Cooking the Books: Not Something to Get Used to (2014)

The Cooking the Books Column from the September 2014 issue of the Socialist Standard

When at the end of July the official figures for the UK Gross Domestic Product in the second quarter of 2014 were announced - an increase of 0.8 percent, which brought GDP back to the level it had been before the slump started in 2008 –the politicians and media who support the government were jubilant. The crisis is over, they proclaimed. Others were more circumspect about what this meant or, rather, did not mean. Anthony Hilton, Economics Editor of the London Evening Standard, even wrote that ‘the next set of output figures should top pre-recession levels –but it is good news only for a privileged few’ as ‘we now live in an economy where the rewards from growth or globalisation go to an ever narrower elite’ (24 July).

The figures certainly meant that production had reached its pre-slump level but this did not mean that the crisis was over for most people in the sense that their standard of living was back to what it was in 2008. GDP had reached its pre-slump level but GDP per person had not. This was because the population has also increased since 2008. GDP per person is not expected to reach its pre-slump level for another three years.

GDP per person is not really a measure of standard of living as it says nothing about how what has been produced is distributed. The figure would be the same whether everybody was getting an equal share or whether a few were getting a very large share with the rest below the average. Or anything in between. As Hilton pointed out:

‘Total output matters but what matters more in terms of individual wellbeing is how the output is spread around. It does not matter how big the cake has grown if you only qualify for a small slice –or possibly something even smaller –than you did a few years ago. Sadly, an ever smaller slice is the reality for most people these days.’

This was confirmed by an article in the Times (16 July) by Ed Conway, Sky News Economics Editor, headed ‘Feeling worse off is the new reality and workers should get used to it’ which started:

‘Were you in any doubt about the scale of the depression Britain is now emerging from, consider the following: real wages, adjusted for inflation, have fallen more in the past five years than in any comparable period in a century and a half. Not since 1864, when vaguely reliable data began, have our living standards been squeezed so much … [N]ever before has there been a five-year period with as sustained, significant and sizeable fall in family earnings as the one now coming to an end. Between 2009 and 2013 real wages dropped by 8 per cent.’

Real wages (what take-home pay will buy) is a better measure of individuals’ standard of living than GDP per person. If the slump in production is over, as it appears to be, real wages will begin to rise again but, according to Conway, at a much slower rate than before. He suggested about 1 percent a year. In that case it could take another seven or eight years for people’s standard of living to reach its pre-slump level. Meanwhile the rich get even richer.

Armed and Dangerous (2014)

From the September issue of the Socialist Standard

On 14 July jets led by Air Marshal Thierry Caspar-Fille-Lambie flew over the Avenue des Champs-Elysées, Paris, to commemorate the storming of the Bastille 225 years ago that triggered the advance of French capitalism. Soldiers led by Brigadier Henry Bazin, closely followed by motorised troops led by General Marcel Druart paraded past the President of the French Republic. This celebration of the bourgeois revolution tellingly illustrates the enduring bond, and historical significance, between the capitalist class and militarism. The theme for 2014 was of course: ‘The Centenary of the First World War’. Ten million dead. The President remarked ahead of the parade, ‘we owe them gratitude.’

Meanwhile, 200 miles away a tiny gathering of protesters took place outside the Science Museum in West London. Inside, in the museum’s Making of the Modern World Gallery, arms dealers from around the world congregated for what the organisers described as the ‘most important event during Farnborough week offering an unparalleled opportunity for industry networking’. Farnborough, for the public, is renowned for its Airshow, but behind the glitz and red, white and blue jet trails lies a marketplace where the world’s weapons salesmen court military delegations. The consequent marriages invariably end in multiple deaths.

The Museum’s director responded to a petition by over 2,000 signees, who view the Museum as supporting the arms trade, by stating: ‘The revenue generated by bookings such as this plays an important role in the funding mix that enables us to remain free to millions of visitors.’ Yes, of course. It’s all about money. Museums need cash, as does science, as do scientists, who can’t dine on principle pie. A large proportion of science’s funding comes from the military. It’s a symbiotic relationship under capitalism. The arms trade is as elemental to capitalism as are banks and insurers. States need weapons to defend profits, gain access to new markets, and to acquire raw materials. Typically as the big stick wielded for show, or simply as a veiled threat in negotiations with competitors. And when all else fails they need weapons—to wage war.

