From Marx to Milton Friedman (1970)

From the November 1970 issue of the Socialist Standard

During the six years of the 1964-70 Labour government, two developments were going on in the field of economic theory; on the one side confidence in a government’s ability to “manage the economy” was being undermined by the series of crises and the rise of prices and unemployment; on the other a big offensive was being mounted by monetary economists against the Keynesian ideas on which the Labour government’s policies were based. The two trends came together in the declaration made on 19 May 1969 by Roy Jenkins, Labour’s Chancellor of the Exchequer, that his priority was not expansion of production and employment, as his supporters would have wished, but dealing with the problem of “too much money” in the economy.

Prominent among the monetary school is Professor Milton Friedman of Chicago University, whose lecture, “The Counter-Revolution of Monetary Theory”, was reproduced in the Financial Times  (7 September). It should be noted that Friedman said he was attacking Keynes’ followers not Keynes himself. Indeed he claimed that Keynes, if still alive, would, in present circumstances, be in the forefront of the counter-revolution.

Among the many aspects dealt with by Friedman the two most interesting were his treatment of inflation and his own idea of how a government should try to manage capitalism.

On the first he declared:

  “Inflation is always and everywhere a monetary phenomenon – in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

At first glance it may seem that Friedman was merely restating the view held in the past by economists as diverse in their approach as Marx, Cannan and Keynes, that if an inconvertible currency (such as exists now) is issued in excessive amounts this causes a proportionate rise in the general price level. There is however a variation of terms that should be noted. These three economists were talking specifically of currency (notes and coin) while Friedman was talking of currency plus bank deposits. (Current use of the term “money”is so variously defined that the government central statistical office now has three different calculations of the money supply).

In practice no doubt the Friedman “money” view of inflation comes back roughly to the currency view because any policy of controlling “money supply” would in the last resort entail also control of the currency issue. Most economists follow Friedman in including some or all of bank deposits in their conception but among those who after the war continued to deal with inflation specifically in terms of currency was Sir Arnold Plant, Professor of Commerce in the University of London. He declared that “all our troubles arising from the present inflationary position would cease as soon as a British government decided to accept the full responsibility of their position as the sole controller of currency issues”. He wanted an absolute ceiling to be placed on the total currency issue (The Times, 1 June 1956).

In order to understand the attitudes of Friedman and Keynes (and Marx) it is essential to separate the question of inflation (currency depreciation) from the question of the possibility of managing capitalism. Keynes was not an advocate of currency depreciation for its own sake, though he did rely, as a method of handling certain situations, on his belief that workers who would strike against a reduction of money wages could be induced to accept a fall of real wages through a rise of prices (The General Theory, p.9).

Keynes’proposition was that no control of the currency issue was necessary because if the monetary authorities looked after bank lending (“the creation of credit”) the creation of currency could be left to follow suit (Tract on Monetary Reform, p.184).

When Keynes declared his belief that formal control of the currency issue was unnecessary Professor Cannan immediately raised the alarm. He said that experience showed that unless there was some form of control governments would always succumb to the temptation to depreciate the currency, with its consequent rise of prices. In fact currency in the hands of the public has increased from £449m in June 1938 to £3,107m in June 1970. Such a rate of increase was never intended or anticipated by Keynes. Friedman is now saying that some control is necessary. He wants the increase to be limited to a steady 4 or 5 per cent a year.

   “A steady rate of monetary growth at a moderate level can provide a framework under which you can have little inflation and much growth. It will not produce heaven on earth. It will make an important contribution to a stable economic society.”

If Friedman’s lecture is compared with the 1944 White Paper Employment Policy, which was the agreed three-party statement on how Keynesian doctrines were to be applied after the war, it will be seen that Friedman’s other main criticism was of the belief that interest rates could be kept down by government policy and that this could be an effective instrument for controlling economic affairs. Bank rate under the Wilson government rose to the highest level for a century and Friedman argues that the excessive rate of growth of the money supply is a contributory factor in high interest rates.

That 1944 statement showed how the government would iron out the ups and downs of overexpansion and depression by varying interest rates, by alternately increasing and decreasing government and private capital investment and by increasing and decreasing the market for consumer goods, and at the same time aim at “work for all“, stable prices and continual expansion of production and a rising standard of living. It has failed in most of its objectives.

What are the prospects that Friedman will do any better? He is of course more moderate in his claims. He appears to think that under his proposal British experience will come more into line with American. It would seem that he is not expecting much; indeed it may well be he expects the already rising unemployment in Britain to reach the higher level that has prevailed in America in recent years.

There is no reason at all to suppose that his moderate and controlled inflation will get rid of the cycle of expansions, crises and recessions than did the more rapid inflation of post-war Britain, or the long period without inflation in the 19th century.

Marx never supposed that capitalism could be made to work smoothly and neither Keynes nor Friedman has shown how capitalism can do without unemployment to provide an industrial reserve army and keep wages down to a level profitable to the capitalist. It is true that post-war governments thought they had found a substitute in the form of an incomes policy and wage restraint but it came up against working class resistance they never expected.

Incidentally in all the plausible plans of the 1944 statement there was not a word about having to include such a policy.

Edgar Hardcastle

Russia and Marxian Economics (1970)

Pamphlet Review from the November 1970 issue of the Socialist Standard

‘Marxism and Market Socialism’. Irish Communist Organisation pamphlet. 5s.

“Market Socialism” is of course a contradiction in terms since the establishment of the common ownership and democratic social control of the means of production necessarily involves the abolition of the market. It is used here by a group of Maoists (they say that soon after the death of Stalin in 1953 the Russian government began a policy of “restoring capitalism” in Russia) in their criticism of the current economic doctrines of the Russian ruling class. They too see this term as contradictory but from a different angle since they accept Lenin’s false distinction between “socialism” and “communism”. Nevertheless this is an interesting pamphlet which makes some pertinent points.

“Marxist-Leninist literature”, a Russian economist Lev Leontyev has written, “has proved as entirely groundless the idea that Marx and Engels, and Lenin, pictured socialism as a natural economy without commodity-money relations”. To see why this is a distortion of Marxism we must know something of what Marx said.

