Material World: Looking inside the doughnut (2025)

The Material World Column from the October 2025 issue of the Socialist Standard

Kate Raworth’s 2017 book Doughnut Economics has three main themes: the Doughnut itself, the shortcomings of mainstream economics, and reformist proposals about how society should be organised. We will discuss these in reverse order, finishing with the one that offers the most interesting ideas about humanity and the world we live in.

Most of the ideas in the book about how society should be organised are fairly standard left-wing reformist fare, such as firms being owned by their employees. In the peer-to-peer economy, everyone can become both a maker and a user. There should be community currencies, alongside national currencies. Rather than commercial banks creating money when they offer a loan (a claim which misunderstands how banks function), central banks can issue new money to every household. Tiered pricing, whereby the more people consume, the more they pay, will ration use of resources and benefit the less well-off. Economies should be regenerative by design, recycling carbon, water and so on. These schemes, however, leave capitalism in place and so will not solve current problems.

Tomelilla, a small town in Sweden, is attempting to apply some of the principles of Doughnut Economics (Guardian, 17 July). This includes, for instance, revamping an existing building rather than building a new ice rink. This is an example of the Doughnut Economics Action Lab (doughnuteconomics.org), which has several hundred member organisations across the world, and is intended to put the Doughnut ideas into action. The trouble is that it all assumes the continuation of capitalism and so will not be able to go beyond a system which prioritises profit over caring for the planet and its inhabitants.

Raworth argues that economics as taught nowadays is rooted in the mindset of the 1950s and even the 1850s, with little or no discussion of what the aims of the economy should be. In reality, the free market has never existed, as markets are strongly shaped by laws, institutions, cultures and so on. Nor is there such a thing as free trade: power relations always influence cross-border flows. Unpaid labour is ignored, as is the fact that the economy exists within society and the living world. At the heart of economic theory is Homo economicus, ‘solitary, calculating, competing and insatiable’, whereas humans are in fact reciprocating, interdependent and ‘deeply embedded in the web of life.’

The book’s subtitle is Seven Ways to Think Like a 21st-Century Economist, which would involve, for instance, acknowledging an embedded economy with social, adaptable humans which is distributive and regenerative by design and agnostic about growth. There are some good points here, but humanity would still be stuck with capitalist economics.

As for the Doughnut, this is ’the space in which we can meet the needs of all within the means of the planet.’ It is shown via a diagram of a doughnut, with two rings and an empty interior. Its inner ring sets out the basic requirements of life, including sufficient food, water, sanitation, energy, education, housing, all achieved with gender equality, peace and justice. But these are not currently being met, as millions ‘lead lives of extreme deprivation’. One person in nine, for instance, does not have enough to eat, and millions of children die each year from easily preventable illnesses. And the richest 1 percent of the world’s population own more than the other 99 percent put together.

The outer ring relies on the notion of planetary boundaries proposed by Earth-system scientists, an ecological ceiling that humans need to keep within: these include climate change, ocean acidification, chemical and air pollution, freshwater withdrawals, and ozone layer depletion. Most of these are associated with specific levels that should not be crossed. But at least four of them have already been transgressed: climate change, land conversion, nitrogen and phosphorus loading, and biodiversity loss. Biodiversity loss, for instance, is at least ten times the recommended rate, and the amount of carbon dioxide in the atmosphere is above what should be aimed at.

The idea behind the Doughnut is to meet everyone’s basic needs while keeping within the planetary boundaries that will prevent environmental catastrophe. ‘Raworth’s fundamental assertion is that a sustainable and just society can be realized only if a global economic system can be put in place that will allow as many people as possible to thrive in the space between these upper and lower boundaries’ (Kohei Saito: Slow Down).

As an illustration of the problems faced by humans, the Bulletin of Atomic Scientists recently moved its Doomsday Clock to just 89 seconds to midnight, the closest it has ever been to catastrophe. This was partly because of the war in Ukraine and the risk of nuclear war, but it was also on account of climate change, emerging and re-emerging diseases, and so on.

Raworth uses an Embedded Economy diagram to illustrate how energy plus living matter and materials are employed within Earth and society, while heat and waste matter are output within the market, the state and finance. But more constructive is the idea of a butterfly economy, whereby renewable materials are used and the two wings involve regenerating and restoring (repair, recycle etc). An economy cannot be completely circular as it is not possible to re-use all materials, so speaking of a cyclical economy is more helpful. The latest Circularity Gap Report argues that the global economy is in fact becoming less circular than it was a few years ago.

The Doughnut is not a solution in itself but a framework for examining some possibilities and looking at how a system designed to meet people’s needs could work while remaining inside the limits that have been identified. A socialist world, without classes or borders or the profit motive, would be by far the best way of addressing these issues and achieving the goal of, as Saito says, thriving within the boundaries.

Paul Bennett

Blogger's Note:

Kohei Saito's Slow Down was reviewed in the May 2025 issue of the Socialist Standard.

Economics Reworked (2025)

Book Review from the August 2025 issue of the Socialist Standard

An Economy of Want. Economics Reworked. By Donald Power. ISBN 978-1399985888. Also available free from Amazon as an e-book.

This self-published book starts off well enough. That, like all other animals, humans survive by applying their natural energy to obtain from the rest of nature what they need. Thanks to humans’ particular anatomy, their needs — or ‘wants’ as Power calls them — have become immensely greater than those of any other animal, as have the ways of obtaining from nature the means of satisfying them. How they obtain them has been the basis of the economic system of every human society.

Present-day society, he points out, is one where a minority owns most natural resources and instruments of production, fashioned and refashioned from materials that originally came from nature, while the rest have nothing but their natural ability to work. The latter have to work for the former and provide them with the means to satisfy their wants. This means, Power claims, that the economy is driven by what the owners ‘want’ in order to satisfy their needs. They pay workers to produce these and so provide workers with the money to satisfy some of their own ‘wants’ even if not much more than enough to maintain their particular ability to work.

That is alright as far as it goes, but the assumption is that what drives the economy today is the consumption wants of the owners. Power explicitly states this and it is the basis of his argument against the dominant school of economics that teaches that the free market system tends to lead to full employment and also of his explanation of booms and slumps. According to him, the level of employment depends on what the owners want (desire) to consume, so it is entirely possible that they might not want enough to bring about the full employment of the whole workforce. Booms are explained by the owners coming to want more and slumps by their coming to want less after the bubble bursts. He would seem to be saying that the economy is driven by the arbitrary desires of business owners.

He is, however, on the right track in that how today’s economy moves does depend on what the owners do with the surplus that the workers provide them with. But it is not what they want to consume that drives the economy but what they re-invest — or don’t. Power is well aware that they seek profits but gives the impression that this is something they decide to do when they desire to consume more. In reality, it is something that is forced upon them by the workings of the competitive struggle for profits, which is part of what capitalism is; they have to give priority to re-investment in more modern machinery and methods just to survive as a business concern. The capitalist economy is not driven by consumption, not even the consumption of the capitalists. It is driven by business owners’ market-imposed quest for profits, not their own consumption. What we have today is not so much an Economy of Want as an Economy of Profit.

Power’s main concern is to save the planet. Because he thinks that the economy is driven by wants rather than profits, he thinks that it can be reformed — ‘redesigned’ is a word he uses — to work differently by measures to change what people want to buy or use. He proposes to limit the consumption of the owners and, through taxes and subsidies, to re-direct the population towards wanting goods and services whose production and use don’t harm the rest of nature. This is a desirable goal but is incompatible with the present economic system which is driven by profits not wants and so requires its abolition.

Having said this, the book is written in simple, easy-to-read English. It is also refreshing to read a book from a critic of the way capitalism works who doesn’t repeat nonsense about banks having the power to create money from thin air. He accepts that work is the basis of wealth-production. In fact, he uses a labour theory of value, even though he doesn’t realise that Marx was as aware as he is that this doesn’t explain the price of land, paintings or the high income of talented footballers and other artists (demand in relation to unique supply does; the labour theory only applies to what can be reproduced).

