This is classic Norther and then some from Billy Butler. It is emblematic of the sound of Chicago Soul of the 1960's. Billy was the bother of Jerry Butler, who along with Curtis Mayfield and Gene Chandler comprised the Impressions.
Saturday, 29 May 2010
Feeling The Pain
Greece is an emblem for Europe. It is the problem facing European workers writ large (and to an extent European Capital). The living standards of many Greek workers, and even small business people, were not particularly high to begin with, but it is clear that the standard of living as a whole, the cost of a bloated Public Sector, and pensions and retirement packages for some that would be generous even for a much richer country, could simply not be sustained. Yet, its not clear that its possible to easily remedy that situation quickly. The rest of Europe, with the possible exception of Germany and some small Scandinavian countries, faces essentially the same problem.
The problem is an inevitable consequence of globalisation, a consequence which is historically progressive, but which will be extremely painful for Western workers who have enjoyed almost two centuries of rapidly rising living standards. As I have written before, that globalisation is part of the historic mission of Capital as Marx described it, that proceeds via a process of combined and uneven development. It is the means by which millions of human beings are rescued from poverty and “the idiocy of rural life”. It is the means by which a global working class is created, the revolutionary force that will establish Socialism as a global system. That process was already well under way in the 1980’s, and was facilitated by the end of the Cold War.
It enabled Western Capital to respond to the problem of a low rate of profit by relocating production of mature products, requiring mostly unskilled labour, in low wage economies, often in Greenfield sites, and specially created Enterprise Zones that offered all of the protections of a Capitalist State, but also the kind of transport and other infrastructure that had previously only been available in developed economies. But, this process also saw, in Asia in particular, a strong growth of domestic Capital too.
During the 1980’s, this process of “de-industrialisation” of developed manufacturing economies went alongside the rise in unemployment of traditional organised industrial workers that enabled Capital to defeat organised Labour. But, alongside it went social unrest that was destabilising. Western Capital produced a compromise. Large numbers of workers were drawn into low or unskilled jobs in retailing, distribution and services on new developments, built on old industrial sites. They were low-paid and badly organised, but the effect on workers living standards was disguised by two factors. Firstly, many of the things these workers bought as consumer goods – and which they sold, distributed etc. in their new jobs – because they were now coming from new, efficient, up to date factories in Asia using very low paid labour, were available at very much reduced prices. Secondly, the second half of the 80’s saw the Tories introduce the Financial deregulation, which, alongside the same process in the US, was ultimately to lead to the Financial Meltdown of 2007-9. Together with a policy from that time on of loose money, it meant that people who previously would have been denied access to credit, became now the target customers – hence all those inane TV adverts advertising credit to people with no possible means of affording it, or like those fronted by people like Carol Vorderman, offering people already drowning in debt the prospect of a lifeline by taking on even more, over even longer periods. Of course, unlike Governments, individuals cannot simply print money to pay back those debts. In addition, the Tories financial deregulation meant that the age old rules about how much money could be borrowed, for example for a mortgage, were scrapped. Where previously you could only borrow two and a half times combined income for a mortgage, it became common for people to be offered up to six items combined income, and frequently on bogus income figures to boot. The consequence of throwing so much money into demand for assets such as housing, which are fairly limited in supply was obvious, prices bubbled up. That in turn meant that those who had houses appeared to become wealthier, as their main asset was now worth double what it had been only a couple of years before, and on that basis, some at least, borrowed even more using it as security. Of course, it was a nonsense the real value of the house was no different than it had been before, a fact that was quickly demonstrated in 1990, when the bubble popped and house prices fell by 40%! People should have been forewarned, because in 1987, a similar bubble caused by the same factors had led to the Stock Market bubble popping with share prices falling by 25% at a stroke, and along with it the value of all those personal pensions the Tories had encouraged people to take out. The real problem for Britain and most developed economies has not been Public Sector debts, but a ballooning Private Sector debt over the last 25 years, as people were encouraged to borrow recklessly.
But, that encouragement was no accident. It was the means by which Capital pulled off the trick. One the one hand this fictitious wealth meant workers did not notice that in storing up all this debt they were not becoming wealthier whatever the paper value of their houses, but poorer. It also meant that as the thought they were becoming wealthier, they also felt they were becoming more affluent, because the same debt, the same loose money, alongside those cheap imported goods, meant that they could go out each week and buy some other piece of ephemera. All the time they were led to miss out the fact that their real wages were standing still. Not only did it buy them off, but it also gave Capital a breathing space. Capital employed in retailing, distribution etc. got to share in the Surplus Value being produced by all those workers in Asia. Capital employed in Finance created new Surplus Value through the production of new financial products sold to consumers, and also shared in the Surplus Value of others – in Asia or elsewhere – through its traditional role as a provider of Money Capital.
During the period of the Long Wave downturn, throughout the 1980’s and 90’s, although there were repeated sharp recessions, these measures meant that unemployment and the destruction of Capital never reached the kinds of levels of the 1930’s or previous Depressions. In so doing, Capital was able to avoid the kind of social instability of the 1930’s too, and the political costs and risks that went with it. But, there were consequences. One function of such crises is to destroy Capital in those areas where it has been over-accumulated, and, thereby, to lay the basis for it to move to those areas where it can be more effectively used, where the Rate of profit is higher, which also means it can afford to pay higher wages. This process was never thoroughly accomplished. In the US, in particular, huge monopolies like Ford, GM, and Chrysler, which not only many workers relied upon, but on which many other industries depended, were able to keep much of their production going, solely because of their dominant position, state support, and the huge Balance Sheets out of which they could fund losses. But, many of these too also kept afloat by diversifying into the provision of finance.
The downside of that was that the Capital that might have otherwise gone too higher profit areas e.g. in developing new forms of energy and technology, remained locked up. The other side was the effect in relation to Labour. In the 1930’s, in the areas of chronic unemployment, workers were prepared to do any work almost at any wage. Workfare schemes were introduced in exchange for Dole. Of course, as an answer to the demand for such schemes today, and to those who believe that markets automatically clear, none of this led to unemployment falling or to the markets clearing. In the 1980’s/90’s, as part of the price of maintaining social unrest within limits, Capitalist States, despite some posturing by politicians, actually extended Welfarism. The consequence was that, amidst quite high levels of unemployment, it was unable to adequately recruit to some of the lowest paid jobs that still needed doing. In both the US and UK, in particular, these jobs were frequently done as part of a black economy. Either they were done by people who were claiming Benefit, and did them to top it up, always risking being caught, or else they were done by illegal immigrants. In both cases those doing them were often putting themselves at risk, and were being super-exploited by employers, because being illegal in both cases, none of them were covered by employment protection on wages, or Health and Safety. Even where they were not done illegally, they were often done by legal migrants on very low wages, and in poor conditions.
In both countries, agricultural work is a good example. Unable to obtain sufficient domestic labour, growers brought in foreign workers. The argument some have used that the growers should have had to pay higher wages to attract domestic workers is spurious. It is, in fact, no different than the argument as to why Capital went abroad to find cheap labour. Had domestic growers paid higher wages, then the prices of produce would have to have risen. Otherwise, growers would not have made a sufficient return on their Capital, and would not have risked it. They may well have simply invested that Capital abroad where they could obtain sufficient cheap labour with a consequent economic loss for the domestic economy both in terms of the loss of demand from the incomes spent by those workers, the loss of tax revenues etc., and from the fact that those products would now have to be imported! Worse, had they raised prices to compensate then they would have found themselves driven out of the market anyway by cheaper imported produce.
And, herein lies the problem. In a globalised economy, the market for Labour and the Value of Labour Power, is increasingly being set at a global level. In terms of its effect on millions of workers around the globe, whose standard of living lags a long way behind that in the West, that is a massively progressive development. For Workers in the West, however, it will be a painful readjustment. Some economies, like Germany, possibly show the answer – not just here and now under Capitalism, but for the foreseeable future under Socialism too. In order for workers, in the West, not to experience a dramatic fall in the value of their Labour-Power, the nature of that commodity has to change. Exports account for more than 40% of Germany’s GDP. Despite being a high-wage economy, with a good social-wage too, Germany does not appear to have great difficulty competing on a global scale. Until recently, it was the world’s largest exporter. That was true even when the Euro was rising sharply against Asian and other currencies. In part, that is due to a longstanding commitment to investment that meant large amounts of Capital stood behind each German worker. But, also, in large part, it is due to the fact that Germany has focussed on the production of high-value/high quality products. Instead of competing on price it competes on quality. How long such a strategy is possible is hard to say. How quickly, such a market place would become crowded, if other Western economies pushed a similar strategy is even more difficult to assess. For one thing it depends on the range of new high-end products that can be developed. For another, it depends upon the extent to which new markets in Asia and other developing economies grow to absorb such products. VW, for example, already sells more cars in China than it does in Germany. It also depends on how quickly developing economies themselves move into this high-end production. The US has had more than ten years since the commencement of the new LW boom to have been moving into high-end areas such as Green Energy production. It is beginning to do so, but so is China! Already, many Asian Tigers, not to mention China, are exporters of Capital to even lower wage economies, as they have been gradually moving their production up the value chain. China, in particular, is pumping quite huge sums into the developing African Lion economies, not just in deals to secure oil and minerals, but also developing the necessary infrastructure, and production that marked the beginning of the development of the Asian Tigers.
I suspect that for workers in Europe the process will be very uneven, and in part will depend upon the degree to which the EU economies hang together as a bloc, or hang separately by descending into rivalry. Gordon Brown was almost certainly correct in his repeated statements during the election campaign that any workers who do not equip themselves with sufficient intellectual skills will suffer badly. Those who do equip themselves may, at best, see only modest improvements, though this may be masked by a continuing cheapening and widening of the range of products. There may also be a reversal of another phenomena that has given rise to discussion. The last 20 years or so has seen repeated inflations of asset prices, as set out above. For workers who bought their houses 30, 40 or 50 years ago, that has given a huge boost to apparent wealth – for some it has also meant a boost to real affluence, because the wage-price inflation of the 60’s, 70’s, and 80’s, meant that Capital sums on mortgages were inflated away, providing almost free housing costs for those who used that to pay off their mortgages. In contrast, it has placed a huge burden on those buying in the last 10-20 years. There have been corrections. In 1990, house prices fell by 40%, but by 1996 they had recovered, and have risen sharply since. Even with the last correction, during the Credit Crunch, prices only retreated marginally. I have just been looking at property in Spain, and decided against buying, at least for now. Prices have fallen, but nowhere near enough given the economic realities.
Spain is one of the PIG or Club Med economies being targeted by the markets. I can remember even as short a time ago as in my late teens and early twenties, things in these countries were much different than they are today. It has to be remembered that at around that time when Greece was ruled by a Military Junta, Spain and Portugal were ruled by Fascist dictators. Spain’s economy has grown considerably sicne then as a result of EU membership, but, in large part it has grown by attracting tourists and northern European buyers of homes in the Sun. The other Club Med economies are the same, which is why whereas exports account for more than 40% of Germany’s economy, they account for only 20% or so of the GDP of these economies, despite their lower wages. It is why the fall in the Euro is not any great benefit to them. Huge numbers of people in Spain, in particular, were employed in construction, building these homes, as their prices rose in a classic bubble. Like all bubbles, such as John Law’s Mississippi Scheme, its closing stages were marked by an attempt to keep it going by building in less desirable areas like the scrub and desert areas, where prices could be kept lower. That bubble has stopped inflating but has not popped. It has left tens of thousands of construction workers without jobs. Spain is still in recession and probably suffering deflation. Even before the latest cuts programme was announced by the Government, unemployment stood at over 20%, which is Depression levels (over 40% for Youth Unemployment). During the 1930’s the level of property prices fell in some case to just 10% of their previous level. Other asset bubbles when they have burst have shown similar falls – the NASDAQ, which listed mainly Technology shares fell by 75% in 2000, when the tech bubble burst. At the moment some sellers in Spain are holding out still hoping to sell at prices higher than they have paid. That is not sustainable. Although, Keynes wrote that markets can remain irrational for longer than investors can remain solvent, its also true as Warren Buffett points out that as a buyer you do not have to buy an investment if you don’t see anything worth buying. Its far more likely under the current economic conditions that it will be the sellers not the buyers who will become insolvent first.
A fall in house prices in developed economies might then mask some of the fall, or sluggish growth in wages by means effectively of a shift in wealth from existing home owners to future home buyers. That will be more so if, as I expect, the massive amounts of liquidity, pumped into the economy, leads to a significant rise in commodity price inflation and nominal wages. What is clear, is that, in respect of workers in developed economies, the kinds of arguments that the Left has put forward in the past, will be even less relevant than they have been in the past. As I pointed out recently, in relation to Greece, even a Workers’ State cannot simply re-write the laws of Economics. Workers will have some benefits if they can create their own Co-operatives in areas of production, which enable them to compete in a global market. But, in that global market, the problems that workers face will increasingly be resolvable, at least, only on a Continental basis. Calls simply for more state intervention, for more militancy and so on will completely miss the point. Defensive actions through the Trade Unions will be necessary, but not enough. Political action, especially to demand common standards across Europe will be necessary, but unlikely to be granted unless workers are first in a stronger position. Demands for international wokers unity and solidarity and common organisations in Europe, are undoubtedly correct, but unlikely to be established for so long as the very working of Capitalist competition is a more powerful force dividing workers from each other.
In reality, as I have argued elsewhere, building Workers Co-operatives is a means of getting round that. A National Co-op Federation can easily join together into a European Federation. The same economic forces that drive Capital to combine in monopolies, cartels and trusts, would impact on workers as owners of the means of production too. And through such combination in these Co-operative Federations, Labour that is not Labour, Capital that is not Capital, to use Marx’s terms in the Grundrisse, will increasingly demonstrate to Labour that is Labour the immediate benefits of doing so themselves. If we are to build workers unity we have to begin to do so on our terms, on the basis of our property forms not on the bosses. On the basis of the former it can be a basis for advance, on the latter only at best for defence.
The problem is an inevitable consequence of globalisation, a consequence which is historically progressive, but which will be extremely painful for Western workers who have enjoyed almost two centuries of rapidly rising living standards. As I have written before, that globalisation is part of the historic mission of Capital as Marx described it, that proceeds via a process of combined and uneven development. It is the means by which millions of human beings are rescued from poverty and “the idiocy of rural life”. It is the means by which a global working class is created, the revolutionary force that will establish Socialism as a global system. That process was already well under way in the 1980’s, and was facilitated by the end of the Cold War.
It enabled Western Capital to respond to the problem of a low rate of profit by relocating production of mature products, requiring mostly unskilled labour, in low wage economies, often in Greenfield sites, and specially created Enterprise Zones that offered all of the protections of a Capitalist State, but also the kind of transport and other infrastructure that had previously only been available in developed economies. But, this process also saw, in Asia in particular, a strong growth of domestic Capital too.
