From the August 2008 issue of the Socialist Standard
Tuesday, August 22, 2023
Cooking the Books: Sinned against not sinners (2008)
“PAY RISES DON’T CAUSE INFLATION – AN INCONVENIENT TRUTH FOR DARLING” was the headline in the Daily Telegraph of a recent article by the unspeakable Simon Heffer (25 June) . He was criticising the increasingly strident calls by the Chancellor of the Exchequer for pay restraint so as not to fuel inflation. Heffer’s argument was that as rising prices have been caused by the government allowing too much money to get into circulation they can’t be stopped by holding back wages.
We have to admit that he is basically right. Insofar as rising prices in Britain are not due to other factors such as rising world oil and food prices (since rising prices and inflation are not the same), if the government overissues the currency, i.e. puts more into circulation than enough to make payments, pay taxes, settle debts, etc, then all prices will tend to rise. As wages are a price – the price of a person’s ability to work, or what Marx called their labour power – they too will rise. So to blame inflation on wage increases is wrong.
So, sometimes a nasty person can be right. Heffer reminds us that another obnoxious character, Enoch Powell, was saying this about inflation in the 1960s. He quotes something Powell said about the wage restraint policy of the Wilson Labour government. Powell was even clearer in a speech he made on 20 November 1970 about the similar policy of the Heath Tory government:
“Wage claims, wage awards, strikes, do not cause rising prices, inflation, for one simple but sufficient reason – they cannot. There never was a strike yet which caused inflation, and there never will be. The most powerful unions, or groups of unions, which was ever invented is powerless to cause prices generally to rise … in the matter of inflation, the unions and their members are sinned against, not sinning. In the matter of inflation, the unions and their members are as innocent as lambs, pure white as the driven snow”.
We couldn’t agree more and said so at the time. There is, however, a point of difference. Heffer (and Powell himself sometimes) suggests that it is government spending as such that causes inflation (Heffer is a mad marketeer who wants to reduce government spending and interference so as to let the market rip). But this is not necessarily the case. If it is financed by overissuing the currency, government spending will have this effect, but inflation is not due to the particular way the excess money is spent (in this case by the government to finance its spending) but to the fact that it has been issued in excess.
Darling may be cleverer than Heffer gives him credit for. The job of all governments is to preside over the operation of the profit system and to try to ensure that profits are protected and maximised. So they are always against pay increases, irrespective of whether or not prices are increasing. Darling may just be using the current spurt in prices as a pretext to reiterate what is a permanent policy of all governments.
The End of the Market (2008)
Is there an alternative to the market and what is it?
‘The market’ may be taken as a generic term to include markets of all kinds: places (not necessarily physical) in which goods, services and people are bought and sold, offered for sale, rejected or bargained over. Markets imply a medium of exchange, usually money in some form, although barter is a form of exchange without money.
The market system is one way of regulating relations between producers and consumers and between owners of capital and labour. There are in fact three ways of regulating relations between producers and consumers: by the ‘free’ market, by the unfree or controlled market and by no market. These represent market capitalism, state-controlled or ‘command economy’ capitalism, and socialism respectively.
No society has been or is 100 percent free-market capitalist. Every human activity and item of wealth would have to be marketed to make it so. No society has been or is 100 percent state-controlled capitalism. Some private enterprise or free marketing was always allowed or even encouraged in so-called communist countries. The principle of ‘no market’ means simple giving and taking based on understanding, reasonableness and trust. It is present in some activities and some goods and services in all societies, in domestic and voluntary work, for example. But nowhere (except in small communities) have productive and social relations been dominated by the non-market principles of common ownership and free access. In other words, since the first form or property was introduced in ancient civilisations, some form of class society based on some form of possession and market transactions has always been dominant.
The history of the market would make a fascinating subject for research, but there is no space to go into it here. However, a few words about the relative strength of free-market capitalism and state capitalism during the 20th century may be useful.
State capitalism probably reached its high point with the establishment of the Soviet Union in 1917. Fraudulently using the labels of socialism and communism, the leaders of the Communist Party put as much economic activity as possible, including markets, under the control of the state. Eventually, the controlled, centrally organised, ‘command economy’ form of capitalism proved less efficient than the ‘mixed economy’ form, and now the former Soviet Union countries are as free-market capitalist as most other parts of the world.
In post-war Britain there was a similar reaction against free-market capitalism. Beveridge reorganised poverty in the welfare state. The original National Health Service enabled people to get glasses and false teeth free at the point of consumption. This was hailed as socialism, but again it was a fraud. The best that can be said of such measures is that they were the result of a feeling among supporters of capitalism that it could in some respects be better run by the state intervening on behalf of all capitalists rather than letting uncontrolled market forces produce too much inequality and discontent.
Today free-market capitalism is in the ascendancy around the world, despite all its crises. Not everything is privately owned and bought and sold in a market, but more and more industries and services are being privatised. As compared with a century, or even a decade, ago, what might be called the market for markets has grown enormously. To take just a few examples, labour markets for parliamentary lobbyists, spin doctors and corporate headhunters have developed. Bankruptcy specialists and leisure consultancies are flourishing. Sperm is marketed on the internet. In the information market, business skills video providers rub shoulders with computer dating agencies and weather forecasting bureaux. Genetic testing at a hefty price will tell customers who is the real father of their child. In Japan if your child is short of a grandparent you can go into the market and hire one.
Of course, market penetration, as it is called, is never complete. Much human activity is still outside the market. However, it is not too cynical to say that if a way could be found to bottle the air we breathe, such a market would be created. Domestic work, voluntary work, and serious leisure are largely, but not wholly, outside the market. We still have to buy household cleaning items, but we don’t usually charge for doing the washing up. About one in six people in Britain – more in America – give up some of their spare time to help others voluntarily (though some employees do paid work for voluntary organisations). Serious leisure – regularly getting together with others to pursue common interests for pleasure – is mostly a non-market activity (though some participants have to buy things from the market to pursue their serious leisure).
