Coal Mining Insanity (2012)

The Material World Column from the November 2012 issue of the Socialist Standard

According to a report released in July by National Public Radio and the Center for Public Integrity, black lung disease in coal miners has quadrupled since the 1980s and doubled since 2002. The doubling coincided with an increase of 600 hours in the work year of the average miner. Over 10,000 miners died of the disease in 1985-94 in the Appalachians alone.

There is no treatment for black lung disease. At its final stage – ‘massive fibrosis’ – even mild exertion causes disabling oxygen deprivation. Victims say they can either eat or breathe, but not both at the same time.

The coal seams in old mines have thinned, and the companies extract seams down to one inch thick. These thin seams are often embedded in quartz rock with a high silica content, which generates dust even more deadly than coal dust.

Hiding the dust

In 1960 Congress passed a law to regulate dust levels in mines. But Big Coal and its bought politicians – such as the late Senator Robert Byrd, who cynically called himself “the coal miner’s friend” – weakened its safety provisions to keep down costs for the companies. They seek to protect corporate profits, not workers’ health. Miners are expendable and can readily be replaced, perhaps at even lower wages, from the ‘reserve army of the unemployed’.

The main weakness of the law as passed is that it lets the companies police themselves. A government inspector cannot enter a mine while production is underway – and that is 24 hours a day! – without the company’s prior consent. When the dust level readings taken by the company disagree with those taken by the inspector, the company is allowed to take definitive new readings at five locations chosen by itself.

Weak as the law is, it is often broken. During the last decade mining companies were cited with over 53,000 violations. Fewer than 1,000 resulted in court action.

Waste stream

In February 2011 the Annals of the New York Academy of Sciences published a report by scientists from several US universities, entitled ‘Full Cost Accounting for the Life Cycle of Coal’. The authors found that each stage in the life cycle of coal – extraction, transport, processing, combustion – generates a waste stream that poses multiple hazards to health and the environment.

Thus, the release of Coal Combustion Waste (CCW), also known as fly ash, by burning coal exposes people to toxic chemicals and heavy metals known to cause cancer, birth defects, reproductive disorders, neurological damage, learning disabilities, kidney disease and diabetes.

The coal companies do not pay these ‘external’ costs and therefore ignore them. The scientists estimate the annual cost to the US public as at least a third of a trillion dollars, possibly over half a trillion. Accounting for the damage caused by coal gives a ‘full social cost’ double or triple the ‘economic cost’ of generating electricity from coal. Measured against this benchmark, wind, solar and other non-hydrocarbon energy sources are far cheaper than coal.

Greenhouse gas emissions

The authors found that burning coal produces 50 percent more emissions of carbon dioxide (CO2 — the main greenhouse gas) than combustion of an equivalent amount of oil and double the CO2 emissions from burning an equivalent amount of natural gas.

Coal also contains mercury, lead, cadmium, arsenic, manganese, beryllium, chromium, and other toxic and carcinogenic substances that are released into the environment during combustion. Finally, the crushing and processing of coal release tons of tiny particles every year that contaminate the water, air and soil, with consequent harm to health and the biosphere.

Methane is also released in the process of coal mining. It is a greenhouse gas 25 times more powerful than CO2. Even when methane decays it yields CO2 — a lose-lose situation.

Mountaintop Removal

The coal companies make wide use of Mountaintop Removal (MTR) in the Appalachians. To get at the coal inside a mountain, they use explosives to blast away the summit, together with the forest covering it. The resulting rubble or “spoil” is dumped into the valleys below.

MTR has been used at about 500 sites in four states (Kentucky, Virginia, West Virginia, and Tennessee), burying 2,000 miles of streams and despoiling 1.4 million acres of scenic natural terrain. In Kentucky alone there are 293 MTR sites, with over 1,400 miles of streams damaged or destroyed and 2,500 more miles polluted.

This reckless vandalism is directed against a region whose rich biodiversity is second only to that of the tropics. The Southern Appalachian Mountains are home to the greatest variety of salamanders in the world, with 18 percent of all known species.

Just say no!

In view of the massive social costs associated with coal mining and the availability of less destructive energy sources, this industry would be a thing of the past if the government, with its monopoly on violence, were not in collusion with Big Business — in this case, the coal companies.

There is not and never was any such thing as a ‘free market’. Government, with its law-making, courts, and self-sustaining monopoly on violence, is necessary to camouflage the tremendous imbalance between the classes and create the illusion of a society of normal human relations.

If we all, every working class person, just said no, we don’t want this anymore, it would be a first step towards the means of life passing into our hands so we could stop the insane forms of capitalist production that have been destroying our world for over centuries.

Joe Hopkins (WSPUS)

The Great Crash of 1929 (1969)

From the October 1969 issue of the Socialist Standard

The events of October 1929 which have become known as the Great Crash have been written not only into capitalism’s history but also into the system’s mythology. There are still plenty of people living who remember it, who recall with bitterness the seemingly endless unemployment, the contemptuous clerks at the Labour Exchange, die indignities of the Means Test. Many political prejudices were set solid in those dark days, forty years ago.

The economists also remember and promise us that 1929 will never happen again—which might have more force, were it not for the fact that in 1929 the economists were confident that the Crash could not happen in the first place. The promise, in any case, is always conditional on our doing as the economists say, with 1929 held over our heads much as Napoleon held the threat of Jones' return over the animals in Animal Farm. This, for example, was Harold Wilson’s warning to the 1966 TUC about what would follow a rejection of the government’s policy of wage restraint:

  . . . one false, careless, regardless step . . . could push the world into conditions not unlike those of the early Thirties.

Wilson is here making the familiar claim that the economy is now under control, even if sometimes it needs drastic measures like wage freezes and devaluations to remind it of the fact. And behind this lurks the notion that the economists of capitalism have learnt something from the Great Crash which they will never forget.

As 1929 started, the world was not entirely empty of optimism. Since the last great depression of the 1890’s there had been many developments in fields like electricity, the motor car and telecommunications and these were widely assumed to be bringing in their train greater freedom and equality. It was true that in Britain there was a chronic unemployment problem but the United States was in the midst of a prolonged stock exchange boom which convinced millions of people that mass production, credit trading and private enterprise were among the best things ever invented by man.

At the year’s opening the Conservatives in Britain were looking back with satisfaction on the work Parliament had just finished on amendments to the Book of Common Prayer; if there was an unemployment problem, they were confident they had dealt with it in their Derating Bill and Tory politicians toured the country telling everyone that prosperity was on the doorstep. This hilarious tone was kept up by Stanley Baldwin during the general election that year, when he managed to forget that basic industries like coal, steel and shipbuilding were depressed and pointed joyfully to the unmistakable signs of recovery to be found in the export of Cornish broccoli to Europe. Perhaps it is not surprising that the Tories lost the election.

The unpalatable fact was that Britain’s economy had been in decline for something like sixty years and in particular had emerged from the war to find the tendencies which had previously undermined British dominance — foreign competition, tariff barriers and the growth of home industries in former markets abroad-—were all accentuated. Soon after 1918 there was a surprise boom, largely due to the replenishment of war-depleted stocks. Prices shot up to impossible heights and, despite the demobilisation of 4 million servicemen, there was virtually full employment. But as raw materials which had been held up by the lack of shipping began to come onto the market the boom collapsed. By early 1922 prices had been halved; in 1921 unemployment exceeded 2½ million.

The slow recovery from this recession was probably due to the British government’s decision, in 1925, to return to the Gold Standard. The government were aware of the possible effects of this, but they found themselves in something of a cleft stick, having to choose between slowing down a possible recovery and risking contamination by the inflation which was destroying so many European currencies. (At the end of that inflation, prices in Poland had risen 2½ million times their pre-war level; in Russia 4,000 million times; in Germany one million million times.)

