The Circulation of Capital. Its Effect upon Society. (1915)

From the September 1915 issue of the Socialist Standard

In present-day society production is capitalised ; that is to say, wealth functions as capital. It is the nature of this capital to take on peculiar characteristics. All capital is such that it seeks to fructify, become ever larger and larger.

The process is carried on like this. The capitalist, i.e., owner of capital, starts out with a certain amount of money for the purpose of making this amount into a larger one. This is how he sets about it. With his money he buys means of production, e.g., a workshop and machinery, and then raw materials ; he next buys labour-power for the purpose of setting his works going ; in other words, for producing wealth. At the end of a certain time the capitalist has goods produced of a greater value than he formerly laid out in money for procuring means of production, raw material, and labour-power, or which is the same, the money he laid out as constant capital, i.e., that portion of his capital whose value does not vary, and the money he laid out as variable capital for labour-power, i.e., that portion of his capital which brings him in extra, or added value. But yet he has not received that larger amount of money that he sets out to obtain. How then is it procured ? He must deliver his goods to a certain market for sale. For instance, if it is boots he has produced then he must seek a market where boots are in demand. If he be fortunate enough to sell all, or nearly all, his boots he will then have realised his extra value, his profit, i.e., reckoning on the assumption that his boots were sold at, or about, the average market price.

It will be seen then, that capital must of necessity circulate. There must be an ever whirling round of commodities, i.e., articles of exchange. For this markets must be found ; hence the keen competition that we see between the leading capitalist countries to gain colonies. This is the prime cause of wars in capitalist society. A successful war to a country is, generally speaking, a starting point for industrial development and supremacy. As De Gibbins, speaking on England’s industrial greatness, said:

“The high place the nation (England) thus came to occupy was due to various causes, among which the state of European politics in the latter part of the eighteenth century may be reckoned. If we consider the condition of the great European powers after the peace which terminated the Seven Years War in 1763, we perceive that England was in a favourable position. In the first place she had seriously injured her great commercial and colonial rival, France, in her possessions both in India and North America. By the Seven Years War England had gained Canada, Florida, and all the French possessions (except New Orleans) on the Mississippi River, while in India the victories of Clive had established English influence as supreme and laid the foundation for a further extension of trade and sovreignty.”

There can be no doubt about it that, with England’s acquirement of colonies, her trade developed by leaps and bounds; so that it is only quite natural that the countries which have come later in the field as capitalistically developed countries should seek to gain markets. Hence the present European war which is at bottom competition for the Balkan States’ and other markets.

There are, however, people of the Norman Angell type of mind (whatever that may mean), who claim that war is of no benefit at all to a country ; it is caused, they say, through ignorance plus military vanity. It must be said here, that we are speaking in the capitalist sense. We agree that war does not and cannot benefit the great mass of the people of a country i.e., the workers. But it does benefit the capitalists of a victorious country as Norman Angell himself attests when quoting Sir J. R. Seeley in the appendix to his book, “The Great Illusion.” Says Seeley:

“It is admitted that a particular order of men—namely, the merchants who trade with the Colonies—may have benefited from the monopoly, but their gain has been at the expense of the bulk of the nation.”

Since wars are proclaimed by the ruling capitalist class, this class will see to it that there is a good chance of gain before they embark on so costly a speculation as war. So we may dismiss this Norman Angell idea by pointing out that the richest capitalist country (England) has not lost but benefited by her possessions ; and that the other capitalist countries know this only too well, hence their endeavour to do likewise. The capitalist countries do not, as a rule, seek to conquer territory that has been already capitalised, as the Angellists seem to imagine, but to gain territory where capitalist conditions are very little or not at all in vogue, e.g., China.

Many times do we hear the Angell economists (?) trotting out the claim that markets are free to all ; it is the one that can sell the cheapest that corners it, they say. Yes, that is all very well, but who has the monopoly of a market at the average price ? Obviously the occupiers of the country or colony. For that reason a country without colonies and depending on home markets is forced to institute a system of protective tariffs to stop the influx of cheap goods.

What is the effect of the situation then ? It is this : A leading capitalist country with little or no colonies must, if she wishes to capture a foreign market, undersell her competitors. She can do this by either of two methods, or by both methods together. By cutting down expenses as much as possible in the works, or by relinquishing a certain portion of the profits. The former can be done by speeding up the worker to the highest pitch, and the latter by employing commercial travellers and agents who, by various devices, such as advertising extensively, seek to get a sale for certain products ; all of which expenses must come out of the profits of the capitalist. Thus it will readily be seen how handicapped the capitalists of a country without colonies are.

Further, it will be seen that the capitalists of a country so handicapped will be forced to develop their industries to the highest possible extent. In such countries like America will the anomalies that capital imposes upon society, e.g., sweating and unemployment, riches and poverty, be most marked.

* * *

With a view to helping the business man out of the difficulties of competition for markets and the antagonism of the workers, an American writer, Norris A. Brisco, A.M., Ph. D., has written a book, entitled “Economics of Efficiency.” I quote you the following rather lengthy passages without any apology.

At bottom of page 3 he says :

“The nineteenth century has been frequently called the century of the machine. Successful industrial management was concerned largely with obtaining greater efficiency through two sources : firstly, the acquiring of a more efficient plant through more efficient buildings and arrangement, and secondly, the the acquiring of more improved and specialised equipment for the different processes. Production was greatly increased, which necessitated more extensive markets. Manufacturers realised that industrial development was dependent upon markets. The question of markets has always been a fundamental one in industrial progress. Improved machinery and production on a larger scale drove the manufacturer to extend his field from the locality to the nation, and further improvements made more extended markets an absolute necessity. With the entrance of our commodities into the world’s markets competition became more intense, and the question of costs became more important ; but during the nineteenth century, the average employer, in his efforts to lower costs, centralised his attention upon buildings, equipment, machinery, and methods. Near the close of the century a few more enterprising employers had their attention attracted to the human element, the most important in production, and this attraction is the beginning of a new science of business, the science of efficiency, which is a secure and sound foundation for further growth and greater industrial progress.”

And on page 5 we read :

“Manufacturers were amazed at the extent of the wastes which were found in their plants. Wastes of material, time and energy were found everywhere. A prominent manufacturer declared that they were getting only about 50 per cent. of the ability of workmen in their factory. Another stated that few shops produced more than 60 per cent. of the work that it would be possible for them to produce with the same working force and the same physical equipment. The chief problem which arose was how to eliminate these wastes. How can an industrial country hampered with the presence of wastes compete with one with wastes partially or wholly eliminated ? It is impossible ; it is a dollar and cents proposition, and when manufacturers realise this they will pay heed to the conditions existing in their plants, and make endeavours to eliminate as much waste as possible.”

Mr. Brisco recognises that markets are necessary, but since all countries cannot acquire them he thinks that the next best thing to do is to cheapen cost of production and undersell competitors. He thinks he scores with “labour” efficiency, apparently forgetting that other competitors can adopt the same methods.

In quoting him again Socialists will readily see the piquancy of the following passage. On page 8 he writes :

“Labour should be conserved, directed, and given just and fair remuneration. Efficiency demands this, and as soon as business men realise that exploitation does not pay, and that efficiency does, the relations between employers and employees will be less antagonistic, and both will find it to their advantage to work for their common interests.”

Yes, don’t exploit your workmen, Mister business man, but fairly rob him !

* * *

What is then the lesson the we can derive from the foregoing ? We see that the masters who control out lives and existences are merely forced, by the conditions that obtain in society, to act in certain directions whether it be the proclaiming and organising of war or shooting down defenceless strikers struggling for an existence.

The only way out for the workers is to understand the nature of present-day society and its effects upon themselves. They will then realise the necessity of a change of society where wealth functions as capital, i.e., where wealth functions for the profit of the few at the expense of the rest of society, for a society which shall have as its basis the production and distribution of wealth for the needs and requirements of society. In a word, the workers will realise that Socialism alone can save themselves and civilisation.

They will further realise that to attain Socialism they must organise as a political body, with the conscious aim of being at all times and occasions hostile to the capitalist class and their representatives.

They will not then betray working-class principles as the skunks of the B.S.P. and freaks of the I.L.P. do, but will unflinchingly uphold those principles, as the Socialist Party of Great Britain does, until working-class political supremacy and the emancipation of the proletariat shall have been attained.