During the 1980’s, this process of “de-industrialisation” of developed manufacturing economies went alongside the rise in unemployment of traditional organised industrial workers that enabled Capital to defeat organised Labour. But, alongside it went social unrest that was destabilising. Western Capital produced a compromise. Large numbers of workers were drawn into low or unskilled jobs in retailing, distribution and services on new developments, built on old industrial sites. They were low-paid and badly organised, but the effect on workers living standards was disguised by two factors. Firstly, many of the things these workers bought as consumer goods – and which they sold, distributed etc. in their new jobs – because they were now coming from new, efficient, up to date factories in Asia using very low paid labour, were available at very much reduced prices. Secondly, the second half of the 80’s saw the Tories introduce the Financial deregulation, which, alongside the same process in the US, was ultimately to lead to the Financial Meltdown of 2007-9. Together with a policy from that time on of loose money, it meant that people who previously would have been denied access to credit, became now the target customers – hence all those inane TV adverts advertising credit to people with no possible means of affording it, or like those fronted by people like Carol Vorderman, offering people already drowning in debt the prospect of a lifeline by taking on even more, over even longer periods. Of course, unlike Governments, individuals cannot simply print money to pay back those debts. In addition, the Tories financial deregulation meant that the age old rules about how much money could be borrowed, for example for a mortgage, were scrapped. Where previously you could only borrow two and a half times combined income for a mortgage, it became common for people to be offered up to six items combined income, and frequently on bogus income figures to boot. The consequence of throwing so much money into demand for assets such as housing, which are fairly limited in supply was obvious, prices bubbled up. That in turn meant that those who had houses appeared to become wealthier, as their main asset was now worth double what it had been only a couple of years before, and on that basis, some at least, borrowed even more using it as security. Of course, it was a nonsense the real value of the house was no different than it had been before, a fact that was quickly demonstrated in 1990, when the bubble popped and house prices fell by 40%! People should have been forewarned, because in 1987, a similar bubble caused by the same factors had led to the Stock Market bubble popping with share prices falling by 25% at a stroke, and along with it the value of all those personal pensions the Tories had encouraged people to take out. The real problem for Britain and most developed economies has not been Public Sector debts, but a ballooning Private Sector debt over the last 25 years, as people were encouraged to borrow recklessly.
But, that encouragement was no accident. It was the means by which Capital pulled off the trick. One the one hand this fictitious wealth meant workers did not notice that in storing up all this debt they were not becoming wealthier whatever the paper value of their houses, but poorer. It also meant that as the thought they were becoming wealthier, they also felt they were becoming more affluent, because the same debt, the same loose money, alongside those cheap imported goods, meant that they could go out each week and buy some other piece of ephemera. All the time they were led to miss out the fact that their real wages were standing still. Not only did it buy them off, but it also gave Capital a breathing space. Capital employed in retailing, distribution etc. got to share in the Surplus Value being produced by all those workers in Asia. Capital employed in Finance created new Surplus Value through the production of new financial products sold to consumers, and also shared in the Surplus Value of others – in Asia or elsewhere – through its traditional role as a provider of Money Capital.
During the period of the Long Wave downturn, throughout the 1980’s and 90’s, although there were repeated sharp recessions, these measures meant that unemployment and the destruction of Capital never reached the kinds of levels of the 1930’s or previous Depressions. In so doing, Capital was able to avoid the kind of social instability of the 1930’s too, and the political costs and risks that went with it. But, there were consequences. One function of such crises is to destroy Capital in those areas where it has been over-accumulated, and, thereby, to lay the basis for it to move to those areas where it can be more effectively used, where the Rate of profit is higher, which also means it can afford to pay higher wages. This process was never thoroughly accomplished. In the US, in particular, huge monopolies like Ford, GM, and Chrysler, which not only many workers relied upon, but on which many other industries depended, were able to keep much of their production going, solely because of their dominant position, state support, and the huge Balance Sheets out of which they could fund losses. But, many of these too also kept afloat by diversifying into the provision of finance.
The downside of that was that the Capital that might have otherwise gone too higher profit areas e.g. in developing new forms of energy and technology, remained locked up. The other side was the effect in relation to Labour. In the 1930’s, in the areas of chronic unemployment, workers were prepared to do any work almost at any wage. Workfare schemes were introduced in exchange for Dole. Of course, as an answer to the demand for such schemes today, and to those who believe that markets automatically clear, none of this led to unemployment falling or to the markets clearing. In the 1980’s/90’s, as part of the price of maintaining social unrest within limits, Capitalist States, despite some posturing by politicians, actually extended Welfarism. The consequence was that, amidst quite high levels of unemployment, it was unable to adequately recruit to some of the lowest paid jobs that still needed doing. In both the US and UK, in particular, these jobs were frequently done as part of a black economy. Either they were done by people who were claiming Benefit, and did them to top it up, always risking being caught, or else they were done by illegal immigrants. In both cases those doing them were often putting themselves at risk, and were being super-exploited by employers, because being illegal in both cases, none of them were covered by employment protection on wages, or Health and Safety. Even where they were not done illegally, they were often done by legal migrants on very low wages, and in poor conditions.
In both countries, agricultural work is a good example. Unable to obtain sufficient domestic labour, growers brought in foreign workers. The argument some have used that the growers should have had to pay higher wages to attract domestic workers is spurious. It is, in fact, no different than the argument as to why Capital went abroad to find cheap labour. Had domestic growers paid higher wages, then the prices of produce would have to have risen. Otherwise, growers would not have made a sufficient return on their Capital, and would not have risked it. They may well have simply invested that Capital abroad where they could obtain sufficient cheap labour with a consequent economic loss for the domestic economy both in terms of the loss of demand from the incomes spent by those workers, the loss of tax revenues etc., and from the fact that those products would now have to be imported! Worse, had they raised prices to compensate then they would have found themselves driven out of the market anyway by cheaper imported produce.
And, herein lies the problem. In a globalised economy, the market for Labour and the Value of Labour Power, is increasingly being set at a global level. In terms of its effect on millions of workers around the globe, whose standard of living lags a long way behind that in the West, that is a massively progressive development. For Workers in the West, however, it will be a painful readjustment. Some economies, like Germany, possibly show the answer – not just here and now under Capitalism, but for the foreseeable future under Socialism too. In order for workers, in the West, not to experience a dramatic fall in the value of their Labour-Power, the nature of that commodity has to change. Exports account for more than 40% of Germany’s GDP. Despite being a high-wage economy, with a good social-wage too, Germany does not appear to have great difficulty competing on a global scale. Until recently, it was the world’s largest exporter. That was true even when the Euro was rising sharply against Asian and other currencies. In part, that is due to a longstanding commitment to investment that meant large amounts of Capital stood behind each German worker. But, also, in large part, it is due to the fact that Germany has focussed on the production of high-value/high quality products. Instead of competing on price it competes on quality. How long such a strategy is possible is hard to say. How quickly, such a market place would become crowded, if other Western economies pushed a similar strategy is even more difficult to assess. For one thing it depends on the range of new high-end products that can be developed. For another, it depends upon the extent to which new markets in Asia and other developing economies grow to absorb such products. VW, for example, already sells more cars in China than it does in Germany. It also depends on how quickly developing economies themselves move into this high-end production. The US has had more than ten years since the commencement of the new LW boom to have been moving into high-end areas such as Green Energy production. It is beginning to do so, but so is China! Already, many Asian Tigers, not to mention China, are exporters of Capital to even lower wage economies, as they have been gradually moving their production up the value chain. China, in particular, is pumping quite huge sums into the developing African Lion economies, not just in deals to secure oil and minerals, but also developing the necessary infrastructure, and production that marked the beginning of the development of the Asian Tigers.
I suspect that for workers in Europe the process will be very uneven, and in part will depend upon the degree to which the EU economies hang together as a bloc, or hang separately by descending into rivalry. Gordon Brown was almost certainly correct in his repeated statements during the election campaign that any workers who do not equip themselves with sufficient intellectual skills will suffer badly. Those who do equip themselves may, at best, see only modest improvements, though this may be masked by a continuing cheapening and widening of the range of products. There may also be a reversal of another phenomena that has given rise to discussion. The last 20 years or so has seen repeated inflations of asset prices, as set out above. For workers who bought their houses 30, 40 or 50 years ago, that has given a huge boost to apparent wealth – for some it has also meant a boost to real affluence, because the wage-price inflation of the 60’s, 70’s, and 80’s, meant that Capital sums on mortgages were inflated away, providing almost free housing costs for those who used that to pay off their mortgages. In contrast, it has placed a huge burden on those buying in the last 10-20 years. There have been corrections. In 1990, house prices fell by 40%, but by 1996 they had recovered, and have risen sharply since. Even with the last correction, during the Credit Crunch, prices only retreated marginally. I have just been looking at property in Spain, and decided against buying, at least for now. Prices have fallen, but nowhere near enough given the economic realities.
Spain is one of the PIG or Club Med economies being targeted by the markets. I can remember even as short a time ago as in my late teens and early twenties, things in these countries were much different than they are today. It has to be remembered that at around that time when Greece was ruled by a Military Junta, Spain and Portugal were ruled by Fascist dictators. Spain’s economy has grown considerably sicne then as a result of EU membership, but, in large part it has grown by attracting tourists and northern European buyers of homes in the Sun. The other Club Med economies are the same, which is why whereas exports account for more than 40% of Germany’s economy, they account for only 20% or so of the GDP of these economies, despite their lower wages. It is why the fall in the Euro is not any great benefit to them. Huge numbers of people in Spain, in particular, were employed in construction, building these homes, as their prices rose in a classic bubble. Like all bubbles, such as John Law’s Mississippi Scheme, its closing stages were marked by an attempt to keep it going by building in less desirable areas like the scrub and desert areas, where prices could be kept lower. That bubble has stopped inflating but has not popped. It has left tens of thousands of construction workers without jobs. Spain is still in recession and probably suffering deflation. Even before the latest cuts programme was announced by the Government, unemployment stood at over 20%, which is Depression levels (over 40% for Youth Unemployment). During the 1930’s the level of property prices fell in some case to just 10% of their previous level. Other asset bubbles when they have burst have shown similar falls – the NASDAQ, which listed mainly Technology shares fell by 75% in 2000, when the tech bubble burst. At the moment some sellers in Spain are holding out still hoping to sell at prices higher than they have paid. That is not sustainable. Although, Keynes wrote that markets can remain irrational for longer than investors can remain solvent, its also true as Warren Buffett points out that as a buyer you do not have to buy an investment if you don’t see anything worth buying. Its far more likely under the current economic conditions that it will be the sellers not the buyers who will become insolvent first.
A fall in house prices in developed economies might then mask some of the fall, or sluggish growth in wages by means effectively of a shift in wealth from existing home owners to future home buyers. That will be more so if, as I expect, the massive amounts of liquidity, pumped into the economy, leads to a significant rise in commodity price inflation and nominal wages. What is clear, is that, in respect of workers in developed economies, the kinds of arguments that the Left has put forward in the past, will be even less relevant than they have been in the past. As I pointed out recently, in relation to Greece, even a Workers’ State cannot simply re-write the laws of Economics. Workers will have some benefits if they can create their own Co-operatives in areas of production, which enable them to compete in a global market. But, in that global market, the problems that workers face will increasingly be resolvable, at least, only on a Continental basis. Calls simply for more state intervention, for more militancy and so on will completely miss the point. Defensive actions through the Trade Unions will be necessary, but not enough. Political action, especially to demand common standards across Europe will be necessary, but unlikely to be granted unless workers are first in a stronger position. Demands for international wokers unity and solidarity and common organisations in Europe, are undoubtedly correct, but unlikely to be established for so long as the very working of Capitalist competition is a more powerful force dividing workers from each other.
In reality, as I have argued elsewhere, building Workers Co-operatives is a means of getting round that. A National Co-op Federation can easily join together into a European Federation. The same economic forces that drive Capital to combine in monopolies, cartels and trusts, would impact on workers as owners of the means of production too. And through such combination in these Co-operative Federations, Labour that is not Labour, Capital that is not Capital, to use Marx’s terms in the Grundrisse, will increasingly demonstrate to Labour that is Labour the immediate benefits of doing so themselves. If we are to build workers unity we have to begin to do so on our terms, on the basis of our property forms not on the bosses. On the basis of the former it can be a basis for advance, on the latter only at best for defence.
The Return Of Illiterate Economics - Part 4 – Who Rules?
It was no accident, however, that the “social-democratic” consensus of the post-war boom – what was termed “Buttskillism” in Britain – was shattered in the 1980’s, represented most illustratively in the form of Thatcher and Reagan. The truth is that time and again when workers have been asked that question, “Who Rules?”, the workers have not been able to respond, “We Do!” In Marx’s words in his, “Critique of the Gotha Programme”, not only do the workers not rule, but they have not been prepared by the Marxists to be fit to rule. Partly, that is because they have been encouraged to see rule in terms of political power, at best in control of the State, at worst in control merely of Parliament. It is to see things upside down, as Marx says in his “Critique”, to see society as the creation of the State and not vice versa.
“The German Workers’ Party – at least if it adopts the Programme – shows that its socialist ideas are not even skin deep, in that, instead of treating existing society (and this holds good for any FUTURE one) as the basis of the existing state (or of the FUTURE state in the case of future society), it treats the state rather as an independent entity that possesses its own intellectual, ethical, and libertarian bases.”
No class can control the State unless it first rules in society, unless its method of production is on the rise and the ideas that flow from it are permeating the minds of all society. Simple rejection of the old, as a result of a crisis, is not enough.
Having begun that process, in part, in May ’68, by taking over the means of production, and establishing some limited workers control, the French workers settled for that old idea. And, when DeGaulle called an election, the question, “Who Rules?”, was answered. He did! The reality was that only a minority of workers had been actively involved. Instead of the occupations and workers control appearing as a new, rational, better way of organising society, they only had time to sow in the minds of society, of the majority of passive workers and middle classes, the notion of anarchy and disorder. They voted to end it. Even in Britain, in 1974, the question was almost settled in Heath’s favour. Had he offered the Liberals PR they would have supported him. As it was the workers only got Wilson/Callaghan and five years of pay control and spending cuts.
For so long as the workers failed to recognise the need to create their own property forms, upon which would develop new social relations, then they could only ever consider the answer in restricted terms that could never provide a real solution. And, having been forced to ask the question, as a result of the conditions imposed by the conjuncture, the question, having been answered in the affirmative for the bosses, the bosses then used the new conditions of the Long Wave downturn, to impose their terms on the workers. Keynesian policies in the late 60’s and during the 1970’s, alongside loose money, meant inefficient businesses, that should have gone bust, or been restructured, were able to struggle on with low rates of profit, by pushing up prices. The same policy, designed to stop unemployment rising, meant workers, where they were well organised, could push up wages. Indeed, Heath even introduced a sliding scale of wages, which lifted many workers wages more than they might otherwise have expected!
What characterised the economic policy of Thatcher and Reagan was not actually that they slashed the size of the State – neither did – but that they began by cutting back the Money Supply – a classically Misean policy. Thatcher was guided by the Misean, Frederick Hayek. Reagan was guided by the same policy under Paul Volcker at the Fed. Both combined that policy, which meant inefficient firms could not raise prices to cover higher wages, thereby forcing them to confront workers, and many went bust, with a refusal to intervene to save them, and with the use of the State to beat down workers attempts to defend themselves – the Air Traffic Controllers in the US, the Miners in Britain. Again, it is an illustration of how limiting that statist view is, that the best the workers could struggle for was a demand that the Capitalist State intervene to ensure that they could continue to be exploited by Capital! In reality, there was no hope even of achieving that pathetic ambition outside what would have been a near revolutionary situation. And despite what some London comrades might have thought at the time, as I recall hearing some of them say at one National Labour Briefing meeting I attended, those of us who lived in mining areas knew that 1984 certainly was not that.
