Capitalism and Climate Change: Cause and effect (2019)

From the September 2019 issue of the Socialist Standard

In a recent interview with Channel Four veteran Jon Snow, Bank of England Governor Mark Carney made the audacious claim that capitalism is part of the solution to climate change (LINK.). Carney calmly delivered this claim in an ongoing capitalist context of political malaise, escalating trade tensions, continued financial mismanagement, and imminent sovereign debt crises.

The argument he made was that in order to mitigate risks (not doing anything about climate change rendered a risk to profitability, rather than dealing with the problem being a genuine social priority), capitalist businesses will have to move their focus from where we are today, to where we need to be tomorrow. Perhaps this wooliness doesn’t placate your concerns? Well, Carney went further in arguing that the financial sector had a prominent role to play in this switchover, whereby funds will be withheld from businesses that are unable to move with the times and prioritise climate change.

When probed by Snow, Carney reiterated that capitalist businesses which ignored climate change would go bankrupt ‘100 percent’. While you could argue that an incumbent business which completely disregarded climate change could plant the seeds of their own long-term demise, the ‘100 percent’ route to bankruptcy is by a capitalist ignoring profitability.  Carney would most probably respond that, as climate change poses a ‘risk’ to long-term profitability, capitalist businesses will be forced to prioritise the mitigation of climate change. However, surely the Governor cannot believe that other ‘risks’ of not making a profit are simply going to make way for the prioritisation of the environment?

Leaving aside Brexit and the US-China dispute, let us consider a few contemporary ‘risks’ prioritised by financial institutions. Argentina, for example, faces yet another sovereign debt collapse. Once perceived as an emerging market with relatively wide investment margins, its borrowings from western financial institutions soon proved to be unsustainable. Rather than allowing for an accountability of failure on behalf of banks and investors, the Argentinian government has been provided with multiple large IMF bailouts. Only months since a $7.1 billion IMF loan, Argentina’s dollar-denominated sovereign debts appear on the precipice of default as the strongly IMF backed incumbent government came second in primary elections, resulting in a 25 percent devaluation of the peso and a stock market collapse. 

In Malaysia, Goldman Sachs has promised to ‘vigorously defend’ itself against state prosecutors who claim that senior bankers and domestic politicians alike had embezzled state investment funds, defrauding investors in the process. Does any of this inspire confidence that the financial sector can lead a gilt-edged defence of the environment? Not when such unprofitable investments in loans are bailed out and fraud and embezzlement are vigorously defended. Capital that risks disappearing because a sovereign state borrower is unable to repay the loan cannot be protected by central banks and monetary funds indefinitely, but they will be defended as long as possible at whatever social cost. The idea that investments in loans that are not ‘profitable’ will lead to an immediate risk to bankruptcy or to a redirecting of capital into sustainable and socially acceptable ends is an age-old laissez-faire myth.

As per usual with liberal economics, climate change has been reduced to an economic abstraction in an effort to plead for the capitalist system. Can we afford to wait for climate change to pose the biggest risk to capitalist profits? Are central banks and the IMF going to allow financial institutions to go ‘bankrupt’ if they continue to make loans that turn out to be unprofitable investments, as Carney insists?  Is it likely that in the immediate future climate change will overtake the quarterly demands of investors? How long will it take to simply wait for the profitability of environmentally-damaging goods to slowly deplete?

Can we afford to wait? The answer of course, is no. Environmental groups must no longer prioritise the achievement of empty emissions promises from politicians on behalf of financiers and capitalists. The socialist response is to advocate a system based on common ownership and economic democracy which can prioritise social need, rather than the ability to make profits and if not, to defend unprofitable investments at any social cost. 

James Clark

An Open Letter to The Chairman of the Bank of England (2012)

Mervyn King

From the August 2012 issue of the Socialist Standard

Dear Sir Mervyn

Having heard on the BBC news channel on the evening of the 29th June your condemnations and exhortations concerning the practices of your fellow-bankers I am taking the liberty of writing to you to register my surprise at your remarks. It is not my purpose to be offensive but I find it difficult to accept that a man of your knowledge and experience can view the current crisis of capitalism in moral terms or, indeed, as aberrational.

I am an eighty-seven year old man and a great-grandfather which gives me a particular concern for the future. I was born four years before the awful world economic slump of 1929 and I have lived through some eight or nine ‘recessions’ –as they are euphemistically referred to today. I have witnessed life under the system of capitalism when it was largely unregulated –capitalists had discovered earlier that they required some sort of Queensbury Rules to protect themselves from one another.

Post-1945, when government adopted the war-time National government’s commitment to the Beveridge Report, I experienced Maynard Keynes’ antidote to the caprice of the system, via ‘demand management’: the exchange of bonds for shares and –in recognition that working-class poverty was an endemic feature of capitalism – the institution of a complex scheme of nationalised poverty.

It would be churlish to deny that there was some improvement in social conditions for the producing class: improvement, it has to be said, greatly assisted by the need to make good the awful destruction of the late world war –while frenetically preparing for yet another possible war against our late ‘glorious Russian allies’ and their Leninist philosophy of trying (vainly, as it turned out) to rationalise commodity production through central state planning.

While knowledge was constrained by the cash nexus, science in all fields of human endeavour has brought about a geometrical increase in our potential to create the material conditions of a full and happy life for every human being on the planet. Unfortunately much of our fantastically expanded wisdom and wealth has been siphoned into military establishments which are today a vital indigenous segment of the world economy; a segment which often manifests an independent and dangerous threat to human freedom.

The world of my lifetime has seen the economic murder of some eight billion people through starvation, lack of clean water and necessary medication. The food and medication to keep these people alive was available but the men, women and children concerned did not represent a viable market that would yield profit. They died because they were poor.

In the same period I have seen World War Two –the awful sequel to World War One –that brought homes onto battlefields. Now, since the end of WW2, there is at least one major conflict occurring every single day. In fact, the industrialised killing of human beings that arises from the endemic conflicts of capitalism has itself created investment opportunities effectively making international concord a serious economic threat.

Rich list
It is surely legitimate, Sir Mervyn, to ask such as your good self how you think people in what we hope will be a more enlightened future will see the current phase of what we are told is civilisation. How, for example, would a future economic historian see the current Sunday Times ‘Rich List’ which shows that the wealth of the one thousand richest people in the UK –a mere 0.003% of the adult population –increased by an incredible £155 billion over the last three years? This in a period when wages and social security benefits were, and are, being slashed and the vision and disagreements of the three political parties, marketing the same political product, is confined to the duration, in years, the working class will have to endure the appalling increase in its miseries.

Moral aphorisms appealing to those who have purloined the means whereby the rest of us live have never restrained the appetites of an owning class. It is said that Jesus got his comeuppance for suggesting the meek –by definition, the poor –should inherit the land. Centuries later, in the dying years of the nineteenth century, when Pope Leo mildly admonished the capitalism of his day, opining that “…the wages of the working man ought not be insufficient to support a frugal and well-conducted wage-earner…” (Encyclical: Rerum Novarum, May 1891) public criticism was raised by Italian businessmen who suggested that the promulgation of the document might cause social unrest.

Poverty and riches are two sides of the same coin –almost literally so, for as Shelley put it, “Paper coin, [is] that forgery of the title deeds which we hold to something of the worth of the inheritance of earth”. You cannot be ignorant of the mechanism by which a small minority class dispossesses the creators of all real wealth of the fruits of their labour and rations their access to their needs through a wages-money system.

Whatever the form of society, real wealth is produced, and can only be produced, by the application of human labour power to nature-given materials. Capitalism adds a third element to this simple equation: investment on foot of the promise of profit. The shareholder, whether s/he is a billionaire or a plumber in a pension scheme, seeks a return on their investment and is rarely persuaded by the needs of ‘the nation’ or their perception of morality. Only the threat in the aforesaid ‘Queensberry Rules’ of the system curbs the pecuniary enthusiasm of the more predatory captains of capital and that, as we are currently learning, is not always the case.

Capital on strike
The labour power that provided the fervid productive activity of, say six years ago, when the system was in relative ‘boom’, is still available as are the natural resources of that period. The missing element is capital; effectively, capital is on strike, holding the nation up to ransom as the pensioned editors of their newspapers proclaim when some group of low-paid workers withdraws their labour. Surely the fact that a small minority of satiated money shufflers can visit such overwhelming hardship on the populace in general (as it does periodically) must bring the entire system into question.

