Letters: So that’s why . . . (2008)

Letters to the Editors from the July 2008 issue of the Socialist Standard

So that’s why …

Dear Editors, 

Under the heading “Working classes ‘have lower IQs'” the BBC reported on 22 May:

“Working class people have lower IQs than those from wealthy backgrounds and should not expect to win places at top universities,” an academic has claimed. Newcastle University’s Bruce Charlton said fewer working class students at elite universities was the “natural outcome” of class IQ differences. The reader in evolutionary psychiatry questioned drives to get more poorer students into top universities”. (Link)

So that’s why I’m a bit thick and should know my place.Or does it say something about the validity of IQ testing or the disadvantage of just being poor and the limitations to knowledge opportunity? Or does it say something about a ‘science’ that justifies the status quo or about what is ‘science’ in this field of biological determinism which justifies the fundamental ‘rightness’ of our social organisation based on a hierarchy where those with the highest IQs take their natural place?

Obviously university is not the place for me if this is the type of thinking that goes on there. I’m the better for it. I wish I hadn’t been born stupid but apparently it’s quite natural. I should respect my betters with their superior intellect. I’m not a prisoner of my genes but of my limited intelligence. I know my place! 

Stuart Gibson, 

Bournemouth

MP’s pay 

Dear Editors,

 The ongoing row over MP’s pay and allowances obscures that those elected to Parliament will always receive a remuneration far superior to the average income of their constituents regardless of what punitive measures are taken to masquerade it as greater equability.

 Contrary to the conventional wisdom, MP’s aren’t elected to the House of Commons to represent their constituents in the running of the country’s best economic and social interests. They are elected to assist in the running of capitalism’s best interests and whatever personal style they choose to deal with the problems they encounter at their surgeries (all of which inevitably have their genesis in the traumas of the system), what they do and say will always be dictated by this factor.

 Now that the underlying rottenness of the system is becoming more evident in the form of banks running dry, home repossessions, and global stagflation even the most opportunist of MP’s particularly if they’ve used New Labour as a political career platform are placed in a dilemma in how to explain the economic crisis to their anxious electors particularly if those electors actually voted for them personally.

 Consequently the whole purpose of such excessive remuneration packages they receive is to act as an inducement to ensure that all of them, particularly if associated with the left, act in the highest traditions of parliamentary etiquette and bi-partisan propriety so that none, apart from the odd maverick who can easily be marginalised, dares to challenge the wisdom in Parliament that there isn’t an alternative to capitalism and the global chaos it causes when there quite clearly is!

 This issue has all been comprehensively laid bare by New Labour’s electoral drubbings in recent local elections and the Crewe and Nantwich by-election. Tory leader David Cameron was ironically ‘right’ when he said afterwards the results heralded the end of New Labour but not for the reason he infers. After ten years of an economy tied to the US dollar and credit, voters actually rejected the neoliberal economic policies New Labour had stolen from the Tories so that in effect politics, like the housing market has plummeted into a type of ‘negative equity’ where voters reject Tory policies by New Labour yet vote in official Tory candidates on the other.

 Such apathy will persist as long as MP’s are paid in a way that buys them off to defend or play down the woes of the system, regardless of what their previous political leanings were. 

Nick Vinehill, 

Snettisham, Norfolk

Would you credit it? 

Dear Editors, 

In your reply to my last letter (Socialist Standard, May 2008), you deny that banks create money by lending. This flies in the face of the facts … see any book on economics! How else do you explain the huge increase in the money supply over recent decades?

 Yes, they do have to balance their books – so when they make a loan they account the money put into the borrower’s account as a liability, and balance their books by entering the debt taken on as an asset. If the loan is not repaid, and has to be ‘written off’, then their books do not balance – hence their present woes.

 You really ought to study the system. The fiction that they only lend money deposited with them is promoted to confuse the general public about this matter.

(At the end of the last World War, the government still did create almost half of our money – the notes and coins – and spent it into circulation; but with the decline in use of these, it now only provides about 3%, the rest being created by banks and other ‘financial institutions’.)

Brian Leslie (by email) 

Reply: 

We have been studying the system for over 100 years and it is because of this that we know that banks are financial intermediaries who channel and distribute purchasing power rather than ‘create’ it. The idea that they can create vast multiples of credit from a given deposit base is a total fiction – it is theoretically incorrect and empirically unsupportable.

