Monday, April 23, 2007

Markets, Monopoly and War (1985)

Book Review from the July 1985 issue of the Socialist Standard

A new edition of Rudolf Hilferding's Finance Capital: A Study of the Latest Phase of Capitalist Development has been published in a new translation and with a useful introduction and notes by Tom Bottomore (Routledge and Kegan Paul). It provides an opportunity to consider whether the theories advanced by Hilferding and others have been confirmed in the years since the work was first published in 1910.

Towards the end of the 19th century there was a growing tendency towards the formation of trusts and combines associated with what came to be known as imperialism. Among the other books on the subject there were J.A. Hobson's Imperialism (1902) and his earlier Evolution of Modern Capitalism, Lenin's Imperialism: the Highest Stage of Capitalism and L.B. Boudin's Socialism and War (1916). Later on J.M. Keynes had something to say about it in his General Theory (1936). Hobson held that monopolistic industries restrict output in the home market, in order to raise prices and profits, and therefore have to seek foreign outlets for investment and markets. For this purpose they get governments to colonise foreign territories (Evolution of Modern Capitalism, page 26). Lenin made use of Hobson for his own Imperialism, and gave high praise to much of his works. Keynes saw in Hobson many features of his own theories set out in the General Theory.

Hobson, unlike Lenin but like Keynes, offered a remedy:
If the whole gain of improved economies passed, either to the workers in wages or to large bodies of investors in dividends, the expansion of demand in the home market would be so great as to give full employment to the productive forces of concentrated capitalism, and there would be no self-accumulating masses of profit . . . demanding external employment.

Keynes (in Chapter 24) saw "the competitive struggle for markets" as a predominant factor in "the economic causes of war". But, said Keynes, if governments followed Keynesian policies to increase demand at home and thus maintain full employment, the competitive struggle for markets as a main cause of war, would disappear.

Lenin and Hilferding gave detailed accounts of the supposedly unstoppable growth of monopoly in industry and banking but carried it much further, crediting the banks with dominating industry and the cartels with fixing prices and dividing up world markets among themselves. Lenin wrote: "Cartels become one of the foundations of the whole economic life. Capitalism has been transformed into imperialism." Hilferding wrote: "An ever-increasing proportion of the capital used in industry is finance capital, capital at the disposition of the banks which is used by the industrialists" (page 225). Lenin quoted and endorsed this. Hilferding (page 368) said that it was only necessary to take over six large Berlin banks to take possession of "the most important spheres of large-scale industry". It is worth noticing that in the depression of the 1930s most of the big German banks collapsed, or almost did so, along with the industrial companies in which the banks' money was tied up. Among other forecasts made by Lenin was that because of the dominance of finance capital "there was a decrease in the importance of the Stock Exchange".

Some social-democrats, including Kautsky, thought that the end result would be "a single world monopoly . . . a universal trust", followed by socialism. Hilferding thought that this single world monopoly was "thinkable economically, although socially and politically such a state appears unrealisable, for the antagonism of interests . . . would necessarily bring about its collapse". But Hilferding (page 343) thought that world cartels would result in "longer ... periods of prosperity" and shorter depressions. The long depression of the 1930s and the long depression since 1979 belie this.

It was Boudin in his Socialism and War who put in its most crude form the theory on imperialism and war. He argued (like Hobson and others) that the turning point was the replacement of such industries as textiles by iron and steel. He wrote (page 64):
Modern imperialism ... is the expression of the economic fact that iron and steel have taken the place of textiles as the leading industry of capitalism, and imperialism means war. Textiles, therefore mean peace, iron and steel - war.

The argument was that exports of textiles and similar consumer goods are paid for at once but iron and steel exported to build railways, factories, ports and so on are long-term investments needing the protection provided by the home government turning importing countries into colonies. Boudin's theory to explain competition for markets (page 55) was:
The basis of all capitalist industrial development is the fact that the working class produces not only more than it consumes, but more than society as a whole consumes.

