Tiny Tips (2025)

The Tiny Tips column from the September 2025 issue of the Socialist Standard

The latest Oxfam report which was released at 4th UN Financing for Development meet in Seville, Spain, shows that since 2015 the top 1% people in the world have amassed US$ 33.9 trillion in new wealth which is enough to end annual poverty 22 times over. 

(Scoop Independent News)

In some cases, health professionals perform FGM [Female Genital Mutilation] secretly in exchange for payment, turning the practice into a commercial enterprise, 

(People Daily)

The island is currently facing its worst economic crisis since the 1959 revolution. Long and daily power cuts, scarce internet connection, food and medicine shortages, and high prices are the realities of present-day Cuba. Some staple items like beans are nowhere to be found; rice production has declined and much is now imported. Sugar, too, has become an import in Cuba, which, until recently, was the leading sugar exporter in the world. People cannot make ends meet with their meager incomes — a doctor’s monthly salary is approximately $50. Even by conservative World Bank estimates, 72 percent of all Cubans live below the poverty line. Beggars seem to be everywhere, with the African community descendant from slavery being the most economically victimized. 

(Consortium News)

The entire political and intellectual machinery of the French ruling class is now moving in this direction. That includes the miserable little left, led by the Socialist Party, who bark at us from morning to night. They don’t realize that they’re participating in a broader establishment strategy: acting as the left-wing auxiliary of the right. They live in a dreamworld, wanting France to be like Germany, with a grand coalition of the centre: Social Democrats who are indistinguishable from liberals, Greens who are always clamouring for war. These people are doing the work of dividing us every day while pretending to be for unity.

(Portside)

One recent survey discovered that 70 percent of Americans are the most financially stressed that they have ever been in their entire lives. That figure alone tells us that we have a major economic crisis on our hands. The cost of living has been rising much faster than paychecks have been, and most of the country is just barely scraping by from month to month. Anyone that attempts to deny this is simply not living in reality. 

(Zero Hedge)

Donald Trump styled himself as a populist, ‘anti-establishment’ president. But look at what he has actually done in office, and you see he’s a status-quo politician with nothing to offer working Americans.

(Jacobin)

Will voters finally stop both blaming politicians for their troubles and depending on them to end them? Will voters—and non-voters—transform themselves into people who act for themselves, in their own interests, instead of allowing others to act for them? That would be what social change looks like. The survival of the human race may well depend upon it. 

(The Brooklyn Rail)

(These links are provided for information and don’t necessarily represent our point of view.)

Why are prices always rising? (2023)

Book Review from the November 2023 issue of the Socialist Standard

In The Return of Inflation (just published by Reaktion Books) Paul Mattick (the son, not the father) gives a potted history (there are only 146 pages of text) of inflation. The word dates from the middle of the 19th century. He cites an American book of 1855 complaining that an ‘inflation of the currency makes prices rise’ and comments ‘here it is the quantity of paper currency that is inflated; later the term settled into its present-day meaning of an increase in prices’. True, but the word still retained its first meaning for a further eighty or so years. The change of meaning from describing a cause to describing its effect doesn’t help, especially as a rise in the general price level can result from other reasons such as supply not being able to keep up with demand in a boom or a fall in the value of the money-commodity (when there was one).

He provides a useful section in which he explains how ‘inflation’ (as it has come to be defined) is measured by a rise in a consumer price index based on the prices of a changing basket of goods and services that consumers typically buy and discusses the limitations of this. In fact, today ‘inflation’ means a rise in some index of consumer prices, but this can come about for other reasons than an over-issue of the currency; from an increase in the price of something that enters into the cost of production of all consumer goods, energy for instance.

At the end of chapter 4, after explaining that, due to increasing productivity, you would expect prices to fall and noting that in the 19th century this did tend to happen and that even in the 1920s and 1930s prices fell during the slump stage of the business cycle, Mattick poses the question of why this has not happened since WW2. On the contrary, the general price level has continuously increased. In Britain prices today are more than 50 times higher than what they were in 1939 and are still rising. It is similar in other countries. Certainly something that needs explaining.

The Quantity Theory of Money

This monetary theory, referred to by Mattick simply as the Quantity Theory, keeps cropping up throughout the book. It says that the general price level is determined by the amount of money in circulation, so that if the amount of money is increased this will lead to a rise in prices. It was originally put forward when ‘money’ meant gold (or silver) and paper notes convertible into it at a fixed rate. Its proponents, known in Britain as the Currency School, based their case on what had happened there when, during the Napoleonic Wars, paper notes were not convertible into gold, and so many of them were issued that prices rose.

They argued that the same thing would happen when convertibility was restored, and framed legislation to restrict the amount of bank notes that could be issued without being backed by gold. They were opposed by the Banking School, whose main proponent, Thomas Tooke, produced evidence, as Mattick notes, that showed that this had not happened after convertibility was restored and could not have happened; if too many notes were issued (if their number was inflated) what would happen would be that gold coins would drop out of circulation and be turned into bullion (demonetised into gold bars) leaving the price level unchanged. In other words, it was the amount of prices to be realised that determined the quantity of money (gold and paper notes together) in circulation, the exact opposite of what the Quantity Theory posited. Marx, Mattick adds, accepted Tooke’s findings and rejected the Quantity Theory. He regarded banking legislation based on it as mistaken, such as the 1844 Bank Act which gave a monopoly in the issue of bank notes to the Bank of England and restricted the amount it could issue to not much more than the amount of gold it had in its vaults.