Marx set out to examine how capitalism worked. Capitalism, he showed, was the most developed form of commodity production, a commodity being an article of wealth produced by separate, competing enterprises for sale on the market. The existence of commodity-production implies the existence also of private property, of private owners of commodities who buy and sell them. What prevents a complete breakdown of this unorganised system of production is the fact that commodities exchange in definite proportions depending on their value (or the amount of socially necessary labour used in producing them). It is through the impersonal workings of the market, called by Marx “the law of value”, that production is regulated under capitalism.

Socialism, by establishing the common ownership of all the means of production, brings commodity-production to an end. No longer is wealth produced by numerous separate enterprises all competing to sell their goods on the market. The law of value ceases to operate. Instead there is the planned production of useful things under the democratic control of society. This was the view of Marx and Engels and is the view of the Socialist Party of Great Britain. It was inherited also by the Bolsheviks who seized power in Russia in 1917. They proclaimed their ultimate aim as the abolition of the market and money and explained the persistence of commodity production after 1917 as a survival of capitalism which would gradually be eliminated. This is what the classic Bolshevik textbook of 1919 The ABC of Communism argues; it is also what the Irish Communist Organisation describe as “orthodox Marxism”.

In 1936 Stalin declared that Socialism had been established in Russia, despite the continued existence of commodity-production. This glaring contradiction was not resolved until 1943 when an article on “Teaching Economics in the Soviet Union” appeared in a leading Russian journal. This simply denied that Socialism involved the abolition of commodity-production and said that the law of value continued to operate under Socialism though, instead of acting blindly as under capitalism, it was consciously applied by the State. This line of thought has led today to Russian economists (just like their colleagues in the West) defending the market, and even rent, interest and profit as useful economic weapons. All this is traced and discussed in detail in this pamphlet.

In wishing to absolve Stalin from any blame for this distortion, the ICO is in a curious position. They say that the 1943 article “clearly represents revisionism at a high level of development and in an influential position in the CPSU” and imply that Stalin would not have endorsed it. This is most unlikely. So important an article could not have been written without Stalin’s knowledge or approval. Indeed it probably arose from the meeting Stalin had with leading Russian economists in 1941 which is mentioned in passing by one of the Russians quoted in this pamphlet. All the ICO have to go on to argue that Stalin held a view similar to the early Bolsheviks is some remarks in his Economic Problems of Socialism in the USSR, written in 1952.

It is odd that this pamphlet should be chosen as an example of the orthodox Marxist view. For it contains a very significant distortion of Marx’s view ― it argues that there will be “objective economic laws” under Socialism. An objective law is one that operates independently of the will of man. Natural laws are thus objective and so is the way capitalism works or what Marx called its laws of motion. A moment’s thought will show that there can be no such economic laws in a socialist society. For Socialism establishes full social control over the use of society’s productive resources. The production and distribution of wealth becomes purely a technical and administrative matter carried out in accordance with plans worked out and consciously implemented by human beings. Under these circumstances to talk of “objective economic laws” is nonsense. But Stalin was insistent on this point. “The laws of motion of the political economy of Socialism” he wrote, “are a reflection in the minds of men of objective laws existing outside of us”. But men could, he went on, discover what these laws were and “utilise them in the interests of society”.

In proclaiming that objective economic laws existed which could be controlled by the State in the interests of society, Stalin was paving the way for the current Russian argument that there is nothing as such wrong with commodity-production or money or the market or profits as long as they are properly controlled and not allowed to work blindly. This of course is the old impossible dream of capitalism planned to work for the good of all.

In a sense Stalin was right. The Russian economy has always been subject to economic forces that operate independently of men’s will. But that was because it is not, and never has been, socialist but a form of state capitalism.

Adam Buick

Marxism and Russia (1970)

From the November 1970 issue of the Socialist Standard

The outcome of the Russian Revolution —the evolution of state capitalism in Russia— was a confirmation of Marxism. For Marxism holds that Socialism is only possible at a certain level of social, economic and political development: when the productive system can provide plenty for all, and when the working class, being the main class in society, understands that their problems can be solved only through political action to make the means of production the property of the whole community. In 1917, could the Russian productive forces provide plenty? Was the working class the main class there? Were they Socialists? The answer to all three questions must be “no”. Given this the failure of the Bolshevik attempt to impose “Socialism” by dictatorship was inevitable. Marx was right. It is not possible to skip stages by bold leaps or legal enactments.

Enclosing the sea bed (1970)

From the December 1970 issue of the Socialist Standard

Nearly all the land of the Earth has been claimed by one or other of the many States into which the world is divided. The one exception is Antartica which, like the Moon, is governed by an international treaty which bars States and individuals from exercising territorial or property rights over any part of it.

Much of the sea area of the world, however, including the sea bed is still unclaimed. This is now beginning to cause problems as the seabed, especially the various continental shelves, are potentially profitable sources of raw materials like oil, natural gas and minerals. The United Nations Seabed Committee has been meeting in Geneva since August to consider the problem. Various suggestions have been put forward as to who should own the rest of the seabed once the matter of just how far out the territorial waters of coastal States should go has been settled.

The British government has proposed that the seabed outside these limits should be divided amongst all the States of the world, including land-locked ones. The sea would thus, like the land, come to be divided up by frontiers.

Another proposal is that the seabed outside territorial waters should belong to an international agency which could grant licences to States and/or companies to exploit the mineral resources. Royalties might be used to help finance investment in the underdeveloped countries. This proposal is sometimes described, as it was by President Nixon in a message he sent to Congress on 9 July, as one to make the oceans and the seabed “the common heritage of mankind". This is not really accurate but at least this arrangement would avoid the absurdity of drawing frontiers all over the seabed and an international agency would be able to exercise better control over conservation and pollution.

If ownership of the seabed were vested in an international agency this would not make it the common property of mankind, for the agency would be an inter-governmental body responsible to the various capitalist States of the world (including state capitalist Russia) perhaps through the United Nations. It would be an example of common ownership. but by the capitalists of the world rather than by the people of the world.

