Monday, July 6, 2020

The slump in Germany (1993)

From the July 1993 issue of the Socialist Standard

The optimism and euphoria that accompanied the reunification of Germany two- and-a-half years ago has evaporated. At the time Chancellor Kohl and other European politicians talked of the coming of yet another economic miracle, not only for a unified Germany but for the whole of the EC.

So confident was Kohl of success that he decided to give the East German currency parity with the West German Deutschmark, in spite of warnings from the Bundesbank officials of the inflationary consequences that would ensue. German social welfare payments were also extended to the whole of East Germany. The result was an increase in the purchasing power of the formerly poorly-paid East German workers who rushed to spend the newly-upgraded currency on goods previously unavailable to them. The extension of welfare payments to the East German population has been estimated to cost the German Treasury DM 170 billion per year.

These measures did not, however, make up for the obsolete nature of East German industry, where manufacturing production has failed to catch up with that of West Germany (see graph). Eighty percent of railways in the East were still steam-driven at the time of unification. East German workers, although paid in DMarks, still get lower wages than their West German counterparts. Inevitably, they have taken strike action to obtain comparable wages.

Steel workers have recently managed to obtain an increase in wages from about 60 per cent of western levels to 80 percent this June and 90 percent by October 1994 (Wall Street Journal, 24 May). These concessions have been obtained against a background of a severe crisis in the European steel industry that has already forced two western German steel companies—Kloeckner Werke AG and Saarstahl AG—into bankruptcy proceedings. Effective unemployment in eastern Germany is up at 30 percent. "German industrial output is now 7 percent below last year", according to the Sunday Times (28 March).

The automobile industry is also being hard hit by the depression:
  Results from Daimler Benz, Volkswagen and BMW are among their worst on record, reflecting world-wide recession and the rapid deterioration of the German economy. Volkswagen, Europe's largest car manufacturer, lost DM 1.25bn (£503m) in the first three months of the year after sales fell by 23 percent in Germany and more than 17 percent across Europe as a whole . . . Volkswagen plans to cut 12.500 jobs over the next two years, while Daimler is shedding 7 percent of its 367,000 workers" (Daily Telegraph, 14 May).
With the inevitable rise in welfare spending accompanying rising unemployment and immigration estimated at 500,000 per year, pressures to cut government spending have developed.

Worsening deficit
The German deficit for the state sector will amount to over 8 percent of GNP this year, which is similar to that in the UK. in order to try to maintain stability against a background of runaway public spending the Bonn government signed a solidarity pact with the local governments of the western and eastern regions:
  Under the terms of the pact the government agreed to certain measures in return for restraint. Income tax is to increase in 1995, but so does public borrowing for Eastern Germany in order to help restructure the obsolete industries there. It was also accepted as part of the pact that there would be no cut in social spending in the economies pursued by the government (Daily Mail, City & Finance. 5 May).
Since the pact was signed, however, there has been a marked change in outlook for the German recovery that these measures among others were supposed to help. According to the Economist (19 May), "the budget deficit is rising alarmingly as recession cuts revenue and drives up unemployment. Unless the government cuts spending its finances will deteriorate further. The Finance Minister T. Waigel has proposed cuts of DM 20bn annually beginning next year”.

Leaking boat
Much of the propaganda extolling the benefits of a unified Europe have suggested that subsidies to ailing industries would help smooth over cyclical downturns, the euphemistic term used by orthodox economists who do not wish to acknowledge the worsening features of recession.

Subsidies have certainly not helped Germany or other European states in difficulty. The crucial restructuring of Europe’s stricken steel industry is in danger of total collapse, leaving British steel struggling against unfair competition from heavily subsidised Continental producers, has warned Industry Minister Tim Sainsbury:
  Mr Sainsbury told his counterparts that Spain and Italy ran the risk of undermining the whole restructuring programme “unless they finally agreed to reduce public funding of their loss-making steel producers as well as to implement radical cuts in capacity" (Daily Telegraph, 5 May).
The German Economics Ministry now forecasts that the western German economy will shrink by at least one percent this year. The vision of Germany as a strong economy at the centre of Europe is fading. "Investors have concluded that Germany is in the same leaking boat as other members of the ERM", commented the Financial Times (22 May). “Unification has swept away its financial stability and the historic strength of the German current account; inflation is now well entrenched; and the all-German unemployment rate is the highest in the EC".

Compounding Germany’s economic difficulties further is its exposure as a result of huge loans to Eastern Europe. It is estimated that total loans to Hungary, Poland and Czechoslovakia by German firms had reached almost $2 billion by the end of 1992. Many banks loans to these regions are not receiving any returns on their investments. Total exposure to Russian banks, hardly the most secure, is greater than that of all the rest of Europe combined.

Interest rates
Many government spokesmen throughout Europe are urging the Bundesbank to lower interest rates in order to bring about European recovery. The fact that interest rates in the US are at their lowest since the 1930s with no major recovery occurring is not explained. The Bundesbank sees its primary function as to prevent inflation, and the fear is that reducing interest rates will revive it. Memories of Weimar and runaway inflation die hard.

The depression has come to Germany and is deepening. The problems of Germany are the problems of Europe and are ultimately caused by the present world slump. The idea that the Maastricht Treaty can overcome these problems is absurd. For the Treaty to work it would have to be assumed that the competing economic powers in Europe have common interests. The violent movements of currency markets, in spite of central banks losing millions trying to restore stability, is indicative of the futility of trying to adjust or solve the problems of capitalism by altering interest rates.

One disturbing feature of Germany’s plight is the revival of rightwing movements. "Opinion polls show a steady increase for parties of the extreme right led by the Republicans", according to the Financial Times (German Survey, 26 October 1992). Failure of the capitalist politicians to solve the problems that result from the depression has led to widespread disaffection with the major political parties. Refugees in Germany are being blamed for unemployment and housing shortages and have become the focus for attacks by neo-Nazi skinheads.

The problems developing in Germany have happened or are developing in other parts of Europe, namely, rising unemployment, falls in production, bankruptcies, growth in extreme rightwing racist movements along with public spending crises. These problems do not develop or emerge exactly simultaneously in each country, but the overall trend is there.

The problems occurring in Europe are fundamental to the capitalist system. When the working class world-wide understand and accept this then the remedy will be the abolition of the system that puts countries and peoples against each other either on the marketplace or on the battlefield.
Terry Lawlor

It's no joke (1993)

From the July 1993 issue of the Socialist Standard

Browsing through the local library recently—us “dole scroungers" really know how to live it up—I came across a coffee-table-sized book titled A History of Class. I offered up a silent thank you to whoever had had the foresight to order and stock a book which might allow the casual browser to discover something about the continuing class struggle both now and through the ages.

When I was much younger and had fallen off my bike for the umpteenth time and went into the house blarting my eyes out. my dad used to say to me. “you’ll have much worse than that before you’re finished". Admittedly, I don’t think he had in mind discovering that I had misread the title of a library book, A History of Class was. in fact, A History of Glass!

