Boffy's Blog

What Happens If Greece Defaults?

2012-01-29T12:49:00.000Z

Its possible that we are approaching the end game in the long running debt crisis in Europe. On any rational basis, Greece is already in default. It is almost wholly reliant on the bail-outs it has received from the EU, and IMF just to cover its current running costs, including the costs of paying the interest on its existing loans. Its private sector creditors have already agreed to write-off 50% of the loans they have made, and now the current discussions are about increasing that figure to 80% plus. The question is not really about what happens if Greece defaults, but about what kind of default it is. But, the other question is, if Greece did have a disorderly default would the consequences for workers across Europe, be as catastrophic as is being portrayed?

In his blog Paul Mason, writes,

“I understand the IMF believes a "sustainable" settlement needs an 80% plus write off - and the IMF rules do not allow it to sign off deals that are unsustainable.”

In a sense, this shows the nature of the real problem. If Banks and Finance houses can write off more than 80%, of what they are owed by Greece, then it shows that in the big scheme of things, those debts in themselves are not that significant. What is significant, is the fact that if Greece has a disorderly default, then that will trigger claims by Banks and others on the Credit Default Swaps they have bought with other Financial Institutions, which are a bet that Greece WILL default. The amount that these institutions might have to pay out on these CDS bets, could be many times what the actual Greek debt is. That creates massive instability and fear because, no one knows who is liable to pay out, on these bets, how much those bets are, and so who themselves might become insolvent. It is what led to the Credit Crunch after the collapse of banks like Northern Rock in 2007, and particularly after the collapse of Lehman Brothers in 2008. Already, the exposure of European Banks, and the fear that, unlike US Banks, which were nationalised and recapitalised in 2008/9, those Banks do not have sufficient Capital to withstand such an event. Already, that has caused interbank rates in Europe to rocket, many foreign Banks will not lend to them, and other global businesses will not deal with them. It was to deal with that situation that the ECB, with help from the federal reserve and other Central Banks, made available €0.5 trillion a few weeks ago to provide the European Banks with liquidity. So, the problem is not a Greek default as such, in fact, a lot of the Greek and other peripheral debt that was on Banks Balance Sheets, has been transferred to the Balance Sheet of the ECB over the last few months, because the ECB has been printing money to buy peripheral Bonds in the secondary markets, and the sellers of those Bonds, will have been the European Banks. The problem is a disorderly default.

The problem is that the actions of EU politicians, particularly German politicians, seems to be driving inexorably towards such a disorderly default. It was obvious more than a year ago that under current conditions, austerity measures could only have a negative effect. Perhaps the biggest problem for a country like Greece is not the debt, but its inability to generate the income to pay it off. The same cause is what leads to the debt in the first place, the inability to cover your expenditure from your income. In the new global economy, that is a problem for all developed economies, as they confront the expanding power and competitiveness of China and other new, dynamic economies. Austerity can only act to contract the economy, and create the conditions under which businesses are loathe to invest, because they can see no possibility of selling what they produce. What Greece really needed was a massive injection of new Capital in the same way that West Germany provided for East Germany, and other East European economies after 1990. But, with a growing European recession, it is not just Greek businesses that will be reluctant to invest. That is why we see around the globe, not a crisis of overproduction of Capital, but a massive hoarding of Money, which does not re-enter the Circuit of Capital, but sits in Bank deposit accounts earning low rates of interest, but whose owners are happy to take it, because they have become concerned with return OF Capital, not return ON Capital.

Paul Mason continues,

“Numerous hedge funds are reported to have bought Greek debt so as to operate in the space of uncertainty this opens up, much as a gambler operates next to a roulette wheel. If the "haircut" is 80%, I am told, many of them lose money and are prepared to trigger credit insurance contracts that will then torpedo the entire deal. They will not lose money as a result, but the European banking system will go into crisis.”

The actions of Germany's politicians, at first sight seem perverse. Almost every global economist, almost every organisation representing the interests of the global Capitalist class – IMF, World Bank, OECD, NIESR, S&P – as well as numerous think tanks, and business groups, have pointed out that the policy of austerity is not working, and that measures to stimulate growth are vital. Yet, Merkel continues to echo the views of Cameron and Osbourne that yet more austerity is needed! But, as I showed recently in relation to Cameron, thinking about this in Marxist terms, rather than crude Economic Determinist terms, makes this not at all difficult to understand. Economically, Germany has every reason to desire stimulative measures in Greece, and other parts of Europe. Germany's economy, and the prosperity of its workers have been built on being able to export to these European economies, and the existence of these other economies in the Eurozone, has meant that the value of the Euro has been lower than would have been the Mark, providing German exporters with a competitive advantage.

But, the picture that has been painted across Europe, is that the crisis in Greece was caused by a profligate government, and workers who retired too early on too high Pensions etc. That was never true. The real problem for Greece, as with other economies in Europe, including Britain and Ireland, is that low interest rates encouraged investment not in productive activity, but in blowing up speculative bubbles in shares, property etc. The cause of Greece's problems is not Greek workers, but Greek Capitalists. However, having established this narrative, just as the Tories have established the narrative that Britain's problems are due to overspending by Labour, and high wages and pensions for workers in the State Capitalist sector, it creates its own dynamic. Any attempt by the Tories now to reverse course will undermine their narrative, and mean that people will quickly catch on to the fact that they were conned by the Liberal-Tories. In Germany, with elections due, Merkel faces a similar problem. The SDP and Greens, who look set to win in the next elections, are both in favour of the creation of EU Bonds, and of the ECB acting as lender of last resort to stand behind it. If Merkel wants to have a chance of winning, she has to have a different narrative. Given that the CDU appeals to that same kind of strata in Germany, that the Tories appeal to in Britain, it is quite clear that to maintain electoral support, she has to be seen to be demanding fiscal responsibility by those who Germany is bailing-out. Of course, there is another reason for Germany to push this line. When a new European State is established, Germany will be the economic power at the heart of it. Ultimately, it will have to be the force that provides the financial ballast for that State. It has to ensure that other economies will not simply leach off it. That is why Germany is insisting on a level of fiscal responsibility that is unlikely to be maintained once such a state is established – the Maastricht criteria were not adhered to, and Germany was one of the first countries to breach its requirements.

But, if Germany continues to push in this direction it may well push Greece over the edge, making all of those plans redundant. Paul Mason writes,

“Not free are Merkel, Monti - because constrained by politics in Italy - and the Greek government. The latter have, off the record, briefed that the IMF's proposed austerity programme means "civil war". The most likely outcome of next week is they accept a fudged austerity programme that then does not work. One Greek commentator put it to me like this: "the people who sign a deal that gives away Greek sovereignty over debt that then goes wrong have to be prepared to be court-martialled". He wasn't joking.”

He may be right. Much of what has happened over the last year or so has been for public consumption. Many of the deals were done on the basis that an agreement to undertake various austerity measures would provide the justification for agreeing the latest bail-out, without any expectation that the measures would be fully implemented. That has bought time during, which the Banks and Financial Institutions were able to off load their Bonds to the ECB, and other Central Banks. Money Capitalists have been busy off-loading their potential losses on to workers and productive Capitalists, whose taxes will be expected to cover the losses. That is why they have been pulling money out of not just Greece, not just the peripheral economies, but even out of France.

So, what if Greece does go through a disorderly default? It would mean that money would be withdrawn on a huge scale from Ireland, Portugal, Spain and Italy overnight, with probably France, and other potentially vulnerable economies following suit. Claims on CDS's would escalate, probably bankrupting huge numbers of European banks, which would inevitably have a knock-on effect on US and other international Banks. It would create a Credit Crunch much more severe than that of 2008/9. Of necessity, such a credit crunch means that money stops being made available for businesses, consumers, homebuyers etc. As in 2008, it would mean that share prices crashed, and along with it house prices, as all asset prices are revalued, Banks raise mortgage rates severely, and begin a firesale on all properties where there are arrears, to prevent a capital loss in a collapsing market. Given the scale of the property bubble in places like the UK, and Spain (still) it could see property prices fall by 90%. The stopping of credit to business would inevitably lead to a sharp contraction of economic activity.

But, its important not to get too carried away by all this. There is a general misconception that the Great Depression was caused by the 1929 Wall Street Crash, and that a similar Financial Crash now would have the same result. But, the Great Depression was NOT caused by the Wall Street Crash. It may have acted as a trigger, but the real cause of the Depression lay with the ending of the Long Wave Boom that ran from the late 1880's, to 1914-20. It was that, which led to the onset of a period of low growth for Europe, which saw a number of economic crises during the 1920's, and 1930's, of which the Great Depression of 1929-33, was merely the worst. In 1987, when there was an even sharper sell-off on the Stock Market, it did not lead to a more severe economic crisis than had already existed from the late 1970's. So, the fact of a financial crisis and a revaluation of assets is not at all the same thing as an economic crisis, based upon an overproduction of Capital, particularly one associated with the termination of a Long Wave Boom. And, today we are in the first half of a Long Wave Boom, not downturn.

A Credit Crunch does not affect all aspects of economic activity in the same way. For example, the drying up of credit is important if you are a small business dependent upon credit for working capital on a day to day basis. But, nearly all big companies have huge cash balances out of which to finance working-capital. It may lead to a drying up of consumer credit, but under current conditions, where households have huge amounts of private debt, and they are attempting to deleverage, that should be less of a problem, because, the demand for credit itself should decline. One means of that deleveraging may well be that large numbers of people themselves default on their private debts in the same way that countries might be led to do. In that way, the real burden would fall on those Money Capitalists who have been lining their pockets for the last 30 years, during the period of Neo-Liberalism, and who are largely responsible for the current debt crisis.

Of course, it is always portrayed that such a crisis will have terrible consequences for ordinary workers. But would it? If small businesses go bust, because of lacking working capital, its possible they might be taken over by a bigger company, which tends to provide better conditions for workers. If not, with a large scale devaluing of Capital Assets, it would be easier for the firm's workers themselves to take it over, and run it as a Co-op. Such a derating of Capital is always portrayed as meaning big losses for workers in their Pension Funds, but is it? The Value of the Fund might fall sharply, but Pensions are mostly paid out of the income the Fund receives not from Capital Gains made by the Fund. As a consequence of what is called “Pound Cost Averaging”, massively falling share prices, will mean that workers contributions into their Pension Funds, will buy many more shares than they did previously. Moreover, as the price of shares falls dramatically, the Yield on those shares, the percentage of dividend to share price, will rise sharply. Because, Pension benefits tend to be paid out of this Dividend Income, the potential arises for being more able, rather than less able to cover future pensions. The same is true with Pension fund investments into Bonds.

At the moment, the fear in the global economy means that owners of large amounts of Money are prepared to put it wherever they think it is relatively safe. That means that the price of Bonds in countries like the US, the UK, Japan who are able to print money to cover their debts are unsustainably high. Moreover, it is the actions of those States in printing money with which they buy their own debt, in order to pump liquidity into their economies, which also forces the Yields on those Bonds down, whilst at the same time, pushing inflation up. Once the event that is causing the fear has gone, the basis of that will disappear. The owners of Money will be able to look at investing it where it might bring in a reasonable return. Once the fear has gone, after the debt crisis explodes, businesses will once again be able to plan on investing, and be able to utilise some of those vast stores of Money – at least $15 Trillion in the US alone – waiting to be invested.

The real losers in such a process will be the Money Capitalists who over the last 30 years have rule the roost, and who have drained Surplus Value away from productive capital, both directly, and through the turning of workers into debt slaves. The Money capitalists through the links they have, and the power they exercise over right-wing parties like the Tories have been able to protect themselves from that denouement. Workers should not be conned into believing their interests are served by a continuance of that. In fact, were workers to obtain control over the funds in their pension Funds, such an event that put Money Capital in its place, could be highly beneficial to workers, who would be able to pick up huge amounts of productive capital at low prices. And a fall in house prices of 90%, would go a long way to resolving the current housing problems by making houses once again affordable for first-time buyers.

In 2008, the International Co-operative Alliance put out a statement arguing that none of the Co-operative and Mutual Banks across Europe had been affected in the way the Capitalist Banks had. If huge swathes of Capitalist Money Capital was wiped out, it would open the door for a huge expansion of those Co-operative Banks. And, as I argued a year or so ago, over the collapse of the Irish Banks, rather than the Capitalist State bailing them out, the State should have just protected the deposits of savers, whilst the Banks were allowed to go bust, and their workers take them over to run as Co-ops, taking over the assets of the Bank.

Rather than being a threat to workers, properly armed with the idea of workers taking over bankrupt capitalist property and running it themselves as worker owned Co-ops, a Greek default, and the subsequent devaluing of Financial and other assets, could provide workers with a golden opportunity.

Northern Soul Classics - Cheyenne - The Promised Land

2012-01-28T09:41:00.000Z

Top Northern instrumental dancer from the days of the Torch.

Northern Soul Classics - Seven Day Fool - Etta James

2012-01-21T09:44:00.003Z

To the late, great Etta James, who died yesterday. Also check out the snippet of the uptempo Northern Soul "The Love Of My Man" by Etta at Pat Brady records here

Horizon

2012-01-18T10:30:00.001Z

Last night's Horizon on BBC2, was an fascinating programme for anyone interested in Science and Economics. The programme, titled “Playing God”, looked at developments in biotechnology and genetic engineering. It began by visiting a University Farm in the US, where the gene from a spider had been merged with the DNA of a goat, so that the protein, which creates the spider's silk, could be produced on an industrial scale. The silk, which is stronger than any such material that can be made synthetically, has numerous potential functions from industry to medicine. But, this was just the beginning of the kind of developments that are taking place.

Why is this science interesting from an Economists perspective? For the reason described above. Biotechnology, nano-technology and genetic engineering are now making possible the production of whole new ranges of materials, machines and products. These developments have largely been made possible because of previous developments in other areas, particularly that of microprocessors, which have brought about regular and massive increases in computing power. Without that computing power, the sequencing of DNA, for example, would have taken decades. Today, it can be done in weeks if not day. Without the ability to sequence DNA, and isolate the functions of particular genes and sets of genes, genetic engineering would not be possible. Now it is possible to not only sequence the DNA on a computer, but to construct new DNA via a computer model, prior to its actual manufacture in the test tube. There are already moves in the other direction. Computer technology in the future will not be based upon silicon chips, but will be built from organic material capable of repairing itself like any other organism.

But, the reason this is so fascinating from an Economists perspective is this. There area a number of factors which create the conditions for a Long Wave Boom, as opposed to the period of the Long Wave Downturn – which is actually a period of below average growth rather than actual negative growth. One of the most important of these factors is that there has to be the potential for the development of a range of new industries, producing a range of new products, using a range of new productive forces, and new production methods. As Hobsbawm points out in his “Industry & Empire” had the British Industrial Revolution been based solely on the revolution in textile production, it would have failed. Exchange Value is precisely that. It is the value a commodity has in exchange with other commodities. If there are no other commodities, against which some particular commodity can be exchanged, or if there are too few of these commodities, then the Exchange Value, embodied in the particular commodity, cannot be realised, and therefore, the Circuit of Capital (Money – Commodities{Raw Materials, Machines, Labour Power} – Production – Commodity1 – Money1) is broken. The necessary Exchange Value in Money cannot be realised to allow the purchase (reproduction) of the raw materials, Labour Power etc. used up in production, to allow production to continue. In other words, there has been a crisis of overproduction.

What enabled the Industrial Revolution to proceed, and to create a Boom was that, not only was there a Revolution in Textiles, but also there was a revolution in Agriculture, which meant that manufactured textiles could realise their Exchange Value (including the Surplus Value embodied within it) against increased supplies of food. There was a revolution in Iron & Steel production, which meant that Textile manufacturers could realise that Exchange Value in Exchange for machines, that consumed some of this increased supply of metal. There was a revolution in transport, which meant that some of the textile Exchange Value could be realised in Exchange with the owners and builders of canals and railways and so on.

The conditions for the end of the Boom are set in place when the production of all these existing industries, and the products they are responsible for, reaches such a level that much of the potential demand for them has been satisfied, and where no new industries, no new products, have been developed, into which Capital can be diverted, creating new linkages through which Exchange Value can be realised. Under these conditions, it is not just Capital in one industry, which is over produced, which is unable to find sufficient buyers, willing or able to buy its products, at a price that would enable reproduction to take place, but all, or the majority, of industries that find themselves in this position.

Every Long Wave Downturn has ended, and a new Boom started, once these conditions are met, when technological developments make possible a sufficient range of new products and industries, in which Capital can be profitably invested to meet unmet wants and can be realised via exchange with existing commodities. The Long Wave Boom from 1949 to 1974, was a clear example of that, as new types of production such as cars, consumer durables, electronics, chemicals, which had begun to be developed in the 1930's, became major new industries, and in the process created new production methods, new productive relations, and new social relations upon them. That once again confirmed Marx and Engels theory of Historical Materialism, which posits precisely this relationship.

And, in fact, as this new Long Wave Boom develops, we are again seeing exactly this pattern. Much of the old manufacturing commodity production has been relocated to where large supplies of cheap unskilled labour is available. During the period of downturn, the Capital and Labour did not move into new areas of commodity production, because they did not exist in sufficient scale. Unlike the 1930's where that led to mass unemployment, this time it led to Capital and labour moving into various forms of Service production, and into Merchandising (vast excesses of retail developments, large numbers of warehouses on newly developed “industrial” estates) which was financed on the back of huge amounts of private debt. But, during this period, in the background, the same process seen in the past, of the development of new productive forces (microprocessors and the things it made possible such as industrial robots, personal computers, mobile communications, biotechnology and nano-technology) were being put in place. These things are called base technologies. They are the new productive forces that make the new products, industries and production methods possible. Sometimes they are not new, but new applications of old technologies. For example, the ancient Greeks first recognised the ability to use the power of expanding steam to do useful work, but it was James Watt, and Matthew Boulton, who resurrected that technology, and applied it to make the Steam Engine! As increasingly, it has become intellectual production that is the source of new high value commodity production, it is not surprising that much of this development of new base technologies has been done on University Campuses, and in the new Science Parks attached to them.

In the first decade of the new Long Wave Boom, we have only seen a fraction of the application of these new base technologies, and yet anyone older than 40 will recognise what a huge transformation they have brought about during that time. As late as the mid 90's, those who had a personal computer at home were a small minority. Mobile phones were virtually unheard of, and no one had heard of the Internet. The average Long Wave Boom lasts for 27 years, which means that in the remaining 15 years of this one, the scope for the expansion of yet further new industries, products, and production methods is vast. That is so, because the productive forces unleashed by this Boom in the form of the microprocessor, are qualitatively different from all previous developments, precisely because it acts as a huge adjunct to human brain power. The developments in biotechnology and genetic technology, as well as nanotechnology are a clear example of that.

The presenter of the Horizon Programme, Adam Rutherford, described how some of the things that were being done today as a matter of routine, took him years of study, and months of application to do in the University Science Lab, just five years ago. That is the pace of development. One example he showed, I found particularly exciting. He went to visit a Community Centre in the US, where local people from pre-teen kids, to retired people, were learning science by doing it. They were combining DNA to create new life forms. One combined a luminosity gene from sea creatures with the E-Coli bacteria so that it could be seen. This kind of self-organised education, which breaks free of the constraints of State education, is precisely the kind of education that Marx described. But, it is also the kind of development that encourages creativity rather than conformity to established ideas and norms. Those involved, in fact described themselves as “bio-hackers”.

As Rutherford said, what it was reminiscent of was the period during the 1960's and 70's when small groups of teenagers in the US and elsewhere got together in their garages, bought bits of electrical equipment off the shelf from Radio Shack, and began to assemble the first Personal Computers. They turned into Apple, Microsoft and so on. The fact that a lot of this development was once again taking place in the US, should give pause for thought to anyone who thinks that its economy is in a state of rapid, and inevitable decline.

Incredible Indices

2012-01-17T16:32:00.002Z

For some time the House Price Indices put out by the Estate Agents and Building Societies have been of questionable merit. For one thing they all focus attention on the Asking Price of houses rather than the Selling Price, when, in fact, it is only the latter, which is meaningful. What buyers want for their houses, and what they actually get for them when they sell are two completely different things. Even the BBC has carried a report showing that this difference on average is around 40%!!! But, looking at the latest indices even at Asking Prices, seems to show a glaring disparity with what you can see with your own eyes in the real world. Given that the indices are put out by the Estate Agents and Building Societies, both of whom have a vested interest in juicing the market, it would not be surprising to see them put out figures that flatter to deceive. In turn that makes the issuing of the indices a farce.

The BBC's Ian Pollock, wrote in December,

“For the past few years there has been a phenomenal gap between asking prices and actual selling prices.

The gap, depending on which measure of selling prices you use, has suggested that homes put up for sale by their deluded owners or estate agents have been as much as 40% over-priced.”

He quotes Housing Economist Johnathan Davis, who in the past has questioned the usefulness of the House Price data. The difference between Asking and Selling prices comes from the figures released by the Nationwide and Halifax, which show an average UK Asking Price of around £230,000, and the average selling prices of houses as recorded by the Land Registry, which shows an average UK House price of around £150,000!

But, even allowing for this stark variation, which is never brought out by the newspaper or TV News presenters, even the data on Asking Prices seems highly questionable. In their latest report, Rightmove say, the average asking price of a house increased by 0.4% during 2011. Even allowing for the distorting effects of London prices, this seems unsupportable as against what you can see all around . For example, in the West Midlands, prices are recorded as being down by just 7.9%. As someone who keeps a keen eye on what prices are doing, and benefiting from my wife who keeps an even keener eye on prices, this just doesn't seem at all realistic. I was looking at the possibility of buying an old terraced house recently. A number are coming up for auction, they have central heating and double glazing, and on offer for £20-25,000. That is a huge reduction compared with prices a few years ago, and yet a friend of mine tells me that even at these prices they are not selling at auction.

Rightmove have a response to this. They say,

“In areas where there is a lot of property up for sale, buyers are looking hard for properties that tempt them with something really special in terms of value, potential, location or quality of finish. If it doesn’t shout ‘special’ then they are unlikely to overpay for the privilege of buying an average property in these mortgage-constrained times. In locations where there is little stock for sale, they appear to have become online junkies, ready to pounce on fresh property coming to market to see if it will satisfy their housing need.”

The trouble being that there is plenty of evidence of all these “special” properties falling massively in price too! I live in a small village in a rural area near to the Shropshire border. There are only about a dozen properties in the village, and local planning controls prevent even extensions, that would enable additional residency, let alone any new houses being built. It is probably the most expensive area of Staffordshire to live. Most of the other people who live in the village are either current or former medium size business owners, company executives, university professors or lawyers. Many of the houses have their own tennis courts. The bloke who lives across the field from me recently traded in the helicopter he used to go to work in, and now settles for using his new Bentley.

I hasten to add, at this point, should anyone get the wrong idea, that the house I am renting, although it would not be cheap to buy, is probably the cheapest property in the village, by several orders of magnitude. The house opposite me came up for sale about six months ago, with an asking price of £430,000. Its a three bedroom detached house in an acre of ground, with great views. Two people got to the stage of putting down deposits but pulled out, my guess is because they found they would not be able to build on the acre of land that comes with the house. The house has now been reduced to £360,000, a reduction within a matter of months of around 16%. Its not because it was mispriced compared to other similar properties in the area. The house next door but one to me, a seven bedroomed semi, again with about an acre of land sold two years ago for £500,00, though even this was a 10% reduction from the asking price.

Within about a mile from where I live there are a number of “special” large houses in huge tracts of land. They were put up for sale in the last year for £1.5 million. Each of them have now been reduced to under £1 million, or about 33%. Another house that was up for sale for just under £1 million has now been reduced to just over £600,00. But, around the area there are many other houses that were up for sale for prices between £250,000 and £400,000 that have been reduced by similar large amounts. Its clearly not just isolated instances of mispricing. But, despite these large falls, many of the houses still remain unsold, having been up for sale for as much as a year.

Rightmove also say,

“As well as less property coming to market there is less available stock already on the market compared to the same period last year. Average unsold stock per estate agency branch is 66, the lowest we have measured since February 2010.”

But, a look at their data shows that this figure of 66 compares with a figure of only 68 for the same month last year. And from there on the figure rose sharply over the next months to reach record high figures! But, to be honest, I find that figure hard to believe too, because everywhere I go, I see a forest of for sale signs, and most of them have been standing there for a very long time. That is true whether I drive through urban or rural areas, low priced areas or high priced areas.

Commenting on the latest figures they say that asking prices fell by 0.8% compared to the previous month. But, their account stresses that according to their figures asking prices rose by 1.4% in the first week of January – included in this month's figure. They repeat this several times in their analysis. But, on that basis it must also be true that prices fell by almost 2.5% in the other three weeks! Why not emphasise that, rather than the one week's figure, which could easily just be a fluke figure?

This all reminds me of the way, in which those with a vested interest in maintaining an asset price bubble, be it the Technology Bubble of 2000, or the Property Bubbles in the US, Ireland, Spain etc. attempted to massage the data until the last minute, when everything simply collapsed, and it was no longer possible to hide the truth.

Banks and Building Society's have a vested interest in presenting a picture in which house prices only ever rise, or only fall moderately, just as Government's have an interest in minimising the real figure for inflation. It shows why we need Committees of Workers to provide accurate figures of changes in prices.

Ed Balls It Up

2012-01-14T14:56:00.001Z

Ed Balls speech to the Fabian Society today, and his other statements elsewhere are a complete dog's dinner. In an article in Left Foot Forward, Shamik Das writes that it is, “a move that will wrong-foot the Right”. What utter nonsense.

In the speech and his Guardian Interview, Balls says that Labour cannot promise to reverse the Tories cuts when they come to power, and says that they support the attacks on workers wages and pensions, in the State Capitalist Sector, which they would also continue. This latter statement, which would rationally also have to be extended to a pay policy for private sector workers, confirms what I said long ago about the Populist demands being raised by “Compass” and others, and now picked up by the Liberal-Tories. For several years now the Bank of England has been printing money to buy up UK Government Debt. The consequence has been to reduce the value of the pound, and push up inflation to almost treble – even on official measures – its target rate. It does that, because it keeps official interest rates low, because it keeps the property and share price bubbles inflated, and because it inflates away a part of the Government debt. But, several years of high inflation, which despite the BOE claims are likely to continue, because of more money printing, risk causing workers to begin to demand compensating wage rises, which then leads to an inflationary spiral. The populist demands for control of High Pay, (which for the reasons I've set out would never be effective) are merely a cover for introducing extensions to the existing wage freezes to cover all workers, and thereby boost profits.

Its ironic that Balls should capitulate to the Liberal-Tory argument over austerity at this moment, because only yesterday, the bastion of Neo-Liberal orthodoxy – Standard & Poor's – came out in its statements detailing why it was downgrading the Credit Rating of nine Eurozone economies, essentially repeated Balls old mantra that austerity “was hurting but not working”! S& P point out what I have been saying for some time, and indeed what many economists have been saying for some time, including economists within the IMF, OECD etc., which is that austerity measures in many of these countries were going to simply drive down their potential for growth, and thereby make it more difficult, if not impossible for them to cover their debts.

Its obvious why Balls has come out with this statement. Opinion poll after opinion poll has shown that Labour are not breaking through in the argument over austerity. But, Balls new position will if anything have the opposite effect. Were I a floating voter I would read the new position like this. Labour has now capitulated to the truth that the Tories have been speaking for the last few years. That is there is no alternative to austerity. They have not yet admitted culpability for creating the debt in the first place. So, I would conclude that on this basis I may as well vote for the Party that has been honest about the need for austerity, and which has shown in the past that it will introduce the necessary Cuts, however, painful they might be i.e. the Tories.

Were I a Labour voter, or a worker in the State Capitalist sector, I would conclude that there is no difference between Tory and Labour, and so there is no point bothering to vote. Already, the Tories are picking up on the nonsensical position that Labour has now put themselves in. How on Earth can Balls stand up with a straight face in the Commons and say you the Tories should not be implementing these Cuts, which are “too far and too fast”, whilst at the same time saying that he will not only not reverse those Cuts, but will be forced to continue them, and wage curbs in any new Labour Government???

