Making a Decision (2009)

From the January 2009 issue of the Socialist Standard

“Who controls the past controls the future; who controls the present controls the past”

This was the slogan of the dreaded Thought Police in George Orwell’s book 1984. It is today’s rulers’ slogan too, for the ruling class want to perpetuate their dominance. This is why their ideologues and media have redefined “socialism”; to maintain a class-divided society; this is why there are many career politicians claiming “socialism” to gain power. It is a pity that many follow them who have a genuine sympathy with suffering and seek to remedy the disease of capitalism. But, as Oscar Wilde said, “the remedies do not cure the disease: they merely prolong it, Indeed, their remedies are part of the disease” (Soul of Man under Socialism).

Technology, science and human goodwill can solve the problems confronting humanity but only after removing the restrictions of the absurd market system.

The minority capitalist class promote the market system as it maintains private property, by which they gain ownership of wealth produced by the working class who actually run industry from top to bottom. The ownership of this monopoly must be taken from the capitalist class. How? We suggest that the socialist majority of society impose the democratically-expressed will for common ownership on the minority class. Then, with common ownership established, the whole edifice of the market, private property, wage labour, money, rent, capital, interest, for they are all interdependent, is abolished. It is replaced by a rational, classless, society with free access for all to the common wealth of society; and real human progress begins.

Conscious democratic control and application of shared available knowledge will allow the opportunity

of real true freedom. The evidence that everyone has equal power and an equal vote in every decision taken will be obvious within this future, stateless society by the removal of hunger – used as a subtle form of control under capitalism. Within this society of freely associating equal individuals, every woman, man and child will take what goods they need from a communal store. This free access, this freedom, is what will maintain real democracy and it will be possible because money will be non-existent and unnecessary. Our common sense will tell us not to waste what could be shared with others; this is what the early socialists expected.

As socialists we want to participate in a progression of the global community to free humankind’s real human potential. “Give us our world,” you will say. It will not be given; you must make it. Socialists are equal but are each different. We don’t accept leaders, Thought Police or career politicians, which is why we invite you to ignore leaders and Thought Police too. Begin to free yourself, be confident, be disobedient; think for yourself, ask questions and inquire after the case we suggest. We have nothing to lose but our chains. We have a world to win.

CB

Pieces Together: Another “Expert” Speaks (2009)

The Pieces Together column from the January 2009 issue of the Socialist Standard

Another “Expert” Speaks

“This week Citigroup’s already depressed shares have lost half their value, and shares of Bank of America and JPMorgan Chase are down 30 percent. Those declines have come despite reassuring comments from Treasury Secretary Henry M. Paulson Jr., who told National Public Radio a week ago that people were no longer worried about the possibility of a major bank failure. ‘I’ve got to tell you,’  he said. “I think our major institutions have been stabilized. I believe that very strongly.” The Standard & Poor’s index of 500 stocks fell by more than 6 percent on two consecutive days, Wednesday and Thursday, something that had not happened since July 20 and 21, 1933, in the midst of the Great Depression, when panic was brought on by collapsing commodity prices. Such prices have fallen rapidly this week as well, as evidence mounted of a world recession.” (New York Times, 20 November)

Another “Expert” Recants

“Alistair Darling will be forced to admit tomorrow that the credit crunch has plunged Britain into a deep recession, and the economy will contract for a full year in 2009, for the first time since the early Nineties. As the credit crisis ravaged the world’s financial markets earlier this year, the Chancellor insisted repeatedly that Britain’s `economic fundamentals` were sound. In the budget six months ago, he pencilled in a strong recovery for 2009.” (Observer, 23 November)

Good Business Practice

“The European Union accused drug companies on Friday of adding billions of dollars to health care costs by delaying or blocking the sale of less expensive generic medicines. One common tactic, said Neelie Kroes, the European competition commissioner, was for drug companies to amass patents to protect active ingredients in the medicines — in one case, 1,300 patents for a single drug. Another tactic, she said, was for pharmaceutical companies to sue the makers of generic drugs for ostensible patent violations, which tended to delay the availability of the lower-cost products for years. Ms. Kroes made her comments Friday while presenting the preliminary findings of a broad investigation into accusations of anticompetitive practices in the drug sector. She also turned her sights on the generics companies, which she said had received $200 million from pharmaceutical companies over seven years in exchange for holding their products off the market.” (New York Times, 28 November)

World Hunger Grows

“It is the new face of hunger. A perfect storm of food scarcity, global warming, rocketing oil prices and the world population explosion is plunging humanity into the biggest crisis of the 21st century by pushing up food prices and spreading hunger and poverty from rural areas into cities. Millions more of the world’s most vulnerable people are facing starvation as food shortages loom and crop prices spiral ever upwards. And for the first time in history, say experts, the impact is spreading from the developing to the developed world. More than 73 million people in 78 countries that depend on food handouts from the United Nations World Food Programme (WFP) are facing reduced rations this year. The increasing scarcity of food is the biggest crisis looming for the world”, according to WFP officials.” (Sunday Herald, 30 November)

