Trotsky in Euroland (2002)

From the September 2002 issue of the Socialist Standard

We have always argued that Trotskyism and Leninism is a non-revolutionary current, part of the extreme left-wing of capitalism. This was demonstrated at a fringe meeting during the SWP's annual Marxism event.

This meeting involved an internal debate between three of the organisations comprising the "Socialist Alliance", concerning the issue of the euro. Two broad viewpoints were expressed: those firmly in the "No" camp and others who took an arguably more pragmatic approach.

First up was the International Socialist Group (ISG) whose speaker argued that opposition to the euro (and the EU in general) is where class politics should start. As the EU was a "Bosses Club", socialists should naturally oppose it and given the "monetarism" of the convergence criteria/stability pact, we should realise that this will mean increasing attacks upon the working class.

This position was attacked by both the other groups, the Alliance for Workers' Liberty (AWL) and the Leninist Communist Party of Great Britain (CPGB). They argued that this logically leads to "little Englandism" even if this was not the intention.

The CPGB speaker proposed an "active boycott" of any forthcoming referendum arguing that class struggle would be more effective given an integrated European working class. So for the CPGB, Euroland offers reluctant possibilities.

It was interesting watching these pseudo-revolutionaries trying to come up with the correct tactical formula and giving a "working class" spin to what is an internal capitalist class debate.

I publicly ventured an alternative: tell us workers the truth! Tell us that global capitalism is our enemy, whether one group of capitalists support the euro or not. Tell us that class struggle and democratic organisation are prerequisites for the revolution which will abolish private property, wages and money itself (including the pound and the euro). Naturally, this got the usual looks of incredulity and a pleasing nod from the AWL speaker who mistakenly thought I was echoing his earlier point about "independent working class action".

I added for the benefit of the ISG supporters that even if Britain did stay outside the eurozone, the pound would still be affected by European Central Bank decisions and any subsequent machinations on the foreign exchange markets. As for the austerity measures, these would happen anyway because of the need to reform the European "social democratic model" so as to better compete with the likes of USA and Japan.

What this all shows is that despite their militant phrase-mongering these people will lead the working class up yet another reformist dead-end — if given an opportunity. Their politics falls safely within capitalism.

Dave Flynn 

World View: Euro or Krone? (2000)

From the November 2000 issue of the Socialist Standard

On 29 September Denmark awoke to a crisp, sunny day. Various people were nursing hangovers because the result of the previous day’s Euro referendum had been a “no” (53.1 percent—no, 46.9 percent—yes; 85 percent of 4 million eligible voters—turnout).

The Ministry of Finance distributed a (lengthy) booklet to households discussing the euro. TV had live, lengthy debates (where the audience could put questions to the panel) almost every day. There were even TV phone-ins where “Joe Bloggs” could question, e.g. the PM and leader of the Social Democratic Party, Poul Nyrup Rasmussen. Of course the real alternative to the euro didn’t get aired.

The summer months saw the hive of various parties’ activity grow nigh-on exponentially. (The Minority Party turned down a debate with the World Socialist Movement because they were too busy on their anti-euro campaign.) It was intriguing to see how parties, who are opposed to each other, took the same side and often put the same arguments. The most humorous propaganda of the whole campaign, has Holger Nielsen (leader of the Socialist Peoples’ Party) and Pia Kjaersgaard (leader of the ultra-nationalist Danish Peoples’ Party) in a stance parodying the film poster to Basic Instinct. The poster was produced by the (Young) Social Democrats, who urged for a “yes”, just like the Liberal Party (who are more conservative than the Danish Conservative Party, who are like the British Liberal Democrats—confused?). And our old “friends”, the Leninists, were urging for a “no”.

One of the major talking points prior to the referendum was Denmark’s sanctions, now lifted, towards Austria. The Liberals claimed this policy made voters, who were undecided, more inclined to vote “no”. the sanctions were a part of EU policy in the light of Jörg Haider and the Austrian Freedom Party’s electoral successes, where they form part of that country’s government now. As it was, 60 percent of Danes opposed those sanctions (57 percent in Nyrup’s party were against). The Liberals’ argument was fallacious because all sides had people against the sanctions. Political analysts (various sources) noted that the “no” camp was swelling because people found the government untrustworthy, and not because of its sanctions policy.

