Economics Exposed: The causes of mass unemployment (1987)

The Economics Exposed column from the November 1987 issue of the Socialist Standard

Millions of people in Britain and throughout the world are suffering the poverty and indignity of unemployment. It has become a cliche in the 1980s to say that we are in the depths of a recession. That is a simple phrase which contains a massive range of suffering, bringing with it increases in racist violence, alcoholism, illness and even suicide.

There are many myths and false theories about the cause of this mass unemployment. Perhaps one of the most popular is that with the least academic pretensions. It is widely stated that this vast waste of productive resources, the large-scale redundancies and resulting downward pressure on the wages of those still in work has all arisen because "British industry" has become less competitive. Workers, it is claimed, have been both lazy and greedy, with high wage demands and low productivity, and that therefore sales have fallen.

First, let it be said that the politicians and press millionaires who are particularly fond of promoting this myth are not to be seen for dust when any really useful productive work might be going on. However, there are several other reasons why this claim should be rejected.

In almost all of the most industrially advanced nations of the world, unemployment has gone up significantly in the last 10 to 20 years. It is true that the increase in Britain has been particularly rapid, but the problem is quite obviously world-wide and cannot therefore sensibly be seen as a "British" problem.

Second, is it the case that during the 1970s. for no reason, workers in their millions suddenly became more "greedy" and “lazy" than they had been in the 1960s? Such explanations for crisis are clearly fantastical. Moreover, it is a gross insult and distortion to refer to the productive majority in society in this way. Some of the most tragic victims of the recession are people who have worked themselves towards an early grave, building up their employers' fortunes, only to be told in middle age that they are "redundant" to their company's future plans for profit-making.

Thirdly, let us take this popular myth about the cause of recession to its logical conclusion. If it is our high consumption relative to productivity which is the cause of our problems, then the answer would be to work even harder, produce even more, and consume even less. Well, if that formula is the "answer", you might wish you had never asked the question! The fact is, with a full use of modern technology and all of the resources available to us, it would be possible to meet needs far more adequately than at present.

The real problem is that within the present world-wide economic system, production takes place only if it will financially benefit the minority who own and control capital. You could work twice as hard for half as much, and yet still if the market system is passing through one of its periods of recession, your job will be at risk.

The market system which exists throughout the world today is rooted in competition rather than co-operation. Production levels are decided on the basis of guesswork, as companies estimate the activities of their rivals and the level of profitable sales they might expect. The vast network of production is balanced on this fragile foundation.

As the level of investment and production builds up by fits and starts, it is only a matter of time before one industrial sector or other overestimates sales potential and then has to make dramatic reductions in its level of investment. The market becomes "glutted", profits start to decline and redundancies follow, leading to recession in other markets. This happened, for example, in the British steel industry in 1973-4, with 70,000 resulting job losses.

This then produces a knock-on effect on other industries (in the case of steel, these included shipbuilding, car production, metals and heavy engineering). With an imbalance or dislocation between these different industrial sectors, and the spreading problem of overproduction relative to the market, the recession becomes general.

This is part of the trade cycle of capitalism, which has passed inevitably through periods of boom and slump since it began. The recessions of the 1890s and 1930s, like the present recession, were part of this cycle. In future months we will be looking at how recession is caused in more detail. But our starting point, in dealing with the popular myths of the gutter press, is that British workers. like other workers across the world, are the victims of this process, not its cause.

Clifford Slapper

A place of their own? (2013)

Book Review from the June 2013 issue of the Socialist Standard

House of Earth, by Woody Guthrie. Harper Collins, 2013. ISBN: 978-0-06-224839-8.

Guthrie, America's famous working-class troubadour, who died in 1967, presents in this novel, completed in 1947, a realistic picture of a couple struggling to survive in the Texas Panhandle during the Dust Bowl of the 1930s.

Tike and Ella May Hamlin feel frustrated with the inadequacies of their wooden shack and naturally yearn for something better. Tike buys a DIY government pamphlet on adobe houses made from the earth itself. Because it would be warm in winter, cool in summer, wind-proof, fire-proof and more importantly, dust-proof, Tike decides to make one himself. Since the Hamlins don't own the land they live on, Tike's efforts inevitably bring them into conflict with the powers-that-be.

