The Town and Country Planning Bill (1947)

From the March 1947 issue of the Socialist Standard

“A man will no longer be able to buy farmland at £200 an acre in the hope of reselling it as a factory site at £600 an acre. True, it will be worth more as a factory site—but the State, through a Central Land Board, will collect all or most of the difference” (Daily Herald, 8/1/47).

Thus the Labour Government carries out a longstanding demand made in the interests of the industrial capitalist. H. M. Hyndman, in his “Economics of Socialism,” dealt with this. After reviewing the Ricardian theory of rent and the many objections which present themselves to that theory, he wrote: —

“It seems, therefore, that a wider definition of the rent of land under Capitalism is needed than that, given by Ricardo, and the following is suggested: Rent of land is that portion of the total net revenue which is paid to the landlord for the use of plots of land after the average profit on the capital embarked in developing such land has been deducted.”

On the question of confiscating rent he pointed out that it “would not affect the position of the working portion of the community unless the money so obtained were devoted to giving them more amusement, to providing them with better surroundings and the like. . . . In fact, the attack upon competitive rents is merely a capitalist attack. That class sees a considerable income going off to a set of people who take no part in the direct exploitation of labour; and its representatives are naturally anxious to stop this leakage, as they consider it, and to reduce their own taxation for public purposes by appropriating rent to the service of the State. That is all very well for them.”

On this point Marx says: —

“We can understand such economists as Mill, Cherbulliez, Hilditch, and others, demanding that rent should be used for the remission of taxation. That is only the frank expression of the hate which the industrial capitalist feels for the landed proprietor, who appears to him as a useless incumbrance, a superfluity in the otherwise harmonious whole of bourgeois production.” (“Poverty of Philosophy,” Kerr edition, 1920. Page 176.)

“Rent,” says Marx, “results from the social relations in which exploitation is carried on. It cannot result from the nature, more or less fixed, more or less durable, of land. Rent proceeds from society and not from the soil.” (P. 180.)

(The above quotations are used by H. Quelch in his Introduction to Marx’s “Poverty of Philosophy,” Kerr edition, 1920.)

Horatio.

50 Years Ago: Taxation of Land Values (1984)

The 50 Years Ago column from the October 1984 issue of the Socialist Standard 

Marx's writings clearly indicate that land owning as a dominant social status declined with the final breakdown of feudal society and the imposition of capitalism on its ruins. The industrial capitalist, employing many hundreds or thousands of workers, has supplanted the feudal over-lord. Today the workers enter the spheres of production, etc., not merely on "the land", but in vast factories or mills where they are exploited by the owners of giant machinery and the various appliances necessary to the output of wealth. The immediate employer or capitalist is the exploiter of the workers he engages. He has to hand back to them, in the form of money—wages only a portion of the value of their product. The remainder is his own property immediately considered; but. as is well known, he may not own the land or the factory where his production takes place, hence he is compelled to pay rent for the privilege of using these to their owners. From out of what does he pay? Answer, out of the unpaid labour of the workers. From the surplus left over after the wage bill of the workers has been met, a portion of the wealth may be handed to the landlord, and still another portion to the lender of money.

But where, however, our capitalist owns his own factory site and does not have recourse to loans of money whereby interest charges have to be met. he takes and holds the surplus himself. The all- important point to the workers is that no matter which position applies, it would not matter a brass farthing to their position as an exploited class.

Even were it possible to tax the holders of land out of existence, as the land tax advocates insist, it would solve no problem towards social ownership, such as we Socialists are seeking to establish. 

(From an article Socialism and Land Ownership by R. Reynolds. Socialist Standard. October 1934)

"Capitalism's Big 3." (1927)

From the November 1927 issue of the Socialist Standard

Blogger's Note:

The cartoon is unsigned but there was a William Cameron cartoon that appeared in the December 1927 issue of the Socialist Standard.

Economics: Theory of Rent (part 1) (1975)

From the March 1975 issue of the Socialist Standard

Carved in stone above the Royal Exchange in the City of London is the Biblical legend “The earth is the Lord’s and the fullness thereof”, to which we reply “The earth is the landlord’s and the rent therefrom”. In the same Biblical strain we add “And he reaps where he does not sow”.

The ancient forms of rent paid to a feudal lord, or lord of the manor, or to the Church, were usually levied in kind, and met either by the supply of a portion of the produce from the land, or by performing unpaid labour on land belonging to these groups. These old social relations of feudal society have been replaced with other higher social relations of production associated with the land and its capacity to attract rent. Land use, including agriculture, has been specifically adapted to the needs of capitalism. The vast bulk of society’s food is obtained from the land, and takes the form of commodities, i.e. articles produced for sale and profit. Consequently agriculture is under the domain of capital.

Rent is the money tribute levied by one section of society (landlords) against other sections for permission to use certain portions of the globe which they (landlords) have appropriated and monopolized to the exclusion of others. To grow food, to build houses, factories, shipyards, etc., a ground rent must be paid to the owner of the soil. Private property of land, and this includes land owned by the State, is a prerequisite for extracting rent. History is full of instances as to how the rural labourers were driven off the land by force, bloody violence, threats of imprisonment and deportation, as in the case of the Land Enclosures over the last few hundred years. The fact remains that permission even to inhabit the earth has to be obtained from a group of rentier parasites who monopolize it. Ground rent is surplus-value which has previously been extracted from the working class. Whether this is paid to private individuals, the State or the Church makes no difference. It is an element in the overall economic organization of capitalism.

Land has no value — that is, it contains no socially necessary labour, the source of value. The labour of society has not participated in its creation. It cannot be reproduced, and is therefore not a commodity. Not being a commodity it does not have an exchange-value, and consequently does not contain surplus-value. Surplus-value comes from unpaid labour, and as no labour at all has gone into its creation it cannot contain value. Land has use-value as have commodities generally, but whereas you can have use-value (the utility of a thing) without exchange-value (price), you cannot have exchange-value without use-value. The landlord cannot sell non-existent commodities; the service he provides is the service of rent collection.

It is obvious that land is bought and sold both as building plots and agricultural land. To that extent it assumes the commodity form. Capital can be fixed in the soil either through the erection of buildings, land improvements like ploughing, drainage and fertilization, mining and quarrying operations etc. This capital forms part of the labour of society generally and does not spring from the soil. The capitalist farmer produces wheat etc. in the same way as the capitalist manufacturer produces other commodities. They differ only in the element in which their capital is invested. Their capital, like all other, qualifies for the average rate of profit, and if needs be can move from one sphere of production into another.

Capital fixed in the soil — plant, factories, office-blocks etc., as with capital elsewhere, would be entitled (under the laws of capitalism) to attract interest, but strictly speaking this is not the same thing as ground rent, which is specifically paid for the use of the soil and for permission to fix the capital in it in the first place. Unlike machinery and industrial plant which wears away and has to be replaced, the land (apart from natural catastrophe) with normal care and attention, fertilized and drained regularly in the case of arable land, or developed with office blocks and shopping precincts, continues to improve. To that extent it can attract a higher price for its use in the form of ground rent, or fetch a higher price should the landlord decide to sell it. The price of land has nothing to do with its value, which is nil. The price of building land depends purely on the oscillations of the market, or competition between buyers and sellers.

The location of the land is a very important factor in this competition. Land required for building in a big commercial centre like London will fetch a higher price than land elsewhere. With agricultural land the position is somewhat different, but the monopoly of the land owner is a major factor in the determining of the final price in both cases. Obviously good agricultural naturally-fertile land which can yield 2 tons of grain per acre would fetch a higher price than land of lesser quality which would only produce 30 cwts of grain per acre. The rent charged for the use of these lands would vary, and bear some relation to their yields.

