Voice From The Back: Knowledge is power (1999)

The Voice From The Back Column from the March 1999 issue of the Socialist Standard

Knowledge is power

“Evolution,” says the message from the Alabama State board of education, “is a controversial theory some scientists present as scientific explanation for the origin of living things such as plants, animals and humans . . .” New York Times, 24 November.

The promise—

Mr Raynsford, MP for Greenwich, said that begging was the most disgraceful indictment of the present [Conservative] government’s policies. “Our task has got to be to eliminate begging in London and create a memory of how bad life was in the late 80s and early 90s.” Camden New Journal, 7 July 1994.

—The reality

Beggars who exploit youngsters to raise money face having their children taken into care, the [Labour] Government is warning. Ministers [including Nick Raynsford, Minister for London] are worried about the huge upsurge in street beggars using their offspring in an effort to extract cash from passers-by. Police and local social services departments are being told to intervene in such cases. Sunday Telegraph, 3 January 1999.

Strategic class war

Midland-based engineering giants Rolls-Royce today warned it could move production to America if Britain introduces costly new labour laws . . . Speaking at a business lunch in Sydney, Australia, Sir Ralph [Robins] said that social costs made it 30 percent more expensive to manufacture in Europe. “The last thing we want is the on-costs associated with the social costs of Europe,” he said. “But I don’t see any signs of it happening and the current government is not going down that path. But we will progressively move work to the United States if we find ourselves disadvantaged by those sort of social costs,” he said. Birmingham Evening Mail, 25 November.

How wealth divides the world

Here are some pretty amazing facts from the United Nations Human Development Report of 1998: The world consumed more than $24 trillion in goods and services last year, six times the figure for 1975. Of the world’s 6.8 billion people, 4.4 billion live in developing countries, the rest in rich industrial or transition countries. The three richest people in the world own assets that exceed the combined gross products of the world’s poorest 48 countries. Among the 4.4 billion people who live in developing countries, three-fifths have no access to basic sanitation; almost one-third are without safe drinking water; one-quarter lack adequate housing; one-fifth live beyond reach of modern health services; one fifth of the children do not get as far as grade five in school and one fifth are undernourished. Basic education for all would cost $6 billion a year—$8 billion is spent annually for cosmetics in the United States alone. Installation of water and sanitation for all would cost $9 billion plus some annual costs–$11 billion is spent annually on ice cream in Europe. Reproductive health services for women would cost $12 billion a year—$12 billion a year is spent on perfumes in Europe and the United States. Basic health care and nutrition would cost $13 billion—$17 billion a year is spent on pet food in Europe and the United States. $35 billion is spent on business entertainment in Japan; $50 billion on cigarettes in Europe; $400 billion on narcotic drugs around the world; and $780 billion on the world’s militaries. Washington Post, 2 December.

New Labour, old capitalism

On Monday, the new president of the Confederation of British Industry told his members that the greatest threat to British business was red tape. “Excessive regulation,” he said, would “suffocate the golden goose.” He singled out trade union recognition, the minimum wage and the Working Time Directive as measures which would “darken the business horizon” . . . but one speaker went further than most. We need, he told the conference, to hooting applause, “greater labour market flexibility” and “increasing capital market liberalisation”. The government must create “the most business friendly environment in the world”. Even bankruptcy should cease to be stigmatised. The speaker was the [then] Secretary of State for Trade and Industry, Peter Mandelson, Guardian, 5 November.

Pollution and profits

British Steel last night urged the Chancellor to exempt it from the proposed carbon energy tax designed to meet the Kyoto target of reducing greenhouse gases by 12.5 percent by 2012. It said the tax would undermine its competitiveness, putting plants and jobs at risk. Guardian, 28 January.

How could they!

Companies will be warned this week that they could be subjected to devastating computer hacking attacks from disgruntled employees who face the sack as part of cost-cutting programmes. Experts say that employees with only limited knowledge of computers are now able to download hacking programmes from thousands of illicit Internet sites around the world and use them to wreak havoc on their employers’ computer networks. In one recent case, an employee who feared he would lose his job used a hacking program to wipe his employer’s central computer database after his name was erased from the payroll list. Times, 26 October.

Cooking the Books: The limits to tax and spend (2021)

The Cooking the Books column from the October 2021 issue of the Socialist Standard

‘Raising tax on businesses will kill off investment, CBI says’, was the headline in the Times (11 September) about a speech to be delivered that day by Tony Danker, the Director-General of the employers’ organisation, in which he said:

‘I am deeply worried the Government thinks that taxing business… is without consequence to growth. It’s not. Raising business taxes too far has always been self-defeating as it stymies further investment’ (Link).

