Wednesday, May 15, 2019

Keynes — in the land of the sinking sun (1992)

From the November 1992 issue of the Socialist Standard

For more than a decade, Japan has been portrayed as a non-stop growing economy based on new concepts of social harmony that somehow made it different from the other major industrial powers which were characterized by strikes and general social unrest as well as by inferior production records. The Japanese workers employed by the big multinationals such as Nissan, Sony and Honda were looked after in terms of regular employment, access to company hospitals and modern housing. Workers and managers wore the same company-style clothes, ate in the same canteens and worked in teams on the production line where the responsibility was shared by the team, with a resultant increase in production.

The Japanese economy has tripled in size since 1967. To many observers Japan has been, in economic terms, “the Land of the Rising Sun”. The Labour Party have been impressed to the extent that they suggested in their 1991 Policy Review document that the management of the Japanese economy indicated how a country can work its way out of recession:
  In Japan they train their way out of recession . . . Wc want to create a new training culture across British industry, one which recognises the relationship between training, innovation and profit.
With this rapid growth in the Japanese economy and the resulting surplus of funds available to Japanese banks huge loans were made abroad for the purchase of assets which were perceived to be cheap. By June 1990 Japanese banks had 12.4 percent of American assets or $408 billion-worth (Economist, 18 January 1992). The scale of this lending abroad is exemplified by the State of California. In the inflationary 1980s nearly every new office block in downtown Los Angeles was financed by the Japanese. The Japanese banks own the fifth, sixth and seventh largest banks in California.

Today, however, Japan faces an accelerating banking crisis as asset values inevitably decline as the world economy, including Japan, enters the deflationary phase of a world depression.This has resulted in a credit crunch and the consequent downgrading of the credit rating of Japanese banks and institutions. Because the accounting methods of Japanese banks fail to report loan defaults for periods as long as a year after the borrower has stopped paying, and because the Finance Ministry in Tokyo will not compel the banks to report them, the American regulatory authorities are rigorously examining the accounts with the result that the banks have to make higher loss provisions. These problems can be duplicated in Europe, Australia and throughout the industrial world.

The property boom in Japan involved levels of borrowing exceeding that of the UK and the USA. Mortgages of 99 years are not uncommon and housing is bought as an investment as well as a place to live with a view to passing it on to future generations. Availability of land is an important factor since Japan is a mountainous country, 68 percent of which is uninhabitable. Although in land area it is roughly the size of Italy the population—twice that of Italy— is confined to an area about the size of Austria.

This inevitably affects land prices and the banks have accumulated property loans on both domestic and commercial property. A one-bedroom flat in Tokyo could cost $500,000 before the market began to fall. Furthermore, large sections of the Japanese population have used the property they were buying as collateral for further bank loans to invest in the Japanese stock market. Along with the banks and institutions buying shares, this pushed the Nikkei Dow index to astronomic levels.

The Japanese economy is now moving into recession following on the banking crisis and credit crunch. Property prices are on the slide, business bankruptcies are increasing. The major Japanese banks have been put on credit watch by the major debt rating agencies. The worsening economic conditions are reflected as elsewhere in social disorder, as instanced by riots in Osaka:
  Trouble flared on Thursday after labourers tried to storm a municipal centre in protest against a decision to cut benefits to many of the local jobless, who do not qualify for full unemployment pay . . . About 2500 riot police dispersed hundreds of protesters early yesterday after cars and bicycles were set ablaze . . . Japan's unemployment rate is only 2.2 percent but that disguises the fact that many companies arc saddled with surplus staff, whose jobs may be in danger.
(Daily Telegraph, 3 October).
In a recent quarterly report the Bank of Japan acknowledged the worsening state of the economy:
  The outlook for profits, sales and investment were all down . . . The survey was reinforced by Nippon Steels forecast of a 74.6 percent drop in pre-tax profits for the half year ending this month . . . Job losses have so far been relatively few but with consumer demand waning, output falling, inventories growing and profits plunging many economists say it is only a matter of time before the manufacturing sector contracts with big job losses. (Financial Times, 13 September).
Some workers deemed to be no longer useful to their companies are being paid to stay at home but this is unlikely to continue indefinitely.

