Aphorisms of Socialism. [I.] (1912)

From the June 1912 issue of the Socialist Standard

Being an explanation of the Declaration of Principles of the S.P.G.B.

Aphorism I.

Society as at present constituted is based upon the ownership of the means of living (i.e., land, factories, etc.) by the capitalist or master class, and the consequent enslavement of the working class, by whose labour alone wealth is produced.

To declare that any one fact, and especially such a seemingly superficial fact as the the matter of the possession of property, can be the basis of the social system, will doubtless fill many people with astonishment. It seems to be reversing the order of things. It appears, to the ordinary untutored eye, that the ownership of property must arise out of and depend upon the social system, and not that the system arises out of and depends on the form of property ownership. Yet very few words will suffice to make it clear that the truth is revealed in our first aphorism.

Society is a number of people living together in community, having dealings or relations with each other in the every-day affairs of life.

The sum total of all these relations forms the system under which the people live – the social system or the system of society.

It is quite clear, therefore, that the form of these dealings or relations will determine the form of the social system, and that whatever fact or facts shape the relations between the human beings who are the units of society shape also the whole system of society – which is nothing but the sum total of those relations.

Now if you go into a baker’s shop and take possession of a loaf of bread, you enter into certain definite relations with the baker.

Those relations will vary, according to whether you have bought, begged, borrowed, or stolen the loaf. In the first case the relations between the baker and you are those of seller and buyer, in the second .case those of giver and receiver, in the third case those of lender and borrower, in the last case those of robbed and robber.

But the significant fact is that, though each of these relations is different, owing to the different circumstances of your acquiring the loaf, they all arise from the one constant and unchanging factor that the loaf is the property of the baker to start with. Had the loaf not been the property of someone it could not have been bought or sold, begged or given, lent, borrowed or the object of a theft.

In St. Paul’s Churchyard many pigeons may be seen. They belong to nobody. You cannot beg, borrow, or buy one of them, for there is no owner to give, lend, or sell them. If you take possession of one you have stolen nothing. You cannot, enter, on account of these pigeons, enter into any of the relations that characterised your taking possession of the baker’s loaf. Even the law cannot oblige you in this respect, for the only charge that can be preferred against you – and that only by an obvious straining of the law to meet an awkward situation – is that of unlawful possession: the charge, not that you have something belonging to someone else, but that you have something that does not belong to you.

Now it is beyond dispute that what makes the difference in the relations between you and your fellows in the given instances is the fact that the loaf is the property of some person or persons while the pigeon is not.

If we look around to try to discover what are the social relations that occupy the largest and most important place in the social scheme, we find that they are the relations which arise out of the production and distribution of wealth.

The reason for this is plain to see. It is because every living person must be a wealth consumer as the first essential condition of his or her existence.

These relations pervade the whole of society. They cannot be escaped. What form, then, do these social relations take?

Wealth is produced by the application of human energy to the material provided by nature. All wealth, as the term is understood in political economy, is produced thus, and only thus. Even the working-power of the horse is not an exception, for the horse itself is wealth, being the product of human energy applied in horse-breeding and rearing. Its energy, therefore, takes no higher rank in the production of wealth than that developed by a steam engine.

The two things, then, which are fundamentally necessary to the production of wealth are human labour-power and nature-given material.

But to-day, in addition to these, highly developed machinery and other means of production and distribution are necessary before wealth can be produced and placed at the disposal of the consumer, for, under the system, and in the broad sense, human energy can only be applied to material through these means of production.

All normal people within certain limits of age possess one of these essentials of wealth production – labour-power. But before it is possible for them to produce they must have access to the natural material and to the means of production.

Here, then, is the primary need of every person that draws breath, if that person is to be self-supporting – access to the nature given material and the productive machinery.

Now let us place these things, desired of all people, in the circumstances of the baker’s loaf and the Churchyard pigeon respectively, and see what happens – what effect it has upon the great mass of relations between man and man which go to make up the social system.

In the first case, with the means of production owned by individuals, two sets of relationships may arise, according to whether these things are owned by those who use them or by those who do not.

In the Middle Ages the means of production largely belonged to those who used them, and access to agricultural land was the common right. As a consequence the relations between the social units were entirely different to those obtaining to-day. Men had the means of gaining their livelihood in their own hands, and so the wage-worker, the man who had no source of subsistence other than the sale of his labour-power, was practically unknown.

But we are not concerned at the moment with that property condition that was the basis of the feudal social system. We know that to-day the things necessary for wealth production are not, broadly speaking, owned by those who use them. That fact, at least, requires no demonstration.

In this case those who do not share in the possession of the productive wealth must get the sanction of the owners before they can apply their labour-power in the production of wealth.

On this fact the whole structure of modern society is based. All the relations between the social units take their shape from it, as we shall presently see.

In the first place, those people who do not share in the ownership of the means of production find others standing between them and the sources of life. To make mere assertion of that which is to well known to need argument, they have to sell their labour-power to the owners of the means of living in order to obtain subsistence. What other means are there ?

Thus is set up that large and important group of social relations and social institutions which we have before noted. First, society is divided into two classes – employers and employees; those who possess and those who do not possess. So the two-class nature of society, with property as the differentiating agent, is shown to be founded on the ownership of the means of living by the master class.

