How the market doesn’t work (2006)

From the April 2006 issue of the Socialist Standard

When you’re out on the stump discussing capitalism – face-to-face or on-line – you can guarantee some defender of the system that has left a third of the world population without clean water, nearly a sixth without enough food, and wrought megadeaths upon megadeaths from wars within the last hundred years, will try and point out how the market is the most efficient system for allocating resources. A self-correcting mechanism without which we would all descend to barbarism and all advanced industry and technology would utterly cease to be. Leaving aside that the cogs in this marvellous mystery self-regulating machine are human beings who must be ground out to make it run smoothly, such a picture of the market system is quite, quite wrong.

A clear example stands before us from the recent news. Over the past year, television and radio has been reporting how people in well-paid City jobs have been leaving to become plumbers. The shortage of those skilled tradespeople has meant, according to market forces, that the price of their labour has risen. Accordingly, the price of a plumber’s labour or labour power (depending on whether they are self-employed or not) has risen to attract more people into the trade to fill up the gap between supply and demand. All of this sounds exactly like the market functioning perfectly.

The problem is that, at the end of January, BBC radio reported that the market for plumbing skills has become glutted – so many people were attracted into the trade that now there are more plumbers than there is work available. This can happen because, far from being the perfect mechanism for conveying information, the market can only convey information at the speed of trade. Prices will not be lowered until the plumbers start entering the market and begin lowering their prices to tout for trade against stiff competition. New entrants to the market will not be able to see that supply has been fulfilled until after the prices start to fall. People just entering training – having heard the word on the street – will not know until they are finished that the bottom has fallen out of the market, and that the arrival of them and their class mates has caused this.

However, even if some sort of mechanism was applied to coordinate between different branches of production, the problems of capitalism would still occur. Otherwise the state capitalism in the former Soviet bloc would have never collapsed and its system would have been seen to be more sturdy than the Western variety. Even with the greatest planning in the world, accidents happen, things change and perfect coordination is rendered impossible. The problem lies much deeper than that, though, in the very nature of capitalism itself.

If the plumbers could simply jump from the plumbing market to a different trade without any difficulty, there would be no problem – they would still be able to acquire the necessary use values with which to live. The problem is, however, that these workers have invested money that they need to recover – both in terms of paying for training and of earnings and promotions they would have gained had they stayed in their old careers. They have invested money in order to enter into the market, and in many cases may well have borrowed as well as using up their savings. In order to ensure they do not make a loss (which will risk their homes and families) they need to ensure that they get that money back – they have to return their initial investment back into its original form as money.

Many plumbers will be unable to do this, and will find themselves driven out of business, based on nothing but the mistiming of their investments and their inability to lay hands on cash. It will not necessarily reflect on their plumbing skills, their personality or anything about them, but simply the blind workings of the market. In order to obtain use values – the things they need with which to live – they must secure exchange value. To stay in business, though, they must use some of the money – exchange value – they earn to pay debts or to ensure they are not out of pocket.

This process, or turning useful things back into exchange value, distinct from the particular usefulness of any given thing, is the essence of capitalism. Anything that interrupts this process puts a spanner in the works of that shiny self-regulating machine – and miscoordination based on poor information is just one such (common) spanner. Whilst our example here is small affecting only a few thousand people at most, obviously, a major capitalist concern could lose billions of pounds and wreak havoc on millions of lives.

Some sharp-eyed pro-capitalists – skilled in misdirecting arguments from points on which they are losing – may choose to suggest that we have here accepted an important point of theirs. These people, they will claim, are willing to do the dirty work – the plumbing – solely because the price is right and they have been lured into the trade. Such nimble minds would actually find themselves too fast for their own feet. Many of the bored office workers (interviewed by journalists, another species of bored office worker) expressed their pleasure that they would find the work interesting and fulfilling, and that it was because the work paid a decent wage now that they were able to enter that trade.

So, in fact, it proves precisely our point once more – the requirements of exchange value hold back the natural co-operation and ability and desire to work of human beings, rather than enabling it. Socialism would be as prone to nature and accident as any system and so could miscalculate and produce too much of something. But as it would not be hamstrung by turning things into exchange values as capitalism is, it could just write off any waste as a misfortune to try and be avoided, rather than one to be exacerbated and spread by sackings and bankruptcies.

