Greasy Pole: Brand Obama (2009)

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

Is there – can there be – a connection between Barack Obama and two West London Labour MPs?

Obama has just moved into the White House at the head of the most powerful nation, controlling a military, diplomatic and economic force so huge as to be able to invade, distort and destroy the lives of the majority of the world’s people. Against that the two MPs – Andrew Slaughter and Virendra Sharma – are notably low-key. Their constituencies – Ealing Acton Shepherds Bush and Ealing Southall – are unremarkable for their grime, chaos and disorder. The MPs held minor posts as Parliamentary Private Secretaries – Slaughter at the Foreign Office and Sharma at the Home Office – but their resignation from these provoked hardly a murmur of interest. The reason they jumped off the lowest levels of the Greasy Pole was their objection to the government’s plans, in betrayal of a succession of pledges, to further develop Heathrow Airport, specifically by laying down a third runway. In Sharma’s case this was something of an aberration, for he was not an active MP – apart from slavishly voting for the government line. If they had not already done so, Slaughter and Sharma might have learned something from this experience about the essential ruthlessness of politics, in the heat of which all promises and “principles” are devoured.

Glamour
That is something of which Obama is fully aware, which explains why his drive to the Presidency, from its inception through its planning to its execution was, for its single-minded cynicism, such an historically prime example of it. He and his team touted for votes on the single word Change, which was compliantly accepted as an intention to simply get rid of George Bush and as much as possible of his policies, his supporters, his command style. It was made to sound so easy. But it was hardly enough to stimulate the kind of response – the blind devotion to the concept that one man could by himself wipe out the tragedies which had plagued so many lives for all those years. Such was the degree of hysteria that it obscured the fact that in 2004 a similarly psychotic process had ensured George Bush’s triumphant return to the White House. But there was more to Obama than a promise for he is the kind of politician who trades on a spurious glamour. On that score, in terms of their respective political chicanery, McCain was shrunken and exhausted, with nothing to offer in combat. Obama’s lissom confidence and the support acting of his wife and children composed a portrait of the ideal American family. And in a Presidential election there are few things more seductive: “It was like a scene from a Hollywood movie” blabbered the Observer describing Obama and his wife dancing at one of the inaugural balls “(which) created images of fashion and celebrity to rival anything that emerged from JFK’s vaunted ‘Camelot’”. And in case we have not seen enough of them for a while, an invitingly smiling Mrs. Obama appeared all over the cover of the next issue of US Vogue.

Heathrow
But the passion which greeted the emergence of the brand Obama should have had more than a tinge of fear – which brings us back to our two London Labour MPs. At the last general election Slaughter had a majority halfway between five and six thousand, after a swing of 7.54 percent to the Tories. To complicate matters for him his predecessor in the seat was Clive Soley, once a probation officer notable as an assertive lefty in the union and, from 1997 to 2001, chair of the Parliamentary Labour Party. He left the Commons at the 2005 election, allowing himself to be created Baron Soley of Hammersmith and, to the dismay and anger of many of his admirers, become Campaign Director of Future Heathrow, which pushes unremittingly for the airport’s future to be one of expansion. Living in Acton under the flight path, Soley admits that “..when I’m in my garden I have to raise my voice” but he thinks all who suffer in this way should bear it gladly for the greater profitability of British capitalism. Any embarrassment this causes Slaughter with his contrary views on Heathrow expansion are not to be dwelled upon.

Virendra Sharma won a by-election in Ealing Southall in July 2007, after the death of the sitting MP Piara Khabra (who also had an unenviable record as an inactive representative of his electorate) with a majority of 5070. Southall has a reputation as a strong Labour seat (in 1997 with a majority for Khabra of over 21,000). But since the last election the boundaries of both Sharma’s and Slaughter’s Ealing seats have been redrawn, the effect of which is uncertain. After ten years in power Labour is seen as outworn and sterile; many of their MPs must dream of a leader to inject some of the Obama appeal which, shallow and spurious though it is, promises to bring in the votes. But there is nobody in the Labour Party to compare in that way to the new US President. If leaders like Brown, Darling, Straw and Harman have any appeal to desperate, bewildered voters it is unlikely to be as seductive as Obama’s. So Labour – including the likes of Slaughter and Sharma – are in trouble, being forced to face the reality that their time of deceiving enough voters to put them into power is probably coming to an end.

Obama’s War
It did not take long for the true Obama style of government, behind the media drivel, to assert itself. Only days after he had taken office, two American drone craft killed 22 people in Pakistan and it was announced that Obama had approved the transfer of 30,000 US troops to Afghanistan – later raised to 60,000. The war there will go on and many people will die in the interests of the minority owning class. So if Obama’s election does have an effect on British politics, influencing the manner in which the parties here present their pleas to be allowed to run British capitalism, we can be sure that it will have nothing to do with human interests, with bettering our lives. That would be taking glamour too far.

Ivan

John Pilger's 'Palestine is the issue'

John Pilger's 'Palestine is the issue'

The next in the fortnightly series of films and talks at the Socialist Party's Head Office, 52 Clapham High Street, London SW4 will take place this Saturday, 14 March, at 6pm.

It's "Palestine is the Issue", a film by John Pilger on the long-running Israel-Palestine conflict.

It will be followed by a discussion and a presentation of the socialist case against nationalism in all its forms and for a world without frontiers in which the resources of the Earth will belong to the people of the world.

Everybody is welcome and admission is free. The nearest tube is Clapham North on the Northern Line.

