Saturday, January 26, 2008

“Socialism is Illogical and Irrational” (2008)

From the January 2008 issue of the Socialist Standard

Free-market capitalism, left to its own chaotic and predatory devices would self-destruct in very short order.

I’ve been told this on a number of occasions when attempting to discuss the pros and cons of socialism and capitalism . . . not that the proponents of that view can offer any evidence that the present system of free-market capitalism is either rational or logical. Theirs is the response of the semi-secure, semi-comfortable, and semi-informed; they sit within the bubble that the system allows them, observing the world through the reversed telescope of capital’s media machine. What they see, hear and read “informs” them and shapes their world-view. When compared with much of the rest of the world their semi-existence looks infinitely better than that of the vast majority of humankind. Better not to rock the boat, better not to question, better to be satisfied with one’s lot, better to follow the advice of our leadership, after all, didn’t we elect them to take the difficult decisions in our name? Following the crisis of “9/11” didn’t Bush suggest that the best contribution the citizenry could make was to kick-start the economy back into top gear? Don’t think, don’t question – consume!

The capitalist system is rather like an onion. At the centre sits the elite controlling the system and drawing to themselves the fruits of the labours of the rest of us. From this centre each skin or layer gets progressively bigger with those nearest the centre being granted the largest share of the remunerations and benefits that form a part of the “overhead costs” that capital incurs, and those at the outside who are deemed to be totally non-productive by the elites, receiving nothing – not even the right to exist.

Whilst those who are near to the centre refuse to see the faults and failures of the system, there are two groupings who recognise the failings only too well – those on the outside who are robbed of everything, often even their lives, and those at the centre – the thieves and murderers themselves, aka the elites.

We are conditioned to believe that the free-market capitalist system has always been around and because it’s the only system that actually works, will always be around. First, it actually doesn’t work. Free-market capitalism, left to its own chaotic and predatory devices would self-destruct in very short order. Second, there really is no free-market capitalist system in the developed world – the “free-market” is reserved for the rest of the world, the people and resources that are there to be exploited and plundered.

In the developed world the elites have established a system of protectionism and state intervention through subsidies that pass as government contracts; the defence industry with its associated satellite firms is perhaps the definitive example. Through these and similar routes the elites can regulate their economies in an attempt to balance the short-termism that is inherent in the “maximum-profit-now-regardless-of-consequences” free-market. Whilst scorning “big government” in public the capitalists are creaming off vast amounts of money from the so-called public purse through government contracts and through bail-outs for “vital” industries where greed, fraud and ineptitude has resulted in the likely collapse of part of the capitalist’s empire. Witness the revolving door that allows the so-called Captains of Industry or key managers within the bureaucracy to be “fired”, handed huge severance payments and then immediately rehired somewhere else on even higher remunerations. Could there be a better indicator that the elites recognise that there really is no skill in “working” the system, only chance. As long as you are a paid-up member of the free-market masonic club there will be warm hand shakes and even warmer hand-outs as you head off for your next boardroom appointment.

The logic and rationale of socialism is that at its heart lies the principle, not of maximising profits for the few, but of meeting the needs of everybody on the planet. From that it follows that exploiting people or the environment upon which they depend for the short-term benefit of a few chosen individuals is purely illogical and irrational. Witness that illogicality, that irrationality of capitalism in the following comment by Noam Chomsky in conversation with David Barsamian, “Keeping the Rabble in Line” on a news item in the business section of the New York Times (7 February 1992) about a report prepared by Lawrence Summers, chief liberal economist at Harvard, for the World Bank setting out its position for the Rio conference in June that year:

“The idea is that the rich countries should take the position, led by the World Bank, that the problem of pollution is that the poor countries, the Third World, don’t follow rational policies. ‘Rational’ means market policies. Many of them are resource and raw material producers, energy producers, and they sometimes try to use their own resources for their own development. That’s irrational. That means that they are using resources for themselves, often at below market rates, when there are more efficient producers in the West who would use those resources more efficiently. That’s interference with the market. Also, these Third World countries often introduce some measures to protect their own population from total devastation and starvation, and that’s an interference with the market. It’s an interference with rational market policies. The effect of this Third World irrationality is to increase production in places where it shouldn’t be taking place, to increase development where it shouldn’t be going on, and that causes pollution. So if we could only convince those Third World countries to behave rationally, that is, to give up all their resources to us and stop protecting their own populations, that would reduce the pollution problem. This document was produced with a straight face” (author’s emphasis).

The same day on the same page of the New York Times there was another unrelated article, reproduced from Economist magazine, about a World Bank internal memo, written by the same Lawrence Summers, which had leaked. The NYT included an interview with Summers in which he claimed that the article was meant to be sarcastic. Chomsky commented:

“The World Bank memo added to what had been said in the article about Third World irrationality. It said that any kind of production was going to involve pollution. So what you have to do is do it as rationally as possible, meaning with minimal cost. So suppose you have a chemical factory producing carcinogenic gases that are going into the environment. If we put the factory in Los Angeles, we can calculate the number of people who will die of cancer in the next forty years. We can even calculate the value of their lives in terms of income or whatever. Suppose we put the factory in Sao Paulo or some even poorer area. Many fewer people will die of cancer because they’ll die anyway of something else, and besides, their lives aren’t worth as much by any rational measure. So it makes sense to move all the polluting industries to places where poor people die, not where rich people die. That’s on simple economic grounds.”