In America, where the Great Crash was first heard to rumble, things were rather different. The American capitalist class had had a lot to win in the 1914/18 war and came out of the peace talks as an exceedingly strong power. Their exports were increasing in trades which were expanding—in contrast to those of Britain, Which made most ground in declining trades. America suffered a few short recessions during 1920/21, 1924 and 1927 but always recovery followed quickly and taken as a whole the period from 1922 to 1929 was one continuous boom.

These conditions were of course registered on Wall Street, where the New York Times index of 25 industrial stocks rose in a smooth curve from 110 in early 1924 to 338 in January 1929. Just before the Crash, in September, it reached 452. This was the sort of evidence which persuaded many people, anxious to make their own paper fortune, that eternal prosperity had arrived. The monetary authorities seemed to be alone in their concern at the hectic activity on the stock exchanges —on one day just before the Crash over 12 million shares were traded and during the period 1927 to 1929 the bank borrowings of stock brokers rose from $3,500 million to $8,500 million—and when the slide started in October they welcomed it, in mistake for a minor adjustment which would quickly be followed by another bout of expansion.

Early in the New Year there was indeed a slight recovery and the experts announced the recession’s end. But then agricultural and raw material prices nosedived and this was followed by three waves of bank failures between the end of 1930 to mid 1932 which destroyed deposits, caused a panic-stricken contraction of bank loans and finally brought paralysis in the winter of 1932/3.

The bank failures revealed a new and poignant aspect of the Crash. Now it was not only the unemployed industrial and agricultural workers who were queueing and begging; they were joined by small businessmen, shopkeepers and stockholders who had seen their life savings disappear and who, when ruin stared them in the face, sometimes chose to end it all with a bullet or a jump from an apartment window.

The American government, following the customary policy of treating symptoms rather than deal with causes, tried to force prices up by cutting back production and restricting competition. In many cases this policy was superfluous; producers who were faced with a glutted market needed no official prompting to destroy food, and industrialists who found that they could not sell their goods had no alternative to closing their works. From the point of view of capitalism, it was all very logical but it meant that the world was presented, in what was supposed to be a great age of freedom and prosperity, with the spectacle of millions of underfed people while wheat was being burned; of men searching desperately for employment while factories were shut, while the winding wheels stayed still at the pit shafts and the great cranes hung silent and motionless in the almost tangible gloom of the shipyards.

Yet even these drastic and inhumane measures did not work. Tom Johnston, who was one of the Labour ministers given the job of ending unemployment in Britain, spoke about them with grim realism:

  It is in vain that the United States keeps 250 million bushels of wheat, or contact wheat, off the market in an endeavour, by a limitation of supplies, to peg or to stabilise prices. Only the other day wheat sold in Liverpool at a lower price than it has been sold since the days of Charles II. lower than it had been for two and a half centuries. (House of Commons. April 16 1931).

The Great Crash, and the slump which followed, have been subjected to innumerable autopsies and inquests. Perhaps the most familiar has been the theory of overproduction, that the world had simply made much more than it needed. At the time, some experts believed that the developing productive techniques were held back from exerting their full effect by the 1914/18 war, and afterwards made themselves felt in a more concentrated manner. As a result of these developments, productivity increased faster than real wages—one estimate for new manufacturing industries was three times as fast—which led to a surplus of goods on the market with no wages to buy them. (It is worth commenting that nowadays the explanation for economic crises is exactly the opposite — real wages increasing faster than productivity.)

Undeniable as it is that people without money cannot buy anything, the overproduction theory does not explain the fact that the “surpluses” existed while people were literally starving and only too anxious to consume more. It is a theory which only meddles with the symptoms of the crisis and does not touch the cause, nor the stupidity and inhumanity of it.

Then there were the financial theories, which blamed the Crash onto the wild antics on Wall Street and the subsequent slump onto a loss of confidence in investing in production, public works and so on. These ideas cannot tell us why it affected so many countries, whether they had had a stock exchange spree or not; they do not explain why an investment flood should so mechanically bring an investment drought, nor why both these opposite conditions should be blamed for having a similar effect. It is true that capitalism's financial machinery, which is supposed to be such a model of efficiency and such an aid to production can often aggravate a recession. But it cannot produce one—at the most a stock exchange, like a barometer, registers conditions but does not alter them.

What the Great Crash did illuminate was the impossible anarchy of capitalism, the basic contradiction in a system where wealth is socially produced but privately owned. The Thirties might have been years of productive advance but they turned out to be a decade of collapse and stagnation, when capitalism was in the throes of a crisis which hit all states, whatever surface differences there were between their political and economic organisations and whatever remedies they tried.

The political results of the Crash were varied. In some countries the working class opted for what they thought was change; in others they turned for assurance to the more traditional parties. In America, Roosevelt defeated Hoover in the 1932 election by the staggering margin of 472 electoral college votes to 59 and the Democrats won large majorities in both House of Congress. Roosevelt’s New Deal was later given much of the credit for the end of the slump but in fact it was a matter of luck. He had campaigned on a promise to cut Federal spending by 25 per cent and to balance the Budget. But he was as impotent to control events as anyone else and when a policy of deficit financing was forced upon him this happened to coincide with the beginnings of the recovery.

In the same way, the Nazis were lucky in Germany. The recovery started as they came to power, allowing them to spend on armaments and communications and this was enough to convince many people that Hitler also had a magic formula, which included replacing parliamentary democracy with a “strong man” dictatorship and crushing the trade unions.

In Britain the workers took shelter with the established parties. One of the first acts of the 1931 National coalition was to cut unemployment pay but this did not prevent the working class gratefully voting for them in 1935, running up big Tory votes in industrial centres like Manchester, Liverpool, Newcastle and Sheffield.

The Great Crash, then, did nothing to undermine capitalism and it did not. as many left-wingers expected, cause the system to collapse. It merely contributed another chapter to capitalism’s mythology, in which one set of politicians were stubbornly blind to remedies which were obvious to another. And this leads on to the other myth—that the new enlightened experts have learned how to control the system and we should all be grateful to them and if we’re not—why, then, we will have Jones back and 1929 will happen all over again.

As if those were the only two choices.

Ivan

[In a future issue we shall be serialising an abridged version of our pamphlet "Why Capitalism Will Not Collapse." This pamphlet, which w'as published in February 1932, examines the after-effects ,of the Great Crash and showed what influence they had on capitalism,]

Gold Bores (2014)

Book Review from the June 2014 issue of the Socialist Standard

Gold Wars: The Battle for the Global Economy by Kelly Mitchell (Clarity Press, 2013)

The number of writers that are currently churning out books about ‘debt-enslavement’ and advocating currency-crank ideas seems to be rising faster than the price of the average derivative. One particular group of theorists are the ‘gold bugs’ who advocate gold as a safe-haven investment and tend to argue that only a gold-backed currency and international trading system is likely to stabilise the global market economy. Some hark back to the days when paper currency was ‘as good as gold’ and could be converted into the precious metal at a fixed rate.

Business analyst Kelly Mitchell, author of Gold Wars: The Battle for the Global Economy (Clarity Press, 2013) seems to be part of this group. In fairness, to those who are interested, there is a lot of fascinating (if sometimes technical) detail in his book about the operation of the precious metals markets in gold and silver. Part of Mitchell’s case is that the powers-that-be are frightened that physical gold and silver will emerge as real money again now that the currency in use across the world is fiat (token) money not backed by anything of real value like precious metals. He contends that economies using fiat money are prone to asset price bubbles stimulated by credit expansion from the central banks and wider banking system.

Mitchell repeats some of the myths about the power of the banks to create massive multiples of credit out of nothing that have been resurgent in recent years, and also trots out some of the highly questionable quotes often used to justify these views (see Socialist Standard October 2012 on these). He claims the financial crisis has now laid bare the mountains of debt and worthless paper being pumped out by banks and governments and that in order to stop a flight towards precious metals banks and governments have been manipulating the gold price downwards for years. This is to make it look less attractive and credible as an alternative to paper money and credit.

