Voice From The Back: Reformism Fails Again (2008)

The Voice From The Back Column from the April 2008 issue of the Socialist Standard 

Reformism Fails Again 

It is a basic socialist principle that no programme of reforms can solve the problems of capitalism, but here is an example where well-intentioned reformism has made the situation worse. “Hospitals were last night accused of keeping thousands of seriously ill patients in ambulance ‘holding patterns’ outside accident and emergency units to keep a government pledge that all patients are treated within four hours of admission. … An Observer investigation has also found that some wait for up to to five hours in ambulances because A & E units have refused to admit them until they can guarantee to treat them within the time limit.” (Observer, 17 February)

Capitalism And Euphemism 

Capitalism has got to have euphemisms to cover up the sordid nature of the system. Thus children maimed by napalm bombs is called “co-lateral damage” and troops blowing up their own troops is called “friendly fire”. A recent addition to this sorry catalogue is “extraordinary rendition”. “David Miliband has admitted two US ‘extraordinary rendition’ flights landed on UK territory in 2002. The foreign secretary said in both cases US planes refuelled on the UK dependent territory of Diego Garcia. He said he was ‘very sorry’ to have to say that previous denials made in ‘good faith’ were now having to be corrected. The renditions – the transport of terror suspects around the world for interrogation – only came to light after a US records search, he said.” …”Amnesty International UK director Kate Allen said extraordinary rendition was ‘a polite way of talking about kidnapping and secret detention’”. (BBC News, 21 February)

Jobs For The Boys 

When in opposition, Gordon Brown criticised the last Tory government for the “revolving door from the cabinet room to the board room”, but he has remained silent about a similar ploy by his own party members. “Twenty-eight former Labour ministers have cashed in on their connections in government and Whitehall by taking jobs in the private sector in the past two years. It represents the biggest exodus of ministers into the private sector since Labour came to power and is worth at least £10M a year in salaries and fees.” (Sunday Times, 24 February)

  

A Ray Of Hope 

Socialists are often told that socialism is impossible because human beings are innately war-like and aggressive, but this report seems to suggest otherwise. “More and more Israelis are avoiding mandatory military service— something long viewed in this country as a proud rite of passage. “In the past, it is true that not serving in the military was considered the exception,” said Dr. Rueven Gal, author of A Portrait of the Israeli Soldier and former chief psychologist for the Israeli military. “In more recent years it became more tolerable and more acceptable to people.” In 1997, according to army statistics, fewer than one in 10 Israeli men avoided their mandatory three-year military service. These days, it’s closer to three in 10. Women, too, are opting out at a faster pace: Over the last decade, the number of women avoiding military duty rose from 37 percent to 44 percent.” (Yahoo News, 2 March)

Another Ray Of Hope

The awful carnage in the hate-filled Middle East and the religious brutality there fills socialists with gloom but this report would seem to suggest that all is not lost. “After almost five years of war, many young people in Iraq, exhausted by constant firsthand exposure to the violence of religious extremism, say they have grown disillusioned with religious leaders and skeptical of the faith that they preach. In two months of interviews with 40 young people in five Iraqi cities, a pattern of disenchantment emerged, in which young Iraqis, both poor and middle class, blamed clerics for the violence and the restrictions that have narrowed their lives. “I hate Islam and all the clerics because they limit our freedom every day and their instruction became heavy over us,” said Sara, a high school student in Basra. “Most of the girls in my high school hate that Islamic people control the authority because they don’t deserve to be rulers.” Atheer, a 19-year-old from a poor, heavily Shiite neighborhood in southern Baghdad, said: “The religion men are liars. Young people don’t believe them. Guys my age are not interested in religion anymore.” (New York Times, 4 March)

Letters: CND’s weaknesses (2008)

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

CND’s weaknesses

Dear Editors,

As a former ban-the-bomber I would like to make a few points regarding CND (Socialist Standard March)

1. Its original appeal was rather insular, asking the government to set a moral example and give a lead to the rest of the non-nuclear world—“Let Britain show the way”.
2. It recognised that it would seem completely unrealistic to demand unilateral action from either of the two great nuclear powers. Much more reasonable to seek to prevent nuclear possession spreading—those who do not have them should not make them.
3. The Labour Party leader Gaitskell and others (and the media) consistently and quite knowingly mis-stated the CND policy as: “Asking ‘the West’ to disarm.” Which it never did—urging ‘multilateral’ agreement and reductions by means of various treaties.
4. CND sometimes made ludicrous claims that it influenced Test Ban agreements etc. All Test Bans or Weapons Limitation treaties were concluded when (a) Testing was no longer deemed essential or (b) when the warheads to be scrapped had been rendered out of date or no longer necessary as technology enabled the production of smaller, but more accurate and effective, weapons and delivery.
5. Significantly, CND support in the UK began to diminish when it broadened its campaign to oppose all nuclear weapons.
6. Some CND supporters supported the existence of NATO.
7. Some (Stalinists and some Trotskyists etc) members of CND did want ‘one-sided’ disarmament and were staunch supporters of the “workers’” bomb.
8. Some ‘Communists’ did have the integrity to oppose capitalist and workers’ bombs.
9. Pacifists (like myself) were a minority in the movement—most accepting that non-nuclear conventional war may sometimes be necessary.
10. “Entryists” did achieve some limited success (certainly temporarily controlling at least one Branch), but they were generally flushed out by the more genuinely radical elements among the membership.

Nevertheless, it would be churlish to ignore the remarkable contribution CND made in raising public awareness of the nuclear issue. Sometimes it is forgotten how deeply limited was the public knowledge of the kind of facts that CND routinely uncovered. Speaking personally, the kind of stuff that I have tried to articulate exposing (in the cause of socialism) the breathtaking hypocrisy of double dealing defence policies of the past and present was spawned by CND. The real disappointment is that comparatively few CND members moved beyond the optimistic (but narrow) objectives embraced by the original policies.

Obviously, the oft repeated claim that “there will not be time” for a deeper objective than nuclear disarmament (I made it myself) has, thankfully, proved to be erroneous.

Richard Headicar, 

Hethersett, Norfolk

Back to basics

Dear Editors ,

Thank you for the comments. I’ll like to respond only to what I think are the main issues raised by Adam Buick’s remarks on my book (Socialist Standard, March). This does not necessarily mean that I am in agreement with him over other things that I do not take up here.

(1) The Speenhamland system is about as similar to Basic Income (BI) as en egg is to a chestnut. We are more than two hundred years on from that agrarian economy. Moreover, Speenhamland was a conditional system and BI is, by definition, unconditional. Criticisms of a conditional system can hardly be applied to a system that is unconditional per excellence.

(2) The objection at the core of the whole article, that BI “would be a wage subsidy to employers” is rather odd. If the law prohibits employers from paying less than a Minimum Wage, as happens in many countries, the argument sinks all by itself without any extra help. Some trade unions are more than aware of this and, for example, the ESK (Basque Union Group) have been BI supporters for some time now.

(3) The author’s views that a BI would be a “wage subsidy to employers” without taking into account the economic forces of the time and without bothering to look into what effects a BI might have on the working class are not only more-than-dubiously based in historical terms but he also seems to be arguing as if the only decision-maker is the management. But aren’t management wishes conditioned in any way by resistance from the workers? According to this line of argument, one might almost deduce that the workers shouldn’t engage in too many distracting struggles to improve their conditions because the minute a bad economic situation comes along the management will take away what they’ve won previously. This is an odd way of understanding things.

