Cooking the Books: From Marx to Musk (2023)

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

In his interview with Rishi Sunak on 2 November Elon Musk speculated that the widespread application of AI would usher in an ‘age of abundance where any goods and services that you want, you can have’. People would only need work for ’personal satisfaction’.

Clearly, this wouldn’t be capitalism. It couldn’t be as it would mean the end of working for wages and producing goods and services to be sold. This was understood by, of all people, Jeremy Clarkson in a surprisingly perspicacious passage in his column in the Sun the following day:

‘The fact is, then, that if machines are doing all the jobs, there will be no economy. You won’t be able to buy anything because you won’t be earning anything. And there’s no point going to the government for help because that won’t have any money either. Because machines don’t pay taxes. They just spend all day making stuff. That no one can afford to buy. This means we will need a whole new economy. A whole new system where there’s no such thing as money. And that is the biggest worry of them all because no one has a clue what that might be’.

The last bit is not true. Socialists have long understood that the answer would be a society where productive resources including machines would be commonly owned and democratically controlled and used to produce wealth to directly satisfy people’s needs instead of, as now, to be sold on a market with a view to profit. In such a society there would indeed be no such thing as money.

Clarkson may not have known it but he was describing what has recently been called ‘fully automated luxury communism’. But we don’t have to wait for ‘full’ automation to bring about a society of common ownership, democratic control and production directly for use. The productive forces are already sufficiently developed for this. Making the change is now only a question of political will.

As a matter of fact years ago Marx had anticipated the points made by Musk. Writing in the late 1850s he speculated what would happen if the application of science and machinery to production led to such a high level of productivity that not only the value added by direct human labour to each unit produced was reduced to an insignificant proportion, but so was that transferred to these units from the fixed capital deployed:

‘As soon as labour in the direct form has ceased to be the great well-spring of wealth, labour time ceases and must cease to be its measure, and hence exchange value [must cease to be the measure] of use value. (…) With that, production based on exchange value breaks down, and the direct, material production process is stripped of the form of penury and antithesis (‘Contradiction between the foundation of bourgeois production (value as measure) and its development. Machines etc.’, Grundrisse, chapter 14).

In other words, goods and services would be so cheap — each unit would contain so little labour, both new and that transferred by machinery, etc — that the huge amount of them that could be produced could not be priced but might as well be given away or provided free.

Marx did not expect this point to be reached — he expected that the working class would have put an end to capitalism long before — but he realised that, if it were to be, it would mean the end of capitalism. Production for sale would no longer make any sense.

Cooking the Books: Something (a lot) for Nothing (2022)

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

Rishi Sunak, the Chancellor of the Exchequer, cannot be pleased. It seems that his political rivals have been using his wife – the daughter of one of India’s richest capitalists and a capitalist in her own right – to sabotage his political career. It is true that there is something incongruous about a rich politician presiding over the pain, in terms of higher gas, petrol and diesel prices, that the government has decided is worth workers paying as a result of their sanctions against Russia.

The media and the Labour Party made great play of the fact that Sunak’s wife was a ‘non-dom’, someone whose tax domicile is another country and so who can pay taxes there rather than here, in her case India where they are lower. But which state – India or the UK – she pays taxes to is irrelevant from the point of view of those who work for wages. What is relevant is how she gets her income in the first place.

According to the BBC, ‘She owns £700m in shares of the Indian IT giant Infosys, founded by her father, from which she received £11.6m in dividend income last year’ (bbc.co.uk/news/uk-politics-61045825).

£11.6 million a year is £233,077 a week, without having to do anything, not even these days to clip coupons. Who said the idle rich no longer exist? But where does it come from?

The immediate source is the dividends on the £700 million’s worth of shares in the capitalist enterprise founded by her father. But where did the wealth of that company come from? According to the company’s website:

‘From a capital of US$250, we have grown to become a US$106.44 billion company’ (infosys.com/about/history.html) .

Maybe, but how did that happen? It will be a typical story.

Infosys was started in 1981 by a group of software engineers. In 1992 it became a public limited company. The following year it was ‘floated’, selling shares in it to outside capitalists and financial institutions. These will have invested their money with a view to obtaining a share of future profits while the company used the money to expand its activities.

For the first few years the original founders would have worked hard to build up the business, though $250 would not have taken them very far; they would have had to borrow more from somewhere, even if from their friends and relatives but more likely a bank. When they had acquired enough they could begin to take on employees. These too would work hard but, unlike the founders, would not have benefitted fully from their work; a part of the value they added would have gone to the company as profits, most of which would have been re-invested to expand the business.

As the business expanded the original capital made up a smaller and smaller part of the total capital which would have been built up out of the profits produced by the workers and by invested outside capital (built up too out of the profits of other workers).

So, the Chancellor’s wife’s wealth comes from the exploitation of workers. The dividends that enable her to live an idle life of luxury come from the same source. They are a pure property income, what the tax authorities in Britain used to call ‘unearned income’ – before they realised that ‘unearned’ could mean ‘not earned’ and so be interpreted as ‘ill-gotten’. It’s an income that she – and others like her – get just because they have titles of ownership of means of production and to a share of the profits their operation by wage-workers brings.

That’s the scandal, not that she played the system to pay less tax.