The killing business

War is a fundamental consequence of capitalism; since 1900 there have been 247 conflicts with over 77 million fatalities (www.war-memorial.net). Yes, the killing business is always brisk. Since the First World War the character of conflicts has altered. Around 50 percent of those killed in wars in the first half of the last century were civilians. Towards the end it had risen to 90 percent. Vast profits for the manufacturers accrued from these deaths. A handful of capitalists have filled their boots, whilst the workers in the industry received a wage packet. Amongst these were capitalism’s scientists.

Radar, space exploration and communications satellites, nuclear technology, microchips, digital photography, the internet and GPS all have their origins in the killing business. Much earlier mathematics had a role to play in the development of the siege catapult. Even Galileo touted the telescope as a military aid in an effort to gain funds from the Medici court in Florence. In general, though, inventors and craftsmen worked independently from the military developing weapons and then sought their patronage once the product was ready to market. Research and development directed by the military was minimal until the dawn of a new war at the turn of the 20th century.

As much as the civilian population was recruited for the First World War so too was science. Trench warfare, with its use of strongly fortified positions, supported by heavy artillery and machine guns, caused millions of deaths but little strategic advantage. The military minds and their political masters sought new killing technologies and scientists and engineers were employed to deliver them. Tanks and aeroplanes roamed the battlefield but with limited effect. Poison gas however did have an impact—a terrifying psychological one.

Capitalism’s ideologies that had successfully mobilised millions of ordinary civilians and turned them into front line killers also worked on scientists. Why shouldn’t it? Thus scientists like Fritz Haber, described as the ‘father of chemical warfare’ and a recipient of the Nobel Prize in Chemistry in 1918, developed and organised the use of chlorine and other toxic gases employed extensively throughout the First World War. His adversary was the French Nobel laureate chemist Victor Grignard. Haber considered himself a patriot. Decorated and given the rank of captain by the Kaiser even though he was too old to enlist, Haber exposed the poison of nationalism when he penned his rationale: ‘During peace time a scientist belongs to the World, but during war time he belongs to his country’( Science: A Many-Splendored Thing, 2011).

The 20th century saw the development of new weapons. Thousands of scientists have, and still are, recruited and involved in programmes that have only one end product—killing en masse. In 1939, Frederick Banting, the co-discoverer of insulin, argued his way up and down Whitehall for the research, development and use of biological weapons. Banting was an advocate for total war as was Winston Churchill. Thus his plans found willing listeners leading to work beginning on an anthrax bomb at Porton Down under the guidance of microbiologist Paul Fildes. Banting justified total war, in his writings: ‘eight to ten people working at home are now required to keep one man in the fighting line. . . so, it is just as effective to kill or disable ten unarmed workers at home as to put a soldier out of action, and if this can be done with less risk, then it would be advantageous to employ any mode of warfare to accomplish this’ (ncbi.nlm.nih.gov).

Manhattan project

The discovery, in Germany, of nuclear fission in 1939 was the precursor of the Manhattan project which began in 1942. By 1944 the Project employed around 129,000 waged workers, 84,500 of whom worked in construction, 40,500 were plant operators and 1,800 were military personnel. Scientists were at the apex of this workforce. The Manhattan Project culminated in the dropping of the atomic bomb on Hiroshima on 6 August 1945. About 70,000 to 80,000 people, 30 percent of the population, were killed immediately, and another 70,000 injured. The legacy of this project is what we now live under—a nuclear stockpile estimated at 20,000 warheads.

Albert Einstein’s 1905 paper on special relativity shaped the theoretical foundations for Hiroshima’s bomb. Is he to blame for all of the deaths? Or are, perhaps, the 84,500 construction workers? Are Habing and Banter to blame? Or the noxious ideologies that motivated them that creates human beings who are willing to murder other human beings simply because they salute a different coloured rag? Have the protestors at the Science Museum who caused the ‘Bahraini military delegation and a number of arms dealers to be turned away’ considered that the weapons peddlers and the military delegations are just a symptom of a corrosive disease? If one arms dealer is turned away ten others will fill the void. For every tyrant deposed five are evolving. It’s not the weapons, their peddlers, or the buyers that are the problem—it’s the system that spawns them. That system is capitalism. And all industries are governed by its priorities.

