The Socialist Forum: Parliament and the Bankers. (1932)

Letter to the Editors from the June 1932 issue of the Socialist Standard

A Belfast reader asks the following questions : —

(1) Do the bankers or Parliament rule, and is Parliament a tool of the former?

Do the bankers dictate the economic, financial and, for the most part, the political programme Parliament must carry out?

(2) Did the bankers engineer the “crisis” during the autumn of 1931 and compel England to abandon the gold standard and also order a general election to take place?

(3) Could you point out some of Capitalism’s contradictions ?

Reply

(1) The Government is dependent for its existence on having the support of a majority in the House of Commons. The M.P.’s are elected by the voters, the great majority of whom are workers. The bankers, like any other section of the population, can only get their interests protected if they can get Parliament to approve.

The property rights and profits of the bankers are protected by law, just as are the property rights and profits of other sections of the capitalist class. Sometimes Governments lean towards one section of the capitalists (e.g., the bankers) and sometimes towards other sections (e.g., industrial capitalists). This they do either because of some urgent problem requiring treatment for the safety of the capitalist system, or in response to pressure from the M.P.’s and the political parties. The last Conservative Government by its rating reforms helped some industrial capitalists at the expense of other capitalists. The present Government has introduced tariffs with the same object. The return to the gold standard in 1925 was of benefit to bankers and to other sections of the capitalists.

That the bankers are able to secure protection by law and by the Government, is due to the fact that the electors approve. At the last election the “National” parties proclaimed that they were protecting the banks against supposed danger which would threaten if the Labour Party gained office. This did not prevent the majority of the workers from voting for the “National” candidates.

The bankers and other sections of the capitalists, of course, do not state openly that they are seeking protection for their own particular interests. They argue that what they seek is in the interest of the nation as a whole, and especially of the workers. While the workers lack knowledge of Socialism they will continue to accept this plea and vote into power people and parties favourable to the retention of capitalism in general and more favourable to the particular interests of bankers at one time and industrial capitalists, etc., at another.

Our correspondent should notice what happened at the recent by-election in St. Marylebone. There were two rival Conservative candidates in the field. One of them, Sir Basil Blackett, is a director of the Bank of England and had the backing of most of the Conservative leaders and the party machine. Yet he was beaten by the opposing Conservative candidate who had the backing of the rank and file of the local Conservative Party. The electors decided the issue.

(2) With regard to the question as to whether the bankers engineered the “crisis” of last autumn, we can only say that it is for those who hold that view to bring forward evidence in support. On the face of it the suggestion appears improbable, since the abandonment of the gold standard is hardly likely to have been sought by the bankers who favoured the return to gold in 1925. Our correspondent is referred to the articles published in several issues of THE SOCIALIST STANDARD from September onwards, dealing with various aspects of the “crisis.”

(3) The following are some of the contradictions of capitalism.

The existence of great wealth and great poverty side by side.

The existence of unemployment among workers needing the products of industry and willing to produce them, while at the same time the raw materials are lying unused and the factories idle.

Compulsory idleness among unemployed and enforced overwork among the employed workers.

The utilisation of labour-saving machinery not for the benefit of the users of them, but for the benefit of the capitalists, often accompanied by still greater strain on the workers.

The glorification of the leisured class and the simultaneous denunciation of idleness among the workers.

The prohibition of theft by Governments which use armed forces for wholesale robbery from other nations.

Ed. Comm.

The Croupiers and the Faro Wheel. (1940)

From the April 1940 issue of the Socialist Standard

Throughout the political system of British capitalism, with its amazing fluidity, its shifts of front and of allegiance, and its apparent contradictions, runs one clear thread: the idea that there are insiders and outsiders.

So says “The Unofficial Observer,” in his work, “Our Lords and Masters.”

The “outsiders” may get the best jobs, if it suits the purpose of the “insiders,” but they can never determine policy.

For behind and beyond the British political scene there is a superior force, which assigns values, which enumerates—or rather takes for granted—”the things no feller can do,” which pulls the wires and decides events. With Americans that power has been the business and financial community, with its tradition of general corruption and its innocent conviction that individual greed is the yardstick of social utility. That such is not the case in Great Britain can be proved at a single glance at the leaders of British industry and banking. Where American bankers oppose and criticise, where American steel magnates defy Governmental labour legislation, where American oil companies have juggled with administration after administration, British industry and finance work hand and glove with British government. It has taken some consideration above the holding of political office and the fattening of the pocket-book to accomplish this result. There are “insiders” in British business as well as politics. Why?

Snobbishness is what helps to make the wheels go round and induces the lamb to go to bed with the lion on the breakfast-for-two basis. For four hundred years the British social system has been elaborating itself until it has become the most potent force in British life. “There has been no ‘free and equal’ nonsense about it. Great Britain has been governed by a privileged caste of aristocrats, whose morale has been high and whose purpose has been plain—to keep themselves and their country on top of the pile.”

This aristocracy has been open to birth and to wealth. You can be born to the purple, or buy it. So for generation after generation society has set the standards that others try to follow and has renewed itself from vigorous and successful men of every age ; ”The Victorian manufacturers, the merchant adventurers and Indian ‘nabobs’ of the eighteenth century, and the historians, artists, poets, scientists and authors of all generations have all seen as the reward of success the patent of nobility.”

“An aristocracy of birth, an aristocracy of wealth, and an aristocracy of brains when combined constitute a formidable society. When they follow the same standards set by the aristocracy of birth and fortified by a system of privilege, they are irresistible. In England Babbit knows that his place is at the tradesmen’s entrance rather than at the front door unless he ‘plays the game,’ whose rules are set by British society. That is the secret of British power.”

The question before this war was can England recapture her old world-wide predominance in economic affairs ? The Bank of England, that powerful organisation, under its influential Governor, Montagu Collet Norman, is one instrument now being used to work towards this end. It exemplifies the baffling fusion in England of the same interests which have led to the incompatible dualism of Wall Street and Washington in America.

