The Town and Country Planning Bill (1947)

From the March 1947 issue of the Socialist Standard

“A man will no longer be able to buy farmland at £200 an acre in the hope of reselling it as a factory site at £600 an acre. True, it will be worth more as a factory site—but the State, through a Central Land Board, will collect all or most of the difference” (Daily Herald, 8/1/47).

Thus the Labour Government carries out a longstanding demand made in the interests of the industrial capitalist. H. M. Hyndman, in his “Economics of Socialism,” dealt with this. After reviewing the Ricardian theory of rent and the many objections which present themselves to that theory, he wrote: —

“It seems, therefore, that a wider definition of the rent of land under Capitalism is needed than that, given by Ricardo, and the following is suggested: Rent of land is that portion of the total net revenue which is paid to the landlord for the use of plots of land after the average profit on the capital embarked in developing such land has been deducted.”

On the question of confiscating rent he pointed out that it “would not affect the position of the working portion of the community unless the money so obtained were devoted to giving them more amusement, to providing them with better surroundings and the like. . . . In fact, the attack upon competitive rents is merely a capitalist attack. That class sees a considerable income going off to a set of people who take no part in the direct exploitation of labour; and its representatives are naturally anxious to stop this leakage, as they consider it, and to reduce their own taxation for public purposes by appropriating rent to the service of the State. That is all very well for them.”

On this point Marx says: —

“We can understand such economists as Mill, Cherbulliez, Hilditch, and others, demanding that rent should be used for the remission of taxation. That is only the frank expression of the hate which the industrial capitalist feels for the landed proprietor, who appears to him as a useless incumbrance, a superfluity in the otherwise harmonious whole of bourgeois production.” (“Poverty of Philosophy,” Kerr edition, 1920. Page 176.)

“Rent,” says Marx, “results from the social relations in which exploitation is carried on. It cannot result from the nature, more or less fixed, more or less durable, of land. Rent proceeds from society and not from the soil.” (P. 180.)

(The above quotations are used by H. Quelch in his Introduction to Marx’s “Poverty of Philosophy,” Kerr edition, 1920.)

Horatio.

Marxian Economics (2002)

Book Review from the June 2002 issue of the Socialist Standard

Karl Marx and the Classics. An Essay on Value, Crises and the Capitalist Mode of Production. By John Milios, Dmitri Dimoulis and George Economakis. Ashgate. 2002.

The book’s title reflects the fact that in one sense Marx was in the tradition of Classical Political Economy, building on the work of Adam Smith and David Ricardo both of whom like him propounded a labour theory of value. On the other hand, Marx regarded his work as a “critique of political economy” (the title of one of his books and the subtitle of Capital).

Marx’s critique is straightforward enough. Smith, Ricardo and the others imagined that they were studying economics as if it were a natural science like physics or chemistry whose laws were valid for all times and places. Marx pointed out that what they (and he) were in fact studying were phenomena that only came into being under specific historical and social circumstances – predominating production for sale on a market with a view to profit – and that the laws and categories they used (such as value, price, money, wages, profits, rent and interest) were not useful or valid for all time and for all economic systems. Value didn’t exist before capitalism came on to the historical scene and wouldn’t exist after capitalism had disappeared.

This meant, the authors point out, that when Marx used the word “value” he did not mean the same thing as, in particular, his immediate predecessor, Ricardo. Whereas for Ricardo value was an empirically observable phenomenon that could be measured directly in terms of the amount of socially necessary labour-time needed to produce it from start to finish, for Marx value was an intangible social relation and which would exist under any economic system. As such it could not be measured directly, not even in terms of labour-time. All that could be measured was its expression as “exchange-value”, ultimately as a monetary price (which, due to the averaging of the rate of profit, was only indirectly linked to a commodity’s notional labour-time content).

The authors criticise Marx for not always sticking in his writings to this distinction and for occasionally slipping back into Ricardo’s position. This may well be true – there is certainly a discrepancy between his endorsement, albeit rather lukewarm, of labour-time vouchers in one place and his devastating criticism of schemes for labour-money elsewhere – but it should be borne in mind that in his first publications – The Poverty of Philosophy (1847) and A Critique of Political Economy (1859) – Marx didn’t distinguish between value and exchange-value and that, apart from Volume I of Capital (1867), all his other writings on economics were unedited, hand-written notes, prepared for publication by others after his death (Volumes II and III of Capital, Theories of Surplus Value, the Grundrisse). Since Volume I of Capital was carefully edited and seen to publication by Marx himself (incidentally, after most of his posthumous publications had been written) in cases of ambiguity or even contradiction it is what he wrote in this that must be regarded as his considered view.

On two keys points of understanding the way capitalism works the authors reach the same conclusion as we have, on the so-called “law of the falling tendency of the rate of profit” and on the reason for economic crises.

Much ink has been spent on the falling rate of profits (sometimes called, in view of so many predictions which failed to materialise, the falling rate of prophets). Many consider it to be a key element of Marxian economics, an economic law of capitalism uncovered by Marx. Marx’s point is simple enough. Capital is divided into “constant” capital (buildings, machinery, materials, etc) whose value is simply transferred unchanged to the product in the course of its production and “variable” capital (the capital laid out in employing productive labour) so-called because this is the only element of total capital whose value “varies” through productive wage-labour producing a “surplus value” over and above its original value. Marx calls these C, V and S respectively and so expresses the rate of profit as: S/(C + V). It is clear that, from a purely mathematical point of view, that as long as S/V (the rate of exploitation) remains unchanged if C increases faster than V the rate of profit will fall. Marx set out one good reason why C would tend to increase faster than V: technological advance. With this more of the accumulated capital takes the form of means of production (C) than of additions to the wages bill (V).

However, Marx deliberately chose not to call this the “law of the falling rate of profit” but merely the “law of the falling tendency in the rate of profit” (an odd formulation since something must either be a law or tendency but not both, but this was taken from one of Marx’s unedited papers). This was because he knew that other factors than technological advance could affect the outcome and that it could not be assumed that these would always be constant (as “the law of the tendency” as stated above assumed). Marx went on to list various “counter-tendencies”. Two in particular stand out.

The first is what he called the “cheapening of the elements of constant capital”, by which he meant factories, machinery, etc, and the ways of using and organising their use, becoming cheaper than previously. For instance, technical advance need not necessarily translate itself into C rising faster than V and would not if the inventions and innovations were more “capital saving” than “labour saving”. C could also rise less than V for non-technological reasons such as falls in raw material and energy prices due to market conditions.

The second was an increase in the rate of exploitation (S/V), i. e., the amount of surplus value produced per unit of productive wage labour. This in fact is another consequence of technical advance and indeed, under capitalism, is precisely why technical inventions and innovations are introduced, the capitalist class waging a non-stop class war against the working class to increase the amount of surplus value extracted from their labour—what might be called the “law of the rising tendency of the rate of exploitation” or indeed even the “law of the rising rate of exploitation”.

It should be clear that if C does not increase faster than V and/or if S (the amount of surplus value) increases, then (other factors remaining the same) the rate of profit (S/C + V) will not fall. Which means that, in the world of real capitalism, the outcome of these tendencies and counter-tendencies cannot be predicted in advance. As the authors put it:

“. . . the Marxist ‘law of the falling tendency’ in the rate of profit, although logically sound, is not a theoretical reflexion of the actual trend of the rate of profit . . . it applies under certain conditions . . . that may well not exist in a given capitalist society. Furthermore, it influences the rate of profit along with a variety of other factors not directly associated with technological innovation, factors which Marx considered to remain constant when presenting his ‘law’. This means that a falling profit rate in a given capitalist economy over a time period, which may be established on the basis of concrete empirical analysis, can be due to factors other than those related with technical innovation and the ‘law of the falling tendency’, which means that a further investigation will be necessary, if one wants to locate the exact causes of the profit rate’s course” (pp. 155-156).

The authors take the same approach to the reason for economic crises under capitalism to reject the same views held by some in the Marxist tradition as we do:

“Crises are conjunctural suspensions of the conditions for unimpeded reproduction of total social capital. They constitute transitory manifestations of the internal contradictions of capitalism and not permanently operative causal relationships inherently governing capitalist relations (a permanent deficiency in consuming power as against production, or the ever acting ‘law of the falling tendency in the profit rate’)” (pp. 182-3).

