Further Reflections on Crises (1957)

From the April 1957 issue of the Socialist Standard

Because the pattern of a particular crisis is influenced by the concrete circumstances of the time no crisis is merely a repetition of those which have preceded it. While there are elements common to all crises we cannot say in advance how these elements will interact in a specific situation or what is the relative strength of other factors associated with it. Consequently to understand all the relevant details of a particular crisis, we can only be wise after the event.

Nevertheless we can say that all crises are intimately connected with two fundamental features of the system, viz., “anarchy of production” and “disproportional industrial development.” These two features are again intimately bound up with each other.

By anarchy of production we do not infer economic chaos, on the contrary capitalism is a system ruled by laws and compulsions of its own. What is meant is that Capitalism is not a system consciously regulated by social aims. Capitalists do not meet beforehand to harmonise production in accordance with social ends. Capitalism being profit motivated production, capitalists invest in industry for no other motive and without regard for and little knowledge of other investments being carried out at the same time. But capitalist production is social production and the different branches of industry form an interlocking whole. It can be seen then that the different yet integrated industrial spheres, governed as they are by autonomous decisions being made simultaneously, there exists in the system an inherent bias towards uneven development between the various branches of industry. When this disproportionality reaches a certain level the possibility of a crisis emerges.

To put the matter concretely we can begin by saying that the market for any product is dependent on the volume of production in other spheres and therefore cannot be accurately gauged. Now if we assume that Capitalists in a particular industry have over-estimated the demands for their product and so produced more than the market can absorb at a remunerative price and if we take it that other industries have not similarly expanded, then it can be said that this particular industry has over-expanded relative to other industries, i.e. a disproportionality of industrial development has taken place.

This relative over-expansion of industry will, however, generate cumulative effects. Not only will the industry affected cut investment and hence production but in doing so it reduces its demands for commodities, including labour-power, to those industries linked to it. They in turn will cut their orders to other concerns and so on. As a result a widespread decline in production will occur.

If the initial over-expansion is big enough it may permeate the entire economy and precipitate a crisis. Large scale unemployment will appear, purchasing power suffer a sharp decline and surplus products will then begin to appear on the market as a matter of course.

It can be seen then that over-production in one branch of industry brings elements of over-production in other branches of industry, and by rupturing the conditions of equilibrium, initiates relative over-production, which is indistinguishable from general over-production. All crises then are crises of relative over-production. An industry can only over-expand in relation to other industries although the effect which this produces is, as has been already stated, indistinguishable from general over-production.

Crises, as Marx pointed out, do not arise through a lack of paying consumption of the mass of the population. They arise because disproportional development in one industrial sector leads to a curtailment of investment (and so production) which by upsetting the balance of the different industrial branches brings about a general slowing down of production. It is this disproportional development which starts the downward spiral of wages and employment with its corollary of shrinking purchasing power. The lack of paying consumption is then a consequence not a cause of crises.

To elucidate the point further we might add that the effect of a boom is to generate rising levels of purchasing power, and further that wage payments seem to increase more rapidly in the latter stages of the boom than at the beginning. But rising wages tend to reduce profit margins. Further, when an over expansion of one industrial sphere has been big enough to start a downward spiral of investment, and profits, there comes into existence a volume of capital investment too great to be consistent with former profit levels. As Marx says, “Since production depends on investment [such a situation] constitutes an over-production of capital which takes the form of an over-production of commodities.”

From the standpoint of the employers one of the prime factors for ending boom conditions is that wages are too high to make increasing investment desirable. Any return to a new stage of profitable investment depends then on labour-power becoming cheap enough to increase profit margins to the point which makes an expansion of production worthwhile.

A crisis is made possible in Capitalism not because the workers have too little purchasing power—in fact as already stated their purchasing power is at its height prior to the boom breaking—but because of the antagonistic class distribution of income inherent in a system of antagonistic class relations of production. Capitalists cut back investment because there is an unsatisfactory income distribution for them, in that profit margins are too small and wage levels too high. They are not concerned with some abstract purchasing power but in the concrete fact that the purchasing power in the form of wages is too high for the existing volume of capital to earn a given return.

To say, as under-consumptionists say, that crises are caused by too much of everything being produced is not in accordance with the facts. A crisis does not mean there is a total deficit of purchasing power unable to buy back an absolute over-production of consumers goods. The decline in purchasing power of the workers in a crisis situation is the outcome of an unfavourable distribution of income as the result of the system failing to expand proportionally and so bringing about elements of over-production in the various sectors of industry whose net effect is general over-production. It is this that originates a falling spiral of wages and employment and makes inevitable the appearance of market “surplus stock” in the shape of articles consumed by the working class. There is still, nevertheless, plenty of purchasing power in the pockets, holdings, banks, etc., of the Capitalists, to buy this surplus stock but of course they do not choose to spend their money that way.

Muddle-headed theorists have argued that crises could be assuaged and even cured, if at the first sign of a slump, the Capitalists went in for increased personal consumption, buying more Rolls Royces presumably and having nightly champagne parties. But it is forgotten, or is not known by these theorists, that boom or slump, the accumulation of capital i.e. the self-expansion of capital is still the basic urge of the Capitalists. At least the Capitalists are realists who know that they must husband their resources and even increase them as far as conditions permit, if they are to successfully ride the crest of the next boom wave. Like the workers they tighten their belt’s even though the belts are larger and the stomach more capacious. In more theoretical language it can be said that the primary motive of Capitalists is the expansion of exchange value not the production of immediate articles of consumption.

Marx himself took the view that the system in relation to human needs does not produce too much but too little. He held it to be a system of organised scarcity. In Vol. 3 of Capital he states, “It is not a fact that too much wealth is produced. But it is a fact that there is periodical over-production in its capitalistic and contradictory form.”

Which brings us to Mr. Strachey again. In the 1930’s he wrote a much hailed book, The Nature of Capitalist Crisis. Nowhere in it did he provide any coherent account of crises. One could detect, however, the over-tones of an under-consumptionist view of crises. Thus on (p. 248) we are told “that the essence of every capitalist crisis is that the population is unable to purchase the ever-growing quantity of consumers commodities which come pouring on to the market.” One page 289 he adds, “the under-consumptionists were not wrong in one sense but they were wrong in thinking that the payment of high wages was the solution to crises.” All of which shows the confused nature of Mr. Strachey’s thinking on the subject of crises.

What was more serious was his attempt to link what Marx termed the tendency of the law of the falling rate of profit to crises and to establish it as the crucial cause. It is true that Marx had listed a number of tendencies which worked in an opposite direction and Mr. Strachey dutifully enumerated them. But in The Nature of Capitalist Crisis he contended that ” they can check but not overcome the main downward tendency of the rate of profit.” P. 264).

This view that the tendency of the law of the falling rate of profit is the main agency for encompassing the downfall of capitalism can be briefly stated. It is held that the rate of profit falls in a continuous downward curve and finally reaches a point which provides no further impetus for capital accumulation, just as the steady drop in potential of a power source would reach a point where it could no longer supply a driving force to machinery.

Not only would the falling rate of profit as it reached a new low level precipitate a crisis but as a result each crisis would become more catastrophic. Bound up with this view is the belief of some ultimate breakdown of the system. This mechanistic and fatalistic view of capitalism was fashionable for years among Communist theorists and Mr. Strachey fashionably followed it.

Marx’s own formulation of the tendency of the falling rate of profit can be briefly enumerated, Marx divided capital outlay into two parts, one part he called constant capital, which consists of tools, machinery, etc. The other part he termed variable capital constitutes wage payments in order to buy labour-power and set it to productive activity. It is this active labour power which alone produces value and a value greater than its upkeep. It is thus the sole source of surplus value and hence profits.

Nevertheless, a marked trend of capitalism is the increasing mechanisation of the process of production. This means that as capital outlay grows, a proportionally greater amount will be spent on means of production than on wage bills. But as we have seen, variable capital provides the sole source of value and hence profit. It follows then that as capital grows and with it the ratio of constant capital to variable capital, then less value and profit is produced in a given unit of capital. And the rate of profit which is computed on the total capital outlay must fall.

