Letter: "We’ve got better things to do." (2003)

Letter to the Editors from the October 2003 issue of the Socialist Standard

"We’ve got better things to do."

Dear Editors

Regarding the recent dialogue (August Socialist Standard) between the journalist Will Hutton and “RD”, Hutton is clearly wrong to say that socialism has “palpable Christian roots”. Instead socialism and religious thought share (at a psychological level) similar roots – they are both responses to social conditions. Marx’s famous phrase, “the sigh of the oppressed creature” comes to mind.

However we should recognise that the desire for socialism arises not only from the immediate experience of living inside contemporary capitalism. Humans have over the centuries developed abstract ideas or models of justice, fairness and equality from their material experiences. These have been modified through different forms of society and culturally maintained through the years.

Sure, there is much more to socialism than vague ethical notions: socialists have a relatively specific view of society, social change and the alternative to capitalism. But does it really help our cause to go out of our way (as I feel SPGB members sometimes do) to try and deny any continuity – at any level – between our ideas and those of other traditions. We are the Socialist Party (and as such we are right to not permit membership to those with religious views), but we are not The Anti-Religion Party. We’ve got better things to do.

Attacking religion may not necessarily be a waste of time for socialists, but I am more concerned with the general mindset behind this. Of course it is easier to stay secure in a small, ideological (possibly psychological?) bunker. I think it would be healthier however if members more openly recognised that our ideas are sophisticated enough to still allow us to criticise religion at a political level, while at the same time not feel we need to continually begrudge common roots (even with traditions which are nowadays essentially conservative, like religion), without feeling we are somehow compromising our principles.

Brian Gardner, 

Edinburgh Branch

Sting in the Tail: Timex (1) (1993)

The Sting in the Tail column from the August 1993 issue of the Socialist Standard

Timex (1)

Another expert on capitalist enterprise has bitten the dust. He is Timex president Peter Hall. He resigned his post in June although in May he was telling The Herald that “he wasn't a quitter and he would see the dispute through to a resolution".

At that time he was full of confidence about the future of the Timex factory in Dundee:

Timex has been in Dundee for 50 years and we will he here for at least another 50 years, despite the fact that some people seem not to want us here.

Five weeks after that confident forecast he had resigned and the company announced that the factory would close in December. Just another example of the complete unpredictability of the capitalist system and the “experts'" lack of understanding it.

Timex (2)

When Timex’s owner Fred Olsen told the striking Timex workers that they should “reflect calmly” before rejecting the reduced wages and conditions they had been offered, Willie Leslie, the deputy shop stewards’ convenor, replied angrily:

How dare a man described as one of the richest multi-millionaires in the world tell workers who earned £125 a week that they need to tighten their belts to make sure . . . that the profits continue to roll into the Olsen empire. (Guardian. 5 June).

His anger was a natural reaction but does he think Timex is in business to provide jobs for workers? Its aim must be to maximize profits but the Dundee factory is a loss-maker, and as Peter Hall put it bluntly “we have to turn this place round".

Faced with the resolve of the strikers, Timex will now close the Dundee factory. Is this another defeat for the working class? Maybe, but if this dispute serves as a warning to other employers that there is a limit to what workers will endure then the struggle of the Timex strikers will not have been in vain.

Tinkerbenn

Tony Benn has in the past shown that he has grasped at least some of the Marxist analysis of capitalism.

You would never suspect this from his ridiculously idealistic waffle in the Guardian on 29 June. Writing in anger about the American missile attack on Baghdad he correctly describes this as:

a return to Victorian imperialism with its gun-boat diplomacy, carrying out punitive raids whenever the imperial power wishes to demonstrate its strength and assert its authority in defence of its economic interests in oil and the wealth of the Third World.

And his solution? He tells us “what we need is a real New World Order". No, not the abolition of the social system which produces all this hut merely “a reformed United Nations"! Its domination by the “rich nations" is to he swept away and “replaced by policies that are in accord with the Charter of the UN”.

Benn, like all reformers, really believes that with a bit of tinkering capitalism can exist without the warts which are such a fundamental part of it.

That reserve army

Will Hutton, economic editor of the Guardian, wrote on 22 June:

In the middle of the 20th century Keynesian economics came to the rescue of capitalism and dispelled the Marxist claim that to work it required a reserve army of the mass unemployed.

Marx certainly held that capitalism needed what he called an “industrial reserve army" and explained why in Capital (Volume 1, chapter 25). This army was needed to provide labour for new industries without disrupting old industries which also required it and, of course, to keep down the wages of those in work.

Hutton now cites the growth of unemployment in the EC which is expected to rise to 17 million in 1994 as evidence that Keynes's rescue “has proved only temporary" and concludes:

Thus the current spectre haunting Europe is that Marx has finally been proven right—if wrong on the solution.

Marx’s “solution" to unemployment was nothing less than the establishment of socialism and obviously Hutton doesn't agree with that.

Some celebration

Did you know that the United Nations is celebrating its first International Year for the World's Indigenous People?

Trouble is no-one told the Brazilian gold and tin “wildcat" miners. The Yanomami, an ancient Amazon tribal people, are being wiped out by the “progress" of capitalism's development.

In this column we reported in February 1990 that the Yanomami, who have lived in the area for 40,000 years, had been reduced to 20,000. We now learn (Observer, 20 June) this number is down to 7,500:

In some villages there are no surviving old people and no children under two. Gold miners have shot children out of trees calling them “monkeys”, they have raped women and bombed villages, where they want to mine.

Thus does capitalisms market system “improve" the world. Only the mining companies are celebrating such progress.

An unrepentant banker (2011)

From the February 2011 issue of the Socialist Standard 

Bankers’ bonuses: who’s to blame for the greed?

Bob Diamond, Barclays bank’s chief executive, and one of Europe’s highest-paid bosses, last month faced a grilling from the Treasury Select Committee, a cross-party body appointed by the House of Commons. Those expecting a replay of previous confrontations between MPs and bankers – in February 2009, for example, when the bankers said they were ‘profoundly sorry’ for their role in the financial crisis – were to be disappointed.