L. M.

Self-made! (1909)

From the July 1909 issue of the Socialist Standard

A correspondent signing himself A Listener writes :

“Having participated as a humble listener in many discussions on Socialism, I have frequently heard your speakers say that no man can make his own fortune by himself alone. Would you kindly answer through the columns of your paper, the undermentioned questions?

“Now I know a man (a friend of mine) who went abroad, took a piece of land, his object being to discover gold, and fortunately it proved a success. Now this land was worked up by himself alone. 

“Do you not consider him to be a man that has made his own fortune by himself alone ?”

No, good “Listener,” your friend did not make his fortune “by himself alone.” By a fortune we understand such an accumulation of wealth as, through the control of other men’s labour that it gives, enables its owner to live without labouring himself.

In the first place there is the outstanding fact, that apart from property-founded society, wherein wealth monopoly gives some men control and mastery over the labour of other men, there can exist no fortune. Its main characteristic, the power of dominion that it imparts, is obviously conditional upon the existence of other men (and producers at that). Without these there can be no fortune.

In the second place, your friend had to be carried to the gold-bearing land, and so required the help of the steamship and railway workers and all the craftsmen and labourers who contribute to the construction of the means of transportation. He needed tools to work the land and, not less, the knowledge of where and how to get out the gold.

Thirdly, so soon as your gold-mining fortune-hunter had won a surplus over and above the amount required to purchase his means of subsistence, he doubtless, being wise in his generation, banked or otherwise invested it. That is to say, he put it to such use as entailed the exploitation of the wage workers. In the normal course of commerce, then, his property would grow by the accumulation of rent, interest or dividends, regardless of any exertion upon his part.

And so it stands demonstrated, that even in the exceptional case of your friend, the acquiring of his fortune was assisted and alone made possible, not only by the very existence and labour of countless other men, but by the accumulations of knowledge and implements made by the numberless generations of men who have preceded us. In other words, wealth accumulates to-day as a result of social activity without which the individual is utterly impotent. This is more easily seen than ever in modern industrial society, with which the Socialist is more particularly concerned when he says that no man makes (creates) his own fortune.

John H. Halls

Socialism in Debate. Part 4. (1914)

From the August 1914 issue of the Socialist Standard

As mentioned in our April issue, it was brought to our notice that Mr. G. W. Daw, Conservative agent for Wandsworth, had stated publicly that Socialists are reluctant to open the columns of their journals to pronounced opponents. We therefore offered Mr. Daw space in this journal for three months to set out his case. The following is the outcome.

Link to Part 3.

[The original arrangement, under which Mr. Daw was to have space afforded him for three months, was departed from in order to give him opportunity to develop an attack on the Marxian theory of value. The present contribution from our opponent, and our reply thereto, closes the debate.—Ed. Com.]

The Case Against Socialism. 

Mr. Daw’s Final Contribution.

A great deal has been made of my admission that evils exist under what my opponents style “the Capitalist system.” But when we examine the causes of those evils we shall find them due, as I stated, to the shortcomings of human nature.

A man inhabiting an old and rickety dwelling may decide to pull it down and re-build on a new plan, but using the old material. The result is that he gets a different shaped dwelling, but the defects still remain, because the old materials are used. So, if it were possible to re-organise society on a Socialist basis, the same defects and evils would be manifest, because human nature and instincts would remain unchanged; and as the evils would be materialistic, the probability is that greed and selfishness would be far more rampant, and assert themselves, though of course in different forms to those to which we are accustomed under existing industrial organisation.

As to Malthus’s arguments having been crushed to powder by Godwin and Henry George, that is a matter of opinion. Some modern Socialist writers have recognised the difficulty of the question I raised, and suggested methods for overcoming it which would place intolerable restrictions on individual liberty, thereby justi­fying the contention of anti-Socialists that under Socialism there would be no individual freedom. The natural tendency of population to increase up to the extreme limit of the means of subsist­ence is a fact, manifest to all who care to study statistics, and argument against facts is futile.

The Editor seeks to score a point because I admit that there is a surplus value. Yes, but not produced by manual labour force. Moreover, under the theoretical industrial organisation prescribed by Socialists this value would cease, because production is to be for use and not for profit. Exchange, as Bastiat observes, produces at once two interests where there was formerly one; and then the price, as I previously pointed out, is largely determined by the eagerness of the buyer on the one hand, and the eagerness of the seller on the other.

Those who carefully scrutinise the theory of communistic Socialism will discern that it is a reversion to a primitive form of life. Hyndman suggests that man lived under communism for a much longer period than he has lived under forms of private property. This is an important admission, because it will be noted that although the world then contained all the wealth, it was undeveloped, and tribes were constantly warring one against the other to escape starvation. Probably cannibalism had its origin in the extreme poverty to which mankind was driven under that communal organi­sation of human society.

In this discussion I have assumed for the sake of argument that Socialism is practicable. Personally, as the result of a fairly exhaustive study of Socialist writings, I am convinced that the reconstruction of the industrial and political order of things, in accordance with Socialist theories, is impracticable. Socialism is potent for one thing, and that is to cause a revolution which could only overthrow civilisation and leave those remaining in the direst misery and poverty. In a word, although Socialism may profess to be constructive in theory, it is destructive in practice.

When I suggest that the workers should set up their own machinery and factories I do not, as seems to be implied, suggest that the workers should steal someone else’s property. My proposition is that the Trade Unionists should devote a few thousands of their five millions capital, now invested in property, etc., and put their Socialist theories to a test. Whenever I have advanced this argument in debate it is evaded by my opponents. I am therefore not surprised to be told that “the working class have no capital.” On referring to the Fifteenth Abstract of Labour Statistics, compiled by the Board of Trade, I find that 100 principal Trade Unions had funds at the end of 1910 amounting to £5,121,529. The Retail Co-operative Societies of the United Kingdom have a share capital of £4,849,926, and a reserve of another two millions; the agricultural and wholesale departments have several more millions. In 1910 the Depositors in the Post Office and Trustees Savings Banks had 221 million sterling in deposits, the greater part of which must be savings of the workers.

If the workers are the inventors of machinery, why have they persistently opposed the introduction of the same? If they discovered “how to control various forces in nature” why have they allowed them to pass into the hands of others? Are our patent laws defective? Let anyone infringe a patent and he will soon find that it is a very difficult matter to rob the inventor. There is as much skill necessary to conduct a business as is required to invent a machine, and whereas the inventor’s task is generally an affair of months, the capitalist has to exercise his ingenuity throughout his career.

I come now to the criticisms in the last issue of the “Socialist Standard.” Utility. I am informed, “is not considered in measuring value,” and bread, by way of illustration, is cited as “immensely more useful—or possesses greater utility—than gold, yet its exchange value is enormously less,” because “the amount of labour power embodied in a given weight of gold is far greater than that embodied in the same weight of bread.” I venture to controvert this statement. In the first place, the weight of the two commodities can have no bearing on the question. If my critic will again peruse “Capital,” page 25, he will observe that Marx is careful to state that for measuring a commodity by weight “the iron officiates as a body representing nothing but weight,” and says “just as the substance of iron, as a measure of weight, represents in relation to the sugar loaf, weight alone, so in our expression of value, the material object, coat, in relation to linen, represents value alone.”

Therefore when my critic compares the weight of bread with gold, as an illustration in the way he does, he is giving an interpretation of Marx which is not born out by the philosopher’s own words. There is nothing in Marx’s conclusions which qualifies his very definite statement on utility I previously quoted from page 8. He tells us you can only measure value by comparing one article of human labour with another—”the most simple expression of value such as twenty yards of linen = the coat.” In anticipation of further questions which may be put to me I submit this: supposing instead of a coat the same material was cut up and sewn into a shape which was of no possible use whatever? There might be the same amount of material and labour, but it would not be the equivalent of twenty yards of linen. Without utility there can be no value after all.

In conclusion, if we are to measure human labour, let us do so fairly. “As far back as 1886,” Mr. W. C. Anderson, I.L.P., tells us “the Commissioner of Labour for the United States reported that in America the machinery at work represented 3,500,000 horse-power, and that 4,000,000 work people were able to turn out wealth to produce which, without power, would have required 81,000,000.” And in 1887 it was estimated that the power exerted by all the steam engines in existence was “equal to the labour of 1,000,000,000 men.” Notwithstanding all special pleading and argument, I, at any rate, remain, a hardened unbeliever in the Socialist faith, that seeks to maintain the omnipotence of human labour-force in the industrial world by blindly ignoring that greater labour-force and wealth producer, viz., steam power.