We can illustrate this by assuming that a given capital outlay of £10,000 is divided into £5,000 constant and £5,000 variable and that the rate of exploitation is 100%. In that case the profit will be £5,000 and the rate of profit 50%. If, however, the capital grows to £30,000, of which £20,000 is laid out in constant capital and £10,000 in variable capital and the rate of exploitation is 100%, then the profit will be £10,000. Thus proportionately less value—and profit has been produced on the larger capital and the rate of profit has fallen from 50% to 33½ %

But Marx was quick to enumerate counter tendencies for keeping the rate of profit up. The main ones being, increasing productivity of labour due to the increasing efficiency of mechanisation. The cheapening of the elements of constant capital, resulting from increased productivity, which means that although the physical volume of constant capital increases, the value composition does not increase at the same rate. Then there is the existence of an industrial reserve army which acts as a reservoir of cheap labour-power and stimulates the setting up of new industries with a low ratio of constant to variable capital and hence a high rate of profit. The averaging in these higher profit rates with the lower profit rate of the older industries raises the overall rate of profit.

Thus the tendency of the rate of profit to fall is merely a tendency among counter tendencies. Marx’s own analysis of the matter gave no grounds for supposing which, if any, tendencies would prevail. Indeed for Marx to have advanced some economic law in abstraction to which capitalism must conform would have been contrary to his empirical method. For him such tendencies or counter tendencies could only be relevant to the concrete circumstances of any given stage of capitalism. It was left to Communist theorists and the facile Mr. Strachey to elevate this mere tendency to some law of social gravity.

In actual fact there is no direct evidence of some steady decline in the rate of profit over a long period. There are, of course, several profit rates in capitalism and a decline or drop in one of them is not necessarily a cause or even a factor for precipitating a crisis. And even if there did exist a tendency for the rate of profit to fall due to growth of the ratio of constant to variable capital, over a long period, it would be very slow and could not account for the sharp decline in profit levels and the widespread curtailment of investment associated with crises. Again the idea of what constitutes a profit norm for capitalists can undergo change and the norm of one period might be lower than the preceding one. Thus a lower rate of profit would constitute no disincentive for investment which is characteristic of a crisis situation. There is not the slightest reason for supposing that some alleged long term tendency of a falling rate of profit is organically connected with crises and ultimately the demise of capitalism. Such views are not propositions of Marx but projections of Communist politics.

Mr. Strachey in combating the false assumptions he once held, believes he is combating Marxism whereas it is the present Mr. Strachey quarrelling with the past Mr. Strachey without understanding what the quarrel is really all about.

We might add Mr. Strachey makes no reference in his latest book to his past errors. To these “errors” it seems we must also add, sins of commission and omission.

Ted Wilmott

Should We Join the Labour Party? (1957)

Editorial from the April 1957 issue of the Socialist Standard

When it was decided to form the Socialist Party of Great Britain fifty-three years ago those who made that decision did so against the advice of many individuals and groups that claimed to know a better way of getting Socialism—by joining the mass organisation, the Labour Party (known at that time as the Labour Representation Committee). The L.R.C. was, they frankly confessed, not a Socialist Party in any sense, only a trade union organisation formed to look after trade union interests in Parliament, linked up with a number of people anxious to push their pet schemes of social reform. All the more reason, our advisers said, why genuine Socialists should get inside where they would have a wide and receptive audience for Socialist propaganda. Some of those who said this did so with tongue in cheek—all they wanted was an excuse to further their careerist ambitions. Others could not preach Socialism in or out of the L.R.C. for they knew nothing about it. But there were some who meant what they said and tried to do what they promised. And for some time events gave the appearance of justification to their view. It was possible in those days to talk and write about Socialism within the ranks of the Labour Party and to argue the Socialist case with Labour supporters who were at least familiar with the works of the Socialist pioneers. They didn’t accept the Socialist case but they were aware what that case was. Their most plausible line was to argue that Socialism is the only worth-while aim but that, the workers being what they were, the only practical policy was the triple one of making capitalism better through reforms and through eradicating war; of introducing nationalisation as an administrative stepping stone to Socialism; and of preaching Socialist principles to raise the level of understanding among the workers.

They builded worse than they knew

And what has it all achieved apart from the carving out of dazzling careers for many Labour leaders? Has it raised the level of knowledge in Labour Party ranks? In a not-intended sense it has. In and around Labour Party headquarters and among the M.P.s there is now a vast accumulation of knowledge and experience. They know all about winning votes and influencing electors. They have an encyclopedic knowledge of some of the intricacies of government and administration. They can compare with the Tories in a grasp of the pros and cons of joining the European free trade area, they can discuss income tax and purchase tax with the experts, they can hold their own in the wire-pulling and double talk at United Nations, and have proved in a series of wars that they can organise destruction as to the manner born. In short they have passed their apprenticeship and become so statesmanlike as to be barely distinguishable from their opponents the Tories. But where, oh where is the Socialist influence that was to permeate the ranks of the Labour Party?

Where are the “Pinks” of yesteryear ?

The Daily Mail (8/3/57) had an editorial of a kind that is becoming more and more frequent in the capitalist Press. Its theme was that things are in a mess, that the features of the mess change but it is just as much a mess as that between the wars, that literally everything has been tried but without success, and nobody can understand just what is wrong and how to put it right.

Any Labour Party supporter will say that he is not a bit surprised that a Daily Mail journalist should write in this vein, but what has it to do with the Labour Party and Socialism? It has quite a lot to do with it. When the Daily Mail says that everything has been tried, forgetting that Socialism has never been tried, it does but echo what is written in the Daily Herald, Tribune, and other Labour journals. They are full of ingenious schemes for settling Capitalism’s problems but never on any occasion do they put the Socialist alternative to Capitalism or show a Socialist understanding of the nature of the problems.

Challenge to Labourites

And if any member of the Labour Party thinks this is not true let him meet the challenge and show us when he has seen the Socialist case in the columns of the Daily Herald or the other journals, or heard it on a Labour Party platform (except from an S.P.G.B. opponent of the Labour Party) or at a Labour Party Conference.

The Socialist case is not heard in Labour Party ranks and if it were the man who put it would be regarded as a crank or an oddity not to be taken seriously. Far from being influenced by Socialist propaganda inside its ranks the Labour Party has now forgotten what little it once knew. It cannot now even argue against Socialism for it does not know what Socialism is. It no longer possesses what was once its sole attractive quality, an aimless but enthusiastic spirit of revolt against the iniquities of Capitalism. It is now a highly organised political machine for handling the affairs of British capitalism in between Tory administrations.

We still receive the same advice, as was given to the S.P.G.B. when it was formed, “get inside and influence the Labour Party.” Then it was sufficiently plausible to merit argument; now it is a bad joke.

Crises, Catastrophe and Mr. Strachey (1957)

From the March 1957 issue of the Socialist Standard

Did Marx really believe that crises would be so catastrophic in their effects as to ensure the economic collapse of Capitalism? It is a convention of many of his critics and the so-called Marxist revisionists to say he did. None of them have ever given substance to their assertions with any worthwhile evidence.

It is true that the young Marx in Wage Labour and Capital (p. 45), spoke of “crises becoming more frequent and violent.” And again in the Communist Manifesto (p. 18), we are told—”Crises by their periodical return put the existence of bourgeois society on its trial and each time more threateningly.” But it is to Marx’s detailed and mature economic investigation to which we must turn in order to estimate what he thought was the nature and role of Capitalist crises. And here we find no specific reference or concrete indication of a view that some mounting crescendo of crises will ultimately crash to economic ruin.

In point of fact, Marx never formulated a theory of crises, at least not in any systematic or cohesive form. Instead we get a treatment of the different aspects of crises, scattered through the 2nd and 3rd volumes of Capital and Theories of Surplus Value. So far from Marx laying down any hard and fast rules on the subject of crises, we get instead an analysis of a number of tendencies which are bound up with the production of crisis situations.

It seems fairly safe to assume then that Marx in his later and mature investigation of the actual trends in Capitalism, never regarded crises as the agent of the final destruction of extant society. On the contrary there is no little evidence to indicate that he saw crises as a normal but essential phase of the trade cycle which, he said, was peculiar to the Capitalist mode of production.