Now, I do actually understand what Balls is saying. He's saying if the Tories didn't introduce Cuts that are “too far and too fast”, then the economy would not go into a nosedive, the effects of that in terms of rising Unemployment creating even bigger deficits, would be avoided, and so a future Labour government would be in a better position to finance Public Expenditure. But, that argument is highly nuanced, and it is very unlikely that anyone who is not an economist would grasp it. Rather than making it easier to argue Labour's position against the Tories, it makes it much harder.

But, of course, there is another response that Labour could have made to their lacklustre performance in the polls. In 1981, when Michael Foot was Labour Leader, he responded to Thatcher's programme of proposed spending cuts, and the high level of unemployment, by leading demonstrations in London, Liverpool, Manchester, and Birmingham to oppose those policies. Thos demonstrations mobilised tens of thousands of people. More than that, Labour's Opinion Poll rating went to 51%! It looked as though Thatcher was going to be out at the next election, if not before as the Wets, and others in her Cabinet took fright, and considered dumping her. She was only saved by the Falklands War.

The Tories continually repeat the mantra that the debt and deficit, which they claim they have to deal with via austerity, was all due to Labour profligacy. It is not true! In the period after 1999 up to 2002/3, Labour was actually paying down the debt. Under the Thatcher and Major Governments, between 1979 and 1997, borrowing accounted for 3.4% of GDP, whereas between 1997 and 2005 it averaged just 1.2%. Moreover, even when Labour did begin to act counter-cyclically, under Brown, the increase in the deficit was nothing extraordinary. It is clear from the data that the significant change DID come in 2008/9, when, even excluding the amounts pumped into the Banks, net debt rose from 36.5% of GDP, to 43.2%, a bigger cumulative rise than in the previous 7 years combined! In other words, the debt and deficit rose only because of the Financial Crisis caused by the Banks.

The reason that increased spending was compatible with such lower levels of borrowing in that earlier period, was precisely because of the economic growth that was taking place, economic growth that was largely due to the global economic environment of strong and increasing growth. But, Labour are unable to get this message across. There is a good reason for that. In the past, for example in 1981, Labour had huge numbers of members who were grass roots activists. I don't want to glorify that, there have been many more periods when the Labour Party has been moribund with its Branches being mere shells. That was the case for much of the 1960's and 70's. But, in the later 70's and early 80's, it was possible for those activists to get these messages across to their workmates, their neighbours, their friends in the Pub or Club.

Labour does not have that kind of Party any more. Much of the membership is passive. Its no longer even necessary to be a TU member, and some LP members I have known, at a rank and file level, have even been opponents of unions! New Labour did not see the rank and file membership as having any role to play in that regard. In fact, there would be too much chance of such members being “off message”. Instead they preferred to rely on spending money on focus groups and so on to find out what they needed to say to win votes, to rely on the mass media to get that message across, which is why they built up close contacts with Murdoch, and why they employed journalistic hacks to present their positions. But, of course, when the media is almost exclusively talking the orthodoxy of the Liberal-Tories, there is no chance of being able to change the national discourse by such means! Changing the discourse, requires a mass membership Party arguing day in day out with members of the class. That is also the reason the sects will never change anything, because if even the largest of them were ten times bigger than they are, they would still be way too small to be able to do that on an effective basis.

I have recently been re-reading Marx's The Eighteenth Brumaire Of Louis Bonaparte Marx's analysis of the events in the years after 1848, and leading up to the coup of Louis Bonaparte, provide an excellent example of how, and why bourgeois parties in a crisis always give ground to those parties to their Right. In doing so, they always undercut the ground that stands beneath their feet, alienating themselves from the class on which they are based, and whose support they need. That is what is happening here with Labour, and Balls' speech, and it will likely have the same consequence, shifting the narrative Right, and bolstering the Liberal-Tories position. Yet, ironically, as Marx sets out there, in this process the positions that bourgeois parties find themselves adopting, in this process, are not those, which in reality benefit the Bourgeoisie. In France, as Marx sets out, the Party of Order, which like the Tories combined the representatives of Big Landed capital, and of the Aristocracy of Finance, was led into describing even those ideas and measures that are fundamental to bourgeois society as “Socialistic”. As this process moved ever rightward, it was the supporters of Bonaparte, who was based on the reactionary elements of the peasantry and petit-bourgeoisie, just as are the Tories, who took that to heart, and began to attack the bourgeois themselves. To add to the complexity, despite the fact that Bonaparte was the representative of these petit-bourgeois elements, it was again them that were destroyed economically, through the rising interest and inflation on the debts they had been encouraged to take out to buy property etc.

C'est plus ça change, plus c'est la même chose.

Northern Soul Classics - The Horse - Cliff Nobles

2012-01-14T10:04:00.000Z

Another dance craze embodied in a classic Northern dancer.

Defend Scottish Democratic Rights

2012-01-12T09:32:00.002Z

The Liberal-Tory Government are trying to limit the right of Scots to determine their own future. Like previous British Governments, they are very good at advocating bourgeois democratic freedoms for people in far flung parts of the globe - so long, of course that they were not part of the British Empire, whose subjects were kept in abject slavery - including as recently sending British troops to fight and die for them, but very poor when it comes to allowing those rights to its own citizens. The Scottish people like every other nation has a right to self-determination, including separation from the rest of the UK if they so choose. That is no less a right than many in the Tory Party, or in UKIP or the BNP advocate in relation to Britain leaving the EU. The Scottish people have the right to choose the time, place and manner by which they decide if and when to leave the UK. Cameron and all other British Governments and Parties should keep their nose out of that.

The Scottish people have their own Parliament, and they have a right, to determine the timing and nature of the referendum on leaving the UK, through that Parliament. All British socialists and consistent democrats should insist upon that basic democratic right of the Scottish people, and should insist that the British Government, does not interfere with it in any way. When, Norway and Sweden separated, as Lenin says, the Norwegian Parliament simply passed a resolution saying that it was no longer a part of Sweden. All that should be discussed, after a decision to leave, are the terms of relations between the two sovereign states, and the settlement of outstanding affairs.

But, of course, a Marxist does not desire that Scotland should separate from the rest of Britain, any more than a Marxist desires that the UK separate from the EU, and for the reasons that Lenin sets out. The reality is that, more now than when Lenin was writing, small states are reactionary, and increasingly unviable, just as is the case with small Capitals against large Capitals. In the same way that Marxists are opposed to the break up of Monopolies and Trusts, and see in the latter a progressive development, so too we are against the break up of larger states into smaller states.

Larger Capitals, Monopolies and Trusts, represent a more mature stage of Capital, a step closer to its ultimate demise and replacement with Socialism. They also facilitate within them the collective organisation of the workers, their Co-operative production, the greater planning of output. In other words they begin to presage socialistic production. We do not want workers brought together in such ways to be broken apart, only for the Capitalists once again to be able more easily to divide them against each other. The same is true of the bringing together of workers within larger state structures.

Marxists defend the democratic rights of the Scots in determining their own future. Marxists, however, should argue that the Scottish workers should determine their future within a single British State, within a single European State alongside their British and European comrades, rather than by lining up alongside their own bosses.

High Pay, Capital And The Tories

2012-01-09T15:53:00.001Z

Reality is complex, or as Lenin put it, “The truth is always concrete”, which is the basic principle of the dialectic. For many things in normal life, its possible to get by with superficialities and generalisations. This is the stuff of formal logic, where the world is black and white, rather than a spectrum, whose colours blur into each other. So, Marxists who operate with the view of class sketched out by Marx and Engels in “The Communist Manifesto”, for propagandistic purposes, in which society increasingly divides into two hostile camps, Bourgeois and Proletarians, are no Marxists at all, because as Engels makes clear in his letter to Bloch, their view of class is far more complex, far more nuanced than that. Similarly, it is an easy piece of shorthand to say something like, “The Tories are the Party of the Bourgeoisie; Labour is the Party created by the proletarians, but whose ideas were always based on the needs of Capital, and whose leaders long ago sold out to the Capitalists, whereas the Liberals can't even make their own minds up about themselves.” All of these general ideas have some validity, but they can hardly tell us anything really useful about any of these parties in general, let alone about their particular actions. Using this schematic, it would be almost impossible, for example, to understand why the Tories should now be proposing what appears to be an attack on their class interests, by proposing limitations on the high pay of Executives. In fact, a Marxist analysis has no difficulty in explaining it.

Just as classes are not monolithic, homogeneous blocs, so too with mass political parties. It has been said, for example, of the US Republican Party, that its current round of Primaries has shown that it is basically made up of three major constituencies. Firstly, there is the Libertarian wing, which favours small government, balanced budgets and so on, and whose figurehead is Ron Paul. Secondly, there is the Republican Establishment, whose main concern is not any particular point of political principle other than to win elections. They are, therefore, prepared to bend with the wind in order to pick up sufficient middle ground voters to go with their core support to ensure victory. They are represented by Mitt Romney. Finally, there is the Religious Right, which is concerned with banning abortion, and even contraception and so on. It frequently supports the small government agenda of the Libertarians, but unlike the Libertarians, it wants the State to intervene in people's lives to tell them what their morals should be. The Tea Partiers tend to be divided between the Religious Right, and the Libertarians. The Religious Right have attempted to put forward several candidates to act as their figurehead, in order to oppose Romney, but all have crashed and burned. But, the Republicans are not unique, these and other kinds of divisions are a feature of all mass political parties, including the Tories.

The Tories, as Marx describes, began as the Party not of the bourgeoisie, but of their enemies, the old ruling Feudal Aristocracy. In fact, during the 19th century, when that class saw itself being usurped by the Bourgeoisie, a section of it, and of its Party, attempted to win over the workers to its cause. Marx describes it as Reactionary Socialism. Some of them, like the Countess of warwick, even found their way into Hyndman's Social Democratic Federation. The Tories also, as Engels describes, even financed Keir Hardie's election campaign. It was frequently, the Tory representatives who were the ones advocating various forms of social reform, who put forward the legislation on working-time etc. It was Manchester Liberalism, which was the red in tooth and claw representative of the industrial bourgeoisie. But, rather like the workers in the Middle East today have allied with their new enemies in the bourgeoisie, against their old enemies, in the Bonapartist State, so in the 19th Century, the British workers lined up with their new enemies in the industrial bourgeoisie against their old enemies within the Feudal Aristocracy. After all, at the beginning of that century, Peasant life, and the oppression of that old ruling class was within living memory of many workers, or for their parents or grandparents, who had been forced off the land by the Enclosure Acts, and more open robbery by that Aristocracy.

As Marx, sets out, it was not that the Tories changed their class affiliation, it was that the class they represented itself became bourgeois!!! That meant that all of the contradictions which go along with that became entrenched within the Tory Party. Those contradictions continue until today. They were shown vividly at the beginning of the 1960's in the division between the old Patrician Wing of the Party, and that wing represented by people like Heath and Thatcher, the embodiment of the Grammar School educated, offspring of the up and coming middle classes. It persisted when Thatcher was Prime Minister, many of her opponents coming from within the Patrician wing of the Party. Eton educated Cameron, and his cohort are part of that wing of the Party.

In the 19th century, many of the old Aristocracy, where they did not extend their family business of land-owning, into Capitalist farming or mineral extraction, or into vast Colonial estates, used their accumulated Capital to move into Banking and Finance. They saw engagement in industrial or other commercial activity as beneath them, and the function of the nouveau riche bourgeois. Not for nothing are they referred to as the Financial Aristocracy. Most of the British Banks obtained their initial Capital from the activities of the Aristocracy in the Triangle Trade, whereby they brought slaves from Africa to their plantations in the Caribbean, bringing the products of those plantations back to Britain. It is not surprising then that a section of the Tory Party have always had a close connection with this Aristocracy of Finance, as well as their continued links with the large landed estates. The Tories links with the bourgeoisie proper, the industrial bourgeoisie, developed out of the failure of the Liberals.

The Liberals sought to reconcile the contradictory interests of the workers and the industrial bourgeoisie. The idea, borne out of the notion, put forward by Adam Smith, Ricardo and others, of both being part of the producing class, as against the non-productive landlords, and founded in practice in their joint struggle against Landlordism, was bound to founder, because of the inherent contradiction of interests between these two classes. The Liberals in Britain, filled the same function essentially as the Bourgeois Republicans in France, who aligned with the workers in the Montagne. But, as I set out in my post At Last The Liberals Commit Hari Kiri, this basic contradiction within the Liberals was bound to blow them apart, once the workers themselves began to organise a Party of their own. Once that happened, the Tories became the natural Party for the bourgeoisie as a whole, with all of the contradictions, which that itself entailed.

Whenever the actions of the Tories are analysed, it is important to remember that, even aside from the minor limitations, placed upon them by their Coalition with the Liberals, these contradictory influences are continually at play. But, more than that. Just as with the Establishment Wing of the US Republicans, any mass, bourgeois-democratic Party has one main concern, and that is to be elected. There tends to be an attitude amongst some on the Left, which virtually sees bourgeois democracy in conspiratorial terms. In part, that comes from Lenin, who on occasion seems to see the election of Governments as being controlled by the ruling class. Trotsky also talks, for example, about Social Democracy, even left Social Democracy being a final choice for the ruling class to pacify the working-class, before it is forced to resort to Fascism. This assumes that the bourgeoisie are themselves able to determine that choice of Government. Undoubtedly, they can, via their control of the media etc., influence the outcomes of elections, but it is almost certainly marginal. The Sun might have proclaimed “It was the Sun What Won It”, when Neil Kinnock lost the election, but Labour Party internal polling and research showed that it was Kinnock, and the Labour Leadership that had lost the election, not the Sun that won it for the Tories. Nor, in fact, could all of the media support, for the Tories, in the last election, win a majority for Cameron, despite the unpopularity of Gordon Brown, and Labour.

It is the need to be elected and maintain electoral support that is the main dynamic for bourgeois-democratic political parties. That means that Right of Centre Parties have to address the concerns of their core supporters, and tack sufficiently to the Centre to pick up the additional votes needed to be elected, whilst Left of Centre parties have to do the same thing from the other direction. How successfully they can do that depends upon where exactly the Centre is at any one time, and how polarised the support of each Party is. That is part of what is causing the Republicans such problems in the US at the present time, with much of its base looking to choose a candidate that would be so far to the Right as to be unelectable, but with much of that base potentially deserting if the Establishment is successful in getting Romney selected, who is seen by many of the Republican Right as a socialist no different to Obama!!!

It is also what explains the attitude of the Right of Centre parties in the US, in Britain and in Europe in relation to the debt crisis and austerity. For, 30 years the dominant approach has been that of Monetarism, and of control of deficits – even if it was practised more in the exception than the rule. But, when it reaches a situation where it is seen as a crisis, Right of Centre parties are led to reach for orthodoxy straight away, in order to distinguish themselves from their opponents. That is why the Tories, went from saying they would match or exceed Labour's spending plans until just months before the Election, and then switched to claim that Britain was a basket case like Greece that could only be saved by drastic austerity! But, it is also why in the US, the Democrats, who occupy a position similar to that, which the Liberal Party held prior to the establishment of the Labour Party, has instead ignored the massive debt and deficit, and has engaged in large scale fiscal stimulus, to haul the economy away from the danger of recession, which would both damage the interests of Big Capital in the US, and damage the Democrats chances of ensuring that US Workers come out to vote for them.

The same factors can be seen lying behind Cameron's recent actions. The Tories are thoroughly divided over Europe. Part of the Party, which represents the interests of Big Capital is pro-Europe. Another part, which instead represents all of those small minded, reactionary ideas of the small capitalist, the frightened middle classes, and backward workers is anti-Europe. Big Capital sees its main profits coming from a large powerful Europe, a Europe that is modern and forward looking, that operates like a fully fledged state, and is able to counter the US State, the Japanese State, Chinese State etc. within the global economy, within the international quasi state bodies established by Capital to regulate its activities on a global basis. For Big Capital, the excesses of Eurocrats, the costs of improving workers conditions via the Working-Time Directive, Health & Safety regulations and so on, are minor issues, part of the faux frais of production as Marx describes them. But, for the frightened Middle Class, that sees a danger, a threat to its way of life around every corner, and for the Small Capitalists for whom these concessions to civilisation are seen only as an intolerable burden, there is every reason to object, to insist on control being kept at a national level and so on.

So, it is no wonder that Cameron, besides seeking to look after that bastion of the Patricians, the City of London, also sought to accommodate the views of the Tory base, in his EU walk-out, despite the threat it placed upon UK industrial Capital, and its relations with its European partners. Ironically, even the UK Financial Capitalists spoke out about the threats that Cameron's actions had posed for their own activities.

Similar factors can be seen in relation to Cameron's populist campaign in relation to the High Pay of Executives. Who exactly is threatened by Cameron's proposals? Certainly Big Capital is not threatened by these proposals. On the contrary, to the extent that they reduce the salaries of Executives, employed by Big Capital, it will increase Profits! Big Capitalists do not accrue their wealth by the payment of income, but via the increase in value of their assets, shares, Bonds, and other investments. As I pointed out in my post Who Are The Middle Classes?, someone like Lakshmi Mittal, who owns Mittal Steel, is worth £20 billion. Simply putting that in the bank at 2% interest would bring in £400 million a year. But, in fact, with average dividends of around 5%, the actual figure would be more like £1 billion a year, even without any Capital Gain on the share holdings. But, Cameron's proposals say nothing about limiting this unearned income. Similarly, there is no restrictions to limit the earnings of footballers, pop stars, writers, actors and so on, which can frequently exceed those of Executives.

The proposals will not affect many of the Tories core supporters and members either. The frightened Middle Classes, with their incomes of £100,000 and above no doubt look on as much in askance as ordinary workers at the salaries of £1 million and above that some of these Executives take away. Many of the small Capitalists too, probably look on with some envy at Executives taking home such payments without risking their own Capital, in the way the small Capitalist has to do. Its to these voters, and to any workers they can pick up, that Cameron's latest piece of populism is addressed.

Yet, in reality, most of these Executives themselves are closer to the small capitalists than they are to Big Capital. Indeed, many of the Executives have either been, or go on to become, small Capitalists themselves. In reality, they form a part of the bureaucracy of Big Capital, in the same way that the Labour and Trade Union Leaders form a bureaucracy of the Labour Movement. Their position is likewise contradictory. It is also why, the representatives of this strata, people such as John Cridland, of the CBI, frequently represent the interests not of Big Capital, but of the Small Capitalists and Middle Classes upon whom the Tories are based. As Marx says in “The Eighteenth Brumaire of Louis Bonaparte”,

“Only one must not get the narrow-minded notion that the petty bourgeoisie, on principle, wishes to enforce an egoistic class interest. Rather, it believes that the special conditions of its emancipation are the general conditions within whose frame alone modern society can be saved and the class struggle avoided. Just as little must one imagine that the democratic representatives are indeed all shopkeepers or enthusiastic champions of shopkeepers. According to their education and their individual position they may be as far apart as heaven and earth. What makes them representatives of the petty bourgeoisie is the fact that in their minds they do not get beyond the limits which the latter do not get beyond in life, that they are consequently driven, theoretically, to the same problems and solutions to which material interest and social position drive the latter practically. This is, in general, the relationship between the political and literary representatives of a class and the class they represent.”

If we assume that the average Executive achieves their top pay of say £5 million, for around 20 years, then, even were they to accumulate all of it, they would have only a tenth of the increase in wealth of Lakshmi Mittal in just one year!!! In fact, as actual UK earnings, they would be more likely to pay half of it to the taxman, whereas Big Capital can largely avoid paying Tax at all. But, Cameron knows that he is safe in making such proposals. He will not lose the votes of these Executives, and if he did, it would be more than compensated in additional votes from elsewhere. But, he knows he is safe, because he realises that these Executives know why he he has proposed it, and also know that in practice no such proposals will be capable of effective implementation. The only way to control the pay of executives is if it is set by the workers in the Company, and the only way that will happen is if workers themselves own the Company, as happens in the many worker owned enterprises, that currently outperform the FTSE 100 by around 10% a year.

But, with increasing fears about rising wage claims as inflation continues to climb, there is another reason for Cameron's proposals. It is that, which I set out in my post, Beware Of Greeks Bearing Gifts. That is it can act as a trojan horse to implement more general pay controls, extending those already applied in the State Capitalist sector. With the workers at Unilever, showing the way, and standing up to strike against cuts in their pensions, the Tories must be worried that it could presage more wider worker resistance in the coming year.

A Timely History of Briefs

2012-01-08T17:25:00.005Z

(With appropriate apologies to Prof. Stephen Hawking)

In the beginning there was a great nothingness. For a long time the idea that something could appear from nothing was inexplicable without resort to the intervention of some supernatural being. However, modern science and mathematics have shown how this can be. In particular two theories are of particular relevance to the phenomena of briefs. Wantum Theory and the Theory of Relativity will be referred to extensively throughout this history.

It is now widely accepted that the appearance of briefs can be explained by Wantum Theory. All available evidence suggests that briefs appeared on the plains of North America one particularly cold Winter when Chief Oohmegoolies said, “Wantum something to keep goolies warm.” This is the first known application of Wantum Theory but there is some debate over whether Chief Oohmegoolies actually existed or was just a theoretical construct.

Relativity Theory has been used to explain both the general existence of briefs (General Relativity) and their appearance at different times in different locations (Special Relativity). Special Relativity says briefs appeared in some places faster than others due to relative disparities in temperature and is therefore an aspect of Wantum Theory. General relativity came into play when Mrs. Neanderthal, wielding a rather large club, announced to her husband, “and you’d better get those goolies covered because my Mum and dad are coming round tonight and I don’t want any of my relatives having to look at that over hors d’ouvres."

So, this brings us to a number of laws and formulations as basic premises. The first Law of Wantum Theory states that briefs will spring into existence based on probability. The higher the probability of a cold snap or observance the greater the probability of the appearance of briefs.
This can be postulated as more c = more b where c equals the degree of coldness and b equals the probability of the appearance of briefs.

In addition more m = more b where m equals the probability that goolies may be observed. This is a well known peculiarity of Wantum Theory whereby the act of observation actually affects the outcome. The above two postulates have been combined in the well known formula of Relativity Theory - E = MC2 - where E equals Extra large briefs an is the result of a combination of a high probability of cold weather combined with high probability of obervance.

As with all natural laws the possibility of opposite reactions has been identified. In particular the possibility of observance has been noted in some instances to promote the disappearance of briefs. Such occurrences are rare and short lived appearing as streaks.

From the first appearance of briefs on the North American plains things changed rapidly. From this singularity an explosion of briefs spread throughout the continent in what has been referred to as the Big Bang. As briefs spread from their origin they began to take on a variety of forms – jockeys, Y-fronts, knickers, and boxers to name just a few of the better known.

The size of briefs also seems to change in direct relation to age and appears to be an effect of gravity. The phenomenon is particularly marked in the area of the knicker form. Here a number of stages can be identified. First is what has been referred to as the panty stage where everything is fairly tightly contained. During hot weather this may be transformed into the G-string or thong stage reflecting yet again the influence of relativity theory. In the final stage, where gravity has played its full part, has been described as the Granny’s bloomers or Cotton Cons stage and is marked by an extensive expansion of the briefs to a magnitude of two or three times the original size.

This is the Third law - more a = more bcb where bcb equals big cotton bloomers and a equals age.

The phenomena of male briefs also follows a number of physical laws which can be identified using relativity theory. Again temperature and observance play a key role. Generally, speaking, there is an inverse relationship between the degree of coldness and the looseness of the briefs. It is a well known scientific fact that increases in temperature cause expansion and this principle applies here. This expansion allows for a free flow of air around the goolies thereby providing a compensating cooling effect to the higher temperature. This is the fourth law which states less c = more bs where bs equals boxer shorts.

Special relativity comes into play in relation to male briefs. A low possibility of observance is likely to result in the appearance of the first pair the wearer can lay their hands on in the morning even where these are the ones from the previous night. However, where there is a high chance of observance resulting from the gravitational phenomena known as “pulling” the latest fashion of brief is likely to appear even where this contravenes the fourth law. In addition the appearance of the brief is likely to occur as close to the anticipated observance as possible in order to minimise the risk of a feature identified in some briefs that has been labelled in the literature “skidmarking”.

This is the fifth law which states more secs = more fun, where secs equals the chance of the briefs being seen even during a cold snap and fun = fashionable briefs used near to observance.

Northern Soul Classics - Its Gonna Be A Big Thing - Yum Yums

2012-01-07T19:57:00.000Z

What can I say! Absolutely classic bit of Northern. Roll back the carpets, and groove to this.

Keynes Has Won Hands Down

2012-01-06T20:04:00.003Z

In an interview on Bloomberg, today, former MPC member, and professor of Economics at Dartmouth College, David Blanchflower, declared that, in the debate between Hayek and Keynes, Keynes has won hands down. He bases this assessment on the experience of the last few years between the US and Europe. The US has adopted Keynesian stimulus, and its economy has recovered from the recession caused by the Credit Crunch. Europe has adopted Hayekian austerity, and its economy has not only failed to recover, but is in danger of going, once more, into recession, possibly a deep one.

Blanchflower is not alone. Many economists, particularly those on the left of centre, believe that the austerity measures being undertaken, by a number of Governments, across Europe, are counter-productive, even for Capital. A similar argument is put forward by Ann Pettifor in an article at Left Foot Forward. She writes,

“My humble and not very cheering view is that because of the vast unpayable debts of the global private banking sector; because policy makers will not address the private banking crisis; and finally, because politicians wrongheadedly persist with austerity – we can expect things to get a lot worse...

In Britain, private debts make up about 400 per cent of UK GDP – and public debt only about 65 per cent of GDP. (I am guessing that politicians’ blind spot for Britain’s huge private debts is not accidental, but then I may just be a touch cynical.)

It’s the disorderly de-leveraging (‘liquidation’) of those private debts that is the cause of Britain’s double dip, and of global financial instability. The failure of the global investment bank/brokerage MFGlobal and the downgrading of various banks, is the canary in the global financial gold mine.

The problem is not the UK’s or Eurozone’s public debts or budget deficits. They are both simply a consequence of private sector failure. Because of this wrong-headed analysis, politicians in all three political parties have been driven down the dead-end of austerity...

As the year draws to an end, I simply speculate, and may be wrong. After all, George Osborne’s autumn statement represented a small, but significant u-turn: a belated recognition of the scale of the crisis and an attempt at fiscal stimulus to finance infrastructure investment...

Politicians, advised by deranged and culpable economists, will hasten, and intensify this global private banking collapse by accelerating austerity. It is those policies that will prolong and deepen the global economic crisis.

It’s time now to address the solution: first, subordination of the private banking sector to the interests of society; and second, policies for employment. Only jobs can now generate the income needed to revive the economy, to pay down private debts, and to stabilise the global economy. “Look after employment” said Keynes, “and the budget will look after itself.”

Blanchflower and Pettifor are both right, and they are not alone in making this argument. Economists and bureaucrats, within the ranks of the international state bodies, established by Capital, have also argued along similar lines. And, of course, as Blanchlower correctly points out, the US, over the last three years, has been following a policy of fiscal and monetary expansion, which it has been seeking to persuade its European counterparts to follow. Chief Economist at the IMF, Olivier Blanchard, argued, some time ago, that Europe would need to utilise a degree of inflation, in order to deal with its debt overhang. He is now arguing that European Banks should deal with the need to be more robust by increasing their capital rather than deleveraging i.e. reducing their loan book. Its obvious why he should seek such a solution.

Because banks lend many times their actual deposits, and other assets, deleveraging requires the amount of their loans to be reduced by many times the amount of additional Capital they would need to raise. In fact, its estimated that they would need to reduce their loan book by around €1.5 trillion. Such a reduction of loans, to European businesses and consumers, would certainly cause a recession. But, the problem has been demonstrated, in the last few days, in relation to one of Italy's biggest Banks, Unicredit. It needed to increase its Capital, and decided to do so by a new share offer. During the last year its shares have fallen by around 75%. They have fallen by 30% in the last few days. In order to be able to sell shares in this new offer, it had to sell them at a 43% discount!

