SPGB Meetings (2009)

Party News from the September 2009 issue of the Socialist Standard

Sting in the Tail: The Ancient Bill (1989)

The Sting in the Tail column from the September 1989 issue of the Socialist Standard

The Ancient Bill

In a recent Parliamentary debate Douglas Hurd, the Home Secretary, revealed that only three out of ten crimes reported in London are likely to be followed up by the police.

This gave Roy Hattersley, Labour's home affairs spokesman an opportunity to berate the present "crime screening" system, whereby priority is given to those crimes most likely to be solved.

Nothing special about this you may think, It is the old parliamentary game of the opposition criticising the government and pretending they could do a better job. But Hattersley went further than this. He was concerned that this would lead to "a decline in trust between public and police."

This view is based on the fallacy that in the past the public had trust in the police. Those workers who took part In the miners' strike would doubtless have something to say to Mr. Hattersley about that!

But distrust in the police force is no modern phenomenon. The first police force in Ancient Athens had to deal with the same problem:

But this gendarmie consisted of SLAVES. The free Athenian considered police duty so degrading that he would rather be arrested by an armed slave than himself have any hand in such despicable work.

Origin of the Family, Private Property and the State by Frederick Engels.

Left-Right Farce

Are you easily confused ? Do you find politics a bit of a mystery ?

If so then don't worry because you're not alone. Jacques Delors, President of the European Commission and obviously a mighty thinker, doesn't know if he is "on the extreme right of the Left or the extreme left of the Right" (The Guardian 16 June).

And according to the media the left wing Labour Party has a right wing (Hattersley, Gould, etc.) while the right wing Tories have a left wing (Heath, Gllmour, etc.).

What all this shows is that different labels cannot hide the basic sameness of outlook of both the "Left" and the "Right".

Source of Value

The price of gold In 1980 reached 850 dollars an ounce but is now around 370 dollars.

Reasons for this collapse include investors' money being lured away from gold by the strong dollar, high interest rates and the recovery of stock markets.

Of course these factors could change tomorrow and gold's price would rise again but there are more fundamental reasons for its decline.

One is the worldwide discovery of new goldfields which have sharply increased its supply. Another is that gold is simply not so valuable nowadays because the amount of labour necessary to produce it has been cut by more efficient mining methods, and labour is what gives every commodity, including gold, its value.

Inflation and Enoch Powell

The government spokesmen are at It again. They are running around the country talking about "inflationary wage demands". The recent increase of 8.8 per cent awarded to rail workers has been greeted with cries of "inflationary wages".

This is of course nonsense. It is not trade union action that causes inflation of the currency. It is governments that cause inflation.

One of the few politicians who recognise this and is not afraid to state it is, surprisingly, Enoch Powell. In the magazine Intercity of July/August he puts the position clearly:

The guilt is not with the public who persist In spending a depreciating currency. The guilt is not — even the suggestion has an old-fashioned sound nowadays — with the trade unions and the workers who obtain "inflationary'’ wage rises or with the employers who pay them.

Guilt there has to be, however, as guilt there will always be when money Is debauched: and the guilt, as usual, Is political, the guilt of politicians who use the power to manipulate the money in pursuit of objectives which, if they were candidly avowed and debated, would be publicly rejected.

Short Memories

Some people have short memories. During a debate in Parliament on the NUR's industrial action, Norman Fowler, the Employment Secretary, told Labour MPs:

The fact is that, however damaging or irresponsible any Industrial action is, you will always support it.

The Guardian 19 July

If Fowler had been dealing with Labour's attitude to strikes when in opposition then his outburst could be excused, but he must know Labour's record when in government.

For example, did Labour governments support strikes by the Dockers in 1949 and 1950, the Seamen in 1966, the Firemen in 1977 or public service employees during the Winter of Discontent ?

These and many other strikes were condemned and the strikers vilified, and this probably explains why no Labour MP told pipsqueak Fowler that no matter the issues in any strike, his party will always support the employers.

In view of these anti-trade union actions by both Labour and the Tories isn't it crazy that the vast majority of trade unionists will vote for them at the next election ? Some people certainly have short memories.