(4) Have you pondered how a BI might affect the sector of the working class that is subject to the more precarious form of contract (about 40 percent of the workers in my country, Catalonia)? I’ve seen in the talks I’ve given over the years that, when the public consists in particular of very young workers, BI is understood as a measure that would help them to avoid accepting the very bad and insecure working conditions they’re obliged to accept at present. A BI would give them the chance to say “no” to job situations that they have to agree to now. Have you wondered how a BI might affect a lot of women who depend economically on their husbands? Have you really thought about the possibilities for workers’ protests that a BI could offer as a resistance fund? In general, the right immediately grasps the whole potential of BI and is therefore totally against it (as the debate in the Spanish Parliament revealed on 2 October 2007). The left, at least part of the left, has more problems in understanding of the whole potential a BI could have for a good part of the working class. It’s a shame, but that’s how things are.

Daniel Raventós (by email)

Reply:

We can’t see how, given the way that capitalism works, a state payment, whether conditional or unconditional, to all workers is not going to end up being a wage subsidy to employers. It is bound to upset the labour market by setting in motion downward pressures on wages and salaries. Of course workers, through their unions, should resist such pressures (as they always should), but the employers’ trump card is going to be “Look, your members are not going to be worse off, since their total income from us and the state is going to be more or less the same”. In other words, a Basic Income scheme would not make workers better off in terms of money income; it would just be a more or less neutral “reorganisation of poverty”. Surely you don’t think that if BI was fixed at even as low as £5000 a year workers would be better off by that amount? Or that employers could be prevented by law from taking this payment into account when fixing or negotiating the wages they pay?

Yes, we are aware of the benefits that are claimed for BI and they sound alright. But excuse us if we are rather sceptical as we’ve heard claims of this sort made for many reforms of capitalism (including for family allowances, which the advocates of BI now want to replace by their scheme). The fact is that, while workers can obtain some improvements under capitalism, capitalism itself cannot be permanently reformed so as to work in the interest of wage and salary workers. At the present time, with the fiscal crisis of the capitalist state, any reform that will cost more money is not likely to pass anyway. Much better, then, that workers should go for the bakery rather than a few more, perhaps unobtainable, crumbs – socialism rather than a reform to capitalism. 

Editors.

Police strikes

Dear Editors,

Many thanks for forwarding on the article from the Socialist Standard (January) about the last, failed, police strike. I’m sure many of the officers who heeded the old Police Union’s strike call would have agreed with the sentiment – although I’m not sure history has necessary proved it true.

One thing that the article does not reflect is the police’s reluctance, as true now as it was then, to have to resort to this final exercise of industrial action.

Communications Department, Police Federation of England and Wales

Obituary: Gladys Marie Catt (2008)

Obituary from the April 2008 issue of the Socialist Standard

Gladys Marie Catt 1918-2008

Marie joined the SPGB in the spring of 1941. The outbreak of war had profoundly disturbed her, along with her family and friends. Her two brothers and her future husband had become conscientious objectors and she became engaged in their struggles to win conscientious objector status. Marie was persuaded about the necessity of socialism partly by the Party’s stand against working-class participation in the war, but also by the forcefulness and clarity of the Party’s speakers at the outdoor meetings held at Lincoln’s Inn Fields and she joined the Palmers Green Branch where she met Sid Catt, her future husband.

In 1957, she, Sid and daughter Jean emigrated to Canada and settled in Toronto. After settling in, they became a contact and propaganda centre for the Socialist Party of Canada. They set about recruiting members, holding discussion forums in their home and speaking at Allen Gardens. By 1964 they had organized the first Party Local east of Winnipeg.

Marie continued her activities for many years. She always spoke forthrightly and passionately in favour of socialism in whatever circumstances she found herself. Her grasp of the meaning of the object and declaration of Principles was thorough. She once wrote of the significance of these Principles to members of the Party:

 “These have remained the sheet anchor for their understanding, proved the strength of their case and their integrity, making it impossible to confuse them with any reformist organization. This Object and Declaration of Principles are as valid today as they were at the time of the inception in 1904 of this unique political party.” 

B.S. (Canada)

Just in one country? (2008)

Book Review from the April 2008 issue of the Socialist Standard

2050 Vision. How can the UK play its part in avoiding dangerous climate change? By Matthew Lockwood and Jenny Bird with Raquel Alvarez. Institute for Public Policy Research. 2007. £10.95.

This 100-page study by the left-leaning IPPR argues that Britain “should be aiming to make reductions in carbon emissions of at least 80 per cent from 1990 levels by 2050, if we are to avoid a 2ºC global warming above pre-industrial levels”.

The authors show that this is technologically feasible in that wind power and carbon capture (from fossil fuels) and storage could be developed if enough resources were devoted to this. Technically feasible, no doubt, but how likely is this to happen? The authors themselves mention, though only in passing, the main flaw in their analysis: UK emissions represent only 2 percent of the global total, so even if these measures were adopted in Britain this would only have a very marginal, if any, effect on global warming. But if other countries didn’t follow this would have a disastrous effect on British capitalist industry.

The authors admit that the forecasting models they used failed to include “interactions with the wider global economy” and add limply:

  “Some of these interactions involve risks for energy-intensive, and therefore carbon-intensive, industries exposed to international competition, and these may need extra support in decarbonising if production and jobs are not to relocate.”

Well, yes, and if that happened global warming would not be affected at all. The emissions would continue but in a different part of the world. And since all industries depend to some degree on energy they would all be affected by the increased energy costs the authors proposals would involve, even if it is true that energy-intensive industries would be the worst hit.

In short, applying unilaterally what is technically feasible but more costly would undermine the competitiveness of British industry on world markets, and that no government would dare do. So, in practice, there is no chance that any British government would go it alone on this issue. But the authors still maintain the illusion that one might, by talking of Britain giving a lead which others will follow. Some of those they consulted thought this might happen. Others were more realistic:

  “Respondents from the United States were generally less convinced that leading by example would be enough to encourage movements from the US – despite the ‘special relationship’ between the US and the UK – or from other countries. Differing national circumstances were cited as one reason for this. The UK’s (and the EU’s) increasing dependence on fossil fuel imports puts them in a very different position to many of the world’s major CO2 emitters, which have access to large reserves of coal and/or other fossil fuels. It was therefore felt unreasonable to expect these countries to reduce their fossil fuel consumption just because the UK had taken a lead”.

Precisely, and that’s the whole point. The EU countries, including Britain, are prepared to reduce their reliance on having to import fossil fuels to generate energy. That makes economic sense for them. The US and China, which do have access to large internal reserves of oil and/or coal, are not so keen. And, given that under capitalism “nation shall compete with nation”, why should they be? Why would they shoot themselves in the foot by undermining their competitiveness any more than any British government is likely to by unilaterally adopting the measures proposed by the IPPR’s naïve researchers?

There is, quite simply, no solution to the problem of global warming within capitalism.

Adam Buick

Simon the Sociobiologist (2008)

From the April 2008 issue of the Socialist Standard

Cooking the Books: What’s China’s game? (2008)

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

An interesting take-over battle is now taking place in the world mining industry. Towards the end of last year, BHP Billiton, the world’s largest mining company, made a bid to take over Rio Tinto, the world’s second largest mining company. According to the Times (5 February) a BHP-Rio merger

  “would create the world’s largest iron ore, aluminium and coal supplier . . . A merged BNP-Rio would control about 36 per cent of the world’s iron ore, which is used to make steel, and consolidate 75 per cent of that market in the hands of only two companies”. (The other would be Vale, the Brazilian mining corporation).

Steel-producing countries dependent on imports of iron ore – China, the EU, Japan – are not too happy about this prospect of an “OPEC for iron ore”. But so far only China has acted. At the beginning of February Chinalco, the Chinese state-owned aluminium company, splashed out £7 billion in cash to acquire a 12 percent holding in Rio Tinto, probably to at least have a say in the disposal of Rio Tinto’s assets.

