Cooking the Books: The best laid schemes (2026)

The Cooking the Books column from the January 2026 issue of the Socialist Standard

Before the budget on 26 November speculation was rife as to what might be in it. In opposition Rachel Reeves, as Shadow Chancellor, had promised that the priority of a future Labour government would be growth, growth, growth.

But what is ‘growth’? She seems to mean a growth in Gross Domestic Product which is a measure of the inflation-adjusted price of all the goods and services produced in a year. The trouble is that this is not something that a government can bring about. As she herself pointed out in her budget speech, ‘private investment is the lifeblood of economic growth’. So, her plan is to create the best conditions for private investment for profit, one of which in her view is government investment in infrastructure projects. This, however, has to be paid for. As she doesn’t want to rely too much on borrowing she has had to increase taxes. Not that increased government investment will necessarily encourage more private investment; it might for a short while but in the end the only encouragement is the prospect of making a profit.

Capitalism is a system of production for profit where the aim is not growth as such but making profits which, when reinvested, bring about an increase in the production of wealth. It is a result of what Marx called ‘the accumulation of capital’.

Marx himself pointed out that, when it occurs, the more rapid the accumulation of capital, the more jobs there are and the higher are wages due to employers competing for workers. These days, it would also mean an increase in tax income for governments. Reeves seemed to be making the same point when she described ‘economic growth’ as ‘the best means to improve wages, create jobs, and support public services’.

But there is a difference. Marx never expected the accumulation of capital to be continuously onwards and upwards. He saw the process of capital accumulation as ‘a series of periods of moderate activity, prosperity, over-production, crisis and stagnation’ (Capital, vol 1, ch. 15, section 7). Despite all the evidence to the contrary, Reeves believes — and not only her but all the parties that aspire to manage capitalism — that, if the government gets it right, there can be a permanent boom.

A government might be lucky and be in office during the ‘prosperity’ phase of the cycle but not even the government’s own advisers at the Office for Budgetary Responsibility are predicting that. They are currently estimating that ‘growth’ over the next four or five years will be only 1.5 percent a year. Which is slow by previous capitalist standards and won’t bring about many more jobs or higher wages or enough tax revenue to honour Labour’s promises to improve public services.

In any event, the OBR forecasts are little more than a guess. The fact is that economic forecasts, especially over a longer period, are hardly worth the paper they are printed on as nobody can foretell how the capitalist economy will move. If they turn out to be correct, it will have been a lucky guess.

What will happen in practice over the next few years is that the government will merely react to whatever the workings of capitalism present it with. They will just be muddling through, or, to use the nautical language governments do when they seek to explain their failure by having to ‘face strong headwinds’ or being ‘blown off course’, they will just be navigating by sight.

From America: Business week and the “Marxist assault” (1978)

From the October 1978 issue of the Socialist Standard

Business Week, Avenue of The Americas, New York City, should urge its writers to do their homework. In its issue of July 17, 1978, the Economics department does a review (or comment) on a new attack on Marxian economics, co-authored by four British self-styled Marxists (Barry Hindess, Paul Hirst, Athar Hussain, Anthony Cutler) entitled Marx's ‘Capital’ and Capitalism Today. The magazine’s caption reads: “A Marxist Assault on Marx” and the writer wastes no time in displaying his own ignorance of the barest essentials of the Marxian system.

Item: . . . the labour theory of value . . . holds that products are worth as much as the amount of labour that goes into producing them.

Stated thus the proposition is easy to refute. Why would a “product” (commodity) with more labour incorporated in it because of inferior production technique have more value in the market than a similar commodity produced with modern efficiency? It would not and Marx knew this. That is why he insisted upon using the phrase “socially necessary labour time” and explained it with thoroughness as the average labour time needed to produce an article under normal conditions of production and with the average degree of skill and intensity prevalent at the time. Commodities are not produced for some intrinsic pleasure in production but to sell and realise profit for their owners. Competition in the market place dictates that labour time in the factories be socially necessary.

But this is by no means the worst of the Business Week article. The writer, by an exercise of common horse sense, could nave attacked the credibility of the “Marxist” professors by exposing their naïveté. It does not necessarily follow that one must be pro-Marx to expose faults in anti-Marxist critiques.

Item: ‘There is no such thing as a general theory of prices or production,’ says Hirst of the University of London. ‘The way in which firms make calculations depends on each particular situation,’ he adds.

But of course individual firms must be concerned with one particular problem: achieving profitable increase in capital expended. A knowledge and understanding of general theories of the source of such increase is unnecessary to achieving one’s goal although factory managements succeed best that learn how best to milk their work force. Somehow, even without book knowledge, they realise that the source of their profits is not the prices of their commodities in the market place but the value over and above wages paid, created gratis by the workers.

Except that this seems to be what bothers the professors most about Marxian economics. Capitalism, they contend—according to Business Week—is not one enormous factory. Marxists, they say, neglect such areas of activity as the huge service sector and the vital banking system:

Item: But the most glaring error in Marxist economics, they say, has been to ignore the role that money, credit, and financial institutions play in the economy . .

For example, they point to the variety of financial activity in which companies engage, such as foreign exchange speculation, in addition to production. And they further argue that the expanded role of government monetary authorities and their influence on the banking system, as well as the availability of credit, play a key role in how much profits companies earn. Indeed, government now has the clout to bail out companies that would otherwise go out of business were competition to prevail.

Indeed! The most glaring error of the professors— and of such experts as are found in the Economics department of Business Week—is the ignoring of the role that class has always played in capitalism. The total national capitalist, from away back, and the total international capitalist, in this country, have functioned as the final arbiters in the affairs of individual companies and industries through their states and their international financial and political institutions.

But what has all that to do with the source of profits? Long before the times of Marx, certain economists (Benjamin Franklin among them), observed that what took place in the market was an exchange of equal values. Whence, then, came the profit? Having the clout to determine whether or not a business will survive is not the same thing as producing profit. Such is obviously not the function of banks and governments.