Market manipulation
It is certainly true that there appears to have been short-term market manipulation taking place periodically in the gold and silver markets, and this is where Mitchell clearly has accumulated much knowledge and evidence. Indeed, although Mitchell doesn’t describe it in detail here, the way the gold price for physical bullion is fixed in London each day – long the centre of the world gold market – is itself a gift to the conspiracy theorists. The five leading members of the London Bullion Market Association meet at 10.30am and 3pm each day to ‘fix’ in their words, the international ‘spot’ gold price. Until recent years this used to be done at the offices of NM Rothschild in the City of London (enough, of itself, to get the conspiracy theorists’ pulses racing) though these days it is done by Barclays, HSBC, Deutsche Bank, the Bank of Nova Scotia, and Société Générale. Private tele-conferences between these banks communicate information about demand and supply for physical gold until an average price emerges. When representatives of the five banks concerned are happy with the price, they each lower a miniature Union Jack flag on their desks – when all five flags are down the price is then fixed and relayed to other markets (including those for gold futures, options, etc).

Naturally, it is in this sort of environment that conspiracy theories flourish and there are a fair few in this book concerning precious metals and the power struggles around them. These include a bizarre historical one linking the JFK assassination with an apparent attempt by Kennedy to get the US Treasury to issue currency backed by precious metal (in that particular case, silver). A more plausible contemporary theory is that because there are now mountains of paper derivatives of gold, including Exchange Traded-Funds which are investments intended to mimic fluctuations in the gold price, there may not be appropriate levels of physical gold held by banks to satisfy the potential claims on it. In other words, investment banks have been busy creating financial products to sell derived from gold but which are not really backed by gold. Indeed, Mitchell and others have claimed that it is likely that the same gold is used several times over to ‘back’ derivatives – and that if the owners of these financial products demanded physical gold bullion in return for their paper certificates there would be nowhere near enough gold held in the vaults of the major banks and central banks to satisfy the demand, leading to financial panic.

Fort Knox
Compounding this is the mystery about how much gold banks actually have in their vaults, and about the quality of this gold. In 2009, the Chinese government received a shipment of gold from the US only to find that when the bullion bars were drilled they were partly tungsten, and it is thought that an increasing proportion of gold held in bank vaults is adulterated and of poor quality. Most major governments are very reluctant to have the gold held in their vaults audited for volume and quality – the US government has resisted for years an audit of the 4,600 tons of bullion it claims is held in Fort Knox.

What is for certain – and partly accounts for the title of Mitchell’s book – is that a significant shift has been taking place in recent years in the ownership of gold bullion. China and Russia have been significant buyers and so have some Middle Eastern states. This in turn seems to be part of a concerted attempt to undermine the US dollar and the American political and economic hegemony underpinning it, by establishing alternative trading mechanisms to the US currency. An example is that oil has been priced and traded in dollars for decades (the so-called ‘petro-dollar’), but many states are now showing signs of moving away from this system, including both Russia and China who have recently signed a deal to trade oil in the Chinese Yuan. This is indicative of the US losing its place as the dominant global capitalist power as happened to Britain after the end of the First World War. The dollar is seen as a far weaker currency than it has been in living memory and Mitchell claims that the lack of real gold backing it has been part of the cause.

Interesting though it is, there are nevertheless a number of problems with this book. One is that it is not especially well written and many of the charts and figures included are not properly explained or even reproduced in an intelligible way. The analytical faults, however, are even more serious. Like many in this field, Mitchell is prone to exaggeration and overlooks evidence which contradicts his case. For instance, if suppression of the gold price is part of a concerted attempt by major central banks and private banks to prevent gold emerging as an alternative to fiat currency as a representative of wealth, this is hardly consistent with the 800 percent increase in the price of gold seen in recent years, even if it is down on the highs it achieved in the immediate wake of the financial crisis.

Gold standard
More seriously still, Mitchell holds totally untenable views about monetary and trading systems based on gold (both in terms of national currencies and earlier international trading systems like the Gold Standard). Referring to the US Federal Reserve, he says ‘Since the Fed’s inception, the dollar has declined over 95%, the economy has seen a series of booms, busts, crashes, asset bubbles, and bank runs, that almost never happened under a gold standard, and unemployment has been far greater’ (p.110-111). But apart from the decline in the value of the dollar caused by inflation, none of this is true.

The idea that slumps, asset bubbles and bank runs didn’t happen under the Gold Standard of international trading payments and when currencies like the pound sterling and the dollar were convertible into gold on demand, is frankly ludicrous. They actually happened on a regular basis including the major 1907 financial crisis in the US when JP Morgan organised a bail-out of several major US banks that were about to fail, and of course the 1929 Wall Street crash and subsequent Great Depression. As well as banking crises and equity bubbles and crashes, there were also asset price bubbles in housing, land, commodities and a range of other assets. Asset bubbles, runs on banks and financial panics were commonplace throughout the period, and in all major countries. For example, the UK has experienced 12 banking crises since 1800, with only four of these since it came off the Gold Standard, while in the US the figures are 13 and two respectively (see This Time is Different: Eight Centuries of Financial Folly by Reinhart and Rogoff).

Mitchell has failed to understand that the expansion and contraction of the credit system that he is fixated on, and its attendant asset bubbles, is a reflection of the underlying trade cycle of the market economy and is not its cause. This instead is the drive by firms to sell commodities at a profit as if the demand for them is unlimited, leading to over-expansion of the booming sectors of the economy. This overproduction leads to cut-backs, hoarding and lay-offs and the monetary and credit systems are what transmits these effects throughout the economy more widely. An example was the over-expansion of the property sector in relation to paying demand in the US, UK, Spain and other countries which triggered the most recent financial crisis when credit lines and derivatives related to this turned sour. And as Marx pointed out in Capital in relation to the many crises that have taken place when monetary systems were based on gold, convertibility was no solution but just another means for transmitting financial chaos:

  ‘[A]s soon as credit is shaken, and this is a regular and necessary phase in the cycle of modern industry, all real wealth is supposed to be actually and suddenly transformed into money, into gold and silver – a crazy demand, but one that necessarily grows out of the system itself. And the gold and silver that is supposed to satisfy these immense claims amounts in all to a few millions in the vaults of the bank . . . with the development of the credit system, capitalist production constantly strives to overcome this metallic barrier, which is both a material and an imaginary barrier to wealth and its movement, while time and again breaking its head on it’ (Volume 3, p.708).

Indeed, whether the market economy operates with a monetary system tied to gold or not is effectively irrelevant so far as its underlying trade cycle is concerned as this cycle occurs irrespective of the precise monetary conditions, which influence the surface froth and bubble but little else. It therefore follows that tinkering with the monetary system is illusory as a solution to this problem of periodic booms, crises and slumps. In fact, it is partly because the international Gold Standard and also convertibility of notes did not solve these very problems (and in the minds of many economists even exacerbated them) that they were abandoned.

The only change of significance since token money (paper notes, etc) has not been convertible any more into gold at a fixed price has been that this has allowed a massive expansion of the note issue to take place. Over time, gold as a real store of wealth and a product of human labour became the means by which all other commodities and services produced by labour could be measured – in this sense it was ‘real money’. If paper tokens were introduced to circulate on behalf of gold, representing it in fixed quantities, these paper tokens acted as money (as ‘good as gold’) and so were representative of the social wealth embodied in commodities more generally in the economy.

But when convertibility was suspended this allowed paper money to be issued far in excess of the amount of gold that was representative of the wealth being produced by society – and this phenomenon has been the source of the massive currency inflation that has occurred across the world market economy since the 1930s, massively eroding the purchasing power of the dollar, pound and other currencies. It means notes and coins in circulation are no longer tied in any way to levels of production and trade in the economy. In this respect, any move to tie paper money back to gold would in all likelihood halt inflation – but it would do nothing whatsoever to halt the market economy’s periodic crises and slumps, like the recent one, that have caused so much misery across the world. Only the abolition of prices, credit and money itself can do that, enabling social regulation of production and free access to wealth. In such circumstances, gold will no longer be stored in bank vaults (as these will not exist) and can instead be used productively and creatively rather than as an object of financial speculation and power-broking. And that situation will represent a golden opportunity for us all.

