Letter: Socialists and Russia (1935)

Letter to the Editors from the October 1935 issue of the Socialist Standard

Socialists and Russia

August 6th, 1936.

 

Dear Sir,—I was listening to your speaker at Finsbury Park on Sunday evening, August 4th, when he remarked that the Soviet Government had issued loans from 7 to 12½ per cent. profit to subscribers, and hinted that by inviting foreigners to invest they are acting just as State capitalists and that the workers are nothing more or less than wage slaves. May I point out that these loans are used for construction of Socialistic industries and that the bulk of Russian workers, numbering several millions, are subscribers towards the loans, knowing full well the .purpose to which the money is being put. The interest given is certainly an incentive, but it should be pointed out by your speaker that as these loans are spread over an enormous number of subscribers the profit accruing to an individual investor is very small and cannot exercise any influence. Also, the number of foreign investors is estimated at less than one per centum (1%) of the total.

The Bolshevists are practical realists and know full well the impossibility of abolishing wages at the present time. As a matter of fact, this is not so very important, but what is much more essentially valuable is that the ownership and control of the means of production and distribution is held firmly in the hands of the workers themselves. If this is not practical Socialism, what is? Can it be denied that the Bolsheviks took over a graveyard and have now progressed at an amazing rate? Can it be denied that the material well-being of the Russian workers is improving from year to year, and that, to my mind, is the acid test, whether they are wage-slaves or overcoming the conditions of wage-slavery that is inherent in private capitalism.

Your speaker boasted that he is upholding the truth. Therefore he should amplify statements that are likely to be misrepresented by mischievous and unscrupulous individuals.

I remain.

Yours faithfully,

H. Jackson.

Reply.

The principal issues raised by our correspondent are: (1) Whether the social system in Russia is Socialist or Capitalist; (2) Whether the bondholders are all small investors; (3) Whether industry is progressing, and (4) Whether the material conditions of the workers are improving.

For replies to the various points, our correspondent is referred to the pamphlet "The S.P.G.B. and Questions of the Day," and to the Socialist Standard, October, 1934.

Brief replies are also given below: —

(1) Socialists from Marx onwards are agreed that characteristic features of Socialism are the common ownership and democratic control of the means of production and distribution; the production of goods only for use, not for sale; the abolition of all forms of income from the ownership of property; the abolition of the system of wage-labour; and the consequent disappearance of privilege.

Are these things found in Russia to-day? Certainly not. The Communist clique which controls the State machine maintains control of Russian industry as rigid as the control of the British Government over the Post Office. Goods are produced for sale, and at a profit. Rent, interest and profit from the ownership of property, bonds, etc., is a normal and growing feature of economic life. As our correspondent admits, the Bolsheviks, so far from having abolished the system of wage-labour, “know full well the impossibility of abolishing wages at the present time.” Lastly, by various means, including the great and growing inequality of pay between the masses of workers and the high-salaried officials, privilege is enjoyed by a fortunate minority.

(2) It is true that the great majority of bondholders own only small amounts of bonds, but exactly the same plea is made in England and America by the defenders of capitalism. In Russia, although precise figures are not available, it is known that some of the bondholders own large or comparatively large amounts. But in any event, this is beside the point. Under Socialism there will be no investors.

(3) The S.P.G.B. has not questioned the claim that Russian industry (like industry in Japan, Turkey, and other countries) has expanded rapidly since the war.

(4) The S.P.G.B. has not denied that the standard of living has risen since the Bolshevists obtained power. That does not mean, however, that we accept all of the extravagant claims made by some Communists. Russia is a country in which rigid censorship and suppression of independent working-class organisation is the normal order of things. As, therefore, it is impossible to hear the unfettered expression of the opinion of the workers themselves, we must accept with caution the claims made by the Russian Government since that Government has the usual interest in presenting the facts in a favourable light.

In conclusion, we would ask our correspondent a question. Seeing that the Russian economic system is not Socialism because it lacks the essential features of Socialism, will he tell us by what name he would describe it other than the one used by our speaker, “ State capitalism.”

Ed. Comm.

Letter: The compensation of Bank of England stockholders (1946)

Letter to the Editors from the January 1946 issue of the Socialist Standard

(We have received from a correspondent the following letter, which we consider will be of interest to our readers.— Ed. Comm.)

Sir,—A few facts regarding the compensation terms given to Bank of England stockholders might be of interest to your readers. The unit of Bank of England stock is £100. It was quoted on the Stock Exchange recently at £382. Stockholders have been receiving 12 per cent during the past 20 years. The Labour Government proposes to give stockholders, in exchange for their Bank stock, four £100 units of Government stock, equal to £400 for each unit of Bank stock. This new stock will have the guarantee of the State behind it. At 3 per cent. the Government stock will give the same return as Bank of England stock, namely, 12 per cent. The new stock is redeemable in 1966 at the option of the Government. I have found; Mr. Editor, that many Labour Party supporters conclude that at the end of 20 years the stock will be cancelled without the stockholders receiving anything in return. This, of course, is not the case. It is not surprising that such a misconception should have arisen. Several Labour journals did not appear over anxious to explain the details of the compensation terms. Journals devoted to the interests of investors appear to have been more liberal in giving details of the compensation terms. For example, the following appeared in the "Investors' Chronicle," 13th October, 1945, page 444: "So far as holders of Bank stock are concerned, in the circumstances of the case the provisions are satisfactory. They will receive £400 of 3 per cent. Government stock for each £100 of Bank stock. They will have the same gross income as they had before. . . . But the new Government security is not redeemable till 1966, and then the redemption is optional. . . . In other words, present Bank stock looks as though it is worth little short of £400 on the compensation terms. On news of the terms. Bank stock rose to a record level of 390-395."

It seems clear that the redemption terms mean that in 20 years' time, if the stock is redeemed, the stockholders receive roughly £400 for each unit of Bank stock formerly held. Should redemption not take place in 1966, then the stockholders continue to draw their usual 12 per cent, until the stock is redeemed.

Hoping the above facts will be given wide publicity, and thereby help to remove a misconception from the minds of many well-meaning supporters of the Labour Party.

Yours, etc.,

D. A. (Glasgow).

The nationalisation of mining royalties (1946)

From the January 1946 issue of the Socialist Standard

Another Great Labour Party Victory

"Six property owners have been paid more than £1,000,000 each by the State for the coal which lies beneath their estates The long campaign to nationalise these coal royalties ended yesterday with the report of the Coal Commissioners. . . . . At the time of the Sankey Commission . . . the most extensive royalty owners . . . were the Duke of Northumberland, the Marquis of Bate, Lord Tredegar, the Duke of Hamilton and the Earl of Ellesmere." "In addition to the four unnamed owners who got more than a million, six received from £500,000 to £1,000,000 each and twenty-eight between £250,000 and £499,000. More than 11,000 claimants had less than £1,000 each. More than 2,400 got nothing."—(Daily Express, October 31st, 1945.)

Which shows that nationalisation with compensation does not even change the personnel—the individual relationships of the capitalist class.

Nationalisation without compensation would still not be in the "public service"; it would merely transfer ownership from its previous owners to the investors in Government (State) Bonds.

Socialism is a change in social relationships; the abolition of the rich, and therefore, its counterpart, the poor—the workers. It transforms relationships by changing ownership. Private ownership becomes common ownership.

Socialism does not haggle about compensation or confiscation; both terms imply some injury is done the capitalists.

Socialism stands for restoration of the wealth produced to the producers—the workers; about nine-tenths of the people.

Horatio.

Letter: Wicked Uncle (1955)

Letter to the Editors from the September 1955 issue of the Socialist Standard

A reader in Canada writes asking for information about the nationalisation of the Bank of England. His letter and our reply are printed below.

Victoria, B.C., Canada. 

July 11th, 1955.

Dear Comrades,

A reformist friend of mine claims that when the Bank of England was nationalized, a 90 per cent. tax was imposed by the Labour Government upon the Government stock, thereby leaving the bondholders with only one-tenth of what they formerly owned. I can’t see a Labour Government being so unkind to stock or bond-holders.