Mr. Norman’s biographer has called him “the greatest statesman in Great Britain since the war.” As head of the Bank which directs the financial destinies of half the world Mr. Norman has perhaps enjoyed more power than any individual of his generation. He it was who brought the country back to the gold standard in 1925 and moved heaven and earth to keep it there. Between 1923 and 1925 the Bank of England, acting in close and informal co-operation with the Foreign Office, extended credits to a number of central banks in foreign countries and brought most of Europe on what is known as the gold exchange standard. This, by fixing the export value of goods in terms of a single stable commodity, both protected British manufacturers from competition in terms of depreciated foreign money and also assured British exporters with reliable means of payment for their wares.

In the realm of high politics, the Bank’s credits to Germany stabilised Central European conditions, prevented the mark from repeating its nose-dive of 1923 and thus sought to ward off radical upheaval, as well as reconstituting the European balance of power. Thanks to Mr. Norman’s efforts at that time the international gold standard was fully re-established and functioned smoothly from the time the franc was stabilised in 1926 until the disastrous summer of 1931.

The blending of business with diplomacy, however, led to disaster. Mr. Norman’s Central European loans may have been made for political reasons, but they were made at interest rates which accurately reflected the business risk. As it worked out, the Bank of England, not being in business for its health, borrowed money from France at 3 per cent, and reloaned it to Germany at 6 per cent. The Germans, in turn, reloaned some of this money to Austria and Hungary at still higher rates of interest. When the collapse of international wheat prices robbed the Danubian countries of their power to pay, the result was a chain of failures, which ran from Rothschild Bank in Vienna—the Credit-Anstalt—through the German “Big D” banks to the Bank of England, and when the French in their inconvenient way asked to have their money back England went off the gold standard with a bang.

Another “Wizard of Finance,” however, is to be found in Germany, Dr. Hjalmar Horace Greely Schacht, the Nazi Finance Director, the originator of the German confidence game, by which the Allies and America allowed their own cupidity to cheat themselves.

The first step in this game was the inflation of the German mark after the war. German marks were purchased by eager speculators in London, Paris, Amsterdam, Switzerland and New York long after they had become patently worthless. In this way Germany acquired foreign exchange at little or no cost to herself and thus compelled the international bankers to apply the Dawes Plan in 1924, which relieved Germany of much of the burden of reparations by providing a new racket.

This time the racket was in German industrial bonds. These were sold to foreign investors—largely American—and their proceeds eventually were used to pay German reparations. This cost the Germans nothing except interest on bonds for a while, gave the Allies their financial pound of flesh, paid commissions to the international bankers and, best of all, gave the British and American investing public a stake in Germany’s economic prosperity. When investments ran dry, the Germans borrowed short-term funds from British and American banks. Finally, the depression made this impossible, Germany stopped paying reparations and refused to pay back either long-term loans or short-term debts. The American bankers showed their true colours—bright yellow—by offering to sacrifice American investors, if only the banking loans were paid, but by this time Schacht knew he had command of the situation. By its holdings of foreign exchange and by other special controls the Reichsbank had accumulated such large stocks of raw materials that it was able to pass through the difficult winter of 1934-1935 far better than any other country.

Since then Schacht has taken advantage of every crisis Hitler has brought about to bring off barter deals; the game, however, became played out and a naked smash and grab raid was the only way Germany could keep going.

We can now understand her cries of encirclement and her desperate moves to avert the catastrophe the Nazi policy forced upon Germany by capitalist development and the greed of her rivals make inevitable.

The attempt to get capitalism to sail on an even keel after the war of 1914-18 failed. The economic problems confronting the world after the present war is over will be beyond the powers of Montagu Norman, Schacht, and Morgan of the United States.

The firm of J. P. Morgan & Co. is a group of private moneylenders, whose principal office is at 23, Wall Street, New York City, and which has important affiliations in Boston, Philadelphia, Paris and London. The Morgan firm controls (not owns) between a quarter and a third of the organised wealth of the United States, being especially powerful in rails, steel, chemicals and the heavy industries generally. It owes its existence to the opportunities for profiteering in the Civil War and attained its present world-wide importance as Fiscal Agent for the British and French Governments during the period of American “neutrality” in the last world war. “At this time the Morgan firm established the technique of using American money to ‘pay’ for British purchases of American goods, which later flowered in the lavish War Debts and the post-war American loans to the European countries. This practice is an invaluable asset to the British Government, and the relations of the Morgan firm with that Government can only be described as ‘extraordinarily intimate.’ To a very considerable extent Morgan is America and Morgan is the informal viceroy of the British Crown in its American Dominion.”

The spider of Wall Street is an episcopalian —it is easier for a camel to pass through the needle’s eye than for a Jew or a Catholic to enter the firm of J. P. Morgan.

It was the house of Morgan and its associate firms in London and Paris which was responsible for swinging large-scale international transactions during the last world war. “When foreign exchanges were dislocated and the credit of the City of New York was jeopardised by inability to meet obligations of 80 million dollars maturing in London and Paris, the city authorities appealed to Morgan, who quickly organised a bankers’ syndicate, which raised the needful. The Allied purchases of war supplies and foodstuffs were cleared through the Morgan firm as fiscal agents for France and Great Britain on decidedly profitable terms. To facilitate this activity they first established export departments headed by Edward R. Shellinius, with a staff of nearly two hundred engineers, manufacturers and experts. Two thousand five hundred million dollars’ worth of food and materials were purchased in this way, thus creating an American economic stake in Allied victory, sustained by a series of commercial credits totalling 1,550,000,000 dollars. This credit was floated through the Morgan banks, after being negotiated by a joint French and British commission.”

The ruling class of Britain may hope during the present war that Morgan will eventually swing things their way again, as he did during the last blood bath. Americans may reiterate again and again that under no circumstances will she allow herself to be involved. When the time comes for American aid to be essential to victory the United States is likely to line up with whosoever Morgan decrees she shall support. So much for democracy under capitalism.

The political victory of the British and French Governments in the present conflict can be anticipated, but the results from an economic standpoint will be barren. The world struggle for markets will not have ceased but will be intensified.

As for the future of the human race, everything depends upon the knowledge possessed by the working class. Not least in Britain, the United States and the western world. We are building better than we realise. The common ownership of the means of life, production for use and the elimination of all profit will be an economic necessity after the war if society is to advance.

