Burnham's Dead Cat Bounce - Part 4 – (Digression) – The Era of Speculation and Gambling (1)

Part 4 – (Digression) – The Era of Speculation and Gambling (1)

In the 1980's, conservative social-democracy encouraged workers to buy shares, houses and private pensions. As the prices of those assets rose, whilst the surplus of labour meant that wages grew slowly, it was not too hard to sell. As many workers also found themselves unable to get decent full-time jobs, and were encouraged into precarious self-employment, leading to the growth of the petty-bourgeoisie referred to earlier, this kind of individualist, mentality was further reinforced, even though it was delusional and self-destructive.

And, self-destruct it did. In 1987, as a debt spike, in the US, caused interest rates to rise, asset prices crashed around the world, including the prices of all those privatisation shares workers had been encouraged to buy etc. (An example of the delusion and hysteria was shown when, just prior to the BP privatisation, in October 1987, the market price of BP shares dropped significantly below the privatisation offer price, and yet retail speculators insisted on buying the overpriced shares.)

In Britain, workers who had lived comfortably in their council houses for decades were encouraged to take on debt to buy them. As interest rates spiked, and they could not meet the mortgage payments, they were evicted. Large proportions of the council housing stock passed not to former tenants, but to private landlords, who picked them up cheap.

But, unlike previous asset price crashes, the fact that so much of the ruling class's wealth and power was, now, tied up in this paper form, and that so much had been put into selling the delusion/lie that wealth could be created out of thin air (the same delusion is purveyed by MMT), the state was led to intervene not to rescue real industrial capital, but to prevent the collapse of those asset prices. Every time it did so, it simply intensified the underlying contradiction, which, as Marx describes, in Capital III, comes down to the antagonistic interests of interest-bearing capital (fictitious-capital) and industrial capital.

The interest of interest-bearing capital is to maximise the revenue it obtains as interest/dividends, as a deduction from industrial profit. The interest of industrial capital is to maximise the profit of enterprise/retained profits, so as to maximise the potential for capital accumulation. The collective owners of industrial capital, in the era of imperialist capital, are the “associated producers” within each company, as Marx describes them, i.e. the workers and managers. That imperialist capital is “socialised capital”, which replaced the monopoly of private industrial capital, in the process described by Marx as “the expropriation of the expropriators”.

But, other than in the worker cooperatives, the “associated producers”, i.e. the collective owners of this socialised industrial capital, are legally prevented from exercising control over that capital! The ruling-class, as it abandoned its functional role in production, and became a class of merely parasitic coupon-clippers, ensured that its state created company laws that continued to enshrine control over that capital in their hands, rather than in the hands of its collective owners.

It was this “property question” that workers had to address, but, instead, the political leadership of the labour movement, in the 20th century, ignored Marx and Engels analysis and advice, instead simply organising the workers to continue an unwinnable struggle to just improve the price of their labour-power. Consequently, when the process, described earlier, led in the 1980's and after, to asset prices rising faster than profits, the natural response of the ruling-class, as a class of rentiers, was to use that right of control to increase the share of profits that went to interest/dividends, and so reduce the share available as profit of enterprise/retained profits to fund capital accumulation.

Moreover, the same process extended to the rents extracted, and to the taxes appropriated by the capitalist state. Asset prices, be it the price of shares, bonds, property/land rose, but, as profits rose more slowly, yields, be it on financial assets or rental yields, fell. They fell, even if the actual level of interest/dividends, rent etc. did not, simply because of the rise in the price of the assets.

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 27

If workers had control of their money paid into their pension funds, they would be far more likely to see the benefit of using that money to actually invest in real capital accumulation, the use of the money to buy additional machines and buildings, and to employ additional workers, rather than to simply inflate existing asset prices.

They might, of course, use that money to finance the expansion of worker-cooperatives, especially as the shareholders that control corporations have been more concerned to inflate their own share prices, and to use that control to hand money to themselves than to invest in real capital accumulation. So, its no wonder that the ruling-class has created a legal structure that prevents workers from exercising their legitimate, democratic right to control their own pension funds, blatantly in defiance of even basic bourgeois norms of property law. Now that would be a struggle to “take back control” that would be worth supporting.