But, Unicredit is lucky. It is the first in line to try to raise Capital. The other banks, that come after it, will have to try to find investors who have not already taken up earlier offers. If they are able to sell their shares at all, it will likely be at even larger discounts than those that Unicredit had to provide. In fact, as Pettifor sets out, its likely, at some point, that many of these Banks will, effectively, have to be nationalised, in order to provide the necessary liquidity and Capital, just as the US and UK did three years ago. European states will do that not in the interests of European workers, though they will, as the US and UK states did in 2008, phrase it in Pettifor's words as being in “the interests of society” i.e. of Capital.

Blanchflower and Pettifor are both right, as against those on the Left, who see in the austerity measures, of the UK and European politicians, the implementation of the desires and interests of Capital, because it cannot be in the interests of UK and European Capital for there to be a serious European, let alone wider, recession or Depression. It is not in Capital's interest for there to be a dislocation in the process of Capital Accumulation, and the huge reductions in profits, and destruction of Capital that would go with it. It was not in Capital's interest for there to be such dislocations during the last Long Wave Boom that ran from 1949 to 1974, which is why it used Keynesian intervention on each occasion, during that period, to cut short recessions. It was not in Capital's interest in 2008, which is why it was prepared to countenance significant intervention, and action against the Banks, to bring the crisis under control. It is not in Capital's interest now either.

The proof of that is not just to be seen in the actual economic facts, that contrast the economic recovery in the US with the increasing recession in Europe. It can be seen in the real views of the capitalists themselves. Over the last year, the US Stock Market has risen, particularly in the last few months. The surveys of business confidence continue to show increasing optimism amongst the business community. In Europe, the Stock Markets have barely flinched, even in Germany. Meanwhile, the same surveys, of business confidence, continue to fall, and, each time some new austerity measures are announced, they fall even further. If, as some of those on the Left, who have a catastrophist view of Capitalism, insist, the austerity measures are at the behest of Capital, why is that? If they were right, then, on the contrary, Business Confidence should rise with each new announcement of austerity, it should be in Europe where the Capitalists are cock-a-hoop, and eager to invest, not in the US!!!

But, increasingly, the economic facts show that it is the other way around. The US has created 1.6 million new jobs in the last year. It created 200,000 new jobs in December alone, above the estimates. The Unemployment Rate has been on a steady downward path for several months, and survey data suggests that growth is beginning to take hold. More importantly, the employment data shows that the bulk of the new employment growth has come amongst those people with College degrees, and into new higher value production. If anything, the data suggest that unemployment amongst those without College degrees may still be growing, which shows the need for the US to increase its expenditure in education. The nature of this employment growth is important. Not only is new employment in higher value production important, because it is in these areas that the US has an international comparative advantage, helping to cover, if not reduce, its trade deficit, but a higher percentage growth, in higher wage employment, means that a proportionally larger sum feeds back into the economy via, consumption out of those wages, in higher tax receipts to the Government etc.

In essence, we have a fundamental division. In the US, as Blanchflower sets out, we have increasing, if not spectacular, growth that appears to be taking hold. Of course, its not just in the US. As Jim O'Neill set out on Newsnight yesterday, it is only those who fail to recognise that western economies are not now the dominant players in the global economy, who have not noticed that the world economy is growing, based on significant growth in Brazil, China, Russia, India, Indonesia, and many other parts of the globe. China, which has deliberately slowed its economy, to prevent inflation, is itself about to engage in another round of Keynesian stimulation. But, at the same time, those economies, which are about to go into recession, in Britain and Europe, are instead hamstrung with “wrong-headed” solutions that were appropriate for different times. In fact, most economists believe that China itself will, before too long, have to develop its own Welfare State, in order to reduce the large amounts of personal savings that Chinese workers currently build up as protection against Unemployment, Sickness, Health Care, and Old Age. That will be necessary as a means of diverting those savings towards consumption, in order to develop the domestic market.

Blanchflower is wrong to say that, in the debate between Keynes and Hayek, Keynes has won hands down. The Keynesian solution is the appropriate Capitalist solution for current conditions i.e. those of the Long Wave Boom. But, in different conditions, say the conditions of the 1970's, when the Long Wave Boom ended, Keynesian solutions did not work hands down. Instead, they led to stagflation. Interestingly, then as now, bourgeois politicians and state bureaucrats, and many of the economists who advised them, continued, however, to see only Keynesianism as the way out. Why wouldn't they? It had been orthodoxy for as long as most of them has been adults. Even in the early 1980's, when Thatcher was advised by Hayek himself, and his followers at the LSE, the adoption of his ideas, and later those of Friedman, was not without a struggle. As, unemployment rose, and the economy tanked the Tory “Wets” continued a guerilla struggle, and it was touch and go whether Thatcher would survive.

In the end, neither Keynesianism nor Misean, Neo-Austrian orthodoxy, nor Monetarism can provide a lasting resolution for the contradictions of Capitalism. Each is the most appropriate technical solution, for Capital, to its problems, at different times of the conjuncture, in order to overcome a particular crisis. But, none can overcome the constraints, placed on Capital Accumulation, represented by the Long Wave downturn, just as, ultimately, none of them will prevent a more rapid period of Capital Accumulation, during the Long Wave Boom – though wrong-headed policies can cause or lengthen or deepen a particular crisis, and, thereby, worsen the position of Capital in one country/region as opposed to some other, in the same way that is happening in the UK/Europe today, as against the US, China, etc. These technical solutions, at best, can only enable Capitalism to live another day, and thereby for the contradictions, that are inherent within it, to heighten, only to be manifest in a further, larger crisis somewhere down the road. Ultimately, the only solution to Capitalist Crises is the replacement of Capitalist ownership of the means of production with worker ownership of the means of production, and the development thereon, over time, of a Co-operative Commonwealth, based on planned production for need rather than for profit.

Camerons's Desperate Statement

2012-01-02T17:47:00.002Z

David Cameron's New Year statement sounded more like a sigh of desperation. Cameron told us that he “got it” that ordinary working class families were suffering as a result of rising unemployment, and rising inflation. But, clearly he doesn't get it. How could he? The lifestyle and experiences of millionaires like Cameron, and the rest of his Cabinet have nothing whatsoever to do with the realities that ordinary working people face. Having told us he “got it”, he went on to say that he was taking action to deal with the rising unemployment and the inflation. But, clearly he does not get it, because it is precisely the policies that his Government is pursuing, which is causing the rising unemployment and inflation! And with absolutely nothing concrete to tell us about how they would deal with these problems, the only thing he could do was to ask us to believe in the possibility of jam tomorrow, jam we are expected to believe against all previous experience will be created by the expensive white elephants such as the Queen's Jubilee, and the Olympics. The only jam here is that in Jamboree for the rich and famous.

It is Cameron's austerity measures that are the direct cause of rising unemployment, not just in the Public Sector, but in the private sector too, where firms have seen contracts for building and equipping new schools etc. disappear, where even small businesses face disaster, not just from the withdrawal of work and contracts by Local Government, but through the reduction in trade caused by falling Public Sector wages, and fewer Public Sector workers going into their shops to buy a range of goods. It is Cameron's policies based around printing money, in order to try to keep the share and house price bubbles inflated, that has caused the value of the pound to fall, and inflation to rise. On top of that Cameron's Government was directly responsible for a large rise in prices as a result of the increase in VAT.

Two other stories on the news today illustrated the problem that Cameron's Government faces. One was that rail fares had risen by 6%, and in some places by much more than that. The second was that, as a result of the cost of driving increasing, fewer people were learning to drive. Capitalists always want to throw the costs they face on to someone else, be it other Capitalists, the State, or workers. But, the laws of economics mean that, other than in the short run, Capital, as a whole, cannot throw the costs on to workers as a whole. In the Grundrisse, Marx writes,

“It is clear, first of all, that the wage paid by the spinner to his workmen must be high enough to buy the necessary bushel of wheat, regardless of what profit for the farmer may be included in the price of the bushel of wheat; but that, likewise, on the other side, the wage which the farmer pays his workers must be high enough to procure for them the necessary quantity of clothing, regardless of what profit for the weaver and the spinner may be included in the price of these articles of clothing."

Moreover, Capitalists are not interested in merely making a notional or potential profit. They are interested in making real profits, which means recognising the need to sell these goods, when they are produced. This is all the more true, as Marx points out, the more workers constitute the vast bulk of consumers. This creates a vice like contradiction for Capital as a whole. Take the instances mentioned above. The other side of the argument that workers are not learning to drive, because the costs of driving lessons, and running a car, are too high, is that wages are too low. If wages were higher then these costs would be affordable. What is the consequence for Capital? If fewer workers learn to drive, then the immediate consequence is that there are fewer workers who can be employed as drivers. And, the consequence of a reduced Supply of Labour Power, capable of driving, means that wages, for those that can, must rise. The only alternative, for individual Capitals, is that they spend money themselves training workers to drive. In short, the cost becomes one born not by workers, but by Capital itself either in the form of higher wages for drivers, or else additional costs for training.

But, it is not just jobs for drivers per se that are affected. In reality, almost any job you can think of today, relies on workers being able to drive. It would be impossible for Social Workers, Health Inspectors, and those in many other such jobs, to do their work without being able to drive, and, indeed, without their employers relying on them running a car to perform their duties. I can remember that one of the most effective pieces of industrial action, at the Council where I worked, was when workers refused to use their own cars, in a dispute over mileage allowances. Building Inspectors who would have travelled many miles in a day, and covered a large number of properties were reduced to travelling just a few miles, and inspecting just one or two places, when they had to travel to them by bus. Moreover, the administration costs of processing large numbers of bus tickets were much greater than simply paying out car mileage allowances.

But, in addition to this, it has been the availability of private transport that has meant that workers can travel large distances simply to get to their place of work that otherwise would not have been possible. Whilst this has some advantages for workers too, it is Capital that obtains the greater advantage from having a wider range of potential labour-power, and greater flexibility in location. In fact, these are some of the advantages that Capital in a more developed economy can obtain in reducing costs compared to a less developed economy. It is one of the reasons that Capitalist States have encouraged car ownership, and provided huge subsidies to road transport, financed out of general taxation.

But, the example of the increase in rail fares demonstrates this point too. As Marx makes clear in that quote from the Grundrisse, if Capital wants Labour Power of a particular type it has to pay for its production. The wages paid have to cover the costs workers themselves have to lay out in order to make their Labour Power available for Capital. In some parts of the country, the general costs or feasibility, of car transport to work, make it unsuitable. Instead, commuters rely on expensive rail transport. But, Capital as a whole, if not individually, has to cover this cost. Once again, in order to meet the needs of Capital, the Capitalist State has provided huge subsidies to reduce the costs of this rail travel. It is frequently presented as a subsidy to commuters, but it is not. It is a subsidy to Capital. Not only is it a direct subsidy to the private train operating companies, who, without it, would have to reduce their profits or improve their efficiency, in order to reduce their prices to levels that would maintain sufficient demand, but it is a subsidy to all those other Capitalists, who otherwise would have to pay their workers higher wages in order to afford the level of fares! The alternative is that all those Capitalists who rely on commuting workers, would find that the quantity of available Labour Power fell, and so wages would rise anyway, or else they would need to provide workers with affordable accommodation close to the place of work, or else they would have to relocate their businesses out of expensive City locations, and into lower cost areas of the country.

Of course, in the short term, Capital can impose these costs. Workers can draw on their savings to cover increased costs for a certain length of time, or they can go into debt. But that cannot be sustained for long. They could continue to pay for rail fares, or the cost of a car, and reduce their spending on other things. But, that too means that Capital has to pay that cost, because the reduced demand for these other commodities means that there price will fall, and the profit available from them will fall too. The only other alternative is for workers to cover their increased costs through working longer or more intensively. That is a return to the extraction by Capital of Absolute Surplus Value. But, Capital moved away from Absolute Surplus Value to Relative Surplus Value (i.e. the cheapening of the costs of wage goods via increased efficiency) precisely because the former is far more limited in its ability to raise profitability. In addition, as Marx points out human Labour Power is like a machine. The longer or more intensively it is worked, the more it is itself used up, which also means that the costs for Capital in ensuring its reproduction also rise.

Of course, this does not mean that Capital, or politicians, in a particular country, such as Britain, may not adopt such a strategy. But, look at what the consequences of that are! Look at the countries, which for example, do not need workers to be able to drive, or to have their own car. They are countries at a low level of economic development; countries where a large amount of labour-power is employed in agriculture or other small-scale and locally based employment. A look at those economies which do not require workers to have good health, or a decent level of education, shows a similar pattern. Britain could pursue such a course, it could decide to become a Third World economy again, but that is hardly a desirable situation for Capital in Britain either.

Marx defined Capital as a social relation, a point that few people really understand. For Marx, there is a necessary duality in everything. The Exchange Value of a commodity, for example, is determined by the amount of Socially Necessary Labour Time embodied in it. But, in determining this it is necessary to look not just at the act of production, but of consumption too. Why is it that for Marx, it is only Wage Labour, and not slave labour, or animal labour, or machine labour that creates Surplus Value? After all, human beings as Marx points out are animals themselves, and, as he says in the Grundrisse,

“In production based on slavery, as well as in patriarchal agriculture…..the slave does not come into consideration as engaged in exchange at all.” (419)

and “in the relations of slavery and serfdom….The slave stands in no relation whatsoever to the objective conditions of his labour; rather, labour itself, both in the form of the slave and in that of the serf, is classified as an inorganic condition of production along with other natural beings, such as cattle, as an accessory of the earth.” (p489)

The reason that it is only Wage Labour that creates Surplus Value, is that it is only Wage Labour that engages not just in production, but also in the process of Exchange, of buying the commodities it has also produced! The worker measures the necessary Labour-time required for the production of any commodity according to the amount of time, s/he the worker needs to spend producing it, and it is this measurement which gives the Value of the commodity its social being, its Exchange Value in the fully developed form.

In the same way, as Marx again sets out in the Grundrisse, there can be no Capital without Wage Labour, just as there can be no Wage Labour without Capital. These are two aspects of the same thing, the social relation that is Capital. Capital cannot expand without at the same time expanding Wage Labour, even if the rising Organic Composition of Capital means it does not expand at the same rate. If Capital seeks to diminish Wage Labour, through austerity measures, attacks on workers real wages etc., then it ultimately brings about an attack on itself, a reduction in its ability to expand. That is not to say that Capital can expand by simply increasing workers wages, which is the underconsumptionist view, because wages as the price of Labour Power, themselves depend upon the price of production for Labour Power as a commodity, which is in turn dictated by the needs of Capital at the particular time. As Engels put it,

“The history of these Unions is a long series of defeats of the working-men, interrupted by a few isolated victories. All these efforts naturally cannot alter the economic law according to which wages are determined by the relation between supply and demand in the labour market. Hence the Unions remain powerless against all great forces which influence this relation. In a commercial crisis the Union itself must reduce wages or dissolve wholly; and in a time of considerable increase in the demand for labour, it cannot fix the rate of wages higher than would be reached spontaneously by the competition of the capitalists among themselves.”

Herein lies the essential contradiction facing Cameron and the Liberal-Tory Government, because the other side of this argument, put forward by Engels applies too, as I've set out above. Cameron can pursue a policy of austerity and attacks on Labour, but the consequences of that will be detrimental to Capital also. If pursued for any length of time, it implies a degradation of British Capitalism back to some less developed form, and thereby even less able to compete in a global market place. The alternative is to ensure that British workers wages are high enough to cover all those necessary costs of ensuring that it is reproduced, in the quantity and quality, that a developed, advanced economy requires. But, to sustain that, those workers need to be highly skilled and educated, and Capital needs to develop the kind of production that can best utilise those skills.

In the short term that means the very opposite of the kind of austerity measures being pursued by the Liberal-Tories, which undermines higher education, for instance. But, why would any British capitalist themselves invest in high value production, in an economy that is going into recession, that is becoming increasingly isolated from its main markets and trading partners in Europe, that cannot guarantee that a suitable supply of Labour Power will be available? Once again, the Liberal-Tory austerity measures undermine the very conditions needed for a sustainable recovery, and way out of the current situation, including, therefore, the possibility of ever being able to cover, and repay the existing debt. After all, as I have previously demonstrated, with private debt standing at 450% of GDP, a solution based upon workers going into even greater debt is not now available.

What is certain is that Cameron's suggestion that a solution can come from more Royal Pomp or other such jamborees such as the Olympics is a non-starter. After all, last year we were told that the Royal Wedding would provide much needed economic stimulus. When it was over, we were told, on the contrary, that it had cost us billions of pounds, that it was responsible for a 0.5% fall in GDP etc.!!! And, all experience of countries hosting the Olympics or World Cup is that they represent a huge drain on the economy, which takes years after they are over to pay back. For most of us, even in Britain, the Olympics may as well be held in some other country, and certainly we'd be happy if someone else was paying for them! Already we've seen millions of pounds wasted on a fireworks display in London, that represents literally money up in smoke that could have been spent on something useful. The legacy is likely to be a series of white elephant facilities that are useful only to a select few elite athletes, and which provide nothing useful even for local populations, but more than anything the legacy will be a huge amount of extra debt.

If that is the best that Cameron and the Liberal-Tory Government can offer us, they had better not bother trying to cheer us up.

Northern Soul Classics - Do The Temptation Walk - Jackie Lee

2011-12-31T12:10:00.000Z

Absolutely classic dancer from the Torch days. Jackie Lee, aka Earl Nelson, the Earl half of Bob & Earl, was responsible for some classic dance tracks, many like this one, based around different dance crazes.

UK Prepares to Seal Its Borders!!!

2011-12-28T13:57:00.001Z

RT, today has a report that the UK is drawing up plans to seal its borders in the event of a deepening of the crisis in the Eurozone.

The Treasury is reported to be working on plans to introduce full-blown Capital controls, to prevent the draining of funds out of the country, whilst plans to seal the borders are intended to prevent a mass influx, at a time when, in any case, millions of British ex-pats may be seeking to return home. The Government is already known to have been working on plans to bring back up to 1 million holidaymakers and ex-pats in a huge airlift, as any Euro crisis caused a large scale closure of European Banks, and a consequent inability to access individuals bank accounts, the closing down of cash machines etc., and, of course, the possible losses caused in any return to the old national currencies. One of the reasons that many of the Greek super rich, have been getting their money, yachts and other valuables out of Greece, is the prospect that their Euro Bank accounts might be frozen, and that the exchange rate they might get for a new Drachma, when they are unfrozen, would be extremely poor. Its likely that a similar process would unfold in other countries where such a return might be likely i.e. Portugal, Ireland, Spain, and possibly Italy.

As the report states, British banks could not avoid the financial deluge. They have at least €170 billion of exposure to these banks, but the real exposure is likely to be much greater than that as no noone really knows the extent to which all of the complex interaction of financial derivatives extends across the global financial system. What is clear as I showed previously is that the Credit Crunch is already upon us, demonstrated by the huge increase in Banks short term borrowing costs. The ECB has provided half a trillion Euros to European Banks in the hope that they would use the money to buy the Sovereign debt of their particular countries. Some hope. In fact, around €300 billion went to cover their existing exposure, whilst the rest has been used to shore up their own Balance Sheets. In recent days that has meant record amounts of over €500 billion being deposited overnight with the ECB by those Banks, who are too scared to lend it to each other.

What the action by the ECB does show is that the argument about whether it will act as lender of last resort, for the sovereigns, is over. Clearly it will. This was merely an attempt to achieve that by the back door. When push comes to shove it will step up to the plate itself.

Meanwhile, recent economic data shows that even without a Euro crisis, the UK economy is in deep trouble. It now looks like GDP will have shrunk for the fourth quarter of 2011, by between 0.25% - 0.5%. The services data for October, showed a 0.7% contraction. Given that Services account for two-thirds of the UK economy, and given that other survey data show the rest of the economy flat on its back, its clear that the economy is already back in recession. That is likely to be confirmed technically as the first quarter of next year looks likely to see a further contraction of growth.

Orthodox economists, not to mention the Government and Bank of England, are pinning their hopes on a fall inflation coming to the rescue as next year progresses. That is unlikely. They hope that depressed economc activity will cause prices to fall. But, this analysis of inflation, as being due to demand-pull or cost push, is faulty. Inflation is a monetary phenomenon. It is caused by excessive printing of money tokens, and provision of credit. That was seen in Weimar in the 1920's when severely curtailed economic activity did not prevent hyper-inflation. On a lesser scale it was seen in the stagflation of the late 1970's and early 1980's, when growth cratered, but inflation rose to 25%!!!

With official interest rates at near zero, with massive money printing via QE - the UK is likely to increase QE from £250 billion to £400 billion in February - it is inevitable that this will feed through into higher prices. Despite the claims of the Bank of England, that is why inflation, even on the rigged official bases, has been more than double its target rate for most of the last three years. For one thing, it reduces the value of the pound, which means that the cost of imports rises. With demand for raw materials still strong due to the continued high levels of growth in Asia, Latin America and Africa, with rising wage costs in those countries driving up the prices of their exports, it is inevitable that the UK will face higher not lower inflation in the coming year, though statistical anomalies might cause drops during January and other months.

In the meantime unemployment continues to rise sharply, and seems headed inevitably to the 3 million mark, whilst the Chartered Institute of Personnel Managers is forecasting that the number of jobs themselves will fall sharply too. They are also warning of what they call a sigtnificant rise in passive-aggressive sentiment amongst employees. In other words, workers are feeling screwed but powerless to do anything about it, and so manifest it through a lack of co-operation, sullenness, and so on leading to a sharp reduction in productivity levels.

2012 looks like being another interesting year!

Northern Soul Classics - You've Been Cheating - The Impressions

2011-12-23T09:31:00.000Z

Another brilliant sound from the Impressions. This time my favourite, "You've Been Cheating". Great dancer. I've posted two versions, because the second has footage, but the music cuts off short. Everybody have a great Christmas, Saturnalia, or whatever.

Northern Soul Classics - I Can't Satisfy - The Impressions

2011-12-17T09:35:00.001Z

The Chicago Sound of The Impressions (Curtis Mayfield, Gene Chandler, Jerry Butler) was a foundation for many of the artists that were to follow. The Impressions, collectively and individually, were responsble for many great Northern sounds, as well as many other songs that have since been covered by pop artists like Rod Steward. There is an old piece of VT somewhere from an early 1960's "Ready Steady Go", where the Beatles were being interviewed, and commented that the Impressions were an influence on them - though listening to this classic track it makes you wonder how they could then produce Yellow Submarine!

Three Important Charts

2011-12-16T14:45:00.001Z

Newsnight a couple of days ago had a discussion with Gillian Tett, Ann Pettifor, and Louis Cooper. Linked to the discussion were a dozen charts by top economists, which they thought described the current situation. I want to highlight three of these charts.

The first chart is that, which Ann Pettifor focussed on. It shows the extent of Private Sector debt in the UK. For nearly two years, all we have heard from politicians, and from the media is a discussion about how bad Public Sector Debt in the UK is. In fact, as I pointed out a long time ago - UK Debt The Facts - at around 70% of GDP, Public Sector Debt is not at all at historically high levels. During other periods, when the economy needed to invest large amounts to build infrastructure – for example during the Industrial Revolution, when it was necessary to build roads, canals, etc., and after WWII, when it was necessary to nationalise core industries, and set up the NHS – the Debt to GDP ration rose to 250%, and was paid back out of the subsequent growth of the economy.

What Pettifor's chart shows is that the real problem is not Public Debt, but Private Debt. The Chart shows total private debt standing at 450% of GDP. It is divided into three components. It shows the debt of non-financial companies as equal to around 100% of GDP. In other words this is the debt of companies producing goods and services. Given that large companies tend to raise most of their requirements for longer term Capital via the issue of Shares and Bonds, and given that many large companies actually have built up considerable cash balances on the Balance Sheets over the last couple of decades, we can guess that most of this debt is owed by small and medium sized businesses, who will be the first to get squeezed as the economy contracts under the weight of austerity measures, and rising inflation due to excessive money printing by the Bank of England.

Secondly, the figure for household debt also stands at around 100% of GDP. This is debt built up in mortgages, Student Loan debt, Credit Card Debt, Store Card debt, and it seems increasingly debt owed to usurers involved in providing Pay Day Loans. As with the non-financial business debt, this hides a division. At the same time that there is this huge amount of debt, there are other households with savings. The average household savings in the UK is around £30,000, and approximately 30% of the population have net wealth of more than £500,000. Of course, it is possible within a single household for their to be both debt and savings. A household may have a mortgage, and yet have savings in ISA's etc. Yet, its likely that a large part of this debt will be held by people who have little in the way of savings, as a buffer to use if the need to cover this debt arises. In fact, given that its reported that around 3.5 million people are likely to resort to Pay Day Loans to cover their expenses over Christmas, and many are known to roll over these loans at rates of up to 4,000% p.a. we can also guess that a much larger number than this are barely managing to cover their expenses using more normal forms of credit. The data on the number of people whose income runs out before the end of the month, backs up that assumption.

Its clear to see then why the Government has been so keen to keep interest rates low. A huge overhang of household and small company debt threatens to engulf the economy. In the same way that Greece faces insolvency, because its assets and income is not sufficient to cover its debts, and because austerity is making that worse rather than better, as it causes the potential for income growth to fall, so a huge number of households and small businesses face insolvency for the same reasons. But, the debts of the latter make the debts of Greece pale in significance. The only thing preventing these households and small businesses collapsing into insolvency, is the fact that the majority are holding on to some income, and because the interest rates they face on their debts are at unsustainably low levels, and in part, this is made possible by borrowing against property, whose real value is also in a massive bubble. Any change in any of those factors threatens to create an unstoppable avalanche of debt. I have already set out in previous blog posts why the property bubble is set to burst. House prices could fall by anything up to 80%, when it does. Indeed, if IMF Chief, Christine Lagarde is right, in her recent pronouncements that, if current policies persist, the world faces a 1930's style Depression, then they could fall even more than that.

Once house prices start to fall dramatically – selling prices are already about 30% below asking prices, and have themselves fallen by around 10% in the last year – then Banks will stop being as lenient on arrears as they are currently. Forced selling will produce a rapid collapse as it has done in the US, Ireland and elsewhere, where prices fell by more than 60%. Any possibility of borrowing against those assets will cease. But, also given the size of that collapse, and the amount of debt outstanding, it will be the Banks and Building Societies themselves that will find that they are simply unable to recover the money lent. That is why, the Credit Ratings Agencies almost every week bring out another list of Banks that they are downgrading, as they have done in the last couple of days. The importance of that can be seen by the third component of the chart, which is the debt of the financial companies themselves.

Again, this has a two fold character. On the one hand the debts of the household and non-financial business sector will show up as assets of those Financial Companies, but in the modern economy, the lending undertaken by the latter is not done out of deposits by savers. In previous decades, in order to get a mortgage, it was necessary not only to show that you had sufficient income to pay back the loan, but that you were able to save from that income. To be granted a mortgage Building Societies required that you had saved with them for several years, and had a reasonable amount of around 20%, via such savings to put down as a deposit on the house you were buying. After the deregulation of Financial Services by Thatcher in the 1980's, that all changed. In order to compensate for falling wages, as a means of keeping up the level of consumer spending, people were encouraged not to save, but to borrow. Thatcher's Government, from the late 1980's on, began to print large amounts of money to satisfy the demand for all this credit. A policy that all subsequent Governments continued, and which stoked the current property bubble. But, the other side of this is that without large amounts of savings out of which to provide these loans and mortgages, the Banks and Building Societies are themselves dependent upon borrowing money in the Money markets in order to be able to lend it out again. This is what brought down Northern Rock, and then the US banks during the sub-prime crisis.