Charles Lestor

Another banker comes unstuck (1950)

From the April 1950 issue of the Socialist Standard 

The assertion that higher productivity is the only solution to the problems facing the working class to-day has been repeated so often by the politician and his numerous henchmen that there is danger of the idea being accepted through the sheer force of constantly reiterated suggestion.

The latest interested party to lend the full weight of his personality as a “someone" in the financial world is Mr. H. Bibby, chairman of Martins Bank. Ltd., who was quoted in the Manchester Guardian of 13th January, 1950, as follows: “The truth is there is greater danger of unemployment if we do not use advanced mechanical aids." He also finds necessary “a willingness to work conscientiously when they [the workers] are at work. Any other course would lead to disaster. . . ."

So we are led to believe that increased efficiency is the all-important thing. Only through harder work and better machinery will we solve our problems.

In case you too have read this statement and are suffering from qualms of conscience, or developing a guilt complex over those stolen minutes in the only place where the foreman cannot follow, perhaps you will not feel too badly about it if you turn over the page of your newspaper and read the small item at the bottom of column three. For those who have mislaid their copies it reads as follows: —

“A further two hundred workers have been dismissed owing to redundancy in the engine division of the Bristol Aeroplane Company. This follows the dismissal of two hundred workers between July and November last year, and is described in an official statement issued by the company last night as ‘part of the normal continuous process of strengthening the efficiency of the company’s organisation.' "

And what is efficiency in industry but higher output per man, and how is this achieved but by Mr Bibby's advanced mechanical aids and harder work, and with the same inevitable results as those at the Bristol Aeroplane Company?

J.T.

An unrepentant banker (2011)

From the February 2011 issue of the Socialist Standard 

Bankers’ bonuses: who’s to blame for the greed?

Bob Diamond, Barclays bank’s chief executive, and one of Europe’s highest-paid bosses, last month faced a grilling from the Treasury Select Committee, a cross-party body appointed by the House of Commons. Those expecting a replay of previous confrontations between MPs and bankers – in February 2009, for example, when the bankers said they were ‘profoundly sorry’ for their role in the financial crisis – were to be disappointed.

Diamond was unrepentant. In answer to questions from MPs, he said it was about time that unfair public criticism ‘moved on’ so bankers could stop apologising and get back to business as usual. MPs wanted to know if Diamond was going to show ‘restraint’ on bonuses this year (no), refuse his own bonus (probably not), act more responsibly and increase lending to business (impossible to do both), accept personal liability for the failing of institutions (no) and if he was ‘grateful’ to ‘the taxpayer’, ie, the state, for bailing out the financial system and keeping him and his whole industry in business (grudgingly, and after much evasion, yes. In other words, reading between the lines, no). 

Diamond’s performance added fuel to the fire of the ongoing bankers’ bonus controversy. Ministers in the present government, while campaigning for power, said they were determined to do something about the arrogance and excessive wealth of the bankers. And to be fair, they are doing something. In fact, as Will Hutton puts it in The Observer (16 January), compared with Gordon Brown and Alistair Darling, business secretary Vince Cable and chancellor George Osborne are ‘fire-breathing radicals’, clamping down on tax avoidance, taxing bank profits, setting targets for bank lending, regulating hedge funds and contemplating more banking reform and regulation. But so far, they are being relatively timid about bankers’ bonuses. Why? Now that they have taken power, they, in common with all governments, accept the reality of capital accumulation and their role in it. And that means not doing anything that will frighten the financiers too much.

Capitalists united – and divided

That remains true even in the face of an increasingly numerous opposition. After all, as Hutton says, the issue of bankers’ bonuses is uniting everyone in outrage – ‘from captains of industry bewildered how top bankers can earn so much more than they do to the newly unemployed who wonder what they have done to deserve poverty and hardship while the moneymen pocket millions’. That the state bailouts have poured into the pockets of private individuals, and the poorest and most vulnerable will be left to pay the price in terms of job losses, benefit cuts, and reduced levels of social services and so on, we have already stated (see Socialist Standard, passim). But how come we are also seeing criticism from captains of industry and government ministers and the business press and so on? Not so long ago, bankers could rely on them being ‘intensely relaxed’ about such matters. Why now so increasingly angry and vocal?

Partly it is a fear of social unrest and breakdown. It also reflects divisions within the capitalist class. As a class, the capitalists are united by the need to promote the conditions necessary for investment and business activity. For that, they need, for example, a supply of compliant and affordable labour, a state willing and able to provide socially necessary infrastructure, a financial system to facilitate the processes of capital accumulation, a vibrant consumer market, and so on. On issues such as these, capitalists stand united. But the capitalist also finds himself in competition with his comrades. Capitalists have differing needs and interests depending on exactly how they get their hands on the spoils of exploitation – whether as landlord, financier, industrialist, retailer or state official, for example. In the usual course of things, this is just the stuff of competition, of ‘business as usual’, the undertow of everyday life. But when crisis hits, everything breaks to the surface. As Marx puts it (in Capital, Volume 3, Chapter 15):

  ‘So long as things go well, competition effects an operating fraternity of the capitalist class […] so that each shares in the common loot in proportion to the size of his respective investment. But as soon as it is no longer a question of sharing profits, but of sharing losses, everyone tries to reduce his own share to a minimum and to shove it off upon another. The class, as such, must inevitably lose. How much the individual capitalist must bear of the loss, ie, to what extent he must share in it at all, is decided by strength and cunning, and competition then becomes a fight among hostile brothers. The antagonism between each individual capitalist’s interests and those of the capitalist class as a whole, then comes to the surface…’

Who wins out in this struggle is not simply a reflection of factional power, as the Marxist academic David Harvey points out (The Limits To Capital, Chapter 7). The existence of surplus value (profit) in money form is ‘the most adequate form of capital’, which means that ‘the moneyed interest enriches itself at the cost of the industrial interest in the course of [a] crisis’ (Marx). This, then, helps us understand the row about bankers’ bonuses. It’s a row about which class, or which fraction of a class, is going to be landed with the costs of the crisis. We see, therefore, that Marxian theory is not esoteric mumbo-jumbo or outdated rubbish, as often claimed, but a powerful explanation for what is actually going on in the real world. If you understand Marxian theory, bankers’ multi-billion-pound bonuses and the row surrounding them no longer look so much like an insane aberration, but a logical consequence of social and economic structure. Bankers are enriching themselves at the expense of industry and workers? Well, OK, that’s what we would expect to happen…

What is to be done?

