50 Years Ago: The Profit-Sharing Snare (1973)

The 50 Years Ago column from the December 1973 issue of the Socialist Standard

When we have pointed out that profit-sharing and bonus schemes introduced by so-called good employers were merely means to increase profit, effect economies, and attempts to subdue the growing unrest of the workers, we have been accused of being impossibilists, carping critics, or agitators actuated by malice. From time to time we have dealt with the boasted benevolence of the Levers’, the Cadburys, and the various co-partners, and now we have further confirmation of the correctness of our case from the profit-sharing proposals of Lloyds Bank, Ltd. Discussing these proposals, Mr. J. W. Beaumont Pease, the Chairman of Lloyds, said (Daily Chronicle), October 22, 1923;

  “The directors firmly believed the scheme would improve relations between employer and employed and would be all for the good of the shareholders, the directors and the staff.”

To improve relations means, of course, to anticipate the stifling of future discontent, and the recent organisation of bank clerks may have helped the directors toward their latest decision. Further we read:

  “The scheme was not likely to diminish the amount of profit available for the shareholders’ dividend, and it was quite possible it would not cost the bank anything. There was, Mr. Pease added, no question of the loyalty of the staff, but the scheme would increase the zeal with which they worked for the bank, and it would materially increase the profit. . . .With the large number employed, these economies in the aggregate would mean much.”

[From an unsigned article in the Socialist Standard, December 1923.]

Notes on Industry (1933)

From the April 1933 issue of the Socialist Standard

Profits in the Depression

As is to be expected, the average rate of profit has fallen during the “ crisis ” years since 1929. A minority of firms have made little or no profit or have suffered a loss. Most firms have made profit, although not at the rate of the earlier period. Some firms have prospered exceedingly out of the general depression.

The following table shows the up and down movement of profits since 1909. It is compiled by the “Economist" and relates (as regards the more recent years) to about 2,000 typical companies. In each case the figures are based on profits and losses declared during the 12 months from January 1st to December 31st. The figure for 1932, 5.9 per cent, on ordinary shares, shows that the investors are still doing quite comfortably: —

             PROFITS AND DIVIDENDS

	Ratio	Average	Average
	of Profits	Dividend on	Dividend on
	to Pref. &	Preference	Ordinary
	Ord. Capital	Capital	Capital
	%	%	%
1909	7.4	4.3	6.3
1910	8.2	4.5	7.0
1911	9.9	4.9	8.5
1912	... 10.2	5.2	* 8.5
1913	... 11.7	5.1	10.2
1920	... 15.2	5.0	12.6
1921	... 10.3	5.2	10.2
1922	7.0	5.2	8V4
1923	9.8	5.3	9.3
1924	... 10.3	5.4	9.8
1925	... 10.9	5.5	10.3
1926	... 11.3	5.4	11.1
1927	... 10.5	5.3	10.8
1928	... 11.1	5.4	10.6
1929	... 10.5	5.5	10.5
1930	9.8	5.7	9.5
1931	7.2	5.2	7.2
1932	5.8	4.2	5.9

(“The Economist: Commercial History and Review of 1932,” February 18th, 1932.)

The Prudent Pro

Some companies have managed to do extraordinarily well. Woolworth’s paid 70 per cent. this year and held a dinner to celebrate it. Other companies in a comparable position have been more reticent. The Prudential Assurance Co., Ltd., have just declared a dividend of 37½ per cent, tax free on their “B” shares. The original shareholder paid 4s. for these shares, and can now sell at about 55s. The “A” shares are even more interesting. Starting with 40 per cent. tax free in 1919 the dividend rose steadily year by year until it reached 94⅙ per cent. in 1928 and 1929. Then came the slump and the dividend fell to 91⅓ per cent. in 1930 and 1931, and right down to 84¼ per cent. in 1932. But hard times cannot last for ever, and this year the shareholders were able to pick up again with 92 per cent. tax free plus a special bonus of 7⅙ per cent. These shares cost originally £l, and now stand at about £26. Another insurance company, the Pearl Assurance Co., Ltd., paid a modest 50 per cent. tax free for 1932.

The Daily Telegraph (January 6th, 1933) reported the Advertising Association Research and Publicity Department as authority for the statement that 80 firms which are prominent users of advertisement showed average profits exceeding 38 per cent. on their ordinary shares in 1932. This figure is, however, probably inflated by the inclusion of a few firms which paid a very high rate of profit.

Then Lewis’s, Ltd., of Liverpool, paid 275 per cent. on their deferred ordinary shares, the same as last year. Half-a-dozen newspapers which reported on Lewis's profits and on the Prudential's profits managed to convey that they had done well without disclosing actually what the rates of dividend are.

As the Pru. advertises extensively in the Press, including the “Labour” and “ Left-wing Labour” papers, the advertising revenue probably has what is known as a sweetening effect on the editors and their staffs. As a sub-editor on a well-known sensational weekly was heard to remark, “We are allowed to attack anyone and everyone—except our advertisers.”

The Ebb and Flow of Unemployment

Owing to the scrappy way in which newspapers treat social questions, it is not easy for the reader who has no other sources of information to get a full and clear view of what is going on even when the question is one which is always being written about, e.g., unemployment.

A very common misconception is that unemployment, owing to the displacement of workers by machines and to other factors, has been steadily growing since the end of the war. This view is particularly popular with those who hold that the present crisis is essentially different from pre-war crises, and that capitalism will never recover from it. Actually the changes in the numbers of unemployed have followed the same kind of course as in pre-war crises.

The years since 1918 can be divided into a number of well-defined periods.

In 1919 and 1920 there was some “demobilisation" unemployment, followed by a period in 1920, when unemployment was at a very low level, lower than in the years before the war.

Then, in 1921, came the sudden crisis which sent unemployment up to the 2½ million level.

During 1922 and 1923 unemployment declined to a level of about 10 per cent. or 11 per cent.