The Real Dirty Work (2009)

From the March 2009 issue of the Socialist Standard

‘Who will do the dirty work?’ is a question that socialists often hear, whether from inveterate opponents or those who have just come across the socialist case. The questioner usually has in mind jobs such as collecting the bins, sweeping the streets or working in the sewers. The reason why people ask about this kind of work is that it is clearly useful, indeed essential: without collection of rubbish, for instance, towns and villages would soon disappear under a pile of filth and rats.

The standard answer to the ‘dirty work’ question is to say that a socialist society would try to automate such work, or make it less unpleasant, or organise a rota or call for volunteers. Since there will be no employment or jobs in socialism, certainly nobody will be condemned to do such work forty hours a week for years on end. Charles Fourier once suggested that children, who love dirt, should be the ones to do the dirty work. That will probably not be acceptable as a solution, but it at least illustrates one of the possibilities.

However, there is another way of approaching the question: to ask what work truly counts as dirty. For cleaning toilets and removing industrial waste may not be very nice, but there is other work which is dirty in the very real sense of being anti-human, concerned with damaging people rather than helping and benefitting them. This is work which will not be needed in socialism, where all human activity will take place to satisfy people’s needs.

The armed forces, for instance, exist to defend the interests of the ruling class of whichever country they serve. To do this, their members must be prepared to kill, injure, maim and torture, under the orders of their commanding officers. Spies, secret agents and government assassins have essentially the same professional mission. And soldiers don’t just kill: they also die in the interests of a class of parasites. Learning to be a good soldier, sailor or airman/woman involves unquestioning acceptance of orders and soul-destroying drills intended to inculcate discipline and obedience. The humanity of soldiers and their victims are both dismembered by war and the training that prepares for war.

Those who work in arms factories, designing and building the weapons that soldiers use are doing another kind of dirty work. Making guns, bullets, missiles and bombs means making ways of killing and maiming other human beings. Socialist society will know no wars or armed forces, so using and making these weapons — probably the dirtiest work that can be conceived of — will simply not take place.

Other dirty work involves depriving workers of their homes, cars or whatever if they cannot pay for them. Bailiffs are deliberately concerned to prevent people from meeting their needs for accommodation and so on, including the most basic needs of all. Sadly, the poverty that drives workers to labour for a wage can lead them to take jobs that cause them to act in a thoroughly nasty and inhuman way to their fellow workers.

Many would no doubt include employment in slaughterhouses as another example of dirty work: killing animals, often in appallingly unhygienic conditions, so that people can eat meat. Much other employment is numbingly routine, repetitive and boring, perhaps taking minutes to learn and yet forming the basis for a lifetime of labour. This is anti-human too: it reduces people to mere appendages of a machine (whether lathe or computer) and robs them of their freedom and creativity. Human work should if possible be interesting, varied and fulfilling, and such routine work is none of these. William Morris wrote an essay with the significant title ‘Useful work versus useless toil’, and boring unhuman labour is definitely toil.

We have not even mentioned work that is part and parcel of the money system, from banking to insurance, from shops to accountancy. This cannot be compared to killing in the armed forces, but it is not about meeting human need, not about producing useful goods and services (food, homes, clothes, health care, transport, leisure activities). It is essentially useless work rather than intrinsically anti-human (though of course it can be just as boring as anything mentioned in the previous paragraph). Work which produces genuinely useful things is bound to be more satisfying than work which is pointless or just produces luxuries for the idle rich.

It should also be emphasised that, in describing some work as dirty and anti-human, we are not attacking those workers who are forced to do these jobs. They are exploited like all other workers, and their interests lie equally in ending capitalism and establishing socialism. No member of the Socialist Party is allowed to join the armed forces, since we are not prepared to kill and be killed for ‘queen and country’, but we do not regard soldiers, bailiffs and so on as enemies of the working class.

So if sceptics ask you about dirty work in socialism, get them to reflect on what really counts as dirty work. Under capitalism, much work is not just useless and wasted but actually designed to be anti-human and to kill and damage people. This is the true dirty work, just the kind of degrading labour that will not be necessary in a socialist society.

Paul Bennett

Weekly Bulletin of The Socialist Party of Great Britain (87)

Dear Friends,

Welcome to the 87th of our weekly bulletins to keep you informed of changes at Socialist Party of Great Britain @ MySpace.

We now have 1457 friends!

Recent blogs:

Child benefits?

Marketing the suicide seed

'It's Later Than You Think'

Quote for the week:

"Then 'twixt lips of loved and lover solemn thoughts of us shall rise;
We who once were fools and dreamers then shall be the great and wise;
There amidst the world new builded shall our earthly deeds abide,
Though our names be all forgotten and the tale of how we died.

William Morris, All For The Cause, Chants for Socialists, 1894

Continuing luck with your MySpace adventures!

Robert and Piers
Socialist Party of Great Britain

Editorial: It’s capitalism that’s to blame (2009)

Editorial from the March 2009 issue of the Socialist Standard

In the space of a few months bankers and the rest of the financial sector have gone from being the self-styled "masters of the universe" to little more than "Scumbag Millionaires" in the words of the tabloids. Even social workers, teachers and imams are getting a better press these days.

On both sides of the Atlantic, bankers are being hounded by journalists and interrogated by politicians in televised show trials. They're having to hand back the private jet and cancel the company team building event at Florida. (Realising it might look bad to take the private jet, Bank of America’s CEO slummed it on a train for 8 hours travelling to Washington to give testimony at the Senate hearing). Not all executives take well to the sackcloth and ashes: Eric Daniels, Chief Executive of LloydsTSB, tried to claim his £1 million was a "modest salary".

The blame game is in full swing with politicians, bankers and regulators all trying to place responsibility with someone else. And every so often of course, the working class are dragged into this and accused of starting the problem by daring to imagine that they could lead the lives of the class above them that have been trailed endlessly over the years in the media, so ending up over-stretching themselves to accept all those mortgages and other loans.