Diamond was unrepentant. In answer to questions from MPs, he said it was about time that unfair public criticism ‘moved on’ so bankers could stop apologising and get back to business as usual. MPs wanted to know if Diamond was going to show ‘restraint’ on bonuses this year (no), refuse his own bonus (probably not), act more responsibly and increase lending to business (impossible to do both), accept personal liability for the failing of institutions (no) and if he was ‘grateful’ to ‘the taxpayer’, ie, the state, for bailing out the financial system and keeping him and his whole industry in business (grudgingly, and after much evasion, yes. In other words, reading between the lines, no). 

Diamond’s performance added fuel to the fire of the ongoing bankers’ bonus controversy. Ministers in the present government, while campaigning for power, said they were determined to do something about the arrogance and excessive wealth of the bankers. And to be fair, they are doing something. In fact, as Will Hutton puts it in The Observer (16 January), compared with Gordon Brown and Alistair Darling, business secretary Vince Cable and chancellor George Osborne are ‘fire-breathing radicals’, clamping down on tax avoidance, taxing bank profits, setting targets for bank lending, regulating hedge funds and contemplating more banking reform and regulation. But so far, they are being relatively timid about bankers’ bonuses. Why? Now that they have taken power, they, in common with all governments, accept the reality of capital accumulation and their role in it. And that means not doing anything that will frighten the financiers too much.

Capitalists united – and divided

That remains true even in the face of an increasingly numerous opposition. After all, as Hutton says, the issue of bankers’ bonuses is uniting everyone in outrage – ‘from captains of industry bewildered how top bankers can earn so much more than they do to the newly unemployed who wonder what they have done to deserve poverty and hardship while the moneymen pocket millions’. That the state bailouts have poured into the pockets of private individuals, and the poorest and most vulnerable will be left to pay the price in terms of job losses, benefit cuts, and reduced levels of social services and so on, we have already stated (see Socialist Standard, passim). But how come we are also seeing criticism from captains of industry and government ministers and the business press and so on? Not so long ago, bankers could rely on them being ‘intensely relaxed’ about such matters. Why now so increasingly angry and vocal?

Partly it is a fear of social unrest and breakdown. It also reflects divisions within the capitalist class. As a class, the capitalists are united by the need to promote the conditions necessary for investment and business activity. For that, they need, for example, a supply of compliant and affordable labour, a state willing and able to provide socially necessary infrastructure, a financial system to facilitate the processes of capital accumulation, a vibrant consumer market, and so on. On issues such as these, capitalists stand united. But the capitalist also finds himself in competition with his comrades. Capitalists have differing needs and interests depending on exactly how they get their hands on the spoils of exploitation – whether as landlord, financier, industrialist, retailer or state official, for example. In the usual course of things, this is just the stuff of competition, of ‘business as usual’, the undertow of everyday life. But when crisis hits, everything breaks to the surface. As Marx puts it (in Capital, Volume 3, Chapter 15):

  ‘So long as things go well, competition effects an operating fraternity of the capitalist class […] so that each shares in the common loot in proportion to the size of his respective investment. But as soon as it is no longer a question of sharing profits, but of sharing losses, everyone tries to reduce his own share to a minimum and to shove it off upon another. The class, as such, must inevitably lose. How much the individual capitalist must bear of the loss, ie, to what extent he must share in it at all, is decided by strength and cunning, and competition then becomes a fight among hostile brothers. The antagonism between each individual capitalist’s interests and those of the capitalist class as a whole, then comes to the surface…’

Who wins out in this struggle is not simply a reflection of factional power, as the Marxist academic David Harvey points out (The Limits To Capital, Chapter 7). The existence of surplus value (profit) in money form is ‘the most adequate form of capital’, which means that ‘the moneyed interest enriches itself at the cost of the industrial interest in the course of [a] crisis’ (Marx). This, then, helps us understand the row about bankers’ bonuses. It’s a row about which class, or which fraction of a class, is going to be landed with the costs of the crisis. We see, therefore, that Marxian theory is not esoteric mumbo-jumbo or outdated rubbish, as often claimed, but a powerful explanation for what is actually going on in the real world. If you understand Marxian theory, bankers’ multi-billion-pound bonuses and the row surrounding them no longer look so much like an insane aberration, but a logical consequence of social and economic structure. Bankers are enriching themselves at the expense of industry and workers? Well, OK, that’s what we would expect to happen…

What is to be done?

The question is what is to be done about it. As Harvey says, however the class struggle eventually plays out, however the losses of the crisis are finally distributed between factions of the capitalist class, and between the working and capitalist classes, and whatever the power struggle that ensues, the necessary result will be the destruction of value (closure of workplaces, the laying off of workers, destruction of surpluses, defaulting on debt, cutting of state services, and so on) so that a new round of capitalist accumulation can begin. This is totally irrational and insane from the point of view of human needs, but inevitable and logical from the point of view of capital accumulation.

The film-maker Charles Ferguson, whose investigative documentary Inside Job exposes the delusions and deeds of the bankers during the course of the crisis, says that, ‘Those responsible [for the crisis] blame the system. Or they blame the bubble caused by irresponsible borrowers.  Some of them blame low interest rates. In a grim way, it’s actually amusing to watch them blame anyone except themselves’ (Evening Standard, 17 January). The film-maker’s contempt for those who line their pockets and profit from social disaster is justified. But actually, in a sense, it’s the bankers who have got it right. It is the system that is to blame. And we should indeed ‘move on’ – from blaming capitalists who are as much at the mercy of the system as the rest of us, to an understanding of the world we live in and how it works. Politically, that means moving from a demand for ‘regime change’ to one for ‘system change’.

Stuart Watkins

Global reformists (2001)

Book Review from the May 2001 issue of the Socialist Standard

‘On the Edge: Living with Global Capitalism’. Edited by Will Hutton and Anthony Giddens, (Vintage 2001)

This is a collection of essays by various “lefty” and centrist writers on aspects of global capitalism. The essays are sandwiched between an opening dialogue between the editors and a concluding chapter curiously titled “Fighting Back” (against whom or what?—certainly not global capitalism).

Manuel Castells outlines three sources of unsustainability for what he calls info-capitalism. One of these is “the social, cultural and political rejection by large numbers of people around the world of an Automaton whose logic either ignores or devalues their humanity”. Unfortunately he follows this by suggestions for taming the Automaton (global capitalism), not for getting rid of it.