I showed my friend the affixed letter taken from the January ’46 Standard, and he said the tax must have been imposed after nationalisation, because he has an uncle in England who was a shareholder in the Bank of England, and he lost “just about” everything through nationalization and the imposition of this tax.

If it doesn’t take too much of your valuable time, I would like to get the facts on this matter.

Thanking you, I am.

Yours for ours,

J. G. Jenkins.

Reply.

Our correspondent provided his friend with a copy of a statement published in the Socialist Standard of January, 1946 (not reproduced here), which explained the compensation terms given to Bank of England stockholders. The basis of the compensation was to give the holders Government stock sufficient to provide the same return as had been paid by the bank on average in the previous 20 years, i.e., 12 per cent This was done by giving them £400 Government stock yielding 3 per cent., in return for each £100 of their bank stock paying 12 per cent. The Government stock is redeemable by the Government in 1966, so that the stockholder will then or after be paid off at £400 for each £100 bank stock that was originally held.

The story given by uncle to his nephew is a pure fabrication. There has been no such tax imposed on his stock, either of 90 per cent. or any other figure, except, of course, income tax, which is, however, lower now than it was then. Can it be that uncle just wanted to plead that he is hard-up?

The utmost that he can say is that the present higher money rates have depressed all gilt-edged stocks. The stock given to Bank of England stockholders is at present down to about three-quarters of its nominal price so that if uncle had to sell now he would get about £300 for each £100 he originally held of Bank Stock. But this is a temporary situation. When money rates fall again the price, will recover and in any event he will receive the full £400 on redemption in 1966. And in the meantime, irrespective of fluctuations of the selling price of the stock, he goes on receiving his £12 a year on each £400 stock, in place of the original £12 on £100 of Bank Stock.

Ed. Comm.

Answers to Correspondents

C. Luff (British Columbia). Many thanks for letter. Hope to deal further with currency in later issue.

E. Littler (Ashton-in-Makerfield). We will deal with the problem you pose in a later issue.

Ed. Comm.

Work, You Workers, Work (1948)

From the April 1948 issue of the Socialist Standard

Bonus systems, payment by results, co-partnerships, piece work, profit sharing, all these and other schemes we have known. Each and every one has the same objective—to get a little more effort out of the workers, to encourage them to expend their utmost on the job.

Of the co-partnership and profit sharing schemes we hear little these days. Some years ago they were quite popular propositions. Probably one of the largest and most widely publicised of these schemes was the one introduced by Lever Bros, at Port Sunlight. The idea was to share a portion of the profits produced in the industry amongst the workers. This should give them an interest in the business and encourage them to serve it more zealously.

The American journal “Fortune,” which, by any stretch of the imagination, cannot be considered a working class magazine, in its December, 1947, issue, deals with this Lever profit sharing scheme and its failure. On page 204:

“But he (W. H. Lever) seemed obsessed with sharing profits. He concluded that profit sharing was fine provided it resulted in better production . . .” 

and on page 207:

“The idea of direct profit sharing continued to obsess him even after Port Sunlight was built, and he decided to make qualified employees 'co-partners' with whom he shared some of the amount available for ordinary (common) dividends. For a while his scheme worked. The dividends, however, amounted to so little per capita that their effect on production and efficiency over a long time was debatable, and the practice was discontinued after Lever died.”

For the employer it was a matter of an additional investment. The workers were induced to consider that they had an identity of interest with him. The greater the increase in profits resulting from their better production and increased efficiency, the greater would be their dividend—and the dividend of the employers. Unless the amount of increased profit to the employer was greater than the amount he paid out in dividends to his employees, then it was a bad investment for him. Also to be taken into account, of course, was the fact that the “identity of interest” idea is a fine deterrent to strikes and is a means of persuading workers to soft pedal their wage demands. Labour disputes and high wages would tend to affect profits and the co-partner would fear that he might not get a good ”divi.” In practise, the amount received by the worker was so infinitesimal, that the scheme failed in its object At least, the Lever one did.

As we have said, not much is heard of these profit sharing schemes these days and in the collapse of the Lever scheme we see the reason. But a new method has arisen to encourage the workers to foster this idea of an identity of interest with their exploiters. A cheaper method, too. It does not even require that the employer shall disgorge the small amount of wealth that the profit sharing proposition necessitated.

Listen-in at Trade Union branch meetings, Trades Council meetings and other places where workers gather to talk about their wages and conditions. You will hear some one get on his feet and trot out this kind of thing: “ Now that it is 'OUR' industry, we must moderate our demands. We must work to get it on its feet. We must increase our production and efficiency. We are all share-holders now, we must work to make the industry pay. We must not ask for too much . . .” And so on, ad infinitum, ad nauseam.

That is how it is put over today. Old man Lever allotted a portion of his dividends to get the utmost out of his workers. Today we find working class supporters and defenders of the Labour Party (they are all on the defensive now) falling over themselves to give of their damnedest without even the meagre dividend that Port Sunlight workers collected as an inducement.

If nationalised industry were engaged in producing goods or services for use, this point of view would be understandable. Then, better production and increased efficiency would result in more goods and better services for the workers themselves. But nationalised industry, as with all forms of capitalist industry, is engaged in the production of goods and services for sale with a view to a profit being made in the process. This fact is not disguised, not even by the advocates of nationalisation. The workers produce a quantity of wealth in excess of the amount they receive in the form of wages, salaries, etc. This surplus goes into State coffers and forms the fund out of which is shared the dividends to the investors in Government bonds.

True, an increase in production and efficiency in State industries does not mean an increase in the amount paid out as interests to bondholders. Neither does it mean an increase in wages. It may possibly result in an increase in the salary of the chairman of the “Board” or the “Executive," or in a fine, fat, five-figure pension to these "high” officials when they retire. It may also, by increasing the amount flowing into the State coffers, be a means of defraying national expenditure, and so help to alleviate the burden of taxation borne by the exploiting class. We know that finally it will result in an excess of commodities over and above the amount that the markets can absorb. Then we shall get from the Labour Party the same nauseating idea trotted out in slightly different words. “Sorry, fellows—an economic blizzard—tighten your belts and pull 'YOUR’ industry through.” Probably the blame will be put on to the Russians or maybe, the “Yanks,” It will be difficult for them to apportion the blame to the bankers as has been done in the past. It would sound rather puerile to tell us that it was “OUR” nationalised Bank of England that is holding up credit, or doing something or other to cause a financial and economic crisis. Anyway, it will be the workers who will be cajoled to make sacrifices to help "THEIR" industry through the difficult times. The rate of interest to the investor is guaranteed. He will not be worried. It is no longer his headache. He is the holder of “gilt edged.”

There are all sorts of things in store for the working class whilst Capitalism remains. There are no end to the reasons why they should work harder, more efficiently and be patient. Another war will make it necessary for the workers to make sacrifices to pull "THEIR” country through. After a war or after a trade depression there will be the need to produce more to recapture the foreign markets. It will always be possible to concoct some excuse for cracking the whip.

It is interesting to watch how this increased efficiency idea works out. For example, London’s nationalised transport. An agreement has recently been signed by the London Transport Executive and the Transport and General Workers Union adjusting the rates of pay of drivers and conductors of buses, coaches and trolley buses. At the same time, these contracting parties have agreed upon a letter to the effect that they will jointly recommend to the Minister of Transport that the existing rule shall be relaxed to enable eight standing passengers to be carried, instead of five as at present. This, so the letter says, is with the object of increasing the efficiency of the service to the public.

London Transport’s new 70-seat, eight feet wide trolley bus is now in operation in areas on the west Side of London. The Surrey Comet, reporting on the inaugural run of the first of these new vehicles, says (21/2/48):

"The extra width of six inches on the new buses is taken up by having the gangways four inches wider with an additional inch on each seat This should give greater comfort to the standing passenger . . .”

So better production and increased efficiency in this nationalised industry will mean that, (1) Drivers will drive bigger buses; (2) Conductors will pack in a few more passengers; (3) Passenger will be able to enjoy the increased standing comfort, or should we say more passengers will be able to enjoy the decreased discomfort, and (4) last, but by no means least, all passengers will pay their fares, thus increasing the takings per bus when the additional standing passengers are carried.

