Cut and thrust (2026)

Book Review from the July 2026 issue of the Socialist Standard

Tory Cuts. By David Connolly. Self-published. 2026.

This has been advertised in the classified section of Private Eye and is clearly aimed at the sub-section of society that is actively critical about the way UK society and its economy operate. It is at times amusing and frustrating, the latter mainly because of the large number of editing errors and the rather scattergun approach to structure – there is an underpinning narrative thread, but it really does test the patience of the reader as it often meanders off on tangents. At root, it needed a much finer editorial hand.

The over-arching theme is that the approach to economic management favoured by the Conservative Party in recent decades (and to some extent Labour) is a form of neo-liberalism that has only served to damage the UK economy, engender class division and infect the UK public sphere. Connolly’s solution seems to be Social Democratic Party-style economic interventionism allied with aspects of social conservatism. In some ways it is a ‘back to the future’ scenario as all this has been tried before and the social democratic economies of Europe (Scandinavia in particular) that he lauds have now been beset by similar issues. Indeed, pretty much all of them have seen falls in their growth rates like the UK and their halcyon days seem well and truly over, with resulting social discontent which hasn’t been seen in decades and a concomitant rise of the populist right.

It should be added that there is some very selective use of statistics in this book and some of them could be questioned too (including the over-stated claim that workers in the UK are losing 10 percent of our wages for every 10 years of neo-liberalism). But it is entertaining in parts and brings out the class divide at the heart of society well enough.

The solution to the problems Connolly identifies lies not in a return to a mythical social democratic past though – a past, after all, that was perceived as being so glorious the working class elected Thatcher and her successors in gratitude. Furthermore, much of what Connolly blames on neo-liberalism and monetarist economics – such as the decline in UK manufacturing – is really much more a product of the shift in world capitalism away from many of the traditional metropolitan centres of capital in Western Europe to China, India and the Far East instead, where labour costs are lower. For instance, while it is true that the proportion of UK jobs in manufacturing fell from around 25 percent of the workforce in 1980 to about 8 percent now, in Germany it fell from around 40 percent to about 19 percent, France from 25 percent to under 12 percent and Spain from about 20 percent to 10 percent. There has been a big fall in the neo-liberal US economy too, of course, though actually less than any of these European countries, many of whom use the same type of broadly social democratic approach he favours.

Ultimately, the underlying cause of the issues Connolly is rightly concerned about is not the actions of Tory governments and those who wish to copy them like Blair and Starmer – it is the way society is organised. Class division, economic instability and an uneven, antagonistic system of income distribution are at the very heart of all market economies, irrespective of political colours. Top-down, class-divided, based on entitlement and exclusion, with untold riches for a tiny minority and salary slavery for everybody else – that’s the capitalist way and it will need a lot more than a modification of personnel at the top to make it history.

DAP

Cooking the Books: AI, profits and Engels (2026)

The Cooking The Books column from the April 2026 issue of the Socialist Standard

City gents reading the business section of their Times (24 February) might have been surprised to come across a photo of Engels. Socialists would have been intrigued more by the caption ‘could AI create a new Engels pause, named after Friedrich Engels’. The term ‘Engels pause’ was not coined by Engels but by an economic historian, Robert Allen, to describe the course of economic development that led to the workers being in the situation described by Engels in his 1845 book The Condition of the Working Class in England.

Normally, a period of sustained capital accumulation should lead to some increase in working-class living standards, both because of employers bidding up wages as they compete for workers and because the increase in profits means they can afford to pay more. Allen noted that this had not happened in Britain during the period of rapid industrialisation from 1790 to 1840 as wages had stagnated. As in the period after 1840 wages did increase, Allen called this a ‘pause’ and named it after Engels.

Engels might not have regarded this as a compliment. He might have preferred the term ‘the Engels profit bonanza’ as, if wages stagnate in a period of economic growth, that means that profits will be more than they otherwise would.

The article in the Times, by its former business editor David Wighton, discussed two views of the possible economic impact of AI. He quoted a former Google executive as saying that ‘the most likely outcome is an economy in which corporate profits explode as labour costs fall, while workers’ share of output shrinks’. In short, another ‘Engels pause’. The opposite view was put by Jamie Dimon, the head of the bank JP Morgan Chase, who is quoted as saying that while AI will increase profits, ‘this isn’t like you’re going to build three points of margin and you get to keep it — you don’t’. Competition sees to that.

Who is more likely to be right? Critics of capitalism might be tempted to agree with the one-time Google executive as it would be another good argument against capitalism. However, Dimon has a point. His view reflects more accurately what happens when one capitalist enterprise makes extra profits by reducing its costs through some innovation and outcompetes its rivals.

‘An enterprise or industrial sector with an above average level of productivity (…) economizes in its expenditure of social labour and therefore makes a surplus profit, that is to say, the difference between its costs and selling prices will be greater than the average profit. The pursuit of this surplus profit is, of course, the driving force behind the entire capitalist economy. Every capitalist enterprise is forced by competition to try to get greater profits, for this is the only way it can constantly improve its technology and labour productivity. Consequently all firms are forced to take this same direction, and this of course implies that what at one time was an above-average productivity ends up as the new average productivity, whereupon the surplus profit disappears. All the strategy of capitalist industry stems from this desire on the part of every enterprise to achieve a rate of productivity superior to the national average and thereby make a surplus profit, and this in turn provokes a movement which causes the surplus profit to disappear, by virtue of the trend for the average rate of labour productivity to rise continuously’ (E. Mandel, An Introduction to Marxist Economic Theory.)

That’s the likely outcome of the spread of AI to production and business. A temporary increase in profits for the firms that are the first to use AI in their branch of activity but no ‘profit explosion’ in the sense of a general increase in profits for all firms which eventually adopt it.

The Socialist Forum: Some Questions About Gold. (1932)

Letter to the Editors from the April 1932 issue of the Socialist Standard

Elvaston Place, S.W.

Editor of the Socialist Standard.

Sir,

In October, you wrote: “The illusion that lack of gold has anything to do with the main problems is easily dispelled.” Is trade depression not a main problem ? No doubt a large part of the world’s economic difficulties are due to the lack of any plan in laissez-faire production and to the inequitable distribution of purchasing power resulting from private exploitation of the sources of wealth. But the best chance of modifying these conditions lies in the trades unions’ membership being increased, and the number of their members varies inversely with the percentage unemployed.

If the supply of gold is inadequate for the alleged requirements of the central banks and their clients, then primary prices will be forced down ; such a fall in prices involves reduction in the demand for manufactures, and inadequate profit or prospective losses deter the entrepreneur class from operations which increase employment and wages. There is almost complete short-term correspondence between the relation of primary prices to costs and the numbers unemployed, while with the upward trend of prices from 1896 to 1915 there was only two-thirds the unemployment of the preceding twenty years when the trend of prices was downward. Thorp & Mitchell’s Business Annals shows seven times as many years of prosperity per year of depression for the upward periods, 1849-73 and 1896-1920 as for that from 1873 to 1896. Your reference to the “very great increase in the supply of gold from 1890 to 1914″ shows that you do not appreciate the meaning of the term, “relative gold supply,” i.e., the actual supply relative to an increasing demand. This rose but slowly from the year 1896, allowing for an average increase in prices of about 2 per cent. a year from the disastrously low level of 1894-98. Both employment and the standard of living, however, were much higher at the end of the period than at the beginning. In 1926, real wages in the United States, according to Professor P. H. Douglas, were one-quarter higher than in 1890-99, while for Great Britain the New Survey of London gives a figure one-third higher than in 1890.