Money Makers

Victor Keegan usually writes clearly about economics in The Guardian so it was disappointing to read his piece of 17 July on the attempted takeover of BAT Industries by James Goldsmith and his cronies.

Keegan writes that the £3.7 billion which the bid added to BAT shares in just three hours ". . . must surely be the fastest bit of wealth creation ever recorded".

A slip of the pen? Not a bit of it, because he goes on - "The Increase in wealth is real in that if the bid succeeds then the shareholders in BAT will be that much richer . . .".

So they will, but the buyers of the shares will be that much poorer so what has that to do with wealth creation?

For Victor Keegan's information, the financial activities of Goldsmith and his ilk merely MAKE MONEY and they are perfectly happy to leave wealth creation - the production of the goods and services society needs - to the useful majority.

A Brave New World

All of us from time to time have tried to envisage what the future will be like.

However it is doubtful if in our worst nightmares we could have envisaged a future such as planned by the Adam Smith Institute. This bunch of hard right Tory headbangers have been turning their collective genius to the problems of crime.

In a report in The Independent dealing with a book "Streets Ahead” published by the Adam Smith Institute we learn:

The quality of city life would be improved by residents "privatising" their streets, mounting security patrols and putting gates at the end of the roads to keep out traffic, according to the Adam Smith Institute.

The only advantage that we can see in the scheme is that we would be able to repel, at our own privatised Checkpoint Charlie, such socially undesirable types as rent collectors, bailiffs and Tory Party canvassers!

Adam Smith versus the Adam Smith Institute (2023)

From the June 2023 issue of the Socialist Standard

If Adam Smith has a bad reputation amongst socialists it is not his fault. Marx himself had a high regard for Smith and discussed his views in great detail. It’s the fault of people like those who set up the Adam Smith Institute in 1977 to campaign for governments to give capitalist corporations a free hand to pursue profits as they think fit.

Writing in the middle of the 18th century — he was born in 300 years ago in 1723, published The Wealth of Nations in 1776, and died in 1790 — Smith was a witness to the beginnings of industrial capitalism in Britain. His book was written as a criticism of the policy (known as ‘mercantilism’), pursued by governments in his day, of trying to encourage exports by subsidies and restrict imports by tariffs with a view to building up the amount of gold in the home country. He wanted such government intervention to be ended and advocated instead laissez-faire, with governments letting the market function freely, as the best way to increase a country’s wealth.

Smith believed that he was discovering the natural laws of ‘political economy’ and adopted an objective, scientific approach to the subject. This was what Marx admired in him. He realised that Smith was genuinely trying to understand how capitalism worked, unlike the ‘vulgar economists’ of his own day who were merely ideological apologists for capitalism. His criticism was that Smith thought he was discovering natural laws whereas he was studying those only of one particular, transitory economic system. This was in fact Marx ‘s criticism of the whole school of economic thought that Smith’s book gave rise to, his ‘critique of political economy’ (the sub-title of Capital).

The Wealth of Nations famously begins with Smith’s analysis of the division of labour and how this allows more wealth to be produced, using a pin-making factory as an example (incidentally, a sign of the low level of industrial development in his day). He goes on to examine the concept of ‘value’, distinguishing between ‘value-in-use’ and ‘value-in-exchange’. It is the latter that interests him as a student of economic phenomena. His conclusion as to what measures the exchange-value, or price, of a commodity will come as a shock to some of his modern-day admirers:

‘The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities’ (Book I, chapter V).

This was too much for the Adam Smith Institute and has led Eamonn Butler, the Institute’s Director, in his The Condensed Wealth of Nations on their website, to virtually repudiate it:

‘For many commentators, this looks uncomfortably like a crude labour theory of value, which focuses on production costs and overlooks demand. Some argue that it led Karl Marx into his appalling errors about labour. One could defend Smith as just trying to simplify things by talking about an age before land or capital ownership, where labour was the sole production cost, and temporarily ignoring other factors such as land and capital, and also ignoring demand, all of which he goes into later. At best his words are misleading, at worst they are mistaken: but then he was breaking new ground’ (www.adamsmith.org/the-wealth-of-nations).

