Capitalism breeds inequality (2010)

From the March 2010 issue of the Socialist Standard

A recent report shows that the reformist actions of the Labour government have not been able to reverse the inequalities that capitalism generates.

Minister for Women and Equality Harriet Harman, who won the Labour Party deputy leadership by talking up left wing and egalitarian credentials, set up a National Equality Panel to look into inequality in UK society, and report back. That the report, An Anatomy of Economic Equality in the UK (summary at the following link), has come out in the period of the run up to a general election, at which Labour are desperately trying to cling onto their heartland support and produce clear red water between themselves and the Tories, is surely purely coincidental.

Some of the information this panel has produced is extremely useful and well worth reading. Although it mostly contains data that has been made available elsewhere, its focus on equality is thoroughly worthwhile and it does draw all of the current knowledge on the state of equality in the UK into one place. This graph, for example, tells a sorry tale:
Graph 1: Full-time weekly earnings at 2008 prices, 1968 to 2008, men



Source: NEP, based on 1968-1996 New Earnings Survey (NES) (GB),1997-2008 ASHE (UK).
Not only, as the headline writers all noticed, has the gap between the top and bottom earners widened over the last forty years (quite radically) but also it has risen quite markedly as compared to median earnings. What is most startling of all is that the lowest paid workers have barely gained any substantial increased over all that period. So much for the idea propounded by Tories of the ‘trickle down effect’ of gains for the rich becoming gains for the poor. Likewise, so much for the social democrat notion that growth of the economy overall will abolish poverty. Through most of that period, the British economy has grown, and clearly only grown to the benefit of those at the top.

To be fair to Labour – and this has been noted for much of their time in office – what they have achieved is a slight slow-down in the growth in the gap between rich and poor. Much of the reason they can do no more than that is down to the changes in the economy since the 1970s, with the transfer of productive industry to the power houses of east Asia. Further, structural unemployment has persistently remained since the late 1970s effectively preventing any remedy through the labour market. As the BBC’s Mark Easton notes: “The problem for the politicians is that measures to reduce social or income inequality will always be controversial because they mean neutralising the advantages of wealth – a prospect that those with money and influence will fight hard against.” ('Is Inequality Iniquitous?')

Labour has struggled to try and create conditions of social equality, but cannot and will not act against the very structures and systems that create it. It is like someone campaigning to mitigate the effects of slavery without trying to abolish slavery itself.

What the report shows, but does not foreground, is that the top 1 percent of earners earn over £2,000 per week. Indeed, it is notable on the graph of incomes, that there is a sudden and noticeable spike at the top end of the graph, reflecting the small number of people who have astronomical incomes.

Graph 2: Half of the population has income below and half above £393 per week

The chart below demonstrates this further – the top 1 percent have more than double the income of those at the start of the top 10 percent of earners.

Graph 3: People at the cut-off for the top tenth those at the cut-off for the bottom tenth. The top times the median.

Source: DWP, based on HBAI dataset. Incomes are adjusted no children. For a single person, divide actual net income 1.2; for a couple with 2 children under 14, by 1.4 etc (allowing and 0.33 for children aged 14 or over, or additional adults

This of course is income; the statistics on total wealth are worth noting as well:

“Median total wealth (including personal possessions, net financial assets, housing and private pension rights) is £205,000. The 90:10 ratio is almost 100, with the top tenth of households having wealth above £853,000, and the bottom tenth having less than £8,800. The 90:10 ratio is so high because the poorest households have such little wealth. However, even looking more narrowly at the top half of the wealth distribution, those in the top tenth have more than 4.2 times as much wealth as those in the middle, twice the corresponding ratios for earnings or household income. 1 per cent of households has total wealth of more than £2.6 million.”

The authors of the report clearly advocate reducing inequality. They address the various philosophies that claim that social inequality is necessary or even just. They maintain, though, that international comparisons of economic output do not correlate to great inequality, and that some much more equal societies than Britain are more productive and succesful.

Further, it’s clear that the inequalities they discover do not relate to life choices, but in fact reflect the cumulative effects of various advantages and disadvantages produced by background, and yes, class. Although most of the differences they highlight are between different parts of what we would understand as the working class (anyone whose main economic asset is their ability to work) the conclusion that inequality at birth stays through life remains a stark and significant fact.