As in other countries the ruling politicians have been making proposals in order to convince the public “that something is being done to put things right”. And it is Keynesian methods that have been proposed as the solution: injecting large sums of money into the economy in order to upgrade the infrastructure. Undoubtedly the infrastructure badly needs improving. The bulk of the Japanese population do not enjoy the facilities of those who work for the big corporations. Sixty percent still live in backward agrarian conditions in dwellings whose toilets are not connected to outside main sewers. Japans roads are not adequate for the traffic which has increased five times in the last 25 years (Wall Street Journal, 28 September). Traffic holdups 50 miles long are not infrequent. But this is not the reason for the proposed Keynesian spending spree on which the government has embarked.

These plans have already run into difficulties about how the government should finance them:
  Mr Hat, Japanese Finance Minister, giving a lecture in Tokyo ruled out a return to special borrowing to finance the emergency spending package announced in August. He also rejected demands from retailers and industrial leaders for an income tax cut in 1993 to boost flagging consumption . . . His comments signal an intensification of the political struggle over how the government should finance higher public spending, which is virtually the only domestic source of economic growth at the moment. (Financial Times. 30 September, our emphasis).
In other words, the economy is moving into deep depression with zero growth in the private sector. So how can the Keynesian-inspired government bail-out plan revive the Japanese economy? Attempts to avert slumps by increased public spending have never yet been effective in a contracting economy. It failed to revive the American economy in the depression of the 1930s in spite of schemes such as the Boulder Dam under the New Deal. There are many similarities between the 1929 crash in the USA and the crash that is beginning now in Japan where the Nikkei Dow has lost over 60 percent of its value. The instability of the Japanese banking sector bears some comparison with the state of the American prior to Roosevelt closing them.

The socialist analysis, using the scientific Marxist economic approach, shows that this proposed solution (or any like it that are propounded by the Labour Party) is doomed to failure. The world depression that today engulfs all countries in varying stages, and the human tragedies that go with it of which the Osaka incident is but one example, are inherent contradictions of the capitalist system whether market-orientated or state “controlled” and cannot be solved by tinkering about with government finances.

But Japan may prove to be different in one sense, namely that the depression may reach depths not seen in previous ones as the huge mountain of debt is liquidated. The world depression is causing contraction in the Japanese economy and is exposing the phoney myth of permanent Japanese social tranquillity between workers and employers. The economic sun is no longer rising in the East. It is sinking and taking Keynesian theory with it.
Terry Lawlor

Letters: Yugoslavia (1992)

Letters to the Editors from the November 1992 issue of the Socialist Standard


Dear Editors,

I am writing to query what seem to me certain anomalies in the article on the bloodshed in Yugoslavia (September Socialist Standard). The writer states that uneven economic development amongst the constituent republics of the former Yugoslavia is the primary factor behind the conflict. Specifically, it is said that the capitalists of Slovenia and Croatia were reluctant to see their profits “exported” to fund development in the poorer republics. Hence the pro-independence policies of their respective governments.

The above is undoubtedly true but it still leaves the position of the workers in these two republics unexplained. According to the article, free elections were held in Croatia and Slovenia in 1990 in which parties promoting secession from Yugoslavia were victorious. This must mean that the majority of workers voted for these policies. The reason they voted so would appear to be that they could expect vastly improved earnings as workers in a capitalist Slovenia or Croatia rather than a capitalist Yugoslavia; a figure of possibly up to six times as much is mentioned in the article. This again is a straightforward result of the uneven development. Further they obviously felt little ethnic kinship for their fellow workers in the rump state of Yugoslavia.

Thus the writer’s comment that workers have been injected with nationalism by unscrupulous capitalists would seem simplistic. It would appear that both capitalists and workers in the breakaway republics had a material interest in going it alone. Hence the governments, being elected, acted accordingly to carry out the aspirations of both sections of society.

Yugoslavia is but one historical instance where the economic demands of capitalism and nationalism have combined, resulting in human tragedy. To prevent its repetition, by being able to explain to workers its causes, it is necessary to understand these phenomena fully. Perhaps questions such as the nature of the state; the role of government and what forces in a "democratic” capitalist society it represents; and the influence of nationalism and ethnic culture in forming workers’ political views and modifying their experience of the class struggle could be explored in future issues of the Socialist Standard.
Kevin Cronin

No doubt the workers in Slovenia and Croatia who voted for pro-independence parties perceived this to be in their economic interest, but this does not mean that independence will in fact make any substantial difference to their economic situation.

