Banking Reform: is it relevant? (2011)

From the October 2011 issue of the Socialist Standard

Banking reforms are never going to stop capitalist crises.

Last month the Independent Commission on Banking, chaired by Sir John Vickers, published its final report. As expected, it recommended that banks should separate their ordinary High Street activities from their more risky (and more profitable) investment banking (their dealings in derivatives, securitised loans, etc). The aim is to avoid a future bail-out of the whole of a bank in the event of another banking crisis like that of 2007-8. If this happened again a bank’s investment arm would be allowed to sink or swim while the proposed requirement for extra capital reserves for the High Street arm should be enough to allow it to weather the storm.

The banks are up in arms and have been lobbying strongly against any such reform because it will hit profits for their shareholders, first, by tying up more of their capital and accumulated profits in reserves and second, by constraining their investment banking activities, since without the prospect of an eventual government bail-out they will become more risky and so more costly to fund. It remains to be seen how successful this lobbying will be, but the government has said it will accept the Commission’s recommendations and implement them sooner or later, if later rather than sooner.

Should we as workers care either way? In a word, no. This is an internal problem for the capitalist class, a fight between two of its factions. The non-banking faction is annoyed at having to pay for what it regards as the irresponsible activity of the banks which contributed to making the 2007-8 crisis worse than it would otherwise have been. They don’t want to be put in this position again and have been exploiting people’s dislike of banks to gain their support for moves towards more bank regulation.

People don’t like banks because they perceive them as parasitic on real activity. Indeed they are, but they are still essential to capitalism. Whereas, the role of industry is to profit by investing money in production, the role of banks is to lend industry that money and, in return, receive a share of its profit in the form of interest. Since profit is derived from the unpaid labour of those who work, banks are parasites on parasites.

But don’t banks lend to individual workers as well as to businesses? Yes, they lend workers money to buy a house or a car or some other big expenditure which couldn’t be paid out of monthly wages or salaries. Banks naturally charge interest on these loans but calculate that in time they will get both the interest and the loan back out of the future wages of the borrower. So, to this extent, worker-borrowers are affected by the level of interest rates.

Does this mean that low interest rates could be said to be in the interests of the working class? It’s not as simple as that because other workers are savers and prefer high interest rates. Some populist demagogues (such as reform-dangling Trotskyists) propose low interest rates for borrowers and high interest rates for savers. At the time of the Northern Rock crisis Militant said that they had “always demanded nationalisation, but on the basis of safeguarding all jobs as well as giving favourable deals to ordinary depositors and mortgage holders” (The Socialist, 19 February 2008.) But it’s not possible to pay depositors a higher interest rate than that offered to borrowers, as banks (and building societies) get their principal income from the difference between the rate they pay depositors and the rate they charge borrowers.

In any event, this is an academic issue since interest rates are not fixed to benefit workers and there is nothing workers can do to influence them.

How banks work
The Report does provide an insight into how banks work. There’s no nonsense here about banks being able to make loans out of thin air by a mere keyboard stroke. Banks are recognised as “financial intermediaries” whose role is to “bring together savers and borrowers”. Banks of course do other things as well (such as deal in derivatives and securities, and underwrite share issues). The Report proposes to “ring-fence” a bank’s “core economic function of intermediating between depositors and loans” from these other activities. It proposes that only what it calls “ring-fenced banks” (which will include building societies) should be able to take deposits from and provide overdrafts to individuals and small and medium-sized businesses (fewer than 250 employees). If they choose, they will also be able to accept deposits from bigger but non-financial businesses and make loans to them. Non-ring-fenced banks will not be able to take deposits from or make loans to individuals or small businesses, but they will be able to do everything else they have been doing until now.

The clear assumption throughout the Report is that a bank’s loans are financed out of its deposits. Ring-fenced banks will, however, be able to borrow money from the money market in a limited way to cover a short-term need to make payments. Here, the Report makes a reference to the famous (or notorious) cash reserve which banks have to keep to deal with withdrawals, and which forms the basis of so-called “fractional reserve banking”. The reserve is not very high now (about 2-3 percent) and doesn’t all have to be kept in cash; part may be held as very liquid assets (i.e. assets that can be converted more or less instantly into cash). “Within a bank”, says the Report, “the treasury function maintains an appropriately sized pool of liquid assets so that it can be confident of meeting its obligations to pay out depositors and other creditors”. The rest of what is deposited with the bank it can lend out (if it can find enough suitable borrowers).

This aspect of banking (which applies equally to building societies, credit unions and savings clubs) has given rise to all sorts of misunderstandings and confusions. Some even believe it to mean that when a bank receives a cash deposit it can immediately make a loan of many times the amount. As stated, the Report doesn’t give any credence to this sort of nonsense. It simply takes it for granted that banks make loans out of deposits.

The Report does propose a new capital ratio requirement. This is the ratio of a bank’s own capital to its assets (loans) and is not the same as the cash reserve requirement. The Report suggests that this should be “at least 10 percent of risk-weighted assets”. This would not normally restrict the amount a bank can lend, nor is it intended to. The money to build up its capital to the required level would not come from depositors but from the bank’s profits or from a share issue. Similarly, a ratio in excess of 10 percent would not mean that the bank would lend more. The Report sees this as increasing a bank’s “loss-absorbing capacity, and is trying to ensure that banks have enough capital and accumulated profit to sustain a potential big loss.

The Report does not go the whole hog and propose a complete separation of “ring-fenced banks,” as was done in America from the 1930s till 1991. Lloyds, HSBC, Barclays, etc can continue to exist as universal banks, but they will have to take legal steps to “ring-fence” their lending and deposit-taking to and from individuals and small businesses, and so separate them from their investment activities. No doubt the banks are already thinking up ways to get round this and, when the present crisis is history, to launch a campaign for de-regulation.

One thing that the banking reform will not do is to stop another economic and financial crisis, as some politicians are suggesting. We hold no brief for the banks but they did not cause the present slump. This was caused by capitalism’s tendency to overproduce for particular markets in a boom, not by monetary policy or institutional arrangements, even if they were an exacerbating factor. So, no banking reform is not going to eliminate the boom/slump cycle that is built-in to capitalism.

Adam Buick

Editorial: Libya: job done? (2011)

Editorial from the October 2011 issue of the Socialist Standard

The ‘Arab Spring’ flowered in Libya in February of this year. A series of protests against living conditions, then against the government, quickly escalated into a civil war aimed at removing the dictator Muammar Gaddafi. On 19 March, the British government, with its American and French partners, launched a bombing campaign, ostensibly to ‘protect citizens’ from Gaddafi’s troops. Just six months later, on 15 September, the French president, Nicolas Sarkozy, and the British prime minister, David Cameron, landed in the Libyan capital, Tripoli, to declare, in effect, ‘job done’.

But what job is being done? If you’re gullible enough to believe the rhetoric of politicians, then Western intervention in Libya was all about protecting citizens from dictators and helping revolutionaries establish democracy. But the real reason for Nato’s concern is quite obvious. The real reason is oil.

You needn’t take socialists’ word for it. Mustafa Abdul Jalil, a former Gaddafi henchman and now chairman of the National Transitional Council, was anxious to assure Cameron and Sarkozy of the intentions of the new regime: “The supportive role of France and Britain will have a future influence. Until now we have signed no [oil] contracts and we will honour all previous contracts. But our friends will have a premier role according to their efforts in supporting Libya,” he said (Financial Times, 15 September).

Indeed, it’s so blindingly obvious that the Western intervention in Libya was about oil that it is instructive to watch commentators who are obliged, for ideological reasons, to deny it.

George Friedman of Stratfor.com, for example, in one of his regular email reports (30 August), said that he “sympathised” with those who thought the war must be about oil and tried to find “a deep conspiracy” to explain it. But Friedman dismisses the “theory” for the simple reason that Gaddafi “loved selling oil”, that he would simply change the arrangements about oil if pressure was brought to bear because he “was as cynical as they come”, and it was therefore “not necessary to actually go to war to get whatever concessions were wanted”. Friedman then concludes that the official explanation is therefore “the only rational one”.