Most tellingly of all is their revelation that the share of wealth for the top two thousandth of the population (the very, very, very, rich) is back to where it was in the 1930s. Thos gap narrowed towards the 1960s, but since 1969 their share of ‘post tax’ income has trebled from 0.5 percent to 2.5 percent. For the top 1 percent they have gone from 4.7 percent in 1979 to 10 percent by 2000. Put another way, a century of Labour and Labour governments has not dented the power and wealth of those at the top of society. That, as opposed to any specific failure of the current Labour administration, is the lesson that socialists need to draw from this report’s findings.

For those who would deny that inequality is a problem, it must be sufficient to show that inequality in wealth and social status translates into a shorter, iller life, with less knowledge and personal development. The findings of this report must not be allowed to lie gathering dust on political correspondents and professional politicians’ book cases, but must be made a spur to show the rotten truth of our present system of society, and become a weapon in the arsenal of overturning it in its entirety.

Pik Smeet

Weekly Bulletin of The Socialist Party of Great Britain 141

Dear Friends,

Welcome to the 141st of our weekly bulletins to keep you informed of changes at Socialist Party of Great Britain @ MySpace.

We now have 1565 friends!

Recent blogs:

An inconvenient future

Eat shit and die!

Capitalism breeds inequality

Quote for the week:

"Under private property ... Each tries to establish over the other an alien power, so as thereby to find satisfaction of his own selfish need. The increase in the quantity of objects is therefore accompanied by an extension of the realm of the alien powers to which man is subjected, and every new product represents a new potentiality of mutual swindling and mutual plundering." Marx, Human Requirements and Division of Labour, 1844.

Continuing luck with your MySpace adventures!

Robert and Piers

Socialist Party of Great Britain

Voice From The Back: Capitalism is worldwide (2010)

From the March 2010 issue of the Socialist Standard

CAPITALISM IS WORLDWIDE

Members of the working class are taught in schools from a very early age that the country they were born in is somehow special. We are taught to be proud of the country wherein for generations our family has been exploited. We wave flags, sing patriotic songs and are taught to mistrust workers from other countries. The owning class suffer from no such xenophobia. They are prepared to exploit workers of any nationality, creed or so-called race. To them profit is much more important than patriotism. Here is a recent example from the Brighton College newspaper. "Workers at a Sussex-based electronics firm were today left "devastated" after being told in a video message that manufacturing at their factories is to end and 220 jobs moved to Korea and the Czech Republic. Unite said Edwards planned to cease all manufacturing at its Burgess Hill and Shoreham factories. The announcement was made to employees via a video message, which the union said was "tactless"." (The Argus, 13 January)

A GRATEFUL NATION

Capitalist nations are continually in conflict with their rivals and inside capitalism economic rivalry leads to military action. During these actions the press praise "our boys" in uniform and regale us with tales of heroism. Nothing is too good for "our boys" they claim, but the reality is far different. "Britain's military veterans are too often descending into alcoholism, criminality or suicide because of a lack of support from the Government according to the Mental Health Foundation. Veterans under 24 are two to three times more likely to kill themselves than civilians of the same age. An estimated one in five veterans and Service personnel is said to have a drinking problem. The charity said: “More needs to be done to help veterans stay well." (London Times, 28 January) Having risked life and limb in pursuing the interests of their masters in these hellish conflicts the heroes of yesterday are thrown on the social scrapheap.

CLASS DIVISION

Socialists are often pilloried because we look at the world from a class perspective. We are accused of being outdated, old fashioned and living in the 19th Century. All that Marxists stuff about class division has been outdated by the new dynamic capitalism of the 21st Century we are told by our critics. A recent government sponsored health review seems to give the lie to that notion. "Healthy living is cut short by 17 years for poorest in Britain. The poor not only die sooner, they also spend more of their lives with a disability, an "avoidable difference which is unacceptable and unfair", a government-ordered review into Britain's widening health inequalities said yesterday. ... Not only is life expectancy linked to social standing, but so is the time spent in good health: the average difference in "disability-free life expectancy" is now 17 years between those at the top and those at the bottom of the economic ladder, the report says." (Guardian, 11 February)