And then the confusion of Business Week and the British “Marxists” becomes confounded because, accepting the myth of socialist nations (Russia, China, Poland, Cuba, etc.) they blame the “marked slowdown in economic growth” of some, such as Russia and Poland, on a blind adherence to Marxist economics.

Item: ". . . By adhering to a narrow interpretation of Marx’s theories, these nations have pursued one-dimensional development programmes, pumping up production in such industries as steel and heavy machinery, while neglecting to improve agricultural yields, expand the production of consumer goods, or provide better cultural and recreational services. According to some Marxists, these countries have sacrificed the socialist ideal for the sake of rapid industrial growth.”

Now why should anybody believe that Marx’s Capital offers a programme or an understanding of how production can be organised within the relationships of wage labour and capital in a manner as to benefit all, or anything more than a minority, of the population? Certainly there were no nations professing to be Marxist or socialist in Marx’s time, no national propaganda machines teaching that wage-labour and capital relationships can be socialist as well as capitalist. He did not have that idiocy to contend with and there is nothing in Capital to indicate that he foresaw such a turn of events.

Yet the woods and streets are filled with true believers of that myth, from plain men and women on the street to economics professors and business magazine writers. The answer to the question of why these “socialist” economies fail to equal those of the more traditional capitalism is not nearly so important as why or how state capitalism gets tied to the analysis in Capital and touted as socialism.

The emphasis of most “socialist” nations on production of capital goods and heavy industry (China and Cuba are cited as exceptions where the “socialist ideal,” presumably, has not been “sacrificed for the sake of rapid industrial growth”—despite the overt attempts of both nations to overcome backwardness) indicates only that they are by very nature capitalist. What is the number one object of capitalist production? As Marx so well put it:

Accumulate, accumulate! That is Moses and the prophets! . . . Therefore, save, save, i.e. reconvert the greatest possible portion of surplus-value, of surplus-product into capital! Accumulation for accumulation’s sake, production for production’s sake: by this formula classical economy expressed the historical mission of the bourgeoisie, and did not for a single instant deceive itself over the birth-throes of wealth. But what avails lamentation in the face of historical necessity? (Capital, Vol. 1, p. 652 Kerr Ed.)

Whether by traditional bourgeoisie or state bureaucracy functioning as bourgeoisie the primary object still holds.

And yet, out of this concentration on production for the sake of more production eventually must come a mass realisation that the floodgates of abundance for all—the socialist ideal—can be opened simply by abolishing the relationships of wage labour and capital and introducing a world wide system of production for use. That is the message of Capital and Marxism generally.

Harry Morrison

(WSP-US Boston)

Material World: Why they keep piling up manure: the psychology of wealth accumulation (2009)

The Material World column from the October 2009 issue of the Socialist Standard

Money is like manure.  If you spread it around, it does a lot of good, but if you pile it up in one place, it stinks like hell.

I can’t trace the original author, but it seems to be a popular motto among rich “philanthropists”. It has been attributed, in slightly variant wordings, to steel magnate Andrew Carnegie, oil tycoon J. Paul Getty, New York “socialite” Brooke Astor, Clint W. Murchison (chairman of Tecon Corporation) and Kenneth Langone (founder of The Home Depot).

Two questions spring to mind.

First, if these people so hate the smell of manure, why do they keep piling it up? After all, they are free to stop at any time.

Second, what do they want all that money for anyway? Surely a few hundred million should suffice to buy all the luxuries anyone could want? So why chase after the billions?

An addiction to extravagance

One answer is offered by Eric Schoenberg of Columbia Business School (on the site of Forbes magazine). Driving your first Rolls Royce is a fantastic experience, he explains, but as you get used to it you no longer enjoy it so much. So you have to look for new experiences, which for some reason are always more and more expensive.

 Presumably, an obsession with money spoils the enjoyment of anything that does not cost a lot of it. The result is an addiction to extravagance that reinforces the drive to make more money.

Kudos

Besides addiction to extravagance, the most common motive for accumulating wealth appears to be simply the desire to be admired by others. Kudos, however, depends less on absolute wealth than on place in the pecking order, as indicated by lists like the Forbes 400. Only Number One can feel fully confident of his superior status – and even he must beware of rivals overtaking him.

 Astonishing but true: many people honestly think – indeed, assume – that being rich is something worthy of pride and admiration. They consider having more money than anyone else the greatest of all conceivable human achievements. Never mind where the money came from, how it was acquired. To be a “winner” is glorious, to be a “loser” shameful and pitiable. They were brought up to think so, and can hardly imagine that anyone might be sincere in thinking otherwise.

 We might expect there to be an element of subtlety or mystery in the driving impulse at the core of a dynamic that spawns so much evil. Instead, we find something insufferably boring and trivial, the ultimate in banality.

The “philanthropists”

And yet the worship of wealth need not wholly exclude other social values. Many people feel that just being rich is not sufficiently glorious in itself: in addition, one should “do good”. As a result, some wealthy individuals wish also to be “great humanitarians and philanthropists”.

 There is actually a special business that makes money by selling “philanthropic” fame. For a fixed sum you can have a concert hall, museum, hospital, college or whatever named after you (or a relative of yours). For example, Brown University named its Institute of International Studies, where I used to work, in honour of Tom Watson of IBM in exchange for $25 million.

 The publicity given to large “philanthropic” donations suggests that in certain circles kudos may now depend on how much money you give as well as how much you have. It is like the potlatch among the Kwakiutl of western Canada, where the wealthy gain kudos by making generous gifts.

Guilt feelings?

While “philanthropy” is often just a means of cultivating a favourable public image, some wealthy people may be sincere in wanting to “do good”. Some authors even attribute the giving of certain individuals to guilt feelings about how their fortunes were made.

 Thus, it is claimed that Brooke Astor was ashamed of her family’s reputation as New York’s biggest slumlords. Carnegie, we are told, felt guilt over the workers killed in the suppression of the Homestead strike of 1892. Yet he also wanted “Carnegie Steel to come out on top” – and that feeling proved stronger than any sense of guilt.