Money (2009)

Book Review from the January 2009 issue of the Socialist Standard

Marx’s Theory of the Genesis of Money. By Samezō Kuruma, translated with an introduction by Michael Schauerte, Outskirts Press, 2008

Money can function as a means of exchange, a measure of value, a general equivalent, a standard of price, a store of value. Samezō Kuruma takes a close look at some of the key theoretical issues related to Marx’s concept of money. Kuruma (1893-1982) was a Japanese Marxist economist and the text here is translated by a member of our American companion party. He also provides an introduction which seeks to outline the answers to how, why and through what is a commodity money. Karuma’s text, however, is purely analytical in its approach and is devoid of historical context, a common failing amongst many Japanese writers on Marxian economics.

Lew Higgins

SPGB Meetings (2009)

Party News from the January 2009 issue of the Socialist Standard

Blogger's Notes:

• Zeitgeist Addendum was reviewed the December 2008 issue of the Socialist Standard.
• A video recording of the debate between Adam Buick and Hillel Ticktin is available on YouTube. (A warning: it's in 10 parts.)

50 Years Ago: Memorable happenings in 1958 (2009)

The 50 Years Ago column from the January 2009 issue of the Socialist Standard

The falling off of production and decline of sales have hit privately owned textiles just as hard as the State-owned railways and mines, and the textile industry presents us with a harsh example of another illusion that ran parallel with the nationalisation campaign and was held by the same people. This was the illusion, prominent after World War II, that things were not going to be as they had been in the depressed ‘thirties. No more would there be unemployment and the dole queue; for those “in the know” had learned how to plan for full employment.

( . . .)

Unemployment for all industries is now on the way to 600,000, a figure that does not take account of the many who have lost their jobs but do not register as unemployed, and though the government professes to be sure that things will get better “in the Spring” they have yet to explain the whys and wherefores of what has already happened. What has happened to their supposed control of the employment situation and their readiness to step in at short notice to head off depression?

The Labour Party and the Tory Party, the latter with its belief in managing “full employment” and the former believing as well in nationalisation, can look back at 1958 as a year in which their theories were demonstrated to be unsound and useless to the workers. The S.P.G.B. alone can justifiably claim that it predicted both failures.

[From editorial, Socialist Standard, January 1959]

Greasy Pole: Post Offices – Open or Shut? (2009)

The Greasy Pole column from the January 2009 issue of the Socialist Standard

“By all of capitalism’s standards of logic the Post Office must be under threat of disappearing”

Postman Pat, delighting children by zooming around Greendale with his observant cat Jess, became a TV success by cashing in on the romance which lingered around the workers who, in all weathers and at all places, delivered the mail. How would Pat survive now, with Greendales’s post brought by a tee-shirted trolley-pusher jigging along to loud calypso music from his radio, who is liable to stuff as much junk advertising material through the letter box as proper mail? It was not always like this; well within living memory postmen (they were always male) wore thick, dark uniforms topped by a hard helmet resembling the pickelhauber of the German Army at the start of the 1914/18 war (the peaked caps, just as obligatory, came later). No trolleys then; postmen had to carry the mail in a large, rough sack slung across their shoulder held by coarse string. And they came several times a day; before the age of the telephone it was common for people to tell their family or friends that they would visit them on the following day by writing them a post card – relying on the post to get the message there on time. No wonder the posties had so exhaustive a knowledge of their round – who lived where and with whom, how well, or how sick, they were, who had a birthday when. It was this sense of human contact that brought many postmen to be addicted to the job. Like Postman Pat.

Closure

Along with your friendly neighbourhood postman, as part of the same deal, is – or in some cases was – the local post office – also friendly, in fact at times so much so that it resembled a kind of minor, casual branch of the Samaritans. Because it was here that local people came, not just to buy their stamps and postal orders or draw their pension but to unload their anxieties or celebrate their successes. They were more small shops than post offices, selling newspapers, food and the like. It is a general assumption that they existed only in rural areas, in small sleepy villages but in fact they survive, supplying their locality, in many a town and city. One example was given by Keith Hill, the MP for Streatham, in a House of Commons adjournment debate on 13 March 2008. He described the Abbeville Road post office in Clapham, a part of London where roses do not grow sweetly around the doors of quaint cottages and no ploughman homeward plods his weary way. This post office was under threat of closure (it has now closed); in its defence Hill praised the services on offer there, making it “a focal point in the community” and “a lifeline of human contact for its many elderly customers”; a petition with over 2000 signatures testifies to this.