The current stand-off between the banks and the government exposes one of the hidden features of the market system. While the government has provided the banks with mind-bogglingly large sums of financial support, they still seem reluctant to lend. (There is even a joke doing the rounds. Apparently Gordon Brown has told the police that they should now turn a blind eye when they see a bank robbery. The reason? - he's realised that given the current stand-off between the banks and the government, it’s probably the quickest way to get some money into circulation).

But of course, while capitalism may be going through interesting times at the moment, that does not mean that the fundamental rules of capitalism are not holding. In fact we are going through such apparent upheavals in order to maintain an orderly and even conveyor belt of profit to the capitalist class. Recession is a natural part of the life-cycle of capitalism.

Economists may be confused, and financial modellers may be bamboozled, but capitalism is actually acting true to form. The fundamental requirement is for investment to deliver a return commensurate with the risk. The banks don't see many parts of the economy where they can confidently see a return on their investment, so they are refusing to lend. For the 5 percent of the world's population who don't need to work but instead live off their monopoly and the profit generated by others (or its close relations, rent and – with particular relevance to the banking sector – interest), this may be a period of uncertainty. But it’s all in a good cause, ensuring the maintenance of a healthy profit stream into the future.

There will be many innocent by-standers caught in the cross-fire of this latest in the long list of economic crises of the market system, but ultimately it’s an issue for the capitalist class. Workers shouldn't waste their time trying to sort out this mess, or to try and better regulate it. Instead its high time we posted notice on an economic system that creates chaos and is, by its nature always in crisis.

THIS JUST IN! Word of the Day (2009)

From the World Socialist Party of the United States MySpace page.

[Articles in this series will feast on random juicy statements about capitalism reported in the media.]

Erin McKean, a lexicographer writing in the Boston Globe, gives us a dictionary tour of today’s corporate capitalism and its private jargon that lights up a few interesting dark alleys. “The Word” of the day is “bonus” (as in “Bonus reduced”). For example:

…major financial institutions continued to pay massive bonuses to executives despite losing even more massive amounts of money. Last year Merrill Lynch essentially collapsed, but still paid almost 700 executives cash bonuses of more than $1 million each. (Boston Globe, 2/22/09)

Probably little folks like us just don’t understand how hard it is to run a complicated system like capitalism. We of course tend to weigh quantities against each other the way our parents and teachers taught us to do and draw the simplistic conclusion that someone is getting away with wasting a lot of precious money. Especially since the funds for these bonuses come from (among other sources) laying off millions and millions of workers around the world for the sake of making business more “cost-effective.”

But how are we ever going to manage cracking open a nice, warm fuzzy economics text again without laughing a blue streak, once we’ve learned that “unscrupulous executives may also engage in vest fleecing when they accelerate the vesting of their stock options, or they may get their companies to agree to imputed years of service, where their 10 or 15 years of employment are counted as 25 or even 40 years to bump up their pension payouts.”

Imputed years of service? Bump up their pension payouts? When was the last time you “bumped up your pension payouts” to get a cushier deal? And if you got away with inflating your years of service, did anyone (the IRS, maybe) come around wanting to know where all that nice money came from? Workers who still have real pensions should count themselves lucky, as corporate pensions are second only to the Big Black Lies told by CheneyBush during their Power Trip days.

Well, hold on! says a voice from the back. The hard work of oversight and supervision is well paid because it’s money well spent. Keeping profits from sagging isn’t for sissies. Some very special executives are so highly thought of, in fact, that they “are offered what is called a gross-up, where tax payments are made by the company (and thus borne by the shareholders) on behalf of those high-paid executives” (ibid).

What is a golden coffin? Don’t ask! But just imagine your skimpy little paycheck surviving you…

While it is true that even the Congress now sees such practices as abusive, the abuses don’t seem to cross the wage and salary line somehow. If they could, the uproar from the Top would be quite deafening. We knew all along, to be sure, that the rules work differently for “executives” than they do for everyone else. Now we understand too that the rules governing capital apply only to feeders at the trough of surplus value; ordinary (“little”) people Need Not Apply.

When you hear someone who dismisses all this as par for the course turn around and argue that common ownership and democratic control of the instruments for producing wealth by and for the whole community will never work because human nature is too weak to support it, you know you are listening to an ideologue who wants to sell you on the virtues of capitalism. Demonizing human nature is one of the time-honored tricks inherited from the past masters of civilization to justify their respective class rules, ever since humans first began planting seeds in the ground.

What do we learn from this? In societies that have Tops and Bottoms, the Top is usually made up of swindlers, liars and self-servers, protected by governments whose job is to limit the excesses of their pocket-lining. It is time for a society that has no Bottom, and therefore no Top.

- ROEL

The Story of Stuff

The next in the fortnightly series of films and talks at the Socialist Party's Head Office, 52 Clapham High Street, London SW4 will take place this Saturday, 28 February, at 6pm.

It will be a showing of a short, 20-minute film "The Story of Stuff". Afterwards Pat Deutz will open a discussion on how to organise the production and distribution of "stuff" directly for use without markets or money instead of, as a present, for sale on a market with a view to profit.

Everybody is welcome and admission is free. The nearest tube is Clapham North on the Northern Line.