And, whilst the Tories were prepared to use the State, to physically beat down workers, they were also prepared to see Welfare spending balloon as unemployment rose. In fact, quite early on, they introduced measures like that under which men coming up to 60 could get higher Unemployment Benefit if they agreed to sign to not seek further employment. Once they had beaten down the workers ability to compensate for rising prices, they abandoned Misean economics for Monetarism, and turned the money taps on so that big business could raise prices and profits. In a sense the policy adopted in the US and UK, in particular, from the mid 80’s onwards, was a kind of reverse Keynesianism. In a Long Wave boom, businesses see continued expansion as the norm and periodic cycles as just temporary. They are happy with the idea of these temporary blips being cut as short as possible by Government action, even in the knowledge that it will have to be paid back in higher taxes, because it means continuing demand for their products now until normal service is resumed. A bit more tax out of much bigger profits will be worth it. It represents a temporary transfer into workers pockets to keep up demand. What the US and UK effectively did from the mid 80’s was the opposite.
In the US, real wages are at the same level as 30 years ago. Real wages in Britain have been relatively stagnant too. Loose money enabled businesses to raise prices and profits, but it also encouraged workers to borrow on the back of a perceived increase in their wealth as house prices bubbled, and so did the Mutual Funds and Pensions an increasing number of workers had been persuaded to invest in. They financed their continued consumption out of this borrowing against rises in fictitious wealth. In reality, it was a transfer of wealth from workers to Capital.
It is impossible to understand Economics in normative terms; a reaction between two chemicals will always be the same. If you want to counteract an acid you use an alkali. But, Economics is a science of human behaviour, and human society is divided into classes with differing interests, and the interests of the dominant class – essentially to maximise profits – is achieved by different means at different phases of the Long Wave. As I have said before, unless you understand where you are within the Long Wave, its like trying to navigate without knowing where you are, and without a map or compass. By the same token, attempting to apply policy prescriptions as the Tories and others propose, based purely on dogma, and support for eternal prescriptions is simply economic illiteracy.
“The German Workers’ Party – at least if it adopts the Programme – shows that its socialist ideas are not even skin deep, in that, instead of treating existing society (and this holds good for any FUTURE one) as the basis of the existing state (or of the FUTURE state in the case of future society), it treats the state rather as an independent entity that possesses its own intellectual, ethical, and libertarian bases.”
No class can control the State unless it first rules in society, unless its method of production is on the rise and the ideas that flow from it are permeating the minds of all society. Simple rejection of the old, as a result of a crisis, is not enough.
Having begun that process, in part, in May ’68, by taking over the means of production, and establishing some limited workers control, the French workers settled for that old idea. And, when DeGaulle called an election, the question, “Who Rules?”, was answered. He did! The reality was that only a minority of workers had been actively involved. Instead of the occupations and workers control appearing as a new, rational, better way of organising society, they only had time to sow in the minds of society, of the majority of passive workers and middle classes, the notion of anarchy and disorder. They voted to end it. Even in Britain, in 1974, the question was almost settled in Heath’s favour. Had he offered the Liberals PR they would have supported him. As it was the workers only got Wilson/Callaghan and five years of pay control and spending cuts.
For so long as the workers failed to recognise the need to create their own property forms, upon which would develop new social relations, then they could only ever consider the answer in restricted terms that could never provide a real solution. And, having been forced to ask the question, as a result of the conditions imposed by the conjuncture, the question, having been answered in the affirmative for the bosses, the bosses then used the new conditions of the Long Wave downturn, to impose their terms on the workers. Keynesian policies in the late 60’s and during the 1970’s, alongside loose money, meant inefficient businesses, that should have gone bust, or been restructured, were able to struggle on with low rates of profit, by pushing up prices. The same policy, designed to stop unemployment rising, meant workers, where they were well organised, could push up wages. Indeed, Heath even introduced a sliding scale of wages, which lifted many workers wages more than they might otherwise have expected!
What characterised the economic policy of Thatcher and Reagan was not actually that they slashed the size of the State – neither did – but that they began by cutting back the Money Supply – a classically Misean policy. Thatcher was guided by the Misean, Frederick Hayek. Reagan was guided by the same policy under Paul Volcker at the Fed. Both combined that policy, which meant inefficient firms could not raise prices to cover higher wages, thereby forcing them to confront workers, and many went bust, with a refusal to intervene to save them, and with the use of the State to beat down workers attempts to defend themselves – the Air Traffic Controllers in the US, the Miners in Britain. Again, it is an illustration of how limiting that statist view is, that the best the workers could struggle for was a demand that the Capitalist State intervene to ensure that they could continue to be exploited by Capital! In reality, there was no hope even of achieving that pathetic ambition outside what would have been a near revolutionary situation. And despite what some London comrades might have thought at the time, as I recall hearing some of them say at one National Labour Briefing meeting I attended, those of us who lived in mining areas knew that 1984 certainly was not that.
And, whilst the Tories were prepared to use the State, to physically beat down workers, they were also prepared to see Welfare spending balloon as unemployment rose. In fact, quite early on, they introduced measures like that under which men coming up to 60 could get higher Unemployment Benefit if they agreed to sign to not seek further employment. Once they had beaten down the workers ability to compensate for rising prices, they abandoned Misean economics for Monetarism, and turned the money taps on so that big business could raise prices and profits. In a sense the policy adopted in the US and UK, in particular, from the mid 80’s onwards, was a kind of reverse Keynesianism. In a Long Wave boom, businesses see continued expansion as the norm and periodic cycles as just temporary. They are happy with the idea of these temporary blips being cut as short as possible by Government action, even in the knowledge that it will have to be paid back in higher taxes, because it means continuing demand for their products now until normal service is resumed. A bit more tax out of much bigger profits will be worth it. It represents a temporary transfer into workers pockets to keep up demand. What the US and UK effectively did from the mid 80’s was the opposite.
In the US, real wages are at the same level as 30 years ago. Real wages in Britain have been relatively stagnant too. Loose money enabled businesses to raise prices and profits, but it also encouraged workers to borrow on the back of a perceived increase in their wealth as house prices bubbled, and so did the Mutual Funds and Pensions an increasing number of workers had been persuaded to invest in. They financed their continued consumption out of this borrowing against rises in fictitious wealth. In reality, it was a transfer of wealth from workers to Capital.
It is impossible to understand Economics in normative terms; a reaction between two chemicals will always be the same. If you want to counteract an acid you use an alkali. But, Economics is a science of human behaviour, and human society is divided into classes with differing interests, and the interests of the dominant class – essentially to maximise profits – is achieved by different means at different phases of the Long Wave. As I have said before, unless you understand where you are within the Long Wave, its like trying to navigate without knowing where you are, and without a map or compass. By the same token, attempting to apply policy prescriptions as the Tories and others propose, based purely on dogma, and support for eternal prescriptions is simply economic illiteracy.
The return Of Illiterate Economics - Part 3 - The Economics of Class Struggle
Put in clear class terms, the Capitalists are not prepared to finance an increase in society’s (mainly workers) aggregate demand by tax deductions from their profits, (which they could have achieved by simply agreeing to an across the board rise in wages) in order to revive the system, because they see no prospect of a sustainable revival creating the conditions out of which such a reduction in profits would be worthwhile. There are too many of the same products to be sold (and usually other newer, lower-cost producers producing them) too much competition between the sellers to enable them to make sufficient profits. One or both of two things they see as needing to happen. Firstly, less competition, which means some of their competitors have to disappear. Secondly, other products have to be available for them to produce, and sell, for which, as yet, there is no or little competition. In the meantime, in order to ensure that its not them that goes to the wall the order of the day is to cut their costs, mainly wages, even though, overall, the consequence of that is to reduce aggregate demand further, and worsen the immediate situation.
The prolonged crisis deals with the first, as businesses collapse or get restructured. Innovation deals with the second. Innovation takes two forms. Firstly, businesses, seeking to gain competitive advantage, to cut their costs and raise profits, without new investment, look to new methods and procedures, for example, the introduction of Fordism and Taylorism in the 1920’s, the introduction of Japanese style Quality Circles of the 1980’s, that was part of the “After Japan” project. Similarly, keen not to invest in additional productive equipment until they see signs of sustained recovery, businesses seek to replace existing equipment when it wears out with more efficient equipment. Some of the new procedures, such as mass production, in the 1920’s, or robotisation and CAD/CAM in the 1980’s, spur the development of new base technologies that themselves form the basis not just of new investment goods, but of mass produced consumer goods too. The same electric motors that powered assembly line conveyor belts, powered similar belts on washing machines, dryers, vacuum cleaners and a myriad other consumer products. The microchips that enabled the assembly line robots of the 1980’s to work, and the development of computer software languages and interfaces, that replaced clunky punch card systems and teletype machines, that enabled a thousand CAD/CAM systems to operate also facilitated the first personal computers to be introduced, and led to the development of thousands more consumer goods applications of the micro-chip – a process that is only just beginning.
This is what characterises investment during the Long Wave downturn, periodic, cautious investment in new productive methods and technologies, and small scale tentative steps by venture Capital into new types of consumer goods. Both act as a means of raising the Rate of Profit. It’s also why during such periods it is new geographical areas that can lead the way. Almost every Long Wave downturn has seen the emergence of new locations, new economies that are able to leap-frog, established areas, and form the most dynamic economies of the new upturn.
The introduction of more efficient methods, and new types of machine, acts to raise labour productivity, and the Rate of Surplus Value, without any large rise in the organic composition of Capital. New types of product both tend to have a low organic composition of Capital – they require a high relative proportion of skilled labour to Constant Capital – and to face less competition. This again acts to raise the rate of profit.
At the conjuncture, at the end of the Boom and onset of the downturn, demand for Labour has reached a peak. Workers have had 20-30 years in which to gain strength and confidence. They have rebuilt basic organisation, selected new leaders. At each such conjuncture of the Long Wave we have seen that, as employers feel the need to impose harsher conditions, workers are prepared to fight – Chartism, Paris Commune, Russian Revolution are the clearest examples. But, each is followed by a period of retrenchment. As the post-war Long Wave began to come to a close, in the late 60’s, the bosses’ attempts to throw the burden on to workers was strongly resisted. France in May ’68, the Prague Spring of the same year are graphic examples. In Britain, workers struggled against attempts to impose anti-union laws, and similar struggles took place across Europe and North America. As the boom ended in 1974, the struggles became more intense, more of a class wide rather than sectional nature. Miners strikes in the US saw gunfights as mine owners brought in hired goons as strike-breakers. In Britain, the question of power itself was posed, as Heath’s Government, in an attempt to beat the Miners, called an election on the basis of “Who Rules?”
The prolonged crisis deals with the first, as businesses collapse or get restructured. Innovation deals with the second. Innovation takes two forms. Firstly, businesses, seeking to gain competitive advantage, to cut their costs and raise profits, without new investment, look to new methods and procedures, for example, the introduction of Fordism and Taylorism in the 1920’s, the introduction of Japanese style Quality Circles of the 1980’s, that was part of the “After Japan” project. Similarly, keen not to invest in additional productive equipment until they see signs of sustained recovery, businesses seek to replace existing equipment when it wears out with more efficient equipment. Some of the new procedures, such as mass production, in the 1920’s, or robotisation and CAD/CAM in the 1980’s, spur the development of new base technologies that themselves form the basis not just of new investment goods, but of mass produced consumer goods too. The same electric motors that powered assembly line conveyor belts, powered similar belts on washing machines, dryers, vacuum cleaners and a myriad other consumer products. The microchips that enabled the assembly line robots of the 1980’s to work, and the development of computer software languages and interfaces, that replaced clunky punch card systems and teletype machines, that enabled a thousand CAD/CAM systems to operate also facilitated the first personal computers to be introduced, and led to the development of thousands more consumer goods applications of the micro-chip – a process that is only just beginning.
This is what characterises investment during the Long Wave downturn, periodic, cautious investment in new productive methods and technologies, and small scale tentative steps by venture Capital into new types of consumer goods. Both act as a means of raising the Rate of Profit. It’s also why during such periods it is new geographical areas that can lead the way. Almost every Long Wave downturn has seen the emergence of new locations, new economies that are able to leap-frog, established areas, and form the most dynamic economies of the new upturn.
The introduction of more efficient methods, and new types of machine, acts to raise labour productivity, and the Rate of Surplus Value, without any large rise in the organic composition of Capital. New types of product both tend to have a low organic composition of Capital – they require a high relative proportion of skilled labour to Constant Capital – and to face less competition. This again acts to raise the rate of profit.
At the conjuncture, at the end of the Boom and onset of the downturn, demand for Labour has reached a peak. Workers have had 20-30 years in which to gain strength and confidence. They have rebuilt basic organisation, selected new leaders. At each such conjuncture of the Long Wave we have seen that, as employers feel the need to impose harsher conditions, workers are prepared to fight – Chartism, Paris Commune, Russian Revolution are the clearest examples. But, each is followed by a period of retrenchment. As the post-war Long Wave began to come to a close, in the late 60’s, the bosses’ attempts to throw the burden on to workers was strongly resisted. France in May ’68, the Prague Spring of the same year are graphic examples. In Britain, workers struggled against attempts to impose anti-union laws, and similar struggles took place across Europe and North America. As the boom ended in 1974, the struggles became more intense, more of a class wide rather than sectional nature. Miners strikes in the US saw gunfights as mine owners brought in hired goons as strike-breakers. In Britain, the question of power itself was posed, as Heath’s Government, in an attempt to beat the Miners, called an election on the basis of “Who Rules?”
The Return Of Illiterate Economics - Part 2 – Keynes Versus Mises
For, the last ten or more years, the economist, Nouriel Roubini, warned of the increasing danger due to rising levels of debt, and excessive liquidity, earning himself the nickname, Dr Doom. Despite the fact that there is no shortage of politicians and journalists who ask why no one saw the crisis coming, the reality is that there were plenty of people warning it was coming. The problem was that the politicians, the journalists, and the Public, didn’t want to hear it because it would have spoiled the fun they were having spending all that cheap credit, and running up the debt! Alongside Roubini, there were many “Austrian School” economists warning that it was a “Crack-Up Boom” that would lead to a bust. But then, the Miseans have been arguing against profligate politicians, and “socialist” central bankers ever since the 1920’s. Similarly, there have been Marxist economists that have been making similar warnings since early in the decade, but then there has been a tradition amongst Marxists of “catastrophism”, which seeks to uphold the view of Lenin and others, again from the 1920’s, that Capitalism had run its course, and was in its Death Agony, an argument against which I wrote at the end of last year, in the Weekly Worker.
Around 1998, I came to the conclusion that a serious crisis was likely, because of what appeared to be massive overproduction. Everywhere I looked, I saw new or nearly new cars, whilst car plants were still pumping out more and more, many of which ended up stored in fields. A similar picture could be seen for other consumer goods. At the time, I fully expected a 1930’s Depression, and possibly even imperialist war. I was wrong. The overproduction was really a sign of a disproportion in the allocation of Capital, a disproportion which the current crisis has begun to resolve, as old monopolies like GM, Ford and Chrysler get restructured, and as new, high-tech, areas of production begin to attract investment. The number of new cars, and other consumer goods, were, in fact, a sign of a new Long Wave Boom beginning, and in the West, the availability of cheap credit.