The ‘defence’ that Smith was writing of a time before there was ‘land and capital ownership’ does not stand up, as Smith explicitly stated that he was writing of a situation when ‘stock has accumulated in the hands of particular persons’. That the Adam Smith Institute should find Smith’s ideas here ‘uncomfortable’ is easy to understand.

Smith can certainly be called an advocate of capitalism, though not of the corporate capitalism we know today and for which the Adam Smith Institute stands. In Smith’s day, if you were a capitalist employer you risked everything should your business fail, as today’s generalised limited liability did not exist. You were personally responsible for all your business debts, so that if your business failed disastrously you could end up in a debtor’s prison. Capitalists take no such risk today; with limited liability, they are only liable for the amount they have invested.

Such companies did exist in Smith’s day but they had to be set up by Royal Charter or Act of Parliament, such as the East India Company. The irony is — at least for those who try to project Smith as a defender of capitalist corporations — that he didn’t like these, for the same reason that the Adam Smith Institute and other free-marketeers don’t like government-run industries: that the people in charge were managing other people’s money and not their own and so wouldn’t be so concerned about avoiding waste and inefficiency; the famous invisible hand would not necessarily move them to act in the general interest.

The only activities in which Smith accepted that ‘a joint stock company’ was justified were banking, insurance, canals and water supply. This is another sign of how undeveloped capitalism was in his day, as the limited liability company is now the predominant form of business enterprise and essential to modern capitalism. The amount of capital required to run a capitalist enterprise is now too large to be raised by a single person (just as canals were in Smith’s day). Which shows that the era of individual capitalist ownership (where most ideological defenders of capitalism seem to be stuck) is a thing of the past, making the individual capitalist owner economically and socially redundant.

It shows that while in Smith’s day individual, private enterprise was viable this has long since ceased to be the case. Today production is too big for that; it is already socialised from a technological point of view in the sense of involving a vast network of producers to produce something. The problem is that control of production is not. This contradiction between socialised production and non-social ownership and control is the cause of today’s economic and social problems. The corporate ownership that has evolved to replace individual ownership is not the answer; in many ways it makes things worse. Nor is state ownership the answer. Both are still forms of sectional ownership. The contradiction can only be resolved by socialism where the means for producing wealth becomes the common property of society as a whole, under democratic control.

Adam Buick

Sting in the Tail: Institute of Dementia (1994)

The Sting in the Tail column from the May 1994 issue of the Socialist Standard

Institute of dementia

One of the influences on the thinking of Downing Street is the Adam Smith Institute. This organization is the so-called “think-tank" of the Tory Party. Their latest foray into the brave new world we can all expect under a Tory government is typical of the Tory Utopia they have in mind for all of us.

Britain, which at present is covered by five percent of forest, will have a forest covering 65 percent of the total land mass. Mines, factories and farmland will be given over to forests with wolves and bears.

Presumably these creatures will be shot, trapped and maimed by champagne-swilling landlords assisted by forelock-tugging peasantry.

"Private security firms will patrol villages and housing estates and surveillance cameras will cover the bulk of Britain. " (Guardian, 5 April)

In the Tory Utopia there will be major breakthroughs, in a privately-run Health Maintenance Organization, in dealing with dementia, cancer and AIDS.

We can only hope that scientists, seeking a cure for dementia, start their research in that dementia-ridden pocket of human stupidity called the Adam Smith Institute.

Land of hope and tory

A Tory Party Conference is a festival of unreality. The stirring chords of Land of Hope and Glory are struck as the leader emerges to thunderous applause.

The themes are loyalty, nationalism, toughness and realism . . . but most of all loyalty. The leader is everything. Mindless devotion . . . and loyalty are pledged. In reality it is all an empty sham. John Major is now finding out just how empty.

Take the case of Sir Nicholas Fairbairn, the former Solicitor General for Scotland, bon viveur and wearer of tartan trews, tartan waistcoats and for all we know tartan boxer shorts.