With regard to the second part of the article, “The Gold Standard and the Crisis,” I should like to say that (1) a practical policy must adapt itself to changing conditions. At the beginning of 1931, Mr. Keynes—who was mainly responsible for the Macmillan Report—considered that Great Britain would be in a much stronger position for leading the world out of the depression if sterling remained tied to gold. In the summer he no longer held that view. (2) Mr. Norman’s opinion as to the efficacy of Bank Rate is of no importance. Under the circumstances, a 9 per cent. rate would have been ineffective, but would probably have caused a panic. It might have been better if we had abandoned gold without first borrowing and then being pushed off, but to contend that the Bank should have maintained payments in gold, come what might, is to imagine that gold parity is an end in itself. The essential—as opposed to the ostensible—reason for high money rates is a sharp rise in the level of prices. And prices were falling heavily.

Geoffrey Biddulph.

Reply

Mr. Biddulph’s remarks are only distantly related to the articles which he seeks to criticise. Further they reveal a complete lack of understanding of the Socialist view of the depression. Our contention is that the present crisis is merely a fresh manifestation of an ever-recurring phenomenon of capitalism. As such it does not create any new problem for the workers, whose political object should be the substitution of capitalist society by Socialism. Consequently the workers, as a class, have nothing to gain from any of the various measures—from tariffs and wheat quotas to currency reform—put forward to rescue capitalism from the mire in which its own inherent defects have landed it. By whatever means the depression is ended, capitalism, as a system, will remain intact. In other words the propertyless condition of the workers, the ending of which is, in our view, their sole concern, will persist. Reforms designed to make that condition less oppressive have no attractions for us. When we discussed the present trade depression it was with two objects in mind. In the first place we wished to show how the fundamental cause of this crisis—as of its predecessors—was the fact that goods are produced by wage-labour for profit and not for use. Secondly, we sought to refute certain of the explanations of the crisis that have been advanced, and to expose the incompetence in high places that it has revealed. As we carefully pointed out, we are not concerned to take sides on the question of gold versus managed standard; we merely gave an account of the events thai led up to the abandonment of the gold standard by this country.

Having made clear our position let us turn to Mr. Biddulph. Although he does not specifically say so, it would appear that his view is :—

(1) That the depression is attributable to a fall in the general price-level, itself the consequence of the fact that the rate of increase of the world’s gold has been less than the rate of increase in “the alleged requirements of Central Banks and their clients” for gold.

(2) That a rise in general prices is required to end the depression.

(3) That rising prices are desirable from the point of view of the workers.

The second and third points can be taken together. Even if it is conceded that the depression could be ended by a currency policy that would raise world prices, would the basic conditions of the workers be altered? For one thing would unemployment be eliminated? The most that Mr. Biddulph can claim for a period of rising prices is that unemployment (on the experience of 1896-1915) might be reduced to two-thirds of what it is at present. It is just because Capitalism cannot provide a full life for all, even given the most favourable business conditions, that we are Socialists. Unemployment is a symptom of a defective economic organisation and the defects it indicates remain when unemployment is relatively low as when it is relatively high. This is what reformers and those who talk of “years of prosperity” overlook when they urge their reforms and the taking of steps to restore “prosperity.”

So far as Mr. Biddulph’s first contention is concerned, that is open to two criticisms. Firstly, if it is correct, then Capitalism stands condemned on account of the incompetence of capitalists, for from his use of the word “alleged” in the phrase “alleged requirements of the Central Banks and their clients” for gold it is clear that these requirements were in his view capable of being reduced. In other words, the relative shortage of gold, which he believes to be at the root of the trouble, need not have manifested itself if the world’s leading bankers had possessed but an elementary knowledge of correct currency principles. This is to say that the crisis occurred because of the inability of those in charge ot the financial machine to run it properly. A system of production under which there is such scopes for incompetence to produce evil must stand condemned.

But in our view the crisis cannot be traced to monetary causes. Prices did not fall because of the decline in the relative gold supply but because, as periodically does and must happen under capitalism, goods were produced beyond the capacity of the market to absorb them.

The facts do not support the contrary view advanced by Mr. Biddulph.

The period from 1925 to 1929 was, for the world as a whole, one of increasing economic activity. Even here the national income was rising, and U.S.A. enjoyed the greatest boom in its history. The increase in the supply of gold during that period must have been sufficient to carry the increased volume of business, since economic expansion in fact occurred. In the face of this Mr. Biddulph’s theory requires that the rate of increase in the gold supply after 1929 was less than during the preceding 4 years. Unfortunately for the theory, however, the figures show exactly the opposite. According to the estimates of Mr. Kitchin (see “The Times,” February 18th, 1932), in the years from 1925 to 1928 the world’s gold production increased, as compared with the preceding year, by nil, 1.8 per cent., .04 per cent, and 1.3 per cent, respectively and in 1929 was 1.1 per cent, less than in 1928. On the other hand, in 1930 output rose by 3.5 per cent, above the 1929 level and in 1931 was even 4.4 per cent, more than in 1930.

But apart altogether from the question whether the relative supply of gold was or was not sufficient to maintain the 1929 price level, Mr. Biddulph has no justification for stating, without further evidence, that the crisis resulted from a fall in general prices. The price level was falling continuously up to 1929, yet the slump did not start until that year and indeed, as already stated, the period from 1925 to 1929 was one of economic expansion. This last fact destroys the whole of Mr. Biddulph’s case and completely disproves his implied assertion that periods of falling prices are periods of dwindling trade, reduced employment and declining “prosperity.” In this connection it is worth looking at some figures. Between 1924 and 1929 wholesale prices fell about 20 per cent. During the same period the Board of Trade index of industrial production rose about 14 per cent., and the numbers of insured workers in employment rose by nearly 9 per cent., although admittedly the percentage unemployed rose from 10.7 per cent, to 11.1 per cent.

Of those, such as Mr. Biddulph, who relate trade activity to rising prices, Mr. D. H. Robertson, the well-known economist, has well written that they speak “with the voice of the inflationist entrepreneur of all ages, claiming that the scales must always be weighed in (their) favour if (they) are to do (their) job properly” (The International Gold Problem, 1931, page 146).

So much for Mr. Biddulph’s main argument. The other points in his letter must, because of the lack of space, be dealt with only briefly.

(1) He implies that the standard of living rises with rising prices and vice versa. Sauerbeck’s index for 1873 was 111 and for 1896 was 61, a fall of about 45 per cent. Would Mr. Biddulph contend that the standard of living was lower in 1896 than in 1873?

(2) So far as the last paragraph of his letter is concerned, we regret that we cannot, without evidence, accept Mr. Biddulph’s view of the efficacy of the Bank Rate as being of greater value than the view of Mr. Montagu Norman.

(3) As we do not enjoy the personal confidence of Mr. Keynes we are interested to be informed of his changes of opinion by Mr. Biddulph. We had, however, thought that Mr. Keynes had been opposed to the gold standard for some years. As long ago as 1925, Mr. Keynes was opposing a return to the gold standard, and advocating a “managed” currency. (See “Nation,” March, 1925.) The “Nation” (supposed to echo the opinions of Mr. Keynes) were attacking the gold standard early in 1931.

4) Finally, we would assure Mr. Biddulph that we fully appreciate the meaning ol the term “relative gold supply.” In fact, we understood the phrase to have been introduced into economic discussion by Prof, Cassel, and that among economists it had the meaning given to it by him. For Mr. Biddulph’s guidance we quote from “Fundamental Thoughts in Economics,” where Prof. Cassel writes : “I have introduced the conception of a relative gold supply, which is for any given year the actual gold supply divided by the normal gold supply.” Mr. Biddulph might compare this definition with that given in his letter above.

B. S.

Cooking the Books: No Marx without Adam Smith? (2026)

The Cooking the Books Column from the February 2026 issue of the Socialist Standard

Next month is the 250th anniversary of the publication of Adam Smith’s The Wealth of Nations. In the run-up to this, the Economist (18 December) carried an article by its ‘senior economics writer’, Callum Williams, in which he suggested that Smith had been ‘misinterpreted and his influence overstated’.

His case was that Smith wasn’t the originator of the ideas he expressed, that he copied from others and was a bad writer, and that he also made mistakes:

‘In the “Wealth of Nations”, he argued for the “labour theory of value” (the idea that the amount of work that goes into a product determines its price, rather than how useful that product is). This theory distracted economists for decades and laid the groundwork for Marxism. Exploitation, in Marx’s view, arose from the difference between how much workers had laboured to create a good and what they were paid for producing it. Without Smith, there could have been no Marx’.