George W. Daw

—————————-

The Socialist Reply.

Mr. Daw’s concluding contribution empha­sises the truth of our statement in the first reply, namely, that no one has yet shown a flaw in the essentials of the Socialist case. In this closing contribution to the debate we have a number of question-begging statements, but no facts or evidence are brought forth to support these statements.

For instance, what is the chief evil under Capitalism? Want in the midst of plenty due to the slavery of the working class. Mr. Daw was quite unable to meet this point when we first put it. He is unable to do so now, and to fall back on the “shortcomings of human nature” after our analysis of the cause of poverty, is a confession of defeat.

Again, who are the “Socialist writers” who have “recognised, the difficulty” of the popula­tion question? We are not told—and for the simple reason that they do not exist. In our first reply we pointed out that neither Malthus nor anyone else had given any evidence of the “natural tendency of population to increase up to the limit of the means of subsistence.” If Mr. Daw has any evidence why does he not produce it? Our first reply to this Malthusian rubbish has not been touched, let alone met, by our opponent.

We are again told that surplus value is “not produced by human labour force.” We never said that it was. What we stated was that it was produced by applying human energy to the nature-given materials and forces, and we challenged Mr. Daw to show how it could be produced otherwise. Instead of doing this he merely repeats his former statement.

Socialism will not be a “reversion to a primi­tive form of life,” because it will be neither a “reversion” nor “primitive.” We state quite distinctly that we desire the common ownership of all the modern means of wealth production—huge machinery, control of colossal forces, far-reaching organisation and distribution of the results of productive activity. There is nothing “primitive” about this, but only action in line with social development.

The present “civilisation” leaves the mass of the workers “in the direst misery and poverty” to-day. How its overthrow would leave this condition remaining Mr. Daw, wisely, does not attempt to explain. The great thing Socialism will destroy is wage-slavery and exploitation.

Then the hoary wheeze of telling the workers to “set up their own machinery and factories” is trotted out again with figures from the “Fifteenth Abstract of Labour Statistics.” Mr. Daw is evidently quite ignorant of trade union work or responsibilities, or he would know that only a small portion of the £5,000,000 is invested in property. The larger portion has to be kept in readiness to meet the continual Sick and Death Benefit claims, as well as to furnish dispute pay.

As we mentioned in the June “S.S.,” it would be absurd to suppose that any serious critic would suggest the withholding of these benefits to buy machines or factories. The co­-operative societies are not restricted to working men. Anyone can take up shares in most of them, no matter which class he belongs to. Ah! but what of the 221 millions sterling in the Post Office and other savings banks? We are told that the greater part of this “must be savings of the workers.” Why “must be”? Can Mr. Daw or anyone else give any evidence to support this claim ? We say they cannot. It is largely baseless assertion. It is true that the bulk of the trade unions’ funds are deposited in the Post Office Savings Bank to meet their current liabilities ; but these having been already reckoned in the trade unions’ funds, should be deducted from the Post Office account. Again, a number of businessmen put money in the Post Office, while, where competition is keen, or some scheme of bankruptcy is contemplated, the funds are often deposited in the names of the various members of the family. Where workers do put any savings in the bank, these, as we said before, are only the few pence scraped off the wages to provide against serious sickness or unemployment. It would be useless for this purpose in the form of shares in a factory, for it could not be turned into cash when wanted.

But all these stale old quibbles of Mr. Daw are quite beside the point. It is a sheer dirty insult to tell the working class, who are robbed of the whole of the means of wealth production—means of production which they alone fashion and operate—that they should pinch and starve themselves a little more to put their tiny mite into a factory or works. Let the workers stop the robbery and take possession of what is rightly theirs—the means necessary to live.

The question of the inventor and machinery has already been fully met in the June and July issues of the “S.S.” Our opponent, instead of trying to meet the refutation given to his previous statement, merely repeats it like a parrot. As to it being difficult to rob an inventor, only an appalling ignorance of the history of inventions could excuse so false a statement. From the day when Arkwright robbed Paul Kay to the time when Carnegie robbed John Breslin the growth of modern industry has shown countless instances of inventors being robbed of their discoveries by capitalists.

Note first that the onus is thrown on the inventor to prove his claim. The capitalists’ agents, the lawyers, raise every technical point and quibble the laws are so prolific of, and often in cases where the inventor does go to law he loses on some small legal shuffle that does not concern the essential questions at all. John Breslin was unable to pay the fees for hearing the case in the Court of Appeal. Even the mere stamps for the documents cost more than many working men can pay.

As for our patent laws being defective, we have only to point to the fact that to take out a full patent costs about £100, and most inventors would be glad of a hundred pence by the time they have worked out their drawings and made their models. The law is most effective—for the capitalists !

We are then told that “There is as much skill necessary to conduct a business as is required to invent a machine,” and that “the capitalist has to exercise his ingenuity throughout his career.”

The careful reader will see that there is absolutely no connection between these two statements. If Mr. Daw means to suggest—for he does not say it—that the capitalist “conducts” or manages his business we have already denied this in our first statement of our case. All the management of business, as well as the manipulation of machinery, is done by wage-slaves—a fact Thomas Lipton admitted to the shareholders of Liptons Ltd. when referring to the Army canteen scandals.

After having proved how little Mr. Daw understands Marx, it is rather refreshing to be referred to the portion we ourselves quoted. We never said that weight determined or measured value. We simply pointed out, that Mr. Daw’s illogical and confused statements on utility being the measure of value, because it always had to be present, was similar to saying that volume measured weight instead of density. Simple as our explanation was it was evidently beyond our opponent’s mental capacity.

Whenever two things are compared in any science or sphere some basis has to be taken to measure from. We may compare yards of silk with pounds of coffee or tons of iron or ounces of gold, and it is evident to the poorest intelli­gence that, having taken a given unit to begin with, it must be kept throughout the calculation. Gold is usually dealt with in small quantities, and the ounce is the unit of weight generally used in England. Now take our illustration.

Why does a given quantity of gold—say an ounce—not exchange for the same quantity of bread? Every schoolboy knows that an enormous number of ounces of bread (over 12,000), usually reckoned in multiples called pounds, exchanges for one ounce of gold ; yet the utility of one ounce of bread is much greater than that of one ounce of gold. It is simply idiotic for Mr. Daw to say that weight has nothing to do with it. He must take some unit quantity for comparison or obviously he cannot compare at all. The particular unit he chooses does not affect the question in the slightest. Let him take equal volumes if he prefers ; still the same dilemma faces him. Why does a bushel of gold exchange for a large number of bushels of bread, despite the greater utility in the latter?

Note how Mr. Daw shuffles round this point by failing to give the slightest indication of how utility can be measured. Yet indeterminate as he leaves it, he tries to claim it determines value. His last point on machinery and steam has already been fully met in our June issue. Instead of looking at our reply Mr. Daw merely repeats statements that have already been pulverised. Discovery of machinery and steam power and the manipulation of these forces are entirely due to the working class, not to the capitalists.

This debate has been successful in exposing another empty braggart—an agent of the capitalist class—who, evidently lacking the ability to understand the Socialist case, sets up as a powerful critic and demolisher of the “Red Spectre.” This claim sounded very well until he met the Socialists, and then his empty boast and pitiful lack of even an elementary knowledge of Socialism were fully exposed.

No one, whether a member of the capitalist class or a renegade from the workers’ ranks, has yet shown a flaw in the case for Socialism, because it is based upon the irrefutable facts of social life and development. Its propaganda steadily grows. The way in which the various agents of the master class, in pulpit and in Press, in the political field and in the economic arena, are all shrieking against Socialism, proves not only what progress its propaganda is making, but also the hate and dread in which the capitalist class hold the force that will wipe them out cf existence.

Ed. Comm.

Socialism in Debate. Part 2. (1914)

From the June 1914 issue of the Socialist Standard 

As mentioned in our April issue, it was brought to our notice that Mr. G. W. Daw, Conservative agent for Wandsworth, had stated publicly that Socialists are reluctant to open the columns of their journals to pronounced opponents. We therefore offered Mr. Daw space in this journal for three months to set out his case. The following is the outcome.

Link to Part 1. 