Adam Buick

Where’s the money going to come from? (1994)

From the August 1994 issue of the Socialist Standard

Anyone who watches the political programmes at Sunday lunchtime will he familiar with the question "Where’s the money going to come from?" On 1 May, for instance, Brian Walden pressed Labour MP Ann Taylor on this question as a rejoinder to her suggestion of increased nursery provision. And Robin Cook, who insisted on the European Social Chapter (On The Record, 29 May), was similarly rebuked by the money question. Labour MPs of course have no real response they can hold against this shibboleth of received wisdom; they believe in the basic precepts which necessitate the asking of the question.

It seems obvious to socialists that an analysis of the nature of money is required here. It can't be simply assumed that money is a type of innocuous representation of actual wealth. On the contrary it must be asked if its overall arithmetical form imposes certain ideological categories and casts its own ethical (or unethical) shadow over our existence.

Nowadays the analysis of money has disappeared, in Orwellian fashion, from economic discourse. But critiques of money extend back over 2000 years. One of the best discussions of money, and one that greatly influenced Marx, is still that of the Ancient Greek philosopher Aristotle.

Aristotle

Aristotle attributed two natures to money, that of a means and that of an end. This distinction reflects an ethical critique of the effects of money and how it is used. Some uses of money were acceptable and even laudable, argued Aristotle, as when money is used simply as a convenient means of getting useful things. But other uses, he said, were unacceptable or perverted, as where the exchange of goods was simply a mask for the accumulation of money or spurious wealth. So trading directed towards the use of goods with money merely as a common medium of transaction was seen as good, and trading directed at the exchange of commodities for profit, with commodities used merely as a means of securing this profit, was seen as bad. The distinction corresponds closely, but problematically as we shall see, to the one between use value and exchange value.

Aristotle used the example of the Delphian knife to illustrate the perverting effect of money. The Delphian knife was a tool that was made to be exchanged for money rather than to be used to perform a task. It could be used as a knife, a file, and a hammer, but in none of these functions was it very adequate, its only advantage was that it was cheaper in money than the three separate tools together. Hence a compromise is made between the tool-like properties of the knife and its exchange properties, and insofar as it was made to serve the latter function, it is not really a tool, except, as it were, a tool for making money rather than things.

Even philosophy itself is compromised by its association with exchange value. According to Aristotle, the Sophists let themselves be tainted by the profit motive, for the Sophist "is one who makes money from an apparent but unreal wisdom". The medical profession too becomes confused when its ends are mixed between money-getting and health. Contemporary examples inevitably spring to mind: "health" businesses selling liposculpture, far from providing perfect information on the effects of the operation, as the market sophistry maintains, on the contrary deliberately deceive patients about the risks involved, in order to secure the sale. And it could be argued that in every consumer product, a compromise must be made when the purposes involved in its creation are divided between exchange and use value; between the requirements of the seller and those of the customer.

Aristotle’s distinctions of exchange and use, means and ends, ethics and purely economic factors apply to the modern orthodoxy. The relatively trivial question "Where’s the money going to come from?" becomes the penetrating question "What is money?" The latter question challenges the received categories of exchange relations and demands an investigation into the barbaric practices out of which exchange arose. It is a question that asks is money realistic — or atavistic?

It is clear that ideas as much as facts are central to the workings of money. For example, the principle that whatever projects are envisaged must come out of existing funds. Fiscal spending, so it is said, represents a real practical limit which it is impossible to surpass. Behind this is the idea of a finite cache of wealth, a fund or a larder, in which things have been stored, and out of which things can be withdrawn at a later date. Is this really a practical matter, as no doubt Brian Walden would believe, or is it the promulgation of an ideological programme?

Admittedly the roots of this "larderism" lie deep in the facts of prehistory, when the store of food for the winter exemplified the model of a limited physical source determined by the real quantity and the real fertility of the land. This model still provides a basic formula for the operation of banks and nations, the only difference being that food has been replaced by an abstract symbolism of money, taking the form of bank reserves or national currency reserves representing all forms of production, not just agricultural.

This larderism has a powerful hold on the level of folk economics. On this level, the constraints of fixed budgets emerge in populist style as slogans such as "you can't just print money", "there is no bottomless pit", "you can't have your cake and eat it", "you don’t get ought for nought", "money isn’t made in heaven it's earned here on Earth", "there's no such thing as a free lunch", etc. Ah, the stuff tabloids are made of. And on the academic level, the principle seems to be simply elevated by nobler terms of expression rather than critically evaluated. Lord Robbins urged us to accept economics as the eternal problem of matching infinite wants against finite resources; the fundamentals of Mercantilism insist that "no man profiteth but by another's loss". All these aphorisms, ranging from crudity to casuistry, suggest a store of goods gained by toil in the summer as protection from the oncoming winter.

Despite creditable origins, this economic picture is logically flawed by its attempt to project the properties of a primitive domestic situation upon the complexities of the modern macroeconomic world. Some systems do follow the model of a fixed fund of goods, but the patterns of complex interaction between humankind and the biological and physical world, are, or can be, either synergistic or mutually exclusive. In the case of synergy, the more you take out of them, the more you have left; in the case of exclusivity, activity in one area has no effect on activity in another. The universal form of money makes all activities mutually burdensome, and insists, for instance, that the growth in education must be paid for by cuts in health, or investment in transport must be paid for by defence. Thus a kind of universal parasitism is established. One must question the nature of a formula of mutual burden which happens to have the very useful effect, for the Establishment, of dividing factions of society as competitors for limited resources.

The concepts of synergy and mutually exclusivity seem to violate the plausible, but examples are easy to find. The human body is synergistic in that the more you expend its energy as in exercise, the more energy you have as in fitness. If the linear economic model was applied to the body, you would get fit by sitting still and eating, thereby accumulating capital as fat. Mutual independence is clearly a fact of the natural and human worlds; there is no logical or physical connection between distant objects and activities. A bee taking honey in Glasgow is not constrained by one doing the same in London, yet Strathclyde is constrained by public spending in the Home Counties. Why do we impede ourselves in this way? Well, the popular wisdom is that there is only one pot of honey (money), for which we vie for attention. We should learn something from the symbiotic ecology of insects.

Free lunch

An even more serious error of money symbolism concerns the frontier of possible growth. The pseudo-physical arithmetic limit on economic development seems to be rooted in the Physiocratic principle that all wealth comes from the Earth, or the similarly-arbitrary Mercantilist precept that all wealth comes from the trade, or for that matter from the Marxist view that value is added by labour. But not only are the Earth’s resources, in contradistinction to the money model, symbiotic; they are also supplemented, as is the human body, from an external source. The human body is an organism in the world and receives its energy through food, and the Earth is a planet in the solar system, that likewise receives, free of charge, an inexhaustible input of fuel from the star in the middle of the solar system: the sun.

The sun is the free lunch that orthodox economics can’t come to terms with. The money system operates on a closed world assumption, on the much-stated monetarist principle that money is made here on Earth, it doesn’t come down from the sky. In fact all the wealth-making processes on the Earth are driven by extraneous energy that does come down, as it happens, from the sky. If money fails to reflect this reality and its function becomes not to reflect actual resources but to impose an ideological limit on their development and distribution. And if those limits demand that the homeless cannot be housed and that the hungry cannot eat (because where’s the money going to come from?) then that ideology isn't innocuous but a necessarily ethical, and unethical, force.

So Aristotle’s point is proved: the effect of money does poison the transactions and distributions it enforces its rule over. But not just directly because of the profit motive or exchange, but indirectly because of the general nature of the abstract form of exchange which embodies false assumptions about the nature of the world: the assumption that the fiscal frontier is the final frontier.

But to make Aristotle’s analysis fully consistent we ought to abandon the means/ends distinction which had a confused relation to the use/exchange distinction, and say not that there are two types of money (use money and exchange money) but that money necessarily is exchange value, that exchange value is necessarily perverse, and that true usefulness is necessarily contrary to the abstract value which money imposes on the physical world.