Dave Perrin

'Free enterprise' v. Life (1978)

From the June 1978 issue of the Socialist Standard

Those who hold that capitalism is about ‘free enterprise’ and ‘healthy competition’ should consider the aircraft industry. Visit any airport in any part of the so-called ‘free world’ and you will notice the vast majority of aircraft are of US manufacture.

Revelations of widespread bribery by firms like Lockheed are only part of the story. The US Government discourages foreign competition by imposing a 5 per cent. import duty on non-US aircraft purchased by American carriers. Presently, west European companies account for only 7 per cent. of the world-market (excluding Russia and China) and attempts to break US protectionism meet heavy resistance.

An example of this: US ‘feeder’ airlines (those which ferry passengers from the smaller airports to international ones) receive Government subsidies for aircraft carrying up to a maximum of 30 passengers. The increase of air-traffic has put pressure on the Government to increase subsidies to cover 50-seaters. But, if they did this, the US aircraft industry would be vulnerable to European competition in this range. According to Radio Nederland (13.4.78), a successful Dutch aircraft in the 45-seater range is expected to remain unattractive to US carriers because of Government legislation which will restrict the subsidy to planes carrying no more than 36 passengers.

Aircraft safety is another area where profits are given priority over passengers.

According to a Radio Canada International report (2.4.78), statistics covering commercial aircraft accidents only record fatalities among fare-paying passengers and leave out a host of other categories such as employees using special passes and very young children who travel free.

In ground accidents fire is one of the chief killers in aircraft. Foam sprinkler systems could easily be incorporated into aircraft but no aircraft company has, so far, done so. An executive of one large airline was reported, [in the same broadcast], as saying that, on a 650-seater ‘jumbo’, the inclusion of such a sprinkler system would reduce the payload by 8 seats. For the sake of ‘healthy competition’, it seems, the loss of eight fares is too serious to bear consideration so all the rest, including the crew, are put at risk.

Such examples—and they are to be found everywhere—illustrate how capitalism devalues human life by exploiting it for the sake of making a ‘fast buck’. As a system it offers no lasting solution to the problems confronting workers. If capitalism continues workers will pay an increasingly heavy price. Only socialism bases itself on the needs of humanity, not on exploitation.

REW

Greek Myth (2015)

Book Review from the August 2015 issue of the Socialist Standard

‘The Global Minotaur. America, Europe and the Future of the Global Economy’, by Yanis Varoufakis. Zed Books. 2015.

It will only be because the author later become Greek Finance Minister for a while that this book, that originally came out in 2011, has been republished (with a new introduction and an added chapter, plus a preface by Paul Mason). It’s an account and attempted explanation for the course of the world economy since the end of WW2 and up to the crash of 2008.

Varoufakis agrees with Marx’s basic analysis of how the capitalist economy works: that it is driven by capitalist corporations in pursuit of profit and that consumer demand and the demand for bank loans are dependent on this. Even though he places ‘financialization’ at the heart of modern capitalism, he doesn’t fall for the illusion that banks get their profits by creating money out of nothing but knows they do it by borrowing at one rate of interest and lending it at a higher rate, even the notorious CDOs and CDSs (don’t ask) that flourished in the run-up to the crash.

He also accepts Marx’s view that capitalist crises are cyclical and self-correcting in that slump conditions eventually create those for a recovery (e.g. by purging unprofitable firms) but, he adds, from time to time a big one with a capital C comes along from which, despite what Marx held, capitalism won’t spontaneously recover. 1929 was one. So, he says, was 2008.

His explanation for the crash of 2008 was the fatal wounding of what he calls ‘the Global Minotaur.’ The Minotaur was a monstrous half-man, half bull in Greek mythology which demanded that young men and women from the areas subject to Crete be sent to fight and be killed by it, reflecting as Yaroufakis points out the domination of the Greek-speaking world by Crete at one time.

The US – of course – is the new Crete and the Minotaur its financial system, based on the dollar being the currency in which other states and multinationals hold their reserves. This allows the US to run both a trade and a budget deficit. According to Varoufakis, this way of balancing world capital and trade flows broke down in 2008 and the world economy won’t recover until another one to replace it emerges. He favours what Keynes had proposed at the conference at Bretton Woods in 1945 to work out a new international payments system: ‘to create an International Currency Union (ICU), a single currency (which he even named the bancor) for the whole capitalist world.’

So, although he is a critic of some aspects of capitalism, he still thinks that it is in principle capable of reform to work in a different way from how it currently does. Since Keynes’s type of reform was not on the agenda, he must have felt in his discussions (when Greek Finance Minister) with his counterparts in the EU and Eurozone, that all they were discussing was tinkering with a broken system. It will be interesting to see what he writes about these in his memoirs which, judging by this book, should be readable and even amusing.

Adam Buick

The Great "Work Harder" Mystery (1947)

From the June 1947 issue of the Socialist Standard

In Great Britain we are told we must live austerely, work harder and forego claims for higher wages and shorter hours. If we ask why, the answer is that this is a poor country, dependent on the loan from America, and that we have to reduce our imports and avoid spending precious dollars except for absolute necessities. If, of course, we were in the happy position occupied by America how different would be the attitude towards demands for higher wages.

Well, just how different would it be? In America production and profits have been rising fast—“Corporation profits after taxes are running a third higher than a year ago” (Financial Times, 28/4/47). In the economists' fairy tales the American Government and the employers would hurry forward to press wage increases on the workers. In real life what they are doing is to preach just the same stuff as is plastered on the hoardings by the British Labour Government. 

  “To Labour, the President’s advice is that there should be restraint in asking for further wage increases, since substantial increases must lead inevitably to further price increases.” (An American Correspondent in Financial Times, 28/4/47.) 

And read what the Daily Mail (23/4/47) prints from Don Idden, its New York Correspondent:—

  “There are many exhortations to work harder, and both Bernard Baruch and Alfred Sloan, chairman of General Motors, proclaim that the only solution of current troubles is working a lot more for a lot less.”

We now have the whole thing in a nutshell.

Part I

  “In Britain not enough is being produced. If the workers will do a lot more work without more pay everything will come all right and we shall be like America where production has reached record heights.”

Part II

   “In U.S.A. too much has been produced and things are in a bad way. If the American workers will work a lot more for a lot lees pay everything will come all right."

In truth it is not so daft as it seems to be. The American and British capitalists are both out for the same thing, making as much profit as possible out of the exploitation of the workers, and they can always find some plausible propaganda to help on their aim.

Not enough gold? (1963)

From the December 1963 issue of the Socialist Standard

We are being asked to concern ourselves with another crisis, caused this time by the decline in the American gold reserve and by the steps the American Government proposes to take to stop the loss.

The alarm was sounded in an article in the Economist of July 27 of this year, and the problem has since been discussed at conferences attended by financial authorities of ten leading industrial countries at Washington in October, followed by meetings in Paris last month.

A natural reaction of those who are unfamiliar with the intricacies of the problem is to leave it to the experts to tell us what to do. Unfortunately for that view the “experts” are unable to agree on the solution, or even on the problem. As recently as a year ago the late Per Jacobsson, Managing Director of the International Monetary Fund, speaking in Washington, said there wasn't anything to worry about. The Daily Telegraph on September 18, 1962, reported him as saying that “there were indications the world was approaching a state of economic equilibrium solid enough to withstand monetary tension." In particular he believed that it would be possible "to assure a stable exchange rate structure without altering the price of gold," and that "the ample monetary reserves of individual countries, together with central bank credits, and the increased facilities of the Fund, provided formidable lines of defence against any pressures that might arise.”