 It was a view that gained credence because of the 1931 MacMillan Committee Report into Finance and Industry that was written in large part by John Maynard Keynes. You may be interested to know that a significant minority of the Committee at the time opposed the view promoted by Keynes and several of those who went along with it did not understand or realise the implications of what they had signed up to – and we know this because some of our members at the time (including a member of the Editorial Committee of this magazine) were in correspondence with them about it.

 Interestingly, in his most renowned work, The General Theory of Employment, Interest and Money (1936) Keynes effectively abandoned the view he had promoted on the MacMillan Committee just a few years previously, stating that “the notion that the creation of credit by the banking system allows investment to take place to which ‘no genuine saving’ corresponds can only be the result of isolating one of the consequences of the increased bank-credit to the exclusion of others”.

 Indeed, what the simplistic model used in the Report had assumed was that banks kept a certain ‘cash ratio’ back for customers to access as a proportion of whatever is deposited with the bank (10 percent was assumed at the time though these days this would be far less). They then assumed that the whole of a new deposit by a customer could be held in cash to underpin the creation of credit nine times its value (i.e. operating with a 10 percent cash reserve an initial £1,000 deposit would enable the creation of £9,000 worth of credit). Bizarrely, it also then assumed that this cash was never called upon in practice. In other words, for the model to hold, they correctly assumed that banks kept cash in reserve for customer use, but then assumed that nobody ever withdrew any of it!

 Very few economics textbooks today repeat this nonsense. Instead, they typically promote the version put forward by Paul Samuelson among others which explicitly rejects the approach used by the MacMillan Committee in favour of a multi-bank model. However, this model does not demonstrate anything more than that currency circulates around the banking system and can be used more than once in the process of customers’ creating bank deposits – as opposed to banks somehow creating multiples of credit from these deposits (the July 1990 Socialist Standard dealt with this particular model in more detail).

 If banks could create vast multiples of credit from their deposit base then the recent problems of Northern Rock and others would never have occurred. In reality, their problems arose precisely because they wished to lend out more than had been deposited with them and to do this they had to borrow ‘short’ on the money markets to finance their long-term loans and mortgages. When inter-bank lending rates hit the roof, the game was up – and the Bank of England and the Treasury did not just tell them to go away and create some more multiples of credit from their deposits.

 Traditionally, banks have covered most of their loans through the generation of deposits by customers; Northern Rock was unique in that in its dash for growth it allowed its ratio of deposits to loans to go down to under a quarter, an unprecedented level in UK banking history (it was around £24 billion in deposits set against around £113 billion in loans and other assets at the time of its major crisis). The difference was not made up through ‘credit creation’ but simply by borrowing on the money markets at the prevailing inter-bank rates of interest, as can be seen from an examination of its balance sheet.

 Similarly, the current £12 billion discounted ‘rights issue’ of new shares by the Royal Bank of Scotland is an attempt to shore up its asset base partly because of losses it has made on investment vehicles tied to the US sub-prime mortgage crisis. So again, much to the chagrin of their shareholders, there is no easy way out of this crisis for banks by attracting some more deposits and then creating vast multiples of credit from them to magically cover their losses.

Editors

Material world: Sliding Into The Abyss: The Gaza Ghetto (2008)

The Material World column from the July 2008 issue of the Socialist Standard

” In my childhood I suffered fear, hunger and humiliation when I passed from the Warsaw Ghetto through labour camps to Buchenwald. I hear too many familiar sounds today.. I hear about ‘closed areas’ and I remember ghettos and camps. I hear ‘two-legged beasts# and I remember Untermenschen. I hear about tightening the siege, clearing the area, pounding the city into submission, and I remember suffering, destruction, death, blood and murder . . . Too many things in Israel remind me of too many things from my childhood.” Shlomo Shmelzman (Ha’aretz, 11 August 1982)

In March a coalition of humanitarian and human rights organizations reported that the situation of Palestinians in the Gaza Strip was “worse now than it has ever been since the start of Israeli military occupation in 1967 ” (www.oxfam.org.uk).

Under siege

Since June 2007 the strip has been under near-total siege – fenced and walled in on land, the five border crossings mostly closed, the shoreline patrolled by the Israeli navy. Together with the sanctions imposed by the United States and the European Union, the siege has progressively paralyzed public utilities and economic activity. 