Certain vineyards in the Bordeaux/Medoc area — Pauillac, Pomerel, etc. because of certain chemical properties in the soil, are able to produce fine wine. Other vineyards which lack these properties in the soil are unable to produce such fine wines, although the same amount of useful labour has gone into their production. The finer wines and lesser-quality wines contain, broadly speaking, the same amount of useful labour, but there is a considerable difference between the price of a bottle of Chateauneuf de Pape from the Rhône  valley, and a bottle of Chateau Petrus or Chateau Lafite from Pomerel or Pauillac, as any wine-drinking capitalist will tell you — at £5 per bottle this is hardly a worker’s tipple.

The difference in price does not arise from the labour involved but purely because of the natural properties of the soil. The owner of land where the vines were grown would be able to charge a higher rent for the use of this land, and the wine producer would have to part with a larger share of the surplus- value to the landlord than would the Rhône  wine producers. Were the fine-wine producer the owner of the vineyards instead of the tenant this would make no difference. In that case, he would pocket the extra profit in his capacity as a landlord and not as a wine-growing capitalist. In any event, before he could become a landlord, he would have to acquire the land from the previous owner, and spend a capital sum in order to achieve this. To that extent, the rent that he virtually paid to himself instead of to the landlord would merely represent the interest on the capital which he had invested in the purchase of the land.

Rent is the way in which land realizes itself economically, and whilst rent itself is not interest (i.e. money paid for the use of capital), it is influenced by the rate of interest, as also is the buying and selling of land. Naturally, market conditions intervene because of the monopoly of landlords (sellers) and the demand from other portions of the capitalist class (buyers), particularly competition for building sites in city centres where any price may be paid. During periods of inflation the price of land will rise with other prices, not only because the value of money has fallen but because ownership of land provides a certain protection against the depreciation of money. The price of farmland rose from approximately £50 per acre in 1949 to £800 per acre in 1973, due to inflation. Prices are now falling. They fell 22 per cent, in the first half of 1974, and are expected to fall to £582 per acre towards the end of 1974. (Farmland market, Farmer's Weekly: The Times 3rd February 1975). Mr. Donald Campbell, editor of the report, said “The market is highly volatile; only a few years ago changes in value were gradual and their range was small.”

Over a period, the yardstick for measuring the price of land is by a capitalization of the rent. That is, by assuming that the rent represents the interest on an imaginary capital. If the prevailing rate of interest is 10 per cent, and the landlord receives a ground rent of £500 p.a., that £500 would represent the interest on an imaginary capital of £5,000. Were the rate of interest to fall to 5 per cent, the £500 p.a. would represent the interest on an imaginary capital of £10,000. The price of land is arrived at under normal conditions by the number of years it would take for the rents to reach the capital sum. In the first case the price of land would be £5,000 i.e. 10 years’ ground purchase. The external rate of interest can and does influence the price of land. During a period of low interest rates, the price of land will tend to rise, and during a period of high interest rates the price of land will tend to fall, without affecting the rent at all. In England particularly, land is usually sold at so many years’ purchase, usually twenty years or more.

A value is therefore conferred on land by circumstances outside, i.e. the rate of interest, and does not arise from the land itself, simply because those who own the monopoly can prevent others from having access except on terms and conditions decreed by them. In this the landlord is joined by capitalists generally who operate in the same way by excluding society at large from access to the means of production and distribution, as well as monopolizing the social wealth. As society develops, and the population increases, and there is a growing demand for land for all purposes, the landlord will share in the fruits of this social progress without contributing anything at all. The industrial capitalists who dominate the political machinery take legislative measures to curb the appetite of the landlord, but you cannot abolish rent without abolishing private property in land, and as this forms the basis of the capitalist system of production, you cannot abolish private property in one sphere and retain it in another.

Private property includes State property, which will be dealt with later.

Jim D'Arcy

Letters: The Profits of Building Societies (1957)

Letter to the Editors from the April 1957 issue of the Socialist Standard

The Profits of Building Societies

A reader (M. H., Monmouthshire), asks about the profits of building societies:—

"The Marxian Socialist position is that Rent, Profit and Interest is derived from Surplus Value. In toe case of Building Societies, however, the Interest paid to their shareholders is obtained directly from the extra monies, over and above the cash purchase price of the property, paid in by the buyer from his wages or salary. How then can it be said that Building Society Profits and Interests are derived from Surplus Value."

Reply:

The answer is that the three items, interest on borrowed money, rent and profits, all come out of surplus value and all surplus value arises out of the exploitation of the workers, the wages they receive being less than the value their labour adds during the production of commodities.

If the individual Capitalist worked entirely on his own capital, owned his own land and did his own wholesaling and retailing he would not have to share the surplus value with the landlord, the banker, the merchant. As he cannot in any event realise the surplus value in the commodities he owns until they have been sold it often suits him to make use of these other agencies, in which case they receive a return on their capital more or less proportionate to the size of their capital; and what they receive is in fact part of the surplus value created in production.

The building society is an intermediary between the builders of houses who want to sell them, not let them, and house buyers who cannot afford to put down the purchase price. The building society makes it possible for the builder to sell his property and get paid at once, and for this the builder gives up to the building society some of the surplus value created in toe building industry. The owners of houses that are not new can also sell with the aid of a building society.

Editorial Committee

Slow Progress of the Socialist Movement

A reader (M. H., Monmouthshire), asks the following:-

If the S.P.G.B. concept of Socialism and Socialist organisation is the correct one and is thus the view which will eventually have to be embraced by workers in all countries, if they are to achieve Socialism, how is it that no other country in the world can show an organisation based on the same Socialist principles as the S.P.G.B.? The questioner is aware of the existence of the "Companion Parties" but notes that these flourish in English speaking areas only, and at best these bodies seem to be no more than tiny discussion groups adhering to the S.P.G.B.

Reply:

It is not easy to understand what exactly our correspondent is driving at. Socialism can only be achieved by the organised political action of a Socialist working class and the factors making for the growth of the Socialist movement operate in all countries. But nobody has ever suggested that all conditions (economic, political, climatic and geographical) are identical in all countries and therefore the growth of Socialist parties must be at identically the same rate everywhere. These present variations are of little importance, and as the Socialist movement grows stronger they will probably decrease since the numerically stronger sections of the international Socialist movement could help the others to overcome some of the difficulties.

Our companion parties are not “tiny discussion groups," but political organisations carrying on propaganda for Socialism and based upon the same principles as the S.P.G.B.

The Socialist Labor Party of America

A correspondent (M. H., Monmouthshire), who is a seaman just back from U.S.A. notes the S.P.G.B. view in an article in the November Socialist Standard that the American workers had no interests at stake in the recent Presidential and other elections and asks:—

Why does this article ignore the existence of a Presidential Candidate put forward by the Socialist Labor Party of America? Since this candidate, together with the other candidates put forward by "the S.L.P. stood for a programme free from social reforms and one which called for the abolition of the wages system and its replacement by a society based on common ownership of the means of living, such a society to be inaugurated by the democratic method and by a class-conscious proletariat, what advice would the S.P.G.B. have given to American workers who felt that their votes should have gone to the S.L.P.?

Reply: 

The article did not refer to any but the Democratic and Republican candidates, for the reason that it was based on reports in the English Press which did not give information about the candidates of small organisations.

Our correspondent gives his version of what the S.L.P. candidates stood for in such terms that the reader of his question may conclude that here were candidates fighting an election on S.P.G.B. principles. With due respect for our correspondent's choice of words in which to describe the S.L.P. platform we, knowing the past activities of the S.L.P., do not suppose for one moment that it really was identical with the S.P.G.B. position. We await from our correspondent (or anyone else who can help) copies of S.L.P. election literature from which this can be verified.

In the meantime may we point out that the S.P.G.B. does not “give advice" to workers how to vote. Those who are Socialists will know how to vote and those who are not Socialist could only vote for a Socialist by mistake and we naturally would do our best to prevent that mistake being made.

Editorial Committee.

Letter: An Anarchist defence of private property (1927)

Letter to the Editors from the April 1927 issue of the Socialist Standard

The following letter has been received from an anarchist reader of the S.S. We append our reply.