There is no advantage here that would make it advisable for the workers to moderate their demands for increased wages or better working conditions. We suggest to all workers that they should regard the State in the same way as they should regard any other employer, as an opponent who is out to get as much energy from his employees for the price that he pays, as is possible. The workers, in turn, should endeavour to get the highest price (wage) and best conditions of sale for the energy that they sell, as they possibly can. All increased efficiency should be directed to this end, and to the struggle to abolish the system of Capitalist exploitation.

To paraphrase Prime Minister Attlee :

"This year, let us all put into our struggle that spirit that will make our class free.”

W. Waters

The Socialist Forum: Russia's Bondholders. (1933)

From the April 1933 issue of the Socialist Standard

Russia's Bondholders.

Reply to P. L., Poplar.

In addition to commercial credits obtained by the Russian Government abroad, and unofficially estimated at between £200 million and £300 million, the Russian Government has raised large sums at home to help finance the new industries. The total sum so obtained, according to information given in the Moscow Daily News (Weekly Edition, January 5th, 1933), has exceeded the original estimate of 6,000 million roubles (£600 million) and has reached a total of over £1,000 million. £800 million of this is held by the Government direct, and the remainder by Government industrial undertakings. The interest paid to the bondholders is in most cases at 10 per cent., or more; on some issues there is no interest, but in its place the chance of winning a big lottery prize. The Moscow Daily News states that the bondholders number 40 million persons, "the vast majority of whom are workers and collective farmers.” No figures are given showing the extent to which a minority of wealthy individuals have large holdings. While the Russian Government is now trying to sell its bonds abroad it is certain that the major portion of the £1,000 million is held internally.

Ed. Comm.

The Swindle of Nationalisation (1956)

From the November 1956 issue of the Socialist Standard

(Address at a meeting held by Swansea Branch)

Comrades,

The subject for to-night’s consideration has been selected by the Branch with some thought as one of the most important questions of the day, particularly in this area of the Coal and Steel industries.

For many years before the 1950 Labour Government, the idea was widely held that if the Government took over an industry, then progress would be made to some future ideal.

This was evidently the case with trade unionists, as resolutions passed at many Trade Union Congresses show. The notion was abroad that by removing the often objectionable or notorious exploiters and replacing them by Government officials or managers, some improvement in the workers’ position would result. This idea can only occur to those ignorant of the wages system; coal miners or steel smelters still work for wages, whether paid by the Government or private employers.

Wage-labour remains the basis of production. Wages are the price of labour power, which is the stuff a worker sells to an employer—his energy. This stuff has a value corresponding to the cost (in hours) of production. Who pays wages? Those who own wealth. Who receives wages? Those who must work to live. When are wages paid? ONLY when the sale of the work they buy results in profit. Therefore, nationalised industries, run on wages, have to show a profit, just like "private" capital.

The next point is this: if some receive wages, others must pay them. Who can pay wages? Those who own wealth. They can employ others. These employers are owners of wealth, so that wages must mean classes, rich and poor—workers and idlers, or, as the Principles of of the Socialist Party declare, society is divided into two classes, one class possessing—the other producing.

By being owners these people are also rulers, they conserve their ownership by consent and force, if necessary. That is, in a world based on private ownership and profit, the owners dominate the Government. They are the real power behind the State.

We are told that today we have a “Welfare State"; “welfare’’ or not, it remains a “State." What is a State? No better definition has been given than Marx’s own: “ It is the executive committee of the capitalist class.” Please note that; the capitalist class as a whole.

The State is the machine of power which arose when conflicts between owners, or groups of owners, threatened the existence of organised society itself.

From the days of the ancient Greek City Republics and Imperial Rome, to Napoleonic France and Stalin’s Russia, this political machinery has been used to feather the nests of exploiters at the expense of the labourer. Sometimes it was a committee, sometimes a group, often a personal dictator, a Caesar, a Cromwell, a Bismarck, a Lenin, or a Hitler.

These "personal" States—whether of Persian kings of antiquity or rabble-rousers like Tito, are usually the most rabid and ruthless "Nationalisers" of all.

And the reason is obvious. The State exists to further the interests of the owners, not only by stopping one group of capitalists from reducing society to ashes, but also by providing services of value to capitalists’ businesses. Therefore, all those branches of industry which are of vital concern to most capitalists are the target of the Nationalises. Bismarck nationalised the German railways to get troops quickly to the French frontiers. Napoleon covered France with “Routes Nationals” to get armies on their way. Attlee nationalised coal mines to provide British capitalists with raw material. The Post Office, Docks, Electricity, Cables and Wireless occupy first places.

Some people claim that even if all this is true, it is still possible for the workers, fed up with private employers, to alter the position by Nationalisation in a democratic country. If the manager or director were replaced by trade union officials they think that these officials would then be subject to their control. This is nonsense.

The workers who wish to do this do not understand enough about the wages system. Workers cannot control wages—they can only abolish them.

Not understanding this, those workers vote for the Labour Party, which is committed to the maintenance of capitalism.

Nationalised concerns are expected to show a profit —they can only be capitalist. Whoever signs the order to close the pit is of little real consequence. What is important is the group the order is issued for—the capitalist; it is the same in Russian factories, or German railways, in Swiss electricity or the American postal service.

The nationalised industries must make profits for Bond holders instead of Shareholders.

Before the workers had undergone many years bitter experience of nationalisation, parties like the Labour Party (and also Lord Beaverbrook) made great play with some rubbish they called “public control of finance.” They included demands for the “Nationalisation” of the Bank of England in their election addresses and rashly promised to curb the wicked financiers. The actual nationalisation of the Bank of England has turned out to be as little momentous for the British worker as the question of which group of capitalists control the Suez Canal

Actually the Bank of England always has been controlled by Act of Parliament, and the investors who owned its capital. These investors had to satisfy the customers (the joint stock banks or Big Five). The Bank was always and still is the Government banker. 

When today the Treasury raises (borrows) money by issuing Treasury bills, it must pay interest on the loans. When .an investor buys Government bonds he receives interest which can only come from profit made by exploiting the workers.

When the Labour Government “socialised” the Bank of England, they bought out (compensated) the owners whose stock paid 12 per cent., by declaring a guaranteed rate of 3 per cent. interest and paying £4 for a £1 share, so that the former owners still got their 12 per cent.

The payment of interest by nationalised concerns can only come from profit it must be capitalism.

The demand for nationalisation, therefore, is not a demand for Socialism at all; but strong Capitalism.

Under Socialism—a system of society based on common ownership, there will be NO wages, classes, money, armies or State, but freedom, equality,

What then, would the Socialist say when faced with the widespread growth of nationalised capitalism in all countries, spreading now to India and China.

This is the normal development of Capitalism, which concentrates in fewer hands. The biggest band is the State. Let is be so. We can no more stop it than stop uranium turning to lead. In Frederick Engels words: 

“The modem State, no matter what its form, is essentially a capitalist machine, the State of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of the productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers. The capitalist relation is not done away with. It is rather brought to a head. But brought to a head—it topples over.”

Socialism, Utopian and Scientific,

The solution is Socialism.

In the discussion which followed the question was raised as to whether, in spite of being still run by wage-labour, the South Wales coalfield had not improved working conditions under the Coal Board.

In answer to this, the chairman of the meeting cited the case of the pits at Gwaun-cae-Gurwen, where the whole population of the village had been threatened with destitution due to the Board's decision to close the pit if output did not increase.

A special group of the strongest men had been picked and told that the decision depended on them. They went down, ignored safety precautions, went without meal times, slept in their pit clothes, and slogged away. They were then told “Not good enough” and given two more weeks by the Board. Finally the Board agreed to keep the pit open for a further trial period. It was questionable whether the South Wales miner had ever been reduced to such a position in the past, with miners' officials egging them on and the local parson thanking God for the "miracle.”

The question of distribution without the payment of wages was raised, and the possibility of abuse of free consumption under Socialist.

A local resident from Loughor (Swansea) pointed out that fifty years ago there were no water mains there. When water pipes were laid, it was true that for a time people left taps running and took more water than they needed, but they “soon grew out of it."