Without fuel to generate electricity, wells no longer pump water for drinking or irrigation and sewage is no longer treated. Bakeries have run out of flour. Gunboats sink any fishing boats that are still able to put to sea. The Israeli army conducts repeated cross-border raids with tanks, bulldozers and helicopters, demolishing houses, razing crops, shooting and abducting civilians (Dr. Elias Akleh,) ‘Gaza’s Imminent Explosion’ at mwcnews.net/content/view/23006/26).

 

The untreated sewage is dumped into the sea. The smell and the mosquitoes and other insects it attracts make life very unpleasant for people living near the shore. Another threat to health arises from the use of cooking oil as a substitute fuel in vehicles: its combustion releases carcinogenic hydrocarbons into the air.

Lack of food or lack of money?

As unemployment approaches 50 percent and food prices rise rapidly, the proportion of families dependent on food aid has reached 80 percent. On April 24, UNRWA (the UN Relief and Works Agency for Palestine Refugees in the Near East) announced that due to lack of fuel food aid is no longer being distributed. 

The problem, as Erik Johnson explains, “is not yet a lack of food, but of money to buy it” (“A Visit to Gaza” at www.roadjunky.com/article/1612). True, with no fertilizer or seeds being imported, there is no new planting, so the outlook for the future is grim. But there is fresh produce of the kind that is usually exported but cannot be exported now because of the siege. The trouble is that local residents do not have enough money to buy it all. So much of it – if the money system is allowed to function in its normally perverse manner – will go to waste in the midst of growing starvation.

Ghettoes: Europe, South Africa, Palestine 

Observers have called the Gaza Strip “the world’s largest open-air prison” (360 square kilometres), a cage, a concentration camp, now even a death camp. But a more accurate term for it, as well as for certain areas administered by the Palestinian Authority on the West Bank, is a ghetto. As in the Jewish ghettoes of Nazi-occupied or late medieval Europe (the first was established in Venice in 1516), the inhabitants of the Palestinian ghettoes are confined to closed areas but not directly governed by the dominant power. They have their own semi-autonomous though dependent institutions. This usage requires only expanding the concept to cover rural and mixed rural-urban as well as urban ghettoes. 

Another parallel that many draw is with the Bantustans of apartheid South Africa. While officially Israel indignantly rejects the comparison with apartheid, former Italian premier Massimo D’Alema revealed that Israeli PM Sharon had stated at a private meeting that he took the Bantustans as his model (www.informationclearinghouse.info/article19256.htm). There is no conflict between the two parallels, as the Bantustan too may be regarded as a form of ghetto. 

Besides its basic political function of confining and controlling a stigmatized group, a ghetto may perform economic functions. It may provide capitalists with a captive and therefore cheap labour force. This used to be an important function of the Palestinian ghettoes. But as ‘closure’ has tightened they have lost this function. Palestinians have been replaced in menial jobs by workers from Romania, Thailand, the Philippines, and West Africa. The number of unemployed among Israelis has also increased (to about 200,000). So Palestinian ghetto workers are increasingly superfluous to the labour needs of Israel’s capitalist economy. This gives even more cause for concern about their fate.

Torment by sonic boom

One of the worst miseries inflicted on the hapless residents of the Gaza Ghetto is sonic booming. The Israeli Air Force flies U.S. F-16 fighter planes low and fast over the ghetto, generally every hour or two from midnight to dawn, deliberately creating sonic booms. The noise and the shockwaves prevent people sleeping, shake them up inside, make their pulses race, ears ring and noses bleed, cause miscarriages, crack walls, and smash windows. Children, especially, are terrified and traumatized: they suffer panic and anxiety attacks, have trouble breathing, wet their beds, lose appetite and concentration. Many are thrown off their beds, sometimes resulting in broken limbs. 

The sonic booming began in October 2005, after the Jewish settlements were evacuated from Gaza. Since then it has been periodically suspended but always renewed. An anonymous IDF source described its purpose as “trying to send a message, to break civilian support for armed groups.” And yet the first wave of booming was followed by the victory of Hamas in the Palestine Legislative Council elections of January 2006. (The US had ordered free elections, but neglected to give clear instructions on who to vote for. In view of the harsh punishment for voting incorrectly, that was most unfair.)

Stupid monkeys or malevolent humans?

