Cooking the Books: AI, profits and Engels (2026)

The Cooking The Books column from the April 2026 issue of the Socialist Standard

City gents reading the business section of their Times (24 February) might have been surprised to come across a photo of Engels. Socialists would have been intrigued more by the caption ‘could AI create a new Engels pause, named after Friedrich Engels’. The term ‘Engels pause’ was not coined by Engels but by an economic historian, Robert Allen, to describe the course of economic development that led to the workers being in the situation described by Engels in his 1845 book The Condition of the Working Class in England.

Normally, a period of sustained capital accumulation should lead to some increase in working-class living standards, both because of employers bidding up wages as they compete for workers and because the increase in profits means they can afford to pay more. Allen noted that this had not happened in Britain during the period of rapid industrialisation from 1790 to 1840 as wages had stagnated. As in the period after 1840 wages did increase, Allen called this a ‘pause’ and named it after Engels.

Engels might not have regarded this as a compliment. He might have preferred the term ‘the Engels profit bonanza’ as, if wages stagnate in a period of economic growth, that means that profits will be more than they otherwise would.

The article in the Times, by its former business editor David Wighton, discussed two views of the possible economic impact of AI. He quoted a former Google executive as saying that ‘the most likely outcome is an economy in which corporate profits explode as labour costs fall, while workers’ share of output shrinks’. In short, another ‘Engels pause’. The opposite view was put by Jamie Dimon, the head of the bank JP Morgan Chase, who is quoted as saying that while AI will increase profits, ‘this isn’t like you’re going to build three points of margin and you get to keep it — you don’t’. Competition sees to that.

Who is more likely to be right? Critics of capitalism might be tempted to agree with the one-time Google executive as it would be another good argument against capitalism. However, Dimon has a point. His view reflects more accurately what happens when one capitalist enterprise makes extra profits by reducing its costs through some innovation and outcompetes its rivals.

‘An enterprise or industrial sector with an above average level of productivity (…) economizes in its expenditure of social labour and therefore makes a surplus profit, that is to say, the difference between its costs and selling prices will be greater than the average profit. The pursuit of this surplus profit is, of course, the driving force behind the entire capitalist economy. Every capitalist enterprise is forced by competition to try to get greater profits, for this is the only way it can constantly improve its technology and labour productivity. Consequently all firms are forced to take this same direction, and this of course implies that what at one time was an above-average productivity ends up as the new average productivity, whereupon the surplus profit disappears. All the strategy of capitalist industry stems from this desire on the part of every enterprise to achieve a rate of productivity superior to the national average and thereby make a surplus profit, and this in turn provokes a movement which causes the surplus profit to disappear, by virtue of the trend for the average rate of labour productivity to rise continuously’ (E. Mandel, An Introduction to Marxist Economic Theory.)

That’s the likely outcome of the spread of AI to production and business. A temporary increase in profits for the firms that are the first to use AI in their branch of activity but no ‘profit explosion’ in the sense of a general increase in profits for all firms which eventually adopt it.

What to do about the Property Speculators (1974)

From the February 1974 issue of the Socialist Standard

Whichever party wins the coming General Election will have had to promise to curb the property speculators. In the arguments over the three-day week, fuel shortages, and the belt-tightening enforced to try to deal with British capitalism’s troubles, they have become the universal bêtes noires. Why, it is said, should the miners be denied a modest wage-increase when the speculators roll in unearned riches ? Who is going to be impressed by the Government’s call for sacrifices while Harry Hyams swells his fortune by keeping a mammoth office-building vacant for years ?

These are the voices of common-sense and fair play — and the sad truth is that they are irrelevant. If the appeals to run speculators out of town were responded-to, no difference would be made to the situation. That is why the present Government or its successor will not mind responding to them, if it has to. The Left, with its unvarying stupidity, has been demanding that “something be done” for years; in the agitation over housing and homelessness Hyams’ Centre Point remains an obligatory gathering-place and his name daubed on protest banners galore. A recent newspaper report showed the ultimate cure for profiteering in the Land of the Left:

Two directors of a Soviet drinks factory have been shot for leaving the fruit out of the fruit juice they were producing. The newspaper Babinski Rabochi says the two from the Southern Republic of Azerbaydzhan, sold a mixture of water, citric acid and sugar, pocketing more than £400,000. Their appeal was rejected and they were shot.

(Guardian, 3rd Jan. 1974)

No doubt this sounded, to some, like the way to treat them. But will it stop privileged sections raking-in in Russia ? Not likely. Will it make a single worker better off? Of course not.

Profits Galore

Property developers have indeed had a bonanza in Britain since the war. Joe Levy’s profit from the development of the Euston Centre in 1967 was estimated at £22 million (Oliver Marriott, The Property Boom). In September 1972 it was said that sales of land in the Tolmers Square Development Area of London had “been taking place at the rate of £800,000 to £1,000,000 per acre’’ (Town Clerk’s report to Camden Council, 28th Sep. 1972). Of Hyams, The Observer on 23rd December said that his personal fortune

has increased by £300 million in the past six years — at a time when he has hardly been engaged in active development at all, but simply sitting on his steadily appreciating portfolio of office blocks.

Astronomical as figures like these may seem, it is absurd to imagine they are unique to property development and dealing. The same page of the Observer business section on 23rd December reported that the British Leyland motor company’s profits for the year had risen to £51.3 millions, and a race-horse owner was offering to give Cambridge University £10 million. A “Guide to Property’’ recently distributed by the First National Finance Corporation contains graphs of Financial Times Share Indices that put this in perspective. The all-share index includes property. It will be seen that while property in its recent boom period has been the best investment, other shares rise proportionately; and at other times have compared favourably. Incidentally, Counter Information Services have just issued (16th Jan.) a report on the enormous profits of insurance companies and pension funds, of which £4,000 million is estimated to have gone to back property developers—including substantial support for Hyams by the Co-operative Insurance Society.

Someone to Hiss

Supporters and revisionists alike of the capitalist system love a scapegoat. There is nothing admirable about the speculators. The illustrations to Marriott’s book are mostly portrait photographs of well-known property tycoons, and it would be hard to find another collection of faces of such ugliness and vulgarity. Nevertheless, they are only the latest in a succession of ogres but for whom, it is conveyed, the capitalist system would make us all as happy as kings. Their place in the nineteen-twenties was held by “the hard-faced men’’ who had done well out of the 1914-18 war. In the ’thirties it was the arms manufacturers. Malcolm Muggeridge says in his autobiography:

Armament manufacturers — commonly known among us as merchants of death — were a godsend in the way of providing us with an identifiable villain; one of the great needs of the political left being to be able to point an accusing finger at someone, or some corporate body, as being responsible for public and private wrongs and misfortunes.

It is part of the same tradition that the property speculators’ diabolic reputation rests largely on their immunity, so far, to legislation. Laws aimed at quelling them have helped them boom again. The post-war Town and Country Planning Acts, intended to snuff out speculative building, created favourable new conditions for it. The taxation laws in force till 1965, by assuming the developer who did not sell to be making no profit, gave him a magnificent advantage. Most uproarious of all was George Brown’s 1964 prohibition of office-building in London, which pushed up rents and profits and earned Brown the title of “the developers’ best friend”.