Vandana Shiva is scathing about global capitalism and its effects on poor people and the environment: “Instead of getting rid of pollution, systems are being evolved which allow the rich to sell their pollution to the poor . . . The proposal to give market values to all resources as a solution of the ecological crisis is like offering the disease as the cure”—good diagnosis, pity about the lack of treatment.

Arlie Russell Hochschild describes how a Philippines mother-of-five migrates to the US to work as a nanny to the young son of a wealthy Beverly Hills family. The family pay the nanny the going rate, and the nanny pays her domestic worker the going Philippines rate. The nanny would have preferred staying home to look after her own children. The Beverly Hills family are satisfied with the deal. So Hochschild asks: are that family getting emotional surplus value?

In the face of this and much other evidence that global capitalism is destroying or severely damaging human relationships and values, you would expect the editors to condemn the system and urge its replacement. Not a bit of it. Hutton does not go beyond recognising the driving force behind global capitalism: “Its overriding objective is to serve the interests of property owners and shareholders, and it has a firm belief . . . that all obstacles to its capacity to do that-regulation, controls, trade unions, taxation, public ownership, etc—are unjustified and should be removed.”

Giddens, seeking to magnify the minuscule differences between himself and Hutton, claims that “Capitalism, at least for the moment, has hardly any critics.” Not true. Capitalism has plenty of critics, but none of them (except socialists, of course) carries their criticisms to the point of advocating the removal of the system whose deficiencies they eloquently describe. Instead they accept the myth that There is No Alternative.

The editors say in their concluding chapter “the task, surely, in the absence of alternatives, is to keep the current system going and improve it.” It doesn’t seem to occur to Hutton and Giddens that this “task” is effectively to condemn us to endure some form of capitalism for ever. Echoing Fukuyama, we really have, according to this scenario, reached the end of history.

Stan Parker

Voice From The Back: Good Will Hutton (2001)

The  Voice From The Back column from the April 2001 issue of the Socialist Standard

Good Will Hutton 

Surprise, surprise—the journalist Will Hutton, Keynesian economist and supporter of New Labour has actually written something interesting:

“The wealthy are doing well in America. Since 1976, the share of wealth owned by the wealthiest one per cent of Americans has doubled courtesy of the explosion of stock options, near halving of the top rate of income tax and the cuts in inheritance and capital gains tax. As a result the top one per cent of households own more than the bottom 95 percent of Americans combined” (Observer, 25 February).

Construction site carnage

  “Deaths of construction workers are ‘spiralling out of control’ as building companies slash staffing numbers in a bid to meet tight margins. There have been 100 fatal accidents on British sites over the last year in an industry booming thanks to increased orders and consolidations. Unions blame this ‘construction site carnage’ on firms that force workers to go self-employed. George Brumwell, general secretary of the builders’ union UCATT, said: ‘The increase in the number of employees forced to go self-employed leads to corner-cutting, risk-taking, people doing jobs they are not trained to do, and cash-saving at all costs'” (Observer, 25 February).

Supporters of capitalism delight in telling socialists that competition and the market are the most efficient way to run society. According to the above press report, capitalism is the best way to run society—if you happen to be an undertaker.

10,000 kids a day

Profit is the driving force of capitalism. The environment, the health and happiness of humanity is of no importance in relation to the profit motive. This has been again illustrated by the WHO report Water for Health; Taking Charge:

  “More than a billion people lack access to clean water, despite 10 years of intense efforts by aid agencies to avert drought and pollution. An investigation by the World Health Organisation has revealed that tens of thousands of children are dying every day of thirst or from diseases triggered by infected or poisoned water. The WHO report, to be published next month says global warming will exacerbate the situation. ‘The greenhouse effect is already bringing more extreme weather and that means more droughts and more outbreaks of serious flooding,’ said Dr James Bartram (co-ordinator of the WHO’s water, sanitation and health programme). With flooding, drinking supplies get contaminated with sewage and people can no longer consume unpolluted water. Epidemics of disease, such as cholera then break out” (Observer, 25 February).

Mysterious indeed

The Judeo-Christian God is a particularly blood-thirsty deity. According to his followers he is a dab hand at slaughter, famine and pestilence. Not to be outdone the Muslim deity (or is he the same one?) has been busy on the mayhem trail lately. The ways of God are indeed mysterious but those of his superstitious adherents are downright baffling.

  “Thirty-five Muslims were crushed to death in a stampede near the holy city of Mecca in Saudi Arabia yesterday, as tragedy once again struck the annual hajj pilgrimage. The victims, 23 women and 12 men, mostly elderly and of various nationalities, were trampled and suffocated when a huge crowd in Mina valley rushed towards one of three giant pillars representing the Devil during a ritual known as ‘Stoning of Satan’. It was the first such tragedy at the hajj since 1998 when at least 118 pilgrims died, and more than 180 were injured in a stampede at the same spot in the third and last day of the stoning ritual. A year earlier, 343 pilgrims were killed and more than 1,500 injured when a fire destroyed 70,000 tents in Mina. The worst hajj disaster came in 1990 when 1,426 pilgrims were crushed to death in a stampede when a bottleneck developed at the entrance to a congested tunnel” (Times, 6 March).

It’s not cricket

The socialist view that capitalism distorts every human endeavour and makes it a mere commodity to be sold on the market place was recently illustrated by that arch-conservative the former Test Cricket umpire Harold Davis Bird (Dickie Bird):

  “I think it is very, very sad that the old umpire has gone, but it all boils down to money. Winning means everything—don’t get me wrong—we all like to win but, once we lose the enjoyment of playing the sport you’re gone and it’s all down to money” (c.CrickInfo.Ltd, 6 March).

The futility of reform 

  “The Government’s measures to help the most excluded people in society have had no significant effect, researchers have concluded The study, Low-income Families in Britain: Work, Welfare and Social Security in 1999, found that more than 80 per cent of children in households where neither parent worked were forced to go without basic necessities.” (Times, 15 March)

Boeing: the fatal price of competition (2019)

From the May 2019 issue of the Socialist Standard

Capitalism’s supporters are always telling us that competition brings out the best in human beings. It is supposed to encourage efficiency and creativity and promote innovation. We are also informed that capitalism’s drive for profit creates high quality goods that most people desire at a competitive price. However, as we have shown time and time again, the reality is rather different, and as in the two recent air crashes, the consequences can be fatal.