He would say that, wouldn’t he? Yet businesses have to be taxed, whether directly or indirectly, to pay for the upkeep of the government and the services it renders them as a whole. Capitalist enterprises recognise this and Danker himself qualifies his statement by saying that it is raising tax ‘too far’ that risks discouraging investment.

He does have a point. There are limits to how much tax governments can raise from businesses. The capitalist economy is driven by business investment for profit and, if governments tax too much, this will provoke an economic slowdown or even downturn. It is something Keynesians learned the hard way but which has yet to be learned by the ‘Modern Money Theorists’ and the Green New Dealers.

Danker went on to make another point:

‘It’s clear that consumption is likely to rage in the short run. Consumers have saved and will spend… But unless investment catches up, rather than falls behind, that story will be short lived’.

True again. If investment doesn’t pick up, the post-lockdown consumer boom will peter out when all the pent-up demand has been spent.

We don’t suppose that it will contribute to Danker’s ‘rage’ in consumer spending, but if you live in Northern Ireland you’re lucky. Well, sort of.

The devolved administration there is giving away £100 to anyone who claims it under its ‘High Street Voucher Scheme’. Actually, it’s not a voucher that they will be given but a plastic card with £100 pre-paid on it which they can use in local shops and eating places to pay as they would with their bank card. The money has to be spent by the end of November.

It is not exactly the ‘helicopter money’ that some economists propose as a way to get the economy out of a recession. Not that that would work anyway since what drives the capitalist economy is not consumer spending but business investment, as the CBI’s Director General pointed out. The aim of the scheme is simply to support local businesses. It will to a certain extent.

When Marxists hear the word ‘voucher’ they tend to think of the Labour-Time Voucher Scheme that Marx mentioned in passing a couple or so times. Under this, people, in the early days of socialism, would be issued with vouchers based on the amount of hours they had worked and which they could redeem for consumer goods at the local distribution centre. It wouldn’t have worked and Marx didn’t go into any detail (it wasn’t his idea anyway) about how the goods to be redeemed would be ‘priced’.

In any event, given the tremendous development of the forces of production since his day, socialist society should now be able to go over very rapidly to free access and free distribution and there would be no need for vouchers. Or plastic cards.

Observations: Oily Shore (1982)

The Observations Column from the October 1982 issue of the Socialist Standard

Oily Shore

Peter Shore does not usually have the effect of confusing and splitting his opponents. A more familiar experience for him is to unite them in a common contempt and irritation at his transparently ambitious suggestions for the more efficient exploitative operation of British capitalism.

So perhaps Labour's Shadow Chancellor was surprised at the effect of his recent talks with the big brass of the employers’ organisation, the Confederation of British Industry. Many Tories were angered at what they saw as the CBI consorting with the enemy. Taylor Woodrow, the building firm which is a hefty contributor to Tory funds, resigned from the CBI in protest.

In fact Shore’s talks were all very proper and necessary. If there is ever another Labour government. Shore will hold a very high post in it; indeed, as a likely future Labour leader he may even become Prime Minister. The Labour Party will presumably eventually lose patience with Foot’s unerring instinct for losing votes and look around for a leader with a slicker, craftier approach.

It has always been a preoccupation of Labour governments to promote the greater profitability of British industry and commerce, and this has fashioned their policies of contesting with the workers over wages and conditions of work. They have also gone to great lengths, in both words and deeds, to reassure the British capitalist class that there is absolutely nothing for them to worry about in the event of a Labour government in this country. And in power they have been as good as their word. Under Labour the rich have got richer and the poor have got poorer.

As the employers’ trade union the CBI is naturally interested in such policies. That is why they are concerned to discuss and negotiate with Shore, perhaps to make promises and pacts for the more intense exploitation of the British working class if Labour gets back to power. It might all have saved the need for those embarrassing speeches, aimed at giving comfort to the City of London, soon after a clutch of Labour ministers have gone to kiss the queen’s hand or whatever they do before they get down to the business of making her even more secure in her class dominance.

And while the Tories and the CBI members were protesting, what of the Labour Party? What outrage seethed in their ranks at this blatant example of fraternising with what is supposed to be their bitterest class enemy? It was all silence. Are the Labour Party so paralysed at the prospect of losing yet more votes? Or are they so keen to have Oily Shore as their leader?


Loose Nott

There was no perceptible dejection in the ’bus queues, supermarkets and factories when the news came out that will soon give up being Defence (sic) Minister and go back to being a busi(sic)man.

Neither was there any apparent gratitude for Nott, who in 1966 generously left the lush pastures of merchant banking to toil in the bleak fields of trying to run the Armed Forces, order new weapons, send workers out to fight in the Falklands and so on.

