Thursday, January 1, 2015

Another Reform Goes Wrong

The Cooking the Books column from the January 2015 issue of the Socialist Standard

When the Chancellor announced in his Autumn Statement that stamp duty on buying a house was being reformed, to reduce it on most purchases while increasing it on the most expensive, he claimed that this reform would benefit 98 percent of house-buyers. The assumption was that as this tax was being reduced, the price of houses would also fall.

The Chairman of the Office for Budgetary Responsibility, Robert Chote, however, warned ‘the reform could put up prices in some areas, predicting that they would rise where the tax had fallen and fall where it had risen.’

This paradoxical effect is what happens when something for sale is taxed in a sellers’ market as one where demand exceeds supply. This, in fact, is the logic behind the taxes on tobacco, alcohol and petrol. By regulating sales the government creates an artificial sellers’ market which pushes up their price; it then taxes the surplus profits of the sellers.

This situation can also arise without government intervention and is what Chote was predicting with regard to house prices.

John McDermott, in his ‘Since You Asked’ column in the Financial Times (6/7 December) elaborated. He has his questioner say ‘I thought that lower taxes would mean buyers would pay less overall.’ To which he replies:
‘Of course prices will go up. The Office for Budgetary Responsibility, Britain’s fiscal watchdog, estimates that for every 1 per cent fall in the effective rate of stamp duty, house prices rise 1.4 per cent, a house currently worth £300,000 would cost about £2,000 more under the new rates according to Shelter, a housing charity. When you lower  transaction costs of any transaction, there will be more of those transactions. There will be lower transaction costs for 98 per cent of purchases, according to the OBR. In a market where there isn’t a lot of supply, the extra demand will push up prices.’
That’s how the market works. Sellers always charge what the market will bear at any time, irrespective of whether the tax on what they are selling goes up or down. If the tax goes up and the market won’t bear an increase in price, then the tax falls on them. If, on the other hand, the tax is reduced and the market will still bear the same price as before, they won’t pass the reduction on but keep the whole of it for themselves.

If again, as in this case, a tax reduction results in increased demand, this means the market will bear a higher price and the seller will increase the price. And vice versa, as with the higher stamp duty for the most expensive properties, this reduces demand for them forcing the seller to reduce their price.

This phenomenon was noted in the second issue of the Socialist Standard in October 1904 with regard to rates and the price of rented accommodation:
‘When the Central London Railway was opened the competition for houses in Shepherd’s Bush increased largely, and as a consequence rents rose as much as 3s. in the £. This was the limit offered for the time being, and when shortly after rates were raised by a good sum, the rents remained unaltered. At West Ham, which is the most heavily rated district in England, rents are falling, while rates are rising, owing to the decreased demand for houses.’
In any event, taxes on items that workers consume to recreate their labour-power, in so far as they increase or decrease the price of these items, exert, respectively, an upward or a downward pressure on wages. It’s just that, in the field of housing, reforms have a habit of not working out as planned.

MY TIME AND WHAT A LIFE! (1950)

Book Review from the June 1950 issue of the Socialist Standard

"My Time, My Life," by George Camden, Dent, 8/- 254pp.

They say that sick people cannot read enough about their particular complaint. In the same way many workers, not content with witnessing the misery and unhappiness around them, are eager to read another's experiences of their own conditions. As a result such volumes as William Goldman's "East End, My Cradle," and "Tent of Blue," dealing with the slums and sweat shops of Whitechapel, and Max Cohen's "I Was One of the Unemployed" have earned a fair measure of success. It is likely that "My Time, My Life," will be equally successful. Of its type it is a well-written work.

Need I recapitulate the story? The pre-1939 unemployment, life in two rooms: the economic fear of a young wife at the signs of a second pregnancy; the deep-felt horror of the blitzes; the tragedy of a man returning from work to find his wife and baby dead; these are things we know only too well from the realm of hard experience. Yet Mr. Camden has set it down with a reality which excludes any of the false heroics which so frequently mar a work of this nature. In fact so honestly does Bill Smith, the "S" of this novel, react to his surroundings, that several critics, presumably in search of some treacly glorification of the "man in the street" at war, have condemned him as a cynic and a misery.

Bill Smith, just like his counterparts throughout the whole of the modern world, does not like his position in society, spending the best part of his life on the "ball and chain," released only to the dole or the army. He says, with typical bluntness:
"Brother, it's all double Dutch to me! We don't deal with this type of goods in our neighbourhood. We like each other or hate each other and there's always a good reason for both. We've got no territory except what we pay rent for. And when it comes to our turn in the wooden box we'll all have the same landlord."
How many workers make statements such as this; how many workers are aware of the contradictions and fallacies of the world around the, yet unable to recognise their cause and their cure! If Mr. Camden's work will prompt his readers to answer such questions as the one he poses above and many others besides, it is well worth while, but for those actively seeking a solution we suggest a little less consternation with effects and a lot more with causes.
Ronald.

