Capital vs the environment (2025)

 

From the November 2025 issue of the Socialist Standard

If the scientists are right, humanity is facing a climate emergency. There has been much hand-wringing at the many COP-out meetings, but little protection has been afforded to the environment. In fact, the damage seems to be increasing. This should come as no surprise, as socialists have long argued that the capitalist system of production prevents rational stewardship of the planet. The five features of the system set out here show why this is so.

1. The economic status quo

The ownership/control of the world’s productive resources is in the hands of a small minority – via ‘legal title’, as with private capital, or via membership of a clique that controls a state. Yet this ownership/control is fragmented, creating a host of competing interests among that minority.

To consider the implications of this fragmentation, let’s imagine there’s an individual capitalist, Bill, the sole owner of a factory where copper pipe is produced, a standard product sold to industrial customers. All of Bill’s money is tied up in the factory, and the business provides him with an income that means he has no need to do any work himself.

This also means that, if he is to maintain his status as part of the minority, he is absolutely reliant on the continuing success of the business (and who can blame him for wanting to maintain his status? Who would willingly swap the relative freedom of the capitalist for the life of a worker?). However, Bill has no monopoly over copper pipe. His factory is competing in a market and, as any capitalist knows, competition means ‘expand or die’. So what does Bill have to do to avoid economic death?

Experience shows that competition constantly forces businesses to adopt new technologies to increase productivity, that is, to reduce the amount of labour used in their production processes, and produce more in the same amount of time. So Bill will be obliged to use much of the income generated by his company to bring in modern equipment.

One of the facts of new technology is that it won’t be new forever. Sooner or later, there’s no telling when, it will be overtaken by even newer tech that will tend to depress market prices. This means that Bill will have to ensure his new tech runs as fast as it will go to get as much of his product out of the door before prices drop, before his now outdated technology becomes relatively less productive or even economically unusable. This of course means an increase in the use of raw materials and in output – more pipe will be thrown onto the market.

And remember, competitors will be trying to match or better what Bill is doing, so demand for raw materials and output will be multiplied across the pipe-making sector.

A minor detail of new technology is that ‘early adopters’ expect to undercut their competitors for a while and gain market share. But this advantage will only persist until the new technology becomes the norm. This gives an additional impetus to increase production in the meantime, and of course, increase the use of raw materials.

The increased production in Bill’s sector cannot continue ad infinitum. Sooner or later, an imbalance, where supply exceeds demand, will occur. This will usually result in smaller, less productive companies being forced out of business. Supply will align more with demand, until competition creates a new imbalance. (The slump phase of the general business cycle would have a similar effect on Bill’s sector, but that is beyond the scope of the present analysis.)

2. Production for profit

Nothing is produced under the capitalist system unless there is an expectation of profit. In general, although rates of profit will vary, profits are made most of the time (even in a time of economic crisis when lots of businesses go to the wall, there is money capital around to pick up industrial assets at ‘fire sale’ prices which can then be exploited profitably). This increases the amount of money capital that, in light of the competition discussed above, has to be re-invested in some sort of productive process. Hence the staggering amount of wealth in the form of industrial assets that has accumulated under the capitalist system. And it is the very same competition that ensures that these assets can never be left idle for any extended period of time. They must always be put to use, putting new demands on natural resources.

3. The scramble for sales

What has been said above applies to every type of company, be it private, a PLC or workers’ cooperative. It applies too to every sector of capitalist production, be it ship-building, production of industrial robots or the garment trade. But there is an additional factor that operates when we consider the production of personal consumption goods – furniture, clothing, cars and the like.

As we saw above, capital is always on the look-out for profits. In the personal consumption goods sector, this results in the use of cheap materials, planned obsolescence and rapid turnover of fashions, anything in fact that will result in more sales. And on a more general level, it leads to the promotion of individual ownership when public provision would be a far more efficient use of resources (think public transport and laundries, tool libraries, even clothes libraries – why not, it works for wedding suits, doesn’t it?)

4. Anarchic production

The conflict of interests within the owning class makes the rational planning of production (and hence rational use of resources) impossible under the capitalist system. So at the time of writing, (August 2025) there is world overcapacity in, for example, steel, cars, and chemicals.

5. A ‘political’ dimension

Even though capital has now created a world market, individual nation-states, a hangover from capital’s early days, still have a role in protecting the common interests of ‘their’ owning class. So as we are seeing at present, the overcapacity that tends to arise from the economics of capitalist production can also be created or exacerbated by national industrial policies (eg the Chips Act in the US and the ‘Made in China 2025’ policy in China). Although this feature appears to be political, it derives directly from the underlying economic structure.

Budgie.

Letter: Full employment, slumps and other questions (1964)

Letter to the Editors from the October 1964 issue of the Socialist Standard

Full employment, slumps and other questions

Dear Sir.

An article published in the Socialist Standard in January of this year posed a question with its title, namely "Are you better off?" Unfortunately, however, the article does not provide any definite conclusion.

The article does however concede that the average increase of the purchasing power of take-home pay is probably about 10 per cent.

"In the meantime, owing to more than proportionate increases of pay deductions from pay (national insurance and income tax), the average increase of the purchasing power of take-home pay is not the 18 per cent of the two indexes would show (wage rate index and retail price index) but something less, probably about 10 per cent Socialist Standard, page 9, January 1964.”

It might also be pointed out that.the present alleged standard of affluence that many of the working class are at present living at is dependent on their wives going to work in order to augment the family budget. But, notwithstanding, this and other factors such as the tremendous growth in hire purchase commitments, it is difficult to deny that the worker of today is better off if fully employed, as the vast majority are at present, than his counterpart was when unemployed in large numbers before the Second World War, particularly in the slump of 1929. In case it should be asked why one should compare the lot of a fully employed worker to that of an unemployed one in the pre-war period the answer is that millions were unemployed then, and relatively few are unemployed now. The article in question gave four columns of figures, one of which gave the number of unemployed of 1938 when it stood at 1,927,000. The column next to this gives unemployment as a percentage of 1938. this year being taken as 100 per cent. If these figures are accurate, then we may conclude that unemployment has not reached 50 per cent of this level since 1938.

On this aspect of the problem the article in your journal is significantly silent. In fact I think it would be true to say that the Socialist Standard has failed to account for this continuing full employment since the end of the war and does not even find the subject worthy of discussion in its columns.

May 1 therefore ask the following questions?

(a) Why in your opinion has the slump which you maintain is an essential feature of capitalism failed to appear in England?

(b) Why has there been no slump of the magnitude of 1929 since the war.

(c) Are the present conditions of full employment, increasing the membership of your organisation and the sales of the Socialist Standard.

(d) Do you think the orthodox economists using ideas of the late Maynard Keynes have found a way of preventing widespread and profound slumps of the pre 1938 variety and if not how do you account for this rather prolonged period of full employment?

I am, yours etc.

T. Lawlor

Reply:

Our correspondent comments on the fact that, compared with pre-war years, the position of the workers has been affected by the decline of unemployment and the increased number of married women who go out to work, as well as by the rise of average wages in relation to prices. This was referred to in the article, where it was pointed out that total wages are about five times what they were in 1938, “mainly because of the decline of unemployment and the fact that far more married women are now out at work".

Whether this last factor can be regarded simply as a gain is another matter. In the nineteenth century the need of married women to work was commonly regarded as a disadvantage by those who studied its consequences.