 Ashamed or not, Astor gave nothing to the victims of her family’s rack-renting. Instead, she gave $200 million to cultural institutions. Similarly, Carnegie endowed the arts and academia, but gave nothing back to the workers who slaved in the heat of his steel mills at poverty line wages – twelve hours a day, every single day of the year except 4 July

 

 The ruthless capitalist precedes, makes possible and is vindicated by the “generous philanthropist”. The capitalist drives the system that causes the misery; the “philanthropist” then does a little to ameliorate that misery. Strangely enough, the capitalist and the “philanthropist” turn out to be one and the same person.

Piling up and spreading out

Why keep piling up manure just to spread it out again? It seems senseless – even if the manure does not end up exactly where it was before.

 Yes, it seems senseless when we focus on outcome. But when we shift our attention to process, it starts to make more sense.

 Piling up brings one sort of kudos, then spreading out brings another. One sort does not cancel out the other.

 Both piling up and spreading out give the satisfaction of exercising power, making decisions that affect millions of lives – on the sole qualification of the possession of wealth.

 So it all makes perfect sense. From a certain point of view.

Stefan

Editorial: Boom-Time (1956)

Editorial from the August 1956 issue of the Socialist Standard

Under the conditions of accumulation supposed thus far, which conditions are those most favourable to the labourers, their relation of dependence upon capital takes on a form endurable, or as Eden says, “ easy and liberal." Instead of becoming more intensive with the growth of capital, this relation of dependence only becomes more extensive, i.e., the sphere of Capital’s Exploitation and rule merely extends with its own dimensions and the number of its subjects.

A larger part of their own surplus-product, always increasing and continually transformed into additional capital, comes back to them in the shape of means of payment, so that they can extend the circle of their enjoyments, can make some addition to their consumption fund of clothes, furniture, etc., and can lay by small reserve funds of money.

But just as little as better-clothing, food, and treatment and a larger pecullium (Pecullium: pocket-money given to slave by master), do away with the exploitation of the slaves, so little do they set aside that of the wage-worker.

A rise in the price of labour, as a consequence of accumulation of capital, only means, in fact, that the length and weight of the golden chain the wage-worker has already forged for himself, allow of a relaxation of the tension of it. (Karl Marx,“ Capital,” Vol. 1, page 676. Kerr edition, 1921).

Is Capitalism Really Changing? (1957)

From the May 1957 issue of the Socialist Standard

If the parties of reform cannot call the tune to Capitalism they can at least call it by fancy names. Tories and Liberals rather like the sound of “The People’s State,” “Progressive Industrialism,” or simply “The Welfare State.” With unconscious irony the Labour Party in this never-never or hire purchase age, refer to it as yet a further instalment towards getting Socialism, while the ingredients for their recipes are the same each rival party seeks to sell its programme as a proprietary brand and the label assumes greater significance than the contents. Word magic then becomes an essential feature of political art and future historians may note that the differences among the reform parties were at bottom semantic differences.

Last Days of Pompeii

Mr. Strachey’s book, Contemporary Capitalism, is yet another verbal variation of the current situation. Dramatically he names it, the last stage of capitalism. For all its relevance to actuality he could have called it. “The Last Days of Pompeii.” Mr. Strachey deals with capitalism in terms of its symptoms, not the malady; which is as futile as a physician treating measles in terms of its spots or malaria in terms of its shudders and shivers.

Mr. Strachey in diagnosing the body politic and economic discovers by certain signs that capitalism has changed, is changing, and will continue to change—for the better. Mr. Strachey lists the signs as evidence for this, in the separation of ownership from management—which we shall deal with in a separate article—the increase in State activity, the appearance of the Welfare State and even the new method of setting out the national accounts. If all this is coupled with the atrophy of competition, which, says Mr. Strachey, is the essential regulating and controlling mechanism of capitalism, then a new kind of capitalism is being produced. A new kind of capitalism which in Mr. Strachey’s view, it will in the foreseeable future be an abuse of language to call capitalism. It is the ending of what he calls unrestricted competition that is the basis of, to use another term of his, the mutation of capitalism.

Capitalism and Competition

Mr. Strachey by treating competition as the essence of capitalism is able by invincible logic to establish the proposition that as unrestricted competition is no longer with us, neither is capitalism, or at least only its last stage. The weakness of identifying capitalism with laissez-faire, i.e., individualistic competition and an absolute minimum of State interference in industry is that such a state of affairs corresponded only with the coming to maturity of English capitalism, while the development of capitalism in England went through a “free trade” phase, in the U.S.A. it went through an opposite phase—protection again in Germany, Japan, Italy, etc., the early stages of capitalism so widely departed from the classic English development as to say that a laissez-faire free trade capitalism was peculiar to, England. We might add that Soviet capitalism has never known anything remotely connected with laissez-faire.

What can be said is that laissez-faire and free trade were components of 19th century capitalist ideology, but its actual economic practice only came into operation under certain conditions. Also, if trusts, cartels, etc., are à la Mr. Strachey, evidence of a last stage capitalism, then U.S. and German capitalism must have come to it in the alleged traditional fashion of the Chinese by going through the last stage first, for such things were features of the early capitalist development of the above countries.

On historical and factual grounds it can be shown that individualistic competition and non-intervention by the State in matters industrial, although they corresponded to the growth of English capitalism were not features basic to the maturing of capitalism elsewhere. Laissez-faire and capitalism cannot then be regarded as synonymous terms. Even on purely logical grounds Mr. Strachey is guilty of a howler unpardonable in a high school student. Thus, if there is a last stage monopoly capitalism and a first stage competitive capitalism, and the species is still extant and recognisable, then competition cannot be the essence of capitalism. There must be some basic factor common to both stages.

The Nature of Capitalism

What that basic common factor is. Mr. Strachey never really attempts to explain. The nearest he gets to it is a casual observation (page 92) that “Marx showed that wealth is not due to capitalist abstinence but wealth and capital accumulate because workers produce much more than they consume.” But this does not tell us what makes capitalism tick or show its essential differences from other exploitative social systems.

