Bottom of the heap (2010)

Book Review from the August 2010 issue of the Socialist Standard

Chinese Whispers. Hsiao-Hung Pai (Penguin Books)

The changes in Chinese capitalism over the last few decades – privatisation, sackings, factories producing for multinational companies – have led to vast numbers of workers moving to the biggest cities in search of work. Many have also felt they had little choice but to try their luck abroad, if only to earn enough to pay for their children’s education. It is these, usually undocumented and ‘illegal’ migrant workers, numbering perhaps 200,000 in the UK, whose story is told in this revealing book.

Most Chinese workers who move to Britain in search of work borrow money to pay the ‘snakeheads’ who smuggle them here. They also have to pay the gang-masters who find jobs for them (and if they are sacked or leave their jobs, they have to pay again to get another). Pai, a journalist who sometimes went underground as a pretend undocumented worker herself to gather information, shows the kind of work they do and the conditions in which they labour.

From assembling Samsung microwaves in Hartlepool to chopping up pork in Suffolk, from picking vegetables in Selsey to washing up in London’s Chinatown, they do the hardest and dirtiest jobs, with little if any training and no health and safety instruction. Typical wages may be £3.20 an hour, well below the legal minimum wage and further below what British workers doing similar work might earn. The hours are long, there are no paid holidays, and there may be compulsory and unpaid overtime when more output is wanted. Pai even manages to speak to some of the three thousand or so undocumented Chinese women who work in the sex trade.

Being undocumented, the workers have no access to health care or the few protections that capitalist laws provide. Nor can they join a trade union. Most speak little English, which further limits their links to anyone who might help them and opens them to even worse exploitation. They are, however, sometimes able to strike up a camaraderie with other migrant workers, such as Ukrainians.

The British government has occasionally cracked down on illegal workers and those who employ them, but this just makes the workers’ position even more precarious. Policies on asylum seekers and those denied refugee status contribute to the existence of an army of people desperate for any job they can get. British capitalism makes the most of their cheap and flexible labour power, but even that may not be enough to keep the factories here. In 2005 some of the Hartlepool factories relocated to Slovakia for access to even cheaper labour power. And no wonder many Chinese employers in Britain support the Chinese government’s policies which give rise to all these migrant workers.

Pai’s book gives a vivid picture of those at the very bottom of capitalism’s heap, and also fills in some of the background in terms of the global nature of production and of the sourcing of labour power under capitalism.

Paul Bennett

Cooking the Books: Economic soothsaying (2010)

The Cooking the Books column from the August 2010 issue of the Socialist Standard

One bit of window-dressing George Osborne did on taking over as Chancellor was to set up a supposedly independent “Office for Budget Responsibility” (OBR) to calculate by how much the economy can be expected to grow, for the government to take into account when drawing up its budget.

Economic forecasting is no more reliable than the weather forecast. It is based on assumptions derived from past experiences and only “forecasts” what is likely to happen, not what will happen. Thus, when, on the budget, the OBR forecast that the economy (GDP) will grow by 2.3 percent in 2011 all they are really saying is that it is more likely than not that something like this will happen. Other economic soothsayers are saying that 2.3 percent is over-optimistic. The Business Secretary, Vince Cable, is saying that there is a one in four chance of a double-dip recession (London Times, 9 July), i.e., of the economy shrinking next year. Basically, it’s just guesswork.

The OBR prediction of growth next year is based on the key assumption that business investment will recover:

“Business investment is forecast to pick up during 2010, though in the year as a whole by only 1½ per cent. The recovery is maintained in 2011, although it takes until 2013 before investment returns to its pre-recession peak . . . The measures to reform corporation tax, which are estimated to reduce the cost of capital faced by firms by about 3 per cent, should have a positive effect on investment . .. Business investment also strengthens as resources released from the government sector flow into the private sector.”

They are right to see any growth as arising from a revival of business investment since capital accumulation is what drives the capitalist economy. But that business investment will resume just because government spending is reduced is an ideological assumption; which is shared by the new government (so much for the independence of the OBR). As the London Times (23 June) put it, that the economy will grow next year “derives from Osborne’s belief that public spending has been ‘crowding out private endeavour’ and is a big economic judgment.”

The theory is that, as taxes on profits are being reduced, capitalist firms will invest more. But it is by no means as simple as that. If businesses judge there is no prospect of making a profit from expanding production they won’t do it. They will simply hoard their extra profits and build up cash mountains. There are plenty of examples of this happening in the past. Japan’s decade of stagnation in the 1990s, for example. You can bring a horse to water but you can’t make it drink.

Long-term predictions are even less reliable. Even so, the OBR has indulged in this, predicting (and we record the figures for future reference) that in 2012 growth will be 2.8 percent, in 2013 2.9 percent, and 2.7 percent in 2014 and 2015. This is not worth the paper it’s written on. It’s like the Met Office predicting a barbecue summer in two years time. After all, no economic soothsayer predicted in 2004 that in 2009 GDP would fall by 4.9 percent. They didn’t in 2005, or 2006, or 2007, either.

The fact is that the way the capitalist economy is going to go is unpredictable. Governments can only navigate by sight within it, reacting to what it throws up.

NHS: short-term prescriptions (2010)

From the August 2010 issue of the Socialist Standard

For Tories, liberty means the freedom first and foremost to make money.