Therefore, said Boudin, developed countries cannot find markets inside the capitalist world but only on the fringes of capitalism, first in primitive agriculture at home and, when that too is developed, only in the countries not yet developed. These countries themselves develop and have to seek non-existent markets for their "surplus" products.

It is only necessary to look at what actually takes place to see that Boudin's theory is demonstrably false. The working class do not produce more than society itself consumes. Or rather, they alternately produce more than society currently consumes and then less than society currently consumes. At the onset of a depression stocks pile up of the goods some industries have overproduced for their markets but later on, as recovery begins, stocks run down again, as they did early in 1985. In 1983 British exports totalled 60,534m pounds sterling. According to Boudin this was all "surplus" to demand in the home market. Who then bought the 65,993m pounds sterling of imports that were sold in this country? In the same year, 77 per cent of British exports went to countries officially classified as "developed countries" which Boudin said was impossible. Hilferding, Lenin and Hobson all failed to allow for the sectional divisions of interest in the capitalist class. Hilferding treated the monopolist industries as representing a united capitalist class.

Certainly the export industries have an interest in getting the government to promote exports. But most capitalists have no such interest. British exports represent under a third of total production; for America and Russia about 10 per cent of total production. At their conference last year the Confederation of British Industries defeated an executive resolution calling on the government to lower the exchange rate of the pound in order to promote exports. The industries making profit by selling imports in the home market, and the industries buying cheap imports rather than pay more for home products, want the exchange rate to be higher, not lower.

At a time when the Thatcher government was declaring that they wanted the pound exchange rate not to fall but to rise, and asking Reagan to help bring it about, the Financial Times published an article (14 January 1985) with the title "Industry Delighted At Fall Of Pound". It was true only of export industries not having to import raw materials, but in the article there were examples of industries having to import materials which wanted the pound exchange rate to rise and not to fall. The British Steel Corporation told the Financial Times that "every one cent decline in the value of sterling costs us 4 million pounds sterling".

The failure to recognise sectional capitalist interests applies particularly to monopoly, which raises selling prices and consequently profits for the monopolies and is viewed very differently by the rest of the capitalists, who object to being held to ransom. In the 19th century British government policy towards monopoly was to protect the interests of the rest of the capitalist class by nationalisation, as with telegraphs and telephones. Frederick Engels put the same view in his Socialism, Utopian and Scientific: " nation will put up with production conducted by trusts, with so barefaced an exploitation of the country by a small band of dividend-mongers". The same idea was behind the Tory railway nationalisation Act of 1844. It gave the government power to take over the railways and was used as a threat of what would happen if the railway companies continued to use their monopoly to the detriment of the rest of the capitalist class.

But in America the method used was to control monopoly by the Anti-Trust Laws, which have resulted in heavy fines and sometimes imprisonment. American Telephone and Telegraph, controllers of the near-monopoly Bell telephone system and described as the largest and richest corporation in the world, has recently fallen foul of the law and has been broken up into separate organisations, all open to competition. In Britain, the Tory government has gone over to the American system. Along with partial de-nationalisation the Telecommunication services have lost their monopoly and been thrown open to competition. The same applies to bus services. British governments long ago halted further amalgamation of the big commercial banks who now face competition from the development of ordinary banking services by the building societies, the Trustee Savings Bank and others. How far this process will go remains to be seen, but the belief of Hilferding and Lenin that competition was dead, has been disproved.

It is equally clear that Boudin and Keynes were wrong in their belief that the competitive struggle for markets results from an inbuilt deficiency of demand in the home market. The profit motive behind the search for overseas markets by the export capitalists is no different from the profit motive behind the home producers for the home market, and the import capitalists.

What then are the causes of international conflicts of interest and war? Some, but not many, wars are fought over markets. For example the opium wars, when British traders were able to get the government to go to war to compel China to allow the import of opium. In the modern world, markets take second place to strategic issues. The conflict between America and European countries on the one side and Russia on the other illustrates the point. It is not Russia but Japan, America's ally which has flooded American and European markets with their cheaper products. The point was put in proper perspective by Professor Edwin Cannan in 1915:
"Commercial interests seem to me to appear in international quarrels simply as a cover for strategic interests. Where there are not supposed to be divergent strategic interests, no amount of divergent or supposedly divergent commercial interests produces either war or preparations for war" (An Economist's Protest, page 26).