On 10 March, an Ethiopians Airline flight bound for Nairobi from Addis Abba crashed shortly after take-off, killing all 157 on board. This was eerily similar to the Lion Air crash that took place five months earlier in Indonesia where 189 passengers lost their lives. In both cases the pilots were unable to prevent their planes from taking a steep nosedive and both planes were of the new Boeing 737 Max 8 design. Preliminary investigations in the Ethiopian Airlines crash absolved the pilots of any blame.

Competitive pressures

Around ten years ago, Airbus developed a new range of aircraft with enhanced fuel efficiency and lower operating costs. They were able to pick up a lot of orders from airlines keen to lower their running costs. Boeing feared that they might lose out on market share to their European rival and were spurred to action when American Airlines, a longstanding customer of Boeing, purchased a large consignment of the new Airbus model. Boeing set to work to design an aircraft to compete with Airbus.

For a plane to fly successfully without stalling, that is avoiding a situation in which the angle of the plane points so far upwards it stops flying and is at risk of falling and crashing, the weight and power of the engines needs to be in balance with the wings, the cargo areas and other component parts of the plane. Therefore, if you are going to build a plane with heavier, more fuel-efficient engines you normally need to design an entirely new aircraft. Indeed, Boeing did investigate this option, but they ruled this out as it was deemed to be too expensive and just as importantly the development timescale of up to ten years was considered to be too long, as Boeing needed to deliver the new planes more quickly in order to maintain its share price. So they made the fateful decision to fit the new heavier engines onto the existing 737 design. The 737 Max 8 aircraft was introduced in 2017. The aerodynamics of the new plane were altered with the heavier engines, in certain flying conditions, potentially forcing the plane to thrust upwards raising the likelihood of stalling. To counteract this, Boeing installed anti-stalling software, known as the ‘Manoeuvring Characteristics Augmentation System’ (MCAS). When the angle of the plane is too high, sensors on the nose would transmit signals to MCAS, which would then force the nose down. An advantage from the point of view of the manufacturer and the airlines was that this automated software obviated the need to retrain the pilots, thus saving Boeing and the airlines money.

This set up depends on the software working correctly at all times. However, It is now generally believed that in both fights incorrect signals were being transmitted from the sensors to MCAS indicating that the angle of the plane was too high when in fact it was flying normally, thus forcing it to point downwards. The only thing that the pilots knew about MCAS is that they could deactivate it and use manual controls. Unfortunately, as the sensors continued to supply incorrect signals, MCAS was reactivated after a few minutes, forcing the planes to nosedive until they crashed. Two safety measures, a so-called ‘angle of attack indicator’ and a ‘disagree light’ indicator which warn that the sensors are malfunctioning, were not installed on the planes as Boeing sold them as optional extras. Evidently, Neither Lion Air nor Ethiopian Airlines had decided to purchase them.

Largely due to budget cuts over the last ten years, the Federal Aviation Authority (FAA) has found itself short of the qualified staff that is required to oversee the airworthiness of new aircraft and have effectively delegated regulation to airlines and manufacturers. One thousand Boeing employees had been seconded to the FAA.

In the wake of the crashes, the US flight attendants’ trade unions called for the 737 Max 8 planes to be grounded and pledged that they would support any member who refused to fly in them. Airlines around the world grounded their 737 Max 8 planes. The FAA in the United States reluctantly agreed to ground the planes a few days after the crash in Ethiopia. Boeing shares plummeted and their image has been tarnished. They are facing expensive lawsuits from victims’ families. They are desperate to restore their reputation and get their 737 Max 8 planes flying again, and are working on a fix for their MCAS software and have pledged an improved safety manual and training for pilots.

Some do see that the market has played a role in these tragedies, but do not arrive at the conclusion that capitalism should be abolished. They argue that corporate power should be reined in with tougher regulations. Will Hutton, in an article published in the Observer (7 April), says ‘The Boeing scandal is an indictment of Trump’s corporate America’, citing ‘America First nationalism, indulgent free market economics, Republican libertarianism and a political system in hock to corporate lobbying’ as the villains. It is true that Trump’s government pursues a free market capitalist agenda which is hostile to regulation, and Trump is in favour of privatising the FAA. He has representatives from the major banks and corporations in his government. Indeed, former Boeing executive Patrick Shanahan is Trump’s acting secretary of defence and it is alleged that he has tried to enhance Boeing’s contracts with the government. Boeing has spent billions on lobbyists to obtain lucrative defence contracts and has given donations to both Republican and Democrat lawmakers

When a government is said to embrace free market ideology, what this really means is that it is committed to pursuing the interests of its capitalist class ruthlessly without the impediments of workers’ rights, human safety and human welfare. This is not just the case with Trump, but also with Republican and Democrat presidents before him. Indeed it is the function of governments within capitalist society to defend and promote the profits of their capitalist class. Over recent years, governments have come under global competitive pressures to cut their costs and therefore implement more ‘free market’ policies of deregulation.

Cheating the regulations

Then there are manufacturers who try to cheat the regulations. In September 2015, the US Environment Protection Agency discovered that Volkswagen installed software in the engines of their diesel cars that was able to detect when they were being tested and give out false emission readings to enable them to pass emission tests. These cars would be pumping out more pollution into the atmosphere compromising people’s health. As with Boeing, Volkswagen shares fell and its reputation was badly damaged.

In the era before Trump and ‘indulgent free market economics’, some companies would dangerously cut corners to maintain their market share. One notable case in the 1970s was the Ford Pinto car, in which the fuel tank was placed dangerously in the rear. This meant that if another car hit it from behind, the tank was in danger of exploding. In fact this happened in one instance and the driver was killed. An investigation by the victim’s lawyers found that Ford cynically calculated that it would be more cost effective to pay out damages than remedy the design flaw. Ford was forced to pay out substantial damages.

The ex-Militant Tendency Trotskyists claim, in an article, ‘Corporate capitalism jeopardises air safety’ (Socialist, 3 April) that ‘public ownership of the aviation industry under democratic workers’ control and management’ is the solution. However, companies under public or state ownership also have to compete in markets and keep their costs down. In 1966, disaster befell a small Welsh mining village called Aberfan when a colliery spoil tip collapsed and engulfed the village, including schools, killing 116 children and 28 adults. A period of heavy rain led to a build-up of water within the tip which caused it to slide downhill as a slurry, The National Coal Board, a state-owned company, decided it was cheaper to dump the colliery waste on the mountain slope above the town. In 1987, a fire ravaged Kings Cross station killing 31 people. A shortage of staff and lack of maintenance due to budget cutbacks resulted in more people losing their lives. More recently there has been the tragedy of the Grenfell fire where the local council had the block of flats covered with cheaper but highly flammable cladding.

