Wednesday, December 31, 2008

Weekly Bulletin of The Socialist Party of Great Britain (79)

Dear Friends,

Welcome to the 79th of our weekly bulletins to keep you informed of changes at Socialist Party of Great Britain @ MySpace.

We now have 1426 friends!

Recent blogs:

  • Let’s make a real socialist revolution
  • What is Poverty?
  • The problem that never went away
  • Coming Events:

    Saturday 10 January, 6pm


    Speaker: Jim Lawrie

    Socialist Party Head Office, 52 Clapham High St, London SW4 (nearest tube: Clapham North)

    Tuesday 20 January, 8pm


    Chiswick Town Hall, Heathfield Terrace, W4.(nearest tube: Chiswick Park)

    Wednesday 21 January, 8.30pm


    Speaker: Vic Vanni

    Community Central Halls, 304 Maryhill Road, Glasgow.

    Saturday 24 January, 3pm to 5pm.


    Yes: Hillel Ticktin, editor of Critique; No: Adam Buick, Socialist Party.

    Hillhead Public Library, Byres Road, Glasgow. (next to Hillhead subway)

    Saturday 24 January, 12 noon to 4pm


    12pm informal chat, 1pm meal, 2pm to 4pm Discussion

    The Conservertory, back room of Rosary Tavern, Rosary Road, Norwich.

    Monday 26 January, 8.30pm


    Unicorn, Church Street, Manchester City Centre.

    Saturday 31 January, 6pm


    Socialist Party Head Office, 52 Clapham High St, London SW4.

    Quote for the week:

    "The first duty of society is to give each of its members the possibility of fulfilling his destiny. When it becomes incapable of performing this duty it must be transformed." Alexis Carrel (1873 - 1944), Reflections on Life, 1965.

    Continuing luck with your MySpace adventures!

    Robert and Piers

    Socialist Party of Great Britain

    Saturday, December 27, 2008

    Pieces Together (2008)

    From the December 2008 issue of the Socialist Standard

    "Once it was the Greeks who commanded the best boats. Aristotle Onasis's yacht, Christina O, hosted Marilyn Monroe, Frank Sinatra, Eva Peron and Sir Winston Churchill who were all photographed on board. Then the Arabs became involved. Ten years ago, Diana, Princess of Wales, was photographed sunbathing on Mohamed Al Fayed's yacht the weekend before she died. But in the past five years the Russians have turned it into a different league. Your bog-standard superyacht now costs between £40 and £70 million depending on the interior specification. The running costs tend to be about £5 million a year for the bigger vessels." (London Times, 23 October)
    "If it was not evident already how much developers in Dubai value the input of a celebrity name, the news that Kylie Minogue is to be paid about $4.4 million (£2.8 million) to officially open the $1.5 billion Atlantis Hotel on November 20 should silence any doubters. The Australian singer's first performance in the Middle East will be part of a $35 million extravaganza billed as the most expensive party yet held - the fireworks alone are to cost $6.8 million. But why bother with such expenditure? The Atlantis has already attracted huge publicity over its £13,000 a night suites." (London Times, 31 October)
    "Bruce Springsteen wants to make sure one bank remains solvent: the Community Food Bank of New Jersey. The singer will appear in a newspaper ad for the state's largest food bank that says: ‘We Can't Let This Bank Fail!’ Springsteen has been a supporter of the food bank for 23 years, often donating proceeds from concerts or encouraging fans to bring food donations to his shows. This is the first time he's lent his image to the anti-hunger campaign. The Community Food Bank says the economy has resulted in a 30 percent increase in those needing food and could lead it to ration supplies for the first time in its 26-year history. The food bank assists charities serving a half-million people each year." (Yahoo News, 11 November)
    "Families are flooding homeless shelters across the United States in numbers not seen for years, camping out in motels or staying with friends and relatives, homeless advocates say. ‘There are lots of families haemorrhaging into homelessness and we need to figure out how to put a tourniquet on the haemorrhaging,’ Philip Mangano, the homelessness czar appointed by President George W. Bush in 2002, told Reuters. There is little time to waste. The U.S. unemployment rate is at a 14-year high and more job losses are forecast, while the Mortgage Bankers Association says nearly 1.5 million homes are in the process of foreclosure." (Reuters, 12 November)
    "Millions of elderly people will heat just one room in their homes this winter to cut down on soaring heat bills. Research by the charity Help the Aged found that 4.5 million people planned to live in one room in the coldest months. Many would stay in bed longer to keep warm, the charity found. A spokesman said: ‘It is a scandal that in a civilised society we are behaving in this way.’ Energy bills have risen by about 30 per cent this year." (London Times, 10 November)

    Thursday, December 25, 2008

    Is the World Slump Over Yet? (1994)

    From the August 1994 issue of the Socialist Standard

    The Great Reckoning by James Dale Davidson and William Rees-Mogg (Pan, London, 1994 £7.99), subtitled "How the World Will Change Before 2000", aims to be prophetic. It foresees rocketing taxes, worldwide stock market crashes, a further fall in the property market, a collapse of the welfare state, social disintegration writ large, petty nationalist squabbles and terrorism.

    The odd thing is that its authors are both gung-ho supporters of the very system - capitalism - that is capable of unleashing such horror, and find no contradiction in their position. They view the economic basis of capitalism as being fundamentally unstable, yet their advice is only to those already wealthy enough to be able to use their capital to their own advantage in the coming economic crunch. No talk of revolution here.

    Nevertheless, The Great Reckoning is a fairly sophisticated book, which is unusual for one that prophecies a Doomsday scenario. Central to its analysis is its prediction of a 1930s-style economic crisis from which other dangers will follow. Davidson and Rees-Mogg claim that there are two main reasons why the world capitalist economy is in for a major period of slump. One is taken from the Austrian Physicist Cesare Marchetti who has spent time analysing the penetration of innovations and products in the capitalist economy. Marchetti dispenses with price-analysis and deals only in physical quantities, claiming that the penetration of commodities into markets can be equated with the spread of living species. He has, for instance, argued that the growth and spread of motor-cars into Western Europe can be explained by the same logistic equation that describes the penetration of, say, rabbits into Australia. Ten years ago Marchetti claimed that most of the markets that provided the spur for the post-war economic boom, like motor-cars, had become saturated. This, he reasoned, would mean economic slowdown.

    Economic Slowdown
    Marchetti's argument doesn't fully take into account that technological innovation is itself a spur to capitalist growth and that the "old" industries are forever being replaced by new ones - and continue to be so. If capitalism is true to its development so far, the industries supposedly at the point of market saturation today will be heard of only in history books in the future. It should also be noted that devices exist - from proverbially "reinventing the wheel" to built-in obsolescence - which ensure that the long-term growth in cars, televisions and many other lines of production continue apace. There used to be near-physical market saturation for black-and-white TVs, but did that stop growth in the market for television? - Hitachi, Sony and Ferguson are testament to the fact that it did not. The manufacturers replaced black-and-white with colour, then brought out VCRs, then replaced colour mono with colour stereo, then stereo with surround-sound. Market saturation disappeared in a flurry of pound notes and dollar bills.

    In truth Davidson and Rees-Mogg have a far better argument than Marachetti's to justify their view of the major world economic slowdown. Their second, more plausible view, is that capitalism is currently drowning in an ocean of debt:
    Debt cannot go on compounding faster than output forever. At the rate it expanded in the United States in the 1980s, interest payments would consume 100 per cent of GNP by the year 2015. No such thing will happen. Long before debt reaches that extreme, it will be wiped away...One way or other we expect a great reckoning. A settling of accounts. We expect the long economic boom and credit expansion that began with World War II to come to an end. The end, when it comes, will not only reveal the insolvency of many individuals and corporations, it may also bring bankruptcy to the welfare state and breakdown of authority within political economies.
    There is more than a grain of truth in this. In many world economies, debt is compunding at a faster rate than income and total world indebtedness, by every yardstick that can be named, was heavier at the start of the present slump than at the beginning of any other. In the United States alone the rate of debt to national GNP is now 195 percent, compared with 120 percent before the 1929 crash.

    History has demonstarted that sustainable recoveries only begin when a considerable of debt built-up during the boom has been liquidated. If debt liquidation is insufficient, growth will remain sluggish even when "recovery" has supposedly begun, such as at present. Davidson and Rees-Mogg estimate that the amount of debt still to be liquidated during this slump in the US is three to four trillion dollars-worth.

    The extension of credit effectively delays the onset of capitalism's periodic economic crises only to make them worse when they finally occur. In all economic booms some industries over-extend their operations in the pursuit of further profits and find that they have overproduced for their particular markets. A case in point in the present slump was the commercial property sector.

