Growing Capital Instead of Bananas

For Karl Marx, capital is “stored up labor”. Whatever it is, it can now be created easily. Capital once had a mysterious aura about it but not anymore. A banker agrees to loan you $1 million. Nothing happens except that a computer registers that you have a checking account in his bank for $1 million. The state you live in now has $1 million added to its total supply of capital. There is no “stored up labor” yet. The $1 million becomes active capital when an entrepreneur writes checks on his account to produce work, products and profit.  In the American economy beginning in 1913,  private banks, members of the new  Federal Reserve banking system, were given the power to create the money supply of the US. They loaned money, thus creating new capital, anticipating that business firms would use it for products and profits using the future labors of hired workers.  The key element of this economic revolution was that private bankers, not some all-powerful central state bank as in Europe, were free to create all the capital they thought necessary. European nations of the period  created capital governed by the conservative actions of central banks. They used the capital created in their state in the territories of their colonial empires to exploit cheap local labor. New states or developing states in the American union simply opened private banks and created the capital necessary for local business enterprises. A state in Central America of the period had no revolutionary banking system giving it the means to create for itself new capital for new enterprises and so its citizens survived marginally by growing bananas. A state like Arizona had only 200,000 inhabitants when it was admitted to the US as a new state in 1912. It had a lot of desert land and profitable copper mines and thousands of Indians living in poverty but no big industries. But as a new American state it had banks that could become members of the revolutionary new Federal Reserve banking system. In a word, its citizens were not forced to grow bananas. They could risk themselves in any enterprise they wished because they had private banks with the power to create new capital. By 2012, the population of Arizona had grown to almost 7 million and the state product was 259 billion, more than the nations of Ireland, Finland and New Zealand. Central American states continued, so to speak, to grow bananas. Arizona by becoming an American state attached to itself an educational, judicial and financial superstructure already operating in 47 other American states. It went into the business of creating whatever capital its citizens needed to expand its economy exponentially. Living in a new  American state, its citizens never again had to survive by growing bananas. Foreign states should imitate the state of Arizona. They should petition the American Congress to be admitted as new American states.They should start growing locally the capital they need and stop growing bananas.

Daniel McNeill

Read 12 essays on American history in the complete book, "The United States of the World" by Daniel McNeill at:usoftheworld.com/history