Not only does capitalism exploit us, it is gambling with our lives. State ownership, tighter regulations and software fixes cannot change this. We need to stop being chips on capitalism’s roulette table and organise to get rid of this pernicious economic system once and for all.

Oliver Bond

Reformists never learn (1998)

Book Review from the March 1998 issue of the Socialist Standard

The State to Come by Will Hutton. Vintage Press, 1997. £4.99.

Reformists never learn. Despite all the evidence to the contrary, Observer editor Will Hutton still claims that societies can shape capitalism “to meet their wider goals. Different ethical values apart from the market ethic must be protected . . . Human values need to be incorporated into the core of market processes . . . to produce a kinder, more tolerable society . . .” But if this is possible, why has it never happened up to now, at least not for any length of time?

The fact is that capitalism can’t be reshaped so as to put human values before market values. It has to put profits first and its economic mechanisms impose this on any government which may have other thoughts. Since 1973 it has been even worse for reformists. The end of the post-war boom and the period that has followed of slow growth, punctuated by recurring slumps, has meant that capitalist states have been in almost permanent fiscal crisis. They have not had the money to introduce any new social reforms and have been compelled to cut back on existing ones. The Blair government’s action against single mothers and their future plans against the sick and disabled is merely a continuation of this. They are acting as all governments of capitalism are forced to these days.

Hutton, who is a Labour supporter (this short book was written to urge people to vote Labour in the last election), is at the same time an open supporter of capitalism. He wants Britain to “develop its own specific capitalist model” and “to build a capitalist structure that can regulate itself better”. He realises that this is all that Labour aims at too but has his doubts as to whether it wants to go even that far. Labour, he says, “wishes to reshape British capitalism-a little” but the danger is that “Labour will find in office that it governs as a nicer group of Conservatives”. Whether Blair and his band of hypocrites (particularly the one who shopped his son to the police) are nicer than the other arrogant lot is a matter of opinion or remains to be seen but, in any event, is irrelevant in that it is not the personal attitudes of ministers that count but what the workings of the capitalist system forces them to do. It is capitalism that is the enemy and not the particular politicians who run it.

And capitalism can no more be reformed or reshaped so as to serve human rather than market values as Hutton deludedly imagines than a leopard can change its spots.

Adam Buick

Will Hutton: Back to the Future, part 3/3 (2015)

From the Socialism or Your Money Back blog

Part 1 here and Part 2 here.

Hutton’s prescription for the global economy is a Keynesian one with a ‘credit creationist’ twist, attempting to iron out the boom and bust inherent in capitalist production.  J.M. Keynes (writing in the slump of the 1930s) saw the instability of capitalist production, its tendency to boom and bust, as due to the fact that investment tends to stall because not every seller in a market becomes a buyer as there is a tendency for businesses to hoard a portion of profits rather than to reinvest it all in new production, which creates a deficit in market demand.  For Keynes, the state needed to step in order to provide the demand that was missing through direct investment and through redistributive taxation. 

To overcome the crises such as that of 2008 and the current crisis in China and other ‘emerging market economies’, Hutton urges international banking reform and demand stimulation in western economies.  He argues that global banking needs to be regulated by a ‘reinvigorated IMF’, reconfigured so as not to be dominated by western political right (those marauding Anglo-Saxons) in order to ensure ‘proper surveillance of global finance’.  This would involve restrictions on capital flows between countries and ensure that central banks regulate banks reserves to prevent banks ‘creating money’ by lending multiples of what they hold as fractional reserves.  This assumes that global banking has not arisen hand in glove with global trade and that banks can lend what they don’t have (which they can’t). 

 In order to divert ‘excess credit’ from flooding ‘emerging market economies’ Hutton also calls for western governments to ‘launch massive economic stimuli, centred on infrastructure’ and ‘new smart monetary policies that allow negative interest rates.’  This is Keynesian economics designed to stimulate demand by direct government investment and kick-starting investment by making it expensive for banks not to lend.  The problem with the first suggestion is that Quantitative Easing inflated the value of asset prices (stock-market prices) without stimulating inflation (because the new money created – by the Bank of England which can create money - did not enter general circulation as notes and coins).  The ‘economic stimuli’ mentioned by Hutton (what has been called ‘People’s QE’ by Jeremy Corbyn), on the other hand, would involve the creation of new money that would enter circulation as notes and money and therefore run the risk of creating high inflation (a rapid rise in the general price level).  The problem with the second proposal of negative interest rates (which is happening in several European countries) is that in the absence of the opportunities for profitable investment (i.e., in a recession) banks may not lend more but simply hoard, accentuating the fall in investment.

Keynesian economists often point to the post World War 2 period as evidence of the success of their policies of state intervention in the economy to increase demand.  However, sustained post war growth was due to the recovery of the global economy following the slump of the 1930s and reconstruction following the World War 2.  When this growth stalled in the 1970s Keynesian attempts to stimulate demand created double digit inflation.  This and high rates of taxation tended to stall investment even further and state borrowing came with conditions to reduce the policies that necessitated the borrowing.  These problems were faced by all governments following Keynesian strategies once the post war boom was over.  It was not Thatcher but Dennis Healey who started the process of spending cuts in the late 1970s.  In France Mitterand was elected in 1981 on a platform of increasing consumption through state intervention.  The higher taxation, government borrowing and inflation led not to stimulation of the economy but to lower growth - by 1983 the Mitterand government had taken the ‘austerity turn’ in an attempt to restore favourable conditions for profitable investment.  Bang up to date the failure of the Syriza government in Greece to reverse austerity in Greece by renegotiating the terms of its borrowing failed ignominiously, the government backing down rather than face even more uncertain prospects outside of the EU.  Austerity is not being imposed by the political right as Hutton would have it.  It is being enforced by the need to create conditions favourable to profitable investment.  Trying to go back to a time before Thatcher and Reagan to get to a non-austerity future is going back in time to face the same problems, pursuing policies that will require the same policy reversals enacted by Healey and Mitterand.  Hutton’s Keynesian and currency proposals to calm global economic turbulence could not be enacted (say by a Corbyn Labour government) without worsening the prospects for productive investment, requiring a return to the very policies blamed by the left for causing current economic stagnation.   A real end to austerity requires the success of the socialist campaign to abolish capitalism itself not repeating the disillusion of past attempts to save capitalism from itself.