The last sentence is ridiculous. There were others before Smith who put forward the view that the exchange-value of a product of labour depended on the amount of labour required to produce it. In a footnote early on in the opening chapter of Capital, Marx’s quotes Benjamin Franklin as having pointed out in 1729 that:

‘Trade in general being nothing else but the exchange of labour for labour, the value of all things is … justly measured by labour’.

Prior to Capital, in A Contribution to the Critique of Political Economy (1859), Marx credited Franklin as the person ‘who for the first time deliberately and clearly … reduces exchange-value to labour-time.’

In a podcast on the same subject on 1 January, Williams attempted to refute the labour theory of value by saying that, on the contrary, ‘what determines the price of a good is … how much demand there is for that good and how much of that good is supplied by the market’. This differs from what he had written in his article that a product’s price is determined by ‘how useful that product is’. That argument is easy to refute —there are a lot of things that are more useful than gold or diamonds yet gold and diamonds have a higher price; which, clearly, must have something to do with the fact that it is more difficult (takes more work and time) to produce gold and diamonds than it does to produce the other, more useful products.

Supply and demand determine the short-term market price but, in the longer term, supply will only continue if the suppliers — profit-seeking capitalist firms — cover their costs and make a profit. In bringing about the longer-term price the play of market forces will take into account the labour-time required to produce the product from start to finish.

Not that Marx did argue that under capitalism products exchanged at their labour-time value. He was well aware that the pursuit of profits resulted in this happening only accidentally but that the prices at which products sold could only be explained on the basis of a labour theory of value.

The reason why economists came to reject any labour theory of value (Smith’s as well as Marx’s) was that it led to the conclusion Marx reached who, said Williams, based ‘his entire theory of exploitation on the labour theory of value’. It was, he said, ‘precisely because Smith was so influential, his wrong-headedness about the labour theory of value was a big problem.’

This problem was solved, says Williams, when economic theory ‘gets wrestled back through the correct understanding of value by the marginalists at the end of the 19th century’. How convenient for the exploiters of labour, but it turned academic economics from a science into apologetics for capitalism.

Finance & Industry: Our educated politicians (1961)

The Finance and Industry column from the February 1961 issue of the Socialist Standard

Our educated politicians

In an interview published in the Observer (8.1.61) the banker Lord Brand, asked if he thought that academic economists do more good than harm, replied that they are extremely valuable. He claimed that through the studies of Keynes and other economists knowledge has grown and this “has altered the whole picture of economic life”. Possibly because Lord Brand would hesitate to claim that economic life has altered particularly (“I do not think we have an easy time ahead of us in the next year or so”) he went on to blame the politicians for not accepting the good advice of the economists.

He recalled the reparations chaos after the first world war, when the politicians (backed however by 3 out of their 7 banking economic advisers) insisted on exacting impossible reparations from Germany. Lord Brand says: “It was clearly mad at the time to those who would, and could, see, and were prepared to act accordingly. But the people who had control of policy could not see”.

He singles out Lloyd George—”Like most statesmen of the day, he knew little or nothing of finance”—yet Lloyd George had been Chancellor of the Exchequer. But it appears, according to Lord Brand, that Lloyd George insisted on the mad policy because he had boasted of squeezing Germany “till the pip squeaked” and dared not back down for fear of losing political support among voters as blind as he was.

But in the second world war the statesmen appear not to have changed much. Lord Brand tells how Churchill and Roosevelt, on the advice of Morganthau, Secretary of the U.S. Treasury and with the agreement of Lord Cherwell (a “highly intelligent” man) adopted a plan to reduce Germany to a purely agricultural country. Lord Cherwell’s defence of his action was that the British Government wanted a loan from America and acceptance of this fantastic plan would make it easier to get the loan.

Capitalism 1961

Lord Brand’s complacency about the altered picture of economic life reads oddly in face of the motor car slump and the looming difficulties facing international trade and currencies. The years between the wars were spent creating currency collapse in one country after another and then laboriously re-establishing stable currencies. After World War II it was all supposed to be different but now Professor Meade is warning of the drastic remedies that he thinks may be necessary because of America’s loss of gold, so he proposes that the dollar and the pound should be cut adrift from their existing link with gold.

The Guardian in an editorial (3.1.61) remarks “Undoubtedly a period of chaos would follow. Professor Meade feels sure that stability would return at a new level of exchange rates within six months. Perhaps so; but in the process the structure of the International Monetary Fund, one of the greatest achievements of international collaboration in our generation would have been laid in ruins “.

One prospect seen by the Guardian is that “soon the Russian rouble might be the only major currency with a fixed gold parity “.

This seems ironical to the Guardian but only because they persist against all evidence in believing that Russia is not a great capitalist power, but something else.

Flood Havoc in China

Through floods and storms China is threatened with what may be a catastrophic fall of food supplies. In a Socialist world such an event would be met by movement of supplies from elsewhere. But under capitalism a different set of values rules. America, Canada and other countries have masses of food they cannot sell profitably. The Times (20.12.60) reported that in the four chief exporting countries America, Canada, Argentina and Australia, “the end-of-season carry-over on July 31 next are expected to reach the unprecedented total of 60,400,000 tons, a rise of 7,500,000 tons on the year”.

So what problem can there be? But capitalist trade and rivalries create problems. The American government when it wanted to give wheat away or sell it cheaply met opposition from the other exporting countries, who feared this would reduce world prices and cut into their own sales. Secondly there are those who on political grounds would object to help being given to China, and according to Mr. Cyril Osborne, M.P., who was recently in Peking, there are politicians in that country who reply that the Chinese people “would rather starve than eat American food or accept American charity”. (Daily Telegraph, 3.1.61). (The starving might give a different answer).

According to Reynolds News (1.1.61) projected Canadian sales of their surplus to China are likely to meet with objections from the American government.

In the meantime the American food stocks are being nibbled at by the recently increased numbers of unemployed :

“In September 3,200,000 Americans were given food from the surplus supplies held by the government”. (Guardian 2.1.61).

Speculating in Misery

Under the heading “It’s an ill Wind” the Financial Times (9.1.61) had the following:

“Americans, by their law, may not trade with Communist China. But no law stops them speculating on the effects of China’s misfortunes, and for the past week they have been rushing to do just that. Scene of their operations is the Chicago soybean (spelt this way in America) market, biggest commodity futures market in the world.

The present bout of speculation in soya-beans and their products began three months ago, as reports of crop disaster began to seep through from China, only big soya-bean producer apart from America itself. People in the trade saw then that if the usual Chinese exports did not reach Europe, American beans and oil would have to go instead. So they put their money on a rise in the market.”

Edgar Hardcastle

Classic Reprint: Income tax and the wage struggle (2026)

A Classic Reprint from the January 2026 issue of the Socialist Standard

Given the recent budget from Rachel Reeves and the debate about income tax rates and thresholds, we reprint this article as it will have some resonance.

It is popularly supposed to be a virtue in a government not to impose income tax on low-wage workers. So each government tries to claim credit for having made alterations in the income tax which have the effect of freeing some workers from tax liability entirely, or at least of reducing the amount of it. This claim was made by the Labour Party following its six years in office after 1945 and was repeated by the Conservatives at the 1959 election.

Both the claims are so framed as to be distinctly disingenuous.

It was quite true, as the Conservatives claimed, that the raising of the tax allowance exempted millions of people from tax, but it was equally easy to see that, as wages rise, the exempted millions came into tax range again. And when the Labour Party Handbook 1951 claimed that a youth earning £3 a week in 1951 was paying less income tax than would have been levied on a wage of £3 in 1938 it would have been appropriate to point out that £3 in 1951 would buy only about half what it would have bought before the war.

