Friday, August 4, 2006

Cooking the Books: Commodity Markets (2006)

From the August 2006 issue of the Socialist Standard

Cooking the Books (1) - Commodity markets

"1p and 2p pieces are now worth more on the commodities market than in the high street"
, reported the [London] Times on 12 May. Pre-1992 copper coins are 97 percent copper and, as the price of copper had reached a record high of $8,312 a tonne, they had, theoretically, come to be worth more than their face value. "Commodity prices yesterday", the report went on, "continued their bull run as traders bet that demand from fast-growing economies such as China would continue. Platinum, nickel, zinc and copper prices hit a new high".

Socialists, too, talk about "commodities". We say that capitalism is "the highest form of commodity production"; that workers' ability to work is today a mere "commodity", bought and sold on a market; that people's needs, and life generally, have become "commodified".

The meaning that the financial pages of the papers attach to the word is much more restricted. For them, it refers only to primary products, not just metals such as platinum, nickel, zinc and copper but also to oil and to agricultural produce such as coffee, sugar and wheat. These are indeed commodities in the Marxian sense in that they are items of wealth produced with a view to being bought and sold, but they are not the only things that are commodities.

In the Marxian sense, anything produced with a view to being sold is a commodity. Capitalism is the "highest form ofcommodity production" in that under it most items of wealth are produced as commodities. In addition, the human capacity to work, our mental and physical energies, take the form, as something bought and sold, of a commodity. In fact, this is what distinguishes capitalism from "simple commodity production", where this is not the case. Under capitalism anything, even if not originally produced to be sold, can, and increasingly does, take the form of a commodity, from honour, sex and influence to body parts and past works of art. There is a market for all these things. The tendency of capitalism is for everything to become "commodified".

But to return to the commodities of the financial pages, the [London] Times report was unusually frank in admitting that gambling is involved in "commodity markets". The primary products on sale on these markets have two types of price: a "spot" price, which is the price on the day, and a "futures" price, which is a price at which someone agrees to buy or sell the product at some set future date.

The economics textbooks say this is to allow the users of the product to plan ahead. This is true but you don't have to besomeone who actually wants copper or oil or wheat or whatever to intervene on a commodity market. When you buy something there is no physical transfer of the product but merely a change of ownership.

Gamblers can offer to buy a product in the future at a given price even though they don't want it, in effect betting that the spot price at that time will be higher. In which case they sell - transfer ownership - and walk away laughing with a bigger bank balance, while the product goes to someone who will use it to produce something.

It's nice to know that while millions are suffering from malnutrition there are others gambling on the future price of wheat.What a way to organise the production and distribution of the things humans needs to live and enjoy life.

Cooking the Books (2) - Was there an alternative?

Mrs Thatcher always maintained there was no alternative to the policy her government was pursuing in the 1980s of putting promotion of profits before meeting people's needs. When challenged about cutting benefits and social services, she replied: There Is No Alternative. When confronted with protests about closing factories and coalmines, her reply was the same: TINA.

Socialists were inclined to agree. We knew that capitalism - the profit system - runs on profits and that all governments, taking on as they do the management of capitalism, sooner or later have to apply its priority of profits before people. The Thatcher government was merely doing this sooner rather than later and with undisguised glee. Not that capitalism can never offer reforms but, since the post-war boom came to an end in the early 70s, previous reforms had become too expensive and had to be cut back to ease the burden of taxation on profit-seeking business.

Proof that there is no alternative under capitalism to putting profits first has been provided by the Blair government which took over in 1997. They have continued the same policy, even if they have been more mealy-mouthed about it, calling it "modernisation" and even "reform".

Now, in a bid to out-Blair Blair, the new Tory leader wants to kill off Tina. The [London] Times (22 May) reported that "David Cameron will tell business leaders today that there is 'more to life than money' as he attempts to make a clean break with Thatcherism".The pre-released text of his speech explained: "Wealth is about so much more than pounds or euros or dollars can ever measure. It's time we admitted that there's more to life than money, and it's time we focused not just on GDP, but on GWB - general well being. Well being can't be measured by money or traded in markets. It can't be required by law or delivered by government. It's about the beauty of our surroundings, the quality of our culture, and above all the strength of our relationships."

Most people probably feel like this, but capitalism as an economic system cannot take into account "general well being" precisely because this can't be quantified in money terms. Capitalism is all about making and accumulating monetary profits and, in pursuit of this, not only ignores but actually degrades "the beauty of our surroundings, the quality of our culture, and the strength of our relationships".

Cameron, naturally, disagrees. The next Tory government, he said, will embrace "capitalism with commitment" (London Times, 23 May), presumably to make it promote people's general well being. The trouble is that Cameron himself is a product of the degradation of "the quality of our culture". He's just an image designed and packaged by the same people who try to (mis)sell us washing powder, deodorants and private pensions, only with the aim changed to attracting votes rather than sales. To expect such a product to change capitalism"s priorities is just absurd.

The next Tory government will be no different from the present Labour one. It will continue to promote the general commercialisation of life and the reduction of human values to monetary ones. People will continue to be reduced towards becoming isolated atoms competing against each other on the market place, with the consequent weakening of "our relationships". That's the tendency under capitalism, which no government can reverse. There is no alternative. Or rather, there is, but not within the profit system.