    Perilous Situation
    While some industries get into difficulties, other sections of the owning class find that their profits are increasing. The banks, acting as intermediaries between the buyers and sellers of money capital, lend out their accumulated capital to the enterprises in difficulty to keep them going. But this cannot generally correct the fundamental disproportion in growth between the industries and uneven expansion in relation to market demand. Through knock-on effects in industry overproduction spreads and the demand for money capital rises, pushing interest rates up. In this way, the mechanisms of credit extension in the capitalist economy papers over the underlying weaknesses in the productive sphere and buys firms some breathing space before the crisis comes - and this usually comes when the demand for credit is highest and interest rates are at their peak. However, the ultimate outstanding debt increases through this process, requiring a much greater "correction" in the slump as capital assets are devalued to bring productive capacity back into line. The result is not merely an industrial slump, but a financial, banking and property crash as well, as in the 1930s.

    Davidson and Rees-Mogg see this as the present outlook for world capitalism. Mounting corporate, government and personal debt has placed the world economy into its most parlous situation for decades. They are all too aware that the only way out for capitalism, sooner or later, is a financial reckoning which will bring about a growth in poverty, a reduction in social welfare programmes and possibly more armed conflict between nation states.

    Their analysis of the situation ends there. There is no prescription for how the slump can be avoided - we must just let it wash over us. The authors are completely blind to how the world might be organised to avoid financial slumps, without the market mechanisms which causes them in the first place. They dismiss the Soviet Union's model of capitalist planning out of hand, as well they might, but in doing so claim that this proves socialism to be an impossible dream. Particularly crass is a chapter on the fall of the Eastern Bloc - which socialists predicted - containing the assertion that this demonstrates the failure of Marxism. Indeed, some of the comments in this chapter, like the assertion on page 188 that workers exploit capitalists rather than the other way around, defy rational analysis and are completely at variance with the otherwise coherent account presented. But, of course, the likes of Davidson and Rees-Mogg want workers to think that there really is no alternative to capitalism, however bad it may be, and that, despite everything, workers still get a good deal out of the system. Unluckily for them some of us know different.
    Dave Perrin

    Weekly Bulletin of The Socialist Party of Great Britain (78)

    Dear Friends,

    Welcome to the 78th of our weekly bulletins to keep you informed of changes at Socialist Party of Great Britain @ MySpace.

    We now have 1425 friends!

    Recent blogs:

  • Cold charity
  • Who are "we"?
  • The struggle for democracy
  • Quote for the week:

    That time of the year is almost on us

    When department stores will cheat and con us,

    Trying to steal our money from us.

    So you'd better watch out because

    There's a fat old jolly bloke

    With the long white beard and the bright red cloak,

    Who'll do his best to send us broke?

    It's Santa Bloody Claus.

    Eric Bogle, Santa Bloody Claus.

    Continuing luck with your MySpace adventures!

    Robert and Piers

    Socialist Party of Great Britain

    Saturday, December 20, 2008

    Manufactured scarcity (2008)

    Book Review from the December 2008 issue of the Socialist Standard

    Green Capitalism. Manufacturing Scarcity in an Age of Abundance. By James Heartfield. .2008

    James Heartfield is associated with the former Trotskyist (British) Revolutionary Communist Party (RCP) which used to publish Living Marxism (LM) and has moved on considerably since “the collapse of Communism” at the end of the 1980's and the dissolution of the formal RCP organisation in 1997. These days the so-called “LM network” produces the edgy website and organises debates and events under the auspices of the Institute of Ideas and a myriad of propaganda campaigns expedited largely through a robust, sometimes entertaining, and not ineffective style of media entryism.

    One area this current has been particularly interested in over the last two decades is in promoting a full-on critique of the reactionary imperatives of the politics of “Environmentalism”. In Green Capitalism James Heartfield reminds us that the profit system is essentially a system of rationing, which is now, in certain circles and in a variety of ways, being dressed up as “greenwashing” by Big Business and Governments – as the contemporary ruling elites reinvent scarcity in an age of abundance.

    Heartfield rightly presents the capitalist mode of production as an epoch in which the force of human ingenuity has sought to ameliorate the exigencies of life through technical breakthrough with the result that happiness is the condition for most of us in Western societies. I do, however, take issue with the notion that one out of any of the 300 workers at the Lombe silk works on the Derwent in 1721 or the 5000 wage slaves at Arkwright's Mill in Cromford in 1771 woke up for work every day with a sense of unmitigated joy. Whilst those long deceased exploited workers are no longer “variable Capital”, my modern-day neighbours don't seem to enthuse much about the conditions of their means of living whilst having a sup on a Friday night in the local pub, either. Nevertheless, the material gains we have made in the interim between the first factories and 21st century capitalism are impressive.

    In a summation of capitalist economics Heartfield tackles the neo-classical economists and suggests they were in effect “Rationers by Trade“ (my phrase not his) but you get the point. Notwithstanding that, the book opens with a great sense of optimism and opines succinctly upon the gains made by the working class under capitalism. The author explains carefully the concomitant progressive and destructive forces at play within the profit system and hints at transcending towards a more rational form of society founded upon technological progress.

    This work sets out to show how modern Environmentalism came about as a consequence of ruling elites ideas about scarcity. Heartfield‘s argument is that, in Western society, the myth of the “fragile” planet emerged as a consequence of the retreat from production in the original heartlands of industrial capitalism.

    Much of the Green Capitalism provides an excellent exposition of the fools' errand of “Environmentalism” and the levers of power behind that aspect of the moribund profit system. Meanwhile, at times the prose is poor and plodding, and some of the referencing is both points-scoring and unnecessary to make the more essential issue clear. Do we really need to be lectured about Trotsky's ideas on production? Some of this stuff would leave the general reader all at sea in very short order. Whilst a final extraordinary point is clearly made: the world population grew from 791 million in 1750 to 5.9 billion in 1999, as a consequence of advances in agriculture, transport, sanitation, industry. Many of that number exist at the level of subsistence – and it should not be that way! So, from an editorial perspective the narrative simply peters out – a bang and a whimper! Where is the alternative?

    Notwithstanding that, this book has much to recommend it, not least for cocking a timely snook at both the modern-day misanthropes who see mankind as a plague upon the planet and the long-dead 'dismal scientists' of neo-classical economics who could not comprehend a theory of productive growth through collective endeavour. Heartfield puts a well aimed, populist boot into the modern-day Green Capitalists – Branson, Goldsmith, Charles Windsor, Al Gore, Bill Clinton, Lord (Peter) Melchett, and makes reasoned argument that Western Capitalism has got to go Green for the sake of exploiting new sources of profit.

    There is an argument that modern socialists need to take on the Green catastrophists and promote technology and real democracy to face down the spectre of Austerity Capitalism in the 21st Century - in order to kill the pernicious profit system once and for all.
    Andy P. Davies

    Thursday, December 18, 2008

    Weekly Bulletin of The Socialist Party of Great Britain (77)

    Dear Friends,

    Welcome to the 77th of our weekly bulletins to keep you informed of changes at Socialist Party of Great Britain @ MySpace.

    We now have 1423 friends!

    Recent blogs:

  • Co-operation
  • Banks - Who needs them?
  • 150 Years of the Communist Manifesto
  • Quote for the week:

    "The credit system has a dual character immanent in it: on the one hand it develops the motive of capitalist production, enrichment by the exploitation of other's labour, into the purest and most colossal form of gambling and swindling, and restricts ever more the already small number of exploiters of social wealth; on the other hand however it constitutes the form of transition towards a new mode of production." Marx, Capital, Volume III, Chapter 27 (1894)

    Continuing luck with your MySpace adventures!

    Robert and Piers

    Socialist Party of Great Britain

    Thursday, December 11, 2008

    Weekly Bulletin of The Socialist Party of Great Britain (76)

    Dear Friends,

    Welcome to the 76th of our weekly bulletins to keep you informed of changes at Socialist Party of Great Britain @ MySpace.

    We now have 1416 friends!

    Recent blogs:

  • Booms and slumps - what causes them?
  • Capitalism, war and atrocity
  • Future al Fresco
  • Quote for the week;

    'A rise in the price of labour, as a consequence of accumulation of capital, only means, in fact, that the length and weight of the golden chain the wage-worker has already forged for himself, allow of a relaxation of the tension of it.' Marx, Capital, Volume I, Chapter 25 (1867)

    Continuing luck with your MySpace adventures!

    Robert and Piers

    Socialist Party of Great Britain

    Friday, December 5, 2008

    The next capitalist frontier (2008)

    The Material World column from the December 2008 issue of the Socialist Standard

    Over the last few centuries, one region of the planet after another has been “opened up” to capitalist plunder. Often rival capitalist powers fought over the spoils of conquest. In the 19th century they had the “scramble for Africa.” In the 21st they are scrambling to control the resources of the Arctic, which global warming and technological advance are making accessible to exploitation (Socialist Standard, September 2007).