From 1923 to 1929 (apart from a short period in 1926 due to the General Strike) unemployment was not increasing, but remaining fairly stable at about 10 per cent. or 1,100,000. Actually, in July, 1929, there was less unemployment than in July, 1923, in spite of a very big increase in the total number of insured workers. In other words, there were many more workers in work than there were six years earlier.

The years 1923 to 1929, which newspapers at the time habitually referred to as years of “depression" were, in fact, years of expanding production and trade, and increasing profits; Then, late in 1929, began the “crisis," with unemployment soaring up to 2½ or 3 millions, and a percentage (23 per cent.) only reached before for a short period in 1921.

The present “crisis" will eventually give place to a new period of expansion, but the fact that there were never fewer than 1,100,000 unemployed in the “boom" year 1929, shows what may be expected by the workers when prosperity returns for the capitalists. At its best, capitalism in England holds out little prospect of reducing unemployment much below 1 in 10 of the workers. That will be “normal" unemployment.

The Displacement of Workers

Closely linked up with the question of unemployment is the displacement of workers either by labour-saving machinery and methods, or by the rise of new industries and the decline of old ones. That process goes on steadily, but it does not mean (as the “Technocrats" have thought) that the number of workers employed gets steadily smaller. This can be illustrated from the course of events in this country during the years 1923 to 1932, about which the Ministry of Labour has made a special inquiry. (See Labour Gazette, November and December, 1932.)

In the first place the total population of the United Kingdom increased by 1,800,000 during those nine years, and the number of insured workers, aged 16 to 64, increased by about 15 per cent., or 1,670,000; from 11,140,000 in 1923, to 12,810,000 in 1932.

The next thing to notice is that in July, 1929, the year of maximum production just before the crisis, the number of insured workers actually in work was more than 10 per cent. greater than it was six years earlier, and it had been increasing more or less steadily in the intervening years. So that, in spite of machinery and the decline of certain big industries, there were 11 men and women actually in work, in 1929, for every 10 who were working in 1923.

How can this be explained? Some facts and figures will make the position clear.

Between 1923 and 1932 a number of industries were declining or were installing labour-saving machinery, or both, and consequently the number of workers employed was being reduced. Nearly 300.000 men were pushed out of coal mining between 1923 and 1929, and another 300,000 by 1932.

The number of non-permanent workers on the railways decreased by 60,000 in nine years, and insured workers in Government employment decreased by 46,000. Including the miners, there were about 400,000 fewer workers actually at work in the declining industries in 1929 than in 1923, and a further decline of about 1,000,000 due to the crisis between 1929 and 1932.

But while these industries were reducing their number of workers, the expanding industries were taking on far more men up to 1929 than were being displaced elsewhere. While mining was shrinking, electrical generation and the manufacture of electrical machinery was rapidly growing. Artificial silk was replacing cotton. Motor transport was replacing railway transport. While the staffs of the Central Government were being reduced, the Local Authorities were taking on more men.

Dividing all industries and transport services into the declining group and the expanding group, we find that while the declining group got rid of about 400,000 workers between 1923 and 1929, the expanding group of industries and services increased the number of workers actually in their employment by 1,400,000—a net increase of 1,000,000 for insured trades as a whole.

Since 1929 the crisis has thrown another one million men out of employment in the declining trades, but the expanding group have still managed to increase, although only very slowly. As remarked above, for the whole group of insured trades, the number in work in 1932 and now is still about the same as in 1923, in spite of the heavy fall in employment since 1929, and, after making all due allowance for any increase since 1923 in the number of unemployed not on the register.

It is interesting to notice that while mining and many manufacturing trades have been badly hit, the distributive trades have increased enormously, from 1,100,000 workers in 1923, to 1,700,000 in 1932.

The National Income

Mr. Colin Clarke, M.A., has made estimates of the amount and distribution of the National Income in the years 1924—1931. ("The National Income." Pub. MacMillan, 1932. 8s. 6d.)

He shows (p. 72) that the National Income (including net income from Overseas) increased from £3,586 millions in 1924, to £4,006 millions in 1929, these being years of expanding production and trade.

He estimates that the wage earners receive about two-fifths of the total national income (39.9 per cent, in 1929).

On the assumption that the average family consists of, roughly, man, wife and two children, he estimates that the national income, if equally divided, would have been sufficient in 1929 to provide £349 per family, or £6 14s. per week. (P. 78.) If an amount were deducted to provide for the existing rate of new capital, and excluding income from overseas, the figure would be about £310 per family in 1929, or just under £6 a week.

Edgar Hardcastle

Pity the Poor Capitalist. (1931)

From the March 1931 issue of the Socialist Standard

The Economist newspaper’s index of profits, based upon the accounts of 1,932 concerns, shows that the net profit, after payment of debenture interest, etc., was practically the same in 1929 and 1930, the respective totals being £198,800,000 and £197,500,000. The decline is only 0.6 per cent. (See Supplement, Feb. 14th, 1931.)

The rate of dividend on preference capital was slightly higher than in 1929 (5.7 per cent., as against 5.5 per cent.), while the average dividend on ordinary capital was lower (9.5 per cent., as against 10.5 per cent.).

The rates for the past ten years, and for five years before the war, are given below :

The Manchester Guardian (January 6th) published a list of profits of about 240 “important public companies.” More than half of them made higher profits in 1930 than in 1929, and the total profits in 1930 of all the companies (after deducting losses) amounted to over £8 million more than in 1929.

The Times published a summary of the profits of 176 British industrial concerns, “showing the broad tendency of profits in British industry as a whole.”

The average dividends in 1930 represented 8.4 per cent. of the paid-up capital, as compared with 8.2 per cent. in 1929. (See The Times Annual Financial Review, February 10th, 1931.)

The Banker’s Magazine Index of the market values of 365 securities shows that in December, 1930, the average value, while about 5 per cent. less than in December, 1929, was still 16.8 per cent. above the level of December, 1921. (See Economist monthly supplement, January 24th, 1931.)

Edgar Hardcastle

Russia: Land of High Profits. (1930)

Book Review from the September 1930 issue of the Socialist Standard

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

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

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

Production and foreign trade.