What are the good things and the bad things about the market system? The good things are said to centre around being able to exchange things, stimulate competition, and produce new goods and services. It is claimed that without a means of exchange, expressing the price at which goods and services are bought and sold, no one would be able to exchange what they had for something they needed. Obviously, within capitalism this is true: without a labour market (free or controlled) no one would be able to sell their labour power and ‘make a living’. But this is only because both capitalists and workers accept that labour is a commodity to be bought by the capitalist class or the state and sold by the worker. If, instead of being in the hands of a small minority, the means of wealth production were common property, then that ‘advantage’ of having a market would disappear. We wouldn’t need to sell our labour power to live, and it wouldn’t be possible for capitalists to buy it and live on the surplus value it creates.
A second supposed advantage of the market system is that it stimulates competition, especially if it is ‘free market’. This means that buyers shop around for what they want (or are persuaded to want) at the cheapest price, while sellers hold out for the highest price. This may sound a good idea if you are deciding which supermarket to shop at for the best bargain, but it’s not so good if you are competing to sell yourself on the labour market. You may get a slightly better wage or salary if you join a union, but there is no guarantee you won’t be ‘priced out of the market’, i.e., sacked and unable to compete successfully for another job.
A third stated advantage of the market system is that a market can be created for almost anything – in theory for everything. Is this such an advantage? As compared with feudalism and early capitalism, late capitalism offers those with money a myriad things to buy – unnecessary things, ludicrous things and sometimes harmful things. A fourth television set for the bathroom, a fashion haircut for the dog, a state-of-the-art security system or weapon to protect yourself against robbers. The worst obscenity is the indifference to real poverty and suffering that the market-mediated pursuit of trivia brings: people worry if they miss an episode of their favourite ‘soap’ while millions in the world starve.
Now for the bad things about the market system. I have already touched on some of these when questioning the good things. The labour market is unlike all other markets in two respects. The owners of labour power have to sell something that is capable of producing more than its own cost. And, by having to sell themselves rather than something they possess, they are at the mercy of the buyer, who can dictate, with the help of the state, not only the terms of the transaction but whether it takes place at all.
Competition is an essential feature of the market system. It rewards winners and penalises losers. Socialists may disagree about whether all competition will disappear in a socialist world (I would personally argue that playing games and sports where there are inconsequential winners and losers can develop skills and be good fun). But the kind of cut-throat competition engendered by capitalism cannot be justified. Making excuses for the excesses of the competitive market system is a kind of Nuremberg defence: ‘I was only carrying out orders given by my customers’. The invisible hand of the market can be a cruel hand, destroying and damaging its victim losers, while enabling its ‘top’ winners to live selfish, pointless and distorted lives.
The waste involved in the market system is tremendous. Think of all the useless and harmful jobs (often dignified by the title of profession or career) that are created. People working in banking, insurance and financial services produce nothing of real value, nothing that a society based on production for need and free access couldn’t happily do without. Commercial advertising uses up far more human and material resources than required to inform people of what is available. The worst example of waste is war and preparation for war. A mind-boggling $1,000,000,000,000 is spent each year on this around the world. Countless deaths and injuries have been caused by weapons used to defend and acquire markets and associated spheres of influence in which the workers of the world have no real interest.
To turn now to the marketless, moneyless world that will replace the capitalist market system. First, the absence of money, though it is certainly a feature of socialist society, is not a defining characteristic of that society. The absence of money is a negative idea. Money will not be needed as a means of earning a living or registering the ownership of capital (incidentally, money may well survive but only in inconsequential money games or historical re-enactments).
The positive definition of socialism is a society in which the means of wealth production and distribution will be commonly owned and democratically controlled in the interest of the whole community. It will only be possible when a majority of people (workers) understand, want and work for such a revolutionary change. They will work, not in a labour market, but to produce goods and services that they and their fellow human beings need.
Marx once said that he didn’t want to write recipes for future cookshops. We can agree with him that we shouldn’t try to draw up blueprints for the details of how to run a socialist world of the future. The people at the time will decide those details. But we ought to be interested in principles, in the ingredients to be used and the social relations to be entered into in future cookshops and other places.
A socialist world will only be possible by people behaving in pro-social ways. We do not ask for a fundamental change in human nature. None is needed. Even today, with the market system dominant and people encouraged to look after themselves first, most men and women behave pro-socially when they see someone in need of help. Market forces are forces alien to the best in human nature (human behaviour would be a better term). The building of the world socialist movement is a task for those not passively submitting to the discipline of the market but able and willing to help create something better for themselves and their fellow humans.
Stan Parker
Cloudy View From the Summit (2008)
Last month’s G8 Summit in the far north of Japan was typical of meetings of the heads of state these days. Held in a remote location, well out of sight and sound of protest marches, and protected by an army of police, the meeting was carefully choreographed to convey an impression of competence and confidence—but in the end only exposed the impotence of government leaders in the face of grave problems arising from their beloved social system.
The two problems that were the focus of attention at this year’s summit were climate change and price rises. Newspaper headlines quoted the vow of the heads of state to tackle both of these problems, yet the articles underneath admitted that this is much easier said than done.
One obvious reason why the various leaders are finding it difficult to solve such problems is that there is no clear consensus among them regarding the actions to take, which reflects the different and often directly opposed interests and standpoints of their respective nations.
For instance, not only are there differences between “rich” and “poor” nations regarding how to counter global warming, and the role that each nation must play, there are stark differences in the standpoints of the G8 nations regarding this issue, not to mention the political divisions within each nation.