By the beginning of this decade, my only doubt had become whether the new Long Wave Boom could enable the restructuring of Capital, in the West, and the unwinding of the debt to occur without a large crisis. The Crash of 2001, seemed to suggest it might. The crash of 2008/9 puts it in doubt. Yet, we should remember that even now with the worst financial crisis in history, and on a global scale, the economic crisis has been extremely muted. There has been – yet – no repeat of the Great Depressions of the 1930’s or 1880’s. In fact, not even anything like the 1980’s. Much now depends on the actions of politicians and the economic ideology that guides them. Even “Dr. Doom” himself, Nouriel Roubini, in a recent book, “Crisis economics” with Stephen Mihm, writes that, during a crisis, governments need to be “Keynesian”, spending money to head off the crisis and prop up the system. Only after the crisis can they begin to claw back the debt, and apply free market principles. Yet, no one can surely suggest that in Europe, as a whole, and in the PIGS, in particular, the crisis is over!
Roubini and Mihm accept the basic Marxist premise that Capitalism is a system marked by repeated crises. As Gillian Tett, in her FT review of the book puts it, they are “white” not “black” swan events. But, of course, as a bourgeois economist, Roubini is only interested in putting forward a pragmatic solution to that fact. In that, he has an advantage over the dogmatists like the “Austrians”, who just have an ideological objection to any state involvement whatsoever – an extreme position even compared with someone like Hayek. But, as I have pointed out before, what even someone like Roubini fails to account for is the question why is this kind of Keynesianism seen as appropriate by Capital sometimes, for example, now or during the post-war boom, but not during others, for example in the 1930’s outside the US, or during the 1980’s. Why, on the contrary, during these periods, does Capital see the absolute necessity of balanced budgets?
The answer it seems to me is clear. It depends entirely upon the conjuncture, on the phase of the Long Wave. Monetarists, like Milton Friedman, are undoubtedly correct, as against the Miseans, in arguing that a contributory factor to the 1930’s Depression, was the fact that Monetary Policy was tightened precisely at the moment it should have been loosened. But, Keynes was also right in arguing against a sole reliance on Monetary Policy as a means of countering such Depressions, by pointing out that in those conditions, a loose money policy is like pushing on a piece of string. Make money as cheap as you like, but, consumers will not borrow to spend, if they have no job or likely prospect of one, and businesses will not borrow to invest if they do not see any prospect on the horizon of sustained increases in demand for their products.
But, Keynes, and others, like Mandel, who also falls into a sort of under-consumption theory of crisis, is wrong on two counts. First is the idea that Capitalist crises can be resolved if only Capital applies the appropriate technical remedies. Second, that Capital requires overall rising demand to fuel higher profits to spur investment. What both miss is the combined and uneven development of Capitalist economies. In the 1930’s, in Britain, for example, the Depression brought mass unemployment and falling levels of aggregate demand. In certain parts of the country, like the North-East, traditional industries, like shipbuilding, were decimated. Unemployment was chronic and sustained. Yet, at the same time, in the South-East, new industries were being established in motor manufacture, and consumer electronics. Rates of profit were high, stimulating investment, and, along with it, came relatively high wage rates and living standards. Under these conditions, cheap money, the beginning of consumer credit, COULD finance consumer spending and investment. It was not enough to lift overall aggregate demand, but it does show how even within the Long Wave downturn, even within a Depression within that, combined and uneven development leads to the development of the seeds of the new upturn. In part, this process not only led the way out in the post-war boom, but also laid the basis of the so called North-South divide in Britain. Today, we can see a similar pattern on a global scale.
But, straightforward Keynesian deficit spending could not have offered a solution under those 1930’s conditions. In conditions where businesses do not see the likelihood of sustained rises in demand they will not spend on new investment more than they can avoid. That again is typical of the Long Wave downturn. They will respond to what they see as temporary rises in demand instead with rising prices to make windfall profits while they can. Loose money facilitates that. Similarly, workers will seek, where they can, to raise wages to compensate, and again loose money facilitates that, because employers will concede higher wages, rather than endure a strike, and miss what might be a temporary window of opportunity, if they believe that they can cover them with higher prices. It is a typical price-wage spiral. What you get is not a counter-cyclical reflation, but just stagflation, the combination of, at best, sluggish growth with rising prices. That is what happened with such policies during the 1970’s, and led to their abandonment in the 1980’s.
Around 1998, I came to the conclusion that a serious crisis was likely, because of what appeared to be massive overproduction. Everywhere I looked, I saw new or nearly new cars, whilst car plants were still pumping out more and more, many of which ended up stored in fields. A similar picture could be seen for other consumer goods. At the time, I fully expected a 1930’s Depression, and possibly even imperialist war. I was wrong. The overproduction was really a sign of a disproportion in the allocation of Capital, a disproportion which the current crisis has begun to resolve, as old monopolies like GM, Ford and Chrysler get restructured, and as new, high-tech, areas of production begin to attract investment. The number of new cars, and other consumer goods, were, in fact, a sign of a new Long Wave Boom beginning, and in the West, the availability of cheap credit.
By the beginning of this decade, my only doubt had become whether the new Long Wave Boom could enable the restructuring of Capital, in the West, and the unwinding of the debt to occur without a large crisis. The Crash of 2001, seemed to suggest it might. The crash of 2008/9 puts it in doubt. Yet, we should remember that even now with the worst financial crisis in history, and on a global scale, the economic crisis has been extremely muted. There has been – yet – no repeat of the Great Depressions of the 1930’s or 1880’s. In fact, not even anything like the 1980’s. Much now depends on the actions of politicians and the economic ideology that guides them. Even “Dr. Doom” himself, Nouriel Roubini, in a recent book, “Crisis economics” with Stephen Mihm, writes that, during a crisis, governments need to be “Keynesian”, spending money to head off the crisis and prop up the system. Only after the crisis can they begin to claw back the debt, and apply free market principles. Yet, no one can surely suggest that in Europe, as a whole, and in the PIGS, in particular, the crisis is over!
Roubini and Mihm accept the basic Marxist premise that Capitalism is a system marked by repeated crises. As Gillian Tett, in her FT review of the book puts it, they are “white” not “black” swan events. But, of course, as a bourgeois economist, Roubini is only interested in putting forward a pragmatic solution to that fact. In that, he has an advantage over the dogmatists like the “Austrians”, who just have an ideological objection to any state involvement whatsoever – an extreme position even compared with someone like Hayek. But, as I have pointed out before, what even someone like Roubini fails to account for is the question why is this kind of Keynesianism seen as appropriate by Capital sometimes, for example, now or during the post-war boom, but not during others, for example in the 1930’s outside the US, or during the 1980’s. Why, on the contrary, during these periods, does Capital see the absolute necessity of balanced budgets?
The answer it seems to me is clear. It depends entirely upon the conjuncture, on the phase of the Long Wave. Monetarists, like Milton Friedman, are undoubtedly correct, as against the Miseans, in arguing that a contributory factor to the 1930’s Depression, was the fact that Monetary Policy was tightened precisely at the moment it should have been loosened. But, Keynes was also right in arguing against a sole reliance on Monetary Policy as a means of countering such Depressions, by pointing out that in those conditions, a loose money policy is like pushing on a piece of string. Make money as cheap as you like, but, consumers will not borrow to spend, if they have no job or likely prospect of one, and businesses will not borrow to invest if they do not see any prospect on the horizon of sustained increases in demand for their products.
But, Keynes, and others, like Mandel, who also falls into a sort of under-consumption theory of crisis, is wrong on two counts. First is the idea that Capitalist crises can be resolved if only Capital applies the appropriate technical remedies. Second, that Capital requires overall rising demand to fuel higher profits to spur investment. What both miss is the combined and uneven development of Capitalist economies. In the 1930’s, in Britain, for example, the Depression brought mass unemployment and falling levels of aggregate demand. In certain parts of the country, like the North-East, traditional industries, like shipbuilding, were decimated. Unemployment was chronic and sustained. Yet, at the same time, in the South-East, new industries were being established in motor manufacture, and consumer electronics. Rates of profit were high, stimulating investment, and, along with it, came relatively high wage rates and living standards. Under these conditions, cheap money, the beginning of consumer credit, COULD finance consumer spending and investment. It was not enough to lift overall aggregate demand, but it does show how even within the Long Wave downturn, even within a Depression within that, combined and uneven development leads to the development of the seeds of the new upturn. In part, this process not only led the way out in the post-war boom, but also laid the basis of the so called North-South divide in Britain. Today, we can see a similar pattern on a global scale.
But, straightforward Keynesian deficit spending could not have offered a solution under those 1930’s conditions. In conditions where businesses do not see the likelihood of sustained rises in demand they will not spend on new investment more than they can avoid. That again is typical of the Long Wave downturn. They will respond to what they see as temporary rises in demand instead with rising prices to make windfall profits while they can. Loose money facilitates that. Similarly, workers will seek, where they can, to raise wages to compensate, and again loose money facilitates that, because employers will concede higher wages, rather than endure a strike, and miss what might be a temporary window of opportunity, if they believe that they can cover them with higher prices. It is a typical price-wage spiral. What you get is not a counter-cyclical reflation, but just stagflation, the combination of, at best, sluggish growth with rising prices. That is what happened with such policies during the 1970’s, and led to their abandonment in the 1980’s.
The Return Of Illiterate Economics - Part 1 – The EU Crisis
I heard, former Bank of England MPC member, David Blanchflower, describe the policy of cutting budgets, being pursued by the Tories and other governments, as economically illiterate. It’s a good description.
A few weeks ago, I wrote that the obvious, and probably likely, solution to the Greek, and Club Med economies, debt crisis was that the ECB should simply monetise the debt; print money that was used to buy up the debt. A week later, that was almost exactly what happened. A massive, 750 billion euro, stabilisation fund was set up to guarantee the sovereign debt of Eurozone economies, and the ECB began to buy up Greek debt. The Euro rose sharply, and, around the world, Stock Markets soared. A week later (when I first wrote this) the Euro has fallen to an eighteen month low, and is almost back to its original value against the dollar. Stock Markets have crashed by as much as 5% in a single day. Why?
The reason is simple. When I spoke about monetising the debt, I also pointed out that such a process would only be tolerated by the rich Eurozone economies, who, ultimately, will have to pay for it via a lower Euro, higher interest rates and inflation, and/or higher tax payments, if it was part of an overall package in which there was greater control over the budgets of individual states. Germany, in particular, especially during elections, was reluctant to cough up any money to bail out Greece. According to a report in El Pais, Sarkozy threatened to take France out of the Euro unless the Germans did. I pointed out that you can’t have a single market, for long, without a single currency, without a single state acting as the Executive Committee of the ruling class, ensuring a level playing field for all Capital within its borders. That means common fiscal policy, common benefits, pensions etc, or at least in large part.
Behind the scenes, the proto-European state has been bringing some of these things about. The Maastricht Treaty set down fiscal rules that had to be met before countries could join the Euro. But, as Greece has shown it was a sham, and the FT has given data showing that, in fact, France and Germany breached the Treaty far more than has Greece! Throughout the EU, there are now reciprocal arrangements in relation to Pensions and Benefits, so that if you are in receipt of a Benefit in one country, you continue to receive it in another. But, it is precisely the fact that these measures have had to be introduced by the back-door that demonstrates the contradiction at the heart of the EU. To work it has to centralise, it has to establish a strong and controlling central state apparatus, but the continuing national interests of sections of Capital – particularly small Capital – and of political elites, stands in the way of bringing that about. As Marxists have always argued, Capital probably cannot create a United States of Europe, only workers can do that.
In the US, the original Constitution saw it as a Republic – not a democracy – in which the real power continued to be vested with the people of each state. The role of the central, Federal State was to be extremely limited. However, it did not take long before the needs of US industrial Capital blew that Constitution away. It needed a strong central state, and when several, non-industrial, states baulked, it was prepared to wage a Civil War against them, to bring it about. In Europe, several centuries of national identity, a couple of centuries of existence as nation states, and the legacy of Nationalist ideology that goes with that, particularly in Britain, where it is combined with a strong dose of racism, which was developed to justify its Colonial Empire, in a way that was not so true for France, or Spain, now also stands in the way. Those ideas, in the heads of peoples, now stand as a democratic impediment to Big Capital’s, historically progressive, EU project. So, it has simply ignored democratic principles and proceeded by bureaucratic means.
The representatives of Capital are now speaking openly about what has to be done. But, at a time of economic crisis, and after a period during which Euro-scepticism has grown in various countries, partly because of the bureaucratic manoeuvrings within the EU, and its democratic deficit, it is the least likely time that an open debate about establishing a Federal European state will succeed. In that most federal of European states, Germany, which has most to gain from a united federal Europe, Der Speigel, which is the equivalent of the Daily Mail, has been responding in typical populist terms, by whipping up Euro scepticism over the Greek bail out, and raising demands about the return of the Deutschmark.
In its absence, the price that Greece is being asked to pay, for the bail out, is swingeing cuts in its Public Spending. As Daniel (Danny The Red[now Green]) Cohn-Bendit said in a speech in the European Parliament, cuts way beyond anything even rich countries like France have ever been able to achieve. For Greece, still in recession, and suffering deflation, the consequences are inevitable. Not only severe social unrest, but also a collapsing of its economy into deep recession, that, of itself, is likely to increase its deficit, just as Thatcher’s recessions of the 1980’s did in Britain, as tax revenues fell, and Benefits payments soared. But, its not just Greece that has been placed in that position. The markets have turned their attention to the other PIGS. Portugal saw the interest payments for its sovereign debt rise sharply, and has introduced its own austerity programme. Spain, still in recession, and with unemployment at Depression levels of over 20% (and staggering youth unemployment over 40%!) has introduced its own programme of economic suicide. Ireland has already gone down the same road. Now, with a Tory Government in Britain, threatening to also begin to immediately swing the axe, Europe stands on the verge of a self-inflicted severe recession, because if the PIG economies, and Britain, are laid low, then for the rest of Europe, whose economies are bound to them, the consequences, when they are themselves still in a stage of fragile recovery, will be severe. That is why the Euro has been collapsing, that is why EU Stock markets have been tumbling, and why the consequences of a severe EU recession for the global economy, has sent world stock markets into crash mode once again. It appears that EU Governments, and those like the Tories in Britain, have got themselves into a kind of machismo mindset, of outdoing each other in the cuts they propose to make as a means of “reassuring the markets”, without actually noticing that their very actions of proposing such cuts, and sending their economies into recession is precisely what is sending the markets into a panic!!!
The comparison with other economies is clear. China’s Command economy responded to the Financial Crash in 2008, and subsequent recession, almost immediately. It stepped up Public Spending, and resorted to measures such as handing out vouchers to citizens so that they could just go out and buy consumer goods. Even during the global recession, China grew at nearly 8%. Its now growing at over 12%. In the US, the massive stimulus programme has continued, and the US rapidly came out of recession, and is now in a V shaped recovery. Brazil is growing at 5% a year, and is set to overtake Britain, and it too has been increasing its Public Spending, particularly on Social projects, which put money into the hands of the poorest who are most likely to spend it. Yet, there are still those like Jean Claude Trichet, at the ECB, or like the Tories, who insist that, irrespective of the consequences, deep cuts are absolutely vital. It is economic illiteracy.
A few weeks ago, I wrote that the obvious, and probably likely, solution to the Greek, and Club Med economies, debt crisis was that the ECB should simply monetise the debt; print money that was used to buy up the debt. A week later, that was almost exactly what happened. A massive, 750 billion euro, stabilisation fund was set up to guarantee the sovereign debt of Eurozone economies, and the ECB began to buy up Greek debt. The Euro rose sharply, and, around the world, Stock Markets soared. A week later (when I first wrote this) the Euro has fallen to an eighteen month low, and is almost back to its original value against the dollar. Stock Markets have crashed by as much as 5% in a single day. Why?