We are obliged to add that chapter 4 on “The Question of ‘Commodity Fetishism’“ is both confused and confusing and detracts from the rest of the book. In fact, when the authors venture into philosophical matters they follow too much the theories of the now completely discredited French philosopher, Louis Althusser, who ended up murdering his wife and confessing that the only work by Marx he had read properly was his journalistic The Eighteenth Brumaire of Louis Napoleon. There is also a hint, at the very end of Chapter 3, that the authors could think that the banking system has the power to “create” a “volume of credit . . .which constitutes a multiple of all forms of liquid assets and reserves”. If this were true—that the banks can lend out more, much more than what has been deposited with them – then it wouldn’t be true that labour is the sole source of newly created value. Not only Marx but the Classics Smith and Ricardo too would have been mistaken.

Adam Buick

Before Marx: David Ricardo (2023)

From the September 2023 issue of the Socialist Standard

David Ricardo, who died 200 years ago this month, was after Marx the person who contributed most in the 19th century towards an understanding of how the capitalist economic system works. Today he is remembered in academic economics only for his theory of comparative advantage in international trade (that a country should not necessarily produce for export what it can produce the cheapest but should concentrate on what it can produce cheaper than others). Socialists remember him for his class analysis of the capitalist economy and for formulating the labour theory of value in clear terms.

Class analysis

The 1817 Preface to his On the Principles of Political Economy and Taxation begins:

‘The produce of the earth — all that is derived from its surface by the united application of labour, machinery, and capital, is divided among three classes of the community; namely, the proprietor of the land, the owner of the stock or capital necessary for its cultivation, and the labourers by whose industry it is cultivated’.

This three-class division had already been used by Adam Smith and was adopted by Marx in Capital. It was accepted by nearly all those analysing the capitalist system, whether for or against it, up until the end of the 19th century. Academic economics then abandoned both it and the labour theory of value, and for the same reason — the anti-capitalist interpretation given to them by Marx and others.

Ricardo’s use of the word ‘cultivate’ brings out how important a role agriculture played in the economy at that time. It was also important for politics in Britain, with the main struggle in the 19th century being between the representatives of the ‘proprietors of land’ and the ‘owners of stock or capital’. Ricardo was an open supporter of the latter and his economic theory underpinned his politics by showing that rent was an unearned income that impeded capital accumulation. He was himself a capitalist (a financial capitalist rather than a factory owner) and a Whig MP.

By the end of the century the three-class division had become outdated, with the economic and political victory of the ‘owners of capital’ and the merger of the landowners into the capitalist class. Since then there have been only two classes in the capitalist economy — the owning class and the working class.

Labour theory of value

The labour theory of value states, basically, that the exchange-value of a commodity depends on the amount of labour required to produce it. As Ricardo put it, in the opening lines of his book:

‘The value of a commodity, or the quantity of any other commodity for which it will exchange, depends on the relative quantity of labour which is necessary for its production…’

He went on to deal with various objections to this view and answered them in a way which socialists still do.

To have an exchange value a commodity must be useful:

‘Utility then is not the measure of exchangeable value, although it is absolutely essential to it. If a commodity were in no way useful — in other words, if it could in no way contribute to our gratification, — it would be destitute of exchangeable value, however scarce it might be, or whatever quantity of labour might be necessary to procure it.’

The theory did not apply to such items for sale as ‘rare statues and pictures’ – since they were unique and could not be reproduced, their exchange-value depended entirely on the demand for them. The theory applied only to commodities that can be reproduced:

‘In speaking then of commodities, of their exchangeable value, and of the laws which regulate their relative prices, we mean always such commodities only as can be increased in quantity by the exertion of human industry, and on the production of which competition operates without restraint’.

It wasn’t just the labour applied at the last stage of production that counted, but also the labour applied in the early stages of their production. So it was the total labour employed in producing a commodity from start to finish including the labour involved in transporting it to the place of sale:

‘Commodities vary in value conformably with this principle: in estimating the exchangeable value of stockings, for example, we shall find that their value, comparatively with other things, depends on the total quantity of labour necessary to manufacture them, and bring them to market’.

Ricardo then went on to spell this out in detail:

‘First, there is the labour necessary to cultivate the land on which the raw cotton is grown; secondly, the labour of conveying the cotton to the country where the stockings are to be manufactured, which includes a portion of the labour bestowed in building the ship in which it is conveyed, and which is charged in the freight of the goods; thirdly, the labour of the spinner and weaver; fourthly, a portion of the labour of the engineer, smith, and carpenter, who erected the buildings and machinery, by the help of which they are made; fifthly, the labour of the retail dealer, and of many others, whom it is unnecessary further to particularize. The aggregate sum of these various kinds of labour, determines the quantity of other things for which these stockings will exchange, while the same consideration of the various quantities of labour which have been bestowed on those other things, will equally govern the portion of them which will be given for the stockings’.

A fall in the amount of labour required at any of these stages would result in a fall in the exchange value of the final product. On the other hand, a fall at the last stage, because it contributes only a part of total value, would not mean an equivalent fall in the product’s value, a point often forgotten when it comes to calculating productivity and which is why an increase in this is not as much as sometimes assumed.

There were inconsistencies. One was over the ‘value of labour’ — what determined wages: how come that there was a difference between what labour produced and what it was paid? Some in the 1820s and 1830s argued that the monopoly of instruments of labour by the ‘owners of stock or capital’ and the competition between workers for jobs meant that workers were not paid ‘the full product of their labour’ and that the source of profits was the ‘unpaid labour’ of the workers. They were later called the ‘Ricardian Socialists’ though this was not what they called themselves.

In his economic writings up until the mid-1850s Marx could be classified as one of these. He, too, saw competition between workers as resulting in them being paid less than the value of what they produced. It was only when he began to study economics more thoroughly in the library of the British Museum in the 1850s that he came up with the solution: what the workers were paid for was the value of their capacity to work (their ‘labour power’) which was different from and less than the value of their labour (what they produced). Marx called this difference ‘surplus value’. This was the same as ‘unpaid labour’, a term still in use inherited from pre-Marxian working-class economics but which must not be understood as saying that workers are not paid the full value of their labour power; they generally are.

Falling rate of profits

There was another question that Ricardo discussed and that Marx was also led into discussing. Ricardo’s chapter ‘On Profits’ is devoted to arguing that there is a ‘natural tendency’ for there to be ‘a fall in the general rate of profits’. He saw this as being the result of diminishing returns from agriculture which would require more labour to be devoted to producing what workers needed to consume to be able to work properly; so wages would rise at the expense of profits. Not only that but the rent paid by the ‘owners of stock’ to those who owned the land they farmed or on which their factory stood would go up as more and more land had to be brought into cultivation to provide food for workers’ consumption.

The general assumption of post-Ricardo economists was that the rate of profit would tend to fall. Marx took up the problem and sought to explain any such tendency from factors internal to the workings of capitalism rather than something external such as diminishing returns from agriculture. He explained it as resulting from a larger and larger proportion of capital consisting of buildings, machinery and plant compared with that used to employ productive workers as only the latter produced the new value, a part of which was the source of profits.

Because Marx devoted so much space to correcting Ricardo on this the impression has been created that Marx saw this tendency as having an actual long-run effect on capital accumulation. Some students of Marxian economics have been so bold as to argue that it would lead to the collapse of capitalism as, at some point, the rate of profit would fall so low that capital accumulation would stop. This was not Marx’s view. He did see a temporary fall in the rate of profit as playing an important role in capitalism’s boom/slump cycle but this was caused by other factors (over-investment in a boom leading to overproduction).

Adam Buick

Cooking the Books: Energy wars (2022)

The Cooking the Books column from the October 2022 issue of the Socialist Standard

In September the G7, the group of the world’s leading Western capitalist economies (US, Canada, France, Germany, Italy, Japan and Britain), agreed to try to impose a cap on the price of Russian oil. The level has not yet been fixed but is likely to be somewhere near to the cost of production plus a mark-up for profits. Russia would still have an incentive to export oil but would only make a ‘normal’ profit rather than the super-profits that they and others (such as Saudi Arabia and the Gulf States) get because the cost of extracting oil there is less than the cost in the other parts of the world whose higher cost of production sets the world price.

What the West seems to want is to impose as the price of Russian oil is what Marx in Volume III of Capital called its ‘production price’, ie, its cost of production plus the average profit on the capital invested in its production. Over a fifth of Volume III is devoted to a discussion of this in relation to ground-rent, the money paid to a landlord for the use of their land to grow crops or raise livestock but also to extract materials.