The most recent piece of legislation was Antony Barber’s taxation measures in his budget of 17th December 1973. The chief provision was to tax first lettings of new buildings as equivalent to outright sales. Financial writers like Bennie Gray and Christopher Booker in The Observer (as well as Labour critics) were quick to point out that applied to established examples this was anything but crippling, and concluded:

In other words, the situation whereby property profits have generally come to be regarded as the most conspicuous example of economic injustice in pur society is likely to remain.

It is interesting that Oliver Marriott, when his book appeared in 1967, thought the property boom had been demolished. He wrote at the end:

The era of the property tycoon as the arch-symbol of capitalism is over. Forces of competition and taxation have ended the days when an individual could rapidly amass a fortune with a few well-chosen deals and developments.

A Simple Answer

The rise of the office-building tycoons has been a direct outcome of the workings of capitalism. Its main sources have been wartime destruction; obsolescence; amalgamations of companies and the growth of fresh forms of commerce; the spread of administrative machinery; and the compulsion to rebuild town centres on account of road traffic. Given that proliferation of causes, there is no difficulty in seeing why fortunes have been made and why legislation has failed. Indeed, the motives of such legislation are always contradictory ones — acquiescing in the need for more development while hoping not to be shown the “unacceptable face” it inevitably wears.

It is worth remarking also on the belief that little or nothing is done about the speculators because Conservatives in government will not harm their capitalist friends. This could apply to Labour also. But the capitalist class is not united in its commercial interests; at any time, a section will be sent to the wall to suit the more vital needs of other sections. An example is the Act of 1915 which smothered landlords in the interests of industrial capitalists and the war. If the need were strong enough, any government would come down on property speculators. What must always be borne in mind, however, is that legislation is enacted for severely practical purposes and hardly ever for moral ones.

The contrast between poverty and plenty is an inevitable feature of capitalism: a class-divided society cannot help but display it. Likewise, in a society built round production for profit, it is no use lamenting that excessive profits are made. One can imagine fat capitalists tittering behind their hands at the naiveté of “radical” sentiments like Michael Duane’s in a letter to The Guardian on 7th January:

In the national emergency of war it was found impossible to create the unity necessary for survival until, by rationing food, clothing and fuel, we had demonstrated the good faith of our democratic protestations.

That is the kind of assurance rulers want. Given it, they know a few sops and humbug-gestures of “good faith” will quieten the murmurs — and the system will go on as before.

Rather than talking of injustice as if there were an alternative to be had, working men and women should ask why the benefits of their labour are unfailingly taken by somebody else. When the working class decides that this state of affairs can continue no longer and capitalism must go, the end of speculation in property, shares and lives will have come at last. The sight of vast wealth being accumulated by parasites who simply happened to be in the right place at the right time, understandably makes people sick; but none of us will feel better until we have established Socialism.

Robert Barltrop

The Festival of Capitalism (1951)

From the October 1951 issue of the Socialist Standard

It may have been part of the general optimism of the good times ahead that pervaded His Majesty’s third Labour Government in its early days, that induced “Old Moore” Morrison to announce in December, 1947, the Government’s plan for a national display to mark the centenary of the 1851 Exhibition. Possibly it was thought then that festivals were to be part of the usual scheme of things that was to be “ours” in the “Brave New World.” Alas! it was not to be. In fact the attitude generally expressed is for Christ’s sake let’s go to the Festival and forget Korea and raw materials just for one day.

As always, only this time more so, the main problem confronting trade unions is the standard of living. As is to be expected, resolutions calling for wage increases are the order of the day.

In line with their political thought trade unionists have in the past few years made many sacrifices; the outstanding instance being the wage freeze. But the harsh realities of the capitalist economics expressed in the continual increase in commodity prices make a mockery of present day wages—the wage increases of last year, last month, or even last week, have already been gobbled up—and force unions to go forward with new demands in the attempt to catch up with the rising cost of living.

One of the slogans that carried the Labour Party into power was “Fair Shares For All.” This, like many of the catch-phrases bandied around the political arena, is an ambiguous statement; just as meaningless as “A fair day’s work for a fair day’s pay.” Supporters of the Labour Party would claim, however, that “Fair shares for all ” and “Redistribution of wealth ” mean simply: that the rich get poorer, and the poor get richer. But the evidence of six years of Labour Government bear out once again the correctness of “Tin Pan Alley ” who said in “Ain’t We Got Fun,” “The rich get richer and the poor get poorer.” You would think then—if we accept for a moment the seeming logic of the Labourites—that if the workers are up against it, then the capitalist class should be really on the floor. The position, however, is to the contrary; published figures for the five months up to the end of May show that the aggregate profits of some 1,300 companies hit the all-time high of £700,000,000. This indeed is festival year for British Capitalism.

The ever increasing announcements of record profits have even astounded some of the most devout supporters of Capitalism. The City Editor of the Sunday Express is promoted to the front page, leading article, on June 17, 1951, where he asks, “Are Prices Too High Because Profits Are Too High? ” He wrote thus:—

“These [profits] in the aggregate total more than £700 million, compared with £587 million in the previous year.

“Profits reported last month were on the average 5/6 in the £ higher than in May, 1950.

“City experts I have consulted believe that by the end of the year the total profits to be announced may be nearly half as much again as in 1950, which itself was one of the lushest years for money making.

“On all the evidence never before has British industry experienced such a profit boom as it is enjoying now."

Here are four examples showing the fantastic increase in profits: —

Usually the last ten or so pages of the Economist each week, are given to reports of company meetings, together with a summary of the accounts. To read some of the comments of the chairmen, when trying to explain away the high profits in terms of high taxation, and the high cost of replacing plant, you would think they were one step away from the workhouse. Workers also have to contend with higher costs—the high cost of existing. Only they start off with a measly six or seven pounds a week.

They can, though, if they will, comfort themselves from the following nonsense:—

“ . . . that the higher the increase the greater has been the rise in the average price of goods and services bought. The wage-earner has therefore improved his comparative lot to an even greater extent than is indicated by the income differences already calculated.”

(Economist, 16.6.51)

Therefore take the example of two men, say, ten years ago. One could afford a car, the other couldn't. To-day, neither of them can afford a car. This, then. makes the person who couldn't afford a car in the first instance, relatively better off than the other. Or so this cockeyed writer in the Economist would have us believe.

We see in another direction how the facts belie the claims of the Labour Government. Those in the past who styled themselves socialist, often stated in round figures that 10 per cent. of the population owned 90 per cent. of the wealth. For comparison we give these recent figures of Mr. Hugh Dalton: —

“One per cent, of the people still own 50 per cent. of the wealth, and five per cent. of the people still own 75 per cent. of the wealth. Official figures show that we still have several hundred millionaires among us. and it is notorious that, apart from the large incomes assessed for tax. many people have been living on capital gains and many have been tax-dodging.”

(Sunday Times, 17.6.51.)

Although Mr. Dalton does not go into the top flight and give comparative figures of to-day and pre-war, so that we may adjudge his party's claim of “redistribution of wealth,” we would say that there is very little difference. Before we leave this point let us give an illustration, using Dalton's figures of five and seventy-five. Let us say that both population and wealth equal a hundred. This means then, that five persons have £15 each, and the remaining 95 have approximately 5/3 each. This is the sum total of the “redistribution of wealth.”

