The Big Pensions Lie - Part 1

Once again over the weekend, as strikes loom over the Liberal-Tory attacks on workers Pensions, we have seen the Big Pensions Lie being repeated. The lie is that because workers are living longer they have to retire later, and/or pay more into their Pension Funds, and/or take smaller Pensions.

None of these things are true. It is time that instead of simply accepting this lie perpetrated by the Liberal-Tories and their friends in the media, the Trades Unions and Labour Movement exposed it. Of course, that Big Lie, is only the main one, springing from it like roots from a plant are many other smaller lies.

Let us deal with the Big Lie first. Back in the first half of the 19th Century, workers life expectancy was no more than into their 20's, as the Industrial Revolution slashed the life expectancy of the average person in half.

When we think about “Victorian Values”, its worth remembering that due to this very low life expectancy, the average worker at this time was “married” and started having children when they were around 13 years old. The Tory MP, William Ferrand, described just how pitiful life expectancy was at the time, and how the industrial Capitalists were just “using up” generations of workers like cattle. In a speech in Parliament, he said,

“The cotton trade has existed for ninety years…It has existed for three generations of the English race, and I believe I may safely say that during that period it has destroyed nine generations of factory operatives.”

(Ferrand’s speech in the House of Commons 27th April 1863.)

The Industrial Capitalists were able to “use up” a generation of workers (a generation normally considered to be 30 years) in just 10 years, because it was able to rely on an effective “slave trade” of workers sold to them by workhouses in other parts of the country.

“This system had grown up unto a regular trade. This House will hardly believe it, but I tell them, that this traffic in human flesh was as well kept up, they were in effect as regularly sold to the (Manchester) manufacturers as slaves are sold to the cotton grower in the United States….

In 1860, the cotton trade was at its zenith…. The manufacturers again found that they were short of hands…. They applied to the ‘flesh agents’ as they are called. Those agents sent to the Southern downs of England, to the pastures of Dorsetshire, to the glades of Devonshire, to the people tending kine in Wiltshire, but they sought in vain. The surplus population was ‘absorbed’.”

Of course, in 1863, when Ferrand delivered this speech, there was no Pensions for workers in Britain. It was only with the development of the Co-op, and with the Friendly Societies created by workers themselves alongside the Trades Unions, that workers in the latter half of the 19th Century, began to put some small amounts of savings to one side to cover Unemployment, Sickness and Old Age.

By the end of the 19th Century, and beginning of the Twentieth Century, as workers wages rose significantly as part of the Long Wave boom of the time, all of these workers institutions and Funds began to grow significantly, which is why the Capitalist State tried to get its hands on them, and why Marx and the First International had to raise the demand that it should keep its hands off them.

But, alongside this sharp rise in workers living standards that accompanied the late 19th Century boom, also went a significant increase in workers life expectancy, as their food, living conditions, and Public Health also improved.

By the time Lloyd George introduced the Old Age Pensions Act, and the resistance of the Tories in Parliament had been overcome with the Introduction of the Parliament Act in 1911, life expectancy for Men was just over 50, and for Women around 55. House Of Commons Research Paper In other words that was about double what it had been at the time of Ferrand's speech.

Of course, its true that the Liberals Pension proposals were really about getting their hands on the workers own provisions, and preventing a powerful, worker owned alternative developing in opposition to the Capitalist State. The reality of that is shown by the low levels of Pensions to be provided, and by the fact that most workers would never receive them, because they were only payable after age 70. Yet, the fact remains that SOME workers now did receive these Pensions, whereas just 50 years earlier, NO workers received a pension. Moreover, by 1925 the Pension Age was reduced from 70 to 65, despite the fact that life expectancy continued to rise, as can be seen by the chart. And despite life expectancy by 1951 having risen by 30% compared with the 1911 figure, not only was it possible to continue to finance these Pensions, but it was possible to make Pension payments more generous. More than that, it was able to finance these Pensions during the 1950's, when the War meant that not only were there fewer people of working age to pay for them, but the Baby Boom, also meant that there were a large number of people at the other end of the age spectrum i.e. Children, who required support. A look at the chart shows that, in fact, where life expectancy rose by 30% between 1911 and 1951, it rose by only around half that amount between 1951 and 2011.

So, if it was possible first to provide, and then to improve Pensions for workers, to reduce the Pension Age, and so on, then it must be clear that the claim that rising life expectancy is the cause of demands for workers to retire later, to pay higher pension contributions and so on, cannot be true. If Capitalism in Britain today cannot even make the kinds of provision that it made for workers in respect of their Pensions as it did at the beginning of the 20th Century, or that it did in the dire conditions after WWII, then that is an indication of the decrepit nature of British Capitalism today. Why should workers pay for that failure?

Yet, even that is not the whole truth. The reason that British Capitalism could introduce an Old Age Pension in 1911, despite the fact that life expectancy was double then what it had been in the first half of the 19th Century, is that by 1911, the amount that each worker produced was vastly greater than it had been in 1863 when Ferrand made his speech. Marxist economists analyse and explain this as follows. We divide total production into three different parts. The first part comprises all of the machines, raw materials etc. used up in production. We call this Constant Capital, because its value remains constant in the production process, only transferring as much Value into the end product as it has itself. The second part we call Variable Capital. This is the Labour Power used in transforming the raw materials with the aid of the machines into the end product. We call it Variable because although the Labour Power used in this process has a definite Value of its own determined by its own Price of Production, the Value created by this Labour Power is not limited to it. Workers can continue working past the point where they have produced enough new Value to cover the cost of their Labour Power. Any Value they create past this point we call Surplus Value, and it is confiscated by the Capitalist as Profits, as well as him sharing it with Landlords as Rent, Money Capitalists as Interest, and the Capitalist State as taxes. Indeed, workers are only allowed to work if they agree to the Capitalists confiscating a part of what they produce.