The question is what is to be done about it. As Harvey says, however the class struggle eventually plays out, however the losses of the crisis are finally distributed between factions of the capitalist class, and between the working and capitalist classes, and whatever the power struggle that ensues, the necessary result will be the destruction of value (closure of workplaces, the laying off of workers, destruction of surpluses, defaulting on debt, cutting of state services, and so on) so that a new round of capitalist accumulation can begin. This is totally irrational and insane from the point of view of human needs, but inevitable and logical from the point of view of capital accumulation.

The film-maker Charles Ferguson, whose investigative documentary Inside Job exposes the delusions and deeds of the bankers during the course of the crisis, says that, ‘Those responsible [for the crisis] blame the system. Or they blame the bubble caused by irresponsible borrowers.  Some of them blame low interest rates. In a grim way, it’s actually amusing to watch them blame anyone except themselves’ (Evening Standard, 17 January). The film-maker’s contempt for those who line their pockets and profit from social disaster is justified. But actually, in a sense, it’s the bankers who have got it right. It is the system that is to blame. And we should indeed ‘move on’ – from blaming capitalists who are as much at the mercy of the system as the rest of us, to an understanding of the world we live in and how it works. Politically, that means moving from a demand for ‘regime change’ to one for ‘system change’.

Stuart Watkins

Voice From The Back: Football fortunes (2010)

The Voice From The Back column from the May 2010 issue of the Socialist Standard

Football fortunes

Every day in the newspapers and on television we are told of the fabulous incomes of some of the footballers in the Premier League. Some are reported to be earning £140,000 a week. To most workers this appears a fortune and yet it is chicken-feed compared to the immense wealth of people like the Russian multi-millionaire who at present owns the Chelsea football club. Of course the majority of professional footballers have to struggle by on more ordinary incomes like most workers. At the other end of the scale from the well-heeled Premier footballers and the millionaire owners we have the poor makers of the footballs. “The city of Sialkot in Pakistan produces as many as 60 million hand-stitched footballs in a World Cup year. The firms here are running out of new workers since child labor was abolished. Western buyers may have a clear conscience, but the children of Sialkot now toil in the local brickworks instead. …Shaukat is a strong, 20-year-old man. He has been working for this independent stitching factory, Danayal, for eight years. Danayal produces handmade footballs for professional leagues. … At the entrance to the factory there’s a notice board showing the current rates of pay. Depending on the model, his employer pays between 55 and 63 Pakistan rupees per ball ($0.65 to $0.75). ‘On a good day I manage six balls,’ says Shaukat. That’s eight hours work. ‘That’s not a lot of money,’ he says as he pushes a needle through the thick synthetic leather and stitches together two patches. His boss is standing close by so he quickly adds: ‘But it’s not little either.’ He gets paid every Saturday and has to feed a family of six with his wages” (Spiegel on line, 16 March). That is how capitalism operates – immense wealth for the millionaire owners and penury for the working class.

Cause for celebration?

According to the media the US and Russian leaders have scored a wonderful step forward for world peace. “US President Barack Obama and his Russian counterpart, Dmitry Medvedev, have signed a landmark nuclear arms treaty in the Czech capital, Prague. The treaty commits the former Cold War enemies to each reduce the number of deployed strategic warheads to 1,550 — 30% lower than the previous ceiling. Mr Obama said it was an important milestone, but “just one step on a longer journey” of nuclear disarmament. Mr Medvedev said the deal would create safer conditions throughout the world” (BBC News, 8 April). Before we crack open the champagne and engage in dancing in the street it would be worthwhile reflecting on what this really means. 1,550 nuclear warheads is sufficient to destroy the whole world! A more sober analysis of the US/Russia agreement is that it is an attempt to limit arms expenditure and aims to discourage non-US/Russia opponents from entering the nuclear arms race. Our champagne remains uncorked.

Capitalism in action

Defenders of capitalism laud it as a dynamic social system that may produce some problems, but claim that in the long run it is the only possible way to run society. “One of Britain’s richest bankers has landed a record pay package of £63.3million. The extraordinary deal for Barclays president Bob Diamond sparked a major new row over payouts to banking fat cats. The sheer size of his salary, perks and shares package flies in the face of assurances that Barclays and other banks have adopted a culture of restraint” (Daily Mail, 20 March). We can understand why the Bob Diamonds of this world would support capitalism but what about the predicament of the kids reported in the latest WaterAid charity leaflet? “Every 20 seconds a child in the developing world dies from water-related diseases. In around the time it takes you to read the next paragraph, a child somewhere will die. Every day, people in the world’s poorest countries face the dilemma of having to trust their health and that of their children to the consequences of drinking water that could kill them. It’s a gamble that often carries a high price — seeing children needlessly dying is simply heartbreaking.” A dynamic system for bankers maybe but a death sentence for these children.

Prostitutes, pimps and politicians

It is the sort of story that those pimps of Fleet Street love. The French to bring back officially-sanctioned brothels! “More than 60 years after Paris shut its famed maisons closes, or brothels, an MP from President Sarkozy’s UMP party is campaigning to legalise them again. Chantal Brunel, who was appointed last month to head the national watchdog on sexual equality, is arguing that crime would be cut and sex workers would benefit from ‘sexual services centres’ similar to those run by most of France’s neighbours” (Times, 19 March). In advocating a change in French law this MP expressed a long-held but completely fallacious notion. “Ms Brunel, MP for the western Paris suburbs, says that France should follow the example of nearly all its neighbours and allow modern bordels. ‘It is true that few women prostitute themselves willingly,’ she told Le Parisien. ‘But we should not be blind. Prostitution has always existed and will always do so’.” Prostitution can only exist in a property based society. For thousands of years before the advent of private property prostitution did not exist, but what is more important in the society based on common ownership of the future affronts to human dignity such as prostitution will be completely impossible.

