The Socialist-Myth Countries (1974)

From the June 1974 issue of the Socialist Standard

Among the: many factors which have contributed to the undoubtedly disappointing speed (if that is the word) at which the working class have progressed towards an understanding of Socialism in the years since the Socialist Party was formed, one which has undoubtedly had a serious effect is the emergence of the so-called socialist countries, commencing in 1917 with Russia and continuing with many others in more recent years. The effect has been pernicious in two ways. First, the picture of life as it affects the working class in those lands has been of sufficient grimness as to cause those workers who think at all about these things to say: if that is Socialism (and only the tiniest handful realise that it is isn’t), you can keep it.

Secondly, and perhaps of even greater importance, large numbers of workers who are dissatisfied with capitalism as they experience it in their daily lives, especially the younger and more idealistically-inclined elements, have been taken in by the propaganda put cut by these countries from Lenin’s time onwards, the mouthing of pseudo-Marxist phrases, the glib misuse of the terms Socialism and Communism for realities which were so different, often horrifically so. If all the youthful energy and enthusiasm which have been wasted on these false dawns had been channelled into genuinely Socialist effort, it is reasonable to suppose that the cause would have been materially advanced. The damage done to Socialist progress by Lenin and his ilk hardly bears thinking about.

It is of course no coincidence that the Socialist Party was never taken in by the spurious talk about the creation of Socialism in Russia. Our party was from the first anchored to the doctrine that there can be no Socialism until the material conditions for a society of abundance have been achieved (this, ironically or not, being the task of capitalism); and, equally important, till the majority of the working class understand and want the new system of common ownership. We stood behind Marx’s dictum that the establishment of the new society must be the work of the working class itself. And we therefore regarded with contempt Lenin’s completely opposite teaching (in What is to be done ? and other works) that the workers were not equipped to understand Socialism, which must be brought about by an élite Bolshevik leadership who were so equipped (presumably either by God or by nature). (It should be noted here that with Marx and Lenin having two mutually exclusive attitudes on this fundamental aspect, the very phrase “Marxism-Leninism”, always on the lips of the so-called Communists, is about as meaningful as square circles or black snowflakes.)

The rest of the world expressed puzzlement in 1917 (still does) that, contrary to Marx’s ideas, Socialism should come first not in the industrialised west but in backward Russia. We had no bother in dealing with this puzzle; we knew it was just a figment of the imagination. Lenin kept talking about Socialism. To many people that proved it existed. It didn’t. And doesn’t. The vast majority of Russians are propertyless workers who are forced to allow themselves to be exploited just as in the west. Marx’s “abolition of the wages system” is not even on the horizon in Russia. Any more than it is here. And the Russian workers are not even permitted the luxury of being allowed to talk about the idea or to publish papers like this one to propagate the idea of Socialism.

Since the Hitler war ended, the plague of fake socialist countries has spread widely. The countries of eastern Europe fell under the control of the military might of the state-capitalist giant in Moscow. The feelings of the workers who live under those pernicious régimes show through from time to time in the form of uprisings in Berlin, Budapest, Prague or Danzig (where Polish workers who merely protested against a massive increase in prices were mowed down by tanks sent by their “Communist” masters in Warsaw).

In China, a tiny gang of Maoists have imposed their iron grip over 800 million workers who are exploited without mercy and without the slightest vestige of trade union rights and other freedoms. And a British Labour Peeress, Lady Wootton, who has the nerve to call herself a Socialist, actually wrote in Encounter that it was quite right that these millions should not be allowed trade unions ! While in The Observer, an ignorant intellectual, Professor Galbraith, actually wrote: “It works for the Chinese” (this echoing a previous-generation American intellectual who returned from Moscow with the infamous remark : “I have seen the future and it works”). Of course it works well enough for these impudent carpet-baggers who enjoy VIP trips to see the exploitation of the Chinese workers and then return to their home comforts to get paid for writing lies about it. But it is a sad fact that many young workers and students, who apparently now see through the Russian fraud, have simply switched not to studying Marx but to bootlicking Mao.

The rash has now spread so that every tin-pot black dictatorship in Africa has the nerve to call itself Socialist. And of course, so-called radical papers like the Guardian play their ignoble part in fostering the myths and the confusion by conning their readers into thinking that Socialism exists in such unlikely places as Zambia, Tanzania or Cuba. It never seems to worry these western apostles of freedom that all these places have one thing in common — prisons crammed with poor wretches whose only crime is to have fallen foul of the tyrannies run by Kaunda, Nyerere or Castro. Perhaps they have a great deal to learn, but many of them must be already learning it.

L. E. Weidberg

The myth of consumer sovereignty (2024)

From the July 2024 issue of the Socialist Standard

In his seminal work, Stone Age Economics published in 1972, the anthropologist Marshall Sahlins controversially suggested that hunter gatherers, though conspicuously lacking in those sundry accoutrements of what we call ‘civilisation’ – like money, fast cars, an 80-inch flat- screen TV and a semi-detached terrace in the suburbs – may nevertheless have constituted what he called the ‘original affluent society’.

This was a startling claim, to say the least. It certainly challenged what we conventionally mean by the term ‘affluence’. As Sahlins noted:

‘By the common understanding, an affluent society is one in which all the people’s material wants are easily satisfied. To assert that the hunters are affluent is to deny then that the human condition is an ordained tragedy, with man the prisoner, at hard labor, of a perpetual disparity between his unlimited wants and his insufficient means. For there are two possible courses to affluence. Wants may be “easily satisfied” either by producing much or desiring little.’

‘Producing much’ is what Sahlins called the ‘Galbraithean way’ to affluence – named after the economist, J K Galbraith, who had written a book in the 1950s called The Affluent Society – although Galbraith himself was somewhat ambivalent about the whole subject of affluence.

As he saw it, the age-old problem of scarcity had been largely overcome. The emphasis on increasing productivity and output, he argued, may have been apposite in earlier times when large swathes of the population had little option but to endure grinding poverty. However, this was no longer the case in the post-war era of mass production and consumer plenty. Hence, society’s priorities needed to change – from delivering yet more affluence to dealing with the challenges that affluence threw up – such as glaring inequality and environmental destruction. Amongst other things, concluded Galbraith, this called for more Keynesian-style government regulation of the economy, more investment in the public sector and so on.

As a consumption theorist, Galbraith was very much influenced by earlier writers in that tradition – like Thorstein Veblen, author of The Theory of the Leisure Class (1899), for instance. Galbraith argued that the conventional wisdom regarding the role of consumers had become outdated – that is, the idea that the ‘consumer is king’. According to this, whatever the consumer wants, businesses obligingly provide.

For Galbraith, the boot had since transferred to the other foot: it was now the producer who was king and the consumer, the subject. The consumer was, for instance, now more of a price-taker than a price-maker, a tendency that would have been reinforced by the increasing concentration and centralisation of capital in fewer hands. In short, the increasing domination of the economy by giant corporations.

Because of their large size, these corporations were not so much constrained by market competition when it came to setting prices. Nor for that matter, by the single-minded quest to maximise profits. That might well still be the primary goal of small businesses or, indeed, the shareholders of large corporations. However, suggested Galbraith in another book entitled The New Industrial State (1964), the former were in decline while the latter had largely lost control to a specialist planning and technical elite – dubbed the ‘technostructure’ – intent upon promoting technical efficiency and expanding the corporation out of undistributed profits.

In that sense profits still mattered; the corporation would prefer, for example, to finance itself rather than depend on bank loans and this obviously required that it be profitable. But the point that Galbraith was making was simply that the pursuit of profit was not of such overriding importance as it once was and that other objectives had entered into the frame alongside profit-making. With hindsight, however, things have not turned out quite like Galbraith imagined, with ‘shareholder capitalism’ now back firmly in the driving seat.

Dependence effect

For him, all these various developments also gave rise to something that he called the ‘dependence effect’. By this he meant consumer preferences had become more dependent on, or conditioned by, the corporate imperatives of big business. These latter were to increase sales and thereby make the fullest possible use of the large-scale productive capacity they had built up and so reap the benefits of scale economies. In other words, to some extent, these imperatives were technologically driven. While the resulting price reductions might, in the short run, seem to adversely affect the revenue stream of a business and hence its profits, in the long run it enabled the business to undercut its competitors and so capture a larger slice of the market.