It’s a daft argument. Friedman is dismissing a silly theory no one believes in – that there was a “deep conspiracy” to start a war to steal Gaddafi’s oil – in order to discredit and dismiss a different theory which is obviously true, but socialist, and hence to be suppressed – the theory, namely, that all capitalist economies have a vital strategic interest in guaranteeing their supplies of raw materials, most crucially oil, and that therefore those countries’ states pursue foreign policies with such interests in mind. Formerly, that meant installing and arming the dictatorships the Arab Spring rose up to overthrow. Since the Arab Spring, it has meant scrambling to come up with some other way of installing or supporting regimes that will be subservient to Western capitalist interests.

And it is in this sense that, for now at any rate, the Nato intervention seems to be going so well. For a relatively low cost, and with relatively few Western casualties, Britain, France and America looks like it has got rid of a tyrant they had struggled to control for decades, staged a brilliant PR exercise supporting a democratic revolution in the Middle East, and are about to help install a regime friendly to its vital strategic oil interests in a country with the largest oil reserves in Africa. Job done indeed.

Media moguls and tabloid hacks are old news (2011)

From the September 2011 issue of the Socialist Standard

Tabloids and ruthless reporters pre-date Murdoch’s era by many decades.

Rupert Murdoch and his sleazy crew of phone-hacking journalists are easy to hate. But even if Murdoch’s media empire crumbles, other media moguls and conglomerates will simply pick up the broken pieces. And tabloid reporters will continue to write titillating stories about celebrities and crime with or without recourse to phone hacking. Murdoch, of course, is hardly the first to build up a newspaper empire. One way to put the current scandal in some historical perspective, is to watch two classic Hollywood movies: Citizen Kane (1941) and Ace in the Hole (1951).

A Pre-Murdoch Mogul

In his film Citizen Kane, Orson Welles plays the role of newspaper owner Charles Foster Kane, who he models on the real-life tycoon William Randolph Hearst. The media empire that Hearst built, beginning in the late 19th century, bears more than a superficial resemblance to the present-day empire of Murdoch.

In the film we see the obscene amount of wealth and power concentrated in the hands of Kane and how he uses his network of newspapers to influence public opinion and politics, to the point of not only cheerleading for war (as Murdoch has often done) but even furnishing a casus belli for the Spanish-American War. Kane tells a correspondent, “You provide the prose poems, I’ll provide the war.”

Even the meddling of newspaper tycoons in politics seems, if anything, worse in the Hearst era as depicted in the film – or at least more blatant. Kane uses his newspapers to build up an image of himself as the people’s crusader, and then to launch his own political career, taking on the corrupt politician, Jim Gettys, in the gubernatorial election. His opponent is no chump when it comes to using the press either and beats Kane in the election by exposing his adulterous affair.

For all of its insights into the brutal reality of journalism, the film may give the profession more credit than it deserves. At times Welles seems to imply that Kane’s tragedy stems from his veering away from the muckraking journalism of his early years when he even exposed economic scandals that touched on his own business interests.

There is an interesting early scene in the movie where Kane, admitting that as a capitalist owner he is just another scoundrel, says his duty as a newspaperman is, “to see to it that decent hardworking people in this community aren’t robbed blind by a pack of money-mad pirates just because they haven’t anybody to look after their interests.” Kane thinks that the fact he has “money and property” makes it possible for him to play this role. And it is hard to tell whether Welles as director thinks that Kane could have looked after the interests of hardworking people, or whether he recognizes the absurdity of a man with “money and property” defending the interests of those who lack both.

Kane may not in fact be as split in two between good journalist and bad capitalist as he claims, for in the same scene he adds, “If I don’t look after the interests of the underprivileged maybe somebody else will, maybe someone without money and property.” This seems to imply that the split between Kane the stockowner and Kane the journalist corresponds to the difference between his narrow interests as an individual capitalist and his broader interests as member of the capitalist class—two different shades of greed. If this is a point Welles was trying to make, he was a bit too subtle for his own good.

Ironically, the campaign Hearst led to suppress Citizen Kane did more to expose the newspaper tycoon’s obscene influence on society than the film itself. Hearst did not succeed in physically destroying Welles’ film as he had tried to do, but he did use the full power of his newspapers and columnists to coerce movie theatres not to screen it.

A Wilder View of Things

The 1951 film Ace in the Hole, written and directed by Billy Wilder, centres on a character far lower on the journalistic food chain, the newspaper reporter Chuck Tatum (Kirk Douglas).

The film opens with Tatum arriving in Albuquerque, New Mexico and begging his way onto the staff of a local newspaper, The Albuquerque Sun-Bulletin. Tatum’s only hope at this stage in his career, after being fired from a string of newspaper jobs, is to chance upon some sensational story that will land him back at a big-city paper.

His opportunity finally arrives a year later when he is the first reporter to discover that a man, Leo Minosa, has been trapped inside an ancient Indian burial mound. Tatum is quick to realize that each day that Leo remains stuck is another day of exclusive reporting. To elbow out other tabloid sharks and drag out the rescue operation as long as possible, Tatum enlists the services of a corrupt sheriff up for re-election.

Tatum thus crosses the line between simply reporting a story and influencing how it plays out—all the while posing as Leo’s saviour and claiming, “I don’t make the news, I just report on it.” Tatum’s self-interested attitude disguised as compassion is no different from the outlook of today’s obnoxious reporters who feed on human tragedy.

Billy Wilder makes it perfectly clear that Tatum is no exception in the news racket by introducing other vicious journalists who almost make Tatum look decent by comparison. Tatum knows most of them by name from former jobs, and not one of them ever helped him when he was down on his luck. So when they plead, “Hey Chuck, we’re all in the same boat,” his icy response is that he is in the boat and they are in the water, “So let’s see if you can swim, buddies.”

Tatum knows the public’s appetite for “human interest” stories. He digs through the photo album of Leo Minosa to fashion a compelling profile and uses his skills as a writer to transform Leo’s estranged wife Lorraine into the picture of wifely fidelity because “that’s how the story reads best.”

Just as Tatum expects, the public eats up his story, even flocking to the site of the burial mound by the hundreds to take part in what has literally become a media circus, replete with amusement park rides and carnival performers. These onlookers are eager to believe that their own morbid curiosity and craving for entertainment actually constitute a sort of human compassion.

Wilder’s criticism cuts much deeper than the world of tabloid journalism and its readership. Tatum and the other reporters are not the only ones dazzled by money and power. There is Leo’s wife who wants to peddle enough hamburgers and Navajo rugs at her husband’s store to make her escape to New York, the young cameraman working with Tatum who is losing his innocence and dreaming of a world bigger than Albuquerque, the contractor beholden to the sheriff who agrees to the most time-consuming rescue method out of fear of losing his job, and all the carnies, musicians, and other riffraff who flock to the site to make a buck off the crowd. Even Leo, the victim, had gone into the cave in the first place to get his hands on some Native American relics to sell.

Money is the magic substance that brings together this crowd of strangers in the New Mexico desert, forming what a radio reporter there describes as a “new community” which has sprung up. But once the show is over and there is no more money to be made, this community dissolves in a matter of minutes. Leo’s “friends” take off in search of the next new thing, leaving behind his grieving parents.

Although minor characters, Leo’s parents are important: their love for their son contrasts sharply with the selfish and superficial human relations around them. In several scenes we see Mr Minosa refusing any payment from Tatum and others, mistaking them for his son’s saviours. And his devout wife is so lost in prayer for her son that she is almost oblivious to the obscene scramble for cash going on around her. Whenever Mr or Mrs Minosa enters a scene it immediately highlights how crass and downright bizarre the world of commerce is – a world where nothing is sacred, where everything and everyone has a price.

Setting the film in a part of the country where there are still traces of a pre-capitalist society is another way that Wilder makes our familiar money-centred world seem grotesque. The Native American rugs and pottery Leo had sold in his store were not originally commodities for the market but things for direct use or “sacred items” buried with the dead. What a remarkable contrast between that extinct society, where people had not been connected by money and the manic scenes of product peddling in the movie.

Tatum’s brand of journalism is perfectly suited to the money-mad society in which he lives. Wilder does present us with a character who might seem an alternative to Tatum: the upstanding owner of The Albuquerque Sun-Bulletin, Mr Boot, whose motto is “Tell the truth.” But Boot is only able to follow that motto by limiting his reporting to rather inconsequential local stories about soapbox derbies and rattlesnake hunts. When, later in the film, he says that he thinks the sheriff is corrupt and wants to expose him some day it does not sound convincing. A guy like Mr Boot has to stay in Albuquerque because he would not last a week in the cutthroat big-city newspaper business.