Secondly, the wages system, with the labour market – into which every propertyless person is driven, to seek his livelihood by the sale of his labour-power – together with the whole range of relationships between people on the industrial field – the relations between employer and employed, foreman and underling, and even those arising between master and master competing against one another for labour-power at the lowest price, and between worker and worker competing for jobs – all these relations and institutions are set up by the possession of the means of living by a class.

One other great and striking characteristic of the present social system arises out of this basic property condition, but one to which we are so accustomed that we are surprised to find that this feature is peculiar to the present system. It is that all the wealth of society is produced as commodities, that is, as articles for sale instead of for the use of the producer.

This is a very important distinction. It takes away from mankind the sane, logical purpose of productive effort, and replaces it with an incentive more mad even than the inmates of Bedlam. Bread is no longer produced to feed people but because profit may be made from its sale. And the remark applies to all other goods.

Where goods are produced for use the incentive produce remains as long as a human need is unsatisfied. But when production is for sale, it ceases when goods cannot be sold, though the children of the nation are crying for bread and perishing for want of clothing and shelter.

And, strange as it may appear, though with the productive instruments belonging to those who use them, there may be famine as the result of scarcity, with the instruments belonging to those who do not use them there must be famine on account of the very plentitude of wealth.

The reason for this is not far to seek. The wealth the wage-worker produces must, in order to satisfy the employer, exceed the amount of his wages, and therefore must exceed the amount he is able to buy back and consume. This surplus of commodities, far in excess of the requirements of the masters themselves, accumulates in the warehouses until the mass is so vast that the markets are glutted. Then production is strangled. Then there is no demand and no prospect of sale for further products. The incentive to create wealth has ceased. There is a falling off in demand and prospects of only small sales for further products. The machines are stopped, the factories partially or wholly shut down, the workers thrown out of work, and all the miseries of famine stalk the land because too much wealth exists

If the means of living were in the case of the pigeons in St. Paul’s Churchyard an entirely different social system would of necessity result.

Were the means and instruments of production the property of no individuals, but of the community as a community, the wages system could not exist. Each one having equal right of access to the means of living, none would be compelled to sell his labour-power to another person in order to live. In addition, none would purchase labour-power because none would have the opportunity to do so, and, secondly, because, even if any could, since no individuals would possess the means of production, none would be able to exploit labour-power.

So society could not be composed of two or more classes – could know no class distinction at all, in fact. It could not contain masters and men, and could not be founded on the labour of a section of the community. No able-bodied member of the community would be exempted from rendering his due quota of useful service to the community, in return for the material wealth which society placed at his disposal, for in the absence of private ownership there would be nothing on which to base such privileges.

And in a social system founded upon common ownership in the means of living, goods could not possibly be produced for sale. As now the wealth created belongs to those who own the machinery and factories – the masters, so then the product of labour would belong to the owners of the means of production – the community. The community could not sell the goods to itself, and there would be no party outside the community to whom to sell. Hence goods could only be produced for use, and production would continue as long as there were social needs to be satisfied.

What has been said shows how the social system of to-day is “based upon the ownership of the means of living by the capitalist or master-class,” and also how this class-ownership results in the enslavement of the working class, who are doomed to a life of drudgery and want, because every avenue of life is closed to them save that of the wage-labour market. But while it has been shown that the basis of society determines the form of social structure, no attempt has been made to explain what determine the basis of society. This point will arise in another connection.

A. E. Jacomb

Cooking the Books: Be they dragons? (2024)

The Cooking The Books column from the April 2024 issue of the Socialist Standard

In the November/December issue of the Skeptical Inquirer, Benjamin Radford dealt with a question ‘What do you make of the memes going around comparing billionaires to hoarding dragons and monkeys? Are billionaires hurting the world by hoarding their obscene wealth?’ He answered that billionaires were not like the dragon Smaug in The Hobbit who slept on a hoard of gold as they did not literally ‘hoard’ their wealth. Although he appears to be a supporter of the world as it currently is he made a couple of valid points.

First, that much of the wealth of billionaires is not actual, tangible wealth like gold.

‘Ultra-rich people don’t literally own billions of physical dollars in the way that Smaug physically sits on gold and treasure. Instead, owning five billion dollars and being worth $5 billion on paper are two different things. That’s because the value isn’t tangible. It’s not a zero-sum game in which if you have something (say a house, car or $100 bill) that, by definition, means someone else does not have it. In the case of wealth, a person can (and usually does) get rich when the value of a company’s stock increases. But that increase doesn’t mean that someone else loses money or value if the value of your stocks goes up by $100.’

Radford presents this as a difference between ‘money’ and ‘wealth’, between money as a store of wealth and the price of what a person owns. There is a difference here but between wealth (properly understood as physical things that have a use) and its price. The price of some item of tangible wealth can go up (or down) without affecting the ownership of that wealth. If it goes up, this is a ‘capital gain’ for the owner.

In the case of stocks and shares, what is being bought and sold is not even anything tangible, but the right to draw an income from the production of future tangible wealth, more precisely the expected profits to be made from this. Marx called this ‘fictitious capital’ but a more immediately understandable term might have been ‘notional capital’.

The riches of super-rich individuals like Musk and Bezos are mainly in the form of stocks in the corporations they own. If the price of these goes up then they get richer. Recently, due largely to the quantitative easing, there has been a boom in the price of stocks and shares, resulting in the rich and super-rich getting richer. Thus, calculations have been made of how much Musk’s riches have been increasing per day. It’s $49,439,601 (tinyurl.com/msf5tjf8).