Inconvertible paper money

By the end of the 1930s in most countries gold coins had ceased to circulate and the currency was composed entirely of bank notes issued by a central bank together with lesser denomination token coins. This situation, where the currency was just inconvertible paper notes, was discussed by Marx who accepted that in this circumstance the Quantity Theory could apply: if more such notes were issued than the prices to be realised of goods and services in the economy required, the result would be a depreciation of the underlying value of the notes and a consequent rise in the general price level, i.e £1 would buy less than it did. Mattick mentions this but only in passing, even though it must clearly be of some relevance in any explanation of the continuous rise in the general price level since 1939.

An inconvertible paper currency in itself does not have to lead to a rise in the general price level but does place the onus of getting right the amount to issue on those responsible for issuing the notes. If they get it broadly right there won’t be a persistent rise in prices. But the temptation is always there to use their position to issue money to fund government spending, or to passively make it available to commercial banks in a way that still leads to an excess issue.

Keynesianism fails

Another change in usage that has occurred since the 19th century, but which Mattick does not mention, is a change in the meaning of ‘money’. Since the 1930s it has commonly been extended to include commercial bank loans.

Keynes went along with this and taught that controlling the amount of the currency (which only the state can do) was relatively unimportant and that the monetary authority could safely make available what was needed including by the government. He argued that the way out of a slump was government intervention to encourage spending, as by transferring money from the rich to the rest and by the government itself spending on infrastructure projects (or even digging holes in the ground and filling them up again). This appeared to work for nearly three decades after WW2 in the sense that no big slump occurred even if a rise in the general price level did. However, put to the test when the post-war boom came to an end in the mid 70s, Keynesianism led to ‘stagflation’; prices continued to rise despite slump conditions whereas before the war they would have fallen due to declines in production and trade.

As in his previous writings Mattick is good on why Keynesianism was mistaken:

‘From the Keynesian point of view, government spending is just an expansion of demand, or an additional investment in future production (…) Once we remember that the goal of capitalist production is the earning of a return on investment, however, things look different (…) Capital is not produced but consumed by governments; state spending does not solve the problem of insufficient profitability. It is an expense of the capitalist economy’ (p.110).

Monetarism too

Following the failure of Keynesianism in the 1970s, the monetary authorities heeded instead the theories of ‘Monetarism’ as propounded by Milton Friedman. This was an attempt to revive the Quantity Theory of Money but since in the meantime the definition of ‘money’ had typically expanded to include bank loans it was, rather, more a Quantity Theory of Bank Loans: that bank loans play a key role in determining the price level. (Already in the 1920s this had been dubbed the ‘Bank Deposit Theory of Prices’ by the Classical economist Edwin Cannan). This was clearly a different theory to the classical formulation but its application in the 1980s arguably did bring the rate of rising prices down even if inflation continued, though it certainly didn’t end the slump; in fact unemployment rose to record post-war levels. As Mattick notes, ‘the money supply turned out to be difficult to control, swelling and shrinking in response to the needs of businessmen and bankers’ (p.67).

The objections to the original Quantity Theory of convertible paper currency were seen to apply to Friedman’s quantity theory of bank loans. Bank lending depends on the state of the economy. It goes up in a boom and down in a slump. Neither the state of the economy nor the level of prices is intrinsically controlled by the level of bank lending. It’s effectively the other way around. Governments have tried and are still trying to control bank lending by varying short-term rates of interest (the government can’t control long-term rates); after the crash of 2008 keeping them low in an unsuccessful bid to encourage expansion and, currently, increasing them in the hope that this will reduce the rate at which prices are rising,

Inflation or recession

Mattick’s explanation of the continuous rise in the general price level since 1940 is that ‘inflation ha taken the place of recession’ (p. 123), that ‘all this extra money has provided an alternative to the deflationary depressions of the past’ (p. 120). He is not the only student of Marxian economics to take this position. His argument is that in a slump the price level would normally fall because of reduced overall demand for goods and services (as it did up to the end of the 1930s) but that governments’ monetary policy has prevented this, in his view initially to avoid a workers’ revolt and, later, to keep them happy with jobs, pensions and other payments.

He says the extra cost of providing education, health services, unemployment and sick pay — all needed to maintain a trained and fit profit-producing workforce— will have had something do with the continuous post-war rising prices because governments chose to partly finance this by issuing more money. This is sometimes called ‘printing’ more money but the process is not so simple as that, as Mattick explains in regard to what happens in the US (it’s essentially the same in other countries):

‘The Federal Reserve puts money into the economic system when it purchases treasury bonds (and other securities) in what is called “open market” operations (it withdraws money from the system by selling Treasuries). It pays for them with Federal Reserve notes — “liabilities” in accounting talk, IOUs against Federal securities which can always be sold. It is these notes — government debt — that circulate throughout the economy’ (p. 66).

Central bank notes are a part of the government’s debt but only a very small part of it. Although the initiative to create new money comes from the central bank the whole banking system is involved. This gives rise to the illusion that it is the commercial banks that create new money whereas in fact they are only circulating what the central bank created. Unfortunately, Mattick seems to accept that commercial banks can create new money. He writes, for instance, of what a bank can do when an amount of money is deposited with it:

‘The money can be loaned as a note — another form of IOU — or in the form of a new deposit, in the borrower’s name, in the loaning bank; thus the original money lent to the bank can appear in two or more different deposits, each of which can be used to make payments by banknote. In this way … banks can enlarge the supply of money’ (pp.22-3).