Those same sorts of national and domestic differences came to the surface with regards to the rising food and fuel prices. Not surprisingly, each government has sought to frame the problem in a manner that lays the maximum blame on others. The root cause of the price rise has thus been identified, respectively, as the result of rising consumption in China and India, insufficient production by OPEC nations, or the flood of speculation on the commodities markets and declining dollar.
That is not to suggest, however, that such problems could be solved if only there was a clear consensus among the leaders and sufficient political will. The deeper issue is that the heads of state (with the backing, however tepid, of their electorate) have set out to solve problems that stem directly from the social system (= capitalism) that they are paid to serve and protect. (And it is worth emphasizing that their role is indeed as servants, rather than masters, of this system.) In other words, the reason that our self-styled “leaders” are unable to arrive at solutions is not that they are shortsighted, selfish and stupid—although more than a few fit that description—but that they are naturally reluctant to pursue the root causes of problems if it calls into question the capitalist system.
It does not take much digging, incidentally, to unearth the direct relation between a system of production for profit and a whole range of problems. This is particularly clear in the case of environmental problems. Capitalism is all about capital accumulation and the insatiable pursuit of profit is naturally accompanied by tremendous waste and destruction. If there are profits to be gained, capitalists are not too bothered by the long-term, or even short-term, consequences for other people or future generations. Political leaders lecture about the need to address environmental problems, while turning a blind eye to the role played by this rapacious system of profit chasing.
In the case of rising prices as well, it is rather absurd for politicians to bemoan the problem without fundamentally calling into question a system that revolves around prices and money. Granted, as long as the prices are “reasonable,” many people find this social system unobjectionable, or even natural. But a quick look at economic history reveals that inflation is a not uncommon side-effect of the money-centred capitalist system and that governments have had little success in bringing inflation under control once it picks up speed.
It is not surprising that inflation can be impossible to control, because commodity prices are not under our conscious human control to begin with. Simply put, prices are determined by the market. It is true that a business can set prices at whatever level it wants, but if that level is too far above or below that of their competitors the business runs the risk of losing sales or profit. Ultimately, therefore, businesses will tend to set the prices of their products according to the cost of production plus the average rate of profit. And, on a more essential level, these “production prices” are themselves ultimately determined by the amount of labour (or “socially necessary abstract human labour”) expended to produce the commodities.
In short, the very existence of prices reflects the fact, pointed out by Marx, that we live in “a state of society, in which the process of production has the mastery over man, instead of being controlled by him” (Capital vol. 1). When prices are high, the absurdity of this anarchic social system comes into clearer view, but even in “normal” times our lives remain prey to forces outside of our control. The “solution” to the problem, at least as far as workers are concerned, is not to bring prices back to some acceptable level (assuming that were indeed possible), but to progress beyond this social system where production is just a means of generating profit and distribution is mediated by money.
If the businesses that carry out production are not free to ignore “market forces” and arbitrarily set prices, then it is foolish to imagine that national governments somehow possess the magical power to bring prices under control. To remain in power, heads of state need to convince the public that they are in control of the economic situation, or can at least curb the worst excesses of capitalism. In fact, their “control” over the direction of the capitalist economy resembles that exercised by a rodeo rider over an angry bull during those four seconds before he is tossed from the saddle into the dirt.
The powerlessness of world leaders was highlighted by a comment made during the G8 Summit by a Japanese government source who told Reuters that “there is a limit to what governments can do now” to stem the rising prices. The fact that this bland and exceedingly obvious statement was made on “condition of anonymity” speaks to the insecurity of world leaders who are desperate to pass themselves off as superheroes.
Michael Schauerte
Cooking the Books: The world could produce more food (2008)
“OF COURSE WE CAN FEED THE WORLD – JUST LOOK AT ALL THE UNUSED SPACE” was the headline of a recent “opinion” article by Ross Clark in the Times (26 June).
Clark, a supporter of the market (who thinks that any opponent of the “free” market is a “Marxist”), argues that food production has fallen, so causing the present shortages, because in previous decades it had been overproduced. It is of course obscene to talk of “too much” food being produced when there are millions in the world who are starving, but he means “too much” in relation to paying demand. Even so, his explanation exposes the irrational way in which the capitalist system works.
According to him:
“The reason for the fall in cereal production over 15 years has not been soil degradation or climate change: while crops yields are not increasing as fast as they were doing in the 1960s, they have still risen by 1-2 per cent per annum over the past 15 years. Rather, the decrease in production has been a straightforward response to overproduction. Remember the grain mountains of the 1980s? They resulted in a collapse in prices that in turn persuaded grain producers to contract their operation. Now that prices are rising again the opposite has happened: the FAO estimates that this year’s wheat harvest will rise by 13 per cent as a result of extra planting, putting downward pressure on prices next year.”
He points out that today:
“the background to rising food prices is the shrinkage of global agriculture over the past decade and a half. Globally, less food is being produced on even less land than was the case in the early 1990s. Take the US, which according to the FAO was producing 1,210kg of cereals per person per year between 1990 and 1992 and 1,104 kg between 2001 and 2003. Or Canada, at one time the ‘world’s bread basket’, where cereal production fell from 1,905 kg per person per year in 1990-92 to 1,384 kg in 2001-03.”
Given the current strong paying demand for food, the 1990s levels may well be reached again but this would satisfy only paying demand. What about those who can’t pay?
Though it is far from his intention, Clark provides information which shows that enough food could be produced to satisfy their food needs too. Of course it won’t be, and never will be, under the capitalist market system which he supports. But it could be in a socialist world where production would no longer be limited to what can be sold.