This exactly fits the relationship between America and Japan because the latter is held to be strategically so important to America's control of the Pacific against Russia. The most frequent cause of conflict and war is the effort of national sections of capitalism to obtain control of needed overseas sources of food and other materials and to protect transport routes. Petrol products have bulked large in this century. It has not been competition by oil producing countries to sell their oil that has threatened war but the importing countries' need to have dependable supplies. Two years ago, America threatened military action if the Middle East oil producing countries organised an embargo on exports to America and Europe.

Discussing the question Engels, in a letter dated 27 October 1890, pointed out that it was the search for gold which led the Portuguese to Africa, and it was not exports to India but imports from India which led to the conquest of India by the Portuguese, Dutch and English between 1500 and 1800: "Nobody dreamed of exporting anything there". Exports came later.

Lenin made a valid point in his Imperialism about some annexationist wars. He wrote that sometimes the powers try to annexe regions "not so much for their own direct advantage as to weaken an adversary and undermine its hegemony". Lenin and Hilferding both saw the growth of monopoly and its resulting wars as a prelude to socialism, and insisted that socialism was the only answer. But Hilferding found himself acting as Finance Minister in a German coalition government, trying vainly to solve the problems of German capitalism. And Lenin's "socialism" has resulted in Russia becoming a capitalist super-power.

Lenin saw "the export of capital" as the hallmark of capitalism's highest stage. It is interesting to note the role now played by Russia. The Statesman's Year Book, 1962 had this to say:
After the second world war the USSR has become one of the biggest creditor countries in the world. Between 1955 and January 1961 economic aid in the form of 2 per cent and 2? per cent loans, has been advanced for over 520 industrial and agricultural enterprises in socialist countries.

This foreign loan policy has continued since 1961.
Edgar Hardcastle

More of Edgar Hardcastle's article from the Socialist Standard can be accessed at his page at the Marxist Internet Archive.

A Century in Print

From the September 2004 issue of the Socialist Standard

In September 1904, three months after the founding of the Socialist Party of Great Britain, the first edition of the Socialist Standard appeared. It made a modest start with an ambitious declaration of future intent. The first ever editorial commented that:
"We are all members of the working class, and cannot hope that our articles will always be finely phrased, but we shall at least endeavour to lay before you on every occasion a sane and sound pronouncement on all matters affecting the welfare of the working class. What we lack in refinement of style we shall make good by the depth of our sincerity and by the truth of our principles . . . We shall, for the present, content ourselves with a monthly issue, but we are confident that the various demands upon us, by the quantity of matter at our disposal, and by the growth of our party, will necessitate in the near future, a weekly issue of our paper."
Looking back, the writer certainly need not have been quite so bashful about the Standard's content as over the period since it has developed a well deserved reputation for a style of political journalism not dissimilar in many respects to popular science writing as it developed throughout the twentieth century which has been characterised by clarity of expression and use of vernacular language wherever possible. Whatever disagreements some of our readers may have had with us, misunderstandings based on the style in which we have put across our case have been comparatively few and far between, for while many groups on the political left have chosen to mark themselves out from their competitors more through the invention of their own particular liturgy than through the distinctiveness of their political positions, we have always done our best to say it as it is, in language readily understandable to our readership. Given the propagandistic and educational roles of the Standard, this has been important.

One hundred years on, and 1,200 issues later, we are still a monthly journal (the sought-after transition to weekly publication has so far eluded us) but can legitimately claim to have published without interruption ever since, being Britain's longest-running socialist political press. Given the financial travails at various points in our history not to mention two world wars in which many of our members were sent to prison or went 'on the run' this is no small achievement, sometimes brought about through huge personal sacrifice impelled by massive commitment to the cause.