CSK

Will Hutton: Back to the Future, part 2/3 (2015)

From the Socialism or Your Money Back blog

Part 1 here

Hutton’s view is that lax regulation around the cash reserves that banks are required by law to hold (the fractional reserve) and the abandonment of other controls on capital flows between countries (previously part of the responsibilities of central banks) are responsible for an excess of credit being ‘created’ in the global economy.  Hutton argues that the ‘emergence of a global banking system’ means that ‘central banks are much less able to monitor and control what is going on’.  Because ‘few countries now limit capital flows’ the result, says Hutton, is that ‘cash generated out of nothing can be lent in countries where the economic prospects look superficially good.’  This leads to a ‘false boom’:

‘Property prices rise. Companies and households grow overconfident about their prospects and borrow freely… all seems well until something – a collapse in property or commodity prices – unravels the whole process.  The money floods out as quickly as it flooded in, leaving bust banks and governments desperately picking up the pieces.’ 

Hutton argues that the current problems in China follow on from the financially induced crisis in 2008 and that crises in other ‘emerging market economies’ are a knock on of the same process of ‘sky-high commodity prices… fuelled by wild lending’ that create ‘super-high but illusory growth rates.’

But the crash of 2008 was not a ‘false boom’ caused by finance but a particularly far-reaching crisis in the history of the business cycle that is inherent in capitalist production.   This cycle has played out numerous times in the past couple of centuries in capitalist economies, a process of capitalist production that Marx described as moving ‘through periodical cycles. It moves through a state of quiescence, growing animation, prosperity, overtrade, crisis and stagnation.’  In an expanding economy banks see a plethora of opportunities to lend at relatively low risk.  This lending greases the wheels of the productive economy which continues to expand at an even faster rate.  At some point in the process of expansion a sector of the economy overproduces relative to the demand.  Production slows in this sector, questions are asked and glances are exchanged.  Production slowing in one sector knocks on to another and then another, doubts begin to grow and confidence is dented.  Before long what seemed like a never-ending process of expansion turns into economic contraction as panic sets in and investment slows or stops.  This is what happened in 2008 as house building in the US outstripped demand leading to a collapse in prices.  This knocked on to the global financial system because the risks of default for US mortgages were bundled up in financial institutions around the world, a contagion that caused panic to ripple around financial markets and confidence to collapse.  Lending contracted, investment stalled.  It wasn’t caused by banks and credit but the global nature of banking did allow the results of overproduction to spread widely and rapidly (just as global banking facilitates investment and economic expansion widely and rapidly). 

The cause of the crisis then is not banks or even overproduction as such but production as it is carried on in capitalism.  Goods are produced not for direct use but for exchange, for sale on the market, rather than being consciously planned in the light of social need.  Inevitably, at some point, more goods will be produced than can be sold at a profitable price causing a dislocation in the expansion of production, the consequences of which (depending on its magnitude and inter-connections) may remain only local or may ripple out to affect regional, national or even the global economy. Frederick Engels referred to this process of production in capitalism as the ‘anarchy of social production’.   The situation is not caused by banks ‘creating credit’ but rather the opposite, an increase in investment in the productive economy causes a rise in lending, which facilitates and accelerates this growth by lending to apparently relatively risk-free borrowers.  Conversely the restriction of credit does not cause an economic downturn but is a reflection of it as borrowing for investment declines and lending is relatively more risky.  Credit accentuates the business cycle by inflating bubbles in times of growth and deepening downturns by restricting credit but it does not cause it. 

So too, the Chinese financial downturn is a tale many times told of rapid growth followed by a crisis and a recession (establishing the conditions for renewed growth).  In an attempt to reverse a slow-down in the productive economy the Chinese government cut interest rates in an effort to stimulate the economy.  Borrowing increased and the Chinese stock-market boomed for a while.  All that happened was that the gap between the reality of a slowing productive economy and stock-market prices grew larger.  At some point the two had to come together again and so they have. Banks did not cause the crisis by creating credit they only delayed and accentuated it.  More regulation of banks will not solve the problem of the cycle of boom and bust inherent in capitalist production.  Banking regulations of the sort that Hutton want aim to reinstate, it is argued, prevented crises in the past and will iron out the instability caused by the psychological flaws of bankers who ‘create money’.  It did not work before and it attributes to banking a power of the economy that it does not have.  Like many on the left Hutton wants to return to a time before Keynesian interventionism was ousted by free market ideologues.  Socialists argue that capitalism, not the form that it takes, that is the problem.  The future lies not in going back in time to a world of more regulated banking but forward to a world where the anarchy of production (indirect social production where goods and services are for sale and realised only when exchanged for money) is replaced by consciously planned production for meeting human needs (directly social production where goods and services are consumed without exchange) and where the conditions of production that give rise to banks will have been abolished.

CSK

Will Hutton: Back to the Future, part 1/3 (2015)

From the Socialism or Your Money Back blog

It was with a sense of irony that I read Will Hutton in the Comments and Debates section in a copy of Guardian Weekly (16.10.15).  It was the previous week’s edition and the irony was that I was reading it on Back to the Future day (21/10/15), which summed up the economic views that I was reading.  Hutton wants to go back not to 1985 but to any date before the rise of what Hutton calls the ‘Anglo-Saxon political right’  in the US and UK which put Keynesianism out in the cold (usually identified by the left with the bogeymen of Thatcher in Britain and Reagan in the US).  Now I thought that the political reach of Anglo-Saxons had ended a thousand years ago but I will leave that particular question mark to one side.  Hutton argues that the roots of the 2008 financial crisis and current crises in China and other ‘emerging market economies’ lie in a ‘world financial system that has gone rogue’.  At the heart of this argument is Hutton’s claim that the power of banking to ‘create money out of nothing has been taken to a whole new level.’ 