A key test of intelligence in monkeys is whether the monkey goes on using a means that has repeatedly failed to achieve its purpose. By this criterion, Israeli generals and politicians appear to be very stupid, even for monkeys. But perhaps they are not so stupid. Perhaps their true purpose is something else. In the opinion of Professor Ur Shlonsky, that purpose is to “terrorise” the Palestinians and make “daily life … unbearable” for them in order to “encourage emigration and weaken resistance to future expulsions” (‘Zionist Ideology, the Non-Jews and the State of Israel,’ University of Geneva, 10 February 2002). Some do emigrate, but for the great majority that is not a viable option. As for expulsion, how will the Palestinians of Gaza be expelled? Will they be pushed into the Sinai desert? Will Egypt be compelled to accept them? It seems more likely that in the absence of strong countervailing pressure they will simply be abandoned to perish where they are, of disease, starvation and thirst – a direct consequence of Israeli, American and European policy.

Stefan.

The Ire Of The Irate Itinerant (2008)

From the July 2008 issue of the Socialist Standard

Too little, too late (2008)

From the July 2008 issue of the Socialist Standard

That’s the most that will ever be done under capitalism about the problems that global warming may bring.

It’s simply that the way the capitalist system works rules out the effective action at world level that is needed to begin tackling the problem. It even encourages economic activities that contribute to it.

Capitalism is based on production being controlled by profit-seeking enterprises which, supported by governments, compete on the market to buy resources and sell products. This competitive pursuit of profits is the essence of capitalism. It’s what capitalism is all about and what prevents any effective action to deal with climate change.

Fossil fuels

Nobody can deny that global warming is taking place. Nor that, if it continues unchecked, it would have disastrous consequences – such as rising sea-levels and increased desertification – through its effects on the climates of the different parts of the world. There can only be argument over what is causing it. Most scientists in the field take the view that it has mainly been caused by the increase in the greenhouse gas carbon dioxide in the atmosphere largely as a result of the burning of the fossil fuels, coal, oil and gas.

If this is the case, then one part of any solution has to be cut back on burning these fuels. But this is not happening. In fact, on a world scale, it’s increasing. This is because this is currently the cheapest way of generating the energy to drive industry – and the logic of capitalism compels the profit-seeking enterprises that control production to use the cheapest methods. If they don’t, their competitors will.

There are other sources of energy, in particular hydroelectricity and nuclear power, and the various countries into which the world is divided rely to different degrees on burning fossil fuels. Which means that they would each be affected differently by having to reduce reliance on them. It is this that has prevented, is preventing and will prevent any effective international action to check the burning of coal, oil and gas. The 1997 Kyoto Treaty, which sought rather half-heartedly to do this, was not signed by the biggest emitter of carbon dioxide (the United States) and deliberately excluded the second biggest (China).

These two states – whose rivalry is likely to mark the 21st century – will never agree to limit their burning of fossil fuels and put their enterprises at a competitive disadvantage with regard to enterprises operating from other states less dependent on them. No government of either country could afford to agree to this. And nobody can force them to.

Market forces

There are those who, recognising that governments will never agree to do anything effective, argue that market forces will eventually bring about a decline in burning fossil fuels. Oil is supposed to be running out. As it does market forces will bring about a rise in its price and to alternative methods of generating energy – such as wind power, solar energy and other non-polluting, renewable sources – becoming relatively cheaper. Capitalist enterprises will therefore switch to these other sources. That’s the theory and maybe in the long run it might work. But the long run could be a long time, by when it would be, as we said, too little too late.

But there are arguments about whether oil really is running out and, as its price rises, so it will become profitable to exploit less easily extracted and previously unprofitable sources, such as the oil under the deep sea. Already the states surrounding the Arctic Sea are manoeuvring to be in a good position to exploit the oil underneath it. The same applies to coal, of which everyone agrees there’s enough to last for many centuries. New mines are already being opened in China.

So, within the framework of capitalism, intergovernmental co-operation and leaving it to market forces will both prove to be ineffective. Are we then doomed to suffer the consequences of global warming? Is there then no solution?

The right framework

There will be a solution and, given the right framework, humanity will find it. We already know that any solution will have to involve finding replacement sources of energy to burning of fossil fuels. What is needed is a framework which will allow rather than impede the implementation of this and the other measures. The capitalist system does not, and cannot, provide such a framework. It must go before anything lasting and effective can be done.

What is the alternative framework? First, the competitive struggle for profits as the basis for production must be ended. This requires that the Earth’s natural and industrial resources become the common heritage of all humanity. On this basis, and on this basis alone, can an effective programme to deal with the problem be drawn up and implemented, because production would then be geared to serving human interests and no longer to make a profit for competing enterprises.