But the Economist article, referred to above, denies everything that Dr. Jacobsson said and demands early action to do the things he said were not necessary. It also threw in the interesting titbit that the banking experts do not know their job at all—"The difficulty lies with bankers all over the world who still do not really understand modern monetary economics.” (It will be interesting to look later at some of the odd economies of the Economist),

The Financial Times on September 9th added the further observation that the central bankers (who according to the Economist don't understand what they are doing) cannot ever agree among themselves. It pointed out that while the bankers of the Bank for International Settlements "dismissed the problem of international liquidity as artificial,” the other lot in the International Monetary Fund "takes a very different line," and the paper calls on governments to take action to stimulate demand. The Financial Times actually quotes the late Dr. Jacobsson as having urged courses the reverse of those he was advocating in September, 1962. So much for the experts.

What then is the problem? It is a truism to say that the exports of goods and services of all the countries in the world balance the imports of all the countries in the world: two ways of looking at the same thing. But in practice any one country may at a given time be exporting insufficient to pay for its imports, or may be exporting more than enough to pay for its imports: again, the total “surpluses ” of exports over imports balance in amount the total "deficits."

What then happens to a country which is importing more than it can pay for by its exports? If it had large gold reserves or reserves of dollars or other currencies it might use them to pay for the excess of imports. Or it might pay for them out of loans or gifts or capital investments from one of the countries running an excess of exports over imports: the United States is such a country, in spite of which it is in difficulties. American exports do exceed its imports, but the amount of American money spent abroad in aid, loans, investments, tourist spending and the maintenance of armed forces has been so great that the huge American gold reserve has been running down at the rate of $3,000 million to $3,500 million a year, and the American Government proposes to cut its foreign spending deficit by that amount. The Economist admits that in theory this should not matter because other countries running a surplus of exports could themselves step up their own foreign loans, investments and did to the countries running a deficit. "But everybody knows that the pattern of deterioration will not work itself out with this marvellous neatness, and that all the finance ministries of the world are not sufficiently enlightened to react to it with absolute logic."

Instead, thinks the Economist, the developed countries which could step in to fill the gap will not do so but will start cutting their imports and production to protect their own reserves of gold, etc.; and the underdeveloped countries will have to cut their own development programmes because the capital they need from outside will not be forthcoming. Then there could be a general world lessening of trade, with an increase of unemployment as has happened so often in the past century and a half.

To Socialists this is just another demonstration of what an anarchic, unstable and wasteful system capitalism is, and of the need to end it and get the world operating on sane lines. Not so to the Economist and the rest of the experts. For the writer in the Economist, “the best and most idealistic method” is not the commonsense one of ending a system which does on repeating crises of this kind but the idea of establishing "some new international central bank that would create some $3,000 or $3,500 millions a year of new deposits with itself which it could put to the credit of underdeveloped countries."

This makes sense to the Economist because they believe that it is all due to there not being enough money, but while the Economist waits to form still another bank to offer to lend still more money, the Guardian city editor on September 30 was reporting that one of the existing two international bodies, the World Bank, is facing the dilemma of having money to lend but not being able to find borrowers to whom it is safe to lend it:

  The problem is not a lack of money but rather a lack of borrowers—at least of borrowers who can meet the stiff terms on which the bank has so far always insisted when making loans.

Despite this the Economist believes that there is not enough money about and that this is due to scarcity of gold:
 There is at least some element of truth in the ridiculous thought that if some aged prospector in Australia in the last century had made a luckier strike in the outback, or if the ancient Egyptians had given the first mystical monetary significance to some commodity which had subsequently proved to be more easy to produce than gold, we would not now face quite the same danger of unnecessary restriction of world production and trade as we face today.

Which goes lo show how little the Economist understands about the capitalist system which it defends so stoutly. During the past 150 years capitalism has boomed when gold production was rising and when it wasn’t, and slumped into depression when gold production was rising and when it wasn’t. And in the course of history governments have indeed tried some other commodities, including silver, without in any way avoiding booms and slumps.

What the Economist does not recognise is that the exchange rate between commodities, including gold and silver, depends basically on their values. The total world output of silver, measured by the tonnage produced, is six or seven times the output of gold, but the value of gold (on the current price relationship) is about 28 times the value of silver, ounce for ounce. So if the world used silver for its reserves instead of gold, or if gold were so plentiful than an ounce of gold could be mined as cheaply as an ounce of silver, the gold or silver reserves of the world would need to be something like 28 times as large by tonnage as they are now, the price of each ounce being one twenty-eighth of the present price of gold. The Economist would consequently still be saying, during recurrent balance of payment difficulties, that it was all due to the insufficiency of the then not-so-precious metal.

In the meantime, the Russian Government is helping to lessen the immediate problem by using the hundreds of millions of dollars of its gold reserve to buy wheat in Canada, U.S.A. and elsewhere because of the failure of the Russian harvest. This throws light on the real nature of the problem. Vast quantities of wheat and other foodstuffs have been produced in those countries and held in store because it was surplus to market demand and could not be sold profitably.

Russian gold has been there all through the years that the American Government has been holding the unsaleable stocks, and the Russians could have bought if they had wanted to. They didn't want to because they, too, had surplus foods in years of good harvest. And all the lime, side by side with private hoarders who hold enormous quantities of gold, there have been hundreds of millions of people (including some in America and Russia) who would have been glad to have more food but lacked the money, and they lacked the money not because of a mistake by the ancient Egyptians but because capitalism divided the population into owners and non-owners, into rich and poor.

The ideal and only practical solution to a problem that capitalism cannot solve (except in the temporary fashion of each expansion of production and trade being followed by a contraction) is to get rid of production for profit and for the market.

Edgar Hardcastle

Far From Wealth (2018)

Book Review from the May 2018 issue of the Socialist Standard

‘Hinterland: America’s New Landscape of Class and Conflict’. By Phil A. Neel. (Reaktion Books. £14.95)

The hinterland is the area of the US outside the wealthy cities, ‘the growing desert beyond the palace walls’. It can be divided into the ‘near’ parts, the mainly suburban areas outside the central parts of cities, and the ‘far’ parts, primarily the rural areas but also including urban wastelands where much housing has been demolished. Even the far hinterland, however, has a great deal of industrial space, from factory farms to logistics complexes and mines, and is dominated by the informal economy of the black market and production of illegal drugs.

Neel records here some of his travels around this hinterland, beginning in northern Nevada, where the far right have begun a resurgence. They are less tied to the militia than used to be the case, and often reject white nationalist ideas. Some adopt so-called Third Positionist politics, claiming to be neither left nor right, while Patriot groups emphasise self-reliance rather than use of declining government services. Small capitalists, who often work in their mines or mills themselves, are the backbone of the Patriot movement. The election of Trump is likely to have a dampening effect, especially on the extremes of the far right.

On the California–Oregon border, wildland firefighters do extremely dangerous work. They usually earn less than $1,000 a week, and work for only a few months of the year. Neel refers to one firefighter in Idaho who was working to pay for chemo for his six-year-old daughter, who had leukaemia. As many as forty percent of firefighters are prisoners paid a pittance.

The near hinterland, Neel suggests, will be ‘the central theater in the coming class war’, as so many who have become surplus to the economy live there. Unfortunately, there is very little here on how the classes in this war are to be characterised, what it will involve or what the outcome might be. The book as a whole contains some useful material but rather little by way of concrete suggestions or conclusions.  

Paul Bennett

Intervention USA (1989)

From the April 1989 issue of the Socialist Standard

In these days of the enterprise culture, government involvement in industry, commerce, banking and other economic activities is not the flavour of the month. Market forces are in and intervention, or so we are told, is out.

Indeed it would appear that this is true, for all over the world, in Britain, France, Australia and elsewhere, governments have been getting rid of much of what is called “the public sector”. In fact nationalisation, the main form of government involvement in a nation’s economic activity and once seen as a device which would solve all of capitalism’s economic and social problems, is more or less a dead duck.