Statistics from the “Institutet for Konjuktur—Analyse” showed that 61.4 percent said the euro would be good for business, 52.1 percent said a nay would increase unemployment, 45.5 percent said a “ja” would make an independent fiscal policy difficult—33 percent took the opposite view, 73 percent thought a “yes” would lead to a “United States of Europe”, 57.1 percent said the euro was a threat to “Danishness”. And so on.

The statistics are of interest since they give some indication of the views held by Danish workers and Party leaders. (It would be wrong to say that the parties were unified around a “yes” or a “no”.) A few other arguments are worthy of note. The SDP leader Holger Nielsen said a “no” would make it easier for the Baltic states to join the EU. A fringe group, consisting of refugees and immigrants entitled to vote, urged a “yes”; they argued that a “no” would lead to a deterioration in the Welfare State and give fuel to Denmark’s already growing far-right parties. And then there was the notorious argument put forward a few days before the referendum by PM Nyrup: a “no” would force up interest rates and thus cost 20,000 jobs. (In fact the, unaccountable, National Bank director put up the interest rate by 0.5 percent the following day.)

In the statistics above, people argued that an independent fiscal policy would be made difficult by a euro. This is true. A central European Bank would have the control over the issue of euro notes and coin. But for how long? Countries can make agreements but history has shown that each country can and does break agreements or push for amendments, since each country’s government is the executive committee of the collective capitalist class. A European Bank would still have an inconvertible currency (the euro) and could still influence price levels via inflation. A Central Bank could never avert economic crises, which are an inherent part of capitalism, because it is a system of anarchic production.

Control of currency issue and interest rates, high or low exchange rates, etc and what monetary policies are carried out depend on which section of the capitalist class has enough lobbying power. Each party stood for a policy of running capitalism. Capitalism cannot work in the workers’ interests. It’s creed is profit.

The working class should not side with any of our class enemies. It should stand for its own interests—freedom from wage slavery and exploitation; socialism: a society of production for use and free access, where all will contribute according to their abilities.

Despite all the debating and statements and what not through the weeks and months, one thing was patently clear: the basic previous which the politicians based their specious arguments.on were not examined. Thus anybody could say anything without being asked any awkward questions, like “What is money anyway?”, “Why does money exist?” and “I don’t have enough euros, does that mean I’ll have to go without food still?”

As this article has hinted, a certain viewpoint was not addressed at all: socialism. Socialists are against capitalism. This means socialists are for a global union, and not nation states, federal unions or global capitalism. socialists are also not interested in what the name of a currency is, as we are for abolishing money.

The question of “euro or Krone?” was of complete irrelevance, as will be “euro or Pound?” when Britain holds its referendum, to the workers. The real issue is “Capitalism or Socialism?” That is why your humble scribe wrote “World Socialism—Abolition of the Wages System!” on his voting paper.

Graham C. Taylor

Cooking the Books: The Gnomes of the Market (2012)

The Cooking the Books column from the January 2012 issue of the Socialist Standard

The Eurozone is an economic area in which 17 different countries have agreed to use a common currency, both internally and externally. In the years between 2002 when it was introduced until the crash of 2008 the economies of these countries were growing and investors (largely banks) were prepared to lend the governments their money to cover their budget deficits by purchasing their bonds. They took the view that their money was safe as the governments would be able to pay the interest and repay the loan out of future tax revenues.

The crisis upset this as economic growth, and tax revenues from it, fell. Some Eurozone countries had borrowed an amount that was higher in relation to their GDP than others and so were harder hit. They are now denounced in the financial pages of the press (generally more favourable to creditors than debtors) for having been “profligate”.

Creditors began to fear for the repayment of their loans and brought pressure to bear on the governments concerned by refusing to lend them more except at higher, penal rates of interest. They have gone farther, making it a condition for future lending at lower rates that the governments cut their spending so as to have the money to repay any loans. They picked off the governments one by one: Ireland, then Portugal, then Greece; and now Italy, with Spain and even France possibly next.

All this has been done impersonally through “the markets” but not the less effectively for that. The debtors are not entirely at the mercy of the creditors because they always have the nuclear option of bringing the whole house down by defaulting; in which case the creditors would lose all or most of their money.

So creditors have an interest in not pushing the debtors too far and in coming to some arrangement which will ensure that they get most of their money back, eventually.