What is clearly obvious is the extent to which Guthrie was influenced by the eroticism of D.H. Lawrence (in fact, most of the first quarter of the book is about the Hamlins having sex), and the social realism of his friend, John Steinbeck.

This reviewer would certainly recommend the book, but primarily because of the 34-page introduction by Douglas Brinkley and Johnny Depp, which contains an excellent description of the Dust Bowl and its effects. They destroy the myth that soil erosion was caused by the poor farmers not replenishing it: ‘. . . it's that those with power, especially Big Banks, Big Lumber, Big Agriculture, should be chastised as repugnant robber barons and rejected by wage earners.’

Brinkley and Depp mention several interesting tit-bits, such as the social activism of actor Eddie Albert, a friend of Guthrie's and that, when he wrote ‘This Land is Your Land,’ it was a rebuttal to ‘God Bless America.’ They contend that Guthrie could not get this book published at its completion in 1947, owing to the political climate of the times, which they called ‘Trumanism’ and that the book had been largely forgotten during the intervening years.

It is to be regretted that Guthrie was enamoured of the so-called Communist Party and that some of his work was patriotic. In ‘The Big Grand Coulee Dam,’ he wrote, ‘Now roars a flying fortress, for to fight for Uncle Sam.’

However, in his introduction he hits the nail on the head, ‘Life's pretty tough . . . you're lucky if you live through it.’

Steve Shannon

The Great Public Schools of England. (1904)

From the December 1904 issue of the Socialist Standard

It should be mentioned at the outset that by the “Great Public Schools” are meant those open only to the members of the Public who have long purses or long pedigrees. They are institutions peculiar to England, where the sons of the propertied-class are taught to play games well, and to despise both healthy labour and those who are foolish enough to provide them with free education and free maintenance, while refusing to claim the same for their own children. For centuries past it has been the aim of all members of the capitalist-class to obtain places for their sons at Eton, Harrow, Rugby, Winchester, or any other great public school, the mere mention of which is to stamp the youths as “gentlemen.” The majority of our “famous statesmen" have been educated at these “theatres of athletic manners and training places of s gallant, generous spirit"; and it is in these pleasant places that our rulers and owners have acquired that “education" which is so powerful a factor in fostering class prejudice. It will therefore be interesting to learn for what purpose they were founded.

In the 14th century, William Wykeham, the son of a small farmer, founded the first English Public School at Winchester; the Statutes declare that his purpose was to establish s school where a liberal education might be given to those who desired it but who were unable to pay the cost; they were to be pauperes et indigentes (poor and needy), and they were to be "clothed, boarded, lodged, and taught entirely free of cost"; further, 70 Fellowships at New College, Oxford, were to be reserved for them. The number of well-to-do scholars, paying full fees, was limited to 10! Well, in 1873 the “poor and needy” were being charged £60 a year, while 150 scholars were paying full fees.

The world-renowned Eton College was founded in the 15th century by Henry VI. The scholars, who were to be “pauperes et indigentes, apt for study and of good morals," were entitled to board and lodging, clothing and education, free of charge! It is needless to say that only the wealthy can afford or dare to send, their sons to Eton, and the founder would find it difficult to recognise his carefully formed, constituted, and endowed school in the present famous “patrician seminary." For high-class snobbery an Etonian easily beats all records, and those of some of the other public schools are hard to beat.

In 1512, Thomas Sutton was given permission to found the Charterhouse School for the free education and maintenance of poor children. The air of London proving unwholesome, the "poor children” now resort to Godalming, where plenty of good food and healthy exercise help to form those fine, strapping fellows that form such a contrast to the stunted growth of the slum dweller.

In 1567 L. Sherriff started a free school at Rugby, chiefly for Rugby boys.

In 1571, John Lyon, a yeoman, formed a school at Harrow for the "perpetual education of the poor children of the parish of Harrow, without any charge for the same." Harrow School, second only to Eton!