Speaking on BBC Scotland (4 April) he called his leader a "ventriloquist’s dummy" and a "softie".

Not that Major’s rivals fared much better. "I don’t like Clarke and I don’t trust Heseltine — I   think he’s a spiv and Clarke’s a bounder."

In the nasty world of capitalist politics, loyalty is a conference illusion. These horrible job-hunters are all falling out as they try to get their snouts deeper into the Westminster trough of power and wealth.

Another ego trip

The Detroit summit involving the seven leading industrial nations (G7) set about the impossible task of solving capitalism’s unemployment problem.

Needless to say, the attending finance ministers were less than unanimous about what should be done. America wanted Germany to relax its monetary policy in the hope that this would get economic growth moving again, but this was angrily rejected: Britain was all for a free-market approach but Japan warned of the social consequences of this, and so on.

However, numerous "Think-tanks" were not slow to offer their solution. These included the inevitable work-sharing, the spread of "wise taxes" and one which really boiled down to the jobless taking in one another’s washing.

But the summit did succeed in achieving its primary aim — to provide the opportunity for some political peacocks to strut their stuff on the world stage, and they enjoyed it so much that they agreed — and here they were unanimous to do it all over again in July in sunny Italee!

Go for the big one

 

"Paying For Our Crimes" was the title of an article by Joan Bakewell (Guardian, 21 March) in which she highlighted various groups throughout the world who want restitution for the wrongs they have suffered.

There are those British prisoners of the Japanese during World War Two who want compensation for their ordeal; American indians and Australian aborigines who demand the return of lands stolen by white settlers, and an African organization which wants an apology for slavery along with the cancellation of all Third World debt on the grounds that "We don’t owe them anything. They owe us"!

All of these claimants, or at least their ancestors, have been treated abominably, but so has the world’s working class. They have been robbed, murdered and degraded by capitalism for two hundred years but socialists do not encourage them to ask for compensation. Instead, we urge them to forget about crumbs from the table of their masters’ banquets and to take the whole feast for themselves.

Benn’s glad tidings

That big lead over the Tories in the opinion polls may seem to point to a rosy future for the Labour Party, but an article by Tony Benn in Tribune (8 April) paints a different picture.He says that the party is in an alarming" position in the constituencies:

"Party membership is down . . . young people seem uninterested in joining . . . and our historic link with the unions has been weakened. "

If this last bit means that trade unions are at last putting the interests of their members before those of Labour politicians then it is good news. Even better is that any youngsters who dislike capitalism are less likely to have an entanglement with Labour standing between them and a consideration of the case for socialism.

Levelling-up

"Socialists believe in levelling down while Conservatives believe in levelling-up" has been the oft-repeated claim of trie Tories down the years.

Of course, by "socialists" they mean the Labour Party, but how valid is that claim? One feature of the past 13 years of Tory rule has been the huge pay-outs that top business people award one another. The latest example is the £1.4 million Barclay’s Bank paid to the head of its broking business while offering staff in its branches a two percent pay rise. Is this levelling-up?

Then there is the Tories’ insistence that if British capitalism is to be competitive workers here will have to accept the low level of wages and conditions prevalent in Asia and eastern Europe, and they actually boast to prospective overseas investors about how this is already happening.

If “levelling-up" means bringing the wages and conditions of workers here more into line with those of the world’s sweatshops then the Tories are living up to their claim.

An old tradition

A Glasgow Tory councillor has predicted that Tommy Sheridan, leader of the council’s Militant group will be in the House of Lords thirty years from now: 

"There was nervous laughter from the Labour benches when Councillor Young reminded them: "We've seen it all before and we will see it again". Presumably, the Militant leader would be re-absorbed into the mainstream of Labour ranks on his journey to the right. And respectability. ’ (The Glaswegian, 7 March)

Well, perhaps, but that Tory councillor does have history on his side. Bigger rebels than Sheridan, "Red Clydesiders" such as Manny Shinwell and Davie Kirkwood, ended up in ermine, so maybe some of that nervous laughter was coming from Sheridan and his Militant cohorts.