As the chart shows this debt amounts to around 250% of GDP. The cascade effect is clear. If households and businesses begin to default on their debts, then the Banks and Finance houses that have made these loans, will then begin to default on their debts too. Yet, as Ann Pettifor said, this much greater threat to the economy from Private Sector debt is rarely mentioned by Government or the media. The focus on Public Sector debt is clearly ideological. In fact, rather than attempting to reduce this Private Sector debt, the Government is busy trying to bolster it. It is encouraging students to take on vast amounts of debt, which current patterns of Graduate employment, and unemployment, suggests they will never finish paying back. The Government's recent measures in relation to housing are also designed not to address the real problem of the housing bubble, to encourage first-time buyers to go into further debt in order to buy massively over-priced houses.

The other two charts show just how significant this is. The second chart shows that one of the fundamental requirements for people and businesses to be able to pay back that debt is missing. Just as Greece, and other economies need strong economic growth, to be able to have any chance of repaying their debt, so, individuals and firms need strong growth in order that they can see their incomes rising. But, contrary to the Governments assurances that its austerity measures would see a rush of Capital into the private sector, creating rapid economic growth, the reality is that, as in most other economies where austerity has been adopted, the opposite is the case. The only economy where growth looks likely, where austerity measures have been implemented is Ireland. But, its growth is despite the austerity not because of it! The austerity measures there also tanked economic growth. Growth is now recovering in Ireland for the simple reason that it has a reasonably large sector of its economy that has been modernised, that is involved in high-tech, high-value production that is globally competitive. Had it not already had that, it is unlikely that investors would have flooded to establish such businesses, in a climate of economic retrenchment.

In fact, what this chart put forward by Andrew Lillico demonstrates is that the trend growth rate of the UK Economy looks set to decline sharply even from its historic average!

Lillico comments that the message of the chart is that the UK economy will struggle to grow by more than 1% p.a. over the next decade. If that were to be the case, then the consequences are pretty dire. Historically, productivity in the UK has risen by around 2% p.a. In addition, we know that the UK population is rising. If the economy were to grow by only 1% p.a. then unemployment would be set to rise by more than 1% p.a. over the next decade! But, such a low level of economic growth would mean that large numbers of those small and medium sized businesses with large debts, would find it impossible to grow their earnings at anything like the rate necessary to service them, given the inevitability that rising inflation, will at some point mean that interest rates have to rise. More immediately, not only will sharply rising levels of unemployment mean that large numbers find their household debts rising quickly – I saw a headline recently that said that the City Council's Rent Debts had doubled! - but, such slow growth will mean that household incomes will be severely restrained, meaning that a further downward twist in bursting the property bubble is inevitable.

The final chart, demonstrates just how imminent that might be.

This chart put forward by Louise Cooper from BGC Partners shows that Credit Crunch 2 is already upon us. As she says, it shows that it is now costing Banks a full 1% more to borrow short term in the markets than it was in the Summer, up from 0.2%. Yet, as she continues, even at these rates, many banks cannot find anyone to lend to them. So, whatever, the bank of England, or other central Banks decide in relation to official interest rates, the reality is that the Banks and finance Houses themselves are facing a Credit Crunch. That is at a time when they are also being told that they have to bolster their Core 1 assets, which means that they will provide less liquidity to households, and businesses, and will sharply increase the interest rates on the loans and mortgages they have already provided.

So, both households and businesses, who are both massively in debt, and whose debts make the Public debt look minor, are facing a double whammy. Increasingly squeezed income as a result of the effects of austerity, and higher interest rates on those debts, as a result of the Credit Crunch, and level of indebtedness of the banks and finance houses themselves. Moreover, as I have pointed out before the nature of private debt is much more serious than Public debt. State's own printing presses, which mean they can simply print money tokens with which they can repay their debts – and at some point, the markets will force the ECB to do that too, whatever Merkel's current opposition – but households and businesses cannot do that. Their only alternative when they can't pay is to go bankrupt, which then threatens to bankrupt those to whom they owe the money.

In his analysis of the crises of 1847 and 1857, Marx demonstrated that the crises were being caused by the implementation of a wrong and damaging policy by the Bank of England. That policy determined by the 1844 Bank Act, once suspended saw the crises quickly ended. It is quite clear that the austerity policies being adopted in the UK by the Liberal-Tories, and foisted upon the economies of Greece, Spain, Portugal, Ireland, Italy and elsewhere, as well as being proposed by the Republicans and Tea Party in the US, are equally wrong and damaging. Even in the terms of Capitalist rationality they are irrational. As Lagarde says, if the current policies are continued then, at least Europe, including Britain, faces a 1930's style Depression.

It is no task of Marxists to advise the Capitalists on the policies they should adopt. Whether, they adopt Keynesianism or Monetarism, fiscal expansion or austerity, the basic contradictions of Capitalism will remain, and a crisis resolved or avoided today will re-appear as a more severe crisis at another time. Our solution is neither form of Capitalist solution, but the overthrow of the existing chaotic, and crisis ridden system of capitalism, and its replacement with Socialism, based upon a Co-operative Commonwealth in which the means of production are directly owned and controlled by the workers, who organise production to meet the needs of society rather than for the sake of profit. But, until that time, we are not indifferent as to which solutions the capitalists adopt. Marx and Engels described this approach in their writings on the question of Free Trade v Protectionism. In his Introduction to the pamphlet they wrote on this issue, Engels wrote,

“That was the time of the Brussels Congress, the time when Marx prepared the speech in question. While recognizing that protection may still, under certain circumstances, for instance in the Germany of 1847, be of advantage to the manufacturing capitalists; while proving that Free Trade was not the panacea for all the evils under which the working class suffered, and might even aggravate them; he pronounces, ultimately and on principle, in favor of Free Trade."

As Marx makes clear, the best conditions for workers, is when Capital is expanding. It is during those times that the demand for Labour Power rises, and where, therefore, workers are able to secure higher wages, are better able to focus and rebuild their organisations and so on. These are vital conditions for workers in preparing to put forward their own forms of property, their own democracy, their own State as an alternative to those of the bosses. We cannot, therefore, be agnostic in these issues. Our focus has to be to help the workers to resist austerity, and thereby make that option less appealing to Capital, and the bourgeois politicians. At the same time, we should illustrate that the bourgeois politicians claims that “There is no alternative” are wrong, even within the terms of the existing system. That does not relieve us of the duty to explain to workers that such solutions are only palliatives, it does mean we are not left in the position of mere revolutionary phrase mongers, whose only solution is always “Revolution Now”.

Northern Soul Classics - Do Unto Me - James & Bobby Purify

2011-12-10T11:04:00.001Z

Absolute monster sound from J&B. Great brass, great vocals. Brilliant.

Cameron Relegates Britain To Third Division

2011-12-09T13:25:00.001Z

Anyone who believed that the crisis in the EU was not political should have been disabused of that belief over the last 48 hours. What stands in the way of a deal which would create the kind of political and fiscal union, and from there the issuing of EU Bonds backed by the ECB, is political wrangling between the member states, each of which has attempted to look after its own national interests – which should not be overestimated because the national interests of each country depend upon a resolution of the financial crisis and the promotion of a strong EU economy – and has had to have an eye on its own Party members, and electoral support. That has been one of the main constraints on Frau Merkel agreeing to the kind of measures necessary to resolve the situation. But her problems were as nothing compared to those faced by Cameron. One TV reporter described Cameron's position as being like someone turning up to a wife-swapping party without a wife!

Cameron had absolutely nothing to bargain with. From the beginning Britain has had a stand-offish attitude to the EU, of which it is nominally a part. British politicians of all parties except the Liberals, have reflected the continuation of Little Englander, Nationalism in their attitudes to Europe. That is one reason that, the gutter press have been able to whip up their ridiculous anti-European stories, and stoke Nationalistic sentiment. Britain was outside the Eurozone already, and Cameron had even taken the British Tories outside the umbrella of the Centre-Right, European People's Party group. Instead he had linked the Tories up with all sorts of weird politicians from Eastern Europe that in Britain would have been on the neo-fascist fringe.

The extent of Britain's isolation was demonstrated by the fact that of the 27 EU members, 23 had signed up to the deal whilst, 2 more said they would consult before signing. That left just Britain and Hungary refusing to sign the deal. This morning it now looks like even Hungary will sign. As one commentator put it, its not so much that we now have a two-speed Europe, but that we have Europe occupying one large house, and Britain being consigned to the attic like some relative everyone wants to ignore. Britain's influence has been gradually on the wane, anyway, now Cameron and the Tories have ensured that it will be completely marginalised.

But, it was again politics not economics which determined that. In reality, Cameron was put in a vice. If he agreed to the deal, then it was clear that the Tory right-wing would have demanded a referendum. If Cameron had refused that, then the backbenchers would have forced a vote as they did recently. Cameron would have had to rely on Labour and the Liberals. The Tories may well have split with an increasing number defecting to UKIP. The Liberals are already dead as a political force as a result of their Coalition with the Tories, and their abandonment of their positions on Tuition Fees, Cuts etc. that necessarily flowed from it. Such a split in the Tories would have saved the Liberals, as the Liberal MP's would have then merged into the rump of the Tory Party, but such a split would have largely destroyed the Tory Party too. The other side of a split of the Right to UKIP would have meant that the right-wing vote would be split in a similar way to what happened to Labour after the SDP was established.

But, having vetoed the deal, Cameron has now just further isolated Britain, and given further encouragement to the Eurosceptics to press further for Britain to leave the EU, which is their ultimate goal. What is also interesting is that Cameron and the Tories have emphasised their intention to rebalance the UK economy by reducing dependence on the City, and encouraging growth of the manufacturing sector. But, Cameron's position has exposed the fraudulent nature of that. At the first opportunity Cameron has been forced into defending the interests of the City and Financial Capital at the expense of British manufacturers. It was on the basis of protecting the City that Cameron refused to sign, and that means that Britain will be increasingly sidelined. Decisions that affect the ability of British manufacturers to compete in Europe will be made without Britain having a say. If that simply affected British Capitalists there would be no reason for workers to shed any tears. But, it will necessarily work to the disadvantage of British workers too. Once again, the Tories put the interests of British bankers ahead of the interests of British workers.

In the meantime the deal itself, agreed by EU members other than Britain, is still not sufficient to deal with the crisis. The real problem is this. The economies of Greece and Portugal are fundamentally uncompetitive. They do not have a large enough sector of their economies, which is globally competitive and able to sell goods to cover the costs of the goods and services that they need to import. That is not the fault of Greek and Portuguese workers, as is often portrayed in the media. It is the fault of Greek and Portuguese Capitalists, who for years were prepared to sit on their existing Capital, and make profits from low paid workers. When these countries joined the Eurozone, cheap money meant that they could raise their living standards through borrowing. Instead of using the access to cheap credit to invest in new machines, industries etc. the Capitalists in these economies simply continued in their old ways, making larger profits as workers borrowed to buy their goods. But, this problem also affects other Eurozone economies in a less acute way. The same lack of a sufficiently large competitive sector also affects Spain, Italy, and a number of other economies.

This problem is not unique to the Eurozone. In Britain for instance, there are generally speaking the same wage rates paid to workers in the North-East, as in the South-East. Certainly, workers in one area receive the same Benefits, and pay the same rate of taxes as in any other. Yet, area like the South-East are rich in high-value, profitable industries, whereas the North-East has a deficiency in such industries. The South-East is like Germany, whilst the North-East is like Greece. This is one reason the Liberal-Tories are now looking at trying to abolish National Wage Bargaining so that workers in the North-East would get lower wages. But, at the moment that is not generally the case. Because Britain is a fiscal as well as a political union, taxes collected by the central State, are then used to pay benefits to everyone wherever they live. Because, there is more employment, and higher value production in the South-East, which pays higher wages etc. the State collects more taxes from there, and pays out less Benefits. There is an automatic fiscal transfer to the North-East, because in that area, there is higher unemployment, less high value production, and therefore, less high incomes. In the North-East it is the opposite to the South-East. The State collects less tax from there and pays out more in Benefits. But, no one in Britain generally argues that the North-East should have to pay its way, or that this fiscal transfer should not occur. On the contrary, there has been Regional Policy to try to put even more State Capital into these areas to stimulate employment. Government departments have been relocated there etc.

This is how the Eurozone should work, and if it had worked like that the current debt crisis would not have arisen. As unemployment in Greece, etc rose, there would have been an automatic fiscal transfer from the Central Budget. So borrowing would not have risen to cover these payments. Moreover, under such conditions, a Central State would have had a direct incentive to try to minimise these payments by adopting growth policies that help stimulate employment within these economies. Ultimately, in order to deal with the fact that economies go through cycles of boom and bust, States do not attempt to cover all of this expenditure out of taxation. They borrow money on Capital markets to smooth out their costs. This is what the Eurozone needs to do. It needs a fiscal union, whereby each economy has essentially the same level of taxation, certainly for the main taxes such as Income tax and VAT. That tax would be collected by a Central Treasury. This Treasury would then be responsible for paying out Benefits. But, that would mean that benefits throughout this union would also have to be harmonised. All of that means that you cannot have a Fiscal Union without a Political Union. The American Colonies after all fought a War of Independence on the principle of “No Taxation Without Representation”!

And, in order to ensure that these costs were smoothed out over the longer term, it would be necessary for such a union to borrow on the Capital markets via Eurobonds. But, as has been seen in recent weeks, a condition for such Bonds being effective is that a Central Bank stands behind them, prepared to buy them up, to prevent their prices falling, and interest rates rising too sharply.

But, so far the EU leaders have still not come to accept the need for such a resolution. The leaders seem to have made a number of decisions needed to set up a fiscal union, but its not clear how extensive those measures are yet. It does not seem that there will be any central Treasury, or harmonisation of tax and benefits any time soon. Even were that to be agreed, it would take up to a year to put the necessary administrative mechanisms in place. Moreover, Merkel is still opposing the central planks needed for such a resolution – the creation of Eurobonds, and the ECB acting as lender of last resort. Yet, in the absence of those two measures, there can be no resolution, because it is impossible for Greece and other PIIG economies to pay their way, and it is probably political impossible, for Germany to raise the taxes needed for a fiscal transfer of the size needed to cover their debts, and deficits.

In the absence of that the only temporary solution is for the ECB to buy up the Bonds of Eurozone countries when they come under attack. That is what it has been doing in relation to Spain and Italy in recent days. But, as Britain found out with the ERM crisis, the markets have so much money that if they decide to attack a single country it is pretty impossible to resist for ever. Moreover, the ECB is restricted in its actions by the requirement to sterilise any money printed to buy the Bonds of Eurozone economies, by withdrawing money from elsewhere in the system. Not only is their a limit to that, but it threatens to cause a credit crunch elsewhere in the Eurozone at a time when such a Credit Crunch is developing already as foreign banks and investors withdraw funds from Europe. On top of that, the new head of the ECB Mario Draghi, said at the press Conference yesterday that the ECB would NOT be stepping in to act as lender of last resort to Eurozone States. As a result the Yields on Spanish and Italian 10 Year Bonds soared yet again.

His comments should not be taken too much to heart maybe. What he emphasised several times was that the ECB could not act in that way because the current Treaty prevents it. But, of course, at a time when Treaties are being amended on a range of subjects that does not mean that if the Treaty under which the ECB operates were amended, he would not be free to act as lender of last resort to a new European State! The markets have so far reacted cautiously to the events in Brussels. In the past it has taken them a few days to absorb the full contents of what has been done. On the basis of what I can see so far, I'd expect the markets to resume their attacks again next week. The Euro is bound to fall one way or another. If no further progress is made it will fall as markets price in its demise. If the ECB intervenes to print money to support the Bonds of sovereigns – which is a very expensive and ineffective tactic compared with issuing Eurobonds – then markets will price in inflation and a devaluation of the currency resulting from an inflated money Supply. If a settlement is reached and Eurobonds are issued, then the ECB will have to print money to backstop them, and to cover the repayments.

But, Eurozone countries will not worry too much about a falling Euro. A report from Eurocredit the other day said that many European financials were looking to inflation as a means of reducing the debt. A lower Euro would also boost competitiveness, benefiting France and Germany in particular as against Britain. Given that Cameron has now made Britain an outsider at the Party, that is something they will welcome all the more.

The Great British Property Scandal – The Real Scandal

2011-12-08T14:53:00.001Z

This week, Channel4 has been running a series of programmes entitled The Great British Property Scandal, dealing with the fact that there are 1 million empty homes in Britain, 350,000 of them for more than 6 months, a figure equal to the number of homeless people in the country. That is indeed a scandal. That a rich country like Britain – and Britain is a rich country despite what the Liberal-Tory Government tries to convey with its austerity agenda – should have ANY homeless people, should be an indictment of the Capitalist system, and a source of shame for all UK politicians. However, the programme does not deal with this. On the contrary, it is based upon the same false premises that every other TV property programme has been based upon during the whole period that the current housing bubble has been blown up. The real scandal is that many of the people in these series of programme, are the same people who for the last ten years or more have helped blow up the current unsustainable property bubble, which is, in reality the main reason why both these homes are empty, and why so many people cannot afford a home, and in turn why so many people are homeless. In fact, what the programmes do is not address that fundamental problem, but perpetuate it.

For example, one of the proposals is to establish an “Empty Homes Loan Fund”. The premise of this was demonstrated in a programme, in which George Clarke looked at some empty homes, where the owners were not renting them out, because they needed money spending on them to bring them up to rentable standards. The idea was that such Landlords would be able to get cheap loans from this Fund to do the work so they could be rented out. He examined one house in particular where the owner had re-married, and moved into the house of his new wife, leaving his old house empty. He was paying, and had been paying for some considerable time, £500 a month mortgage on this empty house. The obvious response of an economist in such circumstances, and in the current economic climate would be something along the lines of “What a muppet! Sell the house for what you can and save yourself £500 a month!!!” To be fair Clarke did ask why the owner was not selling, to which the answer came back, “Its not the right time to sell!” This presumably means that the owner is under the delusion spread by papers like the Daily Express, and fostered by all those TV property programmes over the years, that the price of houses always goes up except for temporary set backs, and so house prices are likely to rise sharply in the future.

But, of course, they are not. Not only are house prices in an historic bubble, but even if they were not, then in conditions where the economy is facing at best no growth, and more potentially a severe recession, its likely that house prices will be falling significantly. The delusion of the owner is typical of that held by people towards the end of such a bubble going back to the Tulipomania and beyond. But, surely a programme which claims to be dealing with the Great Property Scandal, should have been setting him straight, surely it should have been attempting to undo some of the damage all those TV Property Programmes have done over the years in helping to create the current situation! But, no.

Instead, what was proposed was a continuation of the very things, which have created the current scandal. It was proposed to provide the owner with a cheap loan to do up the house so that it could be rented out. In other words, a relatively well-off property owner is further subsidised by the provision of cheap credit, in order that they can exploit some future tenant, rather than have to face reality, and sell their property at a more reasonable price than that they expect to receive. But, it got worse from there. Having made the house suitable for renting, a new tenant was found. This was a young woman with several kids, who was living in terrible conditions. Unfortunately, she seemed to have no visible means of support, and was considering going to University, where she would no doubt have to run up, further huge debts, as with other students.

Herein, of course, lay the reason she was living in sub-standard accommodation in the first place – inadequate income to be able to rent somewhere decent. But, given that the owner of the property was paying £500 a month mortgage, BEFORE they took out the additional loan to do the house up, how on earth was this unfortunate woman expected to be able to pay a sufficient level of Rent to cover the costs of the owner? It was inevitably setting up the woman to either go into serious debt, or be evicted when she could not pay, or else for the owner of the house to have to be making a monthly loss on the rental income received compared with the mortgage paid out!

This was a similar story in another example, in which Phil Spencer did up some empty properties, and flats over shops, into which were moved a number of homeless people, who had been living on the streets etc. But, again, the real reason these people were homeless was because they did not have a sufficient income to be able to rent or buy somewhere to live! It is like the situation with famine. The reason that people in parts of the world die from starvation is not because there is insufficient food. On the contrary, the world is able to produce, and does produce, far more food than is required to feed all of its population. The reason people starve is because they cannot afford to buy the food they need. The same is true with homelessness, and the inability of other people to buy a house. It is because house prices are too high. If these programmes wanted to deal with the Great British Property Scandal they would be doing everything they could to crash house prices, rather than perpetuate the current bubble.

More than 80% of the properties that are empty in Britain are privately owned. The reason the owners do not sell them is because they are under the delusion that prices will not fall drastically. If they felt that prices were going to fall by 70-80%, which is how much I believe they will fall, and is consistent with the kinds of falls we've seen in the US, Ireland, Spain etc. where similar bubbles were blown up, then the owners of these properties would be likely to rush to sell them tomorrow. It would mean, at those kinds of prices that many people now unable to buy would be able to do so. It would put strong downward pressure on Rents as current renters, would be able to buy. That would mean that many of the homeless would then be able to move into these rental properties at more reasonable levels of rent. Moreover, it would put strong downward pressure on land prices, meaning that a large component of the cost of building new houses would be reduced. It would also be an incentive for those builders holding on to large land banks in the expectations of rising land prices, to sell them, or get houses built on them quickly.

It would also mean that ordinary workers could begin to form their own housing Co-ops to build houses for themselves to be owned and controlled Co-operatively. It would mean they could begin to provide employment for some of those within their communities, who are unemployed, with work building those houses, even if only initially in unskilled work. It would prove the basis for setting up proper training and apprenticeships for young workers in these communities, and so on.

But, of course, its unlikely that any TV property programme is going to advocate such measures. It would call into question all those other programmes they have made that helped blow up the current bubble, which in turn has caused the problems of so many millions of people. And, of course, no doubt they too hope that the current falls in prices are only temporary. Then they can get back to their old ways concentrating on those programmes that fool people into the belief that rising house prices are a good thing rather than a cause of misery.

Merkozy Proposals Will Not Resolve Euro Crisis

2011-12-06T21:13:00.003Z

Recent days have seen massively intensified pressure to bring about a resolution of the Eurozone crisis before 9th December. Sarkozy said the other day that he and Merkel intended to "frog march" their proposals through, such was the urgency of bringing about a resolution. The deadline itself set a week ago in terms of "9 Days to save the Euro" itself puts pressure on politicians, bureaucrats, and Central Bankers to reach an agreement. If that were not enough, S&P have come out and threatened to downgrade the credit rating of virtually all Eurozone economies including Germany! But, the proposals put forward by Merkozy cannot resolve the crisis.

Those proposals are still based on the idea of pushing through the kind of austerity measures which have already collapsed the Greek economy, sent Ireland into a sharp contraction over the last year, and are having the same consequences in Portugal, Spain and probably shortly Italy. There is a reason the proposals are framed in these terms at the moment. Elections are due shortly in France and Germany. In Germany, in particular, any suggestion that Merkel was about to sign up to a deal whereby German taxpayers wrote a blank cheque for every Government in Europe, would be electoral suicide. Anyone who has been involved in politics at any kind of administrative level, or involved in Trade Union negotiations will see through much of the rhetoric, to understand that the participants real positions are not those on public display.

The proposals put forward by Merkozy argue for establishing in law the 3% limit for deficits as a proportion of GDP, that was originally formulated at Maastricht. Every state would have to put into law something along the lines of a Balanced Budget requirement. For now, Merkel continues to oppose the idea of Eurobonds, and of the ECB acting as lender of last resort. But, in reality, this week the ECB has already been forced to intervene to buy up the bonds of peripheral economies in Spain and Italy, because the Yield on those Bonds had risen to unsustainable levels. In theory, it has to sterilise this intervention, by withdrawing funds from elsewhere. But, ECB intervention is now becoming so great that this sterilisation will become impossible. Already, the argument is being put forward that it would be possible for the ECB not to sterilise this money printing, on the basis that its mandate to control inflation justifies it due to the threat of deflation.

Greece has already demonstrated that without growth, it becomes impossible to repay debts, and growth can only arise through stimulation of these economies, promoting investment. The only rational means for that to happen is either through fiscal transfers from surplus economies within the Eurozone i.e. Germany, or through borrowing. But, if each Eurozone economy is to be constrained in its deficit then this is doomed to failure. Greece and other economies cannot borrow at anything approaching sustainable levels to achieve that. Unless, therefore, Germany is about to make a huge fiscal transfer to Greece and other debtor economies to cancel out their debts, and provide the resources for investment to bring about the necessary growth, the only option is the issuing of EU Bonds i.e. to borrow on global Capital Markets the money required, and backed by the fiscal power of Germany, and the Monetary power of the ECB.

Its doubtful Merkozy do not realise this, and certain their advisors have pointed it out to them if they didn't. Its likely then that all we have seen so far is the opening steps in a diplomatic dance of European politicians prior to them bringing about a solution based on the above. If that is not the case then the Euro is dead, and we are looking at a huge financial, economic, and political crisis. Without such a resolution the markets will attack the Bonds of all Eurozone economies, as the S&P potential downgrading shows. It would mean Greece exiting in short order, followed by a collapse of its economy, and a knock-on effect to international Banks that would put Lehman's in the shade. It would be quickly followed by the exit of Portugal, Ireland, Spain, and probably Italy and most of the other smaller economies.

Because of the seriousness of those consequences its doubtful that EU politicans will fail to come to the necessary conclusions. It is also why Cameron has been left powerless. He cannot stand in the way of Eurozone leaders implementing a resolution with or without him. If he stands aside to avoid upsetting his backbenchers and their demands for a referendum, so that an agreement of only the Eurozone 17 is made, then Cameron and Britain is marginalised, cut out of all future decision making in that regard. He cannot concede to a referendum that would delay a new Treaty, because he can't guarantee he'd win it, and the delay would be sufficient to destroy the potential for a deal anyway.

The Liberal-Tory policy on Europe has hamstrung them, but the real problem arises from Britain's stand-offish attitude towards Europe over decades, including the decision not to join the Euro in the first place. It means that Britain is now, and for the foreseeable future merely a by-stander when it comes to European decision making. That will be welcomed by the Nationalists. The Tory eurosceptics and their co-thinkers in UKIP and the BNP, will welcome such a development seeing it as a step on the way out of Europe altogether. They will be joined in that approach by the National Socialist Left in the CPB, and other such organisations. That would, of course, be even more disastrous for British workers.

The idea that Britain could prosper outside the EU is mad. It could not have the same kind of relation that Norway or Switzerland have to the EU, as some of these nationalists often argue, because Britain is a much larger economy than either Norway or Switzerland. With its continuing links to the US, and Imperial history, Britain would be seen as a competitor to an EU State, and would be treated as such. But, its inevitable that these bourgeois politicans should end up in this situation, because they continue to see things in Nationalist terms themselves. Only workers armed with a revolutionary, socialist, internationalist programme can begin to provide workers in Britain and the rest of Europe with a solution to their problems.

The basis for that has to be the building of a European wide Labour Movement, a single European Trade Union Movement, a single European Workers Party, fighting for a consistent democracy throughout the EU, fighting for common Trade Union Rates of pay, Benefits and conditions across the whole of Europe, and opposing the current policies of austerity that are driving Europe into a severe crisis.

Northern Soul Classics - Tell Her - Dean Parrish

2011-12-03T10:22:00.000Z

Top stormer from the man himself. Dean Parrish at his best. I've done some backdrops to this at the Torch over the years.

