Blue Labour Will Fail, Prepare For It Now - Part 9 of 10

As Marx sets out in Capital III, the socialised capital is the collective property of the associated producers (i.e. the workers in each enterprise), and so consequently, the ruling class owners of interest bearing capital stand in an antagonistic relation to them, not as, in the past, capital – labour, but as owners of interest bearing capital to collective owners of industrial capital, of interest to profit of enterprise. 

The interests of workers, as collective owners of that socialised capital, is to minimise the amount going to interest/dividends, but in the joint stock companies, they do not exercise control over that capital. It has been legally vested in its non-owners, i.e. the shareholders, and they have used that control, as yields on their assets fell, to compensate by devoting an increasing portion of profits to dividends, as described by Haldane, from 10% in the 1970's to around 70% today. A truly progressive social-democratic policy, therefore, would seek to change that.

The obvious means of doing so is that the unjustified position of shareholders exercising control over property they do not own should be ended. But, to demand that shareholders lose their control over companies, and that, instead, companies should be democratically controlled by their collective owners, the workers and managers in the company, is tantamount to demanding the socialist revolution, because the ruling class would not simply give up such control voluntarily.

That does not mean Marxists should not advocate it, as part of our programme, of socialist revolution, just as we do not have to immediately raise the demand for soviets, whilst noting their necessity for the success of the revolution. In the meantime, as I have suggested, elsewhere, in place of the petty-bourgeois attack on large-scale capital, represented by demands for increased taxes on corporate profits, Marxists should advocate lower, or no Corporation Tax, but much higher taxes on dividends, so that encouragement is given for companies to retain profits/maximise profit of enterprise, for capital accumulation, rather than paying them out to cover the revenues of shareholders.

It is not only as collective owners of socialised capital, however, that workers have an interest in maximising the profit of enterprise at the expense of interest/dividends. As Marx describes in Wage-Labour and Capital, under capitalism, the best conditions for workers exist, where the economy is growing and capital is accumulating more rapidly. Its in those conditions that more labour is employed, where greater stability for workers is created, and where this increased demand for labour makes possible higher wages. But, so long as capitalism, and commodity production and exchange persists, the underlying contradiction between capital and labour also persists, as Marx sets out, whether that capital is owned by a private capitalist, or collectively by the workers themselves.

“The co-operative factories of the labourers themselves represent within the old form the first sprouts of the new, although they naturally reproduce, and must reproduce, everywhere in their actual organisation all the shortcomings of the prevailing system. But the antithesis between capital and labour is overcome within them, if at first only by way of making the associated labourers into their own capitalist, i.e., by enabling them to use the means of production for the employment of their own labour. They show how a new mode of production naturally grows out of an old one, when the development of the material forces of production and of the corresponding forms of social production have reached a particular stage.”

(Capital III, Chapter 27)

The workers, must still maximise the production of surplus value/profit, so as to maximise their own ability to accumulate additional capital, and thereby, to gain market share, and retain efficiency.

The ruling class also has an enemy in the petty-bourgeoisie, because the petty-bourgeoisie represents the remnants of the old petty commodity producers, and private capital. It clings to all of the outmoded facets of that past society that large-scale socialised capital has grown out of, such as the attachment to the nation state, as witnessed in the petty-bourgeois campaign for Brexit. So, although the working-class, as the collective owners of socialised capital, stands in opposition to the ruling-class, as owners of interest-bearing capital (fictitious-capital), whilst the petty-bourgeoisie also stands in opposition to that ruling class, there is no basis for the working-class, in any way, seeing the petty-bourgeoisie as its friend or ally against the ruling class.

The working-class stands in opposition to the ruling class because the latter has become conservative, and a fetter on further rational development of capital. It wants to move beyond the constraints that the ruling class place on that development. The petty-bourgeoisie, on the other hand, stands in opposition to the ruling class, from the opposite perspective. It sees the development of that large-scale capital, upon which the ruling class and its state ultimately depends, as already having gone too far. It wants to turn history back to a more primitive condition, of private capital, and the independent nation state, a condition which is a reactionary delusion, and impossible to achieve, which is why Brexit, in whatever format it is presented, is reactionary and doomed to fail.

All of Starmer's and Blue Labour's perspective, which is based upon that petty-bourgeois perspective, and attempts, purely for opportunistic and electoral considerations, to appease and appeal to those reactionary petty-bourgeois sentiments, is equally doomed to fail.

Back To Part 8

The Final Part Will Appear On Thursday

Confusing Inflation and Prices

I read this article, at Social Europe, yesterday, and wanted to briefly respond to the fundamental confusion contained in it.

