Ireland Under Capitalism (2016)

From the March 2016 issue of the Socialist Standard

The CIA World Fact Book is a useful resource for looking at how our masters view the world. Ireland, it says, ‘is a small, modern, trade-dependent economy’. It notes that between 1995 and 2007 the Irish economy grew at an average of 6 percent a year, which, compared to the trend rate for the UK of about 2.5 percent is very healthy indeed. It took Ireland from being one of the poorest countries in Europe to one of the wealthiest.

This was part of what was known as ‘the Celtic Tiger’, a moniker that linked the growth there to that being achieved by the Asian Tiger economies, such as Malaysia. The link was more than just symbolic, there were structural similarities. The growth was achieved through state-driven social partnership, low corporate taxes and inviting foreign investment (chiefly American, taking advantage of the shared language and the membership of the European single market to turn Ireland into a corporate base for American firms in Europe). Also, the European Union has transferred vast amounts of money in structural fund payments to develop Ireland’s economy.

Further, as an article in the Spring 2004 Quarterly Bulletin of the Central Bank of Ireland noted ‘While the level of Irish GDP per worker [was] second only to Luxembourg in the European Union, GNP per worker is roughly equal to the EU average. However, this means that productivity levels, measured as GNP per hour worked, are still somewhat below the EU average because of the higher average hours worked per employee in Ireland.’

All of this reflects the relatively low level of development in Ireland previously, and that it was part of a worldwide spread of industrialised production. This meant Ireland could not escape the worldwide trends, and while GDP growth was over 9 percent up to 2000, after that it fell to 5.9 percent up to 2007.

When the Great Crash came in 2008, Ireland was particularly vulnerable due to internal factors (such as the very large housing and mortgage debt market) and also exposure to foreign markets. Further, due to the over-expansion of the property sector, Ireland like countries such as Spain ended up with a property bubble, and ghost estates full of habitable houses that no-one could buy. As the CIA Factbook notes: ‘economic activity dropped sharply during the world financial crisis and the subsequent collapse of its domestic property market and construction industry. Faced with sharply reduced revenues and a burgeoning budget deficit from efforts to stabilize its fragile banking sector, the Irish Government introduced the first in a series of draconian budgets in 2009. These measures were not sufficient to stabilize Ireland’s public finances. In 2010, the budget deficit reached 32.4 per cent of GDP - the world's largest deficit.’

Ireland since has successfully imposed harsh austerity measures, as part of an international bail-out, to eliminate that deficit, and it has largely succeeded, and has managed to successfully balance its budget, but at considerable price. It has not yet returned to the productivity rates it had at the height of the Celtic Tiger period. This was falling even before 2008, as the real economy began to dry up; and even now, the profitability of Ireland has not returned to 2005 rates.

At the height of the crisis, Ireland had an unemployment rate of 14 percent. This however, whilst being lower than, say, Spain’s horrific unemployment rate, is slightly distorted. Ireland has historically been able to export population in times of crisis: to nearby Britain, or the United States, Canada or Australia (due to historic connections), as well as the wider EU.

The chart below, released by the Irish Statistical Office last April, shows net emigration in Ireland over the past ten years. The advent of the crisis clearly shows the switch away from net immigration to emigration, and around 45 percent of those leaving the country are Irish nationals. It represents an average rate of about 70,000 leaving per year.

As unemployment falls to 8.8 percent today, people are returning. This rate of unemployment, though, remains relatively high, and is the rate at what could well be the top of the current economic cycle (for example, the unemployment rate in the UK is about 5 percent).

Further, there may be distortions in the official figures: ‘an additional 22.8% of the working age population are ‘inactive’, arising from disability or illness, care duties, full-time education, full-time parenting or early retirement. In order to sign on to the Live Register, a person has to be available for full-time employment, an eligibility criterion that discriminates against those who cannot be available full-time, particularly women.' That’s about 120,000 people who might want to work but aren’t counted. (www.tasc.ie/download/pdf/tasc_cherishing_all_equally_web.pdf).

Even those who are working aren’t benefitting. As the Irish Times noted last year (16 February), ‘a third of all income [is] concentrated in the hands of the top 10 percent of earners. When taxes and benefits are taken into account, though, this is just about the European average. Further, ‘Estimates of wealth distribution give the Top 10% between 42% and 58% of all wealth, and the Top 1% between 10% and 27% of all wealth.’

As demonstrated by the below graph (from the same website):

So, for the vast majority of the Irish, they do not own Ireland, nor Ireland’s wealth. They are not invited to share in growth in good times, and they are politely shown the door in bad times. That is what independence has meant for the workers of Ireland.

What it means for the top dogs in the country is that they have been able to shop around for patronage. No longer tied to the capital of John Bull next door, they can become the clients of European and American capital instead. The Tiger economies were known for their crony capitalism, and Ireland has had its fair share of that. Charles Haughey was legendarily corrupt when in office in the 1980s, Bertie Ahern (who was Taoiseach throughout most of the Celtic Tiger years) eventually fell due to revelations of brown-paper enveloped ‘dig out’ funds. The Mahon Tribunal found that he was not alone, and numerous public officials and councillors had been engaging in corrupt practices.

Legitimate business people are largely benefitting from foreign capital inflows. As Paul Sweeney noted in the Irish Times (16 January): ‘[The Irish] State is highly interventionist and spends between €4.7 billion and €6.2 billion a year supporting enterprise (half to agribusiness and farmers under the European Union). The equivalent of 5,200 full-time public servants supports such firms. Foreign firms play a key role in all small, open economies, but here their role is disproportionate because we do not have enough successful indigenous firms of scale.’

It’s worth noting that, according to the CIA World Fact book, agriculture in Ireland makes up about 1.6 percent of economic activity, so its share of state aid represents a hang-over of the status of farm and land owning in the Irish Republic.

Independence has not benefitted the working class of Ireland. It has not freed them from wage slavery. It has not freed them from exploitation and inequality. The Irish economy is not run on behalf of the people who live in Ireland, but on behalf of the owners of capital. For all the state intervention, it is still subject to the anarchy of production and the vagaries of the market.

In the good times Ireland’s wealth grows based on the work of its citizens, most of which is stolen from them. When the market turns sour, they are shown the door, or robbed some more to balance the books.

Ireland is enmeshed in a worldwide capitalist system, and only by joining a general struggle to emancipate the working class of the whole world, and turn the planet into the common property of humanity will people in Ireland liberate themselves.

Pik Smeet

Letter from Austria (1964)

From the September 1964 issue of the Socialist Standard

In the “ free world," demonstrations and marches of discontented workers are now the order of the day. No trade, profession or service is exempt from these public protestations against rising prices, lagging wages, social injustice and other evils suffered by all sections of the wage-slaves. One trade after another, from transport, metal, textile and chemical industries to doctors and teachers, is on the move threatening strikes, and marches to the seat of government. Banners and posters are carried, airing grievances and demanding redress and help. Television usually focuses on these demonstrations — such mournful processions, plus military parades, are indeed among the regular tele-features.

In Austria, last year's march of a thousand miners to Vienna recently had its double, this time from the federal province Burgenland, the most depressed area of this country.

Among the inscriptions on these Burgenland workers’ banners was one reading : “ Not yet come of age.” One sadly reflects how many Burgenland workers are aware of the sorry fact that in whatever respect or aspect they may consider their province as "not yet come of age” the workers themselves, and for that matter, the workers of the whole world, have yet to reach maturity. One wonders how many adult and normally intelligent workers would be ashamed to confess their political unripeness. Or does it betray political maturity and common sense for workers with the overwhelming majority of votes in their hands, to invariably vote for the continuation of their economic dependance on a small parasite minority, and to entrust leaders and guardians the safeguard of their class interests?

