Black Money: On Marxism and Corruption

En route with my daughter to the Purim Carnival, I stopped at my friends Greg and Manu‘s house. Manu’s mother Toshi is visiting from India, and we got to talking about corruption scandals there. Specifically, what people do with money they’ve gotten illegally. Toshi called it “black money”—a phrase I hadn’t heard before. Turns out, it’s a fairly common term.  Here’s one definition:

Proceeds, usually received in cash, from underground economic activity. Black money is earned through illegal activity and, as such, is not taxed. Recipients of black money must hide it, spend it only in the underground economy, or attempt to give it the appearance of legitimacy through illegal money laundering.

Talking about the kind of hoarding people engage in when they have black money—think of the wads of cash you see in Mafia movies—it occurred to me that corruption stands the Marxist theory of capitalism on its head. Or at least two parts of it.

But before I explain how, caveat lector: What follows is the speculation of an amateur. I’ve done no research on corruption, and the Marx I know is the Marx I teach. That is to say, beyond the incidental mention or allusion, I’ve never written about Marx or Marxism, and beyond some secondary reading, I’ve not done any research on Marx or Marxism.

So why do people hoard black money? For the obvious reason that they can’t deposit it in a bank, invest it, or use it for any kind of legal or illegal transaction that would bring it to the attention of the government.

This makes the person who deals in black money similar to a miser, and for Marx, the miser in a capitalist economy is an irrational actor. The proper way to make and accumulate money under capitalism is to put the money one has into circulation. In its simplest form, someone uses money M to buy commodity C and then sells commodity C at a higher price to someone else (Marx’s famous M—C—M′ circuit). As Marx writes in chapter 4 of Capital, Volume One, “It is this movement that converts it [the original money one had and then advances] into capital.”

Movement, or circulation, is the key to profit in capitalism. Where the process of satisfying one’s wants or desires has a discrete terminus—ending with the consumption or use of the desired object—the increase of profit, which depends on circulation, does not. “The circulation of money as capital is, on the contrary, an end in itself, for the expansion of value takes place only within this constantly renewed movement.”

The miser, by contrast, operates under the delusion—though it’s only a delusion under capitalism—that the best way to increase his wealth is by taking his money out of circulation, hoarding it in a mattress or under the floor. Like the capitalist, he’s engaged in an endless quest for more money. And while he’s often represented in literature as mad—possessed by some malignant daemon, driven by some unfathomable end—Marx makes the point that his madness is purely situational, a failure to match his ends with his means. Unlike the capitalist, who shares the same goal of increasing his money, the miser simply doesn’t understand that best way to make money in a capitalist economy is to spend it.

This boundless greed after riches, this passionate chase after exchange-value, is common to the capitalist and the miser; but while the miser is merely a capitalist gone mad, the capitalist is a rational miser. The never-ending augmentation of exchange value, which the miser strives after, by seeking to save his money from circulation, is attained by the more acute capitalist, by constantly throwing it afresh into circulation.

In corruption rings, men and women are as rational as any capitalist, but they’re forced to act with all the madness of a miser. That is, like the capitalist, they correctly estimate their situation, but their situation, unlike that of the capitalist, requires that they hoard. Even if they were to launder their money, which would put their sums into a kind of circulation, that circulation would not do what circulation does under capitalism: it might make their illicit funds clean, but it wouldn’t increase those funds.

There’s a second way in which corruption turns the Marxist theory of capitalism on its head. In his early “humanist” writings, specifically the Economic and Philosophical Manuscripts, Marx was obsessed with the ways in which money and its pursuit distorted men and women. We pursue money in order to possess something, but ultimately money possesses us. It turns our weaknesses into strengths, our assets into liabilities. It makes us into what we are not, and makes what we are not into who we are.