The films of Welles and Wilder and the past century of journalistic history are a warning to those who might think the end of Murdoch will mark some qualitative improvement in journalism. Take away Tatum, and another shark swims into his place: topple Kane’s empire, and another tycoon rises up. And the same will be true if Murdoch and his crew one day meet their demise. It is foolish to call for a reformed journalism but leave in place the profit motive that drives tabloid excesses.

Michael Schauerte

Cooking the Books: Too much debt or too little profit? (2011)

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

“Debt being the problem, creating more debt can’t solve it” was the title of a recent thread on the Zeitgeist global forum. Given all the fuss in the media about government debts (or “sovereign debt”), this is not surprising, but it is not debt that is the problem. Government debt is a symptom of the problem.

Government’s borrow money to cover the gap between what they spend and what they raise as taxes (the budget deficit). Like all borrowers, governments anticipate being able to repay their debts with interest out of future income, in their case, future tax revenue. Most taxes fall, in the end, on the new value created in production, and either taken directly as taxes on profits or indirectly as sales taxes and taxes on personal income.

Since the current slump broke out in 2008 new production has fallen and is nowhere near the level it was before, so putting governments in difficulty, some more than others. The anticipated income as tax revenue to repay their loans has not materialised. The current sovereign debt problem is thus a direct consequence of the continuing slump.

Governments typically borrow by issuing bonds for sale at a given face value and fixed rate of interest, repayable in a given period of time which can be as short as a month or as long as 30 years or more, say £100 at 5 percent interest per annum. Once taken up, the bonds become tradable and are bought and sold. The price at which they are traded is determined by the laws of supply and demand, not by their face value, but the amount of interest remains the same.

If, as has happened to Greek, Irish, Portuguese and now Spanish and Italian bonds, those wanting to sell (supply) exceed those wanting to buy (demand) then their price falls. If it falls, say to £90, the government still has to pay the same amount of interest on them (in this case £5). The ratio between this amount and the bond’s price is known as their “yield”. In our example it would be 5/90 or 5.55 percent. In other words, the rate of interest will have risen from 5 to 5.55 percent and this will be the rate the government will have to offer on future bond issues. Which presents a problem when the loans come up for renewal, as they continually do.

The governments of the Eurozone countries and the European Central Bank are not trying to solve the sovereign debt crisis of some of their members by creating more debt. They are trying to reduce the likelihood of the holders of these debts (amongst them leading European banks including some in Britain) not getting all their money back. This is why they are pressing the governments affected to reduce their budget deficit by reducing their spending, i.e. by imposing austerity. They have also come up with various schemes to keep interest rates on these governments’ bonds down as interest payments on them are part of government spending.

What all this confirms is that interest is secondary to profit. Debt and the interest on it is not the root problem. Interest is a share in the surplus value created in production. If not so much surplus value is being created – and a slump is precisely a drop in production including of surplus value – then there is less available to pay interest, either directly by businesses or indirectly via governments.

Creating more debt is indeed not the solution. But neither is creating less debt. If capital accumulation resumed and reached previous levels, there would be no further talk of a “debt crisis” as international investors would be assured that the surplus value would be there from which the interest on their loans and investments could be paid.

If, on the other hand, capital accumulation does not resume quickly enough, as some are beginning to fear, then the investors may well lose some of their investments. But it won’t be the result of too much debt but of too little profit.

The riots: not the way to help ourselves (2011)

From the September 2011 issue of the Socialist Standard

Self-regarding and typically under-employed, those exotically nominated experts in human behaviour have offered many wordless thanks for the unheralded events that enlivened the streets during those August nights. Suddenly they found the immediate future looking decidedly rosy with the prospect of well-paid sessions of unexciting analysis from TV sofas responding to badgering by equally tedious chat-show figureheads. Then there was the blossoming market for anaesthetic contributions to the newspapers, offering the seamier among them some help in recovering from the consequences of their exposed habit of phone-tapping. All of which sprang from the reassuring assumption that there was an easily accessible explanation, handily encapsulated in a slogan or even a single word, for the mobs with their rioting, looting and violence. This was a process to be helped in accordance with the weight of the qualifications of the “expert”. Even more so if their theories or explanations could be presented as original but neglected.

Previous
There is, as usual, no lack of precedent offered by those same experts and commentators. For example from London's recent history there were the events in Brixton in 1981 and the disturbance in Broadwater Farm Estate in 1985 in which a policeman was killed, for which a black man was sentenced to life imprisonment only to be exonerated in 1991. Inevitably, there were official enquiries after the disturbances, yielding the assurance that “lessons will be learned” – a phrase which has been worked to exhaustion in response to the present crisis, demonstrating how futile and misleading it is. Because the “lessons” have often revealed faults – shortcomings, errors or deliberate provocations such as racist bigotry on the part of the police – which have persisted to the present. So when it comes to the inevitable probing of this year's disturbances the starting point should be the police killing of Mark Duggan on 4 August and the attempt to dismiss the family's concern until, on 6 August, the threat of serious demonstrations on the streets burst out, spreading across London and to other cities.

In their response – or perhaps lack of it – the police seemed to be following an established procedure. This was not the first such case in which the official version, coming immediately after the event, was quickly shown to have a worryingly tenuous relationship with the truth. It brought back memories of the death of Ian Tomlinson during the G20 demonstrations in 2009. It then required some years of probing before the facts of Tomlinson's death were established and, however reluctantly, accepted by the police. One result is that a police officer, condemned by the inquest, is now due to stand trial for manslaughter.

In the case of Mark Duggan the police said initially that they had been forced to shoot him after he fired the first shot at a police officer, whose life was saved only because the bullet struck his radio. It did not take long for this version to be blown away, when the Independent Police Complaints Commission stated that there was no evidence to prove that Duggan had fired a gun. But beyond this confusion – if that is an adequate word for it – there is the hard reality of the actual social situation, of unyielding divisions, of inequality, poverty, sickness, despair... The police can deny any obligations arising from this, except to act as the enforcers of the essential principles of capitalist society, whatever misery they cause.

Opportunistic
We have not seen the last of the verbal strategies used to conceal the nastiest facts about those recent public disorders. For example there was a newly minted vocabulary to denounce the looters, which had them as “opportunistic” offenders against property. This paid no heed to the fact that we are actively encouraged to accept that very word in admiration of much of what is rapturously accepted within capitalist society. Like the bankers and their infamous bonuses, or hedge traders gambling on a forecast movement in share prices. Like the exploitation of any and every development for whatever advantage it can allow a political party. Like the flood of lies designed to conceal the tragic reality of the wars in Iraq and Afghanistan. All of them opportunistic.

Then there was the dismissal of the looters' claim that as things are now they can have little sense of ambition for their future and were merely trying to ease their poverty by helping themselves from the shelves of convenience stores or giants like ASDA. A youth worker from East Ham told the media that young people feel “trapped in the system...disconnected from the system and they just don't care”. This was countered with the argument that young people can hardly complain about poverty when they are wielding the latest models in so-called social networking technology, suggesting that they could cope with their problems as stoically as others such as elderly vulnerable people.

The limits of this case were shown by a social worker in a part of London unaccustomed to social disorder among its leafy green open spaces who was almost speechless with rage on behalf of one of his clients who is housebound, blind and incontinent, and whose (paltry) special laundry allowance has been cut off by the local council. This woman is scared of the rioters in her locality, and the social worker, while not at all likely to join them, has something of an understanding of their motivation. He is not at all impressed by the millionaire ex-Etonian, David Cameron whining about “...sickening scenes... This is criminality, pure and simple, and it has to be confronted and defeated” – which brings us stark memories of Thatcher's opinions about the riots which periodically broke out while she was doing something called putting the Great back into Great Britain: “Nothing, but nothing, justifies what happened...They were criminal, criminal...”