    Once the Arctic and Antarctic are brought fully under the sway of capital, what next? Won’t that be the end of the story, the closing of the last frontier? There remains space, to be sure. But won’t the costs of extracting resources and transporting them to Earth be prohibitive? So you might think.
    In fact, the strategists of the six powers that now have active space programs – the United States, Russia, the European Union, China, India, and Japan – already have their sights on the commercial and military potential of the cosmos.

    On 22 October India launched the Chandrayaan-1 satellite, and on 11 November it entered Moon orbit. One of its main tasks is to map deposits of Helium-3 (He-3). This isotope, used together with deuterium (H-2), is the optimal fuel for nuclear fusion: in particular, it minimises radioactive emissions. It is very rare on Earth – according to one estimate, only 30 kg is available – because the solar wind that carries it is blocked by the Earth’s atmosphere and magnetic field. The dust and rocks in the Moon’s surface layer contain millions of tonnes of the stuff.

    It has been calculated that a single shuttle flight bearing a load of 25 tonnes (currently valued at $100 billion) would meet energy demand in India for several years or in the US for one year, while three flights a year would suffice for the world (Guardian, 21 October; Tribune, 23 October).

    The main problem is extracting the He-3 as gas from the lunar soil. This requires heating the soil to a temperature of 800ºC. in furnaces or towers, using solar power. (Silicon for solar cells is also abundant on the Moon.) To collect enough gas for one load, it would be necessary to process 360,000 tonnes of soil. Nevertheless, technologically this is believed to be feasible; modern furnaces do actually process such huge quantities of material. Some specialists question whether it would be economically feasible to strip mine the Moon in this way.

    Despite uncertainties, Indian strategists hope that the Chandrayaan-1 satellite will enable India to “stake a priority claim” on He-3 resources when lunar colonization begins (SkyNews). India’s main rivals in this field appear to be the US, which has “re-energised” its Moon program and plans to establish a manned base by 2020, and also China.

    Enough for everyone?
    Given the abundant supply of He-3 relative to foreseeable demand, why should India need to compete with other space powers for preferential access? Surely there is more than enough for everyone.

    Yes, but some locations on the Moon’s surface are much better for mining than others. Finding the best locations is the main aim of satellite exploration.

    First, the nature of the terrain will obviously matter when building bases and installations, whether operated by human workers or robots. It will be a great advantage to have water (ice) available nearby.

    Second, it will be least expensive to work in areas where deposits are richest, where the smallest amount of soil has to be processed for each unit of gas extracted.

    Third, reliance on solar power for soil heating (and other purposes) puts a premium on those parts of the lunar surface which are exposed to sunlight for most of the time.

    These are also the warmest regions (by lunar standards). An example is the Shackleton Crater at the South Pole. India is especially interested in this area, and it is also here that the US wants to establish its base.

    Militarisation of the Moon?
    Certain places on the Moon are already thought of as “strategic locations.” Thus, the topography of Malapert Mountain makes it an ideal spot for a radio relay station. Near the Shackleton Crater, it enhances the strategic value of the crater area.

    Considerations of this kind will become more important in the event of the Moon’s militarisation. This may happen as a result of competition for land and resources on the Moon itself. Or it may happen simply as an extension of existing military preparations: lunar stations may serve as reserve command centres for wars on Earth.

    Even if international agreements are reached to constrain the process of militarisation and divide the lunar surface into zones belonging to the various space powers, military threats may arise from “dual use” technologies. Let us suppose, for instance, that instead of mining He-3 a space power decides to generate electricity on the Moon using solar cells and transmit it on microwave beams to a receiving station on Earth. The problem – under capitalism – is that these same beams may equally well be used as powerful weapons against Earth targets.

    There will also be potential conflict between the space powers and other countries that for one reason or another are unable to compete in this sphere. Like the club of nuclear weapons states, the space powers may constitute themselves as an exclusive club and think up a rationale for joint efforts to thwart “space power proliferation,” that is, to prevent other countries from acquiring space capabilities. The two clubs will, of course, largely overlap.

    Space programs and socialism
    It is absurd for humanity to venture into the cosmos while still divided into rival states and still dominated by primitive mechanisms like capital accumulation. Even the first people in space, almost half a century ago, could see that our planet is a single fragile system.

    A world socialist community will have to decide which elements of existing space programmes to retain and which to freeze or abandon. National programmes that are retained will be merged into global programmes, eliminating the wasteful duplication inherent in the competition among space powers. Ambitious programs of purely scientific interest may be deferred pending the solution of more urgent problems.

    Attitudes in a socialist world toward reliance on space activities may diverge quite widely. Some people may wish to enjoy the benefits of a complex high-consumption lifestyle made possible by He-3 fuel for nuclear fusion and other off-Earth technologies. Others may prefer to avoid the irreducible risks of a space-dependent strategy and solve Earth’s problems here on Earth, at least to whatever extent this proves possible.

    Wednesday, December 3, 2008

    Weekly Bulletin of The Socialist Party of Great Britain (75)

    Dear Friends,

    Welcome to the 75th of our weekly bulletins to keep you informed of changes at Socialist Party of Great Britain @ MySpace.

    We now have 1418 friends!

    Recent blogs:

  • Work as it is, work as it could be
  • Five benefits of not having money
  • The Keynesian myth
  • Coming Events:

    Did you enjoy your Christmas?

    Public Meeting followed by Social.Saturday 10 January, 6pm, at SPGB Head Office, 52 Clapham High St, London SW4 (nearest tube: Clapham North).

    Quote for the week;

    'The few who understand the system, will either be so interested in its profits, or so dependent on its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantages...will bear its burden without complaint, and perhaps without suspecting that the system is inimical to their best interests.' Rothschild Brothers of London communique to associates in New York June 25, 1863.

    Continuing luck with your MySpace adventures!

    Robert and Piers

    Socialist Party of Great Britain

    Tuesday, December 2, 2008

    The return of Karl Marx (2008)

    From the December 2008 issue of the Socialist Standard

    Marx is again enjoying something of a revival. After his views on the globalising tendencies of capitalism, it is now his theory of crises that is attracting interest and being discussed in the media. Unfortunately not always accurately. For instance, in an article headlined “BANKING CRISIS GIVES ADDED CAPITAL TO MARX’S WRITINGS”, Roger Boyes, the Berlin correspondent of the (London) Times wrote (20 October):
    “Marx's new relevance relates mainly to his warning about the creation of an exploitative capitalism that ends up destroying itself: ‘An over-expansion of credit can enable the capitalist system to sell temporarily more goods than the sum of real incomes in created current production, plus past savings, could buy,’ said Ernest Mandel, the Marxist scholar, quoting his guru, ‘but in the long run, debts must be paid’. Since these debts cannot be automatically paid through expanded output and income, capitalism is destined for a ‘Krach’ - Marx's word for a crash.”
    If the suggestion is here, as it seems to be, that it was Marx’s view that capitalism will end up destroying itself in one big Krach, then it is wrong as Marx never argued that there was some flaw in the economic or financial mechanism of capitalism that would lead to it collapsing for purely economic reasons. In his view, as expressed in the last-but-one chapter of Capital on “The Historical Tendency of Capitalist Accumulation”, capitalism would come to an end by the working class becoming more and more organised and eventually expropriating the expropriators and ushering in a society based on “co-operation and the possession in common of the land and the means of production produced by labour itself”. In the meantime capitalism would continue being subjected to an ever-repeating cycle of boom and slump, with each boom ending in a Krach which would eventually create the conditions for a recovery of production and the next boom . . . and the next Krach.
    The following day the (London) Times2 section of the paper had a full-page photo of Marx on its front page saying “He’s back. Does the financial crisis prove that Karl Marx was right all along?”. The main article, by a Philip Collins, was just silly, but some of those asked to comment did have something sensible to say, in particular Mick Hume (introduced as “The Times’s libertarian Marxist columnist, launched and edited Living Marxism magazine 20 years ago” who said on this issue:
    “Marx was right to identify and analyse the tendency towards crises within capitalism, but he did not predict the system's ‘inevitable’ collapse. Today too many people who have never read or understood Marx are trying to turn him into an anti-capitalist Nostradamus who supposedly predicted it all, a soothsayer rather than revolutionary social scientist. Marx always emphasised that the resolution of a crisis would ultimately depend on political factors: that man makes his own history, although not in circumstances of his own choosing.”
    Hume has come a long way since, as the Trotskyist editor of what we used to call Dead Leninism, he advocated that workers should follow a vanguard party.
    One of the others asked to comment was the Labour MP John McDonnell who proposed that “Das Kapital and Wages, Prices and Profit should be issued to all government ministers as the definitive guides to the causes of capitalism in crisis”. He also recommended a book by Ernest Mandel and another by David Miliband’s father who considered himself a Marxist. If he re-reads Wages, Prices and Profit himself he will see that Marx urges workers to adopt the revolutionary watchword “Abolition of the Wages System”, which is the last thing the party he represents in Parliament wants.
    Mandel was in fact writing above only about credit crises, not economic crises. And he wasn’t quoting from his “guru”. The passage Boyes quotes is not from Marx but from Mandel (see Mandel, who died in 1995 was another Trotskyist, the leader for many years of one of the many “Fourth Internationals”, did, despite this, have a grasp of Marxian economics (at least, as applied to the West since he mistakenly thought Russia wasn’t capitalist). Even so, it is not clear that Marx would have expressed himself in the same terms. For instance, credit - if it is genuinely credit and not just the issue of more paper currency by the central bank - can’t exceed “past savings” plus savings from “real incomes created in current production” since these are precisely the source of any credit, i.e. of the money that is loaned.
    Of course debts do have to be repaid and if for some reason (such as overproduction in relation to the market for some key product) they can’t be, the banks and other financial institutions will be in trouble and a financial Krach or, as we say nowadays, a credit crunch will result. Marx wrote quite a bit about these and, to give Boyes his due, he recognises this even mentioning the articles Marx wrote in the New York Daily Tribune in 1857 on “The Financial Crisis in Europe” of that year.
    But then he goes on:
    “In the manifesto, published in 1848, he lists the ten essential steps to communism. Step five was ‘Centralisation of credit in the hands of the state . . .”
    It is true that one of the ten immediate measures, listed at the end of section two of the Communist Manifesto, that the Communist League of Germany advocated should be taken if political power in Germany was to fall into the hands of the working class in the course of the anti-feudal and anti-dynastic revolutions of 1848, did include
    “Centralisation of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly”.
    But there was no chance of the working class gaining control of political power at that time, as Marx and Engels later came to realise. In their preface to the first reprint of the pamphlet in 1872 they wrote that “no special stress should be laid” on the ten proposed measures which had “in some details become antiquated”. So to describe them today, in 2008 over a 150 years later, as “the essential” “steps to communism” is absurd.
    No doubt the working class, when it does come to win control of political power, will have to have drawn up a programme of immediate measures, but they won’t include setting up a single State Bank as, given the development of the forces of production, society can now move straight to socialism (or communism, the same thing) where there will be no need for banks as there will be no need for money. What the manifesto elsewhere called “the Communistic abolition of buying and selling” can now be achieved immediately.
    Adam Buick