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

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

High Rates of interest and profit.

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

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

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

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

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

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

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

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

Excess profits tax.

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

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

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

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

Wages and unemployment. 

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

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

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

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

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

Inheritance.

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

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

The Communist Party. 

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

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

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

Education.

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

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

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

Hopes and facts.

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

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

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

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

Edgar Hardcastle

Cooking the Books: Profit restraint (2023)

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

If a group of workers demand and get a wage increase this doesn’t mean that the business they work for can then simply increase its prices to compensate. If businesses had the power to increase their price at will, why would they need to wait for a wage increase to exercise this? Why wouldn’t they have already done it? Wouldn’t that bring them more profits?

That’s not how it works. Businesses fix prices by what the market for their product will bear, ie, the highest price they can get that will secure them the largest profit. If they fix it above this level they will lose sales to their competitors and so make less profit, and if they fix it below they will not be making as much profit as they could. If the market will not bear it, they cannot raise their prices without jeopardising their sales and profits. Sometimes they may be able to raise them without doing this, sometimes they can’t; it all depends on market conditions.

With rising energy costs, business are currently in the same sort of position as they would be in the face of increased wages and so face the same dilemma of whether or not to raise their price in response and, if so, by how much. Writing in the Times (1 November) Ed Warner, billed as sitting ‘on a number of company boards’, gave the benefit of his experience:

‘I have seen businesses agonising over pricing decisions recently, wondering how much their markets will bear. Faced with a sharp rise in input prices, including labour, it’s understandable that these debates are about how big a jump is justifiable and achievable.’

No automatic ability, then, to pass on the whole increase in input prices (‘including labour’). What is likely to happen is some increase but not by the full amount of the increase in costs. This will mean that their profits will take a hit. In the longer run, they will find ways to reduce their energy or labour costs. In the latter case, they will typically seek to get their workers to work harder and/or introduce machinery to replace them.

While some, probably most, businesses will currently be taking a hit on their profits, others, especially those selling energy, will be reaping more profits than usual.

The TUC is calling for ‘profit restraint’:

‘Businesses had tremendous support from taxpayers during the pandemic. They should now help to counter inflation with greater profit restraint – especially energy firms’ (tinyurl.com/4pxpxnc6).

This may be a good debating riposte to calls for wage restraint, but it’s not going to happen voluntarily and a Labour government, which the TUC wants to see in office, won’t impose it. Firms are not going to restrain their profits more than they are already forced to by what the market will bear. And the energy firms are going to make hay while the sun shines, even if they know the government will tax away a part of their extra profits. The logic of capitalism is that all firms seek the maximum profit they can and that’s what they will do. But that does not mean that they have a free hand in fixing what profits they make by raising their prices at will.

Cooking the Books: Calculating the Rate of Profit (2006)

The Cooking the Books column from the February 2006 issue of the Socialist Standard

Every quarter, the government’s Office for National Statistics (ONS) publishes figures for “corporate profitability”. The latest, those for the third quarter of 2005, were released on 5 January (see www.statistics.gov.uk). They show that the profitability of gas and extraction companies rose from 34.4 percent in the previous quarter to 36.3 percent, while that of service companies stayed more or less the same at 16.6 percent and that of manufacturing companies fell from 7.1 to 6.2 percent. Overall profitability of private non-financial corporations as a whole fell from 13.8 to 13.4 percent.

But what do they mean by profitability? The ONS explains:

“Profitability compares the profits made by companies with the value of the buildings, plant, machinery and vehicles held as capital assets by these companies. Expressed as a ‘rate of return’ on assets held, these can be compared between sectors to judge whether the returns on investment are worthwhile”.

Marx divided capital into two parts: “constant capital” (which was, as above, the value of the buildings, machinery, unprocessed materials, unsold goods, etc), which he designated by the symbol C, and “variable capital” (basically the money-capital required to pay wages), called variable (V) because it was the only part of total capital that varied in the process of production – through the labour of the workers creating a surplus value (S).

For Marx, the rate of profit was calculated as S divided by C + V, expressed as a percentage. The ONS’s profitability is not the same, but is more like S divided by C.

Marx expected, as he explained in the opening chapters of Volume III of  Capital, the rate of profit to tend to be the same in whatever line of business money capital was invested. But, going by the figures released by the ONS, this does not appear to be the case, with profitability in services currently at around 16 percent, higher than in manufacturing where it is around 6-7 percent? The ONS offers an explanation:

“Generally, service sector profitability is higher than that of the manufacturing sector, reflecting the more capital-intense nature of the manufacturing sector”.

This is reasonable enough. In the service sector the proportion of C to V is less than in manufacturing, i.e. a higher proportion of their money capital has to be invested in employing workers than in acquiring plant, equipment, machinery, materials, etc. This being the case, if you are calculating the “rate of return” only as S/C rather than as S/(C + V), i.e. ignoring V, profitability in the service sector will come out higher than in manufacturing. On Marx’s definition, which takes into account V, – for which statistics are not produced – it would tend to be more equal.

What about the extremely high profitability – over 30 per cent – of oil and gas companies? Oil and gas extraction is similar to land used for agriculture where the price of the product is fixed by costs on the least fertile land in use. Those whose costs are lower than on this land reap an extra monopoly profit – or “ground rent” as Marx, following the tradition of Classical Political Economy, called it.

The high profits in the UK oil and gas extraction business are to be explained by the fact that the costs of extraction in the North Sea are much lower than in those oilfields, elsewhere in the world, whose production costs set the price. Their profits, in other words, contain an element – a large element in fact – of “ground rent” rather than profit in the strict sense of a return on capital invested, a fact allowed for by Marx in his analysis of landed property later on in Volume III.