The Case Against Socialism. 

Mr. Daw’s Second Contribution.

The statement in the opening paragraph of the reply to my previous contribution may claim to be the key-stone to the Socialist case, viz., that all existing wealth “is produced by the application of human labour-power to nature-given materials.” It has probably gained more adherents to Socialism than any other argument advanced by propagandists. No defender of Capitalism, we are assured, has been able to show a flaw in the statement. Nevertheless, we shall find on examination that this invulnerable argument is based on a partial suppression of relevant facts.

Existing wealth owes its origin not to two, but four primary agencies. (1) The nature-given material. (2) Machinery propelled by steam or electricity. (3) Labour. (4) Invention and Design. The Socialist argues that without labour, the material would be useless, but pursuing this method of deductive reasoning, we may contend that without demand there would be no value, for as Marx himself admits, “nothing can have value without being an object of utility,” and the same writer, referring to nature’s gifts, says “We see, then, that labour is not the only source of wealth.” It is obvious that labour without material is valueless, for labour creates nothing of itself, but merely shapes or changes the form of matter already existing.

We have now three sources of wealth recognised. It is when we come to machinery and design as wealth producers that the contention arises. Machinery is the most important item because it is the multiplier of wealth, to which we are indebted for that surplus value which Socialists use to dazzle the eyes of the proletariat.

“This wealth is all produced by your labour-power” the Socialist says in effect, “and is appropriated by the capitalists. They are robbers and you are the victims.” If this wealth was all produced by human labour-power, such a statement would be just, but it is not true. Machinery effected an industrial revolution which largely supplanted human skill, and steam power reduced human labour-power in the process of manufacture to such an insignificant part that the early manufacturers who first availed themselves of its agency, dispensed with men and—to their lasting disgrace—employed children of tender age to attend the same. But these employers of Lancashire and Yorkshire were not aristocrats, but all self-made men. A writer in “Justice” (9.12.1905) “estimated that of all work done by this country, an average of 84 per cent. was done by steam power.” To day it is not the workman that employs the instrument of labour, but the instrument of labour that employs the workman. When we examine the part steam power and machinery take in distribution, this is more plain. In past ages haulage was done by man. He carried produce on his back. To day the steam engine carries tons of merchandise and the workmen are driver and stoker.

Now let us examine the claim of the designer to be considered as a contributor to wealth. If I desire to become a ship owner I must utilise materials, labour, machinery, capital, and an architect to design the vessel. The material may be the best that can be obtained, the labour the most skilled, both human and mechanical, but when the ship is launched it has such a heavy list that it is condemned as unseaworthy and therefore useless. Labour and material alone, unaided by a competent designer, fail to produce wealth. As with the ship, so we shall find on examination, design, in one form or another, play an all-important part in wealth production. Two men start life with the same opportunities, the same capital and equipment, yet whilst one amasses a fortune, the other lands in the Bankruptcy Court. The different results are not due to the labour employed by each—both being equal—but owing to the inequality of business capacity on the part of the two men.

It is, however, when we come to the inventor and the machinery he has designed that the absurdity of the Socialist claim becomes most apparent. For centuries human labour-power plodded along, turning out with no appreciable variation, the same amount of goods per man. Of production in those times it might be said with truth that wealth was due to human labour, plus material ; but it was comparative poverty. WE ARE INDEBTED TO THE INTRODUCTION OF MACHINERY, AND THE SUBSTITUTION OF STEAM-POWER FOR HUMAN LABOUR-POWER, FOR THE ENORMOUS SURPLUS WEALTH OF TODAY. These are facts which cannot be gainsaid, and to read the futile attempts of Marx and his followers to evade this fatal flaw in their argument provides amusement which is seldom found in the pages of professed economic works.

The contention of Marxists is that the use of machinery is to exploit labour, and of itself creates no value. “The surplus-value comes from unpaid labour only.” This surplus-value is said to be the difference between the cost of the labour-power to the capitalist and the amount of labour-power he is able to extract from his work people. This is Marx as interpreted by Bax and Quelch in their “New Catechism of Socialism.”

Then how stupid the capitalist employers must be to spend millions on the installation of steam power and machinery, which “create no value” and reduce the number and quantity of human labour power, from which alone profit is produced !

Of course, all Marxists do not take this view. For instance, Mr. H. M. Hyndman informs us in “England for all,” that “the riches due to machinery have gone to the few.” That the rich alone have benefitted is not true, but even if wholly accurate, I would emphasise the admission that this wealth is the result of the exploitation of machinery, and not men.

I have often met with the retort on the platform that the machinery was made by the workers. My reply is that it was designed by the few, and violently opposed by the industrial classes because they recognised that the machinery was a substitute for human muscle power, in fact, it was doing their work. The capitalists had discovered a substitute for human labour-power and skill, which was able to produce wealth in far greater abundance. The old hand-loom weavers became machine-minders. Bearing on this I ask, if labour makes the machinery, how can capitalists maintain an exclusive monopoly ? There is sufficient capital in the hands of the employed to acquire their own instruments of production.

If the workers are robbed of two-thirds of what they produce, they would, by setting up as their own masters, reap enormous profits, which would enable them to drive all competitive capitalist employers out of the market. The capitalists have no monopoly of human labour-power, or of the market—viz., the consumers. Anyone with capital can buy land, material, and machinery.

I should like, if space permitted, to have dealt in some detail with Chapter XV. of Marx’s “Capitalist Production,” showing how, whilst indulging in a long diatribe on “Machinery and Modern Industry,” he shuffles over the question. [We have pleasure in offering Mr. Daw additional space for this specific purpose. Ed. Com. “S.S.”] I will give one example of his sophistry for my critics to ponder over. He says (p. 405) machinery “being constant capital, does not produce surplus-value.” This platitude is as puerile and irrelevant as if he had written: “An overcoat bought on the instalment system produces no warmth.”

G. W. Daw.

————————————

The Socialist Reply.

Practically the whole of our opponent’s second contribution is taken up with one point, viz., the one emphasized in his sixth paragraph that “We are indebted to the introduction of machinery, and the substitution of steam for human labour-power, for the, enormous surplus wealth of to-day,” and according to Mr. Daw, this is another “fatal flaw” in our argument.

Now even if this statement were true, as it is put by Mr. Daw, it would still leave our case untouched. All the various ringing of the changes, in words, about the same point can be met with two answers, so simple that only an opponent of Socialism fails to see them.

Firstly, machinery and steam-power are quite useless and incapable of producing a single atom of wealth until labour-power is applied in starting, running, and controlling that machinery and power. Hence these factors are still dependent upon the human element—labour-power—for their operation.

Secondly, the machinery and engines themselves are manufactured by the working class and the capitalists do nothing in the introduction or manipulation of this machinery and power, yet they own both the means and results of wealth production, thus enslaving the rest of society.

If we take our opponent’s variations upon the one theme, we will find the same answers fitting them every time, though amplification may be useful on some of them.

Thus we are told in paragraph (2) there are four primary agencies in wealth production instead of the two given in the brief statement of our case. But what is machinery itself except the result of labour-power applied to the nature-given materials ? We thus see at once that it is no new factor but simply a portion of the previously stated ones.

Again, are not Invention and Design the application of human energy upon certain materials in the endeavour to obtain a given result ? Then we are still left with but two primary agencies, labour-power and natural resources.

In paragraph (3) we read that “Machinery is the most important multiplier of wealth, to which we are indebted for that surplus-value which Socialists use to dazzle the eyes of the proletariat.” It would be interesting to know how this statement opposes Socialism. As shown above, machinery can do nothing without labour-power.

That various discoveries and the general growth of knowledge increase our powers of production is a point in favour of, not against, Socialism, though it contradicts Mr. Daw’s statement in his previous contribution that we can never supply the needs of our growing population. He even now admits that there is a “surplus value,” a thing not usually conceded by our opponents.

It is quite informing to know that the “early manufacturers” “to their lasting disgrace, employed children of tender age to attend” their machinery. The later and present manufacturers, who still employ children, are free, we suppose, from any such imputation upon their characters.

The reference to the part taken by steam-power and machinery in distribution is fully met by our first answer.

Paragraph (5) would be laughable were it not swallowed by so many working men when they hear it expounded by one of their masters or his agents. Our second answer meets this point, but a little extension may be useful.