The killing business needs customers and capitalism’s impetus towards war always provides them: ‘Ukrainian President Petro Poroshenko said he will reduce the country’s ‘useless’ science programs to finance the production of drones and precision weapons. ‘There will be no more spending of billions of people’s money, taxpayers’ money on useless research programs, which were used as a tool for theft’, said a statement published on the president’s website early on Wednesday. ‘Today, Ukrainian production will be busy making precision weapons systems, Ukrainian drones, everything the Ukrainian army needs, starting with bullet proof vests and ending with thermographic cameras,’ he said’ (rt.com).

A clock is ticking. A scientist who understood how capitalism works and what it is capable of left this timely reminder for all of us: ‘I do not know with what weapons World War 3 will be fought, but World War 4 will be fought with sticks and stones’ -- Albert Einstein

Andy Matthews

The working class is us (1978)

From the January 1978 issue of the Socialist Standard

In the middle nineteen-fifties academics and littérateurs invented the old-time working class. Before that, books about the life of the poor had always been more or less documentary, describing the miseries of unemployment and slum conditions. The new picture presented via "kitchen-sink" drama, novels like Saturday Night and Sunday Morning and "deeper" works such as The Uses of Literacy was of a materialistic, hearty, boozy industrial proletariat with a core of sensitivity which made uprisings possible.

This emerged in the 'fifties as a subsidiary of the myth of "the affluent society".  After ten years of post-1945 full employment, plus the wartime period, it was felt that the bad old days had gone for ever. Working people owned cars and television sets, the Welfare State was in full swing, and forests of council flats were springing up in former slum areas. At the same time, there was a great deal of talk about "the quality of life". People said they were unhappy in better living conditions as compared with the communalty of the slums, and the young were dissatisfied by their own lack of dissatisfaction; the memorable line in the play Look Back in Anger was "There aren't any good, brave causes any more".

As a result, the working-class living standards of the past were looked at (by those who had not experienced them) through rose-tinted spectacles. The current vogue for "labour history", information and reminiscences about working-class life and struggles, continues this tendency as far as the 20th century is concerned. Labour history is useful, but the grafting-on of present-day motives does a disservice to labour itself. A writer on working-class life has described to the present writer how radical academics encourage him, but also pressed him to lay on thick what they wanted to see: plenty of swear-words and accounts of rough behaviour.

All this thoroughly anti-working-class, from two points of view. First, it is contemptuous, it reiterates the traditional upper-class attitude that the workers are indeed the lower orders. Second, it assumes that "working class" means only those in manual jobs. The writers, and the people presumed to read their books and articles, are in "professions" or non-productive occupations and are therefore held to be "middle-class". This is a familiar idea, but repetition does not make it any less mistaken or change the way it divides the working class.

Who are the workers? People who go to work, of course: those who have no alternative and must work in order to live. The necessity is created by the constitution of capitalist society. There is an owning class, to whom all the means of producing and distributing wealth belong. This fundamental fact of ownership establishes the pattern of life for the remaining nine-tenths of the population. They have to sell their labour-power for wages, on an exploitative basis: to produce surplus-value—rent, interest and profit—for the owners. Outside the ten per cent. who live by ownership, we are all in the working class, and consequently in the struggle against the capitalist class.

The belief that a lot of workers are not in it because they belong to a "middle" class is a very useful one to capitalism because it is divisive. It was institutionalized in an Act of Parliament in 1864 which commanded the running of workmen's trains. These continued until the second world war. They were early-morning trains whose passengers paid approximately one-third of the normal day fare. The purpose was to hold down wages in industry and the distributive trades, and there was a long list of unskilled and semi-skilled occupations eligible for workmen's tickets. Clerical workers were excluded, and the tickets were not issued from stations farther out on the lines. Thus, clerks were separated from from "workers" and could go to work later. They could also look down on them because workmen's trains were slow, crowded and dirty; and could live in outer suburban districts while the labouring sections were held in the inner cities.

Nevertheless, clerks and the "professions" are all in the working class. They are as insecure and as vulnerable to the problems imposed by capitalism as all the others in the non-owning nine-tenths; very often, their respectability is a nastier kind of poverty. To realize the solution to these problems, their first and greatest breakthrough must be to the fact of their class position. We live in a world of Them and Us, but it is necessary to identify Us.