However, what this also meant is that more demand for these products had to be created, or stimulated, in order to justify and maintain a high level of output. Price cutting would help in that respect but, in addition, boosting demand necessitated resorting to intensive advertising and ‘salesmanship’. In short, by generally promoting a culture of emulative and acquisitive consumerism.

Strictly speaking, the aim was not so much to satisfy the wants of the consumer as such. Rather, it was to ensure that the consumer remained perpetually unsatisfied and forever in a state of wanting more. In short, it was to promote the idea of ‘consumption for the sake of consumption’ (mirroring ‘production for the sake of production’).

Galbraith argued from what he called a commonsensical premise that the more amply a person´s wants are supplied the less urgent will those wants become. However:

‘If the individual’s wants are to be urgent they must be original with himself. They cannot be urgent if they must be contrived for him. And above all they must not be contrived by the process of production by which they are satisfied. For this means that the whole case for the urgency of production, based on the urgency of wants, falls to the ground. One cannot defend production as satisfying wants if that production creates the wants.’

In other words, the institutions of modern advertising and salesmanship ‘cannot be reconciled with the notion of independently determined desires, for their central function is to create desires—to bring into being wants that previously did not exist’.

Predictably enough, Galbraith´s arguments were excoriated by hostile critics like market libertarians for whom the concept of consumer sovereignty was something sacrosanct. It was key to their model of competitive market economy that works to maximise economic welfare in strict accordance with the wants of rational actors expressed through the market. Since these are essentially both rational and sovereign it was not for anyone else to question or frown upon such wants – whatever might be the social or environmental costs of satisfying them.

Any suggestion that consumer preferences might be moulded by institutional forces emanating from outside or beyond the individual themselves was regarded as anathema, an affront to the individualistic worldview of the market libertarians. If individuals were so easily manipulated, what is to prevent them making irrational choices, perhaps leading to some or other suboptimal outcome that might tarnish the good reputation of the free market?

Rejecting the very idea of a ‘dependence effect’ thus committed these market libertarians to the view that our wants (whether urgent or not) must necessarily always be ‘original’ to the individual themselves – or, to use Galbraith’s expression, will always spring from their own inner disposition alone. Suggesting they can be conditioned or shaped by some external force or factor had one further consequence. It could potentially call into question that most sacred of dogmas upon which much mainstream economic thinking hinges – namely, that our wants are insatiable. For if we can be persuaded to buy more we can also be persuaded to want less and therefore to buy less. Clearly, that would not be in the interests of the business community.

Manipulating wants

For Galbraith, that is precisely what this community was in the business of doing – persuading consumers. As he argued, if wants were genuinely original or innate to the consumer then what would be the point in advertising at all. The consumer would seek out and find the product that might satisfy their particular want of their own accord. The fact that the product is so relentlessly publicised strongly suggests that the purpose of the advertisers is to expand the consumer´s wants or even to supply them with completely novel wants that they did not even realise they had.

Naturally, this has prompted a counterargument from Galbraith´s critics that advertising can be justified on the grounds that it is merely alerting us to the existence of useful products we might otherwise have overlooked. However, this counterargument strikes one as being somewhat disingenuous.

To begin with, there is the sheer scale of advertising to consider. It seems absolutely disproportionate to what the market libertarians claim its purpose to be. It does not seem credible, to put it mildly, to suggest that businesses, ferociously competing against each other for a bigger slice of the market, would spend such vast sums of money merely to provide a public service, as it were – of informing the consumer of the availability of these products and thereby enabling them to better satisfy their wants.

Galbraith might have been naïve if he imagined that advertising could somehow be pruned back to a bare minimum in a competitive market economy. But his critics were no less, if not considerably more, naïve in their understanding of what advertising is about. Its purpose is, very clearly, more to persuade than inform. This is evident in the very of techniques of advertising itself. These involve repetition, reinforcement and the copious use of emotional associations, fantasy, irony and downright innuendo. Such techniques are demonstrably manipulative in style, often preying on people’s vulnerabilities and sense of self-esteem.

In the early days of advertising there was, arguably, rather more in the way of factual or informational content to adverts but those days have long gone. The dark arts of the advertisers have evolved way beyond that since then. Advertising today, suggests Andrew Simms, is about mind control. Like air pollution it seeps into every nook and cranny of our lives. Indeed, it is reckoned that the average American citizen is exposed to anywhere between 4,000 and 10,000 adverts every single day:

‘Advertising works by getting under your radar, introducing new ideas without bothering your conscious mind. Extensive scientific research shows that, when exposed to advertising, people “buy into” the materialistic values and goals it encourages. Consequently, they report lower levels of personal wellbeing, experience conflict in relationships, engage in fewer positive social behaviours, and experience detrimental effects on study and work. Critically, the more that people prioritise materialistic values and goals, the less they embrace positive attitudes towards the environment – and the more likely they are to behave in damaging ways.’

More ominously, Simms goes on to refer to the findings of neuroscience on the effects of advertising on the human brain: ‘advertising goes as far as lodging itself in the brain, rewiring it by forming physical structures and causing permanent change. Brands that have been made familiar through advertising have a strong influence on the choices people make. Under MRI scans, the logos of recognisable car brands are shown to activate a single particular region in the brain in the medial prefrontal cortex. Brands and logos have also been shown to generate strong preferences between virtually identical products, such as fizzy drinks – preferences that disappear in blind tests. Researchers looking to assess the power of advertised brands concluded that “there are visual images and marketing messages that have insinuated themselves into the nervous systems of humans”’ (Guardian, 11 October 2021).

If we accept that the purpose of advertising is more to persuade than to inform then this puts our market libertarians in an essentially untenable position. It means having to concede that our wants are not necessarily those that are original to ourselves and that, consequently, we are not at all like the sovereign individuals depicted in individualist mythology, driven by impulses that arise entirely within ourselves. It means having to acknowledge that we are, indeed, social animals capable of influencing and being influenced by others.

Given the manipulative nature of advertising it follows that weakening or removing its influence would result in a situation in which consumer wants would indeed more closely approximate those of our hypothetical sovereign individual. Therein lies a delicious irony – the fact that market libertarianism through its endorsement of the practice of advertising would appear to be in league with those very forces that threaten our individual sovereignty and our ability to rationally think for ourselves.

Untenable position

Faced with the incontrovertible evidence that advertising does indeed contrive to expand our wants or introduce new ones, some market libertarians have adopted a somewhat different tack than that of outright denial. This might be described as an exercise in damage limitation.

A case in point was the prominent free market supporter, Friedrich von Hayek. Hayek contended that it was a gross exaggeration to suggest corporations could determine consumer preferences through the power of advertising alone. That is undoubtedly true although it misses the larger point. The inculcation of consumerist values in the population is not something for which any one particular agency or institution can be held solely responsible. It is woven into the very fabric of life under capitalism.

It arises from the system´s competitive dynamic and its built-in disposition to grow without limit. The relentless accumulation of capital that competition compels finds its correlate in the no less relentless drive to boost market sales by means of which the economic surpluses to finance that accumulation can be realised.

Robin Cox

These Foolish Things: “Scientific” research (1995)

The Scavenger column from the April 1995 issue of the Socialist Standard

The basic contradictions in capitalism cause widespread death, destruction, pollution, poverty and waste. But this is to take the world view. Most of us experience day-to-day capitalism as a series of small stupidities, irritations and frustrations. Here are a few. If you encounter any worth a wry smile, please send them to The Scavenger who will publish the best.

“Scientific” research

Increasingly, large companies are shedding their own research departments and “buying in” research from specialists. The obvious advantage of this is that work does not have to be found for idle researchers.

But, more importantly, the external professionals can be assumed to be impartial in their findings. On the other hand, any findings they produce which are not to the liking of the commissioning firm can be referred back for “further confirmation”.