There is a theory which sees multinational corporations such as BHP and Rio Tinto as agents of the Western “imperialist” states, but here the victims will be other capitalist corporations in the developed capitalist world who are consumers of iron ore and aluminium. In any event, there can be no doubt that China’s various state-owned companies such as Chinalco, Sinochem Petroleum and China Shenua Energy are agents of the Chinese capitalist, not to say “imperialist”, state.

Capital accumulation is going on apace in China and China has a desperate need for the materials to sustain this (while it lasts):

  “China is forecast to consume more than half of all the world’s key resources within the next decade and the country is seeking to control mines and oilfields to ensure its supplies. China is already the world’s largest consumer of every big resource except oil and accounts for 47 per cent of all iron ore, 32 per cent of aluminium and 25 per cent of copper.” (Times, 5 February).

China is also the world’s leading consumer of nickel and zinc. To ensure a steady supply of all these essential materials, China has set up a whole range of state-owned capitalist corporations which operate on the stock exchanges of the world, doing deals with and acquiring shares in Western capitalist corporations.

Western financial journalists such as Patrick Hosking of the Times are intrigued as to “why is China playing the Western capitalist game” (Times, 5 February). Hosking doubts that Chinese state corporations such as Chinalco are interested in maximising profits or in maximising dividends to their single shareholder, the Chinese state, and concludes:

  “In one sense it is encouraging that Beijing is buying – literally – into joint-stock capitalism. But it would be naïve to assume its business leaders are motivated by the same forces as their Western counterparts”.

He is probably right. While non-state capitalist corporations are motivated by maximising profits and dividends to their shareholders, states can take a longer and broader view of the overall national capitalist interest. They need to take into consideration such factors as the security of supply of essential materials to industries within their borders. Many a war has been fought to achieve this. But wars are expensive and risky. Much better to try other means first, commercial as well as diplomatic.

This is what China appears to be doing via its state-owned corporations operating alongside Western corporations. At the same time China is building up its armed forces just in case this fails and other means of acquiring a secure supply of essential materials have to be employed (see for example here.).

Greasy Pole: Blair’s a Catholic – it’s official. But who cares? (2008)

The Greasy Pole Column from the April 2008 issue of the Socialist Standard 

 

If Blair had read Labour Party history, would he have been put off a political career for life?

Soon after Tony Blair’s costive farewell to Number Ten, anyone who fretted about the chances of him joining the ranks of the impoverished – which his government promised to abolish – would have been reassured by the carefully crafted plans of this reluctantly-disciplined ex-public schoolboy who grew up into the ambitiously manipulative barrister on the look-out for an easy way into Parliament. All will be well for the Blair family budget. There will be the “lecture” tours during which each speech will attract fees running into tens of thousands of pounds. A lavish advance of payment will lubricate the writing of his memoirs (we all wait with tightly bated breath to find out how much he reveals and how much hides, of what went on). With staggering, if predictable, audacity he accepted the job of a Middle East Peace Envoy charged with repairing some of the damage wreaked on that unhappy place by military decisions in which his government was heavily implicated. Any spare time will be absorbed by the “consultancy” jobs which, for a few hours a month, promise to richly reward the advice he will give to commercial and banking interests about how to inflate their profits through prudent contracts. But apart from all that – after all, a poor boy from a multi-million pound home in Connaught Square has to scrape a living somehow – there are the spiritual riches Blair expects to spume out of his formally declared conversion to the Catholic Church.

Rebuke

The announcement of Blair’s change to the Roman Catholic church was “formal” in the sense of his long-standing contact with that church while he was a practising Anglo Catholic. His biographer, Anthony Selsdon, described him as “a profoundly religious figure” and says that it was religion and not “…reading Labour Party history” which brought him into politics in the first place. (It will be a matter for Blair to discuss in the confessional whether, if he had read Labour Party history, he would have been put off a political career for life). But for some time there has been little doubt about where, in terms of his allegiance to a church, he would end up. Although an Anglo-Catholic he took communion at Westminster Cathedral which, as it is not permitted for non-Roman Catholics, brought down a stern rebuke from the late Archbishop Basil Hume. For Blair, it must have all been reminiscent of time up before the head of Fettes. That his present situation continues to be confused was quickly pointed out by Ann Widdecombe (herself a convert): “he’s gone against Church teaching on more than one occasion”. On the Michael Parkinson chat show in 2006 Blair offered a rather different version, saying that he had prayed while deciding whether to order British troops into Iraq “I think if you have faith about these things, you realise the judgement is made by other people … and if you believe in god, it’s made by god as well”. Which conveniently passed off the blame for the slaughter onto someone who, as they don’t exist, could not have a say in the matter.

Sedgefield

But Tony Blair cannot argue that his conversion was an attempt to understand, and unravel, a history of confusion about his political aims. Any reading of his rise through the Labour Party must bring a chilling sense of his single-minded ambition. His first attempt to get into Parliament was in May 1982, in Beaconsfield. A less likely opportunity for an aspiring Labour candidate would be hard to imagine, for Beaconsfield is one of the most arborescent and moneyed towns in the Chiltern Hills. Blair agreed to stand there on the advice of a more seasoned party member, on the grounds that making his mark there would help him in applying for other seats. Perhaps that, as well as the rock-solid Tory vote, gave him some scope in how he presented himself politically; he had no qualms about describing himself as “a socialist” (either without defining the word or offering a definition which was a nonsense) and to admitting to support for CND. Of course he lost his deposit, reducing the Labour vote by 10 percent in the process. But he did indeed make his mark and, buoyed up with approval from local Labour stalwarts, he moved thankfully in search of a more possible seat.

This came in 1983, in Sedgefield, where the local man Les Huckfield was expected to win the Labour nomination. Conscious that the people had their differences from the bankers and chief executives of Beaconsfield, Blair was careful that his address for the adoption meeting did not mention that he had been to public school nor that as a barrister he had represented big corporations in court. He presented a letter of support from the then Labour leader, ex-left-wing-firebrand Michael Foot and it was arranged to unsettle Huckfield by hostile questions fed to Blair’s supporters in the audience. It was all tightly organised and very effective, giving Blair the nomination in a safe Labour seat. It was also – although none of the party members there probably realised it – a foretaste of how he would behave when he got into Parliament and later into Number Ten.

Iraq

We may ask, for example, how those Sedgefield members would have voted had they heard him say, as he subsequently did: “I believe Margaret Thatcher’s emphasis on enterprise was right” or that “Britain needs more successful people who can become rich by success through the money they earn”. Would those members have sat on their hands knowing that Blair was to justify the invasion of Iraq, at the cost of tens of thousands of lives, by lies about weapons of mass destruction the existence of which, he said, was “beyond doubt” and the defiant declaration “I am absolutely convinced and confident about the case on weapons of mass destruction-critics will be eating some of their words”? And would they have approved him sucking up to the rich and powerful while 13 million – that’s one in five – of the population of the country he was supposed to be leading to the promised land of plenty and safety are officially classed as suffering poverty?

If Blair is to be a proper Catholic he will have to attend confession – get down on his knees behind the curtain in one of those small boxes in a church while some robed hypocrite who rivals him in disseminating falsehood sits on the other side of the grille trying not to yawn while listening to him unburdening his mind before telling him how he can make himself feel a bit less guilty, perhaps by reciting some meaningless incantation or other. The question is, can Blair be trusted to come clean about his sins? After all what he has to confess will be the most serious for a catholic – the mortal sins which have speckled his time in politics. This may take him some time while others – politicians, media people, bankers and the like – wait their turn. It is all a part of the great deception which keeps this unbearable society in being.