Whatever of the past, when the owner of the local factory lived in the big house on the periphery of the town or village and occasionally visited the local hostelry and even bought the lads a pint, capitalism today is a curse on the lives of the world’s billions. Technology has given it a mobility to seek the cheapest labour, circumvent health and safety standards that might impinge on profits or capital on-costs and to force the hand of allegedly democratic authority.

The implications in the current crop of chastisements against bankers and those of their ilk is that capitalism is an efficient, humane economic system that offers the human family the best of all possible worlds except when, as now, it falls victim to the ineptitude or greed of some of its functionaries. That is a lie told in defence of the system. Of course there has been abuse, and even absurdity, in the administration of banks and businesses but it was the uncontrollable greed that fuels the system that gave rise to the activities of bankers and speculators. Nor should we forget that it was the approbation of millionaire and billionaire shareholders that justified the fabulous salaries and bonuses so lately enjoyed by now-discredited servants of capital.

The widespread clarion for a public enquiry might expose some of the greedy swindlers whose dishonest activities have added misery to capitalism’s cyclic trade crisis as well as the self-interested manoeuvrings of politicians in all the three main parties. For a while these scoundrels might suffer in comfort the embarrassment of being publicly pilloried. But the system itself, the vile, anachronistic system that brings dire poverty or mere want to most of the people on the planet, will be off the hook.

What we will not have is an incisive enquiry into the question of capitalism’s suitability for purpose and whether socialism, in a clearly defined sense, offers a better way of life for the whole of humanity. That would be much too democratic.

Such are my thoughts. I confess, Sir Mervyn, that I am a ridiculous optimist who thinks human concern and human honesty might occasionally rise superior to the exigencies of office. Additionally, of course, in submitting this to the Editors of the Socialist Standard, I would stipulate that publication guarantees your right of reply.

Sincerely

Richard Montague

Voice From The Back: A Redundant Society (2013)

The  Voice From The Back column from the March 2013 issue of the Socialist Standard

A Redundant Society

Capitalism is a social system based on slumps and booms and no amount of political posturing by so-called statesmen will change that. ‘The number of jobless people around the world rose by 4 million in 2012 to 197 million and is expected to grow further, the UN labour agency warns. In a report, the International Labour Organization (ILO) said the worst affected were youth: nearly 13% of the under 24s were unemployed. It said global unemployment was projected to rise 5.1 million this year and by a further 3 million in 2014’ (BBC News, 22 January). This immense waste of human endeavour is the norm for capitalism. Inside world socialism think of the abundance that these millions of potential producers could contribute to society.

Bravery, Bombast And Reality

Hollywood is fond of portraying the heroism of warfare. We are asked to believe that there is something ennobling about military conflict. These figures from the USA show that the horrors of war are so great that they often force soldiers to take their own life. ‘In 2012, for the first time in at least a generation, the number of active-duty soldiers who killed themselves, 177, exceeded the 176 who were killed while in the war zone. To put that another way, more of America’s serving soldiers died at their own hands than in pursuit of the enemy. Across all branches of the US military and the reserves, a similar disturbing trend was recorded. In all, 349 service members took their own lives in 2012, while a lesser number, 295, died in combat’ (Guardian, 1 February). War inside capitalism is far from being a noble experience. It is brutal, inhumane and terrifying.

Political Promises And Poverty

Politicians like to pose as the friend of British working families but government ministers have admitted for the first time that as many as 100,000 children from working families will be forced into poverty as a result of the government’s plans to cut benefits for the poorest. ‘Official figures show that a total of 200,000 youngsters from all families will be pushed into child poverty as a result of George Osborne’s 1 per cent cap on benefits from April, in effect a real-terms cut in welfare payments. But Steve Webb, the Liberal Democrat pensions minister, revealed in a parliamentary written answer last week that 50 per cent of those children come from families where at least one parent is in work. This new figure undermines claims by the Chancellor, George Osborne, that the cap on benefits is designed to target Britain’s jobless ‘shirkers’. The children will join the 3.6 million already classed as living in poverty. Two-thirds of those are in families where at least one parent works’ (Independent on Sunday, 3 February). The real ‘shirkers’ of course are members of the owning class who have no intention of working.

. . . And Steadily Improving Living Standards

‘Food prices are rising more than three times faster than the average worker’s pay package as the cost of living ‘crisis’ continues, official figures revealed yesterday. While the average private sector worker’s pay has risen by just 1.4 per cent – and millions of State workers are subject to a pay freeze – food prices have risen by 4.5 per cent in the last year, according to the Office for National Statistics. The crippling cost of the weekly trip to the supermarket is the most striking figure in the Consumer Prices Index (CPI) for January’ (Daily Mail, 13 February). A food price rise of 4.5 percent against a 1.4 percent wage rise? It doesn’t take a master statistician to see this isn’t a ‘steadily improving standard of living’.

Tough At The Top?

The new governor of the Bank of England has taken over this top post at a time when we are told we will all have to make sacrifices in order to get out of this economic slump. ‘The next Governor of the Bank of England, Mark Carney, has been forced to defend his £800,000-a-year deal under questioning from MPs. Mr Carney’s base salary of £480,000 is more than that of his US and European equivalents combined – and he will also receive a £250,000 housing allowance on top. … Justifying the housing allowance, Mr Carney pointed out that London was a far more costly place to live than his present home city of Ottawa. “I am moving from one of the cheapest capitals in the world to one of the most expensive,” he said’ (Independent, 7 February). Mr Carney is an example to us all. He is prepared to scrape by in expensive London on a mere £250,000 housing allowance. Such fortitude!

A History of Slumps (2013)

The Cooking the Books column from the August 2013 issue of the Socialist Standard

To mark the 50th anniversary of the publication of its Quarterly Bulletin the Bank of England published an article in the June issue entitled ‘The UK Recession in context – what do three centuries of data tell us?’ This took a look at the booms and slumps since 1701.

Actually, the terms used are ‘upturns’ and ‘downturns’. A downturn is defined as the period between the highest point production reached and the lowest point it falls to before it starts to rise again, i. e., from peak to trough. An upturn is the opposite, the period from trough to the next peak. A cycle is defined as the period from peak to peak or from trough to trough.

A table gives the average length of cycles for various historical periods:

The inclusion of data from the 18th century is interesting but doesn’t tell us much about cycles of capitalist production. Not that the economy of the period could not be described in a sense as capitalist, but because the upturns and downturns were caused not so much by the workings of the economy itself as by the outside factors of war (in this century Britain was frequently at war) and bad harvests (agriculture then accounted for 30 per cent of GDP).

It is the later periods that are more relevant for the study of the capitalist production cycle.

1831-1871 was the period Marx studied in Capital and his other economic writings, though he identified the first crisis of industrial capitalism as occurring in 1825 (which can been seen in Chart 1 in the article). He suggested a cycle of about 10 years, not too far from the 8-year cycle the article identifies. At 2.21 per cent a year, this was a period of relatively rapid growth with the short downturns, a period of confident capitalist expansion.

On the other hand, 1871-1913 was a period of slower growth, with the downturns lasting just as long as the upturns and which misled Engels into thinking that capitalism had entered a period of permanent stagnation.

It is perhaps surprising to learn that the period 1921-1938 was also a period of relatively rapid growth with only short downturns but, apart from the severe but short-lived slumps of 1921 and the early 1930s, in Britain this was a period of growth in output, even if mainly confined to the South East and the Midlands. In the rest of the country unemployment remained high and shaped the popular perception of the 1930s as one big Great Depression.

The authors do not explain why they lumped together 1952-1992 as a single period when it would have been more historically useful to have broken it in the mid-1970s when the biggest downturn since 1945 occurred (as can also be seen in Chart 1). Even so, during both parts of this period the cycles were shorter with fewer deep troughs than in the previous historical periods.

According to the article’s definition, as output is up on the trough of 2008 we are now in the upturn phase of the cycle even though, five years later, production is still nowhere near the 2007 level. It looks as if the current cycle is going to be longer than in the recent past. In fact it looks more like what happened in the period 1871-1913.