The meeting also dealt with some anarchist objections to political action.

Horatio.

Passing Comments: Unsolicited Testimonial to Mr. Gaitskell (1951)

The Passing Comments Column from the October 1951 issue of the Socialist Standard

Unsolicited Testimonial to Mr. Gaitskell

When 1 was reading in a public library, a lady next to me reading the Daily Telegraph approved so much of what she read that she had to unburden herself immediately; and 1 was the nearest person. I haven’t checked on all her facts, but the substance of what she said was this:

“Thank goodness someone’s talking sense at last—Mr. Gaitskell is saying they ought to give the workers bonus shares if the work is going well. Now that’s what I’ve always said—I had some shares in the South Metropolitan Gas Co. during the war and they used to give the workers bonus shares and it always kept them satisfied—they never had a strike all during the war! That’s just what I’ve always said—keep the workers contented and you won’t get any trouble. And I see Mr. Gaitskell has been saying we shouldn’t have any more taxation on the important people—the people with capital and the people who provide work. Because if you tax them they’re not going to stay in this country are they? And if they go how should we get on?—because they provide all the work.”

I feel sure that Mr. Gaitskell will be glad to know that, although he may not be very popular with the trade unions, his proposals have drawn forth the admiration of at least one shareholder.

* * *

State Capitalism

As the nationalised industries continue to publish each year their reports, showing how much interest has been paid to people who are called (for some reason unknown) “ex”-shareholders, it should become obvious to the most fervent nationalises that whatever nationalisation is or is not. it is not Socialism, and that the workers in nationalised industries cannot be said, by any stretch of the imagination, to be either the owners or the controllers of their industries. These facts, which the Socialist Party has been trying to propagate for the last half-century, have at fast reached the edges of that bastion of ignorance, the Labour Party. Among the first to make a public recantation is a Labour M.P., Fred Longden, who has just published a book of essays.

* * *

Lucrative Stockholding

In it he says that nationalisation “does not disturb the present social order.” It “does not dislocate the pyramid-like build of society. Its horizontal classes and perpendicular grades and castes remain intact with greater security than ever. Stockholding is sounder and more lucrative. Management rests in the hands of a Board that is more distant from the worker and consumer than ever. This is ’democracy’ with a very remote control. It is not Socialism.” (“The Proletarian Heritage,” quoted in Reynolds News, 12.8.51.)

With your last sentence, Mr. Longden, we couldn’t agree more. But what a pity it is that you have spent your political life in the Labour movement working to bring about that state of affairs you now so justly criticise. Still, we don’t want to harp too much on your past misdeeds. If you really want to bring about a Socialist society, you can still join with all the other people who want to do so. Apply at your nearest branch of the Socialist Party.

* * *

Never Say Die

Mr. Longden has at least been honest enough to admit that he was wrong, now that it is clear beyond any possibility of doubt that nationalisation is not Socialism. But there are others who are incorrigible —chief among them being the Stalinists. With them the evidence counts for nothing. Theoretical argument, practical demonstration, both leave them cold. Ignoring the experience of the coalminers, the gasworkers, the railwaymen, the Daily Worker continues to cheer on nationalisation projects wherever they appear. In Persia, a nationalisation demonstration evoked the approving comment, “Smallest hint of government weakness in face of imperialist pressure brings the crowds out to show the people’s determination to force oil nationalisation through” (11.7.51). And when the secretary of the “Northern Rhodesian African Congress” demands the nationalisation of the Northern Rhodesian copper mines, the Daily Worker headlines it “Africans want copper mines” (23.7.51). The Africans may want the copper mines. But if they do, they’re certainly going a queer way about it.

* * *

It’s What Yon Wanted

Even when trade unionists see that nationalisation has left them exactly where they were before, any attacks they make on the new state-directors, any claims they bring forward for higher pay, are greeted with a reproachful “well, you wanted nationalisation yourself.” The head of the British Electricity Authority, Lord Citrine, went along to the annual conference of the Amalgamated Engineering Union recently, berated those delegates who had attacked the B.E.A. administration, and ended up by appealing to “the trade unions, which were really responsible for bringing about nationalisation, to ‘give us a little help occasionally, and perhaps a little more charity when public utterances are made’.” (Daily Herald, 22.6.51.) And the trade unions cannot deny the charge that they helped to bring about nationalisation.

* * *

Labour “ Socialism ” in Action

From the Daily Herald (2.8.51): “The fall in share values, following Mr. Gaitskell's announcement a week ago that dividends are to be limited, is only one-third of their rise during the past three and a half months. With that statement the Chancellor of the Exchequer torpedoed a half-hearted Tory attack in the Commons yesterday.” But what an interesting commentary it makes on Mr. Gaitskell’s claim to be a Socialist when he publicly boasts that he isn’t half as hard on the shareholders, on those who live on the labour of others, as his opponents make out. In fact the Stock Exchange, despite the loud cries of anguish which were heard in Lombard Street when the slight dividend restriction was first announced, soon came to see what a mild measure it was. Even the small drop in share values which actually took place was not long-lived. Two and a half weeks after the original announcement the Sunday Express (12.8.51) said: “All but one-tenth of the losses has been regained. And from the way things are going it won’t be long before the remaining tenth is made good.”

Which, in practice, amounts to another vote of confidence by the shareholders in the Labour Government.

* * *

Discovery

Another of the Chancellor of the Exchequer’s remarks during the Commons debate on August 1st was this: “Figures of the distribution of property do not bear out any suggestion that ordinary shares are held in large quantities by the poorer section of the community.”

This must rank as the understatement of the month.

* * *

How to Fight Wars—1

From the Daily Graphic (24.7.51): “At Verdun in 1916 Petain flung back the German hordes with a scornful 'Ils ne passeront pas ’ (they shall not pass). Nor did they, although half a million men died round the shell-torn forts in five months.” Half a million men died, but not Petain, who became a General largely on the strength of that battle. (And if it was Petain who “flung back the German hordes,” what were all these other Frenchmen doing there?) Petain survived the men under his command for thirty-five years, dying at the age of ninety-five.

* * *

How to Fight Wars—2

General Kurt Student, formerly supreme commander of Hitler’s airborne troops, wrote an article in the Sunday Express last May 27th. He said: “ For me, as commander of the German airborne troops, the Battle of Crete in 1941 carries bitter memories. I miscalculated when I suggested this attack, which resulted in the loss of so many valuable parachutists that it meant the end of the German airborne landing forces, which I had created.” Many parachutists were lost. But modern war has its compensations. General Student is still with us. And ten years after his miscalculations at Crete, the General is still fit enough to write articles for the papers.

Alwyn Edgar

The New GDP: Gilts, Debts and ‘PIIGS’ (2010)

From the October 2010 issue of the Socialist Standard

During 2010 the most talked-about consequence of the housing and banking crisis has been its knock-on effect for governments – those charged with masterminding the bailout. We examine the state of what is euphemistically known as the ‘public finances’.

There are ultimately only three sources of revenue for any government – taxes, borrowing and printing money. The economic crisis has led to a media preoccupation with all three. Because of the bailout of the banks and massive financial stimulus programmes initiated by governments the world over in an attempt to avoid another Great Depression, there is quite some interest in how all this is going to be paid for.

One aspect of this, which the Cameron government is now grappling with, is to try to compensate for the bailout and the costs of the recession by reducing other government expenditure (e.g. on state-provided services like education, on defence, and on staffing in the civil service, etc). However, if printing money causes inflation, and there are limits to the amount that can be raised through taxes, why not just borrow more to avoid the need for big public spending cuts?

The borrowing option is very often there, but government borrowing is not always as straight forward and risk-free an exercise within capitalism as it may appear at first sight.

Good as gilts

Governments borrow money through the issuance of bonds, which are sold to investors with the promise to pay a rate of interest and – usually – to return the original capital advanced by the investor at a pre-determined time (when the bond ‘matures’). The issuance of debt in the UK is overseen by an agency of HM Treasury called the Debt Management Office. Bonds issued with maturities of less than a year in the UK are called Treasury Bills and are traded on the money markets, typically by big financial institutions who only want to tie-up some of their money for short periods. However, the vast bulk of the bonds issued in the UK to finance government debt are for maturities over a year and are called ‘gilt-edged securities’ because the original bond certificates had a gilt-edge to the paper.

