Cooking the Books: Global turbulence (2007)

The Cooking the Books column from the January 2007 issue of the Socialist Standard

Around 1973 the post-war boom came to an end. Various explanations were advanced. At the time one of the more popular was that profits had been squeezed because the working class had been able to take advantage of full employment to push up wages, as put forward by Andrew Glyn and Bob Sutcliffe in British Capitalism, Workers and the Profit Squeeze.

It was also the view, at the other end of the political spectrum, of Mrs Thatcher, who determined to destroy this supposed power of the unions. Which her government did after 1979. But this didn’t bring about a return to pre-1973 boom times. Which shows, argues Robert Brenner in The Economics of Global Turbulence, that it wasn’t increased wages that caused the fall in the rate of profit that precipitated what he calls “the long downturn” that is still with us.

So what did? His explanation is that the unplanned and competitive nature of capitalism led to world overproduction and overcapacity in manufacturing industry. The expansion of American manufacturing industry led the post-war boom but, in time, the same productive methods it employed were applied by its competitors in Germany and Japan, so increasing – over-increasing in fact (in relation to paying demand, not real need of course) – world manufacturing capacity.

“Normally” this would be rectified by a world slump in which the high-cost, inefficient producers would be eliminated but this didn’t happen, argues Brenner, or at least not sufficiently, because of government intervention and because some of the inefficient producers were prepared to carry on with reduced profits. And it still hasn’t happened as, although world paying demand (world trade) has expanded, world manufacturing capacity has expanded more, with the arrival, first, of Korea and Taiwan and, now, of China. As a result since 1973 the world economy as a whole has only been limping along.

The motor of capitalism has always been industry, which transforms material things into other material things. It is the renewal and expansion of such industries, and the repercussions this has on the rest of the economy, that has resulted in the accumulation of productive capital that is the essence of capitalism. But in Western countries today, with their stagnant or declining manufacturing sectors, this no longer appears to be the case. Judging by the commentaries on the financial pages, this role of motor would seem to have been taken over by “consumption”.

Capitalism has of course always satisfied paying consumer demand but this has been generated as a by-product of the accumulation of capital. Keynesianism was an attempt to go beyond this and artificially stimulate consumer demand through government spending.

Brenner argues that governments are still trying to stimulate and manipulate demand, by deliberately engineering an illusory increase in wealth by lowering short-term interest rates. This has the effect of increasing the price of stocks and shares and houses; people feel richer and, once a stock exchange or housing bubble develops, can get more money to spend through cashing in their capital gains. Brenner calls this “asset-price Keynesianism” and argues that in the end it is just as impossible to sustain as classical Keynesianism. Not only does it lead to “stop-go” as the artificially inflated demand draws in imports and creates balance of payments problems, but it also leads to stock exchange and/or housing booms and busts.

He says that the current apparent expansion in the US will sooner or later come to an end (as it now seems to be) “but, whether the reversal takes place with a whimper or a bang, economic slowdown and new turbulence still seem much more likely than a leap into a new long upturn”. So capitalism will just stagger on from mini-boom to mini-slump and back as it has done since 1973.

Cooking the Books: Back to the seventies? (2007)

The Cooking the Books column from the June 2007 issue of the Socialist Standard

Last year the Oxford economist Andrew Glyn brought out a new book called Capitalism Unleashed. Thirty-five years ago he was the co-author of a Penguin Special that came out in 1972 called British Capitalism, Workers and the Profits Squeeze. In it he and his fellow author (Bob Sutcliffe) argued that capitalism, at least in Britain, had been brought to a life-or-death crisis because working class militancy, on the one hand, and international competition, on the other, had squeezed profits, the life-blood of the system without which it couldn’t survive. One more push from the workers, they suggested, and capitalism could be overthrown.

We ourselves were sceptical about the whole analysis, suggesting that they were greatly exaggerating trade union “power” and that the crisis was not a life-or-death one but just a phase of the ordinary business cycle which capitalism goes through and from which it would recover sooner or later (see our review in February 1973 Socialist Standard). Actually, it turned out to be a bigger turning point than we thought, as capitalism has never since returned to the “full employment” days of the 50s and 60s.