But this can’t be. If $1,000 is deposited in a bank, the bank can lend most of this, say $900, in the form of a bank account which the borrower can draw on. There will be now be two bank deposits, one of $1,000 and the other of $900, totalling $1,900, but one is an asset (the initial deposit) and the other a liability (a loan to the borrower). It should be clear that no more than the initial amount of $1,000 can be spent. If together the amount withdrawn by both deposit holders comes to more than this, the bank wouldn’t be able to honour the excess. Banking is in fact based on the fact that the initial depositor is not going to withdraw more than $100. What banks do is increase spending by lending already existing money that might otherwise lie idle – in essence, commercial banks circulate money but don’t invent it out of nothing.

Despite this error, Mattick provides a good description of how capitalism works:

‘The goal of production in this mode of social organization is not actually “growth” — the enlarged production of consumable goods — but enterprises’ competitive accumulation of control over social resources in the form of money: capital accumulation’ (p.145).

He points out that taxation is not ultimately a burden on the workforce:

‘Wages are also taxed, but if we think of wages as the amount of national income that the class of wage-earners accept in return for their work, it is clear that the amount taken as tax could just as well have been retained by their employers’ (pp 89-90).

Mattick is neither a professional nor an academic economist; which is probably why his book is written in simple English and easy to follow, though the last chapter in which he argues that capitalism has become ‘a sort of Ponzi scheme’ differs in this respect from the rest. All in all, though, with some minor caveats it can be recommended for those seeking to learn more about ‘inflation’.

Adam Buick

Cooking the Books: Greedflation? (2023)

The Cooking the Books column from the June 2023 issue of the Socialist Standard

‘Lone voice on inflation grows louder’ was the headline in the Times (8 May), ‘A star economist says the key is not to raise interest rates but to target corporate greed’. The star in question is Isabella Weber who, according to the article, has made an ‘important contribution to the study of how companies’ pricing power is forcing up inflation, a phenomenon that has been dubbed “greedflation”’.

The article continues :

‘Weber prefers to use the term “sellers’ inflation” to describe how the shock of a global energy crisis and supply shortages during the pandemic led companies to pass on costs to consumers and make inflation a “generalised” feature of the economy. This in turn led to workers asking for more pay, she says’.

In other words, she is neatly turning the tables on those who blame workers for setting off a ‘wages-prices spiral’ and saying that, on the contrary, it is companies that set off a ‘prices-wages’ spiral by putting up prices to make more profit.

But this is not a new theory. It’s been the standard left-wing theory of inflation since the 1950s, including by some Marxist economists – Paul Mattick Jnr, for instance. This is how he explained the rise in the general price level in the late 1970s:

‘Businesses defended their bottom lines by raising prices; workers fought for higher wages to defend their standard of living, usually more slowly than the price increases to which they were reacting. Prices increased throughout the economy as different business sectors struggled to make others pay the costs of the debt: the dread stimulus-induced inflation’ (tinyurl.com/2a927sd5).

Tempting as it is to blame capitalist businesses for causing a ‘generalised’ rise in prices, businesses are no more able to do this than workers are. Inflation, properly understood as a rise in the general price level, can only be caused by a depreciation of the currency due to too much money being issued. Individual prices can rise for other reasons (as recently due to the global energy price shock and supply chain shortages) but this is not the same as a rise in prices generally. Once monetary inflation has started, the price of what both businesses and workers sell will go up, creating the illusion that one (take your pick) caused the other whereas they are both caused by a third factor.

It is not clear from the article whether Weber is arguing that ‘greedflation’ was the cause of past rising prices or just of what’s happening currently, but the Socialist Standard dealt in October 1972 with the theory that inflation is due to greed. Referring to the abnormal rise in prices since 1939 we said:

‘Most of the so-called explanations take the form of blaming some group or other for being “greedy”; bankers, or manufacturers, or retailers or trade unionists. It is an explanation that a glance at certain facts will show to be nonsense. Did the copper companies reduce their prices by 40 per cent in 1971 because they had suddenly become less greedy? Between 1948 and 1968 prices rose by 100 per cent in Britain, but only by half that amount in America and Switzerland: are the British twice as greedy?’ 

Business can’t increase prices at will to increase profits. Sellers fix their price according to what they judge the market will bear. That’s the limit of their ‘pricing power’. Sometimes they are able to increase their price but they can’t control the conditions that enable them to. Causing ‘inflation’ is a charge to which capitalist corporations can justifiably plead not guilty.

Anti-Bolsheviks (2021)

Book Review from the August 2021 issue of the Socialist Standard

The Council Communist Reader. Radical Reprint, 2021

The articles in this collection – by Paul Mattick Snr, Herman Gorter, Karl Korsch, Otto Rühle and Anton Pannekoek – have long been available elsewhere.