Just as remarkably, considering the forthright and direct use of language by writers for the Standard over the years, we have been sued only once (though admittedly threatened with it on a few more occasions than that). This action was, ironically enough, brought by a trade union the Amalgamated Society of Railway Servants who objected to an attack on their General Secretary, Richard Bell MP, on the front page of the August 1906 edition. When the case came to court nearly a year later, Bell was awarded a token 2 worth of damages by the Judge after our comrades Fitzgerald and Anderson had stoutly defended the case against the union's King's Counsel.

During the two world wars, the Standard's political stance led it into conflict with the authorities and on both occasions the consequences could have been far more serious than any likely libel action. Throughout the First World War the Standard largely defied the Defence of the Realm Regulations introduced in November 1914 concerning comment prejudicial to the conduct of the war, and on the advice of 'E' Branch of MI5, the Standard was prohibited by the Home Office from being sent to any destination outside the United Kingdom. In 1917 the Party's offices were raided too, with several members questioned about their political activity. The matter had come to a head after an article for the Standard by Adolph Kohn had been sent from America and intercepted by the authorities there. During the Second World War, the Defence Regulations introduced in May 1940 were even more strictly upheld and the Standard's opposition to the conflict was expressed codedly, with no overtly anti-war articles appearing after 1940.

On only three occasions have outside agencies otherwise directly and deliberately interfered with articles due to be printed in the Standard. In February 1916 a printer refused to print an article on Lloyd George and the Clyde workers that our comrade Jacomb had set into type, leading to a brief explanation and an otherwise blank column. Then in March 1952 an article about the institution of the monarchy and King George VI entitled 'The King Is Dead' didn't appear because the compositors disagreed with its contents. The third occasion was in March 1988 when the printers (without the consent of the Editorial Committee) issued their own disclaimer at the end of an article on sectarian violence in Northern Ireland which had attacked the political gangsters of the IRA in the wake of the Enniskillen atrocity.

A Matter Of Style
Articles in the Standard have always tended to reflect the Socialist Party's origins in Britain's movement of self-educated workingmen in the late nineteenth century and early twentieth century; written by volunteers, they have exhibited a style which has relied heavily on formal definitions and logic, together with the use of statistics and quotations designed to support an approach that can typically be described as critical and polemical.

While items have always been characterised by a clarity and directness of approach, they have nevertheless evolved over the last century to reflect wider changes in the use of language and in writing style. Early articles sometimes seemed written with the intent of bludgeoning the sceptical reader into submission, and correspondents for the Standard has enthusiastically opened up its correspondence pages to friend and foe alike from the outset had to tread warily lest they incurred the wrath of a hawk-eyed Editorial Committee on the look-out for 'unsound' or 'unscientific' arguments.

The pages of the Standard were replete with attacks on 'capitalist cant', 'quack remedies', 'currency cranks', 'labour fakirs' and 'apologists for reformism' though these rhetorical and polemical pieces were typically intermingled with theoretical articles (some reprinted from Engels, Kautsky, Guesde and others) involving eloquent explanations of complex issues. Whether it was Fitzgerald on the intricacies of Marxian economics, Housley on the materialist conception of history, or Freddie Watts waxing forth like the best popular science writer in pieces like 'Is Society An Organism?', contributors to the Standard were able to translate complex arguments into accounts and propositions that were readily understandable to the readers.

This is a tradition that has been continued in the years since, both in general, theoretical articles and in pieces which have sought to apply Marxian theory to specific conditions and developments within capitalism. In the first category, various theoretical articles particularly in the 1920s and 30s by Robert Reynolds ('Robertus') and Gilbert McClatchie ('Gilmac') on history and the evolution of society, by Raspbridge (B.S.) on the nature of the banking system and Goldstein on the labour theory of value are amongst the finest of their kind; eloquent interpretations and expositions of complex analysis and argumentation made comprehensible to the man or woman in the street. This was a tradition which was sustained after the Second World War, but with the field of engagement widened to include ecology, psychology and discussion of theories relevant to the refutation of 'human nature' arguments against socialism.