The extent of the power of money is the extent of my power. Money’s properties are my properties and essential powers—the properties and powers of its possessor. Thus, what I am and am capable of is by no means determined by my individuality. I am ugly, but I can buy for myself the most beautiful of women. Therefore I am not ugly, for the effect of ugliness—its deterrent power—is nullified by money….I am stupid, but money is the real mind of all things and how then should its possessor be stupid? Besides, he can buy talented people for himself, and is he who has power over talented people not more talented than the talented? Do not I, who thanks to money am capable of all that the human heart longs for, possess all human capacities? Does not my money therefore transform all my incapacities into their contrary?

Marx called this power of money to turn “fidelity into infidelity, love into hate, hate into love, virtue into vice, vice into virtue, servant into master, master into servant, idiocy into intelligence and intelligence into idiocy” the “fraternization of impossibilities.”

Money, in other words, constituted a profound form, or instrument, of untruth. It was the ultimate deceiver, the greatest liar, for it had the capacity to transform that which is into that which isn’t and vice versa.

In the case of corruption, however, money is the great instrument of truth, at least potentially. It is the most tangible sign of some ill-gotten gain, of some illicit or criminal activity. That is why its possessor must go to such lengths to hide it by hoarding or laundering it.

The possessor of black money has something for which he cannot account, at least not legally. If he deposits it in a bank, the government will ask how he came by it, and that is a question he cannot—or does not want to—answer. The law of equivalence in monetary exchange—the rule that for every dollar I possess someone has to have given up one dollar—ensures that the truth will out (a phrase, perhaps not coincidentally, deriving from a play obsessed with money and its equivalences). The equivalences that money engineers, which Marx saw as so much mystification, become in corruption scandals the sources of demystification. The M—C—M′ circuit, which Marx treats as a sign of an almost ontological disorder, a cosmic diremption, becomes, in the case of corruption, the sign, the guideposts, by which order is restored.

Skeptics will point out that Marx is talking about capitalism, not corruption (though it’s clear in his early writings that he sees capitalism as a mode of corruption, at least in the literal sense of the term).  But as Manu pointed out, corruption and neoliberalism—the ur form of capitalism—often go hand in hand. While corruption certainly preceded neoliberalism, it’s also part of the everyday life of neoliberalism.

In fact, one can posit an interesting relationship between neoliberalism and corruption. On the one hand, prior to the onset of neoliberal regimes, corruption is often used to justify the push toward privatization and marketization, on the assumption that the free market would not allow for the kinds of shenanigans that a state-run economy encourages and fosters. (Just think how the classic films about corruption—On the Waterfront, Serpico, Chinatown—color our view of institutions like labor unions and the state; one wonders if such films, particularly the later ones, didn’t ultimately have something to do with the conservative turn of the 1970s.) On the other hand, the loss of state-provided resources that neoliberalism entails often push men and women to make up for that loss through corruption. That, it certainly seems, is what’s happening throughout so much of the world where the state has been downsized.

As Manu also pointed out—this, I think, is an especially acute insight—the hoarding practices of corruption mimic an earlier mode of capitalism, mercantilism, where accumulation and wealth are achieved not through circulation but through stockpiling. I’m not sure where we want to go with that, but it does suggest something I’ve mused on before: neoliberalism doesn’t represent a great leap forward so much as a great leap backward.

So, some questions for you readers:

  1. Are there Marxist theories of or writings about corruption? What are the best ones?
  2. What kind of theorizations have there been about the relationship between neoliberalism and corruption? Am I right—remember, I’m just a piker on these matters—that there’s relationship between the two, or at least that there’s been an uptick with the shift to neoliberalism?
  3. This seems like the kind of thing David Graeber would have a lot of smart things to say about. Has he? (Haven’t read Debt or most of his other writings.)