The Merchant Taylors' School was founded in 1560 for the free education of 250 boys, who alone should be eligible for some 50 Scholarships and Fellowships at St. John’s College, Oxford.

In Edward VI's reign many free schools were started, including Shrewsbury School, and Christ’s Hospital in London for the sons of the "very poor." Christ’s Hospital, indeed, has long been of advantage to the hard-worked city clerk and the ill-paid curate, but with its removal to Horsham, it will doubtless soon become, like Charterhouse, a place where the working-class will give free education and free maintenance to the sons of the wealthy.

St. Paul’s School was founded by the great Dean Colet, who ordained that it should be free to "153 children of all nations and countries.”

At Westminster School it was placed on the statutes that 40 scholars were to be educated free and freely boarded at the expense of the Dean and Chapter.

Dulwich College was founded by Edward Alleyn for the "free education of poor boys.”

Perhaps these notes on the charters of eleven of the most famous public schools will suffice to indicate the purpose for which they were founded and bow that purpose was fulfilled; of course there are many others whose origin and development were the same.

Although as long ago as 1855 the annual revenues of only four of these schools amounted to £74,000, gratuitous education is now practically non-existent; there are indeed at all the above institutions various scholarships, that often considerably reduce the fees, which vary from £80 to £150, but they are only to be gained by those who already have the qualifications of birth, influence, and education.

Among the boys, wealth and aptness for games are of primary importance, and those "apt for study and of good morals" have to endure the “ ragging,” so popular, too, at the Universities. It is incredible what suffering has to be endured by those who come to school to work or who refuse to join in the immoral practices so prevalent. The weak are oppressed, and the poor are treated with such contempt that they often run into debt to escape the stigma of poverty. Sham patriotism runs riot, and the daily attendance at chapel. engenders that sham religion which is seldom believed in but which proves of service in keeping in its place the working-class. The ignorance of the average public school boy astounding, and well accounts for the mismanagement of the late South African War, and in a degree, for the decline of British industry. Literature, top, may well become degraded when the leisured classes, can hardly write half-a-dozen lines in correct English.

The Rev. R. J. Campbell has denounced the working-class in a way that has even called forth remonstrances from most of the capitalist papers; no one, however, who knows anything of the "Great Public Schools” will deny that the boys, as a rule, are “lazy, unthrifty, improvident, immoral, foul-mouthed, and untruthful and sometimes drunken." “Betting and gambling" and “idle self-indulgence” are almost as prevalent in some public schools as in Park Lane.

This is the way in which the commands of the founders have been obeyed, and it is for this that the poor and needy have been so disgracefully robbed. The history of the “Great Public Schools” is symbolical of the history of the world ; the good things produced by and belonging to the working-class, stolen from them and devoted to luxury and riotous waste. It is to pot an end to all this that The Socialist Party has been formed, and there is only one method by which the Working-class may recover its possessions from the capitalist-class, and that is—Expropriation.

Sydney Chase

What the papers don't say (2): The broadsheets (1999)

From the June 1999 issue of the Socialist Standard

We conclude our examination of the capitalist press. Last month we dealt with the tabloids. This month it's the broadsheets.

Although there has been a general contraction of newspaper reading since the 1960s, there is one area that has bucked the trend: this is financial journalism. Here we find in the British press almost a model of probity. Financial reporting is factual, reasonably accurate, and does not exhibit any of the hysteria rightly associated with the downmarket press. Whilst the tabloids may be screaming blue murder about some take-over by a foreign company of an English one (a notable example was the take-over of Rover by BMW), the Financial Times, by comparison, will actually report the intricate financial details—the financial facts.Why does the financial press behave like this? The papers take the power of the City seriously; as well they might since the City is seriously powerful. The levels and detail of financial journalism have increased steadily in all the broadsheet papers since the 1960s. In that time the Financial Times has become, arguably, the most successful heavyweight paper. One can only begin to imagine what its corporate sales must be like; it is difficult to imagine a financial department or institution anywhere in Britain that does not take at least one copy of the Financial Times. Unlike the tabloids, the broadsheets print detailed and accurate business information. Who reads these papers? Why the capitalists and those who run their businesses of course! Bullshit for the workers—but information for the capitalists.The financial press has, over the years, gained autonomy from other sections of the press, and has also cultivated a really rather cosy relationship with Whitehall and its various departments. For instance Denis Healey, who could never be described as having an easy time of it with the press during the 1974-79 Labour government, described his relationship with the financial press like this:

"I regularly invited the top editorial staff of the leading newspapers to dinner, and accepted their invitations in return. I would discuss my problems frankly with them, and never had a confidence betrayed. As a result, at least they understood what I was trying to do, even if they did not approve of it. However much I deplored their criticisms, I rarely felt it was unfair. This was true at least of the so-called 'quality press', including newspapers which supported the Conservatives." (The Time of My Life, pp. 442-3).

One important and identifiable role that the financial press came to play in the politics of the 1980s was the switch away from Keynesian economic policies which unravelled so disastrously in the late 1970s, to the Chicago Monetarist policies which unravelled so disastrously in the late 1980s. The major players in this scenario were Samuel Brittan of the Financial Times, and Peter Jay, and William Rees-Mogg of the Times. Also important here was Nigel Lawson, Chancellor of the Exchequer from 1983-89, and who was a Financial Times journalist from 1956 onwards. All four of these men came from Oxford or Cambridge, and had remarkable family connections in the field of politics and finance, and were all converts to Friedmanite Monetarism. Wayne Parsons in his The Power of the Financial Press argues that the Times and the Financial Times introduced monetarism to Britain, ahead of the Treasury civil servants, the Bank of England, and the academic consultants.

In line with the increasing globalization of capitalism the Financial Times, in 1979, began its first foreign printing in Frankfurt. It currently gets 50 percent of its circulation and over half of its advertising revenue from outside Britain. The massive polarization is obvious: whilst The Sun exudes xenophobia "Up yours Delors", and "Hop off you Frogs", the capitalist papers of choice are international in scope, and provide hard facts.  

Lobby system

The tabloids deliberately limit the quantity and quality of their political coverage to screaming abuse, and then only for a small part of the paper, so as not to alienate the voters whose political party is being abused. The broadsheets, meanwhile, carry much more political news and comment. This is obtained through the lobby system. Very simply, this involves lobby journalists being allowed to speak informally to politicians in the lobby of the debating chamber in the Houses of Parliament; these stories can then be used on a "non-attributable" basis. Although television has impacted upon this scene with its various "on-the-record" interviews, the lobby system remains potent and mischievous. Here the picture gets very muddy indeed.

Politicians use lobby journalists to leak information that might:

• damage the opposition,
• damage a fellow politician with whom they have fallen out,
• to fly the kite as it were - to experiment with policy to see how it will go down,
• or simply as an opportunity to trade points of view.

This situation is made more problematic in that the lobby system is essentially self-policing, and self-censoring, according to unwritten and ill-defined rules. Nowadays the various spin-doctors are extremely adept at manipulating the journalists, in order to spin a story that may deflect attention from other things that are going on, or to put a different spin on another story from another non-attributable source, and so it goes on.

But arching over these various machinations is the market. Journalists need to move copy, and nothing does so like a crisis. Papers feed on crises. It is the media that provides the image and framework of "the crisis". Once the papers have reached the "crisis" conclusion, the government can either deny the crisis, and thus give the original story more weight and run the risk of "Crisis, what Crisis?" headlines, or ignore the situation and be accused of inaction and incompetence.

Jeremy Tunstall, in his book Newspaper Power, has identified a pattern to the media crisis. Once there has been one "crisis", this is usually followed by a couple more. Once the press's appetites have been whetted, and circulation temporarily increased by the "crisis"—another is the journalistic equivalent of manna from heaven, and so a rather ordinary event may be promoted to the crisis league.

So what have we learned? The press was recently described by the ex-chancellor Kenneth Clarke as a bucking bronco which he was continually forced to ride. For the Socialist the press can sometimes be a goldmine of information. Occasionally, in the oddest places, the press pay unwitting testimony to the lunacy of capitalism. We don't want to suggest for a moment, that there is nothing but lies in the press; rather that the capitalists, as the newspaper owners and users, as political movers and shakers, have the press as part of their armoury with which to dominate and subdue the working class.