Merchant banks are strange, if often wildly prosperous, organisations. Strange because they are prone to criticism from public supporters of capitalism on the unlikely grounds of their excessive appetite for profits. Names like Lonrho (the cheekbones in Ted Heath’s '‘unacceptable face of capitalism”) or London and Counties sit uneasily on the City of London's memory.

Prosperous because they are often adept at taking advantage of the complex financial machinery which capitalism has made essential as one of the shackles on human progress and security. Taking this advantage can involve unpopular operations like asset-stripping, which usually stripped a lot of workers of their livelihood. But the merchant banks are devotees of their own sales talk. They regard their role — really as one of the band of robbers who share in the proceeds of working class exploitation — as vital, for which all workers should be grateful.

Nott is a lean man with a citric face and a smile like a Falklands winter. His public devotion to the exploitative, repressive disciplines of capitalism’s class relationships is as rigorous and relentless as a Dickensian schoolmaster. In his very person he demonstrates the connection between “business” and “politics”, that it is natural for someone who has made a lot of money from realising some of the results of surplus value to want to have a say in how the robbery is organised and legalised.

He will not be missed, and whoever his successor may be will not be welcomed, by anyone who is concerned to end the exploitation and cynicism of this miserable society.

Employers know people aren't lazy (1970)

From the July 1970 issue of the Socialist Standard

In which socialist journal did the following appear?

  Most people have a simple theory about work. They think they do not like it. The view is not just confined to employees. Throughout history, employers have assumed that unless they could hold some kind of economic or even physical threat over their workforce, idleness and indiscipline would take over.
  Those rather simplistic beliefs have never entirely squared up with some observable trends in human behaviour. Left to themselves, the majority of people do not spend their time lazing around. They indulge in pursuits like gardening and home decorating which, to the traditional observer from Mars would look exactly like work, except maybe, that a higher level of energy and dedication is exhibited.

In fact this is from an article by Frank Broadway in Industry Week (15 May), the journal of the Confederation of British Industry — the employers' equivalent of the TUC.

This should provide much food for thought for those who imagine Socialism could not work because people are lazy by nature. The fact is that the social sciences have shown Socialism to be possible. There is nothing in the nature or behaviour of human beings that would prevent them organising a society based on common ownership where work would be voluntary and where goods would be free.

The employers know well that people want and need to work. They have long cynically tried to pervert the findings of social science on this point so as to make more profits. As Broadway frankly put it:

  For nearly a hundred years industrialists have been watching, and sometimes subsidising, the infant sciences of industrial psychology and sociology in the hope that something would emerge to enable them to exercise a more dramatic influence over the motivations of their employees (our emphasis).

When employers argue that Socialism, with its democratically-controlled and voluntary work, is impractical because it is against so-called human nature, they know they are lying. It is time that the facts about work disclosed by social science found their way out of the boardrooms and the anti-human personnel departments and into the factories and offices where ordinary people work. After all it is not the employers who keep capitalism going but rather their employees who don’t yet realise that Socialism is possible.

Memo to Sir John Methven (Secretary, CBI) from Karl Marx (1980)

Quote from the March 1980 issue of the Socialist Standard

Nothing is more absurd than to explain a fall in the rate of profit by a rise in the rate of wages. The rate of profit does not fall because labour becomes less productive, but because it becomes more productive.

Capital III, p 281

Cooking the Books: Pleasing Business Leaders (2018)

The Cooking the Books column from the May 2018 issue of the Socialist Standard

Jeremy Corbyn and John McDonnell may well still want the Labour Party’s old Clause IV to be implemented and all industries to become state-owned, but they are well aware that, if Labour comes into office, it will have to govern in the context of virtually all industry being in the hands of profit-seeking private enterprises. In other words, that they will be presiding over the operation of a classic capitalist economy.

The representatives of business realise this too and that they would have to work with a future Labour government. Hence, the CBI’s invitation, on behalf of big business, to Corbyn to address their annual conference last November and the British Chambers of Commerce’s invitation, on behalf of smaller businesses, to McDonnell to address theirs in March. The Times (9 March) reported the latter under the headline ‘McDonnell wins applause from business leaders’.

So what did McDonnell say to win applause from a gathering of capitalists? The Times quoted him as promising:

  ‘A Labour government will champion business by ensuring small companies get the long-term investment and start-up risk capital they need.’
   ‘Good businesses don’t require no government, good businesses require good government … It means a government that pays a little less time to the rentiers and speculators and more time for those who work in and run our businesses. It means making finance the servant and not the master of the real economy.’

And, in the passage at which the applause was perhaps the loudest:

  ‘Mr McDonnell said that Labour would create “an environment where people feel if they invest they will get a secure return”.’

McDonnell is being realistic. He knows that a future Labour government will be governing in the context of capitalism and that, as capitalism runs on profits, it will have to let profits be made; not just that, but must encourage them to be made and create an environment in which they can be made. This is what being a ‘good government’ for business will involve.