Peter Ashby, principal consultant for the research company, Full Employment UK, aired his version of making the jobless earn their dole in the Daily Telegraph of 21 January. There is no doubting which side of the class divide Mr Ashby belongs to. He said:
  We need to move away from the old Beveridge notion that you have an income-based safety net for the unemployed. Instead we need to create a work-based safety net. Society would say after this period of unemployment. it's no longer acceptable to us for people to be outside the process of work.
His company had, he said, done research which found that:
  Once people had been out of work for a year, quite a rapid process of psychological decline sets in. People’s self esteem begins to plummet and they talk themselves out of the ability to get back into employment. Then if they get an interview they will under-perform to such a degree that they are unlikely to get the job. Others burrow into the hidden economy accepting the risk that that entails.
As my dad used to say, “if you’ve made a mistake, be big enough to admit it". After all these years of despising the British ruling class—that’s the two percent of the population who own or control the factories, the transport industry, the construction industry, the food industry, the banks, the service industries and the farming industry—I now realize that most members of that class deserve sympathy for their low self-esteem and the psychological damage suffered by them for never having worked. The rest of us, the working class, should be grateful that we have no choice but to sell our labour power—our physical and mental skills—because, obviously, being economically exploited by a minority class is what keeps us sane in an insane world. Unless, of course, capitalism is going through one of its periodic crises of overproduction better known as a slump. The psychological, emotional and economic consequences of suddenly becoming an unpaid wage-slave as opposed to a paid one are well documented.

Many years ago when I was at school, April the First was always a day to be approached with caution. Although the sensitivity of an adolescent was likely to be wounded at times, on that day it was even more galling to fall foul of an April Fool’s trick. As I recall, the deadline for catching out the unsuspecting was midday.

Earlier this year, my local paper reported that Lady Cobham, wife of the local, titled. squire, had been appointed to the board of the London Docklands Development Corporation and to the board of British Waterways. She was given these jobs by Michael Howard, Secretary of State for the Environment. Her ladyship is also president of the Heart of England Tourist Board. A spokesperson said Lady Cobham was delighted with the appointments but did not wish to comment further. The reason for the reticence? The one "job" pays £6,140 a year for half-a-day’s “work" a week. The other “job” pays £8.000 a year for a day’s “work” a week. As my dad used to say, “Them as have got, will get”.

Are you filled with moral outrage? Does it seem grossly unjust to you that someone should receive that amount of money for doing so little when millions are on the dole and across the country workers are agreeing to pay cuts simply to keep their jobs? Or are you envious that opportunities to make such easy money don’t fall into your lap? Or are you simply indifferent because that’s the way thing are and they'll never change? The story was carried in February, not on April First, but the joke continues to be on the working class.

Fitted carpets
Worcester Park is a well-heeled Surrey suburb where John Major lived until he was twelve. Not much likelihood of “dole scroungers” inhabiting that part of the world surely? But in a capitalist world no-one is immune from the effects of market forces. The Telegraph Magazine carried a report on 7 November on the devastating effect of the recession there:
  Lady Olga Maitland, newly elected MP for Sutton and Cheam which includes most of Worcester Park, described her constituency as "a third world, neither town nor country, inhabited by secure, safe, clean, decent, honest people. Salaries range from £14,000 to £30,000. This is absolutely middle England. in income, lifestyle and ambitions, people are uncomplaining. They take pride in stability. They are house proud, with nice kitchens, fitted carpets, central heating, and go to a lot of trouble to make sure the curtains tone".
It is easy to sneer at such "middle-class” aspirations but there are, no doubt, thousands of fellow wage-slaves who would like nothing better than to exchange their poverty-stricken lifestyles for nice
kitchens. fitted carpets and central heating.They would be eager, given the opportunity, to sell their labour power for two hundred and fifty quid a week, let alone for one-and- a-half days. What’s wrong with wanting decent housing, decent education, decent health care and a crime-free society? Who could argue with that? Are the inhabitants of Worcester Park and elsewhere in this island asking yet whether a society based on the economic exploitation of the majority by a minority, a society based upon production for profit not need, a society subject to the demands and whims of market forces, can ever provide the not unreasonable needs of individuals and society as a whole? The joke has gone on long enough and if we don't utilize the power which we possess as a class we might all die crying.

Think of the number of fans at a Saturday Premier League football match. If they were all committed to the introduction of a society based upon free access could they be ignored? Think of the number of workers on the dole. If they understood the reasons why capitalism has to go, to be replaced by a society which no longer screws people in every aspect of their lives, could they be ignored? Strength lies not only in numbers but in an understanding and an overwhelming desire to exercise the political power which the working class possesses. The means to abolish for ever the psychological traumas which living in a capitalist society induces. The inequality, the unfairness, the pressure of the state to conform, and the economic exploitation of the majority by the minority, are waiting for the working-class majority to say, the unfunny joke is over—let’s create a world with real laughter in it.
Dave Coggan

Letters: IRA bombers (1993)

Letters to the Editors from the July 1993 issue of the Socialist Standard

IRA bombers

Dear Editors,

I feel that your article in June’s Socialist Standard on the IRA’s bombing campaign completely misses the point.

Firstly, you are wrong to imply the specific problems of Irish Catholics in Ulster are caused by capitalism: capitalism exists all over the world but Catholics do not suffer the systematic discrimination they suffer in this sectarian state protected by British troops.

Secondly, it is wrong to say the IRA is fighting specifically for a united Ireland. Their most important objective is equality and an end to discrimination against Catholics, this then becomes a demand for an end to British rule as it is Britain that props up the system. In fact the Eire Government is no friend of Sinn Fein and has supported Republicanism only as far as Irish public opinion has forced it to. It is unlikely the IRA has a utopian view of a united Ireland.

Finally, you describe the IRA as terrorists, which is misleading. It is the British State that does by far the most terrorising: some 30,000 troops and 50,000 police and paramilitaries on the street, and Loyalist assassination gangs are all used to intimidate republicans. Surely as an “anti-British” party, as all British socialist parties must be, you should be concentrating on the brutality of the British state in crushing legitimate demands for equality rather than the understandable reaction to it by Irish Catholics.
J. Davey

This is the first time we've heard anybody claim that the IRA is not fighting specifically for a united Ireland, but you’re right about the British Army being the biggest terrorist group in Ulster. As to the problems facing Catholics, discrimination over voting, council houses and public sector jobs has now largely gone; what remains—unemployment, bad housing, poverty—is also suffered by Protestants and is clearly caused by capitalism— Editors.

Sexual politics

Dear Editors,

Re Carl Pinel’s article “The Roots of Gay Oppression” (May Socialist Standard), being Gay can often be an isolating experience which often supercedes any political ideology, creating a climate where any political activity by Lesbians and Gay men is often concerning the fight against our own oppression. This is usually our most immediate and primary concern simply because it is the most immediate and constant threat to our everyday lives, even from those we would otherwise regard as comrades.

Where it is true that it is the solidarity of the working class that will bring about the downfall of capitalism, it would be wrong to condemn the work of any minority-biased pressure group, as homophobia, as well as racism and sexism, is a working-class disease too!
Stephen Webb 

As part of our campaign to spread socialist understanding we oppose racism, sexism, nationalism, homophobia and other prejudices that divide the working class—Editors.