Tiny Tips (2012)

The Tiny Tips column from the February 2012 issue of the Socialist Standard

The majority of psychiatrists, psychologists and other mental health professionals “go along to get along” and maintain a status quo that includes drug company corruption, pseudoscientific research and a “standard of care” that is routinely damaging and occasionally kills young children:

[Dead Link]

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If the federal minimum wage had been updated since 1974 using the Social Security yardstick, it would now stand at $10.74 an hour. In other words, after adjusting for inflation minimum wage workers today are paid less — about 26 percent less — than they were in 1974:

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Rape within the US military has become so widespread that it is estimated that a female soldier in Iraq is more likely to be attacked by a fellow soldier than killed by enemy fire:

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The number of empty houses in England has risen by nearly 12,000 to stand at 662,105:

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Homeless men live to an average age of 47 while women who live rough generally die four years earlier, new figures show:

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“At one major investment bank for which I worked, we used psychometric testing to recruit social psychopaths because their characteristics exactly suited them to senior corporate finance roles.”

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She holds in even greater contempt the Islamist parties that have emerged in the first rounds of Egypt’s elections as the revolution’s biggest winners. Though a devout Muslim who covers her hair, she thinks politics and religion shouldn’t mix. The Islamists, she says, “have hijacked the revolution.” “I hate them,” she says. “The real owners of the revolution are the workers.”

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With over 20 million internet users and growing fast, Pakistan has managed to secure the number one slot for searching the term ‘sex’ globally for all years:

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Airlines’ accident risk is highest when they are performing very close to their financial targets, according to a study by a professor in BYU’s Marriott School of Management:

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Software developed for closed-circuit television systems can identify individuals and track them across entire networks of cameras:

[Dead Link]

Bankers Bonus Bonanza (2012)

From the March 2012 issue of the Socialist Standard

Pigs, fat cats or scapegoats?

Bankers are unpopular. Not the ordinary bank teller or the back-up IT staff, but the directors and top managers who award themselves huge salaries and big bonuses. They are so unpopular, in fact, that the chief executive of Royal Bank of Scotland, Stephen Hester, has been forced to give up a bonus of nearly £1m while his predecessor, Sir Fred Goodwin, has been stripped of his knighthood.

The banks defend themselves by arguing that they bring “wealth” into Britain, and pay a considerable amount of tax on it. Some even describe themselves as “wealth creators”. This is absurd. What banks do is compete for a share of the pool of wealth already created by the productive sections of the world’s working class, wealth which is extracted from them as surplus value. They can be more or less successful in doing this. Banks situated in Britain can channel some of the world’s surplus value this way which might otherwise have gone elsewhere, but this is capturing surplus value rather than creating wealth. In this way, banks do bring profits to Britain and the taxes they pay on it help finance the capitalist state. It’s an argument that carries some weight with other capitalists and with the government, whether Tory, Coalition or Labour (and it was Labour who knighted Goodwin), which manages the general affairs of UK Plc.

The popular perception of banks as merely shuffling money rather than producing anything useful is basically correct, even if it doesn’t go any deeper than that. Wealth – as something useful to human living – can only be produced by humans applying their physical and mental energies to material that originally came from nature to fashion it into something useful. As an early political economist, Sir William Petty, put it in the seventeenth century, Labour is the father and the Earth is the mother of all wealth. No bank, not even any bank worker, is engaged in the production of wealth as they are not involved in transforming materials from nature into something useful. This is not to say that banks do not play an important role within the capitalist system. They are part of the division of labour within the capitalist class. If banks didn’t exist then industrial capitalists would have to be their own bankers.

Under capitalism, as under all social systems, wealth is produced by human labour acting on materials that came from nature. But capitalism is a class-divided society in which the means for producing wealth – factories, machines, means of transport and communication as well as raw materials – are monopolised by a minority.  On those means the rest of us are dependent and in them wealth is produced for sale with a view to a profit for this minority. Two consequences follow. First, wealth acquires a value (related in the end to the amount of labour required to produce it from start to finish). Second, that those involved in the actual production of wealth are exploited – they produce more value than what they are paid for the sale and application of their mental and physical energies. This “surplus value” is the source of all profit, not just the profit of the industrial capitalists but also of the profit of those capitalists engaged in non-productive activities such as selling – and banking.

Such non-productive activities are necessary under capitalism and if they were not organised by independent businesses then the industrial capitalists would have to arrange for this themselves. They would have to tie up some of their capital in a department to sell their product to the final users or in a fund to finance longer-term activities. It proved more convenient – and in fact more profitable – to in effect hive off these activities to independent businesses. But this still involved sharing some of the surplus value extracted from their workers with these hived-off businesses.

Banks make their profits out of providing some services for other capitalist businesses, but essentially out of lending money to them and getting a share of the surplus value as interest. The money they lend could be their own or, more likely, it could be money they have themselves borrowed, though at a lower rate of interest. While some capitalist firms have a need to expand production, others will have a temporary cash surplus; the economic role of banks is to channel money from those who don’t need it for the time being to those who want to invest it. They are economic intermediaries.

The share-out of the surplus value produced by the productive section of the working class comes about through the averaging of the rate of profit. Different amounts of surplus value are produced in different industries, but if capitalist firms were able to keep as their profit all the surplus value produced in them then some industries would be more profitable than others. To the extent that this tends to happen the higher rate of profits attracts more capitalists to the industry, leading to more being produced and to prices and profits falling. In the end the equilibrium position (which is never reached) is when capital invested wherever, including in non-productive activities, would make the same rate of profit.

It’s as if all the surplus value produced in all industries was pooled and that capitalist firms of all sorts compete to withdraw from it as much profit as they can. This gives rise to the illusion that it is the business acumen of the directors or managers that determines the amount of profit a firm makes.  This is true only to a certain extent. The amount of profit a particular firm makes does depend on the decisions of those managing the firm. Being able to see trends and follow them up, being more efficient and the like can bring a firm higher profits. This is why some firms are prepared to pay their top managers big bonuses, on the assumption that their skills will bring in more money than the amount of the bonus. Whether this is in fact the case or whether the top managers are simply plundering the shareholders is an open question. In any event, it is not the business skills of those in charge of a firm that “create” the profits; they only withdraw them from the pool of surplus value previously produced by the working class, “capturing” them as we said. And the more they capture the bigger the bonus some get.