And both governments refrained from stressing the fact that since the war income tax (Pay As You Earn) has been brought down to lower pay levels to take in millions more wage and salary earners than before the war. The number of people paying tax was under four million in 1938, 12 million in 1945, over sixteen million at the end of Labour’s term of office, and up to nearly twenty million in 1961-2. The Tory budget of 1963 removed nearly four million from liability but with every wage increase some will be coming into the range again.

So if it is a merit not to make workers pay income tax neither the Labour Party nor the Tories can match up to the performance of the National Government in 1938; and none of them can compare with the governments in the nineteenth century which exempted practically the whole of the industrial workers and clerks from liability. An article in the summer number of Public Administration, by Mrs. Olive Anderson, shows that in the middle of the century the minimum level of pay liable to tax was about £3 a week, while the wages of even the most highly skilled craftsmen were under 30s. a week, and clerks’ wages were under 40s. a week.

Interest attaches to the comparison because during the Crimean War tax reformers campaigned to get the taxable level brought down so that the mass of workers would be brought in, one suggestion being to make the tax payable on all wages of 6s. a week and over. One of the arguments was that as it was the town workers who were so keen on the war, why shouldn’t they help to pay for it through income tax?

The proposed changes were not adopted, chiefly because of the difficulty and cost of collecting small amounts of tax from millions of individuals, many of whom often changed their jobs and moved to different towns. Below a certain level the tax costs more to collect than the yield to the government.

Later on tax collection became more efficient and more and more people were brought into tax liability by the twofold movement of the lowering of the exemption limit (from £160 in 1899 to £130 in 1915) and the upward movement of prices and wages.)

But what is there in the common belief that the working class as a whole gain from a lowering of income tax and would gain still more if they were entirely exempt? The answer is, nothing at all! The condition of the working class, apart from possible short term effects when changes are introduced, is not the result of taxation whether in the form of income tax or the so-called indirect taxes, Purchase Tax, etc.

To start with, were the working class better off in 1938 when most of them were exempt from income tax and the rate was only five shillings (1s. 8d. on the first £135), than they have been since the war when nearly all of them are within the tax range and tax is at a higher rate? The evidence points to the fact that as a class they were rather worse off in 1938. And to go further back, were they better off in 1900 or 1850 when they paid no tax at all? Again, the answer is No!

In the latest year for which figures are available there were about 23 million wage and salary earners (including company directors) whose total income was about £14,000 million and who paid a tax of £1,200 million. If we take the industrial workers and shop assistants only, with a total wage bill of about £9,000 million a year, the amount of tax might perhaps be in the region of £300 million to £400 million a year.

Of course those who now have tax deducted would find their take home pay correspondingly increased when the deduction was reduced or ceased, and would for a while be better off; but in the general struggle between workers and employers over wages, this reduction of tax would be a factor in stiffening the attitude of the employers. In the situation of recent years, with fairly continuous low unemployment and increasing prices, such a reduction of tax would operate like any slackening in the rise of prices, it would make it that much more difficult for wage claims to make headway against the employers’ resistance.

Conversely, changes which have brought more and more workers into the tax range, or have increased their rate of tax. had consequences similar to rises in the cost of living: they have stiffened the pressure of the workers for higher wages especially when unemployment has been low. In other words now that millions of workers have tax deducted they have come to think in terms of ”take home pay” and to struggle for the maintenance or increase of that, rather than to look at the wage before deduction.

Mrs. Anderson, whose article has already been referred to, has found that a similar situation may have existed during the Crimean War. One of the reasons why income tax was not then extended to take in wage earners was that with the shortage of labour caused by the war it was feared that to whatever extent tax was levied on the workers the employers would be forced to raise wages to keep take home pay at its former level.

In short, struggling to raise wages is in line with working class interests, campaigning over taxation is not.

H. (November, 1963)

Material World: A history of inequality (2025)

The Material World Column from the November 2025 issue of the Socialist Standard

Thomas Piketty is an academic who specialises in the study of economic inequality and has written a number of books on the subject, the most well-known of which is the 700-page tome Capital in the Twenty-First Century (2013), which we reviewed in 2014. The most recent is A Brief History of Equality which first came out in French in 2021. Based on historical records such as the archives of legacies, property transactions and tax returns, Piketty identifies a trend since the beginning of the 19th century towards less inequality in wealth ownership, income, and access to education, health care and better-paid jobs. Describing himself as a socialist but in the gradualist, reformist tradition, he believes this can continue and lead to ‘a systemic transformation of capitalism’.

On wealth ownership, he takes as a measure of inequality the proportion of wealth owned by the top one percent compared with that of the bottom 50 percent. The figures for all forms of property are:

‘The wealthiest 1 percent held about 45 percent of total property in France in 1810, and about 55 percent of the total in 1910 …. Then, in the course of the twentieth century, we observe a very strong deconcentration of fortunes: in the whole of France, the richest 1 percent’s share fell from 55 percent in 1914 to less than 20 percent at the beginning of the 1980s, before beginning a slow increase; in 2020, that share was nearly 25 percent’.

But ‘this did not benefit much the poorest 50 percent, whose share rose from 2 percent in 1910 to 6 percent in 2020’ and ‘the richest 1 percent’s share of total private property is currently two times smaller than it was a century ago, but it still remains on the order of five times larger than the share held by the poorest 50 percent’.

The beneficiaries have been the middle 40 percent between the top 10 percent and the bottom 50 percent who Piketty calls the ‘patrimonial middle class’. Their wealth he finds is ‘held mainly in housing’. In fact, the monetary value of housing represents about half of that of all privately-owned wealth. The figures for the ownership of all wealth are interesting but the relevant one for socialists is the one for the ownership of means of production. Piketty usefully defines means of production as ‘all the goods necessary to produce other goods and services’ (‘agricultural land and equipment, factories and machinery, offices and computers, shops and restaurants, salary advances and working capital’). He doesn’t produce figures for this but says that ownership of these is more concentrated than for all wealth. But there is a table which shows that:

‘In France in 2020 (as in all countries for which such data are available), small fortunes are composed principally of cash and bank deposits, middle-sized fortunes of real estate, and large fortunes of financial assets (especially stocks)’.

It cannot be denied that the middle 40 percent — the vast majority of whom are members of the working class properly defined — have benefited, but this doesn’t mean that this group is not dependent, like the rest of the working class in the bottom 50 percent, on having to sell their ability to work in order to buy what they need to live. If they lose their job, they can survive for longer before they become destitute, perhaps a year or so after selling their house. But it does mean that we socialists should be careful when we say the working class is ‘propertyless’. We don’t mean that they literally own nothing but that they don’t own means of production.

There has also been a reduction in inequality of access to education and health care. But this can’t be seen as anti-capitalist, as a better educated and more healthy workforce became necessary as production methods became more complex. As Piketty himself points out:

‘During the second Industrial Revolution [chemicals, electricity, the car industry, household goods], it became essential that an increasingly large part of the labour force be capable of mastering manufacturing processes that required technical and digital education, and the ability to understand detailed equipment manuals’.

Nor is the lessening of discrimination over job opportunities for women and minorities incompatible with capitalism. Capitalism could cope with the abolition of discrimination and even benefit from it by being able to draw on a wider pool of trainable and competent workers.

As a gradualist, Piketty would like to see what he calls ‘the march towards equality’ continue and completely ‘transform capitalism’. Besides steep taxes on wealth and inheritance, he envisages changing company law to allow for more employee participation in decision-making and for a proportion of profits to be set aside for spending to benefit workers. Neither of these will change the workings of capitalism as an economic system which imposes on those who make decisions about production that the priority be making a profit. Widening the circle of those who make such decisions won’t alter this; even worker cooperatives have to obey capitalism’s basic economic law of ‘no profit, no production’. And, of course, from time to time companies go bust and there are no profits to set aside.