By The Way. (1923)

The By The Way Column from the December 1923 issue of the Socialist Standard

When we have pointed out that profit-sharing and bonus schemes introduced by so-called good employers were merely means to increase profit, effect economies, and attempts to subdue the growing unrest of the workers, we have been accused of being impossibilists, carping critics, or agitators actuated by malice. From time to time we have dealt with the boasted benevolence of the Levers’, the Cadburys, and the various co-partners, and now we have further confirmation of the correctness of our case from the profit-sharing proposals of Lloyds Bank, Ltd. Discussing these proposals, Mr. J. W. Beaumont Pease, the Chairman of Lloyds, said (Daily Chronicle), October 22, 1923;

  “The directors firmly believed the scheme would improve relations between employer and employed and would be all for the good of the shareholders, the directors and the staff.”

To improve relations means, of course, to anticipate the stifling of future discontent, and the recent organisation of bank clerks may have helped the directors toward their latest decision. Further we read:

  “The scheme was not likely to diminish the amount of profit available for the shareholders’ dividend, and it was quite possible it would not cost the bank anything. There was, Mr. Pease added, no question of the loyalty of the staff, but the scheme would increase the zeal with which they worked for the bank, and it would materially increase the profit. It would also lead to economies by the staff keen on increasing the profit. With the large number employed, these economies in the aggregate would mean much.”

Here the plain, brutal truth is revealed. For the staff, harder work and a probable reduction in their number, while for the directors and shareholders the prospect of an “increase of profit” guaranteed through the continued docility of their employees, and, cheapest of cheap philanthropy, “to cost nothing.”

At a time when the Capitalists are incessantly crying out for “more trade,” “greater efficiency,” “reduced costs,” etc., with, of course, the illusionary bait of ”more work” to appease the swelling numbers of the workless, it is significant to note the effect of these master class desires when put into operation :—

  “There has been a saving of £55,000,000 in the wages bill of the railway companies since 1921. . . . Mr. Thomas remarked that, as there was a greater volume of traffic dealt with on the railways with a personnel of 50,000 less, that would obviously indicate more efficiency.”— (Daily Chronicle, 17/11/23.)

Nor is that by any means the final word in economy, for the amalgamated companies propose further improvements by way of automatic signalling, electrical luggage trolleys and conveyors, the elimination of the army of railway ticket punchers, examiners and other officials by improved methods for the issue and cancellation of tickets, etc. Commenting upon these innovations, the same report says :—

  “These will be gradually carried out. The introduction of new labour saving and safety devices will mean big reductions in the railway staffs.”—(Daily Chronicle, 24/10/23.)

Could the brutal nature of Capitalism be more plainly revealed than in these few facts.

These Foolish Things: The Age of Leisure (1996)

The Scavenger column from the May 1996 issue of the Socialist Standard

The Age of Leisure

"The holiday home was buzzing with the sounds of the modem cottage industry— faxing, computing, phoning . . .

Technology, once hailed as the liberator of the work force, has become an insidious thief that steals scarce holiday time. Laptops, phones and faxes are readily transportable, available at hotels, airports and on some planes. Holidays can all too easily turn into the virtual reality' of a day at work.

Rob Donnelly of the Confederation of British Industry, says: “More people in management roles are seriously eroding their free time. There’s a cult of irreplaceability that says, ‘As long as I keep my place. I’ll have a job”’ 

Mail on Sunday, 4 February.

Competition will cost £320 million

“Government plans to introduce full competition into the electricity market from April 1998 suffered a setback last night after warnings that an expensive new system for trading power was unlikely to be ready in time.

The committee governing the electricity pool—the wholesale electricity market—warned that a new £250 million computerised trading arrangement would need to be phased in and said it remained unclear how this initial price tag plus the annual running costs of £70 million would be met.”

Guardian, 21 December 1995.

On the scrap heap

The research will confirm “the significantly raised mortality of the unemployed in comparison to all men of working age,” according to tire 1996 edition of Social Trends—the bible of official social statistics . . . In 1990, analysis of an Office of Population Censuses and Surveys study which is tracking a sample of more than 500,000 people drawn from the 1971 census, showed death rates were 37 percent higher than average among men seeking work during the period 1971-81. 

Guardian, 25 January.

If you can pay

“Doctor John Stanford is about to realise a dream. It began in a swamp in Africa and it could result in a medical breakthrough that would rank alongside Sir Alexander Fleming’s discovery of penicillin . . . Skin tests carried out in Nepal, India and Burma revealed that somehow the harmless mycobacterium vaccae worked to stop the terrible tissue destruction effects of TB . . . The company in which John and Cynthia Stanford, Professor Rook, UCL and Eric Boyle retain a major share holding now has a capital value of £70 million ... if [the team at UCL] is right, a lot of people will make a lot of money. But, far more importantly, the world could be freed of the terrible threat of TB. . . “ 

Lorraine Fraser, Mail on Sunday, 25 February’.

“City delights at good round of job cuts”

"It is one of those paradoxes. While most ordinary people get upset at job losses, the highly paid young men and women in the City'—assuming they aren’t the ones being downsized—love them. Job cuts, they argue, enable companies to become more competitive, streamlined, “leaner”, helping improve profitability and dividends. On the wider front, they are also good for the economy as they also help keep down wage inflation. It was for this reason that yesterday’s move by United Utilities, to trim its workforce by a further 1,700, was so welcome in the Square Mile. The shares shot up 14p to 611p, after Wednesday’s 19p jump, as analysts smacked their lips in expectation of chunky dividend increases. One, who wisely asked not to be identified, summed it up this way: ‘The cost reductions are greater than expected, and that’s very good news, really exciting’” 

Guardian, 29 March.

The Scavenger

Mr Cube The Economist (1951)

Tate & Lyle's Mr. Cube

From the April 1951 issue of the Socialist Standard

Tate &  Lyle, Ltd., have recently had a large size advertisement appearing in the daily press. The advertisement consists of a series of cartoons entitled, “Where all the money went in 1950.”

It is an attempt to show that out of a gross income for the year amounting to £84,435,000 only £618,000 was left for net dividends to stockholders, equal to 1/7 of a farthing for each pound of sugar sold.

The advertisement states that, “ Tate & Lyle, Ltd., employ 8,500 workers.” If you divide the net dividend of £618,000 by the 8,500 workers you find it amounts to over £72 per head.