Indeed it was no other than Marx who pioneered the investigation into the nature of the antithetical yet mutually reciprocal trade cycle. It was Marx who showed one phase of the trade cycle is characterised by an acceleration of capital investment and as a corollary to this an increased tempo of industrial activity, rising employment, rising wages and increasing profits.

Because the different branches of industry are atomistically controlled or to state it alternatively because “anarchy of production,” prevails in Capitalism, decisions for capital investment are carried out by Capitalists without knowledge or regard for investment decisions being made at the same time by other Capitalists elsewhere.

As a result of these autonomous and unrelated decisions to invest in a period of expansion, it is hardly surprising that over-expansion of a particular line of industry takes place or what comes to the same thing disproportionality of industrial development between the various branches of production. Thus one industrial sphere may have over-expanded relatively to other spheres and as a result it will be unable to sell its goods at a remunerative price. Consequently there will be in this particular sphere a contraction of investment and hence production. This action will have cumulative effects by leading to a reduction of demand of products and services of those industries which are linked with this particular industrial branch and which in turn will reduce their orders to other concerns likewise linked with them. If the initial over-expansion or disproportionality of industrial development is big enough a general fall in the demand for goods and services will spread from point to point and a general relative over-production will ensue.

Thus the phase of the business cycle associated with accelerating investment, rising wages, rising employment and increasing profits, will come to an end and be replaced by the antithetical phase of reduced investment, falling employment and declining wages and profits.

The orthodox economists also treat of what is termed in modern economic usage the business cycle theory. For them a period of brisk trade activity is linked with a high return on invested capital. While the antithetical phase i.e. a recession, is associated with a decline in the rate of profit below the normal range for investment purposes. Thus for them crises are analysed from the formal level of the supply and demand of investment funds. Marx, however, probed deeper and showed that the behaviour of the Capitalist class springs from the basic features of Capitalist society which constitute a particular set of antagonistic class relations of production and gives rise to an antagonistic form of income distribution. From the general standpoint of the Capitalist class a “recession” is the outcome of an unfavourable distribution of income in that the form of income going to the working class as wages, is too high and that part of income going to them as profits is too low, to make it worth their while to maintain a high level of investment.

If Capitalism could operate on some master plan then the correct proportional expansion between the different branches of industry might be attempted and investment decisions synchronised in respect of the entire economy. But Capitalism does not work like that. Each Capitalist or group of Capitalists produce for a market of whose size they have only an imperfect knowledge, let alone the entire network of markets operating in Capitalism. Hence whether too little or too much is produced cannot be known until after the event and it is only a major upset in the price mechanism which reveals that a number of unrelated and separate investment decisions have brought about a rupture of equilibrium conditions.

Crises are not as some theorists of underconsumption imagine the outcome of expanded production, outstripping total consumption demand, and so bringing about some permanent market decline.

It was never Marx’s view that crises arise as the result of a chronic bias towards over-production and an ever-increasing inability of the Capitalists to dispose of their products in a perpetually shrinking market. In Capital, Vol. 3 (p. 299), Marx, commenting on the upward swing of the trade cycle ends thus: “And in this way the cycle would run once more. One portion of capital which had been depreciated by the stagnation of its function would recover its old value. For the rest the same vicious cycle would be described once more in an expanded market and with increased productive forces.” 

From what has been said it is evident that Marx never viewed crises as an ineluctable agent for the ultimate destruction of existing society but as an antithetical but inseparable phase of the trade cycle.

In the light of the foregoing it would seem that periods of prosperity for the Capitalists i.e., periods of accelerating capital investment bring nemesis in the way of rising wages, rising costs, etc., which sooner or later tend to appreciably diminish profit margins. Crises would then seem the specific remedy for the evils arising from “prosperity.” Stated from the more fundamental standpoint of Marx’s analysis, these evils are “a production of too many means of production and necessities of life to serve as a means of exploitation of the labourer at a certain rate of profit.”

Nevertheless if crises can be looked upon from one point of view as a retribution for prosperity they can also be regarded as acting as a purgative to the body economic, allowing it to be restored to the healthier state of equilibrium. To put the matter specifically, crises contain the germ of a trade recovery. In the first place the existence of a large industrial reserve army will serve to cheapen the price of labour-power and so raise the rate of profit and because of the cheapness of labour-power, tend to retard the introduction of machinery and new methods and so make possible the more primitive technical concerns to become profitable once more. At the same time the sharp depreciation of capital values will lower the organic composition of capital, i.e. lower the ratio of constant capital (means of production) to variable capital (wage payments) and so assist in raising the rate of profit. Again during a crisis there are cheap and abundant resources available, including large reserves of labour-power. Thus the conditions are prepared in a shorter or longer period, for a resumption of increased investment and rising profit margins.

Crises are not then incidental interludes between periods of high trade activity but an essential corrective for the uninhibited self-expansion of capital. As Marx states it: “Periodically the conflict of antagonistic agencies seek vent in crises. The crises are always but momentary and forcible solutions of the existing contradictions, violent eruptions which restore the disturbed equilibrium for a while.” (Capital, Vol. 3, p. 292).

To say then that Marx tied up his views on crises with an automatic breakdown theory is either to misunderstand or misrepresent him. While it is true that crises subject Capitalism to stresses and strains, to suggest that they will bring about the social and physical collapse of the system is something quite different. Marx so far as the present writer is aware never used the term “economic collapse of Capitalism.”

For Marx, however, crises were a significant part of the dynamics of Capitalism and he regarded his own treatment of them as an important contribution to the understanding of the system. He saw them as not only an outcome of antagonistic agencies but as a means of resolving the conflict in a new equilibrium. The crisis plays then a definite role in influencing the long term trends of the system.

Capitalism may thus be described as a system of unstable equilibrium. Which brings us to Mr. Strachey, who states in Contemporary Capitalism (p. 218) that “Marx regarded the instabilities of Capitalism as a secondary matter and did not expect them to prove fatal to the system.” But in that case the economic collapse theory which Mr. Strachey accuses Marx of holding, cannot be explained from Marx’s theory of the production cycle of Capitalism. Marx, says Mr. Strachey, formulated something different. Marx’s view of economic collapse is deduced from Marx’s contention, according to Mr. Strachey, that Capitalism undergoes a continuous process of mass under-consumption and thus an ever-increasing inability of Capitalists to dispose of their products in an ever-decreasing market. Intense mass poverty would result, the workers would revolt and Capitalism would perish.

We are asked to believe, minus any evidence, that Marx gave up his formulation of the trade cycle concept and substituted a view of permanent stagnation, i.e. of falling wages profits and investment, and ever increasing massive unemployment. Thus the system would run down like a clock. Crises would no longer play an active part; no new equilibrium could be established; capital accumulation would go on contracting and the basic feature of Capitalism, the self-expansion of capital would atrophy. Both employers and workers would become ever poorer, even if at different levels. Mr. Strachey, consistent in his confusion, would have us believe nevertheless that Marx thought that in all this process the Capitalists would in some way grow ever richer.

Mr. Strachey, however, flatly contradicts himself in the same paragraph by stating that the instabilities of the system and Marx’s alleged under-consumption views of crises are in some way clearly related. He adds lamely, “but Marx never fully elucidated the connection between them.” Marx did, of course, fully elucidate the connection between the instabilities of Capitalism and the emergence of crises. Mr. Strachey has never fully understood this connection, even though he wrote a book called The Nature of Capitalist Crisis. When Marx in the preface of Capital presupposed a reader willing to think for himself, he was perhaps a little optimistic. But a person who can state on one page that Marx regarded the instabilities of the system as secondary and then on the previous page aver that “Marx and Engels lived in the confident expectation that each crisis would be the system’s last” i.e. fatal, is incorrigible.

Marx never constructed a catastrophic theory of crises. Nor did he say, as Mr. Strachey avers, that crises are due to the inability of the workers to buy back what they have produced. Although Mr. Strachey was posing as a Marxist, he put this view forward in the name of Marx. Nevertheless Marx repudiated Rodbertus’ view that crises were caused by a lack of paying consumption and could be remedied by highering wages. Marx also showed that it was “high wages” which constituted a factor for producing a crisis and a plentiful supply of cheap labour-power as a factor for initiating a boom.