He also proposes a scheme to give everyone at age 25 a minimum inheritance equal to 60 percent of average wealth per adult (which is France in 2020 would have been about 120,000 euros, or about £105,000; more today of course). The aim, he says, would be to ‘increase the negotiating power of everyone who owns almost nothing (that is, about half the population)’:

‘Recipients could reject certain job offers, buy an apartment, engage in a personal project, or create a small business. This freedom, which is certain to delight some, may well frighten employers and property owners’.

Which, apart from the cost, is precisely why it will never happen; it would undermine the wages system by putting workers in a stronger bargaining position with employers and enable them to extract a higher wage, meaning less profits. It is rather surprising that anyone should seriously imagine that the capitalist state could be made to give half the working class a lump sum of at least £105k. In any event, such a redistribution of wealth would not affect the unequal ownership of means of production.

In short, the trend since 1800 towards less inequality has not undermined the basis of capitalism. Even less has it been an ongoing slow, gradual transition towards socialism. Not that socialism is a society with a more equal distribution of wealth. Its basis is the common ownership of the means of production which will allow everyone access on equal terms to education, health care, work and what they need to live.

Adam Buick

Labour's failure (1986)

From the September 1986 issue of the Socialist Standard

The Labour Party assert that what makes them different from the Tories is their belief in government-directed planning for all aspects of production — which industries shall be encouraged to expand and which to contract and how much all of them shall produce. The aim of such planning is to secure maximum total production; wages as high as possible and. of course, "full employment". On the other hand, the Tories would leave it all to market forces with the managers of industries making their own decisions about how to react to market changes in demand. For the Tories, government intervention would be restricted to promoting competition, as the way to reduce costs and prices and enable British industry to be competitive in world markets.

The Labour Party's ideas were embodied in The National Plan, a volume of nearly 500 pages, adopted as official policy by the Wilson Labour government in 1965. The ineffectiveness of Tory policy has been shown by, for example, the increase from 1⅓ million when they entered office in 1979 to 3½ million seven years later. One of the factors in the increase in unemployment has been the long-term decline of British manufacturing industry. Some of present unemployment is due to world recession, the rest is due to the shrinkage of manufacture. In 1900 British exports of manufactured goods represented 33 per cent of the world total of such exports. In 1965 it was down to 14 per cent and is now about seven per cent. On balance Britain is now an importer of manufactures. It was noted in the 1965 National Plan that the British share which was a quarter of the world total in 1950. had declined by 1962 to less than one sixth. The extent of the decline can be seen in a comparison between Britain. Germany and France. In 1951 British total production was equal to that of Germany and France combined. In 1985 German production was three times what it was in Britain and French production nearly double that in Britain.

The problem had been considered in 1931 by the MacMillan Committee on Finance and Industry. The committee accepted that the decline had taken place but took comfort in the fact that British exports of manufactures were still the largest of any country in the world and that British wage levels were the highest in the world except the USA. British wage levels are now the lowest in Europe except for Italy and are far below those in the USA. Japan and many other countries. The MacMillan Committee also pointed out that. "The USA is unable to compete with us in world markets in our principal staple exports such as coal or textiles and many iron and steel products".

There are now many countries which can undersell British products in all these fields. Textile exports have been drastically reduced, coal can now be imported at prices below those of British coal and the exports of British coal, once enormous, have reduced almost to vanishing point. The MacMillan Committee were complacent about the future. They took the view that "the shortcomings in this country in technical efficiency" were exaggerated, though they also recognised that the high level of unemployment in Britain (1,290,000 in 1928, compared with 432,000 in 1913) had already come into existence before the depression which began in 1929. In the depression itself it rose to 23 per cent. not far short of double what it is in 1986.

The Labour Party's justification for the 1965 plan was that 13 years of Tory rule had made the problems of British industry much worse. A Labour Party pamphlet summarising the plan had this:

In 1964 the crisis was reached: the Balance of Payments deficit was about £756 million — the largest in Britain's peace-time history. Years of stagnation had taken their toll. Once more an emergency squeeze was needed; but this could not be the final remedy. This time we could not be content with the old "stop-go" cycle. A new plan of action was needed

(Target 1970)

The plan was drawn up after consultation with the trade unions, employers' organisations and big employers, who were asked what expansion of production was possible in the five years to 1970. The plan itself settled on a 25 per cent increase in total output, with a 20 per cent increase in wages. It planned to avoid inflation: prices were to remain stable. It included particular forecasts such as raising the annual rate of housebuilding to 500,000 a year. A remarkable feature of the plan was its assumption that unemployment was not a problem but that there was an absolute shortage of workers. The plan foresaw that 800,000 additional workers would be needed by 1970, 400,000 of which would come from the increase of population. The remaining deficiency of 400,000 workers would have to be met, as much as possible, by increasing the output of the workforce.

This showed an astonishing, but typical, failure of the Labour Party to understand capitalism. In effect it assumed that all that had to be done was to increase output and that the real problem, of selling the increased output at a profit, would look after itself. In particular it showed no awareness that unemployment in this country, after the abnormally low rates of early post-war years, was already on a long-term upward trend. In the event production increased between 1965 and 1970. by about half the planned 25 per cent forecast and the actual increase was less than the increase that had taken place in the previous five years under the Tories. Only half the 500,000 houses a year were built. The plan failed entirely to keep prices stable. They went up by 31 per cent and wages, after discounting the rise of prices, rose by about two-thirds of the planned 20 per cent. And contrary to the belief of the planners that there would still be a 200,000 shortage of workers, it was unemployment which went up by 200,000. from 376,000 to 579,000.

The plan accepted that there would be some industries in which more workers would find jobs and others in which the number of jobs would fall. They were right about an increase in the number of jobs in the Health Service, education and insurance, banking and finance but they got it badly wrong about manufacturing industries. Halting the decline of manufacture was one of their main concerns and they planned an increase in the number of jobs by 292,000. Instead the number of jobs in manufacture fell by 260,000. The plan had no effect at all in increasing total production but some boards of directors of companies, including some in the manufacturing industries, were encouraged by it to step up their output. What happened in manufacture was that profits, which had been steadily failing since 1951, fell further during the five years of the plan.

The method of preparing the plan had been to ask companies to forecast what types and designs of products they would be turning out in five years' time and in what quantities. Some companies regarded the whole thing as being unrealistic to the point of farce. What types and what quantities will be produced in five years' time depends on what demand there will be in the market, something no company can possibly know in the inherently unstable world of capitalism. How many of the many tens of thousands of companies which have gone bankrupt in the depression since 1979 could see it five years in advance?

The plan accepted that some industries were in decline and would need fewer workers. Among the industries in which jobs would decline were agriculture, coal mining and transport, the planned number of redundancies being 142,000, 179,000 and 99,000 respectively. Based on their assumption that there was an overall shortage of workers, the plan described redundancies as "releasing” workers for employment elsewhere. No doubt many of the redundant workers did find other jobs for a time at least. To ease the transfer, the Labour government passed the 1965 Redundancy Payments Act. Of particular interest is the coal industry One of the factors expected to reduce the number of coal miners' jobs was the expansion of nuclear power. Dungeness "B" nuclear plant was expected to "produce base load electricity more cheaply than a contemporary coal fired station. The number of coal miners who lost their jobs under the Labour government was 199,000, twenty thousand more than the government had planned. They lost their jobs because the pits in which they worked were running at a loss.

Here is the statement about loss making , pits made in the National Plan.

The aim of the industry will be to eliminate inefficient capacity, rather than to under-utilise efficient capacity, in order to keep costs down as far as possible and to match the falling level of demand. Pits where proceeds of sales fall short of mere running expenditure are being closed down as quickly as possible, unless there is a prospect of their moving out of this category, e.g. after a reconstruction is complete. These measures should lead to a compact and competitive industry still supplying more than half the nation's energy and offering attractive jobs.

It will be observed that this is almost identical with Ian MacGregor's pit closing formula for getting rid of 40,000 miners which led to the year long strike in 1985.

There was no strike against pit closures in 1965. Indeed the minister in charge of the plan, the late George Brown, when introducing it at the Labour Party Conference received a standing ovation. Evidently the Labour Party and trade union delegates, and the workers they represented, all shared the illusion of their leaders, that "full employment" was a reality and that they would never have to fear the dole queue.