Consciousness

Does this mean that the labouring poor have got to embrace workers who think they are middle-class as their brothers? The unskilled and semi-skilled in general know they are working-class, because they are continually told so; what they need to learn is some implications of it. Principally, it is for the "superior" workers to face up to and act upon. They must grasp that they are not superior, that the middle class is a myth, that all those who work for wages or salaries are in the same boat. When they understand this, they can stop insulting other members of their class — in particular, by romanticizing versions of working-class life which are disguised imputations of inferiority.

The left is guilty on this count. Most of those who pronounce the word "worker" with veneration don't think they themselves as workers; they are the educated vanguard who choose to get among the workers. If that conception were true, a person would be much more among workers in a football crowd than in a left-wing gathering. But whose doctrine is this? It reasserts the divide-and-rule outlook and the contemptuous stance of capitalism. The capitalist class says the workers are stupid and vicious. He wants this repeated by one section of workers against another; his position depends on it. The reply of class-conscious workers is that they are educated in a sense he never can be, and that their—our—capability will get rid of the wealth-based arrogance of his kind.

Class awareness is the all-important condition for bringing a new world into being. It arises from existence under capitalism; workers become all the time more responsive to their environment, the framework of which is the wages system. The task of socialists is to give precision to those responses. We judge all claimants to working-class support by their attitude to class. Whoever conceals it or distorts its meaning is acting contrary to the interests of the workers. The apparent divisions between social and occupational groups are shadows cast by the real and irreconcilable division between capitalists and all workers. Class rule can and shall be ended, through the understanding of what class is.

Robert Barltrop

'Capital in the Twenty-First Century' (2014)

Book Review from the September 2014 issue of the Socialist Standard

Book Review from the September 2014 issue of the Socialist Standard.

Capital in the Twenty-First Century. By Thomas Piketty. Harvard University Press. 700 pages. 2014

Capitalism is based on the ownership and control of the means of wealth production by a minority. This can take various forms but, historically, the most usual – what might be called the classic form – has been through private property titles vested in individuals and enforced by the courts and the state generally. Another has been direct minority control of the state where ownership of most means of production is vested in the state, as in the old USSR.

Where ownership is through private property rights, minority ownership can be shown from the degree of concentration of property titles. This can be worked out from inheritance tax returns, wills and household surveys. The results in all countries show a very unequal distribution of wealth amongst the population .

The minority ownership of the means of wealth production is also reflected in the unequal distribution of income, due to the large non-work, property income of the top property-owners.

In this much-discussed book French economist Thomas Piketty has assembled data about the distribution of wealth and of income covering over two centuries, mainly from France, Britain and the US but also from other European countries and some in Asia and Latin America. He posits an economic law that the distribution of wealth tends to become more unequal, in that the top 10 percent come to own proportionately more, the wider is the gap between what he calls the ‘rate of return on capital’ (r) and the rate of growth (g).

What is capital(ism)?

Although he sets out two ‘fundamental laws of capitalism’ he never actually defines what he means by the term. He does, however, define ‘capital’:

‘In this book, capital is defined as the sum total of nonhuman assets that can be owned and exchanged on some market. Capital includes all forms of real property (including residential real estate) as well as financial and professional capital (plants, infrastructure, machinery, patents, and so on) used by firms and government agencies’ (p. 46).

This is not the definition of either conventional or Marxian economics as it includes land and owner-occupied houses. So his ‘rate of return on capital’ is not the same as the rate of profit, which is the ratio of profit to wealth invested in production with profit in view. Piketty himself recognises this:

‘… the rate of return on capital measures the yield on capital over a year regardless of its legal form (profits, rents, dividends, interest, royalties, capital gains, etc.), expressed as a percentage of the value of capital invested. It is therefore a broader concept than the ‘rate of profit,’ and much broader than the ‘rate of interest,’ while incorporating both’ (p. 52).

It will in fact be less than the rate of profit, which is normally much higher than the 4-6 percent that Piketty calculates as the range of his rate of return.

There is another peculiarity about his ‘rate of return on capital’. In some of his graphs he applies it to pre-capitalist times so it comes to mean any return, in whatever form, that property-owners obtain by virtue of owning property, including the labour service of feudal barons and the slave-labour of slave-owners in ancient Greece and Rome and not just the financial returns on marketable wealth as under capitalism.