The reason is simple. When I spoke about monetising the debt, I also pointed out that such a process would only be tolerated by the rich Eurozone economies, who, ultimately, will have to pay for it via a lower Euro, higher interest rates and inflation, and/or higher tax payments, if it was part of an overall package in which there was greater control over the budgets of individual states. Germany, in particular, especially during elections, was reluctant to cough up any money to bail out Greece. According to a report in El Pais, Sarkozy threatened to take France out of the Euro unless the Germans did. I pointed out that you can’t have a single market, for long, without a single currency, without a single state acting as the Executive Committee of the ruling class, ensuring a level playing field for all Capital within its borders. That means common fiscal policy, common benefits, pensions etc, or at least in large part.
Behind the scenes, the proto-European state has been bringing some of these things about. The Maastricht Treaty set down fiscal rules that had to be met before countries could join the Euro. But, as Greece has shown it was a sham, and the FT has given data showing that, in fact, France and Germany breached the Treaty far more than has Greece! Throughout the EU, there are now reciprocal arrangements in relation to Pensions and Benefits, so that if you are in receipt of a Benefit in one country, you continue to receive it in another. But, it is precisely the fact that these measures have had to be introduced by the back-door that demonstrates the contradiction at the heart of the EU. To work it has to centralise, it has to establish a strong and controlling central state apparatus, but the continuing national interests of sections of Capital – particularly small Capital – and of political elites, stands in the way of bringing that about. As Marxists have always argued, Capital probably cannot create a United States of Europe, only workers can do that.
In the US, the original Constitution saw it as a Republic – not a democracy – in which the real power continued to be vested with the people of each state. The role of the central, Federal State was to be extremely limited. However, it did not take long before the needs of US industrial Capital blew that Constitution away. It needed a strong central state, and when several, non-industrial, states baulked, it was prepared to wage a Civil War against them, to bring it about. In Europe, several centuries of national identity, a couple of centuries of existence as nation states, and the legacy of Nationalist ideology that goes with that, particularly in Britain, where it is combined with a strong dose of racism, which was developed to justify its Colonial Empire, in a way that was not so true for France, or Spain, now also stands in the way. Those ideas, in the heads of peoples, now stand as a democratic impediment to Big Capital’s, historically progressive, EU project. So, it has simply ignored democratic principles and proceeded by bureaucratic means.
The representatives of Capital are now speaking openly about what has to be done. But, at a time of economic crisis, and after a period during which Euro-scepticism has grown in various countries, partly because of the bureaucratic manoeuvrings within the EU, and its democratic deficit, it is the least likely time that an open debate about establishing a Federal European state will succeed. In that most federal of European states, Germany, which has most to gain from a united federal Europe, Der Speigel, which is the equivalent of the Daily Mail, has been responding in typical populist terms, by whipping up Euro scepticism over the Greek bail out, and raising demands about the return of the Deutschmark.
In its absence, the price that Greece is being asked to pay, for the bail out, is swingeing cuts in its Public Spending. As Daniel (Danny The Red[now Green]) Cohn-Bendit said in a speech in the European Parliament, cuts way beyond anything even rich countries like France have ever been able to achieve. For Greece, still in recession, and suffering deflation, the consequences are inevitable. Not only severe social unrest, but also a collapsing of its economy into deep recession, that, of itself, is likely to increase its deficit, just as Thatcher’s recessions of the 1980’s did in Britain, as tax revenues fell, and Benefits payments soared. But, its not just Greece that has been placed in that position. The markets have turned their attention to the other PIGS. Portugal saw the interest payments for its sovereign debt rise sharply, and has introduced its own austerity programme. Spain, still in recession, and with unemployment at Depression levels of over 20% (and staggering youth unemployment over 40%!) has introduced its own programme of economic suicide. Ireland has already gone down the same road. Now, with a Tory Government in Britain, threatening to also begin to immediately swing the axe, Europe stands on the verge of a self-inflicted severe recession, because if the PIG economies, and Britain, are laid low, then for the rest of Europe, whose economies are bound to them, the consequences, when they are themselves still in a stage of fragile recovery, will be severe. That is why the Euro has been collapsing, that is why EU Stock markets have been tumbling, and why the consequences of a severe EU recession for the global economy, has sent world stock markets into crash mode once again. It appears that EU Governments, and those like the Tories in Britain, have got themselves into a kind of machismo mindset, of outdoing each other in the cuts they propose to make as a means of “reassuring the markets”, without actually noticing that their very actions of proposing such cuts, and sending their economies into recession is precisely what is sending the markets into a panic!!!
The comparison with other economies is clear. China’s Command economy responded to the Financial Crash in 2008, and subsequent recession, almost immediately. It stepped up Public Spending, and resorted to measures such as handing out vouchers to citizens so that they could just go out and buy consumer goods. Even during the global recession, China grew at nearly 8%. Its now growing at over 12%. In the US, the massive stimulus programme has continued, and the US rapidly came out of recession, and is now in a V shaped recovery. Brazil is growing at 5% a year, and is set to overtake Britain, and it too has been increasing its Public Spending, particularly on Social projects, which put money into the hands of the poorest who are most likely to spend it. Yet, there are still those like Jean Claude Trichet, at the ECB, or like the Tories, who insist that, irrespective of the consequences, deep cuts are absolutely vital. It is economic illiteracy.
Wednesday, 26 May 2010
At Last. The Liberals Commit Hari Kiri
In the “Communist Manifesto”, Marx and Engels wrote that society was increasingly dividing into two great camps – the bourgeoisie and the proletariat. Like much of the manifesto, written as a piece of propaganda, it was an exaggeration. In their more analytical writings, such as on the events in France, both Marx and Engels dealt with the more nuanced realities of class society, and the existence of a myriad of strata, and corresponding political ideas and forces.
Yet, in fact, for most of the 20th Century, Britain, the country where Engels complained that even the proletariat was bourgeois, has, almost more than anywhere else, mirrored, in its two-party system, that model of a society divided into two great classes, confronting each other. In many ways, the Liberals have represented a kind of political schizophrenic. Historically, it was they that represented the Manchester School and the Free Trade ideology of the industrial bourgeoisie. The Tories were the representatives of the Landlords and Financial Aristocracy. When working men eventually did get the vote, the Liberals sought to persuade workers to vote for them on the basis that Free Trade would provide them with cheap food. The Tories “One Nation” politics was based on the idea that British workers had an interest in defending the Empire, and protectionism against the rising economies of the US and Germany. The working-class gravitated towards its old allies within the bourgeoisie against its old enemies within the aristocracy, despite the fact that, as Marx pointed out in the Manifesto, it was the Tories who most frequently put forward measures to limit the excesses of the industrial bourgeoisie, as they attempted to turn the clock back through things like Disraeli’s “Young England” movement, even up to the end of the 19th Century. In part, that also shaped the ideas on which the Labour Movement developed, and on which the LP was created.
Once the Labour Party was created, and became the natural party to which workers gravitated, the basic dichotomy for the Liberals was exacerbated. In order to survive they could only exist within the interstices of political life, and as a localist rather than a National Party. In each area, they accommodated their political approach to what would win them votes and Council seats. In the North, that meant appearing as a Labour clone, but, perhaps, with a more radical edge, particularly on social issues, where their natural Liberalism facilitated Libertarian rather than statist ideas. Indeed, from my own limited experience, I would say this is reflected in the make-up of the Party’s membership, in the North, which appears to be drawn far more from free thinking workers than in the South, where the Party, in competition with the Tories, has been far more based on traditional, “Orange-Book”, free market, Liberalism, and, therefore, made up of the traditional petit-bourgeoisie.
The idea that the Liberals were a “party of the radical Left, disguised by the fact that its MP’s are such reasonable looking people”, is a ridiculous concept that could only be put forward by a former Liberal, and current representative of New Labour’s extreme Right, as Lord Adonis. It was no surprise to me that the Liberals formed a coalition with the Tories, even if it came as a surprise to some of the Liberals own misguided rank and file. As I said before the election, pointing to the fact that, up and down the country, Liberals were in coalition, in numerous Councils, with backwoods Tories, they would do anything to get their grubby hands on power.
In a strange way, what we have seen is an unravelling of the political realignment of the 1980’s, in which the SDP split from Labour. In he 1980’s, Thatcher choked off the support of those to her Right, such as the NF, by adopting some of their agenda. Today, it is no secret that Cameron seeks to define the Tories more in “Liberal” terms. There is a natural affinity between Cameron’s Libertarian politics and Clegg’s Orange Book Liberalism. But, it excludes all of those many misguided Liberal activists, many of whom, as teachers and intellectuals, saw a natural home in the Party, as opposed to the “vulgar”, “uneducated”, workers that make up the bulk of LP Branches in the North, who really believed that their Party represented something radical. I even know of some former SWP members who are Liberals who hold that view.
But, the genie is out of the bottle, the hymen is broken. The attempt to portray themselves as political virgins, unblemished by the realities of political life has been lost forever – or at least probably for another 65 years! The likelihood now is that the Tories will lose some of their members – and fewer voters – to UKIP, or even the BNP. But, the extreme Right is dead for the foreseeable future. In time, the Tories will incorporate the best elements of the Liberals free market wing. Already, it appears that many at a rank and file level have drawn the appropriate conclusions and joined the LP. The Guardian has produced a poll, which shows considerable disillusion, and 20% of Liberal voters saying they will switch their vote. When the sound of gunfire erupts, then the inevitable frictions between the Liberal and Tory politicians will sharpen. Some might baulk, but the experience of Liberals, over the last few decades, is that their degree of opportunism shows no bounds when it comes to clinging to office. Vince Cable, who was the media’s poster child over the last couple of years, has lost all credibility, as Paxman’s questioning on “Newsnight” brought out that degree of that opportunism over his switching position overnight to supporting immediate cuts.
We now have a clearer two-party politics than for many decades. For a while, there were irrelevant sects on the Right and left of the main parties, and the Liberals represented the only real distraction. Now, they too have committed hari kiri, and left the two main parties, representing the two main classes in society to battle it out. Marxists should be in the LP working in its Branches alongside ordinary workers to rebuild the structures and ideas we need to win that battle.
Yet, in fact, for most of the 20th Century, Britain, the country where Engels complained that even the proletariat was bourgeois, has, almost more than anywhere else, mirrored, in its two-party system, that model of a society divided into two great classes, confronting each other. In many ways, the Liberals have represented a kind of political schizophrenic. Historically, it was they that represented the Manchester School and the Free Trade ideology of the industrial bourgeoisie. The Tories were the representatives of the Landlords and Financial Aristocracy. When working men eventually did get the vote, the Liberals sought to persuade workers to vote for them on the basis that Free Trade would provide them with cheap food. The Tories “One Nation” politics was based on the idea that British workers had an interest in defending the Empire, and protectionism against the rising economies of the US and Germany. The working-class gravitated towards its old allies within the bourgeoisie against its old enemies within the aristocracy, despite the fact that, as Marx pointed out in the Manifesto, it was the Tories who most frequently put forward measures to limit the excesses of the industrial bourgeoisie, as they attempted to turn the clock back through things like Disraeli’s “Young England” movement, even up to the end of the 19th Century. In part, that also shaped the ideas on which the Labour Movement developed, and on which the LP was created.
Once the Labour Party was created, and became the natural party to which workers gravitated, the basic dichotomy for the Liberals was exacerbated. In order to survive they could only exist within the interstices of political life, and as a localist rather than a National Party. In each area, they accommodated their political approach to what would win them votes and Council seats. In the North, that meant appearing as a Labour clone, but, perhaps, with a more radical edge, particularly on social issues, where their natural Liberalism facilitated Libertarian rather than statist ideas. Indeed, from my own limited experience, I would say this is reflected in the make-up of the Party’s membership, in the North, which appears to be drawn far more from free thinking workers than in the South, where the Party, in competition with the Tories, has been far more based on traditional, “Orange-Book”, free market, Liberalism, and, therefore, made up of the traditional petit-bourgeoisie.
The idea that the Liberals were a “party of the radical Left, disguised by the fact that its MP’s are such reasonable looking people”, is a ridiculous concept that could only be put forward by a former Liberal, and current representative of New Labour’s extreme Right, as Lord Adonis. It was no surprise to me that the Liberals formed a coalition with the Tories, even if it came as a surprise to some of the Liberals own misguided rank and file. As I said before the election, pointing to the fact that, up and down the country, Liberals were in coalition, in numerous Councils, with backwoods Tories, they would do anything to get their grubby hands on power.
In a strange way, what we have seen is an unravelling of the political realignment of the 1980’s, in which the SDP split from Labour. In he 1980’s, Thatcher choked off the support of those to her Right, such as the NF, by adopting some of their agenda. Today, it is no secret that Cameron seeks to define the Tories more in “Liberal” terms. There is a natural affinity between Cameron’s Libertarian politics and Clegg’s Orange Book Liberalism. But, it excludes all of those many misguided Liberal activists, many of whom, as teachers and intellectuals, saw a natural home in the Party, as opposed to the “vulgar”, “uneducated”, workers that make up the bulk of LP Branches in the North, who really believed that their Party represented something radical. I even know of some former SWP members who are Liberals who hold that view.
But, the genie is out of the bottle, the hymen is broken. The attempt to portray themselves as political virgins, unblemished by the realities of political life has been lost forever – or at least probably for another 65 years! The likelihood now is that the Tories will lose some of their members – and fewer voters – to UKIP, or even the BNP. But, the extreme Right is dead for the foreseeable future. In time, the Tories will incorporate the best elements of the Liberals free market wing. Already, it appears that many at a rank and file level have drawn the appropriate conclusions and joined the LP. The Guardian has produced a poll, which shows considerable disillusion, and 20% of Liberal voters saying they will switch their vote. When the sound of gunfire erupts, then the inevitable frictions between the Liberal and Tory politicians will sharpen. Some might baulk, but the experience of Liberals, over the last few decades, is that their degree of opportunism shows no bounds when it comes to clinging to office. Vince Cable, who was the media’s poster child over the last couple of years, has lost all credibility, as Paxman’s questioning on “Newsnight” brought out that degree of that opportunism over his switching position overnight to supporting immediate cuts.
We now have a clearer two-party politics than for many decades. For a while, there were irrelevant sects on the Right and left of the main parties, and the Liberals represented the only real distraction. Now, they too have committed hari kiri, and left the two main parties, representing the two main classes in society to battle it out. Marxists should be in the LP working in its Branches alongside ordinary workers to rebuild the structures and ideas we need to win that battle.
Wednesday, 5 May 2010
A Greek Tragedy
Three Greek bank workers have been killed, during today's protests. Were that not tragedy enough, what makes it a further tragedy is the fact that it appears that they were killed as a result of the Bank, where they worked, being fire-bombed by Anarchist protesters, the same Anarchists who claim to be protesting in support of workers such as those who were killed. From the TV pictures, it also appeared that some workers, already suffering due to the austerity measures, had their problems added to by their cars being set alight. Such events are inevitable during revolutionary situations, and form part of the overhead costs.
But, it is typical of the outbursts of the petit-bourgeois, of which the Anarchists are the political representatives, that they are marked by a lack of any clear political direction, and excess of mindless destruction. In the Great French Revolution, the peasants would march at night and burn down the chateaux and farms of the aristocrats. During the Russian Revolution, Lenin and Trotsky had to continually try to argue against similar acts by the Russian peasants. After all, if you want to build a new society, it does not help if you have destroyed the very elements of the economy you need to bring that about. Whereas the working class is concentrated in large factories and other such enterprises, where they can simply seize this property, and place it under their own control, where they can strike against the economic interests of the Capitalist owners, the same is not true of peasants, or other sections of the middle classes. The peasant or small business person, or student cannot strike against anyone's economic interest but their own! They have no other means of production that they can occupy and place under their control. That is why working class revolution takes the form of the mass strike, the Occupation, the creation of Workers Councils in order to begin bringing the levers of economic and political power under their control, whereas the traditional form of rebellion by the petit-bourgeois is the street demonstration, and acts of violence.