There will be those who say that we haven’t the time to wait for the coming into being of this, in their view, unlikely or long-distant framework, and that we must therefore do something now. In this age of apathy and cynicism when any large-scale change is dismissed, this may seem a plausible argument but it begs the question. It assumes that a solution can be implemented within capitalism. But if it can’t (as we maintain), then concentrating on something now rather than on changing the basis of society and production will be a waste of valuable time while the situation gets worse.

Adam Buick

Capitalism versus nature (2008)

From the June 2008 issue of the Socialist Standard

Capitalism is bound to come into conflict with nature. It cannot go green because it cannot change its spots.

It is by no means unknown for a society to collapse for ecological reasons, which is to say, because it did not treat its environment with care. By ‘collapse’ here is meant a drastic reduction in living standards and population, not that everybody who lives in a certain place dies. One example would be Easter Island in the Pacific, where the population had fallen to just a few thousand by the time it was discovered by Europeans in the eighteenth century. Deforestation had led to soil erosion and a consequent cut in crop yields, so that the isolated island could no longer support the numbers it had previously. Another would be the Mayan civilisation of central America, which declined gradually through the ninth century, leaving great ruined temples and cities behind. Though it is more arguable in this case, the probable reason was a combination of drought and deforestation leading to a big drop in agricultural production.

The collapse of present-day society, then, might involve far fewer people surviving and at a far lower standard of living, but it would not result in the end of humanity and certainly not of the planet on which we live. Yet how likely is it that there will be a societal collapse caused by climate change or other ecological factors?

In answering this question, we need to look not mainly at technical questions such as how energy is produced and how crops are grown, important though these of course are. Rather, we need to examine the economic basis of society and see the implications of the ways in which production as a whole is organised and of how priorities are considered.

For present-day society is capitalism, which means that it is based on ownership of the earth and the mines, factories, offices and so on by a small part of the population, leaving most people to rely on selling their labour power to an employer in return for a wage. Unless you’re one of the small minority of owners, you cannot live under capitalism without working for a wage, or living with someone who does so. Moreover, production takes place because of the need of the owners to make a profit, and they have no choice but to strive to maintain and increase their position of power and wealth. Since production is guided by the profit motive, it inevitably comes into conflict with the rest of nature.

As a small example, many high-street shops leave their doors open because it looks more inviting to potential customers, even though it increases their heating bills and the amount of energy consumed. An instance on a grander scale was the recent decision by Shell to withdraw from developing an offshore wind farm in the Thames estuary. The sizeable initial investment needed and rising costs — including the impact of raw material prices on the production of the turbines themselves — mean that oil is currently more profitable than wind. Shell noted that reviewing existing projects and focussing on efficiency were simply normal business practice, and sadly that’s just what they are: ecological concerns take very much a back seat.

Perhaps the worst single occasion of capitalism’s priorities coming into conflict with the health of the planet and its people is the explosion at the Union Carbide factory in Bhopal, India in 1984. This saw toxic gas released on a wide scale, with up to eight thousand people dying immediately and many more in the aftermath, to say nothing of those made seriously ill. In The Enemy of Nature, Joel Kovel looks at the background to this disaster. The factory was losing money, so Union Carbide took various steps to reduce costs. Among other things, valves were not repaired, alarms were not maintained, and in general safety installations were inadequate. It may not have been ‘an accident waiting to happen’ exactly, but pursuing profit increased immeasurably the chances of an explosion taking place.

Equally, deforestation in the Amazon is caused primarily not by subsistence cultivators but by commercial interests clearing land for pasture. Cattle ranches occupy vast areas of cleared land and result in huge profits for the owners. The devaluation of its currency, the real, made Brazilian beef more competitive on the world market and increased the profits of the ranchers. The loss of animal and plant species and of renewable timber resources are simply not part of the profit-and-loss calculations.

Moreover, writers on energy constantly refer to economic considerations in discussing whether their technological proposals are viable. James Lovelock, for instance, regards renewable energy as ‘inefficient and expensive’, hence his support for nuclear power. The Severn Barrage, meanwhile, is ‘an attractive business proposition’. In discussing ways to combat global warming, George Monbiot says he is looking for ‘the cheapest way to cut carbon emissions’.