Clark writes:
“the total landmass cultivated for arable crops in 2006, according Food and Agriculture Organisation of the United Nations (FAO), was 1.402 billion hectares – or 14 million sq km. In other words, all the world’s cereals and vegetables are grown on an area equivalent to the USA and half of Canada. A further 34 million sq km – equivalent to the rest of North America, South America and two thirds of Australia – is given over to grazing, much of it extensive, unimproved grassland. The rest of the world – equivalent to the whole of Europe, Asia, Africa, Indonesia plus a third of Australia – is not used for food production in any way. Some of this land, of course, is desert, mountain or rainforest, which either cannot be used for agriculture at all or would require irrigation, engineering or clearance. But a vast amount of it could quite easily be converted into agriculture, but has until now not been needed.”
What does he mean “has not been needed”? Of course it’s been needed! What Clark means again is that it has not been needed to meet paying demand. Socialists say that it is needed to end world hunger but will only be able to be used for this when once the resources of the Earth have become the common heritage of all humanity. That’s the only basis on which these currently unused resources can be used to meet the food needs of everyone, not just of those who can afford to pay.
Sick Society (2008)
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Sick Planet: Corporate Food and Medicine by Stan Cox (Pluto Press £14.99)
This book examines the impact on workers, consumers and the whole planet of the production of medicines, food and various chemicals. Cox’s scientific expertise makes it more than just another volume about the destruction of the environment.
India is a major manufacturer of bulk drugs (raw materials for various pills and tablets), mainly for export. One consequence is that factories producing these bulk drugs pollute their local environment, leading to greater ill-health among residents. One study found that cancer rates were eleven times higher in villages near such factories than those further away. Perhaps this is a global version of a tendency that Cox notes for the US: the most heavily polluting factories are found in the poorest areas, where inhabitants and local government will be more concerned with supposed economic benefits than with environmental damage.
The dominance of factory-style methods in animal rearing makes it far more likely that food will be poisoned in some way. For instance, meat is often contaminated with faeces when it leaves the slaughterhouse. The rearing of poultry has become a vast labour-intensive machine, with repetitive strain injury being prevalent among workers who perform the same small series of actions hour after hour. Cox quotes a neurosurgeon who attempts to repair some of the damage done to these employees: “They become washed out of their humanity. Lives and families are devastated. If the company can demoralize, harass or degrade an injured worker, they will do it.”
In addition to pollution resulting from the production of medicines and food, there are plenty of other ways in which our environment is poisoned. For instance, Teflon makes saucepans easier to clean, but when heated it can give off perfluorochemicals (PFCs). These have entered the bloodstreams of humans and animals in many parts of the world, and are likely to stay around for a very long time, yet their safety is at the very least controversial.
In his final chapter, Cox looks at why production of items that seem to be useful is so often bad for us. Referring to Marx’s Capital, he argues that capitalism without growth is impossible, so it’s the capitalist need for profit that is responsible for the poisoning of the planet and its people. It is hard to see much merit in his proposal that we should develop small organisations that will form part of an unspecified system that will succeed capitalism. But it’s harder to disagree with his conclusion that we cannot have both capitalism and a liveable planet.
Paul Bennett
Gray Matter (2008)
Black Mass: Apocalyptic Religion and the Death of Utopia by John Gray (Penguin £8.99)
Gray’s main argument is that unrealistic political aims should be abandoned and replaced by goals which are truly achievable. It is probably difficult to disagree with this as a general principle, but of course it all depends on what is regarded as realistic and unrealistic.
Quite a bit of Gray’s discussion is aimed at the impossibility of establishing a Socialist society. While Marx was an unrivalled analyst of capitalism, he says, his view of the future society was impractical. Central planning is bound to fail, since nobody can know enough to plan a modern economy; but this is based on the misconception that there will be an office somewhere that decides how many widgets will be produced and where. Other claims fare no better: it’s just not true that Lenin’s State and Revolution is rooted in Marx’s writings on the dictatorship of the proletariat. Lenin twisted Marx’s idea of a transitional form of state into a vicious repressive regime that ruled over workers. Gray’s view that Marx and Engels saw terror as part of the revolution is based on remarks made in a talk in 1850, rather than on any of their mature works. In any case, it deals with how workers should act if bourgeois democrats came to power (specifically in Germany) rather than with the aftermath of a Socialist revolution.
Furthermore, Gray claims that no trace has ever been found of ‘primitive communism’ (which is not true either — see the Socialist Standard for December 2006, on life before the Neolithic Revolution). A Socialist society is allegedly impossible because it would pursue harmony and so clash with ‘the diversity of human values’, since apparently a moneyless society would be a vision of hell to some people. To which we can only say that capitalists who yearn for a world where they are billionaires will just have to lump it in Socialism.
And what of the realism that ought to replace all this supposed utopianism? According to Gray, ‘The root of realist thinking is Machiavelli’s insight that governments exist, and must achieve all of their goals in a world of ceaseless conflict that is never far from a state of war’. The heart of realism is ‘its assertion of the innate defects of human beings’. In other words, we should accept capitalism with its violence and poverty, since people are too fierce and unreasonable to live in harmony. But the true realistic approach is to see through the pretensions of capitalism and its supporters and take the view that a society based on cooperation is a practical possibility.
Paul Bennett
Descriptive economics (2008)
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Economics for Everyone By Jim Stanford (Pluto Press)
This is a very readable description (rather than analysis) of how capitalism works, at least in the form we know it at the moment. At first sight, Stanford’s definition of capitalism seems alright:
“There are two key features that make an economy capitalist.1. Most production of goods and services is undertaken by privately-owned companies, which produce and sell their output in hopes of making a profit. This is called production for profit.2. Most work in the economy is performed by people who do not own their company or their output, but are hired by someone else in return for a money wage or salary. This is called wage labour.”
Production for profit and wage labour are indeed defining features of capitalism, but elsewhere Stanford makes it clear that he thinks that it is not production for profit as such that defines capitalism but only production for private profit. “One defining feature of capitalism”, he writes later, “is that most production is undertaken to generate private profit”.