But, the events in Greece have other lessons. In other posts, I've pointed out that the way that the current crisis can, and probably will, be resolved is through the monetisation of the debt. But that can only be a way of resolving the CURRENT crisis. The underlying problem in Greece arises because of the contradiction at the heart of the EU of a single market and single currency, but without a single state. But, the specific problem in Greece also arises because it has a huge unproductive Public Sector that cannot be maintained by its small productive sector. For those who think that the situation could be resolved by a really socialist Government, by a Workers' Government, or even the establishment of a Greek Workers' State, think again.
Lenin argued that politics dominates economics. The experience of the aftermath of the Russian Revolution proved otherwise. Political action and structures cannot override the laws of economics. Trying to do so can only ever lead to the resolution of economic problems by methods of political authoritarianism, which ultimately lead to further economic and social problems that lead to collapse. If a Workers' State were established in Greece tomorrow, the basic economic problems would remain. That state could default on its debts, but that would simply mean that the international markets would stop all lending to Greece. The basic problem is that of the Law of Value. To support the needs of unproductive workers - be it those employed in whatever form of administration, those that do not work for whatever reason, or who simply produce no new value - for food, shelter, clothing etc, then, those that work in the productive sector of the economy, must be able to produce enough, of those things, to meet their own needs AND enough to meet the needs of those unproductive workers, AND enough to replace what has been used up, AND enough to enable investment in new production.
The basic problem in Greece is that the productive sector cannot do that, and so the needs of the unproductive sector have been financed by borrowing. Now, of course, as socialists we believe that workers could produce more efficiently, and thereby resolve some of those problems. But, such efficiency is unlikely to resolve such a deficit quickly. In fact the early period of change always sees some inefficiency. Only by increasing the size of the productive sector, relative to the unproductive, could a Workers State resolve that basic problem. But, that would not be possible straight away. It requires investment in the productive sector, and that would almost certainly mean a reduction, first, in how much went to the unproductive sector, in order to create the resources for that investment - particularly if all foreign loans and investment ceased. That would mean in effect a Workers' State imposing pretty much the kind of austerity measures now being proposed! It would also mean the interests of workers in the productive, private sector of the economy being counterposed to the interests of workers in the unproductive State sector. A recipe for conflict.
But, in fact, Greece is just a small mirror of the situation that exists in most developed Capitalist economies. Late capitalism has seen the continual growth of an unproductive State sector that acts to stabilise the capitalist economy in the interests of the big monopolies. But, in doing so, it sits like a fat man on the chest of the rest of society. In creating a Workers' State, and an efficient socialist economy, workers would have to deal with that problem, and would face many of those same problems facing Greek workers today. In the 19th century, the first, most militant, most advanced Trade Unions and workers were those organised in the craft unions. It was from such sections of workers that the Communist League was formed. They also provided the backbone for other workers' political organisations during the rest of the century, and indeed into the twentieth century. But, these workers enjoyed a privileged status, compared to the ordinary unskilled workers, who for much of that time were unorganised. They formed an "Aristocracy of Labour" that ultimately acted as a drag on the development of socialist politics.
Today, it is no coincidence that much of the Left, where it is not composed of students, is heavily concentrated in workers employed in the State sector. That too is where most of the Labour Movement's organisation is based, in large Public Sector unions. It forms a similar aristocracy of labour to that of the 19th Century, and, today, it is no wonder that it seeks to defend state capitalism, and statist concepts of socialism. It does nothing other than defend its own sectional interests. Yet, the majority of the class is employed in small to medium enterprises, many indeed in McJobs where even basic Trade Union organisation is difficult. A clear division in the Labour Movement is opening up that poses a significant danger.
Once again, the basic requirement to reject statism, and to begin to look for an alternative based on direct working-class action, on developing enterprises, based on workers ownership and control, tied closely to workers, in their communities, shows its merit. By developing those services such as health, social care etc. on which workers depend so much, and by developing those areas, such as the insurance against unemployment, illness, and old age under workers ownership and control, not only can we ensure that we run these areas efficiently, thereby not placing burdens on ourselves, as producers, that we cannot meet, but we also build the necessary fusion between productive and unproductive workers, and between producers and consumers necessary to overcome the alienation of labour, and the potential for division within the class. It was always argued that whilst it would be more difficult for a revolution to occur in a developed economy, the flip side was that after the revolution the construction of socialism would be made easier, by that development. But, that is only true if the kinds of problems outlined above do not stand in the way. If we want to make the transition to a socialist economy easier tomorrow we have to begin by creating the socialist economy today.
But, it is typical of the outbursts of the petit-bourgeois, of which the Anarchists are the political representatives, that they are marked by a lack of any clear political direction, and excess of mindless destruction. In the Great French Revolution, the peasants would march at night and burn down the chateaux and farms of the aristocrats. During the Russian Revolution, Lenin and Trotsky had to continually try to argue against similar acts by the Russian peasants. After all, if you want to build a new society, it does not help if you have destroyed the very elements of the economy you need to bring that about. Whereas the working class is concentrated in large factories and other such enterprises, where they can simply seize this property, and place it under their own control, where they can strike against the economic interests of the Capitalist owners, the same is not true of peasants, or other sections of the middle classes. The peasant or small business person, or student cannot strike against anyone's economic interest but their own! They have no other means of production that they can occupy and place under their control. That is why working class revolution takes the form of the mass strike, the Occupation, the creation of Workers Councils in order to begin bringing the levers of economic and political power under their control, whereas the traditional form of rebellion by the petit-bourgeois is the street demonstration, and acts of violence.
But, the events in Greece have other lessons. In other posts, I've pointed out that the way that the current crisis can, and probably will, be resolved is through the monetisation of the debt. But that can only be a way of resolving the CURRENT crisis. The underlying problem in Greece arises because of the contradiction at the heart of the EU of a single market and single currency, but without a single state. But, the specific problem in Greece also arises because it has a huge unproductive Public Sector that cannot be maintained by its small productive sector. For those who think that the situation could be resolved by a really socialist Government, by a Workers' Government, or even the establishment of a Greek Workers' State, think again.
Lenin argued that politics dominates economics. The experience of the aftermath of the Russian Revolution proved otherwise. Political action and structures cannot override the laws of economics. Trying to do so can only ever lead to the resolution of economic problems by methods of political authoritarianism, which ultimately lead to further economic and social problems that lead to collapse. If a Workers' State were established in Greece tomorrow, the basic economic problems would remain. That state could default on its debts, but that would simply mean that the international markets would stop all lending to Greece. The basic problem is that of the Law of Value. To support the needs of unproductive workers - be it those employed in whatever form of administration, those that do not work for whatever reason, or who simply produce no new value - for food, shelter, clothing etc, then, those that work in the productive sector of the economy, must be able to produce enough, of those things, to meet their own needs AND enough to meet the needs of those unproductive workers, AND enough to replace what has been used up, AND enough to enable investment in new production.
The basic problem in Greece is that the productive sector cannot do that, and so the needs of the unproductive sector have been financed by borrowing. Now, of course, as socialists we believe that workers could produce more efficiently, and thereby resolve some of those problems. But, such efficiency is unlikely to resolve such a deficit quickly. In fact the early period of change always sees some inefficiency. Only by increasing the size of the productive sector, relative to the unproductive, could a Workers State resolve that basic problem. But, that would not be possible straight away. It requires investment in the productive sector, and that would almost certainly mean a reduction, first, in how much went to the unproductive sector, in order to create the resources for that investment - particularly if all foreign loans and investment ceased. That would mean in effect a Workers' State imposing pretty much the kind of austerity measures now being proposed! It would also mean the interests of workers in the productive, private sector of the economy being counterposed to the interests of workers in the unproductive State sector. A recipe for conflict.
But, in fact, Greece is just a small mirror of the situation that exists in most developed Capitalist economies. Late capitalism has seen the continual growth of an unproductive State sector that acts to stabilise the capitalist economy in the interests of the big monopolies. But, in doing so, it sits like a fat man on the chest of the rest of society. In creating a Workers' State, and an efficient socialist economy, workers would have to deal with that problem, and would face many of those same problems facing Greek workers today. In the 19th century, the first, most militant, most advanced Trade Unions and workers were those organised in the craft unions. It was from such sections of workers that the Communist League was formed. They also provided the backbone for other workers' political organisations during the rest of the century, and indeed into the twentieth century. But, these workers enjoyed a privileged status, compared to the ordinary unskilled workers, who for much of that time were unorganised. They formed an "Aristocracy of Labour" that ultimately acted as a drag on the development of socialist politics.
Today, it is no coincidence that much of the Left, where it is not composed of students, is heavily concentrated in workers employed in the State sector. That too is where most of the Labour Movement's organisation is based, in large Public Sector unions. It forms a similar aristocracy of labour to that of the 19th Century, and, today, it is no wonder that it seeks to defend state capitalism, and statist concepts of socialism. It does nothing other than defend its own sectional interests. Yet, the majority of the class is employed in small to medium enterprises, many indeed in McJobs where even basic Trade Union organisation is difficult. A clear division in the Labour Movement is opening up that poses a significant danger.
Once again, the basic requirement to reject statism, and to begin to look for an alternative based on direct working-class action, on developing enterprises, based on workers ownership and control, tied closely to workers, in their communities, shows its merit. By developing those services such as health, social care etc. on which workers depend so much, and by developing those areas, such as the insurance against unemployment, illness, and old age under workers ownership and control, not only can we ensure that we run these areas efficiently, thereby not placing burdens on ourselves, as producers, that we cannot meet, but we also build the necessary fusion between productive and unproductive workers, and between producers and consumers necessary to overcome the alienation of labour, and the potential for division within the class. It was always argued that whilst it would be more difficult for a revolution to occur in a developed economy, the flip side was that after the revolution the construction of socialism would be made easier, by that development. But, that is only true if the kinds of problems outlined above do not stand in the way. If we want to make the transition to a socialist economy easier tomorrow we have to begin by creating the socialist economy today.
Gold Glisters, Paper Binned
I've been pointing, out for a while, that the solution, to the Debt problems of the EU and UK, will be resolved in the same way that the debt problems of the Banks were resolved - by monetising the debt. That is, Central Banks will simply print money, and use that Money to cover the Government debts. Its what Governments have done from the very first use of money, and the very first creation of debts from borrowing it. In the past, they corrupted money made from precious metals, then they started to simply issue coins that contained less metal, but which retained the same names. Marx speaks, for example, of how the pound sterling, which had begun life as a pound weight of silver, had, by the 19th Century, been reduced to only a fraction of that weight. Once paper money is introduced, as a token representing money, there is virtually no limit to the amount Governments can print of these tokens. As Marx points out, real Money - Gold Silver or whatever has arisen as the Money Commodity - circulates because it has Value. Paper Money, however, only has Value because it circulates. The Value of Gold or silver is determined by the labour-time required for its production. But, paper has very little value because it requires little labour-time to produce. Paper money tokens only have value because they act as representatives of this real money. But, for that reason, the more of them that are printed the less value they have, whatever the nominal value they have. Their real value becomes manifest in exchange in the fact that more of them have to be given up in exchange for any other commodity - inflation.
I've been pointing out that not only is the monetising of the debt the obvious solution - the drastic curtailment of Public Spending to reduce the debt is not in the interests of Capital at the present time in Greece or in Britain - but the drop in the value of the Euro indicates that the markets realise that, and that such a monetisation is inevitable at some point. The other day, I heard a currency dealer on CNBC making the same point. The proposed cuts in Greek spending, as part of the rescue package, are predicted to lead to a fall in Greek GDP of 3% for this year. Other countries, amongst the PIGS, such as Portugal and Spain are also now coming into the firing line, and similar austerity measures have been put in place to reduce their debts, with a similar consequence for growth.
But, the EU is a single market, a single economy. Most EU states conduct most of their trade with other EU states, the biggest Capital flows are from one EU state to other EU states. In good times, this is a powerful driver of economic growth, but you can't have the good without the bad. Economies like Germany, dependent on exports for a large part of their GDP, will suffer if many other areas of the EU not only remain in recession, but are driven even further into recession by swingeing cuts in spending. Gordon Brown is right, when he says that the EU needs to adopt a strategy for economic growth, as the means of dealing with the debt, but the first stage of that strategy has to be to begin by monetising the debt now. Once growth has taken hold again the problem of dealing with the inflation that results from that can be addressed.
But, such a policy of monetisation will result in inflation down the road. It is already leading to a fall in the Euro, just as the massive increases in liquidity from printing dollars over the last few years have led during that time to big falls in the dollar. The same has been true for the pound, and other major currencies, like the RMB and the Yen, have been held down because of policies in China and Japan to print money to keep their currencies pegged or within tight limits against the dollar. But, it follows, that if all paper currencies get binned in this way as a result of printing more paper, the relative values of each will not change that much. That is true, but those currencies are not just valued against each other. As stated above they are valued, each time they are used, in exchange against other commodities. Print more pounds, and more pounds have to be handed over for each sack of potatoes, and so on. More significantly, still sitting in the background, are those Money commodities, those ancient economic relics of Value, on which these money tokens are based, and against which they are supposed to bear some lingering relationship.
Since 1999, Gold has risen, from a low of $250 an ounce, to its current price of nearly $1200 an ounce. It has merely, matched other hard commodities such as Copper in that rise, which is part of the usual Long Wave cycle, during which raw materials rise sharply in price at the beginning of a new Long Wave upswing, as demand rises sharply, which cannot be met due to years of underinvestment during the downturn. In the last Long Wave upswing, from 1949 to 1974, Gold reached its real peak against other commodity prices in 1960. But, between 1970 and 1980, Gold rose from a price of $30 to over $800 an ounce!!! Some people, the so called Gold Bugs, who had invested in Gold during this period, made absolute fortunes, and the same people have been buying Gold again over the last few years.
But, the reason for the near 30 fold rise in Gold prices during the 1970's was due to inflation, because of the massive printing of money, to cover the Vietnam War, and to cover the Keynesian policies, used extensively during that period, to try to stave off the cosnequences of the ending of the Long Wave Boom, and the onset of the Second slump. The rise of Gold, up to 1960, was a rise in its real exchange value, its price of production compared to other commodities. The 1970's rise was purely a rise resulting from inflation. Today, we see the two factors combined. Gold has been rising in price, alongside all other raw materials, as part of the normal Long Wave cycle, but the massive printing of paper money tokens, over the last decade, is very similar to those same policies during the 1970's. The consequence seems inevitable, as paper money tokens get trashed, real money, Gold, will soar possibly to as much as $5,000 to $7,000 an ounce! Good news for South Africa and Russia.
What is different, today, from the 1970's is that, in the 1970's, Keynesian policies could not work to prevent the effects of the Long Wave downturn, and were abandoned. The adoption of Misean economic polices, in Britain and the US, under the guidance of people like Frederick Hayek, led to a reversal of money printing and a contraction that led to mass unemployment. Only when Capital had decisively beaten Labour did people like Thatcher and Reagan switch to Friedmanite Monetarism that called for an expansionary Monetary policy, to stimulate economic growth, in the knowledge that prices could rise, whilst workers would be too weak to obtain compensation in higher wages. It was on that basis they defended profits, and at the same time created asset bubbles on Stock Markets, and in housing. Today, early on in a Long wave upswing, Keynesian polices CAN work. The task for Capital is to restart growth, growth which once underway will be self-sustaining due to the endogenous characteristics of the Long Wave. That has two consequences.
