Tuesday, July 16, 2013

Capitalism’s diminishing returns (2013)

Book Review from the March 2013 issue of the Socialist Standard

Bleakonomics by Rob Larson. Pluto Press. 2012.

Larson has written an engaging polemic against free-market capitalism and its proponents, focusing on the role of ‘externalities’ such as environmental destruction and the inadequate consideration of these by conventional economics.

Indeed, the chapters on capitalism and the environment are amongst the strongest, making very clear –with some well-chosen examples –how the market is unable to allocate resources in an environmentally-friendly and sustainable way. The Deepwater Horizon oil well explosion and spill, and the Great Pacific Garbage Patch (‘a Texas-sized ocean eddy saturated with minute plastic particles’) are just a couple of the externalities of capitalism that Larson highlights to useful effect.

Larson discusses class division intelligently for the most part, along with the excesses of a system that rewards the top one percent merely for their ownership of wealth, though there is a sense that he thinks a regulated capitalism wouldn’t create nearly as many problems as the private enterprise version that exists in America and has spread across much of the world.

He is more consistently effective when he discusses some of the fundamental flaws of conventional bourgeois economics, such as the theories of marginal utility and marginal productivity. An excellent chapter on ‘Economics as a Failed Science’ recounts practical research into how businesses make their decisions and illustrates that diminishing returns on the growth in productive capacity doesn’t typically happen in practice. This is important, because one of the contentions of conventional economics is that these diminishing returns limit the production of individual firms and keep these enterprises small relative to the total market. This is a key factor underpinning the notion that capitalism is based on competitive markets that respond to subtle price signals influencing the ebb and flow of new entrants to an industry.

But the research shows this doesn’t happen in practice –economies of scale are a far more important factor for companies, leading them to expand their production to secure cheaper costs per unit produced. This in turn helps create two of the most significant features of capitalism: first, the drive by companies to expand production as if there is no limit to the market for their products, which leads to overproduction and economic crisis. Then the same phenomenon also leads to the concentration of capital into fewer hands, with a resulting tendency towards oligopoly. This was illustrated in the 2007 US Economic Census, which showed that 97 per cent of cigarettes in America are produced by the four largest manufacturers, the four biggest brewers produced 90 per cent of the beer and the top four oil refining firms produced almost half the petrol and diesel.

So, on this front Marx was right again, even though Larson doesn’t mention his analysis directly. Larson does quote, tellingly, from Einstein and his analysis of the anarchy of capitalist production and focuses on the calls for ‘economic democracy’ made by the Occupy movement among others as the remedy to the problem. But what he doesn’t say is that this remedy can only take effect when the anarchy of the market and the tyranny of money and prices have been destroyed, to be replaced by common ownership and production directly for use, rather than under a ‘regulated’ capitalism.

Billy Bragg: Not Looking for a New England (2012)

From the September 2012 issue of the Socialist Standard

“I never advocated the abolition of capitalism” (Billy Bragg, Radio 4, 21 April)
1984 was the year of the Miners' Strike and Billy Bragg. He identified himself with the Miners’ struggle against the Thatcher Tory government. In fact, Bragg says that Thatcher made him who he was. His album Brewing Up with Billy Bragg contained a song called The World Turned Upside Down about the Diggers and Levellers of the English Revolution of 1649 who advocated the“common treasury” of the earth, the title of the song referencing Marxist historian Christopher Hill's book.  All proceeds from Bragg's EP, Between the Wars, were donated to the Striking Miners’ Fund.

In April, the Reverend Richard Coles invited his old Red Wedge comrade, the ‘Bard of Barking’, Billy Bragg, onto his Saturday Live Radio 4 show, introducing him as “the British Left's most consistent voice”.  Bragg's consistency has been as a reformist, gradualist, and non-revolutionary voice. The Guardian (1 January last year) declared that Bragg had “an unshakeable commitment to democratic socialism”. Is the term ‘socialist’ an accurate description for this Dorsetshire denizen?

