World View: Crisis in Zimbabwe (2000)

From the June 2000 issue of the Socialist Standard

Independence anniversaries in post-colonial countries used to be a time of celebration for those workers who believed they were commemorating their freedom. Zimbabwe’s 20th anniversary of independence fell on April 18th. For the great majority in this southern African country, caution, not cheer was the order of the day.

As well as widespread political unrest, the newspapers that day reported the reality of everyday life for Zimbabwe’s exploited majority, hardly mentioning the 15 year liberation war: a war in the Congo that President Mugabe has committed Zimbabwean troops to at a cost of $1 million per day, fuel shortages, an Aids epidemic, rampant inflation, rising interest rates and soaring unemployment.

Neither was Robert Mugabe’s ruling ZANU-PF government in a celebratory mood, having a month earlier suffered defeat in a constitutional referendum intended to enhance the powers of the state, and a defeat that hinted he would lose his power to the newly-formed Movement for Democratic Change in the coming elections.

Ever the opportunist and desperate to win the rural vote – some 65 per cent of the population – Mugabe set about orchestrating mass occupations of white-owned farms. For 20 years, Mugabe had all but reneged on his promise of land and jobs for the veterans who fought the liberation struggle— only 70,000 families ever having been resettled. Now his government was paying the veterans to occupy white-owned farms, evict the farmers and to attack demonstrations by the nascent MDC.

Not only was he urging the veterans to occupy the land of the white farmers of the profit-hungry Commercial Farmers Union – a capitalist outfit he had always sucked up to – but also keeping from these same landless veterans the story of a land scam involving his government and many of its hangers on.

In the last few years, under Zimbabwe’s land resettlement programme, the majority of state owned commercial farms have been given to individuals connected to the Mugabe regime. Most of these absentee land-lords have no agricultural experience and have been given 98 year leases at knock-down prices. These leaseholders include cabinet ministers, provincial governors, civil servants and members of Mugabe’s office.

Whilst one provincial governor pays £1000 per year for 2,800 acres of land, a defence secretary can be found renting 780 acres for £1.00. All in all, the 500,000 acres of these commercial farms have been divided up into 253 separate units for those loyal to Mugabe, and all land that was initially set aside as part of the governments plan to resettle 150,000 families by 2003.

Similar stories of corruption and cronyism have been the hallmark of Mugabe’s reign in Zimbabwe since 1980 and provide plenty of ammunition for Morgan Tsvangirai’s Movement for Democratic Change that is widely expected to take over from Mugabe in elections planned for late June.

Ostensibly an organisation with a pro-working class agenda, emerging from the popularity afforded the Zimbabwean Confederation of Trade Unions during their struggles of the late 90s, the MDC is in fact just another party that will be charged with running the country in the interests of its capitalist elite.

Claiming to be able to restore “investor confidence”, Tsvangirai clearly nails his colours to the capitalist mast. Although the MDC manifesto (which can be viewed at http://www.mdc.co.zw) is perhaps well intentioned and far surpasses anything Mugabe and Co could dream up, a lengthy section stating its economic agenda nevertheless is fused with the jargon the master class drool over and use to great effect at election times: “stronger currency”, “poverty alleviation programmes”, “progressive taxation systems”, “the MDC will interact with international financial institutions”. If this is not the MDC clearly advocating reformist policies then why does Tsvangirai take on board Eddie Cross, a lead player with the Confederation of Zimbabwe Industry, as an economic adviser?

Without a doubt the elections that will be fought out in Zimbabwe on June 24 and 25 will, as in elections the world over, be little more than a contest between various parties each believing they can run the capitalist system more profitably than the others. Nothing in the MDC manifesto suggests they, rather than ZANU-PF, can alleviate poverty or address the myriad social ills that capitalism gives rise to.

Perhaps Tsvangirai said it all when he described the MDF as “social democrats… though driven by working class interests… who can never be ideologically pure.”

There is hope, though, for the Zimbabwean working class. Whilst we foresee no significant and immediate change in their circumstances, socialism will one day be on the agenda in Zimbabwe. The WSM already has a number of members and supporters there in recent years.

Hopefully in the near future, the voters of Zimbabwe will have a real choice at election time—the chance to vote for a system this journal has been arguing for 95 years

John Bissett

Still the State (2014)

Book Review from the May 2014 issue of the Socialist Standard

Dominic Frisby: Life After the State. Unbound.  £9.99.

The best part of this book is the title, and even that is not totally accurate. Frisby in fact advocates capitalism with a much smaller state apparatus than now, combined with a so-called free market, and where the only tax is on land values. In the last few pages he does say he leans towards ‘anarcho-capitalism’ (capitalism with no state at all, supposedly), but he says nothing about how this would work and it is not his main focus, so we will ignore it here.