The Egyptian Revolution - Part 9

2011-12-01T12:31:00.001Z

The final group that should be mentioned here, is of course, the bourgeoisie proper. In a society like Egypt, where the Capitalist Mode of Production is established, and where the State is a Capitalist State, but a Capitalist State under the control of a military-bureaucratic elite, the bourgeoisie proper does what it has always done – it adapts. The Bourgeoisie's most prized possession is the Capitalist State. As Lenin, argues the best political shell for Capitalism is the democratic Republic, but where the bourgeoisie is weak either absolutely because economic development is at an early stage, or relatively because of the strength of other classes – the Landlords, or the Proletariat – then the State bureaucracy is able to rise up above the contending classes, and exercise control over the State, forced to protect the Mode of Production, and to ensure the conditions of its reproduction, but doing so in a way so as to ensure its own narrow interests. In France, it did not take long, after the Nazi occupation, for the French Capitalists to adjust so as to continue exploiting French Labour Power under a different political regime. In that respect, the position of the Egyptian bourgeoisie is little different to that of its foreign brethren. A Bonapartist regime, that is always prone to severe and unanticipated disruption, that is corrupt, and therefore, presents Capital operating under its remit with additional and unknown costs, which drains considerable sums, from the pool of Surplus Value, into unproductive consumption, as huge revenues, appropriated by the bureaucratic elite, and which can change its allegiances at a whim, is not a preferred option for Capital. But, even such a Capitalist State is better than no Capitalist State, it calculates. For the domestic bourgeoisie, limited in the extent to which it can simply relocate its operations overseas, and for sections of multinational Capital, which because of its sphere of operation can or has little choice, but to do business with such a regime, the options are limited. The domestic bourgeoisie are, even in a developed economy, a relatively weak force in terms of their numbers. They can only effect changes if they can win over, or attach themselves to, larger social classes. Despite the fact that some “anti-imperialists” seem to believe that “Imperialism”, has some God like power to install whatever, political regime it desires, the same is true. It is impossible to install bourgeois democracy on a society where the basic requirements for its existence – a reasonably developed economy, a secure bourgeoisie, and a sizeable middle class – are missing.

In fact, the differing parts of “Imperialism” understood properly respond in different ways. A Multinational company whose main operations are related to mineral extraction, or to commerce might well be able to operate within the confines of such a regime quite happily, because it is the kind of regime such Capital has grown up with from the days of Mercantilism. Large multinational firms, producing industrial products may be more than happy to do business with such a regime in so far as selling goods to it, or into its markets, but may fight shy of actually locating production within its borders. Yet other companies, for example Telecom companies, may look to locating most of their production outside its borders, but will have to conduct some production and other activity within its borders in order to establish communication networks etc. which they seek to sell to the regime. But, Imperialism is not just made up of Capital. Imperialism as a global system of Capital, also implies the existence and operation of all those other necessary elements of the Capitalist Mode of Production – states, be they national or supra national, and quasi state bodies - and in an age of multinational corporations, and transnational finance, the old coincidence between Capital and the nation state is broken, as many Marxist economists such as Radice, Lipietz, and others have long since demonstrated. Ford in its operations in Britain, Belgium etc. does not look to the US State to protect and further its interests. Under modern Imperialism, it is able to look to the British State, or the Belgium State, or the EU proto state to look after its interests just as adequately as the US state will look after the interests of British, Belgian, or EU capital invested in the US.

But, in turn these state formations, no longer have interests synonymous with multinational Capital. Indeed, they may have contradictory interests. Multinational companies, and transnational banks, may well look to the establishment of wider international bodies that better serve their interests in operating on a global scale, whereas the nation state has other interests. It has to continue representing the interests of Capital as a whole within its own boundaries. And, as a consequence it also has to take into account wider considerations, such as the integrity and defence of the state, its longer term strategic interests in relation to its own economic development and welfare, its secure supply of energy and raw materials etc. As a consequence, whatever the interests of various multinational companies, nation states will continue to have diplomatic relations, and strategic alliances with all kinds of states, in order to further these interests. And, of course, in addition to the longer term view, and strategic policies of the State, has to be taken into consideration the shorter term limitations and regulation of such states imposed upon them by the political process within every bourgeois democracy i.e. the point made by Paul Mason that unlike State officials, politicians have to get elected!

In short the bourgeoisie as a whole has a clear and historical incentive to see Bonapartist regimes replaced by bourgeois democracy, particularly where it has space to be able to buy off a sufficiently large section of society, but it will only act decisively to bring about such change, where and when it is confident of success. That is why in Egypt, its preferred method of transition is to be able to persuade the existing military-bureaucratic elite that its time is up, and that its privileges can be largely protected under the new regime. In fact, if it is unable to do that, if the Bonapartist regime attempts to cling to power, then as I have written in my blog Egypt – What Is To Be Done, the concept of Permanent Revolution, may become applicable. Under those conditions, the nature of the revolution will be much more thoroughgoing, and reach down deeper into the social relations of the society. The elite, could then only be overthrown by a mobilisation of the workers, and under those conditions, the workers would necessarily have to push forward their separate interests, and the divisions between the workers and the bourgeoisie and petit-bourgeoisie would be forced wider. It is under those conditions that the bourgeoisie would take fright, throw its support behind the regime, and a new clampdown would begin. In the last few months, and over recent days, we have seen those divisions begin to open up inside Egypt, as it has become clear that the Generals do not intend to simply hand over power, and have sought to establish new social support, by doing deals with the Muslim Brotherhood, which represents the most organised bourgeois political force within the country.

Back To Part 8

N30 In Stoke - Video & Speeches (3)

2011-12-01T09:10:00.002Z

Ron Ffoulkes from UCU

N30 In Stoke - Video & Speeches (2)

2011-12-01T09:08:00.001Z

N30 In Stoke - Video & Speeches (1)

2011-11-30T20:01:00.004Z

This is one of the speeches from the N30 Rally in stoke today. It was a moving speech by the daughter of the late John Urwin, who died in September. John was a good comrade who I first met just before the beginning of the 1984 Miners Strike. He was an electrician at Hem Heath Colliery, and I was with him in Hem Heath Club on the day that Miners there voted to come out on strike. Later after going to University, he became a lecturer in the TU Studies Department at Stoke College, where I met up with him again as a UNISON Branch Secretary, when I was trying to ensure that all of our stewards were properly trained. In fact, John's son was also one of my members, and even as a young man, he showed the same commitment to standing up for his rights.

In another speech I will be uploading soon, one of John's fellow lecturers, Ron Foulkes, who had been T&G Convenor at the local Rists factory, and who was also a Councillor from my old LP Branch, takes up this idea in a quote from Robert Tressle's "Ragged Trousered Philanthropists", talking about the role we all have to play in acting to make a difference.

The Egyptian Revolution - Part 8

2011-11-29T16:19:00.001Z

In January 2008 Mahalla workers drew up a new list of demands. As well as higher wages, bonuses and allowances, it included a rise in the national minimum wage from 35 Egyptian pounds (£E) to £E1200 (£140) a month. It had not gone up since 1984! They announced a strike on April 6th if their demands were not met.

Several weeks later a group of campaigners against the Mubarak regime called for a General Strike on that day. The call was not made by organised groups of workers but was supported by some small opposition parties, intellectuals, some youth and radicals. The General Strike call spread rapidly through the Internet and text messages. Around 65,000 people signed up to a Facebook site promoting the strike. This represented a movement of largely middle class youth inspired by the growing displays of working class power.

The Interior Ministry warned that there could be violence and that people should stay off the streets. Thousands of workers did take strike action but a General Strike did not take place. In Mahalla, some of the workers’ leaders, who had played a leading role in the previous strikes, called the strike off after the monthly food allowance was doubled on April 5th. The strike had been due to start at 7.30am but at 3am hundreds of plain-clothes security moved in to the factory and arrested anyone who tried to speak out. Despite this many stayed away from work.

April 7, saw more battles with the police in Mahalla. A demonstration of 2,000 started at 4pm and grew to several demonstrations with up to 40-50,000 involved. Chants went up against the government and for the release of those arrested the previous day. It was reported that children were “throwing rocks, in a scene similar to the Palestinian intifada, against Central Security Forces officers and soldiers, while chanting ‘The revolution has come! The revolution has come!’”

On April 8th, Prime Minister Ahmed Nazif went to the factory and announced a bonus of 30 days wages! "We know Mahalla is suffering and you have passed through many crises," he told workers. The regime has balanced between repression and concessions whenever powerful workers’ movements have occurred. After Mahalla, the regime was less confident to crack down on workers in the way it did on students, community or democracy campaigners.

The April 6th Youth Movement, one of the initiators of the “Day of Anger” on January 25th 2011, took its name from these events. It attempted to repeat the success on May 4th 2008, Mubarak’s 80th birthday. However, no significant strike action took place that day and street protests were largely prevented by the security forces.

In fact, what we see developing is something that is quite common in revolutionary upheavals. Firstly, we see different social groups having different objectives. The workers who began the movement, were concerned with immediate economic concerns. Looking back to when these disputes began around 2006, it was precisely at that point, around 7 years into the new Long Wave Boom, where the economic tide had had long enough to begin to significantly raise the demand for labour-power. Trotsky, who had begun to analyse the effects of trhe Long Wave as described by Kondratiev – though Trotsky disagreed with Kondratiev in terms of method and detail – spelled it out,

“But a boom is a boom. It means a growing demand for goods, expanded production, shrinking unemployment, rising prices and the possibility of higher wages. And, in the given historical circumstances, the boom will not dampen but sharpen the revolutionary struggle of the working class. This flows from all of the foregoing. In all capitalist countries the working-class movement after the war reached its peak and then ended, as we have seen, in a more or less pronounced failure and retreat, and in disunity within the working class itself. With such political and psychological premises, a prolonged crisis, although it would doubtless act to heighten the embitterment of the working masses (especially the unemployed and semi-employed), would nevertheless simultaneously tend to weaken their activity because this activity is intimately bound up with the workers’ consciousness of their irreplaceable role in production.

Prolonged unemployment following an epoch of revolutionary political assaults and retreats does not at all work in favour of the Communist Party. On the contrary the longer the crisis lasts the more it threatens to nourish anarchist moods on one wing and reformist moods on the other. This fact found its expression in the split of the anarcho-syndicalist groupings from the Third International, in a certain consolidation of the Amsterdam International and the Two-and-a-Half International, in the temporary conglomeration of the Serrati-ites, the split of Levi’s group, and so on. In contrast, the industrial revival is bound, first of all, to raise the self-confidence of the working class, undermined by failures and by the disunity in its own ranks; it is bound to fuse the working class together in the factories and plants and heighten the desire for unanimity in militant actions.

We are already observing the beginnings of this process. The working masses feel firmer ground under their feet. They are seeking to fuse their ranks. They keenly sense the split to be an obstacle to action. They are striving not only toward a more unanimous resistance to the offensive of capital resulting from the crisis but also toward preparing a counter-offensive, based on the conditions of industrial revival. The crisis was a period of frustrated hopes and of embitterment, not infrequently impotent embitterment. The boom as it unfolds will provide an outlet in action for these feelings.”

Flood Tide

This is a potent antidote to those who operate with a crude theory, which comes to the strange conclusion that it is only by the impoverishment, and demoralisation of the working-class via some apocalyptic crisis that it can raise itself up to be fit to rule, and to challenge for power!

But, the workers, being very practical people were mostly concerned with their immediate economic condition, rather than any wider issues. But, we then see another common feature of revolutionary upheavals. The banner passes to another social group. The revolution is characterised by combined and uneven development too! The petit-bourgeoisie, and middle classes are drawn in behind the workers, drawing their own confidence from them. But, although, many of the middle classes, particularly the unemployed professionals, the young graduates that find changed circumstances have left them with an uncertain future, that Paul Mason referred to above, have immediate concerns too, their means of voicing those concerns, their means of addressing them are markedly different from the workers. The workers are brought together in frequently large conglomerations, such as the textile workers at Ghazl al-Mahalla textile mill with its 28,000 workers. Their traditional means of redressing its concerns is via industrial action, which by its nature is focussed on the place of work. But, the petit-bouregoisie and the middle classes have a quite diferent relation to the means of production. In the case of the peasantry and small artisans, they own their means of production, and depend upon their own economic activity to make a living. Although, strikes by such petty property owners are not at all unknown, they occupy a completely different role than for workers, who in striking hit at the owners of Capital. The professionals too where they have immediate economic concerns look to different solutions to them. They lack the collective economic muscle of the industrial workers. The solution to their immediate economic concerns is seen coming from a different route, from economic reforms, and liberalisation that takes the weight, particularly of a corrupt and inefficient State, off their backs, nad gives them a greater say in decision making, in order to be able to effectively press for such reforms, and for the kind of meritocracy they believe their status should be rewarded by. Their immediate frustrtations, therefore, tend to be reflected not by industrial action, but via popular protest, and the focus is not the workplace, but the Public Square. As Lenin, points out in his “Two Tactics of Social Democracy”, then we see that these different forms of protest, not only reflect the different social position of the different social strata involved in the revolution, not only reflect their differing concerns, but also provide us with a forewarning of the contradictory interests of these temporary allies, because the concerns of the petit-bourgeoisie and middle classes for the introduction of bourgeois democracy within which they seek to increase their voice, has as its aim the kind of economic reforms, the introduction of meritocratic principles, which are alien to the interests of the workers.

Back To Part 7

Forward To Part 9

The Egyptian Revolution - Part 7

2011-11-28T13:56:00.001Z

Unlike 1848, the bourgeoisie across MENA are not attempting to overthrow the political regime of some other ruling class. In 1848, the political regime was still under the control of the old landed aristocracy. Across MENA today, the Capitalist Class is the ruling class, it is its State which rules society. The struggle it is waging is against the military-bureaucratic elite that controls that State, and which has become powerful relative to the class whose interests it ultimately serves, just as indeed the Stalinist, Bonapartist military-bureaucratic elite became powerful in the USSR and the other Stalinist States. But, as Trotsky spelled out in relation to the Stalinist bureaucracy in the USSR, the more that elite becomes entrenched, the more the Political Revolution, required to remove it, takes on a more thoroughgoing social character. In relation to the USSR, there was no other healthy, Workers State in existence, which could have pressed down upon the Soviet bureaucracy, and provided assistance to the Russian workers. The Russian working-class existed as a ruling social class in complete isolation, which is what made their rule so weak, so dependent upon the State bureaucracy, and which, in turn provided the strength of the position of the State bureaucracy. But, the Egyptian ruling class does have lots of support from ruling Capitalist classes throughout the globe, and those Capitalist Classes have every incentive as set out above for wanting to establish their “best possible political shell for capitalism” across MENA.

To that extent, in Egypt, the Capitalist Class may be able to effect a fairly stable transition from the political regime of Bonapartism to bourgeois democracy in the same way it has done across much of Latin America, and those parts of Asia, which have experienced rapid economic growth in the last 30 years. What is more, just as this rapid economic growth in Asia and Latin America, has facilitated the adoption of the kind of strategy that was outlined by Engels, i.e. the adoption of some form of Social Democracy as a means of buying off and incorporating the working-class – Lula is probably the best example of that – so the Egyptian ruling class, especially with the assistance of its international brethren via the establishment of some of Marshall Plan For MENA, as I set out recently, may be able to accommodate workers demands for better wages and conditions. The Capitalist Class of today, is much more savvy in how to achieve such things than was its 1848 counterparts.

Under those conditions the strategy set out by Marx and Engels after 1850, and by Lenin in his “Two Tactics Of Social Democracy”, seem even more appropriate. The development of the working-class in Egypt within the context of the unfolding revolution gives considerable hope for the success of such a strategy.

In reality, in Egypt over the last few years there have been increasing signs of worker discontent, just as there have been in other parts of the world such as China, where the State has attempted to control workers demands via State run unions. According to Socialist Alternative,

“Two million workers have taken part in 3000 strikes and industrial actions since 2004, the largest movement of the working class in the Middle East for decades.

Although virtually illegal, strikes increased from 222 in 2006 to 650 in the first nine months of 2007, involving 200,000 workers. In August 2007, alone, there were 100 industrial actions.”

They detail a number of workers disputes such as,

“when Ghazl al-Mahalla textile mill (with 28,000 workers the biggest in the Middle East) became the centre of workers’ militancy. A strike and occupation forced the bosses to make big concessions. Women workers played an important role. Five thousand workers tore up their membership cards of the official union in March 2007 and a new organisation emerged, the Textile Workers’ League.

By September 2007, the workers had still not received the bonus agreed as part of the settlement, worth 150 days pay. A mass meeting of 10,000 workers decided to strike and occupy. Despite threats of police, army and prosecution 10,000-15,000 slept on the premises. During the day, over 20,000 workers were present, organising their own security guards and food deliveries.

The strikers demanded pay rises in line with inflation, affordable housing and the resignation of the official trade union leaders. “We want a change in the structure and hierarchy of the union system in this country,” said Mohammed El Attar, one of the strike leaders. “The way unions are organised is completely wrong, from top to bottom. It is organised to make it look like our representatives have been elected, when really they are in fact appointed by the government.”

Workers in Kafr al-Dawwar textile mill near Alexandria struck in solidarity for several hours and Grain Mill workers demonstrated. Workers organised collections across Egypt. After a week the Mahalla workers won a stunning victory.

In fact, these developments, reflect the kind of transformation of the world working class movement as a result of the progress of the Long Wave Boom after 1999, that I had previously outlined. In my post, Prepare To Dust Off The Sliding Scale, I wrote in 2007,

“As the economic expansion of the upswing begins this demoralised and weakened condition is not easily shaken off. Confidence has to be restored, organisation rebuilt, new leaders developed. It takes time, and with new more productive technology the demand for labour may not rise quickly, and may rise in new unorganised industries. Indeed each Kondratieff upswing has tended to see the emergence of a new economic powerhouse that challenges and replaces the former dominant economy – in the present case China appears to be fulfilling that role, and that may require the development of a whole new Labour Movement

I think all of these elements can be identified in the present conjuncture, and that should give confidence to Marxists that once more the conditions are developing for militant working class struggles. How these struggles manifest themselves will differ. In China wages are rising by 10% plus per year, and there are clear signs that Chinese workers are beginning to become more organised. The same is true of workers in South Korea and other rapidly growing Asian economies.”

That was manifest in Egypt too.

“During the summer of 2007, the movement broadened to include white-collar employees, civil servants and professionals. The single largest collective action of the entire strike movement was the December 2007 strike of 55,000 property (real estate) tax collectors employed by local authorities. After three months of strikes, a 13-day sit-down protest in front of the Finance Ministry by 5000 workers a day ended with a great victory. The strike committee continued to meet together and a year later formed Egypt’s first independent trade union.

Abd El-Kadr Nada, Assistant General Secretary of the new union, told the CWI in 2009, “There haven’t been free trade unions in Egypt since the 1920s. The government philosophy has been to build unions to control the workers and so they’ve not allowed independent unions to start. They are scared more independent unions will succeed. They are scared a revolution will happen.” (op.cit.)

Of course, Marxists have to warn workers that independent Trades Unions, are not a solution to their problems either. The whole strength of bourgeois democracy is based upon the idea that contending interests are able to struggle for their interests on something approaching a level playing field. But, no such level playing field exists. The whole basis of the Trades Unions is to continue to assume the continued existence of Class Society, and, therefore, the dominance of Capital. That dominance of Capital is itself sufficient, as Lenin points out to ensure that even “independent” Trades Unions will act as conveyor belts of bourgeois ideology, or continuing the idea of simply bargaining within the system, and will as the British Bosses soon recognised even be useful means for conveying into the working-class the kinds of “sound economical doctrines” that Engels refers to above.

Back To Part 6

Forward To Part 8

Northern Soul Classics - Working On Your Case - The O'Jays

2011-11-26T09:51:00.000Z

Classic piece of early Northern from the brilliant O'Jays reminiscent of the Wheel and the Torch.

New Tory Housing Policy Undermines House Prices Further

2011-11-25T15:49:00.000Z

The Liberal-Tory proposals to bring in a Government backed guarantee for first-time buyers of new houses, were it to work, would be yet another downward pressure on house prices, and would work to disadvantage private sellers of existing houses.

The Government is caught in a cleft stick. On the one hand, it has to recognise the fact that there are vast numbers of people who would like to buy a house, but who simply cannot afford to do so given the current bubbled up prices. So, the Government is trying to introduce measures that would make more houses available. But, it wants to avoid a fall in house prices, for several reasons.

For one thing a large part of the Tory constituency of voters, is made up of people who if not Middle Class, aspire to be so. Their view of their status and well-being is inordinately bound up with what the price of their house is considered to be. That is why the Daily Express, which also caters for this group, continually has ridiculous front page headlines proclaiming that House prices are “surging”. For another, large numbers of people have mortgages on these houses, as well as large amounts of credit card, student and other forms of debt. With, wages being squeezed, inflation rising, and employment prospects uncertain, a fall in house prices, alongside a rise in arrears and defaults could send UK Banks and Building Societies into a tailspin.

So, ironically, the Liberal-Tories, who have built their entire political narrative around a childish comparison of national debt with household debt, find themselves not only trying to get Banks and Building Societies to engage in the kind of reckless lending that led to the first Credit Crunch, but also, through schemes like the one they have just announced, attempting to get people who clearly cannot afford it, to take on large amounts of additional debt!

The Liberal-Tories are trying to get people to take on this additional debt via another scam. Having insisted that Banks and Building Societies lend more responsibly, and at the same time rebuild their Capital ratios, they now complain that the Banks are doing precisely that. The Banks have returned to the policy that used to apply until recent years, of expecting that borrowers should provide a minimum level of deposit, of around 20%. Many first time borrowers seem unable to provide even this minimum deposit. In part, that is because the savings culture that used to exist has disappeared in a society geared to consumerism, and instant gratification. In large part, it is also due to the fact that house prices are around four times their long-term inflation adjusted average, which is manifest also in the fact, that house prices are at historic highs as a multiple of average household incomes.

The obvious response to that was made by David Grossman on Monday's Newsnight. He put it to, John Stewart of the Home Builders Federation that if buyers could not afford to buy, and lenders were not prepared to lend, then house prices in such a market should fall. That is indeed, what orthodox economics, and the apologists of Market Capitalism continually tell us. However, Mr. Stewart, disagreed. First-time buyers could not raise the amount of around £50,000, for a 25% deposit on a new £200,000 house, he claimed. But, also even if prices fell by 50%, they still would not be able to save the £25,000 then required. There are of course, a number of obvious responses to this argument.

Firstly, it suggests that prices need to fall then by more than just 50%. Secondly, if potential buyers are unable to save even this level, it suggests that maybe they are not suitable to be buying such a house. If a couple could not, over a period of years, manage to save even £25,000 for such a deposit, then it suggests that either their income is too low, or the management of their personal finances is so poor that were they to take on such a mortgage they would undoubtedly have difficulty in making the payments, especially given that monthly mortgage payments are inevitably going to rise sharply as interest rates rise from their historically low current levels. It would be a cruel deception to encourage such people to take on debt under those conditions. Finally, first time buyers are generally younger people, who one would not expect to be able to buy a new house as their first home. If the price of new houses fell, then this would make it easier for people who already have a property, but who want to move up to a better new home, to do so. It would then mean that their houses became available at even lower prices for the first-time buyers to move into.

This shows why the Liberal-Tory idea of making this subsidy available to only first-time buyers, and only for new build properties is nonsensical. In fact, as Merryn Somerset Webb commented, later in the programme, the best advice that could be given to first-time buyers, rather than take on more debt, as the Government was advising, was not to be first-time buyers i.e. sit tight whilst house prices continue to fall and rent until prices become affordable. In that interview, she goes on to make the valid observation that what the Liberal-Tory measure amounts to is, not help for the first-time buyers, but a cynical means by which to provide assistance to the house builders, and to ease their cash flow problems.

In 2008, the Governor of the Bank of England, Mervyn King, came out and stated openly that it was not the duty of the Government or the Bank of England to guarantee the loans taken out. It was the responsibility of the lenders to ensure that those who they lent money to were good credit risks, and to pay the penalty via those loans going bad, where they failed to do that adequately. The Liberal-Tories have spent the last two years echoing that message. Now they want to do the exact opposite. In stark contrast to their mantra that you cannot get out of debt by taking on more debt, they want to encourage individuals to do precisely that by racking up debt of all kinds from additional student debt, to now encouraging people to buy over-priced houses they cannot afford. That is in addition to the Government by-passing the Capital Markets, and proposing to provide a guarantee for a new Financial Derivative bundling up iffy loans to small business, via their proposals for Credit Easing.

As City AM Editor, Allister Heath, pointed out in the programme, by intervening at this time, in this way, the Government were setting taxpayers up for a fall. House prices are continuing to fall at a time when unemployment is rising, and defaults are bound to rise. It would then be the Government, i.e. the taxpayer, who would then have to pick up the bill. Why, he argued correctly, should someone living in a Council House, who cannot afford to buy a house, and who has not recklessly attempted to do so, have to bail-out someone who has, or, in fact, bail-out the bank, for having made a reckless loan. He is right. There are good reasons that Banks and Building Societies are not lending to people who cannot demonstrate even a minimal commitment to the house they want to buy, in putting up a reasonable deposit. In part, it was making available mortgages on that basis in the past 20 years, which not only led many people into vast amounts of debt, but which also blew up the huge current housing bubble.

According to Rightmove, asking prices for houses fell by 3.1% in November compared with October. It is the largest monetary fall in asking prices since December 2007, when the last Credit Crunch was starting to take hold. But, as I have pointed on in my blog post House Price Crash, the figure for asking prices is highly deceptive. Sellers continue to be deluded as to what a reasonable price for their house is. They want the best of both worlds, by expecting to buy their next house at knock-down prices, whilst still obtaining the previous high price for their existing house. Selling prices are around 20-30% below asking prices already, in some cases more than that. In the last couple of weeks I have been doing a number of leisure drives around the area. It doesn't matter whether I go North, South, East or West, I have never in my lifetime seen so many houses up for sale. In every road there is a forest of for sale signs, and I know that some of these houses, despite having been reduced by more than 20% over recent months, have been up for sale for around a year.

Rightmove also point to the fact that the only reason for a small up tick in sales, and mortgage approvals in recent weeks has been due to Buy-To-Let Landlords, taking advantage of falling prices and easier credit, to buy additional properties. But, that too is a negative contrarian indicator. The Buy-To-Let Landlords are not sophisticated investors. They are amateurs, individuals who have been encouraged by a thousand TV property programmes to believe that its easy to get rich quick through buying and renting property. Such investors are always the last “Bigger fools” to enter an overstretched market before it crashes. Exactly, the same could be witnessed in the Technology Bubble of the late 90's. Then too, no one wanted to hear the lone voice warning of a crash. Those carried along on the wave of euphoria, continued to argue that things would be different this time, right up to the point when the NASDAQ crashed by 75%!!!

But, the FT last weekend showed why the measures are not likely to work anyway. In fact, it will not be the Government that is first in line to pay up, when the loans go bad. The FT reports,

“Instead, homeowners would still lose their deposits before the Government suffered losses, which would be shared with the initial lender.”

They quoted Ian Mulheirn of the Social Market Foundation, who said,

“There are good reasons why lenders are currently demanding high deposits from first-time buyers because they think there's significant risk of continued house price falls. Using taxpayers cash to reflate the lending bubble is a terrible use of public money. It will entice young buyers into an overpriced housing market, jeopardise taxpayers' money, and most of the financial benefits will fall to mortgage providers rather than buyers.”

And, as Capital Economics have pointed out, it is not the requirement for a reasonable sized deposit that is keeping first-time buyers from being able to enter the market. They say,

“Remember that the share of home loans advanced to first-time buyers fell to current levels in 2003.”

According to the BBC, Estate Agents are already reporting that first-time buyers are rarely seen. First time buyers share of the market has fallen to a three year low, down from 22% to 16%.

Were the measures to be in any way effective, then as Allister Heath pointed out they would act to distort the market to the detriment of existing private sellers. Because the guarantee only applies to new build properties, it will in effect be a subsidy to those houses. Private sellers will have to reduce their prices even further to compete. In fact, if the policy were to be really effective in creating a substantial demand for new housing, of the size that would be needed to achieve the Liberal-Tories stated objectives of raising housebuilding, and creating jobs, it would mean that the demand for existing houses would crater, with a consequent effect on their prices.

The reality is that, whichever way the Liberal-Tories turn the housing market is in a crisis, because house prices are many times what they should be, having been inflated on a sea of reckless lending. That is not going to be remedied by encouraging people to take on even more reckless lending. It will only be remedied by a bursting of the bubble, taking house prices down by around 80% to more affordable levels, and by breaking the existing monopoly on land ownership that allows Landlords to extract Monopoly Rents from the super profits of the builders. In the meantime, workers need to utilise their own resources, through their Pension Funds (especially as the Government now wants to stage a Maxwell style raid on those funds to use them for its own purposes), through the Co-op Bank and so on, to begin a process of building large numbers of Co-operatively owned and controlled housing as an alternative to the chaos of the Capitalist Housing market.