The first point to note, and one that overshadows all else here, is that it it not the capitalist who is the designer. The latter is employed to do his portion, as the others are to do theirs.

Leaving out the entirely baseless assumption that “labour the most skilled” couid not design a seaworthy vessel, we may just point out that for thousands of years various branches of the human race built seaworthy ships with no other “designers” than those who constructed them. In this as in other branches of production and distribution, it is only when “division of labour” reaches a certain stage in its development, that the “designer” becomes a separate person with a single function to perform. That he is, sometimes, better paid than the ordinary craftsman, makes him none the less one of those employed by the capitalist.

Then we come to the “fatal flaw” with our old friend the “inventor.”

What was the greatest discovery mankind has made? According to the greatest ethnologist that ever lived, Lewis H. Morgan, it was the discovery of iron and how to smelt it. But certainly as great, if not greater, was the discovery of how to control fire, as without this factor iron could not be smelted. Did the capitalists discover these two great factors in human progress? Or have they discovered any such factor? What machine did they invent? What power did they discover the control of? The answer is, not one. Yet they own the results of all these discoveries. In the vast majority of cases no individual “inventor” is known. And of the others, nearly all died in poverty, while the capitalists stole their inventions. It is the working class who “invent” the machinery and discover how to control various forces in nature as well as manipulate these things in the production and distribution of wealth.

The attempted argument in paragraph (9) is utterly unhistorical, incorrect, and fallacious. What “few” invented the wheel, the inclined plane, and the lever? Yet every machine is a combination of such powers.

It is true that those who may be displaced by machinery sometimes—not always—oppose its introduction for the simple reason that under the chaos called Capitalism, we have the utterly insane absurdity that every new means of increasing production means increased poverty and misery for the workers. Hence the cure for such a position is obviously for the workers to own the machinery they invent and operate, as well as its results.

And note the question, childlike and bland, “if labour makes the machinery, how can the capitalists maintain an exclusive monopoly?” Even Mr. Daw dares not attempt to maintain that the capitalists make machinery, so he takes refuge behind his question.

The answer is well known to Mr. Daw. Let any body of workers attempt to take hold of any machinery—or any other commodity—they have produced, and what would happen? Mr. Daw knows quite as well as any Socialist that the legal machinery, backed by the armed forces of the nation, would be used to protect the “masters’ property” and prevent any workers possessing it. This machinery and force is used for the masters’ interests because they control the political powers, dominating and directing these forces, such powers being placed in the masters’ hands by the working class when they vote Tory, Liberal, or Labour candidates into Parliament.

And where is the “sufficient capital in the hands of the employed to acquire their own instruments of production”? It must be in some secret place for, as workers ourselves, we haven’t the faintest inkling of its existence.

The capitalist pays the worker, on the average, a wage that will buy such necessaries of life as will keep him in a condition to continue working. To meet the various ills that afflict the worker, even if in work, he sometimes scrapes a few pence together in a Friendly Society against serious illness (he cannot afford to stay away from work for a slight illness), or in a Trade Union against a lock-out or a strike. But it would be an insult to Mr. Daw’s intelligence to pretend that he is referring to these small sums scattered over so large a number.

One remark he makes, however, is generally true. “Anyone with capital can buy land, material, and machinery.” May we add “and labour-power.” As the working class have no capital they obviously are unable to buy any of these things.

Ed. Com.

Economics Exposed: Ownership and control (1987)

The Economics Exposed column from the June 1987 issue of the Socialist Standard

The whole of human history has consisted of a series of social systems. Each of these social systems has been seen by most of the participants as a way of meeting human needs, by producing and distributing wealth. Those who have been prominent in the introduction of new types of social relationships have claimed that their movements were a step forward for humanity, a dramatic improvement in the organisation of wealth production.

In reality, however, we can now look back and understand that in each case what was really happening was that a particular class of wealth owners or would-be wealth owners were in fact pursuing their own interests, as a class, and simply dressing up this interest as being "the public interest". This was more than ever the case with the rise of the capitalist class in the seventeenth, eighteenth and nineteenth centuries. At that time, the conflict was between the needs of the "modernising" mercantile and manufacturing interests on the one hand and the landed aristocracy on the other.

The key choice facing humanity in the twentieth century, in contrast, is that between capitalism and socialism as systems of society. The socialist movement is unlike all previous movements for change. It emerged over the past hundred years as an expression of the interests of the working class. And unlike all previous classes, the working class forms a vast, dispossessed majority across the world which has no interest at all in developing any "property" base of its own. Indeed, any utopian schemes to turn all workers into small-time capitalists themselves, are in fact doomed to failure for just this reason; the survival of workers within capitalism depends on selling, at the best price possible, the only resource which, by definition, a wage or salary-earner can control — our own ability to work.

The interests of the majority class in society have therefore become identified more and more obviously with the destruction of all property relationships, rather than with their perpetuation. Even after decades of reformist theory and practice from both Tory and Labour parties in post-war Britain, for example, the existence of capitalism still guarantees that wealth becomes increasingly concentrated in the hands of a minority, as we shall see below.

In this column last month it was stated that this minority "possess” the working class as part of their assets. This reference to possession must, of course, be interpreted loosely, since capitalism has no use for the customs of ancient Greece and Rome, under which the wealth producers were the permanent property of slave-masters. Today, when employers invest in the productive power of wage-earners they still, like their ancient counterparts, enjoy the right of ownership over all wealth created by those wage-earners and yet they are not responsible for housing or feeding their wage-slaves outside any specific periods within which they are contracted to be employed.

What then, are the key differences between capitalism and socialism as economic systems?

1. Ownership and control

Capitalism is the dominant system of society throughout the entire world today. In every country, a minority class own and control the productive resources. Farms, factories, industrial plant and machinery, transport and communication networks; all of these are effectively in the hands of a small minority and controlled ultimately for their benefit, rather than for the free use and benefit of all. According to the official statistics published in the Social Trends survey (HMSO, 1987) the most wealthy ten per cent in Britain in 1984 owned more than half of all marketable wealth. This minority ownership and control of society's productive resources of course takes various forms. In the case of nationalised industries, the former shareholders now enjoy regular interest on the state bonds they were compensated with, so they continue to profit from the wealth created by the workers just as they did in the days when they were explicitly the owners. And in the case of Eastern-bloc style state control, or of "nationalisation without compensation". we see a new class of state bureaucrats, fulfilling the role of owning, controlling and profiting from production within that sector of the world capitalist system.

Socialism, by contrast, means the common ownership and democratic control of all productive resources. Factories and farms would then become the common heritage of all humanity, no more hived off or labelled with title-deeds than is the air we breathe, and freely accessible for the use of all.

2. The motive of production

On the socialist basis of placing these resources firmly in the hands of the human race as a whole, rather than allowing them to be owned and controlled by a minority group, it would then for the first time become possible for us to change the basis on which wealth is produced. At present, wealth production is likely to take place only if the goods and services which would result are likely to be profitably sold for cash on the world market. The level of production of everything across the world today is therefore tailored to meet market requirements rather than human needs.

Because the primary aim of production under capitalism is the generation of profit and the accumulation of capital, rather than purely to meet the needs of humanity as safely and comfortably as possible, it therefore follows that human life itself almost always comes a poor second to the pursuit of profit, as these two clash daily within the present. global social system. Examples of this abound, so here we present just one recent example, of the ironically named Herald of Free Enterprise:

Commercial pressures have prevented design changes in roll-on roll-off ships which might have saved the Townsend Thoresen ferry which sank off Zeebrugge harbour last Friday . . . Captain Nic Ruthford of the International Federation of Ships' Masters Associations, which has long expressed worries over Ro-Ro safety, said he would press for all Ro-Ros to be redesigned. He said: "The big problem is that one owner is not going to make expensive alterations that would put him at a disadvantage compared with his competitors until he absolutely has to".

(The Independent,10 March 1987)

Just like the millions who die each year of starvation or hunger-related disease while politicians dream up schemes for cutting back on production to restore profit levels, or for destroying the so-called "surpluses", likewise those who died in the ferry disaster were also sacrificed on the altar of profit.

3. The lives of the majority

One of the most important myths of capitalist economics, which must be exploded, is that workers are free-acting, independent agents, each "seeking their fortune" as best they can within the economic competition of the capitalist jungle. In fact, it is a key feature of the economic system we currently live under that the working-class majority are forced, through economic necessity, to take their own ability to work on to the labour market to be sold as a commodity. As a result of this, we are compelled to subjugate all of our human qualities of individuality and freedom. to give up our own creative needs and impulses, to cut out any individual style we may have, and present ourselves as neatly packaged and reliably productive machines for the consumption of our employers.