So obvious is this even to politicians of “the left” that the Labour Party here doesn’t intend to re-nationalise all the Tory sell-offs of the last decade, while in the so-called communist countries private enterprise is being encouraged to compete with ailing state enterprise.

From deregulation…

However, even in such times as these, governments still have to step in and intervene when they think that the interest of the national capitalist class is in danger. For example, in the United States, the very heartland of non-intervention, there has been the growing problem of the Savings and Loans banks. These S and Ls are the rough equivalent of Britain’s building societies and hundreds of them have gone bust while hundreds more are insolvent. Their losses were $6.8 billion in 1987 and $3.8 billion in the first quarter of 1988, although depositors are covered by a government insurance agency.

How did this happen? Just as nationalisation was once seen as the great cure-all, nowadays it is “deregulation” which fills the bill. This means that enterprises in an industry no longer have to conform to laid-down government regulations but are freer to operate as they see fit. This, it is claimed, will produce a capitalism without its attendant problems, will provide greater all-round prosperity, and so on.

Thus the S and Ls were allowed by the Carter administration in 1980 to borrow, not only from small investors for re-lending as mortgages as previously, but from the money markets at ever higher rates of interest. This laid them wide open to trouble, which duly arrived when the Reagan administration further deregulated by allowing the now exposed S and Ls to move into high-risk lending for big property deals and other get-rich-quick schemes of which they had no experience. The result was the spate of bankruptcies and insolvencies already mentioned.

… to regulation

At present the insolvent S and Ls keep afloat by continuing to borrow at high interest rates and their debts are estimated to be increasing by $35 million a day. Sooner or later the government will have to foot the ever-mounting bill. The implications of this are serious for American capitalism. How can it ever tackle its massive budget deficit of $150 billion while it throws away billions at this rate? More seriously, many American banks have collapsed in recent years (almost 200 in 1987 alone) and the additional collapse of hundreds more S and Ls could trigger a disastrous loss of public confidence in the entire American banking system. The Administration have therefore intervened to try to stop the rot.

Bush and his financial advisers have come up with a plan calling for a one hundred billion dollar issue of new bonds to bail out the S and Ls. The interest on the bonds is to be paid to the government by the S and Ls and the other banks though higher premiums for Federal insurance of all bank deposits. Critics of the plan say it breaks Bush’s election promise of “no new taxes” as “the taxpayer”, in the form of the banks’ customers, will have the extra premium passed onto them through higher bank charges. But this will not necessarily happen because the customers may refuse to pay up, in which case the banks and S and Ls will have to bear the extra cost themselves.

This rescue package also calls for a leaner and fitter S and L industry to be taken over and run by another government agency, the Federal Deposit Insurance Corporation, and amounts to back-door nationalisation. So whatever their ideological preferences any government will make use of intervention, even despised nationalisation, when it suits “the national interest”.

All of this reinforces the Socialist Party’s view that whether government use less intervention or more, they are helpless in avoiding capitalism’s pitfalls.

Vic Vanni

Voice From The Back: A high priest speaks (1998)

The Voice From The Back column from the September 1998 issue of the Socialist Standard

A high priest speaks

"Markets are surely one of God’s great gifts to mankind. But alas, man is conceited. Nowhere is this more manifest than in politics". Sir Alan Walters, Financial Mail on Sunday, 5 July.

A worshipper sings

"Americans have been experiencing the heartiest bull market in history. The Dow Jones average of 30 blue-chip allegedly representative industrials has more than doubled, from 3,760 in June 1994 to flirting with 9,000 today. Unemployment is 4.3 percent while inflation and interest rates have inexplicably remained low . . . With the computer revolution at full throttle, the strictures of classical economics appear no longer relevant for the US. And the economic chattering classes-from the stately John Kenneth Galbraith through the cryptic Alan Greenspan to the trendy Esther Dyson can only anticipate millennium market madness. Let the good times roll". Crocker Snow Jr, World Times, Boston, 5 July.

Hunger persuades

"American legislation to put a time limit on welfare payments is proving a success as more people find jobs. Figures show that people are moving off the unemployment register twice as quickly now than before 1996, when Congress imposed the limits. The Republican law, which went much further than reforms being tried in Britain, was denounced as inhumane because it laid down that no one could receive more than a total of five years of welfare payments from the federal government during their lifetime". Telegraph, 20 June.

Sacrificial victim protests

"[G]rowing evidence suggest that the larger the income gap, the wider the health gap. For example, infant mortality in social classes IV and V in the UK is twice as high as in Sweden. In America’s booming economy, the gap has now reached the point where a child born in Bangladesh has a greater life expectancy than a child born in Harlem". Donald Read, Chief Executive, Association for Public Health, letter in Guardian, 23 July.

Noblesse oblige

"Land reforms proposed for Scotland could destroy traditional family estates, according to the Duke of Buccleuch, Britain’s largest landowner. The duke, 74, who owns more than 400 square miles, mainly in the Borders, said that the system of land ownership most [people] sought to preserve was falling apart . . . . In a 17-page document, the duke said that only 80 years ago nearly 90 percent of the countryside in Scotland was managed by traditional family run estates. Today it is less than 30 percent, due mainly, he said to a wealth tax in the form of estate duty". Daily Telegraph, 20 June.

Dirty neighbours

"The governments of Norway, Sweden and Denmark are demanding that the Sellafield nuclear plant in Cumbria stops reprocessing after it was found that radioactive seaweed collected on their countries’ coasts is a result of new discharges from the site. An analysis by Southampton University shows that levels of Technetium-99-a rare radioactive element which is a waste product of reprocessing plutonium-has increased 15-fold in Norwegian seaweed since the early 1990s. A new plant that discharges Technetium-99 was opened in 1994 at Sellafield and the increases are linked to that". Guardian, 18 June.

Ssh-not a word!

" “Well, all this is a sanitised area,” he said, gesturing at the hotel atop the ridge, the manicured lawns, the trimmed shrubs, the tennis courts, the winding driveway up to the front door, the police checkpoint, more police again in the woods. “Really, you’re wasting your time,” he said. “Really, you are-there’s no one booked to play today.” He was a plain clothes member of Operation Orchid, the codename given by Strathclyde police to the impenetrable security ring surrounding this year’s Bilderberg meetings; a highly exclusive, little known and barely reported annual conference which has been held since 1954 at grand hotels across Europe and the USA. Attendees debate the state of the world and, critics insist, manipulate global politics and economics from behind the scenes. At Turnberry last month, the 120-strong guest list made intriguing reading . . . There was Henry Kissinger, David Rockefeller, billionaire chairman of the Chase Manhattan Bank; James Wolfensohn, president of the World Bank; Giovanni Agnelli, head of the Fiat empire; Javier Solana, secretary general of Nato; Jurgen Schrempp, chairman of Daimler-Benz; the chairmen or chief execs of the Xerox Corporation, BP, Reuters and a bunch of big-league banks and law firms; John Deutch, former head of the CIA; Tory leader William Hague, Kenneth Clarke, Leon Brittan; Defence Secretary George Robertson; assorted other politicos . . . No reporters are admitted, no press conferences held, and no record of what was said is published". Night & Day, 14 June.