Mr. Strachey, however, is not really an economist. He is a politician trying to explain the errors and illusions of the past but in fact only explaining them away. It becomes necessary therefore to set up a lot of false assumptions and with great gusto, knock ’em down. Like most politicians, he has a favourite aunt called Sally.

Ted Wilmott

Marx, Malthus and Mr. Strachey (1957)

From the February 1957 issue of the Socialist Standard

Mr. Strachey in his book Contemporary Capitalism (pp. 88, 89), says, “Marx in spite of his dislike for Malthus and all his theories agreed that a rapidly rising population would help to depress the standard of life of the wage worker.” Natural fertility would always be increasing the number of workers competing for jobs and this would be further augmented by the displacement of workers by continuous mechanisation. Mr. Strachey asserts that not only did Marx say this but he also went on to deduce from it that a labour shortage could never arise. Moreover because or the ever-increasing deadweight of unwanted workers on the labour market, wages would not only be forced down to a bare subsistence level but even increasingly below it. Thus as the result of capital accumulation the mass of the population would come to exist on a semi-starvation diet insufficient for the replacement of their working energies.

Mr. Strachey offers nothing to support these astonishing statements. He merely tells us airily that it can all be found in “the central chapters of Vol. I. of Capital.” But where we are to look for actual quotations or specific references for Mr. Strachey’s claims, God alone knows and Mr. Strachey presumably shares the secret with him.

Our advice to Mr. Strachey is first catch your facts before you cook them. Perhaps a quotation from one of the central chapters in Vol. I. of Capital will show that Mr. Strachey can economise truth as well as evidence. In Vol. I. of Capital (p. 626, Swan Sonnenchein edition), Marx states: —

  “The requirements of accumulating capital may exceed the increase of labour-power or of the number of labourers; the demand for labourers may exceed the supply. This must ultimately be the case if the conditions supposed above continue. For since in each year more labourers are employed than in its predecessor, sooner or later a point must be reached at which the requirements of accumulation begin to surpass the customary supply of labour and therefore a rise of wages takes place.”

The challenge to Mr. Strachey is to show us where in Marx’s economic analysis of Capitalism his conclusions pointed to the depressing of wages to the barest physical level, as the outcome of capital accumulation. So far from that being true, Marx in a detailed analysis in one of the central chapters in Vol. I. of Capital, viz., “Capital Accumulation,” shows the tendency for wages to rise under the impact of accumulation. Nevertheless Marx also pointed out that the defensive mechanism of Capitalism is such as to prevent rising wages from absorbing the whole of profits.

In the first place capital accumulation tends to slacken off appreciably should there occur a sharp threat to profit margins—and rising wage levels can constitute such a threat.

Secondly a typical reaction to advancing wages is the substitution of mechanical power for labour power. The net effect of each concern in its efforts to reduce “labour costs,” will, by freeing workers, bring into being an industrial reserve army or as Marx alternatively calls it “relative over-population ” which by its active competition on the labour market, exerts a downward pressure on wage levels.

The Factors Affecting Wages

The impulse for wages to rise under the stimulus of expanding capital accumulation produces in turn a counter tendency for them to fall. It is this profit motivated expansion and contraction of capital accumulation with its expansion and contraction of the industrial reserve army which constitutes the regulating principle in determining the upper and lower limits of wage levels.

Marx’s solution to the way Capitalism deals with the threat of rising wage levels can be stated in his own words, Capital, Vol. I. (p. 653, Swan Sonnenchein Ed.).

  “The industrial reserve army during the period of stagnation and average prosperity weigh down the active labour army; during the periods of over-production it holds its pretensions in check. Relative surplus population is therefore the pivot upon which the law of demand and supply of labour works. It confines the field of action of this law within the limits absolutely convenient to the activity of exploitation and to the domination of capital.”

Marx’s concept of relative over-population does not rest then on the assumptions of any particular population theory. It is valid whether we are dealing with a rising population, a stationary population, or even a relatively declining one.

If, for instance, we examine a particular country where capital accumulation has historically got under way, we find that an increased working population is one of its necessary adjuncts. In the genesis of capital accumulation the labour force necessary for its expansion is historically recruited by means of land expropriation, the ruin of domestic industry and the elimination of the independent craftsman. Even so this may be inadequate for its needs and in that case an intensive and extensive recruitment for additional labour supplies may be resorted to both inside and outside the national area.

On the other hand in a country where economic development is retarded and capital accumulation lags as a result, although the population may be stationary or even relatively declining, there may be considerable unemployment i.e. relative over-population.

It can be seen then that the Malthusian theory of over-population affords no clue to the emergence of an industrial reserve army in Capitalism.

It might also be mentioned as a point of interest that the growth of capital accumulation in the latter half of the 19th century gave rise to labour shortages in various sections of industry. Moreover large bodies of workers were now organised in strong trade unions and were prepared to make the most of the conditions. Thus in place of flexibility certain rigidities were appearing on the labour market.

The Capitalist answer to this less easy situation in the labour market was more extensive mechanisation and the effect of this is redundancy of workers and the net result an increase in labour supply with its tendency to depress wages.

Through such economic agencies did Capitalism maintain, perpetuate and at times multiply relative over-population and this was going on when a relative decline in fertility rates was taking place, for it was round about the 1870’s that there began marked decline in population trends in the most advanced western countries. Thus the emergence and maintenance of an industrial reserve army, is a phenomenon of Capitalist society irrespective of changes in population trends and contrary to the foolish assertions of Mr. Strachey.

The Changing Composition of Capital

Now what Marx did point out was something quite different from Mr. Strachey’s interpretation of what he said. What Marx actually did say was that the concentration and growth of capital accumulation had certain consequences which affected the lot of the working class and expressed itself in what he termed the changing character of the composition of capital.

If, said Marx, we examine the total outlay of capital, we shall find that the part spent on the means of production i.e. plant, tools, buildings, etc., and called by him “constant capital,” tends to increase relatively to the part spent on wage payments or what he termed “variable capital.” Now seeing that the demand for labour-power is determined not by the total capital outlay of investment but by the variable part of it alone, then although the demand for labour-power increases absolutely, as total capital expenditure increases, the demand falls relatively to the magnitude of the total capital outlay.

Stated as a general theoretical proposition it is this process of capital accumulation as stated above which, as the history of Capitalism shows, has produced relative over-population, or as Marx states, “a population of greater extent than suffices for the average needs of the self-expansion of capital.”

Marx rejected Malthus in toto. “An abstract of law of population,” he said, “exists for plants and animals only, and only in so far as man has not interfered with them.” (Capital Vol. I., p. 645). He also referred to Malthus’s theory as the dogma of the economist and a libel on the human race. Marx categorically denied that population factors were in any way responsible for mass unemployment and poverty.

Rejecting eternal laws of population supposedly applicable to all societies, Marx formulated the proposition that every stage of historical development had its own laws of population. It was not merely that Marx asserted it but he set out to demonstrate it by a detailed investigation of the law of motion of Capitalist society. He was thus able to formulate a law of population peculiar to Capitalism, a law which fitted the facts of the contemporary situation in a way which the eternal laws of Malthus could not do.

The “Iron Law of Wages”

When, therefore, Mr. Strachey asserts that Marx accepted Lassalle’s iron law of wages (Contemporary Capitalism, p. 105), but for politically tactical reasons appeared to oppose it, one realises just how disingenuous Mr. Strachey can be.

In case anybody might be deceived by the pseudo-learned sophistry of Mr. Strachey, let us state that Lassalle took his concept of the iron law of wages from Malthus and Ricardo, not from Marx. In the Critique of the Gotha Programme, Marx repudiated in all its forms, the iron law of wages. He said, “If excess of population is the cause of poverty then Socialism can not abolish poverty which has its basis in nature.” For Marx poverty and mass unemployment in Capitalism cannot be explained wholly or in part as due to an increase in natural fertility rates.