There are two Socialisms, one based upon individual subordination and the absolute denial of private property (Marxian and Kropotkin Socialism), the other based upon individual sovereignty and the insistence upon private property (Proudhonian Socialism). Marx attacks liberty—Proudhon attacks privilege. Marx attacks capital— Proudhon attacks monopoly. Marx thought capital was one thing and labour product another. He would abolish wages by confiscating all capital to the State, that is the conscription of all wages and workers— Militarism, Bureaucracy ! Marx said value could not be determined, yet he says that the worker produces four and receives one. How did he find that out? Marx ignored the money question ; like Kropotkin, he was an absolute dud in finance. Marx thought profits, or that part of the product kept back by the employers, was the only means of exploitation worth mentioning, yet profit is simply the difference between what a man buys goods at and what he sells them at. I contend that competition in the supply of a currency divorced from its metallic or specie basis would abolish that difference ! Why, to-day the four hundred millions interest on the National Debt will admit of eighty thousand to live at the rate of five thousand a year, who need not own any means of production or engage in any enterprise, and who can look with philosophic calm on all your strikes and riots as long as the State remains intact ! Why, even Lord Rothermere, through his Daily Mail, has been clamouring for the Government to tax the Channel Islands because Mr. Houston and other millionaires were flying there to dodge Karl Marx, the old Tory tax collector. I shall insist that every trader shall, like the proprietors of theatres, state the amount of tax on each article, including beer, spirits, and tobacco. This will educate the workers and expose the cowardice, hypocrisy, and criminality of your Labour champions and all politicians and invaders. I will conclude with a few questions. (1) Are not the working classes deprived of their earnings by usury in its three forms—interest, rent, and profit? (2) Is not such deprivation the principal cause of poverty? (3) Is not poverty the principal cause of illegal crime? (4) Is not usury dependent upon monopoly, and principally the land and money monopolies? (5) Could these monopolies exist without the State at their back or the sanction of the Government?

Ground rent exists because the State stands by to collect it and to protect land titles rooted in force and fraud, otherwise the land would be free to all and no individual could control more than he could use. Interest and house rent exist because the State grants to their bankers the sole right to monetise the capital and securities produced by the workers, and to issue credits thereon to finance war and to create parasites by endowing churches, colleges, and hospitals, inspectors innumerable, presidents, chairmen and staffs for boards of trade commissions of enquiry, censors for cinemas to see that you get plenty of military and religious dope; staffs for wireless and for ratifying district agreements, with the Labour Party supporting Army and Navy officers as Parliamentary candidates whose interest is, like the lawyers, to increase taxation, and thus ensuring the slavery of the workers by pawning the future products of the workers and their children to the State ! So we have discovered our enemies—the financiers, the State bankers, the currency jugglers are the vipers sucking at the vitals of industry, and the State, the Government, the public trustees are their protectors and co-operators, which only free labour can detach and kill.

Give the workmen their economic independence by giving them free access to the means of life which come without labour, and they will produce and exchange their wealth. As for the usurers and their protectors, stripped of their power to steal, they will have to join the ranks of labour or starve. This is where I stand, and I invite any and all to meet me here and whip me if you can. I should close here, but I must tell you that the Labour Party is the last refuge for bankrupt aristocracies and broken down thrones; hence the riddle of their titled and military members !

T. H. Mahony.

Our Reply.

This is the third letter we have printed from Anarchist individualists, and it betrays the same vagueness and misconception as those from previous correspondents. There is no attempt made to deal with the economic development and tendencies of our time, and no effort is made to show how private property in the great means of production can exist without a rich owning class on the one side and a vast working and non-owning class on the other. The first accusation to be noted is that “Marx attacks Liberty” ! Where does not occur. The only Liberty Marx attacks is the Liberty to rob ! The sheer nonsense of our critic talking of “Kropotkin Socialism” is an example of the general confusion in his letter. Kropotkin opposed Socialism and stood for “absolute individual liberty”—whatever that might mean. Our critic is referred to the complete answer to Proudhon given by Marx in his work, “Poverty of Philosophy.” Monopoly is a direct result of competition and is inevitable under capitalism. The statements made about Marx in the above letter clearly show that Mr. Mahony has never read Marx. Marx shows in “Capital” that the product of labour becomes capital because the product of the labourer is the property of the capitalist and only a portion in the shape of wages is returned to the worker.

Marx did not propose putting capital in the hands of the State, but that the producers should own the means of wealth production in common, and with the abolition of private or class ownership the State would die out.

In the same sentence our critic accuses Marx of advocating the abolition of wages, and then says Marx advocated the conscription of wages !

Marx advocated neither. The gem in the above letter is the statement that Marx says that Value could not be determined ! Actually all Marx’s economic writings— “Value, Price and Profit,” “Wage Labour and Capital,” “Capital,” “The Critique of Political Economy,” and others—all state that value is measured by the amount of labour socially necessary to produce an article.

The joke of claiming that Marx ignored the money question is evident to the merest tyro in Marxian study, for, apart from the “Poverty of Philosophy,” the great three volumes of “Capital” and the “Critique” deal specifically and completely with the money question. Marx alone was able to demonstrate the secret of money and showed the actual part played by money in capitalist economy.

If there is any other source of exploitation but that occurring in withholding the product of labour from the producers, it would be interesting to have it stated.

The crude notion that a metal or specie currency is the cause of exploitation is completely answered by the facts of modern life wherever there is a paper currency. No tinkering with currency or allowing any person to issue it would touch the simple cause of slavery and poverty—the ownership of wealth by a section of the population, and the dependence of the rest upon that section for permission to work and live. If the National Debt was abolished, the workers would be no better off, because they do not pay for the debt, but interest and principal is paid for by the employing class out of the surplus values taken by them in production.

The fact of the Daily Mail clamouring for the taxation of millionaires who try to evade taxation by moving to the Channel Islands shows the truth of our position. The capitalists, having to bear the general expenses of government (out of the proceeds of exploiting the workers), are anxious to make all capitalists contribute.

Taxation does not concern the workers. If there were no indirect taxes at all, the causes of working-class poverty would still remain. The questions asked by our correspondent are easily answered.

(1) Rent, interest and profit are three parts into which the surplus taken by the industrial capitalist is divided. These three forms result from private ownership and can only be abolished when the producers own the means of production.

(2) The cause of poverty is stated in answer to Question 1. Rent, interest and profit are not the fundamental causes, but these three forms of stolen wealth are effects of capitalist ownership of the means of production.

(3) Modern crime is due to the material conditions resulting from class ownership.

(4) Interest is a result of private ownership and is legalised by all capitalist Governments as a useful means of carrying on trade and commerce for them.

(5) The State is not at the back of the Capitalists. The State is the Central Committee of the capitalist class and carries on the executive affairs on their own behalf. All private property society needs a State to rule the subject class and to conduct and regulate the affairs of government in the interest of the ruling class.

Economic independence for the worker depends upon their free access to the land, factories, workshops, machinery, etc., and all other means of production.

But as the modern methods of producing involve large-scale production and associated labour, the means of wealth cannot be owned individually by each worker. They are too vast and beyond the means of any producer. As they must be co-operatively worked, so they must be commonly owned. There is no other solution. Individual ownership by the few rich non-producers, with the resulting poverty of the many—or common ownership by the producers themselves for their own comfort and enjoyment. That is the position our critic has to face.

The evading of this important fact of economic evolution by our Anarchist critics, and the calm assumption that we are living back in the days when means of production were small enough to be owned individually by the producers—these two points make all attempts at much discussion with them futile.

Adolph Kohn

Inflation and the price of oil (1979)

From the September 1979 issue of the Socialist Standard

The recent increases in oil prices announced by OPEC, the cartel formed by some producer countries, are once again providing Western governments with an excuse for not honouring their oft-repeated promise to keep down the general level of prices. As after the Arab-Israeli War of 1973, we are hearing the refrain again, that inflation is caused by the rise in the price of oil.