Gilts are usually issued for £100 each but come in various types and maturities – which means that the issuing and paying back of government debt is a far from straightforward business. The defining features of a conventional gilt are its ‘coupon’ (the interest payment) and its maturity, both reflected in the name of the gilt e.g. 8% Treasury 2013, a gilt which pays 8 per cent a year – in other words £8 – and for which the government will pay back the initial £100 in 2013.

Other gilts are ‘index-linked’ in that the coupon and final repayment amount are linked to movements in the Retail Price Index, while another category are undated or ‘irredeemable’ gilts such as 4% Consols, gilts often originally issued in the nineteenth century and which pay a regular coupon but for which the government is not bound to pay back the original sum advanced at any set date. The vast majority – nearly three-quarters – of UK gilts in issuance today are of the conventional variety and these are clustered into ‘shorts’ of under seven years maturity, ‘mediums’ of seven to 15 years and ‘longs’ of over 15 years.

The issuance of gilts, as they are commonly called, is a regular activity because government revenue from taxation does not neatly match patterns of government expenditure, either because spending is running ahead of government revenues, as at present, or because tax-collection typically has greater seasonal variations than government spending. And even when governments might be paying back some gilts as they mature (‘redeeming’ them) they will usually still be issuing others.

Other countries have similar mechanisms for issuing debt (in the US the bonds are called ‘Treasuries’) and all have similar issues at root. In particular, the laws of supply and demand will affect the level of the interest payments demanded by investors as will the general level of confidence in a country’s ability to pay both the coupons and the original capital advanced when the bonds mature. In the UK there are usually weekly gilt auctions and the government will have to respond to a lack of demand for gilts by increasing the coupon on new issues thereby making them more attractive – but at the same time making them more expensive from the government’s own point of view.

A big influencing factor on this is the ‘secondary market’ for already existing gilts – the billions of pounds of gilts in circulation until they mature do not usually trade at their face value after they have been issued, but at rates determined by the market. For instance, the return investors want on long-dated gilts may rise to 5% (the interest payment in relation to the price paid is called the ‘running yield’). If so, this means that a long-dated gilt with a 4% coupon is not going to trade at the original £100 face value it was sold at but only at £80 instead, as this is what would give a 5% running yield (a gilt costing £80 which pays £4 on the coupon). This type of shift in price and yield opens up the possibility for investors of capital gains and losses, and also leads to the concept known as the ‘redemption yield’, the running yield investors achieve adjusted for such capital gains and losses. In its simplest form, buying above the initial £100 face value will give a redemption yield lower than the gilt’s coupon rate as there will eventually be a capital loss to be taken into account, buying below face value will increase the redemption yield above the coupon rate as there will be a capital gain when the government repays the face value of the gilt.

Such market gyrations in gilt prices and yields as determined by capitalist investors daily will influence the way and cost at which a government can borrow by issuing new gilts, with shifts in yields being crucial. Because investors may be tying their money up for long periods it is normal for the yield on long-term bonds to be generally higher than for short-term bonds too. However, periods of financial uncertainty and likely recession usually lead to interest rates being temporarily higher for shorts than for longs as investors do not want to tie their money up for extended periods. This leads to what is called an ‘inverted yield curve’, with higher short-term interest rates in the economy than long-term rates, as happened for a time at the start of the credit crunch  (the yield curve is the relation between interest rates, i.e. the cost of borrowing, and the time maturity of debt).

These ever-changing market interest rates at which governments have to issue gilts in order to finance their borrowings is of obvious concern to them. But the maturity of the bonds is a significant issue too.

‘PIIGS’ at the trough

In the last few months a new acronym has arisen in the financial press reflecting the times. Instead of the talk being of the fast-growing emerging market ‘BRIC’ countries of Brazil, Russia, India and China, we have the ‘PIIGS’ instead. These are countries that have been deemed by the international bond markets to have issues regarding the amount and/or nature of the government debt they have outstanding, the unfortunate acronym standing for Portugal, Italy, Ireland, Greece and Spain. The most serious situation, now accompanied by massive government spending cuts and riots on the streets, has been that encountered by Greece, which has implemented austerity measures of around 30 billion euros in return for a 110 billion euro rescue package from the EU.

Interestingly, Greece’s annual budget deficit – its annual expenditure over its annual revenue – is projected to amount to about 8 per cent of GDP this year, actually less than the US’s 11 per cent (Financial Times, 23 June). And its total accumulated national debt built up over time is, at around 110 per cent of one year’s GDP, a lot less than Japan’s at 190 per cent of GDP. The problem, however, with Greece has been that much of its debt was due to be retired in the next couple of years (i.e. a large proportion of the bonds it had issued were due to mature) and there was no guarantee it had the money to be able to do this. This prospect sent the bond markets into fright to the extent that long-dated Greek debt was yielding over 10 per cent at one stage, more than double that typical for other western economies. This was because investors dumped their bonds, in the belief they may not get their original investment back, sending the prices of the bonds plummeting and their yields soaring.

This has been a clear example of the way in which the bond markets are able to determine which countries are able to carry on issuing debt investors are willing to buy, and which countries investors have lost confidence in. This is precisely what has happened to a number of Latin American states such as Argentina during the last 30 years too – and the retribution has usually been severe. When a country shows signs that it cannot pay back its debts or may default on coupon payments on its bonds, a restructuring programme initiated by the International Monetary Fund is not far away, typically leading to cuts in state spending coupled with tax rises and the inevitable social unrest.

Once a government defaults on its debts, the bond markets tend to have long memories, and the fear of future default will push up interest rates (yields) for years to come, making the cost of government borrowing high. In such situations, international investors retreat to ‘safe havens’ like the US and UK, countries that have never had any significant default on their debts during their history.

Just like BP?

In this respect, the markets treat countries and their governments rather like they treat individual companies. Just as credit rating agencies like Moody’s or Fitch  give credit ratings to companies (the highest being ‘Triple A’) so they rate nations too and this influences market perceptions. Credit rating agencies and other financial firms view companies likely to default on their debt (whether to banks, or to investors such as the owners of corporate bonds) with the utmost suspicion. Defaulting on debt or inability to pay coupon payments on bonds or on promised dividends is one of the greatest corporate sins and companies deemed at risk of default have their bonds rated as ‘junk’ and are punished by markets.

Recent examples of those falling foul of financial markets because of a perceived inability to service their debts would not only include the banks but also major companies like William Hill and Premier Foods which have had to go back to their shareholders cap-in-hand asking for money to reduce their debt and shore up their balance sheets. Yet, a company like BP can have a temporary dip in its share price but otherwise largely escape the type of battering from the markets meted out to others despite its involvement in one of the biggest and costliest environmental disasters of all time. And the reason . . . ? BP’s net debt is little over one year’s typical profits (last year being $20 billion) and it has a flexible debt structure.  In other words, it is highly cash generative, has headroom on its debt and so investors have more confidence it can meet its financial obligations.

Little headroom

Like companies, some countries have more headroom to tackle their financial situation than others. Where confidence in government finances are high and where debt servicing is manageable, governments will be able to issue bonds at rates that are not exorbitant and thereby finance their expenditure. This also applies to governments that have more headroom to increase taxes because state spending in the economy is lower (another reason why the US and UK have been seen as safer havens for bond investors than countries like Greece).

But in truth there is an historical element to this as well. The story of the last 20 years or so isn’t that there has been a massive explosion in government debt – the explosion in debt has been in personal debt. In the US this rose from 80 per cent of average disposable income in 1990 to over 140 per cent, and in the UK a similar measure of personal debt rose from 100 per cent to 170 per cent of household income under New Labour (Financial Times, 9 August 2008). By contrast, while government deficits in a given year are now significant (a record £159 billion or 11.4 per cent of GDP last year in the UK) and have caused some market wobbles, the accumulated national debts of most countries have not been particularly high by historic standards.

