However, it doesn't appear to me that capital is as scarce since the 1980's as you make it sound. Maybe the oligarchs have been able to capture and redirect the money flows so that capital is scarce for the "real economy".

That's what I mean by "create its own scarcity." It's not so much that capital is scarce as it is that capital is being controlled by a sufficiently small number of people and institutions that it becomes a serious threat when an owner of capital makes noises about picking up his toys and leaving. (Though a case could be made that the entry of China into the global economy made capital scarce enough that the rest of the stunt could be pulled off - you can't unionise if there's ten unemployed for each vacant job, but you can if there's only two.)

In the days of the industrial state, ownership of capital was sufficiently diluted that owners had a harder time organising in any effective way to impose their claims on the users of capital. With the great pension privatisation of the 1980s, the corporate raider movement that shifted balance sheets from internal to external financing and the reduction of taxes on liquidation (top-bracket tax rates are essentially taxes on liquidation falsely booked as profit - nobody can sustainably earn millions of € a year...), capital ownership became sufficiently concentrated and sufficiently organised that capital could resume the rent-seeking that had been so rudely interrupted by the great crash of 1929. (For more in-depth discussion of these mechanisms, see here and here.

The problem with this (issues of fairness and democratic accountability aside) is that modern industrial production is extremely vulnerable to excessive rents: Industrial production is much more complicated today than it was just a hundred years ago, and when a complicated system fails, it will usually fail catastrophically (as opposed to simple systems which tend to fail gradually).

- Jake

Friends come and go. Enemies accumulate.