Bragg was brought up in Barking in East London, experiencing “the reality of working class experience not the theoretical” and attending Barking Abbey Comprehensive School.  He was energised by the Punk Rock explosion of the late 1970s, stating he was politicised by seeing The Clash at the Rock Against Racism carnival in Victoria Park in Hackney in 1978. The Clash were notorious for radical chic Leftist gesture politics such as wearing Red Brigade/Baader Meinhof T-shirts, and eulogising the Leftist Nicaraguan Sandinista government.

Bragg would have been better politicised if he had seen the Gang of Four confronting British Movement skinheads at Thames Poly in Woolwich in 1979. The Gang of Four were a Marxist post-punk band originating at Leeds University who were influenced by the Frankfurt School, and wrote about love, sex and leisure as fetishised commodities in capitalism, and alienated labour. In 1982, their single, I Love a Man in a Uniform, dissected war and capitalism. This song came too late for Billy Bragg because in 1981 he had joined the British Army. He had not worked out an analysis of capitalism and war and the fact that the working class do the killing and dying in capitalist wars.

After the end of the Miners’ Strike in 1985, Bragg's next campaign was Red Wedge which was a pop music collective dedicated to electing the Labour Party and getting Neil Kinnock into Downing Street.  Bragg told Coles that Red Wedge was “hardly revolutionary, it was Neil Kinnock”. Kinnock was already expelling from the Labour Party Trotskyists such as Militant and beginning the modernisation process that would eventually result in New Labour.  In 1987 Thatcher was elected for the third time.

After the 1987 election, the next stop for Billy Bragg was joining the newly formed pressure group, Charter 88, which had been set up by Liberal/SDP intellectuals. Charter 88 would eventually merge with the New Politics Network (which had evolved from Democratic Left which was, in turn, the 1991 successor to the defunctCommunist Party of Great Britain) and form the pressure group Unlock Democracy.

Barking Abbey Comprehensive School also produced Malcolm Eden and Tim Gane who formed the indie pop band, McCarthy, in 1985 who were explicitly a Marxist group that sang about socialism (Red Sleeping Beauty), the socialist commonwealth (CelestialCity), while their 1987 album, I am a Wallet, was all about capitalism and commodity fetishism in Thatcher's Britain

When McCarthy split in 1990 Tim Gane teamed up with French singer, Laetitia Sadier, to form Stereolab. Sadier told Melody Maker in 1991: “I want to change the world” and Stereolab's lyrics had a Marxist content. One song called Ping Pong in 1994 was a Marxian economic analysis of capitalism's crises. A 1992 song, Surreal Chemist, identifies the Marxist perspective of Stereolab:

“Even more than philosophers/Aiming at no less than the total transformation of man and his world/ True life embodying pleasure principle's noblest triumph/Over the cowering mendacity of bourgeois christian civilisation”.

In 2005, Bragg supported Oona King MP (New Labour, pro-Iraq war) in her election campaign in Bethnal Green and Bow in East London against the maverick Leftist, George Galloway. She was defeated.  New Labour had so abandoned the working class in East London that the far-right BNP gained seats on Barking Council.

The rise of the BNP in his native East London prompted Bragg to write his 2006 book, The Progressive Patriot, where he champions English nationalism and multiculturalism and even draws inspiration from Rudyard Kipling. (He of the British Empire and ‘the White Man's Burden’ whose propaganda egged on the slaughter of millions of the working class in the trenches of the First World War.) Bragg has no class analysis of society and writes he is “developing a narrative which explains how we all came to be here together in this place” (my emphasis) and states we now live in a “present classless society”. He does not see that the capitalist ruling class seek to convince the working class that ‘we’ is ‘the Nation’ and the Nation state is run by the capitalist class in their interests. He does not see ‘multiculturalism’ from a socialist angle, which views it a divisive because it forces the working class to identify with other groups against their class interests.

Since 2001, Bragg has stated that he is a tactical Lib-Dem voter but feels betrayed by the Lib-Dems being in the Coalition government with the Tories: “They had some positive things in their manifesto, and they seem to have abandoned the lot of 'em”.