Whether in fact a Corbyn/McDonnell Labour government will be able to redirect money from speculation in the City to small businesses remains to be seen. The attempt to do this might well lead to a run on sterling and force a U-turn with recriminations about ‘a bankers’ ramp’ and ‘gnomes of Zurich’. The current Labour leadership is apparently aware of this as, according to a front-page headline in the Times (27 September), ‘Labour preparing for a run on the pound, admits Corbyn’.

As a profit-making system capitalism can only run in the interest of the profit-takers. It cannot be run in the interest of the majority class of wage and salary workers. Profits must come before wages. Any government which takes on responsibility for presiding over the operation of capitalism is sooner or later forced to recognise this, as the experience of every single previous Labour government has shown. On the basis of this experience, as well as an understanding of how the capitalist economic system works, we can safely predict that a Corbyn Labour government will be no different. It, too, will fall flat on its face.

Automation Under Capitalism (1970)

Pamphlet Review from the September 1970 issue of the Socialist Standard

Automation and Technical Chance. T.U.C. 2s.

THE trades union congress published its first statement on automation in 1956. This was followed in 1965 by Automation and Technological Change, of which a revised edition has recently been published.

Within its limits it is a useful discussion of the problems and prospects of automation in its various shades of meaning and of other forms of technological change. It dismisses the wild assumptions that automation would quickly revolutionise workers’ lives under capitalism by providing abundance or alternatively by putting vast millions out of work.

It reaches the conclusion that the hitherto slow rate of introduction of automation is likely to quicken in coming years and increasingly affect clerical and managerial workers, not by reducing the total number of jobs but by destroying particular jobs and calling for new types of work and in this way causing great hardship to large numbers of workers forced to change their jobs, move to different areas and undergo new training, often late in life.

While generally favourable to technological change and emphasising the likelihood of higher wages in some industries it admits that conditions of work may be worsened by the introduction of more shift work and, in some fields, by Saturday and Sunday work, excessive overtime and by the replacement of men by women. It records that in offices it sometimes means an increase of tiring and boring jobs such as punch card work, with associated greater noise in the work rooms.

Its great defect is that it tacitly accepts the continuation of capitalism and assumes that the system is now capable of being planned and controlled on a “full employment” basis—the typical Labour Party attitude.

It tells us:

  Maintenance of full employment is chiefly the responsibility of the government. All political parties, the Confederation of British Industry and the TUC accept that this should be the case. There is agreement that the necessary techniques are available to sustain full employment, although not everybody agrees as to when and how they should be used, or whether full employment is a principal responsibility of government or merely one responsibility.

It also tells us that “a high level of employment has been maintained in the post-war period”, a claim that reads rather oddly in face of the fact that unemployment in the past two years has been running at levels which are a record for post-war years and that the TUC has just told the government that they must bring unemployment down to 400,000 by the end of this year.

The statement barely mentions foreign competition and ignores the fact that a decline of world markets which are outside the control of the government, the CBI and the TUC, could drastically increase the amount of unemployment and undermine the safeguards the TUC proposes.

The obligations placed on the TUC by the trade unions exclude consideration of the possibility that capitalism could be replaced by Socialism, with the consequent abolition of production for the market and the wages system. So nowhere does the statement even look at the completely different standards from which automation and technological change would be regarded in a socialist system of society, when for the first time the wellbeing of all would be the only consideration. 

Edgar Hardcastle

Organise—without leaders (1992)

Cartoon by Peter Rigg.

From the October 1992 issue of the Socialist Standard

The TUC met in Blackpool in early September amid a continuing decline in trade union membership. Membership reached a peak in 1979 when overall—TUC and non-TUC unions—it stood at 13,446,000, a density of 58 percent of the working population. Membership of unions affiliated to the TUC amounted to 11,731,399 if the electricians, who were expelled in 1988, are excluded. According to the Department of Employment Gazette (April 1992) overall membership of trade unions stood at 9,947,000 in 1990. This meant that the proportion of workers organized in unions had declined to 43.9 percent. TUC membership at the end of 1991 had declined to 7,757,000, a fall of almost 4 million compared with the 1979 figure (Labour Research, August 1992).

The point can be made that union membership tends to decline when unemployment is on the rise, as it has been in the last two years. However this will not do as an explanation for the decline in membership over the last 13 years. Unemployment has of course had a negative effect on membership in the last couple of years. However, even when unemployment was falling between 1986 and 1989 membership continued to decline. Quite clearly there are other problems such as a longer-term change in employment patterns. The areas of the economy which are witnessing a growth of employment arc those which lack a tradition of strong union organization whereas those sectors which have had that tradition are in many cases areas of declining employment. Therefore, the theory which states that union membership will grow when unemployment starts to fall again must be regarded as dubious.