While it is generally understood that infants and minors, mental deficients, the old and infirm, like the blind and other unfortunates, need guardianship and leading, what is one to say of the brightness and brains of apparently sound adults blindly following leaders, despite their black record in the grim history of blood, sweat, and tears? The sorry fact is that the mass of the workers of the world are quite prepared to remain under tutelage and dominance; to go begging to, and leave their fate in the hands of their masters and ‘‘superior" leaders, instead of themselves organising for the purpose of working out, with their fellow-workers, their lives in accordance with their own needs. As already mentioned, the vote in their hands is the instrument to achieve this end—their emancipation from wage-slavery.

Meanwhile it remains a pitiful spectacle to see adult men and women humbling and degrading themselves by going hat in hand to a propertied, non-working minority of landowners, industrial magnates, bankers, shareholders, etc., with appeals for what can only be crumbs falling from the rich man’s table.

The Burgenland workers are typical of the lack of human dignity. The Esterhazy family, who own one-fifth of the whole federal province, draw 15 million schilling (£205,000) net profit annually from their forest property; 17 million (£233,000) from their lake ground and reeds, plus the income from leased arable land and vineyards, and the Esterhazy castle and grounds at Eisenstadt. Withal, Dr. Esterhazy is not even Burgenlander—he hails from Hungary. The Vienna conservative government procured for him the Austrian citizenship, but Esterhazy left Austria at once and lives in Switzerland. He is doing well there, while 23,000 poor peasants eke out a most precarious existence, and 25,000 itinerant workers are toiling far away from their families in summer, living on the dole in winter. No wonder that one of the delegates of the marchers asked the minister in Vienna how to exist on 167 schilling (about £2 6s.) a week.

Much more could be said on the dismal side of things in Austria, on the housing problem, with nearly half the population still living in single rooms or room-kitchen tenements (no water or W.C. within) and 30,000 urgent cases of home-seekers on the waiting lists in Vienna, while there are at the same time an equal number of empty flats—100,000 of them in the whole of Austria! There is the ever increasing criminality (632 murders between 1945 and 1963), alcoholism, accidents at work (160,000 annually, of which 600-700 fatal), the slaughter on the roads (60,000 accidents with 1,700 killed in 1963), etc., etc. Space does not allow us to deal with more, except to say that with the average annual income of about 20,000 schilling (£274), poverty and sickness is as rampant as ever in the midst of great wealth and affluence. Indeed, the Finanzamt has just revealed that in Austria more than a thousand persons have incomes of a million schilling (about £14,000) per year, and 2.652 persons paid taxes on 500,000 schilling (£7,000) each per year.

To anyone who should ask how this squares with the usual tale of “never had it so good,” I would say this; If the late American Presidents Roosevelt and Kennedy and the current President Johnson had to campaign against the terrible poverty and the innumerable accompanying social evils in the richest country in the world; if, as President Johnson admitted, with “ever increasing productivity and growing wealth on the one side, you have chronic unemployment on the other,” which they “can only try to mitigate, but cannot solve”—is it likely that the working class in any other country are better off and happier?

Withal, some thoughtful writers, politicians and scientists, often express concern and alarm about “Where are we going? ” “Where does science and the further technical development lead to? ” they ask. And they supply themselves an answer: “It will lead to the end of mankind, or at least to total slavery.” Others prophesy: “Relapse into the worst barbarism after a nuclear war.” 

Says one writer: “What is to be done?” And he suggests: “To bring the effects of the continued technical advance drastically and clearly to the knowledge of the people, so that they at last begin to do something about the contemporary problems of their existence.” As if the people were not daily being reminded of the terrible conflicts brewing everywhere, which never allow the constant fear of war to abate. And has this generation not had “the effects” of the continued technical advance “drastically and clearly” enough brought to its knowledge by two actual world-wars? And by the many smaller wars in Korea, Suez, Algiers, in the Middle and the Far East, in Cyprus, etc.? Fact is that none of those writers and seers have any alternative to offer to enable mankind to extricate itself from the most awful dilemma it has ever faced in all its history.

Looking back and at the present anarchic, chaotic world situation, one must ask oneself how long the working class will continue to invest their masters and their paid hirelings with their trust and confidence? Is it not time to ask themselves what intellectual and moral credentials, references or merits those welfare agents and leaders have, to deserve that trust? And what value can be put on their promises? Just consider for example the record of some of the contemporary statesmen, leaders, politicians, experts and scientists, bishops and popes and other top personalities in public life.

The cause of the two world-wars was economic rivalry, which did not justify the shedding of a single drop of working class blood. Yet did not the world’s leaders, ignoring the real cause, either take part in one or the other belligerent line-up or otherwise support the carnage, or do nothing against it? And what are these worthies doing now against the monstrous new armaments which are part of their masters’ preparations for the next holocaust?

Were not “reformers" like Roosevelt, Kennedy and Johnson—and Stalin, Khrushchev, Churchill, Hitler, Mussolini, Tito, and the rest of the war lords— among the foremost active agents in the two bloodiest mercenary commercial conflicts the world has known? And do not the military chiefs on all sides boast of the superiority of their armaments, their preparedness for any emergency, and even indicate the approximate figure of casualties in the initial phase of an all-out nuclear war?

Verily, only real innocents and very naive workers can still look up to their “betters” and continue to place their trust in an “intellectual elite” of such past record, instead of “at last beginning to do something about the contemporary problems of their existence.”

While the writer of these latter words did not or could not say what this “something" should be, Socialists can, and consistently DO SO. They have the beacon light and the rallying parole for the mass of the people, the working class.

It is: “Organize and vote for fundamental change of the present vile and imbecile social system, i.e., abolish the private ownership of the means of life, and establish the World Socialist Commonwealth!

Rudolf Frank

Wring their necks (1997)

From the March 1997 issue of the Socialist Standard

There is a poignant moment in Bertolt Brecht's play Mother Courage, where the protagonist. Courage, despairing at the likely impact the demobilisation of any army will have on her canteen-wagon business, sighs "Peace’ll wring my neck."

They're not words that are meant to be taken lightly. Brecht was fully aware that war was just the continuation of business by other means, and the words are meant to scream out at you from the page, echoing at every announcement of arms sales. They remind you that there are thousands of such Courages roaming the world every day peddling their wares and dreading always the cessation of hostilities or even the threat of peace.

One is the Defence Minister Michael Portillo. Towards the end of November last year he could be found flying to the UAE to sign a co-operation agreement whereby the British government would commit British troops to the defence of the UAE in return for arms contracts his industrial sources suggested could be worth £2 billion.

One week later, Britain's other prized arms promoter, Prince Charles, was also off to the UAE. No doubt in order to lick the sand from the boots Portillo missed.

Only weeks earlier it had been revealed that the British off-shore firm. Mil-Tec Corporation, had supplied $5.5 million-worth of arms to the Hutu militia in Rwanda, and most of this in the wake of the UN imposition of arms sanctions. In true Thatcherite tradition they were in fact "battling for Britain" and hence the government has decided to take no further action. Coincidentally, this came at the same time as evidence was emerging that Britain was re-equipping the Argentinian navy in exchange for a deal that allows Britain to explore for oil in the contested waters between the Malvinas (Falklands) and Argentina.

November was in fact a busy month for the arms dealers. The US, for instance, could be found retraining and rearming Muslim and Croatian forces in Bosnia. One consignment of arms on just one Adriatic-bound ship contained 45 M60 tanks, 80 M1 13 troop carriers, 15 UH-I helicopters, 840 anti-tank weapons and 45,000 rifles complete with ammunition.

As December dawned, the Observer reported:

"The growing number of deals involving conventional arms and nuclear technology between Russia, China and Iran is creating an informal club of powers capable of altering the balance in regional conflicts that would challenge the West’s assumptions of weapons superiority"(1 December 1996).

Russia has signed a $2 billion contract with China and is none too concerned that Iran has announced plans for a $4.5 billion oil-backed deal with China for military equipmentand joint weapons production.

