Metacartel

A brief overview

If we now pose the question as to the real limits of cartelization, the answer must be that there are no absolute limits. On the contrary there is a constant tendency for cartelization to be extended. As we have seen, the independent industries become increasingly dependent upon the cartelized industries until they are finally annexed by them. The ultimate outcome of this process would be the formation of a general cartel. The whole of capitalist production would then be consciously regulated by a single body which would determine the volume of production in all branches of industry… The tendencies towards the establishment of a general cartel and towards the formation of a central bank are converging, and from their combination emerges the enormous concentrated power of finance capital, in which all the partial forms of capital are brought together into a totality. — Rudolf Hilferding, Finance Capital, Chapter 15

Larry Fink is at the hub of the wheel of American Capitalism. — Ken Langone, Home Depot CEO

Rudolf Hilferding’s Finance Capital was published in 1910, three years before the Federal Reserve Act was passed and the United States’ third central bank came into existence. There is, then, something prophetic in what Hilferding was saying: the same forces that were producing economic cartelization were one and the same as those leading to the formation of a central bank. This passage of Finance Capital is speculation on future development arising from historical tendencies, but it is also posing a question. Whose central bank? Where will it be located? What will its functions be relative to monopolistic capital? The inauguration of the Federal Reserve answers these questions.

The ‘general cartel’ alluded to by Hilferding was likewise come to pass, though not in the framework that he had anticipated. It would require nearly a century of development, punctuated by crisis, which saw the rise of powerful monopolies, the full subsumption of industrial capital by finance and its ancillary sectors (real estate, insurance and the like), the arrival of trillion dollar asset managers and, ultimately, a terminal phase-shift rushing through the heart of capitalism itself.

Hilferding’s general cartel, when realized, had already been surpassed by something much stranger and much worse: the Metacartel. In Gravity’s Rainbow, the term already appears, but in that context it is much closer to what Hilferding was describing: an immense industrial combine. Where it angles itself much closer to the reality of the Metacartel that confronts us now, in that it is fused fundamentally to state power, that it moves through and beyond corporate entities that appear legally separate, and that it is largely invisible.

The clearest path to the Metacartel is through the history of central banking in America, because the seeds of it were sown immediately in the creation of the Federal Reserve itself. But the establishment of the Fed was not a fluke or accident or a contingent intrusion into an otherwise pristine curve of maturing capital; it was not the byproduct of a sinister cabal hellbent on imposing a collectivist iron cage on free people. The Fed came into being instead on the basis of sweeping transformation in the forces and relations of production on one hand, and due to the immanent reality of class warfare on the other.

Returning to the primal scene of the transition from the nineteenth to twentieth century (the reader might note that this was also ground zero for the ultimate development of the so-called ‘deep state’). In those years, a new economic order was slowly emerging, but its ultimate form was yet to be settled. On the side of high bourgeoise, threats were ubiquitous: there was a deep fear, on the one hand, of the dissolving acid of market forces, and on the other, the powers of organized labor. This seemingly paradoxical pair was understood as forces capable of undermining the new ‘corporate system’—but it was the introduction of the trusts, large-scale combines integrating industrial and financial capital under new monopolistic form, that was heralded as the machine to bring this situation to its close.

On a deeper level, the introduction of the trust was a bid to increase the rate of profit at all costs: labor disruptions and ‘wage spirals’, competition and the threat of business failures were all eating into this trendline that was already falling under the pressures of rising mechanization. The new paradigm erected by the trusts was summed up by Charles Ranlett Flint, the mover and shaker behind the Computer-Tabulating-Record Company (later known as IBM). “Business enterprises”, said Flint, “are no longer subject to all sorts of unforeseen contingencies. The danger from strikes, lockouts, over-production, and ruinous competition are largely eliminated”.

Such as the order of business form a top-down position. At the bottom looking up, the situation was producing a series of alliances that might look strange to modern eyes: successful militancy pivoted on a triadic cooperation between the industrial proletariat, small entrepreneurs, manufacturers and shopkeepers (today dismissed as the petty bourgeoisie), and local municipal governments. This sort of triumvirate came together under the guise what we might call ‘labor republicanism’, which was the defining ideological orientation of organized labor prior to its defanging via assimilation into the managerial-administrative state.

This heady ferment produced two divergent understandings of how money was to function as a constituting aspect of commercial life. On the side of the labor republicans, money was simply a mechanism reserved for exchange itself; its value was to be tied directly to the output of production and to enable the circulation of commodities on the market. On the side of the newly-minted monopoly capital, money was first and foremost a store of value over time, an object to be hoarded for personal enrichment and to act in a more limited sense as a reserve for future investments.

Both positions were, of course, different aspects of money itself (an Ortho-Marxoid take might be that labor republicanism was always already mired in a petty bourgeois ideology and that their primitive view on money was simply a reflection of simple commodity production—but this, as is always the case, ignores the role this played in the objective real movement of social antagonism and development). Nonetheless, through the rise and expansion of trusts in the monopoly capital era, it was the latter articulation of money that won out over the former.