If however it is a fact that most workers now are rather better off than before the war, this kind of development is not a new thing. Frederick Engels noted in 1885 that since 1844, when he wrote his The Condition of the Working Class in England, the factory workers had become “undoubtedly better off”, and the condition of engineers, carpenters, joiners and bricklayers, organised in the trade unions, “had remarkably improved". (See Preface to 1892 Edition).

In the same Preface and in the 1886 Preface to Capital Engels then went on to state a position which events proved to be wrong. He had concluded, because of the length and severity of the depression, that British Capitalism would never resume its expansion and that “either the country must go to pieces or capitalist production must ”. He thought unemployment was bound to increase year by year and that shortly, “ the unemployed . . . will take their fate into their own hands ”,

Profiting by Engels' mistakes the SPGB reached the conclusion (one indeed that Marx and Engels had themselves seen) that the achievement of Socialism calls for understanding on the part of the workers and cannot be the outcome of discontent and despair without understanding.

Our correspondent accepts rather too easily the claim that there has been “continuing full employment since the end of the war". In the column of figures to which he refers in the January Socialist Standard it is shown that since the war unemployment has ranged from 302,000 in January 1956 to 861,000 in January 1963. This latter figure may not be high by pre-war standards but it certainly cannot be described as “full employment”. Allowance ought also to be made for the fact that unemployment will have been increased in the nineteen thirties by the big flow of migration into this country. In post-war years up to about 1960 the net flow was outwards.

Against that background we can answer the specific questions.

(a) For this question it is necessary to take care about the use of words. If by “slump” our correspondent means only a “heavy slump” like that of the thirties, the answer is that such heavy slumps are not an essential feature following each capitalist crisis.

What we had as an essential feature o! capitalism is, to quote the words used by Marx in Capital, Volume I, Chapter XV, Section 8: —

The life of modern industry becomes a series of periods of moderate activity, prosperity, overproduction, crisis and stagnation.

The crises, that is the sharp interruptions of booms, have continued to happen in the post-war years. For example, the index of production in January 1963 was down to 108, after having reached 120 in January 1961. If in post-war years, the ensuing “stagnations" have not been heavy and prolonged this is in line with the experience of crises in the nineteenth century. Most of these crises were not followed by heavy prolonged slumps. The outstanding big ones were in the eighteen forties, the eighteen eighties (the one that threw Engels off-balance) and the nineteen thirties, and in between there were depressions that were not heavy or prolonged.

(b) Among the reasons why heavy depression existed in the nineteen thirties and not in post-war years in this country (experience of some other countries has been markedly different) is the absence of a very important factor which existed then. This is the pre-war feature of crisis-dislocation superimposed on the long-term decline of some very big industries, agriculture, coal and cotton without the counter effect of strongly expanding new industries. In post-war years, along with a much larger Civil Service, large armed forces and armaments industry, there has been expansion of building (helped by war-time destruction and stoppage of building), man-made fibres, electricity and electrical engineering, motor car and aircraft manufacture, television, chemicals and oil, electronics and nuclear power.

(c) If this question means has low unemployment since the end of the war been accompanied by a continuous increase of membership, etc., the answer is no; but we would not expect increase of membership to be determined by low unemployment any more than the heavy unemployment of the thirties had that effect. Other factors also come into it.

(d) This question relates to the supposed ability of governments to prevent widespread and profound slumps by means of the techniques associated with the late Lord Keynes. It will put the matter into perspective to point out that also before 1935 (the year Keyne's major work appeared) there were, between the heavy slump, long periods without heavy slumps.

If it is claimed that Keynesian techniques give Governments effective control over capitalism why did unemployment rise to 861,000 in 1963? As all governments have at their disposal these same techniques, and numerous economists who approve of them, why have many countries had heavy unemployment for prolonged periods since the war. among them U.S.A.. Canada. Germany, Italy, Belgium and Denmark? In Italy unemployment ranged between 1½ and 2 million for 10 years after the war. During this year unemployment has been at the 6 per cent level in Canada and U.S.A.

How have the techniques supposed to have worked? The Keynesians claim that the Government can, when it likes, stimulate capital investment and consumption and at other times damp down over-expansion. When the present motor car boom slackens off as it certainly will, what can the government do, if the world market for cars is temporality saturated, except wait for demand to recover? Theoretically the government could have prevented the industry from expanding so rapidly—and left the market to be filled with the cars of other producers—but the car manufacturers, the trade unions and the Tory and Opposition M.P.'s would all have protested.

Now that the Southern Rhodesian tobacco industry has been hit by falling prices following a bumper crop, how can Keynes help them? The producers are in fact turning to another and older technique, that of restricting production.

Of course it long ago ceased to he true that Keynesian doctrines were held only by the unorthodox minority. They had become the orthodoxy of large numbers of economists and members of governments. Now fashion is changing again and Keynes comes under increasing criticism. It would seem that his theories have not proved, even to his admirers, to be the panacea they were claimed to be.

Editorial Committee.

Business men worried about the fall of world trade (1956)

From the October 1956 issue of the Socialist Standard

“At a time when this country has to contend with conditions flowing from the credit squeeze and difficulties in the motor vehicle industry, it is not too pleasant to read that there is likely to be a reduction in the rate of growth of world trade this year. The United Nations’ World Economic Survey for 1955 suggests that this decline will follow the reduced rate of expansion in demand and output in the industrial countries. This will affect countries dependent on exports for expansion of economic activity. The report finds that the economic record of the past few years is better than that of the ten years following World War I. There are several grounds for serious concern, however. The growth hitherto has been due only in part to favourable long-term forces. It had been largely based on temporary or special factors, and some of these have been disappearing. It is properly suggested that one decade of prosperity affords no proof that the world has acquired permanent immunity against the business cycle, or that the national or international remedies in its medicine chests would prove sufficiently potent to cope with another outcropping of the disease. Having regard to the changing aspect of world markets, to the increasing tempo and strength of foreign competition and to the domestic difficulties in this country, there is. indeed, no assurance that the comparatively good time through which we have passed in recent years will be prolonged''--(Birmingham Chamber of Commerce Journal, August, 1956.)

Letter From Europe: Mitterrand clamps down (1982)

The Letter From Europe Column from the August 1982 issue of the Socialist Standard

It had to happen sooner or later. The attempt by Mitterrand's PS/PC government to revive the economy and reduce unemployment in France by giving people more money to spend—increasing “popular consumption" as it was called—just couldn't last. Since capitalism is a system which cannot be controlled or manipulated by governments and since most of the money to finance the social reforms in question came straight off the printing press, what happened was inevitable: the general price level in France rose, and at a rate faster than in other countries, leading to a fall-off in exports and a record balance of payments deficit which in turn made a devaluation of the franc inevitable. The effect on employment, on the other hand, was minimal: sales of consumer goods picked up for a while but the number of unemployed continued to grow, by nearly 16 per cent since Mitterrand came to power, passing the 2 million mark in October.

Exactly a year ago the Socialist Standard, analysing the economic policy of the then brand new PS/PC government, wrote:

It will fail completely and within a year or so they will be faced with growing working class discontent over persisting unemployment and rising prices which they will not be able to satisfy, since the continuing crisis will force them to recognise that under capitalism priority must be given to profits and profit-making rather than to social reforms and popular consumption. The crunch will then come and they will be forced, like all governments of capitalism sooner or later, to take openly anti-working class measures. 