MOTHER OF THE FREE

At the last night of the Proms exploited members of the working class like nothing better than to bawl out the words of Land of Hope and Glory. Poor, deluded workers image that there is something superior about being born on a piece of dirt thrown up on the Atlantic Ocean. They never realise that it is an accident where you happen to be born, and indeed that it was probably an accident that they were born at all. This misguided nationalism is fostered by governments and the media. Britain is superior to Johnny Foreigner with his deceitful regimes. No underhanded politics in dear old Britain says the patriot critical of foreign powers, but what is the reality? "MI5 faced an unprecedented and damaging crisis last night after one of the country's most senior judges found that the Security Service failed to respect human rights, deliberately misled parliament, and had a "culture of suspicion" that undermined government assurances about its conduct. The condemnation by Lord Neuberger, the master of rolls, was drafted shortly before the foreign secretary, David Miliband, lost his long legal battle to suppress a seven paragraph court document showing that MI5 officers were involved in the ill-treatment of a British resident, Binyam Mohamed." (Guardian, 11 February) Yet another example of how the quest for markets soon overcomes any ethical scruples. Not so much a case of Britain Rules The Waves as Britain Waives The Rules.

It’s about all of us

Cross-posted from the World Socialist Party of the United States website

In an article Peter Rachleff, a professor of History at Macalester College in St. Paul, reminds us of some statistics concerning the USA.

Between 1979 and 2005, the mean after-tax income of the top 1 percent of income earners rose 176 percent while that of the lower half rose less than 10 percent. In 1970, the average CEO earned forty times as much as the average worker. By 2010, it has become nearly 400 times.

80 percent of all the wealth in the U.S. is owned by the 10 percent at the top of our economic ladder, with some 38 percent of the wealth the property of the top 1 percent alone. The bottom 90 percent of the ladder has to share only 20 percent of the wealth.

“American workers have long organized in unions to gain a share of their productivity increases, assure fair treatment on the job, expand benefits, and lay a foundation for a secure retirement…For two generations, workers purchased cars and homes, sent their children to college, and enjoyed a genuine retirement…As the unionized percentage of the workforce shrank from 30 percent in the 1950s to 20 percent in the 1980s to little more than 10 percent in the 21st century, unions’ ability to defend their members’ wages, benefits, work rules, job descriptions, and rights on the job melted away…” Rachleff writes.

But he also describes that a union can fight back. Its success rested on the ability to make their struggle about “all of us.” To adopt an encompassing approach which pulls together its diverse membership , that builds alliances with the community and organises the support of other unions.

The WSP’s advice to workers would be :-

1 ) Try to push wages and salaries as high as they are allowed to go by the owners and management.

2 ) Organise democratically to achieve your aims, without reliance on leaders, who will often sell you down the river.

3 ) Recognise that any union struggle is necessarily a defensive one as there can be no real and lasting victory within the profit system. So ready yourselves for the inevitable next battle.

Alan Johnstone

Marxism. Last Refuge of the Bourgeoisie? (1985)

Book Review from the January 1985 issue of the Socialist Standard

The important part of the title of this posthumous work by Paul Mattick (he died in 1981) is the question mark, since Mattick did not regard Marxism as "bourgeois" at all. He did, however, want to explain how "Marxism" had become an ideology of regimes and movements which had absolutely nothing to do with Marx's aim of a classless, stateless, wageless world community.

The first part of the book is devoted to a discussion of Marxian economics, where Mattick sets out to explain why so many academics have come to imagine themselves as Marxists without having understood at all what Marx's aim was. Thus many learned works have been published on value and price, and the so-called problem of the “transformation" of the one into the other, without the authors understanding that Marx aimed at the abolition of the price system and that for him "value was a historical category [that] is bound to disappear with the ending of capitalism" Clearly, the "transformation problem" fades into insignificance in the face of a proposal to abolish both price and value. Similarly, those academics who use Marx's ideas to make policy recommendations to governments have failed to realise that "Marxian theory aims not to resolve 'economic problems' of bourgeois society but to show them to be insoluble". As Mattick puts it, “Marx was a socialist, not an economist".

When Mattick writes about Marxian economics. therefore, he is on the same wavelength as us, even if we can't always agree with him. As, for instance, over the supposed economic breakdown of capitalism which Mattick believed in for the whole of his political life and which he still, in this, his last book, expected to finally spark off the socialist revolution.

The second part (which is more lucid and can be read separately before, or without, the more difficult first part) deals with "Marxism" as a political and ideological movement. Here Mattick has some very pertinent things to say, pointing out that German Social Democracy in its heyday before the First World War saw socialism not as the abolition of the wages system and the control of production by the producers, but as the control by a democratically-elected government of the one Great Cartel towards which they saw capitalism tending.