This is an up to date version of a theory that has been doing the rounds since the early 1930s, that of fractional reserve banking; the argument that banks by holding on to a fraction of its deposits (to ensure that withdrawals can be met) can create multiples of credit, that they can essentially ‘create money out of nothing’.  The crude version of this theory assumes that multiples of credit can be created from an initial deposit of £1000 with a fractional reserve of, for example, 10%, £900 could be lent (paid out as a cheque or transfer and deposited with the bank) expanding the initial deposit in one act of lending to £1900 of bank deposits.  If a loan of £900 was carried out 10 times the end result of the initial £1000 deposit would be £9000 in loans and £1000 in reserve, in 10 quick steps an initial deposit of £1000 has been turned into £10,000 – money has apparently been ‘created’ as credit from the scribble of a pen or the tapping of a keyboard.  However, this view of banking does not hold theoretically or empirically. Two quick examples (there are more) will show why the theory doesn’t hold.  Firstly, this model assumes that there will not be a cash withdrawal on the initial deposit during the whole series of transactions, a false assumption but necessary to prevent the theory’s instant collapse.  Secondly, the appearance of the creation of credit is created by standard double-entry book-keeping where when a bank lends, for example, £1000 this is recorded initially as a deposit of £1000 and a loan of £1000, apparently ‘creating’ £1000 (until the loan is withdrawn). Empirically we can also demonstrate that banks in fact do not operate in the way described.  If they did they would be able to create immense amounts of credit from relatively small deposits (pushing interest rates to very low levels).  This does not happen and banks back their lending not just from deposits but from money they themselves have borrowed – something that had increased to risky levels before the 2008 crisis (and interest rates do not fall to very low levels).

Hutton appears to hold to a less crude version of ‘credit creationism’ as he says that ‘the system depends on the truth that not all depositors will want their money back simultaneously… some of the cash banks lend in one month [will] be redeposited by borrowers the following month: a part of this cash can be re-lent, again, in a third month’ and so on.  This is just saying that some of the money that is taken out as loans will find its way back into the banking system as deposits, which can then be used to make further loans.  Unlike the crude version of ‘credit creationism’ Hutton acknowledges that money is constantly being deposited and withdrawn but this still does not mean that banks create money in the way that Hutton suggests.  According to the economist Paul Samuelson (who developed a more sophisticated version of credit creationism): ‘As every banker knows, he cannot invest money that he does not have; and money that he invests in buying a security or making a loan soon leaves his bank.’  That is, loans can only be made from deposited or borrowed money that is currently held - a fractional reserve in an individual bank cannot create multiples of credit.  Samuelson’s theory (and Hutton’s) is that, while multiples of credit cannot be created from a fractional reserve held by an individual bank, an initial deposit of £1000 (again with a fractional reserve of 10%) will eventually be multiplied to £10,000 across the whole banking system by constituting in circulation the basis of deposits in banks.  This theory describes in a simplified way the actual process of circulation of money and how a loan will, in circulation, be the basis of further loans but it does not demonstrate that money is ‘created’ as credit. 

Rather than by ‘creating money’ a bank takes money from real deposits and pays an amount of interest on it.  It then lends this money at a higher rate of interest.  Hence banks compete for customers deposits.  Why bother if it is so easy to turn a deposit into multiples of money out of thin air?  Rather, banks provide credit, they advance money at interest.  Marx held to this view that a bank ‘makes its profit in general by borrowing at lower rates than those at which it lends.’  Banking has an intermediary function, it does not create money but takes it from savers (from cash deposited and from money lent between banks) to lend to borrowers at interest.  By facilitating the transfer of money from where it is accumulated to where it is required in the process of production banks take a cut of the profits of the productive economy as interest. 

Hutton is attributing to banking a power it does not have, holding it responsible for turbulence in global finance that results in economic dislocation – the financial tail appears to be wagging the dog of the productive economy.  The reality is the reverse, turbulence in global finance reflects dislocation in the productive economy…

                                                To be continued…

For more detailed articles on fractional reserve credit creationism see:

http://www.worldsocialism.org/spgb/socialist-standard/2010s/2012/no-1298-october-2012/fractional-reserve-banking-refuted

http://www.worldsocialism.org/spgb/socialist-standard/2010s/2012/no-1298-october-2012/editorial-crunch-time-credit-creationists

CSK

Cooking the Books: Good capitalism, bad capitalism? (2011)

The Cooking the Books Column from the July 2011 issue of the Socialist Standard

“There is good and bad capitalism,” wrote Will Hutton in a recent article for the left-of-centre think-tank, the Policy Network

He argued that

“The left has to understand what capitalism properly managed can deliver: and then to demonstrate that the paradox is that only the left can provide the political tension that biases capitalism towards the good. While the right is the indiscriminate friend of all capitalism, the left’s mission is to hold capitalism’s feet to the Enlightenment fire – and thus make it work best to meet the ambitions and needs of ordinary people.”

This – apart from the philosophical stuff about the Enlightenment (the 18th century intellectual ferment that provided the theory for the American and French bourgeois revolutions) – is what the reformists of the old Labour Party always stood for in practice, despite their talk of socialism (in most cases, actually state capitalism). They believed that it was possible, through legislation and government intervention, to humanise capitalism, to smooth off its rough edges. Only that was not how they (or those of them interested in more than just getting into office and taking on the day-to-day running of capitalism) expressed it. They talked in terms of these measures being stepping stones to something beyond capitalism rather than creating a “good capitalism”.

What Hutton is doing is bringing the theory into line with the practice. As far as Ed Miliband is concerned, he’s preaching to the converted as the Labour leader is already on record as saying he wants “a capitalism that works for people and not the other way around” (Observer, 29 August).

“Bad capitalism”, according to Hutton, is “a universe of bloated incumbents, politically fixed markets, productive entrepreneurs forced to the sidelines and too little public investment. It cares little for the condition and risks of the people.” And good capitalism? It, says Hutton, has

“two key properties – a system of business ownership in which the returns to owners and managers is proportional to the risk being undertaken rather than winners taking all, along with politically and socially constructed institutions that help mitigate risk, thus allowing more to be taken.”

This is how capitalism according to its theorists is ideally supposed to function. But even if it did function in this way, there would still be minority class ownership, production for profit, and the division of society into rich and poor. In fact, for Hutton, there are also good capitalists and bad capitalists:

“Social democrats should properly distinguish between the deserving and undeserving rich.”