Pieces Together (2009)

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

SIGN ON OR STARVE

Sgt. Ryan Nyhus spent 14 months patrolling the deadly streets of Baghdad, where five members of his platoon were shot and one died. As bad as that was, he would rather go back there than take his chances in this brutal job market. Nyhus re-enlisted last Wednesday, and in so doing joined the growing ranks of those choosing to stay in the U.S. military because of the bleak economy. "In the Army, you're always guaranteed a steady paycheck and a job," said the 21-year-old Nyhus. "Deploying's something that's going to happen. That's a fact of life in the Army — a fact of life in the infantry." In 2008, as the stock market cratered and the housing market collapsed, more young members of the Army, Air Force and Navy decided to re-up. (Yahoo News, 2 December)

BEGGING FOR WORK

"Paul Nawrocki says he's beyond the point where he cares about humiliation. That's why he weekly takes a 90-minute train ride to New York, where he walks the streets wearing a sandwich board that advertises his plight: The former toy-industry executive needs a job. "Almost homeless," reads the sign. "Looking for employment. Very experienced operations and administration manager." Wearing a suit and tie under the sign, Nawrocki -- who was in the toy industry 36 years before being laid off in February -- stands on Manhattan corners for hours, hoping to pass resumes to interested passers-by." (CNN.com, 6 December)

HALLELUAH IT'S A SLUMP

"The sudden crush of worshipers packing the small evangelical Shelter Rock Church in Manhasset, N.Y. — a Long Island hamlet of yacht clubs and hedge fund managers — forced the pastor to set up an overflow room with closed-circuit TV and 100 folding chairs, which have been filled for six Sundays straight. In Seattle, the Mars Hill Church, one of the fastest-growing evangelical churches in the country, grew to 7,000 members this fall, up 1,000 in a year. At the Life Christian Church in West Orange, N.J., prayer requests have doubled — almost all of them aimed at getting or keeping jobs. Like evangelical churches around the country, the three churches have enjoyed steady growth over the last decade. But since September, pastors nationwide say they have seen such a burst of new interest that they find themselves contending with powerful conflicting emotions — deep empathy and quiet excitement — as they re-encounter an old piece of religious lore: Bad times are good for evangelical churches." (New York Times, 14 December)

ANOTHER LABOUR FAILURE

"Social deprivation, child poverty and long-term reliance on benefits in parts of Britain are not alleviated or are increasing a decade after Labour pledged reforms to tackle them, a report shows. Many of the poorest households are not being reached by government initiatives to tackle deprivation, with most key measures now making no progress. Of the 56 poverty indicators tracked by the Joseph Rowntree Foundation, including the number of children in low-income families, young adults unemployed and children excluded from school, three quarters have stalled or are getting worse." (London Times, 8 December).

Class versus class (1982)

From the July 1982 issue of the Socialist Standard. 

With all the jingoistic talk about our masters' imperial battles it is easy to ignore the fact that there is a social war going on which will never cease as long as society is divided into two antagonistic classes. The class war turns humans into competing enemies and transforms society into a battlefield.

Under capitalism the means of wealth production and distribution are monopolised by a class which is legally entitled to defend its ownership and control by means of violent force. The facts of class possession are beyond dispute: in Britain, for example, the richest ten per cent of the population owns more of the accumulated wealth than the poorer ninety per cent put together. A society which is so fundamentally unequal can never be genuinely democratic.

The relationship between the two classes - capital and wage labour - is that of exploiter and exploited, robber and robbed. To understand this, one must consider the common source of wages and profits. It is sometimes claimed that workers should be grateful to their employers for giving them wages. It is implied that employment is a gift provided by the capitalists so as to support the workers. In fact, the opposite is the case: wages are the hallmark of legalised robbery; profits are a gift provided by the workers so as to support the capitalists. This closely-guarded secret may sound strange to workers ignorant of their own exploited position, but a little investigation into capitalist production soon demonstrates the truth of it.

The capitalists own and control the technology, means of production and resources which enable humanity to survive. In some countries they own them privately; in others they do so through their executive committee, the state. They are only in this privileged position because a majority of people allow thern to be. In Britain, workers regularly go to the polIs and vote for representatives of the system of class monopoly.

The majority of people are not capitalists: they possess very littie except their ability to work: labour power. So the workers possess mental and physical energies, but lack the ownership and control of the productive machinery; the capitalists have the productive machinery, but they need human labour to run it for them. The obvious conclusion must be for the two sides to form a "partnership ": the workers are employed to produce, but not possess and the capitalists are permitted to possess, but not produce.

A partnership between Haves and Have-Nots is bound to be an unequal one and this is the case under capitalism. The relationship of wage labour and capital is not that of equal partners, but of user and used. The capitalist employs - uses - the worker's labour power at a price which is called a wage or salary. When labour power is purchased it is the capitalist's to use for a period of time. Labour power is a commodity in that, like baked beans and electric toasters, it is produced for sale on the market. Why does the capitalist buy labour power? It is not that he or she feels sorry for propertyless workers and wants to give them money. Capitalists only pay workers to produce wealth if there is a likelihood that the value of the wealth produced will be greater than the wage or salary paid to the wealth producers. In short, unless workers create surplus value they are of no use to the capitalists.

Surplus value is that proportion of wealth produced by a worker which is over and above the reproduction of his own wage or salary (variable capital) plus the cost of machinery and raw materials, used during production (constant capital). So if a worker is paid £100 a week he must produce wealth which reproduces the value of £100, reproduces the cost of machinery and materials used, and in addition he must create a surplus which provides unearned income for the idle owner of capital. If a worker earning £100 only reproduces wealth to the value of £100 plus the cost of machinery and materials used, but not any surplus value, he or she will be considered unproductive.

The objective of capitalist production is the creation of surplus value. Out of surplus value comes rent, interest and profit. In short, profits arise from unpaid labour of the working class. This is not simply a case of a few fraud capitalists robbing a few gullible workers; legalised exploitation is as necessary the capitalist system as illegal robbery is to mugging - just as one cannot have a successful mugger who does not hit his victims over the head and rob them, so one cannot have a successful capitalist who does not exploit workers.