Applied Economics
Where writers for the Standard perhaps had most to contribute was in the practical application of Marxist theory to political and economic issues facing the working class. This had been a hallmark of the journal since the early days when, through applications of Marxian economics, writers had expounded on the reasons why taxation is not ultimately a burden on the working class but on capital, on the irrelevance of tariff reform or the concealed dangers in proposals for free maintenance for schoolchildren. Similarly, the Standard's analysis of the development of state capitalism in Russia and the rise of Nazism in Germany were excellent examples of the application of Marx's materialist conception of history to new issues and developments within capitalism as they confronted the working class.

Particularly with the advent of the Great Depression in the 1930s and the various political and economic proposals of the reformers of the time to tackle it, the Standard came into its own. Hardy ('H') analysed the economic crisis from the Marxian standpoint and derided the arguments of the capitalist reformers who desperately sought to save the system they supported: from the 'social credit' acolytes of Major Douglas through to the Gold Standard abolitionists, the advocates of higher prices and the tax reformers.

Similarly, after the war the Standard spent much time debunking the arguments and proposals of the supporters of John Maynard Keynes, who developed the main economic theory which underpinned the reformist political intent of the period. In a masterly series of articles over the years, Hardy and others demonstrated the flaws of Keynesian economic theory and how it would never be able to put any lasting end to unemployment and poverty within capitalism, instead merely resulting in persistently rising prices because of the excess issue of inconvertible paper currency it typically involved. These articles were not formulated solely at a theoretical level Hardy, in particular, was an empiricist as much as a theoretician, and the attack on the dominant economic theories and practices of the post-war world was supported by detailed empirical evidence to supplement contentions borne out of Marxian theory. This was equally the case with the spread in influence of the so-called 'monetarist' economic doctrine from the mid 1970s when it replaced Keynesianism as the dominant theory; the Standard was not taken in by the elaborate claims made on its behalf and through detailed argumentation dismissed it primarily as a return to the discredited old 'bank deposit theory of prices' masquerading under a new name.

Social Comment
The advent of the 'consumer society' in the 1950s saw some changing attitudes within capitalist society and the development of a new type of article in the Standard in response to it. This was the informed Marxist social commentary, focusing on lifestyle changes affecting the working class. The comprehensive education system, modern advertising, consumer credit, immigration, the growth of television and popular music were all phenomena analysed from the Marxist materialist standpoint and stylishly too, by Coster, Critchfield and others. Looking back on them now, it is hard to not be impressed by their elegance as pieces of social comment, and by their prescience and foresight at a time of rapid social change and uncertainty.

As single issue-campaigners came to the fore from the 1960s onwards (CND, squatters, feminists, Welsh and Scottish nationalists) so the Standard turned its attention to them and their limited visions and definitions of political success. At times it regained some of its old feistiness, but with obvious concessions to the style and language of the burgeoning youth culture of the times. Many have seen the mid-60s to early 70s as one of the Standard's many 'golden periods', with well-crafted articles on galloping inflation and the return of economic crisis from specialists in Marxian economics like Hardy, sitting alongside biting social comment and polemics against the 'new left' from Steele, Crump and other sixties firebrands who had been attracted to the libertarian socialist politics of the SPGB.

The Modern Standard
From the late sixties onwards, the Standard has noticeably sought to increase its coverage of events outside Great Britain, in response to the ever more interconnected nature of capitalism and its development as a 'global village' with issues such as globalisation, environmentalism and capitalism's now constant state of warfare looming large for writers, particularly. The sardonic wit of contributors like Weidberg ('workers of the world wake up!') and Coleman has also been a prominent feature and has ensured that serious socialist comment has often been supplemented by generally well-chosen humorous observations and asides.

Today's articles tend almost exclusively to have a contemporary news focus, with even theoretical pieces being linked to current events and issues within capitalist society. As in previous years, there is a balance between those that are commissioned by the editors and those that are sent in by individual writers as and when they can contribute pieces. It is pleasing to note than in recent times a number of new writers have appeared to complement those who have been contributing over long periods, often decades.