Members of the Labour Party in debate with the Socialist Party of Great Britain have claimed the respective aims to be identical. Where the Labour Party have it over us, so they say, is that they will arrive first by reason of their practical approach. Before leaving the reader to decide which party is on the road to Socialism—that is a classless, wageless society—may we remind you again of the words of Mr. Dalton that “ five per cent. of people own 75 per cent. of the wealth.”

Ray Guy

Cooking the Books: The papers learn how banks work (2023)

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

Over the weekend of 17/18 June two national newspapers ran the same story. ‘Banks rake in £4.8bn extra profits in “appalling rip-off”’, said the i paper. ‘Britain’s biggest lenders rake in £44BILLION as interest rates rise while hard-hit families suffer from rising mortgage costs’ said the Mail on Sunday. They were criticising the banks for being quick – when the Bank Rate goes up – to put up the rate of interest they charge those with a mortgage but much slower to put up the rate they pay to those who have savings with them.

Both pointed out that this leads to an increased ‘net interest income’ for banks which the i paper said was ‘the profit made by banks from charging higher borrowing costs on mortgages and loans, compared to what they pay out in savings accounts.’ The Mail on Sunday defined it as ‘the difference between what the companies charge borrowers for loans and mortgages and what is paid to savers in interest’. Theirs was the more accurate description as it’s the banks’ income. Only a part of this will be their profits as out of it the banks have to pay their costs such as buildings, computer systems and wages. Banks also have other sources of income which are not banking, for example fees from financial advice and management.

‘Net interest income’ is the key to understanding how banks work as it shows that they are financial intermediaries making money by borrowing at one rate of interest and lending at a higher rate. Others have suggested a different model, arguing that banks simply create the money they lend by a few keyboard strokes. In that case banks would not be financial intermediaries but money creators. Their income would be ‘gross interest income’ and their profits greater by the amount they currently pay savers (and others who lend them money). Populist journalists could be even shriller in denouncing them as greedy.

But the papers confined themselves to examining the ‘net interest income’ that shows that banks are financial intermediaries rather than money creators. The money they lend — the credit they extend — comes from money they themselves borrow. They compete against each other to attract savings in order to get money to lend. Which they wouldn’t need to if they could simply create it.

Banks don’t borrow just from savers. They also borrow from the money market, where the lenders are other financial institutions and banks, and, unlike building societies (which are essentially specialised banks), they don’t just lend money to buy houses.

The high street banks are not the only financial intermediaries. There are other financial institutions which borrow money to re-lend; in fact, there is a whole ‘shadow banking’ sector involved in this, less regulated and more risky and dodgy. At the other end are credit unions which nobody dares claim create the money they lend.

There is nothing special about banking. It is just one field of profit-seeking capitalist business enterprise. As their trade association, UK Finance, told the Mail on Sunday:

‘Banks are commercial organisations and therefore seek to offer the best possible value to customers while also making a profit. This allows them to invest in their business and deliver shareholders a return on their investment.’

Bankers don’t control the economy. Banks don’t make bigger profits than other capitalist enterprises and don’t need to be singled out as ‘finance capital’ as something worse than industrial capital. There is one difference, though. While the physical assets of industrial capital will be taken over in socialism and used to produce directly to satisfy people’s needs rather than for profit, banks will have no place.

Material World: The pimps of war (2023)

The Material World Column from the January 2023 issue of the Socialist Standard

Come, you masters of war

You that build the big guns

You that build the death planes

You that build all the bombs

You that hide behind walls

You that hide behind desks

I just want you to know

I can see through your masks

                 (Masters of War, Bob Dylan)

For a capitalist, Winston Churchill’s saying ‘never let a good crisis go to waste’ has never been so apt as in the case of the Russia-Ukraine war. Businesses are making profits from the conflict in Ukraine from the increase demand for liquefied natural gas. Cheniere Energy, America’s largest LNG exporter, says about 70 percent of shipments from its facilities in Texas and Louisiana have gone to Europe, compared with roughly 30 percent last year.

‘The country that is most profiting from this war is the US because they are selling more gas and at higher prices, and because they are selling more weapons,’ observed a senior European Union official (politi.co/3OYBXj8).

As Europe attempted to reduce its reliance on Russian energy, the reduction in gas from Russia meant acquiring new suppliers. In stepped the United States but the price the Europeans have to pay is almost four times higher than the price for American customers.

Beatrice Mathieu, head of the economy department of the French magazine L’Express, explains:

‘Washington’s unwavering support for Ukraine makes the United States the big winner in the global stage without a single soldier needing to set foot onto Ukrainian soil,’ with undeniable geo-strategic, economic, military and political gains, she said (bit.ly/3gWhLBT).

This view coincides with the Russian Ambassador to the United States, Anatoly Antonov, who accuses the United States of prolonging the conflict because of economic reasons:

‘The desire to skim the cream through the mass sale of military equipment and LNG supplies: nothing personal, just business’ (bit.ly/3H5D1Qa).

Mere Moscow propaganda, one could easily suspect, if it was not for the fact that President Biden has also rebuked oil companies for ‘profiteering’ from Russia’s invasion of Ukraine:

‘It’s time for these companies to stop war profiteering… At a time of war, any company receiving historic windfall profits like this has a responsibility to act beyond the narrow self-interest of its executives and shareholders’ (on.ft.com/3H5DbqK).

It’s all got too much for the EU. Germany’s economy minister has called on Washington to show more ‘solidarity’ and help reduce energy costs. French president Macron said high US gas prices were not ‘friendly’ and has talked of a ‘double standard’ being created by the ‘super-profits’ of energy producers (on.ft.com/3UuA8M3).

The war in Ukraine has reinforced America’s role as the arsenal of the world. American arms manufacturers and many other armament corporations expect a big-time bonanza by providing weaponry to countries eager to boost their defences against Russia. There is likely to be a rise in orders to replenish military stocks, from various European countries, in particular for rockets and artillery.

Germany, for example, has announced an extra €100bn to modernise its military capability. Finland, an aspiring new candidate member of NATO, decided to grant an additional €1.7bn to arms and other defence material purchases this year alone:

‘A very significant share of it will go to purchases from the US’ Governmental Counsellor Iikka Marttila from Finland’s Defence Ministry said (yhoo.it/3uigdoW).

American isolationists such as Marjorie Taylor Greene have claimed too much money is being spent on Ukraine: ‘Under Republicans, not another penny will go to Ukraine’ and ‘Our country comes first’. But that is just exactly it. War is proving very profitable for the USA and its business leaders know it.

Russia’s war on Ukraine, both of them major food exporters, the effect of less abundant harvests in Ukraine, and the financial complications imposed by sanctions upon Russia have resulted in American producers increasing their exports of maize to Europe.

This calls into question whether food price inflation can be attributed solely to a shortage. The world is experiencing a food price crisis rather than a food supply crisis. Huge multinational food corporations are reporting record profits (bit.ly/3H3taup).