Between the Lines—Female Equality

Dear Editors,

I write regarding a piece in the June Socialist Standard “Between the Lines—Female Equality". This dealt with a "40 Minutes” TV programme about female recruits to the Australian Army being treated as “a lump of shit” and sneered that this is the sort of thing that women want in the way of equality.

I think this treatment of a very small minority of women who may wish to take up occupations more usually taken by men was a trivilisation of the legitimate aims of many women to be treated on equal terms with men, albeit within the confines of an unequal society, in terms of the home, and their wages, conditions and advancement in their work.

To dismiss women's equality in this way is both misleading and offensive to women within the Socialist Party and those who may come into contact with us.
Phyllis Hart

Obviously, we’re not against women getting equal treatment with men under capitalism, but how can we who condemn men for joining the armed forces (and have encouraged our own members to be conscientious objectors) regard women becoming trained killers as a desirable example of equality?— Editors

Between the Lines: To Hell with Charity (1993)

A Tory B’Stard
The Between the Lines column from the July 1993 issue of the Socialist Standard

To Hell with Charity

Socialists want a society without charity. The function of charity is to throw crumbs at the poor and pity at the disadvantaged. People First (C4, 8pm. 8 June) showed how a growing number of workers classified as disabled are sick of being the recipients of crumbs and pity. Their particular target, which has long been attacked in this column, are the patronising TV charity telethons in which company directors give cheques for a few thousand pounds (in return for a positive mention of their companies) and workers engage in stupid and humiliating stunts in order to raise in pennies what the average capitalist would spend without thinking twice on a good lunch.

Under capitalism disabled workers are usually poor because the bosses can milk less profits out of them than fitter, more agile wage slaves. They are disadvantaged because the social environment is built for the requirements of the physically fit and the cost of adding lifts and ramps to public places is not profitable enough. So, to ease the social conscience there are these annual displays of money-collecting and expressions of concern for those whom capitalist logic would really prefer not to be alive at all.

It was inspiring to see disabled workers refusing to behave as grateful victims and demanding the dignity of being equals. But equality in wage slavery is not the answer. It will only be when humans are recognised for what they are and not what they have that all of us, regardless of shape, form or infirmity, will be free to share the world as a family of equals.

What Community?

The same night as the encouraging documentary about militant disabled workers, Newsnight (BBC2, 10.30pm) had a report, set in Oxford, about what has happened to people who have been released from psychiatric wards into so-called community care. It is like releasing goldfish into the desert waters. The fact is that there is no community. For there to be a community there would need to be a common human interest in society rather than the class division which currently exists. In an increasing number of cases it is the very absence of a sense of community life, and the consequent depression, which leads people to become mentally unstable. The state’s response is to throw these unfortunate people out into a cold and alienating world where they will exist in poverty and loneliness, with medication to keep them quiet (if they remember to give it to themselves). The Newsnight report showed how miserable and uncared for were those who have been sentenced to the scrapheap of bogus care in the bogus community.

Will the Real Alan B’Stard Please Stand Up?

Tory politicians come in all sorts, from wimpy Major, slobbish Clarke to Mad Maggie. One of the latter's closest friends was Alan Clark, the subject of a BBC2 documentary called Love Tory (7 June. 9pm). Clark is a vile old aristocratic character with the callousness of a Ridley, the smugness of an Owen and the muddled thinking of a Lamont. He is the man, should you have forgotten, who referred to blacks in Britain as having come from Bongo-bongo Land.

In the documentary he readily admitted to being a liar and openly stated that when he was a Minister of Employment in the Thatcher government none of his policies made any difference and that he did not believe the speeches written for him to read out in the House of Commons. His candidness comes from the fact that he is extremely rich (he lives off what he called "the income from my income”) and an arrogant belief that the proles are too stupid to do anything about it even if their rulers admit in public to conning them.

Earlier this year, in a Guardian interview, Clark stated that "the arguments for socialism are powerful. But it has never been put into practice properly . . . the social argument for socialism is not easy to refute” (9 January). The reality is that two hours in the debating ring with a socialist speaker and the complacent grin would soon be knocked off Alan Clark's face. He would discover that socialism is impossible to refute and that capitalism can only be sustained while rather more publicity-conscious crooks than him persuade the working class to continue donating to the biggest charity in the world which keeps useless idlers in privileged luxury while the rest of us have to produce the wealth.
Steve Coleman

50 Years Ago: Trade Unions in
 Wartime—And After (1993)

The 50 Years Ago column from the July 1993 issue of the Socialist Standard

Sir Stafford Cripps may now address the workers on Joint Production Committees as "comrades" but this will soon be forgotten when the struggle resumes its normal intensity in the scramble for markets and profits after the war. In spite of all the hopes of industrial peace, backed up by the powers of the Government under the various orders imposing industrial conscription and banning strikes, the number of trade disputes increased from 875 in 1938 to 940 in 1939, 922 in 1940. 1,251 in 1941, and 1,281 in 1942. The number of disputes is actually larger than in the last war. though the number of workers involved, and the number of days lost, are smaller—due to the fact that "the great majority of stoppages affected only individual establishments and were of short duration" (Ministry of Labour Gazette, January 1943). In spite of the elaborate arrangements to secure the reference of disputes to arbitration, there is ample evidence that trade unionists have not accepted the defeatist view that they can afford to renounce what is in the last resort their main if not their sole weapon, the strike.

(From the editorial in the Socialist Standard, July 1943.)

Sting in the Tail: Ignorance is Bliss (1991)

The Sting in the Tail column from the July 1991 issue of the Socialist Standard

Ignorance is Bliss

A recent news item provided a long list of history exam howlers written by college students in the USA and Canada.

Examples included - 

  • Sir Francis Drake circumcised the world with a 100 foot clipper.
  • Martin Luther was nailed to the church door at Wittenberg.
  • The Magna Carta provided that no free man could be hanged twice for the same offence.
Comical stuff, but what about the political howlers reported in the media any day of the week? For instance -
We were the first truly democratic party there has ever been in this country
(David Owen on the SDP)
Karl Marx invented Marxism in the British Museum
(historian A.J.P. Taylor)
We would see an end to all world wars if men wore fishnet stockings more often.
(Richard O'Brien, creator of The Rocky Horror Show)
Many workers vote Tory because the Labour Party isn’t left-wing enough.
(any Trotskyist paper)

Still Dreaming

British Telecom's plan to cut another 10,000 jobs despite having declared profits of over £3 billion outraged opposition MPs, trade union leaders and others.

These dreamers think the sackings are not justified when profits are so high, but BT is in business not to provide jobs but maximum profits so that it can keep its shareholders happy and re-invest in order to stay far ahead of its competitors.

BT knows it can only continue to do this by constantly cutting costs and reducing its workforce is an obvious way of doing this.

Karl Marx described how the war which capitalist enterprises wage among themselves must be fought-
this war has the peculiarity that its battles are won less by recruiting than by discharging the army of labour. The generals, the capitalists, compete with one another as to who can discharge most soldiers of industry.
That is the logic of capitalism no matter what the dreamers may think.