  1. Bruce Bernstein March 4, 2012 at 6:37 pm | #

    why does accumulation of “black money” only encourage hoarding and not investment of black money? think of it as a distinct currency that is not completely convertible. Its existence doesn’t change the laws of capitalism. Tony Soprano had all sorts of growth businesses that functioned based on his “black cash.”

    perhaps the mixture of “black money” vs. “clean” (green?) money in an economy affects the type of investments that are made, as well as other variables. but i don’t see where it changes the basic motives of circulation and investment.

    i also don’t see how possession of large amounts of “black money” changes the “fraternization of impossibilities” dynamic that Marx discussed and you quoted. Meyer Lansky could have all the women he wanted due to his great “black money” wealth, albeit his enjoyment of this was limited to Cuba.

    • Corey Robin March 4, 2012 at 11:27 pm | #

      Right, but to be able to invest that cash and make it productive it first has to be laundered, no? Though someone pointed out on Twitter that there are of course all kinds of underground economies that are productive and expansive. Think of trade in contraband. My question is whether it has the infinite capacity for expansion that Marx had in mind. By definition these have to be bounded economies. Also, I wasn’t saying anything about it changing the motives; like Marx, I was operating under the assumption that the motives are always the same. It’s the context and externalities that change. As for the fraternization point, I wasn’t saying that the corruption obviates that point; I was saying that it creates an antithetical logic to that point. So, while you’re right about Lansky — nice one, by the way — it also remains true that the cash itself can be a truth-teller.

  2. Tim March 4, 2012 at 8:07 pm | #

    Graeber sees money as a form of debt, and it occurs to me that linking debt and corruption is the classic method of operation for organised crime networks such as the Sicilian mafia. They embed themselves in their societies by doing favors and accumulating debts. The local boss may or may not call in the debt you owe (hopefully not) – however that debt is an asset for the boss, and a large accumulated network of debts is the mafia’s wealth. Neoliberalism may increase the opportunities to convert such debts into actual currency.

  3. herrnaphta March 4, 2012 at 9:14 pm | #

    Good (short) Marxist discussion of corruption:

    It’s also discussed passim in Ernest Mandels’ Power and Money: A Marxist Theory of Bureaucracy.

    On black money itself, I’m not sure it’s the case that it’s hoarded under beds and the like. From what I’ve read, a tremendous amount of Indian black money ends up in foreign banks. If this the case, it’s then lent out and joins the regular pool of circulating monies, to be spent on industrial capital, consumption, or the other circuits of capital. While the miser stashing his funds in a Swiss bank may be irrational insofar as he is missing out on the far larger profit opportunities available via direct investment, his money is playing a functional role within the broader system of capital accumulation.

    On neoliberalism, a step forward or backward seems to depend on what axis you’re looking at. I don’t think neoliberalism is actually comparable to mercantilism in thinking about what its motors of accumulation are. Whatever the scale of black money in the neoliberal economy, it seems clear that the main engines of growth were the ones classically identified with capitalism: turning peasants into wage laborers (particularly in China, though elsewhere as well) and making labor more productive while holding down wages. In other words, increasing the amount of absolute and relative surplus value produced. David McNally’s writings on neoliberalism put forward this argument the most forcefully, I think, pointing out that amongst all the financial phatasms of neoliberalism, the period has also seen capitalism expand tremendously in ways with which we are quite familiar.

    • Corey Robin March 4, 2012 at 11:39 pm | #

      Thanks for this, Paul. As always, astute. It’d be interesting to know — though impossible to find out — how much gets hoarded and how much gets put back in the economy in some form. Though again, in the latter case, it first has to be laundered, I would think. So I was only talking about those two options, neither of which is in itself productive, though laundering can lead to that. The other option is circulation within the underground economy, through trade in illicit contraband. You might be right about the second point, in fact I’m sure you are (and I wasn’t really trying to suggest otherwise; I was merely referring to the hoarding itself.) That said, your second point is probably right.

      • Corey Robin March 4, 2012 at 11:40 pm | #

        Though that post you have re India suggests your second point may not be right; the underground economy remains a big part.