Frisby’s strategy is to blame nearly all the problems of society on the state. He defines capitalism as a system where prices and a business’s success or failure are determined by the market. What exists now is not real capitalism but something called crony capitalism, where success is determined by the privileges a business is granted by the state, in the form of subsidies, regulation, etc. Mysteriously, this is claimed to have existed only since the days of Thatcher and Reagan. Under crony capitalism, a person who benefits from the privileges granted by governments is a rent-seeker, defined as ‘Somebody who does not himself create new wealth, but appropriates that wealth from other people after it has already been created’. This is not a bad definition of a capitalist, but alas Frisby has no idea that the capitalist class do not themselves produce but exploit the rest of us.

He wants the state to do no more than defend property rights, which means there would still be police and armies. This is what the state exists for now: it is ‘a coercive machine (police, judiciary, armed forces, schools, etc.) for conserving the monopoly by the capitalist class of the wealth taken from the workers in a geographical area’ (www.worldsocialism.org/spgb/education/z-marxism).

The book has many shortcomings, one of which is that often only part of an argument is made. For instance, Frisby does not even try to argue that capitalism was wonderful before its crony variety developed. Further, he begins by discussing Glasgow, once a major port and centre of entrepreneurial activity (in the 18th century it controlled the tobacco trade with the US), and contrasts this with its current situation: high unemployment, low life expectancy, high  murder rate. As with many things, this decline is supposed to have started with the First World War, when the state began to intervene much more in daily life. But he makes no attempt to describe the lives of Glaswegian workers in the 18th and 19th centuries, such as the appalling living and health conditions (life expectancy of 42 years for men and 45 for women in the 1820s, for instance). Of course, acknowledging this would have completely undermined the point he wishes to make.

Frisby claims that capitalism ‘exalts peaceful co-operation between producers and suppliers, without coercion, theft, and rent-seeking’. What is missing from this idyllic picture is the employer, and there can be no co-operation between the capitalist and the workers who are forced to sell their labour power. He sees socialism as involving a big state and high levels of taxation, yet mystifyingly he refers a couple of times to his own system as ‘socialism without the state’.

The book’s general level of reliability is illustrated by its author not even being able to cite the principle ‘From each according to ability, to each according to need’ correctly, mangling it as ‘From each according to their means, to those according to their needs’.

Paul Bennett

For Whom the Carillion Tolls (2018)

From the March 2018 issue of the Socialist Standard

The collapse of Carillion has brought the Private Finance Initiative (PFI) into the headlines once more, much to the delight of the Corbynite crowd in the Labour Party.  PFI was, essentially, outsourcing state facilities and services to the private sector, delivering the same outcomes for the public but under private for-profit management.

For politicians there were advantages: at certain times, under accounting rules, PFI arrangements would not add to state debt, since the private firms would have to borrow to finance the project (build the prison, school, hospital, etc.).  Further, the ongoing liabilities for maintaining the building would fall on the private company, and not add to the government estate.  The wider benefit would be that it would also keep the headcount of state employees down, and create a downward pressure on wages as workers would be divided between firms.

From an ideological point of view, it was about asserting that private sector management techniques are more efficient and capable of delivering services than the public sector, where employers are subject to political pressure as well as market pressure.  Further, from a capitalist point of view, the state is inherently unproductive, even where it provides useful services.  From this perspective, all expenditure by the state is a barrier to the accumulation of capital and the growth of the capitalist economy.

Profit funding initiative
PFI raised the option of making profits out of these services, and adding to the gross profits of the economy.  For New Labour politicians, this raised the fantasy of ending the antagonism between state and private sector, making serving public needs profitable.  That it expanded the options for the soft corruption of what Private Eye calls the ‘Westminster revolving door’ would have helped.

Giving ex-politicians seats on the boards of firms has long been a way of ensuring compliance from MPs and Ministers: it doesn’t need to be a direct quid-pro-quo of corruption proper, but a generalised reward for services to being pro-business.  With outside firms bidding for state contracts, the possibility arose for ex-Ministers to become ‘advisors’ to the firms that had serviced their departments, added to the feather nest.

There have been obvious problems with PFI: unlike directly employed staff, corporate entities work strictly to contract, and there have been a rash of instances where the precise terms of the contract turn out to be poorly drafted, and the firm has refused to take on work or costs that would normally reasonably be associated with the service they are providing.  Schools in Edinburgh basically fell down, as the builders had cut corners in order to boost their profit margins.  PFIs have turned out to be more expensive in many instances than if the government had borrowed the money directly.

The fantasy of reconciliation has hit the rocks in Carillion: not because the firm was incompetent or specifically venal, but, rather, because of the crisis-prone nature of capitalist markets themselves. Carillion is a construction company that has specialised in winning Government contracts, or buying up firms with Government contracts.