Though such weapons might realistically be used against Russia it does not perplex the likes of one Russian spokesman, Anton Surikov who, believing the pros outweigh the cons, announced that Russia's security was strengthened by the rearming of America’s military rivals with submarines, missiles and sophisticated fighter aircraft. The logic being that in future less Western attention would be focused on Russia who could be left to carry on its global profit-seeking unmolested.

January came and Michael "Courage" Portillo gave the nod for the sale of 350 armoured cars and police vehicles to Indonesia, in spite of the MoD admitting they would most likely be used to suppress pro-democracy demonstrations. This was an admission that makes a fool of Trade Minister Anthony Nelson who declared last year: "We do not allow arms to be exported indiscriminately. We do not export equipment which is likely to be used for internal repression" (Observer, 19 November 1996). Which is why the same paper could report on the same day that "Britain covertly sold arms which ended up on the Turkish side of flashpoint island of Cyprus".

Arming the rest of the world, however, gives the West the perfect reason for arming itself against its arms buyers. Thus because the world is militarily an unsafe place, Britain is desperate for 232 Eurofighters costing £16 billion, 386 Challenger 2 tanks and 64 EH 101 battle helicopters.

As the arms trade escalates, we may well ask where arms suppliers, tainted with the blood of Rwandans and Indonesians. and indeed workers the world over, will draw the line. History, though, shows that the competitive drive for profit obscures all such lines, and that wars, or the threat of them draw the arms suppliers like flies to a cow pat.

John Bissett

Economics: Banks and Credit (1975)

From the February 1975 issue of the Socialist Standard

The use-value of loan capital, which is made available through the banking system, consists of producing profit, and this type of profit is described as interest. The rate of interest is arrived at by competition between lenders and borrowers, or by supply and demand; the lender of loan capital striving to obtain the highest rate of interest for the use of his capital, and the borrower seeking the lowest rate. There is no "natural" rate of interest, nor is there any limit to the rate that can be charged.

In the German Weimar Republic during the period of great inflation after World War 1, the rate of interest was raised weekly in some cases to 200%. The "natural" rate theory has its basis in the repetitive form of dealings between merchants and industrialists in the negotiation of Bills of Exchange. A substantial part of the business of a bank consists in discounting (cashing) Bills of Exchange. They are, generally speaking, promises to pay between merchant and industrialist at 60-90 day intervals, or longer. These Bills usually represent goods in transit or in store, and for the facility of advancing cash immediately on the strength of the Bill, which guarantees the value of the goods nominated in the Bill, the banker will deduct or discount a fraction of the amount shown and buy the Bill. If, for example, a Bill of Exchange was valued at £10,000, and the annual rate of interest was 10%, and the Bill was due in 90 days, the banker would deduct the sum of £250, i.e. 90 days' interest, and advance the sum of £9,750. When the Bill was finally redeemed, the banker would then receive the sum of £10,000 - the full value of the Bill.

Rates of Interest

Naturally the merchant and the industrialist (incidentally banking transactions as described above are not just confined to these two) would seek out the most favourable discount rates, and over a period of years the rate would tend to become adjusted at a regular rate. For many years between World Wars I and II the bank rate remained almost stable, around 2½%-3%. The old bank rate was based on this practice of discounting Bills, and gave rise to the theory of the "natural" rate of interest. Regarding the possibility of the banker getting the better of the merchant, industrialist etc., by successfully charging high discount rates; this would only result in a transfer of wealth between them. Were the British banks to consistently charge usurious rates, capitalists would endeavor to have their Bills discounted elsewhere, say New York or Paris.

Since interest is part of industrial Profit, the maximum limit of interest is marked by profit itself. The leaves can never be greater than the tree, or the part can never be greater than the whole. The high rate of interest today, i.e. 15%-16%, is distorted by inflation. The Chairman of Barclays Bank, Mr. A. Favil Tuke said:

"It is worth recording that of the three parties who make up a bank, namely stockholders, staff and customers, none has gained much from these profits.  Customers do not need to be told how much interest rates have risen in the last year or two; the increases in the salaries of our staff have been limited to about 7% per annum, and that of the stockholders dividend to 5% per annum; all this at a time of inflation of some 10%, per annum." (Directors' Report to AGM, 1974).

Obviously the depreciation of money is taken into account when fixing a rate of interest, and this is basic to the preservation of the value of the loan capital. On the other hand any prolonged fall, resulting in a total loss of interest, as well as an erosion of the value of the money capital, would eventually remove loan capital from the money market. This would, sooner or later, have repercussions in the productive process, as industrialists and other capitalists would find difficulty in raising capital for certain projects. As capitalism's wealth develops there is a tendency for the owner of inherited wealth to live on the annual interest without actively participating in the productive process. The same attitude is adopted by retired capitalists who want to take things easy, instead presumably of just taking them - as in their youth. Loan capital arises mainly from these sources.

Were there no profit in loaning capital, that capital would be hoarded until such times as things improved. The owners of such capital would not retain it in the form of paper currency at the mercy of inflation, which has the effect of gradually reducing the wealth of the banker and the landlord, as well as literally confiscating such savings as are owned by workers. They would hold their hoard either in gold, works of art, land, buildings, or any other desirable commodity which retained its value. No profits would accrue from assets held in this way, but on the other hand, there would be no losses either. However, if this happened on any scale there would be industrial dislocation.

Lenders & Borrowers

The function of banks is firstly to make recurring payments on behalf of their customers; meeting mortgage payment rates, quarterly bills, and regular annual orders. These are payments which are entirely concerned with the circulation of commodities. But their second and most important function is to provide credit or capital for industry, commerce, property, etc. This is not provided out of the resources of the bank, as can be seen by the statement of the London Clearing Banks. Total advances were £16.7 thousand millions (Quarterly analysis of Bank advances; Bank of England, 20th November 1974), whereas the total capital of these banks was £658 millions as at December 1973 (Annual Reports, 1973).

Generally speaking, bank overdraft limits are reviewed every year, and bank borrowing is mainly short-term; up to 3 years in the main. Long-term loans are usually handled by the merchant banks who charge a higher rate of interest for this facility. The credit system which owes its development to the specialized function of the bank has proved to be a significant force in the centralization of capital. Gathering as they do all the disposable money which is spread throughout society, they channel it into the hands of groups of capitalists, who turn it into capital. The accumulation of capital is speeded up, and with it the productiveness of labour, as more and more machinery is introduced into the productive process.

Credit, and the credit system, have given rise to many misconceptions about the power of banks to create credit. Firstly, credit, whatever its form, whether in money or goods, consists in a transfer from one person to another.

Credit, in its simplest expression, is the well or ill founded confidence which induces one man to extend to another a certain amount of capital, in money or in commodities, estimated at a certain value, which amount is always payable after the lapse of a definite time. (Tooke. Capital, Vol. III. Kerr edn., p. 471).

Elements of social wealth, and the conditions under which the transfer takes place, or the trustworthiness of either of the parties to the transaction, need not concern us. An owner of goods may be separated by an interval of time from realizing the value of these goods in money. Certain articles take a longer time to produce than others, and others longer to market. The production of certain commodities, mainly agricultural products, depends on certain seasons of the year. Inevitably the owner of the commodities will borrow money on them, or sell his right to them for money on the spot, or the written promise of money. This is putting it at its simplest — the goods providing the security for the loan. In any case, goods are exchanged or secured against a sum of money which is due to be repaid at a given date in the future. Payment in advance of delivery, or delivery in advance of payment, represent the two sides of simple credit. It is to be assumed that the credit seeker has a reputation for solvency, and that fraud is not the purpose. Credit advances in this way merely facilitate the circulation of commodities by getting them to the market quicker.