Harry Graeber and the Magic Wand (2014)

The Cooking the Books Column from the May 2014 issue of the Socialist Standard

The Bank of England Quarterly Bulletin published in March carried two articles on money which were received with delight by currency cranks. They were further comforted by an article by David Graeber in the Guardian (18 March) headed ‘The truth is out: money is just an IOU, and the banks are rolling in it. The Bank of England’s dose of honesty throws the theoretical basis for austerity out of the window.’

He interpreted the main article as saying that ‘there’s really no limit on how much banks could create, provided they can find someone willing to borrow it’ and that the money a bank lends mortgage holders ‘is not, really, the life savings of some thrifty pensioner, but something the bank just whisked into existence through its possession of a magic wand.’

The Bank of England article does repeat the old but ambiguous bankers’ saying that ‘loans create deposits’ (which could mean merely that a loan made by one bank will, when spent, become a deposit in some other bank or even that, by facilitating an expansion of production, a loan will lead to more deposits). It does indeed say that bank loans are essentially circulating IOUs. It does not, however, say that banks can issue these in unlimited quantities. Quite the contrary. Much of the article is devoted to describing in detail what the limits to banks’ lending are.

The section headed ‘The limits on what banks can lend’ begins:.

  Figure 1 showed how, for the aggregate banking sector, loans are initially created with matching deposits. But that does not mean that any given individual bank can freely lend and create money without limit. That is because banks have to be able to lend profitably in a competitive market, and ensure that they adequately manage the risks associated with making loans. Banks receive interest payments on their assets, such as loans, but they also generally have to pay interest on their liabilities, such as savings accounts. A bank’s business model relies on receiving a higher interest rate on the loans (or other assets) than the rate it pays out on its deposits (or other liabilities). (…) The commercial bank uses the difference, or spread, between the expected return on their assets and liabilities to cover its operating costs and to make profits’ (emphasis added).

It goes on:

  In order to make extra loans, an individual bank will typically have to lower its loan rates relative to its competitors to induce households and companies to borrow more. And once it has made the loan it may well ‘lose’ the deposits it has created to those competing banks. Both of these factors affect the profitability of making a loan for an individual bank and influence how much borrowing takes place. (…) Banks therefore try to attract or retain additional liabilities to accompany their new loans. In practice other banks would also be making new loans and creating new deposits, so one way they can do this is to try and attract some of those newly created deposits. In a competitive banking sector, that may involve increasing the rate they offer to households on their savings accounts. (…) Alternatively, a bank can borrow from other banks or attract other forms of liabilities, at least temporarily. But whether through deposits or other liabilities, the bank would need to make sure it was attracting and retaining some kind of funds in order to keep expanding lending.

This is a good enough description of how modern banks work. Graeber, however, is the victim of his own delusion that banks can lend whatever people want to borrow when he claims that this ‘throws the theoretical case for austerity out of the window.’ This would seem to imply that the Bank of England and the banks could, if they wanted to, create substantially more money for investment and spending than they currently do. But if they tried, the result would be roaring inflation and/or widespread bank failures.

Opportunity Knocks (1992)

From the July 1992 issue of the Socialist Standard

Crowds don't often come much bigger than those they expect to get in St Peters Square in the Vatican but even at that it was an impressively large gathering, a couple of months ago. which witnessed the beatification of Josemaria Escriva de Balaguer. The occasion was not without controversy because de Balaguer was a bit of a fascist in his time, a keen supporter of Franco and not averse to the Nazis either. None of this seemed to affect the Pope, who has the job of announcing these things to the crowd from the balcony. “A joyful celebration”, he called it, “an auspicious occasion”. Meanwhile in the dense, weeping, hysterical crowd others were interpreting the words “joyful" and "auspicious" in their own way; pickpockets trawled through the delirious worshippers, stealing hundreds of wallets and purses.

This was a prime example of how vulnerable people make themselves, while they give their attention to a mythical heaven above, to being robbed on the real material world on Earth. The pickpockets, consciously or not, were working on the assumption that this is a social system in which success goes to those who take their chances—and, until someone else got the beatification treatment, there were unlikely to be many better chances on offer than that.

This has its relevance to John Major—who is not in the same class as a crowd puller as the Pope—and his classless society. It is not entirely clear where Major got his idea from nor what he means, but it is safe to assume that by “classless” he doesn’t actually mean a society without classes but one in which anyone can rise from a lower class to the higher. So "classless society” means that anyone with ability can succeed—they can make a lot of money, live in bigger and bigger houses and travel in bigger and bigger cars and be more and more powerful. Like Robert Maxwell. But of course for anyone to get on in that way they must not only have ability. They must also seize their chances when they see them and be willing to take risks to do so. Like those thieves in St Peters Square.

Romantic delusion
In essential Majors dream society sounds very simple. You work hard and save some money. Then you invest it, starting your own business. Of course there is the problem that you may find your business in competition with some gigantic concern which has the resources to crush you overnight, but with a lot of hard work you can make your business grow. As the profits roll in you begin to expand. Then again and again until you are a multi-millionaire, with the power to crush up-and-coming businesses like yours used to be. You are rich and famous, with a country estate or two, your own private jet and your yacht in the Mediterranean. You are a living example of taking your chance in the classless society.

This romantic delusion seduces millions of people into supporting this supposed society of opportunity where the social and intellectual cream rises to the top—which proves that anyone who does not get to the top must thereby be of inferior quality. However reality is a lot less romantic; there are failures as well as successes, poverty as well as riches, despair as well as fulfillment.

As anyone who reads anything other than the Sun and the Daily Mail will know, we live now in a time of recession. One effect of the recession is to cause a lot of misery to a lot of people whose big mistake was to take what they thought was their big chance when they thought the time was right. In fact it was not a mistake because by capitalism’s standards the chance was there and the time was right. Impressed by the Thatcher government’s assurances that the economy was under tight control and had been steered into perpetual boom by the disdainful brilliance of Nigel Lawson, they committed themselves to a massive debt in order to buy somewhere to live. They were confident that the market would continue to rise so their home would increase in price. They simply couldn't lose, they told each other over their gin and tonics.

We all know what happened next. The economic situation which Lawson claimed to have designed and constructed to work to the eternal benefit of everyone ready to take their chance, and which would last for ever, abruptly changed. Lawson at first called the change a “blip” but blips are momentary diversions; this one went on for years. Interest rates rose to the point at which many mortgage repayments which had once been manageable became cruelly impossible. In many cases things were made worse by redundancies among the mortgagees or their family, whose wages were needed to pay the mortgage. The banks and building societies took action to “repossess” properties which had never been out of their ownership anyway; “repossess" is a polite way of talking about evicting people from homes they had been persuaded to call their own.

Among the evicted John Major’s classless society was celebrated in bitterness. Some dropped the keys of their home through the building society’s letterbox and ran away. One man stripped his home of everything possible—doors, shelves, light fittings, radiators, the bath, sinks—leaving just a shell. Another set fire to the place, killing his baby daughter.

The financial tomorrow
Desperate at this situation is, it is not the whole story for it is not only individual workers, struggling to get themselves somewhere to live, who have seen what looked like a golden opportunity turn to disaster. This recession has reaped a rich harvest of big combines whose collapse has discredited some of capitalism’s current heroes. After the crash of Polly Peck, the fate of Asil Nadir is awaited with interest, in expectation that it holds something extremely unpleasant for him. In Australia Alan Bond is not only bankrupt but with time to reflect on it in his prison cell. Robert Maxwell has been exposed as one of the most unpleasant scoundrels ever to have harried and abused his employees on his way to riches; not content with the legal theft on which capitalism is based he was greedy enough to try the illegal sort as well. The latest in the line of Titanic-like commercial disasters has been Olympia and York, whose Canary Wharf stands as an embarrassing memorial to the anarchy of capitalism.

Illustration by George Meddemmen.

There is now no shortage of experts to tell us what went wrong for the likes of Maxwell and Nadir. They borrowed too much money. They ran their affairs like there was no financial tomorrow. Maxwell borrowed money to expand into American publishing. Nadir to buy up concerns like Del Monte. This presented few problems as long as the boom lasted, as long as sales went up taking profits with them. But when the slump began to bite, the big borrowers had difficulty in just paying the interest on their massive debts. They borrowed to seize what looked like a great opportunity; in the event it turned out to be a trap.