Gray Robertson, President of Healthy Buildings International, USA, a research company, did not wait for this. He personally altered the figures his researchers had established for cigarette smoke levels in buildings. He crossed out the figures and wrote in numbers half as high. This made it possible for the American Tobacco Company to deny knowledge of the addictive and damaging qualities of their products.

The annual budget for the US intelligence empire is S29 billion.

Transporting live cattle

The Transport Minister, Stephen Norris, has opposed the pressure for the government to spend large amounts of money on public transport systems to cut vehicle exhaust pollution. He said that the private car was: “extraordinarily convenient. You have you own company, your own temperature control, your own music and you don’t have to put up with dreadful human beings sitting alongside you.”

Know your place

This month, at the beginning of the new tax year, the government is abolishing the 120-year-old rate levied on field sports—or, more precisely, on the land used for shooting and fishing.

This should raise the market value of thousands of acres of wild, uncultivatable land in Scotland where the price has been depressed in the last few years. Estate agents calculate the value of such land by averaging the number of grouse shot, deer killed or salmon caught. The current value of a brace of grouse in this calculation is about £2,500, a stag at about £18,000 and a salmon in rich rivers at anything up to £10,000.

This is the main reason why Kristiansen (the Lego manufacturer) recently paid around £3 million for the Strathconon estate. The 20,000-acre Tulchan estate in Morayshire fetched £12 million and the rich 32,000-acre Yorkshire estate of Gunnerside was bought by Robert Miller, the American, for approximately £10 million. If you want to enjoy the same sort of freedom to slaughter wildlife, the 6,000-acre Lyon estate in Perthshire is on the market at £2.5 million. A bargain, by the look of it, because it has its own hydroelectric plant.

To be fair, not all such landowners buy the land for blood sports. For some, the objective is simply guaranteed privacy. They want to leave behind the places—and the people—that their wealth comes from. They want that essential quality of private property—to keep everyone else out

“The salary of the chief executive of the large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself ” John Kenneth Galbraith. .

The Scavenger

Boom goes bust in Asia (1998)

From the October 1998 issue of the Socialist Standard

Thirty countries covering a quarter of the world’s population are officially in recession. Even defenders of capitalism are now compelled to use the term “world economic crisis”.

It had to happen. Given the chronic state of overcapacity and potential overproduction in relation to the market in all the key sectors of global industry—electronics, computers, vehicle production, pharmaceuticals, shipbuilding, steel—the boom in Asia had to come to an end sooner or later. It already had in Japan, by far the biggest economy in the region and in fact the second biggest in the world after the US. Now the rest of East Asia—Korea, Malaysia, Thailand, Indonesia, Hong Kong and other so-called tiger economies—has followed.

It is difficult to believe that at the beginning of the decade Kinnock, when leader of the Labour Party, went into the 1992 general election holding up the Japanese model of incestuous government-corporation partnership as the way forward for Britain. Those who pointed to the relatively rapid rate of capital accumulation in East Asia to deny the socialist contention that world capitalism has been in a depressive state since the end of the post-war boom in the early 1970s have also had their come-uppance. Marx was right. They were wrong. There can be no such thing as a permanent boom. That’s only a dream peddled by smooth-talking politicians and ageing Keynesian professors.

Marx was right

Marx, the first person to provide a convincing analysis of how the capitalist economic system worked, concluded that, whereas capital accumulation—or economic growth, if you like—was a key feature of capitalism, this did not take place smoothly. Capital accumulation proceeds by fits and starts, periods of relatively rapid growth being followed by periods of contraction and stagnation. The graph of long-term growth under capitalism is not a straight line moving up from left to right but a jagged line with peaks and troughs, with each peak normally higher than the previous one. Marx argued that this cyclical pattern of growth was not just accidental but was inevitable under capitalism—it was the way capitalism functioned and developed, its “law of motion” as he put it—with each period of rapid growth ending in a slump and each slump preparing the conditions for the next round of growth.

The history of capitalism since Marx’s day has amply proved the validity of this analysis. In order to maintain or increase their share of the market and realise the surplus value embodied in their products, capitalist firms are compelled by competition to reduce their costs by improving their productivity, in particular by the introduction of more productive machines. This leads to an increase in overall productive capacity. During the period of recovery that follows a slump this poses no problem as the market is beginning to recover and expand again.

However, as the competitive pressures to increase productive capacity continue, the point is eventually reached when productive capacity in a key industry or group of industries comes to outstrip the market demand for its products. At this point a crisis of overproduction breaks out. As profits fall, production is cut back, workers are laid off and, through the knock-on effect on other industries, the market shrinks, so inaugurating the period of slump. During the slump, the least productive machines are taken out of production and capital is depreciated or simply written off. This purge of under-productive machinery and over-valued capital eventually creates the conditions which allow capitalist growth to recommence, so beginning the boom-slump cycle again.

This is how capitalism has developed and continues to develop, only now that (as Marx foresaw) capitalism is a global system the periods of rapid growth and purging slumps also occur on a world scale. The big slump of the 1930s was a world phenomenon, as was the post-war boom of the 1950s and 1960s which ended in the early 1970s. So of course is the current world economic and financial crisis.

Mad money

Just because the 1930s slump was preceded by the Wall Street Crash of October 1929, some people jump to the conclusion that it is financial crashes that cause slumps. Actually, it’s the other way round: financial crashes usually reflect the situation in the underlying real world of economic activity. Where they occur this is a sign that something has already gone wrong in the real world, that, to be precise, productive capacity and production has come to outstrip market demand or is threatening to. As J. K. Galbraith showed in his book The Great Crash, this is what happened towards the end of the 1920s; when the gamblers on the stock exchange realised that overproduction was occurring they tried to convert their paper wealth into real wealth and provoked a crash. The slump followed but as a result of the preceding overproduction not of the stock market crash, which at most only exacerbated the economic crisis.

It’s the same today in Asia. The financial crisis there is a reflection of the fact that stock exchange and foreign currency gamblers have realised that the countries of East Asia have expanded their productive capacities beyond market demand. This has been obvious for a few years in the case of Japan where overproduction has led to full-scale recession with lay-offs and factory closures. But Korea, Malaysia, Thailand, Indonesia and the others were in the same situation of potential overproduction since a significant part of their growth had been in the same industries which Japan had overexpanded: car and other vehicle production, and electronics and computer hardware.

The reason why governments and central bankers in Europe and North America are so worried about the financial crisis in Asia is that their own real economies are in the same state of potential overproduction as the Asian countries and that this could provoke a financial crash in their countries too. The king is naked here as well.

So far they have managed to avoid this though current indications are not good. Even if these countries avoid a full-scale crash this does not mean that they also have to power to avoid an economic slowdown or downturn. Such slowdowns and downturns can occur without a financial crash. Indeed this to an extent is what has already happened. Since the early 1970s the world economy has been in a period of slow growth, punctuated by falls in production from time to time. This is a reflection of the a lower rate of profit and of the unresolved problem of productive capacity having outstripped market demand in key technologically advanced industries such as aerospace, petrochemicals, pharmaceuticals, and computers.

One consequence of this period of slow growth is that significant amounts of profits are not being reinvested in production but, instead, are being held in liquid form and invested in financial assets with the aim of making as large a short-term profit in as short a time as possible. All the multinational corporations and other big companies now have treasury departments engaged in financial speculation of one form or another whether on the stock exchange, the bond market, currency transactions, commodity markets or dodgy hedges such as derivatives. In France in recent years many major companies have even set up or taken over banks for just this purpose.

This extra demand for financial assets, deriving from non-reinvested profits, has driven up their price, so creating the anomalous situation of a stock exchange boom in what is essentially a depressed economy. Nothing could illustrate more clearly how divorced is the world of finance from the world of reality. Most of the financial transactions that take place on the world scale today are not investments of productive capital—are not used to set up factories or to buy machinery, equipment or raw materials—but are to buy and sell shares or bonds or foreign currencies or commodity futures or property or failing companies to asset strip them.

Such purely financial transactions are utterly unproductive, even from a capitalist point of view. Not only do they not result in the production of a single extra item of wealth but they don’t even increase the amount of surplus value available for sharing amongst the various sections of the capitalist class. It’s a zero-sum game. As socialists have always maintained, stock exchanges are places where capitalists gamble and try to cheat each other with a view to acquiring as large a mass as possible of the surplus value that has already been produced by and robbed from the workforce.