At the same time they have inevitably created a warped and highly unstable instrument of communication, which has its own internal rules, and which plays a massive power game with the capitalists representatives in Parliament. The capitalists of the late twentieth century make sure that it is their message that gets across. Whilst the workers are encouraged to be parochial and xenophobic when the occasion demands, the capitalists and their papers have expanded their field of operations world-wide.

Intellectual vacuum

Newspapers exist in a dialectical relationship with the capitalist system, "bucking bronco", "a snapping rottweiler"; this kind of metaphor has been used by the politicians who benefit from press coverage. However, the press is there to sell papers and who can predict what they are going to have to do in future in order to achieve this.

There is a literary theorist called Pierre Macherey who wrote in his book A Theory of Literary Production that "a text says what it does not say". His argument is that the silences in a book or a play or indeed a newspaper are as significant as what is said. It is the work's silences that give it form. He argues that in order to really know a work we must, in his words, "move outside it". Then to question the work: "the work has its margins, an area of incompleteness from which we can observe its birth and its production. It is not what the work refuses to say that is important, but rather what it cannot say". Put simply we have to read between the lines, but more than that we have to understand why we are having to read between the lines, and to understand why certain things cannot be said by the press.

For example, when increased emphasis upon personalities replaces real political debate—this happens in all the papers and is justified by extremely erudite pieces in the heavyweights—why does this happen? From a Socialist's point of view it's easy: image increases in directly inverse proportion to content. The Nazi Nuremberg rallies were all lights, loud music, excessive amounts of Wagner, and ranting meaningless rhetoric; a bit like Tory and Labour conferences of today (except without the Wagner). The Nazi's rhetoric of blood and soil had to be couched in these terms, because like the politics of today it was an intellectual vacuum.

The future will re-evaluate the tabloids not for what they said, but for what they did not say. Imagine being in the position of having to explain to a couple of aliens from outer-space why the gold-blend couple (the couple from an advert) were given front page status in the biggest-selling newspapers in the land, when a third of the population of the world were starving. A monumentally difficult task to do without slipping into platitudes.

In a sane world information would be available not because it was saleable, but because it was necessary. Some information is boring, but necessary; some is interesting and fun. All will be available in a socialist society without the distorting lens of the market getting in the way to inflate, downgrade, change, or otherwise manipulate the information we need.

It's easy to disbelieve everything we read in the papers, the more difficult job is to realize what we are not reading in the papers, to identify where the silences and areas of incompleteness lie. Socialist understanding undoubtedly makes this job easier, but it is faced with a deluge of scrambled and partial truth, unconscious misrepresentation, and downright lies. Karl Marx once said, "The first condition of the freedom of the press is that it is not a business activity". How right he was.

Jacek Krause

Cooking the Books: . . . and When Demand Exceeds Supply (2016)

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

There is a housing shortage in London. Or rather, paying demand for accommodation in London exceeds supply for sale, which is not necessarily the same thing. There are probably enough buildings in London to house everybody, certainly enough so that nobody need be homeless or live in accommodation without basic amenities. The Times (12 April), for instance, reported:

‘A growing glut of luxury homes in inner London could encourage developers to turn them into offices, according to a report that says the total floor space of top-end apartments in the pipeline would be enough to cover Hyde Park.’

Where paying demand exceeds supply for sale prices go up, in the case of housing, rents and house and land prices. Those on lower incomes tend to lose out, having to either cut back on food or move to an area where rents are not so high. This can cause problems for the smooth operation of capitalism as many in this position are essential workers who need to live near where they work.

Various ways of dealing with this problem have been tried. Council housing was one, providing subsidised rented accommodation for workers but this has virtually been abandoned, with priority now being given to people who councils have a legal obligation to house.  Rent control was another but, by making investing in house building and renting less profitable, leads in the long run to less private rented housing being provided and to landlords not maintaining their property.