Obviously we hold no brief for the OPEC cartel, but the fact remains that inflation is not caused, or even aggravated, by rising oil prices. Inflation, as the word’s etymology suggests (inflate = blow up), means, correctly understood, an over-issue or blowing-up of an inconvertible (into a fixed amount of gold, that is) currency. In fact, in the nineteenth century the phrase was often given in full as currency inflation, inflation of the currency.

The inevitable result of over-issuing, or inflating, an inconvertible currency, is a rise in the general price level. All prices rise in the same proportion because, as has often been explained in these columns, issuing more of an inconvertible currency than the economy requires for its transactions is tantamount to reducing its gold content. (All currencies, including inconvertible ones, are in economic reality related to gold, whether or not this relationship is legally recognised in some regulation or Act of Parliament.) If an inconvertible currency is defined as, say, one ounce of gold, and twice as much of it is issued as is required by the economy, then its definition will in economic practice change to being half an ounce of gold. All prices — expressed in units of the currency — will tend to double. This is purely a monetary phenomenon and, since governments have a monopoly in currency issue, one for which governments alone have ultimate responsibility.

Unfortunately, the word inflation has come to be used more and more loosely over the years so that it is now almost a synonym for simply ‘rising prices’. This usage is wrong. Inflation is not rising prices. On the contrary, a rise in the general price level is the result of inflation. The easiest way to grasp this is to remember that the word is short for ‘inflation of the currency’.

Oil Prices
The recent rise in the price of oil is merely a rise in the price of a particular commodity and not a rise in the general price level, which is unaffected by this change. All that has changed is the price of oil relative to other commodities. Those who have been buying oil now have to pay more and, if they want to continue buying the same amount, will have to cut back on their other purchases. No extra purchasing power — no inflation — is created; there is simply a re-direction of the previously existing purchasing power. This re-direction may be a painful process, since it means that demand for some non-oil products is going to fall, with inevitable bankruptcies and sackings in firms which will no longer be profitable enough. But whatever the result, it can’t be inflation, since that depends on the government. (Of course, if governments respond to the recent increase in the price of oil by printing more money to allow non-oil spending to continue at the old level, then the result will be a rise in the general price level, what is popularly called inflation. But the cause will not be the rise in oil prices but the government decision to print more money.)

The economic laws governing the incomes of those involved in oil production are similar to those governing incomes in agriculture as analysed by the classical political economists in the last century. According to their theory of differential rent, the price of an agricultural product like wheat is determined by its cost of production (plus average rate of profit) on the least fertile farmland in use. All wheat, even that produced on more fertile land, sells at this price. This means that tenant farmers of more fertile land make extra profits, which they have to pay over to the landlord as ground rent. The landowners are thus enabled to draw an income without having to invest any capital, let alone having to do any work, purely and simply because they monopolise a portion of the globe’s surface. The oil sheiks and, in other OPEC countries, the State which owns the land under which there is oil, are in the same position. Their royalties are a pure monopoly income paid them for nothing. (A qualification is necessary here: to the extent that they don’t spend all this windfall income in riotous living — and some of them try hard to — and invest a part in oil production, then a part of their income becomes profit, a return on the capital they have invested, and not differential rent. A part of their income, though, is always such rent.)

Since the cost of production of oil is cheapest in the Saudi Arabia area, the sheiks who monopolise the land there get the biggest free income, differential rent, royalty, monopoly profit, call it what you will, quite literally for doing nothing. This explains, incidentally, why Sheik Yamani can afford to be in favour of more ‘moderate’ price increases than some of his fellow price-fixers. All they have to do is to lounge about in their palaces waiting for the money to roll in — just like the landed aristocracy of Britain until the opening up of much more fertile wheat lands in North and South America during the nineteenth century deprived them of this privilege.

Absolute Ground Rent
Marx, in Volume III of Capital, identified another element in the income of landowners over and above differential rent, what he called ‘absolute ground rent'. This was the ransom the landlord class was able to extract from the rest of society — essentially, a diversion of surplus value from the capitalist class to the landlord class — by exploiting its position as the monopoliser of a limited natural resource, land. Such absolute rent can only exist where the landowners are well organised, where in fact they form a compact and relatively small group, as did the aristocracy in Britain in the nineteenth century. Today’s oil royalty owners are in a basically similar position. A relatively small group, the members of OPEC, has been exploiting its monopoly position to extract absolute ground rent from the industrial capitalist world. This is different from differential rent — which will come their way anyway, whether the OPEC cartel exists or not, simply as a result of the normal workings of the capitalist economy — and depends entirely on the balance of forces between the two sides.

As the world’s oil resources are used up, so the cost of producing oil — and hence its value and price — tends to rise in any event, since less productive wells and fields now have to be exploited. As the cost of production of oil rises, so, of course, the differential rent of the oil monopolists falls, an additional reason, no doubt, why the rulers of the OPEC countries are seeking to recuperate the loss of this part of their purely parasitic income by trying to increase the other clement in it, absolute ground rent.

This quarrel between the OPEC rulers and the capitalists of the industrialised world is not one that concerns the world’s workers. For, as our analysis has shown, it is essentially a conflict over the division of the spoils of the exploitation of the working class. When we describe the OPEC rulers as ‘parasites’ it should be clear that they are parasites on the world’s industrial capitalists. Since these latter are also parasites they’re the ones who directly exploit wage-labour for surplus value — the oil sheiks and other OPEC rulers are really parasites on parasites.

What happens to the surplus value the working class produce after it has been extracted from them by the industrial capitalists during the process of production whether or not these latter are forced to share some of the loot with some other group, and how much — does not affect the workers. But it vitally concerns the capitalist class. Which is why they have launched the current press campaign — with its racialist undertones and including the myth that rising oil prices cause inflation — directed against OPEC.

If the rent, absolute and differential, of the oil sheiks were reduced to zero, the working class wouldn’t gain a penny. But the capitalist class would, just as they did following the abolition of the Corn Laws in Britain after 1848 which enabled them to pocket a part of the surplus value which they had previously been constrained to disgorge to the landlord class as rent.

Adam Buick

Letters: Productivity and the Wealth of the Capitalist Class (1958)

Letters to the Editors from the March 1958 issue of the Socialist Standard

Productivity and the Wealth of the Capitalist Class

A reader in Australia (G. Harigen) comments, on statements made at various times in these columns about the small average annual increase of productivity. He asks: "Where did the capitalist class get the wealth they have destroyed in two world wars; millions of tons of shipping, with their cargoes, wool, wheat, meat, everything ruthlessly destroyed, to say nothing of seamen and soldiers; labour-power, also a commodity?"

Reply.

In order to understand what has happened in production and in the accumulation wealth by the propertied class, our correspondent needs to consider separately the average amount produced by each worker; the rate at which it increases, year by year; the total amount produced by the whole working class; and the amount of this that is accumulated in the hands of the propertied class.

Taking first the average output per worker, it is a fact that this increases very slowly, though in the early nineteenth century when industrialisation was in its infancy the rate of increase was greater (as it now is in Russia). Colin Clark, who has recently re-examined the question, estimates for Britain an increase of about 1½ per cent a year in the later nineteenth century and in the period 1920-1938, but under 1 per cent, a year since 1945. This is based on average output per worker per hour (see "The Cost of Living” 1957, p. 18). Estimates by other economists do not greatly differ.

The above-mentioned rate of increase relates to the average output per worker. The total output of the whole working class has increased since pre-war days at a faster rate because there are many more workers at work (unemployment of 1,500,000 went, more married women go out to work, and the population of working age is larger). Also hours of work are rather longer because more overtime is worked and this has more than offset the nominal reduction of standard weekly hours.

The division of the national income has changed, with an increase of the proportion going to the wage and salary earners from 56 per cent, in 1938 to 65 per per cent, in 1956; a big increase in the income of farmers and a drop in the proportion going as "Rent, Dividends and Interest" (see "National Income and Expenditure," 1957, H.M. Stationery Office). For “wages” alone (excluding clerical workers) the proportion was 38 per cent. in 1938 and 43 per cent. in 1956.