Nothing from Labour

To pin hopes of a recovery on the trade union leadership is likely to lead to despair. Ever since the election of the Conservative Party in 1979, union leaders have based most of their hopes on the future election of a Labour government. When this failed in 1983 they bowed their heads in disbelief and sat back for another four years. In 1987 the Labour Party once again failed to gain a mandate to attempt to run the wages system more effectively than the Conservatives. With yet another failure this year, it might have been thought that lessons might have been learnt. Nothing of the sort. Most recently, union leaders concerned themselves with the completely irrelevant business of who would lead the Labour Party, quite possibly into a further, record-breaking, fifth defeat in a row.

What needs to be done is to rebuild trade-union organization from the base. The basis of strong trade unionism is effective local and workplace organization with active rank and file participation and direct election and control over local representatives. It seems clear that in many industries and workplaces this organization needs rebuilding whilst in others it needs establishing for the first time. From this base more effective links would need to be built between workers in different workplaces, companies and industries. Such effective organization cannot be built from the top downwards but needs to be established by workers themselves. Effective trade-union organization has to be based on workers self-organization: a self-organization based on the understanding that the interests of employers as buyers of labour power and workers as the sellers of that commodity are antagonistic.

Quite clearly a leadership with strong links with a party which aims at running capitalism and which all too often puts forward the view that the interests of employees and employers are identical cannot be relied upon to build industrial organisations based on working-class interests. This policy of class collaboration reached its disgusting height at this year's TUC when the Director-General of the Confederation of British Industry was invited to address the delegates. The CBI Director-General certainly had a better notion of the interests of his class than most union leaders, calling as he did for lower wage increases.

Walk—out

As usual with capitalism the class who produce all the wealth and receive in return only enough to keep us in working order have to bear the brunt of the downturn in the capitalist economy. We have to suffer for the shortcomings of their system. Whilst socialists might have several disagreements with the miners’ leader Arthur Scargill he [has], at least, had the guts and common sense to lead his members out of the hall when the representative of the class enemy began his speech. This policy of so-called “Social Partnership” must be rigorously opposed by all trade unionists with any understanding of the class nature of present-day world-wide society.

The policy of some unions of seeking to build their organizations by selling themselves to employers on the basis of how friendly they are to the aims of those employers can receive nothing but hostility. The sole purpose of a union is to organize workers to defend and promote their interests, not to increase their numerical strength by selling themselves to employers on the basis of no-strike deals, selling hard-won workers’ rights down the river or any other acts of class collaboration.

Workers need a political party to build a democratic movement designed to oppose and end a system based on the exploitation of the majority by the minority. Likewise, we need a strong industrial movement to defend ourselves so long as the system of capitalism remains. The socialist message to workers who may despair at the state of working class organisation at the present time echoes that of the IWW activist Joe Hill "Don’t mourn, organize”.

Ray Carr

Will there be too many pensioners? (2004)

From the November 2004 issue of the Socialist Standard

Last month the former head of the CBI, Adair Turner, presented his report to the government on future pension provision. It made for scary headlines. “Pension crisis looming for 12 million workers”, worried the Times (13 October).  “Harsh truth is that we must save more or risk retiring in penury,” and went on:

“The root of the problem is increasing life expectancy and lower birth rates. By 2050, the proportion of British people over the age of 65 will increase from 28 percent today to 48 percent. This will leave Britain with dwindling numbers of taxpayers to support a massive retired population.”

Is this true? Will society be unable to cater for future pensioners at the same standard of living as they have today? Is there going to be a sort of class war between the generations, between those at work and those who have retired over how the national income should be divided between wages and pensions?

    

The short answer is: No. These are scare stories put around by employers, who want to reduce the contributions they pay into company pension schemes and the taxes they pay for state pensions, and by insurance companies, who want to sell more private pensions.

    

They've got one thing right though: in any society those who don’t work have to be maintained out of what is produced by those who do work. Everybody would agree that this is fair enough as far as people over a certain age are concerned, as well as for younger people who for one reason or another are unable to work.

    

But, in present-day, capitalist society there is another group of people who don’t work, and have to be maintained by those who do, namely, those who live off what used to be called “unearned income”, income in the forms of rents, interest and dividends derived from property ownership. That in fact is a good starting definition of a member of the capitalist class: someone owning sufficient profit-yielding assets to be able to live without having to work.