Rising share prices—and despite dramatic falls from time to time, there has been a steady long-term rise in the share price indexes of most stock exchanges—do not represent an increase in real wealth. They merely amount to a rise in the book value of the real wealth-the productive capital of the companies in question-that shares are supposed to represent. It’s a rise in paper values not real value. When a share goes up in price this means that you can get more for it if you sell it. If you don’t sell your shares all it means is that their book value has gone up, but if everybody or even large numbers tried to realise this book value by selling their shares, the real situation would soon reassert itself. The price would fall, bringing down the book value of the corresponding productive capital to its real value.

Is the Big One coming?

Even some supporters of capitalism, among them the arch-speculator George Soros himself, have begun to express concern about where the parasitic and volatile nature of global finance capital may lead the world. At a congressional hearing in Washington on 15 September Soros even spoke of the danger of the “disintegration of the global capitalist system”. We have always been cautious in predicting a 1930s-scale slump, but if even supporters of capitalism are discussing this as a serious possibility who are we to insist that they’re wrong?

One thing is certain, though. Until the problem—for capitalism—of excess productive capacity and potential overproduction in relation to market possibilities is resolved, there can be no return to any period of rapid economic growth as in the post-war boom when growth rates were twice the maximum that has obtained in any of the already industrialised countries since the early 1970s. But the only way this problem can be resolved is by a bigger slump than we have yet seen since the war in which the system would be purged of its excess productive capacity and overvalued capital.

If this does not happen, then global capitalism will continue in its present state of slow growth against a background of high unemployment and declining welfare provisions, staggering on from financial crisis to financial crisis and from mini-boom to mini-slump. Can this really be the end of history?

Adam Buick

Letter: Psychology and Socialism (1960)

Letter to the Editors from the April 1960 issue of the Socialist Standard

Psychology and Socialism

I have read E.W.’s review of Professor Galbraith’s book in the Socialist Standard for December, 1959, with pleasure. But I want to take issue with the central argument underlying the review. E.W. writes: “What is wrong, according to Professor Galbraith, is not the social system but the system of ideas. . . . In that case, phrenology or psychology would appear to be more relevant to the studies of the problem of our times than economics." To lump together phrenology and psychology is tantamount to combining astrology with astronomy, and unworthy of a scientific Marxian. Moreover, such an argument may induce serious readers to reject the legitimate claims which can be made for a truly Socialist society.

I believe the contributions which psychology has to make in the fight for Socialism have not been sufficiently explored. If it is true that the main ills of the world spring from the economic system, this system has not developed independently of human minds. Nowhere outside the human mind can the decision be made that the system shall be changed. The ultimate justification for a Socialist society is not economic but rests on concepts which come within the province of psychology human dignity is the concept that springs to mind first. Scientific psychology has something to tell us about comfort, about equality, and about freedom; these are the three ends stressed at the end of the declaration of principles of the SPGB (These were also the ends upheld by the French revolution, before Marx, except that comfort has now been substituted for fraternity!)

Economists who work on behalf of capitalism have not been slow to utilize the fruits of psychology, usually to evil ends (“subliminal” advertising, “motivational" research into impulse-spending, etc.). Let Socialists also face the facts about the “sales resistance” they encounter when trying to educate people in their legitimate rights and interests, and let us study the problem scientifically.

M. G.

Edinburgh.

Reply

We agree that phrenology and psychology should not be confused: the former seems to contain a larger amount of quackery than the latter. E.W.'s review mentioned them in the same sentence only to show the absurdity of Professor Galbraith’s viewpoint that defects in our system of ideas, rather than in our economic system, are responsible for social problems.

It is true that man’s economic system has not developed independently of his ideas, or without men themselves working on it, through their ideas and actions. But these ideas and actions are themselves largely limited by the physical surroundings in which man finds himself and cannot operate outside those surroundings. Man's physical and economic conditions are, at any one time, developed from earlier conditions and his knowledge, built from earlier knowledge, is derived from those conditions. Thus, although the decision to change society into Socialism can only be made in human minds, that decision will not occur to the minds until the economic and social contradictions of capitalism have accumulated the evidence which makes that decision desirable. When that happens, men's conceptions of dignity, freedom and comfort will be different to those which are generally held today—and the material conditions of capitalism, not any brilliant, abstract ideas, will be responsible for the change.

The raw material with which Socialists must work is the social consciousness of men. But this consciousness can only be understood by reference to society’s economic organisation. The effects of this organisation also limit the success of the advertising men (psychological approach and all), for the most skilful advertising can do little to save an industry which becomes caught in a slump. Similarly, what M.G. calls “sales resistance” to Socialism is in fact working class acceptance of their material state under capitalism. To change this, Socialists employ all the persuasiveness they can muster. But our propaganda would fall without the supporting evidence which the material conditions of capitalism —its wars, poverty, insecurity — are constantly providing.

Editorial Committee.

We invite our readers to send letters of comment and criticism. Please keep your letters as short as possible.

Voice From The Back: Dying for work (2004)

The Voice From The Back column from the August 2004 issue of the Socialist Standard

Dying for work 

After the death of ex-president Reagan it was reported that he had once said “They say that hard work never killed anyone, but why take the chance.” Figures from the PSA Journal (June 2004) show that this no joking matter. This journal of the Public Service  Association of New Zealand trade union quotes International Labour Organisation statistics on the subject. “The ILO estimates the number of deaths of workers worldwide, through health and safety causes, to be two million per year. Those figures on a daily basis are that around 6,000 workers are dying from employment based disease and accidents, more than are caused through wars. This is the equivalent of one worker dying every 15 seconds from employment related causes.”

Contrasts (1)

Nothing illustrates the madness of capitalism more graphically than the lot of poorer paid workers and the conspicuous consumption of the owning class. A particularly glaring example of this appeared in two different articles in the Times (25 June) “A fifth of parents on low incomes do not have enough money to feed their children healthily, research claims. The report published today by the children’s charity NCH, warns the government that any attempt to improve the nation’s diet and tackle obesity must consider ways of making healthy food more affordable . . . Half the parents questioned in the survey had gone hungry themselves to feed their families. A minority had considered doing something illegal to get money for food.” Contrast that with a report about some parasites in a St Tropez club. “And if you can get in, you can probably afford a methuselah (the equivalent of 8 bottles) of champagne – the Cristal Roederer goes for a cool £16,500 a pop. When P. Diddy showed up in 2002, the Sultan of Brunei sent five methuselahs to his table. That same summer, two Pakistani brothers set the record by spending £260,000 at the Caves in one night. When a glass of water costs £16, it’s not that difficult to see how it could happen.” In Africa and Asia many children die from the lack of clean water. Why are you not a socialist?

Contrasts (2)

“A black doberman-labrador cross, who travels in a stretch limo and has his own share portfolio, has been named one of Britain’s most pampered pets. Jasper, who lives with Sir Benjamin Slade at Maunsell House near Bridgewater, Somerset, dines on medium rare sirloin steak, Dover Sole and freshwater mussels. “He doesn’t like shooting and is not very sporty” said Sir Benjamin, “but he is big on the social side.” In 1988 the dog was the centre of a custody battle between former girlfriend Fiona Aitken. Thanks to a legacy from a former owner, Jasper was able to pay his own legal fees” Sunday Times (27 June). “Many hotel workers are among the lowest paid in the country – a chambermaid on £4.50 an hour for example, would have to work for four months to make what most of these hotels spend a week on their flower arrangements. When people talk about exploitation in the tourist industry they always assume it’s happening in some far-off developing country” Observer (4 July).

An indictment of capitalism

It is not just Socialists who see through the glitter of capitalism to its rotten core. Here is J. K. Galbraith the economist in his latest book The Economics of Innocent Fraud: Truth for Our Time exposing the destructive nature of the profit system. “The US and Britain are in the bitter aftermath of war in Iraq. We are accepting programmed death for the young and random slaughter for men and women of all ages. So it was in the first and second world wars, and is still so in Iraq. Civilised life, as it is called, is a great white tower celebrating human achievements, but at the top there is permanently a large black cloud. Human progress dominated by unimaginable cruelty and death” Guardian (15 July).