  4. Cyryl March 4, 2012 at 9:16 pm | #

    Well often on the list of neoliberalism’s “deadly sins”, along with inefficency and bureaucracy, is corruption. But isn’t corruption only a transgression of the purpose of a public utility while privatization is just making the transgression the rule? Perhaps a price is sort of an institutionalization bribe.

  5. Cyryl March 4, 2012 at 9:16 pm | #

    sorry it should be institutionalized

  6. Turkle March 4, 2012 at 9:32 pm | #

    Just on a cursory note, I’d point out that Marx himself emphasizes that capitalism proper always and necessarily exists alongside other, more primitive, or merely different economic forms. Thus one might have capitalists trading with feudal agrarian societies, or corruption and black-market economies siphoning off some of the surplus outside the system proper. The existence of non-capitalist economic forms is, as has been suggested by David Harvey and I think Rosa Luxembourg, probably in fact necessary to capitalism – Marx’s chapter on “primitive accumulation” at the end of Capital 1 may be a good initial resource on that.

    Let’s also not forget that “hoards” as such don’t just occur as money. They also occur as inventories, products that need aging (e.g. wine, leather), or any other area where capital might be tied up in the production, distribution, exchange, or consumption processes. Capital II, for instance, is primarily concerned with the various ways capital attempts to remove these hoards, compressing time and space in order to constantly increase the flows of capital.

    One contemporary similar example is offshore money: corporations keep great hoards of money in overseas banks, and every once in a while they lobby the US government to temporarily lower the tax rate for “repatriated” funds. One could argue that “black money” is very much like those financial hoards – temporarily unspendable, but after laundering, quite legitimately usable as capital. Both overseas accounts and black money are hoards necessitated by regulatory regimes; one by anti-corruption laws, the second by the tax code.

    But this misses the real point. Not all those who accumulate money are capitalists. If a worker saves money out of her paychecks, she isn’t a capitalist, just someone with too little money in the bank. Same with the corrupt goons collecting black money. Basically, if you’re not employing purchased alienated labor-power in order to extract surplus-value, you’re not a capitalist. (In vol. II and III we are treated to an analysis of commercial and financial capital, which merely skim surplus off the top).

    The point being here that there will always be skimmers, hoarders, moochers, scammers, and every other kind of non-capitalist accumulation surrounding and occurring within capital. Industrial capital extracts surplus-labor, and everyone else (the shopkeeper, the banker, etc.) gets to fight over their share of the surplus.

    One final comment: I think your idea that Marx thinks that the M-C-M’ circuit is an ontological disruption mystifies the issue a bit and might distort his intention. M-C-M’ describes a real movement of capital from the standpoint of the capitalist. It isn’t that the production of a surplus is an abomination, or that the capitalist is wrong to think that he makes money by investing it (he clearly does). It’s that M-C-M’ leaves the disasters of the labor process, the extraction of surplus value, and environmental degradation out of the picture. It’s not that it’s incorrect, or an abomination, it’s that it’s not the whole picture.



    • Corey Robin March 4, 2012 at 11:52 pm | #

      Your third paragraph makes a very good and interesting point. On the last graf, that’s not how I read the text. The 2nd and 3rd sentence seem fine and are not at odds with what I wrote. But unless one wants to posit a radical break between the early and the late Marx, which obviously a fair number of people do, it seems like the interpretation that renders the two consistent is one that sees a difference between production for the sake of need, pleasure, self-expression, what have you, and production for the sake of profit. The former is, among other things, a process that reached an end; the latter is not. Given the positive value Marx ascribes to objectification, it seems plausible to me that he’d seen in the endless circulation of commodities something that liquefies that which is of worth. In fact, something that renders the possibility of objectification — of value itself — impossible. That, at any rate, is how I read the text, though obviously people have read it differently.

      • Turkle March 5, 2012 at 2:56 pm | #

        Ah, I see your point now. David Graeber has in fact written about that specific value issue in an interesting way, although not in _Debt_. This essay has an interesting value discussion: after the whole section on “The Political Metaphysics of Stupidity” which, while unrelated, is definitely worth a read (in re: your work on conservatism).

