The Economics Exposed column from the December 1987 issue of the Socialist Standard
The plummeting of share values on October 19 of this year produced a lot of hot air, as pundits on all sides attempted to draw their political conclusions. Brian Walden, in a feature article defending the free market, warts and all, glibly referred to "capitalism's manifest superiority to socialism as a method of improving society" (Sunday Times, 1 November 1987). The Labour Party shadow cabinet produced a document stating that what was needed to avoid further trouble was "massive government intervention". And the CBI, at their Conference in Glasgow, made it a shocking crime to utter the dreaded word "crash", referring instead to a range of terms such as "adjustment". "nosedive", "the problem", "the events of the past few days" and "the latest squalls '.
There were two types of people who were immediately affected by the wiping of about 25 per cent off of the share prices at the London Stock Exchange in the course of a week. On the one hand, there were those for whom losing a quarter of the value of their shares meant losing millions, or very many thousands of pounds. Of course, they still had three quarters of the value of their shares, which would have been worth even more millions! Moreover, at the time of writing, share prices appear to be regaining a large part of their former value. For the people in this first category, socialists would not have shed any tears. They are a small minority who live comfortably on the backs of the rest of us. Most big capitalists would not have been affected by such a hiccup. Their privileged lifestyle smugly continued regardless of the panic by workers on their bosses" behalf.
We can sympathise rather more with the second group of people who were affected during that week. Many workers have been persuaded in recent years to buy shares in industries which had previously been nationalised. The government claimed it was taking these industries out of the hands of the state bureaucracy (which Labour had indeed falsely equated with "the people") and handing them over to ordinary people themselves. Of course, there was one snag. Most people are workers and therefore lack the cash to buy more than a handful of shares at the most. All the rhetoric about ordinary people becoming "capitalists" overlooks this simple fact.
To be a real capitalist you would require the cash to buy such shares in hundreds of thousands. Dividends paid on shares tend nowadays to be in the region of, say, 20p a share annually. While this provides the owner of a million shares with a nice unearned income of some £4,000 a week (making it a matter of choice whether to bother to go to work or not), the worker who has proudly bought 400 shares, for example, would receive £1.60 a week; hardly enough to retire on. It is an obvious but rarely stated fact that somebody can have a small "stake" in an enterprise, even with some minimal voting rights or control, but it is the size of the stake they can afford which dictates their position in society, their class and therefore their condition of life. And no reforms proposed by any of the political parties can even attempt to deal with this ultimate inequality at the roots of capitalism.
Beyond this aspect, several other problems have emerged from the great privatisation "sell-off" bonanza of recent years.
★ Largely as a result of these policies, the number of adults in Britain who own any shares has increased from 7 per cent in the late 1970s to 15-20 per cent today. But that still leaves four out of five adults with no shares whatsoever. There is every possibility that the number of shareowners will once again fall below 10 per cent, particularly after recent events.
★ Within the small minority who own shares, there is a much smaller minority who monopolise the bulk of all shares. About four fifths of all privately held shares are owned by less than one per cent of the population.
★ Of all the shares bought in recent "privatisation" issues such as the Trustee Savings Bank. British Gas and even British Telecom, a substantial proportion have already been cashed in again, with more shares gradually falling, predictably, into fewer hands. In many cases workers had saved a few hundred pounds and found that they needed that money back again after a year or two to help with household expenses, for which they had no other resources to fall back on. In other cases the intention was to make a quick (and very small) profit, then withdraw. The proceeds will hardly finance a life of leisure. Real capitalists do not have to sell their entire investment portfolio some months after acquiring it.
It is the people in this second category whose recent position was tragic. In some cases, workers had put their life savings into projects promoted by the government's smooth-talking advertisers only to watch their modest nest-egg eaten into during one week by the fluctuations of the business casino known as the Stock Exchange. During the television coverage of the October "crash", some investment analysts actually came on (rather too late) and said that it really was "not right" for the "very small investor" (the worker) to get too involved in the risks of share investment in the way that the big investors are able to and that the dramatic fall in share prices might serve as a warning and lesson to such people.
The real lesson, however, is that such wild commercial fluctuations show us the true nature of the capitalist economic system. Based on competition for profits throughout the world market, capitalism is unpredictable, uncontrollable and unable to meet human needs securely. The mass media had a field day, getting excited about their tedious obsession with share price indexes minutely fluctuating in a way that was of little immediate interest to most viewers. It was nearly as bad as the boring hysteria of the election coverage during the summer. What they failed to point out, though, was that such "strange" developments have happened before and will happen again, because of the very nature of world capitalism itself. They will happen under Brian Walden’s "free market" and under the "massive government intervention" which the shadow cabinet waffled on about. Nobody can predict when such problems might happen again, or find any way to avoid them.
The price of shares in a company can respond to subtle changes in business "confidence”. In a sane, socialist society the only pointers will be human needs on the one hand, and the real resources available for meeting those needs, on the other. The only “confidence" to be concerned about would be our vital confidence in our own ability to work together co-operatively to meet our needs. That ability certainly exists.
The temporary failure of "confidence" which found expression on October 19, on the other hand, was a failure of confidence in the secure, continued flow of profit into the bank accounts of the parasite class in society. They seem to have picked up since then, and persuaded themselves that there is nothing to worry about. Shall we prove them wrong?