Weakest to the Wall

The second and most important function of the banker is to provide money for industry, which is capital. This has a separate function from money as the medium of circulation. The function of capital is not merely the circulation of commodities but their production in the first instance. Therefore, money used as capital is withdrawn from circulation because the wealth which it represents has been locked up in the process of production. The credit system of advancing capital allows individuals to use capital which is not theirs, and has opened the door to all sorts of swindles and reckless speculation. Who would not gamble with other people's money?

If banks could create credit with the stroke of a pen, that would mean in effect they could create wealth, and consequently the Marxist Theory of Value would be shown to be wrong. However, as time passes the validity of the Labour Theory of Value, i.e. that wealth can only come into existence when men apply their energies to nature, is all too apparent. If banks could create credit, they would never be in financial difficulties, nor would they go bankrupt. As we have seen in recent years, a number of bank failures are taking place. The Ideal Savings Bank, and the Bank of the Lebanon, for example. More recently, the Herstatt Bank of Germany, and the Sindona group of Banks in Italy; the Israel British Bank (London) with deficits of over £40 millions. Many of the 40 or so fringe banks are in dire trouble, and some have gone into liquidation, including Mr. Jeremy Thorpe's London & Counties Bank. (His insight into the political future has not helped him in his banking adventures.) Many of these failed banks had the dubious benefit of advice from economic and political experts forecasting the future of capitalism. Once again they have come unstuck, and we can say with certainty that more banks will fail as the competition increases — the large fish will gobble up the little ones.

Credit Creation a Myth

In these circumstances, why did these banks not create a bit of credit for themselves and literally pull themselves up with their own shoelaces? The answer is all too obvious. The credit of the banker is provided only by his depositors. This is real money. It matters not whether the bank transfers depositors' credit to a bad risk or a dud enterprise — he is liable for its return. At the present time, the property market has turned out to be a bad financial risk, and the little fish are in trouble having lent long to property speculators, and borrowed short from their bigger brothers. The alleged "rescue" operations organized by the Bank of England are nothing other than the lambs being eaten up by the wolves. The smaller fry of the financial and banking world are no more immune from the centralization of capital than the small car firms, garages, shopkeepers, etc. In the last four years the Big Five Banks, Westminster, Barclay's, National Provincial, Lloyd's and Midland, have become the Bigger Four. A number of Scottish banks have been taken over by the Big Four — the Bank of Scotland for example is now under the control of Barclay's, whilst the Clydesdale Bank is controlled by Midland; National Westminster controls Coutts & Co., also the Ulster Bank Ltd. Lloyd's control the Bank of London and South America, the National Bank of New Zealand and many others.

If these small satellites wanted to remain independent all they need have done was to create credit by increasing their capital by a stroke of the pen. Such fictitious capital would no doubt pay a fictitious dividend, and create a series of fictitious deposits. Unfortunately, however, the original depositors who have loaned real money have no sense of fiction — even the science fiction of the economic experts — and would require repayment in very realistic banknotes.

The bank profits for 1973, the last accounting year of the London Clearing Banks and subsidiaries, do not bear out the miraculous power of credit creation. Although this was a bumper year the total profits, after tax, were £335.7 millions (Annual Statement for 1973). This is a large profit, but it is only a small portion of the total industrial profit.

Inflation Fraud

The one institution which appears to create credit is the State, operating through the Bank of England. This is an act of deliberate political policy, the reasons for which will be given in a separate article. The Government, in a variety of ways, instructs the Bank of England to print an excess of paper currency, which the Government uses to finance its own schemes, and without having to introduce tax legislation to deal with particular cases. This inflation of the currency does not, nor cannot, add to existing wealth. What is really happening is that, far from creating credit, the Government is confiscating other people's. This has the same effect as a general increase in taxation. The constant dilution of the purchasing power of money by inflation raises prices and dislocates production and distribution. This is public fraud posing as public credit.

Capitalism is a system of production and distribution with many contradictions, and inflation adds yet another. Whatever strategy is worked out by economic planners and monetary specialists will make no difference. Capitalism will run according to its own laws, and they can only run after it. After all — who ever heard of an expert on anarchy? 

Jim D'Arcy

Economics: Do Banks Produce Wealth? (1975)

From the January 1975 issue of the Socialist Standard

There are three main divisions within capitalist society which share the surplus-value which is socially extracted from the working class; the industrialist, the landlord and the banker. These divisions historically reflect the application of the division of labour to the specialized investment of capital in any field of production and distribution, any process of circulation, of which banking is part.

Individual capitalists, or groups of capitalists, may have financial interests in all three of these groups. There is nothing to stop the industrial capitalist from becoming his own landlord and banker, but were he to do so he would require to hold huge reserves of cash, or have part of his capital locked up in bricks and mortar, thus preventing it from being more usefully employed in the exploitation of human labour-power. Generally speaking, the industrialist, the banker and the landlord pursue their own separate courses. Their interests are intertwined but nevertheless are antagonistic. Whilst it is true that the capitalist class have more in common with each other than with the working class, it is necessary to add that a class society must inevitably produce a conflict of interest between capitalist and capitalist, as it does between capitalist and worker, and worker and worker.

Interest and Profit

In capitalist society all wealth takes the form of commodities and is bought and sold. Capital itself is subject to this process: the price of capital represents the amount paid for the use-value of that commodity for a prescribed period. The lender sells to the borrower the use-value of his capital, and expects to receive an additional payment (i.e. interest) as well as having the original sum returned to him at the end of the mutually agreed period.

If we assume annual average rate of profit is 10%, this would mean that anyone owning £10,000, employed as capital, and provided it was used with average intelligence under normal conditions, would expect this capital to yield a profit of £1,000. If, however, he gives or transfers this £10,000 to another person who also proposes to use this as capital, then he has given to that person the power to produce a profit of £1,000; a surplus value which would have cost him nothing. Obviously this person does not expect to receive this privilege without making some payments in return. If he decides to pay, say, £250 to the original owner out of the £1,000 profit, for making the £10,000 capital available to him, that part of the profit is called interest. It is a payment made for the use-value of the capital.

The banker makes his money out of the process of indirectly bringing borrower and lender together. The banker borrows money at say 10% and lends it at say 14%, and the difference between the two rates, after deduction of expenses of book-keeping, rent, wages, etc., represents his profit. It should be borne in mind that the rate of profit has its origin in the productive process, or at the point of production: that is, at the place and places where socially useful human energy or labour-power transforms natural wealth and natural forces into commodities. The essence of the capitalist form of exploitation is that the capitalist does not, nor cannot, pay the full amount of the value of that socially-necessary labour, and pays only the value of the living labour as represented by wages, and that is not the same thing.

Capital

The surplus-value is the difference between the value of the product and the value of the producers. Living labour produces a greater value than it takes to reproduce itself, and consequently all surplus- value comes from the exploitation of human labour-power under a wages system. Banks produce nothing. They are really middlemen or custodians of idle capital which must be available as a hoard, as potential money capital waiting to be put to use. “The purely technical labour of paying and receiving money constitutes an employment by itself which necessitates the making of balance, the balancing of accounts, as far as money serves as a means of payment. This labour belongs to the expenses of circulation and does not create any value. It is abbreviated by being organized as a special department of agents who perform this work for the rest of the capitalist class . . (Marx, Capital Vol. Ill, p.373). Their profit is made during the process of circulation, as is the case with all commercial and interest-bearing capital.

The difference between interest-bearing capital and industrial capital, or capital used in the productive process where wage-labour is exploited, is that the owner of money capital who wishes to earn interest on that money throws it into circulation not as capital for himself, but so that others can use it; and consequently gains a profit by this service. The basic difference is that whereas the individual capitalist has his capital locked up in factories, mines, heavy machinery, ships and means of transport and distribution, stocks of materials, or committed to a wages bill, the lender of interest-bearing capital invariably has it returned to him. The main exception to the rule is when certain money has been loaned to the government, in which case the lender has a legal title to a permanent income at a fixed rate of interest.