Loss

In that same debate Pat McFadden, the Minister for Employment Returns, after the customary emollients about what a brilliantly eloquent speaker and industrious MP Hill is, gently reminded him of the real facts of capitalism’s life, the sense of which is that it is all very well talking about how valued a service may be but what counts is whether it makes a profit or a loss. And by those standards the Post Office network does not show up well; according to McFadden last year it lost £174m, with the cost of some operations high enough to make any accountant with an eye to a balance sheet choke. The postal system as we know it, including pre-payment through adhesive stamps (the famous Penny Black), arose from the demands of 19th century industry and commerce. In the same way, many of the Post Office’s present problems are due to it falling behind changes in technology, which have led, for example, to eight out of 10 pensions being paid electronically into a bank instead of being drawn over the Post office counter, after a chat with the staff about their family. Car tax can now be paid online, which is quicker and easier than queuing up with people wanting a book of stamps. While people may get some relief, enjoyment even, in being able to drop into their local branch but that is not how commodity society operates. By all of capitalism’s standards of logic the Post Office must be under threat of disappearing as an unvarying, ubiquitous feature of social life.

Reprieve

Chosen to make this happen was Adam Crozier, a man who, even before he got to work on shredding the Post Office network, might have been described as controversial. For example after closing some 4600 offices, cutting the work force by 45,000, in 2007 he collected a 26 per cent increase in his basic pay; with his bonus and pension his total came to £1.250.000. However perhaps he will not be so busy in future. In November the government, anxious to placate back benchers being lobbied by irate Post Office customers and to persuade the electorate that they have the recession under control, decided that the Post Office would keep the contract to run the Card Account, which had seemed about to be passed to a private company. This surprising move is expected to prevent some 3000 closures. When it came to explaining so abrupt and emphatic a change of policy the government were able to call on Minister of Work and Pensions James Purnell, who has shown himself well capable of shamelessly defending any policy – or change of it. Taking time off from harassing the sick and unemployed he told MPs that the Post Office “…is seen as safe, secure and reliable as a provider of financial services. I believe that now cannot be the time for the government to do anything that would put that network at risk” and on BBC Radio that the Post Office is “…a social service which people look forward to visiting. It is often at the heart of local communities”. We should not be surprised at this hi-jacking of the case put by the government’s opponents for it is just another example of the blatant smoke-screening of the reality of capitalism’s chaotic nature. There is no need to watch this space because we can all guess what will happen next…  

Ivan

Cooking the Books: Nothing to offer (2011)

The Cooking the Books column from the September 2011 issue of the Socialist Standard

“People in general have lost faith in the free-market, Western, democratic order,” lamented Daily Telegraph columnist Charles Moore (22 July). “They have not yet, thank God, transferred their faith, as they did in the 1930s, to totalitarianism. They merely feel gloomy and suspicious. But they ask the simple question, ‘What’s in it for me?’, and they do not hear a good answer.”

They certainly don’t. The mad-marketeers who ruled the roost at the time of Thatcher and Reagan didn’t have anything to offer, but at the time many people thought they did. Thatcher openly proclaimed that she intended to destroy “socialism”, by which she meant everything associated with the post-war Labour government (nationalisations, NHS, council housing) and her government went a long way towards doing so, even if she was only doing what the economic circumstances of British capitalism required her to do.

Then, in 1991, the USSR collapsed. The partisans of “the free-market, Western, democratic order” were elated. They proclaimed the “end of history” and that “socialism is dead”. But what had died was state-monopoly capitalism not socialism (which had never existed in Russia). A “peace dividend” was promised. It never materialised. Instead, there was the First Gulf War, to be followed by the invasion of Iraq and Afghanistan by the Western capitalist countries. In 2007 the biggest slump since the 1930s broke out. We’re still in it.

Wars, slumps, capitalism as usual. No wonder the likes of Charles Moore are disoriented and disillusioned. He even entitled his column “I’m starting to think that the Left might actually be right”, explaining:

“One of the great arguments of the Left is that what the Right calls ‘the free market’ is actually a set-up. The rich run a global system that allows them to accumulate capital and pay the lowest possible price for labour. The freedom that results applies only to them. The many simply have to work harder, in conditions that grow ever more insecure, to enrich the few. Democratic politics, which purports to enrich the many, is actually in the pocket of those bankers, media barons and other moguls who run and own everything.”

What Moore was lamenting was that the Right (to accept his term) has no answer to this criticism (only slightly caricatural) of the private corporation capitalism they uphold and promote. And they haven’t. Capitalism is now more intellectually bankrupt than ever. It has no inspiring vision to rally people, not even “freeing” people from state capitalism. As a result of the way it inevitably works, capitalism has become a dirty word again.