David Ricardo is credited with being the first to explain why different areas of land yielded a different rent. The price of what it was used to produce was fixed by what Marx later called the production price on the least fertile land producing it. Those farming more fertile land, where the cost of production was correspondingly less, still sold their produce at the higher price and so made super-profits but which, unless they owned the land themselves, were taken by the landowner as ground-rent.

Marx accepted this theory. Ricardo explained how it applied to mines:

“[T]here are mines of various qualities, affording very different results, with equal quantities of labour. The metal produced from the poorest mine that is worked, must at least have an exchangeable value, not only sufficient to procure all the clothes, food, and other necessaries consumed by those employed in working it, and bringing the produce to market, but also to afford the common and ordinary profits to him who advances the stock necessary to carry on the undertaking. The return for capital from the poorest mine paying no rent, would regulate the rent of all the other more productive mines. This mine is supposed to yield the usual profits of stock. All that the other mines produce more than this, will necessarily be paid to the owners for rent” (Principles of Political Economy and Taxation, ch. 3).

This applies today to the extraction of oil, its price being fixed by the production price in the least productive oilfield in use.

What the G7 are trying to do is to prevent Russia from benefitting from having a lower cost of production than in the oilfields that set the price of oil and so reaping a super-profit. This is to be done by forcing Russia to sell its oil at a price nearer to its price of production. It’s a clever scheme – to be enforced by refusing to insure tankers carrying Russian oil bought above this price – but it may be too clever. Russia has already announced that it will refuse to sell oil to any country that goes along with the G7 plan. And it can’t be a coincidence that the day after the plan was announced Russia suspended the direct supply of gas to Germany.

While the capitalist West and capitalist Russia battle it out, economically and militarily, as to whose sphere of influence Ukraine should be in, workers everywhere are suffering the consequences in terms of higher and higher energy bills reducing their standard of living. But it’s a pain both sides have no qualms about inflicting.

The Falling Rate of Profit (1960)

From the June 1960 issue of the Socialist Standard

In the early part of the 19th century the economist Ricardo had his own simple idea about the falling rate of industrial profit. Essentially his idea was that there is a natural tendency of profits to fall because, or so he believed, more and more labour was required to produce foodstuffs and this meant higher prices and higher wages. In the 3rd Edition 1821 of his Principles of Political Economy, where he dealt with this, he went on to say:

  This tendency . . . is happily checked at repeated intervals by the improvements in machinery connected with the production of necessaries, as well as by discoveries in the science of agriculture, which enables us to relinquish a portion of labour before required, and therefore to lower the price of the prime necessaries of the labourer, (Everyman Library, page 71.)

Half a century later Marx went into this much more thoroughly and dealt with it in Chapter XIV of the 3rd Volume of Capital. He held that there is a general tendency for the rate of profit to fall because of the greater quantity of constant capital in production (plant, machinery, raw material, etc.) and the relatively smaller quantity of variable capital.-i.e., that part spent on wages. He explained in the opening paragraph of the chapter that whereas other economists were looking for an explanation of the falling rate of profit the problem for him was the opposite one, namely of finding out why the fall is not greater and more rapid. He wrote:—“ There must be some counteracting influences at work, which thwart and annul the effects of this general law, leaving to it merely the character of a tendency." In Chapter XIV he dealt briefly with these counteracting factors which included raising the intensity of exploitation, and the cheapening of the elements of constant capital. He therefore expected the fall to be slow.

He recognised that the rate of profit could rise as well as fall, and in an example he gives (page 91) he showed that in a cotton spinning factory where the average rate was about 33 per cent. this was abnormally high because at that time cotton was very cheap and the price of yarn was very high.

It would, of course, not be easy to find out what the average rate of profit is over the whole field of production and, in order to get a true average rate, it would be necessary to look at a period of several years, not merely at what is happening at the moment.

While the average rate of profit rises and falls with the variations of good and bad trade it is quite evident that there cannot have been a continuing fall of the rate of profit for 150 years. If there had been the rate of profit now would be very low, which of course it is not. An American writer, Joseph M. Gillman in his book The Falling Rate of Profit (Cameron Associates—New York, 1958) in an analysis of the course of events in America reaches the tentative conclusion that while the rate of profit was falling it is now rising. He writes: “Whereas for the years before about World War 1 the historical statistics seem fully to support these theories of Marx, after that war the series studied appear generally to behave in contradiction to the Marxist, expectations." We can get an approximate idea of the amount and movement of the British rate of profit from the Financial Times index of profits which covers several thousand companies with total capital running into over £5,000 million. Financial Times figures for the profits of 2,600 industrial companies in 1959 show that total profit less depreciation represents 21 per cent. of the total of the issued ordinary capital plus capital and revenue reserves. Figures from the same source show an apparent slow fall in the percentage in the years 1951 to 1959, but there is reason to believe that this apparent fall is a reflection of the fact that, in a time of inflation, with steadily rising prices, balance sheet figures of capital values and depreciation are an underestimate. At the end of the war capital assets and depreciation would usually appear at a figure not much above the pre-war levels. In the years since the war this has been gradually corrected. If it had been corrected at the outset the rate, of profit would probably have been stable or may even have shown a steady increase. It is certainly likely that between 1958 and the present time, when total profit has been rising fast, the rate of profit has also been rising.

This is not an academic question because round it have been built theories of the onset of crises. John Strachey in his pre-war book The Nature of Capitalist Crisis took it for granted that the rate of profit was falling and moreover that it was falling rapidly. He then argued that because of this fall in the rate the capitalist has to keep on enlarging his capital in order to get the same mass of profit out of a falling rate of profit.

  This is the formula of the minimum rate of accumulation necessary to capitalism. If ever, and whenever, the rate of accumulation falls below this level, the system must, and does, jam. For it becomes more profitable for the capitalists to restrict than to expand production, (page 247.)

It is not particularly important that Strachey no longer holds this view for there are certainly others who still hold it. But in practice it by no means follows that boards of directors behave in this way. Some of them and certainty the very large companies take a longer view and do not curtail investment because of a current fall in the rate of profit. As a case in point the Unilever group reported a quite drastic fait in their rate of profit in 1957 but because they take a longer view, their capital investment did not decline but was increased. The evidence would seem to show that the rate of capital investment is less influenced by the current rate of profit than by the long term expectations of over-production likely lo arise in the near or more distant future.

One of the factors that at the present time may he helping to raise the rate of profit is the merger of many large groups of companies and the economics of capital expenditure that can be achieved that way, while another is the growth of shift working which enables them to keep their plant running more or less round the clock.

Edgar Hardcastle

A Lord discovers the real Marx. (1924)

From the September 1924 issue of the Socialist Standard

One does not frequently discover in the books and articles written about Marx by his opponents any genuine attempt to impart to the reader an adequate idea of the contents of Marx’s works. “The Real Karl Marx” (an article by Lord Riddell in John O’ London’s Weekly, July 26, 1924) merits some consideration, however, for, as a travesty of Marx’s teachings, it is rather more absurd than the ordinary bourgeois production.

The purpose of this article is not to discuss Lord Riddell’s method of misrepresentation, but to point out a few slips made by him in his application of that method, in the first place it should be noted that where Lord Riddell falls in the cart (if one may use a proletarian expression in writing of a bourgeois) is in his choice of a victim. It is common knowledge among Socialists that Marx and Engels never did appear particularly well in the “rôle” of victims of misrepresentation of the type now under review. Both of them had a peculiar habit of replying to their critics’ misrepresentations—sometimes half a century or more before those misrepresentations were made.

A few examples will serve to show wherein “The Real Karl Marx” of Lord Riddell differs from Marx. Lord Riddell, discussing the history of Marx’s ideas, writes as follows :—

  “Adam Smith laid down that labour is the source of all wealth and the real measure of the exchangeable value of all commodities (“Wealth of Nations,” 1776). In 1817 Ricardo (1772-1823) published his “Political Economy,” in which he stated that the worker receives as wages only so much as is required to furnish him with the necessities of life estimated according to the custom of the time.

  Marx based his theories for the reconstruction of Society upon a narrow interpretation of these propositions.”

Marx, in his critical notes on the Gotha Programme, says :

  “Labour is not the source of all wealth. Nature, no less than labour, is the source of use-values (and of these material wealth essentially consists); and labour is itself no more than a manifestation of a natural force, human labour-power.”