So what of the lenders, the banks who stood for such huge sums at risk? Polly Peck were said to owe something like £1.3 billion; Maxwells empire had debts of over £1.5 billion. With hindsight—and that has recently become one of the well-used phrases in the world of finance—they agree that what they did was unwise, in the sense that it cost them a lot of money when they should have been concerned with making profit. Last February the deputy governor of the Bank of England, Eddie George (how did a man with so demotic a name ever get past the doorman at the Bank, let alone become a governor?) slated the banks about this but in the process he revealed how they had little choice:

  [Borrowers and lenders] now tend to blame the authorities for allowing, or even encouraging, the party to get out of hand—though I seem to remember they rather enjoyed it at the time . . . Had we been more successful in keeping “animal spirits” on a shorter leash at the time, the subsequent damage to bank capital and the subsequent economic and social trauma would, of course, have been less.

Another way of saying that is that when the banks were lending so freely it was boom time; had it continued like that, as it was from 1986 to 1988, there would have been a different story. Pressure of competition pushed the banks into lending; if one backed off there were plenty of others only too willing to exploit what they saw as an unending source of profit.

The banks have now been brought face to face with the realities of capitalism— that it is a system of unpredictable swings, falls and rises, not to be controlled by financial experts or economists or politicians. At times it seems to offer the opportunity to some individuals or some firms to get rich fast. If they missed the opportunity they would not be working the system as they should. With luck it comes out right for them; in other circumstances there is disaster. And none of them, from Robin Leigh-Pemberton to the manager of your local branch shows that they understand how the system works and that it cannot be controlled.

Ivan

Letter: A New Reader Asks Some Questions. (1931)

Letter to the Editors from the August 1931 issue of the Socialist Standard

 A correspondent who is evidently not acquainted with the Socialist Party asks a number of questions on a variety of subjects. The answers may be of use to other new readers who have yet to learn where we stand. 

Legion of Unemployed,

54, Poole Road,

Coventry.

Editor, “Socialist Standard.”                             

July 16th, 1931.

Dear Sir,

1. What is your policy with regard to finance?
2. Assuming the S.P.G.B. got a majority in the House, how would they proceed to nationalise the means of production?
3. Do you think that the centre of control of economic power is vested in Parliament, or with the Bank of England?
4. Assuming a Socialist Government nationalised the means of production, how will they guarantee it will function, and how do you intend to distribute amongst the people, claims on the proceeds of production in the form of consumable goods and services, besides wages for labour?
5. As a policy, don’t you think issuing claims on production by the Government to the people, is better technique in achieving Socialism than that of owning means of production?

 Yours faithfully,

George Hickling.

Reply.
(1) Questions of finance are questions of capitalism. Under capitalism the means of production and the products are the private property of the capitalist class. Money serves the purpose (among others) of enabling workers and capitalists to realise in a convenient form their respective shares of the products which the workers produce and the capitalists own; the workers’ share being their wages based on their cost of living. A money system is neither necessary nor possible under socialism. The means of production and the products will no longer be privately owned. The workers will not be in the position of selling their labour-power to a propertied class, and goods will not be the object of buying and selling transactions because buying and selling are only conceivable between private owners. Money will have lost its purpose and there will be no financial questions.

We are not concerned with the financial problems that arise under capitalism between the different sections of the capitalist class, although these questions greatly exercise the so-called “Labour” organisations. They conceive it to be their duty or their interest to try to teach the capitalists how best to run capitalism, whereas we are concerned with pointing out to the workers how to get socialism.

(2) Our correspondent is completely in error when he accuses us of wanting to ‘‘nationalise the means of production." We, want to do nothing of the kind. Nationalisation or state capitalism is an arrangement by which the capitalists exploit the working class through the Government instead of through private companies. Under nationalisation the capitalists receive their property-incomes as before and remain the owners of the means of production. The difference consists in the holding of Government securities instead of company shares. It often means the replacement of a varying ratio of interest by a fixed rate. The change is in the interests of some of the capitalists. It is not in the interest of the working class. The Socialist Party has always opposed nationalisation.

What socialism consists of is the removal of the capitalist class from their privileged positions as owners and controllers of the means of production and distribution. The change is a simple one. When a majority of the workers are socialist and are organised in the Socialist Party, they will gain control of the machinery of Government. By so doing they will have taken away from the capitalist class their only means of retaining their hold over the means of production, &c. Their political power taken from them, the capitalists will then just cease to be a propertied class.

(3) Our correspondent asks us if we think that “economic power” is vested in Parliament or the Bank of England. It is a pity he did not try to explain what "economic power” is. If our correspondent means the power of the capitalist to own and control his factories, land, workshops, &c., and only to permit these things to be used by the workers when and on such conditions as he thinks fit, then that power is based on the laws of property and the armed forces which enforce those laws. That power is centred in Parliament and the rest of the political machinery, because it is Parliament which makes those laws and Parliament which maintains and controls the other political machinery and those armed forces. The Bank of England, like other private business concerns, exists and operates only by virtue of Acts of Parliament. It has no "power” and indeed no existence except that which Parliament permits. This fact is obscured by the circumstance that usually the capitalists in control of Parliament and the capitalists in control of the Bank of England either belong to the same group or see eye to eye because they have identical interests.

(4) This question starts off with a mistaken assumption about nationalisation which is dealt with in (2) above.

The question contains several other serious misconceptions. First of all it is a wrong conception that socialism is going to be introduced by a Socialist Government acting as an entity separate and apart from the people and managing their affairs for them. There will be no socialism until a majority understand socialism and organise to get it. They will decide what they want done and how they want it done. Once political power has been obtained, they, the majority, will decide how the proceeds of production are to be distributed among the members of society. Apart from the early period when there may be an insufficiency of certain kinds of goods (a heritage from capitalism) goods will be freely accessible to the members of society.

There will be no private ownership of the means of life, hence no relationship of employers and employed and no buying and selling of labour-power. In other words, there will be no wages because there will be no system of wage-labour.

(5) Our correspondent here asks us to abandon common ownership of the means of production and to adopt another means of "achieving socialism.” But socialism is a system of society based upon common ownership. Therefore our correspondent’s scheme of social organisation is not socialism, whatever else it may be.

As he rejects common ownership the only alternative is private ownership, and this indeed is evidently what he has in mind, since he writes of—"the Government” issuing claims to the products of' industry "to the people.” It would not be socialism but state capitalism, under which the owning class would own and control the means of production and issue "claims on production” to the working class. State capitalism, as seen in the Post Office and in the Russian state industries, may be a good thing for the capitalists, but it solves no important working-class problem.

Editorial Committee

#    #    #    #

ANSWERS TO CORRESPONDENTS.

Replies to the following correspondents have been crowded out of this issue, and will appear in the next issue. Mr. Dowdell (Oxford), Mr. Manning (Wealdstone), and Mr. Berman.

50 Years Ago: Bank Rate Cuts (2017)

The 50 Years Ago column from the March 2017 issue of the Socialist Standard

Bank Rate is generally regarded among the economic “experts” as a means of controlling the economy.

Put up the Rate, runs their argument, and you slow down production; put it down and production will start booming.

None of the experts have ever explained why, if it is really so easy to control capitalism, the economy ever gets into a crisis.

The Chancellor’s decision to reduce Bank Rate by one half percent was greeted as a stimulant to British industry.

“One positive gain,” said the Daily Telegraph, “it (the government) hopes to see … is a greater willingness among businessmen to proceed with their capital investment programmes.”

Since September 1953, when Bank Rate was 3½ percent, there have been twenty seven changes. Both Conservative and Labour governments agree that Bank Rate helps to control the economy, both have upped it to seven percent in times of crisis.

But none of these changes have altered a course of economic events which was already set. They have, in fact, been made in response to those courses; they have been not an influence but a reaction.

Callaghan’s panic seven percent last July was no exception and neither is the latest reduction. William Davis, the Guardian’s Financial Editor, put it:

   “I gather that the Bank of England advised the Chancellor a few weeks ago that a half percent cut in Bank Rate couldn’t be delayed much longer.”