As a matter of fact the crunch has come sooner rather than later, less than a year after the PS/PC government took office at the end of June 1981. On 12 June this year the French franc was devalued within the European Monetary System, for the second time in less than 9 months in fact, since Mitterrand had already been forced to devalue last October too. The October devaluation had been accompanied by rather timid price controls and mere appeals for some wage moderation. This time it was different. The government has adopted the following measures:

• a legally-imposed wage freeze lasting till the end of October, the only exception being the rise in the minimum wage due on 1 July; a legally-imposed price freeze also until the end of October but with some important exceptions such as oil, gas, electricity and imported goods;
• an increase in contributions to the health service accompanied by a cut in some benefits;
• a similar operation of increased contributions for less benefits regarding the unemployment insurance scheme.

The Minister of Finance, Jacques Delors, has already announced that austerity will not finish at the end of October but will continue. in the form of a restrictive “incomes policy", at least until the end of 1983; in other words, for at least 18 months in all.

Delors has also made no attempt to disguise the fact that the living standards of workers will have fallen by the end of October. He has publicly admitted that, while wages will be completely frozen, prices will rise by at least 2.8 per cent during this period. This will happen not only because prices are much harder to control than wages, but also because a number of exceptions to the so-called "prices freeze” are being allowed, particularly oil products (petrol, heating oil. paraffin) and imported goods. Since one effect of the devaluation will precisely be to increase the prices of imported goods, it is evident how large a loophole this latter will be.

So the government has now done a complete U-turn. The aim is now not to increase popular consumption but to reduce it! The Prime Minister, Pierre Mauroy, had already forewarned, even before the devaluation. that wages were soon going to come under direct attack from the government when he told a PS meeting on 21 May: 

Excessive nominal increases in incomes and wages maintain inflation and deprive our economy of the means to create jobs. The government has decided to act and we will shortly have occasion to talk about this again (Republicain Lorrain, 22 May).

It is clear from this that the government accepts the old. mistaken theory that it is wage increases that cause inflation. In fact, wages only increase in a period of inflation because inflation—an overissue of an inconvertible currency—inevitably leads to a rise in the general price level; wages, the price of labour power, merely rise in line with all other prices. Wage and salary earners are the victims not the cause of inflation.

The government's hope is that its austerity package will bring price rises—currently running at an annual rate of 14 per cent— down to an average of 10 per cent over the 12 months of 1982. This means of course that for the remaining months of the year the rate will have to fall well below 10 per cent. But unless they limit the amount of inconvertible paper money in circulation to what the level of economic activity requires—and there is no evidence whatsoever that this is their intention—then the pressure for prices to go on rising will continue.

If the currency is being overissued, then freezing wages and prices can’t stop prices rising. Certainly this can work for a limited period, just as a dam can stop a river flowing . . . for a limited period. Thus it is possible that the government could achieve a short term success but in the long run they will fail. Eventually, and sooner rather than later, the dam will burst and prices—including wages—will resume their upward trend. Delors is in fact very worried about what is going to happen after the legal wage and price freeze is over and this is why he is hoping to persuade the unions to moderate their wage demands over a longer period.

The union leaders, or some of them, may be prepared to go along with this. French union leaders are also politically involved and may well be prepared to betray their members’ interests to help a government they support just as British union leaders have done when Labour has been in power.

Indeed, just like Labour governments in Britain, the PS/PC government in France hopes to exploit its links with the unions to keep wages down and is publicly boasting that it will be better able to get the unions to co-operate in this than the opposition parties. And it is true that when the previous "right wing’’ government decided in September 1976 to block prices for 3 months it didn't dare block wages as well, as the present "left wing" government has done, limiting itself simply to asking employers not to offer excessive wage increases. But even this brought trade unionists out on to the streets proclaiming "No to Austerity". History shows that allegedly "socialist” governments in all countries are better able to impose austerity on workers than openly capitalist ones. (A case could even be made out for saying that this is their role within capitalism.) What is happening in France today is a further confirmation of this rule.

Two further points must however be made. First, in a period of high unemployment real wages (what wages can buy) will tend to be under pressure anyway for purely economic reasons, irrespective of government policy or of whether the union leaders betray their members or not. Second, if inflation of the currency continues, then nominal money wages will go on rising, once again irrespective of what governments and union leaders may or may not do. But government action to try, in the one case, to reinforce downward pressures on real wages and, in the other, to try to counter the upward pressures on nominal wages clearly reveals that all governments are forced to run capitalism in the only way it can be — against the interests of the wage and salary earning majority. A sustained policy of increasing “popular consumption” under capitalism must sooner or later restrict popular consumption to protect profits.

Actually, as we pointed out in the article last August, Delors did not have such a simplistic solution to the economic crisis as the PCF, the CGT trade union and some of his PC colleagues — that economic activity could he revived by giving people more money to spend. He realised that the French economy was part of the world economy and that a revival in France could not be sustained without a revival in the world capitalist economy. But he too was naive in believing, without any reasonable grounds for doing so, that this world revival would occur within a year and that therefore the French government could safely "reflate” its economy (print more money to finance government spending) in anticipation. In June last year he declared that "the reflation measures already taken by the government . . . are a limited anticipation of the recovery of the world economy which the experts foresee for the end of this year or the beginning of next (The Times, 24 June 1981).

The end of 1981 came, but there was no world recovery. The months of 1982 passed, still no world recovery. The "experts” began to creep back into their holes. Meanwhile, as a direct result of the government's spending financed by the printing press, the rate of inflation remained higher in France than in other countries. . . leading eventually to the devaluation of 12 June and the current austerity measures.

When Prime Minister Pierre Mauroy announced the devaluation he could only remark pathetically that his government had done what it could "but the international recovery was not at the rendez-vous”. It takes two to make a rendez-vous and the PS/ PC government has found out the hard way that governments are in no position to impose a rendez vous on the capitalist economy. Capitalism is a world system which operates according to its own economic laws, going through its regular boom-slump. boom-slump cycles, irrespective of what governments may or may not do. It is true however that, while governments can do nothing to bring about a recovery before it would normally occur, they can. as Marx pointed out. make things worse by mistaken monetary policies, as the present French government just seems to have done. Mauroy would have been better to have employed some other metaphor: "we took a risk and we lost" or "we took a leap in the dark and fell flat on our faces". Or even Harold Wilson's "we were blown off course”!

This utter failure of the PS/PC government in France is yet another confirmation of our contention that capitalism can never be made to work in the interests of the wage and salary earning majority. It is a profit-making system based on the exploitation of wage-labour and can only function as such, whatever the political colour the government may happen to have. Any party which takes on the responsibility for governing under capitalism is sooner or later forced, whether it originally intended to or not, to respect the economic logic of capitalism which decrees that profits must come before wages, that the consumption of the wage and salary earning class must be limited so as to allow profits to be made.

Mitterrand's failure is proof that reformism is a futile waste of time. Since the Labour Party’s economic policy resembles very closely that pursued by Mitterrand until 12 June, there's a lesson here for workers in Britain too.

Adam Buick (Luxemburg)

Full Employment? Another Labour Party Fallacy (1946)

From the January 1946 issue of the Socialist Standard

Is full employment for the working class possible? What exactly does it mean? By whom is it desirable? Or is it a stunt to inspire the workers with hope and trust in our so-called Socialist Government?

 

These are not some of the questions asked in Parliament, or other public places. On the contrary, there seems to be general agreement, especially in the press, to keep up the fiction that full employment is possible, not merely for the repair of war damage, but indefinitely.

According to a leading article in the Daily Telegraph for November 16th, the Government's plan for full employment is much the same as that of the Coalition Government's in 1944. They say :—

“It differs little but in omissions and change of emphasis from the policy for maintaining 'a high and stable level of employment' which the Coalition Government set forth in 1944. That policy commanded general support as a well devised means of smoothing out booms and slumps, the main obstacles to full employment." 