The averaging of the rate of profit means that in effect the whole capitalist class exploits the whole working class. So workers have has no interest in singling out one section, for instance bankers, for special opposition. They are all in it together and should be denounced equally as exploiters and parasites.

We have of course no sympathy for Stephen Hester and Fred Goodwin, but they are only scapegoats for the sins of capitalism. As far as we’re concerned the side show of them being sacrificed is not going to detract us from campaigning to get rid of capitalism altogether.

Adam Buick

An Open Letter to The Chairman of the Bank of England (2012)

Mervyn King

From the August 2012 issue of the Socialist Standard

Dear Sir Mervyn

Having heard on the BBC news channel on the evening of the 29th June your condemnations and exhortations concerning the practices of your fellow-bankers I am taking the liberty of writing to you to register my surprise at your remarks. It is not my purpose to be offensive but I find it difficult to accept that a man of your knowledge and experience can view the current crisis of capitalism in moral terms or, indeed, as aberrational.

I am an eighty-seven year old man and a great-grandfather which gives me a particular concern for the future. I was born four years before the awful world economic slump of 1929 and I have lived through some eight or nine ‘recessions’ –as they are euphemistically referred to today. I have witnessed life under the system of capitalism when it was largely unregulated –capitalists had discovered earlier that they required some sort of Queensbury Rules to protect themselves from one another.

Post-1945, when government adopted the war-time National government’s commitment to the Beveridge Report, I experienced Maynard Keynes’ antidote to the caprice of the system, via ‘demand management’: the exchange of bonds for shares and –in recognition that working-class poverty was an endemic feature of capitalism – the institution of a complex scheme of nationalised poverty.

It would be churlish to deny that there was some improvement in social conditions for the producing class: improvement, it has to be said, greatly assisted by the need to make good the awful destruction of the late world war –while frenetically preparing for yet another possible war against our late ‘glorious Russian allies’ and their Leninist philosophy of trying (vainly, as it turned out) to rationalise commodity production through central state planning.

While knowledge was constrained by the cash nexus, science in all fields of human endeavour has brought about a geometrical increase in our potential to create the material conditions of a full and happy life for every human being on the planet. Unfortunately much of our fantastically expanded wisdom and wealth has been siphoned into military establishments which are today a vital indigenous segment of the world economy; a segment which often manifests an independent and dangerous threat to human freedom.

The world of my lifetime has seen the economic murder of some eight billion people through starvation, lack of clean water and necessary medication. The food and medication to keep these people alive was available but the men, women and children concerned did not represent a viable market that would yield profit. They died because they were poor.

In the same period I have seen World War Two –the awful sequel to World War One –that brought homes onto battlefields. Now, since the end of WW2, there is at least one major conflict occurring every single day. In fact, the industrialised killing of human beings that arises from the endemic conflicts of capitalism has itself created investment opportunities effectively making international concord a serious economic threat.

Rich list
It is surely legitimate, Sir Mervyn, to ask such as your good self how you think people in what we hope will be a more enlightened future will see the current phase of what we are told is civilisation. How, for example, would a future economic historian see the current Sunday Times ‘Rich List’ which shows that the wealth of the one thousand richest people in the UK –a mere 0.003% of the adult population –increased by an incredible £155 billion over the last three years? This in a period when wages and social security benefits were, and are, being slashed and the vision and disagreements of the three political parties, marketing the same political product, is confined to the duration, in years, the working class will have to endure the appalling increase in its miseries.

Moral aphorisms appealing to those who have purloined the means whereby the rest of us live have never restrained the appetites of an owning class. It is said that Jesus got his comeuppance for suggesting the meek –by definition, the poor –should inherit the land. Centuries later, in the dying years of the nineteenth century, when Pope Leo mildly admonished the capitalism of his day, opining that “…the wages of the working man ought not be insufficient to support a frugal and well-conducted wage-earner…” (Encyclical: Rerum Novarum, May 1891) public criticism was raised by Italian businessmen who suggested that the promulgation of the document might cause social unrest.

Poverty and riches are two sides of the same coin –almost literally so, for as Shelley put it, “Paper coin, [is] that forgery of the title deeds which we hold to something of the worth of the inheritance of earth”. You cannot be ignorant of the mechanism by which a small minority class dispossesses the creators of all real wealth of the fruits of their labour and rations their access to their needs through a wages-money system.

Whatever the form of society, real wealth is produced, and can only be produced, by the application of human labour power to nature-given materials. Capitalism adds a third element to this simple equation: investment on foot of the promise of profit. The shareholder, whether s/he is a billionaire or a plumber in a pension scheme, seeks a return on their investment and is rarely persuaded by the needs of ‘the nation’ or their perception of morality. Only the threat in the aforesaid ‘Queensberry Rules’ of the system curbs the pecuniary enthusiasm of the more predatory captains of capital and that, as we are currently learning, is not always the case.

Capital on strike
The labour power that provided the fervid productive activity of, say six years ago, when the system was in relative ‘boom’, is still available as are the natural resources of that period. The missing element is capital; effectively, capital is on strike, holding the nation up to ransom as the pensioned editors of their newspapers proclaim when some group of low-paid workers withdraws their labour. Surely the fact that a small minority of satiated money shufflers can visit such overwhelming hardship on the populace in general (as it does periodically) must bring the entire system into question.

Whatever of the past, when the owner of the local factory lived in the big house on the periphery of the town or village and occasionally visited the local hostelry and even bought the lads a pint, capitalism today is a curse on the lives of the world’s billions. Technology has given it a mobility to seek the cheapest labour, circumvent health and safety standards that might impinge on profits or capital on-costs and to force the hand of allegedly democratic authority.

The implications in the current crop of chastisements against bankers and those of their ilk is that capitalism is an efficient, humane economic system that offers the human family the best of all possible worlds except when, as now, it falls victim to the ineptitude or greed of some of its functionaries. That is a lie told in defence of the system. Of course there has been abuse, and even absurdity, in the administration of banks and businesses but it was the uncontrollable greed that fuels the system that gave rise to the activities of bankers and speculators. Nor should we forget that it was the approbation of millionaire and billionaire shareholders that justified the fabulous salaries and bonuses so lately enjoyed by now-discredited servants of capital.