The economy of capitalism, as so many Chancellors have found out, cannot be controlled by Bank Rate changes or any other juggling. The Labour Party should know this, perhaps better than anyone.

For they once had a mighty Plan to defeat economic crises. But just like the Tories, they end up doing what the Bank of England tells them.

(From “Review”, Socialist Standard, March 1967)

Mark Carney as Vulgar Marxist (2018)

The Cooking the Books column from the June 2018 issue of the Socialist Standard

Mark Carney, the Governor of the Bank of England, seems to be haunted by the spectre of Karl Marx. In December 2016, when discussing the current longest period of stagnating wages since the 1860s, he referred to Marx’s ‘scribbling’ the Communist Manifesto. This April he again referred to Marx scribbling in a speech to the Canada Growth Summit (he is also a Canadian Liberal Party politician). This time, according to a headline in the Independent (14 April), he was concerned that ‘robots taking jobs could lead to a rise of Marxism’. He was reported as saying:

  ‘The automation of millions of jobs could lead to mass unemployment, wage stagnation and the growth of communism within a generation. He warned “Marx and Engels may again become relevant”.’

This, because ‘increases in artificial intelligence, big data and high-tech machines could create huge inequalities between high-skilled workers who benefit from the advances and those who are sidelined by them.’

His argument is that this is what happened after the industrial revolution in England that began in the second half of the 18th century: production increased but wages didn’t because the new jobs that were created were low-paid; it was only in the second half of the 19th century that workers began to benefit. According to him, it was the prolonged period of inequality and stagnant wages that paved the way for the rise of Marxism.

This can be disputed as a historically  accurate account of the spread of Marx’s views. While it is true that the empirical examples in Capital are taken from England in the 1860s, Marx’s views did not begin to penetrate sections of the workers’ movement till the end of the 19th century, during a period when Carney says the benefits of the industrial revolution in terms of higher wages and better conditions began to be felt by workers. Marxism was in fact embraced not so much by low-paid unskilled labourers as by higher-paid skilled engineering and building workers.

Be that as it may, will Carney’s fears come true? He himself doesn’t appear to really believe that robotisation will lead to ‘mass unemployment’ – that’s been predicted about mechanisation since the industrial revolution but has never materialised – but advances, rather, the lesser argument that it will lead to an increasing proportion of lower-paid jobs. He advises office workers, whose jobs are now threatened by artificial intelligence, to retrain for jobs ‘which require a higher emotional intelligence, in sectors such as care and leisure’, both of which are notoriously low-paying.

This does seem to have been happening to some extent as, although the statistics show record employment levels in Britain, they have not been showing any increase in average wages. In positing a direct link between increasing poverty and opposition to capitalism Carney comes across as a ‘vulgar Marxist’. The link between the conditions of the wage and salary working class and the emergence of socialist consciousness is rather more complicated. Even in times of ‘prosperity’ capitalism is based on the exploitation of wage labour for the profit of a minority and is as unacceptable then as in its lean years. Which is why Marx and Engels are relevant as long as capitalism lasts and whatever state it is in and even if Carney’s fears are not realised.

Inflation: the Theories and the Facts (1974)

From the September 1974 issue of the Socialist Standard

Along with explaining what inflation is and why it happens, another question presents itself today. Why is it that a problem fairly widely understood half a century ago now completely baffles the majority of politicians and economists? Some of them admit that as far as they are concerned it is inexplicable and incurable; others offer explanations which a look at past inflations would show to be quite untenable. And now we have psychologists telling us it is not just an economic problem but is to be explained as indicative of a deep-rooted dissatisfaction with life.

A few facts show the irrelevance of most of the theories of inflation now current. Past inflations have always been halted when governments decided to halt them, and British capitalism operated continuously for a century before 1914 without any inflation at all. Are we to seriously believe that it was a century of “satisfaction with life” on the part of the workers? And what of the ten years 1921-31 when prices were not rising but falling, and the workers showed their “satisfaction” by the General Strike?

Push, Pull and Prattle

Understanding inflation may not be particularly easy, but most of the difficulty is the confusion introduced into it by economists. An economics handbook published in 1909 defined inflation in terms of its cause, depreciation of the currency: “high prices caused by an over-issue of inconvertible paper money”. That is how Marx and many other economists correctly explained inflation, but nowadays most economists attempt to explain it in terms of its symptoms not its cause.

They talk about two kinds of inflation, “cost-push or wage-push” and “demand-pull”, the one pushing prices up and the other pulling them up. That is about as useful a concept as Dr. Doolittle’s famous circus animal the Pushmi-Pullyu which had a head at both ends. (It would appear that the economists’ monster has both heads at the same end but, like Dr. Doolittle’s, they mostly take control alternately and not both at the same time.)

If a general price rise had not been caused by currency depreciation its “cost” and “demand” symptoms would also not be there; which is not to say that individual and general price rises cannot happen for causes other than inflation. In the period 1820-1914 in this country, when there was no currency depreciation and therefore no inflation, there were alternate comparatively small falls and rises of the price level in depressions and booms. But it never once rose above the level of 1820 whereas, with inflation, the present price level is about six times what it was in 1938.

General price rises due to currency depreciation were known in previous centuries, but it was a mark of 19th-century British capitalism that, by deliberate government policy, prices were kept comparatively stable by the avoidance of inflation. It did not stop the growth of production and wages.

Marx and Keynes

Marx dealt with one aspect of price changes in his lecture published in the pamphlet Value, Price and Profit, where he examined the erroneous proposition that wage increases cause a general price rise; but he did not there deal with currency depreciation or inflation. On the contrary, as he pointed out, he was dealing with the situation as it existed in Britain when there was no inflation. He was therefore assuming for his purpose no change whatever “in the value of the money wherein the values of products are estimated”.

His examination of inflation is in Capital, Volume I, in the chapter “Money, or the Circulation of Commodities” where he put forward the proposition, based on his labour theory of value, that the excess issue of an inconvertible paper currency puts up prices.

J. M. Keynes in his Tract on Monetary Reform (1923, pages 42-3) gives a similar explanation. Marx pointed out that beyond a certain point an excess issue of notes will result in money “falling into general disrepute”. Keynes, in the work referred to, dealt with the way this condition of general disrepute developed in Germany in the great inflation of the nineteen-twenties. Professor Edwin Cannan, without using the labour theory of value, reached much the same conclusion from observation of what actually happens (Modern Currency and the Regulation of its Value, 1931).      

It should be noted that Cannan, like Marx, dealt with “currency” (notes and coin). Some modern “monetarists” have introduced more confusion by trying to base their theories on “money” defined to include bank deposits as well as notes and coin..

What must be emphasised is that inflation is caused by those who control the note issue, which in this country is the Government through the Bank of England. It is often used in wartime because it is a speedy way of increasing government revenue to meet additional war expenditure. In Germany in the nineteen-twenties, in peace-time, it was a deliberate device (backed by big business) to pay off debts in depreciated currency: inflation, at least in the short term, serves the interest of debtors against lenders.

Marx and inflation

Marx’s treatment started with the economic law that the use of a particular commodity to serve as the money commodity, e.g. gold or silver, rests on the fact that that commodity like all other commodities is an embodiment of value, the amount of “socially necessary labour” required to produce it. If for example one ounce of gold and one bicycle each require ten hours’ labour they are equal values, and gold can serve as the “universal equivalent” for the exchange of all other commodities.

The conversion of value into price takes place through the minting of coins of uniform weight and purity. In Britain each £ or sovereign was, by law, fixed at a uniform weight of gold (about a quarter of an ounce). So the bicycle’s price would be about £4 because its value was equal to that of one ounce of gold. If the British government had fixed the £ at one-eighth of an ounce of gold instead of one-quarter, the bicycle’s price would have been £8 not £4 and all prices would similarly have been doubled. If they had fixed it at half an ounce, all prices would have been halved. On both suppositions, while the price of the bicycle (or other commodity) would have been doubled or halved, its relation to an ounce of gold would have remained unaltered.