    Monday, December 1, 2008

    Poles Apart? Climate Change, Capitalism or Socialism?

    Filmed forum featuring Glenn Morris of 'Arctic Voice' and Brian Gardner of The Socialist Party. The forum was held at Conway Hall in Central London and dates from April 5th 2008.

    Part 1: Poles Apart? Climate Change, Capitalism or Socialism?

  • Part 2:
  • Part 3:
  • Part 4:
  • Part 5:
  • Part 6:
  • Part 7:
  • Part 8:
  • Part 9:
  • Part 10:
  • Part 11:
  • Part 12:
  • Part 13:
  • Part 14:
  • How to lose friends and alienate people (2008)

    Editorial from the December 2008 issue of the Socialist Standard
    It would be hard to devise a scenario more likely to set the UK media drooling than the storyline that developed during late October. A couple of indiscreet politicians and an aristocrat enjoying the hospitality of a Russian oligarch's superyacht moored off Corfu is not newsworthy in itself of course.
    What really attracted the attention of the media was the Tory shadow chancellor (George Osborne) and his indiscreet breach of the code of honour of his old upper-class binge-drinking club, and particularly his friend Nathaniel Rothschild, - who's guest he was - and who is also apparently worth a bob or two.
    Osborne made the mistake of gossiping about a conversation he had on board with Peter Mandelson. At the time he was messing around in boats this summer he was an EU Commissioner for Trade but has since returned as a peer to Labour (previously known as New Labour), after various spells as the “architect” of New Labour (previously known as Labour).
    If you're feeling confused, don't worry - what is of interest to socialists is how the whole episode has lifted a grubby stone to uncover many examples of the shenanigans of our ruling class. For example, one person in the vicinity was Rupert Murdoch's daughter Elizabeth who had her own boat nearby and was spending a week in the Mediterranean just to plan her 40th birthday celebrations. ( If that’s how long the planning takes, what were the actual celebrations like?).
    Anyway, upset that his mates were bitching about each other only a few weeks after the yacht-party, Rothschild dropped Osborne right in it by accusing him of soliciting funds for the Tories, from the yacht owner. His name is Oleg Deripaska and he actually comes over better than most in this episode, despite being alleged to be a thug who has effectively extorted billions of roubles out of the state-owned industry through close involvement with the Russian mafia. This is of course outrageous, but if we are being consistent, it is pretty much how most of today’s capitalist class got their wealth, whether a few centuries or a few generations earlier.
    This story of thieves falling out in the playgrounds of the rich sheds a little light on how our increasingly inter-connected economic and political upper-class spend their money and time (what Peter Mandelson might term “serious relaxing”). But all parties to this grubby exchange – the economic sugar-daddies and their political lapdogs – appear to have now conveniently agreed to call a truce rather than risk damaging their collective reputation.
    Discretion in their discussions with each other obviously counts for more than transparency and accountability to the rest of us who actually create the wealth they go to such lengths to consume. Entering a period of rising unemployment and re-possessions is probably not the best time for the “have-yachts” to rub our noses in the details of the marvellous parties they always seem to be throwing for each other.
    Any workers who share our anger with, and analysis of the problems of, capitalism are encouraged to apply to join via the address below on this page. Needless to say, this address can be used also for any billionaires wishing to make a donation.

    Sunday, November 30, 2008

    Lamont - When Cameron Got It Wrong (2008)

    The Greasy Pole column from the November 2008 issue of the Socialist Standard

    David Cameron is in the habit of sprinkling his speeches, like throwing stale currants into a stodgy spotted dick, with unfunny jokes intended to persuade us that a ruthlessly ambitious, manipulative politician can have a harmless sense of humour. Remember the crack in what was called his keynote speech at this year’s Tory Conference, that he respects entrepreneurs and he knows what he is talking about because he goes to bed with one every night and – in time to get the laughter rocking again – wakes up with the same person every morning. The eagerly tamed audience were enthralled as well as amused and Cameron was able to forget that his bedtime entrepreneur – who, for those who have not been paying attention is his wife Samantha – is a very rich one; her father is an Old Etonian stockbroker and 6th Baronet, her parents are divorced and her mother is now Viscountess Astor. Lucky Samantha showed she has the common touch when she said, in reply to a reporter’s question, that she lived “near Scunthorpe”; it would have gone some way to expunge the image of a blackened steel town summoned up by that misinformation if she had mentioned that the family’s home is Normansby Hall, a lush 300 acre estate which they have owned since the late 16th. Century. Clearly, the Cameron family’s bit of what the Tory leader calls “this broken society” is comfortingly intact.

    In that same speech Cameron raised some embarrassed titters among the laughs when he shyly admitted to having been an adviser to Norman Lamont when he was Chancellor of the Exchequer. The Labour Party, he said, never let him forget this episode in his climb up the greasy pole. Quite right too – all Tories would like to forget Lamont, the memory of whose time in charge of the Treasury tends to undermine any theories about a Conservative government being inherently more able to tame capitalism’s crises than a Labour one. Lamont was at Cambridge with some rising stars of the Tory governments of the 1980s – Michael Howard, Kenneth Clarke, Leon Brittan John Gummer. How many fantasy careers, climaxing in occupancy of Number Ten, were sketched out on the backs of cafe menus in those impatient days? Lamont held a succession of jobs until the Men in Grey Suits did for Thatcher; as Major’s Chief Secretary to the Treasury he acquiesced in, and so had some responsibility for, the policy of Britain being part of the European Exchange Rate Mechanism (ERM). When Major put himself up in the contest to succeed Thatcher Lamont managed his campaign and he was then rewarded by Major with the Chancellorship.

    Lament’s time as Chancellor was not noteworthy for its controlled tranquillity and optimism; indeed his public standing was so abysmally low that years later he recalled a London cabby telling him that one of his passengers, on seeing Lamont crossing the road, offered five hundred pounds to run him down. (He was not to know, of course, that it could be left to Lamont’s political friends to bloodlessly get rid of him later). He was associated with a recession rated in some quarters as the worst since the end of the war and his blithe assurance that it would be “short-lived and relatively shallow” did not inspire any more confidence than his later claim to descry “the green shoots of recovery” all around – although they were not apparent to his struggling colleagues. This fixation with mouthing statements so unwise that they could only haunt him throughout his career was typified by his telling the Commons, in May 1991, that “Rising unemployment and the recession have been the price that have had to pay to get inflation down. That price is well worth paying”. (He did not view his own projection into unemployment, when it came, in quite so positive a light).