Its not just that workers having control of their own pension funds would expose all of the things described above of the vast sums siphoned off as fees and commissions, of the fact that shareholders have preferred to inflate asset prices rather than invest in real capital accumulation and so on. Even without control of our pension funds, a basic democratic demand, here, should be to “open the books” of those pension funds, and all of the banks and finance houses that control them. A Workers Inquiry would itself be a mobilising process, because we all know what kinds of practices would be uncovered by it, as even the Panorama investigation all those years ago lifted the lid on.

Workers, in a large company, might, of course, begin to ask the question why, when that money is available, the company directors do not use it for such expansion, but even if, at first, they don't ask that question, a labour and cooperative movement utilising such funds, of itself, exposes the reason. As I have set out elsewhere, one reason that the vast amounts of money tokens/credit thrown into circulation by central banks, to prop up asset prices did not lead to commodity price inflation is precisely that all this liquidity was diverted, directly, into the purchase of those existing assets. Indeed, the very fact of those inflating asset prices, over the last forty years, and actions of central banks to maintain it, created not just moral hazard but, also, a fear of missing out, in which currency was drained from general circulation into this speculation.

If all of the additional liquidity that found its way, for example, into a demand for existing houses, and so hugely inflated their prices had, instead, been directed into the building/supply of additional houses, so raising the supply rather than the demand, the astronomical rise in house prices would not have happened. In fact, analysis shows that contrary to popular belief – which also fuels racist claims about migrants taking houses – the number of homes per head of population is greater today than it was in the 1970's, before house prices began to soar.

As Moneyweek point out,

“The population has gone up, of course. But the housing stock has risen too. In fact, according to an interesting report from economic research group Fathom Financial Consulting, while the rate of building decreased over the last decade, the quantity of ‘housing per person’ has risen by nearly 50% since 1970, and is still increasing.!"

The astronomical inflation of house prices is not the result of physical supply not rising enough to meet population growth, or new household formation – and is certainly not caused by migrants taking up these already overpriced homes – it is the result of speculative demand for existing houses, driven by the huge liquidity injections that central banks have made since the late 1980's. House prices did not rise because the value of houses, as a commodity rose. Indeed, as with all commodities, on average, the unit value of them falls over time, as a result of rising social productivity. Nor, indeed, as set out above, did they rise because the physical supply did not rise in the same proportion as the physical demand from population growth. They rose, because of a huge rise in the monetary demand – as Marx notes in Capital, the only effective demand is monetary demand – a demand that was inflated, by repeated depreciation of the currency/standard of prices. The price of houses rose, not as a commodity, but as a speculative asset, just like money flocking to the purchase of shares, bonds, Bitcoin, or paintings.

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SNNS 67

 

Northern Soul Classics - Agent Double O Soul - Edwin Starr

 

Burnham's Dead Cat Bounce - Part 3 – Different Labels, Same Cans of Beans

Part 3 – Different Labels, Same Cans of Beans

Those believing that the exposure of Reform's racism will destroy it are deluding themselves. That information is already priced into its support. In fact, the current media attention may even win it back some of the support it lost to Restore from those who saw Reform as not racist enough! Reform may see its support in polls drop as a consequence of the current media attention, but only as a consequence of its “softer” racist wing responding to a changed political “vibe”. Whether even they actually vote Reform, when it comes to elections, or for Badenoch's rapidly Rightward moving Tories is another question.

What is clear is that despite retaining the name - “The Conservative Party” - it is dead. It is, now, simply simply a version of the old Tory Party. The Conservative Party of the 20th Century, which cohabited within the same organisational structure as that Tory Party, and dominated it, has become impossible. Its ideology, and its membership and voter base is, now, the property of the Liberals, and Blair-Right wing of the Labour Party. Ironically, Blair himself, as he cosies up to the likes of global authoritarians such as Trump, Netanyahu etc., in search of making a quick buck, has himself abandoned that ideological ground. Blair is no longer a Blair-Right.