People’s skills could be used when required and people would not find themselves dumped on the rubbish heap and denied access to their necessities of life just because they had worked hard and finished the job or because less of that type of work were no longer required. We would be able to enter into an age where communication conveyed at the speed of light could be used immediately, without having to be grafted onto the old operating system of society – like trying to read the internet on a pocket calculator.

Pik Smeet

Kate Hoey (2006)

The Greasy Pole Column from the April 2006 issue of the Socialist Standard

Hoey Hoo- Hah

Say what you like about rebel Labour MPs, in most cases they are consistent – or should that be boringly predictable? Foundation Hospitals? Against. War on Iraq? Against. Ban Hunting? In favour. All tediously predictable. Then along comes Kate Hoey, Labour MP for Vauxhall, to upset the pattern. The big issue for Hoey – the one which has earned her the most publicity – has been her support for hunting which she demonstrated, on the day the “sport” was banned by Parliament, by riding out with the Beaufort Hunt. She says the ban is unenforceable, that it has actually made hunting more popular than ever: “It’s part of the British rebellious streak that as soon as something is banned it becomes more attractive”. Which raises the question of what she is doing in Parliament, where they lay down laws which ban all kinds of behaviour as a way of making them unattractive to even the most rebellious person. She has also said of the Labour Party : “They don’t understand the countryside” – as if there is a lot more to “understand” than that the countryside is basically the same as the towns and cities, with a class structure which condemns one class to work for their living in varying degrees of poverty and insecurity.

Vauxhall

It is also fair to ask what drives her to be the MP for Vauxhall which, in the London Borough of Lambeth and including Kennington, Stockwell and parts of Clapham and Brixton, is as far from what most people see as the “countryside” as it is possible to be. It is, in fact, one of the toughest and most disrupted parts of London. To ensure that everyone, including the long-suffering voters of Vauxhall, knew where she stood on hunting, Hoey took on the job of chairing the Countryside Alliance – an organisation which tells us it campaigns about rural poverty and the decline of the villages but which was mysteriously silent on these issues until the 1997 Labour victory brought the first ever real threat to hunting. It was unfortunate timing that Hoey announced her new, additional job on the day the police shot John Charles de Menezes – at Stockwell station, in her constituency. This ghastly event did not dampen the Countryside Alliance’s joy at her elevation to lead them, which they said they were “delighted” about. Not all the voters of Vauxhall felt the same: many of them, worried about the living conditions there and the shooting at Stockwell, expressed their angry surprise that their MP had the time to take on so much extra work when she manages to attend only 55 percent of votes in the Commons.

But Hoey’s record of rebellion extends beyond hunting. She is against foundation hospitals (although she was once in favour of hospitals trusts, which many traditional Labour people feared would be a first step in betrayal of the NHS), against student top-up fees, the Racial and Religious Hatred Bill, compulsory ID cards, the war on Iraq… She protests that it the others who are out of step, that the measures she opposes were not in Labour’s manifesto – as if it would have made any difference if they had been. And why does she stay in a party which, she says, imposes policies it was not elected on? Even the Tories are confused about her. In October 1996 the mischievous MP Giles Brandreth recorded in his diary that he plotted about her with Sebastian Coe:

“Why don’t we find someone to defect to us? We decided Kate Hoey was our prime target. We like her, she seems sensible, she isn’t valued by New Labour.”

And more recently a Tory MP in the Daily Telegraph showed that little has changed with her: “She spends more time in our division lobby than on the other side.”

Jowell

Quite what the fatigued electorate of Vauxhall think of the fact that they have elected a Labour MP who votes like a Tory will be apparent at the next election. Meanwhile they may take some kind of hint from Hoey’s assessment of Culture Secretary Tessa Jowell and her husband David Mills with their labyrinthine mortgages and offshore financial manoeuvres. Perhaps she is jealous of a more durable female rival but Hoey refused to acquiesce in the orchestrated campaign from Number Ten designed to discredit the exposure of Jowell as motivated by gender prejudice. She was one of those who wanted Jowell sacked from leading Labour’s campaign in the local elections, for; she “…grew up in a Labour Party that thought that talking money out of the country wasn’t a very loyal thing to do”. In fact the vast majority of the people of Vauxhall are not rich enough to practice that kind of “disloyalty”; as Hoey put it: “Most people have enough trouble just getting one mortgage”.