Many workers thank the capitalists for exploiting them; they think that being exploited is the greatest piece of luck that could happen to them. Some misguided workers, who call themselves socialists, but are in fact the most backward of social thinkers, actually organise processions demanding the right to be exploited. Yet despite the political acquiescence of the working class to its own inferior status, there are frequent and inevitable battles between the two classes. This struggle is inevitable because of the fundamental antagonisrn of interests between those who receive wages and those who receive profits. At its most primitive level the class struggle is a series of minor battles between sections of the two cIasses over the rate of exploitation, or how much of the wealth prooduced shall go to the workers as wages and how much will go to the capitalists as profits. Because the capitalist class own the productive and distributive machinery they always have the upper hand in these battles over the conditions of exploitation. Trade unions are a feature of this defensive struggle by workers to obtain a few more precious crumbs from the capitalist-owned, worker-baked cake. The class war never ceases under capitalism because there can never be a reconciliation of interests between capitalists and workers.

Victory in the class war can only be won by the exploited class, consciously, politically and democratically defeating the exploiting class. The workers must have no sympathy for the professed needs of the capitalists: they are our class enemies, they possess what we want and every effort must be made to take it from them. The political objective of socialists is to dispossess the capitalist class of its ownership and control of the means of life. Once we have done that society will be able to produce wealth for use rather than for profit. Socialists will not waste time engaging in diversionary and ultimately utopian attempts to reform the capitalist system. The revolutionary task is to end the system, not to amend it, for until the wages system has been abolished the majority of humankind will continue to be exploited.

Steve Coleman

Cooking The Books: Have the Tories gone Marxist? (2009)

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

Since the onset of the present crisis, as we have noted, Marx has been mentioned many times in the papers. One of the oddest must be a photo in the (London) Times (8 January) of the Tory Leader, David Cameron, with the caption “David Cameron has lined up with Marx and the Church of England”.

The photo was used to illustrate an article by the paper’s financial guru, Anatole Kaletsky, in which he argued that the way to stop the depression getting deeper was to follow Keynes’s advice and encourage people to spend more. But how can David Cameron, the Church of England and Marx be placed in the same boat? Because, says Kaletsky, all three don’t think much of the government’s policy of trying to spend its way out of the crisis.

True, they don’t, but for quite different reasons.

The Church doesn’t like people pursuing the acquisition of material things and so is opposed to the government encouraging people to spend more on this. In fact, they probably want us all to consume less.

David Cameron claims to believe that the policy won’t work. He wants a different policy to be pursued, but only with him as Prime Minister.

Marxists, like Marx, are not interested in proposing policies for governments to pursue. We say that, whatever the policy they pursue, they cannot make capitalism work in the interest of the majority class of wage and salary workers. We add that, in any event, once a crisis develops, an increase in government and personal spending cannot make it any shorter than it is otherwise going to be.

Crises only come to an end when stocks have been cleared, inefficient businesses eliminated, asset values have depreciated and real wages and interest rates fallen, so restoring the rate of profit, the incentive to produce (and the brake on producing) under capitalism.

Printing more money (or, what amounts to the same thing, the government borrowing money from itself), as an inflation of the currency, is likely to lead simply to rising prices while production continues to stagnate. “Stagflation”, as it has been called.

Cameron – of course – does not accept this. He has a different explanation for the crisis: that it was caused by the policies of the Labour government, and so can be ended by a new government pursuing a different policy. This is just the stuff of the game of parliamentary politics, based on the illusion that governments can, and do, control the way the economy works. But they don’t.

If Brown is being blamed for causing the crisis it’s partly his own fault. When the economy was expanding he was keen to claim the credit. He even made the ridiculous boast that he had ended the boom-slump cycle. Now that things have gone wrong, he’s blaming the international economic situation. This is true, but he – and politicians generally – can’t have it both ways. They can’t claim credit for the good times and blame world events for the bad times. Actually, it’s the uncontrollable world economy that’s responsible for both.

We hold no brief for Brown, but the Tories’s claim that the present crisis is made in Britain, that it’s “Gordon Brown’s crisis”, is not true. It’s not the government’s fault. It’s capitalism’s. It’s capitalism’s crisis, and the answer is not to change the government but to get rid of capitalism.

Smoke and Mirrors: The Bend Some and Hedges Effect (2009)

From the February 2009 issue of the Socialist Standard

The fiasco surrounding the $50 billion hedge funds run by Bernard Madoff has been another illustration of the current instability at the heart of capitalism’s financial apparatus.

Hedge funds try to bend the normal financial rules of the market in whatever way possible, though it appears Madoff went too far in what could be the world’s biggest ever fraud. A massive investigation is under way into how Madoff set up and maintained a giant ‘Ponzi scheme’. These schemes take their name from Charles Ponzi, an Italian immigrant to Boston in the US who, during the early 1920s, set about spreading rumours of lucrative investment opportunities he was involved in. These supposedly guaranteed what the Wall St Journal exposed as impossibly high returns, when in reality most of the underlying investments did not exist and Ponzi merely took people’s money and used some of it to pay dividends and other returns to existing investors, while creaming the rest off for himself. This was able to continue as long as new investors were attracted to the schemes. When the flow of new investors stopped, the schemes imploded.

Although an investigation by the Securities and Exchange Commission in the US is currently taking place into the precise nature of Madoff’s actions, he has apparently confessed that the steady above-average returns that characterised his operation did not reflect the underlying reality and that, over time, his funds became an elaborate sham. There is now a mammoth scramble by wealthy investors, charities and financial institutions to try to recover whatever little may be left of their original investments, with these investors notably including funds managed (or held in custody) by major banks like UBS, HSBC and RBS. Indeed, Bank Medici reportedly had $3 billion invested with Madoff and because of this has now been taken over by the Austrian government (Financial Times, 3rd January).