But this is to ignore the experience of the former USSR and of nationalised industries in the West, where the economy was still based on wage labour but where those who controlled the State or who ran the state-owned industries still undertook production to generate a profit extracted from the labour of the wage and salary workers. He has made the same mistake here as the old Labour Party thinkers who identified capitalism only with private enterprise capitalism, completely ignoring state capitalism (which in fact they were in effect advocating).
Because his approach is purely descriptive, Stanford dismisses Marx’s labour theory of value on the grounds that it can’t be observed directly. It is true that the market price of goods is not a direct reflection of the amount of what Marx called “socially necessary labour-time” incorporated in them, but is fixed by enterprises adding the going rate of profit to the costs of producing them. But the going rate of profit can only be adequately explained on the basis of the labour theory of value (as an averaging amongst capitals of the total surplus value produced).
Stanford accepts – because it’s obvious – that wealth can be produced only by work on nature-given material, but because his approach is purely descriptive he has to explain profits as a sort of ransom extracted from workers by private capitalist firms by virtue of them having private property rights over means of production. This is one way of putting it but, without a theory of value as well as a theory of price, there is no way of establishing the amount and limit of profits. In fact, Stanford says that if the “perfect competition” of the economics textbooks existed it would reduce profits to zero as goods would sell just at their cost price. Marx’s labour theory of value explains why this wouldn’t happen and why the price of goods would still contain some surplus value.
Stanford is also wrong about banks. He seems to think that they simply create credit as they wish, to lend to private industry and to individuals. Banks do indeed lend money and they do have a choice of who to lend to and when and this does have economic consequences, but they can only lend what has been deposited with them or what they have borrowed from other banks and financial institutions. They do just recycle spare money.
Stanford, an economist working for the Canadian Auto Workers union, writes as an open reformist who would like to see capitalism reformed so as to be what it is like in the Scandinavian countries. Although this is disappointing, it is heartening to see criticism of capitalism surfacing again and being given serious consideration.
Adam Buick
50 Years Ago: Depression (2008)
It is a long time since the last great trade depression. Younger people will have little or no clear recollection of it. It occurred between 1929 and 1939, coming to an end after the outbreak of the Second World War. The period was known as the Hungry Thirties. At that time there was something like a million unemployed in Canada, three million in Britain, six million in Germany, eleven million in the United States. In 1934 it was reported that there were between 80,000,000 and 100,000,000 unemployed at that time throughout the world. Even Russia, where unemployment was claimed by its supporters to have lately been abolished, was affected by the depression and had to cope with growing numbers of unemployed. And wherever it existed, unemployment,then as now, deprived its victims of the sources of life other than the limited means made available through charitable groups and government agencies.
The world’s warehouses were filled with goods, the world’s workers were in want and the statesmen were helpless. Bennett, of Canada, who rose to power in 1930 promising to end the depression, was ushered out of power in 1935, leaving 1,341,000 of the electorate on relief. Roosevelt of the United States called to his service the greater part of the alphabet and won the hearts of the American people – but failed to end the breadlines. Hitler of Germany blamed the evils suffered by his countrymen on the victors of the First World War and he fed the German workers’ national pride, red banners and brown shirts – to go with their black bread and sausages. The Labour Party of Britain, which came on the scene to bring shelter to the underdog from the storms and stresses of modern life, became, after a quarter century, without accomplishment, an unheroic victim of the 1930’s, broken by a Labour Government measure designed to worsen the living conditions of large numbers of workers.
(From a leaflet published by the Socialist Party of Canada reprinted in the Socialist Standard, August 1958).
The Arms Industry: From Bazil Zaharoff to Ray Brown (1966)
The affairs of arms manufacturers and their agents have for many years been a fertile field of investigation for social reformers who look for the cause of human suffering and social chaos in the activities of evil men. The recent appointment of Ray Brown to the new government post of Head of Defence Sales, for example, let off a storm of protests by government back-benchers. An old bogey was raised in a question by Labour M.P. John Rankin: —
Is my Right Honourable Friend aware that the appointment of Mr. Brown seems to be similar to a former appointment, that of Sir Bazil Zaharoff, who earned a reputation in this country and in the Labour movement for his nefarious practices which were widely condemned by every member of the Labour movement?
A brief study of the development of the arms industry over the last hundred years will show the points of similarity.
The second half of the 19th century was a period of rapid technical advance in armaments. The industrial revolution produced the coal, iron and steel, chemical and mechanical engineering industries which were to make this possible. The Industrial Revolution was itself part of the development of a society where antagonisms made arms production a necessity.
For about 300 years naval warfare had changed little. It was fought in wooden sailing ships carrying bronze cannons with the winds and human energy as their only sources of power. Between the Crimean War and the end of the century great changes took place. Steam powered, armour-plated ships built with rifled steel guns capable of hurling shells of three-quarters of a ton many miles with great accuracy. Armoured plate became thicker and tougher as the guns became more powerful. At the end of the century the torpedo shattered the supremacy of the battleship. On land similar advances were made by artillery. In small arms the machine gun, developing from hand operated models to the Maxim automatic, gave the infantry far greater firepower. The railways also made it possible to deploy men and war materials rapidly.
The great technical development of the advanced countries and the consequent rapid increase in production provided not only the wealth, but also the source of frictions which were to make increased arms expenditure necessary. One result was the intensified rivalry in the search for markets for the increasing volume of commodities. There were many chances for the weapons to be proved in battle; the American Civil War, Franco-Prussian War, Boer War, Russo-Japanese War and so on until the First World War.