As I have set out before, the problem for that Conservative social-democracy (neoliberalism) is that it is based on the interests of the ruling-class owners of fictitious capital (interest-bearing capital). For most of the 20th century, and particularly during the heyday of social democracy after WWII, (1945-75), the expansion of real industrial capital (large-scale socialised capital) meant a growing mass of profit, and, out of that profit, a growing mass of those other revenues that are deductions from it, i.e. interest/dividends, rent, profit of enterprise and taxes.

The ruling-class owners of fictitious-capital, and their state, were content to see a continuous rise in their revenues (interest/dividends, and taxes), even if, over time, the share of the total profits going to these revenues declined, as a greater proportion had to be utilised as profit of enterprise/retained profits to fund capital accumulation. The latter itself was a consequence of the usual long-wave cycle process, whereby capital accumulation moves from intensive to extensive accumulation, productivity growth slows, the demand for labour rises faster than its supply, so relative wages rise and relative profits fall. That process – the profits squeeze – culminated in the mid 1970's – a crisis of overproduction of capital relative to labour.

The solution to that crisis, as in previous long-wave cycles, was a technological revolution, which replaces labour with fixed capital/machines/technology. In the 1970's/80's, that base technology was the microchip. But, as I have set out, elsewhere, the consequence of this was that the burgeoning profits and rate of profit of the 1980's and 90's, led to the supply of loanable money-capital rising faster than the demand for it, so interest rates fell, and asset prices rose sharply.

As asset prices soared, the ruling-class owners of those assets (shares, bonds, land), and their state, became transfixed by this apparent creation of wealth out of thin air. That delusion, and equation of capital gains with “profit”, spread into popular consciousness, seen in the growing fascination of homeowners with the constant rise in the market price of their homes, even though such nominal rises in price made them, in real terms, worse off!! Their only real consolation was the schadenfreude that those who were not homeowners were made even worse off by such price rises, though even that should have been tinged by the thought that amongst this latter group would be their children and grandchildren.

By the mid 90's, the entire focus of conservative social democracy (neoliberalism), reflecting this delusion, had shifted away from the accumulation of industrial capital, and, thereby, expansion of profit, as the basis of growing revenues (interest/dividends, rent, taxes, profit of enterprise), as well as growing wages as employment expanded, and on to the growth of these asset prices. The era of speculation/gambling had begun.

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 26

Engels, a century before had pointed out.

“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.”

(Condition of The Working Class in England p 243)

Similarly, Marx had confirmed,

“I think I have shown that their struggles for the standard of wages are incidents inseparable from the whole wages system, that in 99 cases out of 100 their efforts at raising wages are only efforts at maintaining the given value of labour, and that the necessity of debating their price with the capitalist is inherent to their condition of having to sell themselves as commodities. ... the working class ought not to exaggerate to themselves the ultimate working of these everyday struggles. They ought not to forget that they are fighting with effects, but not with the causes of those effects; that they are retarding the downward movement, but not changing its direction; that they are applying palliatives, not curing the malady. They ought, therefore, not to be exclusively absorbed in these unavoidable guerrilla fights incessantly springing up from the never ceasing encroachments of capital or changes of the market.”

(Value, Price and Profit)

Trotsky had based himself on that same analysis.

“... 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.)

(Flood Tide)

This could equally have been written in relation to the 1980's, as the 1920's. I remember, in the early 1980's, speaking to a member of the SWP, who confidently predicted that the stagnation and rising unemployment being experienced would never lift. He clearly had not read Marx's analysis of capital, and his statement that “there are no permanent crises.” Moreover, as Marx, Engels and Trotsky set out above, the “economic crisis”, of the 1980's, in other words, the start of a period of slower growth/stagnation, and the related unemployment, did not represent a crisis for capital, but for labour! The period of crisis for capital arose in the 1970's, as it became overproduced relative to labour, resulting in relative wages rising, and relative profits falling. (Workers & The Profits Squeeze, as Glyn and Sutcliffe described it).

The continual catastrophist dream of a never ending, and deepening economic malaise, in which booms are responded to, not as Trotsky does above, but as being a temporary nuisance, as they look forward to “The Next Recession”, which they hope will be different from all the ones that went before, and somehow bring on the revolution, is a delusion, and simply reflects the impotence of those that cling to it, as an alternative to them actually formulating any adequate Marxist strategy of real class struggle, to take the movement forward.