The monetary figure for “Rent, Dividends and Interest” in 1938 was £1,134 millions, and in 1956, £1,937 millions, but as a proportion of national income it has fallen from 22 per cent. to 11 per cent. (In other words it has not kept pace with the rise of prices).

There is nothing final about such changes and it is probable that the proportion of the national income going to property owners is increasing again.

There remains the question of the accumulated wealth of the propertied class as distinct from their annual income. The war-time destruction of property (estimated at £7,000 million) fell, of course, primarily on the propertied class. Part was covered by “aid” from U.S.A. and some or all of the remainder has been made good out of the surplus value taken from production since the war.

The above figures are not at all inconsistent with the fact that the propertied class, then and now. own the overwhelming proportion of the accumulated wealth of the country, for their accumulated wealth is not merely what they retain out of production each year, but is largely made up of what they have retained in previous years and inherited from the past generation of property owners.

Editorial Committee

Truths and Facts

To the Editor.

Dundee.

The writer of an article which appeared in the January edition of the Socialist Standard under the heading of "Get it Straight in 1958" has given a false analogy between a geometrical truth and a historical fact He writes: "Everyone knows the shortest distance between two points is a straight line: a simple, unanswerable, self-evident proposition. Who, then, could fail to think and act on it ?” What he fails to understand here is that the propositions of mathematics are the outcome of cold calculated thought, while the contrary is the case as regards history, where we have the passions and actions of men to deal with, which, of course, have nothing in common with the abstract truths of mathematics. For the former rules only in the realm of thought, while the latter rules in historical facts, which are not the outcome of rearmed truth. History is not motivated by truth. If it were there would be no history. What is self-evident for mathematics can in no way bear a relation to historical motivation that does move, not exist for truth. It is true that we are all prepared to accept the truths of mathematics, but it is an error to think that because of this, we should all, therefore, be prepared to accept the teachings of Socialism. And from the very fact that people are not motivated by the straight line to Socialism, is proof that history from that point of view is not concerned with moving in straight lines, or truths.

R. Smith,

Dundee.

Reply.

Our correspondent might have been on sound ground if the article referred to had been based simply on analogy; if it had argued that because mathematically the shortest distance between two points is a straight line, and for that reason only, therefore there can only be one way of getting Socialism. But the article did not say that. What it did was to point out, on evidence, that the indirect approach to Socialism of the reformists had not arrived at Socialism and is not in process of arriving at Socialism. The argument would stand if the analogy had not been mentioned.

Also in another respect our correspondent misses the point. He writes that the mathematical analogy is no reason why "we should all be prepared to accept the teaching of Socialism.” But the article did not suggest that. It was not dealing with all people and their readiness or unreadiness to accept the Socialist case. It dealt specifically with people who had already accepted the essence of the Socialist idea, but who thought that the indirect, reformist, way would lead to Socialism. They thereby led themselves and others away from Socialism.

Our correspondent tells us that in history we are dealing with men’s passions and actions “which have nothing in common with the abstract truths of mathematics.” This may be true but it is pointless. It misses the important truth that men’s passions and actions can be modified by thought and theory. The S.P.G.B. has always insisted on the practical futility and positive danger of working class actions guided by passion and sentiment instead of by thought and understanding. The more the Socialist case is accepted the less passionate futility there will be and the quicker the progress to Socialism. Men today do not have to go on repeating the stupidities of past history just because it happened.

The study of history has little purpose if it does not enable us to avoid errors of past generations that had not the advantage of being able to study history. We want the present generation to avoid the reformist errors of their fathers. Does our correspondent think we should refrain from trying to do this?

Editorial Committee.

Should We Organize into Political Parties?

To the Editor.

Croydon,

Surrey.

To become party to one idea or aim is to close the mind with regard to all other explanation. We are guided in our ideas by the intuition, and through this the principles of thought. However, "the principle" is to be compared with the hand which guides the torch beam. These "principles" guide every thought and, of course, every action. But, principles are plastic and, as such, can be applied universally.

Parties of a necessity fail, simply because of the negation of this. The “party” restricts the application of any universals, by postulating particular laws of thought and action. Philosophically, rules such as this do not promote plasticity of thought, but restricts the idea (Locke) to inaction.

The parties, because they are viewing “part” of a whole, have rules of conduct which guides the principles; but this is contradictory, for the principles must guide the rules and codes. And, cause to effect, the party ceases to analyse its own rules of conduct; the party-minded are specialists—and like all such, view but a section of the whole.

If the mind is made to concentrate on particulars, it stagnates for want of fresh material. Singular ideas are of little use, unless they are referred to the general principle, remembering that the whole is but the sum total of its parts. All of those particular subjects we know exist, are but of a whole, the universe is made up of particulars, but to try to explain the universe by its particulars would be quite erroneous, but this is the near intention of parties! They erroneously try to explain the whole which exists in the “society" by adopting a fixed opinion, for things are much more than your principles, and they need the plastic mind.

Parties also fail when they insure and secure themselves against expediency—for they fail to see round their narrowness of ideas—that they are expedient in being partisan.

There is a tendency to identify oneself with the ideas which one has, to the point of prestige, and this too, do the parties do and, as a result, they become intolerant of any idea outside their own, and criticise unmercifully any suggestion against the “party-aim”; to observe and study the truth more than often means that the student is unsuccessful in society, and so it is that the party which studies foe truth will anyway never succeed in this society, by that one point; but neither will it succeed among students of truth, for foe truth denies that we become party to it.

Yours faithfully,

M. Nairne.

Reply.

Our correspondent has set out to state what appears to him to be principles of over-riding importance, but in purely general terms and without attempting to examine the consequences of applying them.

His general proposition appears to be that to form a political party involves concentrating on certain aspects and disregarding other aspects. As against this he wants, apparently, that individuals should not form parties but should “study the truth.”

This is all very interesting to those who can live mentally in a void, but what about the solution of the practical problems before us? Capitalism exists. Its machinery of government is controlled by political parties which use their control to perpetuate capitalism. What do unorganised “students of truth” do about this? According to our correspondent they must not form a political party to remove capitalism and establish Socialism, because to do so would require the (to our correspondent) undesirable concentration on the problem of removing capitalism and establishing Socialism.

Since there is no other way to achieve the desired end our correspondent would have us abandon the end— and put up with capitalism. If this is not what he means and accepts, it is for him to come down to earth and tell us.

Editorial Committee.

Letter: Land Values and Socialism (1938)

Letter to the Editors from the April 1938 issue of the Socialist Standard

The correspondent whose letter was published in the March issue has written again, as follows: — 

To the Editor.

I dispute the statement of the Editor of The Socialist Standard that I favour half-strangled capitalism. I maintain that economic rent has absorbed the major part of production called wealth. I want to see a new form of capitalism, in which economic rent is socialised and the barriers to production by way of private land ownership and penal taxation is removed.

To-day, the worker is driven to wage slavery through the private ownership of the natural resources from which all mankind must get the means of life, and that is land. This private ownership has set up a competition between those who seek access to this natural resource, and so places them at the mercy of the owners thereof. If it is impossible for private interests to hold land out of cultivation owing to a heavy tax on its value, then land becomes more abundant and access to it easier. With easier access to land the power to enslave the worker would grow less, and I hope to zero. The boot would be on the other leg, for, instead of the worker competing to get work, capitalists would compete to get workers, with always the knowledge that easy access to land leaves the worker an alternative to owners’ terms. Capital itself would become much more abundant, setting up a great demand for its production, and to the advantage of those who did not wish to rent and use land. An early American settler would not stand a lot of nonsense from his employer, because soil and abundant land was available to him as an alternative. No one man was very rich, but there, too, need be no beggars or grovellers! Marx in his third volume of “Capital” deals at length with the enslavement of the worker by land enclosure.

By access to land, I do not necessarily mean land in the raw. A china clay soil brought into working gives access to the soil, and that access goes on throughout all processes up to the delivery of the cup and saucer to the hands of the consumer. A china clay soil held out of working by private interest, robs in purchasing power every process worker that might be engaged in producing articles of utility.