Neither the Coalition Government, nor the present Labour Government, have so far explained how, by smoothing out the booms and slumps, fuller employment is obtained. Neither do they, or the Daily Telegraph, show how, when one dead level of employment has been reached, it is possible to achieve a condition of full employment. The plan is to spend on public works during the slump, leaving the booms to keep the workers busy during the few years—or months—they last. The Daily Telegraph, while hopeful of the results, is dubious of the ability of the Government and its experts to forecast the slumps, and adjust, their spending on public works accordingly.

Having once made the assertion that ''booms and slumps are the main obstacles to full employment," which is false, any deductions they make on that premise will undoubtedly be wrong. If, instead of eating all my cake to-day, I save a portion for to-morrow, obviously, nothing is added to the total.

In the same way, if a capitalist Government postpones its public works schemes to provide work during a slump, it creates no new employment. All it does is to arrange a levelling out, with little or no fluctuations.

If the unemployment figures during a boom are one million, and during a slump three million, cut out spending on public works during the boom and spread it over the slump and you get approximately two millions throughout both periods. The new arrangement is of no benefit to the workers. On the contrary, the advantage is on the side of Big Business, which has a well stocked labour market on which to draw at the very time world markets are expanding.

The Labour Government, in taking over the Capitalist bag of tricks, have taken with it its superstitions. Ever since the "South Sea bubble" there has been profound dread among capitalists of trade crises. "There's a slump on the way," or "a boom is just round the corner" were common expressions, generally spoken with superstitious awe, as though it were some great convulsion of nature. This dread impotence before the economic blizzard is still prevalent. According to the Daily Sketch (Nov. 23rd, 1945)), Mr. Dalton had said:—

"We must also arm ourselves with anti-slump powers, so that never again, as in past years, shall prices and productivity and employment all fall away through the failure of private enterprise."

The Daily Sketch leader commented as follows : —

"Even Mr. Dalton's Fabian audience must have caught their breath at the sheer ineptitude of that pronouncement, for there is no means within the capacity of man which would leave us an exception to the general experience in the event of a world slump. That will prove to be true Whether this country is run under state control or private enterprise."

For the last 30 years the workers have been unable to see much difference in the amount of unemployment during booms and slumps. They certainly do not become more prosperous during the booms. Big business, even when it gets really busy, cannot absorb more than part of the unemployed millions left over from the previous slump, Booms and slumps are no longer a mystery to all capitalists. This fact is made clear in a book by Roy Glenday, "Economic adviser to the Federation of British Industries," and entitled, "The Future of Economic Society" (Macmillan & Co., 1944).

Mr. Glenday gives facts and figures that shed much light on the subject of trade, both internal and international. In the production and marketing of motor cars, for instance, he says: The huge and complex plant necessary for standardisation and cheapness would be uneconomic without assurance of an ever expanding market. When saturation level has been reached with the ready money section, hire purchase methods are resorted to; which only puts off the evil day of partial, or even total collapse. When it is remembered that this is the normal process of big business in the production and sale of such things as radio sets, cycles and electric appliances of many kinds we can readily understand how this mad race for profits leads to crises.

Mr. Glenday has a convincing array of facts and evidence, from which he argues that Capitalism cannot survive its present crisis without some kind of adjustment in its environment. But contrary to what we should expect from an adviser to the Federation of British Industries, he envisages some form of “communism" the next step in human progress being what he calls the service state. Where, in return for security and a retiring pension, the individual will have to give up the right to choose his job, and must be prepared, not only to move from one locality to another, but also to change his job; undergoing a period of training, if necessary, to fit him for his new job. According to the Conservative press, something like this “service state” is contemplated for this country by the present Government, and already exists in Russia. They (the Conservatives) call it the servile state. But capitalism, whether British, Russian or American, means servility for the working-class always and everywhere. The right to choose his own job is of little value to the individual worker, the majority of whom consider themselves fortunate when they can find any sort of job and hold it down. Booms and slumps mean little to them.

Much depends on the point of view. From the capitalist viewpoint, it is eminently desirable that the workers should be kept busy; though not too busy in case they get independent. And not only because they are a source of profit; but also because many unemployed workers are a menace to a smoothly running system, and they have to be fed anyway.

The worker's point of view is different. He knows that the overstocked condition of the world's markets is the result of working-class energy. Of working-class efficiency combined with modern methods and machinery. The machinery itself being the result of working-class effort. In short, all the ingredients that go to make up overstocked markets are included in the phrase "human energy and the nature-given material," capitalists being excluded.

Under a rational system of society the machines would not belong to the capitalist, but to the people, and the people, while participating in the work of production and distribution, would arrange the conditions for themselves. They would do so through a real democracy worked out by themselves. The idea of finding or making work would be illogical and absurd. Under Socialism only the work necessary for the satisfaction of human needs according to an agreed standard of life and culture, would be performed. Booms and slumps would disappear along with the poverty and unemployment that spring from the wild scramble for profits.

F. E.

The bankers and the crisis (1982)

From the November 1982 issue of the Socialist Standard

The German philosopher. Hegel, said that the only lesson of history is "that people and governments never have learnt anything from history". This is not altogether true but it can be applied to the attitude of capitalists, of capitalist politicians and of economists to the recurrent crises and depressions of capitalism. In spite of a score or more of depressions in the past 200 years the capitalists (and most workers) believe, when each boom comes, that it will last for ever. As Marx put it, when the market is expanding, each capitalist behaves as if the demand for his products is limitless. For a time this appears to be true: there is a growing demand for raw materials and finished products, and for workers. Profit prospects are good, unemployment falls and wages rise. But, as Marx also said, that situation is "the harbinger of a coming crisis". Suddenly some industries find that they have overproduced for their particular market and start to halt further investment and curb output.

Capitalism does not go on producing if there is no profit in it. At that point (as happened in the autumn of 1973) there will be. side by side, some companies cutting back because of falling orders and other companies still reporting inability to meet their orders because of scarcity of materials and workers. Then they all become more or less involved in the depression as unemployment grows and demand falls generally.

When the inevitable depression takes place, politicians and economic "experts" say that something has gone wrong, and that what they have to do is discover what this something is, why it happened and how to avoid it next time. Dozens of "remedies" have been publicised: put wages up or put them down; raise prices or reduce them; go in for free trade or import restrictions; increase government expenditure or decrease it; stay in the EEC or leave it; induce the banks to lend more freely or the reverse; increase government borrowing or avoid it; increase taxation or reduce it; raise the foreign exchange rate of the pound or lower it; tighten up trade union law or relax it: have more nationalisation or less nationalisation. One thing ignored by all these peddlers of remedies is that they have all been tried before and failed.

Take the Thatcher government, with its “monetarist” policies. They say that all will be well if government expenditure, borrowing and taxation are reduced, inflation got rid of, wages and prices left to market forces, if there is less nationalisation and tighter laws governing trade unions and strikes. But all these supposed cures for depression existed in the last quarter of the 19th century. Government expenditure and taxation, in relation to the National Income, were only about a fifth of what they are now. There was no inflation. Wages and prices were then left to market forces and not only were the unions numerically much weaker but they operated under more stringent trade union law. There was much less nationalisation. For most of the time Tory governments were in office. So what happened? It was the period of the Great Depression, which lasted for over twenty years. In the middle of it, in 1884. the Tory leader. Lord Randolph Churchill, had this to say:

We are suffering from a depression of trade extending as far back as 1874. ten years of trade depression, and the most hopeful either among our capitalists or among our artisans can discern no signs of a revival.