Bullingdon
And in case there is any doubt it should be made clear that she was not referring to the earlier activities of Cameron, Osborne and London Mayor Boris Johnson who helped themselves ease the boredom of swotting during their time at Oxford by joining the Bullingdon Club which, apart from dressing up in fancy evening suits devoted themselves to wrecking restaurants and other such places, often to the fear and annoyance of other people there. It was Johnson who came back from his very costly recent holiday to join the chorus about the looters' behaviour being “criminal” without recalling those leisure time activities of his younger days; perhaps he had forgotten that in his case there was a rich parent to defuse any resentment and dissuade the Bullingdon's victims from any intention to refer the matter to the courts.

But for anyone caught up in, or suffering from, those recent nocturnal mob activities, there was no such relief; their lot was fear and anxiety about their safety – or even their survival. For them any anger, desire for revenge about the looters would be perfectly understandable, if as futile as the whole machinery of so-called justice and order. The fact is that riots do not emerge from nowhere or nothing. Social disorder, damage to life and home, are part of the daily assumptions about life within capitalism. Even David Cameron has had to acknowledge that these forces are inexorably at work when he referred to “120,000 most troubled families” in this country (he did not mean those with someone in the Bullingdon Club).

Teaching
The police sent to control this year's outbreaks were stronger in their weaponry and protective clothing than those in the past. This is represented as progress in the verbiage of the politicians and of those experts when what it in fact demonstrates is that the problems persist and show no sign of fading into history. Any meaningful investigation of the origins of the riots and looting cannot disregard their link to the effects of unemployment and the other persistent features of working class life – to poverty whether unemployed or in work, to poor housing and unnecessary disease all adding up to a burden of social deprivation which needs a relatively minor provocation to bring an explosion of anger and violence.
Is this the best we can expect in a world capable of satisfying human needs? Must our society be distorted by the toxicity of social ulcers? The looters deceived themselves that through the shattered shop fronts they were not just helping themselves to material goods but in a sense re-arranging social assumptions. As the enquiries into those events will eventually tell us, there are lessons to be learned here, but we reject the notion that these come best from those who claim the right to teach us, discipline us and punish us. Better to help ourselves by working for a peaceful, co-operative, abundant community.

Ivan

Old Labour (2011)

Book Review from the September 2011 issue of the Socialist Standard

Chavs: The Demonization of the Working Class. By Owen Jones (Verso Books 2011)

This well-received book has a snappy title and the subtitle fairly summarises one of its main themes. But a careful reading of its pages, and especially the concluding chapter, suggests a more descriptive title: “Down with middle-class Conservatism and New Labour. Up with the working-class Old Labour.”
Jones writes at the end of the introductory chapter:, “Class prejudice is part and parcel of a society deeply divided by class. Ultimately it is not the prejudice we need to tackle; it is the fountain from which it springs.” Tackling ‘the fountain from which [prejudice] springs’ is open to different interpretations. But the context makes it clear that for Jones the ending of the class system by the substitution of socialism for capitalism is not one of them.

The following chapters range over the inconsistent media treatment of the disappearance of middle-class and working-class children, the horrors of Thatcherism (no argument there), and the blaming of the victims in ‘broken Britain’.

In his concluding chapter – the author develops some of his Old Labour ideals:

“Instead of economic despots ruling over the British economy with nothing to keep them in check, key businesses could be taken into social ownership and democratically managed by workers – and consumers for that matter. It would be a real alternative to the old-style, top-down bureaucratic form of nationalization…”

Nationalisation is not, of course, the same thing as socialism, nor is it a step on the road to socialism. It is one of the two forms of capitalism: state (or officials acting on behalf of the capitalist class – as a whole) and private (ownership by individuals or corporations).

“The new class politics would be a start, to at least build a counterweight to the hegemonic, unchallenged politics of the wealthy… Working-class people have, in the past, organized to defend their interests; they have demanded to be listened to, and forced concessions from the hands of the powerful. Ridiculed or ignored though they may be, they will do so again.”

With those few stirring words Jones introduces his cunning working-class plan designed to achieve the new – improved – status quo. First, step up delivery of the loaves we produce into the ample larders of the rich and the powerful. Then fight them peacefully for crummy concessions. Good luck!

Stan Parker

Editorial: Why society is falling apart (2011)

Editorial from the September 2011 issue of the Socialist Standard

In 1997, as New Labour was first being elected, we carried a series of articles about the future of capitalism. In the light of the London riots, which spead with devastating effects through many other towns and cities across England a few weeks ago, it seems timely to reproduce some of the most salient points this month. They seem even more apposite now than they were then, and are all the more tragic that they were so predictable.

The social and moral codes which developed alongside the rise of the capitalist class during the system’s ascendency have been undermined. The nuclear family, the bourgeois work ethic and the sanctity of private property have all taken a battering under pressure from the rampant and ruthless individualism unleashed by the market itself. For any system of society to survive and prosper it needs its own codes and regulations of behaviour, but those that developed within bourgeois society are now being ceaselessly undermined.

This putrefying of capitalism's social basis and codes has taken on a number of forms, all of which are symptomatic of a society which is, to coin a phrase, ‘ill at ease with itself’:

The ongoing break-up of community relationships and the atomisation of the individual. This has been particularly characterised by the development of a competitive "every person for themselves" type culture as the dominant one in society, and by the appearance and consolidation of seemingly unbridgeable generation gaps.

The massive explosions of crime and drug taking, phenomena which were once peripheral or isolated in pockets, but which are now generalised throughout the market economy.

The increases in violence and social disorder, spurred on by the horror and violence infecting the media (especially for children), and the re-appearance – generally for the first time since capitalism's turbulent infancy – of mass rioting on a regular basis, which has turned major cities at the heart of capitalism into uncontrollable war zones.

The continuing, if not increasing, political vacuity of the capitalist class which has been mirrored in the rise of a nihilistic ‘no future’ culture among large sections of young dispossessed workers who see no progress and no hope beyond their pint glass or next ‘hit‘.

The massive corruption of capitalism's political apparatus, which is particularly evident in Britain, but which is in fact a feature of the modern nation state virtually across the globe.

It is in these ways that capitalism is undermining the principles and continued existence of collective life . . . and all the signs are that it will continue and probably deepen, for there are few if any forces or tendencies within capitalism operating in the opposite direction.

Filling the prisons is no solution on many grounds, not least of which is cost, and no government following this line has yet really succeeded in reversing the process which the market has started. None of the political appeals to "family values" are likely to succeed either as the very continued existence of capitalism and the forces it has unleashed make that near impossible.

Appealing to some sort of higher morality or set of values within the context of the market is clutching at straws, a long way from a considered and practical response to the problem. If the social decadence infecting society is to be overturned it has to be tackled at source – and that means the abolition of the market and the poisonous relationships which spring from it.

A Denunciation of Nationalism (1952)

Blogger's Note (8/4/2023)

This Hardcastle 'article' is actually from a much longer Notes by the Way Column. I'm not sure why it was separated from the rest of the column. Maybe the content of this piece just extra resonated back in 2011.

Now that I've scanned in the rest of the column, that does not mean I am going to delete this piece. It was obviously posted in 2011 for a reason . . . and, to be honest, I don't want to mess up my numbers for the blog.

From the August 1952 issue of the Socialist Standard

The Indian, M. N. Roy, who was at one time prominent in the Communist International, but later broke away and took a line of his own, recently wrote for the Manchester Guardian (21/6/52) an article "Asian Nationalism. Its Roots in Race Hatred."

In it he puts the case that the Asiatic nationalist movements are not just movements to secure independence from the foreign governments that kept them in colonial subjection, for even after achieving independence they continue to preach the same anti-foreign doctrines as before. He quotes Mr. Nehru, Prime Minister of India, and advocate of Indian nationalism, as having admitted that he does not know what nationalism is:

"What exactly is nationalism? I do not know, and it is extremely difficult to define. In the case of a country under foreign domination it is easy to define what nationalism is. It is anti-foreign power. But in a free country it is something positive. Even so, I think that a large element of it is negative or anti-, and so sometimes we find that nationalism, which is a healthy force, becomes—maybe after liberation—unhealthy, retrogressive, reactionary, or expansive."

Yet though Mr. Nehru could not define nationalism he went on to declare that it "warms the heart of every Asian" and that "any other force that may seek to function must define itself in terms of this nationalism."
Mr. Roy says this is nonsense and that what Mr. Nehru's explanation really means is that nationalism is "race hatred kept alive artificially."