   

The source of all such unearned income (and indeed of the fat cat incomes of top directors, which is only unearned income disguised as earned income) is what Marx called the surplus value produced by wage and salary workers over and above what they are paid, which generally speaking corresponds to what they need to keep themselves fit to work at their particular trade or profession. It is out of this unpaid labour that not only the idle rich but the whole non-productive superstructure of capitalist society (the armed forces, civil service, legal system, banks, insurance and other money-handling activities) has to be maintained. What allows capitalism to maintain an enormous – and still growing – non-productive sector is the high level of productivity in the productive sector, a productivity which increases slowly but steadily all the time, historically at a rate of one to two percent a year.

    

Pensioners too are maintained out of this surplus but pensions are not a transfer payment from workers to pensioners, as the scare stories suggest; they are not paid for by ‘workers paying taxes’ since the burden of taxes paid by workers is in the end passed on via labour market forces to employers. Pensions are a transfer payment from the profits of the capitalists, even if ultimately these profits come from what workers produce. So, even if the ‘over-burdened pension system’ was to be reduced, this would not benefit the working population since the capitalist class would not dream of passing this on as higher wages and salaries.

Growth of pension schemes

One of the non-productive activities that the capitalist State has to undertake is the maintenance of the poor, those members of the working class who are unable to work and therefore have no income from a wage or salary paid by an employer: the sick, the handicapped, the unemployed and of course the old. This used to be done under what was called, appropriately enough, the Poor Law, which required local parishes to maintain the poor from within their boundaries. The fate of poor old people was the workhouse.

    

The history of the “Poor Law” is the gradual nationalisation of the system, accompanied by changes of name such as social insurance, national insurance, social security, national assistance, income support, pension credits, and the substitution of money payments for so-called “indoor relief” in a workhouse. By the turn of the last century, the authorities began to discover that so-called “outdoor relief” – a monetary payment – was actually cheaper than “indoor relief” and in 1909 stingy old age pensions were introduced for some workers aged 70 and over. This was financed by contributions from employers and workers and from general taxation and was baptised “social insurance”. It is still the basis of the State Old Age or Retirement pension in Britain today.

    

The level of the basic State pension has always been fixed as below the official poverty line, with the result that an increasing proportion of pensioners are on means-tested benefits to bring them up to the poverty line. As these top-up “pension credits” are tied to average earnings, the number of pensioners on means-tested benefits is expected to go up year by year. Turner – and the so-called “pensions industry” – are against this scheme as it discourages people from buying private top-up pensions (what they mean by “saving”) since most of any such pensions are deducted from the State's means-tested benefit.

    

To start with and until 1948, the State scheme only applied to a section of the working class, essentially manual workers in private industry. A different situation had evolved for people working for national and local government – so-called “superannuation” schemes (superannuation is just another word for pension), under which in return for contributions related to their salary, workers received a pension also related to their salary. These schemes were not funded, i.e. the money from contributions did not go into a fund that was invested, but went directly towards paying existing pensioners, a system known as “pay-as-you-go”. The logic was that funding was unnecessary since it would always be possible to find the money to pay pensions as governments don’t go bankrupt.

    

Superannuation schemes were also introduced, for office and supervisory staff, in the private sector. Eventually, these all came to be funded, to separate the money for pensions from the firm’s capital and so stop it being raided if the firm ran into cash flow problems or went bankrupt (a protection which has exactly not proved 100 percent efficient in recent years.)

    

A funded scheme means that contributions from members and their employers are paid into a fund which is then invested in government bonds or in shares or in property, and pensioners are paid out of the interest and capital gains on these. In recent years, with the slump in stock market prices, there have been capital losses rather than capital gains and these schemes have run into financial difficulties. Employers have been using this as a reason for cutting benefits, at least for new entrants. Increasingly, these are being forced into schemes which offer smaller and less secure pensions that are no longer related to wages or salary but purely to the amount invested and to the vagaries of the stock market.

    

A third type of pension arrangement is an entirely personal one where the pension payable depends on the contributions (and the income from investing them) of  the individual person concerned. These are basically savings for retirement arrangements which also involve placing the money on the stock exchange and so have run into difficulties for the same reasons as funded pension schemes. They are the ones that are notoriously subject to so-called “mis-selling”.

    

Funded schemes are based on strict actuarial principles and have to be to remain financially viable in the sense of having enough money to be able to meet all their obligations to future as well as present pensioners. What actuaries do is to take statistics on life expectancy and a likely real interest rate over a long term to work out, given the pension benefits under the scheme, how much money needs to be paid into a pension fund to allow it to pay all the pension rights acquired at a particular time. Clearly, if people are living longer – as they are – that means pensions are going to be paid for longer, which means that the scheme is going to need more money to pay them. In actuarial terms, this means more money has to be paid into the scheme, i.e. contributions have to be increased.