Ivan

An Apology

There was a mistake In last month’s Greasy Pole (Flint’s Hard Line). The TV programme in which Flint stood her ground against Andrew Neil was not The Politics Show (which does not exist) but The Daily Politics. For this confusion we apologise to everyone. Even, in case he reads the Socialist Standard, Neil himself.

Party News (2008)

Party News from the April 2008 issue of the Socialist Standard

The Socialist Party will be contesting one seat in the elections to the Greater London Assembly on Thursday 1 May, the same day as the election for the mayor of London. The seat is Lambeth & Southwark and our candidate will be Danny Lambert. This is the constituency in which our Head Office is situated. Members and sympathisers who wish to help distribute our election leaflets, please contact the Election Dept at 52 Clapham High St, London SW4 7UN or phone 0207 622 3811 or email spgb@worldsocialism.org

Kosovo: Open for business (2008)

From the April 2008 issue of the Socialist Standard

Kosovo became an independent state in February and was immediately recognised by the US and most European countries. We look at one of the reasons why.

Kosovo emerged as an independent State after decades of uneasy existence as part of Serbia. There was an inevitable new anthem and new flag.  But there are real political concerns best not forgotten in the ballyhoo and hopes for a brighter future. 

One man interviewed by the BBC’s Mark Mardell described how during the war he fled his village with many relatives under attack by Serbian troops. He had to leave his aunt behind and she was burnt to death. He said: “Kosovo is rich in minerals and rich in farming land, is rich in all other aspects. Here, we provided wealth for so many years for the whole of Yugoslavia, there is no reason why we cannot provide now for just Kosovo. That’s why I’m saying Kosovo has a bright future.” (Mark Mardell’s Euroblog: ‘Mining Kosovo’s Future’  29 January)

Alongside the declared humanitarian reasons for the UN intervention in the Balkans in the 1990s there were other, economic and political, considerations also in play. It is these interests that will shape future developments in the states of the former Yugoslavia and dominate the lives of workers there.

The New York Times (8 July 1999) carried an article by Chris Hedges about the Stari Trg mining complex in Trepca, Kosovo. Possibly inadvertently, it gave an insight into some of the  considerations that surrounded the decision to intervene. According to Hedges, “The sprawling state-owned Trepca mining complex, the most valuable piece of real estate in the Balkans, is worth at least $5 billion.”

It was the reported view of the mine’s director, Novak Bjelic, that “The war in Kosovo is about the mines, nothing else. This is Serbia’s Kuwait – the heart of Kosovo. In addition to all this, Kosovo has 17 billion tons of coal reserves.” The Yugoslav web site www.yugoslavia.com (now defunct) described Trepca as having the “richest lead and zinc mines in Europe.” The capacity of the lead and zinc refineries ranked third in the world and the area as a whole represented some 80% of Yugoslavia’s mineral deposits. The problem was they were old and inefficient and seriously polluting.

According to Michael Palairet of the University of Edinburgh, a leading authority on the economic and social history of the Balkans,

  “The Trepca system ‘as a rule’ lost money under Yugoslav socialism … Because of Trepca’s incapacity to generate funding of its own for investment, all investment funding had to be financed externally, by fund providers who did not anticipate that they would see any return on (or of) their capital.” In his opinion the $5bn figure quoted by Hedges above was exaggerated. However while Trepca consistently performed poorly, this was not because it could not have been managed more effectively: “Unlike most heavy industry… Trepca had good mining assets and low cost access to energy, so on the face of things there were no structural reasons for its inability to trade profitably.” (European Stability Initiative)

Further insight may be gained into the economic underpinnings of the UN intervention from a report by the International Crisis Group. The report is interesting in that it provides further evidence that the breakup of the former Yugoslavia was in large part motivated by conflicting economic interests. The various regions of the Federal Republic had fallen out over how their assets and liabilities were to be divided and allocated. The differences were long standing and could not be resolved peacefully. In other words it was a fight among competing capitalists interests. One of these interests lay in Kosovo – the supposed “heartland of Serb identity.”

 “Trepca is a sprawling conglomerate of some 40 mines and factories, located mostly in Kosovo … Its great mineral wealth is the basis of the economy of Kosovo, but the complex is badly run-down as a result of under-investment and over-exploitation by governments in Belgrade.” (Trepca: Making Sense of the Labyrinth (ICG Europe Report N°82, 26 November 1999) )

In 1974 Tito’s new constitution accorded the province near-republic status, with its own parliament and courts, Kosovo elites enjoyed a period of greatly increased control over their own resources. They used their enhanced authority to build factories in Kosovo that capitalised on their mineral production, created thousands of jobs, and brought some income into the province.

After Tito’s death, pressure grew for more rights and greater political and economic autonomy, but with little success. Belgrade reasserted control of the mines.  Kosovo Albanian workers were accused of having stolen vast quantities of gold and silver and many engineers and technicians were fired.

  “From 1981-89, Belgrade monopolised the export of Trepca’s minerals to Russia and elsewhere, reaping the profits in hard currency and oil, while compensating the Kosovars only with electricity and other non-fungible forms of payment.…

  Trepca’s Kosovar management attempted to sell its products on the European market and to modernise the facilities’ modes of production, only to be foiled time and again by the Serbian government, which was in the process of “integrating” Serbia’s economy – that is, of tethering all economic sectors even more closely to Belgrade.

  By the late 1980s, with the final integration into the Serbian system of the power generating system, Kosovars had lost virtually all control over their economy, as they would over their politics and civic freedoms.” (Trepca: Making Sense of the Labyrinth (ICG))

In 1996 Trepca had exported $100 million of products, making it the largest exporting company in the Federal Republic of Yugoslavia and an invaluable foreign exchange earner at a time when the country was experiencing grave economic difficulties.

Throughout the 1990s the ownership of Trepca conglomerate was never entirely clear. In November 1997 Trepca was under consideration for privatisation by the federal government in Belgrade. This process stalled when the ‘red businessman’ Zoran Todorovic, was murdered by a gunman in Belgrade. Todorovic had been a close confidant of Slobodan Milosevic and was one of the richest men in Yugoslavia.  He was one of a group of state capitalists who had been able to use their political connections to purchase state assets at bargain prices. (He was also director of Beopetrol, another state firm in the process of being privatized.) This was in effect a conversion of state owned assets into de facto privately owned ones by the ruling capitalist class.

Officials of the UN Interim Mission in Kosovo (UNMIK), who took over governing Kosovo in 1999 after the withdrawal of Serbian troops, concluded  that the complex was overall public property and therefore came under their authority in accordance with its mandate. The then head of UNMIK, Bernard Kouchner (now French Foreign Minister), confirmed that an international consortium had been appointed to run the plant. A $16m (£10.7m) investment package was also announced, funded by Britain, France, Spain, Germany, and the EU. The money was to be spent on a full-scale refurbishment of the plant prior to it being sold off.  “We have no intention of closing any part of the Trepca mining complex. On the contrary, we’re going to make it safe and profitable.” he said. (The Guardian, 15 August 2000)

But it was not only the mines that capitalist interests had their eyes on. In July 2000 it was announced that a fund run by the billionaire George Soros was to invest $150 million (most backed by U.S. guarantees) in companies in the Balkans. Soros Fund Management would invest $50 million of it own equity in new businesses, expansions or privatization in the region and would have full autonomy to choose the investments in a whole swathe of South East Europe. Soros had invested millions of dollars in philanthropic endeavors in the region, but said this fund would practice “tough love,” and be driven purely by profit.

The U.S. Overseas Private Investment Corporation had agreed to provide a loan guarantee for another $100 million of investments. OPIC describes itself as a self-sustaining federal agency that sells investment services to American businesses expanding into emerging markets around the world. It provides a level playing field for U.S. businesses in emerging economies.