        And yes, I think you are correct: Marx does somewhere (I think in Capital II?) explicitly posit that the passage from capitalism to socialism will entail the passage from an economy of exchange value to an economy of use value. But I’m much more familiar with later Marx than early Marx, so I’ll defer on the issue of whether it represents an ontological break (the destruction of ‘value’ as such) or a dialectical split (the tension within value itself between use and exchange value).

  7. Philip Wohlstetter March 4, 2012 at 9:36 pm | #

    Saw David Graeber in Seattle about three weeks ago and he had this to say about corruption: the reason the U.S.A. rates so highly on the so-called Democracy Index is that we’ve legalized bribery (i.e. lobbying, Citizens United). Thus we can engage in the practices that give third-world countries their reputation as havens of corruption while nominally following (and getting credit for following) the rule of law. Of course, there’s room for Madoff, regulatory capture and plenty of illegal activity as well.

    Another interesting remark from Graeber. He says that none of the theologians of the free market even try to make Capitalism work for the masses any more; they spend all their money and energy trying to defend it. If you think about it, Keynes was the last person to try to fix Capitalism. Thus, the strictly technical title of his book, ‘The General Theory of Employment, Interest, and Money. Compare that it the hysterico-ideological titles of Friedman (“Free to Choose”, “Capitalism and Freedom”) and Hayek (“The Constitution of Liberty”, “The Road to Serfdom”). What’s at stake for the reader is nothing less than his or her freedom.

    Graeber’s “Debt” is a wonderful read but also worth a look is “Toward an Anthropological Theory of Value: the false coin on our own dreams” (The man has a knack for titles).

    About Marx. It seems to me that his notion of money in the early E.A.P.M is quite distinct from how he’s come to think of it in Capital. Money and commodities and credit are just the different forms that capital (portrayed as a combo vampire-werewolf-Hegelian subject) takes in its ceaseless quest to expand and valorize itself (‘self-valorizing value’). It’s not a thing with special powers, it’s just a moment in the wild and wooly circuit.

    Can’t remember offhand a theory of corruption in Marx (other than specifics about factory owners who skirt compliance with laws) though there must be something in the 18th Brumaire. Neo-liberalism, which masquerades as a market-free-of-the-state ideology, depends heavily on state power to keep it running, as the Marx of Primitive Accumulation would understand very well, and that leads to all kinds of insider shenanigans as we know, not incompatible with Marx’s picture of the laws of motion of Capital. I’m not sure he ever predicted the underground economy as a possible response to the imperium of capital.

    • Corey Robin March 4, 2012 at 11:56 pm | #

      Not sure I understand the comparison between Hayek, Friedman, and Keynes, but if I am understanding it, I’d say two things: first, both of the first two certainly did try to fix capitalism, and both saw themselves as doing it in order to make it a better system for what it was intended to do. And both thought that it did make life better for the masses. Hayek defended it as a source of freedom, yes, but freedom to him was instrumental: it produced the best possible conditions for advancement and progress, for everyone.

  8. Samir Chopra March 5, 2012 at 7:57 am | #
  9. Ashwin March 5, 2012 at 9:56 am | #

    At least in the Indian context, the premise that people with black money hoard their money is not accurate. The only restriction in the Indian context wrt black money is that it cannot be deposited in the bank. The presence of a significant parallel economy means that it can be invested quite easily in businesses or most typically in real estate.

    The fact that India has a high rate of inflation means that if this money cannot be invested, then it is used for conspicuous consumption. A significant driver of luxury consumer goods demand in India is the presence of black money.

    In the act of either investment or consumption, so long as all parties seek to operate in the black economy, then the entire structure is a well-functioning parallel economy with one significant difference – you cannot put your cash in the bank. Cash is held at home to the extent that there is a “liquidity preference” demand. But the rest is consumed rapidly or invested in land, parallel economy businesses etc.