Before she joined the Labour Party Hoey was a member of an obscure Trotskyist organisation, which she later explained by confessing that “I didn’t have much contact with ordinary people. So I didn’t understand their concerns” (Brian Deer interview, Sunday Times Magazine 8 August 1993). After that embarrassing spasm she sat as a councillor in Hackney and Southwark waiting, with other hopeful future Labour stars, for the offer of a winnable seat. Hoey’s chance came when the sitting MP for Vauxhall, Stuart Holland, resigned from the Commons to take an academic job. Holland, who was a disciple of Tony Benn , was described by a fellow member of the Lambeth Labour Party as “…pitifully eager to acquiesce in whatever absurdities Lambeth Labour cared to expound”. Holland’s departure came as a relief to Neil Kinnock, tempered by the fact that the constituency party intended to replace him with Martha Osamor who, with her similar ideas, seemed to be no less of an embarrassment to the Labour leadership. So Hoey was imposed on a resistant local party as a “moderniser” – a word with a meaning we are all aware of now. She won the by-election with a majority of over 15000.

Sports Minister

Realising her ambition to be the first woman Sports Minister (she had a qualification in Physical Education, she had been Ulster high jump champion and Educational Adviser to a number of football clubs including Arsenal and Chelsea) brought Hooey up against the spin doctors of Downing Street. Against instructions from Alastair Campell she criticised the decision of Alex Ferguson (a special favourite of Blair’s) to withdraw Manchester United from the 1999 FA Cup, saying that the club’s supporters had been treated in “a quite shabby way”. She officially complained about the MBE awarded to Arsenal striker Ian Wright, because his behaviour on the field – shouting and swearing at other players and the referee – made him a poor role example. She lasted only a couple of years in the job.

And now, on the back benches there seems little more by way of a political career left for her. There is still her writing for the Daily Telegraph, there is chairing the Countryside Alliance and doing her abrasive best to upset her party as she goes into the opposing voting lobby. And of course there may be her memoirs, which should have the words Tally Hoey in the title. If she hangs on to Vauxhall there will be the job of ministering to the people there who, in their poverty, bad housing, crime and pollution, can be expected to be feeling distinctly unministered to. Like most rebels, Hooey will need to work at living up to her own image. Recently in the Daily Telegraph, she was described as wearing a Gucci watch and a jacket trimmed with fake fur. She did not miss this chance to boost her reputation for reckless confession: “The fur” she responded“was real. The Gucci watch was fake”, provoking a spokesman for the Trading Standards Institute to remind her of the realities of commodity society: “We deplore any public figure who seems to be celebrating the purchase of counterfeit items” he sniffed (which probably gained Hoey a few more votes in Vauxhall).

It was Oscar Wilde who once described Hoey’s favourite pastime as “the unspeakable in full pursuit of the uneatable”. We may wonder what enduring, scathing epigram he would have fashioned about a Labour Minister indulging in such “sport” after her party had made all those promises about building a sustainably better society. Like all other “rebels” Hoey relies on the deception that she offers something so fresh and different that it has not been thought of before. In Wilde’s absence let us sum up the futility of it all: the unmemorable in pursuit of the unpracticable.

Ivan

A hundred years of the Labour Party (2006)

From the April 2006 issue of the Socialist Standard

The Socialist Party was formed in 1904. The Labour Party didn’t come into being until two years later when a number of Labour and Liberal-Labour MPs, elected at the 1906 general election, set up a parliamentary group. We look at the Labour Party’s dismal anti-socialist performance over the last hundred years.

The 1906 General Election is memorable for two reasons. Firstly, the Liberal Party won a remarkable landslide victory, returning 400 MPs to Parliament. Secondly the fledgling Labour Representation Committee (LRC), under the leadership of James Keir Hardie, trebled its vote to gain 27 parliamentary seats, increasing its representation to 29. These dramatic gains prompted the LRC to rename itself and a little over 100 years ago, in February 1906, the Labour Party came into being.