"Asia nationalism is an unmixed evil. It has not got the saving grace of a cultural and idealist origin as in the case of earlier European nationalism."

Although Mr. Roy notices that between the wars European nationalism developed into fascism, and quotes the statement of the late Lord Acton that nationality sacrifices everything "to the imperative necessity of making the nation the mould and measure of the State," he does not appreciate the simple fact that nationalism has been and is everywhere the form in which each capitalist group tries to carve out a place for itself in the world of warring capitalist states. If he did he would not be at all surprised that the politicians who have used nationalism to gain independence from a colonial power need it just as much afterwards in order to persuade the workers to go on fighting capitalism's battles.
If it is an illusion to think that nations can be friendly in a capitalist world provided that they are all "independent," it is equally an illusion on the part of Mr. Roy to think that the Powers, great and small could dispense with nationalism.
At least one thing Mr. Roy has correctly summed up. Discussing the disappointing results of national independence from the worker's point of view, he says that when India and other countries achieved independence, "absolutely nothing changed except the personnel of the State machinery."
On one thing we can put Mr. Roy right. He says of the "reforming Liberals and the revolutionary Left: in the Western countries" that, disregarding the bitter experience and irony of history which had shown them nationalist movements starting with men like Mazzini and ending with regimes like Mussolini's, they "vied with each other in patronising colonial nationalism." Whatever the Liberals and Labourites did, the S.P.G.B. certainly did not fall into this error but always condemned nationalist propaganda whether at home or abroad, in Europe or in Asia.

Edgar Hardcastle

Editorial: Which kind of capitalism – or the alternative? (2011)

Editorial from the June 2011 issue of the Socialist Standard

Around the middle of the last century there were a group of nice people who called themselves Moral Re-armament. They saw some nasty things about the world in which they lived, but they put this down to miscreants who behaved in illegal or immoral ways. They approved of well-earned profits, a fair day’s work for a fair day’s pay, and all that jazz. The Socialist Party debated with them.

Then came the unacceptable face of capitalism, in the shape of the ‘bad cops’ who did a bit too much of what the ‘good cops’ were doing routinely. Greed was good, but too much of it by the wrong people was bad. Workers who wanted more wages or salaries were to be deplored. Capitalists who wanted more profits were OK – they helped to ‘grow the economy’.

The latest take on the profit system is that we have two kinds of market – the fundamentalist and the free. The fundamentalist market is the one in the black hat. It is part of a bidding culture that sets one group or interest against another. If one wins the other loses.

According to Philip Pullman (Guardian, 29 January), this bidding culture has “imported the worst excesses of market fundamentalism into the one part of our public and social life that used to be free of the commercial pressure to win or lose, to survive or to die, which is the very essence of the religion of the market”.

But Pullman is not optimistic about the future. “I’m afraid these fundamentalists of one sort or another will always be with us. We just have to keep them as far as possible from power.”

Now the oxymoronic free market. Very beneficial to the capitalist class, not so beneficial to the working class. Owners of capital are free to invest in it to ‘earn’ rent, interest or profit. Workers are free to offer themselves on the labour market – they may or may not get employment. Whether they do or not – especially if they do not – they suffer material and mental deprivation,.

Moral or immoral, with or without an acceptable face, involving fundamentalist or free markets, capitalism shouldn’t be supported by the majority it exploits.

We don’t have to choose the lesser of two evils – we can help towards something better. A world where the resources of the planet have stopped being the property of rich individuals, corporations or states and have become the common heritage of all. On that basis goods and services can be produced directly to meet people’s needs without the intervention of markets. Neither a free market nor a controlled market but a non-market society.

Cooking the Books: Brown re-invents the wheel (2011)

A Cooking the Books column from the April 2011 issue of the Socialist Standard

Gordon Brown has written a book. Not gossip about what went on between him and Tony Blair but about the Crash of 2008 and what he thinks should be done to avoid another one. Called, Beyond the Crash, the subtitle of the first part could well have been “How I saved the world from financial meltdown.”

He writes that by 26-27 September “the choice was clear: either we had to step in and accept all the associated risks, or simply leave the free-market system to collapse”:

“We were facing a situation that risked becoming worse than 1929. No one trusted anyone in the banking system, and people were predicting not a recession but a depression. People were panicking, asking which would be the next bank to collapse. The financial system was looking over an abyss.”

Brown puffs himself for discovering that the way to end a financial panic in which banks and other financial institutions are afraid to lend to each other is for the government to make more money available. As if governments hadn’t done this in the past, even in Marx’s day.

In Volume III of Capital, Marx quoted extensively from the parliamentary reports into the financial panics which occurred in 1847 and 1857. This from the Report on the Commercial Distress, 1847-8:

“[T]he bankers and others finding that they would not rely with the same degree of confidence that they had previously done upon turning their bills and other money securities into bank-notes, for the purpose of meeting their engagements, still further curtailed their facilities, and in many cases refused them altogether; they locked up their bank-notes, in many instances to meet their own engagements; they were afraid of parting with them… The alarm and confusion were increased daily; and unless Lord John Russell…had issued the letter to the Bank…universal bankruptcy would have been the issue.”

Lord John Russell was the Prime Minister and his letter to the Bank of England suspended the Bank Charter Act of 1844. Engels explained in a footnote what this meant:

“The suspension of the Bank Act of 1844 permits the Bank to issue any quantity of bank-notes regardless of the gold reserve backing in its possession; thus, to create an arbitrary quantity of fictitious paper money-capital, and to use it for the purpose of making loans to banks, exchange brokers, and through them to commerce.”

Marx wrote of “a point where either the entire industrial world must go to pieces, or else the Bank Act”, and went on:

“Both on October 25, 1847, and on November 12, 1857, the crisis reached such a point; the government then lifted the restriction for the Bank in issuing notes by suspending the Act of 1844, and this sufficed in both cases to overcome the crisis.”

So Brown did nothing extraordinary. He merely did what the capitalist class expect their government to do when there’s a financial panic that threatens to seize up commerce and production – make more money available to the banks. As in similar circumstances in the past, this stopped the immediate financial panic. But it didn’t stop the coming slump, as GNP fell from that quarter on and is nowhere near its pre-crisis level even today.

Lord John Russell was more modest. He didn’t write a book about how in 1847 he had saved the world from universal bankruptcy.

Editorial: What then must we do? (2011)

Editorial from the May 2011 issue of the Socialist Standard

Mervyn King, the governor of the Bank of England, kicked off a speech he gave earlier this year by stealing the words of the 19th century Russian novelist Leo Tolstoy, author of War and Peace and Anna Karenina. (The speech is available here.) King turns the opening sentence of the latter novel to his own purposes, stating that, ‘all happy economies are alike; each unhappy economy is unhappy in its own way’. He then goes on to tell us what ‘happy’ economies look like: they ‘combine growth, stability of prices and of the financial system, fiscal sustainability, supply-side flexibility and low unemployment’. He leaves aside the puzzling coexistence of such blessed happiness with historically unprecedented levels of stress, anxiety and depression, and presses on instead to give some of the reasons for the present unhappiness.

One reason we might be feeling glum, speculates King, is that most of us are getting poorer. Real take-home pay has already fallen 12 percent and is likely to fall again in 2011 to 2005 levels. ‘One has to go back to the 1920s to find a time when real wages fell over a period of six years,’ says King. But this ‘squeeze in living standards is the inevitable price to pay for the financial crisis and subsequent rebalancing of the world and UK economies’. Here King inadvertently invokes the ghost of another 19th century radical thinker, but does not mention this one’s name: it was Karl Marx who taught us that capitalism inevitably goes through periods of ‘rebalancing’ (i.e., of restoring profitability by destroying capital and devaluing labour), which inevitably leads to a squeeze in living standards (for the working class).

King concludes his speech with Tolstoy ‘s conclusion to Anna Karenina. This is that, despite life’s ups and downs, happiness is less important than trying to live in the right way. King must have been smugly proud of his intellectual prowess, connecting something as dull as a long speech on inflation with the words of one of the world’s best loved novelists. But the result is revealed as putrid when you compare King’s intent with that of Tolstoy’s.

Tolstoy was disturbed and horrified by the high levels of poverty and misery in the towns of the Russia of his day, and turned his mind to identifying the cause of the misery in his book, “What Then Must We Do?” Tolstoy followed Jesus in arguing that the first thing rich men like himself (and Mervyn King) could do would be to ‘get off the backs of the poor’ by giving up their own wealth. King misses this advice.