This state-capitalist conception of "socialism" was later abandoned by them (in favour of a frank acceptance of the mixed private/state capitalist status quo) but was inherited, and to a large extent achieved, by the Bolsheviks. The Russian revolution, says Mattick, was "a sort of bourgeois revolution" in which "the historical functions of the Western bourgeoisie were taken up by an apparently anti-bourgeois party". And the following comments could just as easily have come from us:

"The Bolshevik regime had no intention to abolish the wages system and was therefore not engaged in furthering a social revolution in the Marxian sense..."
"...The capitalist system was modified but not abolished. The history made by the Bolsheviks was still capitalist history in the ideological disguise of Marxism."

In this way "Marxism" became the ideology of state capitalist regimes, a theory of the totalitarian control of society by a minority, whereas Marx had always stood for a society without classes and without any machinery of coercion. It is a pity that there will be no more books from the pen of Mattick to make this point.

Adam Buick

Cooking the Books: Empty Hope (2010)

The Cooking the Books column from the March 2010 issue of the Socialist Standard

“Fresh blow to hopes of consumer-led recovery as squeeze tightens on pay” ran the headline of an article in the London Times (21 January) by Gráinne Gilmore, reporting on official figures for wage growth in the three months to November:

“Average pay excluding bonuses rose at an annual rate of 1.1 per cent for the period . . . Private sector staff saw no pay rise at all in November. . . Analysts said that companies were cutting workers’ hours and pay to try to limit redundancies . . . Colin Ellis, European economist at Daiwa Securities, said: ‘The lack of any pay increase in the private sector will weigh on consumption during 2010, much as weak wages have in Germany.’”

She didn’t say who was hoping for a “consumer-led recovery” but this was always an impossible dream. As should be clear from her report, consumer demand depends largely on what people are paid. In other words, it is largely made up of what wage and salary workers have to spend. Which depends on the level of employment; which in turn depends on what those who own and control productive enterprises (or who act for them) decide to produce according to what they think are the prospects of selling it profitably.

The economy, and its ups and downs, is not driven by consumer demand, but by capital accumulation, i.e. by profits being invested in expanding production. The ups and downs of consumer demand in fact reflect, not cause, the ups and downs of the economy. Paul Mattick put it well in his Marx and Keynes: “The business cycle is not caused by variations in social consuming power, particularly not that of the workers; rather the cycle determines these variations”.

When production is expanding so is employment and income from employment. Workers have more to spend and, on the basis of the assumption that their employment is secure, are able to borrow against future expected income and so can spend even more. Some economic observers, perhaps influenced by what they were mistaught in college about capitalism being a system of production for consumption, jump to the conclusion that it is this increased consumer spending that is causing the economy to grow. But this is an illusion. Consumer spending is booming because the economy is booming, not vice versa. This becomes clear when the economy stops expanding, as it did in the second quarter of 2008 and in fact began to contract. When this happened consumer spending fell too.

Consumer demand will never recover of its own accord. How could it? Workers can’t simply spontaneously increase their income. It will only revive when production and employment do. And that depends on the prospects of profitable production reviving. Which the squeeze on pay Gilmore reported on will in fact be contributing towards.

Capitalism is a system geared to profit-making, not to meeting needs, not even to restricted, paying needs.

Weekly Bulletin of The Socialist Party of Great Britain 140

Dear Friends,

Welcome to the 140th of our weekly bulletins to keep you informed of changes at Socialist Party of Great Britain @ MySpace.

We now have 1562 friends!

Recent blogs:

The Price of Everything

Thicker than water?

Ethics

Quote for the week:

"The founders [of the United Nations] sought to replace a world at war with a world of civilized order. They hoped that a world of relentless conflict would give way to a new era, one where freedom from violence prevailed…. But the awful truth is that the use of violence for political gain has become more, not less, widespread in the last decade." Ronald Reagan, 26 Sept 1983.

Continuing luck with your MySpace adventures!

Robert and Piers

Socialist Party of Great Britain

"The Road to Socialism - Kropotkin, Morris & Marx"

A transcript of an old talk from one of the speakers which may be of some interest to those interested in the subject of the debate:

What Marx should have said to Kropotkin

Football Fortunes

Cross-posted from the Socialist Courier blog

Every day in the newspapers and on television we are told of the fabulous incomes of some of the footballers in the Premier League. Some are reported to be earning £140,000 a week.