Banks not Dominant

It is quite true that individual sums of money deposited with banks may be too small to function as capital by themselves, but they can be gathered together into useful masses of capital, and advanced to industrialists and others who use the banking system. In the main, however, the hoard of capital which is deposited with the banks is the residue of unconsumcd profits, or capital which is surplus to immediate requirements.

Contrary to popular belief, banks do not dominate the capitalist system. This mistaken view is due to the fact that wealth is represented by enormous quantities of money. All wealth under capitalism expresses its value in the symbolic money form, but that form tends to conceal the fact that capital exists in the physical implements of the labour, factories, minerals, buildings, ships, etc. and that these are the dominant form of capital; the expansion of capital can only arise from these sources and not from the variety of banking and commercial transactions involving interest-bearing capital. At the present time banks have advanced £8,897 million to the manufacturing industries, including £2,103 million to the engineering and metal industries, £2,247 million to the construction industry, and £1,187 million to food, drink and tobacco. The balance of the loans is mainly divided between chemicals, electrical engineering, shipbuilding, agriculture, and forestry (Financial Statistics, HMSO, Table 53. Oct. 1974).

An estimate of the value of the physical assets of the UK wealth was published recently. The total value of the assets was estimated at £400,000 millions. Of this, the figure of £175,000 million was allocated as representing the value of assets which were directly productive. These are mainly the manufacturing industries referred to above. (Times 16/11/74: “Wealth of the UK” by J. Rothman). The banks’ advances, on the basis of this estimate, show that the banks have a stake in British manufacturing industries of about 5 per cent., and this could hardly be regarded as a dominant interest. In any case, banks do not exist to lend their own money, but other people’s. The total advances made overall by the London Clearing Banks — Barclay’s, Lloyd’s, Midland, National Westminster, Williams & Glyn’s, amount to £21,992 million, but the combined deposit and current accounts (money loaned by depositors to the banks) were £37,374 million (Committee of London Clearing Banks statistical unit, 16th Oct. 74).

Effects of Crises

The Labour Party and the Communist Party mistakenly argue that the slump of the ’thirties was due to the fact that the banks withheld loans from industrialists. A variation of the same argument being used today by politicians of all parties, including the residue of the Left and a number of economists, is that the present high rate of bank interest will dissuade the capitalists from borrowing for fresh investment, thus causing unemployment by reducing production. The assumption behind this rather naive conception of capitalism is that as long as the industrial capitalist can find capital, whether by borrowing from a bank or out of his hoarded resources, he can maintain full employment. The point that they constantly overlook is that the function of capital is to produce profit. This can only become a reality when the commodities produced can be sold.

If for some reason, whether it be that the market is already overloaded and cannot absorb further commodities, or that over-production has already taken place, then production will be scaled down, curtailed, or in some cases halted entirely, and workers will be laid off. In these circumstances there will be little prospect of profit, and as experience has shown a number of capitalists, the smaller ones, go bankrupt. “In the first 9 months of this year, 4,000 Receiving Orders were made ... an increase of 40% over the same period for last year” (Sunday Telegraph City 4, 24 Nov. 74). All the machinations of the banks, either by advancing or retarding credit, whether charging low interest rates or not, cannot alter this. At the moment there is no shortage of cash available for investment, and the banks are only too eager to make capital available to bona-fide capitalists. However, in a failing market there is little incentive to the industrial capitalist to commit himself to paying interest when the prospects of earning surplus-value on the borrowed money are extremely remote. Only these capitalists in dire financial trouble, or those who have to meet certain contracted obligations, will be forced to borrow.

Generally speaking, in periods of crisis, when the capitalist’s position deteriorates and he has to meet payments, he will borrow money almost at any price to stay in business. Invariably the rise in the rate of interest implies a fall in the value of shares and securities. Interest comes out of profit, and in these periods the fact that the capitalist needs to borrow means that his normal source of profit has temporarily dried up, therefore the price of shares has fallen. The present rate of interest, i.e. 14-16 per cent, is the highest for over forty years, and the price of shares the lowest for sixteen years (Financial Times Index 168.5, 23 Nov. 74). There is, of course, the element of inflation written into the present interest rate. Unlike real wealth in the physical sense, loan capital exists as a symbolic paper hoard, and as such is subject to the hazards of inflation. Were the commercial capitalists not to take some preventive action their assets, as they exist purely in the monetary form, would be eroded year by year as a result of inflation. So the price of capital rises as with other prices, and the high interest rate is the protective mechanism the banks etc. use to protect their assets. The Utopian promise of low interest rates, at times when the operation of capitalism is forcing high ones, can be ruled out as a pious hope.

The industrial capitalist does not suffer to any great extent from the ravages of inflation as his assets consist mainly of real wealth, whose relative value rises as the purchasing power of paper currency falls, and he can adjust his prices upwards taking into account the rising cost of production. On the subject of inflation generally, we are reminded of the small boy at the seaside saying to his father “Dad, where does the water go when the tide goes out?”. It had obviously gone elsewhere, but it certainly wasn’t lost, and neither is wealth during periods of inflation.

The rate of interest, or bank rate, itself is not arbitrarily fixed. It fluctuates according to the conditions of the market. Supply and demand cause competition between buyers and sellers, and raises or lowers prices. Competition between borrowers (buyers of capital) and sellers (owners of capital) operating through their banking agents, determines the rate of interest.

The mythology surrounding the power of banking helps those who take the view that this vast institution is so necessary that the prospect of a world without money would be unthinkable. The present world with money is becoming uninhabitable, and that is why we want to establish Socialism.

(To be concluded)

Jim D'Arcy

Karl Marx (1959)

From the December 1959 issue of the Socialist Standard

Seventy-Six years ago, on March 17th. 1883, Karl Marx was buried in Highgate Cemetery in London. No massive structure of marble or bronze is needed to remember the man. for his work is its own memorial At the graveside. Friedrich Engels, who was Marx’s best friend and his co-operator for over forty years, said this;

Just as Darwin discovered the law of evolution in organic nature, so Marx discovered the law of evolution in human history. He discovered the simple fact hitherto concealed by an overgrowth of ideology, that man must first of all eat and drink, have shelter and clothing before he can pursue politics, science religion, art. etc.; and therefore the production of the immediate material means of life and consequently the degree of economic development attained by a given people or during a given epoch, forms the foundation upon which the forms of government, the legal conceptions, the art and even the religious ideas of the people concerned have evolved and in the light of which these things must therefore be explained, instead of vice versa as had hitherto been the ease.

Karl Marx was a German, the son of a lawyer who practised in the old cathedral town of Trier on the Mozelle, close to what was then the French frontier. There he was born on 5th May. 1818. He died an exile in London, after he had been forced to flee from Cologne, Paris and Brussels to escape the persecution of the ruling powers of the day. He could have chosen the comfortable career of a lawyer or a university professor, but he preferred to spend his time and energy in educating the workers. He first became active as a writer, championing the cause of the agricultural workers and small farmers in the Rhineland in their fight against the land-owners. When the newspaper in which he wrote was suspended he went to Paris, where he studied the history of the French Revolution. the Utopian Socialists and the start of the French labour movement.

He became a Socialist and made friends with Engels, the son of a textile manufacturer in Barmen, who was then employed in his father’s branch in Manchester. Engels, too, became a Socialist and thenceforth the two men were united in a partnership of thought and action. Notably, they produced the famous Communist Manifesto, which became a guide and compass to the Socialist movement. At the time, the political domination which the semi- feudal reactionaries of the Holy Alliance were able to exert in Europe was being threatened by the rise of Capitalism. The steam engine had put the factory in place of the old productive method of handicraft and the railway had begun to replace the stage coach. But the new social system had its own evils; the second half of the '40’s saw Europe plunged into a long and serious commercial crisis, which severely shook Capitalism.