Tolstoy recognized that even such grand gestures of charity would not make a dent in the problem, because the problem is rooted in the whole system of property ownership and money, backed up by the tyranny of the state machine, which Tolstoy said must all be abolished. King strangely missed these lessons too. Tolstoy was on the right lines because he had the courage and intellectual honesty to pursue social problems to the root, and to state his conclusions regardless of the harm it might do to his previously existing beliefs, or social status or wealth. That makes Tolstoy a truth-telling hero.

What it makes Mervyn King we leave our readers to decide for themselves.

Pity about the politics (2011)

Book Review from the April 2011 issue of the Socialist Standard

Hobsbawm: History and Politics. Gregory Elliott, (Pluto Press, 2010)

Once upon a time, the teaching of history in Britain was a fantasy world in which the emphasis was on the doings of kings and queens, statesmen and Prime Ministers, the role of Empire and ‘facts’ to be learned by rote. About 60 years ago this began to change and to some extent this can be attributed to the thinking of Karl Marx and his insistence that history had to be understood in its material contexts – that is, how wealth was produced, the parts played by social classes and the technology they used.

E.J. Hobsbawm along with other notable historians of this period such as E.P. Thompson, Christopher Hiil and Rodney Hilton produced works informed by Marx’s theory of history. Hobsbawm gained critical and commercial success with The Age of Revolution: Europe 1789-1848, (1962), The Age of Capital: 1848-1875 (1975), The Age of Empire: 1875-1914 (1987) and The Age of Extremes: The Short Twentieth Century, 1914-1991 (1994). These and other works of Hobsbawm have been reprinted many times and have gained him a reputation as probably Britain’s best known historian and Marxist.

However, when it comes to Hobsbawm’s politics a very different picture emerges. Hobsbawm, Thompson, Hill and Hilton were at one time all members of the Communist Party of Great Britain (CPGB). But whereas Thompson, Hill, Hilton and many others saw the error of their ways – especially after the suppression of the uprising in Hungary by Russian military in 1956 – and resigned, Hobsbawm remained in the CPGB until its dissolution in 1991. As a cheerleader for the CPGB and the Russian empire, Hobsbawm defended the leading role of the party advocated by Lenin, and dismissed the view that the emancipation of the working class had to be the work of the working class itself – the cornerstone of any Marxian politics. Even now, aged 93, he is still unapologetic about his political beliefs. Hobsbawm the historian had some interesting things to say, but his politics remain anti-Marxist.

Lew Higgins

Editorial: Libya: brutality and hypocrisy (2011)

Editorial from the April 2011 issue of the Socialist Standard

When the popular movements against long-standing despots in the Arab world spread from Tunisia and Egypt to Libya the Western powers thought that something they had long wanted – regime-change in Libya – was about to be handed them on a plate. But they didn’t have the same control over Gaddafi as they did over Moubarak and Ben Ali and so could not arrange for him to bow out. His own man, and true to form, Gaddafi chose to try to brutally repress the movement. With the support of mercenaries and some sections of the population armed with superior military power, it was looking as if he might succeed.

Faced with this prospect, the Western capitalist powers have decided to play the military card too and have launched a series of bombing and missile raids against the armed forces loyal to Gaddafi. Since, under the UN charter, wars not authorised by the UN are “illegal”, they have had to present their action as being to protect the civilian population against the very real exactions of the Gaddafi regime. Even so, when claiming that the military intervention is motivated by humanitarian concerns, British Prime Minister Cameron has always added that it was also in the “national interest”.

The “national interest” is in fact that the interest of the capitalist class of a country, not of its population. Their interest in this instance is, as in Iraq eight years ago, to have a friendly and reliable regime in an important oil-producing country. That’s what the bombings are really about.

If a desire to protect civilians from being shot down by governments was the real motive, why are the Western capitalist powers not also intervening to stop the despots in Yemen, Bahrain and now Syria from doing this (as they have done)? And why did they not intervene to stop Israel slaughtering civilians in Gaza three years ago?

At least they haven’t had the effrontery to claim that their aim is to bring political democracy. How could they when their bombing campaign is being partly funded by the despotic regime in Saudi Arabia? And in which war planes from the hereditary despots who rule Qatar are taking part?

It is not so much that the Western powers have double standards as that the foreign policy of capitalist states is not conducted according to any abstract standard. There is no such thing as an “ethical foreign policy”. What motivates their diplomatic and military activity abroad is a desire to protect and promote the economic interests of their capitalist class.

Some are urging support for the Gaddafi regime on the ground that, despite everything else, it is “anti-imperialist”. Not us. As Socialists, we naturally sympathise with workers anywhere struggling to get the added elbow-room to wage the class struggle that political democracy represents, but we denounce the hypocrisy and cynicism of the ruling classes of the Western powers in invoking humanitarianism to once again resort to killing and destruction in pursuit of their sordid “national” interests.

Cooking the Books: Was the crisis just a mistake? (2011)

From the March 2011 issue of the Socialist Standard

The Financial Crisis Inquiry Commission set up by the US government reported at the end of January. They concluded that the crisis of 2007 and 2008 was the result of “human action and inaction, not of Mother Nature or computer models gone haywire”, but “of human mistakes, misjudgments, and misdeeds” and so avoidable (http://www.fcic.gov).

Obviously, the crisis was the outcome, even if unintended, of decisions by humans to behave in particular ways, but that’s not at issue. We need to know why the economic decision-makers involved took the decisions they did. What was the context of their decisions? What were the constraints acting on them?

The driving force of capitalism is the pursuit of profits by competing enterprises. As the Commission put it, “in our economy, we expect businesses and individuals to pursue profits…” If there is a chance to make a profit from some activity then the businesses in that field will go for it. If the profits are high enough then other businesses will enter the field to share in the bonanza.

This is what happened in the US. From 1997 until 2006 there was a boom in house building and buying. Big profits were to be made from lending money either directly to housebuyers or to businesses that did so. Easily able to borrow funds at relatively low rates of interest, the Wall Street investment banks decided to get in on the act, and in a big way,

“The large investment banks and bank holding companies,” the Commission reported, “focused their activities increasingly on risky trading activities that produced hefty profits.” The prospect of making “hefty profits” out of lending money to build and buy houses led them to borrow more and more money to take part in the chase after them:

“In the years leading up to the crisis, too many financial institutions, as well as too many households, borrowed to the hilt, leaving them vulnerable to financial distress or ruin if the value of their investments declined even modestly. For example, as of 2007, the five major investment banks – Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley – were operating with extraordinarily thin capital. By one measure, their leverage ratios were as high as 40 to 1, meaning for every $40 in assets, there was only $1 in capital to cover losses.”

Note the matter-of-fact acceptance here that banks cannot create money out of thin air but are dependent on themselves borrowing the money they lend.

The Commission criticised the investment banks and other financial institutions for taking such risks but could those involved in making these decisions have decided otherwise? Could they have decided to forgo the chance of making the ‘hefty profits’ that were there to be taken? No, because if one of them decided not to pursue these profits, the others would have enthusiastically taken their place. It wasn’t a mistake on their part. Given the competitive, profit-seeking nature of capitalism they had to take the decisions they did. In that sense the financial crisis was not avoidable.

It was outside the remit of the Commission to examine the housing boom whose collapse in 2006 triggered the financial crisis. They merely recorded that “when housing prices fell and mortgage borrowers defaulted, the lights began to dim on Wall Street”. If they had gone further into the housing boom and why it ended, they would have discovered that it was a classic case of the pursuit of profits leading to overproduction (too many houses being built in relation to what people could afford to buy) and perhaps revised their view that “the profound events of 2007 and 2008” were not “an accentuated dip in the financial and business cycles we have come to expect in a free market economic system.”

Look back, move forward

Cross-posted from the Socialism Or Your Money Back blog

Two things are utterly predictable whenever there is a mass protest, or a demonstration of significant size, and the anti-cuts demonstration organised by the TUC on 26 March was no exception. The first is that the police will do their best to turn it into a riot and to intimidate all present with violence. The second is that, regardless of police actions, most people will come away with a new sense of purpose and meaning in their lives – awake and invigorated, full of the collective joy that spontaneously arises when human beings get together to show their strength of feeling or merely their urge for festivity. After many decades of a relatively lonely and boring struggle to survive, a struggle that those in power have faithfully promised us will get worse in the coming years, people will have come home on 26 March at the least relieved that "I'm not alone".