    The big crisis in Lamont’s time so near to the top of the greasy pole was “Black Wednesday”, that day in September 1992 when he oversaw Britain’s withdrawal from the ERM. This was especially embarrassing for him because only weeks before he had given a categorical assurance that nothing of the kind would happen: “There are going to be no devaluations, no leaving the ERM. We are absolutely committed to the ERM. It is at the centre of our policy” (26 August 1992). Little wonder that Lamont was looking so unkempt when, on 17 September 1992, he emerged into Downing Street to face the voraciously waiting hacks. Amid the panic that day interest rates were dizzyingly raised from 10 per cent to 12 per cent and 15 per cent, then brought back to 12 per cent. The Treasury was not alone in its panic; workers who were buying their homes through a mortgage were desperately worried about how they were to afford the higher payments and whether there were more, similarly chaotic, days to come. They were probably too anxious to notice on their TV screens, as Lamont came through the door of Number 11, that he was followed by a shadowy figure, caught briefly and fuzzily by the cameras. It was his “political adviser” – David Cameron, future Leader of the Opposition, who would one day bellow his scorn at Prime Minister Brown for floundering among the multi-crises of capitalism and who would then be anxious to conceal his association with the ludicrous failure who was once his boss.

    Habitual optimists may rejoice that a new age of transparency and candour has dawned with Cameron’s confessed embarrassment at the memory of his time with Lamont. But forgetting a fretful past has been developed to a very fine art by suitably ambitious politicians. There would be, after all, an awful lot of embarrassment for them to misremember. Judge for yourself if this is likely to happen or whether they will continue to see their future as survival through concealment and deceit.

    Thursday, November 27, 2008

    “Commerce is more sovereign than the sovereign” (Karl Marx)

    From the Socialism Or Your Money Back blog

    While the Chancellor of the Exchequer was making his pre-budget announcement based on the mere hope that recovery would begin in 2010, Gordon Brown was addressing a meeting of the employers’ organisation, the CBI. If he stuck to pre-released text of his speech he said:

    “We have seen in previous recessions how a failure to take action at the start of a downturn has increased both the length and depth of the recession. That was the mistake made in the recessions of the 1980s and early 1990s. To fail to act now would be not only a failure of economic policy, but a failure of leadership” (London Times, 24 October).

    He was being rather selective in his choice of historical precedents. He forgot to mention what happened in the mid-1970s when the then Labour government did try, as his Labour government is trying today, to spend its was out of that recession – and failed. To such an extent that the Prime Minister James Callaghan had to confess to 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” (London Times, 29 September 1976).

    But Brown also forgot that an attempt was made to try the spend the way out of the 1980s recession. Not in Britain but in France, following the election as President of Labour-type reformist François Mitterrand in May 1981 and his party’s victory in the general election that followed in June. One of their election promises was to abandon the austerity approach of the previous conservative government in favour of:

    “a relaunch of economic activity by an increase in the purchasing power of the most disadvantaged and so by a relaunch of consumer goods”.

    Sound familiar?

    And this is what they did, the first measure the new government took, in June 1981, being to increase the minimum wage, pensions, family allowance and housing benefits and to announce that 200,000 new government jobs were being created. Like Alistair Darling, the Minister of the Economy and Finance hoped to be saved by an early economic recovery:

    “We are hoping to anticipate, but in a reasonable way, a recovery in the world economy”.

    The world economy’s reply was to force a devaluation of the franc within four months, in October 1981. From then on it was downhill all the way. The following June the government had to devalue the franc a second time, the Prime Minister offering the pathetic explanation:

    “the international recovery was not at the rendezvous”.

    By October 1982 the Minister of Planning was admitting:

    “We must not dream. The crisis we are going through is going to get worse”.

    The Prime Minister continued with his inanities:

    “The day will come when the recovery will be there”.

    In December the Minister of the Economy and Finance confessed:

    “It is not us who are the masters of the world. The world goes as it is, it is in the grip of forces that no one can master”.

    Then after a third (yes!) devaluation in March 1983 he declared:

    “We were banking on an economic growth of 3 percent, but the recovery didn’t come”.

    In October 1984 the number of unemployed passed the peak of 3 million (it had only been 1.7 million when Mitterrand came into office).

    This failure to shorten and lessen a slump by trying to relaunch popular spending is one of the most spectacular on record. No wonder Brown didn’t mention it.

    Brown, Darling and the others may not be around to have to make the abject confessions of failure that Mitterrand’s ministers had to make. But they will have maintained Labour’s record of every Labour government leaving office with a greater number of unemployed than when they took over.

    Adam Buick

    Putting the rant into itinerant (2008)

    From the November 2008 issue of the Socialist Standard.

    Wednesday, November 26, 2008

    Weekly Bulletin of The Socialist Party of Great Britain (74)

    Dear Friends,

    Welcome to the 74th of our weekly bulletins to keep you informed of changes at Socialist Party of Great Britain @ MySpace.

    We now have 1408 friends!

    Recent blogs:

  • The Continuing Trade Cycle
  • The taxation myth
  • Reply to the BNP
  • Coming Events:


    Public Meeting followed by Social.

    Saturday 10 January, 6pm, at SPGB Head Office, 52 Clapham High St, London SW4 (nearest tube: Clapham North).

    Quote for the week:

    'Everything in the world is purchased by labour.' Hume, 'Of Commerce,' in Political Discourses, 1752.

    Continuing luck with your MySpace adventures!

    Robert and Piers

    Socialist Party of Great Britain

    God and the Market (2008)

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

    Commenting on the current world financial crisis former 1968 student leader and now a Green MEP, Daniel Cohn Bendit, said that “the belief that the market is god is over” (Guardian, 17 September). Someone who should know more about God, the Archbishop of Canterbury, hopes this is so as he thinks that the Market has become a rival to his god.

    In an article in the Spectator (26 September) Dr Rowan Williams in effect accused “market fundamentalists” of breaking the First Commandment – “Thou shalt have no other gods before me”. He even called in Marx to back up this charge of idol worship:
    “Marx long ago observed the way in which unbridled capitalism became a kind of mythology, ascribing reality, power and agency to things that had no life in themselves; he was right about that, if about little else. And ascribing independent reality to what you have in fact made yourself is a perfect definition of what the Jewish and Christian Scriptures call idolatry.”
    Dr Williams is said to be a learned man and he is right: Marx did see capital as the product of human labour which had come to dominate those who produced it (except that he saw this as applying to capitalism in general not just to “unbridled capitalism”).

    This was in fact his whole “critique of political economy” (the subtitle of Capital), that the economic laws of capitalism were not the natural laws that Adam Smith, David Ricardo, the Rev Thomas Malthus, John Stuart Mill and the others thought but forces that came into operation only because society was organised in a particular way. Market forces were the result of human activity which had escaped from human control and which had come to dominate them as if they were a natural force.

    Dr Williams may also be aware that here Marx was applying to economics the theory that Ludwig Feuerbach had applied to religion in his 1841 The Essence of Christianity. Feuerbach argued that, far from God making man in his own image, it was the other way round. Humans made God in their image and attributed to him the powers which they collectively possessed, and then bowed down and worshipped this figment of their imagination. If humans were to realise this and take their own destiny in hand there would be no need for God or religion. So, according to Feuerbach, the Archbishop’s god was also an idol.

    The Archbishop was getting a dig at Marx in when he said he said he was right about this “if about little else”. But Marx once made a harsh comment about the Church of England, writing in the Preface to the first edition of Capital, that it would “more readily pardon an attack on 38 of its 39 articles than on 1/39 of its income”.

    It is interesting to speculate what the one article it would keep might be. At one time it would have been obvious – Article 38 that “the riches and goods of Christians are not common, as touching the right, title, and possession of the same, as certain Anabaptists do falsely boast . . .” If he keeps on reading Marx maybe the Archbishop might be prepared to abandon this one too.

    Thursday, November 20, 2008

    Weekly Bulletin of The Socialist Party of Great Britain (73)

    Dear Friends,

    Welcome to the 73rd of our weekly bulletins to keep you informed of changes at Socialist Party of Great Britain @ MySpace.

    We now have 1402 friends!

    Recent blogs:

  • Good Cap, Bad Cap
  • Why not socialism now?
  • Another Winter of Discontent?
  • Coming Events:

    Free Film night at SPGB Head Office,

    52 Clapham High St, London SW4 (nearest tube: Clapham North).

    Film starts at 4 p.m.

    Sunday 23 November: The War on Democracy

    "Have we evolved to make money?"

    Saturday, 22nd November at 6.00pm

    The Socialist Party debates with Dr.Terence Kealey (author of Sex, Science & Profits)

    Birkbeck College. (room 407), Malet Street, London. WC1, (nearest tubes: Goodge St & Russell Square)

    Quote for the week;

    "For nearly 40 years we have raised to prominence the idea of the class struggle as the immediate driving force of history, and particularly the class struggle between bourgeois and the proletariat as the great lever of the modern social revolution; ... At the founding of the International, we expressly formulated the battle cry: The emancipation of the working class must be the work of the working class itself." Marx and Engels, Strategy and Tactics of the Class Struggle (1879).