The next stage in Marxian monetary theory was based on the proposition, confirmed by long experience, that with a given total volume of production and buying-and-selling transactions, and with gold minted into the £ or sovereign at about a quarter-ounce, a certain total amount of currency would be needed. (The fact that the required total varies from time to time with the velocity of circulation need not be gone into.) What Marx put forward was that the total value of needed currency represented a total mass of value, and therefore a total weight, of gold, and that if the total of gold is replaced by inconvertible paper money and the paper money is then issued in excess, prices will go up.

“If the paper money is in excess, if there is more of it than represents the amount of gold coins of like denomination which could actually be current, it will (apart from the danger of falling into general disrepute) represent only that quantity of gold, which, in accordance with the laws of circulation of commodities, is really required and is alone capable of being represented by paper. If the quantity of paper money issued is, for instance, double what it ought to be, then in actual fact one pound has become the money name of about one-eighth of an ounce of gold instead of about one-quarter of an ounce. The effect is the same as if an alteration had taken place in the function of gold as a standard of prices. The values previously expressed by the price £1 will now be expressed by the price £2.” (Capital Vol. I, page 108 in Allen & Unwin edn.)

Now Showing

Long experience has shown that Marx was right. Whenever inconvertible paper money has been issued in excess for a considerable period it has raised prices above what they would otherwise be.

In Britain the amount of notes in circulation in 1938 was £554 millions. It is now about £5,330 millions. Since 1938  the needed amount has been affected by certain changes, including greater total production (now more than double the 1938 level), and increased population, which would operate to raise the needed amount of currency. Working in the opposite direction has been the wider use of cheques, etc. and corresponding reduced need for notes and coin.

In the 19th century the issue of notes in excess amount was effectively prevented by law. Beyond a small fixed amount the Bank of England could only expand the note issue by placing an equivalent amount of gold in its reserve, and the paper was tied to gold by the requirement of “convertibility” –that is to say, the Bank of England was compelled by law to give gold in return for notes at the legally fixed rate of about one-quarter ounce for each £1. Except for marginal variations the value represented by Bank of England notes could not be different from the value of gold. Bank of England notes “were as good as gold” and were everywhere accepted as such. Now there is no convertibility, and in effect no restriction on the note issue.

A Two-way Fallacy

The man largely responsible for the adoption of inflation as government policy (they now call it “reflation”) was the economist J.M. Keynes. Yet he did not knowingly and intentionally advocate inflation as a long-term policy. (There were some people who did just that.) What Keynes did was to say that if certain other things were looked after it was no longer necessary formally to restrict the note issue.

“Thus the tendency of today  . . . rightly I think is to watch and to control the creation of credit and to let the creation of currency follow suit, rather than, as formerly, to watch and control the creation of currency and to let the creation of credit follow suit.”

Professor Cannan promptly warned that the doctrine was basically unsound and would open the door to inflation. See Economic Journal, March 1924, and Cannan’s An Economist’s Protest, 1927, pages 370-384. Keynes’s views won the day and came to be accepted by the Tory Party and Labour Party and by the trade unions, not only as monetary theory but because Keynes put them forward as part of his popular “full employment” doctrine.

This doctrine was formally set out by the Tory, Labour and Liberal wartime government in 1944 in the White paper Employment Policy. It was cautiously phrased but was immediately followed by a more crude interpretation drawn up by the Labour Party in Full Employment and Finance Policy. Here it was laid down that if unemployment threatened “we should at once increase expenditure, both on consumption and on development – i.e. both on consumer goods and capital goods. We should give people more money and not less to spend. If need be we should borrow to cover government expenditure. We need not aim at balancing the budget year by year.”

It is the Labour Party version that has been followed by Tory and Labour governments, particularly in the past decade. It has included hoping for a much lower level of unemployment than even Keynes thought possible, and part of the belief has been the idea that increased spending increases production –something which events show to be true, if at all, only for a short period.

The fallacy of the theory is well illustrated from the period 1965-72. In that period annual consumer spending jumped from £22,943m. in 1965 to £39,263m. in 1972, an increase of 70 per cent. In the same period registered unemployment jumped from 360,000 to 943,000 and production went up by only 17 ½  per cent. The principal result was that prices rose by 47 per cent.

The policy is still being operated. One of the few forecasts about the present Labour government that has proved correct was that made by the late Richard Crossman, former minister in a Labour government, that the rate of inflation would be increased (Times, 12th Sept., 1973).

There are two ways in which currency depreciation can be operated, the direct way used by the German government in the ‘twenties and the more indirect way used in Britain. Professor F.W. Paish summarised them:

“In some countries it [the Government] might simply print more notes and use them to pay for its expenditure. Nowadays, in such a country as Great Britain, the government would borrow from the banks, printing more notes to enable the banks to maintain their cash reserves.” (Benham’s Economics. 1967, p. 465)

The additional notes and coin get into circulation through the joint-stock banks (Lloyds, NatWest, etc.) which bank with the Bank of England.

These banks withdraw notes and coin from the Bank of England and in turn the additional notes and coin reach the individuals, shopkeepers and employers who make withdrawals in that form from their deposits with the banks. The note issues are set out in the Bank of England’s Weekly Return. In the week ended 24th July 1974 there was an increase in the notes in circulation by £52,193,306 to a total of £5,098.767,831.

Signs of Alarm

Many economists and politicians would be happy to see inflation going on indefinitely in the belief that it keeps unemployment down. But whatever happens with moderate inflation, even they cannot ignore that when inflation gets to the point that money falls into “general disrepute”, unemployment multiplies. In Germany in 1923, unemployment was 4.2 per cent with another 12.6 per cent partially unemployed. Within the year it had jumped to 28.2 per cent and 42 per cent respectively, representing together over 5 million workers in receipt of unemployment pay and an unknown larger number not receiving relief. At this point the German government called a halt by replacing the notes by a new gold-backed currency.

Realisation of this danger here has induced some politicians and economists to call for the limitation of the note issue. In 1968 the Editor of The Times (15th October) described the idea that price rises could be checked “by printing fewer notes” as a “crude error”. Now the Editor, Mr. Rees-Mogg, has been converted and is urging a return to the gold standard (Times, 1st May 1974).

But at the same time they are fearful that the drastic action of entirely stopping the increase of the note issue would, as in 1920, bring prices down but be accompanied by a big increase in unemployment. So the line taken by one group of economists is to call for a gradual reduction in the rate at which inflation is increasing. Professor A.A. Walters of the London School of Economics is urging that such a slackening should be spread over three years (Money and Inflation, Aims of Industry 1974. and Times, 23rd July 1974).

It only remains to point to the difference between Marx and other economists. Marx was simply describing how capitalism operates, with inflation and without it. He was not saying, as did Cannan, that it is better to run capitalism without inflation, or saying like Keynes that a “full employment” policy will improve and save capitalism.

In Marx’s view capitalism inevitably produces unemployment and crises. For him the task of the workers is to abolish capitalism and replace it with Socialism, in which problems of prices, inflation, crises and unemployment will not exist.

Edgar Hardcastle

50 Years Ago: Mr. Keynes Goes to the Bank of England (1991)

The 50 Years Ago column from the October 1991 issue of the Socialist Standard

The news that Mr. J. M. Keynes, the “rebel against financial orthodoxy”, has become a director of the Bank of England and may in due course become governor when Mr. Montagu Norman retires, inspires great hopes among his admirers in the Labour Party, but it will not cause even the slightest flutter among Socialists. His admirers may congratulate themselves because he opposed the return to the gold standard in 1925 and advocated "unorthodox" proposals such as a managed currency and State control of interest rates, but they should remember his own words: "My trouble has been that orthodoxy has always caught up with me”. In other words, his quarrel with the administrators of capitalist finance has always been at bottom that they did not know their job properly, and should take some tips from him. He has never been concerned with our job of getting rid of capitalism.

(From Socialist Standard, October 1941.)

Naming the Day (1996)

The Greasy Pole column from the February 1996 issue of the Socialist Standard

Will he, or won’t he? Should he, or shouldn’t he? Can he or can’t he? All over the country millions of people will be asking these questions, agonising in sympathy with John Major as he grapples with a historically vital dilemma. Should he call a general election in the near future—this summer, for example—or should he wait until his government has run its full term in 1997?