The Egyptian Revolution - Part 6

2011-11-25T11:33:00.002Z

Egypt is one of those economies identified by Goldman Sachs as being one of the Next 11, economies that are developing behind the BRIC economies. In more recent years, Egypt, along with other countries in MENA, have also benefitted from closer ties with the EU through the establishment of the Union For The Mediterranean, which was a result of the Barcelona Process, started in 1995, which drew various countries from MENA into the orbit of the EU. This is a similar process to that which drew in countries from Eastern Europe, and from the Balkans. Not only is the establishment of bourgeois democracy, in MENA, therefore, in the interests of that growing national bourgeoisie, and middle class in those countries, but it is also in the interests of European Capital, both because it creates the conditions of openness, and the Rule of Law, which Capital needs in order to make large, long-term investments, free from the corruption, intimidation, and uncertainty that surround Bonapartist regimes, and because the establishment of bourgeois democracy has long been recognised by the bourgeoisie as its most effective means of rule.

In State and Revolution, Lenin notes, that Bourgeois Democracy is the “best possible political shell for capitalism”

“In a democratic republic”, Engels continues, “wealth exercises its power indirectly, but all the more surely", first, by means of the “direct corruption of officials” (America); secondly, by means of an “alliance of the government and the Stock Exchange" (France and America).

At present, imperialism and the domination of the banks have “developed” into an exceptional art both these methods of upholding and giving effect to the omnipotence of wealth in democratic republics of all descriptions. ...

Another reason why the omnipotence of “wealth” is more certain in a democratic republic is that it does not depend on defects in the political machinery or on the faulty political shell of capitalism. A democratic republic is the best possible political shell for capitalism, and, therefore, once capital has gained possession of this very best shell (through the Palchinskys, Chernovs, Tseretelis and Co.), it establishes its power so securely, so firmly, that no change of persons, institutions or parties in the bourgeois-democratic republic can shake it.”

Indeed, Engels had even noted the extent to which it was in the interests of Big Capital, not only to establish Bourgeois democracy, but also to adopt the programme of Social-Democracy. In the “Condition of the Working Class in England”, Engels writes,

“And the manufacturing capitalists, from the Chartist opposition, not to Free Trade, but to the transformation of Free Trade into the one vital national question, had learnt, and were learning more and more, that the middle class can never obtain full social and political power over the nation except by the help of the working class. Thus a gradual change came over the relations between both classes. The Factory Acts, once the bugbear of all manufacturers, were not only willingly submitted to, but their expansion into acts regulating almost all trades was tolerated. Trades Unions, hitherto considered inventions of the devil himself, were now petted and patronised as perfectly legitimate institutions, and as useful means of spreading sound economical doctrines amongst the workers. Even strikes, than which nothing had been more nefarious up to 1848, were now gradually found out to be occasionally very useful, especially when provoked by the masters themselves, at their own time. Of the legal enactments, placing the workman at a lower level or at a disadvantage with regard to the master, at least the most revolting were repealed. And, practically, that horrid People’s Charter actually became the political programme of the very manufacturers who had opposed it to the last.”

Preface to the English Edition of “The Condition of the Working Class in England"

The Bourgeois Democratic, Political Revolutions sweeping across MENA have to be viewed in this context. They reflect a maturation of these societies, a sign that economic development and industrialisation have now proceeded to an extent whereby the domestic bourgeoisie – certainly in Egypt, if not in every MENA economy – has become strong enough to be able to rule via some form of bourgeois democracy, and is challenging the Capitalist State military-bureaucratic elite, which has previously been able to raise itself above the contending social classes, and rule in its own interests. The domestic bourgeoisie, is finding support for that challenge initially within the ranks of the petit-bourgeoisie, and middle classes, which having had access to education and culture, now rails against the authoritarianism and inefficiency of the Bonapartist State, particularly as the recession since the end of 2008, has seriously threatened its living standards, and opportunities for escape to Europe. As Paul Mason wrote, in his blog a while ago,

“To amplify: I can't find the quote but one of the historians of the French Revolution of 1789 wrote that it was not the product of poor people but of poor lawyers. You can have political/economic setups that disappoint the poor for generations - but if lawyers, teachers and doctors are sitting in their garrets freezing and starving you get revolution. Now, in their garrets, they have a laptop and broadband connection.”

Paul Mason

But, it has to be borne in mind, precisely the point that Engels and Lenin were making, which is that it is precisely because Bourgeois Democracy is the “best possible political shell for capitalism”,that Capital institutes it, and where it is strong enough to do so, introduces all of those Social Democratic measures, such as some form of Welfare State etc. not out of any sense of altruism, not out of some idealistic moral imperative to do so, but precisely in order to be better able to exploit labour!!! And, it is precisely for that reason that workers, although they have their own immediate interests in winning bourgeois democratic freedoms, such as the right of free speech, to assembly, to join a Trades Union, to strike etc., because all these things facilitate the self-organisation of the working class, cannot, and should not limit their actions merely to a struggle for what is, after all, merely a more efficient means for Capital to exploit them, and to oppress them. In the end, bourgeois democracy is a sham, it is merely a very powerful means by which the Capitalist Class disguises its class Dictatorship.

In the Thesis on the Colonial Question Lenin makes that clear when he writes,

“.. the need for a determined struggle against attempts to give a communist colouring to bourgeois-democratic liberation trends in the backward countries; the Communist International should support bourgeois-democratic national movements in colonial and backward countries only on condition that, in these countries, the elements of future proletarian parties, which will be communist not only in name, are brought together and trained to understand their special tasks, i.e., those of the struggle against the bourgeois-democratic movements within their own nations. The Communist International must enter into a temporary alliance with bourgeois democracy in the colonial and backward countries, but should not merge with it, and should under all circumstances uphold the independence of the proletarian movement even if it is in its most embryonic form;”

Trotsky, further elaborates this point in the Transitional Programme, where he is dealing with how Communists respond in fascist and authoritarian regimes. He writes,

“It is from this point onward that an uncompromising divergence begins between the Fourth International and the old parties, which outlive their bankruptcy. The emigre “People’s Front” is the most malignant and perfidious variety of all possible People’s Fronts. Essentially, it signifies the impotent longing for coalition with a nonexistent liberal bourgeoisie. Had it met with success, it would simply have prepared a series of new defeats of the Spanish type for the proletariat. A merciless exposure of the theory and practice of the “People’s Front” is therefore the first condition for a revolutionary struggle against fascism.

Of course, this does not mean that the Fourth International rejects democratic slogans as a means of mobilizing the masses against fascism. On the contrary, such slogans at certain moments can play a serious role. But the formulae of democracy (freedom of press, the right to unionize, etc.) mean for us only incidental or episodic slogans in the independent movement of the proletariat and not a democratic noose fastened to the neck of the proletariat by the bourgeoisie’s agents (Spain!). As soon as the movement assumes something of a mass character, the democratic slogans will be intertwined with the transitional ones; factory committees, it may be supposed, will appear before the old routinists rush from their chancelleries to organize trade unions; soviets will cover Germany before a new Constituent Assembly will gather in Weimar. The same applies to Italy and the rest of the totalitarian and semi-totalitarian countries.”

Consequently, as I wrote in my blog Egypt What Is To Be Done,

“Our role is to help organise the working-class as an independent political force, capable of intervening not just to pursue goals which immediately are in its interests – such as the establishment or defence of basic bourgeois freedoms, but which at the same time furthers the development of the working-class as a class for itself, which develops its forms separate from those of the bosses – separate forms of property, separate forms of organisation, separate forms of democracy, and separate forms of State. That was the conclusion that Marx and Engels drew from their experiences in the Revolutions of 1848.”

And, as I set out in those posts, the revolutions sweeping MENA have a lot in common with the Revolutions of 1848. In those Revolutions, the Middle Class and the bourgeoisie needed the support of workers. To the extent that the Bonapartist State apparatus clings to power, as Gaddafi did in Libya – and as the Military may yet try to do in Egypt – the bourgeoisie, and middle classes in Egypt will also require the support of workers. In 1848, the workers were able to mobilise to push forward their own independent class interests, but the conditions were not yet ripe for Socialist Revolution. Today, independent workers organisations are springing up across MENA, breaking free from the official State Trades Unions, and today, the grip of Stalinism over the world working-class movement is not so powerful and deadening as it was in the period after the Second World War. Yet, despite rapid economic growth in Egypt and other Middle Eastern and North African economies, it is not yet possible to consider the possibility of a successful socialist revolution. Even were those conditions to exist or to develop in the coming period, the situation of these economies within the context of a powerful global capitalism has to be taken into consideration, and without the rapid spread of socialist revolution to at least Southern and Western Europe, any such revolution would quickly become isolated, and ultimately defeated.

Back To Part 5

Forward To part 7

The Egyptian Revolution - Part 5

2011-11-24T21:05:00.001Z

Ironically, those very trends that Lenin identifies about the need for Capital to expand beyond its borders are more appropriate for the conditions that existed after WWII, even then it is just as plausible to explain the movement of Capital into new parts of the globe on the basis of the principles Marx outlines in Capital, such as the tendency of Capital to move into areas where it can achieve a higher rate of profit, than in terms of any “necessity” to do so.

Moreover, if the drive is merely to move into new parts of the globe to establish new productive industries, then, although this will indeed involve intense competition, between Capitalist enterprises, both from the same country and from different countries – a fact that gives the recipient country some bargaining power, which undermines the notion of super-exploitation or unequal exchange – it clearly does not require a War between them to achieve that right. In fact, for the reasons Lenin himself developed in arguing against the Narodniks, in relation to the way in which Capitalist development itself creates its own domestic market, such Capitalist development, entails a development of the particular economy – again undermining the ideas of the “dependency” theorists – and as a result opens up the possibility of yet further opportunities for Capital to invest, and exploit the available, and increasing labour force.

As I wrote in “Imperialism & War”,

“In fact, as the previous documents have shown, the division of the world into colonies can much better be explained in terms of the dynamic of feudalism, and of Merchant and Money Capitalism leading to Colonialism than it can by a Finance Capital dominated Imperialism.
And when that basic element of Imperialism set out by Lenin – the need for Productive/Industrial Capital to search out new sources of exploitable Labour – does arise, it takes the form not of Colonial powers seeking to divide up the world, but of Multinational companies, whose interest is increasingly to develop global institutions to carry out the functions of the State, and far from seeing their interests lying in the establishment of Colonial rule – which was always extremely costly – see their interests lying in the carrying through of the bourgeois democratic revolution in order that a bourgeois state can arise to shoulder those costs, and to create via some form of bourgeois democracy the best conditions under which Capital in general can operate and accumulate.”

In other words, the situation that arose, in the 19th Century, in Latin America, in respect of the alliance between the interests of Britain and the US, around the Monroe Doctrine, after WWII, became globalised, and for the same reasons. In the 19th Century, Britain, as the global hegemon, and workshop of the world, was in favour of free markets, precisely because it knew that it could undercut every other economic power. After WWII, the US held that position. It had every reason to want to break up the old Colonial regimes in order to open up these markets and sources of primary products.

In fact, FDR even proposed an alliance with Stalin to break up the old Colonial Regimes, if Churchill and the other European powers refused to do so. In short, the basic assumption behind Permanent Revolution, behind Lenin's Two Tactics, and behind the Thesis on the Colonial Question, that the existing Colonial Power would wage a fight to hold on to the Colony, no longer held. Moreover, the other element of Permanent Revolution, the idea that the national bourgeoisie would take fright at the potential for a proletarian revolution, and would make an alliance with the Imperialist Power, or the old Landlord Class, had been severely undermined, precisely because long experience of Stalinism from the 1920's onwards, through the murderous activities of the Spanish Civil War, and the agreements that Stalin had made with the Imperialists at Potsdam and Yalta, went a long way to persuading the Imperialists that the Stalinists were people they could do business with, that the Stalinists would act to police and limit the struggle of the working-class. In fact, many of these regimes were able to establish various forms of State Capitalism with the support of money, materials, and advice from the USSR.

That didn't mean that Capitalists had ceased being Capitalists, but Bismark and Louis Napoleon, had demonstrated that the Capitalist State could play a significant role in bringing about industrialisation and modernisation.

There was plenty of scope for Capitalists in such countries to extract Surplus Value by investing in those enterprises that were able to develop within these economies, through receipt of interest on money lent to the State, and as the Stalinists had shown, control over the State also enabled large Revenues to be drawn by State officials, in an economy where the majority of the means of production were owned by the State.

Nor, did it mean that Imperialism ceased being Imperialism, but Imperialism was now determined by the interests of multinational, industrial Capital, and by transnational Banks. And within this Imperialist System, the need to ensure the rules of the game were adhered to became paramount, including the rules in respect of the defined spheres of influence.

The Cold War was one fought out largely on the basis of manoeuvre, bureaucratic wrangling, the buying out of national leaders etc. That is the basis of the formulation of the notion “He may be a bastard but he's our bastard.”

But, the demise of Stalinism removed this basis upon which the globe was divided, and the context in which this global competition for influence was taking place. It is no coincidence that although, the new International Division of Labour, really commenced in the 1980's, the greatest expansion of globalisation occurred after the fall of Stalinism in the USSR.

Under Nasser the method of industrialisation and modernisation, began in the 19th Century, based on State Capitalism, in fact, fitted well with the top-down, statist methods of Stalinism, which meant that Egypt was able to form a close relation with the USSR, which provided it with resources when the US and UK withdrew financing of the Aswan Dam.

But, all such methods of development have proved limited. Where what is involved is large scale projects, particularly the development of heavy industry, and Civil Engineering, State Capitalism can be effective, but, when a certain stage is passed, and production needs to shift to more complex areas, and the development of consumer goods industries etc., State Capitalism has proved bureaucratic and inefficient. In China, although the State continues to play a significant role via the Five Year Plan, and uses various levers such as that in relation to its control over the Banks, Monetary Policy etc. to direct investment into those areas determined within the Plan, it has been successful by facilitating the development of private capitalism, and the market as the means by which these objectives are met.

But, Egypt did continue to develop. Under Sadat, in the 1970's, a policy similar to that undertaken in China was begun. It was known as, “Infitah”, or “Open Door”.

The economy has grown by an average of 5% per annum, but in more recent years, a liberalisation of the economy has seen growth increase to around 7-8% per annum. Between 1981 and 2006, GDP increased fourfold, whilst bringing inflation down from double figures to single figures. The economic reforms, which reduced the size of the Public Sector, and promoted the growth of private capitalism, created a wealthy and successful Capitalist Class, including the development of some significant Egyptian multinational companies such as the Orascom group, and a developing middle class. Necessarily, industrialisation brought with it, the development of an increasingly significant working-class, demonstrating once again Marx's dictum about the progressive role of Capitalism in creating its own gravedigger.

Typical of such periods of industrialisation, however, the section of society which benefited least from this process were those very workers, which led to repeated outbreaks of violence and protest, as the usual channels for containing workers discontent, the Trades Unions and Bourgeois Democracy, did not exist in Egypt, which sought to suppress the workers via a Bonapartist State regime, and State run Trades Unions.

Wikipedia provides a List Of Egyptian Companies, and it is interesting to note that many of these that have developed in recent years have been in the new, more dynamic sectors of the economy such as in ICT, and Financial Services. In other words we see the process of combined and uneven development at work yet again, with newly industrialising economies being able to move rapidly into those new industries which represent high value added, and high rates of profit. According to the CIA World Factbook, Agriculture now accounts for around 13.5% of GDP, whilst Industry accounts for 38%, and Services nearly 49%. Given the importance of Tourism to the Egyptian economy, it is no wonder that this latter is such a high number. In terms of employment, Agriculture accounts for 32%, reflecting its labour intensive nature rather than its inefficiency – in fact Agriculture in Egypt is relatively intensive – industry accounts for 17%, and Services 51%, again reflecting the large numbers employed in Tourism.
A measure of economic development often used by economists is energy production and consumption. Egypt comes 28th in the world in terms of electricity production, and 29th in terms of consumption. The increasing development of industry, and particularly of the newer industries is reflected in the literacy rates. The Rate, for the whole population, is 71%, 83% for males, and 59% for females, and the normal time spent at school is 11 years.

30% of all those in the relevant age range go to University in Egypt, though only half of these actually graduate. However, this high number, especially given that Egypt has a very young population – its Median Age is just 24, and a third of its population are under 14 – indicates why this growing Middle Class, should become restive, as opportunities abroad diminished after the recession of 2009, and as jobs in Egypt could not grow fast enough to absorb them. It is also not surprising that it was from within this Middle Class section of society that the first signs of discontent were demonstrated in the April 6th Movement.

Back To Part 4

Forward To Part 6

The Egyptian Revolution - Part 4

2011-11-23T20:29:00.001Z

So it can be seen that the conditions that Trotsky set out in Permanent Revolution, that Lenin set out in Two Tactics of Social Democracy, and that the Comintern set out in the Thesis on the Colonial Question, never really applied to the conditions existing in Egypt.

All of those were based on the assumption that a Colonial Power would wage a determined struggle to prevent independence, or that an Imperialist Power would be able to exert indirect control over such a state via, gunboat diplomacy, and the co-operation of a comprador bourgeoisie. But, in reality the economic basis upon which those types of regime were established was already out of date, by the time the Thesis on the Colonial Question was written. The economic basis upon which Colonialism rested was in reality merely a foreign extension of feudal relations, resulting from a joint venture between the landed aristocracy, and the merchants, and the political regimes established reflected that. The idea that the Imperialist Powers needed to carve up the world between them, in order to obtain both cheap sources of raw materials and foodstuffs, and protected markets, into which they could sell their products, particularly their surplus production, is doubtful, in fact, ever to have been true. In fact, the main European Colonial Powers, such as Britain, Spain, Portugal, and Holland had developed their colonies long before the development of industrial Capitalism, and, therefore, long before there was any need to dispose of Surplus Production, or indeed to source large new sources of primary products.

Even in Britain, although industrial Capitalism had become dominant by the middle of the 19th Century, as Engels points out,

“The Reform Bill of 1831 had been the victory of the whole capitalist class over the landed aristocracy. The repeal of the Corn Laws was the victory of the manufacturing capitalist not only over the landed aristocracy, but over those sections of capitalists, too, whose interests were more or less bound up with the landed interest-bankers, stockjobbers, fundholders, etc.
Free Trade meant the readjustment of the whole home and foreign, commercial and financial policy of England in accordance with the interests of the manufacturing capitalists — the class which now [These words belong apparently not to Bright but to his adherents. See The Quarterly Review, Vol. 71, No. 141, p. 273.-Ed.] represented the nation. And they set about this task with a will. Every obstacle to industrial production was mercilessly removed. The tariff and the whole system of taxation were revolutionised. Everything was made subordinate to one end, but that end of the utmost importance to the manufacturing capitalist: the cheapening of all raw produce, and especially of the means of living of the working class; the reduction of the cost of raw material, and the keeping down – if not as yet the bringing down - of wages. England was to become the ‘workshop of the world’; all other countries were to become for England what Ireland already was-markets for her manufactured goods, supplying her in return with raw materials and food. England, the great manufacturing centre of an agricultural world, with an ever-increasing number of corn and cotton-growing Irelands revolving around her, the industrial sun. What a glorious prospect!”

In other words, the existing Colonies formed a ready made basis for achieving these ends. It should also be noted that as Engels again recognises, even until the latter part of the 19th Century, the Landlords, and their associates – the Bankers, Stock-jobbers and Fundholders – continued to exercise a dominant political role in Parliament. It was only with the introduction of Universal Male Suffrage that their stranglehold was broken, enabling the industrial bourgeoisie to obtain a secure measure of control over the political regime, and then only by winning the support of the workers.

“Chartism was dying out. The revival of commercial prosperity, natural after the revulsion of 1847 had spent itself, was put down altogether to the credit of Free Trade. Both these circumstances had turned the English working class, politically, into the tail of the ‘great Liberal Party’, the party led by the manufacturers. This advantage, once gained, had to be perpetuated. And the manufacturing capitalists, from the Chartist opposition, not to Free Trade, but to the transformation of Free Trade into the one vital national question, had learnt, and were learning more and more, that the middle class can never obtain full social and political power over the nation except by the help of the working class. Thus a gradual change came over the relations between both classes. The Factory Acts, once the bugbear of all manufacturers, were not only willingly submitted to, but their expansion into acts regulating almost all trades was tolerated. Trades Unions, hitherto considered inventions of the devil himself, were now petted and patronised as perfectly legitimate institutions, and as useful means of spreading sound economical doctrines amongst the workers. Even strikes, than which nothing had been more nefarious up to 1848, were now gradually found out to be occasionally very useful, especially when provoked by the masters themselves, at their own time. Of the legal enactments, placing the workman at a lower level or at a disadvantage with regard to the master, at least the most revolting were repealed. And, practically, that horrid People’s Charter actually became the political programme of the very manufacturers who had opposed it to the last. The Abolition of the Property Qualification and Vote by Ballot are now the law of the land. The Reform Acts of 1867 and 1884 make a near approach to universal suffrage, at least such as it now exists in Germany; the Redistribution Bill now before Parliament creates equal electoral districts-on the whole not more unequal than those of France or Germany; payment of members, and shorter, if not actually annual Parliaments, are visibly looming in the distanceand yet there are people who say that Chartism is dead.”

In fact, the kinds of trends that Lenin identified in his “Imperialism”, in fact trends that others such as Hilferding and Hobson had set out, in relation to the export of Capital could hardly be an explanation for Colonialism, for the reasons Warren set out in his “Imperialism, Pioneer of Capitalism.”

As I stated in my blog, Imperialism & War,

“But, even a casual inspection showed what was wrong with this theory. Firstly, Lenin argues that the division of the world, the monopolisation of colonies is a consequence of the development of the monopolisation of production and rise of Finance Capital. There are two problems with this. Firstly, the division of the world amongst the imperialist powers was already completed by the end of the 19th century, and the main scrabble for colonies occurred at that time. Yet, even according to Lenin, the rise of Finance Capital, and the dominance of the Monopolies did not occur until the beginning of the twentieth century. So, if that occurred AFTER the world had already been divided up, it could not have been the cause of that division! Secondly, Finance Capital as analysed by Hilferding, was a description of the situation in Germany, but it did not fit the picture in Britain or France, and yet it was Britain and France who WERE the main imperialist powers, the biggest holders of Colonies. In fact, the British economy was the one, probably LEAST characterised by Monopoly at the beginning of the twentieth century.

But, there were further problems with Lenin’s theory as Bill Warren points out in “Imperialism – Pioneer of Capitalism”. For example, there does not seem to have been any particular increase in overseas investment into the colonies by the imperialist powers during this period compared with the investment of previous decades, and Lenin’s argument that it was this rather than the colonies being simply markets for the imperialist powers surplus production does not seem to be born out by the facts either. Moreover, Lenin says that there is a causal link between Monopoly economic power and colonisation, but he does not make clear what that causal link really is. In fact, the theory seems to contradict another fundamental aspect of Marxism, including Lenin’s own analysis, and that is the theory of combined and uneven development. That theory, which is readily observable, states that different economies develop at different rates, that at any one time, the world will have economies at different stages of development. But, in that case it beggars belief that all of these “imperialist economies” could have arrived at the same stage of development at the very same time i.e. the stage where there economies were dominated by monopoly. It even further beggars belief that this point in time just also happened to coincide with the moment when the entire world had been completely divided up!!! As Warren says, it is difficult not to see Lenin’s pamphlet as anything more than a first draft, and the many caveats that Lenin includes in almost every section – some as Warren says, to the extent of making the statements therein meaningless - is testament to that. Yet, on the basis of this pamphlet, many on the Left still base their explanations of the world economy, and more importantly their attitude towards “anti-imperialism”, and questions of War.”

And as I pointed out in my blog, Imperialism, Industrialisation & Trade

“Lenin’s theory of “Imperialism”, was really a theory of Colonialism not Imperialism. It was based on the idea that Colonialism had divided the world up, that each Colonial power had a Monopoly position in each particular colony. But, the Colonial Revolution put an end to that situation. Not only did it bring political independence to those former colonies meaning they were free to choose their own economic policies, but it meant that the situation of Monopoly was itself ended, and far from a position of Monopoly it meant that there was intense competition BETWEEN the “Imperialist” powers not just to secure markets for their goods within them, but to secure supplies of basic materials, food etc. and increasingly between the multinational companies that raised global economic competition to new heights, to be able to locate their production in these countries, to take account of their plentiful supplies of cheap labour, and potential markets for their products. Far from this period being one that was characterised by the limitations of Monopoly it was marked by a substantial intensification of COMPETITION!”

Back To Part 3

Forward To Part 5

The Egyptian Revolution - Part 3

2011-11-22T17:47:00.002Z

Up to the beginning of the 19th Century, Egypt was part of the Ottoman Empire. The brief invasion of Egypt by Napoleon, in 1798, provided Britain, as part of the Napoleonic Wars, to stake its claim in the country. Britain alongside Ottomans, and Mamluks drove out the French, and in the subsequent chaos, Muhammad Ali, the commander of an Albanian regiment, nominally in the service of the Ottomans, seized power.

At the beginning of the 19th Century, not even Britain was yet industrialised. The dominant forms of foreign rule were those established on the back of Landlordism and Merchant Capital. The Landlords established vast estates and plantations, either employing their own agricultural workers, or else simply extracting Rent from domestic peasant framers, whilst the merchants bought cheap materials and foodstuffs in these markets to sell back in Europe, whilst selling the increasing number of manufactured goods from Britain and other European countries into these markets. By its nature, Commercial Capital makes profits from buying low and selling high, rather than by actually creating Surplus Value by productive activity. As a consequence on its own, it tends to be destructive of development, because it undermines the actual producers. The political regimes established in these countries, threfore, tended to mimic the Feudal regimes of the Colonial power, with local Landlords, and rulers being drawn into a system of domination over the mass of the population.

As a result, at this time, prior to the industrialisation of Britain and other European powers, and the military power which went with that, and which allowed them to exert direct Colonial power, towards the end of the 19th Century, many countries like Egypt, or indeed those in Latin America, such as Venezuela, which had experienced a degree of economic development, were able to break free from the clutches of Colonialism, usually under the auspices of some local military strongman.

Indeed, Simon Bolivar, is the classic example of that. Yet, the fact that these countries were able to free themselves from direct political control by some Colonial Power, and which set them apart from places such as India, did not mean that they were completely free.

In the 19th Century, many of these economies had a model of development to follow. It was that, being adopted in France and Germany, where under Louis Napoleon, and Bismarck, the State was driving Capitalist development from the top down.

Indeed, in the US, something similar was happening. Having consolidated power in the hands of a centralised Federal State as a result of the Civil War, that State set about furthering the development of the dominant industrial Capitalism of the North, in whose interests the Civil War had been fought. The State cleared the Native Americans from the land in order to enable the establishment of the trans-continental railway, and settling of the plains for agriculture, it established a high tarriff wall to prevent imports, particularly from Britain, in order to protect the infant US industry and so on. Meanwhile, the Monroe Doctrine, at the same time as opposing any extension of European Colonialism in the Americas, also facilitated access to those markets for the US and the UK, which now as the "Workshop Of the World” sought to end Mercantilism, and gain access to global markets for its products, a strategy adopted by the US in opposing Colonialism after WWII, on a global scale.

But, the extent of Egypt's relative freedom in the 19th Century can be assessed by the fact that under Ali, it waged expansionist drives, taking over Northern Sudan, Syria, and parts of Arabia and Anatolia, though European powers, concerned that Egypt might actually threaten the Ottoman Empire, and the political and strategic implications that would have for Europe's Southern flank, forced him to hand most of them back to the Ottoman's. The main consequence of this was actually to strengthen Ali's position to formalise his title as hereditary, thereby establishing the dynastic rule that was to last until 1952. It also meant that he could concentrate on the economic development of Egypt, which during the 19th Century became a Capitalist economy.