The great arms manufacturers were drawn into the industry by the prospects of greater profits. The steel and heavy engineering industries were in the second half of the 19th century plagued by fluctuations in the demand for their goods. Expansion during boom time and prospects of bankruptcy during slumps made it urgent that their activities be diversified. The British government, in order to have the latest technical developments incorporated in the weapons of its armed forces, placed orders for components such as gun barrels with the Sheffield steel makers and later for the complete guns. It was in this way that pickers came into the industry. Their activities grew as they took over a shipyard at Barrow and the Maxim Machine Gun Company. By 1914, Vickers had grown to an international combine, whose products ranged from complete battleships to machine guns. Armstrongs, a general engineering firm in north-east England, also became a giant of the arms industry. Krupp in Germany and Schneider in France were their main rivals.
Like any other commodity, armaments were—and are—made to be sold profitably. Governments were usually the customers and the industry's sales methods were tailored to suit the markets. The major manufacturers had well staffed branch offices in the capital cities that offered the best prospects of sales. These offices were private diplomatic missions in close contact with the government; some were reputed to have greater knowledge of local politics than the official embassies. Where local conditions demanded it, bribery and corruption were used.
Zaharoff, whose early life was spent in the Balkans, started his career in the arms industry as the Balkans agent for the Anglo-Swedish firm of Nordenfeld. Among their products was the first commercial submarine. His first success was the sale of one of these to the Greek Navy in 1877 followed by an order for two from the Turkish Navy. This was the start of Zaharoff’s reputation for playing one nation against the other; for exploiting a rivalry which already existed. Zaharoff was well equipped for his job; he was fluent in several languages, a great charmer, had a wide knowledge of the world and politics, all of which he applied with great success to his job. He quickly became Nordenfeld's agent for the whole of Europe.
In this new capacity Zaharoff was up against Maxim’s, whose machine gun was far superior to Nordcnfeld's. Zaharoff tried every dirty trick in the trade to win orders for his firm but they were of no avail against the superior product. The result of the clash was the merger of the two firms with Zaharoff looking after the sales and Maxim's the technical details. Later in the 1890’s, Vickers took them over and it was with Vickers that Zaharoff reached the height of his career. His activities look him all over the world, negotiating orders wherever the demand occured.
Vickers at this lime obtained large shares in a number of overseas arms companies including some in Spain. Italy and Japan, as well as contracts to manage the government dockyards of Russia and Turkey. Other international activities included membership of a syndicate of British, French, German and American firms to divide territories and profits and to pool patents for armoured plate; licensing a German firm, Deutsche Wallen, to manufacture and sell machine guns with shared profits in certain markets; an agreement whereby Vickers made and sold Krupps time and percussion fuses. There were also gentlemen’s agreements with Armstrong to avoid clashing in foreign markets.
It is probable that Zaharoff had a hand in negotiating many of these agreements, which were, after all, normal business arrangements. He was also credited with controlling sections of the foreign press and of getting into the confidence of the world’s leading politicians. His tactics included philanthropy; grants to set up aviation studies at one university, financing literary prizes and establishing homes for disabled sailors. It was rumoured that he was one of the richest men in the world and had control of the world's armament industry. When he died in 1936, he left only £1 million which is far from making him one of the richest men but very good for a salesman.
The First World War caused the expansion of the arms industry so that a large part of world industry was geared to supplying the combatants. The war provided the incentive to develop Switzerland’s aluminium and hydro-electricity generating industries: Japanese industry prospered greatly and expanded. The opposing forces faced each other with international armaments. 'The world's navies were clad with Krupp’s patented armour plate. The armies used machine guns operating on principles developed by Maxim. The torpedoes were Whitehead’s design.
Once the war was over the accounts had to be settled. Krupp’s and Vickers were in dispute over royalties on fuses and Vickers and Deutsche Wallen were in dispute over royalties on machine guns. Business, in other words, as usual.
The ending of the war produced the very situation—the slump—which the arms makers had tried to safeguard by joining the industry. Their activities had expanded continuously for many years during the pre-war arms race and during the war had expanded much more again. In Britain, there was a boom in engineering and ship-building for two or three years after 1918, then the slump came with production and prices dropping drastically. Both Vickers and Armstrong had tried to diversify their activities into a wide variety of products from locomotives to sewing machines, but to no avail. By 1925 they were both in great difficulties and outside experts were called in to advise. The two firms were merged and Vickers-Armstrong struggled on for many years before another arms race restored their profits.
In the slump, these two mighty firms were powerless. Their best salesmen could not revive the market. Their close contacts with the great politicians and military leaders of the world could not help them. In fact, capitalism mastered them and not the other way round.
Various efforts were made by the League of Nations to regulate the arms industry but with little success. Many hooks were published during this period exposing the arms industry. They were useful in showing the workings of the industry but their solutions limited to such useless measures as nationalisation and international commissions to control sales. Disarmament conferences were piecemeal affairs, trying to limit the number of battleships and cruisers, weapons which were on the way out.
The arms race before World War Two was concerned with aircraft, tanks, armoured cars and submarines. The industry became more subject to government control. Instead of setting the pace with design and innovations, it became more and more dependent on working to government specifications.
The Second World War saw the introduction of some of the war material with which we are familiar today—electronics in radar and rocket guidance, rockets and the atom-bomb.
The atom-bomb could only be developed by governments; it required far greater resources than any private firm could muster. The IJSA was the first to produce it, over a million men being involved in this project. In spite of the greatest secrecy about its production, there are now five countries openly making this weapon. The main rivalry since the Second World War has been between the USA and Russia. There has been a continuous high level of spending on arms, including a race in the production of nuclear weapons and the aircrafts and rockets to deliver them. This rivalry is now carried on into space.
The expense of this development can only be borne by the giant nations such as the USA and Russia. The former great nations are now left well behind.