It is not that the worker merely produces a value over and above his own upkeep—surplus value, but that this surplus value constitutes the warp and woof of capital accumulation, and it is capital accumulation on an ever-expanding scale which is the dominant objective of the owners of capital. For capitalists the most essential thing is the magnitude of capital under their control and its most desirable characteristic the ability to expand indefinitely. The fundamental urge of capitalist society is the same now as it was in all its yesteryears.

Nor is capitalism crucially altered because owners of capital fight in the massive formation of firms, corporations and cartels instead of rushing into battle single-handed with the cut-throat sword of naked competition, as was the wont of their early and mid 19th century counterparts. Capitalism is still a battleground of rival concerns, each trying to obtain the greatest possible spoils in their efforts to realise the greatest amount of surplus value for themselves. It is true that Agincourt was fought with bows and arrows and armed horsemen, but it was no less a battle than Stalingrad, which was fought with tanks and high explosives.

Capital accumulations have not ceased

If capital accumulation is the cardinal feature of capitalist society, then it is precisely here that Mr. Strachey should have directed his efforts, to show that capitalism is changing in some significant way. He should have sought to reveal that accumulation of wealth is no longer capital accumulation, but becoming social accumulation and that the means and instruments of wealth production are ceasing to become capital, that is, means of exploitation in the hands of individuals or groups of individuals, but were in the process of being invested in the democratic control of the community. If Mr. Strachey could have demonstrated this, then he surely would have proved that when he states that capitalism has undergone a mutation he is using the word in its correct sense. On the contrary, Mr. Strachey implicitly and at times explicitly shows that wealth accumulation still takes the form of capital accumulation.

Nor are the compulsions of capitalism any less compulsive than they were in the 19th century. The process of capital accumulation is not something over which capitalists can exercise a personal choice, to ignore it would be to invite elimination from the ranks of the owners of capital. Capitalists, and here we include management, although they are agents of capital, are not free agents. Capital is an historically conditioned form of wealth, expressed in the class ownership of the means of production and for that reason the motive and aims of the owners of capital are prescribed for them by this form of control. It is in the light of this that we are to understand Marx’s statement when he says in the preface to volume one of Capital that “he treats of landlord and capitalist as personifications of economic categories, embodiments of particular class relations and interests.”

Because reformist policies are themselves, the outcome and implementation of capitalist development the political parties in order to justify their existence seek to rationalise this development in terms of significant changes. But it is a mistake to suppose that development as such is synonymous with change in some transformative sense. Muscles may be developed, but they are still muscles. A plant may in its life cycle undergo change of form, but it is subject to an intrinsic pattern of development. Capitalist development may modify certain features of the system, but it does not alter the essential nature of the beast, any more than sawing off the legs of a Wolfhound if it were possible would make it a Daschund. It would still remain a Wolfhound with short legs.

The acid test of Reformism

It is because the conversion of capital accumulation of wealth to social accumulation provides the acid test to any genuine change in society that Mr. Strachey’s political litmus paper not only fails to turn red, but even parlour pink. In Mr. Strachey’s future society there will still be class ownership of the instruments of production and hence accumulation will continue to be capital accumulation. What will be necessary will be that the rate of investment must be kept as high as possible and in that case Mr. Strachey sees no objection why the economic mechanism cannot be left in private hands. Since, says the arch-revolutionary Strachey, the owners of the means of production or management cannot be ordered they must be induced not to let the level of investment drop. This can be achieved by public works investment and a whiff of inflation.

In Mr. Strachey’s social mutation there will still exist all the characteristics of the old species, capital accumulation, private ownership, profits and wages. And so the more capitalism is changed the more it is like the same thing—only even more so.

Mr. Strachey, a little self-conscious, perhaps, that his mutation looks suspiciously like the old species writ large, implies that owners and management are becoming socialistic because the profit motive is today not the only motive. But if profits are not made owners and those who constitute management will go out of business. For capitalism it remains the golden rule of success and capitalists must play the game in accordance with that rule. Whatever other motives inspire the entrepreneur they are all subordinated to that one and whatever other rules are broken that one is the one which they can least afford to break.

We are all Socialists now

Mr. Strachey puts forward the threadbare apologia that those who direct and control investment do or can play a useful social role. That their job is one of those specialised jobs they do on behalf of the community and in taking profits they are merely being recompensed for their trouble like any other workers. No doubt under Mr. Strachey’s future economy, capitalists will murmur with pride and equanimity, “We are all Socialists now.”

Competition as fierce as ever

Mr. Strachey, who in the matter of politics is the best second-hand dealer in the business, offers the commonplace of fifty years economic theory that competition has declined. It is an over-simplification amounting to falsification to say that price competition between the bigger concerns no longer operates. There are periods in various spheres where price stabilisation is achieved by agreements, but such agreements are temporary in character and have been broken time and time again, and so far as cartels being something new in capitalism they are almost as old as capitalism itself. In fact, the history of capitalism is replete with cartels, both national and international, coming together and falling apart.

Sometimes the conditions of the markets are such that price competition has to be resorted to. When the battle has reached exhausting limits, non-price competition, i.e. selling agencies and advertising take its place. But the antagonism between rival producers is as fierce as ever. Price competition or non-price competition are then merely forms of social antagonism inseparable from such a society as capitalism.

For someone who cannot define capitalism it is hardly to be expected that he can define Socialism. And this turns out to be so when Mr. Strachey gravely utters the nonsense that the outstanding difference between last stage capitalism and Communist societies is political rather than economic. It is the difference between democracy and dictatorship. On such a classification, Nazi Germany, Fascist Italy, the Argentine, and even Spain, are nearer to “Socialism” than England.

One can only say in conclusion that the height of Mr. Strachey’s absurdity is equalled only by the depth of his ignorance.