The earlier decision to set up the LRC was a response to dire working class poverty and more particularly to the legal threat to the trade unions, which were attempting to ameliorate these conditions. Throughout the nineteenth century the state had consciously obstructed collective bargaining, even though legislation passed during the 1870s exempted trade disputes from the conspiracy laws and legalised peaceful picketing. The ‘new unionism’ of the 1880s rapidly expanded trade union representation and, combined with the success of the London Dockers’ strike of 1889, raised concerns that working people were becoming too organised and might mount a challenge to the owners’ interests. The state and employers propagated the notion that unions were synonymous with ‘socialism’, which they claimed would lead to social disintegration, and they looked to the courts to weaken emerging unionisation that might defy the domination of capital.

The trade unions became receptive to the idea of parliamentary representation shortly after the great engineering lockout in 1897-8 and then the Lyons v Wilkins judgement of 1899 which reversed the provisions of the 1876 Trade Union Act that had allowed for peaceful picketing. The 1899 Trade Union Congress proposed a meeting between union representatives, the Social Democratic Federation, the Fabians and the Independent Labour Party to seek agreement on an agenda for parliamentary representation to secure political protection for ‘free negotiation’ with employers. The subsequent conference held in February 1900 agreed that the LRC would be supported by trade union affiliation fees and it elected Ramsay MacDonald as the new organisation’s secretary.

The LRC’s first priority was survival. It was desperately short of funds and its base was extremely weak. In 1900 only 13 percent of the working class had trade union membership and only 18 per cent of these were initially affiliated to the LRC - just 41 unions with 353,000 members. The new party had no programme as such and incorporated various groups that, while calling themselves socialist, held an array of conflicting views. Calls that the organisation should be based on a ‘recognition of the class war’ or commit itself to anything beyond trade union representation were rejected. The LRC was convinced that capitalism could be humanised by reforms and refused to entertain any notion that the organisation should advocate socialism as an immediately realisable objective. Instead, its task was to reform capitalism and strive for a ‘level playing field’ to enable workers to negotiate ‘a fair day’s work for a fair day’s pay’ without state interference.

Trade union affiliations to the LRC were boosted after a disastrous strike in August 1900 by workers in the Taff Vale Railway Company. The workers demanded better working conditions and the right to join a trade union - the Amalgamated Society of Railway Servants (ASRS). The strike was broken and the employers pressed their advantage by fighting and winning a legal action for damages against the ASRS, thereby pushing the union to bankruptcy and making future union strike action virtually impossible. This threat to trade unionism served to reaffirm the LRC’s contention that only by winning political power could workers influence their conditions within capitalism, which in this case meant passing laws to reverse the court’s decision and legalise industrial action.

Despite its weakness, the LRC ran 15 candidates in October 1900 and won two parliamentary seats – Keir Hardie winning Merthyr and Richard Bell taking Derby.

To many unions, however, affiliation to the LRC was not an automatic choice. A succession of unsympathetic Conservative governments between 1885 and 1905 had compelled unions to look to the Liberal opposition for support, although by 1900 some doubts had arisen about the Liberals’ genuine commitment to trade unionism. Nevertheless many trade unions continued to support the Liberals and, in the same 1906 election that saw the LRC make its dramatic gains, 24 trade unionists were elected as Liberal MPs.

It would be misleading, however, to regard the LRC’s 1906 electoral gains as altogether surprising. They were in fact largely attributable to the organisation’s willingness to make alliances with avowedly capitalist political organisations and in particular with the Liberal Party. As an organisation pledged to maintaining and eventually administering the capitalist system, the LRC saw no inconsistency to agreeing an electoral pact with the Liberal Party in 1903, whereby the Liberals agreed to run only one candidate in certain two-member constituencies, leaving the other anti-Tory candidate to come from LRC. The Liberals were eager to avoid splitting the anti-Conservative vote and the LRC was eager to increase its influence.

The fact that such a pact was forged says much about the intentions of the LRC and the later Labour Party. The Party’s objective was to protect workers’ conditions by striving to administer the system and to give workers a ‘fair deal’ within capitalism. The LRC and Labour Party never looked beyond this objective and accordingly did everything in their power to mute any overt hostility to the capitalist system or attract opposition from the owners and their government. Ramsay MacDonald exemplified this strain of thought, arguing that the theories of Marx, the class struggle and the necessity of a politically conscious socialist working class without leaders enacting the social revolution were outdated and invalid notions. Instead, he embraced the views of Bernstein and the German ‘Revisionists’, that ‘socialism’ would come about gradually within the existing structure of society and develop as a result of the growing success of capitalism. It was therefore determined that the Labour Party’s task was to promote this success and to pass useful reforms that would theoretically steer the working class towards a distant socialist society. It was an organisation where ‘immediate demands’ within capitalism took priority over everything else.