Taxation on profits amounted to £1,228,000 which again divided by the number of employees equals over £144 per head. This is used for running the capitalist state machine.

The total profits before taxation amounted to £2,196,000, wages and employees benefits totalled £3,700,000 which with the so called Prosperity Sharing Scheme made a total of £3,818,000 paid to the workers.

This can be expressed as £2,196,000 Unpaid Labour over £3,818,000 Paid Labour.

The rate of Surplus value being just over 57 per cent.

This is being generous to Mr. Cube, as one cartoon states that “£1,770,000 went in overheads and special expenses which includes money spent in self-defence.”

Special expenses can cover a multitude of sins. (One of them is the advertisement). One thing that can be certain is that the workers produced the wealth for these expenses.

The series of cartoons can easily mislead workers who do not look into the figures closely, however the expression unpaid labour over paid labour clearly shows why Mr. Cube takes such an interest in economics. —He is a bright little chap.

D. W. Lock

Blogger's Note:

Mr. Cube (see the above illustration) was a genuine cartoon character devised as a clever and effective company propaganda ploy by Tate & Lyle against the Labour Government's supposed threat to nationalize the British Sugar Industry. More details on this obscure bit of British political history can be found at the following link, Mr Cube the sugar lump.

Cooking the Books: Profitability (2012)

The Cooking the Books Column from the February 2012 issue of the Socialist Standard

Every quarter the Office for National Statistics (ONS) publishes figures for the ‘profitability’ of UK non-financial companies. The latest are for the third quarter of 2011. They showed that the “net return on capital employed” for all companies was 12.9 percent. For manufacturing it was 5 percent, for services, 15.9 percent and for North Sea oil and gas companies, 60.5 percent.

Over the last ten years the annual average has been around 16 percent for services and 9 percent for manufacturing.

Why the difference between these two sectors? Surely, according to the way that the competitive profit system that is capitalism works, capital should flow out of manufacturing and into services until the rate of profit is the same for both, as Marx explained in the section of Volume III of Capital on the averaging of the rate of profit.

The explanation lies in the fact that the rate of profit used by the ONS is not the same as in Marx.

There is no problem with the definition of ‘profits’ which are defined as “that part of a company’s income which arises from trading activities” less depreciation but “before payments of dividends, interest and tax”. It’s “capital” that is the problem. Here’s how the ONS calculates ‘profitability’:

 “Profitability is defined as the net rate of return on capital employed. That is, it is the value of profits (allowing for depreciation) divided by the value of fixed assets (allowing for depreciation) and inventories.”

In other words, “capital” is defined as fixed assets, i.e. buildings, machinery, office equipment and the like, or “fixed capital”. But this is not the only part of capital as it excludes “circulating capital”, i.e. the capital invested in what is entirely used up in the course of production (material, power, labour).

Marx divided capital in another way. That part whose value was only transferred, whether wholly or gradually, to the product (which he called “constant capital”) and that invested in employing productive labour (which he called ‘variable capital’ because, besides transferring its own value, it added new value).

So, the rate of profit in Marx is the ratio between profits and total capital while the ONS’s rate is the ratio of profits to fixed capital only. This is not even how companies calculate their rate of profit and its only usefulness would seem to be to record short-term variations in profits.

The different rates that the ONS formula results in for service and manufacturing companies does, however, neatly illustrate another point Marx made.

Marx argued that because the tendency under capitalism was for constant capital (mainly fixed capital) to increase more than variable capital (productive labour) – in economic textbooks, ‘capital intensity’ – and because variable capital alone generated profits, there was a tendency for the rate of profit to fall. This could be shown mathematically but wouldn’t necessarily happen in practice since there were counter-acting tendencies, notably an increase in the exploitation of labour and the cheapening of fixed capital.

Since manufacturing is more ‘capital intensive’ than services, if you compare profits to fixed capital you would expect this ratio to be less in manufacturing. Which is precisely what the ONS figures show.

How explain, then, the huge ‘rate of return’ on fixed capital in North Sea oil and gas which is a more capital intensive industry than most? It’s that most of their ‘trading profits’ are ground rent rather than profits proper.

Oil and gas have the same price on the world market wherever they are extracted but the difficulty and so the cost of extraction varies depending on geological conditions. The price is set by the most costly oil and gas fields, which means that the less costly ones get an extra, windfall profit that is actually ground rent. In Saudi Arabia and the Gulf States it goes to enrich the despots there. In Russia, it has created oligarchs. In Britain, it is largely taxed away by the government.

Danger: capitalism at work (1988)

From the March 1988 issue of the Socialist Standard

"The Conservatives were the first government to act on the issue although the dangers had been known for 15 to 20 years" declared Francis Maude, Minister of Consumer Affairs, in the House of Commons on 13 January. He was referring to the government's intention to bring in legislation to ban inflammable foam furniture from the beginning of March 1989. In trying to score a point off his Labour critics the Minister avoided having to answer the real question: if the dangers had been known for 15 to 20 years, why wasn't anything done before?

The short answer is: because we are living in a capitalist society where furniture, like everything else, is not produced for use but for sale on a market with a view to profit. If satisfying the need for it was the sole reason furniture was produced, then the problem of having to ban the use of inflammable foam or any other dangerous material in its manufacture just wouldn't arise. Only furniture that was comfortable, solid and safe would be produced. But under capitalism the main reason furniture is produced is not to satisfy needs but to make a profit. Of course what is produced has to have some minimum use, otherwise it would not sell, but safety is a secondary consideration especially if catering for it will increase the cost of production.

Profit is the goal of production under capitalism. It is why production is undertaken and is what every firm, whether private or state-owned, must seek to obtain. Profits are created in the process of production in the form of surplus value and represent the unpaid labour of the producers, the value of what they produce over and above what they are paid as wages. Profits, however, are realised — converted into money (the form in which they really are profits) only on the market when the products in which they are embodied are sold.