This means that his claim at one point that r > g is ‘the fundamental structural contradiction of capitalism’ (p. 572) cannot be sustained. It is not even a contradiction but would be some measure of the exploitation of the producers in all private property societies whether or not that property or its income are marketable.

He offers no explanation as to how and why there should be a ‘return’ on capital but simply takes its existence for granted. There is no understanding that it only arises in private property societies and amounts to a tribute extracted from the producers – under capitalism from the class of wage and salary workers – by those who monopolise the means of wealth production.

It’s the same with ‘growth’, which he defines as the increase in a year of national income plus the increase in population. He just accepts that it happens as productivity and population increase. There is no understanding that what drives the capitalist system is the economic imperative, imposed through competition, on individuals and firms, who have invested in production, to maximise profits and accumulate them as more and more capital. Even so, his criticism of capitalism as he understands it is pretty damning.

Degrees of inequality

Thomas Piketty

Chapter 10 on ‘The Inequality of Capital Ownership’ has tables which show that in France the top 10 percent currently own just under 60 percent of total wealth and the top 1 percent nearly 25 percent. The figures for Britain are 70 percent and 29 percent; for the US 70 percent and 32 percent; and for Sweden (said to be the least unequal country in the world) 59 percent and 20 percent.

The tables also show, as graphs, the evolution of wealth-owning inequality for the two hundred years from 1810 to 2010. The highest degree of inequality was reached in 1910 when the top 10 percent in France owned 89 percent and the top 1 percent 60 percent; in Britain it was 90 percent and 70 percent and in Sweden 90 percent and 60 percent. At that time the US was less unequal than Europe with 80 percent and 45 percent.

The tables confirm the socialist contention that the basis of present-day society is the ownership of the means of wealth production by a minority. But they also show that the degree of inequality has gone down as well as up during this two-hundred year period. This requires an explanation. Piketty offers two.

The first is a long-run secular trend which he calls ‘the emergence of the patrimonial middle class’ by which he means that the share in total wealth of the middle 40 percent – those in between the top 10 percent and the bottom 50 percent – has increased since 1910. This statistical category has come to acquire enough wealth to own, together, between a quarter and a third of total wealth. This has had the statistical result of reducing the share of the top 10 percent but has not affected or reduced or been at the expense of the amount of wealth of the top group, whose wealth has continued to grow in absolute terms.

It should be noted (though Piketty doesn’t) that a large amount of the wealth of the middle 40 percent takes the form of the houses they live in and which have been paid for but which are not capital in the sense of an asset that brings in an income. This means that the figures in the tables underestimate the degree of concentration of the amount of assets that do bring in an actual property income.

Piketty notes that this shift has not affected the share of ‘the poorest half of the population, whose share of total wealth has always been miniscule (generally around 5 percent), even in Sweden (where it has never been more than 10 percent)’ (p. 347).

The exception not the rule

The second explanation that Piketty offers as to why the share of the top 10 percent fell in the period 1920-1970 develops his theory that the wider the gap between r and g the stronger the trend towards greater inequality. His explanation is that during this period the rate of return was reduced by the destruction of wealth during the two world wars of the period and by the devaluation through inflation of capital invested in government bonds. At the same time the rate of growth increased due to reconstruction work. The result was a reduction in inequality beyond that caused by the rise in the share of the middle 40 percent.

This explanation makes this period, when the rate of return, the share of income from capital in national income and the share of the top 10 percent in national wealth, all fell – in other words, when the richest were squeezed a little, though hardly till the pips squeaked – an exception to the normal working of capitalism.

The normal or ‘natural’ tendency as he calls it, for Piketty, is for the rich to get proportionately richer. In fact he argues that the degree of inequality will tend to increase in the course of the 21st century on the grounds that growth is likely to be slower while the rate of return can be expected to remain the same, so that the gap between the two will widen. He sees this as a danger to democracy and the welfare state (which he calls ‘the social state’). As an old-fashioned Social Democrat reformist (he is a supporter of the French ‘Socialist’ Party) he wants to stop and reverse this trend and probably wrote the book to drum up support for measures aimed at achieving this.