Yankee Prosperity (1926)

From the December 1926 issue of the Socialist Standard

The New York correspondent of the Daily News quotes from a report issued by the National Catholic Welfare Conference of America to show the falsity of many of the extravagant tales of high wages said to be paid to workers in the U.S.A. We give below an extract from the Report (Daily News, November 17th) :

  The chorus of voices proclaiming that because of high wages we can now look forward to the indefinite continuation of prosperity misses several plain facts.
   High wages are not nearly so common as is assumed. Great numbers of men are making as low as three and four dollars a day. Great numbers of women are making as low as 12, 13. and 14 dollars a week. Great numbers of both men and women are out of work and are making no money at all.
   The level of wages is higher now than at any time in the past, but even now close upon half of the men working for wages are not making a family living wage, and close upon half of the women working for wages are not making enough to support themselves in reasonable comfort.
  Great numbers of men and women working for a weekly or monthly salary are below the line of reasonable existence, and still greater numbers have not shared proportionately in the increased productiveness of American industry and agriculture.
   Farmers are a third of the consuming public, and their buying power has actually decreased in the last seven years. Along with low-paid wage and salaried workers in cities they stand as a handicap to city prosperity, and a sure cause of inevitable industrial depression in this country.
  Much of the phenomenal selling of goods at home is based on instalment buying by wage and salaried workers, who are mortgaging an essentially insecure future to buy goods now.

Those who saw in America an example of the way in which a more efficient capitalism abolishes working class poverty will need to continue their search for a “prosperous" working class.

Edgar Hardcastle

American Prosperity (1927)

From the August 1927 issue of the Socialist Standard

The financial correspondent of the Daily Telegraph in New York writes on the present situation in America :—

  “Charity organisations are working overtime, hospital clinics are crowded, business failures are reported by the hundred every month, and without doubt there are more people here living on the ragged edge than ever before in the country’s history.”—(Daily Telegraph, July 2nd, 1927.)

How Capital Influences Strikes (1956)

From the August 1956 issue of the Socialist Standard

Strikes in industry are not always an evil to the employing class. When the markets for goods in a particular industry are over-stocked, a strike can be useful to the Capitalists by saving them the trouble of putting workers off and cost of paying those kept on. Hence the best time for workers to strike is during a boom, and the worst time during a slump. Also it is better to strike suddenly than after protracted negotiations which enable the employers to take steps to minimise the embarrassment to themselves. On the same ground long no-strike agreements are harmful because the employers can stockpile against trouble.

These remarks are inspired by a report from the Washington correspondent of the Observer (8/7/1956). This report refers to the strike in the American steel industry over “the length of the contract to be signed between the union and the temporarily united management of the main American steel producers" The report points out the union appears to have been forced to choose a bad time for the assault. The report adds that: “Management insist on a four-year-and-four-month contract—labour would probably settle for three years." The report then follows with statements which illustrate the folly of any long agreements:

   “This strike was foreseen, as the labour-management contract expired at the end of June. Industries dependent on steel have been stock-piling against this emergency. It is not known how heavy these ‘inventories' are, but it was significant that steel sales were maintained this year, even though the automobile industry and the construction industry suffered a noticeable recession."
   “The strike, curiously, comes to the Administration as yet another gratuitous and unearned blessing. It was generally expected that in the third quarter of this year the American economy would suffer a noticeable recession. Plant construction has been running at a level that few thought could be maintained. Motor-cars were expected to be still less saleable in the months before the unveiling of what are said to be revolutionary new models.
  “If the strike lasts a month, as is expected, it will drain off some embarrassing surpluses. It is also expected with more certainty—to be followed by a production boom. This was the case after the eight-week steel strike in 1952.   “This boom will delay the testing of the economy. It will also approximately and conveniently coincide with the election. It will provide an artificial stimulus to the economy at a time when most economists expected a slump."

This is a striking example of how the dice is loaded against the workers and how Capitalist ownership of the means of production and distribution weights the scales in the conflicts between workers and Capitalists.

Gilmac

The Great Crash (1962)

Book Review from the August 1962 issue of the Socialist Standard

With the echoes of the recent Wall Street upset still rattling in our capitalists' ears, Penguin Books have chosen a most appropriate moment to re-issue Professor J. K. Galbraith's book on its notorious forerunner.

The Great Crash, 1929 (first published in 1954) tells the story of the events that led up to that debacle, of the crash itself, and of its aftermath. In it, Galbraith disposes of a number of popular misconceptions and makes many sound comments about economic crises in particular and the capitalist system in general. He debunks the myth that the whole of the American people were playing the stock market before the crash, calculating that there were no more than a million and a half stockholders all told and that of these less than a million were active speculators. This is as we would expect the great majority of the working class, then as now, had nothing to spare from their wages to go on stock market sprees.

Galbraith's indictment of the economic experts of the time is damning. With a very few exceptions, they were all carried along on the tide of apparently end less “prosperity." He gives quote after quote to show just how naive and stupid they were: right up to the time the market went into its steepest dive they were still saying that things were “fundamentally sound" and that the worst was over. Only a few days before the catastrophe a Professor Irving Fisher was saying that he expected “the stock market a good deal higher within a few months.” Within a month the New York Times index of industrial shares had fallen from 542 to 224 and was to drop steadily month after month until in July, 1932, it had reached the fantastic figure of 58. During the same month the U.S. steel industry was down to 12 per cent. of capacity and U.S. steel shares were selling at 22. At the beginning of September they had stood at 262.

Galbraith reminds us that although the stock market crash was sudden and catastrophic, it was only the prelude to something far worse. After the Great Crash came the Great Depression which was to last in the U.S. for ten years. The dollar value of production did not get back to the level of 1929 until 1941. In 1933 there were nearly 13 million people out of work or one worker in four. Even in 1938 one worker in five was unemployed and only once, in 1937, did the number of workless drop below eight millions.

A last chapter discusses the possible causes of the crash and very tentatively puts forward some reasons why another might be averted. But these are so tentative as to say virtually nothing Professor Galbraith has obviously learned from the experiences of his predecessors in 1929 not to commit himself too much when it comes to prophesying what is likely to happen under capitalism.

This aside, the book should nevertheless be in the library of every Socialist as a cheap and comprehensive record of what was one of the most shattering upheavals in modern capitalist history. It should be added that Professor Galbraith tells the story exceedingly well; the style is direct, the wit flows freely, there are many apt comments on capitalism, and he holds the interest throughout. 

Stan Hampson

Trade War (2018)

Editorial from the April 2018 issue of the Socialist Standard

Donald Trump fought the Presidential campaign pledging to put ‘America First’. Soon after taking office, he pulled the US out of the Trans-Pacific Partnership (TTP) trade deal and plans to cancel the Transatlantic Trade and Investment Partnership (TTIP), a trade deal between Europe and the US.

On 8 March, Donald Trump appeared to fulfil an election promise to steel workers by slapping a 25 percent tariff on steel and 10 percent on aluminium. Canada and Mexico are, for the time being, exempt. However, if during the renegotiation of the North Atlantic Free Trade Agreement (NAFTA), they fail to make the concessions that Trump wants, then they will also be hit with these tariffs. Trump justified these measures on the grounds of national security and so-called ‘unfair’ trading by America's competitors. Other countries have threatened to retaliate.

These measures also face opposition within the US Republican Party and some US capitalist interests, such as the aviation sector and car manufacturers, which risk having their profits squeezed by the increased cost of steel. Trump's economic adviser, Gary Cohn, an opponent of these measures, has quit.

The general view seems to be that a maverick president has defied the natural order of free trade that has taken place between nations for decades. However, trade protectionism is nothing new in the history of capitalism. In the late eighteenth and nineteenth centuries, the new American nation state used tariffs to protect its nascent industries from foreign competition. In 1930 the US government introduced the Smoot-Hawley bill, which raised tariffs over a wide range of imports. After the Second World War, when the US emerged as the dominant global power, it supported a liberal trading regime which opened up global markets to US capitalists. However, since the 1980s, its enthusiasm for free trade waned as its economic supremacy was challenged by emerging powers like Japan. Both Ronald Reagan and George W Bush attempted to raise tariffs.

Britain and the European Union have also employed trade protectionist measures, such as subsidising their export industries. Britain, like the US, was in favour of free trade when it was the top economic power in the nineteenth century. However, in the early twentieth century, when facing increasing competition from rivals such as Germany and the US, it sought a more protectionist trade policy.