Said the Communist Manifesto: “All history until now is the history of class struggles.” Capitalism sharpened the struggle into a clash between two classes, the Capitalists and the wage working class. The immediate task was the organisation of the workers into an independent movement for the conquest of political power and the overthrow of Capitalist society. This struggle is no national affair; it must be fought out internationally, until the establishment of Socialism brings the end of class rule and the exploitation of the working class. The Manifesto summed it up; ” Workers of the World Unite! ”

The International

In 1864, Marx took an active part, with Engels, in launching and directing the first International Working Men’s Association. The First International, although necessary, was foredoomed to failure by the immature consciousness of the workers, which arose from the undeveloped conditions of Capitalist society. Internal disputes and the repressive laws on the Continent eventually broke it, but it had not been all in vain. In the midst of his work for the International, Marx published the first volume of Capital, which has been attacked by many people prominent in various fields of thought and by a long line of professional and literary hacks. They have all claimed to prove Marxian theories incorrect and outdated, but events have been against them. Marx’s labour theory of value and his materialist conception of history have been vindicated again and again.

Marx was a great scientific thinker and a courageous man, who bore witness to the old saying that the pen is mightier than the sword. He offered the working class the knowledge—and through know- ledge the power—to establish a classless, warless, tradeless system of society. Because of this, his name will be remembered long after his revilers have perished.

J. E. Roe

Cooking the Books: Swizz Banking? (2016)

The Cooking the Books column from the March 2016 issue of the Socialist Standard

Swiss banking reformers have obtained the 100,000 signatures needed to initiate a referendum to restrict bank lending or, as they put it, to stop banks benefiting from being able to create electronic money out of nothing.

Explaining the apparent logic behind the proposal in the Financial Times (5/6 December), Martin Sandhu wrote:

‘The bank decides whether it wants to make you a loan. If it does, then it simply adds the loan to its balance sheet as an asset and increases the balance in your deposit account by the same amount (that’s a liability for them). Voilà; new electronic money has been created.’

This is indeed what happens from an accounting point of view. Double-entry book-keeping requires every new asset or liability to be balanced by a corresponding liability or asset. In this case, in making the loan, the bank acquires a liability. This has to be balanced, in the accounts, by a corresponding asset, recorded as an IOU from the borrower. That a new asset has been created out of nothing is only an illusion arising from an accounting convention.

Outside the accounts department all that has happened is that the bank has committed itself to making a loan to a customer. It ought to be obvious that, to be able to meet the obligation (liability) to pay this, the bank will have to be able to fund it, but currency cranks (and, surprisingly, some financial journalists) overlook this and believe that banks really can ‘simply’ create out of thin air what they lend. Sandhu even used the word ‘scam’.

This is not to say that loans have to be funded entirely from what people have deposited with the bank (a view sometimes attributed to critics of the thin air school of banking) since other sources of funding are available, from the money market (i.e. other financial institutions) or the central bank, some of which can even be done after a loan has been made.

The Swiss banking reformers subscribe to the mistaken, monetarist view that an over-expansion of bank lending causes (rather than merely reflects) booms and busts and they want to control and restrict it to try to prevent this. It won’t work but that’s the theory.

The proposal is that banks should not be able to re-lend money deposited in current accounts. When it receives such a deposit the bank will be required to re-deposit it with the state’s central bank in return for what Sandhu calls ‘State e-money’. All banks would be able to do with this is transfer it between current accounts.

This would certainly restrict bank lending but it wouldn’t (and is not intended to) stop it altogether. As the Swiss banking reformers explain (tinyurl.com/hnemzep), after the enactment of their reform:

 ‘The banks can only work with money they have from savers, other banks or (if necessary) funds the central bank has lent them, or else money that they own themselves.’

But this is already, now, the case! Money deposited in a current account is just as much a loan to the bank as is money deposited in a savings account. Banks can, and do, re-lend most of it too, except that, unlike with a savings account, it keeps all the interest.

But if money re-lent from a current account is money created from thin air, why is money re-lent from a savings account not? Don’t ask us. Ask the currency cranks.

No Socialism at Labour Party Conference (1976)

From the November 1976 issue of the Socialist Standard

In the foggy atmosphere of Labour Party conferences “socialism” is the self-conscious rallying cry of the faithful, and sop to them when used by the party leaders. (“Socialism” is a rallying cry of a different kind at Conservative conferences.) At Blackpool this year “grass roots” enthusiasts, from the constituencies and the Unions, talked earnestly about the evils of capitalism and called on the Government to carry out “Socialist” policies. Realizing only that “something” is wrong in society they live in perpetual hope of legislating the nastiness out of capitalism. Despite all evidence to the contrary many still see nationalization as the panacea to solve capitalism’s problems. Not understanding how capitalism works, delegates appear to think that Governments have unlimited resources at their disposal. Or that a cut in spending by one Government Department (usually Defence) automatically provides more money for another. In the Pensions debate Jack Jones claimed that the recent NATO exercise would have paid for quite a few Christmas bonuses.

In defending cuts in Education spending Shirley Williams said that in the real world we have to be “realistic Socialists”. We wish that her audience would learn about Socialism. The realism would include the complete rejection of the idea that the Labour Party represents the interests of the working class.

Delegates in the majority opposed Government policy on health, housing, immigration and the Euro-poll. The debate on direct elections to a European Parliament produced more “socialist” rhetoric. (Comment also on MPs who did not now make the short journey to visit their local constituency party and who might disappear altogether in Europe.) The Government had already agreed with its EEC partners on the principle of direct elections. When the conference voted firmly against this decision a delegate asked for the suspension of standing orders so that the Party leader could comment. This was ruled out of order by the Chairman, Tom Bradley MP, on the grounds that there had always been a clear distinction between the party conference and a Labour Government. O Democracy!

After this debate came fraternal greetings from the Co-operative Party. Followed by Tom Bradley’s serious suggestion that those who had complained about the evils of capitalism during the week had one way of opting out of these evils — they could shop at the Co-op!

We suggest that the first step to removing the evil of capitalism is to understand how the system works. When capitalism was in its infancy the early Socialists, looking at working class conditions, could only reject the consequences of capitalist production as bad. In the absence of an analysis of its essential character they were unable to define the only satisfactory solution to working-class exploitation.

The Labour Party and its supporters have never had this excuse, for the mystery surrounding capitalist production was solved by Karl Marx long before the Labour Party was formed. Using the labour theory of value, Marx was able to explain how the working class is exploited. Workers are paid the value of their labour power but only part of their working time is necessary to replace that value. For the remaining time their labour is unpaid. This unpaid labour is the source of the surplus-value appropriated by the capitalist class. Further, the materialist conception of history enabled him to present capitalism in its historical context. By looking at the way the means of life were produced and distributed, and the relationship of different social classes to that production and distribution, he was able to show that capitalism was the inevitable sequel to feudalism. Social development did not end with capitalism. The struggle between the two remaining classes would result in the downfall of capitalism.

Since Marx expounded the materialist conception of history and the labour theory of value, Socialism has had a precise meaning. It can only properly be used to describe the worldwide social system which will replace capitalism. When the working class takes the conscious, political steps to end its own exploitation it will emancipate the whole of mankind. Socialism, the system then established, will be based upon the common ownership and democratic control of the means for production: something the Labour Party has never proposed.

Pat Deutz

Between the Lines: Whose Victory? (1991)

The Between the Lines column from the March 1991 issue of the Socialist Standard

WHOSE VICTORY?

On Saturday, 9 February, while American and British bombers blew up their Baghdad targets and put the fear of bomb-blessing god into countless Iraqi kids, BBCI’s Going Live did its weekly "Press Conference" with Juliet Morris who had just returned from the Middle East where she was covering the war.

The Going Live programme allows teenagers to question the stars. Often the questions are more penetrating than the pompous political pundits ever dare ask. Sometimes they are naive. This week they were coated in fear.