These capital gains don’t represent any increase in real, tangible wealth. Radford is correct in pointing out that they don’t represent wealth that can be hoarded or could be redistributed to others. They don’t deprive anybody of anything. But this doesn’t mean that all the wealth of billionaires exists only as ‘notional capital’. They also have a share of property titles to real tangible wealth, the physical assets (buildings, equipment) of the corporations that they have shares in. They are part of the class that monopolises the means that society needs to use to survive.

Which brings us to Radford’s second point, that hoarding is ‘the last thing that they want to do with their money’:

‘They neither have nor hoard treasure but instead invest their wealth in businesses, which in turn buy equipment and hire employees’.

Exactly. What they want to do with their money is to invest it with a view to making more money. Which is the opposite of hoarding. Unlike ‘capital gains’, profits represent real wealth, a monetary reflection of one part of the real, tangible wealth that employees produce.

Billionaires can be acquitted of the charge of behaving like dragons. But not of being part of the class that monopolises the means of production, to the detriment of the rest of us.

Commodity production (1985)

From the May 1985 issue of the Socialist Standard

Wealth, as the etymology of the word suggests, is what contributes to human welfare; it consists of material objects, or goods, which serve to satisfy some human need. The basic source of all wealth is nature since goods are either found in nature or fashioned from materials that originally came from nature. Nearly all goods come into the latter category of being products of labour, in the sense that human beings have to exercise their mental and physical energies in order to create or produce them.

Producing a good does not involve creating new matter, but changing the form of existing materials. In the process of production human beings employ their own energies. and other natural forces and processes, to change nature-given materials into articles that can be used to satisfy some human need. Materials found in nature are given a new form, new physical characteristics. It is these newly-created characteristics capable of satisfying some human need that constitute goods and wealth. Wealth production is thus essentially a process of transformation of nature to make it useful to human life and happiness. Those goods which are products of labour are parts of nature that have been so transformed.

A good, then, is a part of nature which has, or has been given, particular physical characteristics which can be used to satisfy some human want. These useful characteristics of a good are its use-value. As in the end the good is its useful characteristics — it is these that make it a good for humans — the word use-value can be used as a substitute for good.

An item of wealth is always, by definition. a use-value but under certain circumstances can also acquire another characteristic which has also been called value. But how can an item of wealth have a value for humans other than its use-value? Surely the value of a good can only be its ability to satisfy some particular human need? These common-sense, and basically correct, observations caused the early political economists no end of trouble when they came to study the prices which goods acquired in an exchange economy. For they noticed that the proportions in which goods exchanged for each other bore no relation whatsoever to their relative utilities, or use-values; goods which were very useful, even vital, to human beings had a relatively low price while goods which had a limited use-value, such as gold and precious stones, had a relatively high one. The answer found to this paradox was that prices did not in fact measure use-value but some other kind of value: exchange-value.

A good produced for the purpose of being exchanged has traditionally been called a commodity in English. From an etymological point of view this is unfortunate since "commodity'' ought to be an alternative way of saying "good" or "use-value". but the usage is too long-established to be changed. It still remains true that the German and French equivalents — Ware and Marchandise — are much more expressive since they immediately indicate that what is being talked about are not goods as physical objects but goods as articles of commerce, as "wares and merchandise". But just as we can call goods use-values so we can call commodities exchange-values.

Strictly speaking, exchange-value and value are not the same. The exchange-value of a commodity is the expression in exchange of its underlying "value”, of the economic value which it has in an exchange economy even when it is not being exchanged. The disagreement between Marx and orthodox economics was not so much over what determined value (for Marx, and some others, it was the amount of socially necessary labour incorporated in a commodity in the course of its production from start to finish) as over its nature. For Marx value was not a feature which goods possessed by virtue of being goods but a social relation, a feature goods only acquired in commodity-producing societies; in other societies the only value goods had (or would have) was their use-value.

The other expression of value in an exchange economy is money as a unit of account. Money originated from barter, the simplest form of exchange, as the one commodity in which the exchange-value of all other commodities could be expressed and measured. Money still performs this role today so that exchange-value normally appears as a price expressed in monetary units.

This distinction between use-value and exchange-value, between wealth and value is a key concept for understanding capitalism, which is essentially a system in which wealth is produced as value rather than exclusively as use-value. This is because capitalism is an exchange economy in which most wealth, from ordinary consumer goods to vast industrial plants and other producer goods, takes the form of commodities, items of wealth that have been produced with a view to sale on a market.

Commodity production existed before capitalism but in previous societies was marginal to the predominant form of the production of wealth. In previous societies such as feudalism wealth was principally produced for direct use and not for sale on a market. Wealth was used by those who produced it or else by the privileged classes who lived off the producers and acquired wealth from them by the actual or threatened use of force. In capitalism the roles of production for sale and production for use are reversed; it is now production for use that is marginal, while the great bulk of wealth is produced for sale. In particular, the elements needed for producing wealth (raw materials, machines, and human mental and physical energy) become commodities.

Adam Buick

A Brief Exposition of Socialist Theory. (Continued.) (1920)

From the December 1920 issue of the Socialist Standard

Link to Part 6.

Value.