If Aristotle had accepted this analysis it would have solved a number of problems for him. Instead of having a tension between the two natures of money, one related to use, and one related to exchange, he could have rejected exchange completely and have said that the evaluation of goods should be dependent solely on their quality as defined in use. In a socialist system it is indeed use value that is the criterion of true wealth, and the spurious abstraction which exchange relations arbitrarily, and harmfully, apply to useful things would be simply removed.

If the premise of inherent scarcity is abandoned, as it can be when the qualitative, generous and realistic physical frontier is substituted for the miserly quantitative economic frontier, then it is no longer necessary to measure all goods by one universal standard as a means of rationing them. Is money the measure of all these things or are humans? Let us say the latter and thus advocate, along with an Aristotle-made-consistent, the abolition of exchange and the abolition of money. And if money is abolished, the question, where is the money to come from, is obviously redundant.

Norman Armstrong

News in Review: Wall Street slump (1962)

The News in Review column from the July 1962 issue of the Socialist Standard

Wall Street slump

Wall Street got the twitch last month and so did London and the Bourses on the Continent. The newspapers rushed out pictures of the panic in 1929 and then had to set their City Editors to work to explain why 1929 cannot after all happen again.

Everybody seemed to have forgotten that just before 1929 the financial experts were assuring us that the crash which was in fact just around the corner could never happen anyway. If this does not make the experts of 1929 look very impressive in retrospect, it must also teach us that the forecasts of all capitalism's economic experts are not worth very much.

Nowadays the experts are fond of pointing out the precautions which (they are confident) would prevent a runaway boom like the one which preceded the 1929 crash and therefore (they reason) would also prevent the crash itself.

This ignores the fact that slumps are not the result of an attack of jitters on the Stock Exchange; rather is it the other way round. Nineteen-twenty-nine was one of capitalism's classic crises and no amount of stock juggling could have averted it.

Nor should we assume that hotheaded speculation is dead. The Observer correspondent in New York reported that the “intellectuals" of Wall Street thought that: “By the end of last year the market had reached heights that brokers now, without blushing, describe as insane." and quoted one New York broker:

"The way some of (the big brokers) have been pushing over-priced stocks at naive investors is nothing short of criminal."

Perhaps a repeat of 1929 is not so impossible after all. For some of the experts were mystified by Wall Street’s 1962 twitch. The Guardian said: "The continuing retreat is puzzling commentators in that there seems to be no apparent reason for it. Mr. Walter Heller, President Kennedy's economic adviser, said there were no economic grounds for the condition of the market." Does this fill us with confidence that capitalism’s economists could not be taken unawares by a repeat of 1929? It does not.

Capitalism could have something up its sleeve, just as it had thirty-three years ago, to surprise the experts and impoverish the rest of us.

Liberal Party promises

Nobody can accuse the Tories of not being worried about the Liberal revival. Faced with the fact that some of the electorate undoubtedly find the Liberal Party attractive, the Conservatives have set out to prove that the very allure of Liberal policy lies in its irresponsibility.

This is being done in the time- honoured way of accusing the Liberals of pushing vote-catching policies without also mentioning that they would increase taxes to finance them. Mr. Iain Macleod has estimated that full application of the Liberal policy would put another eleven shillings on income tax. Most workers are convinced that they are the people who pay taxes: to them, the prospect of a standard income tax rate of 18/9d. in the pound must have seemed like black nightmare.

To back up his case. Mr. Macleod had his research boys dig out some choice examples of Liberal promise-mongering. He quoted Liberal policies for spending more on roads and education, for increasing pensions, repaying post-war credits and much more besides. The Liberals claimed that Macleod‘s quotes were taken out of context.

Yet in one way Macleod had a point, even if he did not know that he was making it. All capitalist political parties have to make a lot of attractive promises and boast that they can do things which they know are beyond their abilities. The Tories, for example, said in 1951 that they would stop prices rising.

Such promises can be effective vote-catchers. The one snag is that a party which is liable to be returned to power cannot make its promises too extravagant, because that would only make their betrayal that much more obvious. On the other hand, the more remote from power a party is, the more reckless its promises can be. The Liberals have little immediate prospect of becoming the government of British capitalism.

We may be sure that if the Liberal revival really gets under way their promises will become dimmer and more sober as the votes mount up. And if they ever get into power again most of the promises will disappear. Grimond and his men would run British capitalism in roughly the same way as the parties they now decry.

End of Eichmann?

No time was wasted, after the Israeli President bad written the quotation from the Bible across the petition for reprieve, in sending Adolf Eichmann to his death and scattering his ashes into the sea.

Why was Eichmann executed? For revenge? One man cannot adequately expiate the murder of six million people; a split-second execution is hardly revenge for the years of pitiless concentration camp horrors.

P

erhaps nearer the mark were those observers who think that the whole thing—the abduction, the trial, the execution—was meant to establish Israel as a political reality among the other capitalist nations. Political acts in themselves do have significance and for Israel to put to death the man who organised the extermination of the Jews is significant indeed.

Israel has asserted her power—even if, in terms of capitalist legality, she had little right—to bring the Jews' tormentors to book.

But what else has Israel done?

Perhaps she has made a martyr of the clerk-like Eichmann. Racial theories still live in capitalism's jungle; the execution of Eichmann could be the grain of sand around which they crystallise and flourish.

There is no easy explanation of the Eichmanns of the thirties and forties; Nazi Germany will remain a horrifying enigma for a long time to come. But we can say that part, at any rate, of the reason for the electoral success of the Nazis was the crisis of German capitalism after 1918 and the despair and cynicism which this bred in the minds of the German working class. In this mood, they would have supported anyone who sounded as if he had the answer to their problems. And Hitler, with his race mania, sounded like that to them.

Capitalism is always liable to convulsion and in any case it will never stop looking for scapegoats for its own shortcomings. This means that racial hatred is still with us and that even the madness of the Nazis need not be very far away.

The world may not have seen the last of its Adolf Eichmanns.

Coal profits

The nationalised coal mines made £28.7 million operating profit last year. If the Coal Board were a normal commercial company, said chairman Lord Robens when he announced these figures, it would be paying a dividend of 2½% from its profits.

But the coal mines are not, of course, a normal concern. The N.C.B. is liable to pay out on fixed interest stock and loans, which means that its dividend payments bear no relation to its working profit.

Last year the N.C.B’s interest payments came to £42.4 million, which turned its working profit into an accounting deficit of £13.7 million.

There are three things to be said about this.

Firstly, nationalising the coal mines was obviously a good move from the point of view of those who get the £42.4 million interest from a profit of only £28.7 million; much more than they would have got from Lord Robens' two-and-a-half per cent!

Secondly, the fact that millions of pounds profit is being wrung from the coal mines is proof—if anymore were needed—that nationalisation does not alter the capitalist nature of society. For profit, in private or state industry, can only come from the exploitation of workers in the industry.

Which brings us to the third, conclusive point. Many workers in this country were misled into supporting nationalisation because they thought it had something to do with common ownership. The figures which the National Coal Board has produced, and those which the other nationalised industries turn out year by year, show up that it was nothing of the kind.

Finance and Industry: The experts are fallible (1962)

The Finance and Industry Column from the July 1962 issue of the Socialist Standard

The experts are fallible

The economic experts of capitalism—the City Editors, the economists, the financial seers—sit on something of a pedestal. Whatever twists and turns the economy may take, they are never caught without a remedy. Their readers, political parties, even governments, hang upon their words.

Which makes it very embarrassing for everybody, if the experts are shown to be as fallible as the rest.

Mr. Samuel Brittan is the Economic Editor of The Observer and last year, like all men in his position, he was expected to comment on the Selwyn Lloyd “pay pause” Budget. This is what he wrote, on September 3rd last:

I have a feeling that Mr. Selwyn Lloyd is going to surprise many people by his success in carrying out his economic policies . . . many of the people who are now most vociferous in denouncing him may be loudest in his praise a year from now.