It must be admitted that there are counter-arguments to the effect that capitalism and the profit motive can after all solve ecological problems. Companies which are more efficient in terms of energy use than their competitors will have lower costs and so are likely to have higher profits. Thus simple economic arithmetic will lead to more sensible uses of energy. And more generally, there is profit to be made in industries which are ecologically-oriented, from the manufacture of reusable energy sources to biofuel companies and even the humble bicycle repair shop. It might be argued, too, that international measures have been and can be taken to solve the worst environmental problems, from the banning of the pesticide DDT in the 1970s to the more recent Montreal Protocol that reduced the use of CFCs.

However, energy production and global warming are far different, being integrated as closely as they could be in capitalist production in general. Combatting them would not be a mere matter of disrupting the manufacture of aerosols or weedkillers, but of changing something which is part and parcel of the capitalist system and on which all companies depend. No company will take action which endangers their profits, just as no government will pass legislation that puts the capitalists whose interests they represent at a disadvantage. Capitalism is about competition and profit-making, and this is something which can never be done away with as long as it lasts.

Capitalism, then, is bound to come into conflict with nature. It cannot go green because it simply cannot change its spots. Jonathan Porritt once reflected in an interesting way on what a green society would be like. Among other things, it would involve production for use and work as an end in itself. He’s not a socialist, but in speculating on the meaning of greenness he did in effect realise that a society which lived as far as possible in harmony nature would be a socialist one, and that such a possibility cannot be realised under capitalism.

Paul Bennett

Cooking the Books: Passing on costs (2008)

The Cooking the Books column from the July 2008 issue of the Socialist Standard

On May the index of the factory gate price of manufactured goods rose by 1.6 percent. As this was the biggest monthly rise since March 1981, the media began to talk of “a summer of inflation” (Times, 10 June). Since they mistakenly regard any price rise, however caused, as inflation what they meant was that a spate of price rises could be expected this summer which will affect not just those who buy producer goods but the rest of us too who buy consumer goods.

The manufacturers are arguing that they have to increase their prices because their costs have risen. It is true that their costs, particularly energy, have risen but manufacturers cannot increase their prices just because they have to pay more for their raw materials or energy (or, for that matter, wages). Prices are not determined by what the manufacturers would like but by what the market for their product will bear.

All firms aim to make as much profit as possible but will be satisfied if they can cover their costs and make the going rate of profit. This is the normal situation and is brought about by competition. If a firm tries to make a bigger profit by increasing its price above cost plus normal profit it won’t succeed. Its product won’t sell as those who use it will turn to other, cheaper suppliers.

This does not mean that they can never raise prices, or rather that the market will never allow them to do so. It is official government policy to inflate the currency so that the general price level rises at around 2 percent a year. So, other things being equal, firms can safely increase their price by this amount. As everybody will be doing it, it is something the market can bear.

Sometimes, due to an unexpected fall or interruption of supply, suppliers can increase their price to take advantage of this. This is the operation of the law of supply and demand: there are more paying demanders than suppliers so the price goes up. But this will only be temporary. Supplies will eventually be restored, even if by new suppliers being attracted by the higher profits, and prices (and profits) will fall again.

So, cost increases do not automatically lead to price increases (and this applies to wage increases as well as to other costs). This will only happen if the market will bear it. If the market won’t then the capitalist firm, whether manufacturing or retailing, cannot pass the increased cost on to consumers. They have to “absorb” it, as reduced profits.

The figures for factory gate prices from the Office for National Statistics illustrate this well. They show that the index of “input prices” (i.e. costs) of manufactured goods has been rising faster than that for “output prices”. While the index for these latter rose by 1.6 percent in May that for input prices rose by 3.8 percent. In the year ending May 2008 the index of input prices rose by a record 27.9 percent but the index for output prices rose by only 8.9 percent. (www.statistics.gov.uk/pdfdir/ppibrief0608.pdf)

Clearly, to maintain their profits, manufacturers would have liked to raise the price at which they sold their products as fast as their costs. The fact that they didn’t is sufficient proof that they couldn’t. But there are limits to how far their profits can be squeezed. As Gary Duncan, economics editor of the Times pointed out:

“The double whammy of stalled spending by struggling households alongside rising costs for every kind of business means that companies’ sales and profits are going to be under growing strain. This will spell cutbacks and layoffs. This raises the spectre that the economy could slide into a vicious downward spiral”.