In any event, capitalism did survive. So what does Glyn think now? Modern-day, “unleashed” capitalism, he says, has its problems (financial turbulence, corporate corruption, etc) but cannot be said to be in a state of crisis in the sense of the Oxford Dictionary definition of “the point in the progress of a disease when an important development or change takes place which is decisive of recovery or death” that he believed it to have been in in the 70s. In fact, his view is that there is now no alternative to capitalism on the horizon, so all we’ve got is a choice of different kinds of capitalism.

  

“The longer-term objective of socialism was always to facilitate the development of people’s lives in a more fulfilling direction”, he writes, and asks: “Is it possible to make serious moves in this direction even within what is still a predominantly capitalist economy?”.

His answer is, perhaps surprisingly from someone who was associated with Militant for a while, “yes”, in the form of the scheme proposed by the Belgian social thinker, Philippe Van Parijs, for paying everyone a Basic Income as of right and irrespective of whether or not they work, referring to an article by him in a book with the revealing title of Redesigning Distribution: Basic Income and Stakeholder Grants as Designs for a More Egalitarian Capitalism. Or, as Van Parijs himself has put it:

  “In classical Marxism, socialism is just an instrument for achieving the society in which people can work freely according to their abilities but still get enough according to their needs. If socialism doesn’t work, because of threats to freedom and problems of dynamic efficiency, then why not harness capitalism to achieve the same objectives?” (The Bulletin, Brussels, 19 July 2001).

It’s a pipedream of course and a bit currency cranky (though to give Van Parijs his due, he did come up with a brilliant title for one of his books in What’s Wrong with a Free Lunch?). A Basic Income paid as of right would have to be funded (even squeezed) out of profits and would either undermine the wages system (why work for a capitalist employer if the State is paying you whether you work or not?) or make no difference (since wages would fall by the amount of the State wage subsidy that a Basic Income would represent). Or it would be fixed at so low a level as to be just another name for “Income Support”.

The simple fact is that capitalism can’t be reformed, humanised or made more egalitarian. It must be ended not mended.

Is Capitalism Collapsing? (1973)

Book Review from the February 1973 issue of the Socialist Standard

British Capitalism, Workers and the Profits Squeeze by Andrew Glyn and Bob Sutcliffe. Penguin. 55p.

The thesis of this book can be stated simply: British capitalism is in crisis because profits have been squeezed between rising wages, on the one hand, and increasing international competition which has prevented compensatory price rises on the other.

The authors present figures to argue that there has been a drastic fall in the rate of profit since 1964 and predict that, sooner or later, this will be reflected in a collapse of share prices on the Stock Exchange too. Increasing international competition they attribute to the end of the post-war boom. "British capitalism", they say, “has entered a crisis which it may not survive”. In short, in their view, the long-expected "big slump” is imminent.

Maybe. That there has been a fall in the rate of profit in recent years is undeniable; so is the fact that this has been the cause of a slow rate of capital accumulation in Britain. And, that, therefore, all recent governments, Labour as well as Conservative, have been forced to attack working-class living standards in a bid to increase profits, the lifeblood of capitalism.

But is this fall in profits the beginning of a "big slump” or just the downturn of another normal capitalist business cycle which will eventually be followed by a recovery? Past experience (including our own) of predicting slumps advises caution. Capitalism has proved to be more resilient than we might like.

Two points of economic criticism. First, Glyn and Sutcliffe betray no knowledge of the basic cause of inflation and indeed appear to think that it is the result of capitalist firms putting up prices. But, as we have repeatedly shown in the Socialist Standard, inflation has been caused by the currency policies of successive post-war governments. Partly this has been due to an ignorance of monetary economics, but partly also it has been political: inflation undermines working class living standards without provoking the head-on clash with the unions a direct reduction of wages would. Recent trade union activity has largely been a response to inflation and has only kept real take-home pay rising slightly faster that prices but less than productivity.

This brings us to our second criticism. Glyn and Sutcliffe grossly over-exaggerate the effectiveness of trade unions in raising wages. They attribute to the unions a major responsibility for the present crisis. For, according to them, by pushing up wages in a period of intense international competition the unions have squeezed profits. In fact there is no evidence that rising wages do squeeze profits. The working class has certainly resisted capitalist attempts to reduce their living standards more successfully than the capitalists would have liked, but this is not quite the same thing. As the authors themselves point out, in previous crises the workers have become more militant essentially only in defence of their living standards.