Engels in a letter to Bebel (March, 1875) said categorically that Lassalle’s iron law of wages was “a false statement with a false basis.” He also said “Marx proved in detail in Capital that the laws regulating wages are very complicated  . . . they are in no sense iron but on the contrary very elastic.” Evidently Engels was unable to find in “these central chapters of Capital,” what Mr. Strachey found there.

Nothing exhibits Mr. Strachey’s obfuscation of Marx more than his assertion that if Marx had only diagnosed a tendency towards ever-increasing poverty and final economic collapse instead of making it the automatic outcome of the workings of Capitalism, he would have been justified instead of being falsified. This, itself, is a falsification of Marx’s views which is either due to sheer ineptitude or the bad intent of the apologetic.

The Automatic Breakdown of Capitalism

Marx’s economic analysis never indicates some automatic breakdown of Capitalism. Nor even a tendency towards that end. Thus Mr. Strachey accuses Marx of something he never said, then reproaches him for not saying what Mr. Strachey thinks he ought to have said. Again not only has Mr. Strachey confused notions in seeing in the system a tendency towards greater poverty and collapse, but he reproaches Marx for not sharing his confusion.

Mr. Strachey then blandly assures us that although such a tendency inheres in Capitalism the Labour Movement has overruled this tendency. Mr. Strachey makes central to the Labour Movement the franchise, social reforms and trade unions, whereas in actual fact they are the outcome of the development of Capitalism itself. Such things are not the counter-balance of the Labour Party against some non-existent tendency but an aspect of the normal regularisation necessary to an exploitative system.

Theoretically Mr. Strachey sees the possibilities of this inherent tendency to breakdown producing on a greater scale, slumps, lowered standards of living, etc., but believes that the Labour Party will so manage and regulate Capitalism as to confer on it all the advantages of Socialism. Lord Keynes has made all this possible. Mr. Strachey is, of course, a great admirer of Keynes, whose sole claim to economic originality was to plagiarise Malthus’s doctrine of effective demand.

But this is another story and here we must take leave of Mr. Strachey and Malthus—both in their different ways, shallow and false prophets.

Ted Wilmott

Poverty or Misery? (1957)

From the January 1957 issue of the Socialist Standard

In his book Contemporary Capitalism, Mr. Strachey echoes Bernstein in asserting that Marx held that the economic laws of Capitalism are such as to not only keep the standard of living of the working class down to a bare subsistence level but owing to the downward pressure which these “laws” exert, force this subsistence level even lower. This leads Marx to conclude, says Mr. Strachey again echoing Bernstein, that vast overproduction, leading to a final economic collapse and violent revolution would inevitably follow. Like Bernstein Mr. Strachey never offers to really explain what these laws are, nor how they are supposed to operate.

Mr. Strachey hangs his misrepresentation of Marx on the slender thread of two quotations of a few lines and isolated from the context in which they occur. The first is from the Communist Manifesto. It reads: “The modern labourer . . . instead of rising with the progress of industry, sinks deeper and deeper below the conditions of existence of his own class. He becomes a pauper and pauperism develops more rapidly than population and wealth.”

But the Manifesto was largely a propagandist pamphlet written in highly generalised and scathing language, hardly the place a cull a few lines from as crucial proof of what Mr. Strachey deems the heart of Marxism, i.e., ever worsening poverty for the mass and ultimate economic collapse. Surely on “so vital a matter” Mr. Strachey had the whole of Marx’s detailed analysis from which to chose but he would not have found there what he so obviously wanted to find.

Actually what Marx and Engels were pointing out in the last but one paragraph in section one of the Manifesto from which Mr. Strachey quotes was that the industrial progress of Capitalism not only places the worker in economic jeopardy but one of its consequences is to deprive him of a livelihood and so compel him to live beneath the conditions of existence of his own class and as they add “instead of feeding the bourgeoisie he has to be fed by them.”

According to Mr. Strachey’s interpretation of this, Marx envisaged the end product of Capitalist development as the conversion of the mass of producers of surplus value, into idle consumers of surplus products that is if in such a state of affairs there was anything left to consume. Mr. Strachey cannot of course point to anything in Marx’s economic analysis of Capitalism which remotely suggests such a conclusion.

Marx in fact never speaks of a law of absolute poverty, nor does he make the growth of poverty a necessary outcome of Capitalist development. For Marx poverty is not something absolute and physical but something relative and social. That Marx left no room for doubt on this matter is seen in a work written incidentally before the Manifesto, Wage Labour and Capital. On (p 33) he states:

  “A house may be large or small; as long as the neighbouring houses are likewise small it satisfies all social requirements. But let there arise next to the little house, a palace and the little house shrinks to a hut. The little house now makes it clear that its inmate has no social position to maintain or but a very insignificant one; and however high it may shoot up in the course of civilisation, if the neighbouring palace rises in equal or greater measure the occupant of the relatively little house will always find himself more uncomfortable, more dissatisfied, more cramped within his four walls.”

For Marx the social conditions of one class cannot be determined except by reference to some other class or classes. Thus he declares, “our wants and pleasures are measured in relation to society, not in the objects which serve their gratification.” In answer to the assertions in Mr. Strachey’s book (p. 101) that Marx held that Capitalism condemns the working class to a perpetual lowering of wages, Marx replies on (p. 33) in Wage Labour and Capital, by stating, that a rapid growth of productive capital involves an appreciable rise in wages. That he does not consider poverty an essential condition for Socialism is made quite clear on p. 39 of the same pamphlet when he declares, “the most rapid growth of capital however much it may improve the material life of the worker, does not abolish the antagonism between his interests and the interests of the Capitalist.”

To Mr. Strachey’s unwarrantable assertion that Marx believed in an iron or fixed law of wages, Marx in the work, Value, Price and Profit, says, “the value of labour (power) itself is not a fixed but a variable magnitude, even supposing the value of all other commodities to remain the same.”

On pages 87 and 88 of the same work, Marx, treating of the struggle between Capitalists and workers over the division of social wealth, states, although we can determine the minimum of wages i.e. the essentials necessary to maintain the worker physically, we cannot fix their maximum. The struggle between employers seeking to gain the greatest possible profit and workers striving for the highest possible wages, resolves itself, says Marx, “into a question of the respective powers of the combatants.”

To Mr. Strachey’s assertion that Marx held that workers’ wages represent bare subsistence, or to put alternatively are the cost of mere replacement of physical energies used up in the productive process, Mr. Strachey, if he cares to read Capital (p. 631), will find Marx stating the working class “can extend the circle of their enjoyments, can make some additions to their consumption fund of clothes, furniture, etc., and can lay by small reserve funds of money. But just as little do better clothes, food and a larger peculium do away with the exploitation of the slave, so little do they set aside that of the wage worker.”

Marx then made it crystal clear that the value of labour-power is determined by two elements; one merely physical and the other he calls, historical and moral. By the latter he meant that in different periods and in different countries—even in different localities, there is a traditional standard of life which workers feel is indispensable to their existence. Hence any attempt to lower it will provoke the strongest resistance. Thus, when workers combine in trade unions to maintain or increase wages, they are not fighting hopelessly against some iron law of wages, which must assert itself in the long run but are expressing the historical and moral element involved in the value of labour-power and so helping “to mould the traditional standards of the future.” Marx was aware of the tendency of wages to rise under the impact of capital accumulation. He certainly never believed, however, that wage increases would absorb the whole of profits, never reach a point “where the system itself is threatened.” (Capital, p. 632).

On the other hand, said Marx, there are tendencies in Capitalism which set up a strong counter resistance to rising wages. These tendencies include, the substitution of mechanical power for labour power, the recurring crises of the system and to a lesser degree the export of capital to places where cheaper sources of labour power are available. Thus increased unemployment will lead to increased competition for jobs and downward pressures on existing wage levels. While Marx believed that trade unions could have a retarding effect on these tendencies, he did not believe they could reverse their direction. (Value, Price and Profit, p. 93).

When Marx speaks in the same pamphlet (p. 92) of the general tendency in Capitalism to sink rather than raise wages it can be seen from the foregoing that such a tendency is a marked feature of Capitalism and inseparable from a wages system.