Bragg told Reverend Coles in April that “there are no utopias, I was never that kind of revolutionary. As if I've ever called for the abolition of capitalism”. He agreed with Coles that his was “a modest programme of change, chipping away at that which is tractable”. Last year he told the Guardian:  “We're living in a post-ideological period” and that “the long shadow of Karl Marx” was over, and of the new protests he did not “care if it's called socialism”.
Steve Clayton

Further Reading:
Socialist Standard review of Billy Bragg's The Progressive Patriot

Further Listening:
Gang of Four - I Love A Man In Uniform
McCarthy - Red Sleeping Beauty
Stereolab - Ping Pong

UKIP: Are they really the BNP in blazers? (2013)

From the July 2013 issue of the Socialist Standard

In Trafalgar Square at this year’s London May Day Rally, left wing Labour MP Jeremy Corbyn urged the working class to 'Fight Racism, Fight Imperialism' (although both are symptoms of capitalism) and attacked UKIP as 'the BNP in blazers'.

The main UKIP (UK Independence Party) policy is British withdrawal from the European Union. With this main platform they got 147 councillors elected in the English County Council elections in May taking 23 percent of the popular vote. This followed on from the Eastleigh by-election in February where they achieved 27.8 per cent of the vote. In March UKIP leader Nigel Farage was invited to dinner with capitalist media mogul Rupert Murdoch who later tweeted: 'Economies going nowhere. New leaders emerging on distant horizon. Stagnant Europe racked by discontent and resentment of EU. Farage reflecting opinion'.

UKIP was established in 1993 by Tories opposed to the EU Maastricht Treaty. By the 2009 European Elections UKIP had 13 MEPs, 17 per cent of the popular vote which equated to 2.5 million voters. At the General Election in 2010 they received 920,000 votes. Support for UKIP appears to be an expression of the economic insecurity after the 2008 financial crash, xenophobia, and a distrust of the political elites of the main parties. At present, however, most of the capitalist class do not favour withdrawal from the EU. Recently both Ford and BMW warned Cameron against EU exit insisting it would be 'devastating' for the British economy, and in a British Chambers of Commerce poll of 4,380 companies, 60 per cent felt exiting the EU would harm business.

The Tory Party leadership have been scathing about UKIP over the years; from Michael Howard in 2004 describing them as 'political cranks, gadflies and extremists' to Cameron in 2006 talking of 'fruitcakes and loonies – and closet racists mostly' to this year and Kenneth Clarke speaking about 'waifs and strays' and 'a collection of clowns'. Yet in a Guardian ICM Poll this May Labour were on 34 percent, Tories 28 percent and the 'clowns' of UKIP on 18 percent followed by the Lib Dems on 11 percent.

City backers
Farage has been described as a 'reactionary throwback', and his party, 'the Kippers', revere Churchill and Thatcher, want smoking back in pubs, a small state, low taxes, the end to mass, uncontrolled immigration with a points-based work permit system. UKIP's 'saloon bar politics' are anti-multiculturalism, anti-political correctness, against gay marriage which represents a traditional social conservatism that hides homophobia and misogyny. Their brand of rightwing populism wants increased police numbers, the doubling of prison places, an expansion of the armed forces and to 'no longer involve the UK in military adventurism' which seems to be a rejection of liberal interventionism. UKIP are also supporters of Climate Change denial (see Pathfinders, June issue). An unknown leading Tory referred to grass-roots Tory activists as 'mad, swivel-eyed loons', but they could be describing UKIP.

UKIP have an avowed belief in economic liberalism or laissez faire capitalism. The party is full of ex-bankers. Farage himself is former commodity broker, and UKIP want the City excluded from EU controls. They want the repeal of the EU directive on Alternative Investment Fund Managers which seeks to regulate hedge funds and private equity companies in the City. The Daily Telegraph (1 June) reported that Farage had held fund-raising dinners for City supporters and had received a five figure donation from the former chief executive of a FTSE 100 company.

UKIP propose 'tens of billions' of cuts to taxation, along with a further £77 billion of cuts to the public sector in order to reduce the deficit. The economic plans outlined by UKIP have been called into question by thee Times (29 April) which identified a '£120bn black hole' in their spending plans. On workers’ rights, UKIP want to reduce the influence of Employment Tribunals, limit unfair dismissal claims, scrap most 'equality and discrimination legislation', and limit the power of Trade Unions. UKIP argue that if private sector workers have to endure pay cuts and job losses during the economic recession we are currently experiencing then it’s only fair that public sector workers must do the same. One UKIP MEP feels that women of child-bearing age should not be employed because maternity rights were 'too draconian' for employers.