  10. njmadan March 5, 2012 at 10:56 am | #

    I don’t think there is much hoarding going on at all, with the liberalization of financial and commodity markets black money is efficiently laundered and passes into the regular economy. I highly recommend Misha Glenny’s McMafia for understanding the explosion of organized crime and the role of the “shadow economy” as an adjunct to the world economy. Glenny claims, siting the IMF and World Bank, that the shadow economy “now accounts for between 15 and 20 percent of global turnover.” by which he means GDP.

  11. Privatize the Profits! Socialize the Costs! March 5, 2012 at 11:52 am | #

    I’m not an economist or a marxist, but I think the REAL black money that needs to be talked about is the sixteen trillion (with a ‘TR’) dollar bank bailout that the US Fed printed up for their banker buddies.

    That amount is greater than last year’s entire US GNP. Many of your readers may not know about this, and every US citizen really should!

    Yes, I know this website looks a bit like some sort of internet crank site, but I can assure you that it is operated by a retired University of Montreal economist Dr. Michel Chossudovsky.

    We’ve been hearing from the right wingers for donkey’s years that there’s “not enough money” for anything except tax cuts and military spending.

    Well, gee whiz! It turns out that there IS enough money if what we want the Fed to do is to secretly help their brother banksters.

    Can you imagine if the US Fed were to print up sixteen trillion dollars to fund education, health care, or welfare? The wingnuts would be rioting in the streets.

    But if sixteen trillion dollars is printed up secretly and given to the bankers— and it was!— it doesn’t make the mainstream news, and everybody who accidentally finds out about it ( it was only covered by John Stewart’s Daily Show!) just thinks, “Ho hum, well, nobody is saying anything, so I guess this must be totally ‘normal’.”

    By the way, the only way this story ever got ‘broken’ to the limited degree that it did was thanks to some intrepid reporters at Bloomberg, who apparently had to pester the US Fed relentlessly to get the info… their data actually came from the GAO, which I believe all sane people will agree is a totally reliable source.

    -“Privatize the Profits! Socialize the Costs!”

    PS And if you think this whole thing sounds totally nuts… yeah, I know! And I encourage you to google this for yourself and show me I’m the victim of an internet hoax, because I kind of wish I WERE…

  12. William K March 5, 2012 at 2:30 pm | #

    I don’t think general usage entirely conflates corruption with black money. A massive parallel economy exists, and at certain intersections of these two worlds we have ‘corruption’. Wachovia profiting by laundering Mexican drug cartels money is corruption.

    Jumping past a few realities pointed out about intersections of these two economies, I do see a difference between the ontological status of black and ‘clean’ money, proportional to the barriers that block circulation of black money. Circulation re-inscribes a certain regime of power across the highly structured sectors of the economy and through the cultural sphere. We have more money circulating faster than ever, but at lower profits; high frequency trading. The leveraged power of this money to encode and regulate is much higher than black money.
    Comparatively I’m thinking of The Wire, the top drug-dealers have more money than they know what to do with–laundering is expensive and complicated–not adjacent to their cultural skill sets. This money circulates as luxury purchases and even as gifts–in one episode the kingpin is giving out $200 apiece to kids on the street for clothes. Money in this scheme of circulation doesn’t necessarily produce profit, it symbolizes power without a leveraged encoding comparable to clean money circulating through high finance systems.
    The characters in The Wire remind themselves, ‘The game is always the game, no doubt.’ The one character who almost manages to turn drug money into a legitimate real estate business empire is murdered.

    It occurs to me that perhaps certain ‘illegal’ activities are problematic to the circulation of money on financial capitalism precisely because they are to profitable, or profitable in the wrong places–and hence their illegality.

  13. Nikhil March 5, 2012 at 2:35 pm | #

    Back int he 90s The Source had an interview with one of Pablo Escobar’s main accountants. He claimed they they were making so much cash that it was stored in where houses. The money was coming in so fast that there was no way they could launder it fast enough to not accumulate huge stockpiles.