Ted Wilmott

What is Capitalism? (1984)

From the September 1984 issue of the Socialist Standard

The wealth of capitalism takes the form of value. Everything has an exchange value which has nothing to do with its real utility as a means of satisfying some human want or need. The exchange value of a product depends not on its usefulness but on the amount of time taken under average conditions to produce it from start to finish; or, expressed in another way, on the amount of socially necessary labour incorporated in it. The aim of production under capitalism is to increase the amount of exchange value in existence, to accumulate capital — a sum of exchange values.

We are so used to wealth taking the form of value — to everything having an exchange value and a price — that this seems to be quite natural. It is only when you think about it a bit more deeply that you realise how strange this situation is. What human beings need to survive are specific, tangible things — food, clothing, housing and the like. This in fact is what wealth is: a product of nature or of human labour that is useful to human beings.

All societies previous to capitalism produced most wealth directly as useful things for consumption. This was so even in class-divided societies where the aim was indeed to produce more and better useful things for the ruling class than for the oppressed class, but where there was still production for use. When you think about it. producing wealth directly as useful things is the obvious, natural aim of production. But under capitalism this is not the case. Wealth now takes the form of value and the aim of production is continually to increase the amount of value in existence. It is completely mad and illogical from the point of view of satisfying human needs.

If you don't believe that the aim of production under capitalism is to increase abstract exchange value (to accumulate capital) rather than to produce concrete useful things to satisfy human needs, just turn to the business section of any newspaper and you’ll find them talking about the “Gross National Product” and saying what a tragedy it is that it has remained stagnant for a number of years now, and so on and so forth. But what precisely is the Gross National Product? How is it measured? From its name it should logically be a catalogue of all the various items of wealth produced in a particular part of the world over a given period. Since it is not possible to compare potatoes with slabs of steel, or tins of paint with wooden chairs, and so on, this would have to be a long list of items expressed in tonnes of this, yards of that, cubic metres of something else. But of course it isn't. The GNP is expressed in a single figure, as so many billions of pounds. How is this possible? How is it possible to compare potatoes, steel, paint, chairs and so on? Well, it isn't, but it is possible to compare the economic value which all these things have under capitalism and this is what the GNP is: an aggregate of the exchange values — prices — of all the items of wealth produced in a country in a year.

Wealth under capitalism is produced as value, in more or less autonomous economic units — enterprises — which employ wage-labour. For, under capitalism, labour power — the human ability to work, a person’s mental and physical energies — is also a commodity, an object of commerce, having an exchange value and a price, more commonly called a wage or a salary.

Basically, an enterprise is an economic institution controlling a sum of capital which, as we saw, is a sum of exchange values expressed as a sum of money. Its economic aim is to end up, after producing and selling its commodities, with a greater sum of exchange value (money) than it started with. Of course as exchange value is an abstraction it must be embodied in real concrete things and, since the things necessary to production are raw materials, machines and labour power, it is in these that exchange value (money) is embodied or invested.

The source of the increase in exchange value which enterprises seek and, generally, obtain is the unpaid labour of those who work in the enterprise. For labour power has the peculiar property of being able to create new value. This is a consequence in capitalism of the unvarying fact that wealth, as something useful to human life and survival, is produced by human labour applied to nature-given materials. But labour power produces not only new value but an amount over and above its own value which it is paid as wages. This extra value, or surplus value as Marx called it, belongs not to the workers but to the enterprise. At first it is embodied in concrete things, in the particular product that the enterprise produces, but when these have been sold it has been converted into money and becomes the monetary profit which is the practical aim of production under capitalism.

But enterprises are not free to do what they like with these profits. They are compelled by the economic forces which come into operation precisely when production is carried on for profit by more or less autonomous enterprises, to re-invest the greater part of it in expanding production. Thus capitalism is essentially an economic mechanism, that of the accumulation of capital out of the surplus value produced by wage-labour. It is an impersonal mechanism in the sense that it operates independently of human will. Those in charge of enterprises and those in charge of governments have to implement it: they are cogs in the mechanism. Who benefits from the process of capital accumulation, and how, is also irrelevant because everywhere a part of the surplus value is in practice consumed in good living by a privileged group instead of being re-invested. A whole range of different arrangements are possible here and exist in practice.

In other words, it is not legal property forms and the internal organisation of enterprises that define capitalism. Capitalism is not a particular form of property ownership nor a particular form of industrial control, but an economic mechanism. Where this mechanism exists and operates, there capitalism exists, irrespective of who controls enterprises or enjoys a privileged consumption. This is why neither the state ownership nor the workers’ control of industry nor even the abolition of legal private property incomes amounts to the abolition of capitalism. What must be ended to abolish capitalism is the production of wealth as value: production directly and solely for use must replace production for sale on a market with a view to profit — which can only be done on the basis of the common ownership and democratic control of the means of production.

Adam Buick

The Accumulation of Capital (1948)

From the November 1948 issue of the Socialist Standard

Capitalism is a system of production in which commodities are produced. Commodities are articles that are produced for the purpose of being sold at a profit – in other words goods that are sold on the market. When goods are sold they have realised their values represented by certain quantities of money.

All productive concerns commence with the investment of money in certain ways. The conversion of a sum of money into means of production and labour power is the first step taken by the quantity of value that is going to act as capital. This conversion takes place on the market, within the sphere of the circulation of commodities, that is within the sphere of buying and selling. The second step, the process of production, is complete when means of production have been converted into commodities whose value exceeds the value of all items used up in the productive process, and thus contains the original value (or capital) advanced plus a surplus value. This whole process is constantly repeated and forms what is called the circulation of capital. Money into commodity into money, the latter being greater in quantity than what was originally invested.

Capital invested in production takes two forms – Constant capital and Variable capital. Constant capital comprises all those things whose value reappears without change in the new article; such as raw material, machinery, buildings, etc. Variable capital consists solely of the physical and mental energies of the labourers; it is labour power whose value plus a surplus appears in the new article-because the consumption of labour power, the activity of the labourer, adds more value than is incorporated in its cost of production. Means of production can never add more value to a product than they originally possessed. Further, means of production only become capital under certain conditions. A machine is not capital because it is a machine. It only becomes capital when it is used to extract surplus value, unpaid labour, from the workers.