Consider, for example, the following passage from an official report which was attempting to persuade international employers to invest in British workers, by stressing the exploitative potential of what is on offer:

Not only does Britain's work-force perform well, its costs are remarkably low for what is one of the world's most highly developed countries. US Department of Labor figures show that British wage rates are among the lowest in the Western world. In addition, "on costs" (i.e. those labour costs which are additional to wages, such as state social security schemes and the financing of voluntary sick and pension schemes) are very low in Britain . . You will find the British work-force of today disciplined, motivated, skilled and ready for work. 

(BRITAIN, The Preferred Location, prepared by the Department of Trade and Industry, and the Central Office of Information. 1985)

It would appear, from such brazenly degrading statements, that the British ruling class believes they can talk about workers "behind our backs" without our knowledge. Perhaps they were forgetting that mass literacy has been predominant in Britain for some time.

To summarise, then. Past history has been a series of conflicts between classes, with each successive system serving the needs of a different minority class. Socialism means the total abolition of all property relationships, and is therefore the solution to the problems currently facing the working-class majority. Under capitalism, a minority own and control productive resources and production is geared to their profit. In socialism, productive resources would be owned in common by the whole of humanity and democratically controlled, so that production could be geared to human needs rather than the needs of the market. Under capitalism, the lives of the majority are dominated by the need to survive by selling our working ability on the labour market. The misery which results can only be ended by socialism, in which human beings would cooperate together consciously, to produce wealth with the sole aim of meeting human needs themselves.

Next month, we shall examine the precise mechanism by which capitalism functions, the exploitation of wage-labour.

Clifford Slapper

Producing and paying (1932)

From the December 1932 issue of the Socialist Standard

A correspondent asks if it is correct that “Labour is the source of all wealth.”

The answer to this question is “No.” To say that “Labour is the source of all wealth” would mean that Labour of itself is some kind of inexhaustible reservoir from which wealth (articles of use—or use-values) can be extracted, and would leave out of account the part played by Nature. It is the sort of loose phrase that might be justified in casual conversation if the part played by Nature is left to be understood, but as a definition to be used in studying economic laws it is useless and likely to lead to unsound conclusions.

Nature provides the materials to which labour is applied, and Nature and Labour play an inseparable part in the process of wealth production. Marx criticised the phrase “Labour is the source of all wealth.” He wrote: —

“The phrase quoted is found in all primers for children, and is accurate insofar as it is left to he understood that the work is effected with the aid of the appropriate object and means. But a Socialist programme ought not to permit itself the use of such bourgeois locutions; it ought not to ignore the existence of the conditions upon which the meaning of the phrase solely depends.” (“Criticism of the Gotha Programme.”)

The correct statement of the source of wealth is that wealth is produced by the application of human labour to Nature-given material.

Another correspondent, while agreeing with the above definition, thinks that it contradicts our contention that rates and taxes are not a burden on the working class or, as he puts it, that the workers “do not pay for armaments.”

Here, again, is need for precision. The idea behind our correspondent’s difficulty is that if the workers produce all wealth, then they must pay for everything. The ability to pay is associated in his mind with the ability to produce. But this is a mistaken notion. The workers do not produce for themselves but for their employers. The whole of the articles produced belong to the employers, who sell them and receive the proceeds of the sale. Out of the proceeds they pay away various amounts, including the wages of the workers and rates and taxes. If the armament burden could be reduced the capitalists would benefit by paying away less of their profits in the form of taxes for armaments. Not so the workers. The workers have no means of paying for anything other than the wages they receive (supplemented by charity, social services, etc). If taxes are reduced, and if, as a consequence, prices fall, the workers’ cost of living also falls, and with it their wages. The workers produce the wealth but do not own it.

The tax burden which the various groups of property owners are constantly trying to pass off on to each other, cannot be passed off on to the propertyless class.

DON.

Cooking the Books: Who creates wealth? (2022)

The Cooking the Books column from the December 2022 issue of the Socialist Standard

‘Miners put faith in filters to prevent further dam disasters’ read a headline in the business section of the Times (1 November). You might think that this was an article about mineworkers being reassured that measures were in place to lessen the risk of them being drowned in some mining disaster. But you would be wrong. If you read on, it’s about measures being taken by ‘two of the world’s biggest mining groups’, BHP and Rio Tinto.

This distortion of the word ‘miner’ to mean mining companies and even the tycoons, oligarchs and other multi-billionaires who own them (see ‘world’s richest miners') is standard practice on business pages. Similarly engineering companies are referred to as ‘metal bashers’. But the owners of these companies don’t work in a copper mine and don’t operate a machine-tool. They exploit those who do, by turning into profits what their employees produce over and above the value of their wages.

Such misuse of language is not confined to the business pages. It is also common amongst defenders of capitalism. The short-lived prime minister, Truss, declaimed to the Tory conference:

‘We believe in making it easier for our wealth creators, doers and makers to get things done’ (Daily Mirror, 1 October).

She was justifying the abolition of the highest rate of income tax and the lifting of the cap on bankers’ bonuses. Apparently, bankers and other rich people ‘create wealth’. They are certainly, in some cases, ‘doers’ (though not of anything useful from the point of view of human survival) but they are not ‘makers’ of anything and they don’t create any wealth.

So, let’s go back to basics. What is wealth and how is it created? Wealth is anything that is useful to humans. Some wealth such as the light and warmth from the Sun is a free ‘gift of Nature’ but most wealth has to be produced by human activity, by humans exercising their mental and physical energy. The materials on which humans work are, like the Sun’s rays, provided by nature. New wealth is ‘created’ when humans work to fashion or refashion materials that originally came from nature into something useful to them. Doing this is ‘production’.

Some of the materials humans work on are extracted directly from nature, as by copper or zinc miners; other materials worked on have already been transformed into wealth, as the pieces of metal that engineering workers alter or assemble.

The work of creating new wealth is not just physical. Mining is not only the work of physically extracting materials from the ground; engineering is not only changing pieces of metal into something else. Like all work, these also involve planning and designing the best way to do the physical work. All work involves both physical and mental activity, at both the production unit and the individual level. There is no way that wealth can be created other than by humans working on materials that originally came from nature.

Defenders of capitalism confuse wealth with the monetary value that wealth assumes under capitalism and so assume that anybody who makes a profit is ‘creating wealth’. This has a certain perverse logic from their point of view since capitalism is not a rational system geared to creating wealth to satisfy people’s needs. Its aim is to create monetary profits.

So, let’s rephrase the ephemeral Truss’s words: ‘We believe in making it easier for our profit-seekers to make profits’. Socialists, on the other hand, believe in making it possible for the wealth creators to make useful things to directly satisfy people’s needs. This is possible only on the basis of the common ownership and democratic control by society of the materials, natural and industrial, for creating wealth.

Cold as charity (2001)

From the December 2001 issue of the Socialist Standard

A brief look at the Guardian’s recent ‘Giving List’

The Guardian (5 November) issued a supplement entitled “The Giving List” detailing which companies in Britain gave most and least to charity. It comes as no surprise that business donated £0.68bn whilst the general public gave £4.3bn. The business of business is making money, after all – not giving it away.

Charity is big business in Britain with over 180,000 registered charities, but compared to the US it is petty stuff. In the US last year charities grossed $200bn. Foundations gave 12 percent, corporation 5.3 percent. Why such generosity? Well, it is not as great as it seems. Corporate giving was only 1.2 percent of pre-tax profits and on examination the apparent generosity has ulterior motives. In 1889 Andrew Carnegie, robber baron and philanthropist wrote in his essay Wealth, on the need for charity:

“The problem of our age is the proper administration of wealth, that the ties of brotherhood may still bind together the rich and the poor in harmonious relationships.”

More up-to-date though, the writer Mark Dowie in his recently published book American Foundations, An Investigative History says:

“The sad facts is that a majority of America’s 50,000 or so private foundations are mindless lawyer-ridden tax dodges that accomplish little beyond the transfer of riches to already wealthy institutions.” 

“Some capitalists do value private philanthropy because it creates countervailing force against socialism, others because it quells social unrest.”