We propose now to briefly epitomise the Socialist theory of Value, which is exhaustively and scientifically worked out by Karl Marx in "Capital."

We have already pointed out that a knowledge of what constitutes the wealth of a given period, and the method by which such wealth is obtained, is necessary in order to understand the ideas prevailing at that period. Consequently, to understand the ideas of today, we must find out how the wealth of to-day is obtained, and of what it consists.

By the term "wealth" we do not mean air, water, happiness, misery, and so on. The wealth to which we refer is economic wealth— the result obtained by applying human energy to the material provided by nature, such as food, clothing, houses, ships—articles useful to man which require producing.

Now what is the first fact connected with the nature of the wealth of modern times that comes to our notice on examining present society? In the opening lines of "Capital" Marx plunged right into the heart of the matter. He said:

  In other words the wealth of to-day appears as a multitude of useful article for sale.

These articles that are for sale have different values—one is worth so much, another is worth more, and another, again, is worth less.

To find out the cause of the difference in value, and the substance of value itself, we must separate in imagination a single commodity from the world of commodities and analize its relation to others, and also its origin and development.

A commodity, then, is an article for sale; but to be saleable it must contain two quite distinct properties: it must be useful and it must be valuable.

When we say that a commodity must be useful we do not mean useful to those who produce them. Commodity production is the production of articles that are useless to the producers but useful to others—the potential buyers. An article has as many uses as there are human wants it can satisfy. Its useful side is its capacity to satisfy these requirements. For example, steel is useful for moulding into a bayonet or a ploughshare; gold is useful for ornamenting a temple of peace or financing a war, and so forth. A useless article could not be a commodity, as it would be unsaleable— there would be no demand for it.

The valuable property of an article has nothing to do with its uses. No matter how varied the uses an article can be put to its value is not increased by a fraction. No matter how useful or essential an article may be to humanity its value is not in the least affected. For example, a diamond ring may be worth thousands of pounds whilst a piece of bread the same size would only be worth a fraction of a penny. If the value of an article had anything to do with its usefulness, the positions of the articles in question would be reversed. Further, an article can be very useful indeed, and yet contain no value. Thus a merchant could bring bottles of air upon the market — he might sell the bottles, but he certainly could not sell the air (except in very exceptional circumstances) though there is nothing more useful to mankind.

We have seen that an article, in order to figure as a commodity, must be useful and must contain value. We have already seen what constitutes the useful side of an article, and the question now arises, what constitutes the value side of an article ?

There is a common misconception abroad that the supply of and demand for commodities determines their values. This contention is easily disposed of. The relation of supply and demand is continually altering, supply at one time being greater than demand, and demand at another time being greater than supply. As a consequence of these movements there must come a time when supply and demand balance each other. What then would determine the value of an article ? Obviously not supply and demand, as the equilibration of the two would nullify their effect. Such a theory would then drive us to the absurd conclusion that the articles, at the moment supply and demand were equal, had no value! The supply and demand theory, therefore, offers no solution to value.

The value of an article is something contained in it that is only expressed when the article is put into exchange relations with other and different kind of articles. It is something different from the physical or useful properties of an article. We might look at a pair of boots for years without gaining any information as to their value. We can only find out the value of a pair of boots by putting them into exchange relation with other commodities.

The absolute value of an article cannot be determined, any more than its absolute weight. Relative weight only can be determined, and also relative value—the value of one article as compared with others. Hence the necessity for putting an article into exchange relation with another in order, by this means, to express its relative value.

As all commodities are exchangeable, though differing widely in physical characteristics and usefulness, the value property which makes them exchangeable must be one common to all commodities alike without reference to their peculiar forms or uses. Apart from their physical or useful properties there is only one other property possessed by all commodities alike, and that is—they are all the product of human labour-power applied to natural resources. It is the fact that they are all the product of human energy that enables the different kinds of articles to be put into an exchange relation with one another. Human energy is the common measurable factor of them all.

All commodities represent certain proportions of simple human energy. Skilled labour counts as a multiplication of simple energy, as in it has to be reckoned the amount of simple energy expended in making it skillful.

The average labour required to produce an article—or, to be more exact, to reproduce an article—gives it its value. Where machinery is employed in the production of one article and not in the case of another of the same kind, the value each would be determined by the value of the machine-made article. All commodities are produced for sale and competition compels producers to produce as cheaply as possible. Where out-of-date methods are used the value articles so produced only counts as the same as that of those produced by up-to-date methods —the labour that counts as value the socially necessary labour, the labour which is necessary with tha prevailing resources and technique.

As human energy is not a thing that can be put into pint measures and ladled out we must ascertain the method of measuring it. The sweat caused in producing an article cannot be measured, but the time taken to produce such an article can be measured, and this is in fact the method of arriving at value, although it is done, at present, by a process behind the backs of the producers.

Human labour is measured by time. The product of one man's labour is equal to the product of another's during the same time, assuming that they have each the same skill and follow the prevailing methods with the average results.

Broadly speaking, an article is equal in value to another that takes, on the average, the same time and skill to produce.

The value of a commodity, therefore, is determined by its cost of reproduction in human 
labour time.

Gilmac.

(To be continued.)

Bankers Bonus Bonanza (2012)

From the March 2012 issue of the Socialist Standard

Pigs, fat cats or scapegoats?