Many ordinary people confuse, inflation, manifest as a change in prices, with prices themselves. These are two quite different things. If prices are at an index level of 100, for example, and there is inflation of 100% p.a., then, after a year, prices will be at an index level of 200. If, in the subsequent year, inflation disappears, i.e. no increase in the level of prices, at the end of the year, the index level of prices will still be at 200, it will not have gone back to 100! It is understandable that ordinary citizens might get confused about this, and, as reported, frequently, hear that inflation is falling, and take it as meaning that prices themselves are falling. That economists make that mistake is not understandable. Yet, that apparently is what Ronald Janssen has done, in this article.

He writes,

“Inflation is instead driven by the supply side. Pandemic-linked disruptions—bottlenecks in global supply chains, the invasion of Ukraine, production shifting from services based on human interaction to consumer goods and back—are in the process of reversing. Global supply chains are being repaired and workers moving into sectors where labour is in higher demand. Inflation is thus coming down of its own accord, without much need to push unemployment up by squeezing demand.”

In other words, Janssen confuses a change in prices for the level of prices itself. If, as he claims, the “inflation” is a result of an imbalance of aggregate demand an supply, with aggregate supply having been curtailed as a result of the various supply-side shocks he lists, then, likewise, as those supply constraints disappear, not only should that “inflation” disappear, but it should be followed by an equal counteracting “deflation”, to reduce the price level to its former equilibrium level. If we take the price of ice-cream on a hot day, rising demand that exceeds supply may cause the price to rise from say £1 to £2, a 100% “inflation”, in Janssen's terms. When the weather cools, and demand subsides, to at least its previous level, prices would fall back to £1, a 50% “deflation”. But, does anyone seriously expect to see the same thing with the general level of prices? Of course not! Even if “inflation” falls to zero, rather than the 2% target of most central banks, we will not see prices, overall, falling back to where they were in 2020, or indeed falling at all.

According to Janssen, inflation arises from one of the two above situations.  Either I, aggregate demand rises, or II, aggregate supply falls.  He claims, currently, its due to II, not I.  But, in either case, this is not the cause of inflation.  If as Janssen claims, the inflation is a result of supply-side constraints (a shift of the supply curve to the Left from S`S` to SS), then the removal of those constraints, bringing a shift of the supply curve back to the Right, S`S`, would not only result in inflation disappearing, but in prices as a whole falling!

A simple supply and demand chart illustrates the problem with Janssen's argument, which fails to take into account that prices are measured by something, i.e. a standard of prices, whose own value affects that index. Suppose, on this chart of demand and supply, both are in balanced equilibrium at 1 million units, and a price of 10. (Say, in II, the intersection of S`S` and DD).  We have to ask the question 10 what? If we define this standard of price as £'s, its obvious that, if, instead, we used $'s, with an exchange-rate of $1.20 per £, then the equilibrium price would move to 12, even though there is no change in the level of aggregate demand and supply, no imbalance arising between them. Indeed, if we simply used UK pennies as the standard of price, the equilibrium price would rise to 1000!

But, similarly, as Marx describes, just because the nominal standard of price remains constant, at say £1, does not mean that this £1 has the same value. If that £1 actually only has a value of £0.80, compared to a year earlier, as a result of an excess of these £1's being thrown into circulation, it would be the same as if prices were measured in $'s rather than £'s, or as Marx also demonstrates, silver being used as the basis of the currency rather than gold. Without any change in the level of aggregated demand and supply whatsoever, no imbalance of one with the other, prices would rise from 10 to 12.

Janssen confuses form and content, and is transfixed simply by the impress on the standard of prices, much as Marx describes was the case with Proudhon.

“Philip I was not a maker of gold and silver, as M. Proudhon says; he was a maker of names for coins. Pass off your French cashmeres as Asiatic cashmeres, and you may deceive a buyer or two; but once the fraud becomes known, your so-called Asiatic cashmeres will drop to the price of French cashmeres. When he put a false label on gold and silver, King Philip could deceive only so long as the fraud was not known. Like any other shopkeeper, he deceived his customers by a false description of his wares, which could not last for long. He was bound sooner or later to suffer the rigour of commercial laws. Is this what M. Proudhon wanted to prove? No. According to him, it is from the sovereign and not from commerce that money gets its value. And what has he really proved? That commerce is more sovereign than the sovereign. Let the sovereign decree that one mark shall in future be two marks, commerce will keep on saying that these two marks are worth no more than one mark was formerly.”