Individual ownership of land is not essential to capitalism. Indeed landed property is a particularly parasitical form of ownership since the landowner is in a position to extract a tribute as ground rent and royalties from the rest of society, not only without having to work but also without even having to invest any capital. It was this that made landed property unpopular amongst some industrial capitalists in Britain in the last century; they resented the fact that landowners were able to share in the proceeds of their exploitation of the working class without contributing a penny towards it. Various proposals for ending this burden on profits were put forward: estate duty, Henry George's single tax on ground rent, and outright land nationalisation. This last proposal was of course often claimed as one to make the land “the common heritage of the people”. But there was nothing socialist about it as can be judged from the fact that when Labour nationalised the mines in 1948 the coal had already been nationalised previously by the Tories.

Nationalisation of land or of mineral resources is a measure that allows capitalist concerns access on equal terms to these essential materials. The proposal to have the seabed owned by an international agency has the same purpose: some States are afraid that others might deny them access to the resources of the seabed and want some international body set up to ensure that this does not happen.

Something quite different is required to really make these resources “the common heritage of mankind”. This is meaningless unless the land and the manmade instruments of production are also made part of this heritage in a world without frontiers on land as well as under the sea.

Adam Buick

To workers from Ireland (1970)

From the December 1970 issue of the Socialist Standard

Many of you will be concerned about what is happening in places like Belfast and Derry. You will probably support the civil rights struggle in Northern Ireland,

We too are concerned about the conditions our fellow workers in other parts of the world have to live and work under. We know that the role of the police and army is everywhere to protect private property and the existing political set-up.

When Ireland got independence in 1921 the North East part for economic reasons, was kept under British rule though given a parliament and government of its own. The government there has since armed itself with various undemocratic powers to use against its opponents. It is against these powers, and against bad housing and unemployment, that the Civil Rights people are protesting.

Protest movements are nothing new and are not confined to Northern Ireland. They exist everywhere and show that everywhere workers are discontented with some aspect of their lot. It is by promising to do something about this that politicians obtain your votes — and it is their failures that lead people to protest on the streets.

The politicians fail not because they are dishonest or incompetent but because capitalism cannot be made to work for the good of all.

If you accept this, then you will see that direct action is in the end as futile as voting for parties that stand for capitalism. You will see too the uselessness of a United Ireland as a way of solving the problems of workers in the North. This would merely be a political re-shuffle — a change of masters, we would say — that would leave unchanged the class basis of society which is the real cause of these problems. As anyone who has lived in the Irish Republic can confirm, people there face the same problems of bad housing, unemployment and insecurity (indeed this may be why you are now living here in Britain).

The lasting solution to these problems in Northern Ireland, the Irish Republic, Britain and the rest of the world is Socialism.

Concern for causes (1970)

From the December 1970 issue of the Socialist Standard

During the debate caused by the recent hijacking of a British airliner to a Middle East airstrip, the Daily Telegraph published a delightful letter. It was, like a lot of the Telegraph’s correspondence column, the work of a military man. Its main point was that the Arab guerillas were cowards — full of bounce when dealing with women and children but how would they fare against men!

This rather quaint argument is typical, in its way, of the idea we are fed with from an early age — the idea that there are absolute standards which can be identified as Right on the one hand and Wrong on the other and by which we can conduct our lives. It is ironical, but unexceptional, that the very people who promote this idea are themselves so ready to modify it when it suits them to.

One example of this is in the matter of international trading. The present, capitalist, social system is made up of a host of separate states which, as states, operate in the accepted and necessary way of capitalism. They try to sell the products of their industries to each other; they compete with each other. At times this competition is represented as healthy, productive, necessary.

In this country, as we have all seen so many times during recent times, it is considered a major triumph when British goods are sold successfully abroad; there is no hero like an export salesman who wins an order from a foreign buyer, especially if he is bidding against competition from traditional trading rivals like the Germans and the Japanese. But when this situation is reversed — when firms abroad succeed in capturing a market, or even a part of a market, in this country — it is a different matter.

The motor car industry, for one. is at the moment very anxious about the threat from foreign imports. As the Volkswagens. the Renaults and the Fiats come rolling ashore, the British car makers do not sing ecstatic praises to the purifying joys of competition. Instead, they assert bitterly that British cars are the best in the world and that anyone buying a car in this country should exercise patriotic discrimination in favour of the British-made product. They talk of threats from foreign imports, as if each imported car were some virulent microbe which may destroy us all. To the car firms, as to all exporters, exporting is fine, provided it is all in one direction.

This type of attitude is not confined to British firms. In recent years America has been one of the world's most aggressive and successful exporters. In one way or another American exports have dominated many important international markets — for example in long-range jet aircraft, where no other country gets a look-in. But when the flow seems likely to be reversed, when industries abroad seem to be a threat to American firms, how does Washington react? They do not welcome it. Here are two reports from The Guardian, which illustrate this; the first (5 November) is about an American protest at action aimed at hampering their exports:

   The Nixon Administration issued an unusually tough statement tonight expressing displeasure and concern that Britain's new agricultural levy system threatened to affect American grain exports worth £40 millions a year . . . This protest, hinting at the possibility of a trade war. was being interpreted here today as evidence of the Administration's growing suspicion of the Common Market's price support system towards which Britain has now taken an initial step.

The second, from an earlier (7 October) issue, gives details of a Bill going through Congress which seeks to protect American industry from foreign imports:

  The Bill proposes quotas on US imports of textiles and footwear, which in themselves account for only £5 millions of British exports. But there is also a “trigger" mechanism which could lead to anti-import action by the US on 120 items ranging from ceramic tiles to bicycles and cars in cases where imports have more than 15 per cent of the market.

The Americans, of course, have upset many people in Britain with some spectacular take-over operations. A large part of the car industry is American owned and this has been a source of anger to many a patriotic worker in Luton and Dagenham. But these same workers can have no objection in principle to one country investing in another, else why do they not grow angry about the British money which is sunk in production abroad and which British troops have so often been sent to defend? The argument which raged a few years ago over the presence of British forces in the Persian Gulf area was really about the stake which the capitalist class of Britain had there. They owned about one third of the oil production in the Gulf, with investments worth in 1967 about £900 millions.