They called themselves Communists as they agreed with Lenin’s break with pre-WW1 Social Democracy when he changed the name of his party in 1918 from RSDLP to Communist Party; some initially joined the Communist Party in their country. They had regarded what happened in Russia in November 1917 as what it purported to be – a workers’ revolution in which workers, organised in soviets (the Russian word for ‘council’), had assumed control of society. Within a few years they realised that this had not been the case but continued to call themselves Council Communists as opposed to Bolshevik-sponsored ‘Party’ or ‘State’ Communists.

Their basic position was that workers should abandon the parliamentary Social Democratic parties and trade unions and organise themselves in work-based councils both to wage the day-to-day class struggle and to overthrow capitalism. They became very anti-party and anti-parliament, which made them similar to Syndicalists except that they situated themselves in the Marxist tradition.

They were what Mattick Snr called ‘Anti-Bolshevik Marxists’ (among which we can be included), regarding Russia under the Bolsheviks (Trotsky as well as Stalin) as state capitalism and opposing Lenin’s vanguard party concept. They weren’t always clear on the implications of a post-capitalist, communist society, some of them drawing up elaborate schemes for labour-time accounting and labour-money (not included here).

Annoyingly, Paul Mattick Jnr repeatedly refers in his introduction to the German Social Democrats who took political control in Germany immediately after the end of WW1 as ‘socialists’. He must surely know they weren’t.

Adam Buick

Cooking the Books: The truth about tax (2011)

The Cooking the Books column from the June 2011 issue of the Socialist Standard

The burden of taxation does not rest on the shoulders of workers. Although taxes on wages appear to come out of wages, in reality taxes come out of profits. Workers should therefore ignore all the false promises and baloney about taxes that politicians use in order to try to win votes at election times, and concentrate their efforts instead on the class struggle, seeking to raise their wages and improve their living and working conditions. We often make this argument in the pages of this journal and, although the argument has its roots in the analysis of Ricardo and Marx, we stand alone in making it these days.

Not entirely alone, however. In his new book Business As Usual (Reaktion Books: 2011), reviewed in last month’s Socialist Standard, the Marxist analyst Paul Mattick makes the following argument.

  “Tax money appears to be paid by everyone. But despite the appearance that business is undertaxed, only business actually pays taxes. To understand this, remember that the total income produced in a year is the money available for all purposes. Some of this money must go to replace producers’ goods used up in the previous year; some must go in the form of wages to buy consumer goods so that the labour force can reproduce itself; the rest appears as profit, interest, rent – and taxes. The money workers actually get is their ‘after tax’ income; from this perspective, tax increases on employee income are just a way of lowering wages. The money deducted from pay-cheques, as well as from dividends, capital gains and other forms of business income, could appear as business profits – which, let us remember, is basically the money generated by workers’ activity that they do not receive as wages – if it didn’t flow through pay-cheques (or other income) into government coffers” (page 81).

Our point precisely. As Mattick also points out in his book, while “neither economists nor businessmen have an adequate theoretical understanding of capitalism, the latter at least have a practical sense of how it works”. This applies in the case of tax. Listen carefully, and you can occasionally hear the representatives of the capitalist class admit to the truth of our stand on tax. In the Channel 4 documentary Britain’s Trillion Pound Horror Story (reviewed in the January 2011 Socialist Standard), to take just one recent example, the argument was made that taxes are bad because they raise the costs of labour. Very true: but the logical implication is that this is a problem for those who pay for labour – the capitalists – not for those obliged to sell it. Capitalists understand that raising taxes on wages will just put upward pressure on wages, raising the cost of labour for the capitalist. As we put it on our website:

 “Of course, this will not happen automatically but as a result of an economic tendency for the working class to receive the value of its labour power. When there are tax reductions this will be a major factor in stiffening the attitude of the employers. With tax increases, this stiffens the pressure of the workers for higher wages, especially when unemployment is low. It should be noted that this tendency for workers to receive the value of their labour power is helped by trade union action.”

Crisis: the stories so far (2011)

Book Review from the May 2011 issue of the Socialist Standard

Business As Usual: The Economic Crisis And The Failure Of Capitalism by Paul Mattick. Reaktion Books: 2011. £12.95

Just yesterday, we were all supposed to believe that the globalisation of capitalism and free markets was the route to freedom, peace and prosperity for all. Then, with barely an explanation, and somewhat out of the blue, the story changed. Now we are to believe that, due to circumstances beyond anyone’s control, prosperity will have to give way to austerity. The good times are over.

It is characteristic of crises that the stories we are expected to believe suddenly change. But how can we understand the change? And might there not be better stories than the rather grim and gloomy one we’ve been ordered to swallow? Paul Mattick Jnr’s short book is just such an alternative. For him the crisis signals the complete bankruptcy and destruction of mainstream economics.

Why crisis is impossible 

Why did the crisis appear as a bolt out of the blue? Why was it not expected or anticipated by any economist or mainstream commentator? In short, because there is no place in the standard economic story for crisis, any more than there’s a place for wizards and interstellar travel in a 19th-century realist novel. The old story goes something like this:

  “Capitalism is a system for producing wealth to satisfy consumer needs. Individuals set up in business looking out only for their own interest, but in doing so produce for society. Only what can be sold will be produced; money will be borrowed, land rented and labour hired only because the resulting production meets a need. The money earned by selling one’s product will then be spent either on consumption or further production. The economy therefore tends naturally to a balanced state, in which all products find buyers. There may be momentary imbalances between supply and demand, but rising and falling prices soon take care of those. In this way, capitalism creates the wealth of nations, and all is well in the best of all possible worlds.”