Charitable Thoughts

In the recent furore about registered charities adopting a political stance and the government's threats to tighten the laws governing charities, an interesting fact about the number of charities emerged.
  The number of charities is growing, totalling 171,434 at the end of the year — against 168,170 the previous year.

The Independent on Sunday (2 June)
The picture of 171,434 organisations beavering away trying to alleviate some of the problems arising from capitalism in 1991 shows how correct, a hundred years ago, Oscar Wilde was in attacking charities in his essay The Soul of Man Under Socialism, when he stated:
  They try to solve the problem of poverty, for instance, by keeping the poor alive; or, in the case of a very advanced school, by amusing the poor. But this is not a solution: it is an aggravation of the difficulty. The proper aim is to try and reconstruct society on such a basis that poverty will be impossible.
A very clever person saw the futility of charity in 1891. It must be a very foolish one in 1991 who does not see that these 171,434 organisations are powerless to solve the problems of poverty.

Another Fake

Lesley Mahmood is the "Broad Left" candidate in the Walton by-election in Liverpool.

Ms Mahmood, who was recently expelled from the Labour Party, describes herself as a "socialist". The Guardian (11 June) has provided a selection of her recent statements and given us the opportunity to examine her socialist credentials.

No genuine socialist would say as she did "Of course I want a Labour government elected". After all, the Labour Party has supported the production for profit system throughout its inglorious history.

And although she wants to see ". . . socialist ideas being put into practice . . . her comrades in Militant need not panic because she doesn't mean anything really revolutionary like the abolition of the wages system, only ”. . . the council building new homes for people . . . that kind of thing."

Whatever the Labour Party expelled Lesley Mahmood for, it obviously had nothing to do with socialism.

Pin Stripe Penury

The Socialist Party have always clearly stated that there are only two classes in society. We have denied the existence of a "middle class".

This has made us unpopular with trendy left wingers and marketing people who claim that higher paid members of the working class, like managers, lawyers and doctors, are not members of the working class.

The recent increase in unemployment has made it very clear to many of these "middle class" people that there is no security for the working class — whether relatively lowly or highly paid.
Only 3 weeks ago the Department of Employment told the British Institute of Management that 80,000 people claiming unemployment benefit described themselves as managers.
Independent on Sunday (2 June)
Describe yourself how you may — you cannot escape the often unpalatable truth — if you have to work for a wage or a salary, then you are a member of the working class.

What's in a Name

The recent decision to change the name of Leningrad to St. Petersburg excited a great deal of media coverage.

Changing the name from that of a ruthless dictator to that of a megalomaniacal religious freak is just the sort of trivia that does excite the media.

At least it could be said in favour of the change that the working class residents of that city were consulted. That was certainly not the case in another change earlier that month.
  Republics still wanting to be part of the Soviet Union have agreed on a name, dropping "socialist" from the USSR to become the Union of Soviet Sovereign Republics, Tass reported last night. Leaders of nine of the original 15 Soviet republics, meeting at a government villa in Novo-Ogaievo, outside Moscow, decided on the name in discussions concerning a new Union Treaty.
Daily Telegraph (4 June)
After 84 years of deception the ruling class in the USSR are at least dropping the pretence of calling the country socialist.

The excitement felt by any class conscious worker in the USSR could be likened to that of an inmate of Strangeways on hearing the governor had decided on a new name for the prison.

Hand Outs & Charity

Socialists are always hammering on about people starving while farmers are being paid NOT to produce food. We make no apology for citing the most recent example of this obscenity reported in the Glasgow Herald on 19 June:
 On top of that, Mr Evans said that the Governor of the Bank of England, Mr Robin Leigh Pemberton, as well as being given a £22,000 pay rise, had received £80,000 compensation for NOT growing grain on his 2,000 acre farm.
Now that's what we call a hand out!

What Socialists Stand For (1991)

From the July 1991 issue of the Socialist Standard

How is the Socialist Party different from other left-wing groups?

We’re not left-wing, we’re Socialists! The left (groups like the SWP or Militant) merely want to reform capitalism, generally by increasing the degree of state ownership in the direction of state capitalism. In contrast, the Socialist Party does not aim to tinker with a few features of capitalism — we want to do away with it altogether. Our sole objective is the establishment of Socialism.

Lots of people say they're in favour of Socialism, though it's not always sure what they mean by that word. What do you mean by it?

The Socialist Party is perfectly clear about the nature of Socialist society. We don't use "Socialism" as a slogan to impress people or win votes.

A socialist society is based on common ownership of the means of production and distribution. Land, mineral resources, factories and so on will belong to everybody. It will not be possible for some group of people to lay exclusive claim to some factory or whatever and exploit others, as happens under capitalism. Equally, there will be democratic control of the means of production — decisions about what to produce and how to produce it will be taken by the community, not by an elite few. Production will be to satisfy people's needs, not to make a profit.

That sounds like workers' control with higher wages than now.

Absolutely not. Common ownership and democratic control mean that socialism is a classless society, with no capitalist class and no working class. Since property will be owned in common, the whole idea of buying and selling simply will not be relevant. Consequently there will be no money and no wages — people will take what they need from the stock of goods produced, without needing to pay for it. With no classes or private property, there will be no government, laws or armies. Nor will there be national frontiers either.

Now you're making it sound like what some people call Communism.

We use the term "Socialism", but the name is less important than the idea. You should realise, though, that what we are advocating has nothing at all to do with the regimes in Russia, China, Cuba, and so on, which claim to be Socialist or Communist, but are actually state capitalist, because they still have wages, classes, etc.

But do we need such a drastic change as you envisage? Can't capitalism be reformed?

In one sense, capitalism can be reformed — governments are doing it all the time. But it can’t be reformed to run in the interests of the working class, the overwhelming majority of the population who rely on a wage or salary to live. It's an essential feature of capitalism that there is a relatively small class of capitalists who own the means of production and so can force the working class to work for them in return for a wage. It also follows that the workers are exploited — the goods and services they produce are worth more than they receive in wages; this is where the capitalists' profit comes from. Every reform of capitalism has to come up against this brute fact that capitalism needs profits.

What's wrong with profit? If a firm sells something for a profit, doesn’t that just mean that people want what they're producing?

The problem is that workers are restricted by the size of their wage-packets to buying what they can afford, which may be very different from what they want. And so much of what is produced is third- or fourth-best, because companies know that workers can’t afford the very best (whether houses, cars, clothes or whatever). Of course the very best is produced for the consumption of the capitalists, who can afford it.

What’s more, if people don’t have money, then what they want hardly matters under capitalism. You can see this very clearly by looking the housing situation. People living in the street or in slums, or sleeping on a friend's floor, have housing needs but don't have the resources to rent or buy. No company will make a profit out of selling a house to the destitute. This is all because under capitalism houses (like everything else) are produced for profit, not to meet people’s needs.

In fact, housing is a perfect illustration of the shortcomings of reformism. Since 1868 governments have been legislating about the housing problem. But it hasn't been solved — far from it — and it's actually getting worse at present.