Bankers are unpopular. Not the ordinary bank teller or the back-up IT staff, but the directors and top managers who award themselves huge salaries and big bonuses. They are so unpopular, in fact, that the chief executive of Royal Bank of Scotland, Stephen Hester, has been forced to give up a bonus of nearly £1m while his predecessor, Sir Fred Goodwin, has been stripped of his knighthood.

The banks defend themselves by arguing that they bring “wealth” into Britain, and pay a considerable amount of tax on it. Some even describe themselves as “wealth creators”. This is absurd. What banks do is compete for a share of the pool of wealth already created by the productive sections of the world’s working class, wealth which is extracted from them as surplus value. They can be more or less successful in doing this. Banks situated in Britain can channel some of the world’s surplus value this way which might otherwise have gone elsewhere, but this is capturing surplus value rather than creating wealth. In this way, banks do bring profits to Britain and the taxes they pay on it help finance the capitalist state. It’s an argument that carries some weight with other capitalists and with the government, whether Tory, Coalition or Labour (and it was Labour who knighted Goodwin), which manages the general affairs of UK Plc.

The popular perception of banks as merely shuffling money rather than producing anything useful is basically correct, even if it doesn’t go any deeper than that. Wealth – as something useful to human living – can only be produced by humans applying their physical and mental energies to material that originally came from nature to fashion it into something useful. As an early political economist, Sir William Petty, put it in the seventeenth century, Labour is the father and the Earth is the mother of all wealth. No bank, not even any bank worker, is engaged in the production of wealth as they are not involved in transforming materials from nature into something useful. This is not to say that banks do not play an important role within the capitalist system. They are part of the division of labour within the capitalist class. If banks didn’t exist then industrial capitalists would have to be their own bankers.

Under capitalism, as under all social systems, wealth is produced by human labour acting on materials that came from nature. But capitalism is a class-divided society in which the means for producing wealth – factories, machines, means of transport and communication as well as raw materials – are monopolised by a minority.  On those means the rest of us are dependent and in them wealth is produced for sale with a view to a profit for this minority. Two consequences follow. First, wealth acquires a value (related in the end to the amount of labour required to produce it from start to finish). Second, that those involved in the actual production of wealth are exploited – they produce more value than what they are paid for the sale and application of their mental and physical energies. This “surplus value” is the source of all profit, not just the profit of the industrial capitalists but also of the profit of those capitalists engaged in non-productive activities such as selling – and banking.

Such non-productive activities are necessary under capitalism and if they were not organised by independent businesses then the industrial capitalists would have to arrange for this themselves. They would have to tie up some of their capital in a department to sell their product to the final users or in a fund to finance longer-term activities. It proved more convenient – and in fact more profitable – to in effect hive off these activities to independent businesses. But this still involved sharing some of the surplus value extracted from their workers with these hived-off businesses.

Banks make their profits out of providing some services for other capitalist businesses, but essentially out of lending money to them and getting a share of the surplus value as interest. The money they lend could be their own or, more likely, it could be money they have themselves borrowed, though at a lower rate of interest. While some capitalist firms have a need to expand production, others will have a temporary cash surplus; the economic role of banks is to channel money from those who don’t need it for the time being to those who want to invest it. They are economic intermediaries.

The share-out of the surplus value produced by the productive section of the working class comes about through the averaging of the rate of profit. Different amounts of surplus value are produced in different industries, but if capitalist firms were able to keep as their profit all the surplus value produced in them then some industries would be more profitable than others. To the extent that this tends to happen the higher rate of profits attracts more capitalists to the industry, leading to more being produced and to prices and profits falling. In the end the equilibrium position (which is never reached) is when capital invested wherever, including in non-productive activities, would make the same rate of profit.

It’s as if all the surplus value produced in all industries was pooled and that capitalist firms of all sorts compete to withdraw from it as much profit as they can. This gives rise to the illusion that it is the business acumen of the directors or managers that determines the amount of profit a firm makes.  This is true only to a certain extent. The amount of profit a particular firm makes does depend on the decisions of those managing the firm. Being able to see trends and follow them up, being more efficient and the like can bring a firm higher profits. This is why some firms are prepared to pay their top managers big bonuses, on the assumption that their skills will bring in more money than the amount of the bonus. Whether this is in fact the case or whether the top managers are simply plundering the shareholders is an open question. In any event, it is not the business skills of those in charge of a firm that “create” the profits; they only withdraw them from the pool of surplus value previously produced by the working class, “capturing” them as we said. And the more they capture the bigger the bonus some get.

The averaging of the rate of profit means that in effect the whole capitalist class exploits the whole working class. So workers have has no interest in singling out one section, for instance bankers, for special opposition. They are all in it together and should be denounced equally as exploiters and parasites.

We have of course no sympathy for Stephen Hester and Fred Goodwin, but they are only scapegoats for the sins of capitalism. As far as we’re concerned the side show of them being sacrificed is not going to detract us from campaigning to get rid of capitalism altogether.

Adam Buick

Answer To Correspondent. (1929)

From the May 1929 issue of the Socialist Standard

What is wealth?

High Wycombe, Bucks.,

8/4/1929.

To the Editor of The Socialist Standard.