Edgar Hardcastle

Befogged. (1908)

Book Review from the September 1908 issue of the Socialist Standard

The Distribution of Livelihood. By Rossington Stanton. (Farwell, 6/-).

A certain Lord Spiritual, who was much given to the use of the personal pronoun, once took for his text, “The devil goeth about like a roaring lion seeking whom he may devour,” and proceeded to elaborate, thus : “I propose, dear brethren, to treat of my subject under three heads ; firstly, who the devil, he was ; secondly, where the devil, he was going ; and lastly, what the devil, he was roaring about.”

I am irresistibly reminded of this story by a perusal of this book which has been sent us for notice. Who the author, he is ; where the author, he is going; and what the devil he is writing about are questions I might make long-shot answers at, but whether I should be able to come within miles of the mark, only Mr. Stanton could say. It is an amazing book, just how amazing let anyone who has 6/- to spare discover for himself. The price alone is amazing enough—six shillings for 125 small pages either suggests that the author has a very tall opinion of the value of his work, or that he doesn’t expect to sell more than a dozen or two and desires to cover the cost of production out of that limited sale. Probably, however, the purchaser having recovered (if by the intervention of the beneficent fates he ever does) from the torture of trying to get at the idea presumably underlying Mr. Stanton’s ponderous and unhappy style, will find that he has secured something of high value for his expenditure in the soporific influences the book generates. Any member of the Party suffering from acute insomnia may have the loan of it on easy terms, and if it does not do all that is claimed for it the money will be refunded—if it hasn’t been spent.

In fairness to the author I should mention that in a prefatory note he states that his essay is no more than a preliminary outline of several novel economic principles which it is his intention to elaborate when opportunity allows. He gives them to the world in their present form “in order to secure them from possible oblivion in the event of my unexpected decease.”

I can only add that if the decease should unhappily prevent the elaboration, I am afraid the publication of the present volume will not secure the novel principles, whatever they are, from oblivion. Mr. Stanton has effectually buried them. That, at any rate, is my serious opinion.

Agra.

Analysis of Wealth. IV. Accumulation. (1916)

From the September 1916 issue of the Socialist Standard

Link to Part 3.

Capital is an accumulation of surplus-value. Whatever the original capital with which capitalist production started may have been it has long since disappeared, consumed by the capitalist class.

Likewise with the individual upstart. Even if we grant that by “his own exertions” he becomes possessed of a sum of money, this sum does not become capital until he uses it to exploit labour-power. As this process continues his capital comes to consist of accumulated surplus-value, while his original sum disappears in consumption.

Other things remaining the same the accumulation of capital implies an increase in the demand for labour-power ; for capital, in order to remain itself, must grow by the exploitation of ever more labour-power. This in itself gives rise to an increase in the rate of wages, since in the course of time the demand must tend to outstrip the supply as provided by normal increase in the labouring population.

Capital, however, is by no means satisfied with this state of affairs. It sees in the natural limits of population a limit to the rapidity of its own growth. Hence as we have shown in a former article, it exhibits a historical tendency to force on the productivity of social labour by specialisation of individual functions and by the introduction of machinery. Thus it wrings from a given quantity of labour-power a larger proportion of surplus-value. Therefore, along with the accumulation of capital goes an alteration in what Marx calls its technical composition. Its constant portion, i.e., that invested in the passive factors of the labour process, increases at the expense of the variable element which purchases labour-power.

This enables production to be carried on on an ever-increasing scale without the demand for labour-power increasing sufficiently to cause a rise in its price. On the contrary it reduces the demand for labour-power to such a point as to cause a permanent over-supply of workers ; in other words, it creates an industrial reserve army—the unemployed.

The larger the scale on which an individual capitalist does business the more he is enabled to economise and reduce the number of his employees in proportion to work done. The cheaper, therefore, can he sell his commodities (since they embody less labour) and the keener becomes his competition against his rivals. They in turn are forced to economise and to and “extend the scale of their operations as rapidly as possible. In the long run the large capitals become larger while small ones get absorbed or wiped out ; for the market soon refuses to bear the increased weight of goods supplied by this acceleration of production. This centralisation of capital causes further economy and increases the industrial reserve army.

Thus in the process of accumulation we observe on the one hand a tendency to increase the productivity of labour and on the other hand a contraction of the market for its products, seeing that the growth of the unemployed lessens the demand for commodities, both on their part and on the part of those actually employed whose places they are ever ready to take.

These two forces act and re-act on each other to an increasing extent. The competition of the unemployed forces the actual workers to submit to the lowest wages and the maximum amount of work. This increases the accumulation of capital, which in turn intensifies competition among the capitalists for the market, causing further economies and more unemployed.

At one end of the social scale, then, we have the concentration of capital in fewer hands and consequent luxury and idleness ; at the other end, absence of all wealth other than than necessary to secure the workers’ continued existence in a state of overwork, coupled with a deadweight of destitute wretches denied even that questionable privilege. This state of affairs arises inevitably from the very nature of capitalist production, and its special features are aggravated with every step in capitalist progress. Even the statistics compiled by capitalist authorities, governmental and otherwise, bear out this conclusion.

So far we have examined only the growth of capital. It remains for us to consider its origin and destiny. Assuming on the one hand a class with the means of production and on the other a class without these means it is easily seen that the former can exploit the latter to an ever-increasing degree.

The question arises, however, as to how this relationship was established. Orthodox economists and other apologists for things as they are assure us that it is solely due to the virtues of the possessors and the vices of the proletariat. If by virtue we mean work, however, we have already seen that the accumulation of capital by no means bears out this fairy tale. At present and for centuries the workers with all their toil have been unable to accumulate. If the capitalists saved money by work it was an extraordinarily long time ago. We are forced, then, to turn to history for a solution of the problem.

The system of society immediately proceeding the present social system in the course of evolution we know as Feudalism. It consisted of a complex hierarchy of lords and vassals bound to each other by the duties of military support and obedience and the right of protection. As a basis for this system was serfdom. The land was parcelled out among the lords and their subordinates, and while the latter cultivated the land of their lords they had land of their own for their personal use. In the towns chartered freemen carried on handicrafts and commerce. Thus reciprocal obligations existed and were established by feudal law and custom. No man lacked the means of subsistence, or an occupation. The lords exploited their subordinates, but the latter possessed something tho modern wage slave lacks—security!

The decay of feudalism forms the starting-point of capitalist development. In England it was spread over the 14th, 15th, and 16th centuries. By degrees the peasants and handicraftsmen freed themselves from servile duties and became independent producers, while in conjunction with the growth of trade and the production of commodities arose and flourished the merchant class, who sandwiched themselves parasitically between the producers on either side of the exchange and incidentally fleeced both whenever occasion offered.

The feudal nobility, exhausted, in numbers and resources, by friction among themselves, disbanded their retainers, who thenceforth become propertyless men seeking employment for a living. Large estates passed into the hands of wealthy farmers and burghers, who did not hesitate to evict the tenants in order to convert one-time arable land into sheep pastures. The new nobility also confiscated common land for similar purposes spurred on by the increase in the price of wool. The spoliation of the Church during the Reformation aggravated this condition, and by the end of the 16th century a considerable labour-market had come into being, consisting of expropriated agriculturists, disbanded retainers, and forlorn monks.

The process went on in stages till the 19th century, when the last vestige of the old yeomanry disappeared. At first legislation from Henry VII. onward attempted to stem the tide of usurpation, but in the 18th century the law itself had become the instrument whereby the robbery of the people was effected. Private force was supplemented by the force of the State, which has remained to this day the agent of the plutocrats. From the first it penalised the disinherited for their misfortune : flogging and branding them was its most merciful means of dealing with them.

This, as Marx says, established the “discipline necessary to the wage-system,” and encouraged the new-born proletariat to submit to the low wages and long hours at first legally enforced by the State.