The new Tory government has been quick to establish its credentials in the cause of liberty – first, we had the Free Schools, as opposed to the Tyranny Schools that previously existed, ground under heel by the dark forces of elected councillors. Now, we have the liberation of general practitioner doctors in the NHS, with commissioning of treatment and budgeting being handed to them, rather than the dark forces of professional bureaucracy. It is now to be composed of independent and competing hospitals and services working in an internal market, with the state playing the role of merely being an insurance provider that provides the ultimate source of funds.

As many critics have been quick to point out, doctors have spent years training in medicine, and not public administration, and so it is more than likely that in fact their liberation from public bureaucracy will take the form of hiring the services of private bureaucracies to run their funds for them. Indeed, the despicable bureaucrats who will be run out of state employment will probably find themselves being re-hired as shiny and virtuous bureaucrats by the private companies that will provide GP consortia with administrative capacities.

Profitable opportunities
The amount of economic activity in the NHS is immense, and the opportunity to turn that into profitable activity for private capitalists – especially in straightened economic times – is as alluring as an oasis to a thirsty desert traveller. For Tories, liberty means the freedom first and foremost to make money. They regard economic activity taken on by the state as ‘crowding out’ the private sector, a private sector they think is inevitably more efficient and cost effective than government bureaucracy. Of course, part of that ‘effectiveness’ would require hospitals, etc., to go bankrupt if they don’t manage their budget effectively. It would also mean that different management teams would have to be able to take over weaker organisations. This creates its own chaos and inefficiency; and it may not be possible to fully replicate a market within the NHS, because mergers to achieve economies of scale would simply see a return to one large provider – this time in private rather than state hands, which would be politically difficult.

The new NHS organisations will try and save money, and that will mostly come from the terms and conditions of their staff – sweating them, as Marx termed it: providing a service at the same or less cost as before overall, but making their profit out of paying their staff less. Outsourcing NHS administration means breaking up the national pay bargaining mechanisms. Each hospital will be an independent employer, free to negotiate its own terms with staff. Some staff will inevitably do very well out of this, and the Tories would see that as ‘rewarding excellence’ – although, in reality, often enough it will mean merely rewarding those who are in a lucky enough market position to bargain up their position. As has been seen with the banking crisis, monetary incentives aren’t sufficient to obtain good management.

Under trade union law, because they will be separate employers, it will mean that strikes across the sector will be illegal, and union power may be weakened. The example though, of the railways, where nationally solid unions were able to pick off fragmented employers may haunt the nightmares of the new government, and may be part of the reason why there is talk of further restrictions on the right to strike, by setting further conditions – such as requiring a majority of those eligible to vote, rather than simply of those voting, before a strike ballot is valid. Clearly, their love of liberty does not extend to the liberty of workers to organise to defend and advance their bargaining power in the market place.

We have the examples of other attempts to use this model of the state as a commissioning buyer. The Private Finance Initiative (PFI) was used extensively under Labour to fund public projects, for much the same reason. The problem with this is that it means the state has to behave like a private business person, rather than as a taxing power in the land. It becomes bound by its contracts, and as Private Eye has been pointing out for years, PFI contracts are locked-in spending, which cannot be altered in the same way as directly run activities can be. Providers have penalty clauses or the option of suing should the government try and reduce their payments. This means that the current round of cuts will have to come disproportionately from the directly administered part of the state sector.

Tax or borrow?
Those cuts themselves derive from the fact that over the years it has been easier to pay for state spending by borrowing from private capitalists rather than taxing them. Borrowing by the government increases capital’s revenue whereas taxing reduces it overall. The power relation is also different, with interest rates going up if lenders are not happy with a government’s policies providing a powerful tool for disciplining the state. What this means in practice is that far from the division between Labour and Tories being one of public versus private provision, but about different capitalists who gain their revenue via state or private capitalism.

Those elements of the state, such as health, education, social benefits that represent an insurance function could also be provided by the private sector. Health costs have to be paid for by someone. Unemployment must be paid for somehow. This is demonstrated in the United States, where the Obama administration has created compulsory health insurance (much as in the UK compulsory motor insurance pays for medical costs arising from traffic accidents, which are not covered by general NHS spending). Compulsory insurance is a tax by any other name, except it must be paid to competing private insurers who will ensure they make their profit from it. Of course, once the NHS has been transformed into an internal commissioning market, it would only be a small step for the government to transfer to a US style compulsory insurance scheme, and cut the state’s role down to providing a subsidy for those who cannot afford insurance. The same end result occurs as now, except that the formal ‘liberty’ and ‘responsibility’ of buying insurance care moves from the state to individual. The difference is more ideological than practical, saving that with private insurers there is profit to be made.

Of course, the NHS has always had a massive private element – staff in certain sectors have been able to accrue large wage packets from the NHS labour market; pharmaceutical companies and other providers have always been paid through the market. Doubtless, though, a huge campaign to ‘Save the NHS’ will emerge, lead by such unions as Unison which remain committed to keeping a large public sector.

Ultimately, whatever way it works out in the wash, the provision of health and social insurance within capitalism depends on the capacity of the workers as a class to wring payment out of the owners of the world. So long as the wages system exists the fight is on to secure the means of living, no matter how the owners squabble among themselves about how to pay us our due.

Pik Smeet