Dear Comrade,—

It is stated in the Party’s Manifesto “That wealth is natural material, converted by labour power to man’s use.” Am I right in assuming that unworked coal mines, undelved copper mines, undug gold mines, the uncaught fish in the sea, corn or cattle that grow wild, or the air we breathe, because they have no labour spent upon them, cannot be termed wealth? On the other hand coal, copper or gold which has been brought to the earth’s surface by human hands are wealth; similarly fish that have been netted from rivers or sea, cattle that have been reared, or corn grown by man. Even air, when used for industrial purposes, such as compressed air when used for automatic brakes, lifts, bellows, etc. I should esteem it a personal favour if you would let me know whether these remarks are correct in the columns of your next issue.

Yours truly,

J. E. Roe.

Our Reply.

Our correspondent is quite accurate in his statement of the nature of economic wealth and the manner of its production. Everyday experience (as instanced by the illustration our correspondent gives of compressed air) bears out the correctness of the Marxian view of this question.

Editorial Committee

Cooking the Books: Money for nothing (2006)

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

Towards the end of last year Roger Bootle, one of the “wise men” who advised Tory Chancellor Nigel Lawson , launched a new edition of his book with this title. According to an interview by Heather Stewart,

   “The painful lesson he encourages the reader to learn is that it’s an illusion to think we can have ‘money for nothing’ simply by buying and selling shares – or houses – from each other. Day-trading in equities, or dashing up the property ladder, has winners and losers – it doesn’t make society, or the world, richer ‘any more than taking in each other’s washing’” (October, 9 October).

A perhaps unintended admission that nothing that goes on in the City or in estate agents’ offices results in any increase in wealth, but is rather a drain on resources.

Wealth is something that satisfies some human want, real or imaginary. Some wealth is provided free by nature such as the air we breathe or the rays of the sun, but new wealth can only be produced in one way: by human beings applying their mental and physical energies to materials that originally came from nature, these days using machinery and equipment that had themselves been previously fashioned by human labour from materials from nature.

That new wealth can only result from the application of human labour was once so obvious that nobody challenged it until less than 150 years ago. It was only when the anti-capitalist implications of this obvious fact were realised by the ideological defenders of capitalism that they began to concoct another theory as to how wealth was produced.

One of the first to attack the labour theory of wealth production was the English academic, W. H. Mallock (1849-1923). He introduced a new “factor of production” in addition to the traditional three of Land (a gift of Nature), Labour and Capital (the product of Land and Labour): Entrepreneurship. According to him, without this fourth factor nothing would get produced as it was the entrepreneur who alone could bring the other three together; without entrepreneurs no wealth would be produced. So, it was they would were entitled to be called “the wealth producers”.

Naturally, entrepreneurs were delighted at this new advance in economic “understanding” and today that there are four “factors of production” is incorporated in all economics textbooks. For instance, a typical such book (in the occurrence, Economics by Ralph T. Byrns and Gerald W, Stone) states that “economists conventionally refer to four broad categories of resources: land, labour, capital and entrepreneurship” explaining:

  Entrepreneurs provide a special type of human resource; they combine labour, natural resources and capital to produce goods and services while incurring risk in their quest for profits. After paying wages, rent and interest for the use of other resources, entrepreneurs keep any money left over from their sales revenue. An entrepreneur’s profit is a reward for organizing production, bearing business risks, and introducing innovations that improve the quality of life.

Even a GCSE level economics student should be able to see the fallacy in this (though they would be ill-advised to point it out if they want to pass their exam). Organising production, and introducing innovations, is clearly Labour, the exercise of mainly mental energy, and these days is largely done by hired, if highly trained and highly paid, wage workers no different in principle from the other workers hired by the capitalist enterprise concerned.

Profit is not a “reward” for anything. It is a claim on wealth arising from the fact that the means and instruments of production used to produce new wealth are private property. In other words, it’s a non-work, property income and as such a prime example of “money for nothing” that Roger Booth seems to have overlooked.

The Productive and the Unproductive Worker (1976)

From the September 1976 issue of the Socialist Standard

The descriptions “productive” and “unproductive” worker have nothing to do with the specific functions of labour power in the creation of use value; that is, the production of goods and services which satisfy human needs, and in which the worker has deposited the energy of his brain, muscle and nerve. All wealth is a combination of nature, which supplies the necessary materials, and men’s energy. This simple relation of man and nature forms the basis of all human activity, and we will see this clearly in a socialist world when our aim will be the production of wealth, and not the production of capital.

The terms ‘productive’ and ‘unproductive’ have a very narrow definition which only holds good for capitalist society. The proper meaning of the word would convey that productive work was creative and that unproductive work was wasteful. This is not the case in capitalist society, and workers need not be affronted by being called “unproductive”. The perpetually unproductive class in society (the capitalists) are held in the highest esteem.

From a capitalist standpoint the productive worker is one who produces capital; that is, in addition to reproducing the value of his labour power (his wages) he produces a surplus value. Out of this surplus value the capitalist derives his profit, and this, less overheads and expenses, provides further capital for repetitive transactions for the exploitation of the labourer. The expansion of capital is based on this principle, and the greater the accumulation, the greater the pressures on the capitalist to extend the avenues of investment; more markets, more machinery, and greater intensification of the exploitation of the worker. The productive worker is one employed by capital who produces capital, in the form of the commodity. Capital on the surface exists in the monetary form, but this money represents a sum of commodities of equal value, which when brought into the productive process produces a greater sum through the agency of human labour alone, when an additional value is created.