Mr. Brittan went on to point out that in some ways the Lloyd policy was following behind events and then gave his reasons for thinking that ". . . Mr. Lloyd has been so much luckier than his predecessors . . ." 

Now—almost a year after—what does Mr. Brittan think of the Lloyd policies? Is he loud in his praise? He is not. He has been doing his homework in The Economist and has been impressed by an article in the 12th May issue of that weekly which drew some striking comparisons between the Lloyd squeeze, and what has followed it, and the Butler squeeze of 1957 and what followed that. This is what Mr. Brittan wrote in The Observer of 10th June this year:

On both occasions the same kind of arguments have led to the same mistakes. Mr. Selwyn Lloyd too often gives the impression of believing that history began in July, 1961, and has not devoted enough time to studying the mistakes of his predecessors.

And later in the same article:

Government financial measures have in recent years actually accentuated the trade fluctuations that they were supposed to control. 

If Mr. Brittan was wrong, a year ago, when he expected the Lloyd policies would be lucky enough to succeed, he could of course equally be wrong now that he is criticising the Chancellor. Capitalism is a baffling system which can catch out the experts. But if that is going to happen, there is no point in basing experts, is there?

By a few shares

A new campaign is announced by the Wider Share Ownership Committee, aimed as its name suggests to encourage more people to buy shares. It would seem to have timed its effort rather badly. After the recent Wall Street debacle we would imagine that many a small investor has gone back to his account in the Savings Bank or the old sock under the bed.

The number of shareholders in the U.K. has apparently increased over the past ten years from about a million to 3½ million. Much of this increase is presumably accounted for by firms like ICI distributing shares to their workers and to lots of small men being persuaded on to the stock exchange band-wagon by tales that capitalist inflation and prosperity were here to stay.

It will be interesting to see what success the campaign has and we hope the Committee will oblige us in due course with details of the number of shareholders in say six or twelve months time. They should make interesting reading, especially if there have been a few more stock exchange shocks in the interim.

At the same time, an analysis of how many hold how much would be useful as well as instructive. We have an idea that the greater part of those 3½  millions hardly matter when it comes to working out who really own stocks and shares.

Do they know?

Our editorial this month deals with the recent stock exchange shake-ups and makes the point that they basically reflect the general unease amongst capitalists concerning present economic prospects.

This unease has spread to most sectors of the economy and is obviously causing our politicians and their advisers some real headaches. Nor, in spite of the long words they like to use and their knowing looks, do they seem to have much idea of what to do about it all.

For example, hardly had Mr. Selwyn Lloyd finished warning us that he might have to lake fresh steps to tighten up demand than he calmly goes and cuts the minimum H.P. deposit from 20 to 10 per cent. Only a little while before, he had eased some of the restrictions on the banks. When it is remembered that he was apparently worried only a few weeks ago about a hire purchase boom, it all seems rather strange.

Some cynics have tried to explain the quick turn round as a by-election gimmick to help the Tories in their present political troubles. Perhaps so. But we have the shrewd suspicion that it only requires capitalism to go into the faintest suggestion of a spin for all the politicians and their economic experts to lose their balance. To be quite frank, we don't think really they have a clue.

The Gold Rush

One further thing we have heard for several years past from our experts is that with the new theories about money, credit, and the general control over capitalism, the importance of gold has become a thing of the past. Some of them have even gone so far as to regard it as a myth, a hoax that has been shown for what it really is by the new economic theory.

Unfortunately, our capitalists only seem to think there may be something in these theories when there is little chance of their being put to the test. Immediately things begin to get uncertain, they forget all about the theories and rush us quickly as they can into gold. Which explains the present sudden interest in gold mining shares and the heavy buying of the metal itself.

This is the classic way the capitalists have always acted in times of stress. Not currency, not stocks and shares; but lovely, shiny, golden, gold. As for economic theory, they will come back to that after the crisis has blown over.

Karl Marx, over a hundred years ago, would have found it a quite natural thing for the capitalists to do. He for one was under no delusion about the importance of gold to the capitalist system. The universal equivalent he called it, and universal equivalent it still is.

Stan Hampson

Voice From The Back: Poverty Recruits (2008)

The Voice From The Back Column from the December 2008 issue of the Socialist Standard

Poverty Recruits

“The economic crisis could help the military recruit and retain troops, Pentagon officials said Friday, potentially ending years of extraordinary bonuses and waivers that have become necessary to keep enough troops to fight two wars. “We do benefit when things look less positive in civil society,” said David S.C. Chu , undersecretary of defense for personnel and readiness.” (Yahoo News, 10 October) In other words, when young workers are desperate enough they join the armed services. The best recruiting agency for the armed forces is poverty. You need to eat? – go kill. That is capitalism for you.

War is Mental

We are all familiar with the TV ads for the British Army that portray an exciting, fulfilling career but what many of the impoverished youths at whom the ads are aimed may not be aware of are the following facts. “The number of British military personnel discharged from the armed forces following a nervous breakdown has risen by 30 per cent since the start of the Afghan war. More than 1,300 have been medically discharged since 2001 when operation first began against the Taliban, new figures revealed. Of these, 770 belong to the army, which has borne the brunt of overseas operations in Iraq and Afghanistan. …The rising numbers of service personnel leaving for psychological reasons will fuel concerns that thousands of soldiers face being traumatised by their experiences in Iraq and Afghanistan. Health charities claim that as many as one in 10 soldiers will develop a mental health problem from the horrors of combat.” (Observer,19 October)

 

The Same Difference

Amidst the misguided euphoria about the election of a Democratic Party president it is a sobering thought that whether there is a Republican or Democratic legislation capitalism carries on as usual. “Although there is a widespread belief that Wall Street prefers Republican presidents, most studies show that the market has actually done better under Democrats. Since 1901, the Standard & Poor’s 500 index rose 7.2 percent a year on average under Democratic presidents and 3.2 percent under Republicans, according to Ned Davis Research. Looking at a more recent time period – 1944 through mid-2008 – the S&P was up 10.7 percent a year on average with a Democrat in the White House versus 8 percent with a Republican, according to International Strategy & Investment.” (San Francisco Chronicle, 4 November) Changing the ruling party doesn’t change the exploitation system that is capitalism.

 

Another Market Guru

Mr Brown blames the unregulated stock dealers, Mr Cameron blames Mr Brown and socialists blame the slump/boom cycle of capitalism, but here is someone with yet another explanation. “From his base in India’s financial capital Mumbai, Raj Kumar Sharma has been tracking the turbulence in the world stock markets and has come to one firm conclusion — it was written in the stars. As an astro-finance specialist, he has made a career on predicting whether the Bombay Stock Exchange, Nasdaq, Dow Jones or FTSE-100 will go up or down by studying favourable or unfavourable planetary alignments. Where many blame banks overstretching themselves or inadequate financial controls and policy, Sharma sees a clash between fiery Saturn and its arch enemy Leo as a key factor in the recent financial turmoil. ‘Leo is the sign of the sun and the sun is the father in Indian astrology,’ he told AFP. ‘But the son (Saturn) and his father (the sun) don’t get along, so whenever they are sitting in the same house together, they always fight and create ill-will and danger in the market,’ he said.” (TIME.com, 16 October)

 

Vatican Bonuses

“The Vatican has reintroduced a system of clocking in, nearly 50 years after it was last phased out. Senior clerics will have to swipe plastic cards when entering and leaving, all in a drive to improve time-keeping and efficiency. … Lay and ecclesiastical staff working in the tiny city state, are now using the swipe cards. The cards have been issued to everyone from the lowest office staff to the heads of departments, even if they are priests and archbishops, though there has been no mention if Pope Benedict XVI carries one. …It is all part of a drive to increase efficiency and to make the Vatican more meritocratic. Next year there are plans to introduce performance-related pay.” (BBC News, 3 November) Capitalism is a social system that needs concepts like “performance-related pay”, but we wonder how it will operate in the Vatican. One miracle equals how many euros? Two visions equal more or less than one miracle? We foresee some difficulties when disputes go to arbitration.