The current model is for local councils to sign deals with private profit-seeking developers to provide some ‘affordable’ housing in their projects. ‘Affordable’ is defined as a rent of below 80 percent of the going market rate, which is still unaffordable for many. The property developers naturally seek to maximise their profits, but the more affordable housing they are required to provide the less their profits. This places a limit on how far councils can push them. If pushed too far they can just walk away or, as often happens, plead rising costs to reduce the previously agreed percentage of below-market housing.

During the mayor of London elections some of the candidates made promises to increase the supply of cheaper housing that, given this model, would be undeliverable as they would make house building less profitable for developers. Sadiq Khan, the Labour candidate and ex-MP George Galloway both promised to ensure that at least 50 percent of new housing would be affordable. They also promised to redefine ‘affordable’ at a lower level of rent, so making house building even less profitable.

The 12 April Times also reported on ‘flipping’ where property is bought ‘by investors who have no intention of living there or renting them’ but bank ‘on price rises to resell at a profit before construction is complete. The flipper secures the right to buy a home with a deposit and then sells that right to a second investor for a higher price. They pocket the difference.’

Because housing is produced for profit there is no possibility of a rational approach to housing within capitalism. As Engels pointed out as long ago as 1872:

‘As long as the capitalist mode of production continues to exist, it is folly to hope for an isolated solution of the housing question or of any other social question affecting the fate of the workers. The solution lies in the abolition of the capitalist mode of production and the appropriation of all the means of life and labour by the working class itself’ (The Housing Question).

Cooking the Books: When Supply Exceeds Demand . . . (2016)

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

The capitalist class is not a monolithic block with a single interest. They are united of course in wanting capitalism to continue and a government to enforce their ownership, but beyond that it’s a mass of often conflicting sectional interests of particular groups, industries and firms. An important role of governments is to arbitrate between these conflicting interests.

The current crisis in the British steel industry is a case in point. Tata, the India-based capitalist conglomerate which owned the Port Talbot steelworks (which shows that capitalism is international and that the Leninist theory that imperialist Britain exploits capitalist India is nonsense – they’re all in it together), wanted to dispose of it as it wasn’t making a profit. In fact it was said to have been making a loss of £1 million a day. No capitalist firm is going to put up with that for long.

The reason why Tata’s Port Talbot works had not been making a profit is that it was not ‘competitive’, i.e. could not produce steel at a cost below the price they would get from selling it. This was not because its production costs had gone up but because the world market price of steel has fallen. As the Times (30 March) pointed out, there is ‘a global glut of supply. Capacity utilisation in the global steel industry is just 66 per cent.’

This glut, and overcapacity and overproduction (in relation to market demand not needs), is a manifestation of the world economic slump that followed the Great Crash of 2008, from which the world economic has not yet fully recovered.

China too has a surplus steel-producing capacity. The policy its rulers have adopted to try to recover some at least of the money invested in its steel industry has been to sell its steel below its cost of production. In short, dumping. This is not allowed under international trade agreements or, rather, if one country does it, others are permitted to retaliate by imposing or increasing tariffs. This is what the EU wanted to do, but this was blocked by some member-states, including Britain. But why? Didn’t the British government want to protect the British steel industry? In a word, No. They didn’t want a higher tariff as this would put up the price of steel in Europe and so increase the production costs of industries consuming steel.

The BBC reported (1 April): ‘The European Steel Association said the UK had been blocking an EU measure which would have tackled the "dumping" of cheap Chinese steel in Europe, which is partly being blamed for the crisis. (....) The UK has argued against higher tariffs, saying they would hit other sectors such as the car industry, which import a lot of foreign steel.’ The Times that day added: ‘Mr Javid confirmed his opposition last month, saying that it could hurt consumers and other businesses using steel products.’

Explaining this to the Port Talbot steelworkers was never going to be easy. Business Secretary Sajid Javid came across more as the investment banker he once was than as an astute politician. But he gets full marks for honesty when he told the Engineering Employers Federation:

‘We have to recognise what government can do and what it can’t. There is a huge overcapacity and a fall in world demand and we can’t change that’ (Times, 31 March).

Precisely.