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Burnham's Dead Cat Bounce - Part 2 – A Relief Rally Is Always Short-Lived

Part 2 – A Relief Rally Is Always Short-Lived

The reality of that was seen, after 2024. As Starmer moved further and further to the Right, so Labour's vote fell. A small part of it went to Reform, but for every Labour vote that went to Reform four votes went to the Greens, Liberals and others to Labour's “Left”. In part, all that is happening, now, is a partial unwinding of that.

Blue Labour did not win over any of the petty-bourgeois reactionaries from Reform, and so had few to lose back to them. They had lost votes to the Greens, Liberals, SNP, Plaid and Independents, and Burnham has simply won some of them back. In many ways, as in 2024, that backwash of support to Labour is what, in financial markets, is called a “Relief Rally”. Left inclined voters, in 2024, voted Labour, not out of any conviction, but because even a Starmer, Blue Labour government seemed a better prospect than a continuation of the Tories. That feeling of relief soon dissipated, when the reality of Starmer's government proved to be just as bad as what had preceded it.

It has to be said, therefore, that the chances are that this will be repeated as Burnham takes the reins. The improvement in Labour's standing in the polls looks like what, again, to use the stock market terminology is a “dead cat bounce”. Labour had dropped so far, so fast that the change of Leader was bound to lead to a bounce from the bottom. But, as I wrote in Part 1, one poll at the weekend put Labour only on 32%, still below the level it had at the General Election. According to Professor John Curtice, the average, currently, puts it only on 29%. That is a far cry from the 40% Labour had in 2017, under Corbyn, when, remember, Labour still lost the election.

Burnham's ratings are flattered currently not just because of the factors set out above, but, also, because the intense media attacks on Polanski and the Greens, have accelerated some of the backwash of votes to Burnham's Labour. In Scotland, the resurgence of the SNP, largely at Labour's expense, has been unaffected. According to Curtice, and I agree, Burnham is unlikely to call an election any time soon, because he is unlikely to win large numbers of seats in Scotland, and that means on the current standing Labour would be likely to get less than 300 seats in parliament, requiring some kind of deal with the Liberals, Greens, SNP and so on. But, that poses further problems for Burnham's Labour. Unless he can demonstrate that he is not just Starmer with better PR, his honeymoon will be short-lived, and the Greens and others will be back eating Labour's lunch.

The reality, already is seen in that Burnham plays with words, be it on Palestine, and the Zionist genocide, be it in relation to Trump/NATO and the illegal war against Iran, or be it in relation to the EU, but the underlying stance remains the same. Burnham repeats the same nonsense about getting closer to the EU, but without committing himself to a wholehearted campaign to re-join; he continues to shy away from condemning the genocide committed by the Zionist state against Palestinians, and even fuelled further attacks by Zionists and settler-colonialists in the West Bank, by attacking the Green Party resolution that recognised the reality that Zionism is racism; he has further backed Trump/NATO's illegal war against Iran by, now, also backing the brutal feudal regime in Saudi Arabia, in its war against the Houthis in Yemen. If Netanyahu loses the election in Israel, Burnham and others will no doubt take their cue to end the minimal sanctions currently imposed and swing behind the new government, even though it, too will be a government of genocidal racists and colonialists.

A similar backwash of support has happened on the Right, as some Reform voters have returned to the Tories. Reform has seen attrition on both flanks. On the one hand, it has been hoist by its own petard, as Rupert Lowe's Restore outfit has split away some of its Right flank. At the same time, as Farage has been exposed in the media, in relation to his funding etc., and, now, the ruling class and its media pile in with their investigations into the activities of Reform's members, not to mention the daily disasters of Reform led Councils, former Tories have drifted back to Badenoch, as she has moved further to the Right. Now, of course, that rightward drift of Badenoch drives away more Conservative voters towards the Liberals, which is no doubt why questions are being raised about the adequacy of Ed Davey's leadership, as the Liberals seem to have been singularly incompetent in winning over Conservative voters, over the last seven years, in conditions where their pro-EU stance should have enabled them to fill their boots.

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