Pathfinders: Nobel efforts (2024)

The Pathfinders Column from the November 2024 issue of the Socialist Standard

The Nobel Prize awards have been no stranger to controversy over the years, both for awards they should have given but didn’t, like most famous writers and virtually all women, and awards they shouldn’t have given but did. These included the 1949 Medicine prize for the prefrontal lobotomy, the 2019 Literature prize to a Bosnian genocide denialist and Slobodan Milošević fanboy, and most famously, the 1973 Peace prize to Kissinger, the carpet-bomber of Cambodia, which caused two Nobel Committee members to resign in disgust and prompted the equally famous retort from musician Tom Lehrer that satire had become obsolete.

Media pundits were quick to spot certain oddities about last month’s Nobel awards. Feathers had been ruffled earlier when the head of the Stockholm International Peace Research Institute pointed out that ‘We have now over 50 armed conflicts around the world’ and suggested that perhaps nobody deserved the Peace prize this year (tinyurl.com/4c84a9zp). In the event they gave it to Hiroshima survivors, a clear stand-by choice.

The Physics prize went not to physicists but to two computer scientists for their early work in AI and neural networks. Reasonable enough, one might say, given that computer science didn’t exist in 1896 when Alfred Nobel established the prize topics. A mathematics Nobel might have been nearer the ballpark, but there isn’t one of those either, a fact emphatically not due to the popular gossip that it was revenge for Mrs Nobel having an affair with a mathematician (Alf was never married). In fact, Nobel also ignored dozens of other valid research disciplines, which reflects the deep capitalist truth that the rich always get to dictate to the rest of us what is important, just like today’s vainglorious and increasingly deluded ‘effective altruist’ billionaires.

As for the winning computer scientists, you may remember one of them, Geoffrey Hinton, as a well-known poacher-turned-gamekeeper who resigned from Google in 2023 to renounce AI and warn the world that it was about to kill us all. Given that the prize is awarded to those who, in Alf’s own words, ‘conferred the greatest benefit to humankind’, one might have expect a noble prizewinner to refuse to accept the medal and the money, however Geoff appears untroubled by such qualms.

Still, there must be a lot of physicists out there doing vital Nobel-worthy work, surely? Not according to the popular YouTube doyenne of theoretical physics and clunky jokes, Sabine Hossenfelder, who claims (no joke) that ‘physics is dying’ because it’s become an unfalsifiable pseudoscience whose only purpose is to chunter out meaningless papers in support of funding bids to prop up the physics community’s wage bill (tinyurl.com/5n93hdmb). It might be true that they have a vested interest in stringing us along with string theory, loop quantum gravity, multiverses and endless made-up particles, but perhaps Sabine would say that, as she thinks the idea of an elegant Theory of Everything is a romantic mirage, and besides, popular YouTubers also have a certain vested interest in being controversial, don’t they?

AI had a more direct role in clinching the Chemistry prize, through Google DeepMind and its groundbreaking work on protein folding. Proteins do everything that matters in your body, but there are 100,000 of them and nobody understands how they work. Their exact function depends on what shape they fold into, and working this out for just one protein used to be a 3-year PhD in itself. The DeepMind AlphaFold2 programme can now do it in seconds, triggering a revolution in potential new treatments.

The Medicine prize meanwhile was for work in newly discovered microRNA, which is how genes, when sending messenger-RNA ‘photocopies’ to cells with template instructions for building proteins, effectively Tippex out certain instructions and not others.

What’s called the Economics Nobel is really an ersatz 1968 add-on by a Swedish bank and denounced as a ‘false Nobel prize’ by modern relative Peter Nobel, on the grounds that he considers economics a pseudoscience, a conclusion which will not raise socialist eyebrows. This year’s ‘Economics’ prize was for interesting empirical research into the question why some countries are so much richer than others. ‘Culture’ and geography have been mooted, but these researchers, observing that many poor countries were formerly European colonies, opted to look at ‘settler mortality’ statistics. They concluded that where mortality was low, and Europeans were able to settle and farm (Australia, North America), they also imported their existing social, economic and political institutions, giving the colony a massive head-start. Where mortality was high due to malaria and yellow fever (West Africa, Haiti, etc), they instead kept their distance and imposed vicious, extractive regimes including the slave trade. In sum, liberal democratic institutions are enablers of prosperity, not the other way round. Hooray for liberal capitalism then, which has obviously not resulted in a billionaire elite, global poverty, war and climate change.

Honourable mention ought this year to go to an Ig Nobel prize winner who, instead of discovering something silly about mammals breathing through their anuses, actually found out something useful about centenarians living in so-called ‘blue zones’ of super-longevity, which is that the blue zones don’t exist, neither do most of the centenarians, and the ‘data’ is almost entirely the result of poor, faked or lost records, and pension fraud by relatives (tinyurl.com/4hzna4ka). Many rich capitalists are obsessed with cheating death and living forever. This finding pisses on their chips and allows hard-pressed workers to enjoy some schadenfreude for once.

Would there be Nobel prizes in socialism? Probably not ones named after someone who got rich by blowing things up, including his own brother. And certainly not cash prizes, of course (there wouldn’t be any money). The concept of ‘prize’ is so integral to the fabric of competitive capitalism (prize and price are the same word in several languages) that some will find it hard to imagine a culture that doesn’t need such incentives in order to do worthwhile research. But socialists, who understand the value of intrinsic motivation, won’t have a problem.

Paddy Shannon

Dismal (2024)

Book Review from the November 2024 issue of the Socialist Standard 

The Shortest History of Economics. By Andrew Leigh, Old Street Publishing, 2024

Thomas Carlyle described economics as ‘the dismal science’. But Carlyle was a racist, writing in 1849, who believed slavery should be reintroduced in the West Indies. The ‘dismal’ view he was attacking was the economics of the time which he saw as regarding all peoples as equal (and not, as is commonly supposed, to the dismal Malthus doctrine of overpopulation and famine). Andrew Leigh’s book on the history of economics is, he tells us, ‘the story of capitalism’. Capitalism is defined as the existence of markets and economics studies how people ‘maximise their wellbeing in the face of scarcity.’ Scarcity is an important assumption made by most economists. Just as the slaves in the markets of the West Indies were subjected to deliberate scarcity, it avoids economists having to confront the artificial scarcity of modern capitalism for wage slaves.

Leigh endorses Thomas Hobbes‘s view of human life as ‘solitary, poor, nasty, brutish, and short’. ’Hobbes was right’, declares Leigh, and he argues that human history has been a long struggle to overcome that condition. With the application of the correct economics, of course. However, Hobbes’s view was not based on anthropological or archaeological evidence but on the English Civil War of 1642 to 1651. He fled to France while the civil war raged and while there wrote Leviathan, published in 1651, from which the above quote is taken. In Hobbes’s hypothetical ‘state of nature’ (that is, human nature) a ’war of all against all’ exists and this calls for an authoritarian state to keep the peace. There can be no doubt that much of human history is a record of struggles, but if Hobbes was correct the ‘war of all against all’ should have meant that we would all still be living in caves, without hope for the future.

The fact that human productivity has increased enormously since settled agriculture took place about 10,000 years ago has mainly been due to the adoption of new technologies, not the following of economics wisdom. Leigh claims that at the turn of the twentieth century the Englishman Alfred Marshall ‘was the world’s most influential economist’. In academia perhaps, but the accolade surely belongs to Karl Marx. Leigh doesn’t mention him, and that’s probably just as well. A running argument of this book is the alleged superiority of capitalism over communism in practice. The 1917 Russian revolution was a ‘communist revolution’. Cuba established a ‘communist dictatorship’. East Germany had ‘communist rule’. North Korea has had ‘decades of communism’. They all failed miserably, of course, but none of those regimes claimed to have established communism. Leigh is by no means alone in making this mistake but it is a serious flaw in his book. So when he writes of Russia and China that they have recently ‘transitioned from communism to capitalism, this is simply not true. No country in the world has claimed to have established communism. Ever.