The failure of reform

“The number of homeless families in Britain is set to hit 100,000 for the first time, more than double the figure when Labour came to power . . . According to the homeless charity Shelter the number of families in temporary accommodation, the standard definition of homelessness, will hit 100,000 before the end of the year. The figure compares with 41,250 families who were registered homeless in March 1997, shortly before Labour took office” Observer (18 July).

Sting in the Tail: Tory morality (1994)

The Sting in the Tail column from the March 1994 issue of the Socialist Standard

Tory morality

You would think that any political party which has had so many of its leading lights’ extra-marital activities exposed in the media would think twice about presenting themselves as the guardians of the nation’s morals.

But not the Tories. Having blamed the one-parent family and especially the absent fathers for the decline in "family values", they had to gaze in horror as one more government minister, Tim Yeo, is exposed for his part in creating yet another one-parent family. Yeo’s brazen defence was that his case was different because he is paying towards the child’s upkeep!

So its OK to contribute to this so- called decline in family values so long as you pay for the privilege, and when it comes down to it, money is always what Tory morality, philosophy, and all the rest of that guff, is all about.

Common practice

We’ve heard plenty about gerrymandering in the past in Ulster and more recently in Westminster, but it’s been happening in Scotland too. This piece by "Backbencher" appeared in the Glaswegian (27 January):

GERRYMANDERING IS NOT JUST A
 TORY PLOY

Labour were quick to call it "gerrymandering". But their councillors, up and down the land, appear rather restrained in condemning the peculiar council house sales policy of Westminster City Council.

Not surprising. After all, in the post-war years, Labour activists quickly figured out their own vote-creation formula.

They built new council houses in their 'marginal" wards to strengthen the political control.

Indeed, this explains why some pockets of new homes were created not where Glasgow families actually wanted to live.

But where ambitious local politicians needed extra votes.

Little earners

The Tories’ latest desperate attempt to explain their failure to run British capitalism smoothly has been to blame the parents for almost all of society’s ills. Increased crime? Drug abuse? Poor educational standards? All down to the lack of parental control!

But this pathetic excuse is not exclusive to the British government. BBC’s Newsround Extra (14 January) told how children in Colombia, some only ten years old, are working down coal mines in horrendous conditions. There are shafts with wooden pit-props which frequently collapse, dust-laden air, and access so restricted that even a child can barely squeeze through. Indeed, this was one of the reasons mine-owners gave for employing the children.

A local official justified the government's inaction by claiming that the children did a Lord Lucan whenever rare inspections were made, and added that the blame for this child-labour lay with — guess who? — the parents for allowing their children to go down the mines.

These children, they earn about £10 weekly, are often their families’ sole source of income and, come to think of it, could be held up by the Tories as a shining example to British children.

He’s a scream

That comical Keynesian, Professor J.K. Galbraith, has been wowing his British audiences once again. In his Cardiff gig he was supposedly setting-out conditions for what he called "the good society" (Guardian, 26 January) but this was just a front for his usual laugh-a-minute routine.

And what a routine! The good society, he gagged, would put an end to poverty, unemployment, bad health and poor housing. Then he joked that there would be a "more equitable distribution of income" while "positive government intervention" could end recessions. Hilarious stuff!

For a finale he slayed ’em with "I want to see demilitarisation" plus "an effective curb on the arms trade", and all of this to be achieved within (wait for it) the capitalist system. Stoppit, Prof, you’re killing us!

So maybe it is the same old material, but the Prof knows exactly what his audience wants to hear, and on this form his Vegas debut can’t be far away.

Sheer murder

Anyone who thinks that socialists use over-emotive language in claiming that capitalism murders workers, might like to consider a report which appeared on Scottish Television News (18 January) revealing how the asbestos industry was responsible for the deaths of many workers employed in shipbuilding on Clydeside by deliberately suppressing information about the deadly effect of its product.

According to the report this information became available fifty years ago when experiments carried out in laboratories in America showed how white mice were exposed to asbestos dust with terrifying results. 81.8 percent of mice inhaling long-fibre asbestos develop lung cancer, a figure sixteen times that of other dusts.

Because the consequences of inhaling asbestos dust don’t appear for perhaps twenty years, the industry was able to protest its innocence for a generation. Not only do dead men tell no tales, but even better from the insurers’ point of view, they make no claims for compensation either.

Learning to hate

Did you watch the movie of South Pacific on 9 January? In among all the big hit songs was this little gem:

You’ve got to be taught to hate and fear
you’ve got to be taught from year to year
it's got to be drummed in your dear little ear
you’ve got to be carefully taught 

You’ve got to be taught to be afraid
of people whose eyes are oddly made
and people whose skin is a different shade
you've got to be carefully taught 

You’ve got to be taught before it’s too late
before you are six or seven or eight
to hate all the people your relatives hate
you’ve got to be carefully taught

This song probably explains how racist ideas are learned and not inborn more clearly than all of the speeches and writings on the subject ever could.

Booking his place

This is what Patrick Minford, Professor of Economics at Liverpool University, had to say on Channel Four’s High Interest: Loadsamoney on 16 January:

  "There’s no doubt that in the last decade and a half when we have liberalised this economy and pushed it more towards the free market end of the capitalist system, the distribution of wealth and income has become much more unequal and of course that’s exactly what one "would hope would happen because the whole point of the capitalist economy is that it should throw up enormous inequalities in order to motivate effort and entrepreneurship. It’s now extremely respectable to he a successful entrepreneur. You get invited to the best dinner parties and people pay you the respect that you are due, and that is the visible change in our culture which I think is a tremendously good thing."

If that doesn’t earn this lickspittle his own invitation to "the best dinner parties" then nothing will.

J. K. Galbraith: a radical Keynesian (2006)

From the June 2006 issue of the Socialist Standard

An economist who remained loyal to the end to the discredited view that government intervention can make capitalism work in the interest of the majority.

John Kenneth (‘J.K.’) Galbraith, who has died at the age of 97, was probably – after John Maynard Keynes and Milton Friedman – the most famous economist of the twentieth century. For decades he argued against the dominance of the free market economy in favour of a reformed and humanised capitalism which could be made more equitable and tolerable by government intervention.

A Canadian by birth, he became part of a group of Keynesian supporters at Harvard University in the US that included Paul Samuelson and James Tobin. Galbraith’s career at Harvard led him to become Professor of Economics and something of a radical disciple of the Keynesian belief that poverty and inequality in capitalism – and the related phenomenon of the boom and slump trade cycle – could be reformed away by well-informed and -intentioned governments. From the 1950s onwards he was to write a number of books, all penned in a popular and readable style, which challenged popular misconceptions about society and the economy. In particular, his books The Great Crash: 1929 (1955), The Affluent Society (1958), The New Industrial State (1967), Economics and the Public Purpose (1974) and The Nature of Mass Poverty (1979) established him as a leading commentator on developments within the capitalist economy and a critic of many prevailing orthodoxies.

Galbraith liked to see himself as a rebel and an outsider, which was true up to a point. For a short time in the early 1960s, though, he served as the US Ambassador to India under John F. Kennedy, and was later an advisor to L.B.Johnson and other Western politicians (including, in a critical and somewhat ad hoc capacity, current UK Chancellor Gordon Brown). His pre-occupations were with aspects of the capitalist system that critical thinkers found most dysfunctional: its tendency to promote economic growth (in terms of capital accumulation) at all costs; its inability to address profound issues of wealth inequality; and the tendency for the concentration of capital and the growth of monopoly, in particular, to undermine the more idealistic free market notions of ‘consumer sovereignty’ within capitalism.

Crises and slumps

Arguably Galbraith’s finest work was his historical account – and critique – of the Wall Street Crash of 1929 and the subsequent prolonged trade depression. In many respects, his work serves as a warning to those who feel that capitalism naturally tends towards an equilibrium state of rising productivity and steady growth. What Galbraith detailed was the circumstances in which arguably the greatest trade depression the world has ever known came to develop and cause such widespread misery.