The unproductive worker, from the point of view of the capitalist, is one who consumes more than he reproduces. One who is paid out of revenue, wages and profits, and whose services are exchanged directly against revenue. Most domestic servants who provide personal services for their employer come into the category of unproductive worker, as do most civil servants, all High Court judges, the whole of the armed forces, priests, parsons and bishops, etc. A capitalist may employ a chef, or a gardener, for his own personal needs, and pay them out of his property income. The chef or gardener does not reproduce the value of his labour power, as he is merely concerned with the production of use-value, i.e. meals or herbaceous borders and lawns for the private consumption and amenity of a man who incidentally is a capitalist. He is not employing them in his capacity as a capitalist, and they are not producing capital, but use-value. If, on the other hand, the capitalist is a director in Hilton Hotels or Holiday Inns, he employs the chef and gardener in a wage-labour-and-capital relation, and in this respect they produce a surplus value over and above the wages they receive. The meals prepared by the chef are sold at a profit, and the floral arrangements, cultivation of grounds or vegetable garden, the work of the gardener, are likewise sold at a profit to the hotel guests. The use- value of the labour performed in both cases has not altered at all, but the economic relation under which the labour was performed has changed, and it is this economic relation which determines whether work is productive or unproductive, irrespective of the useful character of the work. The number of such workers who can occupy the position of being productive and unproductive under different conditions of employment is very restricted.

Useful or Not ?
All politicians, the legal profession, government officials, judges, generals are unproductive — in fact the entire State machine is an unproductive institution. Not only are they not productive, they are essentially destructive, yet they manage to appropriate a substantial portion of material wealth. The state is a consumer of revenue which it compulsorily levies through taxation by the political parties who control it.

There is obviously a distinction between useful labour in the real sense and productive labour. A doctor maintains the health of labour-power, keeps it in a reasonable state of repair; but a doctor is not a productive worker any more than is a musician or an artist. The absurdity of this is apparent when, for example, a writer producing books of fiction, or a journalist, is a productive worker. One enriches the publisher, the other the newspaper proprietor. What they write may be absolute bilge, but that is not the criterion, which is: do they add value to the original sum advanced in payment for their work?

The definition of “useful” labour in capitalist society is a different matter. Useful means that the product of labour must be socially necessary. That which is socially necessary is useful; that which is socially unnecessary is useless. Socially necessary means that useful labour has gone into the manufacture of a commodity or service; socially unnecessary means that “useless” labour has gone into the product. The test within capitalism which determines whether a thing is useful or useless is when you try to sell it. If it cannot be sold it is useless. An armoury full of firearms, shells and ammunition is considered useful, as is a nuclear submarine. The whole range of the killing instruments come into the “useful” category. Present-day society has a need for killing instruments. On the other hand, a scheme to remove slums, irrigate the Sahara desert, or the extension of education into the proper study of history, sociology, anthropology and political economy, would be considered useless, although the capitalists would always pay lip-service to the idea. In effect, socially useful means that there is a profit, socially useless means loss. The merits or desirability of the way in which man’s energy and natural resources ought to be deployed have no place in this economic and social arrangement.

What is Wealth ?

Wealth comes into existence at the point of production and only through the application of human labour. The industrial capitalist may appear to be the direct appropriator of surplus value, but there is a whole background of interwoven ruling-class interests struggling for their share of the surplus product. The banker seeks his interest, and the landlord his rent — both are consumers not producers. The landlord does not produce, nor does the banker produce interest. Wealth is not made by Stock Exchange transactions, financial transactions, or any other form of dealing on the commercial markets. It is not made by buying and selling either, although it may be transferred between individuals. Money does not make money. Only labour-power can do that, in the sense that it creates the things which money can buy.

It is precisely the essential circulatory nature of capital, and the great division of surplus value into rent, interest and profit, that leads to the mystery behind the relations of production and the artificial distinction between productive and unproductive labour. With the development of labour-saving machinery and other advances in technology, there is a relative decrease in the number of workers engaged directly in the productive process. On the other hand, there is an increase in civil servants, local government officials, and other types of clerical workers. One of the problems facing the capitalist is how to control this expensive and unproductive bureaucracy which he has created and which he has to pay for. But without the unproductive worker, certainly at local government and national levels, no revenue through rate taxes, etc. could be collected, and no public services could be provided. The whole system would be in a state of chaos, and every capitalist representative knows this. These “necessary evils” are built in to the system and form part of the superstructure.

The extraction of surplus value is a social process, and all workers, whether their work is productive or unproductive, play a part in this process. To that extent all workers are exploited, because they are under the domination of capital and have to sell their labour-power to whoever will buy it. Capitalist society cannot exist without its social bureaucracy, notwithstanding that this is becoming top-heavy. The problems faced by capitalists in trying to keep society on an even keel are nothing compared to the personal and social problems of the workers who have to live and work with it.

Capitalist production has stood the world on its head in every way. The most respected members of the community are a class of rich indolent parasites — the most revered institutions of law and learning are anti-social in that they exist to maintain the class of parasites to the detriment of the majority.

Jim D'Arcy

The Source of Wealth. (1927)

From the March 1927 issue of the Socialist Standard

Capital is wealth used in a way that profit results from such use. Strictly speaking, capital is money invested. Unless money be invested in factories, machinery, raw material and labour-power no profit will come to capital. The origin of profit has to be sought in the nature of labour-power. The labourer is paid less than the value he adds to the article he produces—here is the whole secret of capital and the source from which flows the mighty revenues of the multi-millionaires.