The widespread clarion for a public enquiry might expose some of the greedy swindlers whose dishonest activities have added misery to capitalism’s cyclic trade crisis as well as the self-interested manoeuvrings of politicians in all the three main parties. For a while these scoundrels might suffer in comfort the embarrassment of being publicly pilloried. But the system itself, the vile, anachronistic system that brings dire poverty or mere want to most of the people on the planet, will be off the hook.

What we will not have is an incisive enquiry into the question of capitalism’s suitability for purpose and whether socialism, in a clearly defined sense, offers a better way of life for the whole of humanity. That would be much too democratic.

Such are my thoughts. I confess, Sir Mervyn, that I am a ridiculous optimist who thinks human concern and human honesty might occasionally rise superior to the exigencies of office. Additionally, of course, in submitting this to the Editors of the Socialist Standard, I would stipulate that publication guarantees your right of reply.

Sincerely

Richard Montague

Answer to a Correspondent: Socialism and the Gold Standard. (1930)

From the January 1930 issue of the Socialist Standard

Socialism and the Gold Standard.

We have received a further letter—too long to print in full—from Mr. Edwin Wright, in which he attempts to substantiate statements made in his last letter (see December "S.S."), and introduces a number of fresh points additional to those already being discussed. We deal below with the issues raised last month.

The first issue was Mr. Wright’s denial of our statement that banks make profit by receiving money on deposit and lending it out at a higher rate of interest than the rate they pay to depositors. Mr. Wright’s "evidence” to support his denial consists of a statement which he attributes to Mr. McKenna. Mr. Wright says :—

  Mr. McKenna denies that banks pay their way by merely borrowing from one person and lending to another. His exact words are: "Every bank loan creates a deposit," which is a denial that banks lend money already deposited, if cheques are used.

In our last issue we invited Mr. Wright to say which part of our statement he considered to be wrong. It will be noticed that he does not attempt to do so, but relies entirely on a mere assertion by Mr. McKenna; an assertion unaccompanied by argument or evidence. Let us therefore repeat the statement :—(a) banks receive money on deposit; (b) they pay interest to depositors; (c) they lend money at interest; (d) the interest they pay is less than the interest they receive. Neither Mr. Wright nor anyone else can deny the accuracy of these four propositions.

And now let us see what another banker has to say about the statement attributed to Mr. McKenna.

The late Mr. Walter Leaf, Chairman of the Westminster Bank, in his book "Banking” (Williams & Norgate. 1926) dealt with this question. He wrote as follows:—

  It has indeed been argued that every loan by the banks creates a deposit; that as long as the banks go on increasing their loans, so long will their deposits grow in the same degree, and that thus the banks can be regarded as creating credit. Unfortunately, this theory will not stand confrontation with the facts . . . the course of events in the first half of the year, 1925, gives a decisive answer to this hypothesis.—(P. 102.)

He then gave figures showing that an increase in the amount of loans and advances made by the "Big Five” Joint Stock Banks, from £746 million in January, 1926, to £776 million in June, was accompanied by a decrease in deposits from £1,515 million in January to £1,490 million in June.

The second issue raised by Mr. Wright was his statement (see December "S.S.”) that Marx and Marxians "approve of a gold standard.” We denied this and asked for evidence. Mr. Wright now offers his evidence. He writes:—

  In “Value, Price & Profit,” Marx says, “ Even in England the mechanism (of banking) is less perfect than in Scotland.”—(P. 28.)

   Now Marx unfortunately helps the banker and the rich rather than us. On page 110/111 of 1 Vol. Edition of “ Capital,” he states: “ It is necessary that the quantity of gold be greater than that required as coin. This condition is fulfilled by hoards,” and (P. 110) "this mass of gold must be capable of expansion and contraction.” On page 90 he writes, “The erroneous opinion that it is prices that are determined by the quantity of money . . . this opinion is based on the absurd hypothesis that money is without value when it first circulates.” On page 102, Marx states, “ Money based on credit implies conditions totally unknown to us.”.

These quotations, according to Mr. Wright, show that Marx “approved the gold standard,” and that he “admired our money system,” and that he “defends bankers.”

We would first point out that the last “quotation” is not as Marx wrote it but as it appears after being “doctored” by Mr. Wright.

The correct quotation is "Money based upon credit implies on the other hand conditions, which from our standpoint of the simple circulation of commodities are as yet totally unknown to us.” (Capital, Volume 1. Kerr Edition. P. 143.)

Taken in its context this passage is clear enough and has a meaning totally different from the one assumed by Mr. Wright. Marx is developing an argument stage by stage and in this passage he reminds his reader that he was not “as yet” considering “money based upon credit.”

He did consider it later in Volume I and in Volumes II and III, the existence of which appears to be unknown to our critic.

Mr. Wright fails to realise the whole purpose of the work “Capital.” Mr. Wright imagines that the passages he quotes are intended to be statements of the policy which Marx advocated. This is a childish misunderstanding. “Capital” in general and the passages quoted are statements of the way in which Capitalism was in fact working when Marx studied it.

They are offered as statements of fact, not as tributes to or attacks on bankers.

Mr. Wright’s further contention is that his schemes for money reform "will enable Socialism and Communism to be established far more easily than you hope for.” He himself provides the answer to his illusory hopes. Having quoted Mr. McKenna as his authority for what he erroneously believes to be a fact about banking, he then admits that Mr. McKenna “thinks that Capitalism can be saved by money reform.” So that Mr. Wright’s short cut to Socialism is believed by Mr. McKenna to be a way to the salvation of Capitalism.

Next Mr. Wright bases the operation of his scheme on the existence of “a Socialist Government.”

In other words, Mr. Wright’s schemes cannot be operated until after the working-class have become Socialist and have obtained power. When that condition exists the working-class will use their power for the purpose of establishing Socialism not for the purpose of introducing some trivial alteration in the method by which Capitalism manages its currency. Socialism involves production for use, not for sale and will therefore require no currency system. We, therefore, in agreement with Marx, do not advocate a gold standard or any other currency system. We advocate Socialism.