War tends to establish hegemony rivalries among nations in a certain geographic area. Russia paints the US and EU as its main adversaries with Ukraine portrayed as a pawn in a proxy war. In response Russia, as an imperialist superpower, used its military might to impose its will upon Ukraine to defend its ‘privilege’ to dominate the region. Western interests proclaim their ‘right’ to expand their influence where they deem fit, bringing nation-states into conflict. And while politicians prattle on about the morality and ethics of a ‘just’ war, corporate investors view the cost and pain through the prism of profits and dividends.

ALJO

Cooking the Books: Energy wars (2022)

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

In September the G7, the group of the world’s leading Western capitalist economies (US, Canada, France, Germany, Italy, Japan and Britain), agreed to try to impose a cap on the price of Russian oil. The level has not yet been fixed but is likely to be somewhere near to the cost of production plus a mark-up for profits. Russia would still have an incentive to export oil but would only make a ‘normal’ profit rather than the super-profits that they and others (such as Saudi Arabia and the Gulf States) get because the cost of extracting oil there is less than the cost in the other parts of the world whose higher cost of production sets the world price.

What the West seems to want is to impose as the price of Russian oil is what Marx in Volume III of Capital called its ‘production price’, ie, its cost of production plus the average profit on the capital invested in its production. Over a fifth of Volume III is devoted to a discussion of this in relation to ground-rent, the money paid to a landlord for the use of their land to grow crops or raise livestock but also to extract materials.

David Ricardo is credited with being the first to explain why different areas of land yielded a different rent. The price of what it was used to produce was fixed by what Marx later called the production price on the least fertile land producing it. Those farming more fertile land, where the cost of production was correspondingly less, still sold their produce at the higher price and so made super-profits but which, unless they owned the land themselves, were taken by the landowner as ground-rent.

Marx accepted this theory. Ricardo explained how it applied to mines:

“[T]here are mines of various qualities, affording very different results, with equal quantities of labour. The metal produced from the poorest mine that is worked, must at least have an exchangeable value, not only sufficient to procure all the clothes, food, and other necessaries consumed by those employed in working it, and bringing the produce to market, but also to afford the common and ordinary profits to him who advances the stock necessary to carry on the undertaking. The return for capital from the poorest mine paying no rent, would regulate the rent of all the other more productive mines. This mine is supposed to yield the usual profits of stock. All that the other mines produce more than this, will necessarily be paid to the owners for rent” (Principles of Political Economy and Taxation, ch. 3).

This applies today to the extraction of oil, its price being fixed by the production price in the least productive oilfield in use.

What the G7 are trying to do is to prevent Russia from benefitting from having a lower cost of production than in the oilfields that set the price of oil and so reaping a super-profit. This is to be done by forcing Russia to sell its oil at a price nearer to its price of production. It’s a clever scheme – to be enforced by refusing to insure tankers carrying Russian oil bought above this price – but it may be too clever. Russia has already announced that it will refuse to sell oil to any country that goes along with the G7 plan. And it can’t be a coincidence that the day after the plan was announced Russia suspended the direct supply of gas to Germany.

While the capitalist West and capitalist Russia battle it out, economically and militarily, as to whose sphere of influence Ukraine should be in, workers everywhere are suffering the consequences in terms of higher and higher energy bills reducing their standard of living. But it’s a pain both sides have no qualms about inflicting.

Proper Gander: Profits and power (2022)

The Proper Gander column from the October 2022 issue of the Socialist Standard

With gas and electricity bills rising, along with the cost of near-enough everything else, the most immediate concern for many of us is how and whether we can pay. A recent edition of BBC One’s Panorama featured households already finding it difficult to cope. A couple with a young son in Birmingham with a just-above-average income of £31,000pa were paying £100 a month for their energy a year ago, and now the amount is £250. Alongside all their other expenses, ‘it’s just getting tighter and tighter’. In Bournemouth, another couple care for their daughter with cerebral palsy. The machines which keep her alive all use electricity which they can’t afford if their bills increase further, having already trebled in a year. Her father says ‘I think it’s quite obscene for energy companies to be posting profits in the billions when we are struggling to actually pay our bills. And I think energy companies are isolated from the reality of a family like ours’.

Between April and June 2022, BP made nearly £7 billion in profit, while Shell raked in £9.4 billion. Over a year, BP has paid £10 billion and Shell £15 billion to their shareholders as dividends and share buybacks. Bland statements from both companies say they will provide financial support to those most vulnerable and are investing in low carbon energy production. At other times, though, their bosses have been more honest about their aims: BP’s Chief Executive has described the company as a cash machine for its shareholders.

In the edition of Panorama: The Energy Crisis: Who’s Cashing In?, reporter Bronagh Munro gives an introduction to the current context of sky-high fuel bills for us alongside astronomical profits for the energy companies. Gas prices increased as an effect of the pandemic, and then again due to the war in Ukraine. But, given that the UK hasn’t been dependent on Russia for gas imports while European countries have been, why has the UK been hit the hardest this side of the continent? Whether or not leaving the European Union has had an impact isn’t discussed. Instead, an explanation is found in how the energy market is shaped by policies such as the link between electricity and gas prices.

Munro explains how the wholesale price of electricity tracks the price of gas. The 40 percent of electricity which is generated from gas sets the price of all electricity, regardless of how it’s produced. Now that the price of gas has risen, so will the price of electricity produced by nuclear reactors (15 percent of that in the UK) and wind farms, for example, even though their own costs haven’t increased. EDF, the French company which owns nuclear reactors in the UK, won’t be able to benefit from this yet though, as they’re locked into contracts at a previous lower price. Supplier Centrica, on the other hand, has doubled its prices in the past year with its profits having grown fivefold. Also, producers of so-called ‘green’ energy receive subsidies through the government, adding £6 billion to our bills. These payments have further bolstered the coffers of companies such as Greencoat wind generators, which has quadrupled its profits in a year.

The wholesale price of gas and electricity has climbed enough to make previous price caps on our bills irrelevant. With wholesale costs so high, the price cap would make it difficult for suppliers to buy in energy and sell it on to us customers while also making a profit. The limit on how much we can be charged for gas and electricity is set by Ofgem, the non-ministerial government department whose stated aim is to protect the interests of ‘energy consumers’. So, the cap has been adjusted to higher amounts more in line with the wholesale amount. One of Ofgem’s previous directors and board members, Christine Farnish, is briefly interviewed for Panorama about her resignation from her roles because she disagreed with decisions about the price cap, saying that they benefited companies more than consumers. She says that the price cap is no longer fit for purpose and only the government can have the solution.

The programme was first broadcast only a few days before Prime Minister Liz Truss announced that a new ‘Energy Price Guarantee’ effective from 1 October 2022 would limit typical household energy bills to £2,500 per year. This doesn’t mean that the wholesale price will change though, so the difference will be funded through government to the tune of around £90 billion, with a further £60 billion to subsidise businesses’ bills. Those on the Left have criticised this policy, arguing that it will be funded by more government borrowing to be paid back through more taxation on the working class, rather than by a windfall tax on energy companies’ profits.

However the money is shunted around, and wherever the burden of taxation really falls, the structural problem remains. While the companies which produce and supply energy are owned by a minority to make profits, they will follow strategies which aim to maximise those profits. Although these strategies, policies, reforms can’t control the economy, as shown by the price cap not impacting on the wholesale gas price, they can help the capitalist class benefit, even through the economic turbulence from the pandemic and now war in Ukraine.