Summers did point out in his memo that there might be some counterarguments based on human rights and the right to a certain quality of life. But he further points out that if we allow these arguments to enter into our calculations, then just about everything the World Bank does would be undermined.

In the fifteen years since that report there is plenty of evidence of its principle thrust, the export of hazardous production processes to poorer areas of the world, in action. The same principle works in all areas of production. Capital is international, it goes where the profit is and in the process it undermines the position of the workers in the areas it leaves behind opening them up to greater exploitation as wage and benefit costs are driven down ready for whatever menial service jobs may be introduced for some in the next stage of the capitalist merry-go-round. Capital has no conscience and neither do those who function at the higher levels of the system who benefit from it.

So, there you have it, on the one hand the rationality and logic of free-market capitalism, a world devoid of humanity in every sense. Corrupt, polluting and choking to death on the consequences of its own greed and immorality. On the other hand you have the rationality and logic of socialism, a world where humanity can thrive, where the challenges of meeting the needs of every human being on the planet are balanced against the needs of the planet. Where everyone, including Mother Nature, has a voice and a place at the table, where there are no weak and poor, where there are no needy, where there are no outsiders . . . and no money. The choice is ours; we have to want change enough to bring it about. We have to build socialist thinking one brick at a time, spread the message one person at a time. Last November pundits were predicting the “Perfect Storm” economic collapse scenario due to the convergence of high oil prices and the credit crisis. Both of these events were triggered by the logic and rationality of capitalist greed and corruption; the first through an illegal attempted grab of resources and the second through greed for the easy money to be made out of sub-prime mortgages and the subsequent selling on of re-packaged and concealed risk to other greedy “suckers”. In both instances the capitalists are making vast fortunes or are being bailed out from the “public purse”, screened from the consequences of their greed and crimes. Some might feel that this “event” will provide a window of opportunity where the masses will suddenly get the socialist message by osmosis. Don’t hold your breath! Socialism is about spreading the truth, about making socialists and only socialists can do that. Socialism is logical, rational, pro-people, pro-environment, and above all + pro-active.
Alan Fenn

Dreaming of a super cycle

From the January 2008 issue of the Socialist Standard

Cooking the Books (I)

On 19 November the (London) Times published a special supplement on “Minerals and Mining”. One optimistic article “Boom time for world-wide mining” raised the prospect that world mining was entering a “super cycle” and that “we are now in the early stage of a prolonged upward shift in prices, fuelled by the industrialisation of China and India”.

Industrialisation involves not just the building of new factories but also the uprooting of people from the countryside and their move to urban industrial centres to work. One expert spoke of “the movement of anything from around 10 million to 20 million people per year into an urban setting” in China, so increasing the demand for new houses, roads, administrative buildings and the other features of an urban infrastructure.

Copper is used extensively in the construction industry, for electric wiring and the like. Recent years have seen a boom in the price of copper and the other base metals, zinc (used for galvanising steel and batteries) and nickel (also used in steelmaking), attributed largely to the increased pace of industrialisation in China since 2003. The optimists believe that their “super cycle” will be the third in the last 150 years, “the previous two occurring around the end of the 19th century as the US became a major economic power and the second being the post war expansion of the Japanese and European economies after 1945”.

Three days later, the headlines of the Times business section read: “Fears of recession in US spook commodity markets” and “The wheels are coming off the supercycle”:

A metals analyst, Nick Moore gave his opinion:

“’The supercycle has a flat tyre,’ Mr Moore said, referring to a theory promoted by some analysts and mining groups which suggested that extraordinary demand from China and India would sustain continued long-term growth and prevent the traditional boom and bust cycle of the mining industry. ‘China is not the tooth fairy that can absorb all the ore’”.

Of course since, as on all markets, speculators operate on the commodities market, too much store should not be set on short-term changes there. But the state of the US economy is relevant since China is not industrializing on its own: the motor is exports. If, due to a recession in the US, these fall off so will China’s demand for copper and zinc and the mining industry will suffer from “overcapacity”. Hence the comment of the Times Business Editor, James Harding, that “in the longer term, there is concern that the industry has retained its tendency towards oversupply, adding production capacity and removing the squeeze that props up prices”.

In other words, the classic scenario under capitalism. When the market for some product is expanding, all the firms supplying it assume that this will continue and invest in new productive capacity; when all this comes on stream it is found that supply exceeds demand and boom turns to bust and slump. The mining industry has traditionally been prone to this because of the longer time needed to explore for, find and extract minerals than to build a factory. The last time the world mining industry went through a slump was in the 1990s:

“At that time, with lower demand and lower prices, and in the midst of technological change, metals were, as Tulpulé [chief economist at Rio Tinto] puts it ‘passé’. This of course led to a lack of investment in plant, a fall off in exploration, and a declining growth on the supply side” ( London Times, 19 November).

As long as capitalism lasts, this zigzagging between boom and slump will always be the course of economic activity.

Adam Buick