Advice for him will come thick and fast, to Downing Street, Chequers, Huntingdon or wherever he may be. Some of it will doubtlessly come from Tory MPs who sit nervously on vulnerable majorities. There will be much reference to precedent—to Wilson’s misplaced confidence in 1970, Heath’s misreading of the political situation in 1974, Callaghan leaving it late in 1979 . . .  All of this will have a common theme. The timing of an election is all-important, in fact it can make the difference between winning and losing. People who vote are so fragile in their political knowledge, have such puny memories, are so pliant in their intentions, that they can be easily induced by promises and deceptions into changing their minds about which way they vote. So with a bit of clever calculation, some well-crafted bribes and a canny sense of timing, any government can win its way back to power—again and again and again. Even a government like John Major’s, which day-after-day is exposed for its impotence and cynicism and contempt for the workers.

Interest rates
For example the Chancellor of the Exchequer has recently announced some reductions in the base rate—the last one on 1 January. This is seen as good news, as a promise that soon the economy will boom, unemployment will reduce, everyone will be happier and more prosperous. There is no factual reason for workers to think like that; reality is that whether interest rates are high or low has no significant effect on our living standards.

But reducing base rates is seen as good news for the economy and so for people's welfare and so for the Tory Party. As the Guardian put it: "the intense political pressure on the Chancellor, Kenneth Clarke, to boost the government’s fortunes was underlined yesterday when he brushed aside Bank of England misgivings and cut interest rates for the second successive month.” Bank of England governor Eddie George is, said the Guardian, ". . .  plainly wary that it is the political timetable, of an election in the next 15 months, which is governing the Chancellor's monetary stance . . ." Another one to be wary was Labour's shadow chancellor Gordon Brown, who sulkily tried to play down the change in the rate. In fact, whichever side of this bogus argument they took, both Labour and Conservative were agreed that there are votes in the matter of interest rates and they both want to grab as many of them as they can.

Falkland factor
What is important about this bogus argument is what it tells us about how the parties of capitalism regard elections and the people who vote in them and how to manipulate the whole timing to their own advantage. The government of the day treats an election as a time to try to divert attention away from its obvious failure to do anything about the problems characteristic of capitalist society and towards what it represents as its successes That is why the government tries so hard to convince us that people who are suffering the more extreme poverty do so because of some intrinsic personal fallibility while at the same time they tell us about how many fraudulent claimants of state benefits their investigators have uncovered. That is why in 1983 the Thatcher government submerged the memories of the problems they met in 1981 in a neurotic, reactionary hysteria as Thatcher handbagging the Argentinians. (Of course at the time she did get some help from the Labour Party with its splits and its election of Michael Foot as leader . . .)

By the same token whenever Tory ministers review conditions in Britain in 1996 they do so on the assumption that all reasonable people know things are getting better and better, everyone getting more prosperous, more healthy, more secure. Crime is falling day-by-day. If we believe enough of this often enough the Tories will be encouraged to give us a chance to show how grateful we are for all they have done for us by voting for them in an election.

Stress
Except that it is not quite like that. For one thing Britain is fast gaining a reputation as the sweatshop of Europe, as workers are forced to put in longer hours under the stress of unemployment. This kind of pressure produces its own problems. apart from physical illness such as cancer and heart disease (according to the Health and Safety Executive, stress-related sickness results in 90 million days absence from work annually). There is also a human cost, in mental breakdown, broken families and. in some cases, suicide.

None of this will be highlighted by Major, when he finally tells us the date of the election. Neither will he address the question of why, if his government had been so successful, he has to worry about the timing of the election. Why can’t he just leave the success to speak for itself and let his government stay in power for its full term, confident that the success will bring in the votes?

Perhaps he knows how impotent his government—like any other—really is to affect the course of capitalism and it does to the lives of human beings. Perhaps he knows that the timing of elections is a massive exercise in cynicism, which reveals the contempt which capitalism’s parties have for the workers and the support they regularly give to this social system. There is an effective response this. The voters—the working class—can realise the power they hold to radically change society, to make parties like Labour and Conservative a sordid irrelevance. If that happens John Major will be relieved of the stress of choosing a date for polling, like a gambler hoping he’s on a lucky streak.

Ivan 

Bank of England Swindle (1958)

From the February 1958 issue of the Socialist Standard

A Shabby "Tribune" Stunt

Professional politicians put over so many impudent stunts, made possible by the short memories of the electors, that they understandably grow careless and expect to get away with murder. But surely they cannot perpetrate the same swindle twice in a dozen years? It seems that Tribune, “Labour’s Independent Weekly,” is confident that they can. Its stunt at the end of 1957 was to launch a campaign for the next Labour Government to “take over the Bank of England.” Its issue of 20th December, 1957, carried the bold, front-page headline: “Let’s Nationalise the Bank of England!” with the sub-heading: “You thought we had done it already? You were wrong.”

Who Led the Workers Up the Garden?

As a fact, of course, the Bank was nationalised in 1946 by the Labour Government's “Bank of England Act.” So when Tribune comes along now and pretends that it wasn’t, it is a piece of trickery, designed to cover up the blatant failure of nationalisation to make any difference to the workers. The nationalised Bank is no more popular with the voters than was its privately-owned predecessor under Montague Norman, and Tribune is trying to lay the blame for the failure of Nationalisation on other shoulders. But the responsibility rests squarely on the Labour Party, including the group behind Tribune, who, as M.P.s or Ministers, fully supported that Act in 1946. It was they who told us what a fine thing it was going to be; an instalment of Socialism, they said. It was they who spoke and voted for the Act and later boasted of its “success” when they fought the next election in 1950. Bevan and Mikardo were two of those who voted for the Act, and neither they nor any others got up, in the House or outside, to say that it was a fraud and would not make a ha’porth of difference to the workers—that was left to the S.P.G.B. to say.

It is only now that Tribune, in effect, admits that the Act changed nothing.

Then the story was different. Typical claims made by Labour Ministers and M.P.s (backed by the Tribune group) were that the Act had given the Government “undivided control ”; which was said to be “helping the Government to maintain full employment and to further economic recovery” (Labour Party, Speakers' Handbook, 1949-50, page 115). And: “The Bank is another industry under public ownership which is both serving the national interest and paying its way.”

When the Act for Nationalisation was being voted in Parliament the Labour Chancellor of the Exchequer, Mr. Dalton, rapturously declared that “it is a model It will, in due course, make a streamlined Socialist Statute” (House of Commons Report, 29th October, 1945).

"Tribune's" Charges

To the thoughtless reader who has forgotten what happened when the Bank was nationalised Tribune's slashing charges may make convincing reading. How telling for Tribune to point out that only one of the 18 directors “comes from the trade union movement”; that 15 of them went to those “well-known nurseries of privilege,” Winchester, Marlborough, Rugby and Wellington; that “ten of the eighteen spend only a small part of their time at Threadneedle Street. The rest is devoted to running some of Britain's most powerful industrial and financial groups.” And is it not true, as Tribune says, that these, part-time directors, “are bound to think and act as businessmen and there is' plenty of doubt whether what is good for capitalism is good for Britain.”?

Tribune (20/12/57) publishes the photon of ten of these part-time directors of the Bank with the caption: “They’re all Bank of England directors and City men!”

Fine virile stuff, you think ? But it is less than half of the full story. Let us now look at the rest

What "Tribune” Keeps Dark

Of course it does not really matter whether the men in charge of a capitalist institution came from the coal mine and the elementary school or from Eton and Winchester, but Tribune now pretends that it does and the innocent reader may think that the selection of men from those public schools is a nasty Tory plot. But Mr. Dalton, who piloted the Nationalisation Act through the Commons went to Eton, and one of Winchester’s proud sons is Mr. Gaitskell, present leader of the Labour Party, whom Tribune will be supporting at the next election. And who is responsible for many of the directors being part-timers (as if that mattered either)? The answer is that the provision for part-time directors is in the 1946 Act that the Tribune group then supported. And is it true that ten of them have other business and banking interests? Sure it is, but so it was when the Labour Government (including the Tribune's idols) appointed the court of governors in the years 1946-1951. Seven of the men now named by Tribune (L. J. Cadbury, Sir John Hanbury-Williams, Basil Sanderson, Geoffrey Eley, Lord Kindersley, Michael Babington Smith and Sir Charles Hambro) were actually appointed directors in the first place by the Labour Government—supported by Tribune. So that everything that Tribune lists as items in the present spurious campaign about the Bank of England was true also in 1946-1951 when Tribune was backing the Nationalisation Act and the Labour Government that carried it through. The only change is that then they were promising what great "socialist” benefits it would bring and now the voters don't believe this any more.