William Morris once said that reforming capitalism is like trying to make hell a little cooler in order to be able to carry on living there. We agree — the answer is to do away with capitalism, not reform it.

So how do you propose to go about setting up a Socialist society?

The answer to this follows from what was said earlier about the nature of socialism. Socialist society will be democratic, it will be run by ordinary folk, so people will have to understand socialism and be prepared to take part in running it. In other words, there can be no socialism without socialists. This is something we insist on — to make socialism you have to make socialists. Once a sufficient majority are socialists, they will be able to win political power and introduce common ownership. It must be the working class who establish socialism, not some leadership or vanguard.

But there will always be leaders, won't there?

No, having leaders implies having followers, so leadership is utterly incompatible with the idea of a fully democratic system. And the Socialist Party has no leaders — all members are equal.

How do I join?

Well, before you think of joining you should get to know our views properly, by reading several issues of the Socialist Standard and some of our pamphlets. Also, if at all possible, you should visit your local Socialist branch and talk to some of the members there. Joining the Socialist Party involves a bit more than filling in a form. Applicants need to understand and accept the case for socialism. If you do join, you will find that you are involved in the worthwhile task of helping to create a world where human welfare not making profits will be the over-riding objective.

A world in common (1991)

Editorial from the July 1991 issue of the Socialist Standard

We live in a world which has the potential to adequately feed, house and provide clean water and decent medical care for every single man, woman and child on Earth. The resources exist to banish material want as a problem for members of the human race. Yet millions throughout the world are malnourished, live in squalor or are actually dying of starvation or starvation-related diseases. The big question that faces the human race is what can be done about it?

For some years, pressure groups concerned with the plight of populations in the less developed countries have urged bankers and governments in the richer nations to cancel the Third World debt. They imagine that if the billions of dollars in loans and interest owed by governments in Africa, South America, and Asia were written off then the crushing burden of poverty suffered by the mass of people in those regions would begin to lift. A fresh way would be open for development, they argue. Food subsidies and health programmes would attack the deaths from malnutrition and disease. Education and housing would raise the quality of life for millions.

These things would not happen. The cancellation of the debt would leave the curse of world poverty intact. The beneficiaries would be amongst the ruling elites who own and control production and distribution in the debtor countries. They are the ones who through their governments owe the money but they are not poor. Amidst the poverty of the masses they live in luxury. Holding power often with brutally oppressive methods they care little for their populations. Their aim is their own self-enrichment. Why should we want to bail them out? Why should we want to ease the way for the rising capitalists of the underdeveloped countries to accumulate capital from the exploitation of workers?

There is of course a case for the populations of the advanced regions giving aid and assistance to the people in areas where infrastructures, services, means of production and distribution are poorly developed. This is the compelling case that those with advantages should put themselves out to help those in need. Most people will accept this but it cannot happen under world capitalism which keeps even our ability to help others in economic shackles—or reduces it to the pathetic levels of charity. The tragic illusion which is misguiding those organising the Cancel the Debt campaign is their belief that the devastating problems of world capitalism can be tackled by re-arranging its finances.

The things that are desperately needed—food, clean water, housing, sanitation, transport, medical services and so on, can only be provided by useful labour, of which there is an abundance throughout the world. Finance is part of a system which operates as a barrier to useful labour producing what people need. Useful production must be freed from the constraints of profit and class interests. Only useful labour applied through world cooperation in a system of common ownership can solve the problems of world poverty.

World socialism could stop the dying from hunger immediately, and provide the conditions for good health and material security for all people across the Earth within a short time. It would do this by producing goods and services directly for need.

World socialism will operate with one simple and ordinary human ability which is universal—the ability of every individual to co-operate with others in a world-wide community of interests. For too long has indignation at human suffering been dissipated by useless causes. How much longer must the price of failure be the misery of countless millions?

Caught In The Act: Eric Heffer (1991)

The Caught In The Act Column from the July 1991 issue of the Socialist Standard

Eric Heffer's death came at an awkward time for the Labour Party. It ensured that the party's problems with Militant in Merseyside would get all the concentrated publicity of a by-election swarming with media hacks, when Labour might have hoped that it would be obscured in a general election. And just as Neil Kinnock is congratulating himself on the apparent success of his single minded drive to tune up the the Labour Party into a winning machine, he finds his open cynicism being contrasted to Heffer’s stubborn loyally to principles. For example Heffer's dramatic exit from the platform at Labour's 1985 conference, in protest at Kinnock's assault on Militant, receives kinder treatment now than the speech which provoked it. One obituary put the boot into Kinnock by recalling two episodes from his past as an attention-seeking left winger. On the first occasion he enraged Heffer by calling for a one-day general strike. A few years later, when he had come on a bit, he made a point of lounging on the front bench during the Queen's Speech. Royalists who were upset by this puerile demonstration will have been reassured when Kinnock recently informed the Commons, with a coy simper, that he had spent the previous night as a guest of the Queen at Windsor Castle.

There is, however, a problem about these supposedly unyielding supposed principles of Eric Heffer because there is no certainty about his ideas nor about whether he held them consistently enough for them to deserve to be called principles, let alone unyielding. He began his active political life at the age of 16 or 17 in the Labour Party but he soon became frustrated at the party's lack of commitment so he joined the Communist Party. However the CP were perhaps a bit too committed for him; in 1948 they expelled as a "left wing deviationist" which was their way of describing his stand against their support for a government of national unity and their opposition to strikes during the war.

Heffer then decided that his frustrations could after all be contained in the Labour Party and he rejoined it but by 1954 he had resigned again, propelled by another bout of impatience. The misguided lesson he drew from his political oscillation was that there was a need for a new party which would treat left wing fantasies seriously. With a few others equally deluded, he helped form the Socialist Workers Federation but it did not take long to dawn on him that the SWF was outside the mainstream of the workers' movement — where no self-respecting left winger could ever be comfortable. So Heffer (by now you know what’s coming) joined the Labour Party for the third time. On this occasion his membership survived, perhaps because he took out his frustration by being consistently out of step with the leadership and joining the left wing gadflies in Tribune Group and then the Campaign Group.

Along the way he became famous for what might kindly be called inconsistencies. For example, was it really a loveable eccentricity which caused this righteously left wing MP to like and admire arch reactionaries like Margaret Thatcher and Auberon Waugh? Or was the naive vanity which Heffer's friends said somehow existed in him alongside kindness and sincerity? How could this rigidly principled Marxist also be a devout Christian, dispensing the opiate of the masses from the High Anglican church, where it is more usual to find crusty Tories than Merseyside militants? What happened to the SWF policy of opposition to the Labour Party or any other parliamentary party and to the parliamentary "peaceful" road to socialism, when Heffer became what his admirers called "a great parliamentarian"? How many such contradictions can one person cram into one lifetime?