As Jonathon Ford wrote for the Financial Times:

  ‘Carillion’s balance sheet shows the extent of its dependence on these ethereal assets. At the end of 2016, things that could be sold in a crisis (i.e fixed assets and stocks) accounted for just 5 per cent of the total. Its solvency thus depended on the valuation of intangibles accounting for nearly 40 per cent of the balance sheet. Almost all of those were goodwill — acquired with the many companies Carillion acquired over the 18 years of its existence.’ [LINK.]

The company existed as something of a phantom based on the income derived from government projects, sub-contracting the actual work of owning machinery and tools to smaller firms.  This was fine, so long as the contracts kept rolling in.  Carillion will have been one of the big losers from the Tory governments’ long-term austerity drive, such as when they cancelled the schools building programme.  As the blogger Michael Roberts notes:

  ‘it seems that it had taken on too many projects from the UK public sector at prices that delivered very narrow margins.  So, as debt issuance rose and profitability disappeared, cash began to haemorrhage.  Carillion ran up a huge debt pile of £900m.  But this did not stop the Carillion board lying about their financial state, continuing to pay themselves large salaries and bonuses and fat dividends to their shareholders.  In contrast, the company did little to reduce a mounting deficit on the pensions fund of their 40,000 global staff, putting their pensions in jeopardy. Indeed, Carillion raised its dividends every year for 16 years while running up a pensions deficit of £587m.  It paid out nearly £200m in dividends in the last two years alone.  The recently sacked CEO took home £660,000 a year plus bonuses.’ [LINK.]

In other words, a classic case of a capitalist firm expanding as fast as it could, irrespective of the eventual constraints on the size of the market.  That the board kept paying out dividends (huge firms, like Apple, occasionally choose not to pay dividends, in order to help develop asset growth), suggests that the firm had become very much a money-go-round, sucking in investment to win more contracts to pay dividends to suck in investment and contracts.  This could have gone on, had the economy generally, and the government spending, kept on expanding.

As ‘Socialist Economic Bulletin’ notes:

  ‘revenues were barely changed between 2010 and 2016 at just over £5 billion and net assets actually shrank, even before the latest collapse to zero…The model came crashing down because of austerity. The main reason revenues are flat between 2010 and 2016 is that the Tories (and the Coalition before them) slashed public sector investment in roads, rail, ports and housing, and took an axe to real current spending, in areas such as education services, the NHS, the justice system, and so on. The pace of new privatisations and PFI since 2010 was not enough to top up the bucket with a big hole marked austerity.’ [LINK.]

We have pointed out in these pages before that the only way in which PFI can be made profitable is often by ‘sweating’ the workforce, and driving down wages: the structural inability to be able to do this (due to legal and trade union constraints) means that the profit margins for these sort of deals are tight; and many firms end up handing the contract back (or selling it on to another firm).

Interest charges
Labour will make hay over the questions of how the government could keep awarding contracts (and, indeed, anyone who has ever been anywhere near public sector procurement could tell you that checks and guarantees of financial health are an essential part of the process).  But, venality, political expediency and outright corruption have always gone hand in hand with the market system.  This is especially so, as PFI-style deals are subject to commercial confidentiality (and the firms running the contracts are themselves exempt from freedom of information laws).

The National Audit office has produced a report on PFI deals, which points out:

  ‘There are currently over 700 operational PFI and PF2 deals, with a capital value of around £60 billion. Annual charges for these deals amounted to £10.3 billion in 2016-17. Even if no new deals are entered into, future charges which continue until the 2040s amount to £199 billion. [LINK.]

Further, there remain accounting and structural reasons, other than value for money, which may drive public bodies into considering PFI deals, even if Corbyn and McDonnell manage to clamp down on the practice (should they ever form a government).

The debates around PFI, though, are essentially about differing methods of borrowing money: McDonnell has committed himself to a version of Brown’s rules about only borrowing to invest in capital structures not current spending, and the last Labour manifesto promised to expand certain benefits and spending areas.  So they will have to borrow, which means giving interest payments to the same capitalist robbers who invest in Carillion.  In either case, the need to go and ask the owners of wealth for funds on their terms is a way of disciplining the state: its only other option is to tax directly to fund all its activity, but that would inevitably cut into profits and the accumulation of capital: with the most likely response being a capital strike as fund holders refuse to invest and try and hold their assets where the tax man cannot find them.

The real debate is not about the actual contractual structures by which the government persuades the owners of the world to let them fund services, but about us being able to directly control our own efforts and labour to attend to our own needs.  Any notion that ending PFI is a strike against capitalist fat cats is illusory.

Pik Smeet