Cooking the Books: Tories increase tax on profits (2021)

The Cooking the Books column from the April 2020 issue of the Socialist Standard

One of the surprising measures announced by Rishi Sunak in his budget on 3 March was the increase of corporation tax from its current level of 19 percent to 25 percent in 2023. Corporation tax is a direct tax on profits, so not something to be expected from the traditional party of Big Business.

Rumours that this might be on the cards completely wrong-footed the Labour Party. Keir Starmer had asked Johnston at PMQs on 24 February whether he would not ‘agree with me today that now is not the time for tax increases for families and businesses’. This led to an article in The Times the following day headed ‘Tory rebels and Labour ready to block corporation tax increase’. To be fair, this brought protests from some Labour MPs who remembered that in its manifesto for the 2019 general election the Labour Party had proposed to increase corporation tax to 26 percent.

Starmer backed down but the fact that he was prepared to present Labour as a defender of Big Business and its profits showed the extent to which the Labour Party is committed to maintaining capitalism more or less as it is (as well as assuring the capitalist class that their interests will be in a safe pair of hands if he becomes Prime Minister). Given this, Starmer’s position was not without logic: if you support capitalism, driven as it is by the pursuit of profits, and wish to take on the responsibility of administering it, you have to accept that profits have to be allowed.

Sunak’s defence to business for raising the tax on their profits from 2023 was that in the intervening two years they could get a generous tax break on new investment in equipment and machinery. According to another cabinet minister, Oliver Dowden, businesses ‘are sitting on very large amounts of cash’ (Times, 11 March); in other words, on profits that have not been re-invested. The aim of the so-called ‘super-deduction’ is to get business to invest these, a recognition that what in the end drives growth is business investment rather than consumer spending. With the lifting of the anti-covid restrictions, consumer spending will grow next year but, as Philip Aldrick, the economics editor of The Times, pointed out very pertinently:

  ‘The rescue should ensure that the consumer, who accounts for two thirds of national output, is able to start up the economic engine. The more difficult bit is keeping it going. That requires business investment. There, the chancellor unveiled a big new policy – a temporary two-year capital ‘super-deduction’. For every pound spent on machinery or equipment, a company will be able to get 25p back in lower corporation taxes. Unlike any previous recession, businesses, in aggregate, have built up a £100 billion cash buffer. The government wants them to spend it’ (Times, 4 March).

No doubt they will spend some of it, but this ‘big new policy’ is yet another measure to try to get a horse to drink. Just as horses won’t drink unless they are thirsty so businesses won’t invest unless there’s a prospect of profit. The super-deduction might not work, any more than low interest rates or quantitative easing have. Business will invest but will it be more than they would have done anyway? That depends on the prospect of profit which no government can control.

Cooking the Books: Consumption – not the driver (2020)

The Cooking the Books column from the August 2020 issue of the Socialist Standard

Interviewed on the Andrew Marr Show on 14 June, the Chancellor Rishi Sunak stated that the economy was ‘driven by consumption’. It is understandable why he might think this since consumption (consumer spending) accounts for some two-thirds of GDP. But it does not follow that it is therefore this that drives the economy. In fact, it isn’t.

Apologists for the system claim that under capitalism ‘the consumer is king’; that, in other words, production is carried on – even initiated – in response to what consumers want as indicated by what they are prepared to pay for and do pay for. But this does not explain how consumers come to have money to spend in the first place.

Most consumers are wage and salary earners who get their spending money from the sale of their capacity to work at a particular job, their labour-power, to an employer. So, where do employers get the money to pay them from? It’s a part of the capital they must have to start up a business and keep it going. Marx divided the capital of a business into constant capital (plant, machinery, raw materials, power, etc) and variable capital (the money to pay the wages of the productive workers it employs).

Under capitalism production is initiated by capitalist firms seeking to expand their capital by making and accumulating profits. It goes like this. Capitalists invest in production, including hiring workers; workers exercise and use up their labour power to produce new value, including the value of their labour power; capitalists pay workers as wages the value of their labour power; workers spend their wages on buying what is needed (food, housing, clothes, entertainment, holidays, etc) to recreate their labour power to replace what they used when they worked; capitalists buy the renewed labour power; and so the circuit recommences.

Marx put it this way:

  ‘From the point of view of society, then, the working class, even when it stands outside the direct labour process, is just as much an appendage of capital as the lifeless instruments of labour are. Even its individual consumption is, within certain limits, a mere aspect of the process of capital’s reproduction … Individual consumption provides, on the one hand, the means for the workers’ maintenance and reproduction; on the other hand, by the constant annihilation of the means of subsistence, it provides for their continued re-appearance on the labour market’ (Capital, Volume 1, chapter 23. Penguin edition p. 719).

What this means is that what workers buy to consume is the reproduction of what variable capital is invested in. Capitalist apologists speak unashamedly of workers as ‘human capital’. Some Marxists describe workers’ consumption as variable capital. This is not strictly true (it’s only that both have the same value) but it gets over the point that workers’ consumption is a part, not the initiator, of the circuit capital goes through to increase its value.

What drives the economy is business investment for profit. This depends on the prospects for profit-making and goes up or down depending on whether these are good or bad. Less business investment means fewer workers employed and so less consumption; more business investment means more consumption. So, far from consumption driving the economy, it’s the other way round. Consumption is the tail not the dog.