Although Galbraith over-emphasised the actions of the US government and the Federal Reserve banks, his underlying assessment of the crash was a sound one. He argued that it was caused in large part by the market-driven over-expansion of the producer goods sector of the economy (the sector producing factory machinery, steel, etc for industry) in comparison to the consumer goods sector during the preceding boom years. This had meant in practice that in the competitive drive to accumulate capital, profits were re-invested to expand productive capacity at a disproportionate rate: far more so than was justified given the fall at the time in the share of wages and salaries in National Income. It was this over-expansion of the producer goods sector which led to the production of consumer goods in excess of available market demand and the subsequent downturn in the economy.

Galbraith was affected quite profoundly at an intellectual level by the 1930s slump, as were many others who became attracted to Keynesian economics. Indeed, Galbraith was at the forefront of those who ridiculed the view that, if left to its own devices, the capitalist market economy would naturally tend towards an equilibrium state of steady growth and full employment and that it was somehow government intervention that prevented markets from working properly. Galbraith’s view, which he was to explore in different respects in his published books, was just the opposite.

For Galbraith, the ‘classical’ economists and the so-called monetarists who resurrected some of their views from the 1970s onwards posited an idealised version of the market economy that was as over-simplified as it was driven by a defence of privilege. Galbraith wittily deconstructed many of the economic models on which it rested, highlighting issues such as monopoly, price-fixing, imperfect information and the various possible influences exerted not just by abstract ‘producers’ and ‘consumers’ but by advertisers, suppliers and trade unions too. In the days before corporate scandals such as Enron, he recognised that corporations do not always carry on their activities for the benefit of investors like shareholders, and that the natural growth of large corporations within capitalism sometimes led to practices within organisations which were designed to benefit those who internally controlled them first and foremost.

In many respects, it was in his critique of wider capitalist society that Galbraith was on his strongest ground, recognising imperfections in the system that others willed away. One of his most famous remarks was that “the modern conservative is engaged in one of man’s oldest ever exercises in moral philosophy; that is, the search for a superior moral justification for selfishness”. His withering critique of Arthur Laffer’s theory of how lowering income tax on the rich would increase government revenue, and of the illusory benefits of ‘trickle down economics’ was a prime example. And in arguably his most famous work, The Affluent Society, he took up a critique of the way in which capitalist enterprises try to ensure their expansion by manufacturing artificial ‘wants’ through advertising and other means. While this owed something to an earlier analysis by Thorstein Veblen, it was nevertheless considered subversive and hotly disputed at the time.

Keynesian economics

Whatever insights Galbraith developed into the workings of capitalism and despite his attacks on its most vigorous defenders, he was hampered by two key, related aspects of his approach. First, his unremitting adherence to Keynesian economic theory and second, his inability to be able to countenance anything that went beyond a reform of capitalism.

Galbraith’s view was that where capitalism failed (and he acknowledged that it failed frequently) it was the duty of governments and the ‘public sector’ generally to step in, whether in terms of economic management, regulatory frameworks for corporations, or measures designed to assist the ‘underclass’ of unemployed and unemployables. A consistent thread in all his writings was an overly-optimistic and exaggerated view of the ways in which capitalism can be reformed so as take power and wealth away from the rich and give it to the poor. His views on this had been influenced by his experiences as an economist and civil servant in the wartime Roosevelt administration. Then he had been put in charge of price controls in a period where, due to the central direction needed because of the war effort, the US was the nearest it has ever come to having a ‘command’ style economy. As unemployment and inflation were both low at the time, Galbraith saw this as confirmation of the powers Keynesian ‘demand management’ techniques possessed in dealing with the inefficiency and inequality of unfettered capitalism.

When the economy returned to ‘normal’ in the decades after the war, the supposed benefits of the Keynesian approach soon proved elusive, not just in the US but in other countries too where his advice was sought. And even when the radical Keynesian approach was given explicit government backing and was implemented with some enthusiasm (on the grounds that the patient hadn’t previously been receiving a high enough dosage of the medicine), the results were not encouraging. This was the case across much of Western Europe as well as the US, where prices began to rise alongside increased unemployment.

One of the most notable examples of radical Keynesian failure was in the UK, where in the first two to three years of the Labour government of 1974-9, state regulatory measures generally were increased, a prices and incomes policy was instituted, state borrowing rose to pay for increased government capital expenditure, and the tax system was restructured to disproportionally hit those on the highest incomes. But the result was a near doubling of unemployment and annual price rises at nearly 27 per cent (the latter mainly caused by an over-issue of paper currency not convertible into gold, which became the ubiquitous outcome of the type of lax monetary policy favoured by radical Keynesians).

In this respect, Galbraith is likely to be remembered as an economist who was far more adept at criticising the indefensible than he was at promoting a workable alternative to it. Indeed, it was precisely the failure of his type of Keynesian approach which heralded the return from the 1970s onwards of the free market economic orthodoxy he detested, championed by his sparring partners like Milton Friedman.

Missed opportunity

Unfortunately, the political economist who had a rounded explanation of why the free market does not work, and whose theories indicated why reform of capitalism in the guise of Keynesian economics would be no more successful, was not someone Galbraith was ever attracted towards or studied really seriously: Karl Marx. While Galbraith was capable of making pithy and apposite comments about the Soviet Union – “under capitalism, man exploits man. Under communism, it’s just the opposite” – he never seemed to get too far past the popular prejudice against Marx existing in much of US academia. That so-called ‘Russian communism’ was in reality an extensive and dictatorial form of the type of planned state-run capitalism that he otherwise had a penchant for, in particular seemed to escape him.

In the rather lazy fashion of other American academics he was wont to attribute to Marx views which were distorted interpretations of his theories, such as that capitalism would somehow collapse because of the long-run tendency of the rate of profit to fall, or that the working class in capitalism was condemned to endure conditions of ever increasing misery. This was a shame, because although capitalism is so complex and anarchic that no one individual can attain a perfect insight into it, Marx came a lot nearer than most. The great body of his work still stands the test of time, and far more so than that of either the apologists for the free market or Keynesian interventionists like Galbraith himself.

While Galbraith thought that certain types of capitalism (particularly free-market capitalism) were highly problematic, Marx took a rather different view. This was that it was capitalism itself that was the problem because it was fundamentally based on the pursuit of profit before human needs, was at root anarchic and uncontrollable, and was characterised by class division and an antagonistic system of income distribution that could not be planned or wished away.

It is interesting to look back on the 97 years of Galbraith’s life, and to reflect on the capitalist trade cycle, inflation, the concentration of capital, the nature of commodity production and much more that he addressed. Marx provided a framework that could successfully account for these phenomena while at the same time demonstrating why capitalism can never be reformed so as to run in the interests of the vast majority of its inhabitants. These were insights that Galbraith flirted with but no more, and this was to the detriment of his otherwise urbane and pithy analysis, and most certainly to the detriment of those who lived under the governments he advised.

Dave Perrin

The Affluent Society (1959)

From the March 1959 issue of the Socialist Standard

Part 1

Professor Galbraith, the author of The Affluent Society, is an urbane and incisive commentator of contemporary Capitalism, especially its American version. As an iconoclast he is in the Veblen tradition. We shall, however, leave for a subsequent article, his views in general and only concern ourselves, here, with his comments on Marx in particular.

Marx (long dead) still wears a contemporary larger-than-life look—Professor Galbraith warily measures him up before seeking to cut him down to size. Marx, he notes, was a powerful and subtle thinker, a great deviationist from the stock ideas and sentiments of his age— called by the author “the conventional wisdom.” His influence, he thinks, both direct and indirect, has been enormous.

Marxism dead but won’t lie down

But, says the author, it is not only Marx who is dead, the main body of his doctrine has also atrophied, having presumably no further useful function to perform. It would appear from Professor Galbraith’s interpretation that Marxists have long resorted to artificial respiration in the belief that the body still breathes. Marxism, the author holds, has exhausted its impetus and originality and hardened into a dogma. It is now an article of faith which has acquired a religious quality. That is why for Marxists their opponents are not only in error but in sin. That is why, says Professor Galbraith, you cannot discuss Marxism with Marxists, at least not rationally. Marxists, he says, will always assure their opponents that whatever their criticism of Marx they have failed to understand him. One can at least reply to Professor Galbraith by saying that the history of anti-Marxist argument goes some way to confirm the accusation. For our part we, as Marxists, are eccentric enough to welcome any rational discussion on Marxism with anybody and everybody.