“Since 1971, OPIC has supported nearly $130 billion worth of investments that will generate over $61 billion in U.S. exports.” (Dead Link.)

The Soros investment was conceived at a “donor” conference in Sarajevo in 1999. It was one of a series of efforts to take advantage of emerging investment opportunities in the Balkans. “A year ago, after NATO won the war in Kosovo, more than 40 leaders came together in Sarajevo determined to win the peace with economic investments”, according to National Security Advisor Samuel M. Berger.

George Munoz President and CEO of OPIC said he was pleased that they were making the region safe for international capital. It was a demonstration that “Southeast Europe is an important region on which we should focus our efforts, to enable it to rebuild and enter the global marketplace as a full partner. The Southeast Europe Equity Fund is an ideal vehicle to connect American institutional capital with European entrepreneurs eager to help Americans tap their growing markets.”

The Soros Private Funds Management, he said, was sending “ a strong, positive signal that Southeast Europe is open for business.”

Gwynn Thomas

Obituary: Jean Higdon (2008)

Obituary from the April 2008 issue of the Socialist Standard

Jean Higdon 1934-2007

Jean’s secular send-off was attended by fifty of her family, friends and party members.

Of those who were invited to speak on Jean’s life were her son, Jon, who spoke of Jean’s dedication as a mother; Mike Lee, Chairman of the Auckland Regional Local Bodies’ Council, who briefly outlined Jean’s socialist thinking (production of use, not for sale); and Jean’s neighbour whose fractious child was always comforted by Jean’s pleasant manner, and a party member whose galloping rhetoric brought smiles to what might have been a sombre occasion. Said he, “none of those parasitic bastards in Buckingham Palace, the White House or the Kremlin would be tall enough to polish the shoes of Jean Higdon!”

Jean was for many years secretary of the Auckland Branch of the WSPNZ, taking lengthy notes of the discussions we had, and typed out the minutes almost verbatim.

Jean was responsible for the layout of the party journal, The Socialist Review, from 1971 till 1982 when it folded because we couldn’t find any writers. Jean was also a sometime parliamentary candidate for Auckland Central on the socialist ticket, and with her late husband made a vital contribution to spreading the socialist case in new Zealand.

They are both remembered for their humanity and generosity of spirit.

Our condolences go to Jean’s family.

Executive Committee, WSPNZ, 8 February 2008

Manufacturing Britishness (2008)

From the April 2008 issue of the Socialist Standard

Getting school leavers to swear allegiance to the Queen, what’s it all about?

Gordon Brown now appears to believe that, like Candyman, if you say “Britishness, Britishness, Britishness” in a mirror, it will come to get you.  At least, that’s how it seems with the outpourings of his government.  Of course, in his report, Lord Goodman was merely suggesting that all school leavers get to have a citizenship ceremony, in which they might swear true and lasting allegiance to Queen and country – it isn’t policy (yet).  Even if that small part of the report was spun to make the headlines, all that team Brown are doing is floating an idea, to see if it has legs.

Brown would say that he is just trying to promote and shape a sense of collective identity; to improve social cohesion and welfare; to provide a platform for the different identity communities in Britain to overcome their antagonisms.  Brown simply wants us to celebrate those British values of tolerance and fairness (which, of course, no other polity on Earth espouses).

As Goodman explains:

 “… analysis also shows that [patriotic] feelings have fallen over time; they are less prevalent among younger people; and there is disaffection in parts of our communities.

So the challenge is to renew our shared sense of belonging and take steps to engage those who do not share it. Especially in the light of social changes, we need a narrative of what we stand for together; and we may need to set out that narrative in more explicit terms than we have had to use before and using frameworks that are created for this purpose.”

It is not, you understand, a “crisis”, but, like the spouse in a failing marriage, feeling the romance start to ebb away, Goodman recommends we cry out our love of country ever more arduously.  We should, he opines, have a national day, given over to being British.

Since “British” is what we in who happen to live on the outlying archipelago just off the northern coast of Europe are supposed to be anyway, that seems to make as much sense as a day celebrating carbon.

Unless, such national identities are not as natural as we are led to believe, and they only work by continually shoring up the fragments of their highly artificial walls.  If they are a part of manufacturing consensus that would mean that all those traditions and values were invented; and only as “natural” as the needs of the inventors.

Quite how those needs are served was nicely illustrated in March this year.  Brown let it be known that he wanted to raise the profile of the British military by encouraging troops to wear their uniforms on the streets.  We were to be encouraged to feel pride in the presence of their resplendent attire, and be continually reminded of the marvellous service these boys and girls do for us, putting their lives on the line for their country,  being the rough men who let us sleep quietly in our beds.  The political purpose of such a subtle reminder would be to assist the morale of troops fighting in the various foreign adventures (Iraq and Afghanistan in particular) that the Labour government has seen fit to commit itself to.

It also was a way to spike the guns of the Conservative Party and the natural Tories in the military establishment who have suddenly discovered something called “the military covenant” – some process by which the state assumes a duty of care to look after soldiers.  This is of recent invention, and forms the basis of all bleating about soldiers not being properly cared for or protected.   It is a claim for special treatment and a useful establishment manifesto.  Doubtless, were the Tories in charge, we’d never hear of it again.

Beyond that, is the hope that getting the folks back home to empathise with the military will iron out any political fallout that from launching an unpopular war in pursuit of loot and profits.  Getting people to think of themselves as being against the war but for the troops is an excellent means of quelling practical opposition to the wars – turning the troops into the political and symbolic hostages of their masters.

All this was given a fillip by the highly orchestrated (as revealed by Private Eye) outing of Prince Henry Charles Albert David Windsor’s tour in Afghanistan.  He became, in a blaze of publicity, an ordinary hero, so committed to his comrades in arms and his duty, that he put his Royal life on the line and go and fight.

Pictures of the smiling princeling playing sport in the desert sent out a message of the equality of service, how all the boys are equal under the badge – and added that air of glamour to proceedings that comes with a Royal personage and their saturation coverage in the media.  That it simultaneously improved the image of the Royal Family was, surely, just a coincidence.

He even, it was reported, killed over thirty Taliban “militants”.  Or, that is, rather, he co-ordinated the attack so that air strikes could be brought down on those dreadful fanatics.  He bravely got someone else to do his killing.

Alas (it seemed) this wave of propaganda was punctured.  On 6 March it was reported that personnel at RAF Wittering, near Peterborough, had been instructed not to wear their uniforms in public, despite the wishes of the great leader, because there had been incidents of verbal harassment of troops by a “cross section of the community.”  This follows similar complaints of harassment of troops “forced” to share regular NHS hospitals with members of the public.

Once upon a time, such incidents would not likely be reported, and the wall of propaganda would hide the divisions in society.  This time, though, the press latched onto this story, and began bemoaning the abuse of “our boys” who “put their lives on the line.”  Soldiers began to be clapped in the street.  Newspapers broadcast their support for the troops.  Politicians said that we should all get behind these brave lads.  Suddenly, a story about how the unpopularity of the war was turning into abuse of the troops, turned, into yet another exercise to achieve the politicians aim of binding us together in love and respect for the lethal arm of the state.

Herein is the rub. These people are doing a dirty job.  Skills, talent, energy and resources are being directed from creative productive work, and instead being dedicated to death and destruction. 

Even, were we, for one moment, to accept the unfortunate necessity of having to keep a standing force for murder, we could still question why they should be lauded so.  Tax collecting and being a bailiff is an unfortunate necessity of our current society, but no-one asks us to celebrate bailiffs.