In Europe, various methods were used to move peasants from the land, and to create a rootless working-class, forced to work in the developing towns and factories. In Britain, the process of the landlords stealing peasant land, that had been in progress since the 15th Century, continued under the name of “Enclosure”. In 1801, it was speeded up massively with the passing of the General Enclosure Act.

In France, the Revolution had dismantled the large estates, and introduced land reform. But, the peasants, as Marx describes, then found that they had to take out large loans and mortgages, which turned them into debt slaves. The Emancipation of the Serfs in Russia had a similar effect. In Egypt, the introduction of cash crop farming, particulalry in relation to Cotton, which assumed the form of a monoculture, had the same effect.

In Britain, and much of Europe, the gradual extension of trade led to the replacement of payment of Rent in kind and the Corvee with Money Rent. The consequence was that peasants had to produce at least a portion of their output for sale i.e. as commodities. That was the only way of obtaining money to pay the rent and taxes. This undermined the self-sufficiency of the peasant, and opened up the need for increasing specialisation, as well as providing an opening for the development of the merchant class.

In Egypt, the development of cotton on the basis of cash crop farming achieved the same result. Cotton farmers, had to buy their other goods, which they would previously have produced themelves, from the market. It provides the basis for the development of a domestic market, and domestic Capitalist production. But, of course, by developing cotton as a monoculture, there is insufficient domestic demand to absorb it, and so alongside the concentration of farms, in order to produce more efficiently for the market, comes the inward investment of foreign Capital into those farms, and a concentration on meeting the needs of foreign markets for cotton, i.e. initially Britain.

But, Egypt faced the same problem that many economies face in bringing about economic growth – a shortage of capital. The UK had amassed huge amounts of money wealth by the 18th Century, from piracy, and from the slave trade. That wealth was held by large well established firms of banks and merchants. It provided the basis for the investment in productive capacity that occurred during the 19th Century. Other old Colonial powers had similar stores of money that could be transformed into Capital. In the US, Capital was brought in by Europeans emigrating there, and the Northern Industrialists were able, after the Civil War, to treat the South as an internal Colony.

Lenin speaks of Russia treating Siberia in a similar manner under Tsarism. But, without such “Primary Accumulation”, any economy seeking to industrialise – be it Capitalist or “socialist” - has to amass the resources to fund the development from somewhere. It can squeeze the peasantry, by unequal exchange between town and country, or it can do what most countries in that situation have been forced to do – it can borrow from foreigners.

One of the lessons that economists have learned, however, is that the effectiveness of this borrowing, depends on exactly what it is going to finance. If it simply goes to finance consumption, then it can only have a negative effect, ensuring that the country falls further into debt. But, even if it is going to finance, investment, the kind of investment is also important.

In his, “Economics Of The Transition Period”, Bukharin explained this problem in relation to the USSR. In part, it relates to Marx's analysis of the role of the Rate of Turnover.

In short, what this means is that if Capital is invested in things such as large, heavy industry where it takes a long time for the commodities to be produced, and sold – i.e. for the Capital involved in their production to be turned over, converted into money that can be re-invested – the rate of profit will be lower than where that Capital is invested in commodities that are quickly produced and sold, precisely because less Capital has to be laid out at any one time. In fact, Bukharin argued that if too much of societies' resources was diverted to such big heavy industries, it could actually result in a reduction in the amount of social surplus that could be created. Many of the successful newly industrialised economies of the 1980's onwards, have been those that first concentrated on the production of consumer goods, with a high rate of turnover, and which then having accumulated Capital on the back of that were able to divert an increasing amount of resources towards heavy industry.

In this relation, Egypt made the opposite mistake. First under Said, and then under Ismail, Egypt underwent some considerable development, but at the expense of racking up huge foreign debt.

The latter stated in 1879,

"My country (Egypt) is no longer in Africa; we are now part of Europe. It is therefore natural for us to abandon our former ways and to adopt a new system adapted to our social conditions.",

and having been educated in Paris it was no wonder that he maintained a close relation with France, including the joint venture for the establishment of the Suez Canal. The extent of modernisation that was undertaken can be summarised by the fact that under the latter the railways in Egypt, and Sudan, which had remained in Egypt's control, increased from virtually none to, “the most railways per habitable kilometer of any nation in the world.” (Wikipedia) And demonstrating that the world is far more complex than the idea that it can simply be divided into Imperialist and Non-Imperialist camps, under Ismail, Egypt itself resumed its own expansionist and Colonialist ambitions by expanding its control into Dharfur, and attempts to colonise Ethiopia. Indeed, it was these Imperialist ambitions in Ethiopia that, as much as the extensive plans for economic and social modernisation, left Egypt with massive debts.

“A national debt of over one hundred million pounds sterling (as opposed to three millions when he became viceroy) had been incurred by the khedive, whose fundamental idea of liquidating his borrowings was to borrow at increased interest. The bond-holders became restive. Judgments were given against the Khedive in the international tribunals. When he could raise no more loans, he sold his Suez Canal shares (in 1875) to the British Government for only £ 3,976,582; this was immediately followed by the beginning of foreign intervention.” (ibid)

In other words, and this was true of many of the Latin American economies, the condition they found themselves in stemmed, initially, not from any Colonial power invading them, or indeed from the imposition of grinding unequal terms of trade. In large part, the economic problems of these economies arose due to the economic incompetence of their rulers. But, having put themselves in that position, they did find themselves being dictated to by powerful financial powers. In the absence of any body equivalent to the IMF, at that time, Britain and France sent its own representatives directly to Egypt to oversee its affairs. At the time Engels felt that this was all part of a manouvre, and that Britain had little real interest in Egypt.

In a letter to Kautsky he wrote,

“The Egyptian business is a Russian diplomatic manoeuvre. Gladstone is to take Egypt (which he does not have and if he had it, would not keep for long), so that Russia can take Armenia; which of course, according to Gladstone, would again be the liberation of a Christian country from the Mohammedan yoke. Everything else in the case is pretence, humbug, subterfuge. Whether this little plan will succeeds will soon be seen.”

Engels To Kautsky

In 1879, the extent of British control was extended, and eventually formalised by the official recognition of Egypt as a British Protectorate in 1914. However, Egyptian nationalists after WWI, won a majority in the Egyptian Parliament. When Britain, exiled the leader of the Wafd Party to Malta, a widespread revolt broke out, which resulted in Britain issuing the Unilateral Declaration Of Egyptian Independence in 1922. However, it was not full independence, and Britain retained control over major areas of Egyptian politics such as

(a) The security of the communications of the British Empire in Egypt;
(b) The defence of Egypt against all foreign aggression or interference, direct or indirect;
(c) The protection of foreign interests in Egypt and the protection of minorities;
(d) The Sudan.

Full indpendence came closer with The Anglo-Egyptian Treaty of 1936, but it maintained the right of Britain to retain troops to guard the Suez Canal. It was only after WWII, and the military coup led by Nasser in 1952, which led to the eventual withdrawal of British troops that full independence was restored.

Back To Part 2

Forward To Part 4

The Egyptian Revolution - Part 2

2011-11-21T14:22:00.002Z

The Egyptian Revolution, as I have set out in my posts Egypt What Is To Be Done?, is a Political Revolution. That is to say that its object is not to change the class nature of the Egyptian State, but is merely to change the nature of the Political Regime, the form of Government. It is the equivalent of the changes that have occurred in places such as Chile, or Argentina over recent years, where a Military Junta has given way to bourgeois democracy. It is clear, from these previous examples, that such a transformation is quite possible for Capitalist States to effect, and that in such cases the theory of Permanent Revolution, does not apply.

In fact, like the vast majority of countries that freed themselves from Colonial Rule, Egypt, at the point where the theory of Permanent Revolution might have applied, instead developed down a different path than that, which Trotsky had described in The Permanent Revolution, or that Lenin had discussed in Two Tactics Of Social Democracy In The Democratic Revolution, or indeed that discussed by the Second Congress of the Comintern in its Draft Theses On The National & Colonial Questions. There are very good reasons for this.

The latter thesis states,

“In conformity with its fundamental task of combating bourgeois democracy and exposing its falseness and hypocrisy, the Communist Party, as the avowed champion of the proletarian struggle to overthrow the bourgeois yoke, must base its policy, in the national question too, not on abstract and formal principles but, first, on a precise appraisal of the specific historical situation and, primarily, of economic conditions; second, on a clear distinction between the interests of the oppressed classes, of working and exploited people, and the general concept of national interests as a whole, which implies the interests of the ruling class; third, on an equally clear distinction between the oppressed, dependent and subject nations and the oppressing, exploiting and sovereign nations, in order to counter the bourgeois-democratic lies that play down this colonial and financial enslavement of the vast majority of the world’s population by an insignificant minority of the richest and advanced capitalist countries, a feature characteristic of the era of finance capital and imperialism.”

Yet, many of those who claim to base themselves on these ideas do base themselves on “abstract and formal principles”, and do not base themselves on “the specific historical situation and, primarily, of economic conditions”. And, although they focus on the “distinction between the oppressed, dependent and subject nations and the oppressing, exploiting and sovereign nations”, they do so by ignoring the “clear distinction between the interests of the oppressed classes, of working and exploited people, and the general concept of national interests as a whole, which implies the interests of the ruling class”.

As a result they remove any class content from the struggle, and end up forcing the working class into a position of merely acting as cannon-fodder for the bourgeoisie in all of its guises from the democratic, to the quasi or not so quasi fascist, just so long as those forces are deemed to be “anti-imperialist”. The proponents of such an approach are in reality not socialists, but nationalists.

One of the clearest examples of that is the fawning, and crippling support that many such people have given to various Islamist organisations and regimes. That support stands in marked contrast to the Comintern Thesis, which states:

“the need for a struggle against the clergy and other influential reactionary and medieval elements in backward countries;
third, the need to combat Pan-Islamism and similar trends, which strive to combine the liberation movement against European and American imperialism with an attempt to strengthen the positions of the khans, landowners, mullahs, etc.”

“fifth, the need for a determined struggle against attempts to give a communist colouring to bourgeois-democratic liberation trends in the backward countries; the Communist International should support bourgeois-democratic national movements in colonial and backward countries only on condition that, in these countries, the elements of future proletarian parties, which will be communist not only in name, are brought together and trained to understand their special tasks, i.e., those of the struggle against the bourgeois-democratic movements within their own nations. The Communist International must enter into a temporary alliance with bourgeois democracy in the colonial and backward countries, but should not merge with it, and should under all circumstances uphold the independence of the proletarian movement even if it is in its most embryonic form;”

Exactly, what epithets Lenin, and the other members of the early Comintern would have flung at those such as the SWP, who created the cross-class, communalist “Respect”, or declared “We Are All Hezbollah”, we can only imagine. Less still would they have understood the position of the AWL, which today not only gives support to the reactionary bourgeois and Islamists forces in Libya, but also apologises for the role of Imperialism, and its alliance with those forces.

But, these policies of Popular Frontism were applied by the Stalinists in China in the 1920's, and in Spain in the 1930's with predictable results, indeed results that had been predicted by Trotsky.

So how does the actual development of Egypt from being a semi-Colonial Dependency of Britain to its current state fit into this?

Back To Part 1

Forward To Part 3

The Egyptian Revolution - Part 1

2011-11-20T21:00:00.002Z

The Egyptian masses are one again on the move, and engaged in desperate street battles with the forces of the Egyptian State.

Back in February, I argued that the events in Egypt and other parts of the Middle East and North Africa were similar to the Revolutions of 1848, in which a growing bourgeoisie attempted to assert its right to political dominance through the establishment of a bourgeois democratic regime, and drew in the proletarian and peasant masses behind it. There were lessons for workers from those Revolutions, which saw the existing State apparatus make concessions to the democratic revolution, prior to absorbing it, and then turning it back. In part, it was able to do so, because the bourgeoisie are unreliable allies for the workers. They fear the potential power of the workers, that could overwhelm them. For these reasons, it is always necessary, as Marx and Engels, and later Lenin and Trotsky, concluded, for the workers to avoid being used as cannon fodder by the bourgeoisie. The workers have to maintain strict organisational and political independence, and focus on building their own strength. In making any temporary tactical alliance with the bourgeoisie, the workers have to keep one eye on their ally, as well as looking forward to the immediate enemy.

Given the experience of the 1848 Revolutions, and given the experience of the 1905 Revolution in Russia, I warned of the danger in the Revolution settling for merely the offers of reform.

When Mubarak offered such reforms, the British media continually asked representatives of the Egyptian revolutionaries, if it was not time for them to call off their demonstrations. I wrote,

"Western news reporters, particularly from the BBC, have missed no opportunity to ask the question ad nauseum of protesters whether they should not now call off the protests now that Mubarak has made concessions – concessions which, of course would disappear to be replaced by vicious repression if the protests did end."

Egypt - What Is To Be Done?

And, when the Military organised a Coup to remove Mubarak, I warned that this was merely a case of Cerberus removing one of its heads in order that the rest of the beast could continue.

"Just as the Egyptian working-class began to enter the fray, the Egyptian Generals have implemented a Military Coup. The celebrations in Tahir Square are understandable as the events of the day are seen in the positive light of Mubarak standing down, but in reality the Military that have now pushed him aside, possibly on the back of heavy prompting from the US, are the same Military top brass from which Mubarak himself came, and which supported Sadat before him, and which supported Nasser before him. In reality Egypt has merely swapped the political regime of a Bonapartist leader resting on a military-bureaucratic elite, for the open rule of that same military-bureaucratic elite."

Military Coup As Egyptian Workers Appear On The Stage

In the intervening period that has been borne out. The Military junta has entrenched its power, as the street protests dissipated.

It has acted to beat down workers struggles, it has arrested, and kidnapped radicals, it has used increasing force to break up protests when they arose, it has subjected opponents to Military Trials, and it has attempted to negotiate with other reactionary social forces such as the Muslim Brotherhood, to provide itself with anew social base, in order to limit any real democratic change, so as to continue to exert its power even after elections.

Ebb & Flow In Egypt,

Egyptian Blogger Jailed

I have pointed out in the past how similar the current conditions are to the 25 year period of the Long Wave Boom that led up to the First World War. Today, it is the Middle East and North Africa that occupy a similar position to the position the Balkans occupied back then. The Middle East is a tinder box - From The Hope Of Spring To The Danger of Conflagration. Alongside, the uprisings there are also intense sectarian struggles between Shia and Sunni. The Sunni regimes with their power base in the Gulf are closely tied to the US, whereas Shia Iran acts to support the regime in Syria, as well as backing Hamas, and Hezbollah, and exerting increasing influence over Iraq.

At the same time, this feeds into a global power struggle, with Russia and China standing in the background some distance behind Iran, and its clients. In Libya, it was the US's Sunni client regime in Qatar, that provided many of the Special Forces troops on the ground needed to defeat Gaddafi.

A detailed Marxist analysis of these complex interconnections is needed. Egypt, plays a central role within the analysis of prospects for workers in the region, because of its size, and level of development. The current events cannot be seen outside the wider context of what is happening in Europe either. One of the reasons for the uprising in Tunisia and Egypt was the economic development that had arisen in those countries, which in part was a result of their incrasing integration into a wider Mediterranean Economic Area closely connected to the EU. Part, of the plan was for bourgeois democracy in Egypt to be supported by investment via a form of Marshall PLan. But, with many Governments in the EU being committed to austerity programmes in their own economies, it is difficult to see, how they could justify to their electorates the expenditure that would have been necessary for such a plan. This series of posts seeks to place the Egyptian Revolution - if such it turns out to be - in its historical and wider context.

Forward To Part 2

Northern Soul Classics - The Who Who Song - Jackie Wilson

2011-11-19T10:10:00.000Z

Last of the Top Rank toons. I had to finish with this. Back in 1972, one of my friends, Paul Lawton, who went to be a DJ at the Ritzy in Manchester, called me down on to the floor, because he was getting burned off by another dancer. It turned out to be John Oldfield, who was also friend of the DJ, at the Rank at that time, Chris Williams. For about 15 minutes, me and John Oldfield were dancing off against each at 100 mph.

I can remember putting in every trick in the book. I was diving over one of my friends back, into a forward roll, finished off with a backdrop, before flipping into a forward press. I was doing back and side presses, jacknifes into forward presses, jumping backdrops, jumping spins, the lot. In the end, Chris Williams started playing this, and about half way through put it on 78 rpm, which brought things to a close. By this time, no one else was dancing, and both the downstairs and the upstairs were arranged in a huge arc, just watching the two of us.

At the end, another of my friends from the time, who also worked at the Torch, Trevor Harley, came down and bought me a drink for keeping up the reputation of the Torch. I was going to post a picture of me doing a jumping backdrop, but didn't have time to scan it. I'll add it later.

Northern Soul Generations

2011-11-16T20:56:00.001Z

I had to post this video. In my blog post Soul On Trent, about going to the all-nighter at the Stoke Premiere of "Soul Boy", which my son worked on, I mentioned about a young lad who was dancing near to me, who I spoke to. Well, here he is, and I'm glad to say he seems to have picked up my footwork, because he's dancing like me to "The Bottle" in this clip.

Learning To Be Free

2011-11-16T14:17:00.001Z

I was watching Newsnight, last night, which was featuring a discussion with young unemployed people ahead of today's inevitable rise in unemployment. It made me think about the attitudes, and modes of thinking that now pervade the society we live in; it made me realise the extent to which, people are not just wage slaves of the kind that Marx described, but that they are often not even free in their own heads, in those aspects of life outside the wage relation.

One of the things that people who have faced real limitations on their liberty, such as those in the Gulag, have emphasised, is that no matter how much their bodies were in chains, they could still maintain freedom in their thoughts. If we lose the ability for that, then we are truly lost. At a time, when the issue of freedom in places like Libya, and via the Arab Spring has been highlighted, its important that workers should learn to be free, in those aspects of their life, where that is possible.

What made me think about this was comments that many people made about how being unemployed made them feel. All those responding talked about a feeling of hopelessness, of seeing no point in getting up in a morning, and so on. Think about this, and what it is really saying is that, as individuals, we see ourselves as having no self-worth, no existence, no reason for being, outside our role as providing Wage Labour for Capital. That is a statement about the strength of bourgeois ideas within the working-class, but it is also an indictment of Marxism, and the Labour Movement, that it has provided no alternative view to workers that could break this slave mentality. In fact, in the past, even during periods of high unemployment, it has not been the case.

Mandel, in his “Marxist Economic Theory” talks about the Alienation of Labour. In it he speaks about the different ways in which workers look at the expenditure of their Labour Power in different situations. Expended as part of the wage relation, it is “work”, but the same kind of expenditure undertaken outside it, is often seen as Leisure, as a hobby etc. He quotes the growth of people engaging in DIY, for example. But, in the past, the Labour Movement has always provided workers not just with these kinds of individualistic outlets for their free time – which increases substantially when they are unemployed – but with collective forms of activity.

The Brass Bands, Choirs, Cycling and other Sports Clubs that sprang up during the latter part of the 19th century, and early part of the twentieth century, were not just for the employed workers. They were part of the fabric of working-class communities, that helped bind them together as collectivities. They were also a fundamental part of that necessary aspect of the development of the working-class that Marx had identified, which was its ability to engage in its own self-activity, to organise itself collectively, free from a dependence upon Capital and its State. It could be seen in terms not just of these kinds of activities, but in the number of people with allotments and so on. It is an indication of the effects of the Welfare State, that dependency upon it, which in turn means dependence upon Capital, means that workers have now been enslaved in other ways outside the wage relation. Now not only do large numbers of workers see no alternative but to sell their Labour-Power to Capital, either to private capitalists or to the State Capitalist, but even their free-time they now see as dependent upon provision by Capital too.

When I left school, the post-war, Long Wave Boom was coming to an end, but had not yet ended. It was still possible to get a job relatively easily. I went to work for my local Council as a trainee. Coming from a militant, trade union background, I was not happy to just sit back. When I was not happy with the way the training was being provided, I complained. A week later, I was given a permanent job as a cost clerk. I received a pay rise, which meant I was earning about twice what some of my friends were earning who had gone to be apprentice engineers. I was told I was to be getting another rise, which would have amounted to nearly an extra 20% - from £11 to £13 a week. When it didn't come I began to complain, and asked about pursuing it through the union. At the time NALGO, did not allow ordinary members to Branch Meetings, so the only way I could proceed was by writing to the NALGO Branch Chair. The problem being that he happened to be the Chief Engineer, and his assistant was my boss. You can see the problem, and guess what the outcome was. Fairly quickly, I found myself working in the bowels of the Town Hall, before being asked to look for another job. In fact, one day, after that, at lunch-time, I just decided, it was a nice day, and chucked it in. I'll always remember the feeling of freedom, and relief I felt as I walked through the Park on that Spring Day.

After that, I was unemployed for several months, but the feeling I had was the opposite of not wanting to get up in the morning. On the contrary, it was when I had to sell my Labour-Power that I felt most miserable, most unenthusiastic, and least wanting to get up in a morning. It has been when it is time to clock-off, especially on a Friday, or prior to a holiday that I have felt most enthusiastic. But, there does seem to have been a change.

When I was a kid, we were never at a loss for something to do during the holidays. I suppose it helped living in a village surrounded by fields, but frequently we would play football in the street, or in the Community Centre Car Park. Today, I rarely see kids out playing collectively like that. I do hear parents complaining that they have to find their kids something to do, which invariably involves spending money, so it becomes obvious why, if you do not have any money, you come to believe that there is “nothing to do”, and with nothing to do, you may as well stay in bed. But, that again is an indication of the extent of the pervasiveness of bourgeois ideology, reflected in consumerism, that having something to do, involves spending money to purchase some form of leisure activity, when in fact, most Leisure activities require little or no money whatsoever.

In the weeks after becoming unemployed, on sunny days, I used to take the dog for a walk across the fields behind my parents house, up to the Churchyard at Newchapel, where the great canal builder, James Brindley is buried.

From the age of 14 I'd been teaching myself Yoga, from a book by Ernest Wood, and used the additional time to do those exercises, and improve my breath control, and mind control. Several nights a week I'd DJ at the local Youth Club. The only small amounts of money I'd spend was going dancing at the weekend. A couple of days a week, during the day I'd go up to the Workingmen's Club, and play snooker. That cost nothing, because I was good enough to normally be able to play for the table and a couple of drinks, and win.

I suppose it helps that although I am a materialist, I have never been materialistic. Most of the clothes I wear are up to 20 years old, and many of those that aren't, are ones, my lads have discarded. I don't have a mobile phone, because not only do I have no need of one, but I find them an encumbrance. Its not that I can't afford them, I just have no interest in buying things I don't need. I think there is great merit in the Buddhist notion that unhappiness can only come from continually striving for things you do not have, whereas it is a source of joy to obtain something you had not counted on.

This is important for another reason in relation to what came out of the discussion last night. As in the 1980's, which was the last time the Tories created mass unemployment, there was a lot of nonsense spoken about what the young people should do to improve their chances of obtaining employment. Given that many of those in the audience were themselves unemployed graduates, this was even more ridiculous. The simple truth is that if each and every one of the 1 million plus young people out of work, had a First Class Honours degree from Cambridge, had impeccable CV's and so on, it would not create one single extra job for them to apply for. The stark reality is that under those conditions, if there were only 200,000 jobs available, 800,000 would be unsuccessful, no matter how employable they were.

The answer cannot be for each of these individuals to simply try to make themselves more employable. Rather, it would be better to use their free-time to organise collectively to change that situation.

It would be better, for example, to act collectively to support the Occupy Movement, to become active in local anti-cuts organisations, in occupations and so on. It would be better to engage in other forms of political activity, which might actually change conditions so that more jobs were available.

Of course, it doesn't have to just be these kinds of collective actions. When I was a kid, on the derelict land behind our houses, we always used to have a bonfire every year. Mostly, it was the kids who put it together, but all the parents were involved too. Today, you still see such bonfires in places, but here too, we've been persuaded that we should spend money going to some commercial or Council fireworks display.

But, if its possible to organise collective activities like Bonfires, its just as possible for communities, especially those of its members who are unemployed, to organise many other such collective activities, for example, cleaning it up, and making other such environmental improvements. The idea that we cannot do this because it is the responsibility of the Council or someone else to do it, is to enslave ourselves in that mentality that things can only happen if Capital organises it.

The irony is that, where in the past, such Collectivism was seen to be the feature of the working-class, which held out the prospect of the socialist future, today, it is frequently the Middle Class that engages in such collective activity, for example in establishing Free Schools. What is more ironic is that often the Left puts forward the argument that workers cannot engage in such collective activity, because it requires the motivating force of the State! That is the extent to which Welfarism has succeeded in developing a culture of dependence, which has acted to create an atomisation of the working-class. Dependency can only mean a lack of freedom. The first step in learning to be free is to break that condition of dependence upon Capital and its State.

More Good News On House Prices

2011-11-14T17:49:00.001Z

I recently set out why the conditions are ripe for some relief for those millions of people who want to buy a house, or who want to upgrade their current house - House Price Crash. The conditions are set for the huge bubble in UK House prices to burst, which will be the best news those millions of people could hear.

The OECD, IMF and others have said that house prices in the UK are 40%, above their long-term average, and because corrections to such periods of over-pricing mean that a period of equal undervaluation always follows, that means that house prices are due to fall by as much as 80%!!!

Merryn Somerset-Webb, in Moneyweek, recently set out the data showing that, if you go back 100 years, then there was no increase in UK house prices above inflation, until after 1960 - which just happens to be the time when, as I set out previously, Tory Chancellor, Reggie Maudling, began printing money.

Robert Shiller, one half of the Case/Shiller Home Price Index in the US, came up with similar finding in the US. In a chart from 1890, he showed that house prices in the US did not rise at all in inflation adjusted terms, until 2000, when they went parabolic, before the sub-prime crisis that followed inevitably from that rise, brought them crashing down by around 66%, so far.

In fact, as I set out in that previous blog, there is no reason that house prices should not fall over time, like every other commodity. That is because, like every other commodity, increases in productivity mean that the cost of building houses will fall in real terms.

The fact that they have moved in the opposite direction, shows that they are in a huge bubble, and that it has been kept inflated, by a monopoly in land ownership, by unsustainably low interest rates, and Government policies, as well as reckless lending by Banks and Building Societies, similar to what led to the sub-prime crisis in the US.

In addition, to the changes I set out in that previous blog, showing why there is likely to be a change in the fundamental relations of Supply and Demand, that will crash house prices, a further measure is about to be introduced, which will mean that the good news of lower house prices could be brought closer.

According to House Price Crash.co.uk the EU is to introduce new rules, which will bring some of the reckless lending in the UK mortgage market into line with the situation in the rest of Europe. At the moment, a large number of Buy-To-Let, Landlords have come into the market due to this reckless lending. They can do it, because, at the moment, they are allowed to count rental income from houses they have mortgaged, in order to obtain further mortgages. In other words, this is a Ponzi Scheme.

Everything can continue, as happened with the US Sub-Prime Crisis, so long as the inverted pyramid continues to rise upwards. But, of course, it only requires that the number of renters falls, or that rents fall - both of which are likely results of the Governments changes to Housing Benefit, and the other changes I previously set out, or for mortgage interest rates to rise, which is also bound to happen as Credit Crunch 2 sharply raises Banks and Building Societies own borrowing costs, and the whole house of cards collapses.

Unlike old style Landlords, who usually owned the properties they were renting outright, the Buy-To-Let merchants are newcomers, with only marginal equity in the properties they rent out - which will become even more marginal as the price of those properties collapses - and so the ground they stand on, separating profit from loss, is very tenuous. That is bad news for tenants, who lose out on security of their tenure, and face an uncertain future, if their landlord goes bust. Tenants in Europe, like workers in Europe, have far more security, and far greater rights than do their UK counterparts. The changes being proposed by the EU, will help to change that situation, so it will not just be good news for those hoping to buy a house, or buy a more expensive house; it will be good news for tenants too.