Hedge funds
The Madoff affair is in many respects but the latest (and most spectacular) disaster to afflict the little-understood world hedge fund sector. Until last year, the most infamous previous case of a financial disaster involving a hedge fund was in 1998 when what had become the world’s biggest hedge fund at the time – Long-Term Capital Management – went bust. This had been headed by a team that included two Nobel Prize winners for economics, experts in the pricing and risk-assessment of complex financial instruments. But after years of stellar returns in the 1990s the fund collapsed and had to be bailed-out by a consortium of 50 investment banks put together by the then Chairman of the Federal Reserve, Alan Greenspan. The banks had already invested so much in LTCM (and loaned it so much money) that their own capital would have been seriously jeopardized by the losses incurred and Greenspan had to step in to help them in a way that was a precursor of recent actions during the 2008 financial crisis.

The collapse of LTCM demonstrated that those who viewed hedge funds as an esoteric but peripheral phenomenon were living in the past. Hedge funds had by this time become a hugely significant, if secretive, part of capitalism’s financial operations, with the ability to exert an influence on markets well beyond that of many governments. This had previously been demonstrated to those paying attention by George Soros and his Quantum Fund, which in 1992 had made $2 billion betting against sterling in the European Exchange Rate Mechanism, forcing the UK out of the ERM and metaphorically ‘breaking the Bank of England’ in the process, with government intervention unable to stop the slide of sterling against the deutschmark.

So, given the ascendancy of hedge funds in recent years and the recent media fascination with them, what do they really do and why are they deemed to have so much financial power?

Hedge fund strategies
While the public conception of hedge funds is that they are highly risky investment vehicles that aim at spectacular returns for their investors, this isn’t entirely true in every respect. Indeed, hedge funds gain their name from strategies aimed at ‘hedging your bets’, so that in theory the risk associated with one activity can be mitigated, at least in part, by others. Most hedge fund managers are not interested in relative performance measured against an accepted benchmark. In this sense, they do not aim to beat an index like the FTSE 100 or the S&P 500 in the US in the way that other investment managers running more conventional operations like unit trusts and investment trusts do (whereby, say, an annual return of minus 20 per cent would be considered a good relative performance if the market had fallen by more than 30 per cent as it did last year). Instead, hedge fund managers generally seek ‘absolute returns’, which are positive returns in any sort of market conditions.

Most, though certainly not all, hedge fund strategies are equity-based involving stock market investment, and hedge funds generally aim to try to secure returns noticeably better than the long-term annual average return from shares (which in most major western countries has tended to be in the 8-10 per cent range). This is another reason wealthy investors find them so attractive.

The strategies adopted by hedge funds to achieve this type of performance in all market conditions fall into various categories, the most common of which are the following:

Long/short equity, which involves buying shares in some companies in the hope they will go up (‘going long’), but shares in other companies in the hope they will fall (‘going short’), thereby hedging the bet. Going short usually involves borrowing shares and immediately selling them only to buy them back cheaply later when their price has fallen so that they can be returned to the original lender and the difference kept as profit. Sometimes this type of long/short strategy involves ‘pairs trading’, such as going long on BP but short on Shell in the belief that the former oil stock is undervalued compared to the latter.

Arbitrage, based on a variety of techniques and strategies used to exploit market pricing inefficiencies (for instance, a company like Shell is quoted on more than one stock exchange and there can be temporary discrepancies in the price quoted in Euros in Holland compared to the price quoted in sterling in London). Fixed income arbitrage funds try to exploit pricing inefficiencies in bond markets and this was the main strategy used by Long-Term Capital Management until its collapse. LTCM took the view, backed up by various mathematical models they had developed, that bond yields tend to converge over time. More often than not this is true, though not always – as they were to find out during the Russian debt and currency crisis of 1998 when traders took flight from Russia, sold risky investments and bought into the relatively safety of US Treasury Bills instead.But LTCM had bought low-priced and high-yielding Russian government securities, while at the same time selling short high-priced and low-yielding US Treasuries, in the expectation that their yields would converge over time. This was because they assumed that investors attracted by high-yielding Russian securities would buy them en masse, push their prices up and so reduce their yields, while selling the relatively unattractive US Treasuries, raising their yields. Charles Geisst pointed out in his excellent Wall Street: From Its Beginnings to the Fall of Enron that ‘the idea of converging yields evaporated overnight as the Russian obligations fell precipitously in price and the Treasuries gained as a result of the flight to quality. The fund was on the wrong end of both sides of the trade’ (p.380), a calamitous end for the Nobel Prize-winning economists.

Event-driven strategies, which can involve buying shares in the expectation that a company merger or takeover is likely, or which can involve buying into distressed assets (these are avoided by most investors so there is more likelihood of significant mis-pricing and the opportunity to buy assets at a knock-down price). Often hedge funds will buy the debt of a distressed company as a prelude to taking it over and/or liquidating it for a profit.

Macro-strategies, which are based on taking positions on what is likely to happen in the global economy. George Soros’s Quantum Fund has specialised in these macro-strategies, taking huge, credit-fuelled bets on the direction of currencies and commodities, for instance, and in doing so exerting more economic power than many governments can muster.

Quant strategies, which are based on complex mathematical models, and which can involve elements of the other strategies named above as well as short-term trading designed to profit from minute-by-minute and second-by-second price fluctuations.