All firms are therefore engaged in a competitive struggle to sell their products, precisely in order to realise the profits that are embodied in them. To succeed in this struggle they must be competitive in the sense that their production costs must be low enough to allow them to sell their wares at the going price and at the same time make enough profits to be able to invest in more up-to-date cost-reducing equipment. Competition can oblige all firms to run fast just to stay still. To remain in the race for profits, firms must stay competitive and to stay competitive they must continually increase productivity; to increase productivity they must make profits and accumulate them as capital invested in new. more productive equipment.

The furniture industry is no exception to this rule but. as an industry producing overwhelmingly for sale to wage and salary earners, it has an interest in keeping its prices low, not just through increased productivity but also through keeping the quality low too. The consumption of wage and salary earners is limited by the size of their wage packet or their salary cheque, so they are under constant financial pressure to go for the lowest-priced furniture on sale. This means that when there are two pieces of furniture on offer it will be the one with the lowest absolute price rather than the one with the lowest price-quality ratio that will tend to sell the best. In other words, the furniture industry is one of those industries that can make more profits by selling a large amount of low quality, low-priced goods than by selling a small amount of higher quality, higher-priced goods.

It is clear that in this situation, arising out of the competitive nature of capitalism combined with the restricted incomes it imposes on wage-earners, if no controls exist then furniture manufacturers will use the cheapest material in the manufacture of their goods even if this material is dangerous to the user. This is not contested by people in the trade; indeed, it is taken for granted, as can be seen from recent comments by them in the press.

A safer foam material has been available for some time but has not been used in all furniture because it is more expensive than the dangerous foam. The marketing manager of Dunlopillo, a firm that can produce the safer type of foam, was quoted as saying: . . .

  the [furniture] manufacturers are in a cut-throat business. They won't ask for more expensive foam unless they have to (Independent, 6 January 1988).

A similar view was expressed the next day by the merchandising director of Harris Queenway, the furniture retailers:

  We are in a commercial world. I still have my doubts whether the public will buy the safer furniture. They seem more affected by price and comfort (Independent, 7 January 1988).

After March 1989, if the government's legislation goes through, only the safer furniture will be available in shops. Before supporters of capitalism cite this as an example of how conditions under capitalism can be improved by reforms, they ought to reflect on the fact that, on the minister's own admission, nearly 20 years went by between the discovery of the danger and the banning of the incriminated material. In the intervening period hundreds of people have died unnecessarily, including the 12 over Christmas — without whose deaths ministers would have gone on giving for even more years the same reason for doing nothing as that given by one of their predecessors in 1980: "Alternative fillings would lead to soaring costs in the production of furniture”.

Even if some legislation to protect people's safety and health is eventually enacted, the long delay in reaching this stage is in itself proof of the inherently anti-social nature of capitalism in which it is normal that profits should come before safety. What has happened in the case of dangerous foam in furniture is the general rule every time that some issue concerning people's health or safety arises under capitalism. Two members of the Green Alliance environmental lobby group give us another recent example:

  In 1976. the Royal Commission on Environmental Pollution recommended changes in our air pollution regulations. Six years later, the Government agreed to consider these recommendations. After a further four years it published a consultation paper. Shortly after the election, however, it announced that there was no parliamentary time for legislation (Independent, 13 January 1988).

Legislation will no doubt eventually be passed, perhaps in time for a minister to declare "our party was the first to act on this issue although the measure to protect people's health had been recommended for 15 to 20 years".

Its exactly the same story with regard to water pollution. In 1975 the EEC Commission proposed a Common Market framework directive "on the quality of water intended for human consumption". Five years later, in 1980, the EEC Council of Ministers adopted the directive, giving Member-States two years (to 1982) to incorporate it into their national legislation and a further three years (to 1985) for the higher standards to be applied. The directive, however, also allowed for exceptions and for a longer time-limit for compliance if justified. The higher standards, which in any event represent only the minimum that scientists consider should be done to reduce the danger to health, have still not been applied in Britain. The British government has in fact invoked one of the exception clauses to request a delay in implementation until 1989.

Among the substances whose presence in water is to be controlled are nitrates. These chemical substances have been linked to stomach cancer and to the “blue baby" syndrome. They get into drinking water through some of the artificial fertilisers farmers spread on their land to increase yields — to be able to stay in the race for profits — being leached off by rain into water supplies. The problem is particularly acute in East Anglia. The National Farmers' Union are demanding compensation for the "loss of competitivity" that will result if restrictions are imposed on their use of nitrate fertilisers.

That water supplies have been polluted by artificial fertilisers has been known for many years but nothing much has been done about it until now because, as the NFU rightly points out, to do so would have reduced the competitive power of farming firms which, like all other firms, are in business to make profits rather than to supply useful things. This is a classic example of the environment being polluted as a consequence of the competitive struggle for profits.

Another dangerous farming practice has been the use of anabolic steroids to fatten up cattle for sale. These stay in the meat and are still there when it is eaten by humans, and so get passed on to us. As a result of a scandal a few years ago, a ban on the use of these hormones for this purpose was adopted and came into force in Common Market countries on 1 January 1988. Once again complaints about loss of profits have been made, revealing why they were employed in the first place. Michael Leathes, secretary-general of Fedesa, described by the Times (24 December 1987) as "an animal health association funded by the European animal drug manufacturers", stated:

  The ban will result in the loss of about 10 per cent extra bulk in an animal that a farmer would expect from using previously legitimate implant steroids — that effectively kills his profit.

Some of those involved in the administration of capitalism are very well aware of the limitations that the operation of its economic laws impose on what can be done to reduce the danger to health and to the environment resulting from current farming practices. Consider the following statement by James Kerr, Head of the Farm and Countryside Service to the Northern Ireland Department of Agriculture:

  While it is right and proper that environmental considerations should be given much more attention than in the past, it must be not be forgotten that farmers are in the business of producing food and unless they can do this efficiently they will not be able to compete in the marketplace and will go out of business. Such a situation is clearly not in the interests of either farming or conservation. Farmers must therefore continue to take advantage of new developments in technology to remain viable (Europe in Northern Ireland No 38. December 1987).

