Monday, 2 January 2012

Camerons's Desperate Statement

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Michael Osler said...

Interesting read but some major flaws stand out. Not only are there a lot more people on the planet than in Marx's day but virtually every enterprise is a lot less labour intensive. Capital has a limitless supply of cheap labour, most of whom can already drive, for years to come. Most people can see through Cameron's glib rhetoric but can't see any credible alternative in the short term. Unless some unforeseen "black swan" event turns things upside down we are screwed for a long time to come.

Boffy said...


I was simply trying to use an example taken to the extreme to show that their are necessary contradictions within the operation of Capitalism as a system, and that Capital or in this case politicians, cannot simply make decisions that appear to be in the interests of Capital, and at the expense of workers.

Moreover, I was looking more specifically at conditions within Britain. In that respect the existence of more people on the planet is less significant. Capital can and does seek to resolve some of its contradictions through things like immigration, but that poses problems too. The right-wing populist nature of the tories, for example, leads them to adopt anti-immigration policies to appeal to their nationalistic, small business/middle class base.

Additionally, my point was not just about the reduction in the number of people who were not learning to drive. It was also about the fact of people not being able to afford to run a car. That is emblematic of a wider problem, that with limited resources workers have to choose between different commodities, how to spend their wages, and that has consequences then for demand/price/profits of those commodities that workers choose not to buy.

Finally, my point was also that there is a difference between an advanced economy such as Britain and a less developed economy. In the latter an endless supply of cheap labour is important, because that fits the nature of production. In developed economies a sizeable supply of more educated, skilled workers is required beause of the nature of the production, and society in which it occurs. There is not a limitless Supply of such labour, and even in Britain tody there are many firms complaining that they cannot acquire the workers they need with the necessary level of skills and education.

For the same reasons, and as I have set out elsewhere, it is not altogether true that enterprises today are less labour intensive. For mature manufactured products that is true for the reasons Marx set out, but much of that has moved to China, India etc. High Value production today is based rather on knowledge and skill e.g. the Financial Services industry. But, that applies too to whole swathes of what are the growing sources of exchange value - footballers incomes, pop stars incomes, the computer games industry, designer fashion, high quality restaurants and so on. These are the growing areas of consumption, and they depend not upon large amounts of Constant Capital, but on the employment of highly educated, highly skilled complex labour power. And, as marx showed when looking at it in Value terms, although an enterprise may employ only a small number of actual workers, the more complex this labour power, the more abstract labour it actually represents. That is one reason these areas tend to have a high, and rising rate of profit.

I'm not sure people do see through cameron's glib rhetoric. Part of the reason for that is that Marxists have not actually presented an alternative outside Capitalism, other than millenarian calls for Socialism to be the solution some time in the distant future, or ridiculous calls for Revolution Now. In otehr words a false posing of a dichotomy between reform and revolution. I propose reforms that workers introduce by their own hands today, that are themselves revolutionary because they step outside the bounds of Capitalist reproduction. It is why I advocate Worker Owned Co-ops, in production, in the the way workers organise their communties and so on, and the corresponding democratic and state forms that go with it. As the CM puts it, resolving the problems of today, whilst doing so in a way that takes care of the movement of tomorrow.