Marx, however, in spite of Mr. Strachey’s profound misunderstanding on the matter, never equates these tendencies to the totality of Capitalist social relations. Marx true to his own historic standpoint, reveals the powerful refracting effects on these tendencies by the social factor of the class struggle. For Marx there are no laws of motion of Capitalist society existing in isolation, there are only laws of motion as modified by human beings. Mr. Strachey not understanding this, does not understand the historical method of Marx.

Which brings us to Mr. Strachey’s other quotation, making a grand total of two. This quotation is from the Eden and Cedar Paul translation of Capital. Because Mr. Strachey has made his central point an assertion that Marx believed in some process of a growth of absolute poverty, he has good reasons for using this particular translation rather than the fourth German edition, translated by Samuel Moore and edited by Frederick Engels. In this last-named edition the quotation given by Mr. Strachey is: “Along with the constantly diminishing number of the magnates of capital who usurp and monopolise all advantages of this process of transformation, grows the mass of misery, slavery, degradation, exploitation . . .” (Capital, p. 789 Swan Sonnenchein edition). In the Eden and Cedar Paul translation the word “misery” is altered to poverty. One might also point out that in this same edition, several words are arbitrarily and erroneously changed. The word misery it might also be mentioned is used in the Kerr edition and in the Allen and Unwin edition translated by Dona Torr. This edition was highly praised by Mr. Strachey himself. Also in Value, Price and Profit (p. 93) Marx speaks of the miseries imposed by Capitalism not the poverty, etc.

It may also be noted that the quotation given by Mr. Strachey is merely the briefest of passing references on the subject of Marx. One wonders why Mr. Strachey didn’t quote from Capital (p. 661, Swan Sonnenchein edition) where Marx clearly and explicitly states what he means by misery. But then Mr. Strachey would not have been able to prove what he wanted to prove.

Dealing with the effects of capital accumulation on the working class, Marx states:

  “They mutilate the labourer into a fragment of a man, degrade him to the level of the appendage of a machines destroy every remnant of charm in his work and turn it into a hateful toil; they estrange him from the intellectual potentialities of the labour-process in the same proportion as science is incorporated in it as an independent power. … It follows therefore in proportion as capital accumulates the lot of labourer, be his wages high or low, must grow worse. It establishes an accumulation of misery corresponding with the accumulation of capital. Accumulation of wealth at one pole is, therefore, accumulation of misery, agony, toil, slavery, ignorance, brutality, mental degradation at the opposite pole.” (Italics ours.)

Marx then does not relate misery to the sum of wages a worker gets but to the social conditions of his existence. Engels in a letter to Bebel (March 1875) rebukes those people who falsify Marx by stating he believed in an iron law of wages. Engels also says that “Marx showed in Capital that the laws regulating wages are very complicated . . . they are in no sense iron but very elastic.”

Mr. Strachey did not always accept the view that Marx equated the value of labour power with a bare subsistence level, or the mere physical replacement of working energies. In his book, The Nature of Capitalist Crisis (p. 197) he associated himself with the following: “the value of labour-power is the sum of commodities, necessary to keep the worker in health and strength and enable him to keep his children in equal health and strength and technical ability.” Neither are we given the slightest hint in that work of one of the central assertions which Mr. Strachey makes in his latest book which is that Marx held that such would be the level of poverty of the workers that they would be unable to efficiently perform their working tasks.

Must we conclude that when Mr. Strachey was a “Marxist” he did not really understand Marxism and only understands it now he isn’t? Or could it be truly said that he has never really understood Marxism at any time?

Ted Wilmott

(In the next issue we shall deal with Mr. Strachey’s fantastic assertion that Marx was at bottom a Malthusian)

The Labour Party and the Suez Canal (1957)

From the January 1957 issue of the Socialist Standard

In view of the attitude taken up by the Labour Party in the Suez dispute it is worthwhile casting the mind back to the attitude of Labour Governments in 1924 and 1929 on this matter. 

The Labour Magazine for August, 1929, under the heading “Labour and Egypt,” contains the following quotation from a dispatch sent by Ramsay McDonald in 1924, as Labour Foreign Secretary:

 “No British Government in the light of these experiences (meaning the war) can divest itself wholly even in favour of an ally, of its interest in guarding such a vital link in British negotiations (meaning, of course, the Suez Canal). Such a security must be a feature of any agreement come to between the two Governments, and I see no reason why accommodation is impossible, given goodwill. The effective co-operation of Great Britain and Egypt in protecting these negotiations, might, in my view, have been ensured by a treaty of close alliance. The presence of a British force in Egypt provided for by such a treaty, freely entered into by both parties on an equal footing, would in no way be incompatible with Egyptian independence. Whilst it would be an indication of the special close and intimate relations between the two countries, and their determination to co-operate in a matter of vital concern to both. It is not the wish of His Majesty’s Government that the force should in any way interfere with the functions of the Egyptian Government or encroach upon Egyptian sovereignty, and I emphatically said so.” (Pages 176-177.)

It will be noticed that this outlook is much the same as that put forward by the present Tory Government. However, negotiations fell through but the problem came up again during Labour’s 1929-1930 period of office. The Labour Magazine for September, 1929, contains the proposals made to Egypt by Henderson, the Labour Foreign Minister. Here is an extract from these proposals:

  “An undertaking on the part of Egypt that if she requires military instructors these shall be British; when the British military forces now in Egypt are removed and certain British forces are permitted by Egypt to be maintained on Egyptian territory in the vicinity of the Suez Canal for the protection of that waterway, the presence of these forces is not to prejudice in any way the sovereign rights of Egypt; an undertaking that the Egyptian Government will, as a rule, when engaging the services of foreign officials, engage British subjects” (page 211)

The summary of the proposals concludes with the following:

 “modification of any treaty based on the proposals to be admissible only after the treaty has been in force for a period of 25 years.”

The article adds that Mr. Henderson said that these proposals are “the extreme limit to which the Government is prepared to go.”

Thus the Labour Governments of 1924 and 1929 wanted British forces to remain on Egyptian territory to safeguard the Suez Canal, and the 1929 treaty was to secure that this was so for the following 25 years—and it also included only British military instructors and British officials! What are the “sovereign rights” of a country in the eyes of Imperialists?

The November, 1929 issue of the Labour Magazine had an article on “The Labour Government’s offer to Egypt” containing a typical piece of Imperialist hypocrisy:

  “Later, in the detailed working out of the proposals, we find that, while the occupation of Egypt is to end, the occupation of the banks of the Suez Canal is to continue. The Canal is indisputably Egyptian territory In fact, however, Egypt sees little, and thinks, less of it The Canal is in Egypt, but not of Egypt. The Egyptian life in the main goes on unheeding of the vast international traffic that traverses the waterway from the Red Sea to the Mediterranean. The grip of a country’s capital by foreign troops is one thing; the policing of a vastly important international highway is quite another. The former makes a mockery of national independence; the other—except on doctrinaire grounds—has but little relevancy to the question of national independence” (pages 303-304).

You see it all depends upon whether you look at the question from the point of view of Egyptian nationalism or British Imperialism. The Egyptians contend that as the canal is in Egypt it is in Egypt and consequently they have been trying to kick the British out since 1880. We have been taught that the Thames is an International highway, but if the Egyptians suggested sending a force here to protect it we very much doubt if the Labour Party would argue that the Thames is in England but not of England.

Finally, puzzle; find the difference between the outlook of the Labour and the Tory parties on the Suez Canal question; or, alternatively, which is the greatest humbug.

Gilmac.

Iran: again in the crosshairs (2019)

John Bolton

From the World Socialist Party of the United States website

An American war against Iran has appeared imminent on previous occasions. Eleven years ago we saw similar military and political preparations for a US attack on that country. Fortunately, it never came. Now Iran is again in the crosshairs. War may again be avoided. However, even establishment analysts acknowledge that the confrontation in and around the Persian Gulf could easily cross the line into war as a result of misunderstanding or miscalculation (for instance: vox.com, May 20).  

President Trump says that he does not want war. But even if he does not want war there are men in his entourage who do – above all, his national security adviser John Bolton. The proximity of these hawks to the president is dangerous because, as former insiders have revealed, Trump is much influenced by the last person with whom he happens to have spoken. Simon Tisdall, foreign affairs commentator for the British Guardian, exaggerates only slightly when he writes that the hawks ‘run foreign policy while the president tweets and plays golf’ (May 9). 