Because of inflation over time, the big number headline figures of billions and trillions are misleading, and percentages give the best picture. By way of example, total accumulated national debt as a percentage of one year’s GDP is currently around 70 per cent in the UK. According to figures from the Bank of England this compares with over 250 per cent in 1946 at the end of the Second World War. Indeed, for all the period from the start of the First World War in 1914 until the early 1960s it was far higher than it is now, and the situation in the US has been very similar in percentage terms. Indeed, only as recently as 10-15 years ago governments in the US and UK were running big budget surpluses when the economy was booming and were paying back the national debt as quickly as they could, reducing national debt to GDP ratios to well below 50 per cent in both countries for a while.

What this means practically is that it usually tends to be sudden upward changes in the rate and nature of government debt that tends to really spook markets, drain them of confidence and lead to the type of government austerity measures we are now seeing, rather than particular total levels of debt as such. Indeed, a comparatively healthy economy like Singapore’s has a national debt equivalent to 113 per cent of GDP, while – perhaps counter-intuitively – Uganda, Iran and Mozambique have national debt of less than 20 per cent of GDP. After myriad failed government stimulus programmes over the last two decades Japan has accumulated the second highest national debt to GDP ratio in the entire world (after Zimbabwe) but despite its ongoing problems has comparatively little difficulty borrowing funds via the bond markets.

You can’t buck the market

What is certain from all this is that governments are far more like companies than they would ever generally like to admit, and certainly cannot ‘buck the markets’ and market perceptions, which are always crucial. But then again, who are ‘the markets’ anyway?

The market for UK gilts is typical and is dominated (at around 40 per cent) by insurance companies and domestic pension funds, followed by overseas investors and financial institutions, hedge funds, etc (at 35 per cent). The rest is made up of recognised collective investment vehicles like unit trusts, by banks and lastly by households (households being less than 3 per cent of the total). In other words, the bond markets – like the equity, commodity and currency markets – are dominated by the big capitalists and institutional investors. Their flows of investment capital are substantial and cross national boundaries at the press of a button. These are the people always on the look out for gilt-edged opportunities in life. The laws of the market economy dictate that no government will – or can – argue with them for long.

DAP

Russia: Land of High Profits. (1930)

Book Review from the September 1930 issue of the Socialist Standard

“The Soviet Union Year-Book, 1930.” Publishers: George Allen & Unwin, Ltd. 7s. 6d.

The Soviet Union Year-Book, compiled and edited by A. A. Santalov and Louis Segal, Ph.D., M.A., is published “to provide business and public men with a reliable information on the economic and political life of the U.S.S.R.” It contains in its 670 pages accurate and detailed information from official sources on all the chief aspects of Russian economic and political life. For business men seeking trade connections, and for those who wish to combat the double campaign of misrepresentation which is carried on by the ignorant and prejudiced in the ranks of capitalist parties on the one hand and the ranks of the communist party on the other it is an indispensable work of reference.

It is not possible here to describe fully the range which is covered. It must suffice to indicate some of the facts and figures which will be useful to the Socialist student of Soviet affairs.

Production and foreign trade.

Much space is devoted to the growth of trade and production. Agricultural production in 1928-29 was 4 per cent. above that in 1913, and in 1932-33 it is planned to reach 59 per cent. above the 1913 level (page 92). Industrial production in 1928-29 was 73 per cent. above 1913 level, and in 1931-32 will reach 166 per cent. above that level (page 94).

Exports in 1928-29 were valued at 877 million roubles, as compared with 1,520 million in 1913. Imports in 1928-29 were valued at 836 million roubles, as compared with 1,374 million in 1913 (page 289). It is planned to increase exports to over 2,000 million roubles in 1932-33, and imports to over 1,705 million. In 1909-13 agricultural exports represented 70 per cent. of the total exports, and industrial exports 30 per cent. In 1932-33 the proportions will be equal, if the plan matures (page 291).

High Rates of interest and profit.

The Concession Companies make staggering profits out of the exploitation of the Russian workers. In 1926-27 the average profit was 81 per cent. on the capital invested by them.

In 1927-28 it was 96 per cent. (see page 208). What a harsh reality after the dreams of the visionaries for whom Russia was to serve as a model to the Western world. One of the Bolshevik slogans of 1917 was “Down with the foreign bondholders.” They were duly “downed” and the National Debts repudiated. The Soviet Government has just repeated its willingness to resume part of the old National Debt obligations, but in the meantime the foreign bondholders have given place to “home” bondholders – a distinction without a difference from the stand point of the Russian workers.

A rapidly increasing percentage of the total revenue of the Government is raised by means of additions to the new National Debt. In 1927-28 the percentage was 0.5; in 1928-29 it was 8.6 per cent., and in 1929-30 it will be 11.5 per cent. (page 397).

On October 1st, 1925, the new National Debt stood at 367 million roubles (£36 million). On October 1st, 1929, it was 2,595 million roubles (£259 million) (see page 398). It is at the present moment nearly 3,000 million (£300 million), and it is planned to increase it to £500 or £600 million in the next year or two.

The amount raised by means of loans during the one year 1929-30 reached the total of 1,335 million roubles (page 391). In the same year the Government spent 450 million roubles on payments to the new investing class who have invested their money in Russian industry through the Russian Central Government. Interest rates are very high; up to 12 per cent.

Other avenues of investment for Russia’s propertied class are the co-operatives. Hundreds of millions of roubles are invested in that way (see pages 226 and 621).

All these forms of investment, in the National Debt, in the co-operatives, and in the trading concerns, etc., are forms of exploitation of the Russian workers They, like the workers everywhere, carry on their backs a class of property owners, receiving incomes from property ownership.

The very high rate of interest which rules in Russia owing to slowness with which foreign investors enter the Russian money markets, may serve to explain why the Russian Government, or certain influential groups behind it, continues without any tangible result to finance Communist parties abroad. Investors inside Russia would naturally not want the interest rates to fall from 10 per cent. or 12 per cent. to 4 per cent. or 5 per cent., and an obvious method of preventing this would be to play upon the fears of foreign Governments and investors, and thus save themselves from unwelcome competitors.

Excess profits tax.

As in this country, the income tax in Russia is a graduated one, there being five categories. In each of them provision is made for different rates of tax on ranges of income from under 1,000 roubles a year up to 24,000 roubles and over (page 402).

The fifth grade applies to those whose incomes are derived from “ownership of industrial and trading enterprises, from money investments, dividends on shares, etc.” (page 402), also incomes from “rent” (page 401).

Then, in addition to the income tax, there is an excess profits tax for those companies whose yearly profits exceed a standard which is described as the “normal profits” (page 405).

It is this economic organisation, possessing all the usual features of exploitation (rent, interest, and profit, a working class, and a property owning class, a stock exchange, etc.), which the Communist parties describe as “Socialism”!

Wages and unemployment. 

The average money wages in 1928-29 was 892 roubles (£89, or about 34s. 6d. a week(page 453).

The worker’s output is increasing at a greater rate than his wages. Under the five-year plan the “productivity of labour in the end of the five-year period will be doubled and real wages are to show an increase of 70 per cent.” (p. 97)

(Information about the inequalities of wages and salaries was given on The Socialist Standard for December, 1929)

The number of unemployed in 1924-25 was 848,000; in 1926-27, 1,353,000; and on January 1st 1930, 1,310,000 (page 454).

The amount paid out in unemployment insurance in 1928-29 was 111,500,000 roubles. This works at about 80 to 90 roubles a year for each unemployed person (on the basis of 1,300,000 unemployed). This, in English coinage, is about £8 10s. a year, or 3s. 3d. a week. The trade unions also pay unemployment benefit to their members from 3 to 18 roubles a month, say from 1s. 6d. to 9s. a week. Although the unemployed are exempt from the obligation to pay rent, or charges for lighting, water and transport, it would seem that they do not have a very pleasant time. Is this what our communists have in mind when they ask the Government here to give the unemployed “full maintenance”?

Inheritance.

As in other capitalist countries inheritance of property is recognised in Russia. “Soviet law recognises the right of inheritance, irrespective of the amount involved” (page 498).