Donald Trump's move has to be seen against the backdrop of a global overproduction of steel and the more difficult world trading conditions since the 2008 financial crisis. He is attempting to reassert US capitalism's dominance over world markets and check the rise of Chinese capitalism and keep the European Union in its place. It has little to do with the wellbeing of the American working class. Trade wars are usually cloaked in the language of protecting workers' jobs. Workers should not be fooled by this.

Despite the attempts by global organisations like the World Trading Organisation to regulate world trade, capitalist nations will invariably use their economic clout to gain advantage over their rivals, and on many occasions, back this up with the threat and even use of military force. In this light, to talk of ‘fair’ or ‘unfair’ trading practices is a nonsense.

Overproduction Baffles the Capitalists (1931)

From the December 1931 issue of the Socialist Standard

“The Times" on September 5th, had an editorial on the present world economic situation that was strangely frank and illuminating, as the following extracts will show:—

   How disastrously the financial machinery of the world is out of gear was strikingly illustrated the other day, when, in order to effect an exchange of commodities, the Brazilian Government and the Federal Farm Board of the United States had to resort to the primitive method of direct barter. They signed an agreement exchanging 1,050,000 bags of coffee for 25,000,000 bushels of wheat. That method of meeting the situation is, at any rate., better than some of those which have been adopted. In Texas and Oklahoma the military took charge of the oil wells, not to prevent any interference with production, but to stop production, and in Kansas orders were given to stop production in specified areas  . . .
    The cotton growers of the Southern States were recently urged by the Federal Farm Board to destroy one-third of their crops, and, though they indignantly rejected this suggestion, they themselves are seriously considering proposals to prohibit the growing, gathering or ginning of cotton next year. In Brazil hundreds of thousands of bags of coffee have been draught and destroyed by the Coffee States Council.  . . .
     Every one knows that there is over-production in the sense that there is more cotton, more wheat, more sugar, more coffee, and, apparently, more of every kind of food and raw material on the market than the consumer is able to buy at prices remunerative to the grower. . . .
    Over-production is hard to imagine in the sense that more wheat, for example, is being grown than the world can use. At any rate it cannot be said to exist so long as there are people who cannot get enough bread to eat.  . . .
    Half a dozen professors of political economy, discussing the practical questions on which their studies should enable them to throw light, can disagree among themselves as wholeheartedly as any half a dozen business men in a railway carriage. But somehow or other, with or without the aid of the scientific economist, answers will have to be found for the economic riddles over which the world is now bewildered. Until they are solved, or, perhaps, solve themselves, there can be no general return to prosperity.

Detailed comment would spoil this picture.

Too much of everything, but we are poor because we can’t buy! America can’t sell so she takes to barter. The owners in the producing industries have taken fright and are destroying or restricting production! The sum total of opinion in Tory, Liberal, Labour and T.U.C. camps is that the only way out for this country is a general cut in wages or an increase in prices—a reduction in buying power! Under it all is the hope, frankly expressed above, that somehow or other things will straighten themselves out.

The capitalists, their guides and scribes, are impotent in the face of productive machinery so prolific that the wealth turned out is clogging and weighing the system down. The only real answer they have is to find a means, satisfactory to the bulk of their class, for restricting production and parcelling out markets.

Gilmac.

So They Say: Crystal Ball not Needed (1974)

The So They Say column from the December 1974 issue of the Socialist Standard

Crystal Ball not Needed

Before the war we claimed “If you read it in the Socialist Standard you know it’s true”. That is still the case, and we can give two recent examples. In August this year we gave details of the unemployment and inflation situation in Australia, where so many Britons go in hopes of things being different. On 2nd October The Times reported:

The Australian Government has temporarily suspended its immigration programme to ease the country’s unemployment problem, Mr. Clyde Cameron, the Minister for Labour and Immigration, said today.
   Sources say that the monthly figures due to be released on Sunday will show unemployment at a postwar record level.

And in May we commented on the Labour Government’s show of virtue in cancelling the plans for Maplin Airport. Our observation was that Labour had begun all that themselves by projecting a Third London Airport at Stansted. On 11th November the Guardian Air Correspondent wrote, under Labour ‘Lumbers’ Stansted:

The Town and Country Planning Association has described the Government’s decision to abandon the Maplin Airport project as, in effect, a “monstrous” decision to build London’s third airport at Stansted in Essex.

However, you don’t require a crystal ball to see such things. All that is needed is to know how capitalism and its politics work, and then watch them at it.

Ganging Agley Again

The politicians, of course, exist by saying it will all be different this time: they are going to plan.

In the first week of October the United States Administration announced its economic plan. It lasted exactly two weeks. On 25th October The Guardian published the following from its Washington correspondent:

The Administration’s economic plan, unveiled with much fanfare two weeks ago, may have to be radically revised as President Ford is slowly being forced to admit that the country is in recession, and that he must act more decisively against growing unemployment.

It reminds one of the local Angling Society setting out with rod and line to catch the Loch Ness Monster, and then explaining to the world’s press after a fortnight that its bait was wrong. Except that capitalism is a real monster which eats planners.

To Heel, Rover

The same report also tells us:

Economists are now freely predicting that unemployment will rise soon to 7½ per cent . . . there are indications that the unions are getting more concerned about job security than wage increases.

A week earlier, on 17th October, the London Evening Standard’s front page headline was Rises or Jobs! Jones Warns the Unions. This was “a powerful call” by Jack Jones, the well-known militant leader of the Transport and General Workers’ Union. The report said :

Mr. Jones argued that unions must play their part in fighting the main danger in the economic crisis — the growth of unemployment.
    “It is simply no use pressing actions which lead to the closure of firms we work for,” he said. “A wonderful wage agreement is of no value if the firm with whom we have negotiated the agreement doesn’t employ people any more.”

Concentric Straight Lines

Another aspect of capitalist planning is how the apparent solving of one problem inexorably leads to another in its place. At the end of October newspapers were reporting that cattle were being slaughtered because of an acute shortage of fodder and the prohibitive price of what is available.

Until not many years ago all farmers grew their own fodder crops. Few have dreamed of doing so in recent times, with seductive subsidies to be received for every square foot given to barley, wheat etc. The last Conservative government did all it could to encourage beef production, without correspondingly encouraging the more mundane production of hay. Mr. Philip Brown of the RSPCA was quoted in The Guardian (28th October) as saying “they [the government] did their sums wrong”.

Of course, because capitalism’s sums all require several contradictory answers at once. Socialism is simple one-answer arithmetic.

Squeak Up, Please

Something Labour governments keep promising the working class is hearing the rich squeal. The idea is that if workers can be persuaded to listen intently for this delectable sound they will not notice that while they are lying down listening Labour politicians are standing on their necks.

However, the sound has not yet been detected. What we have instead is, for instance:

A wealthy Kent businessman picked up a pools prize of £44,806 today and said: “I’m delighted, of course, but it doesn’t mean that much to me.”
   Leslie Mustill, 58, said: “The money would mean more to other people. I’ll just take life easy . . . playing golf.” (Evening Standard 23rd October)

Or a full-page advertisement for Fred Olsen cruises in The Guardian on 24th October. “Upwards of £170” is the cost for one person. There is a special inset on shopping for cruisers (“On Madeira you can pay up to £28 for a hand-embroidered lace tablecloth, but the workmanship is superb”) and advice about tipping (“If any steward has been particularly helpful, £5 is customary”).

A Peep under the Sink

When an Enquiry Agent named Quartermain was jailed for “dirty tricks” over evidence for divorce cases, the judge told him he was “a thoroughgoing disgrace” to his profession. Don’t laugh, please.

Quartermain became known in 1969 when he was employed by Redbridge Council as a strong-arm man to evict squatters. Local authorities employ creatures like him to collect arrears and debts, asking no questions about how they do it; so do “respectable” firms. Their function is to do the dirty work behind the genteel facade which property society likes to display.

We are often asked who will do the “nasty” jobs under Socialism. This is one which won’t exist.

Robert Barltrop