He listed all the industries that were, in his words, dead or dying — coal, iron, shipbuilding, silk, wool and cotton. He ended: “Turn your eyes where you like, you will find signs of mortal disease".

This country had not at that time experienced capitalism run by Labour governments, whose record was in fact no better than that of the Tories or Liberals. In the fifty years 1929-79 there were four periods of Labour government, in all of which priority was given to reducing unemployment and keeping it low. (Actually they said they could abolish it entirely.) In all these four periods unemployment was higher when they left office than when they went in. The latest period was 1974-79, which saw unemployment rise from 629,000 to just under 1,300,000. The favourite remedy of Foot and Benn to this is to increase government expenditure. In 1973 unemployment was 630,000 and government expenditure £24,000m. The latter has increased every year since 1973. including the years of Thatcher government, and in 1981 was £107,000 million, but unemployment, though still much below the levels of the 1930s. is now over 3 million.

One question on which the Labour Party, the Tory Party and the economists are agreed is that one cause of depression and heavy unemployment is that prices are too high. In a similar situation of depression and heavy unemployment in 1931 a government committee (Committee on Finance and Industry), took exactly the opposite line. The fourteen top bankers, economists and Tory, Labour and Liberal politicians studied the problems for eighteen months and issued their Report in June 1931. Among the recommendations was a chapter on "The immediate necessity to raise prices above their present level”. Both views are baseless: capitalism has periodic depressions whether prices are high or low, rising or falling.

The belief of the searchers for remedies is based on a misconception. They believe that trade depression and heavy unemployment prove that something has gone wrong. They are mistaken. Nothing whatever has "gone wrong" with capitalism; it is just the way the system operates in accordance with its structure, with alternate expansion and contraction, much like the tides. If, one evening at the seaside, you see the sea almost up to road level, and then in the morning see that it has dropped twenty feet, you don't shout: "Something has gone wrong. What shall we do about it?"

Where the analogy with the tides fails is in respect of regularity and the length of trade depressions. It is not possible to count on all depressions lasting for some specified time. Some are quite short, others very long, like the Great Depression. (Some economists have recalled the "long-wave” speculative theory of Kondratieff. An article on this in the Financial Times on 6 September had the cheerful title:"Why The Recession May Last Till 1996".) All that can be said is that at some stage in the present depression, as in all the earlier ones, expansion will be resumed when capitalists, viewing all the relevant factors (prices, interest rates, wages) decide that it will be profitable to invest again in the development of new industries and the re-expansion of old ones.

The headlines have recently been made by the banking crisis. There is nothing new in this; every trade depression is accompanied by bank failures or banks losing much of their assets. Walter Leaf in Banking (1926 edition, page 59) says that in the crisis of 1837 "it is believed that every bank in the United States, without exception, suspended payment". And the same happened again in 1875. Writing of the American depression in the 1930s, H. G. Nicholas says that “two-thirds of the banks of the country had closed their doors". (The American Union, page 252.) H. M. Hyndman, in his Commercial Crises of the Nineteenth Century (page 95) wrote of the collapse of the great banking house Overend & Gurney, described as standing next to the Bank of England, and “their name and influence extended to all parts of the civilised globe”. When they stopped payment on 10 May 1866 "the panic occasioned throughout Great Britain was to the full as furious and unreasoning for the time . . . as the panic of 1857”. Hyndman says that the Foreign Secretary "was impelled to send a circular to all our Ambassadors abroad, in order to assure foreigners that the bottom had not fallen out of our island". Banks make most of their profit by borrowing money from depositors at a low rate of interest and lending or investing at a higher return. According to the Financial Times (27 September) the London Clearing Banks are now paying on average about 3 per cent to depositors and lending at over 12 per cent. Out of this margin they have to meet the costs of 234,000 staff and of maintaining some 11,000 branches. Banks can get into difficulties either by their depositors wanting to withdraw all their deposits, or by lending money to companies or governments which go bankrupt or default on the loan.

If depositors lose confidence in the bank and try to get their money out the bank is in trouble because they have only very small amounts of cash in their tills or on deposit at the Bank of England, and it may not be possible for them to turn other assets into cash at short notice without big losses. The Evening Standard (8 September) reported that the sudden decision of the Mexican government to nationalise all banks, suspend payment for five days and make the dollar an illegal currency was because there was a run on the banks; they "literally ran out of dollars". The Western bankers are all in trouble through having lent vast sums of money to companies and governments which, because of the depression, are unable to keep their repayment agreements or, in some cases, even to pay the interest. Mexico’s interest payments have been running at £580 million a month.

One aspect has been the fall of oil prices and oil consumption which have reduced the foreign investments of the oil producing countries (OPEC). At the same time Third World countries find their exports falling so that they are unable both to pay for necessary imports and meet commitments on their huge debts. One of the worst-hit countries is Mexico. On the strength of hoped-for big and increasing revenue from oil exports, loans were raised from world banks totalling £67,000 million, of which £15,700 million was due to be repaid this year. Because of the depression and falling oil revenues Mexico was unable to pay. In effect it was on the verge of defaulting. but that is the last thing the bankers want. So the Mexican authorities were able to induce the bankers, through the International Monetary Fund, to lend still more, an amount of £2,640 million, and with the agreement of the bankers to defer repayment of the debt in the hope that sometime or other Mexico will be better able to pay. However, IMF loans are granted only on the condition that the borrowing government agrees to restrict its expenditure and take whatever other measures the IMF will approve'. One action forced on the Mexican government is to impose a wage freeze until the end of the year.

Poland and many other countries are in the same plight as Mexico. While arrangements such as the IMF loan to Mexico save the banks from having to show big losses in their balance sheets, as they would if Mexico defaulted, they cannot avoid the loss they suffer through deferment of repayment of the loans. The Polish Government, which is in negotiation with Western banks over its huge debts is reported (Financial Times, 25 September) to have warned them that "there is no point in talking of repaying our debt over the next seven or eight years".

While the depression, like all the earlier ones, has seen thousands of companies go bankrupt in America. Britain and other countries, if appears that the governments will, this time, try to prevent widespread failures of big banks. And a small step has been taken in Britain to protect depositors against losses through bank failures. The banks, with Bank of England approval, have arranged to set up funds to ensure that depositors up to £10,000 will receive 75 per cent of their deposits in the event of the smaller banks closing down. The Midland Bank is reported (Sunday Times, 19 September) to be asking the government to guarantee any further loans to ailing companies to prevent them closing down, since this was done with government encouragement.

It should of course be remembered that whatever governments may, or may not do, the banks cannot escape running up huge bad debts in a depression, at the expense of bank shareholders. If banks fail, depositors lose. Any government financial aid must come out of taxation — a choice of evils as far as the banks are concerned. The Daily Mail (7 September) quotes an American banker as saying: “We’ll never sec most of these loans again. The best we can plan is to lose them gradually and gracefully”.

What of the future? In this depression, as in all the others, voices are heard prophesying the coming end of capitalism — a "final collapse". This overlooks the fact that all the parties of capitalism, including the Labour Party, far from seeking the end of capitalism, are busy devising policies to keep the system going. Until the world working class decide to end capitalism this present chaos will continue — the present depression will end followed by another crisis and depression, and another and another.