(The Poverty of Philosophy, p 80-81)

The Chinese Revolution And The Theses of Comrade Stalin - Part 23 of 47

Trotsky sets out all of the things that the Chinese Communist Party did that led up to the catastrophe. Knowing the fact that Chiang Kai Shek had launched a coup in 1926, they even hid this fact, as part of trying to continue the bloc with the KMT; they attempted to use the Right, but were used by it; they failed to exercise independent organisation and politics; they sacrificed the interests of workers in practice; so as to maintain the bloc with the KMT, they failed to seriously try to win over the soldiers, and allowed the KMT to establish a “military dictatorship of the centre”, i.e. of the counter-revolution.

“On the very eve of the coup d’état we blew the trumpets for Chiang Kai-shek. We declared that he had “submitted to discipline”, and that we had succeeded “by a skilful tactical manoeuvre in forestalling an abrupt turn to the right that threatened the Chinese revolution”. We remained behind the events all along the line. At every step we lost in tempo to the benefit of the bourgeoisie.” (p 39-40)

The same disastrous results flowed from every such Popular Front, and, repeatedly, we see those same kinds of practice of denying the right-wing, corrupt, anti-working-class nature of the bourgeois regime or forces that are being supported, in the name of maintaining a broad front, for peace against imperialism, or against fascism, and so on. Indeed, against all sorts of things, rather than ever for Socialism.

The Stalinists tried to cover their mistakes by even claiming that Chiang Kai Shek had been provoked by the ultra-left excesses of the workers of Shanghai!

“The “mistake” of the Chinese workers lies in the fact that the critical moment of the revolution found them unprepared, unorganized and unarmed. But that is not their mistake, it is their misfortune. The responsibility for it falls entirely upon a bad leadership, which let every interval pass.” (p 40)

There is also a lesson, here, in relation to the experience of the “Left”, in Britain with Corbynism. Corbyn, and his supporters, again guided by these same Stalinist principles, at every stage, failed to separate themselves from the Right, entrenched in the PLP, and the party bureaucracy, and local councils. In the story of the Chinese revolution, they occupy the same role as the Left Kuomintang.

The “Left”, inside the LP, is engaged in a Popular Front. The Labour Party is a party whose membership is comprised of workers, the large majority of whom are progressive social-democrats, but whose leadership, in parliament, is comprised of conservative social-democrats. In other words, the party members are still dominated by the ideas of bourgeois-democracy, but have some vague notion that it can be used to win some significant improvements for workers, both in terms of living standards and position in society. The conservative leadership has no such illusion, and sees its role solely in pro-capitalist terms, in which it is there to advance the interests of capital, which it can't distinguish from the interests of shareholders etc., and, only as some possible side effect, might that, then, benefit the workers it hopes will continue to get them elected.

In 1917, the Bolsheviks raised the demand “Down with the capitalist ministers”, in relation to the Provisional Government, as they sought to pressure the reformists within it to transform it from a Popular Front into a Workers Government, comprised of reformists and centrists. The equivalent would be, in relation to the Labour Party, to demand “Down with the capitalist MP's”, meaning 90% of the PLP! But Corbyn, and his backers, when he was Leader, made all the same mistakes as the Stalinists, in China, in 1925-7. Instead of driving forward with a democratisation of the party, to get those right-wing, pro-capitalist MP's deselected, they pulled back on the reins of party members seeking to hurry that along.

At each stage, they attempted to maintain that bloc with the Right-wing MP's, who simply used that to launch their coup against him, and, even after that, they still failed to move against the Right, instead accommodating the Right further, as it shifted its strategy to undermining Corbyn's supporters, in the membership, by launching, first, its abortive claims about “intimidation”, and infiltration, aimed at Momentum, before latching on to its successful tack of its fake war on “anti-Semitism”. In the latter case, the failure of Corbyn and the leadership to stand up to the Right was compounded by the fact that they were complicit in witch-hunting thousands of party members, the consequence of which was the witch-hunting of Corbyn himself.

Back To Part 22

Blue Labour Will Fail, Prepare For It Now - Part 8 of 10

What we have is a good example that the mantra “My enemy's enemy is my friend”, is nonsense. The ruling class has two enemies. Its main enemy is the working-class, but, as Marx describes in Capital III, the basis of that is no longer that which it was in the early days of the monopoly of private capital. At that point, there was an objective contradiction between the interests of the private owners of industrial capital, and that of workers. The former sought to maximise surplus-value/profits, and that meant keeping wages to a minimum.