Since the war the international arms trade has continued. The Nato and Warsaw Pact alliances provide large markets, as do the new independent countries many of which spend over 30 per cent of their budgets on so called defence. For all the government control, the internationalisation of the industry is still there. The British Hawker Hunter and Canberra aircraft and the American F104 have been built in many countries. The Russian MIG fighter is built not only in Warsaw pact countries but also in India.
The arms trade has continued to flourish but the British capitalists’ share of it has declined steadily. Russia and America now oiler a far more attractive range of goods and are also better organised to take advantage of the market. Russia’s triumphs include breaking into the Egyptian, Cuban. Indonesian and Indian markets. Private enterprise USA is also showing the way by having a government sales organisation with Henry J. Kuss in charge under the title of Deputy Assistant Secretary of Defence for International Logistics Negotiations. Kuss is a career Civil Servant and The Observer (15.5.66) reported, “Last year he was given a medal by McNamara for selling 9,000 million dollars worth of arms since his appointment in I960.” He also forecasts a booming market. “Mr. Kuss was recently quoted as saying that over the next ten years about 100,000 million dollars would be spent in the free world outside the United States on military hardware." (Financial Times, 22.12.65).
This brings us back to Mr. Ray Brown and his job of expanding Britain’s arms sales. Despite such promising markets, only £125 millions of British arms are being exported each year. The Labour Government are hoping that an increase in exports will help to solve their balance of payments problem. At present, Mr. Brown must he a little confused with his job. as there are certain promising markets out of bounds: South Africa and Spain, for instance. The conditions for sale to America must be hard to swallow: no doubt the Labour conscience would he calmed if the arms were only used for peaceful purposes like strike breaking or quelling riots.
And this brings us back to the agony of the Left. Mr. Rankin sees a similarity between the roles of Zaharoff and Brown. Of course there is: the only difference being that Zaharoff worked for Vickers and not (as Mr. Rankin thought) for the Government. The conditions of 1966 may require different selling techniques to 1906 and, as men, Zaharoff and Brown may be as different as chalk and cheese but the essential features are the sun. Weapons of war are made to be used and their effects will be the same whether gentlemen or rogues sell them or whether it be governments or private firms that employ the salesmen.
Joe Carter
Armaments: The economy of waste (1966)
Anybody who is under any illusions about the priorities of this social system need consider only one fact. In the current financial year the British government, which claims that it cannot “afford” all sorts of things like roads, houses, hospitals and schools, is planning to spend £2,172 million on armaments.
We should be clear that this sum has been arrived at after the government have ruthlessly cut back expenditure, have abandoned many projects—such as the TSR-2—which their predecessors agreed to and have planned to withdraw from several areas overseas. In other words, £2,172 million is not an extravagance; it is an economy.
As we may expect, it took a Labour government to do it. One of the problems facing the British capitalist class in recent times has been the size of their arms bill, and the way this bill increased year by year. Taking the figures of “defence” expenditure at four yearly intervals from 1957/8, we get this picture: £1,483 million; £1,600 million; £1,837 million. At present British armaments spending is running at about seven per cent of the Gross National Product.
When Labour came to power in 1964. they resolved to do something about this situation. Perhaps some of their pacifist members actually expected them to stop spending money on weapons—Mr. Emrys Hughes, M.P. for South Ayrshire, for example, who seems to devote debates on “defence” to unrelenting sniping at speakers on both sides. Like this:
Mr. Amery (then Secretary of State for Air): I understand that there are some who would prefer slavery to death—Mr. Emrys Hughes: Survival.Mr. Amery: -- and if the Hon. Member cares to represent them, that is his affair.Mr. Emrys Hughes: Survival.
And like this:
Mr. George Wigg: There are in the community only a given number of men who like service in the Armed Forces of the Crown—Mr. Emrys Hughes: And getting less.Mr. Wigg: That may well be. I do not believe that it is, but that depends on one’s point of view—Mr, Emrys Hughes: It is common sense.
But of course Labour had no such intentions. All they wanted was to hack out an armaments policy which fitted the realities of Britain's standing in 1966 world capitalism, and to make sure that the ruling class got value for every penny they spent on the Armed Forces—intentions which, applied to any private firm, would bring a smile to the face of the dourest accountant.
So Harold Wilson instructed his Minister of Defence, Denis Healey, to set himself to applying the principles of what is called, in a new jargon, cost effectiveness. In his younger days, Denis Healey was considered to be a far-out Left Wing extremist, but he had no difficulty in reconciling himself to the unexceptional!y capitalist principles of his new job.
For a long time he laboured and then, in February this year, he brought forth the results—the Defence Review for 1966. This piece of work provoked a storm of hostility. The Tories professed themselves furious that Healey had decided against building a new aircraft carrier; the First Sea Lord, Sir David Luce, virtually resigned on the issue. The Defence Minister for the Navy, Christopher Mayhew, also threw up his job, protesting that “. . . the basic mistake of the Defence Review has been . . . giving the armed forces too large tasks and too few resources.”
That storm, which made the headlines for a day or two at the time, quickly blew itself out. Today, Mayhew is almost forgotten. And who now remembers Sir David Luce?
The first thing the Labour strategists had to take into account was that, for British capitalism, things are not what they used to be. Gunboat diplomacy may now be a bad joke but at one time, when Britain was the world's greatest power, it worked. Of course that was long ago; since the First World War, British influence has steadily declined and now any political party which tries to run British capitalism must always remember that they are administering a second rate power.
Today, the great disputes of world capitalism involve the United States and Russia. The world is divided mainly into two spheres of control; all others, like the British or the French, are minor affairs and have to play a supporting role. This unpalatable fact has been faced by De Gaulle, in his policy of joining with other European states in a French-dominated alliance. It has been faced since the war by all British governments, although the Conservatives have sometimes had trouble in selling the idea to the blue-nosed colonel elements in their ranks.