To most workers this appears a fortune and yet it is chicken-feed compared to the immense wealth of people like the Russian multi-millionaire who at present owns the Chelsea football club. Of course the majority of professional footballers have to struggle by on more ordinary incomes like most workers.

At the other end of the scale from the well-heeled Premier footballers and the millionaire owners we have the poor makers of the footballs. "The city of Sialkot in Pakistan produces as many as 60 million hand-stitched footballs in a World Cup year. The firms here are running out of new workers since child labour was abolished. Western buyers may have a clear conscience, but the children of Sialkot now toil in the local brickworks instead. ...Shaukat is a strong, 20-year-old man. He has been working for this independent stitching factory, Danayal, for eight years. Danayal produces handmade footballs for professional leagues. ...At the entrance to the factory there's a notice board showing the current rates of pay. Depending on the model, his employer pays between 55 and 63 Pakistan rupees per ball ($0.65 to $0.75). "On a good day I manage six balls," says Shaukat. That's eight hours work. "That's not a lot of money," he says as he pushes a needle through the thick synthetic leather and stitches together two patches. His boss is standing close by so he quickly adds: "But it's not little either." He gets paid every Saturday and has to feed a family of six with his wages.". (Spiegel on line, 16 March)

That is how capitalism operates - immense wealth for the millionaire owners and penury for the working class.

Richard Donnelly

Swing with The Internationale

From the closing credits of Michael Moore's "Capitalism: A Love Story', Tony Babino belts out what is now my favourite version of The Internationale:

"Speed it up", indeed.

Socialist Guide to Marx’s Capital (3. Labor Theory of Value)

Cross-posted from the World Socialist Party of the United States website

We have seen, then, that capitalism is no different from any other form of society insofar as wealth must be produced through the productive activities of human beings. This goes without saying, for without such wealth production no society (or the people living in it) could continue to exist for very long.

The key difference in the case of capitalism, though, is that this indispensable wealth takes the form of commodities, which simply means that the things produced are exchanged on the market.

People today are so accustomed to this capitalist world, where everything has a price, that the word “commodity” itself has become more or less synonymous with “product,” but Marx draws an important distinction between the two terms and the reader of Capital needs to be aware of that specific usage.

A commodity, as a product produced for exchange, thus has two aspects. On the one hand, it is a thing that satisfies some human want or another, while on the other hand, it is a thing with a certain value or worth on the market. In other words, the commodity is a unity of “use-value” and “exchange-value,” as Marx puts it (borrowing the same basic terminology used earlier by Adam Smith and David Ricardo).

Use-value presents little mystery, as it is simply a matter of how the qualities or properties of a thing satisfy “human needs of whatever kind”—such as the usefulness of clothing in keeping us warm or food in satisfying our hunger.

Since the usefulness of things is hardly unique to capitalism, an examination of use-value does not shed much light on this specific mode of production. A tomato for instance would have the useful property of satisfying hunger whether it was a commodity sold in a supermarket or a non-commodity grown in someone’s backyard for personal consumption.

So Marx quickly turns from use-value, to consider the phenomenon of exchange-value, which is the aspect that characterizes the commodity as such. As exchange-value, any two commodities (of a given quantity) can be equivalent to each other. As an example, Marx ponders the significance of the following equation:

1 quarter corn = x cwt of iron

This sort of equation, Marx says, “signifies that a common element of identical magnitude exists in two different things” so that both are “equal to a third thing, which in itself is neither the one nor the other.” The task, therefore, is to uncover the “third thing” that both commodities are reducible to. In other words: What is the common factor that determines or regulates the exchange of commodities?

The stock response to that question, which will earn a student good marks in Economics 101, is that this value depends on the fact of “supply and demand.” It is true that this explanation accounts for the rise and fall of prices, but Marx pointed out in a pamphlet entitled “Wages, Profit and Price” the limitations of this explanation:

“Supply and demand regulate nothing but the temporary fluctuations of market prices. They will explain to you why the market price of a commodity rises above or sinks below its value, but they will never account for that value itself. Suppose supply and demand to equilibrate, or, as the economists call it, to cover each other. Why, the very moment these opposite forces become equal they paralyze each other, and cease to work in the one or the other direction. At the moment when supply and demand equilibrate each other, and therefore cease to act, the market price of a commodity coincides with its real value, with the standard price round which its market prices oscillate. In inquiring into the nature of that value, we have, therefore, nothing at all to do with the temporary effects on market prices of supply and demand.”