These negotiations have taken place through governments (rather than being left to “the markets”) and have resulted in the holders of Greek government debt agreeing to being repaid over a longer period and even to a “haircut”, i.e. the writing off of some of the debt.

Critics of the euro have gleefully shouted “we told you so”. Here for example is the Times on 7 November: “Greece’s crisis might have been a localised problem rather than a continental threat, but it has been aggravated by the common currency. It has also been rendered more difficult to resolve owing to the inability of weaker Eurozone members to devalue their currency and thereby secure an adjustment in living  standards.”

A downward adjustment, that is. Depreciating a currency (these days by letting its value float downwards rather than a formal devaluation as in the days of fixed exchange rates) leads to imports costing more, so reducing living standards that way.

Despite the political rhetoric, it is not certain whether the British capitalist class really wants a return to a situation where some of its major European competitors, France, Italy, Spain, would be free to let their restored national currencies float downwards, so making their exports cheaper. One of the reasons Britain stayed out of the euro was precisely to retain the flexibility to do this, knowing that their competitors couldn’t.

The Times admits that Greece would still have had to reduce living standards even if it hadn’t been in the euro. So, it’s a question of damned if you’re in the euro and damned if you’re not. In other words, it’s not being in the euro that’s the problem, but being in a capitalist world. After all, Britain is not in the euro but the government is still having to impose austerity.

Cooking the Books: Too much debt or too little profit? (2011)

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

“Debt being the problem, creating more debt can’t solve it” was the title of a recent thread on the Zeitgeist global forum. Given all the fuss in the media about government debts (or “sovereign debt”), this is not surprising, but it is not debt that is the problem. Government debt is a symptom of the problem.

Government’s borrow money to cover the gap between what they spend and what they raise as taxes (the budget deficit). Like all borrowers, governments anticipate being able to repay their debts with interest out of future income, in their case, future tax revenue. Most taxes fall, in the end, on the new value created in production, and either taken directly as taxes on profits or indirectly as sales taxes and taxes on personal income.

Since the current slump broke out in 2008 new production has fallen and is nowhere near the level it was before, so putting governments in difficulty, some more than others. The anticipated income as tax revenue to repay their loans has not materialised. The current sovereign debt problem is thus a direct consequence of the continuing slump.

Governments typically borrow by issuing bonds for sale at a given face value and fixed rate of interest, repayable in a given period of time which can be as short as a month or as long as 30 years or more, say £100 at 5 percent interest per annum. Once taken up, the bonds become tradable and are bought and sold. The price at which they are traded is determined by the laws of supply and demand, not by their face value, but the amount of interest remains the same.

If, as has happened to Greek, Irish, Portuguese and now Spanish and Italian bonds, those wanting to sell (supply) exceed those wanting to buy (demand) then their price falls. If it falls, say to £90, the government still has to pay the same amount of interest on them (in this case £5). The ratio between this amount and the bond’s price is known as their “yield”. In our example it would be 5/90 or 5.55 percent. In other words, the rate of interest will have risen from 5 to 5.55 percent and this will be the rate the government will have to offer on future bond issues. Which presents a problem when the loans come up for renewal, as they continually do.

The governments of the Eurozone countries and the European Central Bank are not trying to solve the sovereign debt crisis of some of their members by creating more debt. They are trying to reduce the likelihood of the holders of these debts (amongst them leading European banks including some in Britain) not getting all their money back. This is why they are pressing the governments affected to reduce their budget deficit by reducing their spending, i.e. by imposing austerity. They have also come up with various schemes to keep interest rates on these governments’ bonds down as interest payments on them are part of government spending.

What all this confirms is that interest is secondary to profit. Debt and the interest on it is not the root problem. Interest is a share in the surplus value created in production. If not so much surplus value is being created – and a slump is precisely a drop in production including of surplus value – then there is less available to pay interest, either directly by businesses or indirectly via governments.

Creating more debt is indeed not the solution. But neither is creating less debt. If capital accumulation resumed and reached previous levels, there would be no further talk of a “debt crisis” as international investors would be assured that the surplus value would be there from which the interest on their loans and investments could be paid.

If, on the other hand, capital accumulation does not resume quickly enough, as some are beginning to fear, then the investors may well lose some of their investments. But it won’t be the result of too much debt but of too little profit.