    Continuing luck with your MySpace adventures!

    Robert and Piers

    Socialist Party of Great Britain

    Wednesday, November 19, 2008

    Have we evolved to make money?



    'Have we evolved to make money?'

    Bill Martin of the Socialist Party debates with Dr.Terence Kealey (Author of Sex, Science & Profits)

    BIRKBECK COLLEGE, (Room 407)

    Malet Street, London. WC1

    (nearest tubes: Goodge St & Russell Square)

    Crisis and Inflation: Back to the Future? (2008)

    From the November 2008 issue of the Socialist Standard
    Gordon Brown claimed that he had ended the boom and bust cycle. The current economic crisis demonstrates that normal service has been resumed.
    It is one of the ironies of our times that the election of ‘New Labour’ in 1997 was meant to have left ‘Old Labour’ and everything connected with it behind. The popular perception (first outside the Labour Party and then inside it) was that Old Labour meant nationalisation, inflation, labour unrest, and a host of other negative experiences that were associated with life in the 1970s. Gordon Brown was the New Labour ‘iron chancellor’ who had left all this behind, created a low inflation environment and abolished boom and bust.

    The current economic crisis has demonstrated that normal service has been resumed. Unemployment is on the up (no Labour government has ever left office with unemployment lower than when it was elected), the financial sector is in turmoil, price rises are at their highest level in years, and state sector wage restraint means that the unions are (understandably) grumbling.

    One of the interesting things about capitalism is the way in which when the economy is booming an economic consensus of sorts has a tendency to break out. The general support for Keynesian economics that developed during the long boom of the 1950s and 60s was famously labelled ‘Butskellism’ by the Economist after Tory Chancellor Rab Butler and his Labour shadow, Hugh Gaitskell. In recent years there has been a similar consensus of opinion even if the Labour and Tory parties don’t like to admit it explicitly – it is almost as if when the economy goes well they are afraid to do anything too different, lest they upset the magic formula in the process.

    Psychological blow
    What happens when an unexpected economic crisis breaks out is that politicians, central bankers and pundits all realise that perhaps the magic formula didn’t work after all. The realisation in the 1970s that Keynesian economics didn’t really work was a psychological and philosophical blow that some never recovered from, and its replacement by something loosely called ‘monetarism’ was never entirely accepted even by those on the political right who had been most well-disposed towards it.

    After a series of crises in the 1970s was followed by the big recession of the early 1980s, and then the recession of the early 1990s, another long boom occurred and with it the latest economic consensus. There was little if any new thinking to underpin it – it was merely a pragmatic amalgam of vague aspects of ‘monetarist’ practice with some left-over bits of Keynesian theory. For the politicians and economists, these had emerged by default because they were the bits of these two theories that hadn’t been transparently discredited to the satisfaction of all concerned by the preceding crises and recessions. There is no better example of this dubious consensus than current thinking on the (interlinked) issues of inflation and interest rates.

    The persistent rises in the price level that have occurred in the UK and most of the developed world since the Second World War have exercised the minds of politicians and economists in the decades since, and various explanations have been put forward to account for it: wage increases above rises in productivity, excessive government spending, high government borrowing, the expansion of credit, and many others besides. In the 1970s and 80s a highly contentious explanation for it was advanced by Professor Milton Friedman and was adopted by the Thatcher government in the UK: the aforementioned ‘monetarism’. Loosely, this was the view that inflation is caused by an overly rapid expansion of the money supply that increases monetary demand for goods and services in the economy and pulls up prices. It was often linked or integrated with other views, such as inflation being caused by government borrowing (with government borrowing and money supply expansion allegedly being correlated).

    The problem for the Thatcher government’s monetarist anti-inflation strategy was that the main definitions of the money supply chosen for the purposes of monitoring monetary expansion were erroneously based on bank deposits. And there was no reliable way they knew of to control their expansion and contraction anyway. Ironically for a Party concerned by government borrowing levels, one method they resorted to was ‘overfunding’, described by Thatcher as when ‘the Government sought to reduce private bank deposits . . . by selling greater amounts of public debt than were required merely to finance its own deficit’ (The Downing Street Years, p.695).

    When this and other anti-inflationary tactics didn’t work, the eventual method settled upon by Thatcher and her Chancellor Nigel Lawson was to use interest rates as a policy instrument. In her memoirs, Thatcher stated that in her view ‘the only effective way to control inflation is by using interest rates to control the money supply’ (p.690) and this was one of the main reasons Thatcher and Lawson famously disagreed towards the end of her reign, because he began to use interest rates as a means of tracking the Deutschmark in the European Exchange Rate Mechanism (ERM) instead.

    Brown follows Thatcher
    It is notable that interest rates have been used as the main policy instrument for controlling inflation ever since, by the governments of Major, Blair and now Brown. This is despite the fact that as a policy it not only arose by default, but has little to practically recommend it. The theory is that when interest rates rise, people borrow less and cut their spending. But this only takes into account one aspect of what happens. Interest rates are the price of borrowing and lending money and when interest rates rise, lenders are affected just as positively as borrowers are affected negatively. A movement in interest rates changes the terms of the relationship between borrowers and lenders in an economy and can create a short term economic disturbance, but it does not affect the level of purchasing power as a whole and can have no significant and persistent effect on the price level (for example, while those with mortgages and other loans are disadvantaged by higher interest rates, those with savings, interest-bearing investments, etc gain to a similar overall extent).

    That raising interest rates cannot halt inflation – or even slow its rate of growth – has been demonstrated by a close look at economic history. During the time when Thatcher was Prime Minister the Minimum Lending Rate (as it was then called) for the banks rose from 9 per cent in 1988 to 15 per cent in 1989 yet the Retail Price Index (RPI) increased considerably across the entire period, having an average annual rate of 4.1 per cent in 1987 that had become 9.5 per cent by 1990.

    If that was considered a ‘fluke’ it has just been repeated, as the UK economy under Gordon Brown has just experienced a similar situation. Base rates reached a recent low of 3.5 per cent in mid 2003 and were progressively raised to 5.75 per cent last year. Yet throughout this time, the RPI has crept up from a recent historic low of well under 2 per cent in 2002 to around 5 per cent now, the highest it has been since Thatcher left office in 1990.

    These two examples reflect what really happens when an economy experiences price rises – which is that instead of interest rates influencing price rises it is effectively the other way around. Banks make their profits generally by lending money out at a higher rate than they borrowed it at, being concerned with the ‘real rate of interest’ after inflation is taken into account – and rates tend to rise in order to protect these banking margins (the contrary idea of the ‘credit creationists’ that banks make profits not by doing this but by effectively creating money out of nothing instead, should never have been taken seriously, and is in present circumstances beyond risible)

    The current rise in the RPI in the UK coupled with the economic crisis has led some economists to argue that capitalism is about to be gripped by the kind of ‘stagflation’ that existed in the 1970s, so called because economic stagnation coincided with rising prices. With the credit crunch biting and the financial apparatus of capitalism in turmoil, unemployment is now on the rise and growth has come to a standstill, at best.

    In the nineteenth century, when the study of economics developed seriously and Karl Marx developed his critique of it, persistent inflation (and therefore the possibility of stagflation) hadn’t occurred at all after the Napoleonic War ended. Instead, prices generally tended to rise during booms and then fall away during slumps when demand was lower, and price charts from this period show the cyclical ebbs and flows quite clearly, both in Britain and abroad. By the start of the First World War in 1914, for instance, the overall price level was almost identical to what it had been in 1850.
    This general tendency for prices to rise during times of economic prosperity and then fall back when there is economic contraction is still evident today. However, it is disguised by something that only existed episodically before the Second World War, after which it has been a permanent feature – currency inflation.

    Since the beginning of the war, the price level has risen every single year and is well over 30 times its 1938 level. The cause of this persistent rise in the price level has been an excess issue of currency (specifically currency that is no longer convertible into an underlying commodity like gold). This is because while interest rates and movements in wages and profits, etc change the distribution of purchasing power in the economy, they do not – of themselves – increase the total amount. An excess issue of notes and coins in circulation does precisely this if it is over and above the amount needed to carry on production and trade.

    An over-issue of currency injects purchasing power into the economy which is not reflective of real wealth generation; put simply, it is too much money circulating given the level of production of goods and services (and the trade associated with buying and selling them). Before this truth was lost in a fog of now discredited economic theories, inflation was routinely called ‘currency inflation’, to reflect this. And on the occasions it occurred governments could – and did – put a stop to it, like when they withdrew the then significant sum of £66 million in notes and coins from circulation in 1920, which led to a fall in the general price level of around 30 per cent, before the return to the gold standard in 1925.