Little wonder, that under capitalism war and oil are almost synonymous terms. And when a country goes to war we are confronted with yet another example of double-think, when its propaganda machine puts out the idea that whatever atrocities are committed (nobody seems to doubt that there will be some) will be the work of the other side. Because in war “our” side is made up of people like the boy next door, our own brothers and fathers, no one is too eager to believe that they could be involved in acts which are readily attributed to the other side. For a person to uncover and denounce any barbarous acts by his own side takes great courage and persistence and in any case has to meet a general assumption that the “enemy” is less than human and is, therefore, not too sensitive or needing consideration.

Such double standards have been freely used during the recent hijackings, which we have already mentioned, and when the FLQ in Canada carried out their kidnapping of Quebec Minister of Labour Laporte and the British diplomat Cross. In all these cases, people were held as hostages while their captors demanded some political concessions. This loosed off torrents of advice to the governments concerned, usually from those whose lives were not in any danger, not to give way to the threats (the hostages probably thought differently about the morals and the tactics of the affair.)

At the same time the captors were described as cowards, brutes, blackmailers and worse. It is true that there were the customary elements of ruthlessness in these events. In particular the killing of Laporte was a chilling business. In the same way, if the guerillas had blown up the aircraft with all its passengers, as seemed possible at one time, that would have been a horrifying act.

But none of this should obscure certain facts. The men who carried out these escapades displayed characteristics which, in different circumstances, are glorified. All of them are devoted patriots ; they are determined, even ruthless ; they arc brave enough to pull off a daring exploit and to take the consequences. Anyone who committed similar atrocities in the name of British capitalism would be hailed over here as a hero, decorated, almost canonised.

In the last war there was an extensive guerilla system on the Continent, working against the German occupation. The underground fighters were responsible for all manner of sabotage, murder, disruption. Sometimes they did something knowing that it would call down a reprisal in which their own side would suffer out of all proportion to the damage they did to the Germans. In all this they were supported by the Allies, whose official propaganda emphasised only their courage and the savagery of the reprisals.

The Allied policy of support for the guerillas did not always pay off. In Yugoslavia they backed Tito's men only to find after the war that they had done much to set up a hostile regime. Since then, of course, the alignments of world capitalism have changed somewhat. This has not happened in other cases; for example in Indo-China. where the Ho Chi Minh guerillas were supported during the war and then, soon after the cease fire, were double-crossed with the help of Japanese troops. That was a long time before the name of Vietnam came to mean a bloodshed obviously useless, apparently endless.

Ho Chi Minh never came to be accepted by the rulers of the Western capitalist powers although there is reason to think that in time he would have been. It is a common experience, for yesterday's hated bogeymen to change into today’s honourable leaders and fellow bargainers. They have only to go over, from one side of thieves to the other. We saw this happen to De Valera, who was once under sentence of death for his anti-British activities. More recently there have been Nkrumah, Makarios, Kenyatta.

Perhaps it is more accurate to describe these examples not as double dealing but as treble, quadruple, inexhaustible . . . The guerillas of the Middle East and the kidnappers of the FLQ are wildly, tragically misled, as were the lrgun Zwei Leumi in post-war Palestine. as were the EOKA in Cyprus in the Fifties. All such movements are devoted to the idea that they are struggling for humane, useful ends; in truth they are seeking to replace a ruling class of one nationality by one of another nationality. And as we have seen in Ghana. Israel, Cyprus, Kenya, that is not something worth struggling for, certainly not worth killing for.

What it comes down to is the guerillas and the FLQ differ only slightly, if at all, from those who denounce them from the other side. Capitalism misuses and perverts human qualities like courage and loyalty. By consistent standards these should be recognised for what they are but here again capitalism distorts and denies. The social system which prates about bravery makes cowards of us all.

Ivan

The Mask of Opportunity (1974)

From the December 1974 issue of the Socialist Standard

In society today: split as it is into two opposing social classes of buyers and sellers of labour-power the word “opportunity” looms large in the everyday vocabulary; implying an advantage over one’s fellows.

The national and provincial press display an endless array of advertisements hammering home the opportunity theme to a labour force who have so far, failed to see the surplus-value con trick hidden behind this mask of opportunism. Here the Armed Forces, large company or international concern encircling the globe: all compete as they fish in the vacancies columns for the human labour-power from which alone flows the coveted profit margins that make capitalism tick.

Tory, Labour and Trade Union leaders all join in a chant of “equal opportunities”, to get to the top of a pile of white- or blue-collared wage stiffs! completely ignoring the Marxian fact that all labour power is homogeneous!

But behind these alluring adverts are some “opportunities” discreetly UN-mentioned; including having one’s legs blown off in the army, being shot down in the air force or torpedoed in the navy. All in the day’s work maybe, according to the ethics of a sick society. A society which has nothing better to offer large numbers of the flower of youth than to dress them up in “smart” uniforms to bolster their morale as they are sent about their murderous tasks by a ruling class bereft of any social conscience.

A recent advertisement in The Guardian of 16th September 1974, seeks suitable sellers of labour-power to participate in the production, maintenance and flight of an Anglo-French fighter plane which boasts, in their terminology of death and destruction, that it can “Deliver 4,000Kg. of free fall, retarded or cluster bombs”: which leaves old-time merchants of death like Basil Zarahoff among the also-rans. But has the Guardian any scruples about accepting such deadly adverts? Apparently not. After all they are staunch supporters of capitalism with its wars, slums and “equal opportunities”.

Now the Socialist Party of Great Britain contends that the working class is certainly capable of a more dignified destiny than that of a hired assassin or mere commodity with a price tag on his carcase denoting the ingredient labour-power in the exploiting process of capitalist society. And although at the moment, the key note of opportunism is the ruling ethic of “every man for himself”: this alien philosophy is being slowly unmasked by Socialists the world over and all men and women who put their shoulders to the wheel of the Socialist Revolution have risen above the otherwise empty, frustrating, money-grubbing existence of mediocrity, matching in inanity that of the capitalist as a machine for accumulation!