Edgar Hardcastle

Editorial: Planless Booms and Runaway Slumps (1956)

Editorial from the March 1956 issue of the Socialist Standard

Although the periodical crises under post-war Labour Government rather took the shine off the idea of planning there is still a lot of belief in it. A hundred years ago those who believed that Capitalism is the best of all possible systems had a different idea. They thought that if each individual went about the business of making money or getting a job on his own the medley of efforts and strivings would, like a mosiac, combine together to make harmony for the nation as a whole. It did not work like that and 19th century Capitalism was rent by class struggle and rocked from time to time in the cycle of boom—crisis—slump.

So the theory grew up, not only in Labour Party circles, that the remedy must lie in the direction of planning. The same idea caught on in other parts of the world and many people believe that governments, alone or in international organisations, can and do plan and control the course of economic events. That is why the “inflation” crisis of the past 12 months and the dark forebodings of another slump inspire such bewildered comments from the “experts” and the newspapers. For if everything is planned and under control then the crisis and possible slump must have been planned—which is absurd—or must be due to pure ignorance and incompetence by the Government and its advisers—which is now meat for the Opposition but poison for the Tories. Certainly the Government's defenders have much to explain away. To start with, the theory that everything is planned to run smoothly according to design, requires, not only that there shall be no crisis and no slump to come after it, but also that there shall be no bursting boom to come before it. So the boom itself proved the failure of planning, though only last year the Government spokesmen were claiming it as their own work and soliciting votes on the strength of it.

The next thing is the “inflation" from which they say we are all in dire peril. They are all now agreed. Government and Opposition alike, that “inflation” is the enemy. A year ago, in February, 1955, the Government raised the bank-rate from 3½ per cent. to 4½ per cent. This was the first step to halt that enemy, and it was followed in July by the instruction to the banks to restrict loans. These measures were supposed to be the cure. They failed, and in October came the emergency budget with more measures. Why then the need for more and still more remedies to curb demand and capital investment? The answer is in the admission in a Daily Mail editorial of 17 February, 1956, that “ inflation . . . gains momentum every day,” and in the declaration of Sir Eric Gore-Brown, chairman of Alexanders Discount Company, (a declaration endorsed by the financial editor of the Manchester Guardian 17/2/56) that “in his view monetary restraints, for example the use of the bank-rate and a credit squeeze, could not either alone or in combination, stop the spiral of wages and prices.”

The leader-writer of the Daily Mail (17/2/56) seeks to condone the failure of the Government to control this crisis with the plea that “in some ways the looming crisis is one we have not encountered before.”

This crisis, according to him, is different because unlike earlier ones, it 

“could be called a crisis of prosperity, for it is caused by the weight of earned money making undue demands on out resources.”

Far from being novel this has always been a mark of booms and crises. Every boom has the superficial appearance of “too much money chasing too few goods” as every depression has the superficial appearance of “ too many goods chased by too little money.”

But booms and slumps are not caused by monetary factors but by conditions in the field of production and marketing, basically by the class ownership of the means of production and of production for sale and profit.

When the Capitalists are convinced that they can look forward to a period of expanding sales and rising profits they rush in to enlarge their factories, buy more machinery and raw materials, and bid for more workers. They all use what money they have and try to borrow more. In these conditions prices and wages rise and the competition for loans sends up interest rates. The raising of the bank-rate a year ago only put the seal on a rise of interest rates that was already happening.

Anyone who thinks this has not happened before need only look at the situation in 1920. There was then a seemingly unlimited demand for goods and for workers. The trade unions (mainly of skilled workers) that kept an unemployment register showed unemployment of about 1 per cent., as it is now. The cost of living was rising, it jumped by 23 per cent, in the year ended November, 1920. Bankers and others were complaining of “inflation ” and the Cunliffe Committee had reported at the end of 1919 on measures to combat it.

And the bank rate was in the news as it is today. In February, 1956, it was raised from 4½ per cent, to 5½ per cent In November, 1919, it was raised from 5 per cent, to 6 per cent., and in April, 1920, to 7 per cent. Then, as now, one of its declared aims was to discourage lending by the banks. Mr. A. W. Kirkcaldy in his “British Finance” (1921, p. 55) says of the first of those two rises:—“in the main it was designed to check the speculative movement that became pronounced during the closing months of 1919, and to administer an effective check to the demand for further expansion of bank credit, if not to commence a gradual process of deflation.”

Inflation the Friend—or the Enemy ?

In 1920 and 1956 inflation is, by common consent, the enemy. It now has not a friend in the world, or at least not one who will disclose his friendship openly. It was not ever thus. In 1932 Lord Beaverbrook’s newspapers were running a great campaign for inflation! The Sunday Express (15/5/1932) had this:—

“The movement is growing and spreading. Most public men are now in favour of inflation. Practically every Member of Parliament speaking in the debates is an inflationist. Some of them are no longer even shy of the word. The movement is extended to many of the newspapers. It is even being adopted by the Times."

Prominent members of the Labour Party were rushing in to support the great new cause of inflation.

Now they have got what they asked for and they like it hardly more than they did the slump situation of 1932 from which inflation was to save them.

Many of them are fearful that this “inflation” crisis may be followed by a slump. (The 7 per cent. bank rate of 1920 preceded the over 2,000,000 unemployed of 1921).

So indeed it may. There are certainly in evidence some of the chaotic features that precede slumps and that in any event provide proof of how planless Capitalism always is and must be.

The American and other governments are embarrassed by the enormous stocks of unsaleable wheat and butter they hold. Was this planned? And the motor manufacturers here and in the U.S.A. are cutting back production “temporarily” because of stocks of unsold cars. But simultaneously all the big motor companies are going ahead with plans to expand their manufacturing capacity, amounting in the aggregate to many tens of millions of pounds. This is not planning but gambling. They all hope that demand will increase again and absorb their still further expanded production. They all fear that there is a possibility that demand may collapse instead of increasing, but they can’t be sure, and at the moment no big company dare drop out of the race to design and produce new and better cars and more of them. The company that ceases to compete fades out. And as if the car manufacturers of the Western Powers had not enough to worry about Russia too is now an exporter.

But who knows how Capitalism will run in the next five years or even one year? It may happen soon that the world’s markets will collapse as in 1921 and 1930— or it may not; or it may happen that particular countries, among them Britain, and particular industries may be hard hit while the rest may be little affected. Such things have happened before and could happen again. The evidence does not by any means all point to a serious depression. A large and rapidly growing place in production is being taken by the new atomic and electronic industries. For production and for military purposes enormous new investments are going on. and will go on even if depression does hit some established industries. A case in point is the raising of £24 million new capital by Associated Electrical Industries Ltd., only one of the many firms interested in this new and rapidly expanding field. It will, of course, seem to the men inside each of firms such as A.E.I., as to the men inside the motor firms, that they are carefully planning every move they make and with every possible effort to foresee the conditions in which their products will be coming on to the market one year or many years ahead. But this is all beside the point as far as world demand and world supply are concerned. While every British firm is planning to sell its products in the world market, so are similar firms and governments in every other country. They do not know very much about the eventual size of the potential world demand for all their products, and they know less still about the total supply there will be to satisfy the demand when all these unrelated plans for expanded production are completed and the bigger flow of products pours out. They all hope to get a large enough share of the market and all hope that the price they get will be a profitable one. They all hope, but they cannot know. They all gamble on the future. And every now and then the gamble produces chaotic conditions of such extent as to disorganise all markets and slow down all production. Capitalism is that sort of system and there is no cure except Socialism.

Contradictions of capitalism (1990)

From the September 1990 issue of the Socialist Standard

Defenders of the capitalist class, noticeably those from the Institute of Economic Affairs and the Adam Smith Institute, have recently been rather vocal in claiming that commodity production—buying and selling and the market—represent the climax of human economic development and in asserting the uselessness of anyone seeking to establish an alternative social system.