So what we have is something like this.

C £1000 + V £1000 + S £1000 = K £3000.

Here K is the total value of all production. Each of these values also represents a certain quantity of actual goods, be they consumer goods or Capital Goods (machines, raw materials etc). The Value of Labour Power respresented here by V is equivalent to all of those goods and services that is required to ensure the reproduction of these workers and future generations. So let us say that this £1000, is equal to 1,000 units. Now, if workers productivity in producing these wage goods increases by 100% these 1,000 units can be produced in half the time, or for half the cost. So we would then have, if workers consumption remained the same.

C £1,000 + V £500(1,000 units) + S £1500.

In other words, because workers now produce enough value to cover their wages in half the time they did previously, if they continue working the same number of hours, they will now be working 50% more time for free, resulting in the Capitalists' profits rising by 50%. There would be no reduction in workers real living standards, because they will still consume the same things they did before. Its just those things are now cheaper, so they require less wages to pay for them.

But, this does not happen. In reality, because workers increasingly become the majority of consumers, and because Capitalists require workers that are increasingly more educated, along with which goes the need for them to be better fed, housed, and in better health, it is in the interests of Capital to ensure that part of these additional profits are given up, and go to raising the living standards of the workers. At a certain point, workers have consumed as much of many of the basic things as they require. With the capitalists producing more and more, as the productivity of workers rises, the Capitalists, in order to realise their profits, by selling these commodities, have to begin to produce a wider range of commodities for workers to consume.

Marx described this process as “Capitalism's Civilising Mission”, because it was forced for its own good to expand workers' horizons towards new kinds of commodities, including things such as health and education.

So we could then have:

C £1,000 + V £600 (1200 units) + S £1400

So now, workers real living standards have risen by 20%, yet workers share of total output has fallen from 33.3% to just 20%.

It was this process that enabled workers by the end of the 19th Century to have disposable income that they could accumulate in their own Co-operative, and Friendly Society Funds. But, this collective, co-operative, independent, workers property posed a serious threat to Capital. The Co-ops created by groups of ordinary workingmen, like railworkers around the country, had already grown into the biggest Retail, and Wholesale business in the country.

The extent to which it posed a threat could be seen by the fact that, the Co-op not only encouraged its workers to join Trades Unions, but, where most shopworkers were still working 60 hour weeks, the Co-op introduced a 48 hour week, as well as paid holidays, and Welfare to cover its workers when they were off sick. If workers could build a huge, succesful Co-operative business, and at the same time provide its workers with these benefits, then that provided a significant vision for all workers of how such things could be extended to cover all businesses.

“Throughout the second half of the nineteenth century (and then repeatedly every 20 years or so) there has been a surge in the number of cooperative organisations, both in commercial practice and civil society, operating to advance democracy and universal suffrage as a political principle[7]. Friendly Societies and consumer cooperatives became the dominant form of organization amongst working people in industrial societies prior the rise of trade unions and industrial factories. Weinbren reports that by the end of the 19th century, over 80% of British working age men and 90% of Australian working age men were members of one or more Friendly Society[8]."

Co-ops

In the 19th Century, Marx and the First International had already demanded that the Capitalist State keep its hands off the workers Friendly Societies, and they also recognised that the Capitalists and their State would not simply allow the workers Co-operatives to continue to grow without resistance.

Following the example of Bismark, who had introduced a National Insurance scheme in Germany, and following the example of Henry Ford, who had raised the wages of his workers and introduced elements of Welfare provision for them, to tie them to the company, the Capitalists In Britain, and elsewhere, followed suit introducing their own Welfare States. The effect was to siphon off the funds that the workers could have channelled into their own Welfare organisations, and to thereby take them out of the control of workers and place them in the hands of the Capitalist State, which could then act to regulate the supply of these commodities to meet the needs of Capital rather than the needs of workers.

But, this process of increases in workers' productivity that enabled, and required that Capital shared some of the proceeds with the workers did not end at the beginning of the twentieth century, or after WWII. It is an on going process. In fact, as the TUC say,

“Labour productivity in the UK has been growing on average by just over 2 per cent per year. The speed of increase in productivity in the last 30 years has been such that the real value of the average worker's output has increased by 69.6 per cent”

Output per worker 1978 = 63.5, spring 2008 = 107.7 (2003 = 100).

See: Here

Yet, as can be seen from the chart above, the rise in life expectancy between 1978, and today has been nothing like 69.6%. On the contrary, the rise has been for men something like from 72 to 78, or an increase of just 12%!!! On that basis alone, it is quite clear that the additional productivity of Labour makes the increase the number of years recieving Pension more than affordable.

In fact, rather than raising the Pension Age, this data shows that workers ought to look forward to enjoying a higher standard of living reflected in better Pensions, and a lower retirement age! Moreover, even these figures hide the real truth, because just as people's Health varies considerably depending upon whether they live in deprived or affluent parts of the country, so life expectancy varies according to what job you do. The more arduous the job (which is usually also the lowest paid) the more likely you are to die early.

Life expectancy is now 77.9 years for men and 82 years for women but in poor areas it falls to 75.8 and 80.4 years. In fact, if the average figure is 77.9 for men, falling to 75.8 in poorer areas, then in richer areas the figure must be higher than 77.9, and likewise for women. So, those who work the hardest and who therefore tend to live the shortest, and who live in the most deprived areas having earned the least, are also to suffer, from having the worst pensions, and receiving them for the shortest periods! But, this is just the Big Lie that the Capitalists and their political and media representatives tell. In Part 2, I'll look at the smaller lies they tell in relation to Workers Pensions, and why despite he inadequacy of that Pension provision, they still want us to work longer, pay more, and receive less.

Forward To Part 2