Marx’s work, “The Poverty of Philosophy,” is itself a reply to the last sentence quoted from Lord Riddell’s article, but the following passage from Engels’ preface to that work may usefully be given here :

  “The above application of the theory of Ricardo, which shows to the workers that the totality of social production, which is their product, belongs to them because they are the only real producers, leads direct to Communism. But it is also, as Marx shows, false in force, economically speaking, because it is simply an application of morality to economy. According to the laws of bourgeois economy, the greater part of the product does not belong to the workers who have created it. If, then, we say, ‘That is unjust, it ought not to be,’ that has nothing whatever to do with economy ; we are only stating that this economic fact is in contradiction to our moral sentiment. That is why Marx never based upon this his Communist conclusions, but rather upon the necessary overthrow, which is developing itself under our eyes every day, of the capitalist system of production.”

A brief examination thus shows that Marx’s alleged “narrow interpretation” is merely the product of Lord Riddell’s imagination.

Elsewhere our critic refers to various matters which, he says, Marx’s theory disregarded. He says : “It also disregarded the necessity of leadership in industry.” Marx’s reply to this may once more be quoted :

  “All combined labour on a large scale requires, more or less, a directing authority, in order to secure the harmonious working of the individual activities, and to perform the general functions that have their origin in the action of the combined organism, as distinguished from the action of its separate organs. A single violin player is his own conductor ; an orchestra requires a separate one.”

Further:

  “Just as at first the capitalist is relieved from actual labour so soon as his capital, has reached that minimum amount with which capitalist production, as such, begins, so now, he hands over the work of direct and constant supervision of the individual workmen and groups of workmen, to a special kind of wage labourer. An industrial army of workmen, under the command of a capitalist, requires, like a real army, officers (managers), and sergeants (foremen, overlookers), who, in while the work is being done, command in the name of the capitalist. The work of supervision becomes their established and exclusive function.”—Capital, Vol. 1, chapter 13.)

Lord Riddell, in the course of a pretence at a representation of what he calls Marx’s theory, says : “The workers, however, become organised and develop class consciousness—viz., a recognition of their rights as opposed to those of other classes.” Marx certainly recognised the necessity for class-consciousness. But “rights” ! How little use Marx’s theory had for the recognition of rights is realised by anyone who has given any attention to his works. Especially in the already-mentioned Notes on the Gotha Programme does Marx deal with this matter. Discussing the expression “equal rights to the whole product of labour,” occurring in that Programme, he shows how “Like all right, therefore, it is substantially an unequal right.” Further on, too, he denounces the “endeavour to uproot the realistic conceptions which (after long labour) have been firmly implanted“ in the minds of our members, and to replace them by ideological fustian about rights and all the rest of it.”

It is possible here only to touch upon a very small proportion of Lord Riddell’s mistakes. The following, however, must be given as his best attempt at concentrated misrepresentation ;

  “The English edition of his chief work, Capital, was issued in 1886. In the preface his co-author, Frederick Engels, committed himself to the statement that British prosperity seemed to have run its course, that we were landed in ‘the slough of a permanent and chronic depression,’ and that the increase of population would shortly lead to a revolution.”

What Engels did write, in his preface, was :

  “The decennial cycle of stagnation, prosperity, over-production and crisis, ever recurrent from 1825 to 1867, seems indeed to have run its course; but only to land us in the slough of despond of a permanent and chronic depression.”—(Capital. Swan, Sonnenschein, Lowrey & Co., 1887.)

The real Engels is as quoted here, and the real riddle is : How did our critic manage to quote nearly a whole line of Engels’ preface nearly correctly? As regards the statement, attributed to Engels, that “the increase of population would shortly lead to a revolution,” it must be admitted that Lord Riddell here deals Engels a nasty blow, the only defence being that Engels did not make that statement.

Lord Riddell gives what purports to be, but most certainly is not, a description ot Marx’s materialist conception of history. What Lord Riddell does not know about this side of Marx’s teachings is evidently well worth knowing. For of Marx he writes : “In 1845 he was expelled from Paris. After this he went to Brussels, where, in conjunction with Frederick Engels, he planned a series of European revolutions to subvert the existing order.” This is the best joke penned by Lord Riddell in his article. Revolutions planned by Marx and Engels ! By those who had formulated the materialist conception of history, according to which the latter is a history of class struggles ! By those who had maintained that “the emancipation of the working class must be the act of the working class itself” ! If Lord Riddell’s version is not a crude joke, then how admirable must have been the modesty of the author of “The Struggle of the Classes in France (1848—1850).”

A clue to the source of Lord Riddell’s mistakes, to use a polite expression, may be found in another of his references to Capital. He remarks : “It is not exciting reading, but its teachings diluted and embellished have been spread in all civilised countries by devoted adherents.” Whether or not Capital is exciting reading depends, of course, upon the reader. But if ever Lord Riddell should desire to become acquainted with the subject of his criticism it would still be of advantage to him to read Marx’s works rather than his “teachings diluted and embellished” by devoted adherents of capitalism.

A. C. Anderton

The origins of socialist theory (1971)

Book Review from the May 1971 issue of the Socialist Standard

The Origins of Socialism, by G. Lichtheim. Weidenfeld and Nicolson. £2.50. A Short History of Socialism, by G. Lichtheim. Weidenfeld and Nicolson. £1.50 (paperback).

Socialist theory has customarily been said to derive from French political thought, English economic science and German philosophy. As Marx was the first to bring these three trends together Socialist theory is sometimes called Marxism. Lichtheim follows this tradition and sees Socialism as one reaction to the coming of industrial capitalism, as a theory which accepted industrialisation but not private enterprise and the profit motive.

French utopian Socialism introduced the idea that society should be organised on a more rational basis to take account of industrialisation. Its most prominent representatives were the followers of Saint Simon and Fourier. The former were responsible for such phrases as “the exploitation of man by man", “the administration of things’’ and, in France, “socialism”. They, and the Fourierists, were pioneers of what is now called women’s liberation and Fourier was among the first to argue that the distinction between town and country could disappear and that work could be made pleasant.

The French Revolution also produced another political trend, the revolutionary communists, who declared that the bourgeoisie had to be overthrown in the same way as the aristocracy had been: by violent insurrection and a temporary emergency dictatorship. Marx and Engels wrote the Communist Manifesto of 1848 for the German section of this trend, the Communist League. But by 1865, says Lichtheim, Marx had outgrown this “communist" phase and come to be the theorist of “democratic socialism” relying on the development of the working class movement rather than on conspiratorial insurrections for the establishment of Socialism.

In 1848, Lichtheim points out, Marx who had not yet worked out the distinction between labour and labour-power was still really a “Ricardian socialist”. David Ricardo, one of the leading English economic thinkers of his day (he died in 1823), was by no means a Socialist but he had said that labour was the source of value. Some of his followers who were also committed to Robert Owen’s Utopian Socialism gave this labour theory of value an anti-capitalist and pro-worker content and can be said to have done some of the preliminary work which Marx was to develop in Capital.

Marx was brought up and educated in what is now Germany and at university, like many others, became immersed in German philosophy and particularly that of Hegel. His critical study of Hegel and his followers led him to develop the materialist conception of history as an alternative historical theory.

Lichtheim’s books, especially the Origins, cover this ground very well, though it is odd to read of people such as the Fabians in Britain and the Stalinists in Russia as “socialists” when they stood rather for state capitalism. But when it comes to discussing Socialism as a system of society Lichtheim’s means more or less what we do.

In the concluding chapter of his Short History he defines Socialism as a democratic classless society based on common (as opposed to State) ownership in which “the wage relation has been abolished” and “all citizens have an equal claim upon the provision of goods and services” and "welfare services would be equally available to all at zero prices”:

  Anything that falls short of abolishing the wage relation has no claim to be described as socialism, though it may be a station on the way thereto.

The last part betrays Lichtheim’s basically gradualist approach to the establishment of Socialism. Indeed he suggests that Socialism is not an immediate prospect and probably will not be until the world is fully industrialised. Obviously we do not agree with this assessment but at least we can recognise that Lichtheim is on the same wavelength as us.

Both books are worth study as much for their discussion of the problems of Socialist and Marxist theory as for their account of its origins and history.

Adam Buick

Marx's Financial Articles (1983)

From the December 1983 issue of the Socialist Standard

In the critique of political economy which became his life work Marx set out, as he put it in the Preface to the first German edition of Capital, to “lay bare the economic law of motion of modern society”. One of his conclusions was that the expansion of production under capitalism did not proceed at a smooth, steady pace, but was “a series of periods of moderate activity, prosperity, overproduction, crisis and stagnation” (Capital Vol I, Pelican, p.58), in which the long-term trend was nevertheless upwards.