This confident bravado coincides with the collapse of state capitalist dictatorships in central Europe. Confusing nationalisation and state planning with socialism, these ideologists present capitalism, particularly the private form they favour, as a “rational” system effortlessly drifting towards some kind of free market Utopia in which every facet of the social world will be reduced to a commodity relationship. Some even suggest that governments and their economic advisers possess the necessary management skills to avert economic problems, while politicians, journalists and academics tell us in unison to be satisfied with our lot and to realise we are living in the best of all possible worlds.

This form of blinkered conservatism miserably fails to understand the workings of capitalism and the array of contradictions to be found within commodity production and distribution.

Economic crises

Despite the political rhetoric, for the governments and the economists who frame their policy documents there remains the uncomfortable fact that the economic and social problems which are features of capitalism cannot simply be wished away. Take for example economic crises and trade depressions which express all the contradictions of commodity production and highlight the anarchy of a system whose sole aim is to produce commodities for a profit.

It was Marx who discovered that crises spring from the very character of capitalism itself. Capitalism produces commodities which have to be exchanged to realise the profit embodied in them and the medium of exchange is money. Yet in this transaction there is an implicit contradiction which Marx expressed in the following way:

No one can sell unless some one else purchases. But no one is forthwith bound to purchase because he has just sold.(Capital. Vol I. chapter 3. section 2a).

Any break in this commodity chain of buying and selling will result in a crisis in which:

The spinner cannot pay because the weaver cannot pay: both of them do not pay the machine manufacturer who does not pay the iron, timber and coal merchant. All these again cannot meet their obligations as they have not realised the value of their commodities . . . and a general crisis thus arises. (Theories of Surplus Value, vol.III pt 2 pp 284-285).

Marx's theoretical explanation of the irrationality and unpredictability of capitalism, and of its crises, small and large, national or global, has been verified empirically, not only during his life-time but afterwards too. We only have to think back to the crisis and resultant trade depression at the end of the 1970s and beginning of the 1980s to see the vindication of Marx over the dreary academic economists and their theories of capitalism as a smooth-running rational system.

Profit before Need

There is currently a slump in the housebuilding industry. Before the crisis there was a feverish boom, with developers building as fast as they could acquire land. Workers within the building industry or related to it were able to gain higher wages, estate agents were snapped up by large corporations with many trading seven days a week, while the Sunday Supplements predicted the boom would last forever.

Then the break in the chain occurred between those buying houses and those selling them. Suddenly developers found they had unsold houses on their hands with interest repayments still outstanding to the banks. Some went bankrupt bringing unemployment and disruption to the lives of their employees. Contractors and building workers found work evaporating, while materials began to stockpile and large distribution companies began to lay off workers. The government and their economic advisers were neither able to predict the depression in house-building nor do anything about it once it had occurred.

This is a classic example of the way under capitalism a contradiction develops between production for profit and social need. Because of the inability to sell houses and realise a profit, house-building is stopped or cut-back while the needs of people for housing are passed over and remain unfulfilled.

This contradiction under capitalism between production for profit and social need takes place in other spheres of commodity production too. Peter Buchanan's 'Open Space' (BBC2 29 May) recently exposed the lie of the consumer fantasy world of the advertisers—the stick which beats the bucket of swill—by showing us homeless men in Cambridge being driven off a skip full of out-of-date supermarket food. There is also capitalism's complete indifference to the needs of 1.8 billion children under the age of 16 in the world to-day. According to a recent report, 61,000 children under the age of 5 die every day in the extreme poverty-stricken areas of the world as a result of preventable diarrhoeal diseases most of which are caused by poor water (Guardian, 25 March). In a rational society producing directly for social need this problem could easily be dealt with through the use of existing technology and of the skills of people working in the field of sanitation engineering. But we don't exist in a rational society: capitalism is perverse and indifferent to anything but the making of profit.

Despite the well-meaning but totally misplaced and ineffective effort of people in charities, the problem of starvation exists side by side with food mountains and deliberate underproduction. Farmers are paid subsidies not to produce and agricultural land is taken out of production to ensure profits are maintained. It would only be someone with a profitable interest in capitalism or someone who had been bought by the capitalist class to produce ruling-class ideas who could ever depict capitalism as "rational" or as a society representing the best of all possible worlds.

To rectify the problems, both social and economic, which affect workers today throughout the world, capitalism has to be abolished and replaced by socialism. To create this new social system of common ownership and democratic control over the means to life in which these problems can be solved and the needs of society met, requires conscious political action by a working class majority. No one else can do it for us. Until we take the necessary steps to capture political power then economic depressions, unemployment poverty and unfulfilled needs will continue: to borrow a phrase from one of Mrs Thatcher s speech writers, "There is no alternative".

Richard Lloyd

Planners' Roulette (1972)

From the September 1972 issue of the Socialist Standard

One of the many pipe-dreams of capitalist politicians and economists is to be able to plan the smooth and even growth of national economies without the disruptive cyclical phenomena which have been part and parcel of the system in the past.

Despite Keynes and his economic theories and various pseudo-socialist governments throughout the world, who claimed that they could produce a planned economy from which stop-go (as downturns and upswings in economic activity have come to be known in Britain) would be obviated, the capitalist system is still working in the same way it has always worked. Marx described the various stages of the industrial cycle of capitalism, ranging from a state of stagnation to one of intense activity, over a hundred years ago, and it is a description still valid today.

Even the new pseudo-science of econometrics and the development of data and statistics collection and forecasting techniques have failed to eliminate the anarchy from capitalism. The information merely enables the economists to get some idea when the next downturn in the business cycle will occur, but not to prevent it, as post-war events have clearly shown.

An example of the impossibility of planning capitalism was recently illustrated by a report that a five-year plan drawn up by the budget and economic planning ministry of Italy had in effect become a four-year plan and might even become a three-year plan, because of the slow growth of the economy. Obviously there is no point in planning resource application in other sectors of the economy if the output of those sectors upon which they are dependent for growth is incapable of meeting their requirements. It seems that the planners are without a clue to achieve this and may even be regarded as playing a game of chance in drawing up plans on the basis of information which is usually useless before it has left the planner’s desk. A suitable name for an economic planner’s game of chance would be “planners’ roulette”. The fault, however, lies not with the planners, but with the economic system which they are trying to plan and with the economic forces which drive it along.

Goods and services under the capitalist system are produced not to satisfy human needs, but for sale in order to realise profit, for a market. For a variety of reasons, the size of the market is constantly fluctuating and it should be obvious that under such conditions planning is impossible.

The recent rise in unemployment levels and the problem of over-capacity in many industries, viz. textiles, shipping and steel, would support the conclusion that economists do not know where to start. Do economists plan over-capacity and unemployment? One of the aims of planning was to eliminate just this problem and yet clearly they have been unsuccessful. They have been forced to change their plans to conform to the changes in the market; the market has not been controlled to conform to their plans. The housing problem, too, is an area in which governments have intervened on a large scale, but here they have been just as unsuccessful in solving the slum problem and homelessness; the situation is as bad as ever.

Economists claim to be scientific in their outlook and yet if scientists in the natural sciences had such a failure rate in their researches in understanding the world, then the outlook would be pretty bleak for the human race. Most of the economists’ claims ultimately rest upon the false premise that an exchange economy is the only, and indeed the best, way of organizing the production and distribution of wealth. Socialists repudiate this notion emphatically. But more than this Socialists advocate an alternative society based upon production for use. Capitalism has generated a vast, world-wide productive network of industries and a technology capable of producing wealth on an unlimited scale, if it were unrestricted by fetters of the market economy. Only when there has been a world-wide social revolution and the means of production have passed into the control of the whole of society will real planning be possible, a system of planning into which no other factor but human need enters.