Printing Money in the 1970's, and its resumption at the end of the 1980's, led to inflation. The reason for that is simple. Inflation arises when more money is put into circulation than the volume of economic activity merits. In the conditions of the 1970's, more money in circulation simply led to firms raising prices, and workers seeking higher wages. It did not lead to more investment, which would have put more goods in circulation, to absorb the additional liquidity. Firms did not invest, because they had no confidence that things would improve. The result was stagflation. In the late 80's and 90's, when the Monetarists adopted a loose money policy, in order to smooth over the structural problems arising from increasing globalisation, amid a Long Wave decline, the result was that company profits rose due to rising prices with subdued costs, and workers sought to compensate not through rising wages, but through increased borrowing out of fictional rises in wealth that appeared to come to them without effort via their rising house prices - and increasingly, for many, rising values of their PEP's, Pensions etc. Although, the increase in liquidity DID result in rising prices, therefore, it did not result in rampant inflation, because a large part of the liquidity was used up in financing these rising asset prices, and, because that very same globalisation was resulting in masses of new low priced commodities coming in from China etc.
Today, printing money to monetise the debt will result in currencies being trashed against real money, will result, in the short term, in high rates of inflation, but, precisely because we are in a Long Wave boom, not decline, the resumption of growth will bring loads more commodities on to the market that will begin to soak up that liquidity, and thereby cap the extent to which inflation will rise. Growth will also create the conditions under which the initial costs of monetising the debt can be addressed. More people in employment with rising wages, will mean more tax in Income Tax, and in VAT as they spend more. Higher company profits will have the same effect, and less people claiming benefits of various kinds as employment and income rises will reduce State spending. but, those who have lost out, because having lent to the State, they find themselves paid back in funny money, will demand compensation. They will demand higher interest rates on the money they lend over longer terms. But, with higher income and tax the State will be able to pay these higher interest rates. Businesses, with increased activity and higher cash flows will not only be better able to cover higher interest rates, on longer term Commercial Bonds, but that higher cash flow will reduce their borrowing requirements, and higher incomes and profits will make it easier for them to raise Capital through share issues rather than issuing bonds.
Capital DOES have a fairly straightforward escape route from the current problems, if they choose to use it, and provided their political representatives can take the decisions to effect it - the biggest problem at the moment appears to be that Germany is baulking at resolving the Greek crisis, because of the political background of German elections. The Tories have committed themselves to spending cuts for similar reasons, because they believed it would win them votes.
I should stress that I am not, in any way, suggesting a crisis free Capitalism here. What I am suggesting is that the usual response of the Left, of wanting to present a picture of a Capitalism in terminal decline, in a state of perpetual crisis, is way off the mark even now. Even during a long wave boom Capitalism undergoes crises like the current one, and their will be more during this phase of the Long Wave Boom. But, it is necessary to understand the conjuncture, and to understand how these crises differ from those when the Long Wave boom ends, and those during the Long Wave decline. Without that its like trying to find your way using a compass that always points South, and without knowing where you are to begin with because you don't have a map.
I've been pointing out that not only is the monetising of the debt the obvious solution - the drastic curtailment of Public Spending to reduce the debt is not in the interests of Capital at the present time in Greece or in Britain - but the drop in the value of the Euro indicates that the markets realise that, and that such a monetisation is inevitable at some point. The other day, I heard a currency dealer on CNBC making the same point. The proposed cuts in Greek spending, as part of the rescue package, are predicted to lead to a fall in Greek GDP of 3% for this year. Other countries, amongst the PIGS, such as Portugal and Spain are also now coming into the firing line, and similar austerity measures have been put in place to reduce their debts, with a similar consequence for growth.
But, the EU is a single market, a single economy. Most EU states conduct most of their trade with other EU states, the biggest Capital flows are from one EU state to other EU states. In good times, this is a powerful driver of economic growth, but you can't have the good without the bad. Economies like Germany, dependent on exports for a large part of their GDP, will suffer if many other areas of the EU not only remain in recession, but are driven even further into recession by swingeing cuts in spending. Gordon Brown is right, when he says that the EU needs to adopt a strategy for economic growth, as the means of dealing with the debt, but the first stage of that strategy has to be to begin by monetising the debt now. Once growth has taken hold again the problem of dealing with the inflation that results from that can be addressed.
But, such a policy of monetisation will result in inflation down the road. It is already leading to a fall in the Euro, just as the massive increases in liquidity from printing dollars over the last few years have led during that time to big falls in the dollar. The same has been true for the pound, and other major currencies, like the RMB and the Yen, have been held down because of policies in China and Japan to print money to keep their currencies pegged or within tight limits against the dollar. But, it follows, that if all paper currencies get binned in this way as a result of printing more paper, the relative values of each will not change that much. That is true, but those currencies are not just valued against each other. As stated above they are valued, each time they are used, in exchange against other commodities. Print more pounds, and more pounds have to be handed over for each sack of potatoes, and so on. More significantly, still sitting in the background, are those Money commodities, those ancient economic relics of Value, on which these money tokens are based, and against which they are supposed to bear some lingering relationship.
Since 1999, Gold has risen, from a low of $250 an ounce, to its current price of nearly $1200 an ounce. It has merely, matched other hard commodities such as Copper in that rise, which is part of the usual Long Wave cycle, during which raw materials rise sharply in price at the beginning of a new Long Wave upswing, as demand rises sharply, which cannot be met due to years of underinvestment during the downturn. In the last Long Wave upswing, from 1949 to 1974, Gold reached its real peak against other commodity prices in 1960. But, between 1970 and 1980, Gold rose from a price of $30 to over $800 an ounce!!! Some people, the so called Gold Bugs, who had invested in Gold during this period, made absolute fortunes, and the same people have been buying Gold again over the last few years.
But, the reason for the near 30 fold rise in Gold prices during the 1970's was due to inflation, because of the massive printing of money, to cover the Vietnam War, and to cover the Keynesian policies, used extensively during that period, to try to stave off the cosnequences of the ending of the Long Wave Boom, and the onset of the Second slump. The rise of Gold, up to 1960, was a rise in its real exchange value, its price of production compared to other commodities. The 1970's rise was purely a rise resulting from inflation. Today, we see the two factors combined. Gold has been rising in price, alongside all other raw materials, as part of the normal Long Wave cycle, but the massive printing of paper money tokens, over the last decade, is very similar to those same policies during the 1970's. The consequence seems inevitable, as paper money tokens get trashed, real money, Gold, will soar possibly to as much as $5,000 to $7,000 an ounce! Good news for South Africa and Russia.
What is different, today, from the 1970's is that, in the 1970's, Keynesian policies could not work to prevent the effects of the Long Wave downturn, and were abandoned. The adoption of Misean economic polices, in Britain and the US, under the guidance of people like Frederick Hayek, led to a reversal of money printing and a contraction that led to mass unemployment. Only when Capital had decisively beaten Labour did people like Thatcher and Reagan switch to Friedmanite Monetarism that called for an expansionary Monetary policy, to stimulate economic growth, in the knowledge that prices could rise, whilst workers would be too weak to obtain compensation in higher wages. It was on that basis they defended profits, and at the same time created asset bubbles on Stock Markets, and in housing. Today, early on in a Long wave upswing, Keynesian polices CAN work. The task for Capital is to restart growth, growth which once underway will be self-sustaining due to the endogenous characteristics of the Long Wave. That has two consequences.
Printing Money in the 1970's, and its resumption at the end of the 1980's, led to inflation. The reason for that is simple. Inflation arises when more money is put into circulation than the volume of economic activity merits. In the conditions of the 1970's, more money in circulation simply led to firms raising prices, and workers seeking higher wages. It did not lead to more investment, which would have put more goods in circulation, to absorb the additional liquidity. Firms did not invest, because they had no confidence that things would improve. The result was stagflation. In the late 80's and 90's, when the Monetarists adopted a loose money policy, in order to smooth over the structural problems arising from increasing globalisation, amid a Long Wave decline, the result was that company profits rose due to rising prices with subdued costs, and workers sought to compensate not through rising wages, but through increased borrowing out of fictional rises in wealth that appeared to come to them without effort via their rising house prices - and increasingly, for many, rising values of their PEP's, Pensions etc. Although, the increase in liquidity DID result in rising prices, therefore, it did not result in rampant inflation, because a large part of the liquidity was used up in financing these rising asset prices, and, because that very same globalisation was resulting in masses of new low priced commodities coming in from China etc.
Today, printing money to monetise the debt will result in currencies being trashed against real money, will result, in the short term, in high rates of inflation, but, precisely because we are in a Long Wave boom, not decline, the resumption of growth will bring loads more commodities on to the market that will begin to soak up that liquidity, and thereby cap the extent to which inflation will rise. Growth will also create the conditions under which the initial costs of monetising the debt can be addressed. More people in employment with rising wages, will mean more tax in Income Tax, and in VAT as they spend more. Higher company profits will have the same effect, and less people claiming benefits of various kinds as employment and income rises will reduce State spending. but, those who have lost out, because having lent to the State, they find themselves paid back in funny money, will demand compensation. They will demand higher interest rates on the money they lend over longer terms. But, with higher income and tax the State will be able to pay these higher interest rates. Businesses, with increased activity and higher cash flows will not only be better able to cover higher interest rates, on longer term Commercial Bonds, but that higher cash flow will reduce their borrowing requirements, and higher incomes and profits will make it easier for them to raise Capital through share issues rather than issuing bonds.
Capital DOES have a fairly straightforward escape route from the current problems, if they choose to use it, and provided their political representatives can take the decisions to effect it - the biggest problem at the moment appears to be that Germany is baulking at resolving the Greek crisis, because of the political background of German elections. The Tories have committed themselves to spending cuts for similar reasons, because they believed it would win them votes.
I should stress that I am not, in any way, suggesting a crisis free Capitalism here. What I am suggesting is that the usual response of the Left, of wanting to present a picture of a Capitalism in terminal decline, in a state of perpetual crisis, is way off the mark even now. Even during a long wave boom Capitalism undergoes crises like the current one, and their will be more during this phase of the Long Wave Boom. But, it is necessary to understand the conjuncture, and to understand how these crises differ from those when the Long Wave boom ends, and those during the Long Wave decline. Without that its like trying to find your way using a compass that always points South, and without knowing where you are to begin with because you don't have a map.
Tuesday, 4 May 2010
Who Will Bail Out the Workers?
Lst year when the global finanncial system of Capitalism was on the brink of collapse, due to the reckless actions of bankers, who took the basic principles of Capitalism to their logical conclusion, Governments around the world bailed them out to the tune of trillions of pounds.
At around the same time huge Capitalist enterprises such as General Motors, Ford etc. also facing economic collapse after years of gross mismanagement were also bailed out by Governments to the tune of billions of pounds.
Now, airline companies, whose competition amongst theemselves have driven the price for airline travel down to ridiculously low levels by driving the wages and conditions of their workers down, and by not making proper provision for the full costs of airline travel are also demanding similar bail-outs, because having driven their prices down to suc low levels they do not have the reserves to cover the cost they are legally bound to bear of putting up and feeding their passengers when they cannot delive them to their destinations.
On top of that billions of Euros have been given to the Greek Government to cover its debts, debts run up by a Government that has been shown not only to be corrupt, but to have deliberately falsified its accounts, a Government that does not even make sure that its citizens pay their taxes. Today markets have decided that the bail-out isn't enough, and the interest rate demanded for Greek debt has risen. In addition the markets have spread rumours that Spain is to a request massive bail-out to cover its debts - rumours denied by the Spanish PM - which has caused rates for Spanish Bonds to rise sharply, and led to a 5% drop in the Spanish Stock Market.
As I said the other day, the obvious conclusion to this is for the debts of these European economies to be monetised. That is instead of borrowing to cover these debts, money is simply printed to cover them, so that creditors are simply paid back with newly created money. Its what Governments down the ages have done. In the past when they had currency based on Gold or silver, the Government used to simply mint new coins that contained less of the precious metal. Today, with paper money its even easier. All you have to do is crank up the printing presses.
The effect is always the same. In the past people realised that their coinage contained less precious metal, and raised the number of coins demanded in return for their products. Today, printing more money in the same way results in inflation about two years after it has been put into circulation. Who suffers most from that? It is ordinary workers who cannot simply raise the price for the only commodity they can sell - their labour power. A manufacturer raises prices to cover their costs, and everyone accepts that it is not only normal, but their right to do so. A shop raises its prices because the price it pays to the manufacturers have gone up, and no one quesstions their right to do so. But, if workers follow suit, if they raise the price of their labour because the costs they have to cover have gone up, then the media is full of stories about greedy workers holding the country to ransom!!! If you go into a shop and the shopkeeper tells you that the price of the food you need is £10, you would not thyink him unreasonable if he refused to sell it to you because you only wanted to pay £8. Yet, in doing so he is only doing what workers do when they are forced to go on strike. A strike is only workers telling employers what price they want for the only product they have to sell, and refusing to sell it if the employer will not meet it.
Yet, the Tories and Liberals would have workers give up this basic right to set the price they require for selling thier labour. They would deny them the right that every other seller of commodities has - to refuse to sell if the purchases will not pay the required price. They would try to deny workers the right to strike i.e. the right not to sell their labour power if its price is not met by the purchaser, and would do everything in their power to break such strikes when they occur.
Yet, these are the same Governments that not only guarantee those same rights to businesses, they are also the same Governments that bail-out their rich friends in those businesses when they get into trouble. In doing so what they really ask for is or workers to bail-them out from their taxes. If these Governments can bail-out the rich, the corrupt and unscrupulous, or just the inefficient why then should we not demand that the workers be bailed out from the consequences of those actions too?
But, of course, the Tories and the Liberals will have no such intention of doing that for all their talk of us all being "in this together". There is no together, other than them being together with their rich friends, and us being together with the rest of our class in opposition to them. They will bail-out the rich at our expense, by cutting wages, by reducing pensions and benefits and the value of savings through inflation, by cutting back on Education, health and Social Care and the other Public Services that workers have paid for, but which they often never receive, and when they do its often not to the standard it should be.
If we are to stop them getting away with that, its necessary to prevent the Tories and Liberals having the benefit of Government office to launch those attacks. Of course, the bosses, the Tories and Liberals and their agents within the Capitalist State will still try to bring that about with a Labour Government, and unfortunately the experience of Labour Govenments in the past shows that they see things in terms where the interests of Capital are also the interests of society. But, the majority of ordinary LP members are ordinary workers, who feel the pressure of thier workmates and neighbours, the Trade Unions continue to have the ability should they choose to use it to also pressure the Party. If workers join and pressure the Party they can use it for their interests.
That is why its necessary to Vote Labour, but organise to fight. The bosses won't bail us out, we have to do it ourselves.
At around the same time huge Capitalist enterprises such as General Motors, Ford etc. also facing economic collapse after years of gross mismanagement were also bailed out by Governments to the tune of billions of pounds.
Now, airline companies, whose competition amongst theemselves have driven the price for airline travel down to ridiculously low levels by driving the wages and conditions of their workers down, and by not making proper provision for the full costs of airline travel are also demanding similar bail-outs, because having driven their prices down to suc low levels they do not have the reserves to cover the cost they are legally bound to bear of putting up and feeding their passengers when they cannot delive them to their destinations.