Programmes like Panorama are useful to highlight issues and explain some of the economic context. But they stop short of considering the class divide central to any capitalist economy, or any kind of alternative. In a socialist society, energy production wouldn’t be measured in money and subject to the vagaries of either a profit-driven market or fraught relations between nation states. Instead, the only considerations would be the practicalities of generating sufficient power for people’s needs and wants in an environmentally sustainable way.

Mike Foster

Profitable pills (1985)

From the June 1985 issue of the Socialist Standard

The pharmaceutical industry has grown at an unprecedented rate in the last forty years. The British drug industry expanded 10 per cent each year during the ten years before 1972, more than three times the growth rate for manufacturing industry, while the world industry has grown even faster (Widgery. 1979).

Although Jenner's smallpox vaccine was widely used by the beginning of the nineteenth century, and the first hypnotic was discovered in 1866, it was the discovery of aspirin in 1899 which marked the beginning of the age of new drugs which proliferated for the next fifty years. There are now about 7,500 preparations on the market, and the number is growing, despite the fact that in 1965 an assessment of 2241 products in Britain, of the 3.000 or so then available, judged 35 per cent of them to be ineffective, obsolete or irrational combinations and in 1971 the American Food and Drug Administration found that 60 per cent of the 2,000 products investigated by them lacked evidence for their therapeutic claims (Widgery). It has been estimated, that 95 per cent of health problems could be treated by 100-200 drugs (Shulman, 1982).

Obviously, neither the lack of usefulness nor, in some cases, the positive harmfulness, of the majority of modern drugs have hindered their growth. Although some medicines have considerably eased pain and misery (the discovery of insulin has saved the lives of millions of diabetics), the use and development of drugs has been abused and perverted under capitalism because of the enormous profits which can be made. Doyal (1979) has pointed out that in the USA in the years 1960-73 the average return on capital in the drug industry was around 18 per cent compared with 11 per cent for manufacturing industry as a whole, and a study in Britain showed profits of 26 per cent for 1967-69 compared with 12.6 per cent for manufacturing industries.

The enormous amount of capital needed for the research and development of new drugs creates a tendency towards monopoly as small firms simply do not have the necessary resources to compete against the giant multinationals.

The seventeen year patent protection given to new drugs also helps drug firms to monopolise the market and with an increase in cardiovascular diseases, road and industrial accidents, diabetes, cancers, respiratory diseases, suicide, drug abuse, alcoholism and mental disorders a ready supply of customers can be relied on. Thus capitalism, having caused an increase in stress-related illnesses, makes a fortune supplying remedies to alleviate them.

Robson (1973) has pointed out that far from stimulating research, patents tend to promote "molecular rouletting" whereby rival firms try to break into the market by providing drugs with minor modifications to those protected by patents. In this way considerable amounts of resources are used up to develop drugs similar to those already on the market with very little chemical advantage, if any, over their rivals but with the added risk of new side-effects. Clearly such drugs are not provided to cater for people’s needs but for profits.

The profits afforded by patent protection are considerable. The products of countries with Patent Laws are priced from 18 per cent to 225 per cent higher than drugs in countries without Patent Laws (Robson). Probably the best known, and most notorious. example of monopoly trading was the supply of chlordiazepoxide under the trade name Librium to the National Health Service at £370 a kilo when the actual cost was £9, and diazepam under the trade name Valium at £922 a kilo when the actual cost was £20.

Mitchell (1984) estimates that if drugs were prescribed by their generic names instead of by their trade names the National Health Service's drugs bill would be more than £50 million cheaper. In 1979 doctors wrote 370 million prescriptions at a cost of £750 million, yielding profits of £121 million. Medicines sold over the counter make further profits (Illiffe. 1983).

Considerable sums of money are spent on advertising medicines. Robson (1977) states: "Drug effectiveness is often open to question and is in inverse proportion to the amount spent on advertising the product." Thus 1.9 per cent of the cost of anti-diabetic drugs is spent on advertising but 13.9 per cent of the cost is spent on promoting products of dubious value such as antacids and cough and cold remedies. The role of the general practitioner in prescribing drugs is recognised by the drug industry, who spend more money per doctor on the promotion of drugs than is spent on medical training.

Drug firms, in fact, spend more on advertising than on research although they claim that expensive research justifies the high prices charged for their products. The haste to produce new. but often similar, drugs leads to many unsafe medicines being sold. Bodenheimer (1984) claims that an estimated 130,000 people in the United States die each year from adverse drug reactions and that as many as 60 per cent of the medications are entirely unnecessary. Hurwitz (1969) found that 2.9 per cent of patients in Britain had adverse drug reactions requiring hospital treatment.

Unfavourable results from drug research are frequently covered up in the interests of profits. Shulman states that the anti-arthritic drug Opren was taken by 700,000 people in Britain and caused 3.500 adverse reactions and 61 deaths in two years. But "By April 19th 1982. when "Opren" was licensed in the USA. 25 "Opren" patients in the UK had died. The Sunday Times investigation shows that Lilly failed to inform the Food and Drug Administration of this until after the licence was granted for the USA. A further five cases in the USA of dangerous side effects were not reported to the British authorities".

Bodenheimer (1984) has described how MER/29 was marketed by William S. Merrell Company in 1960 for lowering cholesterol and withdrawn two years later after more than 5,000 cases of side effects had been reported. An investigation by the American Food and Drug Administration revealed that laboratory notebooks had been falsified to produce favourable research findings.

The human testing of drugs is frequently contracted out to private clinics who exploit the unemployed and the poor to be guinea-pigs in the testing of potentially dangerous substances for paltry payments. The absence of legislation regarding the human testing of drugs in Britain has led to foreign drug companies testing drugs in British clinics to evade stricter laws in their own countries. In particular, the loss of the captive prison population in the United States for drug testing has led to more frequent contracting out of human drug research to Britain.

Drugs which are restricted or banned in the United States or Britain are sold in underdeveloped countries, often with serious side-effects. Depo-Provera. an injectable contraceptive banned in the United States, is widely used in underdeveloped countries; chloramphenicol, reserved for the treatment of typhoid in Britain because of the risk of developing aplastic anaemia, a potentially fatal condition, is sold over the counter in South America. The sale of antibiotics for trivial infections has led to resistant strains of more serious infections developing in countries such as Mexico and Brazil.

The tragedies that have resulted from the use of Thalidomide and Debendox. both of which caused severe birth defects in thousands of children and led to law suits for compensation, have not lessened the pharmaceutical industry's enthusiasm for new drugs or made them any safer. This is because under capitalism goods are produced for profit and human needs are always secondary; the drug companies make such enormous profits that compensation, even in the few cases where it is paid, amounts to only a fraction of annual profits; the state, acting in its role as facilitator of capital, allows the drug industry to produce drugs which can maim and kill.

Although drugs arc often tested in underdeveloped countries to avoid litigation arising from serious side-effects, research into parasitical and tropical diseases is a fraction of the amount spent on cardiovascular diseases and cancers, which are common in developed countries, because of differing abilities to buy drugs. Because drug firms are multinational they are able to exploit low-paid labour in underdeveloped countries. Profits are also increased by avoiding taxes. As it is also extremely difficult to determine the extent of profits made abroad, profits declared in Britain or the USA may represent only party of the enormous gains made by the pharmaceutical industry.