How can we believe what we are told about the number of children killed and injured when the censors are at work? We can't, answered Morris - we just have to hope that the lies being told are not too great. Are Israeli kids scared of chemical missile attacks? Yes, very scared. How are they coping? Schools have been closed down - the difficulties of teachers putting gas masks on classes full of 30 six-year olds at a time are too great. Was she frightened when she was in the war zone? Yes.

Going Live is, by tradition, one of those jolly BBC shows put on to keep the kids smiling at the beginning of the long weekend. At the end of that week's show none of the children in the studio showed a tract of a smile. They had been dragged into the pit of fear which war pushes most of us in to. Going Live? But how long for?

SEEK TO BE DONE

On Sunday, 3 February your reviewer watched two films on TV. Both were about Justice. They could not have been more different. The Winslow Boy (Channel 4. 2pm) was about a false accusation made against an English public school boy. The boy’s father would not allow injustice to prevail and so sacrificed everything to see that his son's innocence was upheld. He took the matter to the House of Commons where the brilliant British defender of the law, Sir Henry Morton, made an impassioned plea for the right of the father to sue the Admiralty (who ran the boy's school). Of course, the parliamentarians were moved to a mass wave of sentimental awakening by the lawyer-MP’s speech and they voted for the case to be given a "fair trial". Then came the trial, with the sickening little goody-goody, Winslow up against the forces of the Mighty State. Needless to say, wee Winslow was in the Right, so the Mighty State had to concede defeat. Jolly good cricket, what! The film ends with the boy's father having been vindicated. But no, it was not he who was shown to be righteous in all of this, but the great English Legal System where Right is always done and, furthermore, seen to be done. What self-righteous little prats must have written, acted in and believed this film. What a smug and ridiculous act of complacent belief in good old English fairness this cinematic drivel symbolised.

Was the English parliament which decided to give young Winslow a "fair trial" the same kind as that which has refused persistently to free the Birmingham Six? Was the kindly judge out of the same stable as Lord Denning who is of the view that it would have been better for the Guildford Four to have been hanged, even though they have been found innocent?

The same night BBC1 showed Korczak, directed by Andrej Wajda. This was a film of painful truthfulness about one man's attempt to protect a group of orphan children from a full awareness of the brutalities of the Warsaw ghetto.

Korczak isolates the children in order to spare them a realisation of the grotesque social disorder which the fascist regime had imposed upon them. Perhaps he was wrong to deny them the truth; without a doubt, his intentions and actions, as depicted, were beautiful in their sincerity.

It was a film which refused to indulge in pathetic illusions about justice. In the end Korczak and his children are deported by train to meet their deaths in the gas ovens. There is a wonderful utopian moment close to the end of the film - a moment in which the carriage carrying the children falls off the end of the train and the young ones dance away to their freedom. It was one of the most moving scenes in any film ever. But Wajda, who is one of the finest film directors alive today, refused to allow viewers to roll back into the idiot's comfort of seeing justice done where it was not to be. The film ends with the stark information about the fate of Korczak and his children. It would have been a hardened viewer who did not weep.

THE MAD EMPIRE

First prize for the craziest moment of TV nationalism during the recent war lunacy goes to the half-time display during the US Superbowl. This was Nuremberg meeting Spielberg; George Bush on a big screen, and Fred Savage from The Wonder Years looking like junior commandant of the Florida Hitler Youth. Whoever devised this absurd pro-war pageant should be given an immediate offer of a star part in the sequel to Mel Brooks' The Producers. Bad taste? It’s the kind of thing that could make you wish that Columbus had never discovered America. And while the clowns performed workers died - needlessly.

Steve Coleman

Summer School 2016 - Money Talks (2016)

From the March 2016 issue of the Socialist Standard

Summer School
 
22nd - 24th July 2016
 
Fircroft College, Birmingham
 
Money flows through every aspect of society, and therefore affects every aspect of our lives. What possessions we have, the efficiency of the services we use, and how we are supposed to value ourselves are all shaped by the money system.


We’re encouraged to think of the economy in much the same way as we think about the weather – something changeable, but always there. When the climate is ‘good’, life feels brighter. When the climate is ‘bad’, we huddle down until we can ride out the storm. Although we’ll always have the weather, the economy doesn’t have to be permanent.


Our weekend of talks and discussion looks at the role of money in our society. In what ways does money affect how we think and behave? How does the economy really function? How did money come to be such a dominant force? We also look forward to a moneyless socialist society, which will be – in more than one sense of the word – free.
 
Full residential cost (including accommodation and meals Friday evening to Sunday afternoon) is £100. The concessionary rate is £50. Day visitors are welcome, but please book in advance.
 
To book a place, send a cheque (payable to the Socialist Party of Great Britain) to Summer School, Sutton Farm, Aldborough, Boroughbridge, York, YO51 9ER, or book online through the QR code or at http://spgb.net/summerschool2016. E-mail enquiries tospgbschool@yahoo.co.uk

Letters: Solidarity (1970)

Letters to the Editors from the September 1970 issue of the Socialist Standard

The Socialist Party of Great Britain has always held that the widest possible discussion of conflicting views is desirable. In this issue we publish, together with our replies, a number of letters we have received arising out of recent articles in the “Socialist Standard.”

Solidarity

If to wish to oppose capitalism and have it replaced by a society run by and for the workers themselves, without bosses or leaders, is “anarcho-syndicalism”, then Solidarity members will confess to that heinous deviation.

But as a member of North West Solidarity, I must beg your allowance of a reply to certain points made in the article "Listen Anarchist” (Socialist Standard, March 1970).

Firstly, workers management cannot be dismissed by saying that under Socialism, “all work should be entirely voluntary”. So it should, but even then, someone, some group, will have to organise society, plan the economy, run the towns, factories and farms. Our advocation is based on the proposition that the .Socialist-conscious working class, once they want to change society, are capable of establishing a Socialist system and running it without any orders from above. In other words, will run society without leaders, bosses, managers or any Party claiming to speak for them or represent "their interests". “Workers Management" means no more elitism!

Secondly, Solidarity is a democratic organisation of people united on certain basic beliefs. We have no "Party line” or “sacred texts”, so to try to lump us all with accepting the more obvious of Cardans faults is either a mistake due to misunderstanding of what Solidarity is, or a cheap way of scoring points.

Thirdly, to put down learning by experience as "claptrap" is to make the same wild generalisations as those who only believe in it. The relationship between experience and ideas is an ever-changing, dialectical one. in which either can alter the other. The worker’s experience within production, of having to act collectively, of “unofficially” regulating speed and amount of production so as to share out work and equalise wages, is such an experience that can produce Socialist ideas, as collective action and control are “fundamentally Socialist in content". After all, where do ideas conic from, not, as you point out yourselves, from the fresh air! But "can" produce Socialist ideas does not equal must. So our task is to spread Socialist ideas to the workers, ideas that correspond to their experience, ideas contributed as much as possible by workers themselves.

The last point explains why Solidarity mags have contained a lot of material on “strikes and other activities”, because these are workers’ activities, and we do believe workers should be able to read the truth about strikes and other anti-boss activities. However if any of your readers would like to buy a copy of North West Solidarity, they’ll find that it does cover more than strikes. If they do, they can get it from: Secretary. 96 Doveleys Road, Salford, 6. Lancs.

Paul A. Harris.

Bolton, Lancs.

REPLY: 

“Workers Management", as Paul Harris describes it here, does not seem to mean much different from what we understand by “democratic control" in our definition of Socialism as a society based on the common ownership and democratic control of the means of production by and in the interests of the whole community. If he only means that, on the basis of common ownership (and the consequent abolition of the wages system, money and buying and selling), free men and women will democratically manage their social affairs including work, then our only objection would be to his choice of words. The word “workers” would be inappropriate since, with common ownership, the working class as well as the capitalist class would have disappeared.