Factories are built, machinery is constructed, raw material is obtained by working men and women applying their energies to the material Mother Nature so lavishly provides. Money itself, that which the capitalist invests and which appears to have a magic power of self-expansion, is also obtained by the application of human energy to natural resources. In fact, without the raw material and human energy there is no economic wealth at all. These two things together are alone the source of all economic wealth, in spite of the wonderful tales of the mysterious power attached to capital. Before capital was thought of wealth was produced; after capital has taken its place beside the other relics of past epochs wealth will still be produced.

While the shipbuilder builds the floating palace, other workers in other industries are making those things that are necessary so that he may eat, drink, clothe and house himself until such time as his work is completed. This is an instance of what is happening in all directions. Workers supplement each other’s efforts in various ways so that society shall live. People in this country make articles that are required in the tropics. People at the equator produce products required in temperate regions. Often the raw material comes from one region and is worked up in several other regions before taking its final shape for use. In fact, so much are the products of to-day the result of social effort, that if an article be picked up and inspected it will generally be impossible to determine how many regions of the earth were concerned in its production.

And what of the fruitful beast of burden by means of whose labour these products exist in such prolific quantities? The worker does not own his product, it belongs to the owners of capital. The more wages the capitalist pays, and the more waste there is, for a given amount of production, the less profit the capitalist reaps. Thus the capitalist has a great interest in low wages and peace in industry.

Everything is done to make the worker more fruitful, docile and cheap. Technical instruction is boomed because a better educated worker means higher skill, better organisation and, consequently, more products, with the expenditure of less energy. A recent development with the same object is the increasing attention given to industrial psychology.

In this latter direction, astonishing results have been recorded, as the following quotation indicates:—

  Increases of output, varying from five to as much as forty per cent., have been obtained by our methods in such industries as coal-mining, engineering, tinplate, weaving, spinning, cabinet-making, calico printing, seed-crushing, dressmaking, the manufacture of margarine, rubber and fancy goods and confectionery.—(Dr. Charles S. Myers, Director of the National Institute of Industrial Psychology, quoted by the Observer, 8/11/25.)

Many and various are the methods adopted to ensure the workers' docility. Large firms spend huge sums equipping sports' grounds and organising welfare work. Health Insurance, Old Age Pensions, Widows’ Pensions, Unemployment Insurance, and the like, are really capitals’ insurance against rebellion. They minimise the danger that is always on the doorstep. Formerly, these needs were met in charitable ways, now they are all organised in a way that makes them cheaper, more effective, keeps the worker less dissatisfied while at the same time binding him tighter to the wheel of capital by bonds of fear.

At its best, capitals’ ideal for the worker is to make of him a fruitful and contented slave, content to remain a beast of burden while his master enjoys the earth and the fulness thereof.

Gilmac.

Cooking the Books: What classless society? (2005)

The Cooking the Books column from the April 2005 issue of the Socialist Standard

At one time, a long time ago now, when the Labour Party still retained some sort of vague commitment to being opposed to the workings of capitalism it used to say that it favoured the redistribution of wealth from the rich to the poor. They were going (they said) to establish a more equal society by taxing the rich and using the money to provide better public services for the rest of us.

Actually, in the last century there was a long-term trend towards a less uneven distribution  of wealth ownership. But this did not result from any deliberate policy on the part of governments (the wealthy soon found ways of minimising or avoiding taxes on their existing wealth and on their accumulation of more wealth), but rather from a majority of people coming to own more consumer goods, etc. resulting in the total amount of wealth owned by the non-rich sections of society rising faster than the total amount owned by the wealthy.

The rich still got richer – and, in absolute terms, each one of them got more than each of the rest of us – but, proportionately, together they got less than the rest of us as a group. There was no redistribution from them to us; which would have gone against the logic of capitalism involving as it does the accumulation of more and more capital in the hands of a capitalist class.

In the 1990s this long-term trend (which continued even under Thatcher) was reversed. Since 1991 the rich have been getting richer faster than the rest of us – despite a Labour government. In December the Office for National Statistics published the figures for the latest available year, 2002. Two sets of figures are published, one for all marketable wealth and the other for ““marketable wealth less value of dwellings”. Since capitalism is based on the concentration of the ownership of the means of wealth-production  in the hands of a tiny minority, and since houses are not means of production, it is the second set of figures that are the more relevant (even if they still include other items of wealth such as cars and hi-fi equipment that are also not means of production),

These figures (published on the ONS website at  http://www.statistics.gov.uk/cci/nugget_print.asp?ID=2  show how things have changed since 1996, as the situation inherited by the present Labour government when it came into office:

                                     1996  1999 2000 2001 2002

Top 1% owned               26      34     33     34     35

Top 5%                           49      59     59     58     62

Bottom 95%                    51      41     41     42     38

Bottom 50%                      6       3        2       2       2

As can be seen, whereas in 1996 the top 5 percent owned as much as the bottom 95 per cent - or one out of every 19 persons owned as much as the other 19 (of whom half owned virtually nothing) taken together - by 2002 the top 5 percent owned nearly 40 percent than the rest of us.

Who says that we’re living in a classless society? Who says that the capitalist class have died out? Who says that the Labour Party can deliver a more equal society or is even trying to?