At best drugs are a substitute: an attempt to cure or alleviate rather than prevent disease; at worst they cause suffering, pain and death through misuse. Psychotropic drugs used for depression and anxiety are all too often taken instead of trying to secure political and social change and reduce people's capacity to fight against their exploitation. The elimination of poverty and the diseases it causes will come about through the establishment of socialism and not the hastily researched. dubious remedies of multinational drug firms who prey on human misery to amass large fortunes.

Carl Pinel

References:

Bodenheimer. T.S. (1984): The transnational pharmaceutical industry" in Issues in the Political Economy of Health Care, edited by John B. McKinlay. Tavistock.

Doyal, L. with Pennell, I. (1979): The Political Economy of Health, Pluto Press. p193.

Hurwitz. N. (1969): "Admissions to hospital due to drugs '. British Medical Journal. 1. 1539. 

Iliffe. S. (1983): The NHS: A Picture of Health? Lawrence and Wishart, pp159-160.

Mitchell. J. (1984): What Is To Be Done About Illness And Health? Penguin Books.

Robson J. (1973): "Take a Pill . . .  Marxists in Medicine, p.9.

Robson. J. (1977): "Quality. Inequality and Health Care". Marxists in Medicine. pp29-30 

Shulman. J. (1982): "Pills and profits — dealing with the drug companies'. Medicine in Society. 8(3) 18-22.

Shulman. J. (1983): "The Opren affair — tragedy or scandal". Medicine in Society. 9(1) 26-31. 

Widgery. D. (1979): Health in Danger, Macmillan. pp84-88.

News in Review: The Budget (1967)

The News in Review column from the May 1967 issue of the Socialist Standard

The Budget

Callaghan's 1967 Budget, for the man in the street whose fortune is supposed to be involved in it, was nothing more than a bore. Very few people seemed to be aware that April 11 was Budget Day; even fewer seemed to care.

The reason for the apathy was that nobody expected any great changes in taxation; the financial pundits had almost unanimously forecast what is called a standstill Budget, although there were the usual pleas for some sections of the population (somebody seems to have suddenly discovered that there are actually people living in dire poverty) and for some regions of the country (it seems suddenly to have become obvious in certain quarters that unemployment is not a thing of the past).

Callaghan, apparently, agreed with the experts. "Steady as she goes" was his epithet for the Budget and that was the most newsworthy thing about it. (Although one banker called it the Puppet On A String Budget)

Budget day is always the time for the airing of two delusions. The first is that a Chancellor of the Exchequer, by using Bank Rate or any of the other financial measures at his disposal, can exert an exact and sensitive control over the economy.

In truth, capitalism is quite uncontrollable—as many Chancellors have found to their cost. Callaghan was not the first Labour leader to apply nautical terms to a financial situation; last July Wilson, admitting that things were out of control, said that the economy had been "blown off course."

The second delusion is that changes in taxation have some significant effect on working class conditions. The most that any Budget can do to a worker is for a time to alter his take home pay, up or down, by a few shillings.

In the long run a worker gets paid what it takes to keep him. That is a fact of capitalism and, like its economic anarchy, is something which no Chancellor can change.

Our Boys in Aden

What are British troops doing in Aden, apart from putting the boot in and expressing a willingness to accept a massive punch-up?

The newspapers tell us they are keeping the peace, which avoids the question of why the peace is threatened.

Aden was annexed (a diplomat's word for stolen) by Britain in 1839, and used as a base to guard the trade route to India. (It is still the only fortified point between Egypt and Bombay).

When the British left India in 1948 it could have been the end of their interest in Aden, had it not been for the rich oil fields which had been discovered in the Middle East

Aden now stands guard on the Persian Gulf, where two-thirds of the oil resources of Western capitalism lie. Britain gets more than half its oil from the countries around the Persian Gulf and British oil companies own about one third of the Gulf's production.

It is to protect these interests that Our Boys in Aden are being killed—and are themselves doing a bit of killing. Sir William Luce, who was Governor of Aden 1959-60, made it clear in an article in the Daily Telegraph on April 12 last:

We did not undertake the “policing” of the Gulf for some vague, altruistic purpose; we went there, and have remained there, because it has suited us to do so.”

By “we” and “us” Sir William is really talking about the East India Company in the old days and the oil companies today. These are the interests which need working class bodies to protect them, interests which are threatened today by claims from Persia, Iraq and Saudi Arabia and by the opposing Aden nationalists.

British capitalism’s only hope is to stay in Aden until some sort of order has been imposed in this conflict. A withdrawal now could well plunge the place into a Congo-like war, with serious results for the oilmen of the Persian Gulf.

So it looks as if Our Boys in Aden will have to carry on keeping the peace for a while, even if they have to kill half the population to do it

The Bristol Affair

Bristol Siddeley Motors’ excess profits on aero-engine overhaul—they had to pay back the government £3.9m.—is but one example of what goes on in capitalism. Recent years have also seen the Ferranti affair and the collapse of various insurance companies. But what effect do such commercial malpractices have on the working class as a whole? Well-meaning political reformers see this as a moral issue in which the community is harmed by loop-holes in the law and by administrative shortcomings which a minority exploit to line their pockets. The fog of moral indignation raised serves to obscure some very important points as far as the profit-making of capitalism is concerned. In the long run profits are not made by charging excessive prices or by milking the funds of companies. These are exceptional cases and fail to explain the source of the profit gained by the bulk of industrial and commercial enterprises. To find the answer production itself must be examined.

The people who do the work of producing and distributing goods and services do so for a wage or salary. However many sources of cheating are blocked off, and however much money is recovered by the government, wages will not be affected. These are normally raised by workers organising in unions to press for more. Employers, of course, are organised to resist these demands and to press their own for greater productivity or pay cuts as conditions demand.

Workers’ pay is part of the capital invested in production and is not their share of the product (which belongs in whole to the employer). Wages amount on the average to the sum of the things required to maintain workers and their families as healthy and efficient workers. As a class workers produce more than is needed to keep them and it is from this surplus that the employing class get their incomes. This comes to them in various forms such as rent, interest and profit and also provides the source of the funds which are needed by the government to finance their collective requirements such as armaments and the education, health and welfare of their workers.

So when arms contractors make more than the accepted rate of profit, it is a hindrance to the whole of the capitalist class in any country. The Bristol affair is but one of the sectional quarrels of capitalism in which all are striving for the maximum advantage. The government may be quite competent to deal with Bristol Siddeley but cannot hope to touch the greater question of the exploitation of the working class which is the norm of capitalism, with or without the swindles.

The anti-imperialist delusion (1998)

From the August 1998 issue of the Socialist Standard

In the course of the 20th century socialism, as a word, came to be transformed from a doctrine and aim associated with the emancipation of the working class into a doctrine and aim associated with the coming to power of nationalist, anti—imperialist elites in the economically less developed parts of the world.