    

In this sense, for funded schemes, the fact of people living longer does indeed mean that the pension contributions for working members have to increase. But actuaries have known for years about likely future population trends and pension schemes will have already taken this into account. What has caused the current financial problems for such schemes has been the unanticipated slump in stock exchange prices. This is mentioned by Turner but almost in passing, since he is all in favour of people’s pensions being dependent on the vagaries of the stock market.

    

One idea mooted by Turner to save money on pensions is for the normal pension age to be raised from 65 to 70. This of course would mean that pensions wouldn’t have to be paid for so long and, as the TUC has pointed out, no pension at all would have to be paid to those who die between 65 and 70, as one in five existing pensioners do (Times, 19 July).

The ghost of Malthus

But this problem only applies to invested, funded pension schemes and cannot be validly extended into a general social problem of “too many old people” or “people living too long” (even though it would be typical of capitalism to regard what is after all an improvement in the human condition as a problem). The fallacy is that the narrow financial criteria that apply to funded pension schemes don’t apply when it comes to considering the economy as a whole. Here the broad economic, rather than the narrow financial, position is what counts:

“Over the twentieth century the British population grew from about 36 million in 1900 to 56 million in 2000. People aged over 64 grew from about 1.8 million (five percent of the total population) to about 8.6 million (fifteen percent of the population). So the total number of mouths to feed and support rose by one-half, the proportion of elderly rose three times and the numbers of elderly rose nearly five fold. All these increases were dwarfed by the seven-fold rise in annual wealth production.”

And for the future:

“The long-term record of productivity growth alone undermines the claim of a demographic time bomb in the future. Even without any increase in the size of the active workforce, productivity growth at this long-run trend of about two percent a year means a near doubling of annual output over the next 40 years” (The Challenge of Longer Life: Economic burden or social opportunity?, Catalyst pamphlet, 2002, p. 28).

The “too many old people” doom merchants are making the same mistake as Malthus made two hundred years ago with his (completely wrong) predictions about “overpopulation”: they are ignoring that productivity also increases over time, so that whereas there are indeed proportionately less workers engaged in production they are able to produce proportionately more wealth. It is the increasing productivity that will go on between now and when existing workers retire that will mean that society, even capitalist society, will be able to support the expected increased proportion of retired people in the population. There is in principle no problem here.

    

So why the scare? Basically, because there’s a vested interest involved – the self-styled “pensions industry”. They want to reduce the State’s involvement in pension provision to paying a basic minimum pension so that they can themselves make money out of providing any pension over and above this. They’ve got their greedy eyes on the £57 billion a year “shortfall” mentioned by Turner and on the commissions they can make on this if the government forces both employers and employees to “save” this amount, or even a proportion of it, each year.

    

What in fact is ironic – or rather, it’s a bare-faced cheek – is that they are not an “industry”, i.e. not part of the productive sector, at all. They are part of the non-productive sector maintained, just as much as pensioners are, out of the surplus-value produced in the productive sector. Not one person working in insurance companies and other private companies engaged in pensions provision produces a single item of wealth. From an economic point of view they, too, are a burden on surplus value. But don’t expect any government report to point that out.

    

The real question facing workers is whether they should continue to support the whole non-productive superstructure of capitalist society when, if it were to go, along with capitalism itself, how we they going to survive in old age wouldn’t be a perpetual worry, since in socialism every member of society, including the old, would have free access, as a matter of right, to what they needed to live and enjoy life.

Adam Buick

Cooking the Books: In or Out - Who Cares? (2013)

The Cooking the Books column from the October 2013 issue of the Socialist Standard

Socialists sometimes talk of ‘the capitalist class’ doing this or wanting that as if they were a monolithic whole with a single interest. In fact different sections of the capitalist class have different interests. Their attitude to the EU is a case in point.

Cameron has rather foolishly promised an in/out referendum on the issue; rather foolishly because (as the vote in parliament on bombing Syria shows) he cannot be sure that the result will be the one he wants, which will be to stay in with reforms, also the position of the Confederation of British Industry, which represents the biggest capitalist corporations operating in and from Britain.

One of the export-oriented big boys put the case for staying in to the Evening Standard (9 August):

‘Britain should stay in the European Union to safeguard exports to the Continent, the boss of Hitachi’s train operations in the UK urged today.… Mr Dormer… said exporters wanted Britain to have warm and stable relations with Europe. ‘Europe is potentially our biggest market and we would not want anything to happen that would create barriers or damage the relationship,’ he said.’

The previous day, the Times had reported ‘Business leaders press for single market withdrawal’:

‘Business for Britain will call for the nation to downgrade its relationship with the EU and become part of a customs union instead… The plans would allow Britain to avoid tariffs when trading with Europe, while not having to sign up to various rules which harmonise business conditions across the 28 member countries. If a future government managed to negotiate such a change, it would put Britain in a similar trading position to Turkey.’