The article did not say that their wages could go up by as much as six times. It merely recorded that the average wages in Slovenia were reputedly six times as much as in Kosovo, the most backward part of former Yugoslavia. This was due to economic rather than political considerations, for instance a higher degree of industrialization and a higher level of education, training and culture amongst the working class, “a straightforward result of the uneven development” as you put it. It follows from this that independence—a change in the political superstructure—will make no difference to wage levels.
Independence will, however, mean an immense gain for the capitalists of Slovenia and Croatia in that a proportion of their profits will no longer be syphoned off to Belgrade (to pay much more for the upkeep of the Yugoslav army than for projects in backward Kosovo and Macedonia, as it happens). If the Slovenian and Croatian capitalists were to share these retained profits with their workers in the form of higher wages, then a case might be made for saying that workers as well as capitalists had a common material interest in independence. However; this would be to assume a generosity on their part never yet displayed by capitalists anywhere. Perhaps the workers who voted for independence believed that this would happen. If so, they will be sorely disappointed—Editors.

Democracy and Votes

Dear Editors.

Your cartoon in the July issue of Socialist Standard really did reach the depths of Stalinist-style amalgam tactics, in its attempt to link anarchism to Stalinism and Nazism. Not only was the cartoon scurrilous, it was also inaccurate as well. Stalin through the Comintern advised the Communist Parties worldwide to use parliamentary tactics, as was so miserably illustrated with the career of the Communist Party of Great Britain. Hitler for his part used parliamentary methods, as did, and still do. other fascist parties, including Mussolini.

You say that anarchists ignore the State. On the contrary, those revolutionary anarchists who have learnt the lessons of history believe that a social revolution must involve the active destruction of the State. There is a big difference between electing MPs and mandating delegates to, for example, a workplace or neighbourhood council. The delegates to these would be decided upon by mass assemblies. and would be mandated and subject to instant recall. Parliamentarians would be under no such control of the masses. What is more alienating under capitalism than to file singly into an election booth once in every five years?

You pay lip service to self organisation and mass action. In reality, in your advocacy of parliament, including the defence of institutions like the Russian Constituent Assembly, you show yourselves as staunch defenders of bourgeois democracy.
Ron Allen, 
Anarchist Communist Federation 
London E1

Thanks for the compliment! Yes, we do say that the vote is an important gain and we do say that “bourgeois” democracy, for all its many limitations, provides the best framework for workers to organise themselves without leaders—both to defend their interests under capitalism and to struggle to replace it by the fully democratic society that socialism will be. What are you saying? That it makes no difference whether or not we have the vote? We don’t think you will get very far with that one— Editors.

Sting in the Tail: What's Up Doc? (1992)

The Sting in the Tail column from the November 1992 issue of the Socialist Standard

What's Up Doc?

In the Observer Magazine (27 Sept.) under the headline Poverty Makes You Sick, a doctor John Collie wrote:
  There is one piece of health advice which is more effective than all the others. One guaranteed way to live longer, grow taller, avoid chronic illness, have healthier children, increase your quality of life and minimise your risk of premature death. The secret is: be rich — because all the major health indicators are directly related to income. People living in poverty are not simply 'less comfortable' than everyone else — they have shorter lives, sicker children and babies which are more likely to die in infancy.
So there you have it, fellow workers; stop whingeing, just get rich.

Dying For A Job

Here is some heartening news for those workers who are still managing to hold on to a job.
  Losing your job increases your chances of dying, according to new evidence. Data from the British Regional Heart Study, which has spent 10 years studying people from 253 British towns, shows that unemployment kills.
  "We have found that men we were screening who were unemployed at any time over a five-year period were more than one-and-a-half times as likely to die in the next five years as men in continuous employment" said Dr Joan Morris, lecturer in medical statistics at St Thomas's Hospital, London.
The Observer (27 September)
For those of us still with a job it is not all sunshine however.
  Stress at work is an important reason why people take time off sick, according to Dr Paul Oldershaw, head of health sciences at the Health and Safety Executive. "A 1990 Labour Force Survey suggests a national picture of around 110,000 people who regard themselves as victims of stress and depression caused by work, and 200,000 who regard themselves as having a problem made worse by their work."
Got the picture then? Out of work and facing hellish poverty problems you are more likely to snuff it; in work and you are driven nutty by the stress of it all. Aint it time we got shot of this crazy society?