On top of that billions of Euros have been given to the Greek Government to cover its debts, debts run up by a Government that has been shown not only to be corrupt, but to have deliberately falsified its accounts, a Government that does not even make sure that its citizens pay their taxes. Today markets have decided that the bail-out isn't enough, and the interest rate demanded for Greek debt has risen. In addition the markets have spread rumours that Spain is to a request massive bail-out to cover its debts - rumours denied by the Spanish PM - which has caused rates for Spanish Bonds to rise sharply, and led to a 5% drop in the Spanish Stock Market.
As I said the other day, the obvious conclusion to this is for the debts of these European economies to be monetised. That is instead of borrowing to cover these debts, money is simply printed to cover them, so that creditors are simply paid back with newly created money. Its what Governments down the ages have done. In the past when they had currency based on Gold or silver, the Government used to simply mint new coins that contained less of the precious metal. Today, with paper money its even easier. All you have to do is crank up the printing presses.
The effect is always the same. In the past people realised that their coinage contained less precious metal, and raised the number of coins demanded in return for their products. Today, printing more money in the same way results in inflation about two years after it has been put into circulation. Who suffers most from that? It is ordinary workers who cannot simply raise the price for the only commodity they can sell - their labour power. A manufacturer raises prices to cover their costs, and everyone accepts that it is not only normal, but their right to do so. A shop raises its prices because the price it pays to the manufacturers have gone up, and no one quesstions their right to do so. But, if workers follow suit, if they raise the price of their labour because the costs they have to cover have gone up, then the media is full of stories about greedy workers holding the country to ransom!!! If you go into a shop and the shopkeeper tells you that the price of the food you need is £10, you would not thyink him unreasonable if he refused to sell it to you because you only wanted to pay £8. Yet, in doing so he is only doing what workers do when they are forced to go on strike. A strike is only workers telling employers what price they want for the only product they have to sell, and refusing to sell it if the employer will not meet it.
Yet, the Tories and Liberals would have workers give up this basic right to set the price they require for selling thier labour. They would deny them the right that every other seller of commodities has - to refuse to sell if the purchases will not pay the required price. They would try to deny workers the right to strike i.e. the right not to sell their labour power if its price is not met by the purchaser, and would do everything in their power to break such strikes when they occur.
Yet, these are the same Governments that not only guarantee those same rights to businesses, they are also the same Governments that bail-out their rich friends in those businesses when they get into trouble. In doing so what they really ask for is or workers to bail-them out from their taxes. If these Governments can bail-out the rich, the corrupt and unscrupulous, or just the inefficient why then should we not demand that the workers be bailed out from the consequences of those actions too?
But, of course, the Tories and the Liberals will have no such intention of doing that for all their talk of us all being "in this together". There is no together, other than them being together with their rich friends, and us being together with the rest of our class in opposition to them. They will bail-out the rich at our expense, by cutting wages, by reducing pensions and benefits and the value of savings through inflation, by cutting back on Education, health and Social Care and the other Public Services that workers have paid for, but which they often never receive, and when they do its often not to the standard it should be.
If we are to stop them getting away with that, its necessary to prevent the Tories and Liberals having the benefit of Government office to launch those attacks. Of course, the bosses, the Tories and Liberals and their agents within the Capitalist State will still try to bring that about with a Labour Government, and unfortunately the experience of Labour Govenments in the past shows that they see things in terms where the interests of Capital are also the interests of society. But, the majority of ordinary LP members are ordinary workers, who feel the pressure of thier workmates and neighbours, the Trade Unions continue to have the ability should they choose to use it to also pressure the Party. If workers join and pressure the Party they can use it for their interests.
That is why its necessary to Vote Labour, but organise to fight. The bosses won't bail us out, we have to do it ourselves.
Unions Together
Unions Together have a video on why workers should remember what a Tory Government means for them, and why they should vote Labour.
Unions Together
Unions Together
Sunday, 2 May 2010
Northern Soul Classics - Compared To What - Mr. Floods Party
Another political Norther Soul classic. I think it was originally an old Blues song, and there is also a version by Ray Charles on Youtube. But, this version is the classic Northern version. One contributor to Youtube relates that its her Dad singing on the track.
The only details on the band I've been able to dig up quickly is on the blog here
Lyrics can be found here
The only details on the band I've been able to dig up quickly is on the blog here
Lyrics can be found here
Saturday, 1 May 2010
Liberal Change
Nick Clegg and the Liberals almost sole appeal for our votes rests upon the idea that they are different from Labour or the Tories. Of course, even were that true, different does not necessarily mean good. After all, UKIP and the BNP make the same claim. Of course, the Liberals are indistinguishable from either Labour or the Tories, in terms of the policies they are advocating in this election. They are, if anything, advocating even more severe cuts than the other two.
Yes, they are proposing not renewing Trident - a policy they might not have raised had they thought they might be in Government - but are only proposing to replace it with some other nuclear deterrent, that the review of alternatives showed would probably work out more expensive. They play up their opposition to the War in Iraq, but that's history, and they do not call for a withdrawal from Afghanistan.
The Liberals, as they always have, play up their Traditional "Orange Book" Liberalism in areas where they are fighting the Tories, whereas they play up their social conscience, social liberalism where they are fighting Labour. Of course, to be a "National" rather than purely localist party you can't get away with such deception and hypocrisy for long. But, its necessary to look at what the Liberals do, not what they say.
For the last few years, my local Council has been run by the Liberals in coalition - as they are in most other places, where they share power - with the Tories. From that alliance, and the others they have formed, with the Tories, up and down the country, we should judge their claim to be different from the other parties, and in particular their claims to be different from the backwoods Tories. In reality, they will compromise on any principle in order to get their grubby hands on a Cabinet post. Ask the ordinary workers here if they think that the Liberals represent anything different!
The Liberals make a play of their Liberal principles in relation to Civil Liberties, but they have not rushed out, here, to tear down CCTV cameras, for example. On the contrary, like most other Councillors, they have been keen to claim the kudos for getting them set up in areas they represent - and some they don't. At the Sports Centre, I used to attend, the staff were completely demoralised, because of the way things were run. Customers continually complained that they were paying good money for use of the Centre, whilst it had not even been painted for years, equipment was left unrepaired for months on end.
Two-thirds of the Councils budget goes, not to provide services to the Public, but on "Finance and Management" that is paying for the Council bureaucracy, and the cost of collecting the Council Tax! Not that their Tory partners are any better. Cameron talked the other day about cutting out the leaflets that Local Government send out - which, as I pointed out, would hit small printshops and their suppliers - but the Council, which would hardly count as even a large business, let alone a large Council, has a large Public Relations Department.
Last year, one of its Chief Officers was reportedly suspended because he had cost the Council £1.5m by not claiming grants that should have been claimed. Staff at the Council reported to me that he'd been retired with a pay off of £400,000! I don't know if that's true, because the Council's books are closed on such things to the Public. Again, so much for the Liberals claims to be different. I could only calculate his pay off to be about £200,000 - £80,000 as 1 Year's Pay for redundancy, and a lump sum payment of around £120,000 being 3 years annual pension of around £40,000 p.a. assuming a salary of £80,000 a year. If it was more than that then again questions arise as to why, but again the Liberals won't be disclosing that to the people who elected them.
At the same time, that they can pay out huge amounts, to chief officers under such conditions, the Council now sacks workers who have been off sick for any length of time, even where that is with full medical certification, whereas in the past they would have been retired with a pension on health grounds.
And, when it comes to approving of waste,a signal example was given. Only a few years ago, a large new block was built at the local F.E. College. Yet, in what must be one of the most wasteful examples of local Government Planning and Economic Development, the Council approved the demolition of this brand new building in order to make way for a new Sainsbury's store!
Liberal Change? Different faces, same policies and practices! The more things change the more they stay the same!
Yes, they are proposing not renewing Trident - a policy they might not have raised had they thought they might be in Government - but are only proposing to replace it with some other nuclear deterrent, that the review of alternatives showed would probably work out more expensive. They play up their opposition to the War in Iraq, but that's history, and they do not call for a withdrawal from Afghanistan.
The Liberals, as they always have, play up their Traditional "Orange Book" Liberalism in areas where they are fighting the Tories, whereas they play up their social conscience, social liberalism where they are fighting Labour. Of course, to be a "National" rather than purely localist party you can't get away with such deception and hypocrisy for long. But, its necessary to look at what the Liberals do, not what they say.
For the last few years, my local Council has been run by the Liberals in coalition - as they are in most other places, where they share power - with the Tories. From that alliance, and the others they have formed, with the Tories, up and down the country, we should judge their claim to be different from the other parties, and in particular their claims to be different from the backwoods Tories. In reality, they will compromise on any principle in order to get their grubby hands on a Cabinet post. Ask the ordinary workers here if they think that the Liberals represent anything different!
The Liberals make a play of their Liberal principles in relation to Civil Liberties, but they have not rushed out, here, to tear down CCTV cameras, for example. On the contrary, like most other Councillors, they have been keen to claim the kudos for getting them set up in areas they represent - and some they don't. At the Sports Centre, I used to attend, the staff were completely demoralised, because of the way things were run. Customers continually complained that they were paying good money for use of the Centre, whilst it had not even been painted for years, equipment was left unrepaired for months on end.
Two-thirds of the Councils budget goes, not to provide services to the Public, but on "Finance and Management" that is paying for the Council bureaucracy, and the cost of collecting the Council Tax! Not that their Tory partners are any better. Cameron talked the other day about cutting out the leaflets that Local Government send out - which, as I pointed out, would hit small printshops and their suppliers - but the Council, which would hardly count as even a large business, let alone a large Council, has a large Public Relations Department.
Last year, one of its Chief Officers was reportedly suspended because he had cost the Council £1.5m by not claiming grants that should have been claimed. Staff at the Council reported to me that he'd been retired with a pay off of £400,000! I don't know if that's true, because the Council's books are closed on such things to the Public. Again, so much for the Liberals claims to be different. I could only calculate his pay off to be about £200,000 - £80,000 as 1 Year's Pay for redundancy, and a lump sum payment of around £120,000 being 3 years annual pension of around £40,000 p.a. assuming a salary of £80,000 a year. If it was more than that then again questions arise as to why, but again the Liberals won't be disclosing that to the people who elected them.
At the same time, that they can pay out huge amounts, to chief officers under such conditions, the Council now sacks workers who have been off sick for any length of time, even where that is with full medical certification, whereas in the past they would have been retired with a pension on health grounds.
And, when it comes to approving of waste,a signal example was given. Only a few years ago, a large new block was built at the local F.E. College. Yet, in what must be one of the most wasteful examples of local Government Planning and Economic Development, the Council approved the demolition of this brand new building in order to make way for a new Sainsbury's store!
Liberal Change? Different faces, same policies and practices! The more things change the more they stay the same!
Dateline London - Immigration Discussion
There was actually quite a good discussion about Immigration on BBC's Dateline London today. Of course, some of the right-wing journalists, like most of the right who complain that the Left don't want to discuss Immigration, actually DIDN'T want to discuss Immigration when that discussion actually tackled the normal assumptions that debate is placed within, when the idea that ranting about Eastern Europeans flooding into Britain, did represent a type of bigotry that is rampant within British society.
Of course, the Right only want to discuss Immigration in terms of how harsh should be the controls to prevent it, they certainly do not want to discuss the idea that there should be no controls on Immigration, that such controls are racist, and that the discussion over controls simply scapegoat one group of workers for the problems of some other group. In fact, interviewed on TV yesterday, BNP Fuhrer Nick Griffin, openly admitted that his friends the bosses should be perfectly free to discriminate in who they employ, not just against foreigners, but against women, the disabled, gays or whoever else they chose! So much for the BNP's claims to be the workers' friend!!!
Of course, the Right only want to discuss Immigration in terms of how harsh should be the controls to prevent it, they certainly do not want to discuss the idea that there should be no controls on Immigration, that such controls are racist, and that the discussion over controls simply scapegoat one group of workers for the problems of some other group. In fact, interviewed on TV yesterday, BNP Fuhrer Nick Griffin, openly admitted that his friends the bosses should be perfectly free to discriminate in who they employ, not just against foreigners, but against women, the disabled, gays or whoever else they chose! So much for the BNP's claims to be the workers' friend!!!
The Guardian & Labour
What is all this nonsene over the Guardian and Labour. For years prior to New Labour, the Guardian was a Liberal newspaper. Even when it has supported New Labour, its Liberal/SDP columnists like Polly Toynbee have supported only the right-wing of New Labour! Of course, it is easy for a Liberal newspaper like the Guardian to support the right-wing of New Labour, when it is the only game in town. There is no more surprise that under the current conditions the Guardian decides to support the Liberals, than that the Murdoch Sun, supports the tories, or that the bosses organisations came out in support of the Tories economic policies!
What it does demonstrate is the need for a decent mass circulation Labour paper - not just the right-wing Labourism of the Daily Mirror - or better still the development of a good quality Labour Movement Internet based TV station. The technology means that it could be achieved at quite affordaable cost if gthe whole Labour Movement backed it. There are plenty of socialist journalists, media workers etc. to staff it, and we have some of the most creative people avialable, like Ken Loach, not to mention dozens of entertainers etc. - that could provide the necessary quality, and spark to make it a success. And as many other aspects of new technology have shown the viral nature of the Net, means that once the ball had started to roll for such an outlet, it could quickly expand to challenge the bourgeois media.
What it does demonstrate is the need for a decent mass circulation Labour paper - not just the right-wing Labourism of the Daily Mirror - or better still the development of a good quality Labour Movement Internet based TV station. The technology means that it could be achieved at quite affordaable cost if gthe whole Labour Movement backed it. There are plenty of socialist journalists, media workers etc. to staff it, and we have some of the most creative people avialable, like Ken Loach, not to mention dozens of entertainers etc. - that could provide the necessary quality, and spark to make it a success. And as many other aspects of new technology have shown the viral nature of the Net, means that once the ball had started to roll for such an outlet, it could quickly expand to challenge the bourgeois media.
Typical Tories
Watching News 24 this morning Gordon Brown and Labour were in the North-East. Outside the TESCO they were visiting were a handful of Tories with placards.
I thought it was amusing, and typical of the Tories that when the BBC interviewed them, not one had a Geordie accent! One of the things that worker should remember is that the Tories current standing in the opinion polls - which isn't that great even so - is largely based on their support in the affluent South-East. Just as regions like the North-East, Scotland etc. were attacked and abandoned in the past, so in a climate where a Tory Government is set on attacking workers, the Tories will ensure they look after their heartlands in the South-East.
And, just as the Tory-light Liberals, have sucked up to Tories in Council Chamber up and down the country, so the Liberals would go along with Tory cuts at a national level if it meant getting their grubby fingers on Government office.
I thought it was amusing, and typical of the Tories that when the BBC interviewed them, not one had a Geordie accent! One of the things that worker should remember is that the Tories current standing in the opinion polls - which isn't that great even so - is largely based on their support in the affluent South-East. Just as regions like the North-East, Scotland etc. were attacked and abandoned in the past, so in a climate where a Tory Government is set on attacking workers, the Tories will ensure they look after their heartlands in the South-East.
And, just as the Tory-light Liberals, have sucked up to Tories in Council Chamber up and down the country, so the Liberals would go along with Tory cuts at a national level if it meant getting their grubby fingers on Government office.
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