The rate of profit given in the returns of commercial companies does not by any means give the real picture of the amount of unpaid labour wrung from the workers employed by those companies; the rate of exploitation is far higher. The rate of profit is the relation between the surplus value and the total capital, but the rate of exploitation is the relation of the surplus value to the amount of capital invested in labour-power, wages and salaries, because it is solely the labourers’ work that has produced the surplus value. Let us suppose that capital to the amount of £1,000 has been invested and that this investment has taken the form of £500 for machinery, etc., and £500 for wages and salaries. Let us further suppose that this investment has resulted in the production of goods to the value of £1,100. The rate of profit is the relation of the extra £100 to the £1,000 capital invested, that is 10 per cent.; but the rate of exploitation is the relation of the £100 to the £500 invested in wages and salaries, that is 20 per cent. Thus the rate of profit conceals a much higher rate of exploitation.

The capitalist concern engaged in the production of surplus value shares this surplus value with landowners, moneylenders, and others; for the purpose of this article, however, we assume that the original capitalist owns the entire surplus value. The way surplus value is split up into rent, interest, profit, etc., has no bearing on the particular matter we are discussing.

If the surplus value produced serves only as a fund to provide for the capitalists’ personal consumption then it is only simple reproduction, there is no industrial expansion. It would be just as if a farmer only sowed enough seeds each year to provide for the needs of himself and his family. This of course is not the way capitalist production works or the gigantic trusts of today would not have come into existence. It is the constant reconversion of surplus value into capital that is the basis of capitalist expansion. Accumulation of capital resolves itself into the reproduction of capital on a progressively increasing scale. Accumulation of capital is really accumulation of surplus value—unpaid labour.

In the productive process the worker is not paid until after he has produced; he produces his wages at the same time as he produces surplus value. Thus it is the labourer’s own labour, realised in a product, that is advanced to him by the capitalist in the form of a wages fund. Under Feudalism the peasant worked, say, three days on his own land and three days on his lord’s land. The first three days kept him and the second three days kept his lord. When the lord took away the peasant’s land, cattle, etc., the latter had to work as a wage labourer, but still three days covered his own keep and three days his lord’s. From the moment when forced, or customary, labour was changed into wage labour the labour fund took the form of capital advanced as wages by the employer.

The amount of capital originally invested by the capitalist disappears after a time and his declared capital only represents surplus value, accumulated unpaid labour. The surplus value has been capitalised and served to buy means of production and labour power to produce further commodities and at the same time surplus value. Thus the ownership of past unpaid labour has become the sole condition for the appropriation of living unpaid labour on a constantly increasing scale. The more unpaid labour the capitalist has accumulated the more he is able to accumulate. This entirely disposes of the claims made by capitalists that their wealth is the result of their own efforts.

One of the conditions of commodity production was the exchange of equivalents but it has become the very opposite because there was only an apparent exchange of equivalents. In appropriating the surplus value the capitalist is taking without equivalent a portion of the labour of the workers. The laws of property that are based on commodity production work out as the right, on the part of the capitalist, to appropriate the unpaid labour of the workers and make it impossible for the latter to own their own products; these laws have converted the workers into a propertyless class.

Accumulation of capital is obtained by increasing the mass of surplus value produced by the worker and therefore that portion of it that is capitalised. To attain this end wages are forced down as much as possible; piece work is introduced with a progressive lowering of the price paid for work done; hours of factory operation are increased by shift work which lessens the proportion of constant capital needed to provide a given amount of surplus value; new machinery and methods are introduced which results in more production at the same cost. The greater productivity obtained means, however, a greater quantity of raw material worked up in the same time and hence more machinery, larger factories, improved means of transport, and so forth. This in turn means that a smaller quantity of labour is required in proportion to the means of production. As the capitalist is not concerned with the production of useful articles but only with the accumulation of surplus value he forces the productive powers to the limit and also builds up ever greater masses of constant capital to offset the shrinking number of labourers required to produce a given quantity of products.

The accumulation of capital, with the introduction of improved machinery and methods, involves the periodical growth of the unemployed army, at the same time this unemployed army is a necessity. In order to meet the needs of accumulation the capitalists must have at hand a reservoir of labour upon which they can call at any moment for the purposes of expansion and can discard when no longer required.

Accumulation of capital means growth in the wealth and comfort of the capitalists and growth in the misery and degradation of the workers. In the course of history it has developed the means of production to a point where the needs of all can be met without involving unhappy toil, insecurity, degradation and misery for the worker. It only remains for the workers to take possession of the means of production and use them to provide comfort for all instead of surplus value for an idle and useless class.

Gilmac

Capitalism's crisis cycle (1982)

Cartoon by George Meddemmen.

From the October 1982 issue of the Socialist Standard

Capitalism is a system of society in which the means of production take the form of “capital” or wealth used to produce other wealth with a view to profit. It is a system where wealth is produced to be sold profitably on a market. For capitalism to have come into existence (and to continue to exist) certain conditions have to be met, in particular the separation of the producers from the means of production. The producers must have been reduced to the status of a propertyless proletariat compelled to sell their mental and physical energies for a wage or salary to the minority who monopolise (own and control) the means of production. The essential features of capitalism are then: production for profit, buying and selling, wage labour, class monopoly of the means of production and distribution.

Capitalism differs from other systems of society by the fact that under it production is not carried on for use. Even under another class system like feudalism most production was for use; the peasants produced their own subsistence needs, the rest going in kind to maintain the barons, the church and other exploiters. It was the same in ancient slave society. Capitalism is different in that goods are no longer produced to be directly used but to be sold on a market with a view to profit.

Decisions about production — what to produce, how it is produced, where it is produced, and soon — are no longer simple decisions to produce what is needed, either by the producers or by their exploiters. Decisions about production become decisions to produce those goods which, at any moment, appear most likely to procure a profit when they are sold. In other words, production is governed by the search for profits, by the impersonal forces of the market which express themselves in the minds of the individual capitalists (or of their hired managers) as the "profit motive”.