Not unsurprisingly the first legislative measure of the new Labour Party and its Liberal allies was to reverse the Taff Vale judgement. This was achieved under the Trades Dispute Act of 1906. The Labour Party also made small amendments to the Workingmen’s Compensation Bill and the School Meals and Medical Inspections Act, but by 1907 the Party had run out of ideas and was reduced to simply accepting Liberal Party reforms. The passing of the Trades Dispute Act, however, coincided with a reduction in real wages and a rising tide of industrial disputes, and these factors encouraged further union affiliations to the Labour Party. The affiliation of the Miners’ Federation in 1909 was of major importance, since mineworkers’ votes cast in favour of the Labour Party represented potentially another 60 parliamentary seats. Potential became reality in 1918 when the Liberal electoral pact was no longer in operation.

By the end of the First World War – in which the Labour Party abandoned any class solidarity and enthusiastically supported British capitalism – it was well on its way to becoming the main opposition in parliament. Towards the end of the war the planned extension of the franchise, combined with the 1917 Bolshevik revolution in Russia, prompted the Labour Party to redraft its constitution under the influence of the ‘radical’ Sidney Webb. The recast constitution included the famous Clause Four that was intended to appeal to the anticipated ‘leftward’ swing in public opinion and to draw a clear distinction between Labour and the Liberals by committing the Labour Party to nationalisation or state-run capitalism.

The Labour Party participated in minority administrations in 1924 and again in 1929, but it had to wait until 1945 – and the carnage of another World War, in which it again wholeheartedly supported British capitalism – before fully completing the transformation from trade union parliamentary pressure group to a party of capitalist rule. The 1945 Labour government is best remembered for its programme of nationalisation that was touted as solving many of the problems of working people but failed miserably to do so. It is also remembered for its welfare reforms which were presented as bringing improvement to working-class conditions of life but whose main aim was to improve the efficiency of working men and women without provoking a general wage increase. Further opportunities for Labour Party management of British capitalism occurred in 1964 under Harold Wilson, in 1974 first under Wilson again and then James Callaghan, and finally under Tony Blair from 1997.

Given its early history it is hardly surprising that the Labour Party should have developed in this way. The LRC and later the Labour Party were never organised to challenge capitalism or eradicate the irreconcilable class differences between the working class and the owning class that lives on expropriated labour by virtue of their ownership of the means of producing and distributing wealth. At no time in its history has the Labour Party advocated revolution for socialism, but rather, until relatively recently anyway, relied on a cynical propagation of the pretence that state-run capitalism and reforms represented ‘stepping stones’ to a socialist society.

The Labour Party consciously steered the social-democratic or socialist movement of the early twentieth century away from social revolution to a futile policy of ‘reformism’, maintaining unswerving support for the exploitation of working people, the wages system, commodity production and the private ownership of the means of producing wealth. The one-hundred-year history of the Labour Party is one of deceit and opportunism that has given a bad name to socialism and induced working people to hand political power to representatives of their class enemy to administer capitalism against the working class interests that Labour has pretended to represent.

Steve Trott

Capitalism for ever? (2006)

The Cooking the Books column from the April 2006 issue of the Socialist Standard

On 2 March Jacques Attali, author of a recent biography of Marx in French (and former top adviser to President Mitterrand and former head of the European Bank for Reconstruction and Development), gave a talk with historian Eric Hobsbawm on “Marx for the 21st century” at the Jewish Book Fair in London.

Interviewed in the Guardian (25 February) he was reported as saying:

“Contrary to popular belief, Marx was not mistaken: capitalism will fall and be replaced by a socialist system. The only question is when. ‘For Marx the fall of the rate of profit will appear when capitalism has exhausted its capacity for growth, which is not the case,’ he says. ‘Socialism will come after this.’”