    Printing presses
    In 1938 there was £442 million in notes and coins outside of the Bank of England circulating in the UK economy. Economic growth since then has averaged around two and a half per cent a year (typically going up more than this in booms and down in slumps) yet the amount of notes and coins in circulation has persistently increased far beyond what has been needed for the purposes of production and trade. Today, according to the Bank of England, notes and coins in circulation stand at £50,370 million, up from £47,800 million a year earlier, as the inflationary process that started in the late 1930s has continued apace. This is why, unlike in the nineteenth century when slumps led to overall price declines, prices have risen every single year since the war whether the economy has been in boom or slump (because while slumps have put downward pressure on prices this has always been outweighed by the effects of the ongoing currency inflation).

    It is true that for some years prices rises in the UK and other countries – while still positive and persistent – haven’t been at quite the levels seen in the 1970s, 80s and early 90s. The main reason for this appears to have been the entry into the world market of vast amounts of low cost goods produced by the massive emerging market economies of the Far East, including China. As rising productivity lowers the amount of labour time necessary to produce goods, this phenomenon is to be expected, and its scale in recent years has been colossal with massive price falls in clothing and leisure goods like electricals according to the Office for National Statistics (prices of many goods have fallen by between a quarter and a half in the last 10 years). Without this effect, overall rises in the basket of goods that comprise the RPI measurement would have been higher still, as has been evidenced by the continuing big price increases of goods not directly affected by this phenomenon, such as fares, catering and leisure services.

    What’s happened over the last couple of years is that this low-cost goods effect has started to lessen because of the world economic boom that built up, especially in commodities like oil, metals, wheat, and so on. The persistent, ongoing currency inflation plus the effects of this well-documented commodities ‘bull market’ have meant large price rises are once more a major policy concern (in the 1970s, when price rises took off and peaked at nearly 27 per cent in 1976, this again was a combination of the background effect of currency inflation with a massive bull market in commodities like oil).

    One club golfers
    Here lies a big current problem for Gordon Brown and other world leaders, and in some cases the central bankers to whom they have devolved responsibility. Unaware of the real cause of inflation, which has been lost in the mists of time, they have reached a stage – more by default than design in some respects – whereby they have only one policy instrument to deal with inflationary pressures (raising interest rates) and one main policy instrument to deal with a declining economy drowning in debt (lowering interest rates). When asked to deal with the two problems simultaneously, they have only confusion, as the two solutions they would have proposed are mutually exclusive of one another.
    In reality, such have been the problems on the money markets and the declines in the stock markets in recent weeks – and such is the evidence that the credit crunch is now having a significant effect on the real economy – they have belatedly decided to lower central bank base rates as the lesser of the two evils.

    What is germane to this is that in the nineteenth century, Marx wrote that while the market economy’s periodic crises and convulsions cannot be eradicated through government policy, there are occasions when it can make matters worse (he cited, in particular, the 1844 Bank Act which kept interest rates abnormally high). This is in some respects the history of recent times too, as after the credit crunch began last summer base rates have been higher than they might have been because of the view of governments and central bankers that high rates were needed to stave off inflationary pressures.

    During any slump, interest rates tend to fall away from their peak reached at the end of the boom as the demand for money capital eases, this being one of the many conditions for an eventual improvement in production and trade, but on this occasion it has been slow happening (especially given the severity of the housing bust and the associated financial crisis). The irony now is that such is the magnitude of this crisis, with a major bank filing for bankruptcy or being rescued almost literally every week (Bear Stearns, Lehman Brothers, Wachovia, Fortis, Bradford and Bingley, HBOS, the entire Icelandic banking system, etc) that wherever central banks decide to pitch base rates, these are being effectively ignored by the banking system as a whole, where the key London Inter-Bank Offered Rate (‘Libor’) is still nearly two per cent above base rates with the credit markets locked into a state of fear-driven paralysis.

    The severity of the current crisis, with big falls in demand in the economy and increasing unemployment, may well lead to pressure on retail prices easing somewhat despite the government’s continuing recourse to the printing presses. But whether this happens or not, there is a sense of real danger and panic in the market economy at the moment as the lubrication that keeps the capitalist machine running – the money markets – are dysfunctional.

    So, with inflation concerns (and no clue how to handle them), the effects of a recent oil price spike, stock market crashes, soaring unemployment, the most significant financial crisis in most people’s lifetimes, and the return of nationalisation as a means of propping-up failing businesses, it is certainly a case of ‘back to the future’ for Britain’s Labour government.

    Most market commentators don’t know whether the most appropriate comparison is with the 1930s slump after the Wall Street Crash or the 1973-4 UK secondary banking crisis and bear market which followed the ‘Barber Boom’ and housing bubble. While capitalism never repeats its history precisely, it may be an especially severe dose of the latter rather than the former . . . nevertheless, given the general panic and helplessness of recent weeks, you wouldn’t want to bet your Collateralised Debt Obligations on it.
    Dave Perrin

    Sunday, November 16, 2008

    The New Offices. (1923)

    From the December 1923 issue of the Socialist Standard

    "No, Jack! I shall not join just yet. Your Party is right, your position sound, and your arguments conclusive. I admit all that, but I don't think the time is ripe. When that time comes, Jack, 'You may count on me.”

    "And when do you think the time will be ripe, as you call it?"

    "I haven't a ghost of a notion. But I'd like to see the workers wake up a bit , first. I'd like to see your Party bigger, more active, you know what I mean - more prominent.”

    "So would I, friend. But apparently you have not seen our new headquarters, I can hear."

    "New headquarters? I -"

    "Listen! It is neither a pretentious, nor a massive building. We are not building it for posterity; we shall not need it long. Immediately to the right of the entrance hall, there is a book saloon wherein any work helpful to the furtherance of Socialism may be procured or consulted. Most of the leading periodicals are represented on the reading stands. To the left are the editorial offices, where the three official journals and numbers of pamphlets are produced"

    "Three official journals? I –“

    "Wait a minute. There is the Socialist Standard, now enlarged to forty pages, still appearing monthly and having all the characteristics of a first-class political review. There is the Socialist Tribune, a weekly summary of a more topical character. It focuses the reader's attention upon events whilst they are still current, and picks out the thread of history whilst it is being made. The Socialist News appears daily, and, I say it without boasting, is unique in the world's journalism. Not an advertisement appears in it. It is thus entirely free from subsidised matter, and is independent of any attempt at a capitalist boycott. It is smaller in size than the usual capitalist rag, but it is all meat. Its editorial and contributory staffs are well grounded in Marxian economics and their historical application. Its daily articles are the despair of the few remaining capitalist sheets, for the latter's long reliance upon reiterated lies and mass suggestion has broken down in face of hard economic facts. You cannot convince a man who is going down for the third time that he is not drowning by bawling through a megaphone fifteen times that all is for the best. And the workers were no longer convinced that capitalism was the only possible system, when they remembered the hard times before the war, the little glimpse of better times during the war's progress, and the return to bad times again afterwards. But I am digressing. There is a dispatch department at the back, and that about completes the ground floor. Upstairs there are writing rooms, studies, classrooms and committee rooms. There is a good-sized hall for lectures and public meetings, and there is even an information bureau, where anyone with a difficulty may seek Socialist 'counsel's opinion'. The most interesting perhaps are the organiser's room, where information, facts and figures are compiled for the use of our staff of speakers and propagandists. There are other details you would find interesting, and even stimulating, but I think I have said enough to set you wondering."

    "You have, Jack! I have been wondering where these premises are situated."

    "There now! If you, a convinced Socialist, were only in the movement, you would know as much as I about it."

    "Yes! But tell me, Jack, where are these new headquarters?"

    "Well! At the moment, they are in my mind's eye. All we are waiting for is for you, and many others like you, to leave off waiting for the time to be ripe, and to come and help ripen it. We shall get our new offices and our new journals, when we get the funds. We shall get the funds when we get the members. We shall get the members when you leave off waiting, as I said just now, and start working. Then will follow, not merely new offices and journals, but, greater than all else, a new social system -Socialism. Join up!"
    W.T. Hopley

    Saturday, November 15, 2008

    Good Cap, Bad Cap (2008)

    From the November 2008 issue of the Socialist Standard
    The credit crisis has tarnished the image of capitalism but its defenders may help it live on by pinning all of the blame on financiers.
    Investment bankers have gone in the past few months from being the “masters of the universe” to the object of universal scorn. Across the political spectrum in the United States, particularly at the fraying ends of its two main political parties, criticism of Wall Street can be heard. Even McCain and Obama – whose presidential campaigns have been generously funded by Wall Street – have had to make half-hearted statements about how “greed is, um, bad.”