Still, they all loved him. Tories like Robert Rhodes James (". . a very special and for me remarkable friendship") and Kenneth Baker ("He has won the respect of the House"); right wing Labourites like Joel Barnett ("He will be much missed by all who knew him") and of course Militant, whose cause he defended on the Labour NEC (". . . he felt it his duty to stand up and speak for me" said Derek Hatton). In fact there may have been rather more than that to Heffer’s relationship with Merseyside Militant. There was every reason for him to respect their organisational talents and their ability to marshal votes; every reason for him to want them on his side rather than to antagonise them with one of his famous outbursts of candour, vanity, kindness, stoical principles and parliamentary greatness. We can only speculate about his reaction if Militant had put up a candidate against him as they have in the by-election caused by his death. Perhaps, among his irritation, there would have been a sneaking admiration for this policy change, worthy of Heffer at his best; for by contesting the election they are challenging the Labour Party openly instead of trying to change it from within.

Heffer spent a lot of his time clinging to the wreckage of the theory that the Labour Party lost elections because it was "not socialist enough". It is difficult to reconcile this with what has actually happened to Labour in recent elections. Even someone as divorced from reality as Heffer was would be hard put to find any convincing evidence that Labour would have stayed in power from 1945 until the present if only they had behaved as if capitalism is not a social system in which everything has to be paid for, the books must be balanced and a nice profit made for the class who are in ownership over us. In any case Heffer was not excessively eager to do the donkey work in applying his theory about the electoral harvest to be reaped from "more socialist" policies. In 1967 he was offered a junior ministerial post but he turned it down; when he agreed to be Minister of State under Tony Benn at the Department of Industry in 1974 he lasted only a year. Far from trying to change Labour policies from within the government he took one of his "principled stands" and left Harold Wilson with no choice but to sack him.

Heffer is not the first left wing politician to be kindly assessed after their death and he will not be the last. So far no one has mentioned the confusion people like that are responsible for and the effect it must have on workers who are aware of what capitalism does to them and are genuinely looking for a better way of organising society. In his Liverpool constituency, plagued by desperate poverty and scarred by the memory of the Toxteth riot, Heffer persuaded thousands of workers to vote for him on the assurance that his intellectual muddle of irreconcilables could tame the worst features of capitalism. Well he failed: the Militant by election candidate. Lesley Mahmood, promised to fight on the same issues like council redundancies, unemployment and hospital closures which Heffer had been supposedly dealing with since his election nearly thirty years ago.

Did Heffer ever wonder, from the depths of his futility, if there was another way? In April 1981 he wrote a pompous letter to The Socialist Standard ("It has been drawn to my attention . . I expect an apology and retraction in your next issue".) when we mistakenly attributed to him a piece in the SWF journal Socialist Revolt. He was right and we said so unreservedly. We also pointed out some important inconsistencies in an article which he definitely had written in the same issue of Socialist Revolt. The point is that Heffer must have read — or at least had his attention drawn to — The Socialist Standard and so to the ideas of Marxism, of socialism and the democratic revolution necessary for its establishment. It meant that all of his confusion and wobbling from one daft idea to another was unnecessary. He should have known better.

In the name of profit (1991)

From the July 1991 issue of the Socialist Standard
"Over one million babies will die this year from diarrhoea because their mothers have been sold unnecessary bottle feeds".
There seems to be little, if any, dispute amongst nutritional experts that breast milk is best for babies, and for the poor it has the additional advantage of being free. In addition, a baby receives antibodies in the mother’s colostrum which gives some immunity from a number of infectious diseases.

There are a few mothers who are unable to breast feed and have to resort to artificial feeds as a subsititute, but the vast majority of mothers are able to feed their babies satisfactorily. But capitalism is not concerned with the best interests of developing babies—profits are the overriding priority and, therefore, business strategies have been devised to persuade mothers to use milk substitutes instead.

In the industrialised countries many mothers from working-class homes have to return to work within a few weeks of giving birth to earn wages to help support their families. This forces many of them to abandon breast feeding in favour of bottle feeds which can be given by other members of the family or child-minders.

Infants from poorer families have substantially higher mortality rates than the wealthy, in which artificial feeding, by depriving the babies from receiving some of their natural immunity, plays a part. There is also a risk of over-feeding and obesity if the feed is mixed too richly. Obese children tend to develop habits of over-eating and grow up into obese adults.

In underdeveloped countries artificial feeding can be a matter of life or death. Dr Peter Poore, chief medical officer for Save The Children states:
  For a sub-Saharan African baby the early termination of breast feeding can be tantamount to a death sentence. (Guardian, 8 March).
Food and drug firms in industrialised countries spend millions of pounds trying to persuade doctors, nurses and mothers in underdeveloped countries to abandon breast feeding and use artificial feeds. In 1981 the World Health Organisation and UNICEF’s code was adopted by most industrialised nations which prohibited advertising and stopped free artificial feeds being supplied to hospitals.

This has not prevented tinned milk from being donated to hospitals, allegedly for mothers unable to breast feed. But the supply of milk substitutes far outweighs the number of mothers who need it and is clearly intended to persuade other mothers to abandon breast feeding. Far from being charitable, hard-headed commercial considerations are behind the “donation” of milk substitutes.

In underdeveloped countries it is rare to find a mother who is unable to breast feed. The supply of free artificial feeds is designed to create a dependence on the product. Once the mother has stopped breast feeding for a while the milk supply dries up and the mother has no choice but to continue using bottle feeds.

The European Commission, after secret consultations with food and drugs manufacturers, has decided to remove most of the regulations governing the advertising and supply of milk substitutes. This directive will come into force in 1992 and, in the future, aggressive advertising will be used to promote artificial feeds to provide profits at the expense of babies’ lives.

Aggressive advertising
In urban Brazil, studies have shown that bottle-fed babies are 14 times more likely to die from diarrhoeal infections and three times more likely to die from respiratory infections. Many mothers in underdeveloped countries dilute artificial feeds too much because they are too poor to pay for sufficient tinned milk once they have become dependent on it. In some countries the water supply is contaminated or fuel to sterilise the bottles and teats is in short supply.

The continuation of breast feeding also reduces the chance of becoming pregnant. And while it is only partly effective it does help women in poorer countries to space their children in the absence of more effective contraceptive methods. The encouragement of mothers to abandon breast feeding removes this natural contraceptive effect and leads to unwanted pregnancies.

In addition to the supply of milk substitutes for small babies there has been the development of “follow-up” milks designed for babies over six months of age. These are blatantly advertised in underdeveloped countries and are starting to increase the mortality rates of slightly older babies. And the European Commission's deregulation of milk marketing practices next year could soon lead to these milk substitutes being advertised in Britain.

Each year underdeveloped countries spend $1.5 billion on milk substitutes which are, for the most part, unnecessary. But capitalism is not concerned with what is necessary or desirable for health. Any product, no matter how dangerous, will be produced if there is a market for it. And the same capitalist logic will prevent much needed food being produced if people are unable to pay. The death toll these result in will continue as long as this vicious system lasts.
Carl Pinel

New Age anti-rationalism (1991)

Book Review from the July 1991 issue of the Socialist Standard

The Truth Vibrations by David Icke. Aquarian Press, 1991. £4.99.

You’ve heard the prophesies, seen the turquoise tracksuits, and now you can read the book. David Icke, former professional footballer, TV presenter, Green Party spokesperson and now self- proclaimed “aspect of the Godhead” says this new book is all part of what he calls The Plan. The Plan, ostensibly, is to reveal the Truth, show humankind the Light, and thereby save the planet from famine, earthquakes and ultimate destruction.