    In fact there was so much that they had to have people make sure to rotate the old boxes of money to the front of the where house when they received new cash. This was so the old money could get spent/laundered before it rotted.

    I know this was a farther in the past with a less sophisticated financial system than we have now, but it is one example of the amount of hoarding that goes on in a very lucrative underground business.

  14. James Turley March 5, 2012 at 6:07 pm | #

    A Marxist writes:

    Corruption is under-represented in Marxist theory. This is partly because the major trends in Marxist political economy – starting, in fact, with Capital v1 – have set out to prove that even under the best imaginable conditions, the system doesn’t work; but also, secondly, because corruption, while it appears phenomenally as one thing, in fact from a Marxist perspective comprises different practices with distinct functions.

    So, to start as you do with M-C-M’ – this circuit designates not the source of profit *per se*, but of surplus value. Banking, to take an obvious example, yields a great deal of profit but does not produce anything. So where does the profit come from? Primarily, from interest. Without a ready supply of credit, capitalist production finds itself with serious difficulties (as has been particularly obvious in the recent period). Interest, from the Marxist economist’s point of view, is paid out of surplus value: it is, in effect, a tax on economic activity. Likewise with consumer credit: the need to finance a mortgage or a credit card bill is written into the wage bundle, and so equally eats into the (productive) capitalist’s surplus value by increasing the cost of reproduction.

    The main point here is this: For Marxist political economy, the standpoint is not the individual firm, but the system as a whole; the *total* surplus value produced is redistributed, sometimes from more surplus-value-productive enterprises to less productive ones, and sometimes from productive to unproductive economic processes as such (like banking, but also state maintenance of infrastructure, education etc through taxation). Because a process is unproductive does not mean it is wasteful or unnecessary – simply that, for whatever reason, it doesn’t work through M-C-M’.

    So, then, corruption. In my view (and this will have to be ridiculously schematic), capitalism cannot exist (contra Rothbard etc) without the state; and it cannot exist without a state that will act in capital’s interests. But capital is not God, who can give Obama and Cameron instructions through the time-honoured means of burning bushes and booming voices from on high. It is scattered into innumerable individual capitals, some big and some small, some productive and some unproductive, etc, each attribute carrying its own interests. So the state has to find a way of representing the different interests of different capitals according to their relative importance and weight in the overall economy.

    The oldest fashioned way of doing so is simple bribery. In this form, corruption is simply a functional means of ensuring the state does the necessary things to reproduce capital – one petty official at a time. There are now far more sophisticated means of doing so – the armies of lobbyists in Washington DC and Westminster, and media blackmail to name but two. Still, this has not wiped out the good old bung – as is obvious from the ongoing News International scandal…

    On the other hand, there is the matter of ‘black money’ altogether. I have not done any major research on this, either, so this is just thinking aloud, but it is well known to Marxist political economy that you can have too much of a good thing; that is, overproduction of capital, or indeed the multiplication of ‘fictitious capital’ (ie. the meaningless money-values that made up most of the balance sheets of most august financial institutions circa 2006), causes problems in itself, and simply has to be got rid of some way. So what do you do with that money to take it off the books and get it moving again? You can plough it into arms (an American favourite), or into luxuries, or into utterly redundant public sector activities (example: if you live in public housing in the UK, the rent may well be paid out of welfare receipts – which means that a local council will have one lot of bureaucrats to pay you benefits, and another lot to receive your rent)…or indeed into the black market.

    Of course, we Marxists like to say that there are more disagreements within Marxism than there are between Marxism as such and the rest of it. So all manner of interesting answers no doubt await, should you wish to advance beyond the Marx material you are required to teach. 😉

  15. Nik Barry-Shaw March 7, 2012 at 5:29 am | #

    Regarding 1. I would suggest R.T. Naylor’s Wages of Crime: black markets, illegal finance, and the underworld economy. I don’t know if he’s a Marxist or if he’s the best, but it is a radical look at these questions.