Finally, Socialism offers no advantage, no promotion. No stripes, no medals, no gory glory, no guns, and no enemies, no pensions and no governments: but plain social ownership of the means and instruments for producing and distributing wealth by and in the interests of the genus homo. Then only will the world be our country and mankind our brethren and the cacophony of “opportunism” will be but a faint echo in the corridors of time.

G. R. Russell

Cooking the Books: Labour’s Share Goes Down (2012)

The Cooking the Books column from the December 2012 issue of the Socialist Standard

In July, the OECD, an organisation grouping the developed capitalist countries of Europe, North America, Japan and Australasia, published its Employment Outlook 2012. Chapter 3 noted that ‘during the past three decades, the share of national income represented by wages, salaries and benefits – the labour share – has declined in nearly all OECD countries’. The Times (11 July) summarised the report:

  "Automation and computerisation are responsible for as much as 80 per cent of the decline in so-called “labour share”, which measures wages as a proportion of total income generated by the economy … The research … shows that the average labour share dropped from 66.1 per cent in the early 1990s to less than 62 per cent in the late 2000s. In all but four of the 26 OECD nations analysed, workers’ slice of their country’s income declined between 1990 and 2009.”

What the OECD was trying to measure, at national level, is what Marx would have called ‘relative wages’, i.e., the workers’ share in what they produce. This does not necessarily mean a decline too in ‘real wages’ (what wages can buy). In fact, according to the OECD, ‘in essentially all OECD countries, while the fraction of national income accruing to labour decreased, economic growth was still sufficiently rapid so that real labour compensation increased and workers were on average better off.

Since the income of the self-employed was divided between labour and capital, a decline in labour’s share meant a rise in capital’s, with the result, as the Times pointed out, that:

  ‘Corporate investors have been the big winners, as businesses save on salaries and their profits increase.’

Further, as workers became on average better off, the shift meant that ‘corporate investors’ had to have become even more better off.

The OECD’s figures have some bearing on the arguments amongst students of Marxian economics about what has caused the present economic downturn. Some say that is due to a fall in the average rate of profit; others, that it is due to the decline in labour’s share of national income. One passage in the OECD report seems to give some credence to the latter view:

  ‘… the shift of income away from labour (and, in particular, from low-wage workers) towards capital (and top earners) may have a negative impact on aggregate demand to the extent that workers with below average pay tend to have a higher consumption propensity than do top earners and capitalists.’

On the other hand, it may not, as long as the capitalists use their increased profits to increase their luxury spending and, more importantly, to re-invest in production; which in fact they did until 2008.

The OECD figures say nothing about the rate of profit since they concerned only the division of new income corresponding to new wealth and value produced in a year. The rate of profit measures total profits in relation to the total amount of capital invested. No doubt, due to ‘automation and computerisation’ that went on during the period in question, the stock of capital would also have increased. Whether it would have increased more than the increase in the amount of profits – which it would have to have done for the rate of profit to fall – is not something the OECD went into.

While capitalist firms do calculate an expected rate of return to decide when, where and whether to invest, and check whether or not this is being achieved, they will not take into account the rate of profit of the whole economy, if only because this is something they have no means of knowing.

Cooking the Books: The Bank Charter Act (2012)

The Cooking the Books column from the October 2012 issue of the Socialist Standard

The Bank Charter Act of 1844 is back in the news. An article in the Guardian (13 July) by Deborah Orr discussed its terms and stated that it “removed from banks their licence to print money.” It did remove the right of banks other than the Bank of England to issue their own bank notes, but gradually rather than immediately. Banks which had been issuing notes until 1844 were allowed to continue until they merged or were taken over, but not to increase the amount they had been issuing. Some banks continued to issue notes for the rest of the 19th century, the last continuing till 1921.

According to the wikipedia entry, “The Act exempted demand deposits from the legal requirement of a 100-percent reserve which it did demand with respect to the issuance of paper money.” The source for this claim is given as the Ludwig von Mises Institute, as if this could be regarded as a source of reliable information.

This claim is wrong on two counts. The Act does not mention “demand deposits” at all, let alone exempt them from anything. Nor did it require banks to hold an amount of cash (gold or Bank of England notes) in their vaults equal to the face-value of the notes they were allowed to continue to issue.

The basic aim of the Act was to regulate the issue of paper currency which its promoters thought would lead to inflation if too much were issued. This was based on the theories of the Currency School, but was challenged by the Banking School who argued that, as long as bank notes were convertible on demand into a fixed amount of gold, this would not happen. Marx agreed and a whole chapter of Volume 3 of Capital is devoted, with contributions from Engels, to “The Currency Principle and the English Bank Legislation of 1844.”

The Act was not concerned whether or not banks backed up their notes with an equivalent amount of cash in their vaults. How much cash to hold was left to banks’ judgement. Knowing that only a small percentage of the notes were likely to be presented at any one time for payment in cash, the banks would normally only keep that amount in their vaults.

Giving someone a wad of notes was just one way in which banks could then make a loan. Another was to grant the borrower an overdraft, which is presumably what the Mises Institute mean by “demand deposits”. But these did not need to be backed by “a 100-percent reserve” either. The amount of deposits that a bank would need to retain as cash would depend, once again, on the bank’s experience of how much their clients were likely to withdraw in this form. That you don’t have to retain as cash all the money deposited is the basic principle of banking. To have required all loans to be covered by an equivalent amount of cash in the banks’ vaults would have turned banks into safety deposits and rendered all lending by them impossible. The promoters of the 1844 Act did base it on a fallacy but they weren’t that stupid.

The Act didn’t even require the Bank of England to cover all the notes it issued by an equivalent amount of gold in its vaults. It was authorised to issue £14 million, known as the “fiduciary issue”, without this. This proved not enough during financial panics and the Act had to be suspended in those of 1847, 1857 and 1866, as Marx chronicled in detail in Volume 3 of Capital. His conclusion is as valid today as it was then: “Ignorant and confused bank laws, such as those of 1844-5, may intensify the monetary crisis. But no bank legislation can abolish crises themselves” (chapter 30).