What of, though, putting their lives on the line?  Well, from accident reports we know that thousands of builders are putting their lives on the line every day.  Train track engineers are risking life and limb.  At least, those workers could point to some accomplishment, an addition to the wealth and wellth of society from the risks they are putting themselves to.

It was once a commonplace of radical politics, never mind socialist politics, that a standing peacetime army is a sign of tyranny.  The option to resort to lethal force remains in place, and implicitly backs up any decision of the state and its agents.  When Tony Blair said it was in the interests of Britain to go to war, he was saying, perhaps without the actual thought crossing his mind, that some stakes are so high that they are worth more than a human life.  That they are worth killing for.  The logic of the mafia don.

As socialists we consider that this international system of perpetual warfare stems entirely from the division of the world into units of property, and that it can be replaced by the common ownership of the world by the human race, co-operatively and democratically running their own lives.  The “unfortunate necessity” for the dirty work of slaying can be eliminated, and no-one need suffer to wear a military uniform again.

We understand that, much like those supposed Taliban militants, who are usually boys fighting for a pittance and a rifle at the behest of well-heeled leaders, the military is made up of workers in uniform, proletarians on parade, hired killers plying their trade.  Their work is dirty and despicable, but they, as human beings are no more worth spitting on nor abusing than any other person.  What they deserve, and need, is for their political masters who are using them to be removed, so that all that skill and energy can be redirected into useful work, and not used against us. 

This could build the practical unity of living, working and sharing together, so that we need neither patriotic parades nor oaths of allegiance to bind us together, and we can put the spectre of the dismal time where murderers were heroes far behind us.

Pik Smeet

50 Years Ago: Another Economic Blizzard? (2008)

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

So the bread lines and the soup kitchens have appeared again—in the United States and Canada.

It looks as if the slump that would never come again is now on its way. At least that is the impression one gets from statements by leading financiers, here and in America, and from articles that have appeared in London papers recently.

The Times for March the 4th, under the heading, “World Unemployment Survey,” gives figures of unemployment in different countries. In the United States in January the figure was 4,494,000. This does not include unemployment among the 30 million who are not covered by unemployment insurance. Since January there has been a considerable increase in unemployment. The Times gives the unemployment figure for Canada in January as 520,000. Here also the figure has increased since January.

The News Chronicle for February 28th contains an article on Detroit by Bruce Rothwell. From this article it is evident that the huge empty factories around Detroit, and the empty shops the present writer saw in Dearborn, when he was there last September, were the expression of something more than the shift of industry out of Detroit and the change-over to automation.

The News Chronicle writer has this to say:-

“Signs of the slump are everywhere and this is frightening America.

“For beyond this city millions more jobs depend on the car industry. One business in six is wholly concerned with it.

“Steel, rubber, glass, leather; they all slump when the assembly lines slow; and soon it spreads to us all.

“So Detroit, the centre of it, is harder hit to-day than in the ‘thirties.”

The writer states that there are 250,000 unemployed in Detroit now, and he tells of the soup kitchen run by the Capuchin monks which can only touch a tiny fragment of the thousands of hungry.

(From front page article by “Gilmac”, Socialist Standard, April 1958)

Who Cares? (2008)

From the April 2008 issue of the Socialist Standard

As the US presidential election circus passes, people continue to suffer even in the US

It’s the US presidential election year. Populations of the world take notice. The media circus is in full flow and the season is a long one. The mainstream media love a good fight and will pounce on any juicy morsel, wringing it to death in the cause of democracy – Clinton’s moment with tears in her eyes or the decision or non-decision to show some cleavage; Obama’s plagiarizing or agreed borrowing of phrases from a third party’s speech – grist to the mill of information for the masses, essential in the common voter’s decision making process. Who do we think will make the toughest Commander in Chief and be able to make the ‘hard’ decisions? It appears the aim is to keep the public’s eyes as far away from reality and the real issues as possible. Deflect their attention whilst hypnotising them into believing their vote will actually make a difference in any significant area of their lives.

Even the more serious ‘liberal’ or ‘progressive’ US media are spending an inordinate amount of time and space debating and dissecting which sections of the population will vote for (1) a black, or (2) a woman. The fact that they are from the same party and broadly back the same agenda – and may ultimately stand on the same ticket – is less important than speculating about in which direction the various sections of the electorate are likely to be swayed either by popular appeal and endorsement of celebrities or by muck-raking and negative campaign advertisements.

Seemingly disconnected from the multi-million dollar, multi-media frenzy of the race for the presidency can be found other articles given over to topics not covered in the mainstream media but which ought to be in the forefront for the presidential candidates, the whole electorate and the rest of the world. Writers of several articles recently have investigated the care of physically injured or mentally scarred US troops returning from Iraq, and have revealed some chilling truths. Last year conditions at the Walter Reed Medical Centre, a military hospital, became so bad that it entered the realm of international coverage for a short time. Equipment was in short supply, specialists were leaving, the unit was seriously underfunded leading to lack of appropriate care for seriously wounded patients and a Pentagon Mental Health Task Force deemed its staffing level “woefully inadequate”. Bush made promises that it would be sorted and the hue and cry died away. Fairly early on in the conflict in Iraq some doctors, psychiatrists, psychologists and counsellors recognised that significant numbers of military personnel were suffering from post traumatic stress disorder (PTSD), especially if they had had to undergo a second or third term of duty. Many were simply given a course of drug therapy, a pep-talk and sent back to their unit or, whilst in the US between tours, some of them, with impeccable records and commendations for heroic action, developed problems with drugs, alcohol, gambling, writing bad cheques and ended up in military jail, some losing rank and others being discharged dishonourably.

In the early days counsellors and psychiatrists were pressed not to accept PTSD, certainly not to register it on record, rather to rebrand the affliction as ‘Personality Disorder’ and to suggest that those so afflicted were obviously unstable before they entered the military and were consequently kicked out of the service. Eventually after pressure from certain quarters thousands, rather than the original few dozen, were accepted as bona fide sufferers of PTSD and were put on a list to await treatment. But still denial of PTSD persists, especially in the Marine Corps which has “a deeply macho culture”. It is 93% male, 66% of whom are 25 or younger and 13% are teenagers. One civilian psychiatrist who treats Iraq and Afghanistan veterans tells of young veterans being ridiculed by their chain of command if they asked for help.

The Pentagon’s Mental Health Task Force reported last June that 31% of marines serving in Iraq and Afghanistan are suffering from traumatic stress and that marine suicide rates have been above average since the invasion of Afghanistan. (32 active duty suicides in the Marine Corps in 2004, no mention of the number among veterans). There are severe shortcomings in providing care for those who do qualify. A year after the Marine Corps’ review of less-than-honourable discharges recommended screening all marines and sailors who commit ‘particularly uncharacteristic misconduct’ following deployment the programme has not yet started because they lack the manpower.

Before the severely wounded or traumatised arrive back in the US they are transported to the Landstuhl Regional Medical Centre in Germany. The Air Force colonel who was chief of medical operations in the Europe headquarters for 2 years, 2004-6 said “politics infused every aspect of care” and that the funding was the worst she had seen in 20 years in the military. They weren’t allowed to increase staffing because it would give the wrong message, that it would look like they were expecting more casualties. They weren’t allowed to send the visibly wounded home on commercial planes because it might upset US citizens to see them and the military planes were so cold that charity appeals were made in order to provide hats, scarves and mittens for the wounded. Mittens, because they fit wounded hands better than gloves.

