectively. It is more like a pattern which took a shape over time, which might have started accidentally, yet evolved in certain way because of certain reasons.

This question came to my mind when I was researching London Metal Exchange. In capitalism, producer pricing systems and exchange pricing systems coexist. To make it simple, for most metals, there is a producer pricing system at the beginning of its marketisation. Large producers come together to determine the price of the metal (not always physically, but .

But I noticed something strange while examining the LME. For each metal traded in the LME, the producer pricing system fails at some point and LME acts almost as a gravitational pull for those metals. Put differently, their prices enter the orbit of the LME. When aluminum is first traded at the LME in 1978, the world’s six large aluminum producers show resistance and continue using their own producer pricing system in setting prices. After the collapse of the Soviet Union, incredibly huge amounts of aluminum invade the world market and traditional producers are no longer able to control prices. The LME price emerges as the global reference price for aluminum.

Tin is traded from the beginning of the time LME started operating in 1877. However, since 1956 International Tin Council, representing major tin producers start determining prices by export controls and via a buffer stock mechanism to buy or sell tin according to the levels of supply and demand. This continues until 1985 when new tin producers outside of the ITC emerge and the global demand for tin declines due to shift to other commodities in production areas where traditionally tin was used. The ITC which relies on huge amounts of bank credit in buying tin from the market runs out of money and became insolvent. This also effects negatively several players at the LME from through which the ITC was doing tin trade. Ironically, even though those players undertook enormous risk and lost money, the result of tin crisis helps the LME to a) issue a tin contract which became a reference contract for the world markets b) gradually introduce the clearing system which allowed a third party guarantee to the exchange transactions in order to avoid the type of insolvency caused by the tin crisis. In other words the collapse of the International Tin Council empowers the tin contract at the LME and facilitates the change of weak institutional rules at the Exchange.

Nickel is another metal set by producer pricing system. It starts being traded at the LME in 1979. Dependence of warfare on nickel pushes the US government to control production. 2 canadian companies account for half of the global nickel production in the 1950s and 1960s but the Canadian labour strike of 1969 reduce nickel supply. The rise of new producers in Australia, Dominican Republic and New Caledonia prevent Canadian producers’ ability to control nickel prices and another major strike in 1978 leads to the LME introducing the nickel contract as a reference point in the industry in 1979.

So in all those three metals, the producer pricing systems (either informally or in stricter institutionalized control of the ITC) cede their place to the exchange based pricing. To break down my questions:

1)Why is there such a shift from producer pricing system to exchange based pricing system?

2)What is the thing that the LME does, but producer pricing system does not do so that there is this convergence?

3)Can this shift/tendency tell anything about the nature of capital relation?

In order to answer those questions, we need to understand how what the LME does and how it does what it does. This is for the next post….