That's the positive side. Unfortunately, with the decline of the traditional left and trade unions in this country and around the world, and the accompanying lack of faith in democracy and political parties, it's hard to know what exactly to do with those feelings – how to transform a feeling of solidarity and commitment to opposition into something that will last, something capable of delivering long-term, lasting change for the better.

That lack of faith is not just confined to the mass of people who are not ordinarily involved in politics. It is sometimes declared to be a positive thing from those committed to radical change. The thinking is that the traditional political parties and trade unions and so on have held us back – their ideas have been tried and failed and defeated, and their hierarchical structures and outmoded ideas are boring and not fit for purpose. Instead, we are to celebrate spontaneity and freedom – to get together in small groups and do exactly whatever we want.

There is something to the argument, but it has lost its appeal in the face of a major attack from the ruling class and its representatives who control the state machine. An extremely serious economic crisis that started with the banks has changed the game. The rich were rescued by huge state bail-outs. The costs of the crisis were shifted instead to the state – and the state intends to shift the burden to us, by slashing our jobs, pensions, social services, benefits, and so on. The attack is organised and centralised – shouldn't the opposition be too?

There are no easy answers to these questions, and we don't pretend there are. But perhaps it's time to hear once again a voice that has been marginalised for over a century. From the formation of the Labour party in 1906, and then the Russian revolution in 1917, socialism has come to mean either state management of welfare capitalism, or state dictatorship over a centralised economy. But these rightly discredited ideas marginalised a previously existing conception that it might be worth reviving. The word socialism was already beginning to lose its original meaning by 1894, which caused William Morris, one of the Victorian age's greatest polymaths, to say:

"I will say what I mean by being a Socialist, since I am told that the word no longer expresses definitely and with certainty what it did ten years ago. Well, what I mean by Socialism is a condition of society in which there should be neither rich nor poor, neither master nor master's man, neither idle nor overworked, neither brain-sick brain workers, nor heart-sick hand workers, in a word, in which all men would be living in equality of condition, and would manage their affairs unwastefully, and with the full consciousness that harm to one would mean harm to all—the realization at last of the meaning of the word COMMONWEALTH."

The 20th century did its best to let the curtain fall for ever on this vision of socialism, but a small number of dedicated activists have done their best to keep it alive. We in the Socialist Party count ourselves among their number. We say that it is right that people have lost faith in traditional politics – it has proved by its actions what it is all about. But to say that therefore we must give up on a vision of the future, and an organised commitment to attaining it, is to throw the baby out with the bathwater.

The inspiring struggles for democracy and against austerity we are seeing emerging around the world have a common cause – they are the divided and isolated battles of workers against the relatively united attack of the world's ruling class in its attempt to resolve its economic crisis. We need to follow the ruling-class example – come together and organise in order to resolve the crisis in our way. That is, by organising a political party dedicated to taking state power out of the hands of the ruling class, and to establishing socialism. And given the extremely serious nature of the ecological catastrophe we are all facing, this is not just a nice idea. Increasingly, it's a matter of survival.

Stuart Watkins

Egypt: The hard road to political democracy (2011)

From the March 2011 issue of the Socialist Standard

What will happen in Egypt now? Will the army keep control until a new leader acceptable to the West emerges?

At the time of going to press, the “revolution of anger” in Egypt seems to be entering a new phase. Tahrir Square has been reopened to traffic and commerce. Massive political demonstrations are over, at least for the time being, but strikes and protests by various groups of workers continue. The employees of the National Bank of Egypt have forced the resignation of its chairman, a Mubarak ally. Ambulance drivers, public transport workers, and even the police are demonstrating for better wages and conditions.

Many Egyptians are dissatisfied with what has been achieved so far, and with good reason. Mubarak has gone. But what sort of democrat is the man who took over from him on 31 January – Omar Suleiman, assassin and torturer-in-chief of the dreaded Mukhabarat (General Intelligence Service)? The demand to suspend the emergency law that permits detention without charge has not been met, nor have political prisoners been released. The ruling military council has set no firm timetable for elections and transition to civilian rule. They have made plenty of promises, but who is naïve enough to trust them?

To understand what is happening in Egypt, we must first understand the nature of the ruling regime.

A military oligarchy
The regime is not a personal dictatorship. It can survive the removal of Mubarak or any other specific figure. It is a military oligarchy. The main power centre is the supreme command of the armed forces (the eleventh largest in the world). In addition, there is a ruling party – under Nasser the Arab Socialist Union, renamed by Sadat the National Democratic Party – but its role is secondary.

The military regime has its origins in the Free Officers’ Movement, which overthrew the British colonial puppet king Farouk in 1952. Its domestic and foreign policy has changed over time, under the successive leadership of Nasser, Sadat and Mubarak, but the regime itself has remained the same. It has never been in the least bit democratic.

Why then does the Trotskyist International Socialist Review tell us that Egypt “has been ruled by a dictatorship for 30 years, with arrests and torture a constant occurrence” (socialistworker.org/2011/02/11)? Only 30 years? Didn’t Nasser too jail thousands of political opponents? Ah, but those were “progressive” and “anti-imperialist” jails – and that makes all the difference, doesn’t it?

Before regaining independence, Egypt was ruled by a succession of empires. Before that it endured the despotism of the pharaohs. Mubarak too was popularly known as “the Pharaoh”. Egypt has been a dictatorship for 11,000 years.

From Nasser to Sadat and Mubarak
This is not to deny important differences between the Nasser and post-Nasser periods.

Nasser conducted a protectionist policy on behalf of national capital. A state-owned iron and steel industry was created. The Aswan Dam was built. In 1956 the Suez Canal was nationalised, leading to armed invasion by Britain, France and Israel. Social reforms were undertaken. Land was redistributed and rents paid by tenant farmers controlled. A minimum wage was established. There were also reforms in the areas of housing, health, education, women’s rights and family planning. In foreign policy Egypt was formally non-aligned; in reality it became a client state of the Soviet Union.

Nasser’s successor Sadat expelled Soviet advisers, realigned Egypt with the West (and eventually with Israel), and replaced protectionism by an “open-door” policy. Currency controls were loosened and foreign companies invited to invest in tax-free “enterprise zones”. Mubarak went further in the same direction. Cheap food imports were allowed to flood the country, ruining Egyptian farmers. The gap between rich and poor widened. The country fell deeply in debt to the international financial institutions and became financially dependent on US aid.

Much of state industry was privatised. As was later to occur in post-Soviet Russia, valuable state assets were acquired on the cheap by a handful of businessmen with inside connections. That is how Ahmed Ezz, a close friend of Mubarak’s son Gamal, emerged overnight as a wealthy steel tycoon.

Another lucrative scam was the legal requirement that a foreign investor must give (not sell) a local partner a 20 percent stake in his venture. The “local partner” always happened to be a general or high official.

Mubarak and his family were themselves the greatest beneficiaries of this “crony capitalism”. The family fortune has been rumoured to be as much as $70 billion (£43.5 billion). Both of Mubarak’s sons are billionaires in their own right. Most of this money is held in British and Swiss banks or invested in American real estate.

It should be noted that under Mubarak the regime did not serve the interests of the whole capitalist class. Some businessmen did very well, while others lost out. For example, Ezz used his political clout to force other businessmen to buy his steel rather than importing cheaper steel from China. Similarly, it was difficult for businessmen lacking inside connections to obtain bank loans. This helps explain why some businessmen back the opposition.

The clan and the regime
While most Egyptians want an end to the military regime, the immediate target of the “revolution of anger” was the “Mubarak clan” – Mubarak, his family and their closest allies and associates. The demonstrators wisely took care not to offend the military as an institution. According to some analysts, the Mubarak clan had powerful enemies inside the regime (resentful, perhaps, that they were not getting their fair share of the loot) who used the protests to mount a “half-coup” – meaning a coup against the clan but not the regime. Perhaps this is to overstate tensions inside the regime. It is clear, however, that there were people in the ruling group who did not belong to the Mubarak clan and who were prepared to sacrifice it in order to save the regime. (Apparently they were encouraged to take this step by the Obama administration.)