Here’s the rub – this huge military set-up with an annual budget of billions, desperately recruiting from all quarters, promising college educations for free and later reneging, promising full US citizenship to non-citizens and then reneging and promising full support to veterans and reneging wherever possible. The reason PTSD is a contentious diagnosis is because it means that sufferers are entitled to full support, free drugs and veterans’ benefits for life (i.e. expensive). If it can be reduced to ‘personality disorder’ they can be thrown out and denied entitlement. If they can be recommended for an ‘other-than-honourable’ discharge (for drug use whilst recovering or other misdemeanours) notwithstanding an exemplary service record, veterans’ benefits would be denied, including healthcare, for life.

The bottom line, soldiers, sailors, airmen and marines, don’t kid yourselves about patriotism or fighting terrorists or protecting your country. When was war any different? It’s just the workers protecting the interests of their masters. It’s the same for you as it is for the rest of us. You’re simply there to be used, abused and paid as little as they can get away with. These are the issues that should be engaging the media circus, placing them squarely in front of the electorate and the presidential candidates. But they aren’t and they won’t be because the mass media supports the status quo. Will the workers ever learn?

Janet Surman

Pieces Together - "War is stupid." (2008)

From the April 2008 issue of the Socialist Standard

Land of the Free?

"For the first time in U.S. history, more than one of every 100 adults is in jail or prison, according to a new report documenting America's rank as the world's No. 1 incarcerator. It urges states to curtail corrections spending by placing fewer low-risk offenders behind bars. Using state-by-state data, the report says 2,319,258 Americans were in jail or prison at the start of 2008 — one out of every 99.1 adults. Whether per capita or in raw numbers, it's more than any other nation. The report, released Thursday by the Pew Center on the States, said the 50 states spent more than $49 billion on corrections last year, up from less than $11 billion 20 years earlier. The rate of increase for prison costs was six times greater than for higher education spending, the report said." (Yahoo News, 29 February)

This is Freedom?

"As if the Government doesn't know enough about us already, it is now using lie-detector equipment (or ‘voice-risk analysis’, as it is euphemistically known) to signal whether people claiming benefit are telling the truth. If you receive a phone call from a town hall official asking about your circumstances, it seems that your answers - or rather, the tone of voice in which you give them - could well be scrutinised by a computer for telltale signs of ‘stress‘. ... In the Government's book, apparently, stress in the voice is a pretty good indication of flagrant dishonesty. You will be investigated further. Big Brother is most certainly watching you." (Times, 27 February)

War is Stupid

"The last French veteran of World War I, an Italian immigrant who lied about his age to join the Foreign Legion and fight in the trenches, died Wednesday aged 110, President Nicolas Sarkozy said. Lazare Ponticelli, the last of more than eight million men who fought under French colours in the 1914-18 war that tore Europe apart, died at the home he shared with his daughter in Kremlin-Bicêtre, a Paris suburb. Reflecting on his wartime experiences, he once said: "You shoot at men who are fathers: war is completely stupid." (Yahoo News, 12 March)

The American Dream?

"More American homeowners are mired in negative equity than at any time since the Great Depression of the Thirties ... Close to 9 million Americans, or 10.3 per cent of homeowners in the US, now owe more on their mortgages than their house is worth, according to the latest figures from Moody's, the ratings agency, as inventories of unsold homes continue to pile up in an already over-supplied market." (Observer, 24 February) "House prices in America are now falling at their fastest rate since records began in 1964, while repossessions and new houses for sale are at levels not seen since the Depression in 1929." (Observer, 2 March)

Democracy in Action?

"President Bush has vetoed a law preventing the CIA using interrogation techniques condemned by many as torture, because it ‘would take away one of the most valuable tools in the War on Terror’ ...The veto throws the spotlight back on to America's use of so-called coercive interrogation methods like waterboarding, the simulated drowning technique invented by Spanish inquisitors and adopted by regimes such as the Khmer Rouge." (Times, 10 March)

If I Were A Rich Man . . . (2008)

From the April 2008 issue of the Socialist Standard

‘There’s class warfare all right, but it’s my class, the rich class, that’s making war, and we’re winning’. New York Times, 26th Nov 2006

So said, with more than a hint of shame, the person revealed by Forbes magazine last month to be the world’s richest man – Warren Buffett. With a fortune estimated to be in the region of 62 billion dollars, Buffett is now a couple of billion ahead of the Mexican telecoms tycoon Carlos Slim, and four billion or so ahead of his friend and bridge partner, Bill Gates. Britain’s richest man, Labour Party donor Lakshmi Mittal, is fourth, one of 49 billionaires living in the UK.

Buffett, dubbed the ‘Sage of Omaha’ because of his homespun wit and wisdom, is something of an enigma, a compulsive accumulator of wealth that he is in some respects embarrassed about. He may be the richest man in the world, but lives in the same house he bought for $31,000 when he was 28, exists on a diet of hamburgers, candy bars and Cherry Coke, and refuses to have more than one car (an old one, at that). In a world obsessed by conspicuous consumption, he is hardly a man given to ostentatious displays of wealth.

From a very early age Buffett was fascinated by numbers, mathematical calculations and money, and was obsessed with becoming rich, to such an extent that according to Mary Buffett, as a child in 1938, ‘in the sweltering summer heat of Nebraska, he walked miles to the racetrack where he spent hours on his hands and knees scouring the sawdust-covered floors for discarded racing stubs, hoping to find a winning ticket’ (The New Buffettology). The son of a Nebraska stockbroker, he made his first stock market investment when he was eleven (three shares in a firm called Cities Service) and by the time he was old enough to go to college he had made $6,000.

Harvard reject

After his degree, Buffett applied to study at the prestigious Harvard Business School and was rejected. But this was a blessing in disguise for him, because he ended up going to Columbia University instead where he studied under Benjamin Graham, considered by many at the time (and plenty since) to have been the greatest investment analyst of the twentieth century. Graham wrote two seminal works: Security Analysis (co-authored with David Dodd) in 1934, and The Intelligent Investor, the original edition of which was published in 1949. The teachings of Graham, and these two books in particular, had a profound impact on Buffett, to such an extent that he eventually persuaded Graham to take him on at his own Wall Street investment firm (at one stage he even offered to work for free).

When Graham retired in the 1950s, a homesick Warren Buffett returned to Nebraska to set up his own investment partnership. This was the real beginnings of his fortune, where he began to turn an initial investment of $105,000 collected from friends and family (only $100 of which was his own) into the $62,000,000,000 it is now. Buffett’s fund management fees were performance-related and by 1969, when he decided to close down the partnership, assets under management had grown to around $104 million, in which Buffett’s personal stake was over $20 million. By this time Buffett was convinced that a bear market was around the corner, where sustained downward pressure would be put on share prices after the end of the 1950s and 60s economic boom.

But it was also in this period that Buffett laid the foundations for his greatest leap in wealth, taking over the company with which he has been synonymous ever since: Berkshire Hathaway. This ailing textile company was steadily bought up by Buffett and his partners typically for around seven to eight dollars a share and in 1965 they seized control of it. When Buffett dissolved his investment partnership he offered his partners a choice of either cash or a stake in Berkshire Hathaway. Those who took the shares instead of cash have seen them rise in price in the period since to the extent they currently trade in excess of $140,000 each on the New York Stock Exchange.

Woodstock for capitalists

So, how did Buffett really become so rich and help other Berkshire Hathaway shareholders to be the same? By being, in Buffett’s own words, in the right place, at the right time, but also by being the perfect capitalist. As Buffett would be the first to admit, he has never invented or made anything; indeed, he is very far from being the great all-American entrepreneur of popular mythology – he’s happy to let Bill Gates take that sobriquet. Instead, he is the most famous example of a phenomenon Friedrich Engels wrote about in the nineteenth century, where Engels identified that the key technical role that entrepreneurs played in the growth of capitalism was on the wane:

‘All the social functions of the capitalist are now performed by salaried employees. The capitalist now has no other social function than that of pocketing dividends, tearing off coupons, and gambling on the stock exchange, where different capitalists despoil one another of their capital.’ (Socialism: Utopian and Scientific).

