Karl Marx (1959)

From the December 1959 issue of the Socialist Standard

Seventy-Six years ago, on March 17th. 1883, Karl Marx was buried in Highgate Cemetery in London. No massive structure of marble or bronze is needed to remember the man. for his work is its own memorial At the graveside. Friedrich Engels, who was Marx’s best friend and his co-operator for over forty years, said this;

Just as Darwin discovered the law of evolution in organic nature, so Marx discovered the law of evolution in human history. He discovered the simple fact hitherto concealed by an overgrowth of ideology, that man must first of all eat and drink, have shelter and clothing before he can pursue politics, science religion, art. etc.; and therefore the production of the immediate material means of life and consequently the degree of economic development attained by a given people or during a given epoch, forms the foundation upon which the forms of government, the legal conceptions, the art and even the religious ideas of the people concerned have evolved and in the light of which these things must therefore be explained, instead of vice versa as had hitherto been the ease.

Karl Marx was a German, the son of a lawyer who practised in the old cathedral town of Trier on the Mozelle, close to what was then the French frontier. There he was born on 5th May. 1818. He died an exile in London, after he had been forced to flee from Cologne, Paris and Brussels to escape the persecution of the ruling powers of the day. He could have chosen the comfortable career of a lawyer or a university professor, but he preferred to spend his time and energy in educating the workers. He first became active as a writer, championing the cause of the agricultural workers and small farmers in the Rhineland in their fight against the land-owners. When the newspaper in which he wrote was suspended he went to Paris, where he studied the history of the French Revolution. the Utopian Socialists and the start of the French labour movement.

He became a Socialist and made friends with Engels, the son of a textile manufacturer in Barmen, who was then employed in his father’s branch in Manchester. Engels, too, became a Socialist and thenceforth the two men were united in a partnership of thought and action. Notably, they produced the famous Communist Manifesto, which became a guide and compass to the Socialist movement. At the time, the political domination which the semi- feudal reactionaries of the Holy Alliance were able to exert in Europe was being threatened by the rise of Capitalism. The steam engine had put the factory in place of the old productive method of handicraft and the railway had begun to replace the stage coach. But the new social system had its own evils; the second half of the '40’s saw Europe plunged into a long and serious commercial crisis, which severely shook Capitalism.

Said the Communist Manifesto: “All history until now is the history of class struggles.” Capitalism sharpened the struggle into a clash between two classes, the Capitalists and the wage working class. The immediate task was the organisation of the workers into an independent movement for the conquest of political power and the overthrow of Capitalist society. This struggle is no national affair; it must be fought out internationally, until the establishment of Socialism brings the end of class rule and the exploitation of the working class. The Manifesto summed it up; ” Workers of the World Unite! ”

The International

In 1864, Marx took an active part, with Engels, in launching and directing the first International Working Men’s Association. The First International, although necessary, was foredoomed to failure by the immature consciousness of the workers, which arose from the undeveloped conditions of Capitalist society. Internal disputes and the repressive laws on the Continent eventually broke it, but it had not been all in vain. In the midst of his work for the International, Marx published the first volume of Capital, which has been attacked by many people prominent in various fields of thought and by a long line of professional and literary hacks. They have all claimed to prove Marxian theories incorrect and outdated, but events have been against them. Marx’s labour theory of value and his materialist conception of history have been vindicated again and again.

Marx was a great scientific thinker and a courageous man, who bore witness to the old saying that the pen is mightier than the sword. He offered the working class the knowledge—and through know- ledge the power—to establish a classless, warless, tradeless system of society. Because of this, his name will be remembered long after his revilers have perished.

J. E. Roe

Cooking the Books: Swizz Banking? (2016)

The Cooking the Books column from the March 2016 issue of the Socialist Standard

Swiss banking reformers have obtained the 100,000 signatures needed to initiate a referendum to restrict bank lending or, as they put it, to stop banks benefiting from being able to create electronic money out of nothing.

Explaining the apparent logic behind the proposal in the Financial Times (5/6 December), Martin Sandhu wrote:

‘The bank decides whether it wants to make you a loan. If it does, then it simply adds the loan to its balance sheet as an asset and increases the balance in your deposit account by the same amount (that’s a liability for them). Voilà; new electronic money has been created.’

This is indeed what happens from an accounting point of view. Double-entry book-keeping requires every new asset or liability to be balanced by a corresponding liability or asset. In this case, in making the loan, the bank acquires a liability. This has to be balanced, in the accounts, by a corresponding asset, recorded as an IOU from the borrower. That a new asset has been created out of nothing is only an illusion arising from an accounting convention.

Outside the accounts department all that has happened is that the bank has committed itself to making a loan to a customer. It ought to be obvious that, to be able to meet the obligation (liability) to pay this, the bank will have to be able to fund it, but currency cranks (and, surprisingly, some financial journalists) overlook this and believe that banks really can ‘simply’ create out of thin air what they lend. Sandhu even used the word ‘scam’.

This is not to say that loans have to be funded entirely from what people have deposited with the bank (a view sometimes attributed to critics of the thin air school of banking) since other sources of funding are available, from the money market (i.e. other financial institutions) or the central bank, some of which can even be done after a loan has been made.

The Swiss banking reformers subscribe to the mistaken, monetarist view that an over-expansion of bank lending causes (rather than merely reflects) booms and busts and they want to control and restrict it to try to prevent this. It won’t work but that’s the theory.

The proposal is that banks should not be able to re-lend money deposited in current accounts. When it receives such a deposit the bank will be required to re-deposit it with the state’s central bank in return for what Sandhu calls ‘State e-money’. All banks would be able to do with this is transfer it between current accounts.

This would certainly restrict bank lending but it wouldn’t (and is not intended to) stop it altogether. As the Swiss banking reformers explain (tinyurl.com/hnemzep), after the enactment of their reform:

 ‘The banks can only work with money they have from savers, other banks or (if necessary) funds the central bank has lent them, or else money that they own themselves.’

But this is already, now, the case! Money deposited in a current account is just as much a loan to the bank as is money deposited in a savings account. Banks can, and do, re-lend most of it too, except that, unlike with a savings account, it keeps all the interest.

But if money re-lent from a current account is money created from thin air, why is money re-lent from a savings account not? Don’t ask us. Ask the currency cranks.