In time a deep and perhaps irreconcilable contradiction blossomed in the monopolistic understanding of money, one woven to the underlying substrate of production itself. Because the outlays for capital-intensive production paradigms, necessary to feed economies of scale, were so great, the monopolies found themselves susceptible to shocks, dips, and rapid changes in the market. Far from being a plane of pure rationalization that brought to an end the ‘anarchy’ of the business cycle, early monopoly capital had an Achilles’ heel, and that heel was the crisis.

The new contradiction reflected in the debate between advocates of an inelastic money supply, money whose supply was limited by gold, which helped maintain price stability and the time-value, and those heralding an elastic money supply, money whose supply could be increased. Simply put: capital was discovering that it could blunt the edges off from the sharp jolts of crisis by spending. Keynes avant la lettre.

This was the basis on which the Federal Reserve, as a modern central bank, truly emerged. The impetus and agenda of the early Fed was not to come down on other side or the other of elastic vs. inelastic debate. It was instead to manage the immanent contradiction as an external force, not unlike some sort of money-minded thermostat regulating the temperature of the market.

But time would dismantle this very mandate itself. Development of productive capabilities, the growth of international competitors on the world market, and the return of labor militancy both at home and abroad could not prevent the persistent fall in the rate of profit, culminating in the final moments of capitalism itself with the Nixon Shock—the delinking of the dollar from gold. One line from this moment leads us down the well-trodden path to the emergence of the petrodollar, and beyond it to the advanced forms of economic warfare waged through money and oil by the US against its adversaries.

The other line leads towards the Metacartel, but there’s a few more steps required to fully apprehend the details of its emergence. With the breakdown of the gold system, the Fed’s role transformed. The breakdown signaled an immense rupture: crisis became universal, a general condition of things—Omnicrisis. Capitalism was brought to its furthest limit, and for all intents and purposes died, and yet it still persists. How? The Fed had become something like a Katechon, an impersonal machine for permanently forestalling the apocalypse. The motor of crisis-manager engine fueled by the crisis in order to prevent the crisis from following on to its ultimate conclusion.

Nothing illustrates this better than 2008. If Wolgang Streeck is correct, 2008 was less an example of oscillating, periodic crisis (albeit one of unusual proportions) and more the ‘kicking the can down the road’ of crisis-suspension running backwards to the 1970s coming back to bite us, the ‘Great Recession’ expresses in itself all the truths that zombie-capital wishes to bury. And indeed, it is clear that since 2008, nothing has been the same. The Fed, formerly an essential figure relegated to the background, some abstract tool of policy wonks, moved to the fore. Quantitative easing, the fine-tune manipulation of the money supply, became a household word and the interest rate transformed was transformed into the defining feature of economic life. Nothing less than central planning was introduced on a grand, overt scale, functioning through esoteric special purpose vehicles, swap lines, Open Market Operations and the like.

This was also the moment where BlackRock reared its head and became effectively fused to the Fed, which is the real ground zero for the formation of the Metacartel as something with an objective and continuous existence. Because that is what the Metacartel is: an advanced form of highly socialized capital, presided over not so much by capitalists but by manager-trustees, welded to the central bank apparatus where there is no way to tell where one ends and the other begins.

Asset managers like BlackRock, Vanguard and their ilk have been described as “Universal Owners”, a concept that carries with a vital point for these forces’ relationship to the economy totality. What differentiates the universal owner from the traditional forms of ownership found in the history of capitalism is that they own large slices of the companies not relegated to a given sector, but span the economy as a whole. This makes them “dependent on general macroeconomic performance than on the performance of any one stock or portfolio”. The implications of this are twofold. In the first case, it means that entities like BlackRock are risk-averse, in an interesting echo of the problems that monopoly capital faced after the 1890s. As an extension, it means playing an active role in not just the economic, but political governance of the world system.

Hence BlackRock’s insistence on eschewing short-term profit-mongering for a long-range approach to financial markets (long-term strategic thinking was the rationale for the ‘secret meetings’ between Larry Fink, Jamie Dimon, Warren Buffett and others that took place in 2016, against the backdrop of Trump and a rising MAGA movement). What has largely gone unremarked upon is that the rise of this economy of steering has meant over time that speculative high finance of the type typified by hedge funds has gradually declined—though by no means vanished.

Kees Van der Pijl did highlight this in his recent book States of Emergency by noting that in fall of 2019, “a new financial collapse… threatened to occur… one even surpassing that of 2008”. The fundamental argument of States of Emergency is that the threat of another major crisis—the Omnicrisis overwhelming its managers—combined with a mounting global insurgency precipitated the imposition of a state of emergency via the justification of Covid-19. What interests us here is that Van der Pijl writes of the “need”, in that moment, “to discipline the fraction of money-dealing capital”. The central role played in the economy by asset managers like BlackRock, which has only accelerated from 2020 onwards, acts as a motive force for this disciplining.

In Metacartel America, universal owners carefully manage vast economic resources while central banks work quickly as modulators of the money supply and acts as a backstop to prevent crisis from reaching its apex. Together, these form the the double pincer that allows central planning to truly take place in order to maintain capital in its state of suspended animation. Janus-faced monster, the socialism that nobody wanted—“A certain technocratic Omega-state is achieved”.