As a matter of fact the situation is even more impersonal than this simplified description might suggest. For the individual capitalist does not seek profits just to satisfy their own personal needs. To stay a capitalist they are obliged to reinvest. rather than consume in riotous living, the greater part of the profits they make — in other words, to accumulate capital. It is this in fact — the accumulation of capital — rather than simply making profits that is the object of production under capitalism. The individual capitalist, just as much as the wage and salary earner, is a mere cog in this economic mechanism which is beyond human control and which operates independently of human will.

The accumulation of capital is not the mere amassing of greater and greater sums of money; it reflects itself as the expansion of the means of production, the growth of the stock of machines, factories, means of transport and communication and other means for producing wealth.

This growth, however, does not proceed smoothly and in a straight upward line. The general trend is upward — capitalism has immensely increased the stock of means of production since it made its historical debut in the 16th century and particularly since it entered its industrial phase in the 18th century — but this growth is in fits and starts. Illustrated graphically capitalism’s growth pattern would be an alternating series of peaks and troughs, with each peak normally being higher than the previous one. Or, more accurately, as a series of upward moving waves. Traditionally of course the metaphor that has been used is of a cyclical movement, the ups and downs of growth under capitalism being described as "the business cycle”, the "trade cycle” or the “economic cycle”.

Marx’s explanation, in a nutshell, is that growth under capitalism is cyclical due to the unplanned nature of production — what he calls the “anarchy of production” or the fact that production decisions are taken by a host of independent, profit-seeking, competing firms. This anarchy of production coupled to the search for profits, said Marx, leads to one sector of the economy over-expanding in relation to the others, so provoking by a chain reaction a more general slow-down or halt to growth.

Marx, towards the end of Volume II of Capital (published after his death by Engels from his notes and thus not a form Marx would necessarily have regarded as ready for publication) divides production into two main sectors, or departments:

Dept I: producing means of production or what academic economists today would call "producer goods" or "capital goods”.
Dept II: producing means of consumption or "consumer goods”.

If there is to be steady growth then these two sectors must grow in proportion. The necessary proportion is quite easy to work out. Thus Ernest Mandel in his Introduction (not at all bad apart from the occasional nonsense about Russia being "non-capitalist" or "post-capitalist") to the new Penguin translation of Volume II:

. . . the equilibrium formula of expanded reproduction . . . implies an identity of the rate of growth of demand for consumer goods generated by department I. and a rate of growth of constant capital in department II (p.67).

In a sense this division of production into only two sectors is a gross simplification but its logic lies in the fact that it brings out that capitalism is not a system of production for use and that the output of Department II is restricted in the end by the need to limit the consumption of the producers at the expense of profits and capital accumulation. All the same, there are in fact as many sectors as there are industries and, if growth is to be smooth, all these sectors, or sub-sectors, must expand proportionately. It is thus easy to see how, given the anarchy of production, crises are possible, in fact inevitable, under capitalism. As Mandel puts it:

the very structure of the capitalist mode of production, as well as its laws of motion, imply that the "conditions of equilibrium" are inevitably destroyed; that “equilibrium" and "harmonious growth" are marginal exceptions to (or long-term averages of) normal conditions of disequilibrium (“overshooting” between the two departments) and uneven growth, (p.31)

Crises are due not to simple disproportionality but come about because this happens in the context of a society where production is for profit and where consumption is restricted by the majority being exploited by a minority class. A crisis, as a more or less sudden stop to growth, is in fact only one phase of the capitalist economic cycle. In Volume I of Capital (which he did himself see to the press) Marx speaks of the “life of industry" being a "series of periods of moderate activity, prosperity, overproduction, crisis and stagnation" which are “recurring cycles whose successive phases cover a number of years and which always end in a general crisis, which is the end of one cycle and starting point of another".

The key factor governing the move from one of these phases to the next — from moderate activity to prosperity to overproduction and crisis to stagnation — is profits, short and medium term variations in the rate of profit.

In the period of moderate activity, which is the period of recovery just after the stagnation (the period Tory ministers have been saying for the past year or so is just round the corner!), industrial activity is beginning to pick up. This means that more workers are in employment and have more money to spend. More money to spend means a larger market for consumer goods, which means that capitalist firms in this sector will expand production ordering new factories, machines and raw materials from the producer goods sector. This interaction between the two sectors eventually leads to the period of prosperity and boom, with relatively full employment, rising wages, full order books. So it is the confirmation of the confidence that capitalist firms had in being able to sell profitably what they produced that leads from the period of "moderate activity" to that of "prosperity”.

But this period of prosperity does not last for ever. It inevitably ends in "overproduction", as capitalist firms become over-confident. This is because the competing firms in an industry all assume that they will sell their goods profitably on the expanding market. As a result the total amount produced comes to be more than enough to satisfy the market. In this sense, there is “overproduction” in one industry. This leads to lay-offs and cutbacks of production which affect other industries, and so to a generalised "overproduction” and an end to the boom.

In Marx's day, when most industry and trade was financed by trade bills, this led to a loss of confidence in credit and to a financial crash — or crisis in the sense Marx used it in this context. Then followed the period of stagnation: a fall in industrial output, mass unemployment — which is what we today more usually mean by crisis.

The evolution from "stagnation” to "moderate activity" is once again governed by a change in the rate of profit. As a slump continues the conditions are eventually created for a restoration of profit levels and a gradual recovery of economic activity. Profit levels are restored by a number of factors: (1) depreciation of capital, through bankruptcies, write-offs, takeovers, fall in the value of stocks and so on: (2) a fall in real wages; (3) a fall in real interest rates as the supply of capital for lending comes to exceed the demand. These three factors all work to increase the rate of industrial profit and eventually bring about a recovery, and so the cycle recommences.