What all these hedge fund strategies have in common is that they involve speculation to varying degrees as opposed to investment for the long-term, and typically involve significant amounts of leverage too (hedge funds often borrow in multiples of many times their own value as a way of maximizing their returns - for example, returns from arbitrage activities would often be minute if it wasn’t for the amount of leverage used). And unsurprisingly, these are two of the main reasons hedge funds are often considered to be risky, if not unstable, influences within the market economy.

Hedge fund structures
In truth, the risk hedge funds present to the operation of the market economy’s financial system isn’t solely because of what they do, though it is true enough that regulated investment vehicles like unit trusts and investment trusts are legally unable to adopt many of the strategies hedge funds use. The main issue with hedge funds, exposed once and for all by the Madoff scandal, is that they are largely unregulated entities for the secretive and super-rich, and as such are open to all sorts of abuses, attempting to bend the investment ‘rules’ at will under the guise of innovative practice.

Most hedge funds are restricted to investors – who on investing usually become limited partners – with at least $1,000,000 (excluding their main residence), i.e. they are for capitalists only. They are also limited in terms of the number of investors who are allowed to join the fund. This is to avoid the restrictions and regulations placed by governments on other investment vehicles designed for mass participation and has been a way for hedge funds to slip ‘under the radar’ of the regulators. Most hedge funds – registered offshore for tax reasons and run as private investment partnerships – are covered by little in the way of investor protection and are barred from advertising or being sold to retail investors. Aside from withdrawing their investments (there are often restrictions on this too) hedge fund investors have little practical control over the managers, usually even less so than other collective investment vehicles like investment trusts which have shareholders and an elected board of directors answerable to them and which have to issue transparent annual reports, regular trading updates and so on.

The basic hedge fund structure appears to have changed little since they first appeared in the early 1950s, having been pioneered principally by Alfred Winslow Jones in the US, though many others – such as Warren Buffett before he developed his huge publicly quoted Berkshire Hathaway investment vehicle – established comparable private funds at a similar time. Annual management fees are high, typically 1 or 2 per cent of capital under management, with another 20 per cent of annual returns over and above an agreed threshold, explaining why in recent years many high-flying fund managers working for the big investment banks have been so keen to leave and set up their own hedge funds.

The role of hedge funds
Hedge funds, like private equity, have emerged in the present economic crisis as some of the ‘bad guys’ of the financial world, almost as if a capitalism without them would somehow be sane and humanitarian. Small investors in retail banks in the UK that have had to be nationalised or merged railed last year against the hedge funds for shorting bank stocks, driving their prices ever lower. It was clear that this would have happened anyway though as was illustrated when the share price slides didn’t stop when the shorting of financial shares was prohibited by government order.

There is always a place in capitalism for scapegoats, especially those as rich as most hedge fund managers have been (and as unpleasant as some of them no doubt are). But this detracts from the real issue which is the instability and chaos that lies at the heart of the money/prices/profits system itself. Capitalism without hedge funds is just as brutish and nasty as capitalism with them – and the irony is that if you accept the rationale of the capitalist economy, hedge funds and other speculators, contrary to much popular opinion, play a useful role.

Capitalism’s financial markets are the lubrication for the entire capitalist economy. These markets depend on liquidity and frequent trading to accurately match buyers and sellers at any one moment in time. If trading is thin, this matching of trades becomes difficult if not impossible, whether in shares, bonds, commodities, or more complex financial instruments. If, for example, shareholders investing via the stock market all used a ‘buy and hold’ strategy and didn’t generally sell their shares for long periods after buying them, the equity markets would be stifled and trading difficult. This is why hedge funds and speculators more generally perform a useful role for the system – they are one of the main ways of ensuring sufficient liquidity for it to be able to function properly.

Their growth in size and influence, especially in the last 15-20 years, has been phenomenal, explained by their potential attractiveness to capitalist investors aiming for a steady but above average return, and their attractiveness to fund managers because of their flexibility and fee structures. The number of hedge funds in existence now runs into the thousands, with London’s Mayfair being nick-named ‘hedge fund alley’. According to the Financial Times (31st December), hedge fund assets under management have grown from less than $50 billion in 1990 to around $1,900 billion last year, making them a hugely significant economic force.

The current financial turmoil, however, has seen the biggest outflow of assets invested in hedge funds for decades, a sum estimated at $400-500 billion from January to November 2008. Lack of credit and high interest rates have meant that a great many hedge funds have had to de-leverage, reducing their debt as quickly as they can and selling their assets at the best prices they can get in falling markets. And as investors withdraw their money on the back of faltering returns, this has had the knock-on effect of hedge funds also having to sell their assets to meet redemptions, creating a vicious downward spiral for equity prices in particular, called ‘forced selling’. This was the cause of much (if not most) of the massive waves of selling on world stock markets last September and October, with quite unprecedented levels of market volatility over a sustained period.

Due to this de-leveraging and forced selling at low prices, several hedge funds have already gone bust and there will surely be more to come. In addition, because they were so highly leveraged, the unpredictable volatility in equity, bond and credit markets has ensured that some funds have just folded under the onslaught, including some of the macro and quant funds that should, in theory, have been able to capitalize on these situations.

As hedge funds operate in such a competitive market, those that don’t perform get shut down or merged with others (so much so that around 60 per cent of hedge funds are no longer around within five years of their inception). The financial crisis will almost certainly ensure that this figure increases further. Also, there are already indications that hedge funds will be the next target of the regulators and so it would seem that the great hedge fund bonanza is over, at least for now.

As for Mr Madoff, he will have done the cause of hedge funds no good either as their lack of transparency has been illustrated as starkly as it could possibly have been. Many capitalists will no doubt now be looking elsewhere to invest their wealth – so long as another Mr Madoff hasn’t made off with it first.