The starting point was the coming to power in Russia in 1917 of an elite which had inherited its ideology from the workers movement but which in practice used the state to develop Russia economically and turn it into a power that challenged the domination of the world by America, Britain and France. As such it provided an attractive model for modernizing elites in other countries suffering from economic backwardness and domination by the advanced industrial capitalist states of the West.

The trouble was that this elite continued to use the language and terminology of the workers movement with which it had once been associated. Thus they described their seizure of power as a “workers’ revolution” arid their regime as a “workers’ state”, the first breakthrough by the international workers movement which workers everywhere had a duty to support. And they described the accumulation of capital under the auspices of the state which they were carrying out, not as the state capitalism it was, but as “socialism”.

Marx, who had pointed out that when studying history you should not analyze social and political movements by what they said they were doing but by the material results of what they did, would have been the first to understand (if not to appreciate) how socialism, indeed how his own theories, had become the banner under which a quite different struggle was fought out.

The English Revolution of the 1640s was carried out under an ideology derived from the Old Testament. The French Revolution of the 1790s was carried out under one derived from Roman times. The Russian Revolution, which was the equivalent in Russia of these anti—feudal revolutions, was carried out under an ideology derived from the workers movement but it was no more an attempt to establish socialism than the English Revolution had been to establish the New Jerusalem or the French to revive the Roman Republic.

Although it was Mao who replaced the slogan “Workers of the World, Unite” by “Oppressed Peoples of the World, Unite”, the roots of this change of perspective go back to Lenin.

Lenin’s highest stage

In exile in Switzerland in the middle of the First World War Lenin wrote a pamphlet which he entitled Imperialism, the Highest Stage of Capitalism. In it he argued that, through a process which had been completed by the turn of the century, capitalism had changed its character. Industrial capital and bank capital had merged into finance capital, and competitive capitalism had given way to monopoly capitalism in which trusts, cartels and other monopolistic arrangements had come to dominate production. Faced with falling profits from investments at home, these monopolies were under economic pressure to export capital and invest it in the economically backward parts of the world where higher than normal profits could be made. Hence, Lenin went on, the struggle by the most advanced industrial countries to secure colonies where such “super-profits” could be made.

Lenin exaggerated both the degree to which capitalism had become monopolistic and the difference between the rate of profit at home compared with in the economically backward parts of the world. But it was the political implications of his theory that were to prove the more damaging to the workers movement.

When, after 1917, Lenin became the head of the Bolshevik regime in Russia the theory was expanded to argue that the imperialist countries were exploiting the whole population of the backward areas they controlled and that even a section of the working class in the imperialist countries benefited from the super—profits made from the imperialist exploitation of these countries in the form of social reforms and higher wages,

This was nonsense in terms of Marxian economics which does not measure the level of exploitation by how high or low wages are but by reference to the amount of surplus value produced as compared with the amount of wages paid, whether high or low. By this measure the workers of the advanced countries were more exploited than those of the colonies, despite their higher wages, because they produced more profits per worker.

Lenin’s expanded theory made the struggle in the world not one between an international working class and an international capitalist class, but between imperialist and anti-imperialist states. The international class struggle which socialism preached was replaced by a doctrine which preached an international struggle between states.

The Russian revolution itself was situated in an anti-imperialist context. The whole thrust of Marx’s own analysis of capitalism was that the workers movement would first triumph in the economically advanced parts of the world, not in a relatively backward economic area like Russia. Lenin explained away this contradiction by arguing that Marx had been describing the situation in the pre-imperialist stage of capitalism whereas, in the imperialist stage which had evolved after his death, the capitalist state had become so strong that the breakthrough would not take place in an advanced capitalist country but in the weakest imperialist state. Tsarist Russia had been the weakest link in the chain of imperialist countries and this explained why it was there that the first “workers revolution” had taken place.

This was tantamount to saying that the Russian revolution was the first “anti-imperialist” revolution, and in a sense it was. Russia was the first country to escape from the domination of the Western capitalist countries and to follow a path of economic development that depended on using the state to accumulate capital internally instead of relying on the export of capital from other countries.

In the early days of the Bolshevik regime, when Russia was faced with a civil war and outside intervention by the Western capitalist powers, Lenin realised that this was a card he could play to try to save his regime. Playing the anti-imperialist card meant appealing to the “toiling masses” of Asia not to establish socialism but to carry out their own anti-imperialist revolutions. The ‘super-exploited” countries were to be encouraged to seek independence as this would weaken the imperialist states, who were putting pressure on Bolshevik Russia.

This strategy was presented to the workers movement in the West as a way of provoking the socialist revolution in their countries. Deprived of their super-profits, the ruling class in the imperialist countries would no longer be able to bribe their workers with social reforms and higher wages; the workers would therefore turn away from reformism and embrace revolution.

After Lenin’s death in 1924, this strategy of building up an “anti-imperialist” front against the West was continued by his successors. Because it taught that all the people of a colonial or a dominated country had a common interest in obtaining independence, i.e. a state of their own, it was very attractive to nationalist ideologists and politicians in these countries.

They called on all the inhabitants of the country they sought to rule to unite behind them in a common struggle to achieve independence. As a result, in these countries “socialism” became associated with militant nationalism rather than with the working-class internationalism it had originally been. The political struggle there came to be seen as a struggle, not between the working class and the capitalist class, but as a struggle of all patriotic elements – workers, peasants and capitalists together – against a handful of traitorous, unpatriotic elements who would have sold out to foreign imperialists.

Whereas in Europe and North America, and parts of Latin America, socialism was a movement for the emancipation of the working class represented by various different currents in Asia and later in Africa and the rest of Latin America it was the name of a nationalist, revolutionary anti-imperialist movement. Marxism, in its original sense, has never really existed in many of these countries. What passed for Marxism was in fact Leninism and it appealed to revolutionary modernising intellectuals rather than to workers. It has only been towards the end of this century that groups of workers in these countries have come to realise that Leninism and its anti-imperialist ideology had nothing to do with real socialism. But the damage had been done. To millions of workers in these parts of the world socialism still means nationalism and state capitalism which some of them still they see as something positive rather than a barrier to the working-class co-operation across frontiers which is an essential condition for socialism.

Through the influence which state capitalist Russia used to have over a part of the workers movement in Western countries this is what it came to mean to many working class militants in these countries too. The Russian rulers used the Communist parties outside Russia as simple auxiliaries to their foreign policy which was based on the strategic interests of Russia as an up-and-corning (state) capitalist power. What was “progressive” was what coincided with Russia’s foreign policy’ interests.

During the 1950s Russia moved towards a policy of acceptance of the status quo with the West known as “peaceful coexistence”. The Chinese Leninists, who had come to power under Mao in 1949, perceived the interest of their state differently and sought to become the champion of “anti-imperialism” in place of Russia.

The splits that resulted in the world Communist movement were thus provoked, not as might superficially appear to be the case, by differences over what tactics the workers movement should pursue but over which so-called socialist country’s foreign policy – Russia’s or China’s – should be supported. This was not a dispute which concerned the working class interest at all, but was an argument between states in which workers were being asked to choose whose foreign policy pawns they wished to be.

Lenin’s theory of imperialism had contained the seeds of such a shameful outcome from the start as it made the most significant struggle at world level not the class struggle but the struggle between states, between so-called anti- imperialist and progressive states and so-called imperialist and reactionary states. This was a dangerous diversion from the class struggle and led to workers supporting the killing in wars of other workers in the interest of one or other state and its ruling class.