Supply and demand, however much it might account for price fluctuations, does not explain why prices fluctuate around a certain level. This means that we need to look elsewhere to find the common factor that fundamentally determines exchange-value.

One thing that commodities in common, as already mentioned, is that they each have some use-value or another. But it is precisely because their use-values are qualitatively different that the commodities are exchanged for each other in the first place. So it is fruitless, Marx argues, to look to some “geometrical, a chemical, or any other natural property of commodities” as the common factor that regulates exchange.

After setting aside use-value as a possible explanation, Marx briefly presents his own conclusion: “If then we leave out of consideration the use-value of commodities, they have only one common property left, that of being products of labor.”

Here Marx seems to be on rather shaky ground, for we know that there are things sold on the market that are the product of little or nearly no labor that still fetch high prices, like the autograph of a celebrity, for example. How can Marx reach this conclusion that labor is the only possible “common property” that can determine exchange-value?

It must seem to many people that Marx is trying to get by with a circular argument, where he limits the discussion to commodities created by human labor and then, lo and behold, discovers that “labor” is the common factor that regulates exchange.

That is how it appeared to the Austrian economist Eugen von Böhm-Bawerk (1851–1914), who created the template for subsequent criticism of this labor theory of value. In Karl Marx and the Close of His System, Böhm-Bawerk described Marx as “one who urgently desiring to bring a white ball out of an urn takes care to secure this result by putting in white balls only.”

Marx of course, like anyone else, was well aware that there are all sorts of “commodities” that are the product of little or no labor. In Chapter 3 of Capital, for instance, he notes that, “things which in and for themselves are not commodities, such as conscience, honor, etc., can be offered for sale by their holders, and thus acquire the form of commodities through their price” (my italics). And later in Capital, particularly in Volume 3, Marx goes on to examine a number of these sorts of formal commodities, such as the price of land or stocks. But Marx draws an important distinction between those commodities in form only (i.e. anything with a price) and the commodity in the fundamental sense that is analyzed in the first chapter of Capital.

We need to return to the opening paragraph, examined earlier, to better grasp this conceptual distinction. There Marx reminds us that material wealth is necessary to sustain any form of society. And it goes without saying that this wealth is created through human labor of some kind or another. Marx pointed out this undisputable fact as follows in a letter to his friend Ludwig Kugelmann: “Every child knows that any nation that stopped working, not for a year, but let us say, just for a few weeks, would perish.” Here we have the great, precondition for any society: human beings must create useful things via labor.

The difference in the case of capitalism, of course, is that the material wealth created via labor takes the form of commodities. The commodity in the most fundamental sense is thus premised on the commodity as product of labor (or as the capitalistic form of material wealth).

At first glance it might seem that Marx is making an arbitrary premise to suit his argument, but in fact he is simply starting from reality as it exists under capitalism, as noted in the opening paragraph—namely, the fact that under capitalism the wealth necessary to sustain any society overwhelmingly takes the form of commodities. It is the commodity as the “elementary form” of wealth that Marx analyzes at the beginning of Capital.

So there is an absolutely crucial distinction between Marx’s key concept of the commodity as the capitalistic form of social wealth and the “commodity” in the superficial sense of anything with a price (whether a product of labor or not). Those who ridicule Marx for limiting his initial analysis of the commodity to products of labor are ignoring, or choosing to overlook, the great social fact that “every child knows” with regard to the need for labor to sustain a society. From this perspective, the conclusion that “labor” is the common factor underlying exchange-value should not seem as arbitrary as it might at first glance.

Marx defines this “labor” more exactly as the “socially necessary labor-time required to produce any use-value under the conditions normal for a given society and with the average degree of skill and intensity of labor prevalent to that society.” This is the labor that “forms the substance of value,” according to Marx.

Marx set out to uncover the common factor underlying the phenomenon of exchange-value and he does so by arriving at the underlying concept of “value,” determined by the quantity of labor expended to produce the given commodity. This concept, specific to commodity production and capitalism, would have no basis to exist in a socialist society, where the whole aim is simply to produce useful things to satisfy human needs, rather than commodities to be exchanged on the market.