Socialists and the Crown (1936)

From the November 1936 issue of the Socialist Standard

An anonymous correspondent refers us to an article in The Daily Telegraph (October 19th), supporting the view that a “snatched victory at the polls’' would be utterly useless for the purpose of achieving Socialism, because the whole of the forces of capitalism, including the Crown, would successfully repel any such bluff. The S.P.G.B. has of course always held that view as against Labourites and Communists. We are obliged to our correspondent.

Editorial Committee

The S.P.G.B. and Trotsky (1936)

Answer to correspondent from the November 1936 issue of the Socialist Standard

E. P. (Bradford).—The articles on the Russian trial do not indicate that the S.P.G.B. supports Trotsky or shares his point of view. We thought this was made clear in the articles. On many occasions during the past 18 years we have indicated our disagreement with the Russian Communists, including the Trotsky faction. Trotsky is as much at fault as Lenin and Stalin in believing that violence and dictatorship are justified or can make up for backward industrial development in Russia or the smallness of the Socialist movements everywhere.

The existence of discontent in Russia is not due to agitation by Trotskyites or anyone else, but to disappointment with conditions (the low standard of living, inequality of wages, etc.) and with Government policy at home and abroad. Although the active discontent may be relatively small, and not united, the Stalin Government evidently fears lest the various discontented groups come together, especially in the elections due shortly under the new constitution.

Editorial Committee

"A World to Win" (1936)

From the November 1936 issue of the Socialist Standard

Ye Lords of Wealth, who hold in thrall
    The workers of all lands,
Shall with your ruthless system fall
     When Power lies in our hands!
For paltry wage your wealth we pile,
     Your useless class we keep:—
We’ll raze your robber-system vile,
     And we who’ve sown shall reap! 

Lords of the wealth that we have made—
     Lords o’er our very life—
Think you our purpose shall be stayed ?
    Ye germs of bloody strife!
Tho’ race slay race at your vile call
    When lust of gold and power
And “Profit” is your all-in-all . . .
   . . . . Yet will we make you cower! 

The day will dawn when we, who make
    The wealth of every land,
Combined in all our power, will take
    Control from out your hand:
Wage-slaves not then in time of “peace,”
    Nor pawns to win your wars!
Your tyrant’s might for e’er shall cease:
    We’ll triumph in Our Cause! 

Fulness of life (not slavery !)
     With joy and peace for aye,
Shall bloom for us, as liberty
     Turns man’s long night to day! !

J. G. M.

What to Do About Fascism (1936)

From the November 1936 issue of the Socialist Standard

The Fascist Pot and the Communist Kettle

In the sacred name of liberty Sir Oswald Mosley – who proposes, like his heroes, Mussolini and Hitler, to destroy all opposition parties if he gets power – demands the right to lead his blackshirt troops into the East End. In the sacred name of liberty the Communists – who propose here, as in Russia, to crush all opposition parties if they get power – call upon us all to rally against Sir Oswald Mosley. The Socialist Party of Great Britain, which does not propose to prevent anyone, anywhere, from voicing his opinions and organising peacefully to propagate them, is completely and permanently opposed to both of these suppressive movements. We are opposed to their objects, their methods and their secret finances, but principally to their objects because they neither of them have the solution for the problem of our age. The underlying discontent with things as they are in State-capitalist Russia is so widespread that the dictator and his yes-men are thoroughly scared lest one exile in Norway should prove a rallying point and endanger their positions. In the Fascist lands poverty and promises are as much the order of the day as in the capitalist democracies. Italy and Germany are as much the paradise of the moneyed men, the exploiters of human labour, as England and America. Nothing is changed except the patriotic trimmings and the colour of the shirt.

The Right to Wear what Clothes We Wish

When Sir Oswald Mosley, fresh from his visits of adoration to Mussolini and Hitler, asks if in this country “a man might not wear the clothes he wished to wear?” as he did in an address to Manchester business men on October 9th (Manchester Guardian, October 10th), he at once betrays the limitations of the Fascist movement, and of his own understanding. Nowhere in the capitalist world, whether under Baldwin, Sir Oswald’s former political associate, or under the foreign Fascist dictators, at whose feet he now sits, can a man wear what clothes he wishes to wear. All he can wear is what his class-position enables him to afford. If he is a typical worker, a wealth-producer, he will wear clothes that are cheap and nasty, tasteless and inadequate. If he is a member of the propertied class, whether Liberal or Nazi, Conservative or Fascist, then, and only then, can he exercise his choice about the way he lives, including the clothes he wears. This is the crucial test of all the reformist movements from Mosley to Morrison. None of them dare face up to the question why it is that they propose to use power to preserve the class ownership of the means of production and distribution.

The Fascists Can’t Cure Capitalism

True, the Fascists can point to the manifold reformist activities of the Fascist Governments – and to the decline of unemployment. But this is now the favourite theme of all the apologists for capitalism, everywhere. Capitalism, after its latest crisis, is going through an expanding phase. So unemployment declines because of the expansion of trade and also because of the expansion of capitalism’s most thriving industries: armies and armaments. The Berlin correspondent of the Economist (September 19th, 1936) reports that the official number of unemployed is down to 1,098,000, and adds:

  "The Reich Unemployment Board considers that the shortage of skilled labour in certain industries is the result of compulsory military service.”

And what does it mean, anyway, when we admit that all the capitalist Governments are busy with schemes for patching up this, that and the other evil of capitalism? It means that capitalism is always producing more evils, and that the Fascists are as incapable as any other capitalist Government of solving them. Catholic Dictator Schuschnigg, in Austria, plays the age-old game of bread and circuses because the “Corporative State” is as mangy as all the other variations of capitalist rule. Read what the Vienna correspondent of the Daily Telegraph writes:

  “The Government is presenting 50,000 tickets of admission to football matches, 50,000 cinema, and 10,000 theatre tickets to the members of the (Fatherland) Front. About 400,000 free breakfasts and free railway transport for all will be provided.” (Daily Telegraph, October 15th, 1936.)