Spectator.

Cooking the Books: The coming purge (2008)

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

Is it a depression or just a recession? According to the Penguin Dictionary of Economics, a recession is “an imprecise term given to a sharp slow-down in the rate of economic growth or a modest decline in economic activity”. This as distinct “from a slump or depression which is a more severe and prolonged downturn”. Government statisticians register a recession when GDP falls for two successive quarters.

On this definition Britain is not in a recession – not yet. But most economy-watchers expect that this stage will soon be reached. Gary Duncan, economics editor of the Times, even writes that this would not be such a bad thing:

“If Britain is to succumb to recession we need to remember that such periods are a virtually inescapable feature of even the most successful capitalist economies, even a necessary one to purge the system of past excesses, inefficient practices and the weakest links among businesses” (21 July).

That’s what Marx said, but it’s not what the economics textbooks teach (they still cultivate the illusion, relayed by politicians, that governments can engineer a steady growth of GDP, i.e. can avoid such periodic “purges”).

For Marx the accumulation of capital, which is the engine of economic growth, proceeded in fits and starts, a series of cycles of moderate activity, boom, crisis, slump, recovery, moderate activity, boom, crisis, etc. Booms eventually created the conditions for the next following slump while slumps created those for recovery.

One thing that happens during a slump that helps recovery is that capital is destroyed. Not just in the physical sense as when machinery is scrapped or factories pulled down but also in terms of the depreciation of capital with the physical elements in which it is embodied not being affected. This is the purge Duncan talks about. Marx explained:

“Values used as capital are prevented from acting again as capital in the hands of the same person. The old capitalists go bankrupt. If the value of the commodities from whose sale a capitalist reproduces his capital was equal to £12,000, of which say £2,000 were profit, and their price falls to £6,000, then the capitalist can neither meet his contracted obligations nor, even if he had none, could he, with the £6,000 restart his business on the former scale, for the commodity prices have risen once more to the level of their cost-prices. In this way, £6,000 has been destroyed, although the buyer of these commodities, because he has acquired them at half their cost-price, can go ahead very well once business livens up again, and may even have made a profit. A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction” (Theories of Surplus Value, Part Two, p. 496).

“This fall in the purely nominal capital,” Marx went on “State bonds, shares etc. . . amounts only to the transfer of wealth from one hand to another and will, on the whole, act favourably upon reproduction, since the parvenus into whose hands these stocks or shares fall cheaply, are mostly more enterprising than their former owners.”

As Britain heads for a recession (in whatever sense) the parvenus are already gathering to buy up failed and failing business at bargain prices. As well as laughing all the way to the bank they can justify their unpopular activity as performing a necessary function in capitalism’s business cycle. As indeed they are.

Depression (1958)

From the August 1958 issue of the Socialist Standard

It is a long time since the last great trade depression. Younger people will have little or no clear recollection of it. It occurred between 1929 and 1939, coming to an end after the outbreak of the Second World War. The period was known as the Hungry Thirties. At that time there was something like a million unemployed in Canada, three million in Britain, six million in Germany, eleven million in the United States. In 1934 it was reported that there were between 80,000,000 and 100,000,000 unemployed at that time throughout the world. Even Russia, where unemployment was claimed by its supporters to have lately been abolished, was affected by the depression and had to cope with growing numbers of unemployed. And wherever it existed, unemployment, then as now, deprived its victims of the sources of life other than the limited means made available through charitable groups and government agencies.

The world’s warehouses were filled with goods, the world's workers were in want and the statesmen were helpless. Bennett, of Canada, who rose to power in 1930 promising to end the depression, was ushered out of power in 1935, leaving 1,341,000 of the electorate on relief. Roosevelt of the United States called to his service the greater part of the alphabet and won the hearts of the American people—but failed to end the breadlines. Hitler of Germany blamed the evils suffered by his countrymen on the victors of the First World War and he fed the German workers’ national pride, red banners and brown shirts—to go with their black bread and sausages. The Labour Party of Britain, which came on the scene to bring shelter to the underdog from the storms and stresses of modern life, became, after a quarter century, without accomplishment, an unheroic victim of the 1930’s, broken by a Labour Government measure designed to worsen the living conditions of large number of workers.

And so it went. Wherever one chanced to turn, the story could be told in much the same terms. It was a time of bleakness and want, anger and upsurge, fed upon by demagogues and mountebanks and turned in directions that brought no clear thought, much worthless and harmful effort and nothing of benefit to workers who were willing simply to serve as followers. Children spent their childhood improperly fed and clothed and lacking in playthings other than those that were whittled from wood by their fathers or fashioned from rags by their mothers. They entered schools and came out again, products of an educational system that shed no light on the desolation surrounding them. They approached young adulthood with nothing better to hope for than permission to enrol on the breadline without being subjected to the humiliating impertinences of petty officials. They feared to become married because marriage carried responsibilities which they had no way of meeting, as was carefully pointed out to them by the guardians of society. And those who became married despite these cautions found the stern visage of authority hovering over them fearful lest they add to their numbers and increase further the burden the nation was already groaning under!

The passing years, particularly the dozen recent years of work and wages and television sets, have dimmed the memory of the Hungry Thirties. For most people the angry insistence that something be done has given place to a placid acceptance of things as they are. That there can be another depression is a thought they will not entertain. They feel vaguely that everyone learned a lesson from the last depression, that people will not stand for another one, that in any case the world's governments have taken measures or will take measures to prevent another from occurring. What lessons were learned and what measures have been taken or will be taken to prevent depression, these are matters which the average person hesitates to discuss—the blunt and gloomy truth being that his views in this connection are simply the product of wishful thinking.

It is a fact that the average person learned no lessons that matter from the last depression. It is also a fact that the politicians, the statesmen and all those on whom they depend for impressive thoughts, have failed to prove themselves better informed. The reasons are not hard to find. The average person has not made the slightest attempt to learn about depressions, and the official representatives of society, if they have made a study of the subject, have not come up with knowledge they are prepared to impart or act upon; for if they have discovered anything they have discovered that such knowledge can provide no help in preventing depression and nothing sensible that can be used to encourage the average worker to continue his approval of the existing form of society; and since these people are committed to the preservation of present society without important changes they are obliged either to remain silent or ask people to retain confidence, trust in providence, or engage in other childlike pastimes.

There is no treatment for depressions that can bring lasting and beneficial results for the mass of the people while retaining the present order of society. That is why the brightest of capitalism's defenders have nothing to offer on the subject but nonsense. The trouble is that capitalism is not a system that can concern itself about the needs of people and how best to satisfy those needs; it is a system in which goods are produced in order that capitalists may obtain profits; and when a situation arises in which these goods cannot be sold profitably, they are retained in warehouses whether or not there are people in need. This was the situation that prevailed during the Hungry Thirties; vast quantities of wealth decaying with passing years, vast numbers of people in constant and serious need—and not a government anywhere in the world that knew what to do about it!

Capitalism is by nature a chaotic form of society, often in the throes of stagnation and never free of misery. To end the fears, uncertainties and horrors of modern life requires the establishment of a system of society based upon the common ownership and democratic control of the means and instruments for producing and distributing wealth by and in the interest of society as a whole. This is a task to which you should give immediate thought and action.

(Leaflet published by the Socialist Party of Canada.)