The trouble, from his point of view, is that his theory, if valid, provides a powerful argument against the chances of this reformist campaign succeeding. It means that the reformists in this field have set themselves the task not simply of reducing inequality in the ownership of wealth but also of overcoming economic forces working in the opposite direction.

That legal private property capitalism has a tendency for the rich to become richer in absolute terms is a consequence of the accumulation of capital (in the sense of wealth used to produce more wealth with a view to profit). Where there are private property rights over means of production the income these ‘yield’ when used as capital goes to the owners and the part that is re-invested (accumulated) is added to their wealth, ie, they become richer. This is a tendency the reformists will have working against them, whether or not Piketty is right about there also being a tendency too for the rich to get richer relative to the rest of the population.

The measures he proposes in Part Four to stop the rich getting richer are incredibly weak – higher taxes on high incomes (on the ‘supersalaries’ of the ‘supermanagers’ as well as the investment income of the rich) and a wealth tax. He recognises that no one country is likely to adopt this for fear, in the context of globalised capitalism, of putting off outside investment and so proposes a ‘global wealth tax’. Which is even more unlikely.

In any event, it is not a less unequal distribution of wealth and income that will help solve the problems that the class of wage and salary earners and their dependants face under capitalism. It is for the minority who monopolise the means of wealth production to be expropriated and for these to become the held in common so that they can be used to turn out what people need instead of things for sale with a view to a profit for their owners as at present.

Adam Buick

Editorial: Is it Better to be Exploited by One’s Fellow-countrymen? (2014)

Editorial from the September 2014 issue of the Socialist

Standard

‘If they speak consciously and openly to the working class, then they summarise their philanthropy in the following words: It is better to be exploited by one’s fellow-countrymen than by foreigners.’ (Marx, 1848)

A separate parliament in Scotland would be a capitalist parliament. It would not provide Scottish workers with any greater control over their own lives. Scotland would remain an integral part of international capitalism. An Edinburgh sovereign parliament will leave the workers in exactly the same position as before.

Scottish nationalism is the reaction of one section of the Scottish capitalist class to what they perceive as the declining fortunes of British capitalism and their ‘unequal’ treatment within it. They seek to keep the taxes on North Sea oil revenues and create a corporate tax structure more suited to their own needs. The SNP advocate industrial harmony and an end to class conflict. They entice Scottish workers with offers of a reformist programme and wild promises of more money and a better life. But no natural resources will be put to a sensible or beneficial use until the working class itself has gained control over the use of these valuable and non-renewable resources.

The question of independence threatens relations between English/Welsh and Scottish workers. Scottish workers are asked to place their trust in the local employing class rather than in unity with other workers. United working-class action cannot be easily achieved by insisting that there are supposed national differences in consciousness that distinguish Scottish workers from, say, their English brothers and sisters. And certainly it is not aided by combining with particular Scottish bosses, which lead Scots working people to identify with Scottish businessmen and landowners on the basis of shared ‘nationality’.

Working class unity enables us to combine our tactics for defending our class with the strategy of liberating our class. Socialists do not fall into the trap of the ‘progressive’ facade of nationalism. The success of the right-wing Ukrainian and Russian nationalists shows the danger of believing that radical nationalist slogans always lead to radical results. Scottish nationalism does not strengthen the campaign for socialism or create a united, class-conscious working class, but fragments and weakens it.

To those who are in the ‘Yes’ camp, we are saying independence will not improve your condition one iota. Only class struggle could do that and only with difficulty. Any success or otherwise of any workers’ movement in Scotland depends on close ties with similar movements in England (and elsewhere). At the same time, we are not defending ‘British nationalism’ and the unity of the United Kingdom in any way. That would be an endorsement for the status quo, something we do not support. So we do not argue that the present constitutional arrangement benefits ordinary people either. The liberation for Scottish workers can only come about by overthrowing capitalism itself. If this is not done, no amount of separatism can ever succeed in bringing freedom. Instead of tragically wasting time fostering nationalism, workers should be struggling for a socialist society without national borders.

'Because the condition of the workers of all countries is the same, because their interests are the same, their enemies the same, they must also fight together, they must oppose the brotherhood of the bourgeoisie of all nations with a brotherhood of the workers of all nations.'- Engels, November 29, 1847.