    Regarding 2. other have already said basically this, but it bears repeating: corruption = primitive accumulation. Corruption, a.k.a. the accumulation of wealth through extra-economic means be it force or fraud, is at the very heart of capitalism. Behind every great fortune is an even greater crime, said Balzac, or whoever … Calling it skimming really doesn’t do it justice. David Harvey’s theory of accumulation by dispossession is an extention of this idea to the neoliberal age. Post-Soviet Russia is the poster child for the intermingling of corruption and privatization, but it is common to many diverse experiences of neoliberalism.

    Laundering should be thought of as a cost of production with respect to illicit profits, not as a way to make money necessarily. Black money can be surplus value from illegal production processes (i.e. cooking meth, growing coca, etc.), while making black money white again is the final step in the realization of that surplus. Mw-Cb-Mb’-Mw’, I suppose.

  16. Todd March 7, 2012 at 10:04 am | #

    Corey wrote:

    “Even if they were to launder their money, which would put their sums into a kind of circulation, that circulation would not do what circulation does under capitalism: it might make their illicit funds clean, but it wouldn’t increase those funds.”

    Why wouldn’t it?

    You seem to be attaching some kind of essential quality to “black money” that makes it behave in some way that is totally different from “white” or “grey” money, when it’s all money and has the potential to be used exactly as any money is used.

    If I launder my state-disapproved gains (or if I’m living in a time or place that doesn’t have a state that expresses a certain particular interest in how I got the money ie states nowadays don’t really care that money-making ultimately rests on exploitation although they will balk at openly plundering someone), I can still take that money and use it to make more money (by investing, lending at interest, speculation, etc). If I take the $25 I got from mugging some guy to buy a lottery ticket that wins me $100, the source of the money doesn’t matter.

    If people aren’t doing this, it’s for some other reason, not that capitalism itself is incapable of doing it.


    “Money, in other words, constituted a profound form, or instrument, of untruth. It was the ultimate deceiver, the greatest liar, for it had the capacity to transform that which is into that which isn’t and vice versa.

    In the case of corruption, however, money is the great instrument of truth, at least potentially.”

    Having money can reveal truth as much as conceal it; think of someone born with a talent for music and into extreme poverty. The truth of their talent won’t be revealed unless money is used to bring that talent to fruition.

    No, I don’t see how “black money” stands a Marxist theory of capitalism on its head.

  17. Todd March 7, 2012 at 1:14 pm | #

    I forgot to add the clarification that you made a few days ago:

    “My question is whether it has the infinite capacity for expansion that Marx had in mind. By definition these have to be bounded economies.”

    Any economy is bounded by something even if those boundaries are solely time and space. One major feature of capitalism is that it constantly seeks to move beyond boundaries, even self-imposed ones that result in its breaking-down. So-called “black money” keeps trying to get back into general circulation (hence, money-laundering) so as to make more money. What kind of circulation ie the “shade” of the economy shouldn’t theoretically matter although I think money would be more profitably used in an economy that’s not “black”, assuming, of course, that such an economy would have enough outlets for circulation to make a “decent” profit (which is what partly explains the last global downturn and continuing malaise).

  18. msobel March 13, 2012 at 12:15 am | #

    It occurred to me reading this post that the .001% concentration in a sense keeps money out of useful circulation. That our artificial financial system keeps money circulating in a high speed trading spin but it is seldom used to build roads, schools, or anything useful. that it creates no jobs. The thought that someone worth a billion dollars would do everything he could to make the government give him more money by cutting taxes or subsidizing his industries. It seems pathological to me.

    • Foppe March 13, 2012 at 10:19 am | #

      Yes, that seems quite correct. David Harvey argues that in his book The Enigma of Capital.. Recommend picking it up.

Leave a Reply