But in case you've been put off already, The Truth Vibrations is actually quite a clever book. Not only does it try to address real concerns about ecology and the future of the Earth, it does so by attempting to draw together all the multifarious preoccupations of the New Age movement, the market at which it is principally aimed. Thus Icke's story about how the nature of The Plan was revealed to him by “higher beings". and the part he would play in its successful prosecution incorporates something from virtually every aspect of modern anti-rationalism. Spiritualists and “sensitives", psychic surgery, reincarnation, astrology, tarot, ley lines, earth chakras, pyramidology. UFO's and extraterrestrials (both ancient and modern), ghosts. Merlin, the Holy Grail, Atlantis and many others besides, all receive an airing of approval.

Anyone taking the view that it is capitalism with its ruthless drive towards profit and capital accumulation that is the major threat facing the planet has it wrong if this book is to be believed. The root cause of our problems, according to Icke, are the Earth’s imbalanced "energy systems” (and he isn't merely talking about gas pipes and electricity pylons). His explanation of how the “imbalance” has occurred is too convoluted and fantastic to be dealt with here, but this is the apparent reason for Icke's bizarre behaviour—chronicled in detail—of visiting various “energy sites” and “power points” around the globe so as to dance and chant messages that might “unblock” them before all is lost. However, one might mention that well-meaning but deluded individuals have been doing this for years at places like Glastonbury while capitalism has continued to cause despair and destruction all around them, and that this does not bode well for his efforts.

Icke is one of those Greens who sees industrialisation as a bad thing in itself, but to the extent that Icke specifically recognises capitalism's priorities of production as a problem for the planet, his vision of how they might be replaced is remarkably backward-looking. A move toward local “barter economies" is the best thing he (and his spiritual masters) have come up with, and considering all the denigration heaped upon him in recent months, one is left wondering whether it has all been worth the effort.
Dave Perrin

Karl Marx (1991)

Book Review from the July 1991 issue of the Socialist Standard

Capital, Volume 1. By Karl Marx, translated by Ben Fowkes. Penguin Classic. £10.99.

Penguins have just republished this modern translation that they first brought out in 1976 and which has since become the standard modern one to quote from. Ernest Mandcl, the Trotskyist leader, who even today still thinks that Marx’s theory of capitalism does not apply to Russia was of course a most unsuitable choice to write a 70-page introduction, even if he does provide some interesting historical material on the background to Marx’s major work.

Letters: Malthus, people and pollution (1991)

Letters to the Editors from the July 1991 issue of the Socialist Standard

Malthus, people and pollution

Dear Editors,
Your article. “Ecology and revolution” (April 1991), accepts the seriousness of the world ecological crisis but rejects Jonathon Porritt's claim that environmentalism has superseded the class struggle. Fair enough; I agree that environmentalism cannot wish away the conventional issues of politics.

However, you then change tack and question the seriousness of the crisis itself, beginning with the effects of population growth, which you tackle by rubbishing what you think Malthus said. (If you want to know what he really said. I recommend articles and reviews by Jack Parsons in People, 1977, No.3, and No.4; 1984, No.2 and New Scientist, 11 October 1979). Your approach to the alleged dangers of industrialisation is to argue that since it has been a good thing for millions of men and women (undoubtedly true), fears about its environmental consequences can be dismissed. Dr Pangloss might agree, but I do not.

Looking at the actual situation as it is now, it may be possible to find some common ground if you agree that, broadly speaking, the deleterious effects of human activities on the environment (enhanced greenhouse effect; loss of ozone layer; soil erosion; loss of forests, etc) are a multiple of number of people and per capita use of energy and materials. Not only is world population projected to double by about 2030, but an immense increase in per capita consumption would be inevitable if the poor countries emulate the lifestyles of the rich. Would you not agree that both factors should be reduced, as a matter of common prudence? If you do, then we can discuss the political implications.
John Davoll 
Shepperton, Middlesex

Just because we have a different view as to its cause does not mean that we question the seriousness of the present ecological crisis nor that we think we are living in the best of all possible industrialised worlds. Far from it. There is an ecological crisis and it is serious, but its cause is not the pressure of population nor industrialisation.

The cause of the crisis is the capitalist system where firms compete for profits and where the resulting competitive pressures impose the accumulation of more and more capital out of profits as the over-riding economic goal (what some Greens call “blind economic growth"). This being so, the solution lies neither in depopulation nor in deindustrialisation but in getting rid of the profit system that is capitalism and replacing it with socialism and production for need.

If production was geared to meeting needs, on the basis of the common ownership and democratic control of productive resources, then not only could modern technology and industrial resources be used in a non-polluting way (productive units would no longer be under competitive pressures to minimise costs at the expense of social and ecological considerations) but the whole of the world's present population could be adequately fed and housed.

Pollution is not “a multiple of people and per capita use of energy and materials" but of the waste and profit-seeking of the capitalist system. It is in fact the waste that is built-in to capitalism— the waste of arms and armed forces, of government bureaucracies, and of all activities linked to money and finance—which is responsible for there being a high per capita consumption of energy and materials; since this figure is of course merely such consumption, wasteful as well as useful, divided by total population. With socialism—and the elimination of the waste of arms, the apparatus of repression, and money and finance—this per capita figure will come down even while more resources are devoted, as they must be, to satisfying peoples food, housing, health care and other needs.

Socialists are fully aware of what Malthus preached. After all, we've been combatting for nearly two hundred years now his view that it is impossible to improve the lot of the mass of humanity. But the best way to know what Malthus really said is to read the man himself. This is what he wrote in the very first chapter of his Essay on the Principle of Population:
  Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetical ratio . . . This natural inequality of the two powers of population and of production in the earth, and that great law of our nature which must constantly keep their effects equal, form the great difficulty that to me appears insurmountable in the way of the perfectibility of society. All other arguments are of slight and subordinate consideration in comparison of this. I see no way by which man can escape from the weight of this law which pervades all animated nature. No fancied equality, no agrarian regulations in their utmost extent, could remove the pressure of it even for a single century. And it appears, therefore, to be decisive against the possible existence of a society, all the members of which should live in ease, happiness, and comparative leisure: and feel no anxiety about providing the means of subsistence for themselves and families. (Our emphasis)
We repeat this is rubbish. A society where the whole population can live freed from the fear of material want is possible. John Davoll undermines the case for birth control by associating it with the ideas of Malthus.


Dear Editors,

I was disgusted by the International Socialists, the Danish sister party of the British SWP, because of the position they took during the Gulf War. In line with their Leninist dogma they gave their backing to Saddam Hussein. Their support was based on the fallacious belief that a blow to American Imperialism is in our class’s interests and that Hussein would have unleashed revolutionary forces that would have toppled him and other dictators in the area. There was actually a split in the IS over their attitude to the war. The local branch broke from the IS because they preferred to give their conditional, rather than unconditional, support. Some internationalists!