One highly provocative move was the deployment to the Gulf in early May of the aircraft carrier USS Abraham Lincoln. This enormous vessel, in its current location close to the Iranian coast, is very vulnerable: a single Iranian missile could sink it. Once Iranian leaders conclude that an American attack can no longer be averted, they will surely prefer to sink it before rather than after its planes take off to bomb targets in Iran. Perhaps it is even the intention of the hawks in the Trump Administration to have the USS Abraham Lincoln play the role of sitting duck in order to furnish a suitably impressive casus belli (justification for war).   

What are the underlying causes of the conflict between the United States and Iran? What is it really about? But first – a few things that it is not about. 

What it is not about

In the past the most prominent source of tension between Iran and the United States was the possibility of Iran producing nuclear weapons. Trump’s withdrawal from the nuclear agreement of 2015, under which Iran accepted constraints on its nuclear power program that would have barred nuclear weapons development, suggests that this is no longer the crucial concern for the US (if indeed it ever was).

Nor does the conflict with Iran have anything to do with terrorism. The main source of support for Islamist terrorism is Saudi Arabia. The operations on 9/11 were conducted mainly by Saudi nationals under the direct supervision of Prince Bandar bin Sultan, Saudi ambassador to the US. And yet Saudi Arabia is still regarded as a US ally. Counter-terrorism is a lower-order priority for US foreign policy.

Nor does the conflict with Iran have anything to do with human rights violations or persecution of religious minorities or the defense of ‘Western values.’ Again, the human rights situation is at least as bad in Saudi Arabia as it is in Iran.  

What it is about

One thing that the conflict is about is control over regional resources. The US seeks to restore and maintain control over the hydrocarbon resources of the Middle East, a region that contains 55% of the world’s oil and 40% of its natural gas.

The occupation of Iraq was a big step toward this goal. The petroleum law that the US imposed on Iraq gave foreign companies direct control of its oilfields through ‘production sharing agreements.’ Iran, with 10% of world oil and 16% of world gas, is the main remaining obstacle to US control over the resources of the Middle East.

Control over oil has various aspects. One is control over price – gaining leverage to ensure the continued flow of cheap oil to the American economy. Another is control over who buys the oil. The country that buys the most oil from Iran is now China – a fact that upsets American strategists for whom China is a rival for world power and a potential adversary. 

Arguably, however, the most important issue is which currency is used to price and sell oil. As the position of the dollar in relation to other currencies weakens, the dollar is ceasing to function as the world’s main reserve currency. Countries are shifting their foreign exchange reserves away from dollar assets toward assets denominated in other currencies, especially the euro. 

Similarly, oil producers increasingly prefer not to be paid in dollars for their oil. In late 2006 China began paying for Iranian oil in euros, while in September 2007 Japan’s Nippon Oil agreed to pay for Iranian oil in yen. Continuation of this trend will flood the US economy with petrodollars, fueling inflation and further weakening the dollar. It is feared that the result will be a deep recession.

Occupying oil-producing countries may seem like an obvious way to buck the trend, although the effect can only be temporary. In 2000 Iraq began selling oil for euros; subsequently it converted its reserves to euros. Since the US invasion it has gone back to using dollars. This too may be a motive for attacking Iran.

US concern with Iran also arises from the shifting geopolitical map. 

The collapse of the Soviet Union enabled the US to establish a temporary global predominance, though at the cost of huge military expenditures that exceed those of all other countries combined. Like the dominant position of the dollar, this cannot last much longer in view of the progressive economic decline of the US.

The geopolitical map of the world has begun to shift, and Iran occupies a central place in this process. The framework of a potential anti-US axis exists in the shape of the Shanghai Cooperation Organization, which brings together Russia, China, and post-Soviet Central Asia. American strategists fear further consolidation and militarization of the SCO and its expansion to draw in other major Asian states – first of all, Iran, which already has close ties with both Russia and China. Attacking Iran may be seen as a way to avert a threat to US predominance.

Above all, American strategists seek to deprive Iran of its status as a regional power in West Asia. That means halting Iran’s development of ballistic (i.e., long-range) missiles, even armed with conventional warheads. It also means ending Iran’s support for political and military forces in other countries of the region – the Syrian government, Hamas in Palestine, Hezbollah in Lebanon, the Houthis in Yemen, etc. Here the US is fully in synch with its allies in the Middle East – Israel, Saudi Arabia, and the Gulf States.

Nothing to do with working people

All these economic and geostrategic interests are the interests of competing groups of capitalists and of the states under their control. Working people have no stake in the game. Should matters come to war they have nothing to gain and everything to lose. As socialists we ask working people on both sides of the conflict, including those who happen to be enlisted in the armed forces, to reflect upon this and act accordingly.

Stefan

Ire of the Irate Itinerant (2008)

From the October 2008 issue of the Socialist Standard

Crime and the causes of crime (2008)

From the October issue of the Socialist Standard

Even the government accepts that crime will rise as economic conditions worsen, but is this the only reason for rising crime?

It’s a wonder any of us gets any sleep. It must be terrifying in the world today. Whenever Private Eye puts a spoof Daily Mail headline it its pages, such as “Criminal Yobbo Thugs give you Falling House Price CANCER!” no one laughs. It isn’t funny because it’s too similar to real Daily Mail headlines written for the terminally terrified. Where they are believed, it seems, the world is crawling with criminals with no more desire than to rip people’s hearts out and tear their corpse into indigestible shreds. After all, it is the fear of crime that politicians have sought for so many years to tackle, not the creature itself.

According to the statistics, crime in the UK has been rising steadilly since the mid-1950’s, although it certainly accelerated in the early 1980’s. It should be borne in mind, though, that the rate of reporting crimes has risen in that time, as has the number of crimes it is possible to commit, thanks to the governments (particularly the current one) creating endless new offences year in year out. Real crime, though, has certainly risen. The number of indictable offences per thousand population in 1900 was 2.4 and in 1997 the figure was 89.1. In 1965 6.8 per million people were murdered. By 1997 this had risen to 14.1 per million. Over the last century, the number of police in the UK has risen by over 120,000 to stand at around 150,000.

Yet crime continues to grow, despite all the police. The former Mayor of London, before he was kicked out, Ken Livingstone, made great play over how his increase in the number of the police in the capital, from 25,000 to 31,000 police officers, had reduced crime. He was right that the Tories, for all their talk on being tough on crime, had held back spending on policing levels. In fact, that’s no surprise: policing accounts for around 52 percent of the criminal justice budget, and the Tories are first and foremost cheapskates. Plus, how can you be tough on crime if there isn’t any? For them it is a virtuous political circle: let crime run free, then be tough on it, on the cheap, and then ask for plaudits for being tough on yobbos. That is by the by, though. Despite Ken’s protestations, it wasn’t his police force that cut crime. It was economic conditions.

The “tough on crime” brigade are easy to refute. Some commentators blame the 60’s permissive society and its aftermath of sexual liberation for rising crime. They point to the end of the death penalty and penal reform measures. Yet, the number of prisoners in British cells were growing from the mid-forties onwards, before crime rates themselves began to rise. Now they stand at around 94,000 – and all the prisons are full. They’ve even had to start releasing prisoners early – in the back half of 2007 18,583 prisoners were given early release to relieve overcrowding. A staggering number, that has been replaced. All early release means is more people going through the prison system and being disciplined by it. After all, a great number of released prisoners re-offend and are convicted within two years.

This is all part of the trend. In 1941 there were only around 10,000 prisoners. Even as late as 1991 there were only about 40,000. If prison “worked” surely crime would have been around halved by doubling the prison population? Or at least, more drastically cut than by the modest falls we’ve seen over recent years. Now, the government wants to build extra capacity, three so called Titan Prisons each with a capacity of 7,500, which means they only see the rate of incarceration going up and up.

They have reason to believe that. A leaked draft letter this month told us that Home Office officials were warning ministers that the economic slow down would almost certinly lead to a rise in crime. The letter predicted property crime would rise by 7 percent in 2008 and a further 2 percent in 2009, if the current economic conditions continued. Home Office minister Tony McNulty said the letter was a “statement of the blindingly obvious”, which considering, to their credit, Labour actually formally linked crime rates to economic conditions in their analysis when they first came to power, isn’t a surprising view.