What a nerve!

Several orthodox Jews jeered the Dalai Lama during a visit to the Wailing Wall in Jerusalem yesterday, calling the Tibetan spiritual leader crazy. "You look like an intelligent man, but you're stupid, fleeing from reality," shouted one worshipper.

No, this wasn’t one of the media’s April Fool jokes because it appeared in the press ten days earlier, but shouldn’t religious people be the last ones to accuse anyone else of ‘fleeing from reality"?

Cooking the Books: Profit Freedom Day (2010)

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

“You could have to work for 134 days each year just to pay your tax bill” (their emphasis) read the headline of a full page HSBC ad in the Times (16 March).

“Income Tax, National Insurance, VAT, car tax . . . it all adds up. In fact, in 2009 the average Briton had to work 134 days before they had earned enough to pay their taxes”.

The source was given in the small print at the bottom of the page as the Mad Marketeers of the Adam Smith Institute who each year calculate a “Tax Freedom Day” as the day when people supposedly begin to keep the income they “earn” instead of it going to the taxman (adamsmith.org/tax-freedom-day). According to the small print, “This is calculated with the total tax paid each year by a taxpayer on average income, including indirect taxes, local taxes and National Insurance contributions.”

Actually it is not calculated in this way at all. What is calculated is total government tax revenue as compared to “net national income”, but instead of presenting this as a percentage – 36.7 percent – it is presented as a number of days out of a year (134/355 is the same as 36.7/100). At no point does a figure for the “average income” of the “average Briton” enter into the calculation. This is merely the tendentious and populist way of expressing the result of calculating government tax revenue to national income.

Even if we leave aside the Marxian contention that taxes on wages and salaries are passed on to employers and so ultimately fall on profits, not all taxes are paid by individuals. There are some two million capitalist firms in Britain and these pay taxes (corporation tax, business rates, etc). The Adam Smith Institute gets round this problem by saying that such taxes “ultimately are paid by the owners of each business”. This is to admit that it is not just the income from work that is involved, so that it is illegitimate to talk, as does the HSBC advertisement, of people having to “work” so many days a year to pay taxes.

The Adam Smith Institute’s expert is more cautious, claiming only that their so-called Tax Freedom Day is “the day when the average Briton earned enough to pay his annual tax bill” This is to play on the ambiguity of the word “earned” as, if challenged, they would no doubt reply that this is not just income earned from work (which is what most people including HSBC’s advertising firm would think is meant) but also income so-called “earned” from owning savings.

Adam Smith himself pointed out, in the opening sentence of The Wealth of Nations (he wasn’t as bad as the Institute that’s hi-jacked his name), that labour is the source of the whole of a country’s national income:

  “The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consist always either in the immediate produce of that labour, or in what is purchased with that produce from other nations.”

 This being so, the share of profits in national income is a product of labour, in fact of the unpaid labour of workers. In 2008 the share of profits in National Income was 24 percent (see economicsonline.co.uk/Managing_the_economy/National_income.html). This is the same as 88/365, so it could be said that the “average worker” works 88 days out of 365 to produce profits for their employer. In which case 29 March would be what might be called Profit Freedom Day. It will be much later than this, except that the concept is misleading in that, as Marx pointed out, workers produce surplus value every minute they work. So there’s no day when they’re not exploited for profit.

These Foolish Things . . . : Big Bucks (1997)

The Scavenger column from the September 1997 issue of the Socialist Standard

Big bucks

The world’s top 500 companies, it seems, employ 0.05 percent of the world’s population but control a quarter of the world’s economic output. The combined assets of the 50 biggest companies is now 60 percent of the world’s $20 trillion of productive capital. In eight sectors, including cars, aerospace, electronics, steel, armaments and media, the top five corporations now control 50 percent of the global market. Increasingly the question is: who governs them? And for whom? . . . Ten corporations now control nearly every aspect of the world’s food chain. Four control 90 percent of the world’s exports of corn, wheat, tobacco, tea, pineapple, jute and forest products. (Guardian. 20 June.)