But what is the answer? By “the Left” Moore probably means the supporters of state capitalism (he explicitly states that “the Right” includes “the New Labour of Tony Blair and Gordon Brown”), but the above is a criticism of capitalism which we in the Socialist Party could broadly share, even though we don’t consider ourselves a part of the Left precisely because they stand for state capitalism.

We are opposed to private corporate capitalism and to state capitalism, both of which have failed. The answer is a classless society without rich or poor where productive resources have become the common heritage of all so that the production and distribution of the things we need to live and enjoy life can be carried out in accordance with the principle “from each according to their abilities, to each according to their needs”. It’s the original meaning of socialism before the experience of Russia and Labour governments made it a dirty word. It’s high time it became respectable again.

Cooking the Books: Fictitious capital (2009)

The Cooking the Books column from the January 2009 issue of the Socialist Standard

The present crisis has led journalists to look for quotes from Marx. Here’s another example, this time from John Plender of the Financial Times (18 October):

“Karl Marx was wrong about many things, but in 1893 he provided as good an account of today’s financial implosion as any living commentator. “To the possessor of money capital, the process of production appears merely as an unavoidable intermediate link, as a necessary evil for the sake of money-making. All nations with a capitalist mode of production are therefore seized periodically by a feverish attempt to make money without the intervention of the process of production.” (Link.)

Plender was wrong about many things. First, Marx died in 1883 so he could not have written anything in 1893. This was the date that Engels published the second German edition of  Volume II of Capital. Second, it is not even an accurate quote. The first six words are not part of the quote, but something the person Plender was quoting from added in square brackets to introduce the context. Third, the last sentence about “all nations” was added by Engels, as he explained in a footnote (in section 4 of chapter 1).

This said, the passage brings out well that the aim of production under capitalism is not really to make things – that is only incidental – but to make money, more money than those with or controlling money-capital set out with. The source of the added money is the unpaid labour of those who actually produce wealth, the class of wage and salary workers, but this is obscured in financial dealings.

Marx dealt with the illusion that money can give rise to more money without production in Volume III of Capital. Here (chapter 29) he introduced the concept of “fictitious capital”. There is nothing dodgy about such capital. It’s something insurance companies have been doing for years. As Marx explained:

“The formation of a fictitious capital is called capitalization. Every periodic income is capitalized by calculating it on the basis of the average rate of interest, as an income which would be realized by a capital loaned at this rate of interest. For example, if the annual income is £100 and the rate of interest 5%, then the £100 would represent the annual interest on £2,000, and the £2,000 is regarded as the capital-value of the legal title of ownership on the £100 annually. For the person who buys this title of ownership, the annual income of £100 represents indeed the interest on his capital invested at 5%. All connection with the actual expansion process of capital is thus completely lost, and the conception of capital as something with automatic self-expansion properties is thereby strengthened.”.

Examples of this are government bonds, the price of land, and stocks and shares. Marx called these “fictitious” capital because the capital sum did not really exist, only the estimated future income stream did and that depended in the end on future production. In the case of shares, the real capital is in the fixed assets (factories, equipment, machines) and working capital (to buy materials, pay for energy, the wages fund) of the capitalist firm; this capital does not exist a second time in the prices of the shares.

One thing that banks had been doing in recent years was to increase the amount of such fictitious capital by turning mortgage repayments into bonds, “securitising” them in the jargon. If, however, the future income stream is threatened or fails to materialise – as has happened – the fictitious capital so created is depreciated or ceases to exist. But this does not mean that the real capital to which it corresponds has ceased to exist, only that its paper duplicate has gone to money heaven. A reminder that “the conception of capital as something with automatic self-expansion properties” is an illusion.

Cooking the Books: The myth of magic money (2008)

The Cooking the Books column from the December 2008 issue of the Socialist Standard

One thing that the current banking crisis has done is to explode the myth about banks being able to create credit, i.e. money to lend out at interest, by a mere stroke of the pen. Events have clearly confirmed that banks are financial intermediaries which can only lend out either what has been deposited with them or what they have themselves borrowed or their own reserves. As the US Federal Reserve put it in one of its educational documents:

“Banks borrow funds from their depositors (those with savings) and in turn lend those funds to the banks’ borrowers (those in need of funds). Banks make money by charging borrowers more for a loan (a higher percentage interest rate) than is paid to depositors for use of their money.” (Dead Link. p. 57)

Actually, banks don’t just borrow from individual depositors, or “retail”. They also borrow “wholesale” from the money market. It is in fact the difficulties they have experienced here that has revealed that they cannot create credit out of nothing.