The BBC’s Economics Editor Mark Easton takes issue with whether it is so blindingly obvious that economic downturns promote the increase in crime. As part of this he proposes a different source of crime, citing a report that shows that for every rise of 1 percent in inflation, property crime rises by 0.026 percent; but that is just another name for poverty – when inflation lowers people’s incomes those who can’t easily compensate (for instance through pay rises) will be hard hit.

He is right, though, to note that while the rise in crime generally does not map directly onto the graph of economic up and downs, it does bear a resemblance to the growth in relative poverty. According to the report Poverty, wealth and place in Britain, 1968-2005 from the Joseph Rowntree Foundtion so-called bread line poor, i.e. those who are excluded from normal participation in society due to their lack of wealth, grew to around 27 percent of households in 2005, up from 17 percent in 1980. More strikingly, the non-wealthy/non-poor fell by a dramatic 16 percent in the same period. The proportion of society in the very rich catageory also fell.

This ties in with a graph Easton produces:

The two scales are inverted, the left scale (consumer spending) ascends while the right scale (theft and burglary rates) descends. The match is pretty precise. Whilst it may not be enough to say that one causes another, it is enough to suggest that they are heavily linked. Poverty doesn’t make criminals, it just gives people more chances and incentives to be criminals. Put another way, the decline in social bonds caused by consumerism and rising inequality fuels a dog-eat- dog world which can turn nasty.

Of the 302,000 people sentenced for indictable offences in 2006, 160,100 of them were for property related crimes (theft, criminal damage, etc.). That is, over half of crimes. In 2006/7 some 75 percent of reported crimes were crimes relating to property. Poverty does not just push the creation of crime. It’s well known that the poor are much more likely to be the victims of crime, with the bottom 40 percent of society being way ahead of the top on every measure of crime victimhood. Lone parent and unemployed households are twice as likely to be burgled than the average household; and burglary rates are greater in densely populated and often poor London than in the rest of the south east.

Women in the sex industry are particularly prone to being victims of crime. A report by the Poppy Project, called The Big Brothel found staggering quantities of women working in the sex trade and being treated as little more than shoddy goods by their exploiters. They state that during ‘120 hours of telephone calls, we established the following: at least 1,933 women are currently at work in London’s brothels; ages range from 18 to 55 (with a number of premises offering “very, very young girls”); prices for full sex start at £15, and go up to £250’ The pimps offered two for one deals, discount vouchers, happy hours – the whole marketing gamut as they made between £86 million to £205 million per year with a brothel. This isn’t a normal business transaction though – the women are often beaten and raped. Turned into a commodity themselves, all social bonds utterly severed between them and their clients. In it’s own way, another form of property crime.

There is other evidence for alienation being the motor of crime. A recent report on the BBC revealed that 1 in 11 prisoners in a British gaol is a former member of the armed services, that is, approximately 8,500. The probation officers association NAPO recounts stories of strung out soldiers turning violent after returning from war. That is, those whose social bonds have been deliberately shorn in order to make them into fit killing machines, or whose bonds have been shattered by the experience of killing and conflict, are highly like to fall into crime, and find themselves on the prison scrap heap.

The Home Office report also deals with the rise of policital extremism, another form of expressing alienation. It warns of attacks on immigrants and the growth of racist parties, should Britain slide into recession. Of course, the terrorism obsessed government also considers how this rise in the far-right might lead to more terrorism in retaliation. This should serve as a warning to those who figure that simple economic catastrophism will lead mechanically to socialist revolution. The growth of socialism can only come from the working class consciously deciding that changing the economic system will save them from the woes of crime and violence extremism bred by the current one, and acting on that decision.

Pik Smeet

Production for profit (2008)

From the October 2008 issue of the Socialist Standard

The motive for production under capitalism is making a profit. In order for goods to be manufactured or services to be provided, they must result in a reasonable amount of profit, otherwise they won’t be produced. Even ‘loss leaders’ serve the goal of profit, by enticing customers into a shop.

In contrast, socialism will be based on production for use. The whole issue of profit will be meaningless in a socialist society, with no money or buying and selling. Items will be made because they are useful, because they satisfy people’s needs for food, housing, transport, clothes, leisure interests, or whatever.

Now, some supporters of capitalism will argue that production for profit implies production for use. No company, for instance, will make a profit by producing goods that nobody will want to use. There is therefore, so the argument goes, a requirement for capitalist concerns to produce useful things. Many objects that were once found in people’s homes (mangles, for instance) are not produced nowadays, because technological progress has meant they are no longer wanted.

There is a tiny bit of truth in this, in that people won’t on the whole buy what they don’t want or need. But there is far more to be said on this matter, and looking at it more closely reveals what’s wrong with production for profit, and indeed with capitalism more generally.

For a start, the other side of the coin of production for profit is ‘no profit, no production’. This applies not just to outdated fashions and technology, but to any good or service, no matter how badly it is needed. Take housing, for instance. In the current credit crunch, the number of new houses being built has been drastically reduced, even though there is clearly a need for more houses, given the increasing population and the amount of people homeless or living in sub-standard accommodation. But building houses is now not so profitable as it was a year or so ago, hence the cut in housebuilders’ profits and decline in new housing starts. Hence too the many blocks of flats that are half-built but will not be finished because there is no prospect of selling them at a profit.

And of course it’s not just housing. Whenever you hear of post offices being shut or rural bus services being axed, it’s because they don’t pay, not because nobody wants or needs them. About four pubs a day close; not enough people are spending money in them, but it’s not that they fail to meet some need or are of no use.

We referred above to the homeless or people in bad housing. These are likely to be the very poorest, who are unable to afford a mortgage or the rent for a decent home. But under capitalism they are not part of the possible market for new houses, owing to their destitution. What they lack is not the need for a good place to live but effective demand: they can’t pay so are of no interest to housebuilders. What capitalism fulfils, then, is not human need, but need that can be paid for. There is no point from a business perspective in producing goods if people, whatever their needs, cannot pay for them.

Effective demand further affects the quality of what is produced. It’s no good producing only the best whatever if they are unaffordable. The size of workers’ wages means there is a demand for cheap goods, though it can hardly be said that there is a need for shoddy and dangerous commodities. The current economic downturn has led to more people shopping in cheaper supermarkets, but hardly out of choice. Again, production for profit is in no way identical — or even similar — to production for use.

The same logic underlies the paradox of millions starving in a world where enough food can be produced to feed everyone. The starving in Africa and Asia barely form a market and cannot be sold to at a profit. This simple point by itself should be enough to condemn the domination of the profit motive.

And is it really the case that people only buy what they want? This view ignores the impact of advertising, which can lead people to purchase stuff to keep up with the Joneses or make their children happy or enable their teenagers to respond to peer pressure. Capitalism has to advertise its wares, both to encourage customers to buy new products and to keep them buying existing ones. In so doing, it necessarily promotes new ‘needs’ that are really no such thing.

Moreover, the imperative for companies to make a profit implies that they seek to lower costs, including the cost of labour power, the mental and physical energies of their workers. That’s what wages are: the price of our ability to work. Profits are realised when commodities are sold, but they are arise in the course of production. Workers produce more in the value of what they output than in what they are paid. Profits, or surplus value, come from this difference.

By driving down wages, or making workers labour for longer hours on the same pay, employers can increase their profits. The drive for profit also leads them to reduce spending on health and safety, as this cuts into profits. Whenever you hear about unsafe working practices, it’s a good bet that it’s due not to individual carelessness but to the need for profit.

It’s worth noting that, when we say socialism will be based on production for use, this does not mean that everybody will live in the lap of luxury. It does mean that there will be no squalid housing or a choice between eating and heating or children who go to bed hungry. They key criterion in production will be not ‘is it profitable?’ but ‘is it needed?’. And the process of production will be safe as it can be, and the goods produced will also be safe rather than harmful. Due care will be taken of the impact on the environment too. Production for profit will have been confined to a barely-understandable and barbaric past.

Paul Bennett