I will agree with the S.P.G.B. that nationalisation with or without compensation is not Socialism. Any Conservative can support the Labour Party policy and carry it further. I am advocating a “freed” capitalism with economic rent socialised. Tell me, too, do the S.P.G.B. propose abolition of money?

Yours,

Chas. E. Berry. 

P.S. The Black Hole of Calcutta was an example of air scarcity. We live in a system of land scarcity, freed from which we all shall be free.

Reply.

Our correspondent states that he seeks “a new form of capitalism," in which the advantage would be with the worker ("capitalists would compete to get workers”). In our earlier reply we stated that in effect our correspondent is proposing “a half-strangled capitalism." He rejects this description, but his explanation will not stand examination.

Under capitalism the propertied class exploits the working class. Receivers of rent, interest and profit are living on the unpaid labour of the workers. They are able to do this because they own and control the means of production and distribution, including the land. At the back of their ownership stands their control of the political machinery, including the armed forces. Our correspondent seeks a new form of this system, a form in which the “capitalists would compete to get workers.” But if that situation could be brought about the whole of the surplus value extorted by the propertied class would vanish. In other words, there would be no rent, interest or profit at all. The choice is, therefore, as we pointed out before, between capitalism and Socialism, between a continuance of exploitation and its abolition.

The attempt to modify drastically the relationship of the different sections of the propertied class (landlords and others), while continuing to prevent the working-class majority from ending exploitation, can rightly be described as an attempt to perpetuate a half-strangled capitalism.

Regarding money, it has repeatedly been pointed out in these columns that with the abolition of capitalism the function of money will disappear.

Ed. Comm.

The Vanoculation of "Vanoc II" (1935)

From the December 1935 issue of the Socialist Standard

During the last few years I have regularly met “Vanoc II” in the columns of the Sunday Referee, and alternately have I experienced sensations, both pleasurable and painful, at his writings. My interest is aroused because “Vanoc” claims to be a Marxian and one who lays emphasis upon the principle of Marxian thought known as dialectical materialism. But meeting a fellow behind the screen of cold print is, generally speaking, totally different from meeting the same chap fully materialised in person. And so it came to pass that we met at a meeting convened by the Economic Recovery Association. “Vanoc II” and Mr. W. W. Craik, who at one time was a principal of the National Council of Labour Colleges, were the chief speakers at this meeting. The means of economic recovery was the subject upon which Craik was to speak, whilst that of the present Abyssinian war was to be taken by Vanoc. In the speeches which followed, some affinity was alleged between the two questions, hence were we treated to a fully-rounded “dialectical” process of political and economic phenomena.

In outlining the case for economic recovery, Mr. Craik briefly reviewed the world’s present economic situation and generally exposed many of the economic illusions of capital’s agents. Little objection could be taken to the speaker’s remarks up to this point, but in stating what he conceived to be the chief source of present-day troubles he successfully added to the world’s catalogue of economic illusions. The interest paid to the finance capitalist, the man or groups of people who get their living by loaning money to their fellow capitalists, says Mr. Craik, forms an overwhelming burden on economic and social life, and the heaviest blow in consequence falls upon the working class. Money loaned at gigantic rates of interest has to be borne by the workers whenever they purchase goods of any kind. Further unemployment is induced by the owners of money allowing their money to lie idle because of their not getting a rate of interest demanded by them. The chief task before us, therefore, is to obliterate the finance capitalist by imposing a demurrage charge upon all not directly used for productive purposes, and eliminate the people who merely live by interest alone. Therefore did Mr. W. W. Craik foul all that he had previously stood for in Marxian economic thought.

“Vanoc II” opened his speech by a declaration of his revolutionary “faith,” about which he said he wanted no misunderstanding, but pointed out that he, to some extent, agreed with Craik’s views on economic recovery in view of the fact that “half a loaf is better than none,” which, of course, is a remarkable position for a revolutionary to contemplate. Surely ”Vanoc” must have heard this self-same plea put. in by every social quack and reformer in the world. Nobody this side of a lunatic asylum would dispute that a half-loaf is better than none any more than they would that a quarter was better than none, or even a slice or the proverbial crust. The statement is confusionist and entirely irrelevant from the point of view of Socialist policy. The position is that we need Socialism, and the only means of our getting it is to educate and organise the working class to establish it.

Socialism cannot be brought into being by piecemeal methods any more than capitalism can be reformed out of its existence. If it were otherwise, what sense would there be in declaring oneself a revolutionary? The answer is none whatever, and ”Vanoc” has indicated as much in many of his writings. Until Socialism is accomplished, all the half-loaves are capitalist bread, given by capitalists for capitalist purposes, to permit their dominance to persist. To the workers, the supreme task of their liberation from capitalist control will exist despite all the half-loaves of the social reformers.

“Vanoc” holds that the rise of the finance capitalist lies at the roots of Fascism, and marked Mussolini’s rise to power. Fascism must be smashed, and for this purpose we are urged to join forces with the Conservatives or any political party. Of course, the whole business is bunkum and positively dangerous to the interests of the workers and Socialism. This was made perfectly plain to ”Vanoc” in the discussion which followed. I denied first, that the abolition of the finance capitalist would in any way improve the position of the workers and secondly that the present Italo-Abyssinian war is any concern of the world’s working class.

In the case of the finance capitalist ”Vanoc” and Craik were reminded of the working-class situation in the early part of the 19th century. ”Vanoc” has more than once made reference to that, and has made use of Engels’s work on ”The Condition of the Working Class in 1844.” The horrible conditions portrayed by Engels in this work will convey the devastating effects of capital on the workers at a time when the finance capitalist did not assume the same social significance as he now does.

It seemed strange to have to remind two men who claim to be adherents of Marx, and, unquestionably, both have given a considerable amount of attention to Marx’s writings, that the elementary teachings of Marx were contradictory of their position.

It is an old story, told and re-told by Socialists, that rent, interest, and profit are but different names given to express the various modes of capital’s operations. To the working class it is mainly a matter of academic interest only as to what becomes of the spoils of their exploitation; the important thing is the fact of exploitation.

Marx has made this fact as clear as crystal, and for the benefit of those who have neither the time nor the inclination to refer to his larger and more technical analysis in “Capital," we shall draw their attention to his small work entitled “Value, Price and Profit.” Here we find the following statements set out to indicate to the workers that the holy trinity of capital may divide and sub-divide the swag stolen from the workers as they will, but the position is their business, not ours.

Says Marx: 

  “Rent, Interest and Industrial profit are only different names for different parts of the surplus value of the commodity. . . .
   “For the labourer himself it is a matter of subordinate importance whether that surplus value, the result of his surplus labour, or unpaid labour, is altogether pocketed by the employing capitalist or whether the latter is obliged to pay portions of it under the name of rent and interest to third parties. Suppose the employing capitalist to use only his own capital and to be his own landlord, then the whole surplus value would go into his pocket."

So much, therefore, about our finance capitalists. Socialists want to remove these as part of the entire capitalist system, and nothing is to be gained by our merely concentrating oftr attention on one aspect of capitalism alone.

And now about Mussolini and Fascism. "Vanoc” would have us engage in another bloodbath in the hopeless task of smashing Fascism. Why? Because, says "Vanoc," Socialism is a thousand times more difficult of attainment where Fascism rules. Yet, significantly enough, he holds that Hitler’s Germany is a far greater menace than Fascist Italy. Then what is to be done? First smash Fascism, then Hitler Germany, and we must suppose that the decks will then be clear for action towards Socialism, that is if nothing crops up meanwhile to again urgently require attention.

The scheme is all so simple and would be delightfully good if it weren’t so bad. It always seems to be taken for granted by people who argue in this way that the thing to do is to clear away one or more of the greater anomalies of capitalism and the rest of the task towards Socialism is easy. But all the facts are against the assumption. “Vanoc” was reminded of the position in 1914, which he said he remembered very well, and the cry of the labour leaders of this country on that occasion. Then, the Kaiser was the villain of the piece, he was to be beaten because he and his clique were a standing menace to every democratic idea in the world, and Socialism would be impossible if they had gained a victory. So the Kaiser went, and the workers came back to face their real enemies at home.