Because some banks had burnt their fingers by buying securities based on sub-prime mortgages in America, other banks were reluctant to lend on the money market for fear that the borrowing bank might turn out to be insolvent. Which meant that one source of money for the banks to re-lend to their customers had shrunk. Or at least had become too expensive as interest rates had risen too high compared with the rate banks could charge their borrowers to allow them to make a profit or enough profit. So, deprived of this source of money, the banks had less to lend out themselves. Which of course wouldn’t have been a problem if they really did have the power to create money to lend out of nothing.

But at least one person was unable to see what should have been obvious. On 15 October the Times printed a letter from a Malcolm Parkin, in which he wrote:

“Only 3 per cent of money exists as cash. Therefore the rest is magic money conjured into existence, and issued as debt by banks, at a ratio of about 33 magic pounds to 1 real pound, by the quite legal means of fractional reserve banking. In a rising market, it follows that anybody able to create such money, at such a ratio, can soon get rich.”

The “fractional reserve” he mentions is the proportion of retail deposits that a bank keeps as cash to handle likely withdrawals. Fifty years ago in Britain it was 8 percent. But, as banks resorted more and more to the wholesale money market to get money to relend, the percentage of cash to loans became almost irrelevant. Parkin’s figure of 3 percent is the percentage of cash banks hold compared to total loans, including those based on money borrowed from the money market (which even on his definition is not “magic money“).

What a “fractional reserve”, or “cash ratio”, of say, 10 percent means, is that if £100 is deposited in a bank that bank has to keep £10 as cash and can lend out £90. Parkin has misunderstood this to mean that a bank can lend out £900 – and charge interest on it. Easy money, as he says, if it were true. But it isn’t.

The theory of “fractional reserve banking” is that an initial deposit of £100 can lead to the whole banking system, but not a single bank, being able to make loans totalling £900. The argument is that the initial £90 will eventually be re-deposited in some bank (not necessarily the bank that made the loan), which can then lend out 90 percent of this, i.e. £81, which in turn will be re-deposited, and so on, until in the end a total of £900 has been loaned out.

This is theoretically the case as one of the key features of capitalism is that money circulates, but what the theorists never emphasise is that this is based on the assumption that the same money is used and re-used to create new deposits. If this does not happen then the process cannot work or continue. So, the banking system has not created any “magic money” out of nothing. It is still dependent on individual banks only being able to lend out what has been deposited with them or what they themselves have borrowed – they cannot magically lend out vast multiples of this, as poor Malcolm Parkin assumed.

Cooking the Books: Keynes rides again (2008)

The Cooking the Books column from the December 2008 issue of the Socialist Standard

It is not just the ideas of Marx that the current crisis is getting people to look at again. It’s also those of Keynes. In fact it now seems to be official government policy. In October the Chancellor Alistair Darling declared that “much of what Keynes wrote still makes sense” (Sunday Telegraph, 19 October). Then last month Gordon Brown himself, in America for a summit of the G20, “invoked the memory of John Maynard Keynes”, according to the Financial Times (15/16 November), proposing a typically Keynesian approach to the current crisis, right down to exactly the same terminology:

“Gordon Brown yesterday heralded an anti-recession strategy founded on tax cuts for low earners and further cuts in interest rates, in the hope that Britain will spend its way out of the downturn. Mr Brown . . . suggested that the government would use tax credits to help poor families since they were more likely to spend any money handed out. People on low income had ‘a higher propensity to spend if their credits are higher’, Mr. Brown said.”

Keynes was an inter-war years economist who was at one time credited with having saved capitalism. He argued that capitalism did not automatically tend towards full employment and that government intervention to increase spending was needed to ensure this. He was himself a Liberal, but his ideas were embraced by all three main parties in Britain. He was particularly liked in Labour Party circles as his theories seems to justify their reformist attempt to redistribute income from the rich to the poor with their “higher propensity to spend”.

As it happened, post-war Britain did have more or less full employment for twenty or so years after the war, but this was more due to the expansion of world markets than to Keynesian “demand management” policies. When, in the mid-1970s, world market conditions changed, Keynes’s policies were shown not to work. Instead of stimulating a revival of industrial production they added a new problem – rising prices through currency inflation, which in turn led to periodic devaluations of the pound. In all previous slumps prices had fallen, but the implementation of Keynesian policies in the 1970s meant that they continued to rise. A new word was invented to describe the result: “stagflation”.

In Britain the funeral oration on Keynesianism (Keynes himself had died in 1946) was delivered by the then Labour Party Prime Minister, James Callaghan, at the 1976 Labour Party Conference:

“We used to think that you could just spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you, in all candour, that that option no longer exists and that in so far as it ever did exist, it only worked on each occasion since the war by injecting bigger doses of inflation into the economy, followed by higher levels of unemployment” (Times, 29 September 1976).