But, for political reasons, they want to believe the present crisis to be different. They believe that if the workers keep up their present pressure for higher wages (and if they are not “betrayed” by their trade union leaders as in the past) then capitalism, at least in Britain, can be overthrown.

Quite apart from the fact that what, in their minds, is to replace capitalism here is merely a national state capitalism (which, surely, would be subject to the same pressures from international competition to restrict working-class consumption in the interests of capital accumulation?), this is nonsense. The defensive trade union struggle cannot lead to the overthrow of capitalism precisely because in the end the capitalist class and their government have in their hands all the wealth and power they need to defeat the unions. To overthrow capitalism a conscious political movement for Socialism must arise (and not just in one country either). Otherwise, and until it does, capitalism will indeed "muddle on for ever”.

Adam Buick

Blogger's Note:

See also -  Wish It Were The Seventies?

Wish It Were The Seventies?

Latest post from the SPGB blog, Socialism Or Your Money Back

We've just been sent a review copy of Capitalism Unleashed by Andrew Glyn (OUP). We are not sure why as it came out in March 2006. Still, as they say, you shouldn't look a gift horse in the mouth.

Those (like us) with long memories will recall that Glyn was the co-author of a Penguin Special that came out in 1972 called British Capitalism, Workers and the Profits Squeeze. In it he and his fellow author (Bob Sutcliffe) argued that capitalism, at least in Britain, had been brought to a life-or-death crisis because working class militancy, on the one hand, and international competition, on the other, had squeezed profits, the life-blood of the system without which it couldn't survive. One more push from the workers, they suggested, and capitalism could be overthrown.

The only danger they saw was that the workers would be betrayed by the reformist leaders of the TUC who would hold them back (it's this word "betrayal" which is the clue that they were some kind of Trotskyist; Glyn later became involved in Militant). We ourselves were sceptical about the whole analysis, suggesting that they were greatly exaggerating trade union "power" and that the crisis was not a life-or-death one but just a phase of the ordinary business cycle which capitalism goes through and from which it would recover sooner or later (see our review in February 1973 Socialist Standard). Actually, it turned out to be a bigger turning-point than we thought, as capitalism has never since returned to the "never-had-it-so-good" days of the 50s and 60s.

In any event, capitalism did survive. So what does Glyn think now? Modern-day, "unleashed" capitalism, he says, has its problems (financial turbulence, corporate corruption, etc) but cannot be said to be in a state of crisis in the sense of the Oxford University dictionary definition of "the point in the progress of a disease when an important development or change takes place which is decisive of recovery or death" that he believed it to have been in in the 70s. In fact, his view is that there is now no alternative to capitalism on the horizon, so all we've got is a choice of different kinds of capitalism.

"The longer-term objective of socialism was always to facilitate the development of people's lives in a more fulfilling direction", he writes and asks: "Is it possible to make serious moves in this direction even within what is still a predominantly capitalist economy?".

His answer is, perhaps surprisingly, "yes", in the form of the scheme proposed by the Belgian social thinker, Philippe Van Parijs, for paying everyone a Basic Income as of right and irrespective of whether or not they work, referring to an article by him in a book with the revealing title of Redesigning Distribution: Basic Income and Stakeholder Grants as Designs for a More Egalitarian Capitalism. Or, as Van Parijs himself has put it:

"In classical Marxism, socialism is just an instrument for achieving the society in which people can work freely according to their abilities but still get enough according to their needs. If socialism doesn't work, because of threats to freedom and problems of dynamic efficiency, then why not harness capitalism to achieve the same objectives?" (The Bulletin, Brussels, 19 July 2001).

It's a pipedream of course and a bit currency cranky (though to give Van Parijs his due, he did come up with a brilliant title for one of his books in What's Wrong with a Free Lunch?). A Basic Income paid as of right would have to be funded (even squeezed) out of profits and would either undermine the wages system (why work for a capitalist employer if the State is paying you whether you work or not?) or make no difference (since wages would fall by the amount of the State wage subsidy that a Basic Income would represent). Or it would be fixed at so low a level as to be just another name for "Income Support".

As for us, we're still socialists as we were in the 1970s. Capitalism can't be reformed, humanised or made more egalitarian. It must be ended not mended, and replaced by a system of common ownership and democratic control of productive resources, so that production can be geared to satisfying people's needs on the principle of "from each their ability, to each their needs".

Adam Buick