Socialists are opposed to such ideas which do nothing other than confuse the real issue. If Iran had won, it would have been American workers’ blood that would be soaking into the desert sands. You could imagine how IS'ers would explain their position to workers on a General Motors factory line—"Sorry Comrades, but its for your own emancipation”.

In times of peace, when they have patched up their differences, the masters are united against the workers in the greater war—the Class War. From Rolls Royce’s wage freezes and sackings to Gorbachev’s strike bans, from cops beating up Korean students to the brutal suppression of the Kurds and Shi’ites, its signs are everywhere.

Only when the workers of the world see through the lies of the capitalists, refuse to continue the idiotic butchering of their fellows and unite to take over the means of producing and distributing wealth so that the products of our hands and brains can be used for their logical purpose—the satisfying of human need, only then will peace truly reign, for when we cease to be plundered, there will be no plunder for a class of plunderers to make war over.
G. C. Taylor
Viborg, Denmark

Letters: Banks and credit (1990)

Letters to the Editors from the July 1990 issue of the Socialist Standard

Banks and credit

Dear Editors.

I refer to the April edition of the Socialist Standard. This contained an article entitled 'Inflation: the endless farce'. The article pointed out that an individual bank can only lend a part of the money deposited with it and ridiculed the explanation (based on the idea of a single monopoly bank) of how banks are supposed to "create credit”

However, no reference was made to the explanation of how "credit is created", even though each bank lends only a portion of the money which it borrows, in a multi-bank system. Such expositions are to be found in orthodox economics textbooks such as Economics by Samuelson. Do you also reject the multi-bank analysis?
P. S. Maloney 

In his widely-used textbook Economics the American economist Paul Samuelson is forced to reject the patently absurd view that "the managers of an ordinary bank are able, by some use of their fountain pens, to lend several dollars for each dollar deposited with them". An individual bank, he concedes, "cannot lend or invest more than it has received from depositors". In fact, he goes on, given the requirement in America that banks must retain 20 per cent of their deposits as cash "it can lend only about four-fifths as much. Its deposits are five times its cash, only because its cash decreases, and not because its deposits increase . This is the correct position, but he goes on to claim that "the banking system as a whole can do what each small bank cannot do: it can expand its loans and investments many times the original cash given it” (5th edition, chapter 16)

The argument he then presents, however, by no means proves that the banking system can lend more than has been deposited with it. He begins by assuming that somebody finds $1000 in notes under their bed. which they then deposit in a bank. As the bank has to retain 20 per cent of this as cash it keeps $200 in notes in its vaults or tills and lends out only the remaining $800. Samuelson then assumes that this $800 is spent by the borrower and eventually finds its way back into the banking system as further deposits. The banks receiving this keep 20 per cent ($160) in their cash reserves and lend the remaining S640, which, in its turn, is eventually deposited in banks, which keep 20 per cent and lend out the rest, and so on, until at the end of the process the total amount loaned out is found to be $4000. So for an initial deposit of $1000. Samuelson concludes triumphantly, the banking system has been able to lend $4000: an initial deposit of $1000 has grown, five times, to $5000.

Actually, and the fallacy is easy to see, the amount deposited in the banking system has been not just $1000 but $5000 ($1000 + $800 + $640. etc. etc). All that has happened is that the original notes have been used more than once, i.e have circulated. So all Samuelson has shown is that, under the conditions he assumes, the same notes could be used to make deposits five times their face value. But nobody has ever denied that notes and coins circulate: this is one of their characteristics. He still has not proved, however, that the banking system as a whole can. any more than an individual bank, lend more than has been deposited with it.

Dear Editors.

You said in a reply to a letter in your February edition that "it is absurd to attribute to banks the power to create new purchasing power, as all they can do is redistribute existing purchasing power from depositors to borrowers".

You are wrong. I enclose a photocopy from a GCSE Economics textbook, used by 14-16 year olds, which explains the simple procedure by which banks create new purchasing power, which I hope will help you see the inaccuracy of your assertion.

You also say that "trying to control inflation through high interest rates is one of the most absurd anti-inflationary policies to have been devised since interest rates do not and cannot have any effect whatsoever on the general price level".

One again, you are wrong. Inflation is caused by excessive spending. The effects of high interest rates are to discourage new borrowing (hence less spending), to lower the amount of money which existing borrowers can spend (hence less spending). and to encourage people to save money (hence less spending).

You further state that you "know of no evidence of it having worked anywhere, certainly not in Britain over the past few years"

Allow me to relieve your ignorance. The policy of high interest rates adopted in the early 1980s, when base rates peaked at 17 per cent, was undoubtedly instrumental in lowering the inflation rate. There had been little need for it "in recent years" because inflation has been very low, but I suggest that if you care to stay around for while longer you will see the effectiveness of the policy demonstrated once more.
Andrew Wright 

Our correspondent says that high interest rates discourage inflation because they reduce the amount of money which existing borrowers can spend. That is true: or rather it is half the truth. When interest
rates go up the spending power of the lenders is increased by exactly the same amount as that of the borrowers is reduced. The combined spending power of the two groups is unaltered

His belief that rising interest rates reduce spending can be tested for the period from December 1987. The banks base rate in December 1987 was 8.5 percent. Since then it has gone up by stages to 15 percent in October 1989. What effect has that rise had on spending? The government statistical department publishes figures showing the volume of consumer spending, after taking out price changes. They show that spending in 1988 was nearly 7 percent higher then in 1987 and that it continued to rise through 1989 up to the end of September. The volume of consumer spending does sometimes fall, as it no doubt will when the next big depression comes along, but the rise or fall of interest rates will not be a cause.

The rise of interest rates since December 1987 has not halted inflation. Between December 1987 and February 1990 prices went up by 16 percent. What is more the rate of increase at February 1990 over February 1989 (7.5 percent), is twice as large as the corresponding figure at December 1987, which was 3.7 percent. In other words, the rate of increase of prices is greater now than in December 1987 in spite of the rise of interest rates.

Bank work

Dear Editors,

Following the letter and reply in the June Socialist Standard concerning the exploitation of non-manual, "non-productive" labour, I feel some further explanation is still needed. In order to discover the underlying nature of exploitation in the banking system, say, one must study the banking system itself.

At this point I shall call everyone within the banking system "the Bank”. Differences between employer and worker will become more apparent later. Take the hypothetical example, then, that at a point in time the Bank receives a deposit of £1000 over the period of a year and guarantees the investor 10 per cent interest on this investment. At the same time another customer borrows from the bank £1000 over a year and agrees to pay 20 per cent interest on the money borrowed. After the year is up, the Bank receives £1200 from the debtor and pays the credit £1100, thus leaving the Bank with £100.

This money is then split two ways. First, an amount to the clerk in the form of wages and, second, the "surplus value” appropriated by the employers/owners. It is obvious, though, that one clerk does not perform all the administrative tasks in this process and, further, that the whole deposit and borrowing cycle is a complex and continuous one. It is enough to say however that those who create the surplus value are in fact the wage-paid clerks, and those who claim it the banking capitalists, whose sole part in the productive process is one of ownership and control.
M. J. Britnell (bank clerk) 
Aylesbury, Bucks