Or, as Keynes’s biographer Lord Skidelsky put it, “Then Keynesian policies suddenly became obsolete and the theory that backed it was condemned to history’s dustbin” (Times, 23 October).

It is a sign of the desperation of Brown and his government that they have been forced to rummage through the dustbin of history for a policy to deal with the current financial crisis and coming depression. Spending your way out of a crisis was tried by the last Labour government and, as Callaghan was forced to admit, it didn’t work. There’s no reason to believe it will this time either.

Cooking the Books: Cameron’s hindquarters (2007)

The Cooking the Books column from the December 2007 issue of the Socialist Standard

Last month Tory leader David Cameron was in Manchester. His speech-writer reminded him of that city’s past associations:

“Manchester became great in the 19th century when the words ‘Manchester liberalism’ stood for free trade and capitalism. And of course the city inspired another idea – Friedrich Engels lived here for many years and he wrote about the dark side of the industrial revolution”.

Cameron was there to launch what some might regard as a contradiction in terms: the Conservative Co-operative Movement. After saying he thought it was a shame that the co-op movement had been associated with the political left, he explained:

“there have always been people on the centre-right concerned about the effects of capitalism on the social fabric. Men like Carlyle and Disraeli, following the tradition of Edmund Burke and Adam Smith himself, who recognised at the outset of the industrial revolution that profit was not the only organising principle of a healthy society” (news.bbc.co.uk/1/hi/uk_politics/7084865.stm).

He also repudiated one of Thatcher’s most notorious sayings by admitting that “there is such a thing as society – it’s just not the same thing as the state”.

The free-marketers at the Adam Smith Institute must be cringing and “to the right of Genghis Khan” might be a more accurate description of the views of Thomas Carlyle than “centre right”.

Carlyle (who invented the term “the cash nexus” to describe how capitalism was reducing the relations between people to money ones) and Disraeli (who wrote a novel about there being “two nations” in England) were prominent members in the 1840s of a group of Tories who called themselves “Young England”. Engels did not just write about the dark side of the industrial revolution. He also wrote about “Young England”, in the Communist Manifesto he drafted with Marx:

“Owing to their historical position, it became the vocation of the aristocracies of France and England to write pamphlets against modern bourgeois society . . . In order to arouse sympathy, the aristocracy were obliged to lose sight, apparently, of their own interests, and to formulate their indictment against the bourgeoisie in the interest of the exploited working class alone. Thus the aristocracy took their revenge by singing lampoons on their new master, and whispering in his ears sinister prophecies of coming catastrophe. . . The aristocracy, in order to rally the people to them, waved the proletarian alms-bag in front for a banner. But the people, so often as it joined them, saw on their hindquarters the old feudal coats of arms, and deserted with loud and irreverent laughter. One section of the French Legitimists and ‘Young England’ exhibited this spectacle”.

No doubt, as a Tory Toff who went to Eton, there will be a feudal coat of arms somewhere on Cameron’s hindquarters, but much more prominently displayed will be the words “Opportunist Professional Politician” – which workers should equally greet with loud and irreverent laughter.

Cooking the Books: Buying to leave empty (2007)

The Cooking the Books column from the December 2007 issue of the Socialist Standard

In the 1970s Centre Point, a 32-storey office block in the centre of London at the junction between Oxford Street and Tottenham Court Road, was the centre of a scandal. It had been built with money put up by a notorious property tycoon of the time, Harry Hyams. Once built Hyams kept it empty for many years because, with a boom in the property market, its value rose constantly – but only as long as it remained empty; if it had been let the rent, and so its value, would have been fixed for 10-15 years. A classic case of property speculation.

At the same time homelessness was becoming a problem and people, quite rightly, asked why was a building with the amount of space that Centre Point had being kept empty when more and more people had to sleep on the streets or in hostels. It became a symbol of what Edward Heath, the Prime Minister of the time, called in another context “the unacceptable face of capitalism”. There is still a housing charity pointedly called “Centrepoint”.

Today the same problem has arisen again, though not in such a spectacular fashion. According to an article in the Bricks and Mortar section of the Times (19 October) there are over a “million vacant homes” in the UK, made up, according to the Empty Homes Agency, of 840,000 actual homes (houses and flats) and 420,000 homes that could be provided in disused commercial property.

One reason is that some owners can’t afford to repair them. But there’s another reason:

“Another factor is speculation, where a buyer has bought a property for its investment potential but does not wish to find tenants. David Ireland, chief executive of the Empty Homes Agency, says that this is a growing problem, especially in the new-build market, which has attracted ‘buy-to-leave’ investors who take the view that keeping the property empty will extend its new-build premium. House prices in recent years have made this worse, as generous capital appreciation has reduced the need of some buyers to secure rental income.”

So, once again, there is homelessness alongside empty homes because market conditions make it more beneficial for the owners to keep them empty rather than let them.