As in this country, it is subject to an inheritance tax (page 405). The tax rises from 5 per cent. on the first 2,000 roubles (£200) up to 90 per cent. on that part between 200,000 and 500,000 roubles (£20,000 to £50,000).

The Communist Party. 

The membership of the Communist Party on July 1st, 1922, was 1,554,012 which represented 184 in every 10,000 of the adult population, or 1 in 54 (page 565).

The number of new members enrolled in 5½ years from 1924 to June, 1929, was 1,408,742. The number expelled in the same period were 128,460.

On July 1st, 1929, the party was composed as follows: – workers, 724,115; peasants, 200,452; employees, etc., 629,327. Women form 13.5 per cent. of the whole membership (page 566).

Education.

In December, 1926 (the last available figures) illiterates had been reduced considerably, but still represented 433 per 1,000 of the whole population (page 462)

The expenditure on education by the Central Government is under 3 per cent. of its total expenditure (page 462).

It is less than the amount spent on army and navy (page 389).

Hopes and facts.

In the first section of the “Constitution of the U.S.S.R.,” passed in 1923, Russia is depicted in the following rosy terms: –

“Here – in the camp of Socialism –are mutual confidence and peace, national freedom and equality, and dwelling together in peace and brotherly collaboration of peoples” (see page 1).

The facts given in this Year-Book sufficiently illustrates how illusory the communist dreams have been. Like many pious hopes embodied in the official documents and constitutions of the rest of the capitalist world these phrases have no relation whatever to the actual facts. Russian capitalism, although administered by the Communist Party dictatorship, reproduces almost down to the last detail the paraphernalia of the capitalist world as we know it here.

The lesson of it is the one we have tried to drive home for so many years, that it is not possible for a minority to impose socialism upon a majority who are hostile or indifferent; nor is it possible to remedy backward economic development by means of fine-sounding but ineffective decrees, issued by dictators.

Edgar Hardcastle

Cooking the Books: ‘Ignorant and mistaken’ (2022)

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

The irony of it! A government with a free-marketeer Prime Minister and Chancellor punished by ‘the markets’. This normally happens to reformist governments that have promised to spend money on improving conditions for the workers. The 1929-31 Labour government was said to have been brought down by a ‘bankers’ ramp’. In France the term used was that such governments came up against a ‘wall of money’. Harold Wilson in the 1960s blamed ‘the gnomes of Zurich’.

The villains in question are international speculators – sometimes politely called ‘international investors’ – who buy and sell the bonds issued by different governments. Governments borrow money by selling bonds. These have a face-value and a rate of interest fixed as a percentage of this. Say, £100 at 5 percent. However, while the amount of interest payable remains the same (in the example, £5), the price at which the bonds are bought and sold on the bond market varies. So, if the price falls to £90 the interest is still £5, but 5/90 is 5.56 percent. If the price rises to £110, this ‘yield’ (interest/selling price) is 4.5 percent. When the government sells new bonds it has to take into account the yield on existing bonds and offer that as the rate of interest.

When on 23 September Kwarteng announced tax cuts to be funded by borrowing, the speculators perceived the new government as behaving like a reformist one. Cutting taxes without reducing government spending and covering the extra deficit by borrowing was seen as no different from increasing government spending by extra borrowing. So they sold UK government bonds. With more sellers than buyers, the price of these fell and the ‘yield’ went up, meaning that government has to pay a higher rate of interest to borrow.

This had an unintended side-effect. Some pension fund managers had been persuaded by clever City financiers to borrow money by effectively betting on the price of government bonds they hold not falling significantly. They lost the bet and were required to pay cash to settle. This they could only get by selling some of their bonds, so driving their price further down. To prevent the pension funds becoming insolvent and the risk of this leading to a wider financial crash, the Bank of England stepped in to buy bonds and keep their price up.

This was a classic case of how a central bank has to deal with a dash for cash – it makes more cash available to prevent the whole financial system clogging up. Marx came across this in his time. Under the 1844 Bank Charter Act, the Bank of England was allowed to issue money not backed by gold in its vaults only up to a certain amount. However, in the financial crises of 1857 and 1866 the Act had to be suspended to permit the Bank to make more cash available. Gordon Brown thought he had invented the wheel – and saved the world – when he followed this long-established practice during the Crash of 2008.

Marx’s comment was:

‘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, Vol 3, ch. 30).

Governments can’t make things better but they can make things worse, as we have just seen. Starmer tweeted that ‘the government has lost control of the economy’ (2.02pm, 28 September). But governments don’t control the economy. It’s the other way around, as he will find out if ever he gets the chance to have a go.

The Labour Party’s New Programme: A Bid for Liberal Support. (1928)

From the July 1928 issue of the Socialist Standard

A Committee appointed by the Labour Party to draft a new programme for the next General Election has made its report. The Committee was mostly composed of members of the I.L.P., and the draft programme drawn up by them had been carefully worded to appeal to all Liberals and supporters of Capitalism generally.

The main plank of the Programme is this :

“The land, the production and distribution of the coal and power which are the life-blood of modern industry, the network of communications and transport which form its veins and arteries—these fundamental necessities are too vital to the welfare of the nation to be organised and exploited merely for private profit. Without haste, but without rest, with careful preparation, with the use of the best technical knowledge and managerial skill, and with due compensation to the persons affected, the Labour Party will vest their ownership in the nation and their administration in authorities acting on the nation’s behalf.”

How carefully guarded and appealing is the phrase “merely for private profit.” Private profit they want to keep in existence, but controlled by public bodies—that is the Capitalist State, with bondholders actually owning Government Securities floated to buy out the “public necessities.” “With due compensation to the persons affected” means that the owners will receive (with more security than competitive commerce affords) annual tribute from the unpaid labour of the working class. In other words, the Labour Party preserves the existence of an owning class living upon the non-owning class.

The Programme gives illustrations from modern State-owned services to show how similar are their proposals to the concerns run for profit to-day. One illustration they give us is the National Electricity Board established by the Conservative Government ! The policy of public or State-ownership of “public utilities” can be found in the Conservative programme, and it is one of the “advanced” objects advocated in the Liberal Industrial Report. No wonder the Manchester Guardian says of the new Labour Programme.

“The broad definition of objects will be found as acceptable, to most people outside the party as to those within it. Even when it comes to closer detail the draft contains very little which might not have been written by, say, the Liberal Industrial Committee.”

How thin is the veneer of Nationalisation in the Labour Programme can be seen from this clause :

“Even those industries which remain in the hands of private capitalists exist for the service of the community.

British industry, to-day, can secure the well-being for the mass of the population only if it consolidates its forces, eliminates waste, and calls in the resources of science and organisation.”

The State regulation of private industry is all that this means. And the reorganisation of industry along more efficient and less wasteful lines results, actually, in industry requiring less men to produce more wealth. A larger unemployed army is the magnificent result, and greater insecurity for those employed, who are continually being threatened by new machinery and “speeding up” methods. America, surely, is the ideal example of efficient industry—so efficient that, with greater output each year, fewer and fewer workers are required to run the machines, and a greater difficulty to sell the increasing output of rationalised industry.

Against this programme of private ownership and public control the Socialist advocates abolishing the cause of the slavery and poverty of the working class. The Socialist Party stands for abolishing State and private ownership, and replacing them by common ownership by the whole working community in the interest of the community of workers.

But that is not good election propaganda and vote-snaring material. Hence the Labour Party will have none of it ! They appeal to “all classes” with pills to suit all classes of reformers. Unlike the Communists, we do not offer an alternative programme of scores of reforms. Our Platform is simply Socialism—which makes all reforms of Capitalism fade into insignificance and uselessness.