No doubt the story sounds reasonable – it is, after all, part of our cultural inheritance, as familiar as Noah and his ark, Jesus and the wise men, Little Red Riding Hood and her granny. But there’s no room in this picture for the kind of crisis we’re currently living through. The crisis appears as a shock and is regarded as a mystery simply because there’s no framework within which it makes sense. We can understand that a very small scale ‘crisis’ will result if a business fails to meet consumer need: it may go bust, and this will be a crisis for those relying on that business for their living. But there’s no reason why this should cause much of a problem for the system as a whole – and economists never expect it to. Within the framework outlined above, there is no room for the sort of crises we actually see in the real world – society-wide and global crises where vast amounts of real wealth and the means of producing it (factories, mines, offices and so on) exist side by side with grinding poverty and unemployment. This kind of insanity makes no sense in terms of the story. Surely, great masses of wealth would just go to satisfy consumer demand? And if wealth outstripped consumer demand, then, well, great! The age of leisure and abundance, long promised by capitalism, would finally be upon us, and we could collectively lay back and enjoy it.

Unable to find a satisfying explanation from within the story, the storytellers are obliged to smuggle in some bogeymen from the wings. The balance we expect from the story is then upset by one of various villains, which one depending on the predilections of the storyteller: state interference or largesse, insufficient (or too much) regulation, greed, and so on. Quite why these things sometimes cause a crisis and sometimes not when they’re always lurking in the wings is left unexplained.

Why crisis is inevitable

However, there are some thinkers, Mattick among them, who were not at all surprised by the crisis. This is not, as Mattick says at the start of his book, because they are cleverer than the mainstream storytellers. Nor have they access to more or better information – in fact, for the most part, rather the opposite. Instead it is a matter “of knowing how to think about what is going on”. Or, in the terms we’ve introduced in this article, of having access to better stories – stories that capture what’s actually going on in the real world. Here’s Mattick’s story:

 “Capitalism is not primarily a system for producing wealth to meet consumer demand, but for making money. This is what business is all about: using money to make more money. The capitalist (or, increasingly, a capitalist institution subsidised and backed by the state) starts off with a sum of money, which he throws into circulation in the expectation that it will return to him as a greater sum than he started with. To this end, the capitalist buys means of production and labour power on the market, then puts these to work to produce goods, which he then takes to market in the expectation not just of sales, but of profits. If he is successful in his aim, and if he is to remain a capitalist and keep up with the competition, he must reinvest at least a portion of that profit in yet more production, buying yet more labour power and means of production, to produce yet more wealth and, potentially, money profits. And then the cycle begins again, on an ever-expanding scale.” 

The motive here is not the satisfaction of consumer need – a relatively straightforward matter – but the production and appropriation of profits on an ever-expanding scale – a much more tricky thing to achieve. And as the production of social wealth increasingly takes on this capitalist character, the production of the things we need increasingly relies not on our need for them, nor on our ability to produce them, but on the ability of capitalists to make profits from the whole process. When they cannot make or do not expect to make a profit from production, or when they produce too much to sell profitably, they will not invest in production, but in speculation, or will not invest at all, and hoard money. This can affect not just their own line of business, but the whole system of wealth production. Crisis, in this view, is not caused by any bogeyman in the wings, but is a necessary result of the process itself.

What’s the answer?

Once we’ve understood this story, our expectations are turned on their head. We are no longer shocked by capitalism’s periodic crises, but expect them. The question then is, do we really need to forever make our lives hostage to capitalist profit; or might we be able to do things in a different way? In the mainstream, the debate over how to resolve the crisis is between two alternatives. The first is to just let things collapse so the economy undergoes the necessary correction, restoring profitability and eventually returning the system to business as usual. The second is that the central banks should continue to print money and the state bail-out bankrupt banks and countries and so on, so that ‘business as usual’ is not disrupted by potentially catastrophic upheavals (as was the case in the Great Depression of the 1930s). The debate is between the needs of business, on the one hand, and the need to preserve social cohesion (for the needs of business) on the other. Businessmen and policy-makers are damned if they do, and damned if they don’t. But what are usually thought of as ‘socialist’ alternatives are unlikely to work either – history has shown that reformist social democracy and ‘communist’ central planning have been no better at controlling capitalism’s crises than anything else. It’s no good, says Mattick, demanding jobs from a system that would happily give us the jobs if it could.

If there’s hope, it’s in the belief that human beings will eventually tire of walking into brick walls and begin to look for a door. If you have a concern that produces socially necessary goods or services, on the one hand, and poor and unemployed people on the other, and there is no way of putting the two together in a way that produces profits for owners, then that’s what capitalism calls a crisis. The solution – bringing workers, the unemployed, the poor and the means of producing wealth together, not in order to make profits, but to provide for need – is called socialism.

The story has a name

We’ve left the name of this alternative story till the end because it is liable to scare unwary readers. That’s because, in the standard story, it’s portrayed as one of those bogeymen waiting in the wings. The name is Marxian socialism. Mattick’s is the second major book from a Marxist thinker to appear since the onset of the crisis (the first was David Harvey’s Enigma Of Capital, favourably reviewed in the June 2010 Socialist Standard). And we highly recommend it – it’s a brilliantly comprehensive and yet miraculously short history and analysis of capitalist crisis. The Marxists associated with this journal will have their differences with the details of Mattick’s account. In particular, we would say he puts too much emphasis on Marx’s law of the tendency of the rate of profit to fall, and throws the baby out with the bathwater when he rightly rejects the old left but places his faith seemingly more in the spontaneous appearance of mutual aid and communist formations than in working-class political organisation. But what’s more important than the minor disagreements is the framework that Marxism provides for understanding what’s going on in the real world, and for that, Mattick’s book is an essential guide.