This is our analysis of the current slump. It is one phase of the economic cycle which is repeated under capitalism and will in time give way to the next phases: moderate activity, prosperity and then another crisis and stagnation. In other words, capitalism will eventually recover from the present crisis.

So, to sum up, growth under capitalism is not smooth and steady but cyclical. Crises occur because of the uneven development of the various sectors of the economy which is inevitable given the anarchy of production which reigns under capitalism. The present slump is not the final crisis of capitalism, nor the beginning of a permanent depression, but simply one phase of the economic cycle which will sooner or later come to an end — even if this turns out to be later (say, the 1990s) rather than sooner.

Adam Buick

Cooking the Books: No Profits, No Growth (2013)

The Cooking the Books Column from the January 2013 issue of the Socialist Standard

Growth –the accumulation of capital –is what capitalism is all about. There can be a debate about whether this growth is a good (increasing society’s ability to produce and so, in theory, to eliminate poverty and deprivation) or a bad thing (damaging the environment and depleting resources because of the unplanned way it happens), but this is rather academic as it’s going to happen anyway. Or not. Growth under capitalism is not a straight line but more like the blade of a saw with peaks and troughs. At the moment the economy is in a trough, with production 4 percent below the last peak in 2008.

Governments know enough about capitalism to realise that the way-out of the current situation for them is ‘growth’. This would lead not only to increased consumption and a fall in unemployment but also to a rise in government revenue from taxation and so ease its debt problem. Which is why the Coalition has adopted a ‘growth strategy’. But growth is not something governments can control.

Growth comes about by profits being re-invested in expanding production and productive capacity, and so depends on profits being made. The flip side is that if profits are not being made there can be no growth. In fact, growth stops precisely because it has become unprofitable to produce at the same level as previously. Which is what happened in 2008.

Growth won’t resume until it again becomes profitable, as the government has found out by the failure of one of its policies – encouraging private investment in infrastructure projects. Philip Lachowycz, of Fathom Consulting, noted in the Times (26 November):

‘The main plan has been to kick start investment for around 500 proposed infrastructure projects with pension fund capital worth £20bn. So far the proposals have completely failed to take-off. The government has been unable to encourage the private sector to invest in new roads, housing or anything else for that matter. Official data show that infrastructure spending is down 11 percent from a year ago and the government has raised less than £1bn.’

The CBI demanded that the government insure capitalist firms against any losses from this but the government has refused so the private investment has not materialised (so much for the much-vaunted ‘risk-taking’ that capitalist apologists trot out to justify profits). But, says Lachowycz,:

‘There is a simpler explanation –the chronically low rate of return. At Fathom Consulting we calculate that the real rate of return on all fixed capital expenditure has collapsed in recent years and stands at only 0.5 per cent. For infrastructure specifically, it is lower still, and may even be negative.’

On their website accompanying the article is a graph of the ‘real rate of return on fixed capital investment’ from 1988 to 2012, showing a fall from 4 percent in 2007 to 0.5 percent today. But it is not only the return on investment in fixed capital that is too low:

‘OK, but surely everybody agrees that the UK has a severe shortage of housing and should now embark on a major house building programme? Not us. For housing specifically, we find that the rate of return is deeply negative, as house prices remain significantly overvalued relative to income.’

What a condemnation of capitalism this rather cynical but eminently realistic comment represents! People need houses, hospitals, schools and other amenities but they are not going to get them because the ‘rate of return’ is too low or negative. Time to get rid of the profit system.

Cooking the Books: The problem with capitalism (2010)

The Cooking the Books column from the August 2010 issue of the Socialist Standard

“The problem with capitalism”, former Canadian Prime Minister (1993-2003) Jean Chrétien told the London Times (29 June), “is the capitalists. They don’t know when to stop. They want more and more.”

This is an astute observation from someone with considerable experience in running the political affairs of capitalism. Capitalists do behave in this way. They are always aiming to make as much money as they can for their business, and when they’re on a profit-making spree they don’t know when to stop. Which causes problems from time to time, notably crises of overproduction or overspeculation.

But why is this? Is it because capitalists are just greedy people? Marx offered an alternative explanation: that capitalists are “personifications of capital” and that, as units of capital are driven to expand, this is reflected in their behaviour:

“The simple circulation of commodities – selling in order to buy – is a means of carrying out a purpose unconnected with circulation, namely, the appropriation of use-values, the satisfaction of wants. The circulation of money as capital is, on the contrary, an end in itself, for the expansion of value takes place only within this constantly renewed movement. The circulation of capital has therefore no limits. As the conscious representative of this movement, the possessor of money becomes a capitalist. His person, or rather his pocket, is the point from which the money starts and to which it returns. The expansion of value, which is the objective basis or mainpring of the circulation M-C-M, becomes his subjective aim, and it is only in so far as the appropriation of ever more and more wealth in the abstract becomes the sole motive of his operations, that he functions as a capitalist, that is, as capital personified and endowed with consciousness and a will. Use-values must therefore never be looked upon as the real aim of the capitalist; neither must the profit on any single transaction. The restless never-ending process of profit-making alone is what he aims at.” (Capital, Vol 1, ch 4).

In other words, capitalists are greedy because they are in charge of units of capital. They can’t help it as capital accumulation is what capitalism is all about. Some internalise this and will be nasty people, especially the “self-made man” variety. But others behave like this only when running their business and outside this are alright.

Chrétien sees one of the roles of governments as to restrain capitalists from time to time in the best interest of all of them. As he put it, “You live with it, and you regulate them” (extended interview, London Times, 1 July).

Capitalists and capitalist firms don’t like being regulated and spend huge sums of money lobbying to prevent this. They want a free hand to make profits in any way they can, without restrictions, or “red tape” as they call it. In the 19th century, as Marx pointed out in Capital, they so ruthlessly exploited the workforce by imposing long hours of work, that they risked the reproduction of future workers to make profits for them. The state had to intervene in the general capitalist interest and bring in the Factory Acts to restrain them.

What sort of society is it where those in charge of production are driven to be greedy and need restraining to stop them causing too much damage to their workers and to the environment?