Establishing The United States Of Africa: Toward A New Concept Of Capital And Development (Part 1)

Time will soon reveal that what America is undergoing which is largely being referred to as an "accounting crisis" is far deeper and more serious in nature. At the root of what this country is suffering, and which corporate greed and accounting irregularities are only a symptom of, is a crisis of "capital" that grows, among other things, out of faulty premises, insufficient understandings, improper political remedies and lack of confidence in a system of justice. Most economists and politicians that are making a positive contribution to the current dilemma are only doing so in the third and fourth areas. None, to our knowledge, are properly moving into the more important realm of the first two areas of the endemic economic problems that undergird accounting irregularities and criminal justice issues.

We thought to directly tackle the current debate that has engulfed Wall St. and Washington D.C., but that it might be far more important for a preliminary analysis of the principles and historical context that bring one closer to the root of the economic and financial problems that plague the United States and the rest of the world. Much of that important consideration we already performed last year in our 200-plus page report, "Establishing The United States Of Africa" which we will soon re-publish with an additional volume that will focus on the political and cultural foundations of the African Union. Volume 1 focused exclusively on the economic foundations. Here is our portion of Volume 1 that deals with the concept of capital and development and which is relevant to what is happening in America, right now:

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Africa's challenge is to become a society that identifies, perfectly cultivates, arranges and accounts for all of its capital.

For most of the last 300 years the entire world has labored under the weight of a general confusion over the concept of capital. The dominant sources of that confusion revolve around the dichotomy established and accepted by economists and policy makers who accepted either Adam Smith's view of the concept or that of Karl Marx. Today, the legacy of such internalization is alive and well and visible in the economic policies which permeate the continent of Africa and which guide the thinking of African leaders and their Western advisors and benefactors.

The challenge for an African Union, in part, is to develop a superior understanding of the concept of capital through the improvement and modification of the prevailing worldview as well as an effort to discover new insights on the concept. The result of such a formulation would be a vast improvement of the methods of accounting, developing and organizing Africa's human and non-human resources.

We begin our approach to this subject by taking a brief look at how Adam Smith and Karl Marx defined the concept of "capital". In Wealth of Nations Adam Smith wrote the following:

"When the stock which a man posseses is no more than sufficient to maintain him for a few days or a few weeks, he seldom thinks of deriving any revenue from it. He consumes it as sparingly as he can, and endeavors by his labour to acquire something which may supply its place before it be consumed altogether. His revenue is, in this case, derived from his labour only. This is the state of the greater part of the labouring poor in all countries.

But when he possesses stock sufficient to maintain him for months and years, he naturally endeavours to derive a revenue from the greater part of it; reserving only so much for his immediate consumption as may maintain him till this revenue begins to come in. His whole stock, therefore, is distinguished into two parts. That part which, he expects, is to afford him this revenue, is called his capital. The other is that which supplies his immediate consumption; and which consists either, first, in that portion of his whole stock which was originally reserved for this purpose; or secondly, in his revenue, from whatever source derived, as it gradually comes in; or, thirdly, in such things as had been purchased by either of these in former years, and which are not yet entirely consumed; such as a stock of clothes, household furniture, and the like. In one, or other, or all of these three articles, consists the stock which men commonly reserve for their own immediate consumption.

There are two different ways in which a capital may be employed so as to yield a revenue or profit to its employer. First, it may be employed in raising, manufacturing, or purchasing goods, and selling them again with a profit. The capital employed in this manner yields no revenue or profit to its employer, while it either remains in his possession, or continues in the same shape. The goods of the merchant yield him no revenue or profit till he sells them for money, and the money yields him as little till it is again exchanged for goods. His capital is continually going from him in one shape, and returning to him in another, and it is only by means of such circulation, or successive exchanges, that it can yield him any profit. Such capital, therefore, may very properly be called circulating capitals.

Secondly, it may be employed in the improvement of land, in the purchase of useful machines and instruments of trade, or in such-like things as yield a revenue or profit without changing masters, or circulating any further. Such capitals, therefore, may very properly be called fixed capitals.

Different occupations require very different proportions between the fixed and circulating capitals employed in them."

(End Of Part 1)

Monday, July 29, 2002

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