Lew Higgins

Voice From The Back: This is Democracy? (2009)

The Voice From The Back Column from the September 2009 issue of the Socialist Standard

This is Democracy?

The US government are very fond of lecturing other governments about democracy and extolling the virtues of democracy as opposed to one party regimes. Where it suits their economic interests, such as in oil-rich Middle East states they are less adamant about democracy though. Nevertheless, compared to dictatorship like Saudi Arabia and North Korea, the USA would seem to be a model for the superiority of democracy. However on closer examination the US model is far from perfect. “In 2000, Jon Corzine spent tens of millions of his personal fortune to vault himself from political obscurity to the United States Senate. In 2005, he spent millions more to jump from Washington to Trenton and become New Jersey’s governor. This year he’s opening his wallet again as he looks to overcome a steep deficit in the polls to win re-election, in what could be the ultimate test of whether money trumps all in politics today. Throughout American history, personal wealth has often played a significant role in winning political office. But as campaigns are increasingly decided by 30-second TV ads and sophisticated get-out-the-vote efforts, the two major parties are increasingly looking to recruit individuals with personal fortunes that can help bankroll campaign costs that now more often than not run into the tens of millions of dollars.” (Yahoo News, 9 July) In US-style democracy anyone can become politically powerful but it does help if you happen to be a multi-millionaire.

The Power of Money

It is axiomatic in capitalist society that if you have more money you eat better than those with less of the stuff. Likewise when it comes to accommodation the rich live in palaces while the poor live in inadequate housing. In education, recreation and every other human pursuit money allows for the best of everything and consequently lack of the stuff leads to the cheap and the shoddy. A recent example of this was provided by a review of the treatment of mental health patients in the NHS. “A bleak picture of a mental health service that tolerates bullying and houses children alongside adults in breach of guidelines is revealed in a damning report from a government monitoring body. The Mental Health Act Commission claims many more patient deaths will occur through inadequate staffing and lack of training. The 248-page study, the last by the commission before it is replaced by the new Care Quality Commission, highlights how patients put on suicide watch are often poorly observed, leading to tragedies half-concealed by ‘falsification’ of nursing records.” (Observer, 19 July) Needless to say this sort of treatment is reserved for those who cannot afford the luxurious treatment provided for the very rich. As the Bob Dylan song has it – “Money doesn’t talk, it swears!”

Prophets and Profits

The financial journalist Richard Wachman recently wrote an article in the Observer entitled “We’re two years older and sadder, but perhaps not a great deal wiser”. He reviewed the financial collapse that had occurred from August 2007 to August 2009. “What happened two years ago was to lead to a chain of event that involved the nationalisation of about half the major banks in Britain and the United States. It was also to lead to the collapse of emerging markets from Latvia to Pakistan and the biggest ever globally co-ordinated government rescue package, involving trillions of pounds. The world is now an uglier place with mass unemployment, widespread business failure and dramatic falls in world trade.” (Observer, 2 August) Wachman’s analysis of the problem is not particularly revealing but what is of interest in his article is how the crisis has left so-called experts with egg on their faces. Mervyn King (August, 2007) “I don’t think there’s any real evidence here of a fundamental challenge to the macroeconomic outlook.” and then (February, 2009) “The UK is in deep recession … Restoring both lending and confidence will not be easy and will take time.” George W Bush (August, 2007) “The fundamentals of our economy are strong … and we are headed for a soft landing.” and then “If money isn’t loosened up, this sucker could go down.” (September, 2008) Alistair Darling (August 2007) “People should have confidence that many of the investment they make will be good investments.” and then “Times are arguably the worst they’ve been in 60 years… it’s going to be more long-lasting than people thought.” (September 2008) Capitalism is a social system based on economic slumps and booms and it makes fools of all the “experts”.

Las Vegas, Another View

We are all aware of the Hollywood depiction of Las Vegas as a fun-loving city, full of casinos, nightclubs and good times, but the reality for its growing homeless numbers is far from idyllic. As jobs and homes disappear many of the dispossessed street dwellers are subject to attacks of violence. Now even the streets are being abandoned by the homeless. “Some of the Las Vegas homeless resort to living in a maze of underground flood channels beneath the Strip. There they face flash floods, disease, black widows and dank, pitch-dark conditions, but some tunnel dwellers say life there is better than being harassed and threatened by assailants and the police. ‘Out there, anything goes,’ said Manny Lang, who has lived in the tunnels for months, recalling the stones and profanities with which a group of teenagers pelted him last winter when he slept above ground. ‘But in here, nothing’s going to happen to us.’” (New York Times, 7 August) In one of the most sophisticated urban areas in the world some members of the working class are living like sewer rats. What a hellish system capitalism is.

Planners' Roulette (1972)

From the September 1972 issue of the Socialist Standard

One of the many pipe-dreams of capitalist politicians and economists is to be able to plan the smooth and even growth of national economies without the disruptive cyclical phenomena which have been part and parcel of the system in the past.

Despite Keynes and his economic theories and various pseudo-socialist governments throughout the world, who claimed that they could produce a planned economy from which stop-go (as downturns and upswings in economic activity have come to be known in Britain) would be obviated, the capitalist system is still working in the same way it has always worked. Marx described the various stages of the industrial cycle of capitalism, ranging from a state of stagnation to one of intense activity, over a hundred years ago, and it is a description still valid today.

Even the new pseudo-science of econometrics and the development of data and statistics collection and forecasting techniques have failed to eliminate the anarchy from capitalism. The information merely enables the economists to get some idea when the next downturn in the business cycle will occur, but not to prevent it, as post-war events have clearly shown.

An example of the impossibility of planning capitalism was recently illustrated by a report that a five-year plan drawn up by the budget and economic planning ministry of Italy had in effect become a four-year plan and might even become a three-year plan, because of the slow growth of the economy. Obviously there is no point in planning resource application in other sectors of the economy if the output of those sectors upon which they are dependent for growth is incapable of meeting their requirements. It seems that the planners are without a clue to achieve this and may even be regarded as playing a game of chance in drawing up plans on the basis of information which is usually useless before it has left the planner’s desk. A suitable name for an economic planner’s game of chance would be “planners’ roulette”. The fault, however, lies not with the planners, but with the economic system which they are trying to plan and with the economic forces which drive it along.

Goods and services under the capitalist system are produced not to satisfy human needs, but for sale in order to realise profit, for a market. For a variety of reasons, the size of the market is constantly fluctuating and it should be obvious that under such conditions planning is impossible.

The recent rise in unemployment levels and the problem of over-capacity in many industries, viz. textiles, shipping and steel, would support the conclusion that economists do not know where to start. Do economists plan over-capacity and unemployment? One of the aims of planning was to eliminate just this problem and yet clearly they have been unsuccessful. They have been forced to change their plans to conform to the changes in the market; the market has not been controlled to conform to their plans. The housing problem, too, is an area in which governments have intervened on a large scale, but here they have been just as unsuccessful in solving the slum problem and homelessness; the situation is as bad as ever.

Economists claim to be scientific in their outlook and yet if scientists in the natural sciences had such a failure rate in their researches in understanding the world, then the outlook would be pretty bleak for the human race. Most of the economists’ claims ultimately rest upon the false premise that an exchange economy is the only, and indeed the best, way of organizing the production and distribution of wealth. Socialists repudiate this notion emphatically. But more than this Socialists advocate an alternative society based upon production for use. Capitalism has generated a vast, world-wide productive network of industries and a technology capable of producing wealth on an unlimited scale, if it were unrestricted by fetters of the market economy. Only when there has been a world-wide social revolution and the means of production have passed into the control of the whole of society will real planning be possible, a system of planning into which no other factor but human need enters.

Spectator.