Marx did indeed think that capitalism would prepare the way for and eventually be replaced by socialism (which Attali correctly identifies, both in his book and in his talk, as a world non-market society in which money will have no place and in which goods and services will be freely available for people to take and use). And he could be interpreted as having argued (in the Grundrisse, in the section in Notebook VII on “Contradiction between the foundations of bourgeois production (value as measure) and its development“) that, if capitalism were to continue long enough, productivity would eventually rise to such a level that the unit price of goods would fall so low (their labour-time content being so small) that they would be virtually free and that the prospect of making a profit would therefore be so low that the economic mechanism of capitalism would seize up.

Attali’s reported answer here implies that Marx really thought that socialism would only come when capitalism had reached that stage. Which it clearly hasn’t. So, capitalism would still have some way to go, until in fact it had not only come to dominate the globe (as at present and for at least a century) but had come to exist everywhere including in the currently “undeveloped” parts of the world in Asia, Latin America and Africa. Until, in short, capitalist globalisation had run its full course.

Marx certainly thought that in his day capitalism still had some years to go before it could be replaced by socialism (which is why he supported non-socialist developments within capitalism which he thought would speed up the development of capitalism and with it the material basis for socialism, such as free trade, the victory of the North in the American Civil War, and German unity). But it is doubtful whether the passage from the Grundrisse was anything more than Marx saying what would eventually happen if capitalism were to go on for long enough. In other words, that there were theoretical reasons why capitalism could not literally go on forever. It did have an economic limit, even if this would be far into the future.

Marx can’t be interpreted as saying that capitalism would, or should, continue for that long. His activities as a revolutionary socialist clearly showed that, on the contrary, he thought that capitalism could, and should, be ended by conscious working class action long before it reached its theoretical limit.

Protect and Survive (2006)

Book Review from the April 2006 issue of the Socialist Standard

Jared Diamond: Collapse: How Societies Choose to Fail or Survive. Penguin Books

This is another erudite yet readable book by Jared Diamond, following on from The Rise and Fall of the Third Chimpanzee and Guns, Germs and Steel. His theme this time is how and why past societies have or have not collapsed, and how an understanding of such issues may be of help in the present-day world. The Maya civilisation of central America, for instance, collapsed in the early tenth century CE, after a period of 700 years or so. A number of contributing causes can be distinguished: population outgrew available resources, deforestation reduced the amount of available farmland, fighting among the Maya increased, a severe drought occurred, and the rulers had no interest in long-term concerns.

Diamond distinguishes five points that are generally relevant to societal collapse: environmental damage, climate change, hostile neighbours, friendly trade partners, and a society’s responses to its environmental problems. Often, for instance, forest will be removed and soil eroded, or newly-introduced animals may eat native species or destroy crops: all this may cut the numbers who can survive in a particular area. Destroying unrenewable resources is particularly crucial. Unfriendly nearby societies can also play their part in disrupting production and everyday life. Globalisation has increased the importance of other (not necessarily nearby) parts of the world: China, for instance, accepts untreated garbage, including toxic waste, form other countries (for a fee, of course).

Like his other works, Collapse is wide-ranging and thought-provoking, containing much material that we can’t do justice to here. A useful chapter on the Rwanda massacres of the 1990s makes the point that it was not a simple matter of Hutu against Tutsi. Many other factors played a part, including population pressure and falling world coffee prices. The final chapter asks what all the facts and theories that have been marshalled before mean to us today, emphasising ‘the unsustainability of a world in which the Third World’s large population were to reach and maintain current First World living standards.’ Diamond’s conclusion is that we need ‘the political will to apply solutions already available’, as if it were merely a matter of convincing politicians to do the right thing.

In fact he is far too uncritical in his acceptance of capitalism as the framework within which present-day problems have to be solved. He is well aware that companies exist to make profits, not as charities concerned to protect the environment. Yet, he says, it is not enough to blame companies, for ‘ultimate responsibility’ lies with us, ‘the public’, since we supposedly have the power to make destructive environmental policies unprofitable, e.g. by means of consumer boycotts or pressurising politicians to pass laws that force businesses to clean up the mess they have created. Sadly, this ignores the fact that capitalism needs profits and, while companies will sometimes be keen to play the environmental card if it suits them, they have to put profits first. No amount of legislation or boycotting can change this.

So the c-word to ponder is not ‘collapse’ or ‘climate’ but ‘capitalism’. And the political will that matters is the will to replace capitalism with a sensibly-organised society, within which problems can be tackled in a way much more likely to yield effective solutions.

Paul Bennett