This was one reason why no attempt was made to use the army to suppress the protests. Another likely reason was that the generals judged that the soldiers and junior officers could not be relied upon to obey orders to shoot into the crowds. The security police – the “thugs” who mysteriously appeared “out of nowhere” riding horses and camels – could be used, because they were more isolated from ordinary people and more effectively under clan control, but there were too few of them to scare off the enormous masses of demonstrators.

Youth movements and trade unions
The key role in organising the demonstrations seems to have been played initially by the April 6 Youth Movement. This organisation began as a Facebook group set up to call on all workers to stay at home on 6 April 2008 in solidarity with striking textile workers. (There has now emerged a new umbrella organisation called the Youth Coalition for the Revolution of Anger.)

So the demonstration organisers appear to have been closely connected with the workers’ movement and, in particular, with the campaign to create independent trade unions to replace the old state-controlled Egyptian Trade Union Federation. The textile workers tried to establish an independent union in 2006–2008, but large-scale arrests of activists made this impossible at that time. One of the major gains of the “revolution” was achieved on 30 January, when an independent trade union movement finally emerged in the form of the Federation of Egyptian Trade Unions.

An important point that media coverage fails to convey is that the mass political demonstrations are only part of the upheaval. There are also numerous strikes and protests over “bread and butter” issues. That is not surprising when you consider the rising prices of staple foods and the fact that 40 percent of Egyptians have to survive on under $2 (£1.30) a day. While political demands are uppermost in Cairo, it seems that material demands are much more prominent in other cities. In Port Said, for instance, crowds angry over the shortage of housing set fire to the local state security headquarters, the governor’s office and the main post office.

The opposition parties
The regime selectively and intermittently allowed opposition parties to exist but restricted their activity. As a result, these parties are all very small – except for the Moslem Brothers, who despite being illegal were able (like Islamists in other countries) to take shelter in the mosques. Observers estimate that only 5 percent of Egyptians support any of the parties.

Almost all of the opposition parties belong to one of three categories.

First, there are several liberal capitalist parties that advocate civil rights and “free enterprise.” An example is the New Wafd Party. These parties are backed by a number of prominent businessmen.

Second, there are various Islamist parties. The Moslem Brotherhood is the largest of these, but not the only one.

Third, there are parties that regard themselves as leftist or socialist. What this usually means in the Egyptian context is loyalty to the legacy of Nasser, so it is more accurate to call these Nasserite parties. Thus, the National Progressive Unionist Party (known for short as Tagammu) “defends the principles of the 1952 revolution”.

Some parties combine Nasserite with Islamist ideas. For example, the Umma Party stands for “socialist democracy with Sharia (Islamic law) as the main source of legislation” (!). Finally, there is also an environmentalist Green Party.

It is hard to see what can come out of the negotiations that Suleiman is conducting on behalf of the regime with leaders of various opposition parties. None of the parties played any part in organising the “revolution” and few demonstrators regarded the parties as representing them. In fact, due to popular suspicion the negotiations may further weaken the parties’ base of support. A report from Suez mentions mass resignations from the parties participating in the negotiations, including Wafd and Tagammu, and connects this development with the creation of a Council to Protect the Revolution in Al-Arish (near the border with Gaza).

Who would win free elections?
The weakness of the parties makes it very difficult to predict who would win free elections if they were held today. As the theme of social justice has been prominent in the upheaval, the popular appeal of the liberal opposition may be limited. Social protest can work to the advantage of either Islamists or the left. Given the secular nature of the protests (not only were Islamic slogans conspicuous by their absence: there were also slogans in support of Moslem-Christian unity), the left may do quite well. The Moslem Brothers obviously have considerable support, but they themselves apparently do not think they are strong enough to gain power at this stage.

The existing left-wing opposition parties, however, are handicapped by their Nasserite orientation. To the extent that the demonstrators are against the military regime and committed to democracy, they might hesitate to vote for parties that hark back to an earlier form of the same anti-democratic regime. And, of course, only the older generation has direct memories of the Nasser period. So conditions may be favourable for the emergence of a new democratic left, possibly linked to the independent trade unions. There may even be potential for the spread of genuine socialist ideas.

Dragging out the transition
The uncertain outcome of elections is one reason why the generals aim to delay the transition to democracy as long as they can. They may also seek to retain a power of veto and other prerogatives even after a civilian government takes office, as well as an ability to reassert control whenever they consider it necessary – as in the “Turkish model”.

The wish to delay democratisation is clearly shared by the American and European governments on whom the Egyptian generals depend. These governments are great champions of elections, but only provided that the outcome is predictable and acceptable to them. They need time to prepare the ground for such an acceptable outcome – in particular, to select parties and politicians who can be trusted to respect Western interests and then give them financial, PR and other aid to help them win. Candidates for this role – El-Baradei, for instance – are well aware that pleasing Egypt’s Western patrons is at least as vital to their prospects as pleasing their fellow citizens.

How much time is needed? Statements from the ruling military council hint that six months may not be enough. German chancellor Angela Merkel has drawn a parallel between the transition in Egypt and the process of German reunification, suggesting that a whole year may be needed. And just in case the results of political engineering are disappointing, the generals and their patrons probably want to keep open the option of dragging out the transition indefinitely, perhaps co-opting a few handpicked opposition figures into what remains basically a military regime.

In the meantime, it is the job of the regime to restore and maintain “order” and “normality”. Ordinary people must stop making trouble and get back to work! To achieve that, the regime can be expected to combine – or perhaps alternate between – sweet talk and arrests, appeasement and repression. Neither approach will easily succeed.

As socialists, we do not regard political democracy in itself as sufficient to emancipate humanity. But we do recognise that it provides by far the best conditions for the development of the socialist movement. That is why we wish those well struggling for political democracy in Egypt – and, indeed, throughout the world

Stefan

Kropotkin (2011)

Book Review from the March 2011 issue of the Socialist Standard

Mutual Aid. An Introduction and Evaluation. By Iain McKay. AK Press.

Socialists have always recommended Kropotkin’s Mutual Aid, including it on lists of books for sale. Kropotkin was an anarchist, but had been a scientist (geographer) himself and in this book was writing as science writer. It was originally written as a reply to T. H. Huxley, the biologist known as “Darwin’s Bulldog”, who had argued that both in nature and in human society “life was a continual free fight, and beyond the limited and temporary relations of the family, the Hobbesian war of each against all was the normal state of existence”.

Huxley was a biologist and an expert on Darwin’s views, but here was expressing a popular prejudice; in fact, more than this, a view that justified the division of society into rich and poor, oppressors and oppressed. As Iain McKay puts it in this pamphlet:

“In its most extreme form, this became ‘Social Darwinism’ which (like much of sociobiology today) proceeds by first projecting the dominant ideas of current society onto nature (often unconsciously, so that scientists mistakenly consider the ideas in question as both ‘normal’ and ‘natural’). … Then the theories of nature produced in this manner are transferred back onto society and history, being used to ‘prove’ that the principles of capitalism (hierarchy, authority, competition, etc.) are eternal laws, which are then appealed to as a justification for the status quo!”

Kropotkin produced the evidence from scientific studies to show that this was not the case, neither in nature nor in society. In nature a “struggle for existence” certainly went on, but cooperation (“mutual aid”) was just as much “a factor in evolution” (the book’s subtitle) as competition. It wasn’t just a struggle of members of the same species against each other to survive and so leave more offspring; in many species cooperation was a survival strategy with the less cooperative having less chance of survival and so leaving less offspring.

McKay goes into detail to show that many sociobiologists, including Dawkins himself, accept this, even if on the basis of mathematical models. Kropotkin can be seen as a bit of a sociobiologist himself in that he too argued from animal behaviour to human social behaviour. Only two of his book’s eight chapters are devoted to biological evolution, the rest dealing with human social behaviour and social evolution. However, these are governed by quite different factors that have nothing to do with genetics. But Kropotkin did at least turn the tables on the Social Darwinists by arguing that it was capitalism, not socialism, that was against human nature.

McKay’s 60-page pamphlet is a useful account of the background, significance and influence of Kropotkin’s book.

Adam Buick