Stuart Watkins

The Slump (2017)

Book Review from the September 2017 issue of the Socialist Standard

'The Long Depression'. By Michael Roberts. (Haymarket Books. 2016)

There is a tendency within some flavours of Marxism that has been said to have correctly predicted 6 of the last 3 recessions. The temptation to rely on inevitable crisis and the collapse of capitalism has a silvery allure for some. This book does not join that chorus, but it does seek to make crises of capitalism subject to (at least theoretically) predictable laws.

Roberts positions himself as a heterodox within the already heterodox school of Marxian economists. He sees Marx’s examination of the tendency for the rate of profit to decline as the root cause of recessions and depressions (he defines a depression as: 'countries growing at well below their previous rate of output . . . and below their long term average' and he notes the usual definition of a recession is: “two consecutive quarters in real GDP”).

He sees a potential explanation for Kondratiev long waves in his model:

'Depressions…appear when there is a conjunction of downward phases in cycles of capitalism. Every depression has come when the cycle in clusters of innovation have matured and become “saturated”; when world production and commodity prices enter a downward phase, namely, that inflation is slowing and turns into deflation; and above all, when the cycle of profitability is in its downward phase. The conjunction of these different cycles only happens every sixty to seventy years.'

Following Marx, he defines the rate of profit as the surplus value (S) divided by variable capital, wages (V) plus constant capital, the value of machines, tools and ingredients (C). He notes that the tendency is for the organic composition of capital (the ratio of C/V) to increase: that is for machinery and tools to replace human labour, as capitalists compete to improve the productivity of the labour they employ. This then reduces surplus value, leading to a withdrawal of investment.

'The continual process of an upward cycle in profitability –as the rate of surplus value rises faster than the organic composition, in turn replaced by a downward cycle as the law as such gains ascendancy –explains the cyclical nature of capitalist accumulation'.

The problem with this approach is that it lacks explanatory power for why crises involve stranded capital. In his chapter on the rate of profit, Marx discusses how the falling rate of profit is compatible with ongoing growth in the mass of profits (due to expansion, investment, etc.) This is before he identifies the counteracting tendencies (increasing intensity of exploitation; depressing wages below the value of labour power; cheapening elements of constant capital; relative overpopulation; foreign trade; and the increase of stock capital). Roberts does address these counteracting tendencies, but sees crisis arising out of them temporarily being overwhelmed by the rising organic composition of capital.

If it were a falling rate of profit alone, merger and expansion would be sufficient to escape and renew growth for a while longer.

The Socialist Party has tended towards the view that it is disproportionate investment and expansion of production that causes crises and slumps. There are strict conditions to enable capital expansion, accumulation and reproduction going on, requiring all the different branches of industry to broadly grow together. Since each capital is seeking to grow at the fastest possible pace, driven largely by the expectation of profit, it becomes inevitable that one sector over-invests and has its reproduction choked by relative under-investment either in consumption or in key components.

This view of crisis means they are not governed by an underlying regular process, but by an ever increasingly likelihood of accident and happenstance. Even a state-run economy could not overcome these tendencies, since even if it were possible to plan every commodity exchange in such a way as to provide growth: accidents, happenstance and misjudgement would still mean inevitable crises.

Roberts provides a wealth of empirical data showing long run trends towards a declining general rate of profit. He has debated with Paul Mattick Jr. whether official statistics can meaningfully be mapped onto Marx's categories ( Link -- this is worth reading in itself). We agree that they cannot least because of the level of misrepresentation and manipulation that goes into formulating them.

At the least though, if the measures show distinct trends, that is useful for trying to read the developments of the economy. His tables showing all the US recessions since the mid 19th century provide a salutary reminder of how frequent and endemic they are: indeed, we would agree that they are not just inevitable, but essential to capitalism’s ongoing existence, as they are followed by the clearing of bad investments and creation of new room for growth in the economy.

Where we would certainly agree with Roberts is that the only way within capitalism, ultimately, to exit a crisis is the destruction of the value of capital; and, further, that capitalism will eventually find new scope to grow (although at what human cost in misery?) unless the working class take a conscious political choice to abolish capitalism: that is the only way in which it will collapse.

Pik Smeet

A View on the Crisis: Paul Mattick Jr interview (2011)

Paul Mattick Jnr

Interview from the October 2011 issue of the Socialist Standard

The Marxist economist and author Paul Mattick Jnr talks to Stuart Watkins about his views on Marx, the economic crisis, and the prospects for socialism

Socialist Standard: In your recently published book, Business As Usual (reviewed in the May 2011 Socialist Standard), you give an account of the causes of our present economic situation. Could you summarise the argument for our readers? In your view, just what is this crisis all about really?