In this sense, the capitalist class, as owners of capital who no longer have to work and whose key technical function in the rise of capitalism has been largely taken away, become functionaries of capital – and interestingly, Buffett has defined himself as being an ‘allocator of capital’ above all else. In this respect, Buffett is a very modern capitalist – an investor in companies and markets rather than an inventor of things. Every year, Berkshire Hathaway shareholders arrive in Nebraska for their annual shareholders’ meeting to pay homage to Buffett and his side-kick Charlie Munger in an event they call ‘Woodstock for capitalists’; there is little entrepreneurial spirit to be seen, for there is no need.

Meet ‘Mr Market’

Buffett used Berkshire Hathaway as an investment vehicle, using it to take over insurance companies and other firms that generated steady cash flow. In owning firms outright, he was able to mitigate his exposure to the stock market when he felt it necessary. Over time, though, Buffett used Berkshire’s excess cash to selectively buy back into stocks.

In doing so, he abided by the investing principles handed down to him by his mentor, Ben Graham, often referred to as ‘value investing’. In essence, this meant investing in companies based on their real value and assets (and their ability to grow them) rather than what was likely to happen to their short or medium-term share price. Graham and Buffet both took the view that value and price were not identical, even if they gravitated in the same direction over the long-term (leading Graham to famously comment that ‘in the short run the stock market is a voting machine but in the long run it’s a weighing machine’).

In particular, Graham and Buffett took issue with the academic theory known as ‘Efficient Markets Hypothesis’. This theory states that stock market prices (allegedly like all other prices) are efficient, in that all known information is reflected in them so that it is impossible for significant market inefficiencies to occur, and impossible for any investor to ‘beat the market’ in the long run through anything other than pure luck.

Ben Graham had attacked this view with his parable of ‘Mr Market’, an agreeable potential business partner who is always ready on any given day to do a deal over a business or share of a business so long as he can name the price. One Graham and Buffett acolyte has explained the concept this way:

‘Mr Market is bipolar. Our partner goes through gigantic mood swings from the highest euphoria to the lowest depression. Most of the time Mr Market is taking his meds, and on most days he’s pretty lucid about the prices he sells and buys at. That means most of the time the price of a business is pretty close to its value. But sometimes he can get so insanely optimistic that he prices everything insanely high. On other days Mr Market can get so depressed that, unlike Annie, he’s convinced the sun will not come up tomorrow . . .

It’s kind of a shame to take advantage of someone who’s emotionally unbalanced, but then again, he doesn’t seem to mind. He’s been bipolar for so long he just thinks it’s normal. He doesn’t honestly think that he’s mispricing anything, even if one day the price is $100 a share and just a few months later it’s $10. And if you ask the professors who study Mr Market, they’ll tell you the guy is fine.’

(Phil Town, Rule 1.)

In essence, this is how Buffett has made most of his money – by realising that the market economy isn’t intrinsically an efficient allocator of resources and is driven by wild swings of sentiment that often belie underlying reality. In the great bear market of 1973-4, when stocks in the US more than halved in price measured by the S & P 500 index, and fell by nearly three-quarters in the UK, Buffett said he felt ‘like an over-sexed guy in a whorehouse’. He invested massive amounts and saw share prices recover within a year or so, despite no significant change in the performance of the underlying economy or the companies within it.

Buffett is no lover of the free-market and has made much of his money through exploiting the fact that capitalism isn’t nearly the competitive ideal that many of its fiercest advocates assume. Illustrative of Buffett’s approach is the type of company he has used Berkshire Hathaway to buy into: those he identifies as having an economic ‘moat’, a durable competitive advantage or quasi-monopoly position that their competitors (if they have any) cannot easily breach. Buffett hates, and steers clear of, companies that operate in price-competitive markets, as they are the most vulnerable to the vicissitudes of the capitalist economy and those whose growth is least assured and steady over time. Instead, he typically invests in companies that have very different characteristics – for example, firms:

1. that achieve dominance through having strong brands that involve repeat buying (Buffett has been a major shareholder in both Coca-Cola and Gillette),

2. that can exercise control over a service through which they allow access by charging others for the privilege (such as some utility network companies),

3. that secure massive forward orders based on major long-term contracts, typically with the state sector, for outsourcing, regeneration, etc.,

4. that have a product that becomes so all-pervasive that switching to a competitor isn’t worth the trouble (Microsoft),

5. that have a company secret such as a patent that acts as a barrier to entry for other firms (e.g. Intel, GlaxoSmithKline),

6. that have such economies of scale they can undercut their competitors and achieve market dominance (e.g. Wal-Mart in the US and a recent Buffett buy in the UK, Tesco).

When these type of firms are mispriced in the stock market because of negative sentiment – giving what Graham called a ‘margin of safety’ to the buyer – then Buffett starts accumulating shares. Companies with an economic moat typically grow their profits well in excess of 10 per cent per annum on average; indeed, Buffett usually looks for firms that can grow their ‘book value’ and profits at 15 per cent, potentially giving him a huge compounded return over the years, especially if he has already bought them well below their real value. And he has declared his favourite holding period for such companies to be ‘forever’ (Buffett rarely involves himself in short-term speculation and when he does it tends to be through taking advantage of arbitrage opportunities, again based on market mispricing).

Unions

In many respects, Buffett probably has a better understanding of how capitalism works than most other supporters of it. While, for instance, he understands the need of workers to organise themselves in trade unions so as to defend their interests, he is apparently wary about investing in highly unionised companies:

‘The inherent financial weakness of the price-competitive business has given organized labor enormous power to demand a higher cut of a company’s profits . . . in situations like these, unions become demanding semi-owners with whom shareholders must constantly share their wealth or risk a strike that could lead to the financial destruction of their business. Warren doesn’t like to own businesses that have organized labour.’ (Mary Buffett, The New Buffettology).

This quote illustrates that Buffet knows perfectly well what is going on in the struggle between capital and labour (and which side he necessarily sits on).

Irony

One of the many ironies of Buffett’s life is that he has accumulated capital for the sake of it, very much as the system demands, yet has never really known what to do with his vast personal wealth; he spends very little of it and doesn’t believe in inherited wealth either. So in 2006 he declared he was going to give away at least $30 billion of his fortune to the Bill Gates Foundation, so that it could be spent improving healthcare across the world.

In many ways this was a noble gesture, and a more generous act than anything from most of the world’s other rich men, yet it is the very system in which he is a proud ‘allocator of capital’ that leads to world poverty and lack of decent healthcare in the first place. Buffett has recently attacked the Republican administration in the US on the grounds that it is obscene that he pays less of a proportion of his income in tax than someone on the minimum wage. Yet, above anyone else, Buffett should know that in capitalism, capital accumulates to those who have it and invest it. And it expands because those who are relatively poor (the working class) create value greater than they ever receive back in wages and salaries, with this ‘surplus value’ created by those who have to work for a living sustaining those who don’t, generating rent, interest and profit for the system as a whole than can be reinvested in the capitalist treadmill. In the market economy, the rich are rich because the poor are poor. Indeed, companies grow because the rich are rich and exploit the poor, and it can’t work any other way.

Mr Buffett may be a highly intelligent man and a great philanthropist, but the bipolar extremes characteristic of Mr Market are no way to run a sane society, but are characteristic instead of a system where only a minority can be winners and they depend for their position on the vast majority being losers. And no amount of well-intentioned philanthropy is ever likely to change it.

Dave Perrin