Oil and the Rest (2008)

Book review from the July 2008 issue of the Socialist Standard

‘Armed Madhouse’. By Greg Palast, (Penguin £8.99)

There are three main themes in this book: the relation of oil to the US invasion of Iraq, the plight of American workers, and the way in which US elections are manipulated. Despite its American emphasis, it’s well worth a read.

It is hardly original to claim that the Iraqi invasion was due to US concerns over oil supplies. Palast, however, goes much further than this and argues that there were two conflicting views within the American ruling class. The neo-conservatives wanted to sell Iraq’s oil fields to various private companies, leading to a massive increase in production. This flooding of the market would undermine OPEC, which operates by imposing production limits, and so bring Saudi Arabia to its knees. In contrast, the big American oil companies opposed a sell-off and wanted the oil to be owned by the Iraqi state. That would make it straightforward to restrict production and keep prices high, thus boosting their profits and the value of their own reserves. The invasion, then, would not be about gaining access to Iraqi oil but about controlling the world price of oil (which was difficult with the unpredictable Saddam in power). Palast argues that Big Oil and their State Department allies eventually won the day — the price of oil now would seem to back this up.

Domestically, American capitalism is becoming more and more unequal. One percent of US households own 53 percent of all shares in the stock market. Median wages have gone down by 4 percent under Bush, but the bottom fifth of earners have lost no less than 20 percent of their income. Between 2000 and 2006 output per worker in America went up by nearly one fifth, but workers get less and less of what they produce. Nearly three million are no longer entitled to overtime at time-and-a-half after working forty hours a week. Modern-day capitalism needs a certain number of highly-educated workers, but the rest need to be identified early so that little money is wasted on ‘educating’ them.

Lastly, attacks on the electoral system go well beyond the ‘hanging chads’ of the 2000 presidential election. Palast presents evidence that both then and in 2004 many votes were simply not counted or wrongly rejected as spoiled. Electronic voting machines often don’t work properly, and they exclude the possibility of recounts. Voting machines were removed from many areas likely to vote Democrat, leading to huge queues at voting stations. And many potential voters have been unable to register, perhaps because they are wrongly claimed to have a criminal record or have no authentic ID. Less than half of Americans earning below $15,000 a year are now eligible to vote, and generally poor, black and Hispanic would-be voters are given a hard time in both registering to vote and having their vote recorded.

It might be interesting to reflect on whether these last points have any implications for the idea of using the electoral system to demonstrate the existence of overwhelming support for Socialism when the time comes.

Paul Bennett

50 Years Ago: Socialists and General de Gaulle (2008)

The 50 Years Ago column from the July 2008 issue of the Socialist Standard

Socialists are opposed to what de Gaulle stands for on principle, because he stands for French capitalism, and Socialists do not support any capitalist faction anywhere or at any time. But the Socialist principle on which we oppose de Gaulle just as imperatively lines us up against the French political parties that oppose de Gaulle, the so-called “Communists” and the minority of the French party misnamed Socialist (its majority supports de Gaulle).

The immediate issue which so bewildered de Gaulle’s opponents of a few weeks ago that many of them ended by voting him into power, was the alleged “defence of democracy.” Faced with a threat of civil war from the rebel generals and French settlers in Algeria and their sympathisers in France, they chose what they thought the lesser evil, making de Gaulle head of the government in the hope that he could and would control the generals. The French Communist Party, which defends the Russian dictatorship and still applauds the bloody suppression of Hungarian workers by Russian troops in 1956, came out hypocritically for the “defence of democracy” against the “Fascist” de Gaulle. We need waste no words on them except to wonder whether their failure to back up their outcry against de Gaulle with something more than words may not have been due to a lurking fear—that perhaps de Gaulle may do a deal with the Russian government behind their backs.

But although the Communist Party did not change its ground while the crisis was on, the French Labourites, the so-called Socialist Party, made themselves ridiculous with a series of somersaults. Starting with a resolution not to support de Gaulle in any circumstances, they followed this with a decision to let the M.P.’s have a free hand either to follow their leader Mollet, who backed de Gaulle, or to vote against him; then another decision a few days later to let them abstain from voting on the question of handing over power to de Gaulle. With Mollet and others of their leaders in de Gaulle’s government the party is split into nearly equal halves; with the likelihood that more will swing over to Mollet.

(From front page article by ‘H’, Socialist Standard, July, 1958)