Who are the Marxists?

Professor Galbraith’s description of Marxists as those who assume the role of hard-headed realists, facing the unlovely prospect of ever-greater immiseration (poverty) of the workers, ever-greater slumps, leading to final economic collapse and bloody revolution is certainly concise, clear cut—and wrong. To fasten on Marx such catastrophic views shows how catastrophically Professor Galbraith himself has misunderstood Marx, and regretfully he must be included among the legions who simply cannot discriminate between the “Marxism” of Moscow and the Marxism of Marx.

That the Bolsheviks and latter-day Communists never made Marxism the basis of their activities and yet made it their official creed, is sheer historical irony. Yet the paradox loses its enigmatical character if we know what precisely the role that theory had for them. Theory was not something acceptable, because it provides a systematic and logical picture of social events, theory for them was an ideological instrument, pressed into the services of political strategy and struggles. In this sense and only in this sense are we to understand the cardinal Communist dictum: “Theory must be a guide to practice.”

There were, however, good Bolshevik reasons for claiming Marxist paternity for their views. Unable or unwilling to father a theory of their own, they took over an established and ready-made doctrine which not only gave a semblance of authority to their views, but an ideological basis to which shifts and changes in policy could be ultimately referred and, of course, justified.

And so the dialectic which made all things possible, turned Marxism into its opposite. From a method of free scientific enquiry it was transformed into an authoritative dogma unsurpassed even by the Holy Catholic Church. Its high priests dispensed official Marxist decrees with encyclical infallibility. It was the greatest “negation of the negation” of all time. In Communist hands Historical Materialism became Dialectical Materialism, and Marxist economic doctrines were taken apart and reassembled for the construction of the “Communist model.”

As formulated by Marx, “the law of the tendency of the falling rate of profit,” which he said was a tendency annulled by counter tendencies was converted by the Communists from a tendency to an iron law which had the terrifying and remorseless character of the law of gravitation. Given this iron law of the falling rate of profit, there would go a continuous and progressive decline in the fields of capital investment. This decline in turn would produce slumps of an ever more massive order, more massive unemployment and a greater mass of poverty for the workers. Out of this economic chaos the Proletarian Dictatorship would emerge and give rise to Communist “law and order.”

This was Communist theory, but never Marxist fact.

Marxism and the Intellectuals

Communist theory was then nicely attuned to Communist propaganda whose source of inspiration and direction was Russia. Communist Parties all over the world attempted to follow the Leninist pattern, viz., creation of a mass organization, conditional collaboration with Social Democratic parties, etc. It sought to undermine Western Capitalism by fermenting and organising mass discontent. It inspired its adherents with a belief in the inevitable break-down of Capitalism and inculcated the feeling of a tough realism which not only required that Communism must by all means expedite the decline of Capitalism, but be the organised force to take over power from the bourgeois or left parties.

This was the essence of the Communist ideology, an ideology which created many Communists among its victims. With its insistence on an intellectual elite it sought and at least to some extent succeeded in making an impact on some sections of the intelligentsia. For intellectuals in the twenties and thirties who were in despair, Communism gave them hope. For many in doubt it provided invincible certainty. To the tougher minded the Communists dared them to walk the plank of Communist realism. Many did, although they walked back afterwards.

And so Moscow Marxism provided many of the angry young men of the thirties with an escape route via Russia. In their angry youth they violently proclaimed it. In their mild middle they violently repudiated it.

Enter Mr. Strachey

It is not surprising that when Professor Galbraith, who takes these once angry young men seriously, turns his eyes from East to West, he discovers that angry young man of old, Mr. Strachey, as the most articulate Marxist of the thirties. Mr. Strachey certainly had a flair for writing a lot about which he knew little. No doubt the Communist intelligentsia had groomed him for “Marxist” stardom. Like many other stars groomed by Communists, Mr. Strachey severed his contacts and transferred his talents to rival producers. His Theory of Capitalist Crises merely repeats the Communist economic errors on an expanded scale.

No doubt Moscow Marxism and people like Mr. Strachey provide a barn door of such dimensions that nobody would miss even at a distance. That is why perhaps so many pundits are indulging this pedestrian pastime. One hoped that Professor Galbraith was made of sterner stuff. It is so easy to set up skittles like a Marxist theory of absolute poverty. Of workers living for the most part on the margin of destitution. A Marxist stark under-consumption theory of ever increasing wealth and ever increasing poverty. Of a Marxist “law of the falling rate of profit” where the system comes to a sudden end like an engine with not enough steam pressure behind the piston. It is easy to scatter that lot and walk jauntily into the next chapter.

But we are ready to yell after him, hi, professor, in the hope he hears us, Marx never formulated such propositions. In actual fact not only did he say different things to what Professor Galbraith thinks he said, but even in some respects the opposite.

In the next article we shall discuss rationally and in detail not the errors of Marx but the errors of Professor Galbraith in respect of Marx.

Ted Wilmott

(To be continued)

Link to Part Two.

Marx and Under-Consumption (1959)

From the April 1959 issue of the Socialist Standard

Link to Part 1.

The Affluent Society -  Part 2

A Reply to Professor Galbraith

It often happens that when people look for a criticism of Marx, not being sure where to look, they look in the wrong places. Professor Galbraith, for instance, looked to Moscow, to Mr. Strachey and even to Mrs. Joan Robinson.

Poverty, Crises and Catastrophe

He gathered from some of these sources that Marx had formulated an absolute law of poverty and that the system’s chief defect was acute and chronic under-consumption. Along with the ever greater ability to turn out wealth the workers’ living standards would decline, capitalism would choke under the weight of its unsold commodities and collapse. As if “all this—and purgatory, too,” was not enough. Professor Galbraith adds another alleged Marxian theory of crises, of a continuous fall in the rate of profit and hence capital investment, with slumps of ever greater magnitude and final breakdown. Which one Marx was really supposed to hold we are not informed. Our view is that he held neither. However, let our motto be one crisis one article, and it is the under-consumptionist variety which will be its subject.

Marx not an under-consumptionist

In view of all that has been said of Marx as an “under-consumptionist” theorist, the only statement which has any bearing on the matter is in Vol. 3 of Capital, where he says,

“The last cause of all real crises, always remains the poverty and unrestricted consumption of the masses as compared with the impulse of capitalist production to develop the productive forces as if only the absolute powers of consumption of society were their limit.”

This statement is merely an interpolation by Marx when he is discussing at length the view that shortage of capital is a cause of crises. This statement seems out of context with the passage, but even so, it is obvious that Marx was drawing attention to the contradiction between the tendency of capital to expand in an absolute way the powers of production, and the limits imposed upon it by the antagonistic income distribution inherent in capitalist society. This has nothing to do with under-consumption theories as understood, but implies the conflict between productive powers and productive relations.

To put it simply, capital accumulation logically leads to a demand for labour power and hence to a rise in real wages. It is true that wages are part of the consumption fund of capitalist society and an increase in real wages means increased consumption for workers. But wages are also the purchase price of labour-power and if as a consequence of increased capital investment, wages rise, this means for capitalists an increase in costs and a lowering of the rate of profit. Should wage earnings reach a level which threatens the customary rate of profit yield, then capital investment may sharply recoil.

It is the essence of this society that wage advances can never wholly absorb capitalist profits. The ceiling of wages and hence consumption cannot extend beyond the point where additional wage advances annul profit returns on capital outlay. Even an approximation to such a state of affairs will suffice to induce a downward trend in capital accumulation. The impulse then of capitalist production to expand the forces of production in such a way that only the entire satisfaction of social needs is its ultimate limit is inhibited and finally checked by the antagonistic class income distribution of capitalist society—wages and profits. The forces of production come into conflict with the social relations of production.

