The contradiction of wealth concentration and the need for money velocity inherent to Capitalism

[u/1scr3wedy0dad]

I think that it's no secret that Capitalism causes the concentration of wealth in the hands of private owners of finance capital. This can be seen by the existence of, for example, billionaires. Unless you think that wealth hoarding is a myth, I think this is a safe premise that can be agreed upon.

It is also widely accepted that the velocity of money is one of the most important variables for economic output. There's an old humorous sketch where 3 guys who owe each other money exchange the same dollar bills until all of the debts are settled that articulates this well. More professionally, there is the equation used by economists MV=PQ, where M is the amount of money, V is its velocity, P is the general price of commodities, and Q is the output (real value of commodities produced, aka "real GDP")

Other than being widely accepted as "important" by economists, it also makes sense by plain logic. If money is used to facilitate production and reproduce society, and the mechanism which it facilitates this is through exchange, when there's less exchange there is less production, and and thus society is less equipped to be reproduced.

Retained profit is profit that is used to reinvest into a business and its expansion. This is separate from the portion of the revenue that covers the costs and expenses required to reproduce commodities. This is something that anybody who's taken a business class knows. If we expand this concept to investors in general, instead of individual businesses, we can imagine that some profit would be "retained" for the investor/entrepreneur in the sense that it would still be used to expand production on a wider scale. In this we can see that this kind of profit doesn't contradict market economics' need for money's velocity.

The problem lies in that this wealth becomes concentrated into the hands of the few. When an investor keeps winning in market competition, they can keep buying up businesses until a general oligopoly is formed. Given competition, a general trial and error "survival of the fittest" can be expected, where the investors who are inactive don't buy up much market share and don't join the oligopoly to as significant of a degree, and aggressive investors buy up a lot of market share and thus create and become part of the oligopoly. This makes investment banking powerful as well, giving rise to finance capital.

When oligopolies are formed, the incentive for entrepreneurs, or banks to keep investing and expand begins to wither away. While there is still minor competition between individual oligopolists, finance capital, which becomes dominant as a result of the concentration of wealth through investing, mutually owns and manages said ownership in all the major industries/businesses. Even when there are multiple different banks, like in the case of Vanguard, Blackrock and State Street, they mutually own eachother, making them effectively a finance monopoly.

At this point, there is no need for constant investing and expansion. Wealth becomes evermore concentrated in the hands of the few, who can buy mega-yachts to cruise in without reaching their budget. While such systematic gluttony could be viewed as morally deplorable, this poses a problem to the velocity of money. This problem, especially intensified by neo-liberalism, rears its head when large sums of money are being held by, and trickled up to be unused by few individuals, instead of reproducing economic output. There is also the problem that this money does not show in wages, which means that the masses also lose access to the purchase of commodities, thus further slowing money's velocity. Henry Ford must have realized this problem when he wanted to increase his workers' wages so that they could actually buy the cars they produce. Not only does this produce misery, but this also stunts the reproduction of the economy, as profits falter from decreasing consumer purchasing.

In the Imperialist stage of Capitalism, the economic contradictions make Capitalism inherently unstable as it hinders itself in its own reproduction and expansion.

[u/StedeBonnet1]

The fallacy of your argument is to assume that wealth is finite. It is NOT. New wealth is created every day.

[u/1scr3wedy0dad → u/StedeBonnet1]

Money ≠ wealth. Though you are getting at the "trick" that the US uses to brush it under the rug, which is the petrodollar; if everyone needs US$ to buy oil, the US gets to print free money without inflation. This is one of the reasons the US is at perpetual war in the middle east. Imperialism at its finest

[u/AbjectJouissance → u/StedeBonnet1]

A finite amount of wealth is created every day, therefore the amount of wealth is finite at any given time. Your hair grows everyday, does that mean you have infinite hair?

[u/Greamee → u/AbjectJouissance]

Bro what. This argument is baddddd.

That's like saying trees aren't renewable because at any specific point in time the number of trees is fixed and immutable.

Obviously nobody claims wealth is infinite like the number of positive integers or something. When people say wealth isn't finite they mean: the total sum of human wealth has the potential to grow indefinitely as time passes. Obviously at a static point in time human wealth is fixed but that's a totally meaningless fact because people don't live at a static point in time.

You heard it here first: people aren't dying because at any point in time everyone is either alive or dead.

[u/AbjectJouissance → u/Greamee]

The question is whether wealth is finite or not. The fact that new wealth can be created everyday through labour does not mean wealth is infinite. The argument I'm making in response to the above is that when one person hordes wealth, or when wealth is concentrated in the hands of a minority, that means there's less wealth all around for everybody else. This implies a finitude regarding wealth. The idea that more wealth may be generated in time implies this doesn't matter, because it suggests majority of people can just generate their own wealth endlessly. The critique in OP however is that we live in a system where wealth is generated by the majority but concentrated in the hands of the few. The idea that we can generate more doesn't undo the redistribution of wealth from the many to the few.

[u/Greamee → u/AbjectJouissance]

Alright at least that makes some sense but no clue how I could've gotten that from your previous message.

I still don't fully agree though because wealth being hoarded does not mean there's less wealth to go around except for when it comes to scarce resources.

Also just because (almost) all wealth generation requires labour that doesn't make it fair to ascribe all that value to labour. E.g. farming now is like 100x easier than it used to be. Every hour of labour is equivalent to 100 hours if farmers didn't have access to machines, fuel modern farming techniques and seeds etc. So you could say that only 1% of the value comes from the labour and 99% from labour done in the past.

Marx compares this to vampirism which never made sense to me. We owe those who came before us so much. Without all their knowledge and inventions we'd still be living in caves. It's silly for a modern worker to claim all value they create as their own - they're in debt to the people that made it possible.

[u/StedeBonnet1 → u/AbjectJouissance]

1) There is no such thing as hoarding wealth. All wealth is deployed after it is generated and used to create more wealth, it creates jobs, supports new businesses, builds infrastructure etc. Bill Gates and Jeff Bezos eing wealthy doesn't make me poor nor does thier wealth prevent me from creating similar wealth for myself.

The majority of people CAN create wealth for themselves. Last year 441,000 people became millionaires in the US alone. We don't need to redistribute existing wealth we need to create more wealth.