Having quoted earlier that arch-hypocrite and exploiter Andrew Carnegie let us end with the words of Oscar Wilde, from a socialist perspective the definitive words on charity:

“They try to solve the problem of poverty, for instance, by keeping the poor alive; or in the case of a very advanced school, by amusing the poor. But this is not the solution; it is an aggravation of the difficulty. The proper aim is to try and reconstruct society on such a basis that poverty will be impossible.”

To give or not to give? 

Among all the league tables and the sport of naming and shaming there is a comparative newcomer – the Giving List. In the US since 1996 a league table known as the Slate 60 of the top American philanthropists has been published on the internet. An earlier list of Millionaire Givers ran into legal problems of confidentially and has not been published since 1994. The Guardian‘s Giving List offering us an insight into the generous and the stingy among the top corporations quoted on the London stock exchange.

Much effort is devoted to giving capitalism an acceptable face. A new industry has grown up around the idea and the practice of corporate social responsibility (CSR). Better to give back to the victims part of the proceeds of exploiting them than to be too greedy and to get a bad name.

It seems there are two views among supporters of capitalism about the best way to run it and secure its future. We may call these views hard-line and soft-line, although those terms are rarely used by the protagonists. The hard-liners date themselves back to Adam Smith, with extensions to his “invisible hand” by such as Margaret Thatcher, Milton Friedman and lesser-known luminaries in the “new liberalism”.

The basic proposition of the hard-liners is that the business of business is making money, not employing people or giving them charity. The task of companies is to maximise profit for their owners, the shareholders. Appeals for companies to feel responsibility for the welfare of other “stakeholders” – their employees, the local community, the environment—can only detract from the bottom line. It is argued that widespread adoption of CSR would undermine the foundations of the market economy.

The advocates of the CSR – the soft-liners – don’t want to abolish the market economy. They want to make it stronger by giving it a better image. Their basic motive is still the promotion of “wealth creation” – capitalist code for profit-making. Digby Jones, writing on behalf of the CBI, is frank about this: “Actions that affect beneficially on society create an environment where people feel safer, and this helps business” (Guardian, 6 November).

Socialists don’t take sides in any conflict between those who want “business” to accept more CSR and those who don’t. CSR is just one among many ways of reforming capitalism. Time and energy spent on discussing the pros and cons of CSR is, from a socialist point of view, wasted and deserves to be put in the dustbin of failed reforms alongside nationalisation, public-private partnership, “fairer” taxation, and so on.

But there is one thing about CSR that can be of use to socialists. The practice of social responsibility is at best an “add on” within capitalism (the system is more recognisable for its social irresponsibility). With socialism, social responsibility – concern for those doing the work, the local community, the environment – won’t be an “add on” to the system – it will be a central feature of it. With the pursuit of profit and the subservience of workers to capital off the agenda, we shall be responsible for the kind of world we want to build and live in.

Cooking the Books: Statistical errors (2006)

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

There is a silly argument going on at the moment between the government and an organisation called Migrationwatch which favours tougher controls on immigration. The government claims that people born abroad working in the UK have caused "a small but positive increase to gross domestic product per capita". Migrationwatch claims the opposite and argues that in future only immigrants whose work contribution raises GDP per head should be allowed in.

GDP per head, i.e., total annual production of goods and services divided by total population, is simply a statistic; it doesn't cause anything but is a measure or reflection of a situation caused by real facts. If GDP per head falls because GDP has fallen or has remained unchanged while population has gone up this might indicate a deterioration in general living standards (though even then most people could be unaffected since a fall in GDP per head does not mean that everybody is worse off any more than a rise means everybody is better off). But GDP per head is not falling but rising. So, what the government and Migrationwatch are arguing about is the hypothetical question of whether it would have risen faster if there had been fewer immigrants.

But how do you measure what a worker contributes to GDP, i.e., to total annual production? Migrationwatch explicitly, and the government implicitly, assume that a worker contributes only the equivalent of their wages. As Migrationwatch argue in a recent "research paper":

"In the calendar year 2003 the UK's GDP was 1.099 billion pounds. 613 billion pounds of this amount was 'compensation of employees'. So, apportioning this amount of GDP generated by employment earnings amongst the working population of 27.6 million people this gives average earnings per worker of 22,200 pounds a year" ('Selection criteria for immigrant workers', from the migrantwatch website).

But if workers produced only 613 billion pounds of a total production of 1,099 billion pounds who produced the rest? The same statistics show that the rest is made up of profits (25 percent), "mixed income", i.e., the profits and the labour contribution of the self-employed, (6 percent), and the difference between taxes and subsidies.

Since work is the only possible source of new wealth, a more accurate calculation would be to divide 1,099 billion pounds by the working population; which gives a contribution of 39,800 pounds per worker. This would reflect the fact that all productive workers, whether native-born or born abroad, contribute to GDP considerably more than their earnings but what they produce above this goes as profits to their employers.

This rather demolishes Migrationwatch's convoluted calculations to reach the conclusion that "a worker must earn about 27,000 pounds a year to make, on average, a positive contribution to GDP per head" and that only migrants earning this or more should be allowed in.

Migrationwatch's stigmatising of any worker, native-born ones too, earning less than 27,000 pounds as a burden since they contribute less to GDP than average so dragging GDP per head down is just plain ridiculous. As GDP per head is an average there will always be some above and some below it. Migrationwatch's proposal to raise the average by eliminating some of those below it would achieve this but it would reduce GDP (since even Migrationwatch admits that any immigrant who works contributes something to GDP). A bit like cutting off your nose to spite your face. But then, Migrationwatch is only deploying apparently sophisticated statistical arguments to back up its already-decided policy of "keep the riff-raff out".

Finance and Industry: Who creates wealth? (1967)

The Finance and Industry Column from the October 1967 issue of the Socialist Standard

Many people have a shrewd suspicion that the profits that find their way into the pockets of those who own stocks and shares come out of the wealth produced by those who work. For the capitalist class this is unfortunate since their system runs on profit. To pursue their profit-making in peace they must convince the rest of us that they are doing it for our benefit; they must brand those who link profit with exploitation as ignorant agitators. Sir Peter Runge, a joint vice-chairman of Tate and Lyle and a director of Vickers, in a speech last May, later published by millionaire Labour MP Robert Maxwell’s Pergamon Press under the title The Role of Profit, had a go at showing that profit does not come from the unpaid labour of those who are employed to work. Here is his specious argument:

Let us look at profit in its first role — as an incentive to create capital, without which economic growth is impossible. Capital can only be created by savings, that is to say by the postponement of consumption. Under a voluntary regime consumption is postponed if it is judged that in doing so there is a consequential advantage. Judgement normally rests on the prospects of having more to consume as a result of the postponement; and clearly the better the prospects the greater the incentive to postpone consumption and thus to save. The extra consumption made possible by having waited is the reward for having saved; it is the profit generated by the capital which has been created. Without the reward there would be no capital formation and therefore no growth and therefore no real increase in standard of living or in real wages. Looked at in this way, the reward of capital — I am not talking about usury — exploits no one; it is an essential part of growth in a free economy.

This seems plausible until you take it to pieces. Take the sentence “capital can only be created by savings, that is to say by the postponement of consumption”. What does Runge mean by capital? We doubt, somehow, that he is using it in the Marxian sense to mean wealth used to exploit wage-labour for profit. Nor does he seem to be using it in the more conventional sense of academic economists to mean wealth used to produce more wealth. He seems merely to mean wealth that is not consumed immediately. In which cases his sentence is not a statement of fact but a definition that capital is postponed consumption. He argues that profit is needed as an incentive to save. In fact, he’s not really talking about profit, properly so-called, at all but about interest, the price of money. To talk, as Runge does, about rewards is just to confuse the issue.

We can assume that Runge is not so stupid as to think that money automatically reproduces itself. Or can we? What are we to make of his claim that “the extra consumption . . . is the profit generated by the capital which has been created”? Perhaps he can explain just how capital (in his sense) produces profit. Since he has defined capital as what is saved, and thus talks interchangeably about the “reward for having saved” and the “reward of capital”, he would seem to be committed to the patently absurd view that profit is produced by waiting. But waiting produces, and can produce, nothing. Waiting, in fact, is doing nothing. If Runge doubts this, let him take a sum of money and lock it up in his safe and wait. We can assure him that he will be waiting a long time before his reward materialises. On the other hand, he could lend it to someone who would use it as productive capital. The factory-owner who borrows the money will use it in his business. In his factory people in his employ will work raw materials into finished goods; they will produce new wealth. Part of this will return to them as wages. The rest belongs to their employer, the factory-owner. This is the source of profit and its subsidiaries, rent and interest. It arises in production from the unpaid labour of those who work. Out of his profit the factory-owner can pay Runge interest for the loan of his money.