Dead-End Path

The capture of Abimael Guzman, the leader of the Maoist Sendero Luminosa guerillas by Peru's security forces hit the headlines recently.

Sendero Luminosa (Shining Path) aim to do in Peru what Mao did in China — to sweep away the ruling class by armed force, and they have for years waged a ruthless and bloody war against the police, military, judiciary, politicians of both left and right and even villagers who do not toe the Maoist line.

So the old Maoist illusions live on in Peru. Sendero Luminoso imagine that the poverty of the peasants and workers can be ended by toppling Peru's rulers, but should they win power they will find, as Mao’s successors in China have found, that capitalism is a worldwide system and they must become part of it even against their own wishes.

Mixed-Up Mike

Film star Michael Caine's comments on political and social matters are a strange mixture of sense and nonsense.

A dyed-in-the-wool Tory, Caine is forever on about his working class roots but could still complain in a TV interview about council tenants having cars and, even worse, lockups to put them in when he couldn't find a parking place where he lived in Mayfair for his Rolls Royce!

That’s only some of the nonsense but he can make sense too. For example, he recognises that the Labour Party isn't socialist and just look at this comment on religion:
  I'm born of a Catholic father and a Protestant mother. I was educated in a Jewish school and I'm married to a Moslem. None of these religions has made a mark on me because I see the cant and hypocrisy In them. Each one teaches prejudice.
Dally Express (23 September)

The Dirty Work

Anyone who wants to know who will do the dirty work in socialism such as farming, should have seen a recent TV programme on the government’s "Set Aside” policy. This amounts to farmers being given money to set aside some of their land, that is grow nothing on it because of glutted food markets.

We have dealt many times in this journal with the madness of a social system where this can happen while millions starve, but there were for us some very encouraging views expressed by some of the farmers on Set Aside. They "hated” it: they didn’t want the money but wanted to use the land usefully and saw their role as being primarily one of growing things. Above all they wanted to stay on the land because they loved the life.

In socialism farming, like any other job, will be done by people who wish to do it and there looks like being no shortage of those.

A Useless Unity

Following their humiliation at the general election the Scottish National Party met in sombre mood at their conference in Perth last month.

Like any other reformist party the SNP is a loose coalition with the various strands of opinion all pulling in different directions.

There were "social democrats" ranged against pure-and-simple nationalists, supporters of the multiparty "Scotland United" movement versus go-it-alone hardliners, nationalises clashing with "regulators" CNDers opposed by "defence realists", and so on.

There were, however, two things on which unity was total; the complete acceptance of capitalism and a blind belief, despite all the evidence, in their ability to tame It.

50 Years Ago: The Ugly Reality of Indian Nationalism (1992)

The 50 Years Ago column from the November 1992 issue of the Socialist Standard

We have received a request to give our support to a joint manifesto in favour of the Indian Nationalist movement, and the following resolution has been sent in reply to it:—
  We are not willing to give our support to a joint manifesto in conjunction with other political parties endorsing the Indian Nationalist movement. As Socialists we are opposed to the exploitation of the toilers either by foreign or native exploiters. As that exploitation can be ended only by the achievement of Socialism. through international working-class action, we are opposed to the Indian Nationalist movement which has capitalist aims and is not deserving of working-class support. We are also not prepared to associate with non-Socialist political parties.
The fact that we are opposed to the Indian Nationalist movement does not mean that we acquiesce in the brutal suppression of which the Indians have been victims. We are opposed to the capitalist system wherever it raises its ugly head, but we know that the solution to the workers’ subjective position under it is the same everywhere.

The only road to salvation for the Indian worker is the road to socialism, and he must travel along that road in brotherly harmony with the members of his class throughout the world.

[From a statement signed “Executive Committee, S.P.G.B”, Socialist Standard, November 1942.]