The fact that extant society is not one of conscious motivation, directed towards social ends, but of profit motivation, places grave restrictions on its productive powers and hence consuming powers. As Marx points out : —

  ". . .  It is not a fact that too much wealth is produced. But it is true that there is a periodical over- production of wealth in its capitalistic and self-contradictory form. . . . The capitalist mode of production for this reason meets with barriers at a certain scale of production which would be inadequate under different conditions. It comes to a standstill at a point determined by the production and realisation of profit, not by the satisfaction of social needs.” Vol 3 (p. 303).

This is why Marx indicted capitalism as a system of organised scarcity. In this sense and only in this sense can there be a Marxist view of under-consumption.

Marx and Rodbertus

How little Marx had in common with the underconsumption theory of crises which Professor Galbraith thrusts upon him, along with so many others, can be seen by his criticism of the economist Rodbertus, who formulated in essentials the generally accepted under-consumption theory of crises. It holds that crises are the result of a deficit of purchasing power of the mass of people and would be remedied by raising wages. Marx himself emphatically repudiated such a view, thus:—

  “It is purely a tautology to say that crises are caused by the scarcity of solvent consumers or paying consumption. The capitalist mode of production does not know of any other mode of consumption but a paying one, except that of the pauper or of the thief . . . But if one were to clothe this tautology with a semblance of profounder justification by saying that the working class receive too small a portion of their own product and the evil could be remedied by giving them a larger share of it or by raising wages; we should reply that crises are always preceded by a period in which wages rise generally and the working class get a larger share of the annual product intended for consumption. From the advocates of simple common sense such a period should remove a crisis. It seems then that capitalist production comprises certain conditions which are independent of good or bad will and permit the working class to enjoy that relative prosperity only momentarily and, at that, always as a harbinger of a coming crisis.” Vol. 2 (pp. 475/6.)

There is also a footnote to this passage by Engels which says, “advocates of the theory of crises of Rodbertus are requested to make a note of this.”

Is there a defective monetary mechanism?

The under-consumptionist theory of crises always depicts capitalist society as what it is not and cannot be; a system serving the needs of the community. For them crises are not the outcome of capitalist relations of production, but a defect in the monetary mechanism which can be regulated via banks and state action. This comprises the essentials of Keynes’ theory.

Under-consumptionists hold that the cause of crises is due to deficit purchasing power, i.e., the inability to buy back the ever-increasing amount of commodities thrown on the market. But as we have already noted, before the boom breaks, the workers’ purchasing power is at its height. It is not then lack of purchasing power which causes a cut back in investment by capitalists and unsold stocks to appear on the market, but because from the capitalist standpoint wages are too high and profit margins too low. It is this which can give rise to a crisis (a sharp break in price equilibrium) and if big enough brings about depression.

If this happens there will be a falling spiral of wages and profits and unsold stocks will pile up. This is not a cause, but an effect of certain conditions and has nothing to do with a defect in the monetary mechanism or some absolute deficit in purchasing power. What actually takes place is that a number of capitalists—members of the ruling social group—take decisions as to the future trend of capital investment and, of course, production. If they decide not to invest at the existing profit level or cut back, it is because from the capitalist standpoint the existing income distribution is an unsatisfactory one for them. Profit margins are too small and wage bills too big. As has been already stated it is not a question of workers having too little purchasing power (wages), but from the capitalist view too much. But supposing a crisis does break out. It does not follow there is an overall lack of purchasing power. There is plenty of available purchasing power in banks, holdings, reserves, and the pockets of capitalists to buy up surplus stock for needy workers. But capitalists do not choose to spend their money that way.

There are good reasons why they should not redistribute purchasing power this way. As Marx pointed out, the capitalist, if not a miser by nature, is one by necessity. Being realists they know in any depression period they must husband their resources—even seek to increase them, conditions permitting, if they are to successfully ride the next wave boom.

Capitalism knows of only one form of consumption and that is paying consumption, and as we have seen the system operates in such a way as to impose in relation to the ability to produce wealth, a restrictive consumption on the working class. To say this is due to a lack of purchasing power is the merest tautology. Actually capitalist society generates the purchasing power necessary for the realisation in terms of money, of the wealth it produces. For instance, suppose a boom starts in the capital goods industry (it could, of course, start elsewhere), increased production of the means of production will by employing more and more labour-power, generate increased purchasing power among workers which will be transmitted to the industries producing consumption goods. These industries will expand and order further machines and auxiliaries for this purpose and so a continuous process will go on in the generating of purchasing power. Under the stimulus of demand, prices will rise and the purchase price of labour-power will rise also. In fact, generally speaking, labour-power during the later stages of the boom tends to rise faster than other commodities. Increased purchasing power is synchronised with increased production.

What causes a crisis?

Capitalism, however, is based on anarchy of production. Capitalists do not meet beforehand to harmonise production in accordance with social aims and ends. Capitalists for that reason, invest with little regard and knowledge of other capital investments being carried out at the same time. As a result different industries expand at a different rate and disproportionality of production, as Marx calls it, takes place. If then one industry—say the one producing capital goods—over-expands in relation to the industry producing consumption goods, it means they have over estimated demand and if on a big enough scale, the realisation price of their products will be unremunerative. This disproportional development relative to other industries will, however, have cumulative effects. Not only will the industry affected by over-expansion cut back investment, but as a consequence reduce orders to other concerns linked with them. In turn, these other concerns will do likewise and so on from trade to trade. As a result of cancellation of orders and contracts, unsold stocks will pile up. Relative over-production, which started in one industry, then assumes the proportion of general over-production—but, it must be stressed, not absolute over-production.

In such a situation production and employment will fall sharply and so, of course, will purchasing power. To say that if the workers’ wages were higher, all this could have been avoided is to utterly misunderstand the nature of capitalism. In the first place the cut back in investment by the industry that had over expanded its demand was not a question of purchasing power, but profit margins due to unremunerative prices. What is more, workers do not spend their money in the capital goods industry. Again, from the standpoint of the employers in the capital goods industry, wages are too high and a factor in helping to reduce profit margins.

It is not then a question of too much wealth being produced and too little purchasing power to buy it back which brings a crisis, but simply that an over-expansion in one sphere of industry has been big enough to start a downward spiral of investment and profits. Thus there comes into existence a volume of capital investment too great to be consistent with former profit earnings. As Marx points out, “Since production depends on investment [such a situation] constitutes an over production of capital which takes the form of an over production of commodities” (italics ours).

It might be argued that increased taxation of capitalists might be a means of disbursing extra purchasing power among workers in times of a crisis to prevent a slump. Increased taxation at such a time would, however, be most inappropriate and meet with strong resistance from capitalists. Not only would increased taxation deplete capital funds necessary for future expansion, but the purchasing power generated via taxation at one phase of the cycle, will as the result of restricted expansion, not be available at another phase of the cycle (the boom). But this in no way supports some under-consumptionist view of a total deficit of purchasing power being the cause of crises. It merely means a redistribution of purchasing power via a redistribution of income. Neither Keynes nor the Labour Party have made such proposals.

If Marx had believed in a law of absolute poverty based on absolute under-consumption, why he took such pains to analyse the trade cycle of capitalism—Boom— crises—depression, must for ever remain a mystery. For on the premise of absolute under-consumption, it is not a question of how slumps come to start, but how under such conditions a boom can ever begin.

Some Labour economic theorists have claimed to have gone beyond Keynes by advocating a further period of extensive investment just prior to the boom breaking. (Planned Capitalism). It is, however, at the top of the boom that demand for labour-power is greatest and its purchase price highest. To maintain investment at a high level would deplete the existing labour reserves, cause increased competition among employers for labour-power, and so enhance its price. Along with increased labour costs would go the increase of the supply price of the various factors in production and repeat the process of mounting costs and the narrowing of profit margins to the point where the volume of capital investment would yield too small a profit margin at the existing level. Such theorists seem to forget that capitalism is and always must be a profit motivated society. A profitless capitalism is a contradiction in terms.

We have, of course, dealt with much of this in past issues. We believe, however, it might still be of some benefit to readers, even Professor Galbraith, if he should by any chance read it.

Ted Wilmott

Link to Part 3