Paul Mattick Jnr: This crisis, like those that have punctuated the history of capitalism since the beginning of the nineteenth century, is due to the inadequate amount of profit produced by workers in the capitalist economy, relative to the amount required for a significant expansion of investment. This problem, which first made itself known in the post-World War II period in the mid-1970s, has been hidden by the enormous expansion of debt – public, corporate, and even private – since that time, which continued the expansion of debt in all capitalist nations in response to the long-lasting deep depression of the 1930s. The credit-money created by governments and spread throughout the system by financial institutions created the basis for an apparent prosperity, though one marked by the usual cyclical pattern of ups and downs. But the underlying problem made itself visible, for those who cared to look, in many forms – the persistent inflation of the 1960s, the ‘stagflation’ of the following decade, the debt crises of Latin America and eastern Europe, the currency crises, real estate busts, stock market crashes, and massive bank failures of the last thirty years, as well as the general tendency, worldwide, to substitute speculation for real capital investment. Finally, the capacity of the system to put off dealing with its underlying problem seems to have reached its limits at the end of 2007.

Socialist Standard: According to most commentators in the mainstream press, the Great Recession, though serious, is now over. Do you agree that it is?

Paul Mattick Jnr: Between the time you asked this question and the present moment, many have become anxious about the arrival of a ‘double dip’ recession. In my opinion, the so-called second dip is merely the continuation of the crisis that began in 2007. There are of course economic fluctuations throughout periods of depression as well as periods of prosperity; in addition the government stimulus after 2008, however inadequate, had a certain effect (for instance in China, where the state promotion of an enormous real estate bubble involved the importation of machinery and other goods from Europe and elsewhere). But the fundamental problem, the low profitability of capital, has not been overcome.

Socialist Standard: And in your view, the low profitability of capital can be explained by Marx’s law of the tendency of the profit rate to fall? Can this law be demonstrated to be true empirically?

Paul Mattick Jnr: Yes to your first question; your second raises complex issues. The theory Marx worked out in Capital is an extremely abstract one: it is an attempt to analyze the dynamics of capitalism as a global system, over the long term. It is couched in terms of the quantities of ‘socially abstract labour’ – labour performed in the production process as represented by money when products are bought and sold – because Marx looks as capitalism as fundamentally, like all social systems, an organization of the process of reproducing the human population (and its social relationships). But in the world of business, money is used to symbolise more than the actual activities of social production – it represents, for instance, claims on the social product based on the control of natural resources, and also – to a large extent, in fact – promises to pay in the future, promises to pay off bets made on the way production prices will work their way through the market. And national income statistics, even ignoring the enormous inaccuracies involved in calculating them, are drawn up on the basis of business accounting systems and orthodox economic theorising, which do not distinguish between actual productive activity and speculative hopes. As a result, the data available cannot really be used to prove or disprove Marx's theory.

This is not to say that Marx's ideas can't be measured against experience. His predictions need to be compared with the history of capitalism over the last 200 years. From this perspective, Marx's ideas come off very well, as the main tendencies he predicted for capitalism – towards the supplanting of human labour by machinery, the concentration and centralisation of capital, the spread of wage labour, the tendency towards widescale unemployment, and above all the recurrence of periods of depression – have been realised. In fact, I would say that Marx's theory of the tendency of the rate of profit to fall over the long term is the only convincing account of the business cycle that there is. A particular aspect of this is of personal interest to me: in the 1960s, my father, Paul Mattick, wrote a book, Marx and Keynes, challenging the generally accepted view that Keynesian methods could control or eliminate the business cycle. He asked: if Marx is right, what will happen? And what he predicted has in general come about. This is one of the very few examples of a successful prediction in the social sciences!

Socialist Standard: Could you expand on your claim that the tendency of the rate of profit to fall is the only convincing explanation of the business cycle? Perhaps the most important new work to emerge from the Marxist tradition on crisis in recent years is that of David Harvey. He says, on the contrary, that the tendency of the rate of profit to fall cannot be made to work – it’s too compromised by the counter-tendencies identified by Marx, among other objections. He instead views all the conflicting Marxist accounts of the business cycle – profit squeeze, underconsumption, disproportionality – as possibilities that represent but don’t exhaust possible departures from balanced growth. What is your view of the competing Marxist accounts of crisis, including Harvey’s?

Paul Mattick Jnr: Many Marxist writers have taken some version of the tack Harvey follows, invoking a variety of causal factors to explain crises. The problem with this is that these disparate factors are not operating on the same analytical level. If wages would really squeeze profits, accumulation will decline, putting downward pressure on wages, so this will quickly correct itself. This is why, so far as we can tell from statistics, there have been no notable profit squeezes associated with important downward movements of the economy, despite claims sometimes made that there have been. Similar considerations hold for disproportionality explanations: capitalism in fact is always developing disproportionally, as there is no central regulating agency, but this is also constantly subject to correction by market forces. The explanation of crisis by reference to underconsumption is one of the oldest – it dates back to Sismondi and Malthus in the early 19th century – but also one of the least convincing: clearly, not all the product can ever be consumed, or else there would be no capital accumulation; as well, a constant feature of the system cannot explain the crisis cycle. As Marx points out, of course there is a lack of effective demand in a depression period. But why? His answer is that accumulation – which equals as it determines demand (for consumer goods, via wages, and production goods) – slows in response to declining profitability. And this is in accord with what statistical information we have, as was demonstrated long ago by the American economist Wesley Mitchell and has been recently shown by a number of researchers. Of course, the profits of statistics are, as I have pointed out, not the profits of Marx. But Marx's theoretical considerations provide an explanation for the fluctuations of observable business profits. What is odd is the resistance to Marx's theory when it is in such good accord with the history of capitalism. I believe this is largely due to the fact that most theorists are still in thrall to the economists' idea of capitalism as a naturally self-regulating system. Thus Harvey, for instance, needs to find a reason why it goes out of balance. In fact, however, capitalism is always in disequilibrium. On the broadest scale, it is the crisis that makes continued accumulation possible, just as it is accumulation that leads to a lowering of the rate of profit.