Indeed, on this note, it would be remiss of us not to comment here on the remarkable contribution that a great many Socialist Party members have made to the Standard over the years, whether as designers, writers or editors. The journal's production has been helped hugely in this respect by a certain continuity of service by way of example, when McClatchie and Hardy retired from the Editorial Committee at the end of 1959, they had each put in just over, and just under, forty years continual service respectively. And today, two of our writers have been regularly contributing to the Standard for over fifty years, our comrades Alwyn Edgar (A.W.E.) and Ralph Critchfield ('Ivan'), the latter also with prolonged spells on the editorial committee. The three members of the present editorial committee have been writing for the Standard for around ninety years in total too!


To mark the one hundredth anniversary of our journal, the Socialist Party has recently published a special book. Entitled 'Socialism Or Your Money Back: Articles From the Socialist Standard 1904-2004', it is an anthology of 70 articles (with period commentaries) from the Standard, analysing events within capitalism over the last one hundred years as they unfolded. It is in part a tribute to the men and women who have done so much to ensure that the Socialist Party has been able to make a regular and uninterrupted political intervention through our press during this time, and also an important repository of insightful commentary and socialist analysis, on issues and events from the sinking of the Titanic to the Iraq war.

The Standard has evolved over time and will no doubt continue to do so. It never stays still and to this end we always welcome new writers that can help us sustain and grow Britain's longest running socialist political paper. We have an important job to do, in keeping the socialist analysis of capitalism and the alternative vision of a genuinely better world before the working class, and we are always keen to encourage those who wish to help us in our fight for a better world by writing for our journal.

Finally though, a gentle warning to readers. From the January 1920 issue, but just as relevant now as then:

"Be careful how you handle the Socialist Standard. It is powerful stuff and is fatal to working-class political ignorance."

Dave Perrin

Malawi Musings

From the Socialist Banner blog

Malawi is much in the news. Not for any particular reason other than music icon Madonna is visiting and being rumoured to be planning another adoption of another Malawian youngster. Malawi's economy is said to be 1% of Scotland's - about half the size of Falkirk's. The country's population is 12.6 million people, one million of whom are orphans. More than half the population lives below the poverty line. Malawi is ranked as the 10th poorest country in the world by the United Nations. Life expectancy in Malawi is now as low as 36.5 years, five years lower than it was 50 years ago.

The Herald reports how business is sponsoring aspiring capitalists to learn their trade in Scotland. A small number of students have been brought to Scotland as part of a vanguard of gifted entrepreneurs who it is hoped will provide expertise, enthusiasm and business acumen to transform the economic fortunes of Malawi. They are spending 18 hours a week learning customer care skills, cooking and working as waiters at Brel and Ad Lib, both part of the Baby Grand Group in Glasgow. They will also be enrolled on four-year tourism undergraduate degrees at Glasgow Caledonian University. All very noble.

Yet activist George Monbiot writes of how international capitialism have failed to provide the necessary foreign aid and have imposed spending restrictions upon on the bill for public-sector pay in Malawi that ensure that even basic schooling cannot be improved. In Malawi the IMF sets the ceiling for public-sector wages directly. The pupil to teacher ratio in Malawi is 72:1. The failure rate to complete primary education in Malawi is 70%.

In Malawi, the goods required for the most basic level of subsistence cost $107 a month. A trained teacher receives $55. ActionAid argues that Malawi has now achieved sufficient stability to start raising teachers' pay. But in no case did the IMF consult either the public or the state's own ministry of education before laying down the law. The amount of money a teacher in rural Malawi is paid is decided by the men in London and Washington.

Good deeds like Madonna airlifting some pitiful child out of deprivation, or philanthropic gestures from Scottish businessmen of assisting Malawi's budding capitalist class may hit the headlines. But it is who controls the economy and pulls the financial strings that decides the future of all Malawians and for the moment thats the IMF.

Madonna danced with Malawian children when she toured the $120,000 facility that is home to 4,000 orphans and which she helped to fund and during a visit to an orphanage urged them to "help themselves" instead of relying on her.

Wise words because the only solution to the poverty will be when the poor do join together and do begin to "help themselves" - by seeking the common ownershiop and control of the means of production and distribution - the establishment of Socialism.
Alan Johnstone