Adam Buick

World capitalism (2011)

Book Review from the April 2011 issue of the Socialist Standard

Ending the Crisis of Capitalism or Ending Capitalism? Samir Amin. Pambazuka Press. 2011

Samir Amin was one of the pioneers of “dependency theory” in the 1970s. Its exponents regarded capitalism as a single world system divided into a centre which exploited the “periphery”. They challenged the conventional view, held also by those Amin here calls “historical Marxists” (which would include us), that the sort of capitalism that exists at the centre could develop in the periphery. This was impossible, they claimed, as, to continue to exist, the centre needed a dependant periphery to exploit for what Amin calls “monopoly rent” (and Lenin called “super-profits”).

This led Amin to Maoism and its modification of the famous slogan at the end of the Communist Manifesto into “Workers and Oppressed Peoples of All Lands Unite”. He still stands by this slogan and is still sympathetic to Maoism.

In this book he argues that capitalism developed in the centre by dispossessing those who worked on the land. In the 19th century these dispossessed were able to emigrate, in particular to the US where capital accumulation in search of labour-power was expanding. Capitalism, he says, is still developing by dispossessing the peasantry, this time in the South, but this time there is nowhere for the dispossessed to migrate to. So, they are condemned to vegetate in dire poverty. Pauperisation is still inherent in capitalist development.

He sees world socialism as the only way out but envisages it as coming into being just as capitalism did over centuries, with the countries of the South breaking the link to the centre (now merged into a single imperialism of the US, Europe and Japan which he calls the “Triad”) and developing on a non-capitalist basis.

While we do not share this perspective (there can be no non-capitalist development within world capitalism), or the view that the centre depends on “monopoly rent” from the South (they are just ordinary profits) we can credit the dependency theorists with bringing out the fact that capitalism is a single world system, not just a collection of national capitalisms, real or potential.

Adam Buick

Jack and the Beanstalk (1952)

From the March 1952 issue of the Socialist Standard

At this time of the year the pantomime season is drawing to a close and these Xmas plays are being taken off.

One of the plays regularly performed is "Jack and the Beanstalk." The story is of Teutonic origin and was written during feudal times. It tells of a peasant woman who is forced by poverty to send her son Jack to market to sell their cow. He exchanges it for a bag of beans. On his return home the woman throws the beans out of the window. They grow to a tremendous height during the night and Jack climbs to the top, to find himself in the realm of a giant. By subterfuge he steals the giant's money bags and when this money is spent and gone he goes back and steals the giant's magic hen. The second acquisition has the advantage that the possessor is able to live in permanent luxury as the hen lays golden eggs. The giant's harp warns its master, but Jack succeeds in making his getaway with the hen. The hen's supply of golden eggs enables Jack and his family to live happily ever after.

The audience not only enjoy the usual pleasures associated with attending a play, but, with this pantomime, as with some others, the additional pleasure of merging their own individual identities with some of characters in the play. To merge their identity with Jack and his mother is a very pleasant experience for many workers.

It makes a pleasing even if fantastic dream to leave their world of anxiety, toll, strife, working-class houses and working-class food through the ownership of a hen that lays golden eggs producing such wealth that the fortunate owner can satisfy all his wants. Quite an impossibility to so many workers' minds, much too good to be even though about—except in a pantomime.

Back at the process of making a living next day all thoughts of the pantomime are forgotten. There is no time for such dreams—the workers is far too busy producing wealth for his employer. And what wealth!! The golden eggs of Jack's hen appear quite insignificant against the profits the workers produce for those who own capital.

Just Take a Look at This:—

The profits of companies, public and private, in 1950, according to the Treasury White Paper amounted to £1,692 millions after deducting depreciation. The profits of 3,787 companies, which reported in 1951, as totalled by the Financial Times came to £1,873 millions. This total is an increase of 30 per cent. over the Financial Times 1950 figure of £1,431 millions. After depreciation the figures were £1,636 millions and £1,225 millions respectively.

Aspirations that now seem to many workers to be just wishful thinking can become reality just as soon as they realise that it is the ownership of the land, factories, transport systems, and the means of life generally by society that will enable these dreams to be realised by them. Then there will be no need to waste labour on armaments, advertisements, passports and the host of officials and clerks necessary for the present system of wealth production.

This will come about when the workers understand the exploitation basis of this system of society.

Socialist propaganda will help them. The task is urgent—will you join with us and help to make those dreams come true!

Frank Offord 

Cooking the Books: The Quest for Superprofits (2014)

The Cooking the Books Column from the November 2014 issue of the Socialist Standard

It can’t be often that Karl Marx gets a favourable mention in the Investors Chronicle. But he did in its 5 September issue. Chris Dillow, in an article discussing whether or not robotisation would be good for profits and dividends, quoted Marx as pointing out that new, more productive machines not only replace workers but also, as they spread, reduce the value of the older machines still in use. Part of the value of these machines is destroyed through what he called ‘moral depreciation’ (Capital, Vol 1, ch. 15, s.3b).

Dillow’s point was that this ‘moral depreciation’ reduced the value of the firm’s capital and so also of shares in it. There is another reason why an investor should steer clear of such firms. A firm with old machines will be less profitable as its machines won’t be able to produce its product as cheaply as its competitors who have installed the new machines.

Dillow claims that ‘profits come from monopoly power’ and, on this assumption, asks ‘will new technologies be a source of monopoly power or not?’ His answer: yes, at least for a while until the new technology becomes the norm.

In saying this he was pointing out that those firms that first employ a new technology will, because they can produce more cheaply than the average, be able to make an above average profit. This ‘superprofit’ attracts other firms to adopt the new technology, so bringing the average cost of production down and, with this, the end of the temporary superprofits of the innovating firms.

This is well explained by Ernest Mandel (despite his Trotskyism) in his Introduction to Marxist Economic Theory:

‘ … an enterprise or industrial sector with an above average level of productivity … economizes in its expenditure of social labour and therefore makes a surplus profit, that is to say, the difference between its costs and selling prices will be greater than the average profit. The pursuit of this surplus profit is, of course, the driving force behind the entire capitalist economy. Every capitalist enterprise is forced by competition to try to get greater profits, for this is the only way it can constantly improve its technology and labour productivity. Consequently all firms are forced to take this same direction, and this of course implies that what at one time was an above-average productivity winds up as the new average productivity, whereupon the surplus profit disappears. All the strategy of capitalist industry stems from this desire on the part of every enterprise to achieve a rate of productivity superior to the national average and thereby make a surplus profit, and this in turn provokes a movement which causes the surplus profit to disappear, by virtue of the trend for the average rate of labour productivity to rise continuously. ’ (www.marxists.org/archive/mandel/1967/intromet/index.htm)

So it is not true that ‘profit comes from monopoly power’. Profits come from the surplus value produced by the working class. Monopoly power only enables a firm to draw more than average from this pool of surplus value. If monopoly power was the source of profits then if there was none, as in the ideal of so-called ‘perfect competition’, there would be no profits. Which is absurd. In that situation firms would still be making a profit, only the average with none making a superprofit.