Editorial Committee.

Singing the Praises of the Beautiful Banks (2017)

From the June 2017 issue of the Socialist Standard

The Co-operative bank has had various scandals in recent years, financial and otherwise. The Co-op 'brand' has decided it needs to clean up its image. The result is a current television advertising campaign which is as preposterous as it is insulting to our intelligence. The television ads are voiced by Russell Brand’s former radio show on-air commentator, George The Poet, who utters ponderous platitudes as if these capitalist high-street banks and supermarkets were some kind of socialist utopia. In fact, of course, today’s Co-op bears hardly even a trace of the idealism of the Rochdale Pioneers of 1844. Like the John Lewis Partnership, it has long succumbed to the pressure to act just like any other profit-hungry, hierarchical corporation within a capitalist world.

In 2016 a total of £16 million was allocated nationally by the Co-op to community projects and 'good causes', out of a group turnover of £7.1 billion. Just three of their bank directors (Niall Booker, Liam Coleman and John Baines) that year shared an income of £4 million, a quarter of the entire national community causes budget. So when George The Poet intones 'let’s work together and strive for unity' as 'great things happen when we work together', it is an utter sham. Likewise, when he asks, 'What if communities got a share of the profits? What if everyone could win from this?' he neglects to mention that last year the share handed to 'the community' (in lieu of tax) was only 2p out of every £10.

The recruitment of artistic talent to sell such messages has become the holy grail of companies, and it was a great coup that they had this film directed by one of our greatest living film makers, Shane Meadows (This Is England, Dead Man’s Shoes, SomersTown, A Room for Romeo Brass), well known for his working-class realism and affinity. Rather than carp from the sidelines, however, we can rely on the self-description from the horse’s mouth, as it were. The director of the Co-op brand, Helen Carroll, has praised the style of this new campaign, as it 'doesn’t feel like advertising at all. It shows the power of community'.

In using that power to sell products and make millions for people like Niall Booker and Liam Coleman, the Co-op has shamelessly copied a series of adverts run shortly before by a rival bank, also with false pretensions to being less bank-like than other banks, the Nationwide. Those ads featured a whole range of 'cool' and popular young performance poets, telling us through their rhyming sermons that Nationwide is another bank devoted to sharing, caring, community, responsibility and fairness. But try going to either of these banks if you have just been made redundant and can no longer pay your mortgage or rent. Ask them to show a bit of community spirit by covering it for you for a couple of years. Let us know their response.

All of those poets were either incredibly stupid and gullible, or ambitious and easily bought. The Nationwide, like the Co-op Bank, is a capitalist institution, committed to invest in order to accumulate surpluses. It stands right at the heart of the most exploitative system ever to curse the human species. Is this what music and lyrics are for, to praise banks? If only these artists had possessed one tenth of the decency and principle of Ricky Gervais, who once turned down a million pounds rather than advertise something he found tacky and undesirable – and that was at a time when he was not yet wealthy himself. What those cheap, venal sell-outs bought into was the modern trend in which capitalist corporations do not advertise the products they are selling, but rather their proclaimed decency and high moral values. Of course, they protest too much. The people and organisations who really devote themselves to caring about people and working for the community do not need to spend millions of advertising dollars insisting how nice they really are.

Clifford Slapper

Cooking the Books: “We are the 99 percent” (2011)

The Cooking the Books Column from the December 2011 issue of the Socialist Standard

So proclaim some of those who called for the occupation of Wall Street, explaining: “We are getting kicked out of our homes. We are forced to choose between groceries and rent. We are denied quality medical care. We are suffering from environmental pollution. We are working long hours for little pay and no rights, if we’re working at all. We are getting nothing while the other 1 percent is getting everything. We are the 99 percent” (wearethe-99percent.tumblr.com).

A powerful appeal - the sort of thing we might say ourselves. But who are “the other 1 percent” that are getting the best of everything? According to WeAreThe99percent, “they are the banks, the mortgage  industry, the insurance industry”, by which they presumably mean the rich people who own and control these financial corporations. But is that all of them? Apparently. But if so, this is wrong.

In 2010 CoreData research calculated that the number of millionaires (defined as those having a £1 million in addition to their principal residence) in Britain was 284,317 or 1.1 percent of households. So, the figure of 1 percent of those who benefit from the present system is more or less correct. However: “The study found that the majority of millionaires’ assets are held in shares at 34.2 per cent, while 32.2 per cent is invested in property and 13.2 per cent is held in cash. Just over 5 per cent of their money is invested in physical items, such as antiques, collectibles and art” (Daily Telegraph, 30 September 2010).

So they are not just bankers. In fact, at least in Britain, the biggest group seems to be property speculators and landowners. And the shares will be held in all sorts of capitalist corporations, not just banks and insurance companies. In other words, the 1 percent are capitalists in general. In suggesting that they are just the bankers WeAreThe99percent have got it wrong. It’s a mistake insofar as it suggests that if the bankers are dealt with (whether through banking reform or nationalisation) then the problems facing the 99 percent will go away, which of course they won’t as they are not caused by greedy bankers and the like but by the whole capitalist system.

It’s obviously not the intention, but to say that the 1 percent who exploit the rest of the population are just the bankers is to imply that non-financial capitalists are part of us, the 99 percent, when clearly they are not as they don’t face problems over housing, healthcare, inadequate pay or finding a job. “We Are The 99 percent” is an appealing slogan, but misleading if it means “everyone except bankers”. It should  mean something more like “everyone except the capitalist class”.

A wit once accused us of defining the working class as “everyone apart from the fat controller”. This is because we define the working class as everyone who, owning no means or instruments of production, is obliged by economic necessity to sell their mental and physical energies for a wage or salary to live or, otherwise, to depend on state handouts. In a developed part of the world such as Britain this amounts to about 90 percent of households and this is the group we look to end capitalism because they have a material interest in doing so. The other 10 percent is made up of the 1 percent of capitalists and 7-9 percent of “self-employed” (not that we’ve anything against most of them as they don’t exploit the working class). The trouble is “We Are The 93 percent” is not quite so snappy a slogan.