The crisis which marked the end of the period of boom took the form of a financial crash—that is, a collapse of credit and a strong demand to be paid in cash. This gave rise to the illusion that the crisis was simply a monetary question whereas in fact the monetary crisis was a reflection of the real overproduction that had taken place.

Overproduction reflected itself as a monetary crisis, since, in the middle of the 19th century, the main form of credit was the trade bill, or bill of exchange, a promise to pay issued by a manufacturer or merchant which would be honoured when he had sold his product. Such bills could be discounted, that is, cashed below their face-value, the precise deduction depending on the going rate of interest (discount rate). In normal times these bills circulated alongside bank notes as an accepted means of payment.

Clearly, if overproduction has taken place, all the bills are not going to be able to be honoured, so that as soon as people realise—or even suspect, with or without reason—that  overproduction has taken place they will no longer be prepared to accept these bills in payment and will insist on cash. Nor will banks be prepared to discount the bills, except at a very high rate of interest. The result is a credit squeeze, high interest rates and a financial crisis.

Marx studied two of these crises in close detail, that of 1847—when just after arriving in London in 1850 he was investigating the relationship between crises and revolution—and that of 1857. In fact, by co-incidence, 1857, besides being a crisis year, also saw the publication of two British parliamentary reports on financial questions: the secret evidence taken by a House of Lords committee which investigated the 1847 crisis and a House of Commons report on the workings of the 1844 Bank Act. Marx replied on these two documents, together with the House of Lords report itself which had been published, without the evidence, in 1848 and a report on the 1857 crisis published in 1858, to write a considerable number of articles for the New York Daily Tribune in 1857 and 1858 as well as to make notes for the section of Volume III of Capital to be devoted to interest-bearing capital. Marx had also frequently written on financial subjects before 1857 for the NYDT, especially when a financial or industrial crisis seemed about to break out. He always commented on the British budget when it was presented to the House of Commons and as early as 1853 had written an article explaining the principles and working of the 1844 Bank Act to his American readers.

Since, in the end, Marx never got round to preparing for publication these notes he made for Capital –they were very scrappy and had to be put into some sort of order by Engels—it is these NYDT articles which must be regarded as expressing in a final form for publication his views on financial crises. Hence these articles are to be regarded as an important complement to Volume III of Capital.

The British banking laws of 1844 and 1845 which Marx analysed in detail were an attempt to put into practice the doctrine of the so-called Currency School. In 1797, at the beginning of the Napoleonic Wars, the convertibility of Bank of England notes into gold had been suspended and was not restored until 1819. As a result of the experience of this period of inconvertibility a controversy arose in the first part of the 19th century over whether or not the number of paper notes issued by banks should be controlled by legislation. The Currency School argued that it ought to be, in order to ensure that the circulation of paper notes conformed to what they believed to be the economic laws governing the circulation of a metallic currency (gold and/or silver). Their opponents, known as the Banking School, denied the need for such control arguing that, as long as the paper notes were ultimately convertible into a fixed amount of gold, the number that would in actual practice circulate would always be governed by the economy’s need for currency. It was thus impossible, in their view, for the number of convertible paper notes to be over-issued since if more were issued that the economy needed the surplus notes would eventually find their way back, one way or another, to the bank that had issued them.

The Currency School based their theory on the views expressed by Ricardo on the circulation of a metallic currency like gold. According to Ricardo, there was a direct causal relationship between the amount of gold in a particular country and the general level of prices prevailing there. When a country had a favourable balance of trade, with exports exceeding imports, there would be an inflow of gold to that country; this increased quantity of gold would lead to an increase in the general price level; exports would therefore tend to fall off and imports to increase; as the balance of trade shifted from favourable to unfavourable so gold would flow out of the country, bringing about a fall in prices again. In other words, according to Ricardo, with a metallic currency the amount of money in circulation was automatically regulated by the flow of gold into and out of a country as its trade balance changed one way or the other. [1]

The Currency School wanted to make the circulation of a paper currency (or rather of a currency composed partly of gold and partly of paper notes) conform to this automatic model described by Ricardo. They thus proposed that the number of notes that could be issued should be tied to the amount of gold in the vaults of the bank that issued them. In 1844 led by the banker Samuel Loyd (later Lord Overstone, 1796-1883) they persuaded the then Tory Prime Minister, Sir Robert Peel, to try to put their so-called currency principle into practice. The Act was piloted through the House of Commons by Peel himself and so is often known as the “Peel Bank Act”. Marx explained its principle and main features in an article published in the NYDT on 24 September 1853:

  It assumes that £14,000,000 of bank notes form the necessary minimum amount of circulation. All notes issued by the Bank of England beyond that amount shall be represented by bullion. Sir Robert Peel imagined he had discovered a self-acting principle for the issue of notes, which would determine with mechanical accuracy the amount of the circulation, and which would increase or diminish it in the precise degree in which the bullion increased or decreased. In order to put this principle into practice, the Bank was divided into two departments, the Issue Department and the Banking Department, the former a mere fabric of notes, the latter the true Bank, receiving the deposits of the State and of the public, paying dividends, discounting bills, advancing loans, and performing in general the business with the public, on the principles of every other banking concern. The Issue Department makes over its notes to the Banking Department to the amount of £14,000,000, plus the amount of bullion in the vaults of the Bank. The Banking Department negotiates those notes with the public. The amount of bullion necessary to cover the notes beyond £14,000,000 remains in the Issue Department, the rest being surrendered to the Banking Department. If the amount of bullion diminish beneath the circulation exceeding £14,000,000, the notes returning to the Banking Department in discharge of its advances, or under the form of deposits, are not reissued nor replaced, but annihilated (Marx-Engels, Collected Works, Vo112, pp.298-9).

Marx regarded the theory of the Currency School as wholly mistaken and described the attempt to apply it through the 1844 Bank Act as a “fiasco” even in Volume I of Capital (Pelican, p.939). His first objection was to their view, derived from Ricardo, that the quantity of money in circulation governed the general level of prices. In his view the relationship was exactly the reverse: that more or less money was in circulation because prices were high or low, (see Volume I of Capital, Chapter III, 2b). In other words, money was essentially only a secondary factor, the amount circulating depending on the needs of the economy as determined by real economic factors such as the prices of the commodities to be traded (reflecting their value, or amount of socially necessary labour-time spent in producing them from start to finish) and the level of productive activity and trade. His views are summed up rather well at the end of his A Contribution to the Critique of Political Economy, where he says that Thomas Tooke (1774-1858), who had started out as a partisan of Ricardo’s theory but who later became a leading opponent of the Currency School, was led

  to recognise that the direct correlation between prices and the quantity of currency presupposed by this theory is purely imaginary, that increases or decreases in the amount of currency when the value of precious metals remains constant are always the consequence, never the cause, of price variations, that altogether the circulation of money is merely a secondary movement and that, in addition to serving as a medium of circulation, money performs various other functions in the real process of production (Lawrence & Wishart, 1971, p.186).

Marx had the highest regard for Tooke. He was particularly impressed by his History of Prices from 1792 to the Present Time which appeared between 1823 and 1857. When he wrote that detailed confirmation of the economic law that “prices are thus high or low not because more or less money is in circulation, but there is more or less money in circulation because prices are high or low” was “the only achievement of the post-Ricardian English economists” it was clearly the work of Tooke he mainly had in mind. When Tooke died in 1858 Marx wrote to Engels that the last English economist of any value was dead (letter of 5 March 1858).

Marx’s second objection, based on the empirical research of men like Tooke, was that it was not possible in practice to increase the amount of convertible paper money in circulation beyond what the economy required, as he argued and demonstrated with statistics many times in his NYDT financial articles. The needs of the economy determined the amount of currency in circulation just as much when the currency was gold and convertible notes together as when it was gold alone.

This does not mean that Marx is to be regarded as a member of the Banking School; in fact he criticised people like Tooke for not going beyond the currency question to examine the real economic factors at work. Nor should he be seen as an advocate of the reform of the banking legislation in Britain, even though he knew that this aggravated the monetary crisis phase of the industrial cycle:

  Ignorant and mistaken bank legislation, such as that of 1844-45, can intensify this money crisis. But no kind of bank legislation can eliminate a crisis (Capital, Volume III, Moscow, p.478).