Then Hitler came in Germany as Mussolini had arrived in Italy. All over the world the struggle of the workers went on as before the war of 1914.

The defeat of the Kaiser had meant nothing to those who have nothing but their labour power to sell for a living. The same thing will happen again if Mussolini and Hitler are dislodged from power unless in the meantime the workers will awaken to their class interests.

When this was pointed out to Craik and “Vanoc” the inevitable followed—the usual stock-in-trade attacks on the S.P.G.B. We were labelled “idealists" and were called mechanists and, let us breathe it softly, we are anti-dialectical. To such strange uses is the dialectical principle in Marxian philosophy often put that the phrase dialectical should read diabolical. It was not surprising to hear “Vanoc” declare "logic to be a poor guide,” which, of course, is perfectly true if one will insist upon reaching conclusions based upon premises like “the flowers that bloom in the spring,” that ”have nothing to do with the case.”

To prove that we were mechanists who refused to differentiate, Mr. Craik, supported by “ Vanoc," fired a question to us in the middle of his reply, namely, would we not rather live in this country than in Germany?—surely a real teaser. We' replied that we preferred to work for £4 a week in Hackney rather than £3 in Tooting, so what could they make of that. The argument on the difference between capitalist countries is sheer moonshine. Not that we deny the differences, these certainly exist all right, but they do not affect the main task of the workers, which is to remove the capitalist class from control of the means of life. And we are not under the impression that this can be accomplished in one fell swoop, as Craik suggested. The preparatory work of education and organisation is all too necessary for us to labour under so great a delusion.

If being anti-dialectical means that we refuse to square the circle of political compromise and anti- Socialist activity, we must plead guilty to the soft impeachment.

The Marxian dialectic is an exceedingly useful tool of thought when in the possession of those who desire and know the correct road to Socialism, but to those who can’t or won’t see, there is nothing but the dialectical “unity of opposites” to lead them into the opposite camp of sound Socialist thought and action. If “Vanoc II” continues in his dialectical whirligigs and fails to grasp our case he certainly will fulfil the “law of contradiction” and find himself classified by rising working class Socialist intelligence as “Vanoc II,” who also ran.

Robert Reynolds

The Division of the Spoils (1947)

From the May 1947 issue of the Socialist Standard

The aim of commodity production is the realisation of surplus value and the first step towards this end is the purchase of the necessary means of production, either by the individual capitalist or by what is increasingly the case, a state body. Thus beginning with money, the Capitalists buy factories, plant and raw materials plus the energies’ of working men and women and the net return on this outlay is an increased sum of money, sufficient not only to repeat the process, but enough for further expansion of production.

From the unpaid labour of the workers there is— notwithstanding the personal “expenses’’ of the owning class in luxury living—a sum of money to be reinvested in the productive process, either as an addition to the existing capital or as capital seeking fresh fields of exploitation, leading to an inevitable accumulation of capital seeking surplus-value, or profit. Herein lies the dilemma of Capitalism and the slave-like history of its working-class victims. Let us look at this.

All money set aside as industrial capital can for our purpose be divided into two parts, that spent on the inert means of production we can call “constant” capital, while that for buying labour-power, which preserves and furnishes additional value is “variable” capital. Now if the function of labour-power is to labour, then the call for labour by the employing-class will depend on the market demand for commodities, while the market will, in turn, be gained by those owners that have succeeded in reducing the labour in their commodities to the lower level.

Labour-time is therefore the Capitalist’s devil which claims as its victims those that are hindmost, driving them to centralise or amalgamate their capital and concentrate it in labour-saving machinery, and the plant lay-out of mass production—to invest in constant capital rather than variable capital.

This results in large capital devouring its smaller rivals, while the social outcome is such that the means of production call for a progressively smaller number of workers to operate it, making it impossible for Capitalism to find work for the total employable population, hence an industrial reserve army is in constant being, ever threatening the wage level of those in jobs.

Spurred on by the needs of the market and the greed for surplus-value, capital accumulation in the past was built up by driving labour-power below its value by excessive hours, piecework and low wages, but wiser methods hold sway to-day in production-drives advocated by the workers’ own “leaders” coupled with subtle plea that the workers have a "share” in nationalised industries and state planning —an idea writ large in Russia where the old methods of accumulation are joined with the new. Lastly, though the needs of the accumulation of capital may increase the total wage-bill in connection with the total number employed—the wage-bill—decreases in proportion to the national income. So much for the workers’ "share” in Capitalism’s productivity.

Yet not all capital invested in the Capitalist economy is productive of value or surplus-value. To begin with, the industrialists—whose workers directly produce value and thereby surplus-value—must part with some of the surplus to others whose capital forms an integral part in Capitalist production. The merchants. bankers and others, though not in productive industry, nevertheless share in the surplus according to the size of their capital and receive, over a period, an average rate of increment, enforced by competition : for capital flows out of those spheres where the rate is low to where it is higher. At this point it might be asked: “How do those capitals whose workers produce no surplus-value, exploit their workers?”

The finance-capitalists whose service to capital is to centralise all the available loanable money for the use of the whole Capitalist class, reap the difference between the depositors’ rate and the interest charge for borrowers. The work entailed being done by their employees, who merely receive the cost of subsistence or salary consistent with this type of work. The outlay in wages and equipment compared with the charge for the bank services give these Capitalists their share in surplus-value. Again, the merchants who market the products, effect this much more economically than could the many independent industrialists, thus saving them labour-time and capital. The wage costs' for their workers’ abilities and commercial knowledge, set against that part of surplus-value which the industrialists leave them to realise in the selling price, give the merchants their profits.

The landowners, hereditary possessors of the earth’s surface, lend no like "service” to Capitalist production, hence the historic enmity of the Capitalists against this monopoly. National Capitalism, fresh in the saddle of political power has adopted policies, varying from state control to even the "liquidation” of landowners as in Russia and earlier in France. An eventual compromise is always concluded with this "charge on industry,” even though land as land has no value and will only yield rent out of the surplus values of farmers and industrialists. Landowners in this way take their share of the spoils through the undertakings on their land whether these activities be mining, building or agriculture. They accumulate wealth, brought about, by others activities. Their land offered as a commodity is bought and sold for a sum that is equal to an investment whose interest would equal the rent.

To sum up, surplus value is the totality of unpaid labour wrung from the workers' in the productive process. while its distribution to the Capitalists as rent, interest, and profit takes place in the circulatory process.

Frank Dawe

Economics: Do Banks Produce Wealth? (1975)

From the January 1975 issue of the Socialist Standard

There are three main divisions within capitalist society which share the surplus-value which is socially extracted from the working class; the industrialist, the landlord and the banker. These divisions historically reflect the application of the division of labour to the specialized investment of capital in any field of production and distribution, any process of circulation, of which banking is part.

Individual capitalists, or groups of capitalists, may have financial interests in all three of these groups. There is nothing to stop the industrial capitalist from becoming his own landlord and banker, but were he to do so he would require to hold huge reserves of cash, or have part of his capital locked up in bricks and mortar, thus preventing it from being more usefully employed in the exploitation of human labour-power. Generally speaking, the industrialist, the banker and the landlord pursue their own separate courses. Their interests are intertwined but nevertheless are antagonistic. Whilst it is true that the capitalist class have more in common with each other than with the working class, it is necessary to add that a class society must inevitably produce a conflict of interest between capitalist and capitalist, as it does between capitalist and worker, and worker and worker.

Interest and Profit

In capitalist society all wealth takes the form of commodities and is bought and sold. Capital itself is subject to this process: the price of capital represents the amount paid for the use-value of that commodity for a prescribed period. The lender sells to the borrower the use-value of his capital, and expects to receive an additional payment (i.e. interest) as well as having the original sum returned to him at the end of the mutually agreed period.