This is par for the course under capitalism where houses are not built primarily for people to live in, but are commodities produced for sale with a view to profit. This is why people have to buy or rent their homes, so realising a profit for the building firms or the landlord – and the middlemen such as banks, building societies and estate agencies.

Houses are different from other commodities in one important respect: they last a long time and are fixed on land. It was in fact the price of the land on which Centre Point was built that went up, not that of the building itself. It’s the same with the buy-to-leave-empty houses. And it is this that allows owners, big and small, to speculate on rising land values.

The price of land is “irrational” in the sense that, land, not being the product of labour, has no value in the Marxian sense. Its price depends purely on supply and demand, a pure monopoly price which an owner is able to extract from the rest of society simply because they happen to have a legal right to a piece of the Earth’s surface. But then, as a system geared to making profits instead of satisfying needs, the whole capitalist system is irrational from the human point of view.

Cooking the Books: Who’s to blame for carbon emissions? (2007)

The Cooking the Books column from the January 2007 issue of the Socialist Standard

In 2004 the Office for National Statistics published a report on “The impact of UK households on the environment through direct and indirect generation of greenhouse gases”. It concluded that of the 718.5 million tonnes of carbon dioxide equivalent emitted in the UK in 2001 “households were directly or indirectly responsible for 612.4 million”. That’s 85 percent. Can this be right? Is it possible that industry is only responsible for at the very most 15 percent? How can this be?

To arrive at this figure, the government’s statisticians first calculated how much households directly emitted through burning gas, oil, petrol and coal to heat their homes, cook their food, drive their cars, etc and reached a figure of 155.8 million tonnes. To this a further 2.4 million was added to take account of the emission of other greenhouse gases from households’ using aerosols, fridges and air conditioning equipment, giving a total of 158.2 million, or only 21.6 percent of the total.

But the statisticians didn’t stop there. They then proceeded to calculate how much households were responsible for “indirectly”, explaining:

“Indirect greenhouse gas emissions are those arising through household demand for electricity, public transportation and demand for goods and services. Indirect emissions are considered to be embedded in the product purchased. Electricity contains the embedded emissions from the combustion of coal, gas, oil, etc used in its generation. Similarly, food products contain indirect emissions from the use of pesticides and fertilisers as well as enteric emissions from livestock”.

Some might consider it reasonable to include the emissions resulting from the generation of the electricity used by households for lighting, heating, cooking, TV, computer, music centres, etc, but one consequence of this is that responsibility for the emissions is thereby shifted from the power station companies to households. Still, at least the power stations will be held responsible for the emissions resulting from the generation of the electricity supplied to industry, won’t they? No. Read the passage above again: “indirect emissions are considered to be embedded in the product purchased”. What this means is that the electricity consumed in the production of some product purchased by a household is not attributed to the industry that produced it, but to the household that purchased it.

It’s the same with transport. The emissions caused by bus companies, train companies and airlines are not attributed to them, but to their passengers. And, as the above quote specifically says, the emissions from food production – and agriculture contributes quite a bit to greenhouse gas emissions as methane – are to be attributed to us who buy the food.

When all these dubious calculations are done, the government statisticians saddle households with responsibility for a further 456.6 million tonnes of emissions.

But what, on this logic, is left as industry’s responsibility? 15 percent perhaps. No, again. The government is also a final consumer of electricity and products and, on the report’s logic, is to be blamed for the emissions resulting from their production. Though the report does not calculate this, from other statistics it will be more than half of the remaining 15 percent. In the end, industry and agriculture are going to be held responsible only for the emissions generated by what they accumulate as new capital, or about 7 percent. Which is ridiculous.

There is another way of looking at the matter. From the point of view of Marxian economics, wage and salary workers are not final consumers. What we spend on heating, lighting, cooking, travelling, food, recreation, entertainment, etc is expenditure on what we must consume to reproduce our labour power; which we sell to our employer, who in using it is the real final consumer.

So, it’s the other way round. Instead of the emissions caused by capitalist industry being attributed to us, even that from our direct heating, cooking, driving, etc should be “indirectly” attributed to them. They rather than us are responsible for the great bulk of carbon emissions, even if this is in response to the pressure of the competitive struggle for profits that is built into capitalism. So, in the end, it’s the whole capitalist system that’s to blame.

Cooking the Books: Global turbulence (2007)

The Cooking the Books column from the January 2007 issue of the Socialist Standard

Around 1973 the post-war boom came to an end. Various explanations were advanced. At the time one of the more popular was that profits had been squeezed because the working class had been able to take advantage of full employment to push up wages, as put forward by Andrew Glyn and Bob Sutcliffe in British Capitalism, Workers and the Profit Squeeze.