His concern was to show that capitalism was a system that worked according to economic laws which arose from deeper causes than mere monetary reform. A surprisingly large part of Marx’s writings on economics—not just these articles in the NYDT but also his A Contribution to the Critique of Political Economy and the notebooks known as the Grundrisse—was devoted to exposing incorrect theories about money. For Marx, the only way to end recurring economic crises was a social revolution as a result of which money would be abolished.

The exact way in which the 1844 Bank Act proved to be a “fiasco” is well described by Engels in an explanatory passage he added to the chapter on “The currency principle and the Bank legislation of 1844” (chapter XXXIV) of Volume III of Capital which he edited after Marx’s death and which was published in 1894:

  the separation of the Bank into two independent departments deprived its management of the possibility of freely utilising its entire available means at critical times, so that situations could arise in which the banking department might be on the verge of bankruptcy while the issue department still had intact several millions in gold and, in addition, its entire 14 million in securities. And this could take place so much more easily since there is a period in almost every crisis when heavy exports of gold take place which must be covered in the main by the metal reserve of the bank. But for every five pounds in gold which then go abroad, the domestic circulation is deprived of a five-pound note, so that the quantity of circulating medium is reduced precisely at a time when the largest quantity is most needed. The Bank Act of 1844 thus directly induces the entire commercial world forthwith to hoard a reserve fund of bank-notes at the outbreak of a crisis; in other words, to accelerate and intensify the crisis. By such artificial intensification of demand for money accommodation, that is, for means of payment, at the decisive moment, and the simultaneous restriction of the supply the Bank Act drives the rate of interest to a hitherto unknown height during a crisis. Hence, instead of eliminating crises, the Act, on the contrary, intensifies them to a point where either the entire industrial world must go to pieces, or else the Bank Act. Both on October 25, 1847, and on November 12, 1857, the crisis reached such a point; the government then lifted the restriction for the Bank in issuing notes by suspending the Act of 1844, and this sufficed in both cases to overcome the crisis. In 1847, the assurance that bank-notes would again be issued for first-class securities sufficed to bring to light the £4 to £5 million of hoarded notes and put them back into circulation; in 1857, the issue of notes exceeding the legal amount reached almost one million, but this lasted only for a very short time (Moscow, pp.542-3).

The Act was suspended for a third time on 11 May 1866 during the crisis of that year by the then Chancellor of the Exchequer, Gladstone. Marx did not analyse this crisis in as much detail as he did those of 1847 and 1857, though he does refer to it in passing in Volume I of Capital (Pelican, pp.822-3) and he did discuss the 1866 suspension in a letter he sent to Collet in 1868 and which the latter published in the Urquhartite journal he edited, the Diplomatic Review (as the Free Press became) under the somewhat misleading title “How Mr Gladstone’s Bank Letter Procured a Loan for Russia” (Gladstone had in the meantime become the Prime Minister).

In Volume III of Capital Marx also argued that the 1844 Act had been deliberately designed to keep interest rates artificially high, so benefiting the financial section of the capitalist class at the expense of the industrial section. He thus regarded the bankers like Lord Overstone and George Norman (1783-1882), who both came in for his harsh comments, as being motivated by self-interest as well as being ignorant of monetary economics. In fact as early as 1850, in their notes for the Revue of Neue Rheinische Zeitung, Marx and Engels had spoken of “the Bank Acts of 1818 and 1844, which strengthened the financial aristocracy” (The Revolutions of 1848, Pelican, pp.305-6).

In case it should be thought that Marx’s remarks can be simply transposed to the modern discussion on money and inflation, we should bear in mind that he was talking about the circulation of a paper currency convertible on demand into a fixed amount of gold. This situation no longer obtains today. All modern currencies are now inconvertible paper money, the laws governing which are quite different—the opposite, in fact, insofar as the quantity issued does directly affect the level of prices rather than vice versa—to those governing the circulation of a metallic currency and a mixed metallic/ convertible paper currency. Marx did have something to say on this also in his A Contribution to the Critique of Political Economy and in Capital (chapter III, 2c) where his comments still provide a basis for an analysis of modern inflation as resulting from the over-issue of an inconvertible paper currency.

Adam Buick

[1] A detailed, and very clear, discussion and history of Ricardo's currency theory is to be found in the last section of Marx's A Contribution to the Critique of Political Economy on "Theories of the medium of circulation and money".

Almeria’s Greenhouses: The Dark Side of Agri-Capitalism (2019)

From the January 2019 issue of the Socialist Standard

Part One: Mar de Plastico

In Almeria province in Southern Spain there is to be found the largest greenhouse complex in the world, an area roughly the size of the Isle of Wight. Nothing quite prepares you for the sheer scale of it all – or the brutal ugliness. Driving through it can be a disorientating experience. As far as the eye can see, covering the coastal plain and lapping the mountain range behind, is a shimmering sea of plastic.

The first greenhouses were erected in the early 1960s. Prior to that Almeria province was considered the poorest region in Spain, a barren desolate place, Europe’s only desert and the backdrop of many Spaghetti Westerns and films like Lawrence of Arabia. However, it wasn’t always like that.

Historical Background

At one time, according to Robert Wolosin, the area had extensive pine and oak forests as well as abundant fauna (including bear, lynx and roe deer), despite its meagre rainfall (2006, El Milagro de Almeria, Espana: A Political Ecology of landscape change and Greenhouse Agriculture). Successive waves of human occupation incrementally transformed this landscape to what it has become today. Key to this was the overexploitation and export of local resources linked to the extraction of economic surpluses.

Anthropogenic influences on the environment can be traced back to Roman times and even earlier. After the collapse of the Roman Empire in the 5th century, the habitat largely reverted to its earlier state, only to undergo a further transformation under the Nasrid Moorish dynasty (711-1492). The Moors introduced elaborate irrigation technology and new crops like citrus and almonds. Under them, the city of Almeria itself grew to briefly become the second richest city in Europe after Constantinople, linking the hinterland to the wider world of Mediterranean trade.

The Christian ‘Reconquista’ (re-conquest) of Spain completed in 1492, signalled a new chapter in the region’s environmental history. Feudal lords leased out land for sheep farming to provide wool for the Italian textile industry. The decline of that market in the 1600s and the availability of abundant land, subsequently encouraged a shift towards low-yield, extensive ‘dry’ farming (mainly cereals) necessitating the removal of yet more vegetation cover. Pastures and woodland were recklessly put under the plough, rendering the soil vulnerable to erosion, in a manner reminiscent of Dustbowl years of the 1930s when ecologically inappropriate, commercially-driven, farming techniques were introduced on the vast prairies of North America.

The final, and most devastating, blow to Almeria’s once forested, if fragile, environment was delivered in the early 19th century when, as Wolosin notes, tens of thousands of acres of vegetation cover was lost and half a million evergreen oaks were felled to, among other things, serve the needs of the local mining industry, then experiencing a boom. The growth of the mining sector – Almeria province at that time accounted for 80 percent of Spain’s lead production – also encouraged inward migration and the resultant increase in population exerted additional pressure on the local environment. However, by the late 19th century the mining industry went into a sharp decline because of falling prices but also, ironically, because of a self-inflicted shortage of wood needed to fuel the foundries. With mining in decline and farming adversely affected by centuries of environmental abuse, the province succumbed to significant depopulation.

Such was the parlous state that Almeria found itself in the early 20th century before the advent of the greenhouses:

 ‘An area once known for forests, streams, and a wide array of plant and animal life is now parched, cracked, and shadeless’ (ibid).

The ‘Ecological transition’

Putting this in a wider context Wolosin, citing the environmentalist Heinrich Walter, remarks that the Mediterranean region, and Almeria in particular, are ‘the best and most tragic example of how mankind has removed the foundations for his existence through the overexploitation of natural resources’. How this came about can be usefully understood in terms of the concept of the ‘ecological transition’ pioneered by John Bennett in his book The Ecological Transition: Cultural Anthropology and Human Adaptation (1976).

According to Bennett, there is a spectrum of human adaptations – from a local community completely reliant upon, and adapted to, its own immediate resource base right through to the kind of globalised system of production that characterises modern capitalism. In this latter case, the local community no longer depends entirely on its own resources to meet all its needs but, increasingly, on the ability of other communities to supply some, or even most, of those needs. In other words, environmental adaptation to the immediate constraints of nature gives way to the cultural adaptation of communities to each other.

The classical economist, David Ricardo, advanced his theory of ‘comparative advantage’ in support of this development. It benefits a nation, he argued, to specialise in what it is best at producing while relying on other nations to supply it with goods it is not particularly adept at producing. This reduces the opportunity costs of producing goods across all nations, leaving everyone better off from the resultant increase in global trade.