As the workers became habituated and resigned to their fate the severity of the penal legislation relaxed, only to be applied with all its original vigour again when the workers found in combination a means of parrying the onslaught of the masters.

If to-day Trade Unions and strikes are legal it is only because the capitalists have been able to circumvent the determination of the workers by counter organisation, increased economy, and the corruption of the unions themselves.

The labour-market once established, the genesis of the capitalist class followed as a matter of course. In agriculture the farmer, one­-time agent for the landowner, was transformed into an independent exploiter. Whereas the independent peasant had previously produced many of his own requirements, such as clothes, in addition to purely agricultural products, now, as a wage-worker for the capitalist farmer, he had to purchase these elsewhere. Hence arose a domestic market for capitalist industry in the towns. Merchants and money lenders were not slow to take advantage of this. Employing numbers of disinherited peasants, etc., they entered into competition with the independent handicraftsmen of the guilds, and owing to the larger scale of their operations and the division of labour in the workshops which they introduced, they were ultimately able to outstrip the guildsmen in the race. In the face of this competition the guilds went to pieces and added more exploitable material to the labour market. 

At the same time there arose the struggle between the capitalist nations of Europe for world domination. Spain, Portugal, Holland, France, and England followed one another in rapid succession in exploration and conquest in Africa, America, and Asia, plundering the natives of their wealth and converting them into slaves for export to plantation colonies. The plunder thus obtained by the agents of the “merchant adventurers” helped to form new capital in England and on the Continent for the exploitation of white slaves.

These are the methods, drawn very mildly, by which the modern “respectable” class rose to power. The depths of their historic depravity are in direct proportion to the “loftiness” of their professed ideals. Champions of Justice, Freedom, and Charity, their career is indelibly stained with robbery, slavery, and murder. Need it be added that it shows no signs of improving from the standpoint of the workers ?

To sum up, modern wealth or capital is a product of social labour, past and present, which has been and continues to be monopolised by a small class of individuals, which grows relatively smaller as the mass of disinherited producers increases. In its origin it destroyed the unity which existed between the producers and their products, including the means of production, thus reducing them to social outcasts, having no access to the means of life as provided by nature and society. This relationship it perpetuates and uses as a means of self-expansion at their expense.

Technically, however, it indicates economic progress. In the place of the isolated workers of the middle ages able to produce but a meagre variety of articles of wealth, we have to-day an international combination of producers using a highly complex organisation of machinery, means of transport and distribution capable of providing comfort and leisure for all.

What prevents this desirable consummation of industrial development ? The reader who has followed this analysis will readily see that it is the capitalist character of this social wealth, i.e., its private ownership, which alone stands in the way. The private property of the many workers has disappeared before the private ownership of a few idlers. To return to the former state is neither possible nor desirable. It is not our business to destroy the fruits of centuries of toiling agony, but rather to enter into possession of them ; and as the means of production become ever more concentrated and incapable of control save in the mass, the only alternative to private ownership by the few is common ownership.

This will reunite the producers with their means of production and simultaneously preserve technical progress, for it is this progress which forces on the revolution. It unites them in the productive process and reduces them all to the level of wage slaves for the maintenance of capital. Hence it breeds a community of interest and a common consciousness. Let us speed on the day when they will unite in one organisation with a common purpose. Let us rally them round the Socialist standard, and establish Socialism, the cooperative commonwealth.

Eric Boden

[Concluded.]

Where’s the money going to come from? (1994)

From the August 1994 issue of the Socialist Standard

Anyone who watches the political programmes at Sunday lunchtime will he familiar with the question "Where’s the money going to come from?" On 1 May, for instance, Brian Walden pressed Labour MP Ann Taylor on this question as a rejoinder to her suggestion of increased nursery provision. And Robin Cook, who insisted on the European Social Chapter (On The Record, 29 May), was similarly rebuked by the money question. Labour MPs of course have no real response they can hold against this shibboleth of received wisdom; they believe in the basic precepts which necessitate the asking of the question.

It seems obvious to socialists that an analysis of the nature of money is required here. It can't be simply assumed that money is a type of innocuous representation of actual wealth. On the contrary it must be asked if its overall arithmetical form imposes certain ideological categories and casts its own ethical (or unethical) shadow over our existence.

Nowadays the analysis of money has disappeared, in Orwellian fashion, from economic discourse. But critiques of money extend back over 2000 years. One of the best discussions of money, and one that greatly influenced Marx, is still that of the Ancient Greek philosopher Aristotle.

Aristotle

Aristotle attributed two natures to money, that of a means and that of an end. This distinction reflects an ethical critique of the effects of money and how it is used. Some uses of money were acceptable and even laudable, argued Aristotle, as when money is used simply as a convenient means of getting useful things. But other uses, he said, were unacceptable or perverted, as where the exchange of goods was simply a mask for the accumulation of money or spurious wealth. So trading directed towards the use of goods with money merely as a common medium of transaction was seen as good, and trading directed at the exchange of commodities for profit, with commodities used merely as a means of securing this profit, was seen as bad. The distinction corresponds closely, but problematically as we shall see, to the one between use value and exchange value.

Aristotle used the example of the Delphian knife to illustrate the perverting effect of money. The Delphian knife was a tool that was made to be exchanged for money rather than to be used to perform a task. It could be used as a knife, a file, and a hammer, but in none of these functions was it very adequate, its only advantage was that it was cheaper in money than the three separate tools together. Hence a compromise is made between the tool-like properties of the knife and its exchange properties, and insofar as it was made to serve the latter function, it is not really a tool, except, as it were, a tool for making money rather than things.

Even philosophy itself is compromised by its association with exchange value. According to Aristotle, the Sophists let themselves be tainted by the profit motive, for the Sophist "is one who makes money from an apparent but unreal wisdom". The medical profession too becomes confused when its ends are mixed between money-getting and health. Contemporary examples inevitably spring to mind: "health" businesses selling liposculpture, far from providing perfect information on the effects of the operation, as the market sophistry maintains, on the contrary deliberately deceive patients about the risks involved, in order to secure the sale. And it could be argued that in every consumer product, a compromise must be made when the purposes involved in its creation are divided between exchange and use value; between the requirements of the seller and those of the customer.

Aristotle’s distinctions of exchange and use, means and ends, ethics and purely economic factors apply to the modern orthodoxy. The relatively trivial question "Where’s the money going to come from?" becomes the penetrating question "What is money?" The latter question challenges the received categories of exchange relations and demands an investigation into the barbaric practices out of which exchange arose. It is a question that asks is money realistic — or atavistic?

It is clear that ideas as much as facts are central to the workings of money. For example, the principle that whatever projects are envisaged must come out of existing funds. Fiscal spending, so it is said, represents a real practical limit which it is impossible to surpass. Behind this is the idea of a finite cache of wealth, a fund or a larder, in which things have been stored, and out of which things can be withdrawn at a later date. Is this really a practical matter, as no doubt Brian Walden would believe, or is it the promulgation of an ideological programme?

Admittedly the roots of this "larderism" lie deep in the facts of prehistory, when the store of food for the winter exemplified the model of a limited physical source determined by the real quantity and the real fertility of the land. This model still provides a basic formula for the operation of banks and nations, the only difference being that food has been replaced by an abstract symbolism of money, taking the form of bank reserves or national currency reserves representing all forms of production, not just agricultural.

This larderism has a powerful hold on the level of folk economics. On this level, the constraints of fixed budgets emerge in populist style as slogans such as "you can't just print money", "there is no bottomless pit", "you can't have your cake and eat it", "you don’t get ought for nought", "money isn’t made in heaven it's earned here on Earth", "there's no such thing as a free lunch", etc. Ah, the stuff tabloids are made of. And on the academic level, the principle seems to be simply elevated by nobler terms of expression rather than critically evaluated. Lord Robbins urged us to accept economics as the eternal problem of matching infinite wants against finite resources; the fundamentals of Mercantilism insist that "no man profiteth but by another's loss". All these aphorisms, ranging from crudity to casuistry, suggest a store of goods gained by toil in the summer as protection from the oncoming winter.