But for the analysis of capitalism, the concept of “value” is central, for it is at the very core of an understanding of how things are produced and distributed in that society.

Michael Schauerte

Related Posts:

Socialist Guide to Marx’s Capital (2. The Starting Point)

Adam Smith: A Capitalist Icon?

Marx’s Contribution to the Critique of Reformism

How Capitalism Works (part 2)

Production for Use

Who bailed out the bankers? (2010)

From the February 2010 issue of the Socialist Standard

They tell us that we “the taxpayers” did? But it’s not as simple as that

People are angry at the banks. They blame them for causing the crisis. They blame them for having to be bailed out and then still paying their top people obscene bonuses. They see them as producing nothing, just making money out of shuffling money around.

Some of these criticisms are justified. Some are not. Banks don’t produce anything useful, even if they perform a useful, in fact an essential role, under capitalism. On the other hand, they didn’t cause the crisis, even if they did overstretch themselves like any other capitalist business does when faced with easy profits. It is this general capitalist drive for profits that causes crises from time to time. They were bailed out, but not by us.

Not by us? Weren’t they bailed out by the taxpayers and aren’t we the taxpayers? Yes and no. They were bailed out by the government, whose main source of income is taxes, but, no, we are not “the taxpayers”.

True, anybody in employment can produce their payslip and point to a deduction for income tax. But who actually pays this to the state? You don’t. Your employer does. In fact you never see the money that is deducted from your gross pay. It was never really yours. Putting it on your payslip is a bit of creative accounting. What’s important is the bottom line – your net pay, what you actually take home.
Even if you did have to actually pay income tax yourself, as you do with some taxes (council tax, for instance), it wouldn’t make much difference since it’s your net pay – what you have to live on – that’s important for the labour market. Apart from the fairly short term this has to reflect the economic fact that, if you are not paid enough, you won’t be able to keep your working skills in proper working order and your employer won’t be getting what they are paying for.

If, instead of your employer paying “your” income tax, you had to pay it yourself the employer would have to let you take home more to cover this so as to allow you enough after-tax money to keep your skills in working order.

It’s the same with sales taxes such as VAT. This increases the cost of living, and so the amount of money you need to fully reproduce your working skills. It’s not really paid by you, but is passed on to your employer.

In the end, then, whoever physically pays them to the state, taxes fall on employers (and other property owners). We wage and salary workers are not the real taxpayers. They are.

It is true that the profits, out of which members of the capitalist class pay taxes, originate in the surplus value that productive workers create over and above the value of the mental and physical energies they sell to their employer for a wage or a salary. So, yes, ultimately taxes and bailouts to banks do come from the wealth workers produce. But not directly. We’ve already been fleeced. Taxes fall on those who have fleeced us. They are the ones who, via the state, bailed out the banks.

They didn’t like having to do this, even if they recognised its necessity. And they don’t like the banking capitalists exaggerating. Hence their attempt, via the media, to mobilise us against “the bankers”. But the excesses of the bankers, outrageous as they are, are not really our problem. It’s a case of thieves falling out, over what’s already been robbed from us. Certainly bankers are useless parasites, but parasites on parasites – on those who directly exploit productive labour.

Not all the money to pay for the bail-outs came from taxes. Some came from money the government borrowed – from other capitalists. The capitalist class, as taxpayers, don’t like this either because it means that a portion of the taxes that fall on them has to go to repay with interest those capitalists who lent the government the money. That’s what servicing the so-called ‘National Debt’ (actually the debt of the capitalist state) involves: a transfer of wealth from one section of the capitalist class to another section. So, again, not our problem. It’s their debt not ours.

Except that the capitalist class – and their political representatives in the Labour, Tory and Liberal parties who are vying with each other with talk of a ‘new Age of Austerity’ and ‘savage cuts’ – have started a campaign to defray some of the costs of these payments to their fellow capitalists by cutting down on the payments and services they reluctantly provide for the working class. But then, under capitalism, workers always get the shitty end of the stick. Which is one good reason why we should not put up with capitalism any longer.

Adam Buick

The Philosophy of Money (2010)

Book Review from the March 2010 issue of the Socialist Standard

Money by Eric Lonergan. Acumen, 2009

This is an unusual book, written by a hedge fund manager. It verges between conventional orthodoxy and the highly unorthodox. In many respects it is as much a book about philosophy, thinking and perception as it is about economics, and not unlike recent works by George Soros in that respect.