So They Say: Rogues All (1975)

The So They Say Column from the August 1975 issue of the Socialist Standard

Rogues All

In the great search for the source of inflation, politicians and economists have felt at liberty to express all sorts of fanciful conclusions. How refreshing then that Harold Wilson has applied himself to the task. After careful examination he appears to have identified a hitherto rare specimen — the capitalist who pays too much and it is the antics of this benevolent creature which, he thinks, are at the source of the trouble.

We reject, as we have always rejected, the idea of statutory policies based on criminal sanctions against workers who, misguidedly, perhaps short-sightedly, perhaps acting out of fear, went on strike for higher wages than the nation could afford. The Government might need to take reserve powers. It will take the form of a power directed against a recalcitrant employer, a rogue elephant who sought to wreck the policy of the whole community.

Times 7th July ’75

The roguery being that these unspecified capitalists may be prepared to pay greater wage increases than the £6 a week Government limit.

It is a pity indeed that these fabulous benefactors have to be checked in this way from gaily distributing their wealth on application; they would say no doubt — as several Labour MPs have recently been saying concerning their own pay increases — that any increase would only represent the “rate for the job.” The catch being that however high the rate for the job, the capitalist assesses it against another rate, the rate of his profit.

Official Swindle

The idea that all mankind can co-operate in producing and distributing the means of life is regarded by some as an unreal proposition. We disagree, but point out that it is not the only “staggering proposal” in existence. The British Medical Association’s Junior Hospital Doctors’ Council had an emergency meeting recently in Leeds to discuss the new 40-hour contract which the doctors have been offered by the Department of Health and Social Security. Their chairman, Dr. David Bell, described the contract as “vicious.” Dr. Angus Ford, chairman of their negotiating committee pin-pointed their objections more precisely when saying:

The Department had introduced the staggering concept that the first units of medical time after 40 hours should not count for payment. From 40 to 56 hours we should, they say, work for nothing.

Times 10th July ’75

Now here is an unethical approach to things, surely? Trying to have doctors working for nothing — this really is pulling a fast one. Imagine if this sort of concept was spread even further afield, why — the entire working class would be working some of the time for free, for no-one’s benefit but the employers’. Truly a staggering proposal — but one which makes capitalism tick.

Pay Disparities

Coal miners in the capitalist system which is misleadingly termed “socialism” have recently been in disagreement with one another over the amount of wages each man should receive for his work:

A veteran engineer said that young miners sometimes resented the higher pay given to older men although they did less work. But an older worker said that this was an aspect of socialism and anyway, the senior men were needed for their greater experience.

Times 15th July ’75

The newspaper refers to the moves for equalization of pay as “an informal debate going on among the miners.” The disparities in earnings “vary from the equivalent of £8 to £30 a month.” We point out that these figures relate to the total earnings of miners — not to the amounts of difference between them. Recalling the recent push from members of the NUM for the “£100 per week miner” readers may suspect a misprint but this is not the case. The miners referred to, live in that other “socialist” country, China.

All responsible officials insist that the campaign is still at the stage of discussion and no changes in the wage scales are envisaged for the immediate future. There is no extra pay for overtime, but there is strong moral pressure on young workers to do labour voluntarily in their spare time as well as attend political study classes two or three times a week.

The Labour Party must be casting an envious eye at such an apparently well-oiled process of exploitation.

With Planners Like These . . .

We were treated to the Sunday Times Economics Editor, Mr. Malcolm Crawford, revealing “new moves to allow better economic forecasting” on 20th July. The measures proposed arose from dissatisfaction at the “sharp stops and goes, the blind lurches of policy, of past years,” and are aimed at removing them. Towards this elusive end several MPs have tabled three amendments to the Industry Bill (two of which have been accepted by the Treasury) calling upon the Treasury to reveal more details of its method for forecasting capitalism. It is hoped that this could lead to a better understanding of how to control production, unemployment, government spending, etc.

The proposal is that the Treasury prepare a “macro model” for the future, and the Government together with certain firms will draw up their own “sub-models” to fit within the larger framework. The result of this happy alliance would be that capitalism could at last run smoothly. Not only firms with Government agreements are permitted to join this brotherhood:

This clause also requires the Treasury to provide its model to outside users, on a fee charging basis, so that they can make forecasts based on assumptions of their own, which may be different from the Treasury’s.

It may sound a bit like the horoscope fan who — not approving of his Stars for the Day in the Mail — buys a copy of the Mirror instead, but it isn’t, this is official. We leave for the moment the fact that the needs of capital have not been controlled in the past by models — Macro or Sub — on the contrary, Capital has roared and its would-be-tamers have jumped. Instead we observe more closely the business-like approach of the forecasters. One amendment requests that the Treasury

must also publish a retrospective analysis of its forecasting errors . . . to extract an estimate of the error due to mis-forecasting, after separating out the effects of changes in policy and external factors. It also requires estimated margins of expected error to be published. The trouble here is that figures of this kind which could be understood by more than a few specialists would be meaningless, and perhaps misleading. It is however important to establish the principle that errors are to be expected.

This all sounds somewhat confusing. What use, for instance, are estimates of errors separated from external factors? Come to that on what basis will estimated future error be forecast — even if only to produce figures which are meaningless and misleading. We do however, readily accept the principle that “errors are to be expected.”

. . . Who Needs Problems ?

We move on to the “most radical” of the three proposed amendments. This, Crawford forewarns, “I daresay only about a dozen people understand” (the Treasury itself is opposed) and we are appropriately grateful that he has felt it timely to invite us into this knowledgeable clique:

It means that the Chancellor should adopt a new economic discipline called Optimal Control or Policy Optimisation. Much research has been devoted to this in the US and, apparently in the Soviet Union. The Treasury has someone studying it at present.

The new “economic discipline” is also being intensively researched at Queen Mary and Imperial Colleges. Obviously it is worthy of careful attention, but what actually is it?

The basic premise of Optimal Control is that something is always bound to go wrong. Moreover when it does, we will surely move from that mess into some neighbouring mess: so contingency plans of a highly sophisticated kind should always be at hand to steer us into the least bad mess.

After this eloquently worded proposition has been considered, the working man or woman will soon see that things are always best left to the economic experts.

A minor point of inaccuracy in the report occurs when Crawford comments that more research is required before Optimal Control may be used on any more than a trial basis. We were under the impression that the sort of planning (?) he had outlined above was the only kind possible under capitalism.

Alan D'Arcy

Market behaviour (2009)

Book Review from the October 2009 issue of the Socialist Standard

The Mind of the Market : How Biology and Psychology Shape Our Economic Lives.  By Michael Shermer. Holt Paperback. New York. 2008.

 Some of the chapters in this book are interesting and informative, despite its author being a self-declared follower of the free-market ideologist, Ludwig von Mises and so an apologist for capitalism and a dedicated opponent of anything that seems to be socialism. Shermer is also a leading American ‘skeptic’ and a Scientific American columnist.

 Economics, as now taught, is an odd discipline. It defines itself as the study of the allocation amongst competing ends of resources in short supply. To express this mathematically it has to make the absurd assumption that the ends are infinite, i.e. that people are infinitely greedy. It also assumes that economic actors (corporations, workers, consumers) act entirely rationally. Von Mises in fact regarded economic decision-making as the archetypal form of rational decision-making.

 In recent years, some economists, calling themselves ‘behavioural economists’, have decided to investigate the actual behaviour of consumers, i.e. individual buyers. Not surprisingly they have found that no consumers (not even the writers of economic textbooks) decide what to buy on the basis of some rational calculation about equalising the “marginal utility” of all the things they buy. All sorts of other considerations enter into their decisions as to what to buy (e.g. what other people are buying, status, etc which the advertising business exploits).

 It could be argued that the study of what motivates consumers is outside the scope of economics. Which is the position we Marxists have taken with our criticism of “the final futility of final utility”. We have left the study of the satisfaction users might derive from the use-values they acquire to psychology. Shermer goes along with the behavioural economists who have done some useful work in demolishing the myth of the rationally-calculating, narrowly selfish homo economicus that is one of the basic assumptions of academic economics. He doesn’t seem to realise that in doing so he has abandoned one of the key assumptions of the von Mises school of economics. In fact he goes so far as to concede that if people really did behave in this way, then capitalism could never have survived; even capitalism relies on the social nature of humans and their biological and psychological need to trust and co-operate with each other.