Trick in Preparation for the Next Election

Tribune now declares that control of the Bank of England is not in the hands of the Government but is “kept in the hands of a formidable team representing the Minority rent, interest and profit class.” They say this is intolerable and must be put right; presumably at the next election.

As we have already pointed out, the existing arrangements were created by the Tribune group and the rest of the Labour Party.

But the deception has another angle too. The Labour candidates and M.P.s who backed Tribune, fought the 1950 General Election on the Labour Party Declaration of Policy called “Let Us Win Through Together." It contained the following clause :-

  “Finance must be the servant and not the master of employment policy. Public ownership of the Bank of England has enabled the Government to control monetary policy. Subject to the will of Parliament, we shall take whatever measures may be required to control financial forces, so as to maintain full employment and promote the welfare of the nation.”

So Tribune were telling the electors in 1950 that the nationalisation of the Bank of England, already five years old, had “enabled the Government to control monetary policy.” Now they say that control is really in the hands of a group of capitalists, yet this very group were put there, as directors of the Bank, by Tribune's political friends! And the Labour Government, returned again to power in 1950, kept the same arrangements in being. Now Tribune says that the Bank of England is “run by the same old crowd as before,” that is by the crowd they put in control! Could humbug go further?

Bits of Socialism

When the Labour Government nationalised the Bank of England the S.P.G.B. stated that it was no concern of the workers and nothing to do with Socialism. Tribune, of course, was telling a different tale. Now Tribune largely admits the truth of what we said :-

  “What has actually happened provides a classic illustration of the failure which follows from the attempt to insert a small element of Socialism into institutions left in capitalist hands—the very doctrine since revived by the Labour Party Executive in Industry and Society. The small dose of Socialism is quickly swallowed up in the capitalist mass and nothing is changed.”

Of course as a statement of principle this is true, you cannot insert bits of socialism into capitalism, but for Tribune to say so is humbug. They were believers in that futility in 1946, are in favour of it now, and will be asking the workers to vote for it (and for the ex-Winchester leader of the Labour Party) when the next election comes.

What is more, the Tribune writer takes care to let us know that when he talks about Socialism it is with his tongue in his cheek. If he were a Socialist he would know that Socialism will have no use whatever for the financial banking, and currency machinery of capitalism, including its central organ the Bank of England. Yet the forefront of his demand on the next Labour Government is that it shall make the directors full-time instead of part-time; as if the difference between the capitalism that we have and the Socialism socialists want, is a question of the number of directorships capitalists shall hold.

If Tribune were interested in Socialism it would know that the way the Bank of England is owned, controlled and administered is a concern of the capitalist not of the workers, but Tribune couldn’t care less.

Here's hoping that at least some of Tribune's readers have long memories.

Edgar Hardcastle

The Review Column: Space Deaths (1967)

The Review Column from the March 1967 issue of the Socialist Standard

Space Deaths

The American space authorities knew that the pure oxygen used in their ships carried a serious risk of a rapid, intense fire. But to have changed to a mixed gas system would have delayed the entire American space programme.

If everything went perfectly according to plan, the danger would come to nothing.

In the same way, if everything had gone according to plan the early Comets would not have broken up in the air, there would have been no typhoid epidemic at Zermatt, the spoil heap would never have crashed down the mountain at Aberfan.

Capitalism is a society where economic rivalry — they call it competition—is not only inevitable. It is actually encouraged.

As one result of this rivalry, America and Russia are now engaged in a grim race. They are not probing out to the Moon merely to satisfy a lust for adventure but because the development of rockets has opened up space as a strategic highway, perhaps to be used in a future war.

No major power can now afford to ignore the ballistics of space. Each landing on the Moon adds to this knowledge, apart from the fact that it brings nearer the day when other planets become military bases for the great powers on Earth.

Neither America nor Russia can afford to fall behind. If this means that they have to take chances—with equipment, with buildings, with human lives—this is all part of the competition for top place in Space.

A big prize. Beside that, does it matter to capitalism that trapped inside the burning space craft there were three human beings?

Bank Rate Cuts

Bank Rate is generally regarded among the economic “experts” as a means of controlling the economy.

Put up the Rate, runs their argument, and you slow down production; put it down and production will start booming.

None of the experts have ever explained why, if it is really so easy to control capitalism, the economy ever gets into a crisis.

The Chancellors’ decision to reduce Bank Rate by one half per cent was greeted as a stimulant to British industry.

“One positive gain,” said the Daily Telegraph, “it (the government) hopes to see . . . is a greater willingness among businessmen to proceed with their capital investment programmes.”

Since September 1953, when Bank Rate was 3½ per cent, there have been twenty seven changes. Both Conservative and Labour governments agree that Bank Rate helps to control the economy, both have upped it to seven per cent in times of crisis.

But none of these changes have altered a course of economic events which was already set. They have, in fact, been made in response to those courses; they have been not an influence but a reaction.

Callaghan’s panic seven per cent last July was no exception and neither is the latest reduction. William Davis, the Guardian’s Financial Editor, put it:

I gather that the Bank of England advised the Chancellor a a few weeks ago that a half per cent cut in Bank Rate couldn’t be delayed much longer.

The economy of capitalism, as so many Chancellors have found out cannot be controlled, by Bank Rate changes or any other juggling. The Labour Party should know this, perhaps better than anyone.

For they once had a mighty Plan to defeat economic crises. But just like the Tories, they end up doing what the Bank of England tells them.

Export Incentives

Harold Macmillan, in one of his languid moments, once said that exporting is fun.

Harold Wilson, and Prince Philip, will have none of this. Exporting is a stern business. It is, in fact, a national duty.

In case there are any firms with a sense neither of fun nor of patriotism, the Labour government have provided some inducements to make them look favourably on exporting.

It is apt comment on whether Wilson really believes in the appeal of national duty, that these inducements are financial—tax rebates and so on.

By this the Labour government show how firmly they realise there is only one kind of incentive capitalism understands and that is one which improves the balance sheet.

This is basically what decides a company on whether to export their produce or not. Unless the financial bait is juicy enough, they will ignore all the speeches about national duty, and happily forego their fun, by concentrating on the home market.

This is how Derek Pritchard, chairman of the British National Export Council, put it in an address on January 18 last:

No one in their senses exports at a loss in the national interest. This is a sure way to go out of business. No business man today exports at the behest of politicians. He does it because he sees a chance of making a profit.

There is, of course, nothing exceptional about this statement. All production under capitalism is carried on in the hope of making a profit. If a capitalist thinks that a market, home or abroad, is too tough for him to realise his profit there, he will avoid it. Politicians and princes may blather about having fun and the national interest but in the end they have to face the uncomfortable facts of capitalist life.

The D’Ollveira Affair

The South African government have always made it plain that mixed colour touring teams were not acceptable to them.

For a long time the issue has been dodged by the sporting authorities of the countries which send teams to South Africa. Recently, the New Zealand Rugby Union was brought face to face with it; some of their best players are now Maoris and they were not prepared to go into Tests against South Africa without them. So they cancelled their tour.

Now the MCC are probably praying that Basil D’Oliveira will get them off the hook by losing form (and in the circumstances he will be something of a cricketing superman to keep it) so that the question of his selection does not arise.

Of course, the South African government have been accused of mixing politics with sport. And so they are.

But what were those ranting, hysterical thousands at the World Cup Final doing, but mixing nationalism—which, after all, is politics—with sport? Each foreign foul booed, each English foul applauded as an act of manliness, mixed politics with football.

South Africa’s ban on D’Oliveira is no more than the projection of their unsavoury political and racial theories into cricket. Anyone who objects to this, and who wants to see sport as a contest carried out for the sake of the game alone, cleanly and with no grudges, should ask themselves whether this will ever be possible in a society which fosters racism, nationalist hates and economic rivalry.