We must say, however, that we had always thought Solidarity to mean something different by this phrase, namely, that a committee elected by the workers should take over the functions (including discipline, fixing wage rates, hiring and firing, price policies) now exercised by managers appointed either by the shareholders or by the government. But, as long as there is production for the market, it will be competition that determines how a factory is run whether the decisions are made by capitalist owners or by a manager he appoints or by an elected workers’ council. It was because we had always thought that Solidarity accepted the continued existence, though maybe temporary, of the wages system (“equal wages”) and production for the market that we said that their "workers management” was “in no way incompatible with capitalist exploitation”. We will stand by this until Paul Harris tells us he accepts our proposition that, on the basis of common ownership, wages and money can be abolished immediately.

We are glad we are not alone in seeing Cardan’s more obvious faults.

What we meant by “‘earning by experience’ claptrap” was, as explained earlier in the article, the view that workers can only learn the futility of reformism or the limitations of trade unionism by their own personal experience. We pointed out that by far the greater part of what people knew came from being taught the experiences of others. Of course, strictly speaking this learning is also experience — but this would not be accepted by the school of thought we were criticizing.

There is enough evidence now, and has been for many years, that only Socialism is the solution to working class problems. The task of a Socialist party is to see that hearing or reading the Socialist case is part of workers’ experience. Hence the vital importance of Socialist propaganda, of spreading Socialist ideas. In fact the ideas set out in our own declaration of principles (that this is a class society, that there is a class struggle, that this can only be ended by conscious majority political action, that a socialist party must be opposed to all other parties) are drawn from the experience of the working class under capitalism.

We must say, however, that Paul Harris’ list of the kind of experience that can, with Socialist propaganda (an important concession on his part to our point of view), lead to Socialist understanding is a bit limited. It is not just experience of factory life (after all many workers do not work in factories), but of generally having to live on a wage or salary and all the problems which lack of money brings in housing, education, health, transport and the rest. It is their general social experience, rather than their narrow experience at the point of production, that can lead workers to Socialist understanding on hearing the Socialist case.

Those who think we might have Solidarity’s position wrong should buy Paul Harris’ magazine and find out for themselves. 

Editorial Committee

Dear Friends:

The March 1970 Socialist Standard deals with Solidarity and Paul Cardan in an article entitled “Listen Anarchist!” Since my own beliefs have been rather similar to yours for years and now tend to approximate Solidarity’s much more closely, I read the article with interest. Unfortunately, when a group makes “some advances in understanding and on a number of issues (comes) round to views pioneered by” you, as you so patronizingly put it, you seem to exhibit great hostility and defensiveness. An attitude of empathy and open-minded evaluation would seem to be more useful, particularly in the ease of Solidarity which has evidently gone through a period of careful re-examination and whose works exhibit considerable scholarship. They have predicted that they would be attacked as anarchists by Marxists and as Marxists by anarchists. You seem to have fulfilled your half of the prophecy a little too readily.

Much of your critique consists of setting up straw men by exaggerating stated positions and then demolishing them. For example, Cardan criticizes “Marxists” who revise Marx “at their convenience.” You then ignore the clause “at their convenience” and state that Cardan claims that it is wrong to amend a theory. You follow this by satirical remarks re heinous crimes and fiendish tricks. When Solidarity rejects the propagandists approach of the Socialist Party of Great Britain (your wholly educational technique without participation), you make the irrelevant remark that Solidarity and the SPGB are equally concerned with propaganda, “but its propaganda consists overwhelmingly of reports on strikes and other activities (other activities!, a charge that could be levelled against National Geographic magazine), whereas ours consists of posing an alternative form of society and explaining how it can be achieved.” Actually both Solidarity and the SPGB report on “strikes and other activities” although there are deferences on emphasis (and analysis), and both pose an alternative form of society. The real difference is that Solidarity does offer a plausible mechanism for achieving socialism where you rely essentially on pure education although no historic examples of the successful unaided use of this approach exist. Your penchant for exaggerating an opponent’s position shows up in your reference to the “ ‘learning by experience’ clap-trap.” The SPGB of course must feel that experience in the class struggle will cause the workers to give credence to a socialist programme unless it takes the incredible view that unaided SPGB propaganda alone will turn the trick. That Solidarity doesn’t really believe that “learning by experience" is the whole answer is shown first by its existence and second by such statements as, “Many French workers who lived through the events of 1936 are still alive. But how many of them today draw the same lesson from that experience as would a revolutionary organization?” (Cardan, Modern Capitalism and Revolution.)

Mere exaggeration cannot condone your fantastic allegation that the “workers management” programme for socialism “is in no way incompatible with Capitalist exploitation." "Workers Management” means the total participation and control by the people in the making of all decisions regarding production and other areas of life affecting their common interests. This programme specifically rejects hierarchical and leadership concepts. Your statement “that in terms of genuine human freedom, how work is managed is a side issue” represents a serious blind spot. Any form of coercion in production (or elsewhere), or division of the producers into order-takers and order-givers is obviously wholly antithetical to human freedom, and the workers ought to start thinking about it now and not after the revolution. The picture that could be drawn (hopefully unintended) from your remark here, is that socialist production could consist of “voluntary” producers operating without knowledge of or control over orders sent down from socialist bureaucrats belonging to some parliament which has been taken over by socialist ballot.

I am not a member of Solidarity and have no authority to speak officially on their behalf. However, their influence is growing here as well as in Britain and any serious attempt at refutation is going to require a much greater knowledge and much more serious analysis of their views than was demonstrated in your article.

Benson Perry, 

member, Socialist Committee of Correspondence 

(Philadelphia), U.S.A.

REPLY:
Most of the points Benson Perry raises have been covered in the previous reply to Paul Harris. So we will here spell out in more detail our own position.

The idea of Socialism as a solution to working class problems arises out of capitalism partly because it is the solution and partly because people’s experience of capitalism teaches them that it is. The role of a socialist party, at the present time, is to put socialist ideas before the working class to ensure that hearing the socialist ease is a part of their experience. This is our participation, as a party, in the class struggle. Later the socialist party will be the instrument which the working class can use to win power for Socialism and will disappear as soon as Socialism has been established.

Members of the Socialist Party, as workers, are engaged in the day-to-day struggle to live under capitalism. They could not avoid this even if they wanted to. In so far as this struggle is organised our members are active mainly in the trade unions but also in unofficial workers committees, tenants associations and students unions. The real difference between us and organisations like Solidarity is how we assess this day-to-day struggle. We see it as having the practical aim of protecting workers’ living and working conditions under capitalism. The effectiveness of this struggle, we might add, is limited not only by the economic workings of capitalism but also by the ideas of the workers involved (which is why the spread of socialist ideas, in which we are engaged, helps the day-to-day struggle). Solidarity, on the other hand, sees these struggles as “fundamentally socialist in content”. This we deny. The only struggle that warrants this description is the conscious political struggle for Socialism.

We also say that it is not the task of a socialist party to propose reforms of capitalism. In this way we avoid attracting the support of non-socialists and so being turned into a reformist party.

Finally, a word on management. Under capitalism production is not just a technical question; it is also a question of exploitation. Thus, in varying proportions, a manager’s function is partly technical and partly disciplinary (“order-giving”, as Benson Perry puts it). In socialist society production will just be a technical question; there will be no “discipline”. Work will be voluntary and democratically-controlled — though of course we cannot now give a blueprint of the way this will be done.

The division between “order-givers” and “order-takers” arises out of the capitalist exploitation of the workers through the wages system. This is why genuine democratic control of work demands the abolition of the market and working for wages. To retain these is to retain the same economic pressures on the workers even if exercised through a workers’ management committee rather than a capitalist-appointed manager. We throw out the same challenge to Benson Perry as to Paul Harris: Does he accept our proposition that, on the basis of the common ownership of the means of production, wages and money can be abolished immediately?

Editorial Committee.