 Shermer accepts the theories of the “evolutionary psychologists” according to which our reactions and decisions – including in economic matters – are influenced by the fact that our brains evolved when we were hunter-gatherers (as opposed to by purely rational calculations). No doubt our brain did evolve under these circumstances but this does not mean that we are therefore unsuited to live by acquiring what we need to live in any other way. The human brain that evolved is a brain that allows us to adapt to a great variety of ways of acquiring what we need.

 We can live just as much under a capitalist system (where Shermer says we are ‘consumer-traders’) as in a socialist society (where we’d become ‘giver-takers’). If, as the evolutionary psychologists claim, our brains predispose us not to like freeloaders and to get satisfaction out of co-operating, and even helping, our fellow humans, these are features that would fully fit in with socialist society. Shermer thinks that they point to capitalism being the best system for humans to produce and share out wealth.

 However, his defence of capitalism is pretty pathetic. On the basis of studies of the behaviour of people who are still hunter-gatherers today involved in face-to-face barter and of the measured effects on the brains of individuals choosing to buy something, he concludes that ‘trade’ and ‘trading’ is good for us. This ignores that ‘trade’ is not the only way of transferring the use of something from one person to another. There is also giving and taking. So, this is not an argument for buying and selling as best suited to our ‘biology and psychology’.

 But the main flaw in Shermer’s argument is that there is an enormous difference between face-to-face barter and shopping and inter-capitalist trade. Inter-capitalist trade is carried on by states and corporations which do act in the ruthlessly calculating way that orthodox economics supposes individuals do. They do aim to maximise monetary profits in the long or short term. They don’t behave as we humans do. In fact some psychologists (as in the film The Corporation) have pointed out that if a human behaved in the same way as capitalist firms do – concentrating obsessively on one single aim (in this case, making profits) to the neglect of all other considerations – they would be classified as psychopaths.

 Shermer shows up here the flaw in the defence of capitalism put up by ideologists such as von Mises – they assume that present-day capitalism is based entirely on freely-negotiated contracts between individuals, as if production and trade were carried on by individual, or at least small-scale, producers and shopkeepers. This might have been the case in Adam Smith’s day (mid-18th century) but is not the case today. Today production is carried on in large-scale productive units by producers contracted to work for wages, but not by other individuals but by capitalist firms which, while in contract law having a fictitious ‘personality’, are not really persons with biological brains. Their behaviour cannot therefore be explained by evolutionary or any other kinds of psychology, but only by a study of the impersonal laws of the market and profit-making which impose themselves on those who make decisions within them irrespective of what these human decision-makers might think or want.

Adam Buick

So They Say: 102 Years On (1974)

The So They Say Column from the August 1974 issue of the Socialist Standard

102 Years On

What has Helena Hardigan in common with Frederick Engels? The knowledge that the “solutions” to the housing problem are not solutions at all. On 29th June she wrote to The Guardian about a “Report on Merseyside” it had published. Instead of stuff about the “character” of Liverpudlians, she said, some decent living conditions would be welcome. And:

As far as I see it, Liverpool is just going to be one big motorway through to the docks and that will be its importance in the future. You talk about slum clearance—there has been none. The slums have been transferred to Kirkby, Skelmersdale and Runcorn where unemployment, vandalism, depression and desperation are rife.

Engels said exactly the same thing in The Housing Question written in 1872:

. . . owing to the demand for big centrally-situated business premises, or owing to traffic requirements, such as the laying down of railways, streets, etc. No matter how different the reasons may be, the result is everywhere the same: the scandalous alleys and lanes disappear to the accompaniment of lavish self-praise from the bourgeoisie on account of this tremendous success, but they appear again immediately somewhere else and often in the immediate neighbourhood.

Engels saw that from careful study. This Liverpool lady has seen it by just looking round her.

Always a Little Longer

The Equal Pay Act was passed in 1970. It is likely that many people therefore assume that most women at work are now getting equal pay with men. On 5th July the Assistant Secretary of the Association of Professional, Executive, Clerical and Computer Staff said in The Guardian that this is not so, and the position four years later “is one of general lack of progress towards equal pay”.

The extent of the ignorance on the part of some employers has to be witnessed to be believed. Publicity and propaganda on the part of the Department of Employment will not change this general situation—an all pervading ignorance and lack of interest on the part of many employers.

Those who believe “a law should be passed” is the solution to every problem should take note. The Act comes into “full force” in December 1975, after which cases may be brought to the Industrial Arbitration Board. It remains to be seen how employers will then get round it, and what “full force” means.

Pull up the Ladder, Jack

“Indexation” is an idea for dealing with inflation. Its principle was explained by the Tory MP Christopher Tugendhat in an article in The Observer on 7th July:

The principle of indexation is easy to grasp. It is that financial contracts should be set in real terms rather than money terms. So if incomes were index-linked, each 1 per cent increase in the retail price index would automatically increase the sum of money a person received in his pay packet by the same amount. . . . State benefits of every sort, including pensions, could be handled in the same way. So could such outgoings as rents and national insurance contributions.

Thus if you have £30 a week and prices increase 10 per cent., indexation will bring you an extra £3. If you have £300 it will bring you £30. But Tugendhat is not hiding anything. He says it would ensure that “whatever the rate of price increases, the relationship between the various groups in society remains constant”. Which means it is a scheme for ensuring that the rich stay rich and the poor stay poor.

Splash and Grab

In fact the rich have much simpler methods for beating rising prices. When money is depreciating they exchange it for goods which are not. A report in The Sun on 12th July, headed Hey, Big Spender ! described how they are “splashing out millions in a wild scramble to beat inflation”:

They are on a huge buying spree of diamonds, pearls, furs, yachts and Rolls-Royces.

. . .  At Garrards of Regent Street, the Queen’s jeweller, the gem business is booming—with emeralds, rubies and £10,000 diamonds selling like hot cakes.

Would this have been what Dr. Coggan, the new Archbishop of Canterbury, meant? He spoke to the General Synod of the Church of England about “the pursuit of personal gain” being promoted by competitiveness in schools:

“Thus from very early years ‘me first’ is instilled as the most desirable of all attitudes in life,” he said.

(Guardian, 6th July)

It sounds like a tasteless crack at those who appointed him, but of course it isn’t. If you enquired of Dr. Coggan, you would find it is the working class whose “pursuit of personal gain” he wants to stop.

Anyone's Guess

What is demanded in an economic crisis, by the public and economists alike, is the application of some theory which will stop it. Socialists have always pointed out that no such theory exists for capitalism. But even if there did there is a simple reason why it could not be fulfilled — the interests of the capitalist class lie in going on doing the things which bring about crises.

Hence, the answer which is sought is one which would allow the cause to continue but prevent the effects, and there is not one theory but many. This was demonstrated in The Guardian's “City Comment” on 26th June. Under the heading United They’re Not, various financiers’ views were given:

Some believe that any reflationary moves could spark a disastrous run on the pound. Others think this unlikely, provided there are also measures which act to reduce inflation. .Some—and they tend to be closest to the share market—believe that almost anything which would cushion the developing recession would be welcome. About the only thing which the City is united on is a desire for “a better Government attitude to the wealth producers —industry that is” in the words of one share dealer.

Clunk-Click to You

Are you worried about death on the roads? A full page in the 18th June’s Guardian showed something better than legislation. It’s a Mercedez-Benz:

Any valuable executives involved in a car crash in the ‘S’ class have a better chance of walking away from the wreckage than in any other luxury saloon in Europe today.

That gives a different view of the safety films in which the distressing results of not wearing seat-belts are shown. What is needed now is a film of a maimed person and the message pointed out. Fred was careless. He wasn’t a valuable executive and didn't drive a Mercedes-Benz. Fred has learned his lesson.

And haven’t we all?

Robert Barltrop