The People You Meet No. 4 — "George" (1950)

From the February 1950 issue of the Socialist Standard

Every morning you'll see old George on the 8.45 from Ilford to Liverpool Street, with his neatly rolled umbrella and Daily Express. The affairs of the world are decided in his compartment. Lately they have come to the conclusion that the workers are very lazy, impudent in insisting on wage increases, and in need of the "big stick" of unemployment.

"But didn't you say George came from Ilford where one pawnbroker alone left a million pounds? They've got branches of Woolworths', Montague Burton's and every other chain store. They've even got a labour exchange."

Yes, George's district has all those things, and George is a worker too; but never tell him I said so. He'd throw a fit. You see, George has got on in the world. His old man was only a factory hand but he's "something in the city." Where poor old Dad only produces the goods, George has the job of adding up the profits their common master makes on them. He's got his own house in Ilford, or a least will have in ten years' time when he's finished thirty years' mortgage repayment; his own car, only a Ford, but still a car, and his boy is at a fifth-rate public school.

Wage slave? Not at all, says George. George gets a salary cheque. He's very proud of that. Of course, he doesn't realise what this constitutes. Far from being the value of his services, it is no more than the cost of his production. In other words, enough to provide him and his wife and child with food, clothing and shelter with just a little over for entertainment. Of course, he gets more than Dad. He has required more training and it costs more for his upkeep. Imagine the look on the boss's face of George bowled up to work in dungarees; he must wear black coat and striped trousers, well pressed and neat. He must live somewhere respectable. It enhances the good name of the firm.

Yet George knows poverty—an insidious genteel poverty. In Stepney the kid tells the insurance agent that "Mum says she's out." In Ilford George's wife tells him she hasn't cashed his pay cheque. In slumland the poverty is constant and open, in Ilford it hides behind the curtains and a shining door knocker. And George knows other features of capitalism too. Several hundred of his kind recently were axed from the civil service. As the conditions of capitalism grow tighter the administrative workers are the first to be pruned. What then?—addressing envelopes for football pools or going from door to door trying to sell vacuum cleaners on the never-never to workers as poor as himself.

Yet in spite of it all George still won't have it that he's a worker. And it pays the capitalist to foster this belief, to persuade George that he is a member of the mythical "middle class." The squabbles between "officers and employeeds," "staff and hands," "black coat and dungarees" all tend to hide the real struggle between capitalist and wage-slave, irrespective of the form his slavery may take.

But he's in for a shock. The breeze of economic troubles is fact becoming a tornado, and what will he do then? Maybe the shock will do him good, clear the mist from his eyes, and show him his correct alignment—in the ranks of the workers striving for Socialism.
Ronald. 

Hopes for the New Year?

Editorial from the January 2015 issue of the Socialist Standard

January 2015, the start of another year. Time for looking back on past failures and for promising ourselves we will do better in the future. Do politicians indulge themselves in this game? Perhaps they do, but if so, it would give us scant reason to hope that a better future was in prospect for the working class.

Back in 2010, the Tories promised to eliminate the structural deficit by the next election, to be the greenest government ever, and to ensure that the NHS would be ‘safe in our hands’. They promised a ‘Big Society’ (remember that?) which would give power back to the people and encourage individual enterprise. They said they would rescue working people from the benefit trap by making work pay. Later they promised to replace every council house sold with a new, ‘affordable’ home. At the last election, did the British working class trust the Tories and Lib Dems to keep their politicians promises? Did they believe such promises would make their lives better in future? Or did they merely react against the long list of failed pledges made by the previous Labour governments: to keep debt stable, to keep inflation down, to cut youth unemployment, to borrow only to invest, not to raise income tax. Did not Brown, in fact, assure us of increased prosperity; did he not tell us that he had beaten back the trade cycle and there would never be mass unemployment again?

Failure to keep promises is a defining mark of all governments pledged to run capitalism. Sometimes such failures are the result of opportunistic manoeuvring (the Lib Dem’s promise not to raise tuition fees comes easily to mind). Sometimes the promises themselves are no more than convenient lies, bait to catch unwary voters, or balm to sooth working-class anger or pacify their resistance. But when all the parliamentary squabbling and finger-pointing is done, the fundamental underlying cause of such failures is not the stupidity or greed or ignorance of politicians but the workings of capitalism. The economic system, a tightly-woven web of social and legal relationships driven by profit, is its own master, following its own anarchic way, ceaselessly undermining the attempts of governments and corporations to tame or control it.

Perhaps the politicians, servants of capital, eventually come to believe their own promises – it often seems that a capacity for self-deception is a hallmark of a successful career in parliament. But whatever motives lurk behind politicians’ eyes whenever the glib promises come tumbling out of their mouths, capitalism will have its way with them. And it will have its way with us, too, the working class. It was never set up to meet our needs or to fulfil our hopes or dreams. It was not designed to provide for the fulfilment of humanity as a whole.

Whatever hope this new year may bring, it will not lie in the prospect of working people finally electing a capitalist political party that can keep its promises, for unless it is promising us further exploitation, conflict and unfulfilled hopes, such a party does not, and cannot, exist.