Tax policy
A discussion paper on their website citing Adam Smith and David Ricardo as a guide to their taxation policy, states:

‘Every attempt to tax wages sets in motion a “shifting” process whereby the tax finishes up as a corporate impost anyway. This phenomenon was clearly set out 220 years ago in Adam Smith’s illustration of an employee earning £100. If the state imposes a tax of 20% his pay must rise by 25% in order to re-instate the employee’s former purchasing power (£100). He must now be paid £125 so that the 20% tax leaves him with disposable earnings of £100. In practice there may be a time-lag over which purchasing power (or the basic standard of living) is restored’ (Their emphasis. www.ukip.org/index.php/issues/policy-pages/tax).

David Ricardo did indeed argue: 'Taxes on wages will raise wages, and therefore will diminish the rate of the profit of stock... a tax on wages is wholly a tax on profits'. We too have always argued that although some taxes are paid by the working class, the burden of taxation rests on the capitalists and has to be paid out of the profit accruing to them in the form of rent, interest and profit, the basis of which is the unpaid labour of the working class.

Marx too explained why abolishing taxes on wages would make no difference for wage-workers:

'If all taxes which bear on the working class were abolished root and branch, the necessary consequence would be the reduction of wages by the whole amount of taxes which today goes into them. Either the employers’ profit would rise as a direct consequence by the same quantity, or else no more than an alteration in the form of tax-collecting would have taken place. Instead of the present system, whereby the capitalist also advances, as part of the wage, the taxes which the worker has to pay, the capitalist would no longer pay them in this roundabout way, but directly to the state... For the bourgeoisie the way in which taxes are distributed and levied, and the use to which they are put are a vital question on account of its influence on trade and industry' (www.marxists.org/archive/marx/works/1847/10/31.htm).

UKIP believe that 'Low taxes, few regulations and small government are the recipe for a successful economy'. They want to reduce the rate of taxation on the capitalist class by replacing VAT with a Local Sales Tax, abolishing the employers’ National Insurance contributions ('the tax on jobs'), abolishing Inheritance Tax and reducing Corporation Tax. UKIP are enthusiastic supporters of the Flat Tax to replace income tax and NI. They believe that there is tax avoidance by the capitalist class because rates are too high. So everybody, whatever their income, would pay the same flat rate of personal income tax.

Rather than ‘the BNP in blazers' UKIP are loony rightwing advocates of free market capitalism.

The British National Party (BNP) are Britain's very own pseudo-Nazi party, the successor to Oswald Mosley's British Union of Fascists. The BNP are 'state capitalist' and advocate a different brand of capitalism to UKIP. They oppose globalisation, laissez faire capitalism and economic liberalism, and want an economic nationalism (autarky) whereby industries are British-owned, a renationalisation of the utilities, subordination of the City to central government, and a greater share ownership for workers.

The BNP's 'state capitalism' has its roots in 'Strasserism', the leftwing Nazism that originated in the Nazi Party’s 25 points programme from 1920 which included the abolition of unearned income, the breaking of ‘debt interest slavery’, nationalisation of associated industries, and the division of profits in heavy industries. The Nazi Party economist Gottfried Feder advocated 'breaking the shackles of interest' and saw financial capitalism or 'Jewish finance' as opposite to productive capitalism, and at the root of societal problems not capitalism itself. The Socialist Party pointed out that this opposition to 'unearned income' was due to the fact that foreign capitalists were raking off proceeds from German industry and was a cry from the hearts of the German capitalist class. The BNP state capitalism is indeed more 'reformist eyewash'.

UKIP represent a populist rightwing capitalist reform party which is fundamentally an external faction of the Tory Party while the BNP and their quasi-Nazi state capitalism would be the wages system under new management. Both are just alternative ways to manage capitalism. A Radio 4 talking head recently said Farage was not Mussolini because he had not got the 'grandiose idea'. In that sense, UKIP are 'more Enoch Powell than Oswald Mosley' and not 'the BNP in blazers'.
Steve Clayton