It is not that all new cost-reducing techniques are necessarily more anti-ecological than the techniques they replace but simply that the effect on people's health and on the environment is not the deciding factor in their adoption, as it would be if the aim of production was to provide for needs rather than to make profits.

It is true that in the end capitalism is forced to take some account of these considerations but only after the damage has been done — after some source of water has been polluted. after people have died or had their health damaged — and then only to the extent that the damage done raises production costs, either directly or through reducing the productive efficiency of wage-earners, to a level where it becomes less costly to take steps to reduce pollution than not to do so.

Too little, too late is neither a rational nor a satisfactory approach to protecting the environment and people's health and safety but it is the very most that the rigid economic laws of capitalism will ever permit.

Adam Buick

Cooking the Books: A Thirst for Profits (2015)

The Cooking the Books Column from the April 2015 issue of the Socialist Standard

A study has confirmed that you can bring a horse to water but you can’t make it drink. Or, rather, its modern equivalent that you can reduce interest rates but you can’t make capitalist firms invest.

The study, published last year by three US business studies academics, found that over the period from 1952 to 2010 there was no consistent relationship between interest rates and corporate investment. Corporate investment did not go up when interest rates were low and did not go down when interest rates were high (LINK).

So, what did influence business investment? ‘It turns out’ said the press release on the study, ‘that healthy profits and stock prices are the strongest predictors of corporate investment.’ To Marxian socialists this is rather obvious: the capitalist economy is driven by the quest for profits; so capitalist firms invest when they consider that their investment will bring them a profitable return; an indication that good profitable investment opportunities exist will be that the economy is growing and that firms are already making good profits. Or, as the press statement reported the lead author saying:

  ‘“What corporations really respond to is what sort of profit outlook they face, and the general environment for growth,” Kothari says, noting that investment also closely correlates with gross domestic product growth. Practically speaking, the results make sense in that companies have more money to invest, more investment opportunities, and more pressure to spend from investors when things are good; all those factors dry up when the economy slows down.’

But there is a downside to this, as the study also found. When the profitable investment outlook is good, capitalist firms act as if this is not going to stop, with the result that they come to invest too much in relation to market demand, so provoking an economic downturn and a consequent fall in profits and profitable investment opportunities:

  ‘The research reveals that corporate executives have their own foibles, including a propensity to over-invest at exactly the worst time in the economic cycle. While profits and stock prices rise before a spike in corporate investment, both decline almost immediately afterward.’

The authors are at a loss to explain this apparently irrational behaviour:

  ‘The main reason for the negative relationship between capital expenditure spikes and business performance, Kothari believes, is a behavioural one: irrational exuberance. “As stocks and profits go up, corporations keep investing,” he says. “But rather than stopping at an appropriate point in time, they go a bit too far. If they had stopped at the right point, it could have been great.”

But is this behaviour – keeping on investing while the prospects for profit-making are good – really irrational? Capitalist firms are all competing against each other for profits. For one firm to stop investing when the profit-making outlook is good would be to risk letting its rivals take a share of its potential market. It is that that would be irrational.

In any event, how could capitalist firms know when to stop investing and, if they did, how could they reach a collective decision to all do this. Given the anarchy of capitalism they can’t do either. Once a capitalist horse has started drinking you can’t stop it.

Boom Without Bust: John Major dreams again (1994)

From the November 1994 issue of the Socialist Standard

The present phase of the trade cycle in Britain is one of partial recovery and according to the Prime Minister this will stretch into long-term prosperity with recessions consigned to history. Under the headline “Major forecasts boom without bust”, he was reported as saying “Britain is at an historic turning point. This is a broadly based recovery set to last. The overall direction is clear. Britain is on course for long term economic recovery” (Independent, 20 September). Yes, we might say, we’ve heard it all before.

Major’s remarks are not made more convincing by his idea that a prime cause of recessions is inflation. Hence his stated determination to keep it down. “We are going to take no risks whatever with inflation,” he said. But most of the 19th century and early 20th century' were marked by regular boom and bust with no inflation at all. It appears that Major is trying to talk up confidence whilst having little understanding of the causes of boom and slump.

Marx not Major

It is doubtful if Major would ever bother to consider Marxian theory, which is a pity because if he did he would learn a lot. This knowledge wouldn't help him in his job but he would at least be better informed. In fact, present economic trends are entirely predicted by Marxian theory which states that "capitalist production moves through certain periodical cycles. It moves through a state of quiescence, growing animation, prosperity, over-trade, crisis and stagnation". It appears that at present we are in a phase of “growing animation” and, contrary to what Major thinks, this will eventually lead to further crisis and stagnation.

Marx also described the circumstances which generally cause one phase of the cycle to move to the next. For example, during a boom, industry and manufacture work flat out with each enterprise trying to capture as big a share as possible of the markets for its products. Inevitably, in search of further profits, this scramble leads some industries to produce too much for their markets and this leads to unsold stock; output is reduced and workers are sacked. Then, if the cut-backs are deep enough this spreads to other industries and this may cause a downward spiral of decline in which millions of workers become unemployed.

But just as a boom creates the conditions for crisis and recession so does the reverse eventually happen. The conditions of recession bring back the opportunities for renewed profit-making and growth. Many businesses go bankrupt and their stocks and equipment are bought up cheaply. This reduces competition. Those that survive are re-structured with fewer workers working harder for the same or less wages. Prices come down, or rise less quickly, productivity increases, interest rates are lowered and all these factors combine to improve the prospect of profit-making.

After a period of growth in the late 1980s the crisis struck in 1990 and, after two years of decline, the Central Statistical Office dates the trough, or the last low point of the cycle, as April 1992. All this took place under a Tory government so what happened then to their alleged powers to sustain growth? Since 1992 a range of factors which also have got nothing to do with so-called government management have come into play and tended to reverse the downward trend.