However, by the latter part of the 19th century, that condition had changed, and those private capitalist expropriators had themselves been expropriated by large-scale socialised capital. The private capitalists retreated to become owners of fictitious-capital, i.e. interest bearing capital, in the form of shares, bonds, and their derivatives. The contradiction was no longer between the ruling class and workers on the basis of the antagonism between profits and wages, but between the ruling class as owners of interest-bearing capital, and real industrial capital itself, i.e. between the maximisation of interest/dividends, and the maximisation of profit of enterprise.

“interest-bearing capital as such has not wage-labour, but productive capital for its opposite. The lending capitalist as such faces the capitalist performing his actual function in the process of reproduction, not the wage-worker, who, precisely under capitalist production, is expropriated of the means of production. Interest-bearing capital is capital as property as distinct from capital as a function. But so long as capital does not perform its function, it does not exploit labourers and does not come into opposition to labour.”

(Capital III, Chapter 23)

In other words, the interests of interest-bearing capital, are antagonistic to the interests of real, industrial capital. But, the expropriation of the expropriators, described by Marx, i.e. the expropriation of private capital by large-scale socialised capital, be it in the form of cooperatives or joint stock companies, and transformation of the ruling class into a class of coupon clippers, owners of fictitious capital/interest-bearing capital, means that this ruling class is imminently antagonistic to the capitalist system which created it!

Yet, this contradiction is also detailed by Marx, and shows the problem faced by the ruling class and its state, currently. The superficial appearance of this fictitious or interest-bearing capital, is that it produces interest, naturally, in the same way that a pear-tree produces pears. But, that is impossible, because interest is a deduction from profits, and profits are a function of surplus value, produced by labour.

“The idea of converting all the capital into money-capital, without there being people who buy and put to use means of production, which make up the total capital outside of a relatively small portion of it existing in money, is, of course, sheer nonsense. It would be still more absurd to presume that capital would yield interest on the basis of capitalist production without performing any productive function, i.e., without creating surplus-value, of which interest is just a part; that the capitalist mode of production would run its course without capitalist production. If an untowardly large section of capitalists were to convert their capital into money-capital, the result would be a frightful depreciation of money-capital and a frightful fall in the rate of interest; many would at once face the impossibility of living on their interest, and would hence be compelled to reconvert into industrial capitalists. But we repeat that it is a fact for the individual capitalist.”

(ibid)

This is the problem that the ruling class and its state has had to confront for the last 30 years, and particularly the last 15 years. As asset prices inflated, when money-capital did suffer a “frightful depreciation”, as its supply from surging profits in conditions of stagnation and intensive accumulation, meant that interest rates fell, so there comes a point, where, for some owners of money-capital, the fall in the yield/rate of interest, is not compensated by the rise in the mass of capital. That is apparent for someone who just, has, say £200,000 in a savings deposit. With a 10% rate of interest, they obtain interest of £20,000 a year, which may be enough for them to live on. As interest rates fall to 2%, their interest falls to just £4,000 a year, and not enough to live on. Hence the shift of such savings to the purchase of buy-to-let property, or alternatively to shares, in which the amount of dividends might rise, as company profits rise.

But, if we, then, take these shares, profits and dividends, if the same £200,000 is used to buy 200,000 shares of a company that produces £200,000 of profit, and pays out £20,000 in dividends that again is a 10% return. If, however, the profits rise to £300,000, and it pays out £30,000, but the price of the shares rises from £1 to £2, so that the 200,000 shares are now equal to £400,000, this £30,000 only represents a yield of 7.5%. To begin with, the person who only paid £1 for the shares will see their yield as being, now, 15%, but for anyone, now, coming to buy the shares, the yield will be just 7.5%. Indeed, the original purchaser will see that they have an asset with a current value of £400,000 that only produces a 7.5% yield, and compare that to the yield they could obtain elsewhere. As interest rates fall and asset prices rise, this becomes more acute. But, what Marx could not have foreseen was that, as this process unfolded, over the last 40 years, with a ruling class that now owns its wealth in the form of this interest-bearing capital, it would begin to focus on the total return, and specifically the capital gain, rather than on the actual revenues produced by the assets.

If the share price rises to £10, buyers of these shares, who have the original £200,000 to spend, will only be able to buy 20,000 shares. So, even if the profit per share rises from the original £1 to £3, and the portion of profit paid as dividends remains 10%, the dividends on these 20,000 shares falls to just £6,000. That was the problem faced by workers' pension funds that had more or less the same amount of money in contributions paid into them, but saw the quantity of shares and bonds those contributions could buy slashed, as bond and share prices soared to astronomical levels, in the 1980's and 90's, relative to the profits produced by the underlying industrial capital. It was worsened by the fact that, to compensate, those funds looked to realising capital gains, resulting from those soaring prices, rather than from increased revenues.