Adolph Kohn

A Challenge to Mr. Bevin on Post-War Reconstruction (1942)

From the August 1942 issue of the Socialist Standard

Cutting away from the vague generalities of most of the Government spokesmen Mr. Ernest Bevin, speaking at the annual meeting of the National Chamber of Trade in London on July 15th, 1942, made two definite statements about post-war reconstruction, one on behalf of the Government and the other on his own behalf. The first need not detain us long. He said that “it was the policy of the Government to try to establish for the post-war period minimum wage regulations for all forms of employment” (Times, July 16th, 1942). In form it is somewhat ambiguous since it is not clear whether it is intended to be a permanent arrangement or only one “for the post-war period.” The probability is that it is meant as a pledge of a permanent policy. For the rest it is interpreted by the Manchester Guardian to mean not “universal standards such as those laid down by New Deal legislation in the United States, but . . . the British method of covering all industry with trade boards and collective agreements.” (Manchester Guardian.; July 17th.)

“Mr. Bevin,” says the Guardian, “at least is trying to do something now that will be ready before the good intentions have time to fade.” After the last war the good intentions did fade; so that the Labour Party in office discarded its own minimum wage policy drafted when in opposition. Let us assume, however, that this time the policy will be carried out, what does it amount to ? It will be a gain to a number of badly organised workers but it is only necessary to look at the past experience of such arrangements, with their low minimum rates, the exceptions for workers not up to the average level of health and efficiency, and the wholesale evasions, to see that it is a pledge of very modest value to the workers. Mr. Bevin’s second point is more interesting. He said: “At the end of the war we should be able to buy goods only for goods. The rentier, comfortably living on interest, would certainly be gone. It will mean that we shall have a nation at work, and that will not be an unhealthy thing.” (Daily Herald, July 16th, 1942.) The Times and Manchester Guardian reported him slightly differently. Instead of saying that the rentier would certainly be gone, they have it “would be entirely gone.” This, it will be observed, was not a pledge on behalf of the Government, but a statement of what Mr. Bevin believes will take place and of which he approves. We may digress for a moment to quote the Concise Oxford Dictionary about the rentier. The definition is “Person living on rente, person not needing to earn his living.” And “rente” is explained as of French origin, meaning “Income, especially that consisting of life annuity or dividends.”

So now we may seem to be getting somewhere. People living on property incomes, not needing to earn their living, will be gone ! (Incidentally if Mr. Bevin feared that there might be some propertied persons who would manage to escape the healthy necessity of working, he has already to hand a powerful instrument of which as Minister of Labour he has had experience. We refer to the prosecution of absentees from war work, fined or jailed under Defence Regulations.)

We are, however, going much too fast. Mr. Bevin has not yet convinced his fellow members of the Government, and was disowned by the Chancellor on the radio (2 Aug.) We may safely rule out any mass stampede on the part of the propertied class to surrender voluntarily their property and the income derived from it. An alternative is that it may be taken away from them. The S.P.G.B. has throughout its existence urged that the conversion of private ownership of the means of production and distribution into common ownership is the only way to solve the poverty problem; but Mr. Bevin does not subscribe to this. He is a member of the Labour Party, and that Party, far from seeking to abolish the rentier, prepares to establish him more firmly than ever by setting up state industries or public utility corporations and compensating the present owners with Government bonds, or stocks guaranteed by the Government. Has Mr. Bevin noticed, for example, how the rumours of nationalisation of the railways gladdened the hearts of the railway stockholders ? The Sunday Express (June 7th, 1942) reported “a slow upward move in home rail stocks. The buying is based on the theory that Britain’s railways will never return wholly to private ownership.” The Express went on : —

“That would have most important results for the 500,000 investors in railway stocks. Instead of a fluctuating income dependent on operating results, their revenues would be fixed.”

In short, Mr. Bevin, these stockholders are counting on the Labour Party establishing them in permanent security as rentiers.

Again on July 8th, 1942, the News-Chronicle reported another rise in railway stocks, and said : —

“. . . the current market explanation of the recovery yesterday was that it was inspired by statements of trade union officials that plans for the unification of the railways under a public board are well under way.”

It is then established that the rentier class, far from expecting Mr. Bevin’s Party to deprive them of their wealth and income, and make them work, are confidently looking to that Party for security as rentiers in the difficult post-war period.

There is, of course, a third alternative—that the rentier class have already disappeared or are about to disappear. It is fantastic to consider such a thing, but there are many supposedly well informed people who believe it to be true. There is Mr. J. B. Priestley, who writes that the war-time changes “are tending to bring people nearer to one level, both economically and socially. The differences between classes are much less marked” (Picture Post, June 27th, 1942). There is Lord Balfour of Burleigh, who, commenting on Priestley’s statement, approved of it and added: “I also hope and believe that such changes will continue after the war and on a great scale” (Picture Post, July 4th).

Mr. Priestley claimed that “many of the worst features of our pre-war life have vanished and are rapidly dwindling. For example, our fantastically gross and really sinful inequalities.” Then there Mr. Ivor Brown in the Manchester Guardian (June 6th, 1942), who fancies that we have already slipped into Socialism. “A 10/- income tax (with surtax in proportion) has given us what the Socialist orators could never do, Socialism in our time.” Ownership of a farm or factory is, he says, now only nominal, the owner “is just the employee of one or more Ministries.”

One can only gasp at the self-deception and short vision of such people and wonder how they manage to get like that in defiance of all the evidence that they are wrong. Presumably they knew about the pre-war inequality, that under 2 per cent. of the population owned about two-thirds of the accumulated wealth, and that three-quarters of the population owned between them not more than one-thirteenth of the wealth. Let us grant for the moment that at present the annual increase of the wealth of the propertied class is drastically curtailed in many instances by war-time taxation (as it was in 19l4—1918) but have they never heard how these fortunes leapt up again in the years after the last war ? Do they think that the rich are no longer with us ? Who do they think paid £6 17s a bottle for Benedictine at Christie’s sale on May 22nd, 1942 (Daily Telegraph May 23rd): £50 for six bottles of brandy, and liqueurs at £27 a dozen ? Did they not read of the £100,000 that was bid by a London builder for 130 bloodstock racehorses that had belonged to the late Lord Glenelly ? (Daily Express, July 15th, 1942). Do they ever look at the amounts left in the wills published in the Press ? On seven days chosen at random in July the Times published particulars of 55 wills. The amounts ranged from £12,000 to £426,000, and totalled £4,060,000—an average of £75,000 a head. Let us make the necessary allowance for death duties, ranging up to 50 per cent, and more on the millionaire fortunes, and even then ask Mr. Priestley if he really imagines that the position of these people “tends” to equality with that of the mass of the population. Again let him look at Whitaker’s Almanack, 1942, and see the big estates left in 1941. There are 13 of £500,000 or more, ranging up to one which is over £4,500,000. They average about £1,500,000 per head. Ten of them are over £1,000,000. Does Mr. Priestley not know the authoritative estimate that three out of four adult persons who die each year do not possess even £100 to leave to their heirs ? Does Mr. Priestley not know that in 1939 the average wage of an adult male worker in industry was less than 70/- a week, with hundreds of thousands earning far less than that. Does he not know that earnings have kept pace with the increased cost of living only where long hours of overtime are being worked ? Did he see the comment of the Birmingham magistrate on the disgrace that a married lorry driver, after 19 years’ service on the Great Western Railway, is receiving only 68/6 a week? (Daily Herald, July 16th.) Does he really affirm that there is not fantastic inequality between the position of the workers and the position of the propertied class, in war or in peace ?

This brings us back to Mr. Bevin. Does Mr. Bevin stand for the abolition of property incomes of all kinds ? Does he think this will take place in the post-war settlement ? Since his fellow Cabinet Ministers do not share that view, how does he propose to convince them ? And after that how does he propose to win the Labour Party away from its programme of stabilising the position of the rentier class? Does he agree with the S.P.G.B. that Socialism, which necessarily involves the abolition of private ownership of the means of production and distribution and all forms of property income, is the only remedy for the problems of the working class ? If the answer is yes, why is he a supporter of other programmes ? It the answer is no, what is the programme (apart from the one item of minimum wage regulation) which he believes will solve the problem without Socialism.

We make the confident forecast that no other policy will solve the problem. The propertied class will, under pressure, do various small things to meet working class discontent, but they will never be got off the workers’ backs until a Socialist majority determines to have Socialism. The post-war world will be very much like the world that went before unless the working class themselves determine otherwise.

Edgar Hardcastle