He then added, curiously:

“They should also be prepared to distinguish between the deserving and undeserving worker – and the deserving and undeserving poor. Marx made this point to the French socialists in his critique of the ‘Gotha Programme’.”

Hutton may know about the Enlightenment but he clearly doesn’t know about Marx. The fact that Gotha is in Germany should have been a hint that Marx was addressing German rather than French socialists. And there’s nothing in what Marx wrote there about deserving and undeserving workers. Hutton has presumably misinterpreted the labour-time voucher scheme Marx mentioned.

What Hutton fails to understand is that capitalism is based on the exploitation of wage-labour for surplus value and is governed by the imperative drive to accumulate more and more capital out of this. Which is why it can never be made to work “to meet the ambitions and needs of ordinary people” and why it can only work as a profit-making system in the interests of those who live off profits.

There is no such thing as a good capitalism.

An ahistorical nitwit replies (2003)

From the August 2003 issue of the Socialist Standard

In the March issue of the Socialist Standard there appeared a short item in the Voice from the Back column that has obviously annoyed a supporter of capitalism. It was criticising an article in the Observer of 9 February and has led the Observer writer to describe us as “ahistorical nitwits clinging to a fundamentalism every bit as odd as the Islamic variant”. To put our readers in the picture we will set forth what has been said, and will also put in our own tuppenceworth. It is up to you to decide.

In March we wrote:

“You can always rely on journalists to write nonsense whenever they are dealing with capitalism and socialism. Take the recent example of Will Hutton writing in the Observer (9 February). 'Socialism and social democracy are secular forms of Christianity whose insistence on justice, fairness and equality have palpable Christian roots, while Christian Democracy's embrace of market capitalism is qualified by its Catholic commitment to a just wage, just prices and just profits – and that work should be a source of human dignity.' It would be difficult to find a sentence with more nonsense if you spent a year searching. Socialism is a materialist view that opposes the slavish notions of Christianity. The source of all profit is the surplus value that the workers produce over their wages. To speak of 'just wages' is as daft as 'just robbery'.”

Will Hutton was sent a copy, to which he replied:

“I receive over 100 e-mails a day regularly – sometimes over 200. I don't know where to begin with the criticism. It rests on the belief that the values which socialism promotes somehow did not exist before socialism; and that socialism has a monopoly of concepts like justice – hence the mockery of the just wage. If early socialist thinkers had been as poor as this, the ideas would have got nowhere. Sadly today's champions are ahistoric nitwits clinging to a socialist fundamentalism every bit as odd as the Islamic variant. That is why they have so little influence. If you don't see the pedigree of values upon which socialism rests and is built, you don't deserve to be in the game.”

Wow! Take that you, bounder and other put downs. Now let's take a look at the real world. The Catholic Church's “just wages, just prices and just profits” and commitment to “human dignity” is a historical nonsense. Has Hutton heard of the inquisition? Or the Pope's support of Franco and Mussolini? The Catholic Church, like the Protestant Church is a whole-hearted supporter of private property.

More importantly than Hutton's strange views about socialism and christianity is that he doesn't challenge the basic premise of socialism that profit is derived from the unpaid labour of the working class. Hutton is a very talented worker who sells his ability for a wage or a salary to a member of the capitalist class. He is dependent on a wage or a salary, just like, this “ahistoric nitwit”. Men and women of the working class produce all the wealth of the world. Even silly articles in the Observer. The proprietor has got to fill the spaces between the adverts after all.

Richard Donnelly

Will Hutton tries to defend capitalism

From the Socialism Or Your Money Back blog

Went to hear Will Hutton speak last night on “Them and Us: how capitalism without fairness is capitalism without a future”. It was a lecture at the London School of Economics in the “Ralph Miliband series on the Future of Global Capitalism” (yes, he is related to the two Labour Cabinet ministers; he was their father though he’d probably disown their political views). Former Guardian and Observer journalist Hutton has converted himself into a left-of-centre political philosopher. He started by claiming that all humans have an in-built concept of fairness and that present-day capitalism didn’t live up to it.

The whole idea of a “fair capitalism” is of course a contradiction in terms since capitalism is based on the exploitation of those forced to work for a wage or salary. And as the chairman of the meeting pointed out, even if humans did have an “instinct” for fairness this tells us nothing about what any particular group of humans considers to be fair. In fact Hutton himself criticised the arrogance of the “financial oligarchs” (the “Them” of the title of the talk) for considering themselves to be the “deserving rich” and that it was therefore unfair that they should be taxed and not be allowed big bonuses.

He’s one of the “blame the bankers” school. His version of a “fair capitalism” is one where the banks are broken up into smaller units and where the state intervenes to ensure highly competitive markets so that no enterprise or non-financial entrepreneur gets too big an income for too long. Their profits would be fair because they would have been earned - they would be getting “due deserts for discretionary effort”. He claimed that the “early Marx” supported this and proceeded to quote from his Critique of the Gotha Programme - which was in written when Marx was 57 and eight years before he died. An elementary mistake for a would-be political philosopher who wants to be taken seriously.

Hutton’s claim was that Marx thought that “from each according to their abilities, to each according to their needs” would not be realisable for “decades and decades and decades” and that in the meantime people should be rewarded “according to their contribution”. It is true that Marx did envisage, had socialism been established in 1875, that there couldn’t have been distribution according to needs and went along with the view that in the meantime there’d have to be distribution according to hours worked. But this was because he considered that the means of production weren’t then developed enough, not because this was what humans instinctively considered to be fair. And there is no evidence that he thought such a system would have to exist for a hundred years. As a matter of fact, that was Stalin’s distortion of the Critique of the Gotha Programme when in the 1930s the rulers of state-capitalist Russia officially relegated free distribution according to needs to the distant future and insisted on payment according to work done and praised piecework and high salaries for managers (and themselves). But of course Hutton wouldn’t have wanted to call in Stalin to defend his position.

If this is the best that left-of-centre champions of a reformed capitalism can come up with, it confirms that it’s just not possible to put up a credible intellectual defence of capitalism. It’s the idea of a fair capitalism, not of a socialist society where people would have free access to what they need, that’s unrealistic.

Adam Buick