Profitability restored

The amount spent on wages and salaries to produce each unit of manufacturing output was 5.3 percent lower in May 1993 compared with May 1992. This was the biggest one year fall since records began in 1970. Output per employee in manufacturing was 5.5 percent higher in June 1994 compared with June 1993 whilst workers average nominal earnings were only 3.75 percent higher over the same period.

Interest rates fell. During 1992/3 base rates fell from 15 percent to 10 percent, then after returning briefly to 15 percent fell down to 6 percent after Britain left the ERM.

Output increased. National output rose by 1.1 percent during the second quarter of 1994 and in May 1994 industrial production was almost back to the pre-recession output of June 1990.

Profits increased in some sections, not least in banking. For instance the Hong Kong and Shanghai Bank, owner of the Midland, paid out less than expected for bad debts during the half-year to June 1994 and increased its profits by almost 25 percent to £1.5 billion. ICI gained half-year pre-tax profits up to June 1994 of £234 million, an increase of 40 percent. Hanson, the industrial conglomerate reported a 26 percent rise in pre-tax profits to £965 million over the same period.

With the unemployment figures discredited because of political manipulation, it is difficult to get an accurate picture but, to date with employed workers producing more and working substantial overtime, industrial growth has not resulted in a proportionate fall in the unemployed. Officially, the present figure is about 2.5 million.

According to governments, when the economy is in recession it is caused by factors which are beyond their control, but then when growth is resumed they claim the credit. They are right only in the first instance. The alternate phases of boom and bust are normal features of the capitalist system which operate both ways in varying degrees according to the circumstances of any given time. The only prospect for workers is that it goes on and on grinding through its cycle of exploitation.

Behind the particular features of boom and bust already mentioned there is a general cause which is the nature of capitalist production itself. In previous societies, what mainly happened was that productive resources were used to their full capacity and what was produced was distributed. Under capitalism goods take the form of commodities for sale on the markets and this means that the distribution of goods is limited to what can be sold and in turn this limits what is produced. The process is chaotic with rival capitalists producing for shifting markets never knowing what the market will buy. For example, in Britain 48 rival car-makers are selling cars and no-one knows what the capacity of that market will be at any given time. They are engaged in a scramble to get the biggest share of whatever is going. It is inevitable that, eventually, too many cars will be produced and it is at this point when things begin to spiral down.

The only way to end the boom-bust cycle is to abolish the capitalist system and replace it with socialism. Instead of the market determining what is produced, the community will decide this as part of caring directly for the needs of all its members. Unemployment, exploitation, profit-making and all, the destructive effects of boom and bust will be impossible. In their place, with production solely for needs, the community will be able to use all its productive resources in line with its policy decisions. This is what socialists mean by democratic control. 

Pieter Lawrence

Profit vesus Humanity (1968)

From the November 1968 issue of the Socialist Standard

It will come as no surprise to anyone who has a working knowledge of industry that in the last three years industrial accidents have been on the increase;

No. of industrial                                  No. of days lost
accidents                                                        (millions)
1965 851,200                                   1965 21.78
1966 896,700                                   1966 23.29
1967 938,100                                   1967 24.25
                                                                          (Safety Sept. 1968)

Safety publishes these figures in a vain attempt to persuade the government to set up a Royal Commission to inquire into their causes. Why they should push for a Royal Commission, which is usually a government way of sweeping the dirt under the carpet, is unclear.

The publication of the number of production days lost, and the “cost to Britain", demonstrates the angle from which the British Safety Council approaches these matters. It is also the way the mind of the capitalist works, in fact it is the criterion of capitalism," Cost against Cost".

The cost of a strike against the cost of the wage increase, the cost of a trade blockade against the cost of the loss of sympathy of African governments with respect to the racist policy of Rhodesia, the cost of the loss of production hours in accidents against the loss of production if workers slow down and watch the safety angles.

One thing no government bothers to consider is the human cost: death, pain, suffering. These are things that are so much a part of the way of life of the capitalist system that very few people seem to care any longer. The old. the infirm, the poor, even the starving children seem just an embarrassment, “What can we do about it anyway?", is a remark you often hear.

Why are workers so short sighted? Why can they not see that tomorrow it might be them stretched out on a hospital bed, wondering how the missus is going to manage on sick pay? After all, with all of our cars, fridges, and tellys, we are only as secure as our next wage packet. It is a plausible explanation that workers expect to be cheated, so that when Socialists come along with a straight forward proposal then they feel that there must be a catch somewhere.

To the Socialist it all seems so simple: society is divided into two classes, and the motive behind production is exchange with a view to profit for the owning or capitalist class. All things are sacrificed to this “God" of profits: the safety of workers, the children of Biafra, the Czech workers, the people of Vietnam.

Yet when you think of Socialism, and all the possibilities for humanity within that way of life, where the only criterion of living will be human comfort, we are left asking such organisations as the British Safety Council: 'why waste your time? If you are really concerned with human safety instead of trying to convince Wilson that the cost of safety is less than the cost of accidents, join with us to introduce a way of life where all of us will have free access to wealth, and guiding principle will be human well being'.

Of course we realize that we are appealing in vain, for these organisations are part of the capitalist system themselves, their terms of reference are within the system, and because of this they are quite useless for solving the problems they raise. Every bit of misery that capitalism creates will bring into being a reformist organisation, and so we get a fragmentation of the revulsion that human beings feel when they see any form of suffering. This is of benefit only to the capitalist class, because it diffuses the concern over these problems that is in most of our minds, and prevents most workers from seeing that they have an origin.

Who is worse? The person who seems indifferent to suffering, or the Christian who sees suffering but misdirects our attention to God, and gets us all to sit down waiting for divine intervention? For in both cases the suffering continues.

Even worse perhaps is the person who gets some personal satisfaction from treating the outcome of such suffering, and never gets down to asking what could be the cause.

It is the socialist contention that only when we eliminate the profit account can mankind really deal with the human suffering that goes on in the world today. After all so much of it is down to the economic cost factor, the need for capitalists to produce quicker and therefore cheaper than their competitors, and then to the competition for markets, sources of raw materials and places of strategic importance, that we really can condemn capitalism for murder.

Terry Lord