Business for Britain, the Times explained, ‘claims to have the backing of 500 influential figures, including FTSE 100 directors and the owners of smaller businesses. They include Sir Stuart Rose, chairman of Ocado, Richard Burrows, chairman of British American Tobacco, and Ian Cheshire, chief executive of Kingfisher, parent company of B&Q.’ Other backers are Lord Wolfson, CEO of Next, John Caudwell, founder of Phones4U, Sir Rocco Forte, executive chairman of Rocco Forte Hotels, Tim Martin, chairman of pub group JD Wetherspoon, and Charlie Mullins, managing director of Pimlico Plumbers.

It is easy to see what these have in common: they are all bosses of firms producing for the home market. The exception is BAT but they want to push their risky product in developing countries where restrictions on its sale are less than in Europe.

The same relationship to the EU as Turkey? The CBI has already rejected the even less distant relationships of Norway and Switzerland. Its director-general, John Cridland, had an article in the Times (4 July) headed ‘In or out, Britain has to play by Europe’s rules. Norway and Switzerland pay the costs of membership with no say over EU laws. That’s a bad deal for UK businesses.’

This dispute within the British capitalist class has no class interest for workers. Whether British capitalism is in or out of the EU will make no difference to their position as a class forced to work for a wage or a salary and won’t affect the problems they face either way.

So, if the referendum ever comes, you won’t find us joining with the xenophobic right and the xenophobic left to line up behind Ocado, B&Q, Next, Phones4U, Wetherspoons, Pimlico Plumbers and other firms producing for the home market in saying No2EU. We’ll be advising workers who understand their class position to write ‘World Socialism’ across their ballot paper.

“Commerce is more sovereign than the sovereign” (Karl Marx)

From the Socialism Or Your Money Back blog

While the Chancellor of the Exchequer was making his pre-budget announcement based on the mere hope that recovery would begin in 2010, Gordon Brown was addressing a meeting of the employers’ organisation, the CBI. If he stuck to pre-released text of his speech he said:

“We have seen in previous recessions how a failure to take action at the start of a downturn has increased both the length and depth of the recession. That was the mistake made in the recessions of the 1980s and early 1990s. To fail to act now would be not only a failure of economic policy, but a failure of leadership” (London Times, 24 October).

He was being rather selective in his choice of historical precedents. He forgot to mention what happened in the mid-1970s when the then Labour government did try, as his Labour government is trying today, to spend its was out of that recession – and failed. To such an extent that the Prime Minister James Callaghan had to confess to the 1976 Labour Party Conference:

“We used to think that you could just spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you, in all candour, that that option no longer exists and that in so far as it ever did exist, it only worked on each occasion since the war by injecting bigger doses of inflation into the economy, followed by higher levels of unemployment” (London Times, 29 September 1976).

But Brown also forgot that an attempt was made to try the spend the way out of the 1980s recession. Not in Britain but in France, following the election as President of Labour-type reformist François Mitterrand in May 1981 and his party’s victory in the general election that followed in June. One of their election promises was to abandon the austerity approach of the previous conservative government in favour of:

“a relaunch of economic activity by an increase in the purchasing power of the most disadvantaged and so by a relaunch of consumer goods”.

Sound familiar?

And this is what they did, the first measure the new government took, in June 1981, being to increase the minimum wage, pensions, family allowance and housing benefits and to announce that 200,000 new government jobs were being created. Like Alistair Darling, the Minister of the Economy and Finance hoped to be saved by an early economic recovery:

“We are hoping to anticipate, but in a reasonable way, a recovery in the world economy”.

The world economy’s reply was to force a devaluation of the franc within four months, in October 1981. From then on it was downhill all the way. The following June the government had to devalue the franc a second time, the Prime Minister offering the pathetic explanation:

“the international recovery was not at the rendezvous”.

By October 1982 the Minister of Planning was admitting:

“We must not dream. The crisis we are going through is going to get worse”.

The Prime Minister continued with his inanities:

“The day will come when the recovery will be there”.

In December the Minister of the Economy and Finance confessed:

“It is not us who are the masters of the world. The world goes as it is, it is in the grip of forces that no one can master”.

Then after a third (yes!) devaluation in March 1983 he declared:

“We were banking on an economic growth of 3 percent, but the recovery didn’t come”.

In October 1984 the number of unemployed passed the peak of 3 million (it had only been 1.7 million when Mitterrand came into office).

This failure to shorten and lessen a slump by trying to relaunch popular spending is one of the most spectacular on record. No wonder Brown didn’t mention it.

Brown, Darling and the others may not be around to have to make the abject confessions of failure that Mitterrand’s ministers had to make. But they will have maintained Labour’s record of every Labour government leaving office with a greater number of unemployed than when they took over.

Adam Buick