Lonergan has read Marx, Hayek and many of the key financial analysts of the contemporary era, from Markowitz to Shiller. He has provided a synthesis of their views about markets and money, underpinned by his philosophical readings from his earlier academic studies. These at times border on the insightful but ultimately disappoint.

His discussion of inflation is an obvious case in point. As early as the first chapter he writes:

‘Many people believe that their money is stored in a safe at the bank, if they think about it at all. Ignorantly, we think of a deposit with a bank as money; indeed, in most of economics deposits are referred to as “money”, and are categorized as such in official statistics, which is misleading. Deposits are not money: they are loans we make to banks’ (pp.11-12).

This is quite true and one of the reasons ‘credit creation’ ideas still peddled by some economists are erroneous, along with theories which try to explain rising prices with reference to the expansion of bank deposits. However, he also says:

‘…the solution to a banking panic is effortless and disconcerting: a central bank merely needs to say that it will create as much money as is needed, and provide this to the banks, and everyone should calm down’(p.12).

Later, he writes of ‘an irrational fear of inflation’ (p.133), but these fears are not necessarily irrational. This magazine has chronicled for decades how an excess issue of inconvertible paper currency (beyond that needed for production and trade) leads to an artificial bloating of monetary demand known as inflation. This has been a consistent phenomenon since the late 1930s/early 1940s and in some periods, such as at times in the 1970s, has been quite significant.

At present, the extent to which a tactic like ‘quantitative easing’ can lead to cost price bubbles and can lead to an excess note issue will be the extent to which underlying inflationary pressures will re-emerge with a vengeance within the capitalist economy. Lonergan clearly missed the relevant chapters in Marx’s Capital where the inflationary process – and the explanation for it – is discussed, or has at least failed to apply it to the contemporary situation. It would certainly help explain to him why inflation is a monetary phenomenon created by governments through central banks which cannot, of itself, solve any of the other economic problems endemic to capitalism.

DAP

Weekly Bulletin of The Socialist Party of Great Britain 139

Dear Friends,

Welcome to the 139th of our weekly bulletins to keep you informed of changes at Socialist Party of Great Britain @ MySpace.

We now have 1562 friends!

Recent blogs:

Building a future

Free Trade, Fair Trade or No Trade?

Danger: capitalism at work

Quote for the week:

"As capitalist, he is only capital personified. His soul is the soul of capital. But capital has one single life impulse, the tendency to create value and surplus-value, to make its constant factor, the means of production, absorb the greatest possible amount of surplus-labour. Capital is dead labour, that, vampire-like, only lives by sucking living labour, and lives the more, the more labour it sucks."

Marx, Capital, Volume I, Chapter 10, 1867.

Continuing luck with your MySpace adventures!

Robert and Piers

Socialist Party of Great Britain

Solidarity (2010)

Cross-posted from the Vaux Populi blog

The world we live in. The Tories attack Unite for seeking solidarity from the American Teamsters Union (according to the BBC). Now, the international solidarity of the workers is a principle of trade unionism, so it is in fact a good thing that workers are seeking one anothers' support. Just look, though, at the vitriol being poured on the BA workers for daring to stand up for themselves. Compare with the flood of stories about government cuts being needed to restore 'confidence' in the economy (e.g. here. What they mean by confidence is giving in to the overall policy demands of financiers, who will withhold their economic resources until their demands are met.

We are in the grip of a sustained capital strike, and yet the press turn vicious on any attempt by workers to mount a strike to defend their own interests.

As a note, the Tories are attacking the link between Labour and Unite, because Unite as the biggest union in the country is basically shouldering the cost of the Labour Party now. Labour loyalist Luke Akehurst rebuts the allegations.

The point, though, is that the link is hurting both parties, the interests of political parties and trade unions are not the same. further, by linking themselves to a party that will form government under capitalism, the unions are signing a paycheque to those who will have to implement capitalism's attacks against the workers.

We support, fully and utterly, the BA workers and Unite and the Teamsters in their efforts to stand up to their employer, a struggle we all share an interest in. We share, though, an even greater interest in getting rid of the wages system all together, and Unite the Union would do better to try and raise their aims to Unite the Workers, for socialism. Unite members in Lambeth and Camden can do this by voting for our candidates.