Labour is Right

Even as they elect their new leader, the Tories are in a quandary. They are faced with a government which seems determined to outdo them in all of the things they did best. If new Labour stands for free markets, sound money, prudent finances, a tough stance on criminals, higher school standards, and unravelling the welfare mess, why should anyone need the Tories? They have the difficult task of persuading the electorate that they will do even better, and will have the competence to fulfil that promise. Politics in Britain used to be a clash of ideologies: now it has become a competition in virtue. Dr Madsen Pirie, President of Adam Smith Institute. (Scotland on Sunday, 15 June.)


In proportion

It would take one Haitian worker producing Disney dolls and clothes 166 years to earn as much as Disney President Michael Eisner makes in one day. And Eisner isn’t even one of the seven richest men in the world . . . (Independent on Sunday, 22 June.)


Work is dangerous

Statistics show the work-place is the fastest growing location for violent crime. According to the Loss Prevention Council, between 1981 and 1991 assaults at work doubled to 350,000 a year . . . according to British Retail Consortium figures, retailers reported that more than 9,000 staff were subjected to physical violence, 47,000 to threats of violence and 120,000 to verbal abuse between 1995 and 1996. (Observer, 22 June.)


Market cares

Small charities have been warned to merge or risk going under in the face of fierce competition for declining funds. The Disabilities Trust said the market place for charities was already overcrowded with 188,000 bodies chasing the same money. In a report, it claims public donations are set to fall by 13 percent by 1999, blaming the National Lottery for siphoning off funds. (Evening Mail, 18 July.)


Conspiracy theory

Jonathan Aitken’s world is truly crumbling around him. After his resignation from the Privy Council, the former Tory cabinet minister, ruined by his collapsed libel case against the Guardian, will have to cede another honour—one that his friends say he values as much as being a Right Hon or PC. For the past few years Mr Aitken has been chairman of Le Cercle, right-wing think-tank set up at the height of the Cold War for senior politicians, diplomats and intelligence agents which is one of the most influential, secretive, and, it goes without saying, exclusive political clubs in the West. Now he is about to be relieved of this role . . . [Alan Clark] describes it as “a right-wing think-tank funded by the CIA, which churns Cold War concepts around". (Independent on Sunday, 29 June.)

The Scavenger

Cooking the Books: Capitalism is working (2009)

The Cooking the Books column from the April 2009 issue of the Socialist Standard

The Times (9 March) carried an article by Eamonn Butler, the director of the Adam Smith Institute. Yes, they are still around, even if it might be thought that they would be keeping a low profile these days, given that the pursuit of profit has yet again led to overproduction and a financial and economic crisis, a really big one this time.

Butler began by quoting a speech by an American professor called Boettke at a recent gathering of Mad Marketeers in New York:

“If you bound the arms and legs of gold-medal swimmer Michael Phelps, weighed him down with chains, threw him in a pool and he sank, you wouldn't call it a ‘failure of swimming'. So, when markets have been weighted down by inept and excessive regulation, why call this a ‘failure of capitalism'?”

That depends on what you mean by capitalism. Boettke seems to mean the spontaneous operation of production for profit and the market. But that’s not really capitalism; it’s just a policy that some capitalists (and their paid and unpaid publicists) have favoured at some times.

Capitalism is a system of production for sale on a market with a view to profit. Ideologists such as Butler and Boettke are assuming that there is some irreconcilable conflict between the profit system and government intervention. But there isn’t. Capitalism has never existed without government intervention and never will. For a start, it is based on the exclusion of the majority from the ownership and control of the means of production, which are monopolised by a profit-seeking minority. A state is needed to maintain this exclusion. This has to be paid for, so taxes have to be levied. Capitalists in one country are in competition with capitalists from other countries, and governments have always intervened to help “their” capitalists with tariffs and subsidies and, if need be, by military action.