Despite creditable origins, this economic picture is logically flawed by its attempt to project the properties of a primitive domestic situation upon the complexities of the modern macroeconomic world. Some systems do follow the model of a fixed fund of goods, but the patterns of complex interaction between humankind and the biological and physical world, are, or can be, either synergistic or mutually exclusive. In the case of synergy, the more you take out of them, the more you have left; in the case of exclusivity, activity in one area has no effect on activity in another. The universal form of money makes all activities mutually burdensome, and insists, for instance, that the growth in education must be paid for by cuts in health, or investment in transport must be paid for by defence. Thus a kind of universal parasitism is established. One must question the nature of a formula of mutual burden which happens to have the very useful effect, for the Establishment, of dividing factions of society as competitors for limited resources.

The concepts of synergy and mutually exclusivity seem to violate the plausible, but examples are easy to find. The human body is synergistic in that the more you expend its energy as in exercise, the more energy you have as in fitness. If the linear economic model was applied to the body, you would get fit by sitting still and eating, thereby accumulating capital as fat. Mutual independence is clearly a fact of the natural and human worlds; there is no logical or physical connection between distant objects and activities. A bee taking honey in Glasgow is not constrained by one doing the same in London, yet Strathclyde is constrained by public spending in the Home Counties. Why do we impede ourselves in this way? Well, the popular wisdom is that there is only one pot of honey (money), for which we vie for attention. We should learn something from the symbiotic ecology of insects.

Free lunch

An even more serious error of money symbolism concerns the frontier of possible growth. The pseudo-physical arithmetic limit on economic development seems to be rooted in the Physiocratic principle that all wealth comes from the Earth, or the similarly-arbitrary Mercantilist precept that all wealth comes from the trade, or for that matter from the Marxist view that value is added by labour. But not only are the Earth’s resources, in contradistinction to the money model, symbiotic; they are also supplemented, as is the human body, from an external source. The human body is an organism in the world and receives its energy through food, and the Earth is a planet in the solar system, that likewise receives, free of charge, an inexhaustible input of fuel from the star in the middle of the solar system: the sun.

The sun is the free lunch that orthodox economics can’t come to terms with. The money system operates on a closed world assumption, on the much-stated monetarist principle that money is made here on Earth, it doesn’t come down from the sky. In fact all the wealth-making processes on the Earth are driven by extraneous energy that does come down, as it happens, from the sky. If money fails to reflect this reality and its function becomes not to reflect actual resources but to impose an ideological limit on their development and distribution. And if those limits demand that the homeless cannot be housed and that the hungry cannot eat (because where’s the money going to come from?) then that ideology isn't innocuous but a necessarily ethical, and unethical, force.

So Aristotle’s point is proved: the effect of money does poison the transactions and distributions it enforces its rule over. But not just directly because of the profit motive or exchange, but indirectly because of the general nature of the abstract form of exchange which embodies false assumptions about the nature of the world: the assumption that the fiscal frontier is the final frontier.

But to make Aristotle’s analysis fully consistent we ought to abandon the means/ends distinction which had a confused relation to the use/exchange distinction, and say not that there are two types of money (use money and exchange money) but that money necessarily is exchange value, that exchange value is necessarily perverse, and that true usefulness is necessarily contrary to the abstract value which money imposes on the physical world.

If Aristotle had accepted this analysis it would have solved a number of problems for him. Instead of having a tension between the two natures of money, one related to use, and one related to exchange, he could have rejected exchange completely and have said that the evaluation of goods should be dependent solely on their quality as defined in use. In a socialist system it is indeed use value that is the criterion of true wealth, and the spurious abstraction which exchange relations arbitrarily, and harmfully, apply to useful things would be simply removed.

If the premise of inherent scarcity is abandoned, as it can be when the qualitative, generous and realistic physical frontier is substituted for the miserly quantitative economic frontier, then it is no longer necessary to measure all goods by one universal standard as a means of rationing them. Is money the measure of all these things or are humans? Let us say the latter and thus advocate, along with an Aristotle-made-consistent, the abolition of exchange and the abolition of money. And if money is abolished, the question, where is the money to come from, is obviously redundant.

Norman Armstrong

The Labour Theory of Value - Part 2 (1937)

From the August 1937 issue of the Socialist Standard

(Continued from the July issue.)

Of course, it is only necessary labour which counts as value. If one uses old-fashioned methods or obsolete instruments, or wastes more time or energy or materials than is necessary compared with the generally prevailing knowledge and equipment, this unnecessary additional labour will give no additional value to the product. Society is the accountant, not the producer. The value of a commodity is determined by the amount of socially necessary labour required to produce it.

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The objections of the orthodox economists, and their alternative theories mentioned above, are more significant than important. It is to be expected that they should be preoccupied with an explanation of "price," which is what chiefly concerns their employer, the capitalist. It is not to be expected that they should occupy themselves with a theory of value which strikes the capitalist where he can’t take it, as we shall see. What is important is that the capitalist substantiates the labour theory of value in actual practice. He acts upon it and it works. Not only does he pay more for skilled workers than for less skilled, according to the time and cost of producing that skill, but he constantly aims to reduce the value of his products by eliminating waste, improving methods and so on, while hoping either to go on selling at the old price and thus making an extra profit, or to reduce his price to the new value and smash his rivals. The means of production are thus continually being revolutionised in one industry or another by the constant competition to produce commodities at lower values. The capitalist demonstrates in practice what his economists cannot tell him in theory.

Since value, the quality peculiar to commodities, manifests itself only in exchange it is not surprising that the history of exchange is a large slice of human history. Beginning in primitive times with exchange, between tribes, of surplus products incidentally left over after their needs were satisfied, it initiated the production of surpluses purposely intended for exchange and not for use, the production of commodities, and soon came the need to set apart one of these commodities to serve as a common medium of exchange for all others; this commodity thus becoming— money. Tribal enemies captured in war were not now put to death, but made slaves for the production of surplus wealth. Accumulation of private property, class exploitation, and commodity production are an inseparable trinity. The slave civilisation of the ancient world, of Greece and Rome in particular, witnessed the death-struggles of tribal Communism and saw arise the new system based on private ownership and class exploitation. This under Mediterranean hot-house conditions. In Northern Europe a slower and vaster development of commodity-relationships awaited the coming of the world market. Ocean navigation, conquest and colonisation; conversion of feudal dues into money rents, influx of silver from newly-discovered mines, “enclosure” movements, which took away the peasants' lands, the power-machine factory movement, which pauperised the handicraftsmen—both classes bereft of any claim on the means of production and became proletarians, the working class, wage-slaves of a small class now in exclusive possession of the means of life: the capitalist. These were the processes by which the commodity came to maturity.

The commodity has come of age. For now the very source and content of value, labour-power is itself a commodity. Men are not men but hands in the labour market, hoping for a bidder, rotting without one.

It is here that the importance of the distinction between usefulness and value comes home. It is the distinction which earlier labour theories of value, notably that of Ricardo failed to make between labour and labour power. It is the secret of capitalist exploitation. The worker sells his labour power (his knowledge, skill, energy) for a price, his wages, salary, fees, commission, etc., which, on an average is its value. The worker gets the value of his labour power, the socially-necessary cost of reproducing it—the cost of living. The capitalist, having bought the commodity, proceeds to enjoy the use of it as fast as he can and as long as he dare. By lengthening the working day, or by speeding up, by fines and penalties, by regimentation and discipline, by team competition and pace-setting, by psychological research and cups of tea he squeezes from the worker a far greater quantity of labour than the value of his labour power. He extorts surplus value.

Marx’s analysis of the commodity unearthed a secret which will bury a society! “What capitalism produces above all things are its own gravediggers,” and this is the grim and glorious spadework for which the S.P.G.B. is organised. There are plenty of spades, fellow-workers, waiting but the hands to use them.

Frank Evans.