Britain's economic decline has also meant that the ruling class can no longer support a large peace time armed force. Compulsory military service would be an expensive affair, as ' well as a diversion of manpower from industry, which already carries a burden of labour shortage. The result is that, when the commitments of the British forces have been met, there has often been no reserve of men for movement at short notice to flares-up in Africa and similar places. To try to bridge this gap, British soldiers have sometimes been taken from Germany in an emergency.
The Labour government saw all this and they said that it was not good. They have decided, in the words of the Defence Review, that there are certain “. . . political commitments we must give up or share with others (and) limit the scale of military tasks which may be imposed by the commitments which remain.”
In practical terms, this means that British forces will be withdrawn from Aden in 1968, from British Guiana and South Africa in the near future, and reduced in the Far East as soon as possible. The bases will be replaced by “staging posts”—islands like Gan and the Cocos which will have minimum facilities such as an airstrip, fuel tanks, a wireless station and so on.
This should lead to other economies; very often in the past, bases like Cyprus had to be held by military force against the wishes of a large part of the population. There is unlikely to be any similar problem with the staging posts; the most dangerous inhabitants in the Cocos at the moment are the fierce land-crabs with which the place abounds.
The staging posts will be in the area known as East of Suez, now under British control by permission of Washington, which has its own problems of stretching manpower and resources. Britain will operate East of Suez on a policy of interdependence — of joint military operations within political alliances. The Defence Review talked about ". . . allies and friendly countries who have military requirements similar to our own." Many other countries have had to give up their colonies in recent years. The empires of France. Belgium and Holland, for example, have since the war crumbled into a mass of independent states.
By their policies, the Labour government plan to reduce arms spending so that by 1969/70 it represents six per cent of the Gross National Product—£2,000 million a year at 1964 prices. (Although six per cent of the GNP forecast by the National Plan for 1970, at 1964 prices, comes to £2,463 million). The government claimed that their plan amounts to a 16 per cent reduction on what the Tories would have been spending by 1970, although Mr. Mayhew, in the sort of flash of clarity which is sometimes given to politicians who have left office, said in the debate on February 23 that £2,000 millions was “an artificial figure.”
Whatever the truth of this—and if what Mayhew said is true this would not be the first time a government has based its calculations on sheer guesswork—the fact is that it is impossible for anyone to forecast what defence, or any other, expenditure will be in five years’ time. These things have a habit of getting out of hand—according to The Guardian of June 15, the foreign exchange cost of the British military effort in Malaysia is 30 per cent more than Denis Healey forecast last August. And who can forecast what other conflicts lie in the future? Who can say that there will not be another Korea in the next five years? Or that the Vietnam war will not engulf this country as well?
And even after Labour's economy drive, armaments are still gobbling up an enormous amount of money. Apart from what the British government spends, a lot of industrial effort is devoted to making weapons for sale to the governments of other countries, which also have a big arms bill. (The United States spent about $46,000 million in 1965). The market for weapons is, to use a term which is perhaps inappropriate, cut-throat. Governments know this, and employ their salesmen to sell the products of their armaments industries through international alliances like NATO. In Britain the level of government spending makes what is called defence the biggest industry.
When we compare this colossal industrial effort to the puny attempts which are made to deal with human problems of the world—when we consider, for example, that according to a UNICEF official in India 80 per cent of the population have to live on less than 1s. 9d. a day, we get an insight into capitalism’s miserable inability to provide a world fit for people to live in.
To recognise this is not to join the charity-mongers who divide their time between protesting about the effects of capitalism and to supporting the capitalist political parties at election times. The basic priority of capitalism is the production of wealth for sale and from that a lot more follows—economic competition, international rivalry, war and armaments. It is simply impossible to have the one without the others.
It was never difficult to foresee that weapons would grow into destructive monsters. Nuclear weapons are only a stage in the development of the war machine; we can be sure that there is more to come. Denis Healey, when he was in opposition, said in the House of Commons that “. . . the West must have atomic weapons as long as the Russians have them.” Presumably this also means that if the Russians— or some other country develop something more powerful than nuclear weapons, we shall have to have those as well. This is what is called, in Healey's language, sensible strategy. Other people might call it something else.
The British armed forces exist, just like those of other countries, to protect the property of their master class; to protect their overseas interests, investments and areas of control. At the moment British investments abroad total about £11,000 million. It was as part of the attempt to protect the bit of this total which is in Rhodesia that the aircraft carrier Eagle, and the other British warships, were recently in operation off the east coast of Africa.
South Africa, which is Britain’s third largest market, has nearly £1,000 million of British money invested in it: India has £450 million. Incomes from investments in other parts of the world are now running at these annual levels:
£ millionFar East 70Middle East ... 200Australia and NZ 70Europe 35Americas ... 115Africa 110
The Defence Review said of all this:
. . . we have important economic interests in the Middle East, Asia and elsewhere . . .
and
When . . . instability leads to open war, it may imperil not only economic interests in the area, but even world peace.
We can put it another way. With such mighty interests at risk, capitalism sees it as perfectly reasonable to spend a mere £2,000 million a year to defend them. And of course politicians can always produce acceptable arguments to justify this spending; they rarely have much difficulty in convincing the working class that, no matter how much they may regret the situation, no matter how much they prefer to spend money on cancer research, or defeating famine, or building hospitals, if a foreign power takes over “our” oilfields, “our” markets, “our” investments, we shall suffer a fate far worse than merely dying of cancer.
The numerous mouthpieces of capitalism persistently claim that it is a social system founded on honour, humanity and efficiency. But try an experiment. Take a piece of capitalism, put it in a test tube, put in with it the catalyst of human interests and observe the reaction. The result is undeniable. Capitalism makes honour of betrayal, humanity of murder and a veritable economy of waste and destruction.
Ivan.
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