    This criticism is richly deserved, of course, but many of the harshest critics of speculators are fond of capitalism itself and take a rather benevolent view towards other types of capitalists. Greedy bankers and stockbrokers are lambasted, but in the next breath the capitalists involved in the actual production and sale of commodities are portrayed as unfortunate victims of the credit crisis. This one-sided criticism suits the capitalist class as a whole just fine.

    Now that capitalists themselves are at least exposing some of the high crimes and low comedy connected to their own financial system, and so much popular attention is focused on the role of money capitalists, it seems particularly necessary for us to attack the false notion that there are “good” and “bad” capitalists; and that crisis could be avoided and capitalism perfected if the bad ones could be kept under control or swept away.

    Den of thieves
    This idea that bankers – particularly investment bankers – are any worse than other types of capitalists is not convincing to anyone aware that the revenue of all capitalists flows from same source: the exploitation of labour. The dirty little secret of capitalism is that the capitalist class as a whole, and all of the individual capitalists, enrich themselves thanks to workers adding more new value to the commodities they produce than the value of the wages received as payment for their labour-power.

    Any party to this exploitation of labour – whether the capitalist who advances the investment funds, the capitalist who supervises the commodity production process, or the capitalist who is tasked with selling the commodities – is entitled to a piece of the action and merits an equal share of the blame. It is nonsense to argue that one type of capitalist is more or less culpable than the others.

    The relations between capitalists are very much like those between a group of thieves, who cooperate to pull off a heist and then divide the loot among themselves. Conflicts easily arise from such an arrangement: as a bigger share for one means a smaller share for the others. Such squabbles, however, are of little concern to the person who has been robbed. Likewise, for workers, divisions within the capitalist class should be of secondary interest to the more fundamental conflict between the exploiters and the exploited.

    Yet we need to do more than simply prove that the idea of “good” and “bad” capitalists is wrong: it is also necessary to explain how this false ideology has a basis in reality that makes it seem plausible to many. That basis, as just touched on, is the antagonism that actually exists between different types of capitalists with regard to how surplus-value is divided between them. This fosters the notion that fundamental differences exist between capitalists and that some are more deserving of their revenue – an impression that is further deepened by the fact that revenue takes different forms that appear to be independent of each other.

    This means that we can better understand why money capitalists and industrial capitalists tend to be viewed differently by examining the division of surplus-value between them and the specific forms of their revenue. Marx does this in Volume 3 of Capital, where he examines “interest” and “profit of “enterprise” – the former being the revenue that the money capitalist is entitled for loaning capital to the industrial capitalist, while the latter is the profit the industrial capitalist receives after paying that interest to the money-capitalist.

    Marx’s discussion of “interest” and “profit of enterprise” is not directly related to the economic activities of the now-disgraced stockbrokers, as they have made money in more imaginative ways than simply earning interest, yet his observations reveal why it is so easy for bankers to be cast in the role of villains, while those capitalists owning actual means of production appear in a more favourable light.

    Magical money
    We can begin by looking at interest – or “interest-bearing capital,” to be more exact. The loaning of money to function as capital is the first step in the overall circuit of capital, M–C– M´; and that money (M) is then used to purchase the labour-power and materials of production needed to produce commodities (C), which embody more value than the value of those inputs, making it possible to sell them for a greater sum of money (M´) than initially invested. Part of this surplus in value generated through production is paid to the money capitalist in the form of interest.

    With the form of “interest-bearing capital,” however, we only the two extremes of the circuit above, or: M–M´. In other words, nothing more than the money capitalist loaning out money that returns eventually in a greater amount. Money seems to have the magical power to breed more money. Overlooked is the intervening process of production, which is the actual source of the interest earned. As long as interest successfully flows back to the money capitalist, whatever happens between M and M´ is a matter of indifference. It thus appears at first glance – to this capitalist and others – that profits can emerge regardless of production.

    This illusion is reinforced by the fact that individual money owners can indeed loan money for non-productive uses. Everyone knows, for instance, that credit card companies make huge profits by charging ordinary “consumers” usurious interest rates. Yet that freedom to direct money towards non-productive sectors, or to engage in speculation on fictitious forms of capital, only holds true for individual capitalists. If a large portion of the industrial capitalists were to withdraw from production, so as to become money capitalists, the ultimate source of profit would quickly dry up and the rate of interest would plummet.

    Nevertheless, if we view the capitalist world from the perspective of the individual interest-bearing capital, it seems that profits can materialize out of thin air, without actual production. Marx thus calls interest-bearing capital the “most superficial and fetishized form” of the capital relationship, where capital “appears as a mysterious and self-creating source of interest, of its own increase.” Instead of appearing to be one part of the total surplus-value, interest seems to arise from an inherent property of capital itself, so that any owner of it is entitled to interest.

    With interest, we are one step removed from the actual process of production; and from the exploitation of labour that occurs within that process. This fact is at the root of the tendency for people to view money capitalists – and for them to view themselves – as inhabiting in a rarefied world where it is not necessary to get one’s hands dirty. The money capitalists who engage in this mysterious process, whereby money is able to breed more money, both dazzle and disgust those who must earn a living in more pedestrian ways.

    Capitalist workers?
    If the interest that the money capitalists earns seems to spring out of thin air, the industrial capitalists, in contrast, seem to earn their profits from the sweat of their brow. Their “profit of enterprise” – which is what remains after they pay money capitalists interest – appears to be the fruit of functioning capital, rather than the fruit of owning capital. Just as there is an abstraction from the actual production (= exploitation) process in the case of interest-bearing capital, in the case of profit of enterprise the production process is separated from capital itself, so that it appears merely to be labour process. Profit seems to accrue to industrial capitalists as payment for a useful function performed in that labour process.

    There is in fact an important role played by the industrial capitalist, and that is to ensure that the production process is carried out in a manner that facilitates the greatest extraction of surplus-value from workers. Not exactly a noble calling, but exceedingly necessary under the class-divided capitalist system. The profit of the industrial capitalist thus seems to be a “wage” received for this supervision of labour. It appears, as Marx wittily put it, that the “labour of exploiting and the labour exploited are identical, both being labour.” If the former receives far better wages for that labour, it is said to be compensation for its more “complex” character.

    This false impression that the industrial capitalist is a sort of worker seems plausible because the act of supervision, necessary in any class-divided society, is confused with the coordination function necessary when numerous workers engage in production together. We need to distinguish between the supervision needed to extract surplus-value from wage-slaves, and the coordination necessary in the case of combined or social labour. In the latter case, the workers themselves can quite easily work things out for themselves and determine the most appropriate way to combine their labour – there is no need for the menacing supervisor. Under capitalism, however, there is a blurring of the two functions, so that it seems as if capitalists (or whoever is hired by them to supervise workers) are performing a necessary function that is intrinsic to the labour process itself.

    The fact that industrial capitalists play an active role in the production process, however reactionary it may be in fact, provides a basis for the claim that they are preferable to the money capitalists who do nothing more than provide the investment. Yet even in the case of the industrial capitalists, who are disguised as wage-workers, the labour process is simply a means to an end. It is only because that process is the direct source of their profits that industrial capitalists take such a keen interest in it.

    The real task
    Strange things occur when surplus-value is divided up among different types of capitalists, taking the form of different types of revenue. It seems that each form exists independently and has a separate origin – with none of them traceable to the exploitation of labour. With this quantitative division of surplus-value, as Marx notes, “it is forgotten that both [interest and profit of enterprise] are simply parts of surplus-value and that such a division can in no way change its nature, its origin, and its conditions of existence.”

    The theory of surplus-value brings to light the connections that actually exist between capitalists, by revealing the ultimate source of capitalist wealth, but that theory itself can be hard to grasp precisely because of the existence of those different revenue forms. Once we take those forms as fixed premises, without considering their origin, it seems natural to judge some capitalists more harshly or kindly than others.

    If workers end up concentrating narrowly on the antagonisms between capitalists, it becomes harder to see the more fundamental conflict between wage-labour and capital; and harder to see the real solution to the problems faced. Here we have the old “divide and conquer” approach with a new twist: instead of dividing the working class, the internal divisions of the capitalist class are emphasized to deflect attention from the class divide.

    The criticism of Wall Street today that is being voiced by defenders of capitalism is one example of that divide-and-confuse method in action. The current crisis is framed in terms of “Wall Street vs. Main Street” or “the financial world vs. the real economy” – never as a manifestation of the contradictions of class-divided capitalism. With so many criticizing the financial world, while singing the praises of good old commodity production and the capitalists in charge of it, we need to remind ourselves that the production process under capitalism is a process of labour exploitation, a means of generating profits for capitalists.

    The task for socialists is not to drive out speculators from capitalism, so as to somehow perfect the system, but to move beyond a world where production is merely a means of capital accumulation. So yes – by all means – let’s chomp down hard on the middle finger Wall Street has been pointing at us all these years, but we should also keep an eye on the hand that robs workers every day on the job.
    Michael Schauerte