So, capitalism and the state are not incompatibles. They go together. What is true is that the consensus of capitalist opinion varies at times as to the desirable degree of government intervention. What seems to be annoying the Adam Smith Institute today is that their ideological rivals, the Keynesians, who have no qualms about government intervention in the capitalist economy, are making a come-back because of the present crisis.

“Up to now”, Butler wrote, “the Keynesians have made the running. Greed, they say, has brought down the world economy. Only massive public spending can revive it”. If by “greed” Butler means the pursuit of profits, the Keynesians are not against that, even if they certainly are in favour of trying to spend the way of the crisis. But that’s just an alternative policy for the profit system to the one favoured by the Adam Smith Institute. It’s not a negation of capitalism.

Butler proffers his own explanation for the crisis: “excessive regulation” (of course). This assumes that, without this, the crisis would not have occurred. He rather undermines this approach by concluding his article by saying that “occasional crises are the cost of the prosperity that entrepreneurial capitalism brings”.

So, crises are going to occur anyway, even in his ideal, unregulated capitalist world! And what, without excessive regulation to blame, would they be caused by if not by the pursuit of profits leading to overproduction in some sector in relation to the market, from which the only way out is a crisis to eliminate the lame ducks and the deadwood, as capitalists like to refer to their inefficient colleagues? In this sense, Boettke is right. This and other crises don’t represent the “failure of capitalism”, but capitalism working normally.

Cooking the Books: By Whose Labour Alone (2014)

The Cooking the Books Column from the September 2014 issue of the Socialist Standard

When the economic statistics for the April-June quarter were announced in August, commentators noticed an apparent anomaly. While unemployment had fallen so had wages:

‘Figures from the Office for National Statistics show that the jobless total for the last quarter have fallen by 132,000 to 2.08 million. However wage growth suffered a collapse between April and June with average weekly earnings dropping by 0.2 per cent, the first fall in five years’ (Daily Telegraph, 13 August).

Normally the fewer the number of unemployed the stronger (or, rather, the less weak) is the workers’ bargaining position over the price of the ability to work they sell to an employer for a wage or a salary. So, you wouldn’t expect wages to fall if unemployment is falling; maybe to remain stagnant but not to actually fall. Various explanations for this were put forward. Some, including the Office for National Statistics itself, said it was a one-off due to special circumstances in this particular quarter. Others offered a different explanation, as did the Independent (5 August) commenting on an earlier report by the think-tank the National Institute for Economic and Social Research:

‘NIESR also stresses that the labour productivity performance, which measures output per hour worked, has been ‘abysmal’. It does not expect Britain’s pre-crisis productivity levels to be re-attained until 2017, reinforcing fears of a lost economic decade. Productivity is even more significant than GDP per capita because without growth employers can’t increase wages.’

It is not true that ‘without growth employers can’t increase wages’. They can, but it would mean a reduction in their current level of profits, which workers can sometimes impose in specially favourable circumstances. What is true is that growth brought about by an increase in productivity means that employers can (not the same as will) increase wages without this meaning reducing their current level of profits. They may not make as much as they would without the wage increase but they will still make more than they were.

There is a revealing hidden assumption behind the argument that without growth ‘employers can’t increase wages.’  It’s that profits as well as wages come out of what workers produce. Productivity, as output (measured by the price at which it is sold) per hour of work, is a measure of how much an average worker produces in an hour.

No matter how much the economic textbooks try to get away from it, and in spite of the ridiculous claim by self-styled ‘entrepreneurs’ to be ‘wealth creators’, it remains a fact that the only way that wealth can be created is by human beings applying their mental and physical energies to materials that originally came from nature. Labour productivity determines the size of the cake that profits are going to take a share of. Which is why it is such a key economic indicator for capitalism.

Adam Smith recognised long before Marx that profits come out of what those who work produce:

‘As soon as stock has accumulated in the hands of particular persons, some of them will naturally employ it in setting to work industrious people, whom they will supply with materials and subsistence, in order to make a profit by the sale of their work, or by what their labour adds to the value of their materials’ (The Wealth of Nations, chapter VI).

Adam Smith clearly had a better understanding of how capitalism works than the so-called Adam Smith Institute.