If we assume annual average rate of profit is 10%, this would mean that anyone owning £10,000, employed as capital, and provided it was used with average intelligence under normal conditions, would expect this capital to yield a profit of £1,000. If, however, he gives or transfers this £10,000 to another person who also proposes to use this as capital, then he has given to that person the power to produce a profit of £1,000; a surplus value which would have cost him nothing. Obviously this person does not expect to receive this privilege without making some payments in return. If he decides to pay, say, £250 to the original owner out of the £1,000 profit, for making the £10,000 capital available to him, that part of the profit is called interest. It is a payment made for the use-value of the capital.

The banker makes his money out of the process of indirectly bringing borrower and lender together. The banker borrows money at say 10% and lends it at say 14%, and the difference between the two rates, after deduction of expenses of book-keeping, rent, wages, etc., represents his profit. It should be borne in mind that the rate of profit has its origin in the productive process, or at the point of production: that is, at the place and places where socially useful human energy or labour-power transforms natural wealth and natural forces into commodities. The essence of the capitalist form of exploitation is that the capitalist does not, nor cannot, pay the full amount of the value of that socially-necessary labour, and pays only the value of the living labour as represented by wages, and that is not the same thing.

Capital

The surplus-value is the difference between the value of the product and the value of the producers. Living labour produces a greater value than it takes to reproduce itself, and consequently all surplus- value comes from the exploitation of human labour-power under a wages system. Banks produce nothing. They are really middlemen or custodians of idle capital which must be available as a hoard, as potential money capital waiting to be put to use. “The purely technical labour of paying and receiving money constitutes an employment by itself which necessitates the making of balance, the balancing of accounts, as far as money serves as a means of payment. This labour belongs to the expenses of circulation and does not create any value. It is abbreviated by being organized as a special department of agents who perform this work for the rest of the capitalist class . . (Marx, Capital Vol. Ill, p.373). Their profit is made during the process of circulation, as is the case with all commercial and interest-bearing capital.

The difference between interest-bearing capital and industrial capital, or capital used in the productive process where wage-labour is exploited, is that the owner of money capital who wishes to earn interest on that money throws it into circulation not as capital for himself, but so that others can use it; and consequently gains a profit by this service. The basic difference is that whereas the individual capitalist has his capital locked up in factories, mines, heavy machinery, ships and means of transport and distribution, stocks of materials, or committed to a wages bill, the lender of interest-bearing capital invariably has it returned to him. The main exception to the rule is when certain money has been loaned to the government, in which case the lender has a legal title to a permanent income at a fixed rate of interest.

Banks not Dominant

It is quite true that individual sums of money deposited with banks may be too small to function as capital by themselves, but they can be gathered together into useful masses of capital, and advanced to industrialists and others who use the banking system. In the main, however, the hoard of capital which is deposited with the banks is the residue of unconsumcd profits, or capital which is surplus to immediate requirements.

Contrary to popular belief, banks do not dominate the capitalist system. This mistaken view is due to the fact that wealth is represented by enormous quantities of money. All wealth under capitalism expresses its value in the symbolic money form, but that form tends to conceal the fact that capital exists in the physical implements of the labour, factories, minerals, buildings, ships, etc. and that these are the dominant form of capital; the expansion of capital can only arise from these sources and not from the variety of banking and commercial transactions involving interest-bearing capital. At the present time banks have advanced £8,897 million to the manufacturing industries, including £2,103 million to the engineering and metal industries, £2,247 million to the construction industry, and £1,187 million to food, drink and tobacco. The balance of the loans is mainly divided between chemicals, electrical engineering, shipbuilding, agriculture, and forestry (Financial Statistics, HMSO, Table 53. Oct. 1974).

An estimate of the value of the physical assets of the UK wealth was published recently. The total value of the assets was estimated at £400,000 millions. Of this, the figure of £175,000 million was allocated as representing the value of assets which were directly productive. These are mainly the manufacturing industries referred to above. (Times 16/11/74: “Wealth of the UK” by J. Rothman). The banks’ advances, on the basis of this estimate, show that the banks have a stake in British manufacturing industries of about 5 per cent., and this could hardly be regarded as a dominant interest. In any case, banks do not exist to lend their own money, but other people’s. The total advances made overall by the London Clearing Banks — Barclay’s, Lloyd’s, Midland, National Westminster, Williams & Glyn’s, amount to £21,992 million, but the combined deposit and current accounts (money loaned by depositors to the banks) were £37,374 million (Committee of London Clearing Banks statistical unit, 16th Oct. 74).

Effects of Crises

The Labour Party and the Communist Party mistakenly argue that the slump of the ’thirties was due to the fact that the banks withheld loans from industrialists. A variation of the same argument being used today by politicians of all parties, including the residue of the Left and a number of economists, is that the present high rate of bank interest will dissuade the capitalists from borrowing for fresh investment, thus causing unemployment by reducing production. The assumption behind this rather naive conception of capitalism is that as long as the industrial capitalist can find capital, whether by borrowing from a bank or out of his hoarded resources, he can maintain full employment. The point that they constantly overlook is that the function of capital is to produce profit. This can only become a reality when the commodities produced can be sold.

If for some reason, whether it be that the market is already overloaded and cannot absorb further commodities, or that over-production has already taken place, then production will be scaled down, curtailed, or in some cases halted entirely, and workers will be laid off. In these circumstances there will be little prospect of profit, and as experience has shown a number of capitalists, the smaller ones, go bankrupt. “In the first 9 months of this year, 4,000 Receiving Orders were made ... an increase of 40% over the same period for last year” (Sunday Telegraph City 4, 24 Nov. 74). All the machinations of the banks, either by advancing or retarding credit, whether charging low interest rates or not, cannot alter this. At the moment there is no shortage of cash available for investment, and the banks are only too eager to make capital available to bona-fide capitalists. However, in a failing market there is little incentive to the industrial capitalist to commit himself to paying interest when the prospects of earning surplus-value on the borrowed money are extremely remote. Only these capitalists in dire financial trouble, or those who have to meet certain contracted obligations, will be forced to borrow.

Generally speaking, in periods of crisis, when the capitalist’s position deteriorates and he has to meet payments, he will borrow money almost at any price to stay in business. Invariably the rise in the rate of interest implies a fall in the value of shares and securities. Interest comes out of profit, and in these periods the fact that the capitalist needs to borrow means that his normal source of profit has temporarily dried up, therefore the price of shares has fallen. The present rate of interest, i.e. 14-16 per cent, is the highest for over forty years, and the price of shares the lowest for sixteen years (Financial Times Index 168.5, 23 Nov. 74). There is, of course, the element of inflation written into the present interest rate. Unlike real wealth in the physical sense, loan capital exists as a symbolic paper hoard, and as such is subject to the hazards of inflation. Were the commercial capitalists not to take some preventive action their assets, as they exist purely in the monetary form, would be eroded year by year as a result of inflation. So the price of capital rises as with other prices, and the high interest rate is the protective mechanism the banks etc. use to protect their assets. The Utopian promise of low interest rates, at times when the operation of capitalism is forcing high ones, can be ruled out as a pious hope.

The industrial capitalist does not suffer to any great extent from the ravages of inflation as his assets consist mainly of real wealth, whose relative value rises as the purchasing power of paper currency falls, and he can adjust his prices upwards taking into account the rising cost of production. On the subject of inflation generally, we are reminded of the small boy at the seaside saying to his father “Dad, where does the water go when the tide goes out?”. It had obviously gone elsewhere, but it certainly wasn’t lost, and neither is wealth during periods of inflation.

The rate of interest, or bank rate, itself is not arbitrarily fixed. It fluctuates according to the conditions of the market. Supply and demand cause competition between buyers and sellers, and raises or lowers prices. Competition between borrowers (buyers of capital) and sellers (owners of capital) operating through their banking agents, determines the rate of interest.

The mythology surrounding the power of banking helps those who take the view that this vast institution is so necessary that the prospect of a world without money would be unthinkable. The present world with money is becoming uninhabitable, and that is why we want to establish Socialism.

(To be concluded)

Jim D'Arcy