Ricardo’s theory is based on a number of unrealistic assumptions but, here, we are concerned only with the particular counter argument bound up with the aforementioned concept of the ‘ecological transition’ – namely, that by reducing the local community’s reliance on its own natural resources, this tends to ‘desensitise’ it to the need to prudently operate within the limits of these resources. This does not mean those limits are necessarily fixed and unchangeable – human intervention can, for instance, sometimes significantly enhance the fertility and hence, ‘carrying capacity’, of the soil. Nor does it mean a community will inevitably set about despoiling its own environment if it can rely on others to supply what it needs – there are other factors involved besides this – but this does nevertheless create the conditions which can greatly amplify the environmental impact of those other factors.

The collapse of the Roman Empire is a classic example. In part, the expansion of that empire was driven by the need to secure an adequate food supply to meet the needs of Rome itself – at its height, a city of one million people – and its vast armies. Grain tributes were exacted from conquered territories all around the Mediterranean basin which profoundly altered the region’s ecology. Widespread deforestation occurred to permit intensive cereal farming leading to soil exhaustion and desertification. The resultant decline in output, in turn, prompted the empire to further expand its territory, eventually reaching the point at which its supply lines were so over-stretched that it became increasingly vulnerable to external threats.

In modern capitalism, it is not so much tribute as the quest for profit that drives economic activity. But with capitalism, we see also the same preoccupation with short term interests over long term sustainability. According to Friedrich Engels:

 ‘As individual capitalists are engaged in production and exchange for the sake of immediate profit, only the nearest, most immediate results must first be taken into account . . . What cared the Spanish planters in Cuba, who burned down the forests on the slopes of the mountains and obtained from the ashes sufficient fertiliser for one generation of highly profitable coffee trees – what cared they that heavy tropical rainfall afterwards washed away the unprotected upper stratum of soil, leaving behind only bare rock! In relation to nature, as to society, the present mode of production is predominantly concerned only about the immediate, most tangible result, and then surprise is expressed that the more remote effects of actions directed to this end turn out to be quite different, are mostly quite opposite in character’ (1876, The Part played by Labour in the Transition from Ape to Man).

These words have a particularly modern ring to them in the light of the multiple and escalating environmental crises facing humanity today. The underlying mechanism driving this development is plain to see. Business enterprises strive to ‘externalise’ their production costs as far as possible in order to maximise their commercial gains under a system of market competition – or face commercial ruin. However, just because those costs are made to disappear from the accountant’s ledger book, this does not mean they cease to exist. The burden of those costs is born not just by the wider community but the very physical environment itself upon which we ultimately depend.

In response, capitalism has tended to promote technological ‘solutions’ to these very problems it has itself engendered. But can such an approach ever truly succeed in ensuring we keep our heads above the water or will the rising tide of ‘externalities’ eventually engulf us all?

A Spanish ‘El Dorado’

This is a question we might well ask in turning to consider that particularly remarkable example of capitalist enterprise and innovation: the greenhouses of Almeria.

In the 1950s, under Franco, a model irrigation project was launched in that sparsely populated zone, now under plastic, with the aim of resettling landless peasants there. It was the peasants themselves who initially developed the basic technology of greenhouse production – including the use of polythene rather than glass, attached to a simple framework of wood or metal – capitalising on the region’s natural advantages such as its abundant sunshine and the virtual absence of frost, to give them a competitive edge in the market for early vegetables. At first, it was the local, then the wider national market they supplied but, with Spain joining the EU in 1986, production became truly transnational. Europe, as a whole, now relies for most of the year on Spain to provide almost a third of its demand for fresh fruit and salad crops – a figure rising to half during the cold winter months – much of this coming from Almeria’s greenhouses which generate an annual revenue of about €2 billion.

As the industry expanded so did the role of intermediaries in financing, marketing and basic R&D. Indeed, the institutional architecture that has been built up around the greenhouse industry itself is, today, extraordinarily complex and closely coordinated. Downward and Taylor quote Almeria’s Director of Agriculture as saying: ‘This is the most social level of agriculture in the world, not even the best communist system would have achieved what has been achieved in Almeria… and by people who maybe 50 years ago would have only had a herd of goats’ (Journal of Environmental Management, January 2007).

Remarkably, given the highly ‘socialised’ nature of the industry, the ownership of the greenhouses themselves remains firmly family-based with about 13,500 small scale producers operating in the greenhouse belt typically on plots of somewhat over 2 hectares. This helps to explain the popularity of the greenhouses among the locals who widely regard this development as an ‘economic miracle’ and have prospered as a result. However, it is a miracle bought at a considerable cost which calls into question the sustainability of this model of development – not least, as we shall see, in an era of growing concern about climate change.

(Part 2 follows next month)

Robin Cox

Not anti-Marx (2018)

Book Review from the December 2018 issue of the Socialist Standard

‘Radical Political Economy – Sraffa versus Marx’.  By Robin Hahnel. (Routledge, 2007. 110 pages)

Piero Sraffa (1898-1983) was an Italian economist at Cambridge University, best known for his attempt to revive the approach of Classical Political Economy, as represented by Adam Smith and in particular David Ricardo, whose concepts Marx also employed in his criticism of them for assuming that capitalism was the natural way of organising the production and distribution of wealth rather than just a passing historical phase.

Sraffa’s main work, The Production of Commodities by Means of Commodities, was published in 1960. The title itself was already a revival of Classical Political Economy as he was using the word ‘commodity’, also inherited by Marx, to mean an item of wealth produced for sale; and capitalism is precisely an economic system in which commodities are produced by means of other commodities. What Sraffa was aiming to do was to settle some questions, left unresolved by Ricardo and Marx, about how to square a labour theory of value with an economic system where there were profits and which therefore meant that commodities did not exchange at their labour-time values, i.e., the amount of labour required to produce them from start to finish.

Critics of Marxian economics interpreted Sraffa’s book as showing that there was no need for any labour theory of value to explain how the (capitalist) economy worked and began to use it as a stick to beat Marx. Hahnel (one of the co-architects of the Parecon scheme) is in this tradition. But to see Sraffa as a critic of any labour theory of value is absurd – how could someone dubbed a ‘neo-Ricardian’ reject this when a labour theory of value was central to Ricardo’s economic analysis?

Sraffa’s book is based on assuming that commodities ‘contain’ labour and how the amount of this could in principle be calculated when there are profits. He explicitly states that the labour theory of value as a theory of selling price (exchange-value) is only valid when there are no profits, when the whole product of labour goes to the producer. This was Marx’s view too in an economic system he called ‘simple commodity production’ where all commodities were imagined to be produced by independent self-employed producers. Marx was well aware that, under capitalism, commodities did not sell at their labour-time values but at what he called their ‘price of production’ (a term Sraffa also used) as their cost of production + a mark-up for the going rate of profit. Sraffa goes into this in more detail than Marx was able to in his unfinished notes.

In any event, to counterpose Sraffa to Marx, as in the title of this book, is not justified. There is no evidence that Sraffa was hostile to Marx. Just the opposite in fact, as can be seen from Appendix D on ‘References in the Literature’, Sraffa had as much respect for Marx’s as he had for Ricardo’s earlier work on his subject.

Hahnel gets Marx wrong on a number of points. He commits Marx to a biological/calorie subsistence theory of wages whereas Marx recognised that there was a varying historical and social element in wages (as set out in chapter 22 of Volume I of Capital on ‘National Differences in Wages). Using such terms as ‘total breakdown’ and ‘inevitable collapse’ he attributes to Marx the view that capitalism will eventually mechanically breakdown. He accuses Marx of not identifying a flaw in capitalism that sometimes capitalists do not adopt the most efficient production methods if wages are low, whereas Marx makes this very point, regarding a stone-breaking machine invented and used in the US but not used in Britain, at the end of section 2 of Chapter 15).

Clearly Hahnel doesn’t know his Marx. He also contradicts himself when he insists that profit does not derive only from the labour-power capitalists hire while at the same time explaining ‘profits as the result of denying workers in a productive economy all the surplus goods they produce’.

This said, his book is well-presented and, despite the algebra, very readable. The final chapter in which the capitalists are put on trial accused of being parasites on the producers and their various lines of defence (abstinence, waiting, risk, etc) refuted, ending in them being found guilty as charged, is amusing and to the point.