The EU propose to put the Buy-To-Let merchants in exactly the same position as anyone else wanting to take out a mortgage. That is they will have to base their ability to repay on their actual earnings, not on the potential rent they may or may not receive from renting out properties. That will mean that the current Ponzi Scheme will be ended. Many of those with Buy To Let mortgages will be unable to provide the evidence of sufficient income to justify new mortgages, or to re-mortgage when their current arrangements terminate.

Given that there are around 1.5 million buy-to-let properties, that means that a flood of additional houses are likely to appear on the market, cratering the current excessive prices, and bringing releif to millions as a result.

As I previously set out, that 1.5 million properties is in addition to the 700,000 empty houses already overhanging the market, the huge number of unsold properties on Estate Agents books, due to sellers setting unrealistic asking prices compared to the 10% plus fall in selling prices that has occurred in the last year, the 300,000 houses, for which Planning Permission has already been granted, and the hundreds of thousands of empty properties that UK's growing number of retired people could buy in Ireland, and other parts of Europe, at a fraction of current UK prices.

With unemployment set to soar, and inflation already rising sharply, cutting disposable incomes by a greater amount than any time since the 1920's, the UK Housing Bubble's days are numbered.

Northern Soul Classics - Free For All - Phillip Mitchell

2011-11-12T09:46:00.000Z

I remember lots of the girls at the Rank on a Saturday night dancing in a line to this. Feather cuts, short sleeve, checked Benjis, tank tops, crombies with a bright coloured hanky in the top pocket, with matching socks, sta-pressed or tonics.

Is Germany Going To Change Policy On The ECB and EU Bonds?

2011-11-10T17:18:00.001Z

There was an interesting interview, this morning, on Bloomberg, with Peter Bofinger, the economic adviser to Angela Merkel.

Bofinger argued that it was important that the ECB acted like other Central Banks, and became a lender of last resort, engaging in Quantatitive Easing, to buy up the Bonds of Eurozone countries such as Italy, Greece, Spain, Portugal and Ireland, which are facing falling prices for their Bonds on Capital Markets, which means that they will face higher borrowing costs, in future, when they come to sell further Bonds. He also argued in favour of the establishment of EU Bonds.

Given that the main obstacle, to both these changes, has come from Angela Merkel, it is important that Bofinger came out on Bloomberg today, as the Eurozone Debt Crisis rumbles on, with Italy now being drawn into the whirlpool. On the other hand, Bofinger has been making similar arguments for several months now.

The importance of these two measures has been demonstrated over the last week or so. Firstly, it became clear that not only was the proposal to leverage up the size of the EFSF to €1 Trillion, still not enough to deal with the situation, but, without a single state, like Germany standing behind it, the markets would not have the necessary confidence in it, to bring in the necessary investment.

China, which could provide the funds, quite easily, said, openly, that it would not do so unless Europe itself got its house in order, and showed itself prepared to defend its own currency. In other words, Europe had to create a single state that would stand behind the Euro, and which would have the credibility to guarantee its debt. That is where EU Bonds, issued by the whole Eurozone, and with the whole of the Eurozone i.e. Germany, standing behind them come in.

Secondly, before the Capital Markets would invest in EFSF Bonds, or EU Bonds, they would need to see some lender of last resort already in the market, providing the necessary liquidity, and, ultimately, the ability to step in to ensure that the value of those Bonds could not drop through the floor, as happened with the existing peripheral economy Bonds. At the moment, EU Law prevents the ECB from printing money.

It can step in to buy Bonds in the secondary market, but cannot buy in the primary market. Even its purchases in the secondary market have to be "sterilised", by the withdrawal of liquidity from elsewhere in the system.

As Bofinger set out, in order to have the kind of heavy weaponry, needed to show the Capital markets that it meant business, it would be necessary to have the ability to rapidly buy up Bonds, using hundreds of billions of Euros at a time. It is not possible to do that, if you have to withdraw a similar amount from elsewhere.

The German argument, against enabling the ECB to act as lender of last resort, and have the ability to print money, is supposed to be based upon its experience of the Weimar Republic.

Then, large amounts of paper currency was printed that led to a rampant hyper-inflation. People carried home notes in wheelbarrows, which were worth more than the millions of Marks carried in them. But, this argument is spurious. As Ben Bernanke has pointed out, in relation to the US policy, of Quantatitive Easing, Central Banks know how to stop hyper inflation, you stop printing money and raise interest rates. What they have difficulty with, however, is deflation, as the current experience in Japan has shown, where falling prices have persisted for more than a decade, despite negative real interest rates, and massive money printing.

The Weimar Republic printed vast amounts of money, as a means of paying off the terrible burden that the Allied Powers - minus the US, who opposed the action of Britain and France in that regard - imposed on Germany as part of the Treaty of Versailles. In short they paid back their debtors with worthless money.

It was a strategy that the US has adopted from the 1970's onwards. The printing of vast amounts of money, would undoubtedly raise inflation, but that has always been the means by which Governments, going back to Moses, have used to clear their debts. It would be a much less painful solution than the counter-productive austerity measures being advocated by neo-liberal dogmatists at the moment.

Germany has also opposed EU Bonds, on the basis that without the kind of Budgetary discipline that comes from having a single state, and fiscal union, it would be guaranteeing the loans taken out by other countries, who might borrow recklessly, to finance consumption rather than the investment those economies need to restructure, and make competitive their industries, and infrastructure. But, the reality is that if the Eurozone is to continue, Germany has to pay that cost one way or another.

For the last decade, Germany's economy has done very well from selling Mercedes and other goods, to other parts of Europe, including those peripheral economies, that borrowed to pay for them. If those economies sink, then German's economy, which is reliant upon exports, will sink with them.

In fact, what Germany has been manouevring to achieve, is the establishment of a fiscal and political union on its terms. In the last couple of weeks, we have seen Germany and France, essentially impose Governments on Greece and Italy. Measures have now been introduced that enable Eurozone countries to exercise control and oversight of the Budgets of other Eurozone economies. In other words, the basic framework of a fiscal union is being established.

It is being done, bureaucratically and manipulatively, in the way that the EU has proceeded for much of its history. But, given the immediate need to bring about these changes, and the likelihood that attempting to do it, via democratic means, would simply result in a logjam, like that which has caused the political crisis in Europe so far, they probably have concluded that these kinds of methods are the only ones available to them.

That is no reason that workers should accept that. On the contrary, it is the opportunity to demand that the EU be subject to a thorough democratisation from top to bottom.

Why Did The AWL Take Down This Post

2011-11-06T10:45:00.058Z

In my blog a few days ago AWL Dig Bigger Hole, I referred to the post by Sean Matgamna replying to Attila The Stockbroker. The reply had been posted as a separate post with the Title "Idiot Wind" under the name of Dalcassian, a pseudonym used by Matgamna. Oddly that post has now disappeared! They didn't do a very good job of removing all evidence of its existence, however.

Run a Google Search on their site for it, and its details appear, but try to open it, and it returns a "page not found" showing it has been removed.

Now, Attila's Song appears both as a separate post with a number of replies, not including "Idiot Wind", and appears as a comment under the post of Clive Bradley replying to Seamus Milne, and where "Idiot Wind" now does appear as a comment, but under the name of edwardm!

Why were the AWL not prepared to leave this post up under Sean Matgamna's well known psuedonym of Dalcassian???

In one of the replies to Attila, Lisa Radley comments, to Attila's reference to the AWL's hostility to Hamas,

"That's not a bad parallel. After all, the Islamism of Hamas doesn't stop us supporting the Palestinians, so the Islamism is some parts of the Libyan uprising shouldn't stop us supporting their overthrow of Gaddafi."

But, of course, this is NOT a parallel. Of course, Marxists can support the Libyan masses desire for freedom, just as we can that of the Palestinians, but what is being compared here is not that, but the AWL's support for the Libyan "rebels", not the Libyan masses!!! The rebels are no more the equivalent of the Libyan masses, than is Hamas of the Palestinian masses. The whole point of a Marxist response to such situations is to make precisely that distinction, and to argue for support for the "truly revolutionary" elements as Lenin put it, as opposed to the merely reformist, bourgeois democratic, and certainly the clerical-reactionary elements! In fact, as Lenin and the Comintern made clear, it is our job to oppose these latter elements as part of developing the truly revolutionary forces, and primarily the working class forces in such situations. To the extent that we "make an alliance" with any of these other forces for a specific objective, it is purely tactical, and temporary, and does not at all remove from us the duty to continue to maintain strict separation from them, and to continue the sharpest criticism of them.

The AWL, most certainly did not do that. It has acted to promote the "rebels", as truly revolutionary forces, and to play down its reactionary nature throughout, in a way it has never done in relation to Hamas, for instance.

In a further comment the AWL write,

"No-one's claiming things will be perfect now. We don't "support" the NTC. We've written (in the current Solidarity) about the battle the Libyan people now face against neo-liberal economic policies and, yes, Islamism. Things aren't so sewn up as you imply; the idea that "the flag of Al-Qaeda flies over Benghazi", as if ultra-Islamists have taken full control in Libya, is just untrue.",

which is an indication of the extent to which the AWL have adopted the Stalinist "Stages Theory". Libyan workers do not only NOW face a batlle against the "neo- liberal economic policies" of the TNC, or the Islamism of the rebel fighters! They faced that battle from the beginning, and a marxist position should have been to have identified it, and demanded that workers maintained their independence, in order to fight it from the beginning. The argument that the Libyan workers are only now free to fight those reactionary forces, because Gaddafi is gone is ridiculous. Its certainly not an argument the AWL have raised to defend the Islamists in Iran for instance. On the contrary, they previously said that they had learned their lesson from failing to warn of the dangers of the Islamists assuming power, and the need for the workers to have maintained separation from them. If we find that the Libyan Islamists are just as much a threat to Libyan workers as the Iranian Islamists are to Iranian workers, then it would be just as rational to say that Libyan workers only have to wage a life and death struggle against those clerical-fascists, BECAUSE gaddafi has gone, because prior to that he kept the Islamists suppressed.

But, that would be to adopt the same kind of "lesser-evilist" approach that the AWL have done. Marxists should have advocated an independent working-class position from the beginning opposing the workers enemies on all sides. The AWL could not do that, because as in previous such situations their guiding principle is to support Imperialism, and those in alliance with it.

Northern Soul Classics - My Man, A Sweet Man - Millie Jackson

2011-11-05T08:26:00.003Z

Another toon reminding me of the Rank around 1971. This time from the wonderful Millie Jackson. As someone says, in the comments on Youtube, also check out her live version from Manchester.

AWL Dig Bigger Hole

2011-11-03T11:31:00.003Z

The other day, I pointed out that the contradictions in the AWL's politics, in relation to Libya, had led them to disown one of the main planks of their politics. In order to argue against the position of Seamus Milne, Paul Hampton was led to adopt the position of the "idiot anti-imperialists" to effectively deny that Libya had any meaningful independence under Gaddafi.

Now, the AWL's very own "Beloved Leader", Sean Matgamna, has picked up his shovel, in order to dig that particular hole deeper still. The AWL posted the lyrics of a song by Attila The Stockbroker - Mission Creep. I can't say I was impressed either by the song, or the politics behind it, which in part laud Chavez and Castro. However, it is Matgamna's reply, which attempts to square the circle of the AWL's support for the Jihadists in Libya that is most striking.

Matgamna writes, in response to the fact that a large part of the rebels was made up of such Jihadists,

"Is the NTC led by unsavoury elements? Yes. Are Islamists involved in the revolution? Yes. But what do you expect? If you wanted to wait indefinitely for a revolution that was spontaneously socialist, in a country with no freedom of speech, no kind of independent labour movement, no civil society - you'd be waiting a long time."

This is in stark contrast to the argument the AWL usually make. It is in fact, the argument that the SWP, and other "idiot anti-imperialists" usually make to justify their support for those very Islamists such as Hamas, Hezbollah, the "insurgency" in Iraq, and Afghanistan, and, of course, the Khomeiniites in Iran. It is an argument that the AWL have made a profession out of opposing in the most strident terms for years. Now, in order to defend the position they have taken on Libya, they are forced to adopt the very argument they have spent years, considerable effort, and many pages of their paper attacking!!!

Of course, this is par for the course for the AWL. They are Stalinists. They have no shame in zig-zagging from one position to its opposite, from one event to another, and doing so whilst pretending that no change has occurred in their position. The unassailable position of the gerontacratic bureaucracy, which leads the organisation is able to get away with such behaviour, because the, largely, young membership are not in a position to challenge them, and the tribal, bunker mentality the organisation builds up, leads them to defend it against external criticism. The leadership, as with all other such sects, has been in power for almost 50 years, longer than any of the other Dictators that headed up the Stalinist regimes. Its no wonder that, having become so ossified in their privileged positions, they see themselves, like the Pope, as being infallibe, and demand unwavering faith from their flock. When any kind of meaningful opposition within the organisation does arise, as happened with David Broder and the Minority over Iraq, it is suppressed. It is precisely, the kind of behaviour, of this kind of organisation, that Trotsky described, when he analysed Stalinism as Bureaucratic Centrism.

If we take the "Beloved Leader's" argument here, we can apply it to those other situations, and see how the AWL's position varied and continues to vary from it.

For, example, should we not then "expect", as the "idiot-anti-imperialists" do, that the response of Palestinians to the oppression they suffer from the powerful Israeli State, which is just as brutal in denying them of basic democratic rights as was Gaddafi against Libyans, would be to throw up a resistance that was not "spontaneously socialist", and that, therefore, we should not "wait a long time", for that to happen, but should instead give support to the "revolutionary" movement as it is, led by Hamas???

Or what about Lebanon, which too has the same history of oppression, by that Israeli State, including several invasions and occupations? It has also suffered at the hands of its own Fascist regimes, and internal repression. Should we then again, not "expect" that here too, a less than "socialist" response should be one that arises as the "revolutionary" expression of opposition. On the basis of the new policy of "idiot anti-imperialism" laid down by the Beloved Leader, should we not then give the same uncritical support to Hezbollah as the AWL have given to their co-thinkers in Libya? Can we now expect that on the basis of this new policy, we will see AWL banners proclaiming "We are All Hezbollah"? It appears that the same abandonment of Marxism by the Third Campists of the SWP, which led them into these shameful positions, is now dragging the AWL down that road too.

Or what about the "insurgency" in Iraq? The AWL argued that it could not be considered a national liberation movement, precisely because its politics precluded any real liberation for the people of Iraq, because of its clerical-fascist politics. But, that does not seem to preclude them from providing support for Libyan clerical-fascists. Should we not equally have "expected" that after years of the dictatorship of Saddam, which was equally as brutal, and suppressive of democratic rights as that of Gaddafi, that the "revolutionary" forces that sprang up when that regime fell would not be "spontaneously socialist"? Should we not then have resisted the idea of "waiting a long time" for such a movement to arise, and instead given our support to the Iraqi Jihadists, as the Beloved Leader argues for in Libya? After all many of those Jihadists fighting in Iraq, were the same ones who have now been fighting in Libya!!!

The same applies, to Afghanistan, where there has never been a history of democracy, and where the population have suffered centuries of oppression. Should we have not "expected" that the "revolutionary" forces that arose to oppose the USSR, and which now oppose the occupation of Imperialism would also not be "spontaneously socialist"? Does not that line of argument, to justify support for the clerical-fascists in Libya, also mean the AWL should be arguing for support for the "revolutionary" forces of the Taliban???

And, finally, should we not have "expected" that after years of the Dictatorship of the Shah of Iran, which suppressed the Iranian masses, and denied them the same democratic rights that were denied the Libyan masses by Gaddafi, that the opposition to him would not be "spontaneously socialist"? Should we have rejected the idea of "waiting a long time" for such a devevlopment, and instead have thrown oursleves behind the actual "revolutionary" forces in Iran, represented by the Khomeniites? Well, of course, at the time, the predecessor of the AWL, Workers Action/International Communist-League did. That was before they recognised that such positions have nothing to do with Marxism, or Leninism, or Trotskyism. They claimed they had learned the lesson of that in Iran, but clearly they have not. In all these cases, what support for these reactionary organisations represents is an Opportunist aligning with the "lesser evil", rather than a principled revolutionary stand. In the Theses On The National & Colonial Questions, Lenin and the Comintern set out precisely why, Marxists should not simply provide support for these reactionary forces, who represent the class enemies of the working-class, why our task is to build an independent, working class, truly revolutionary movement, recognising that real independence, real freedom for the workers can only arise on the back of a socialist transformation of these societies. In fact, speaking of these kinds of reactionary clerical forces he writes,

"b) An unconditional struggle must be carried out against the reactionary and medieval influence of the clergy, the Christian missions and similar elements.

c) A struggle is necessary against Panislamism, the Panasiatic movement and similar currents which try to tie the liberation struggle against European and American imperialism to the strengthening of the power of Turkish and Japanese imperialism, the nobility, the big landlords, the clergy, etc.

e) A determined fight is necessary against the attempt to put a communist cloak around revolutionary liberation movements that are not really communist in the backward countries. The Communist International has the duty to support the revolutionary movement in the colonies only for the purpose of gathering the components of the future proletarian parties – communist in fact and not just in name in all the backward countries and training them to be conscious of their special tasks, the special tasks, that is to say, of fighting against the bourgeois-democratic tendencies within their own nation. The Communist International should accompany the revolutionary movement in the colonies and the backward countries for part of the way, should even make an alliance with it; it may not, however, fuse with it, but must unconditionally maintain the independent character of the proletarian movement, be it only in embryo.

f) It is necessary continually to lay bare and to explain among the broadest masses of all, but in particular of the backward, countries the deception committed by the imperialist powers with the help of the privileged classes in the oppressed countries when, under the mask of politically independent states, they bring into being state structures that are economically, financially and militarily completely dependent on them. The Zionists’ Palestine affair can be characterised as a gross example of the deception of the working classes of that oppressed nation by Entente imperialism and the bourgeoisie of the country in question pooling their efforts (in the same way that Zionism in general actually delivers the Arab working population of Palestine, where Jewish workers only form a minority, to exploitation by England, under the cloak of the creation of a Jewish state in Palestine). In today’s economic conditions there is no salvation for the weak and dependent nations outside of an alliance with Soviet Republics."

It is only necessary to read these words to see just how far the AWL's position, in relation to Libya, is from a principled Marxist position, and indeed how far the positions of the other "idiot anti-imperialists" in all these cases is separated from the ideas of Lenin and the Comintern. In fact, in another of his writings on these questions The Question On Self-Determination Summed Up, Lenin speaks about situations where movements for self-determination are acting as representatives of foreign powers. He writes,

"What is the lesson to be drawn from this concrete example which must he analysed concretely if there is any desire to be true to Marxism? Only this: (1) that the interests of the liberation of a number of big and very big nations in Europe rate higher than the interests of the movement for liberation of small nations; (2) that the demand for democracy must not be considered in isolation but on a European—today we should say a world—scale.

That is all there is to it. There is no hint of any repudiation of that elementary socialist principle which the Poles forget but to which Marx was always faithful—that no nation can be free if it oppresses other nations. If tile concrete situation which confronted Marx when tsarism dominated international politics were to repeat itself, for instance, in the form of a few nations starting a socialist revolution (as a bourgeois-democratic revolution was started in Europe in 1848), and other nations serving as the chief bulwarks of bourgeois reaction—then we too would have to be in favour of a revolutionary war against the latter, in favour of “crushing” them, in favour of destroying all their outposts, no matter what small-nation movements arose in them. Consequently, instead of rejecting any examples of Marx’s tactics—this would mean professing Marxism while abandoning it in practice—we must analyse them concretely and draw invaluable lessons for the future. The several demands of democracy, including self-determination, are not an absolute, but only a small part of the general-democratic (now: general-socialist) world movement. In individual concrete cases, the part may contradict the whole; if so, it must be rejected. It is possible that the republican movement in one country may be merely an instrument of the clerical or financial-monarchist intrigues of other countries; if so, we must not support this particular, concrete movement, but it would be ridiculous to delete the demand for a republic from the programme of international Social-Democracy on these grounds."

Again, it is only necessary to read these words, and to consider how much the US hegemon, along with its other Imperialist Allies is similar to the bulwark of reaction played by Tsarist Russia in Marx's time, to see how far the AWL, and the other "idiot anti-imperialists" are from a Marxist position. We only have to consider the fact that the leaders of the TNC had been cultivated by EU Imperialism, and were indeed akin to being "an instrument of the clerical or financial-monarchist intrigues of other countries", especially also given the role of the Qataris in providing hundreds of Special Forces troops in each region of Libya. In fact, from the reports now being recieved of just how few actual Libyan rebels were involved in the fighting, it is clear that far from bing a popular revolution as the Beloved Leader wishes to portray it, this was an Imperialist War against Libya, pure and simple, and would not have been won without massive Imperialist bombing of the country, and without the insertion of hundreds of Special Forces from Britain, France, Qatar and elsewhere on the ground.

We see, in Lenin's comments above the other important aspect of the Marxist position in relation to self-determination, and bourgeois democratic demands. That "are not an absolute, but only a small part of the general-democratic (now: general-socialist) world movement. In individual concrete cases, the part may contradict the whole; if so, it must be rejected". But, the AWL, having rejected Marxism and Dialectics in favour of the Formal Logic and Opportunism of Third Campism, is unable to develop its politics on this basis. It is forced into a moralistic search for the lesser-evil in each particular case. It is unable to see each event as part of a process, and how, therefore, it has much wider consequences than just the individual event.

We are seeing that now. Only a few days after Gaddafi was killed, former US Republican Presidential candidate, John McCain, appeared on Newsnight proclaiming their success, and arguing that it provided an example of how to proceed. He put forward the idea of adopting similar tactics for the removal of the regimes in Russia and China. If someone like McCain can come out with such dangerous nonsense, what ideas must be running through the heads of the more loopy, Tea Party elements, flush with their success in Libya??? In fact, we do not have to look at just those loopy elements. Already, as a smaller bite to chew off first, before launching a new world war, they are openly discussing a war against Iran!!!! The Daily Mail reveals that Israel has been test-firing missiles capable of delivering nuclear warheads into Iran.

We are living in dangerous times, as the Arab Spring could turn to a Nuclear Winter, as fault lines open across the region, with nuclear armed competitors lining up behind the forces on each side of them. In such times the working-class, globally, needs clear thinking, principled Marxist organisations to provide an analysis, and principled a response to the dangers the class faces. We do not have such organisations. The AWL least of all represents such. If we look at the reason it is providing support for the clerical-fascists in Libya, in contrast to its approach elsewhere, it comes down to what it has been in other cases. In Libya, the clerical-fascists were on the same side as the Imperialists. It is support for Imperialism, which dictates for the AWL who is the lesser-evil, and who they will support in any such conflict. It is a far cry from any kind of Marxist, principled position, based on building an independent working-class, revolutionary force capable of winning the leadership, and defending the workers against their class enemies.

Fortunately, the AWL have no influecne whatsoever in the working-class, and the only people they are misleading is a few middle class students. Fortunately, given the nature of their organisation, it could never amount to anything more.

UK Q3 GDP Really Zero

2011-11-01T12:43:00.000Z

According tothe ONS, today, the UK economy grew by 0.5%, in the third quarter of2011, ahead of expectations of 0.3%. However, if we take the ONS atits word, then, in real terms, it did not grow at all!!! In itscomments, in relation to the release of the second quarter GDPfigures, from April to June, it explained the dismal 0.2% figure bysaying that it had been distorted downwards by “Special Factors”. These special factors were things such as the Royal Wedding, theJapanese tsunami etc. It said that these had reduced growth by 0.5%,and that this would be recovered. But, in that case, if growth wasonly 0.5% this quarter, it has only managed to grow by the amountdeferred from the last quarter, meaning no new growth at all! Infact, it could be argued that it is worse than that. The ONSsubsequently revised the Q2 figure to only a 0.1% rise. If thatmeans that the distortion was 0.6%, then this quarter's figure hasnot even managed to recoup that distortion, meaning the economy isalready really shrinking. The NIESR have already said they believethat to be the case, and survey data back up that conclusion.

The UKManufacturing Purchasing Managers Index, released earlier, fell tojust 47.4, the lowest figure since March 2009. Any number below 50represents contraction. On top of that, other economic data show theeconomy heading rapidly back into recession due to the austeritymeasures being imposed by the Government. Unemployment is already ata 17 year high, and, with a 10% fall in University applications, thatwill mean an additional number of young people remaining on the dolequeue, adding to the record high number of youth unemployed, whichhas already gone over a million. The ONS figures themselves, showedthat on an annualised basis, even this distorted figure for Q3,represents a fall to 0.5% from 0.6% last quarter. The Government arefrantically trying to talk up the economy, as they recognise that theyare in deep trouble, and are coming under pressure to change course. With the decision of Greece to call a referendum on the Bail-outdeal, and with Portugal now responding, as they were bound to, bycalling for concessions on their own bail-out, the hope theLiberal-Tories had that Europe would come to their rescue is fastdisappearing.

Meanwhile,TheIndependent have reported that Credit Card debt in the UKis soaring, as families seek to cover the monthly deficit between thefalling wages, and soaring inflation. They quote a report by Shelterand Co-op Insurance, which says,

“nearlya third of struggling families are being forced to spend more moneyeach month than they have coming in, with the average adult facing amonthly shortfall of £165.”

Its nowonder we are seeing a new rash of TV adverts by Usurers chargingover 1,000% interest on pay day loans, and that we are seeing thereturn of the “We Buy Any House, Car etc” merchants who will giveyou, at best, 60-70% of the current value of those items you need tosell to raise money. In fact, although the Government has goneoverboard for the last 18 months with its scare stories about howBritain was in danger of becoming Greece due to the Public Debt, itis Private Debt in Britain, which is the much larger problem, and setto become even more of a problem. Public Debt stands at around £700billion, but Private debt stands at more than £2 Trillion. TheGovernment can always print more money to cover its debt, butindividuals have to either pay up or become bankrupt. The latestfigures show an increasing number will be forced to do the latter. Given that a large amount of this private debt is tied up inproperty, it will inevitably mean a crash in house prices, and bigproblems for the Banks and Building Societies who have irresponsiblylent huge amounts of money, at reckless multiples against income, topeople who will not be able to pay it back. As has happenedelsewhere, when the mortgages go bad, and the house prices collapse,the Banks will find themselves holding worthless assets.

There isanother factor playing into that scenario. Over the last few weeks anew Credit Crunch has been developing. As a result, UK Banks arefinding it more difficult to borrow, and are paying much higher rateson the money they can get their hands on. Nowadays, especially withsuch negligible rates for savers, the Banks and Building Societiesare reliant upon this borrowing in the Capital Markets, to fund themortgages and other loans they make. That was the problem thatafflicted Northern Rock back in 2007, and then affected other Banksin 2008.

Even withoutan increase in the Bank of England’s Bank Rate, the Banks andBuilding Societies are having to pass on these higher interest ratesin higher mortgage rates. Moneyweekreports,

“Lloyds,the largest mortgage lender in the UK, has just raised its standardvariable rates (SVR) – the rate to which borrowers coming to theend of a deal move on to – from 4.84% to 4.95% for borrowers withThe Mortgage Business and the Bank of Scotland (both part of thegroup). At the same time, some banks have begun to raise SVRs andtracker rates for new customers; something that appears to have takenmany by surprise.

Onecouple quoted in the Telegraph declared themselves “dumbfounded”by the rise. They are in the process of selling their house. I wonderif the higher payments will make them feel like cutting the price toget it away a little faster? Given that transaction volumes are underhalf their peak levels and that the average house is now selling foraround 10% under the asking price, it might not be a bad idea.”

All of thefactors required to ensure growth in the economy are heading in theopposite direction, and the austerity measures being undertaken arethe basic cause of that. The problem is that even changing courseis not likely to have the necessary effect, because as I have saidpreviously, it requires more input to reverse the downward momentumthan is required to maintain forward momentum. Only a large scaleprogramme of restructuring and stimulation across Europe is likely tobe able to do that. At the moment a financial collapse, causingsomething approaching a Depression seems more likely.