This was Schuschnigg’s great victory parade at which the population were to give a spontaneous demonstration of loyalty and enthusiasm. The attendance was splendid – it was compulsory for large numbers of workers: “attend or lose your job” was the threat. Still the dictator failed. His “promises of improved conditions for the masses were received without enthusiasm. When he denounced Socialism and democracy the great crowd remained silent.” (Daily Telegraph, October 19th, 1936). It appears that the workers opened their mouths for the free meal and then kept them obstinately shut.

In Italy, a land of semi-paupers and millionaires, like the rest of the big powers, Mussolini blethers about Empire and prosperity like any Conservative but he cannot cure unemployment, he does not find a remedy for desperate poverty, and he never fails to look after capitalist interests. What else can he do, having no choice but to carry on capitalism? On Tuesday, October 13th, his Government instructed stockbrokers to submit the names and addresses of all clients who buy industrial shares. This was at 9.30 a.m. The Fascist syndicate of brokers promptly held a meeting and passed a resolution that “it would be advisable to close all the bourses rather than have to obey the latest order.” The Government instantly climbed down and agreed by 9.45 a.m. to waive the order. (Daily Telegraph, October 14th, 1936.) This is Mosley’s paradise for the workers in which he affects to believe that money no longer rules.

Then in Germany, where the Nazis claim to have got rid of talking-shops, and introduced Socialist deeds instead of capitalist and Labour Party promises, Hitler stages his own brand of circuses for keeping the workers’ attention off their own slave-like conditions. The Nuremberg rally of the Nazi Party in September, at which Hitler begged the German workers to keep their eyes fixed on poverty in Russia (lest they should look nearer home), was a splendiferous jamboree costing £2,000,000 (Daily Telegraph, September 8th, 1936). It contained all the fun of the political fair, every species of mental dope calculated to stop a worker from thinking.

Then, at home, what has Mosley to offer except a mixed bag of reforms of capitalism picked up on his passage from the Conservative Party, via the Labour Party, I.L.P., and New Party to the British Union of Fascists. I.L.P. reforms – 40 years old – plus Communist violence, plus the current exaggerated economic nationalism and patriotism, plus half-baked Stafford Cripps doctrines of rule by Order in Council. That is the sum total of Mosley’s programme: it is as rotten as the rubbish heaps from which it has been gathered.

The Fascists and Disorder

The Fascist technique of propaganda and gaining power is simple, but its effectiveness depends entirely on the level of political knowledge and experience of the workers and on the behaviour of the opponents of Fascism. Fascism (copying most of the traditional methods of the Labour Parties) exploits every phase of working-class and small-capitalist discontent. It denounces Jews, Freemasons, Catholics, Trade Union officials, bankers, all big corporations, bureaucracy, Parliament, financial scandals, unemployment, etc., etc. Where it scores over the older methods is in provoking disorder with the assistance of those who believe they are hindering it. Given an increasing number of marches and the appearance if not even the reality of disorder the Fascist leaders know that they can count, with certainty, on growing support from numerous quarters. They get the support of all who have grievances against Jews, Freemasons, and so on, but, above all, they get the support of large numbers of people who, knowing little of politics, are simply scared by disorder. Such people, if they believe they have to choose between the Communist Party and the Fascists, choose the latter. Every riot brings Mosley support from them.

How, it may be asked, do the Fascists manage to win over workers who formerly supported the Labour Parties; as they succeeded in doing in Italy and Germany, and are doing here? Why is the Labour Party reformist demagogy less successful than it used to be? The answer is simple.       

Labour Parties and Fascism           

Before the War the world was obviously governed by and for the propertied class, landed and plutocratic, on a more or less restricted Parliamentary franchise. The inevitable discontent with capitalism naturally drove workers to support democratic parties claiming to be particularly concerned with political and social reforms.

After the War the franchise was made more or less universal in nearly all countries, and Labour or Liberal-Labour Governments became common. With what result? Capitalism continued, therefore discontent continued. But now the discontent had to find a new outlet. Having tried capitalism under democracy, the workers were ripe for a new kind of demagogue, one preaching dictatorship. Renegade Labour leaders hastened to adjust themselves to the change of fashion. They reaped the harvest, but who sowed the seed? None other than the Labour Parties. It is they who poisoned politics with their doctrines of reforming capitalism without abolishing it.

The Key to Modern Politics

The idea still survives that politics is concerned with a struggle of ideas about Government, trade, etc. Nothing could be further from the truth. Politics is concerned with the ownership of the land, factories, railways and all the accumulated property of the country. The small minority who own and control all that matters, the late Sir J. Ellerman with his £50 million, Joseph Rank and Lord Nuffield, reputed to be worth upwards of £20 million each, the Lady Houstons and the Wills and Coats families, and all the rest of the owning class, have one overriding interest, one motive, one determination. They may tell simple-minded newspaper readers that “Money means nothing to me. I could just as easily go back to where I started – in fact, I might be happier if I did” (Lord Nuffield, News Chronicle, October 17th, 1936), but their actions, individual and combined, belie their words. No exploiting class ever gives up its privileged position until it has tried every conceivable device to retain what it has.

Broadly speaking, in the 20th century the capitalist class are on the defensive. Ideas are on the march. Workers are beginning to think. From the capitalist standpoint that movement must be stopped, destroyed, divided, or turned into blind alleys – anything to preserve capitalism. If the discontented organise to secure reforms the capitalists can try buying off the leaders, offering small concessions to the rank and file, playing off one section against another, Catholic against Protestant, Jew against Arab, German against English, Blackshirt against Greenshirt and Redshirt. And if one group forges ahead and becomes influential, then the capitalists must come to terms with it – hence Labour Governments, and if, in due course, the popularity of Labour Governments wanes then the new rounders-up of working-class votes, the Fascists, must be given their turn. So capitalism goes on.

In Italy and Germany Mussolini and Hitler trod on the heels of discredited Syndicalism and Labourism, backed by capitalist money and under the protecting arm of the State.