Adam Buick

The Importance of Marxism—(continued) (1940)

From the June 1940 issue of the Socialist Standard

Continued from the May 1940 issue.

The school of Political Economy that directly preceded Marx is that of Adam Smith (1723-1790) and David Ricardo (1772-1823).

Both exponents expressed the interests of the rising English industrialists, and as such were apostles of free trade. Marx has called all the economists I have mentioned “Classical Economists” (in contradistinction to many of his superficial and apologetic contemporaries, whom he has dubbed “Vulgar Economists”) because they really endeavoured to analyse the mechanism of capitalist society. All of them were, however, essentially bourgeois, and regarded capitalist society as an eternal order of things.

Adam Smith, in his “Wealth of Nations” (1770), correctly distinguishes between “value in use” and "value in exchange.” He points out that the things which are most useful (water, air, etc.) generally command little or nothing in exchange. Smith claimed that the “natural price” of an article (what we have called “average price”) is the centre of gravity around which the market price fluctuates. This "natural price” is governed by the labour taken to produce a commodity.

He, too, was inconsistent in his views, for he often confused the price of an article with the price of labour (labour-power) and sometimes imagined that prices were regulated by wages, profit and rent.

In his “Principles of Political Economy and Taxation” (1821), David Ricardo established the proposition that the value of a commodity is regulated by the quantity of labour necessary for its production. Ricardo, however, failed to solve the problem of surplus value because he did not see that what the worker sells to the capitalist is his labour power—not his labour. Moreover, Ricardo did not clearly differentiate between surplus-value and profit. 

Incidentally, whilst on Ricardo, it is interesting to notice what he thought of a contemporary “Vulgar Economist,” Thomas Malthus.

We have already alluded to “Vulgar Political Economy” as a school of thought which rehashed current views that were favourable to the capitalists and, instead of attempting to analyse, accepted appearances.

In this connection, Malthus’s economic views are even popularised to-day. His notions on population based on these views finds an echo in Nazi Germany, where Hitler proclaims his need for more “Lebensraum ” (living space).

In a letter to McCullough, dated May 2nd, 1820, Ricardo writes: —

  I have read his book—at present I feel a real difficulty for I confess I do not clearly perceive what Mr. Malthus’s system is.

And in a further letter, dated August 2nd, 1820: —

   Since I have been here I have been .giving a second reading to Mr. Malthus’s book. I am even less satisfied than I was at first. There is hardly a page which does not contain some fallacy.

The Ricardian Socialists

Ricardo’s formulation of the labour theory of value, including his classification of society into three classes (landlords, capitalists, workers), provided the groundwork for Utopian Socialism. The premises of the latter was: As labour is the source of all value, then to labour should all values rightly go.

This commendable proposition from a moral standpoint must not, however, be confused with Marxism. Scientific Socialism is most certainly based on the labour theory of value (we shall explain this in greater detail later) but not on moral implications which can be deduced from that theory. Notwithstanding the ethical basis of their Socialist teaching, the writings of the Utopians are full of illuminating points, which reveal to a remarkable extent the characteristics of the capitalist economic order. It is timely to revive the memory of those outstanding thinkers, who, in the early part of the nineteenth century, exercised a profound influence on the mental development of the founders of Scientific Socialism—particularly now, when most of their works are practically unobtainable.

The Basic Fallacy Underlying Utopian Socialism

Whether we take Robert Owen, Thompson, Hodgskin, Bray or Rodbertus, we shall find underlying each of their writings a basic economic fallacy. This fallacy is associated with the view that what the worker sells to the capitalist is in reality his labour—instead of, as we know to be the case, his labour-power.

The Utopians contended that the worker is robbed in the process of exchange, inasmuch as the capitalist buys his labour but does not pay for it at its full value. Let us illustrate their contention by giving an example: —

A tailor, shall we say, has worked fifty hours for his employer, during which period he has produced suits to the monetary value of £10 (we assume that the raw material, etc., have also been made by him). The value of his labour, i.e., his product, is therefore, expressed in terms of money, equal to £10. In this case the Utopians would have reasoned, quite wrongly, “The tailor has sold ten pounds worth of goods to his employer (his labour). The latter, however, because he owns the means of production, takes advantage of his position and pays the tailor, say, only £5 for the goods—thus perpetrating a fraud in exchange.”

This reasoning led the Utopians to the view that it was necessary, in order to abolish the possibility of fraudulent exchanges, to make the workers possessors of their own means of life. It was essential, they held, to establish communist settlements, in which every worker who laboured for a definite period would be entitled to exchange the goods he had produced for other articles embodying an equivalent amount of labour. Only in such communist settlements, they maintained, would the fraudulent transaction of an exchange of more labour for less labour, practised under capitalism, no longer be possible.

It would take us too far afield to dwell on the intricacies of their communist Utopias, many of which were tried and failed. Suffice it to point out that the Socialism of the Utopians lacked scientific content for the following three reasons: —

(1) Because of the undeveloped conditions of capitalism in which the ideas arose.
(2) Because the Utopians were under the illusion that Socialist society had always awaited discovery and did not grow out of particular circumstances.
(3) Because of the Utopians’ misunderstanding of the way in which the workers are robbed and, consequently, their inability to grasp the mechanism of capitalist production.

Moreover, when all these factors have been taken into consideration, Utopian Socialism still remains valuable for its brilliant critique of bourgeois society. Let us now examine this critique.

ROBERT OWEN (1771-1858) is generally classified as the founder of English Utopian Socialism. Owen was originally a factory owner and actually arrived at his Socialist conclusions as a result of studying the conditions in his own works. His advocacy of Socialism and his struggles to improve the conditions of life for the masses resulted in his becoming outlawed by supporters of capitalist society. Owen’s life and work have, however, been so ably treated by Engels in “Socialism, Utopian and Scientific,” that we cannot do better than refer the reader to that excellent pamphlet. In this review we shall deal in detail mainly with Owen’s disciples.

WILLIAM THOMPSON (1785-1833) was a native of the county of Cork. He was a friend of Jeremy Bentham, the philosopher, and to a considerable extent under the influence of the latter’s radical teachings. Thompson's principal work is an “Inquiry into the Principles of the Distribution of Wealth most conducive to Human Happiness (1824),” a book that runs into some six hundred pages. The essential theme of this work is that rent, profit, etc., are wealth forcibly and unjustly appropriated by the capitalists from the workers. But let Thompson himself speak: —

  "But as long as the labourer stands in society divested of everything but the mere power of producing, as long as he possesses neither the tools nor machinery to work with, the land or materials to work upon, the house and clothes that shelter him—as long as any institutions or expedients exist by the open or unseen operation of which he stands dependant, day by day, for his very life on those who have accumulated these necessary means of his exertions; so long will he remain deprived of almost all the products of his labour, instead of having the use of all of them/' (Page 590. Longman, Hurst Ed.)

And how are going to alter this state of affairs ?

   “In the usual course of things then the productive labourer is deprived of at least half the products of his labour by the capitalist. . . .  No doubt if the productive labourers acquired knowledge, and could trace the immense abstractions made under the name of profits from the products of their labour, they must see the injustice of such an arrangement and endeavour to become themselves possessed of all the articles under the name of capital or of the means of commanding the use of such articles necessary to make their labour productive. . . .  As long as two hostile masses of interests are suffered to exist in society, the owners of labour on the one side and the owners of the means of labouring on the other, as long as this unnatural distribution is forcibly maintained—for without force wielded by ignorance it could not be maintained—so long will perhaps as much as nine-tenths of obtainable human production never be brought into existence, and so long will ninety-nine hundred parts of attainable human happiness be sacrificed."(Pages 160-175.) 

Remember that the above was written over a century ago!

And shall we appeal to the capitalists to introduce Socialism?

   "The excessively rich as a class, like all other classes in every community, must obey the influence of the peculiar circumstances in which they are placed, must acquire the inclinations and characters, good or bad, springing out of the state of things surrounding them from their birth. Having always possessed wealth without labour they look upon it as their right and their family’s right always to possess it on the same terms.” (Page 211.)

In concluding this review of economic theory before Marx, mention must be made of John Stuart Mill (1806-1873), who accepted the labour theory of value but attempted to compromise between Vulgar Economy and Utopian Socialism.

The Utopian Socialists, notwithstanding their shortcomings, were men of outstanding intellect and clarity of vision. But as Utopian Socialism is itself a detailed subject we must reserve a discussion on it for our next article.

Solomon Goldstein