Significantly, Runge chooses to steer clear of the realm of production and to discuss instead how interest can be justified. And even here, instead of seeing interest as a price he speaks of rewards, substituting for an economic category, as Marx put it in another context, a sycophantic phrase.

Another capitalist who has an even more absurd view of how wealth is produced is Tory shadow Minister, Sir Keith Joseph. He thinks it is a few thousand top executives who are the “wealth-creators”. In a speech pleading for a reduction of taxes on the rich, as reported for their benefit in the Financial Times of June 26, he declared:

The Government that wants the standard of living to rise so that there is more for all … must start by allowing its wealth-creators to keep more of their earnings. . . . There are at any given time very few wealth-creators probably no more than a few thousand.

We know that capitalism develops social productivity but had not realised that it had gone quite this far. So only a few thousand people mine all the coal, operate the railways, run the factories, shops and offices! Who are they? Who are these super-men? According to Joseph this fantastic feat is performed by

the creative businessmen who detect new needs and new markets or new versions of old needs and old markets for products or services — and set about supplying them; or the managers who have the brains, character and drive to make an organisation more efficient.

Runge tries to confuse us with his illogical arguments. Joseph just insults our intelligence. Nobody would deny that top executives work, but what about the rest of us, who spend the greater part of our lives in producing wealth that belongs to a privileged and often idle few, do we not create wealth too?

Incidentally Joseph, a Lloyds underwriter and deputy chairman of Bovis Holdings Ltd., hit upon an idea to create wealth for himself (and, of course, for us as well) that never fails. He had the enterprise, brains, character and drive to be born the son of one of the original partners of a construction firm called Bovis.

Why many people look up to men like Sir Peter Runge and Sir Keith Joseph is difficult to understand. They are just human beings like the rest of us, only, perhaps, a little stupid. It is us, the working class, who by applying our energies to nature-given materials produce all new wealth; it is us who run industry and society from top to bottom. Is it not time we did so in our own interests for a change?

Adam Buick

Doubts and Difficulties. The Poverty of the Capitalist. (1905)

The Doubts and Difficulties column from the September 1905 issue of the Socialist Standard

A correspondent forwards me an extract from a recent book of Sir Robert Giffen’s for explanation. The distinguished capitalist statistician contends that the advantages derived from science and invention during the last 50 years have in the main gone to the working-class.

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“Now,” says my correspondent, “I wish you to show how this statement made by the highest living statistical authority in England squares with the position of the Socialist. You contend, as I understand, that the economic position of the worker is with every advance in science and invention becoming relatively if not absolutely worse. Who am I to believe—the highest of our statistical anthorties, Sir Robert Giffen, or the unknown, tin-pot, little Socialist “Economicus?”

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Before proceeding to deal with the main economic question raised in the preceding paragraph I wish to protest against the last sentence with its appeal to authority. Far be it from me to place myself against Sir Robert Giffen as a statistical authority. At the same time it may well happen that he is entirely wrong on this question and the Socialist entirely right. The whole history of both the inductive and deductive sciences is the relation of the mistakes of authorities. In no field of human knowledge has the authority always been infallible.

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Not only is it the case that in physics and in metaphysics, in medicine and in art, the authority has been fallible but it is he who has been the most bitter opponent of new ideas and of new truths. Foremost among the revilers of those who put forward the Copernican theory as against the Ptolemaic in astronomy, the undulatory theory as opposed to the atomic theory in optics were the so-called leaders of opinion in those sciences.

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It may well be then that in economics the statistician of recognised repute may be as little justified in his contentions as his fellows in other directions. The appeal in all discussions must be less to authority than to fact. Is Giffen justified by existing conditions in saying that the greatest share of the advantages of the science and invention of the last fifty years has gone to the working-class ?

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In modern society the greatest advantage that one can secure is the ownership of material wealth. It is around this ownership that the whole of our present-day life revolves. Wealth is the motor which sets in motion the industries, the pleasures, the pastimes, of the nation. Invention pertains more largely to industry than to any other feature of our lives. If Giffen’s contention is correct we should find the worker owning a larger proportion of the national wealth than heretofore. The industries modified or revolutionised by invention—by improvements in machinery or in the application of electricity as a motor—should yield for the worker an ever increasing share.

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On what grounds does Sir Robert Giffen contend that the worker receives such an increasing proportion of the wealth he creates ? On the grounds of improving Income Tax returns and of improving figures from the Savings Banks ! He contends that the higher savings in Savings Banks and Friendly Societies and the larger revenue derived from Income Tax show a continued improvement in the prosperity of the people of whom the working-class form the majority.

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This contention would be unanswerable if (a) the accumulations in Savings Banks and Friendly Societies were the savings of the working-class ; (b) any material proportion of the income tax was paid by the worker; or (c) the prosperity of the country meant the same thing as the prosperity of the working-class.

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As to (a) I pointed out in the June number of the Socialist Standard that the Savings Banks contained in the main the savings of the petty shopkeeper and of the children of the middle class. When we find, for instance, as many as 50,000 depositors in the Post Office Savings Bank putting in £50 in one lump sum in one year we know that not one of them is a member of the wage earning class.

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Similarly with (b). The worker does not as a rule receive a wage enabling him to pay income tax. Incomes of less than £160 per annum are exempt from the payment of income tax, and we know that wage-workers getting so high a remuneration are difficult to find. We have the evidence of Sir Robert Giffen himself, given before the Labour Commission a few years ago, that the average wage of the working-class was 24s. 7d. a week or (say) £64 a year. Our experience tells us and this opinion is somewhat strengthened by the investigations, among others, of Messrs. Booth and Rowntree, that even this sum is exaggerated.

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The statistician studying rates of wages in his library is too apt to mistake nominal for actual wages and forgets to make due allowance for periods of sickness, short time, or out of work. When these modifications have been made, and every day they become of greater importance, it, is found that the actual money wage differs very considerably from the nominal money wage.

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With (c) I cannot now deal but on a further occasion I may he permitted to show that periods of trade prosperity and periods of national prosperity are not necessarily synonymous with periods of well-being for the working-class.

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We see then that the grounds upon which our statistician bases his contentions are not relevant. The income tax returns will increase the more rapidly as the workers’ wage goes down and the savings in the Savings Banks are not appreciably affected when the working-class is at its lowest level of unemployment,

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The reverse of the contention we are criticising is that the least benefit from our increasing powers of production go to the property owning class. The poor capitalist we are often told is not doing nearly so well as is the man who works for him, but we never see any haste on the part of the capitalist to exchange.

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We are told by Sir Robert Giffen and other “authorities” that the capitalised value of the wealth of this country has increased in the last 40 years from £6,000,000,000 to £14,000,000,000. According to this statement the capital of the country has increased during the last 40 years at an average rate of £200,000,000 a year.

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Here we have a spectacle of capitalist poverty ! The capitalist draws his revenues from industry—in essence, from the unpaid labour of the working-class. With it he satisfies his every whim, luxury, vice, necessity, and comfort. And even then he has an immense sum amounting to two hundred millions of pounds sterling to apply in further investment.

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The worker, on the other hand, is enjoying with the progress of science and invention a speeding up of the machinery he minds, an intensification of his labour, a dwelling in the slums, polluted air in the streets, vitiated air in the factories. Clad in shoddy clothing manufactured for his sole use, fed on the poorest of food, he is told that the income tax returns show his growing prosperity.

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The worker has a grim sense of humour but this must be too much even for him. Not always will he be content to produce the whole of the wealth and get for himself a beggarly pittance. He will one day awake to the fact that a parasitic class of rich idlers is fattening upon the results of his labours and he will then show the stuff that’s in him.

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When that time comes woe betide the capitalist class who have robbed him and woe betide the apologists of that capitalist class—the economists and the statisticians unable to rise above their own class interests. The day is rapidly nearing when those who produce the wealth will control its production and its distribution and may one of those who lives to see that day be—

Economicus.