Now Mosley says that he is receiving support from English industrial capitalists (see Rome Giornale d’Italia, quoted in News Chronicle, October 19th, 1936). They hope that he will be able to give capitalism – meaning themselves – a further lease of life.

If the Workers Go Fascist

Many who are alarmed at the growth of Fascism in England talk in a panicky way of fighting or crushing the movement, and appeal to the Government to ban uniforms. This is all so much waste of words. The issue rests with the workers in the main. If the workers understood capitalism and Socialism they would not fall for the Fascist claptrap – but neither would they fall for Liberal. Labour or Conservative claptrap. If, on the other hand, the workers here can, as in Italy and Germany, be won over in their hundreds of thousands to the Fascist programme then all talk of suppression is idle. If the workers want Fascist Government they will get it, as they got Labour Government. At certain stages of the Hitler movement the Prussian and German Governments did try to ban his movement, forbid uniforms and demonstrations, etc., but they failed to stem the drift towards him.

The only answer to Fascism, as to other capitalist-reformist movements, is knowledge and understanding. Their economic programme would deceive no worker who gave serious thought to it –which is, doubtless, one reason why the Mosleyites prefer riotous demonstrations to quiet meetings at which their programme has to be stated in all its poverty.

The most seductive claim of the Fascists is that they are Socialists. Hitler repeated this again in Berlin on October 6th (News Chronicle, October 7th, 1936), and it is the common argument of the Mosley movement nowadays. Every Labourite will laugh at the notion that the Mosleyite programme of reforms is Socialist; but they have little enough reason to laugh. Who, if not the Labour Party and I.L.P., started this dishonest practice? Who made it possible for Lord Beaverbrook’s Daily Express to say (October 1st) that it opposes Socialism but not the Labour Party – “that is a very different thing.”

If the Fascists can get support by misrepresenting Socialism, that is largely due to all the Labour speakers who have done the same in the past.

The Struggle Will Go On

The rise of Fascism to power in this country is, to say the least, improbable. The problems facing the British capitalists, in particular the international situation, are not of a kind to make them give up flattering the Labour and Trade Union leaders in order to encourage Mosley. At a pinch a more likely development, if the situation threatens war, is an enlarged “National Government” in which Trade Union leaders and Mosley work happily together defending British capitalism. 

What is more important to remember about Fascism here and abroad is that the eventual failure of the Fascist movements is as certain as the failure of Labour Governments which helped them to rise. Fascism is incapable of making capitalism work satisfactorily. It is an impossible task. Capitalism goes on producing discontent under the surface. The future of Fascism is forecast in the growing activity of anti-Fascists in Italy and Austria. Sooner or later all the Fascist facades of capitalism will fall away, leaving the main problem still to be tackled. The workers will still have to be won over to Socialism. That is the task for Socialists, whether under Dictatorship or Democracy.

Edgar Hardcastle

The Bitter Fruits of Nationalisation (1948)

Editorial from the November 1948 issue of the Socialist Standard

Over 40 years ago when the S.P.G.B. was formed nationalisation was being preached by the I.L.P. and other organisations and was being exposed by the S.P.G.B. Our case was, and still is, that capitalism is not ended by nationalisation but merely, undergoes a change of form; and to those who argued that even so it had certain small advantages the S.P.G.B. replied that there is one respect in which the worker under a State-owned concern is worse off than before: he can no longer hope to get a job elsewhere in the industry if he gets the sack and is blacklisted. The workers who delightedly celebrated the nationalisation of the mines are just discovering how right we were as will be seen from the News Chronicle's account of events at mines in the East Midlands. It is reported that "miners guilty of habitual absenteeism in the E. Midlands division are being sacked and barred completely from the coal mining industry” (News Chronicle, 2/10/48).

It is stated by a News Chronicle reporter that nearly all Derbyshire, Nottingham and Leicestershire pits are “carrying out 'purges’ of miners who stay away from work without excuse.”

  "At Creswell colliery, near Mansfield, the names of eight men sacked from the pit are being publicly displayed on the notice board outside the colliery baths. The notice declares that these men are not eligible for employment at other collieries.” 

An official of the E. Midlands Goal Board stated that the posting of names was done on the proposal of the men's representatives themselves, but it did not receive universal approval, for one miner (not himself affected) who had been employed at the colliery for 42 years, told the reporter that it was "the wickedest thing I have ever seen posted up at any pit since I started work at the age of 13.” He added

  "I see nothing wrong in dismissing a man for not following his employment, but this does not stop at dismissal. It brands him before the public and makes it impossible for him to find employment elsewhere. I feel that nothing worse has been practised in Germany or Russia.”

Doubtless those who in their muddled way supported nationalisation did not foresee this consequence, but what have they to say about it now? And particularly Mr. Ernest Bevin who, when he was Minister of Labour in 1941, spoke against such methods of industrial discipline. In a debate in Parliament on April 2nd, 1941, Mr. Bevin made the following remarks:— 

  "Some hon. Member, I do not remember who it was, said that industry relies upon the power of dismissal to maintain discipline. What does that mean? It means that there is an economic drive on the workman to work, the ability to force your will on another by the imposition of starvation, which inculcates fear and resentment in the other man’s mind. By relying on that you do not get the right kind of discipline. . . . That means that the basic condition upon which your system is run has been starvation or the ability to make another citizen unemployed. Well, that has meant war.” (Parliamentary Report, 2/4/1941. Column 1076.)

We can imagine Mr. Bevin’s answer if the question were now put to him whether he still holds those views. He would probably say, “I thought so then and I think so now, but what are we to do if men still won’t work in spite of the fact that the mines are no longer run on capitalist lines.”

And this brings us back to the point from which we started. Nationalisation is not Socialism, but State Capitalism. The mines are run on capitalist lines and with a capitalist purpose, that of making a profit in order to continue the payment year by year of millions of pounds of interest to capitalist investors, both the former owners and those who invest new money through the Coal Board. It may be an amiable delusion on Mr. Bevin’s part to hope to have socialist incentives operating under capialism, but it is a delusion just the same.