There is a limit to which the small scale owner of such assets can simply sell a portion of the assets they own so as to convert the capital gain into revenue, because, at some point, all of their assets are sold. But, the ruling class has such a large mass of such assets that, even with its extravagant consumption, it can fund that consumption by a combination of the revenues from them, with partial liquidation of assets to realise capital gains. But, that depends upon those capital gains continuing, i.e. on asset prices not crashing as happened in 1987, 1994, 2000, and 2008, and as Jim Rickards records, nearly happened in 1998, at the time of the collapse of LTCM.  The ruling class has, therefore, used central banks to ensure that whenever such falls occur, liquidity is injected to purchase assets and raise their prices. But, that does nothing to increase the revenues produced by those assets, so that the yields on the assets fell further, as the asset price rose, even resulting in the ludicrous position of negative yields on assets.

To avoid that, the ruling class needed to avoid economic growth exceeding what could be funded without causing interest rates to rise, and asset prices to crash. Hence austerity, lockdowns and so on. But, despite its best efforts, it has failed to achieve that, in the long run. The interests of real industrial capital, is to minimise the amount paid out in interest/dividends, and so to maximise profit of enterprise, as the means to accumulate capital, and so, produce more profit. But, the immediate interest of the ruling class, is to maximise the amount of dividends/interest it receives, or else to maximise capital gains via perpetual rises in asset prices, which requires it to use its control over the state to hold back economic growth, and, thereby, interest rates!

Back To Part 7

Forward To Part 9

Chapter 1, A Scientific Discovery, 3) Application of the Law of the Proportionality of Value, A Money - Part 4 of 7

Marx, then, examines what Proudhon claims are the “economic” reasons for gold and silver achieving the status of money, prior to other commodities, as a result of their value being “constituted” first. All of these reasons, given by Proudhon, amount to nothing more than vague restatements, using other words for the assumption he needed to validate.

“These economic reasons are: the “visible tendency to become dominant,” the “marked preferences” even in the “patriarchal period,” and other circumlocutions about the actual fact – which increase the difficulty, since they multiply the fact by multiplying the incidents which M. Proudhon brings in to explain the fact.” (p 78)

And Marx quotes another reason given by Proudhon, which shows the way he gets things back to front.

“Money is born of sovereign consecration: the sovereigns take possession of gold and silver and affix their seal to them.” (p 78)

Marx notes,

“Thus, the whim of sovereigns is for M. Proudhon the highest reason in political economy.” (p 78)

There is a lesson, here, from Marx to the Stalinists and statists, including today's economic nationalists, proponents of MMT etc. He says,

“Truly, one must be destitute of all historical knowledge not to know that it is the sovereigns who in all ages have been subject to economic conditions, but they have never dictated laws to them. Legislation, whether political or civil, never does more than proclaim, express in words, the will of economic relations.

Was it the sovereign who took possession of gold and silver to make them the universal agents of exchange by affixing his seal to them? Or was it not, rather, these universal agents of exchange which took possession of the sovereign and forced him to affix his seal to them and thus give them a political consecration?

The impress which was and is still given to money is not that of its value but of its weight. The stability and authenticity M. Proudhon speaks of apply only to the standard of the money; and this standard indicates how much metallic matter there is in a coined piece of silver.” ( 78-9)

It is not possible, however, to know the value of an ounce of silver, simply from its weight. To know its value, I must know how much universal labour it represents, and to know its exchange-value, I must know in what proportion this value stands to that of other commodities such as wool, linen, wine etc. A jumper might bear the label “pure wool”, but this cannot tell me its value, without knowing the value of wool and so on, Marx says. Similarly, a coin thrown into circulation, by a sovereign, - be it an absolute monarch or a bourgeois-democratic state, or workers' state – cannot have its value determined simply by an impress upon it.

Marx quotes Proudhon's example of Philip I, and responds,

“It has been proved times without number that, if a prince takes into his head to debase the currency, it is he who loses. What he gains once at the first issue he loses every time the falsified coinage returns to him in the form of taxes, etc. But Philip and his successors were able to protect themselves more or less against this loss, for, once the debased coinage was put into circulation, they hastened to order a general re-minting of money on the old footing.” (p 79-80)

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