It was also the view, at the other end of the political spectrum, of Mrs Thatcher, who determined to destroy this supposed power of the unions. Which her government did after 1979. But this didn’t bring about a return to pre-1973 boom times. Which shows, argues Robert Brenner in The Economics of Global Turbulence, that it wasn’t increased wages that caused the fall in the rate of profit that precipitated what he calls “the long downturn” that is still with us.

So what did? His explanation is that the unplanned and competitive nature of capitalism led to world overproduction and overcapacity in manufacturing industry. The expansion of American manufacturing industry led the post-war boom but, in time, the same productive methods it employed were applied by its competitors in Germany and Japan, so increasing – over-increasing in fact (in relation to paying demand, not real need of course) – world manufacturing capacity.

“Normally” this would be rectified by a world slump in which the high-cost, inefficient producers would be eliminated but this didn’t happen, argues Brenner, or at least not sufficiently, because of government intervention and because some of the inefficient producers were prepared to carry on with reduced profits. And it still hasn’t happened as, although world paying demand (world trade) has expanded, world manufacturing capacity has expanded more, with the arrival, first, of Korea and Taiwan and, now, of China. As a result since 1973 the world economy as a whole has only been limping along.

The motor of capitalism has always been industry, which transforms material things into other material things. It is the renewal and expansion of such industries, and the repercussions this has on the rest of the economy, that has resulted in the accumulation of productive capital that is the essence of capitalism. But in Western countries today, with their stagnant or declining manufacturing sectors, this no longer appears to be the case. Judging by the commentaries on the financial pages, this role of motor would seem to have been taken over by “consumption”.

Capitalism has of course always satisfied paying consumer demand but this has been generated as a by-product of the accumulation of capital. Keynesianism was an attempt to go beyond this and artificially stimulate consumer demand through government spending.

Brenner argues that governments are still trying to stimulate and manipulate demand, by deliberately engineering an illusory increase in wealth by lowering short-term interest rates. This has the effect of increasing the price of stocks and shares and houses; people feel richer and, once a stock exchange or housing bubble develops, can get more money to spend through cashing in their capital gains. Brenner calls this “asset-price Keynesianism” and argues that in the end it is just as impossible to sustain as classical Keynesianism. Not only does it lead to “stop-go” as the artificially inflated demand draws in imports and creates balance of payments problems, but it also leads to stock exchange and/or housing booms and busts.

He says that the current apparent expansion in the US will sooner or later come to an end (as it now seems to be) “but, whether the reversal takes place with a whimper or a bang, economic slowdown and new turbulence still seem much more likely than a leap into a new long upturn”. So capitalism will just stagger on from mini-boom to mini-slump and back as it has done since 1973.

Cooking the Books: Stating the obvious (2006)

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

Edmund Phelps won the 2006 Nobel prize for economics for research into the interplay between prices, unemployment and inflation expectations. A press release gave the reasons:

“Phelps suggested that in setting prices and negotiating wages, employers and workers make judgements about future inflation that in turn influence the inflation outcome. As a consequence, the long-run rate of unemployment is not affected by inflation but only determined by the functioning of the labour market. The academy said the theoretical framework Phelps developed in the late 1960s helped economists understand the causes of soaring prices and unemployment in the 1970s. Phelps’s work has fundamentally altered our views on how the macroeconomy operates.” (MoneyCNN: Dead Link.)

Phelps’s explanation for inflation amounts to the circular argument that rising prices cause rising prices. This doesn’t really explain anything about contemporary capitalism and it doesn’t explain those periods of capitalist history when the general price level (including the price known as a wage or salary) was stable or falling.

The real explanation is to be found outside the circle of rising prices, in the government issuing more currency than is needed for economic transactions to take place. Whenever and wherever currency inflation has taken place, rising prices have been the result. It is of course true that once the psychology of inflationary expectations is established, employers and unions will want to take into account future inflation rates when determining wage levels. But the real underlying explanation (currency inflation) is radically different from Phelps’s superficial view that rising prices cause rising prices.

Up to the 1970s the ruling theory in economics was the Phillips Curve. This basically said that there was a trade-off between inflation and unemployment: we could have higher inflation and lower unemployment or lower inflation and higher unemployment. Until the 1970s, that is, when we had both rising inflation and rising unemployment. That discredited the Phillips Curve. But what would economists tell the ruling class now? According to Phelps, the message is: “unemployment is not affected by inflation.” Brilliant! Give that man a Nobel prize! But even this isn’t quite right, since it is possible for inflation to get seriously out of control, causing economic dislocation and rising unemployment as in Weimar Germany in the 1920s.

Phelps is right to say that the long-run rate of unemployment is determined by the functioning of the labour market. But this is something we have said for many years — well before Phelps. Can we have our Nobel prize now?