DAP

Weekly Bulletin of The Socialist Party of Great Britain (85)

Dear Friends,

Welcome to the 85th of our weekly bulletins to keep you informed of changes at Socialist Party of Great Britain @ MySpace.

We now have 1454 friends!

Recent blogs:

Stop Supporting Capitalism! Start Building Socialism!

Have the Tories gone Marxist?

Is the End of Capitalism Nigh?

Quote for the week:

"Journalism is one of the devices whereby industrial autocracy keeps its control over political democracy; it is the day-by-day, between-elections propaganda, whereby the minds of the people are kept in a state of acquiescence, so that when the crisis of an election comes, they go to the polls and cast their ballots for either one of the two candidates of their exploiters." Upton Sinclair, The Brass Check (1919).

Continuing luck with your MySpace adventures!

Robert and Piers

Socialist Party of Great Britain

How Near Is Socialism?

Socialist Party Public Meeting
Wednesday 18th February 8.30pm

HOW NEAR IS SOCIALISM?

Maryhill Community Central Hall

304 Maryhill Road Glasgow, G20 7YE

For over a century the objective conditions necessary for the establishment of socialism, i.e. the development of the means of production and distribution of wealth to a level which first permitted abundance and now superabundance, have existed. So, why has it not happened? When will it happen?

These questions are obviously much easier to ask than they are to answer.

Subjective Conditions, a majority of socialists.
To answer these questions, it would probably help to look at some indicators within society which might show us what progress, if any, has been made in the last century or so towards increasing socialist consciousness, and consequently towards socialism itself.

Some Indicators within society
What does the decline of belief in religious superstition during the last century tell us about the state of consciousness amongst wage slaves? Has this decline been accompanied by a correspondingly better understanding of the society in which they live? What effects do globalization and improved. communication systems, such as the internet, have upon the potential for greater class consciousness amongst workers?

Globalization is not new: it is a development which has been in progress for at least several hundred years, but its effects have become much more noticeable as a result of modern communication systems. Globalization has joined the lexicon of buzzwords used by our bosses' media machine.

What are the effects of this media machine upon the minds of the working class?

We are often told that certain events should be seen as "important", or signifi-cant", or even "historic". The recent presidential elec-tion in the United States of America was reported as such an event.

The fact that Hillary Clinton and Barack Obama were both seeking to be candidates for the presidency, we were told, was in itself an "historic achievement". Now that Barack Obama has become the new President of the United States, we are invited to see this as some kind of great event. There is much goodwill, and sadly adulation, for this latest disappointment-to-be who now occupies the White House. Will those who support this man today be ready for socialism any time soon?

These are some of the items Comrade John Cumming will be discussing at our 18th February branch meeting, looking forward to seeing you all there.

Admission Free. All Welcome

For more information about Glasgow Branch of the Socialist Party, visit their website.

One for your diary . . .

. . . if you are so inclined.

Details of the Summer School will be posted on the blog if and when I stumble across them on the SPGB website.

Is it just me or are you also thinking Port Sunlight?

What is socialism (Baby don't hurt me. Don't hurt me)

Originally posted on the Marx and Coca Cola blog

Recently Congressman Paul Broun (Retardlican-GA) had this to say about the Stimulus Bill:

I see this as a huge leap toward socialism as a nation. It's creating new government programs, it's creating new government jobs, that don't have any sunlight to those programs, to those jobs. It expands programs that are already there. It further - some of the tax relief, I believe and hope the gentlemen will agree with me, actually just furthers through the refundable tax credits a dependency upon government. My friend Star Parker had wrote a book one time that she called Uncle Sam's Plantation. And what this does is it economically enslaves people. And that's what we see happening.

Putting aside for a moment that this is all gibberish (Really? Tax credits are slavery. And "creating new government jobs, that don't have any sunlight to those programs", What the fuck does that mean?) let's explore this idea that somehow any government spending is equatable to socialism (I have a feeling that this idea will pop up a lot over the next couple of years). Socialism, like capitalism, is an economic system, which is the way goods and services are distributed throughout a society. A society can't have to two different economic systems. That would be like a hunter-gather tribe living next to a feudal estate next to a modern factory farm and operating as a coherent unit. Eventually one system would come to dominate the others. While the nation-sate may be the largest player within our capitalist system it is one of many. When governments spend money on goods or services (à la the stimulus) it does so in capitalist market with the other players (individuals, corporations, charities, etc.)

But how is this "socialist" stimulus plan any different from regular government spending? As this handy graph from the Heritage Foundation shows discretionary spending, especially military spending, increased dramatically during George W. Bush's term. Rather it was Medicare part D, No Child Left Behind, or his two wars he used government spending to fuel economic growth (for a good account of how W turned Northern Virginia into a Silicon Valley of lobbyists and defense contractors see Thomas Frank's The Wreaking Crew). George Bush was a Keynsianist in everything except name. But why didn't the free marketeers stand up and decry Bush as a socialist? The government spending programs that are described as "socialist" are school construction, health care for children, etc., in other words spending that benefits the vast majority of working people. Government spending that lines the pockets of the rich is "capitalist". It would also mean that the hundreds of billions of dollars that are spent on defense is not meant to actually protect Americans, but to enrich the few. This idea that social spending is socialism is the view that is also taken by various "communist" parties and the likes of Hugo Chavez. Republicans are just like Trotskyists; no wonder they can't win an election.

So from this we can conclude that socialism is anything Paul Broun doesn't like. For example if he saw The Curious Case of Benjamin Button, and didn't like it, it would be a "socialist" movie. And just as bad as slavery.

JM