This highly abstract statement ignores the counteracting factors, the list of which Marx borrowed from J.S. Mill. It is not hard to show – it was done by Grossmann and others – that over the long run these factors cannot overwhelm the tendency of profits to fall. But we already know this empirically, since the history of capitalism demonstrates the effects of a periodically falling profit rate.

Socialist Standard: You say your father was proved right and Keynes wrong. But many supporters of the system would say that Keynesian methods saved capitalism from a Great Depression in the 1970s, and led to the Great Moderation – with capitalism delivering generally and gradually improving prosperity for all and monetary policy moderating the ups and downs of the business cycle. Did that not prove Keynes right? Might the same tricks not work again and pull us out of our present crisis?

Paul Mattick Jnr: I think it's fair to say that Keynesian methods saved capitalism from a deep and long depression in the 1970s. But the cost was the rising level of government debt in all capitalist countries. In the 1980s and after this was joined by an unparalleled expansion of corporate and private consumer debt. What happened around 2007 was that this expansion of debt collided with the continuing failure of the capitalist economy proper to expand at a sufficient rate. So one could say that the chickens of 1975 have come home to roost in the current depression. And since the Keynesian card has already been largely played, capitalist governments are now torn between fears of further unraveling of the private-property system and the dangers of further increasing sovereign debt.

Socialist Standard: Your father was connected with our American party, occasionally publishing in its journal. In a newly published biography of one its members (see here), we see you as a child sat at your father’s knee while political discussions raged around you. Do you have memories of these times? What is your memory and present opinion of the WSPUS and our political tradition generally? You say in your book that the heydey of the left and the trade unions is over and there's no hope of reviving them. So what can be done? What's the alternative?

Paul Mattick Jnr: My memories of the WSP are very good ones – I liked the people involved very much. I still remember going to classes in Marxian economics in Boston, taught by Rab and others, in some ways my real initiation into radical theory. I remember, with equal pleasure, the ‘socials’ – parties – when we kids moved around the legs of smoking, drinking, discussing, lovely adults. But I think these experiences, precious though they are to me as an individual, belong to the past. For most of today's young people – and most of their elders – the political ideas of the past have little meaning. And not only ideas – the political movements of the past no longer exist as serious forces. The trade unions have long been in decline world-wide, and the political parties of the left are either fully integrated into the capitalist political system or have become minute, unimportant sects. To an extent, this is good, as it seems to me that leftwing political organizations have historically stood in the way of creative responses to social crises, obsessed as they have been with their own agendas. But in any case, the response to the coming depression and the suffering to be imposed on people by the world's masters (and nature, as a result of the workings of the capitalist economy) is something people will have to work out for themselves, with little help from the past, in response to evolving conditions. To solve their problems, people will have to take direct, concrete action – occupying empty housing, seizing stocks of food and other goods, and eventually, if all goes well, occupying and beginning to operate the means of production and distribution. This lies in the future, but already one can see steps in this direction, in phenomena like the Greek cry ‘We won't pay!’ and French occupations of defunded schools. Even the action of tens of thousand of young Spaniards, simply meeting in the centre of Madrid and other cities, like the Egyptians in Tahrir Square, to discuss politics, is a step towards autonomy from the political wing of the ruling classes, a step towards an autonomous working-class control of social life.

Socialist Standard: We see your point, but we would also say that as people begin to work these things out for themselves, they will also probably be drawn to some of our conclusions: namely, that state power will have to be reckoned with in an organised way, and alternatives to the present system discussed and agreed upon. That’s at least a possibility, isn’t it?

Paul Mattick Jnr: Both of your points seem to me quite true. We can already see the state mobilising its forces in defence of capitalist social relations, even when they are barely challenged, and radical confrontation with the current social order will definitely involve finding ways to counter the military forces that will be deployed. Meanwhile, exploring alternatives to the present system, after a long period during which even the idea of an end to capitalism has been nearly unthinkable, is of great importance. This is especially true because earlier models of social change have been rendered obsolete by the development of capitalism as a system: for instance, an idea like that of the network of workers councils so important to revolutionary thought after the First World War requires thoroughgoing reformulation in a period when large numbers of workers have insecure jobs, and no longer identify themselves as workers within particular industries, not to mention workplaces, while gigantic masses of people all over the world struggle to exist without employment, and when many production processes involve workers and workplaces in different countries, as when Chinese workers assemble iPhones from parts produced in other places. Then, the developing ecological catastrophe raises novel issues which will require serious, large-scale efforts of a technological as well as a social nature. At the same time, the growing proletarianization of the world’s people and the greater level of international integration of populations and cultures, make the old slogan of “world revolution” in some ways more realistic than ever before.

Socialist Standard: Thank you, Paul, very much for talking to us.