Saturday, 31 March 2012

Northern Soul Classics - I'll Never Fall In Love Again - Bobby Freeman

Another classic from the early Torch. I bought this from the late great Phil Morgan. It cost me £5, which at the time was the equivalent of half a week's wages. In the late 60's, we used to go to the Torch on School nights, when you could get in for six old pence. Often it was free to get in, but if there was a charge it was usually offset by having free beer for an hour, which none of us should have been drinking, of course, because we were only 14 or 15.

At the time there were two legendary dancers at the Torch - Phil Morgan and Eddie Whiston. They both had distinct dancing styles. I only really knew Phil. he lived at the bottom of Tunstall, just below Brownhills High School, with his Mum and Dad. He was a few years older than us. We used to see him coming through the village often on his Lambretta SX 250, with all the trimmings. He'd always wave, and if he had time, stop and talk.

He worked at the Michelin factory in Stoke, and told us about all the gymnastics training he did that he used for his dancing. Phil used to do lots of backdrops, jacknifes, back and side presses, whereas Eddie was best known for his foot work, and spins. No sooner had he told us about that, than at night time, we'd get out what bits of gymanistic equipment we had at the school, and spend most of the time at the Youth Club, diving through hopps we'd hung up on th climbing ropes, and so on. I'd done Judo since I was six, so, as part of learning how to fall I was used to throwing myself about the floor in various forms of tucked forward roll, barrel roll and so on. It didn't take long to combine it with jacknifes, and a variety of other tricks.

Thursday, 29 March 2012

Liberal-Tory Incompetence

Campo, Foggy Osborne, and Clegg
It comes to something when even the Capitalist media spend more than a week with headlines attacking the Liberal-Tory Government. But, that is what we have seen. Its an indication of a feature of the Liberal-Tories I've pointed out before – their seeming sheer incompetence, and political ineptness. Over the last few weeks, we have had “Horsegate”, “Dinnergate”, “Grannygate”, and now “Jerrygate”, and “Pastygate”! Of course, that comes on top of the Tories association with various characters of interest to the Police in their investigations over “Hackgate”. Then there have been the travails of the Liberals, which caused David Laws to step down within days of taking office. That is the least of the Liberals problems, however, as their voter and membership base disappears into the air, as the Liberal leadership become more and more indistinguishable from the Tories – witness the terrible attempt of Liberal Energy Minister, Ed Davey, this morning, on TV, to blame the tanker drivers for the Government's incompetence, by saying responsibility lies for a strike, which has not yet even happened! All Government's eventually pile up a number of calamities, over the years, but this Government, has piled them up from Day One. No wonder, even Chris Huhne's supporters called the Deputy Prime Minister, “Calamity Clegg”.

The Liberal-Tory incompetence began even before they were elected. The Liberals had gone into the election sharing Labour's position that any attempt to withdraw the fiscal stimulus, before the recovery had properly taken hold, would be folly. Of course, less than a year earlier, David Cameron and the Tories had been saying the same thing, promising to even outspend Labour, on a range of services! But, the Republicans, in the US, had undermined the position of the Democrats, in Congress, by attacking the kind of fiscal stimulus policies that they had been carrying out, under Bush, and which Obama was continuing. The Tories, like good opportunist politicians, saw the possibility to pull off the same trick. They abandoned their previous position, and adopted a position similar to the “Tea Party Taliban”, in the US. Both appealed to a right-wing populist constituency that forms the core of Conservative support. So, they ridiculously came out with statements which equated Britain with bankrupt Greece. The Liberals, before the election, opposed this nonsense, and according to an interview David Laws gave to Sky News, even during the Coalition negotiations, the Liberals held to that position. He talked about the issue of the deficit being “hyped up”.

But, with the sniff of the leather of a Ministerial limousine, the Liberals quickly dropped their opposition to this economic illiteracy, and fell into line, to insist that the country was about to go bankrupt unless the most severe austerity measures were introduced. See: Liberal Economy With The Truth. This then provided the narrative for the Liberal-Tories to distinguish themselves from Labour. In every subsequent interview, the Liberal-Tories parroted the mantra, “Its all the fault of Labour's extravagant spending. The country was about to go bankrupt. The fiscal austerity has reduced our interest rates. There is no alternative.” But, that is all it was, a narrative, it had no basis in reality.

The UK clearly was not Greece. The country was not about to go bankrupt, or anything like it. There had been no extravagant Labour spending. In fact, the average percentage deficit under Blair and Brown was significantly lower than under Thatcher and Major. Interest rates were not particularly high. There was no chance that Bond Markets would stop lending to Britain. Interest rates have not fallen due to the austerity measures, but because the Bank of England has printed billions of pounds, and used it to buy UK Gilts! The same process has caused the pound to fall, and inflation to soar. It has also caused “Financial Repression”, in other words, pensioners and other savers find that the interest they receive is significantly below inflation, causing them to lose money. There clearly was an alternative. The austerity has caused the economy to tank, worsening the Government's financial position, and the ability to repay the debt. The US, which continued to apply measures of fiscal stimulus, has continued to recover, with unemployment beginning to fall significantly.

The narrative adopted by the Liberal-Tories might have been politically convenient, but from the beginning it shot them in the foot. See: Victims Of Their Own Incompetence. Once locked into this narrative, they were unable to get out of it without causing a crisis of confidence, and undermining their only response to attacks by Labour. But, it was that narrative that forced the Liberals to accept the increase in Tuition Fees, for example. They cannot openly change course significantly, because that would be political suicide. But, of course, they have already changed course. That is illustrated by the fact that only around 6% of the austerity programme has so far been introduced. They have been forced to modify some of their welfare measures, though welfare continues to bear the brunt of the cuts, and they have been forced to introduce some changes to Capital investment programmes, in response to complaints by Capitalists as the economy tanks.

Michael Gove's Alter Ego - Pob
But, that again showed the incompetence of the Liberal-Tories. The first programmes to get hit were Capital projects that were important for business. The “Building Schools For The Future” programme was the first, which hit not just construction companies and their suppliers, but the IT companies who would be providing the technology for those schools. It was no surprise that the announcement of this, by Michael Gove, was itself a catalogue of errors. The Liberal-Tories were undertaking this programme, whilst at the same time attacking the very State bureaucrats they needed to support them in the plan! See: A Bit Of A Pickle.

The Liberal-Tories have appealed to a right-wing populist constituency that makes up the core of their membership and voter base. That is more true of the Tories than the Liberals. The Liberals also have that base, but in the past, they were also able, by being two-faced, to appeal in parts of the country, to a different constituency, the petit-bourgeois intellectuals, the Guardianistas. In order to get their hands on the Ministerial limos, they have been prepared to ditch that base, and throw in their lot with the Tories. There is probably no way back for them from that position. That is why the Liberal-Tories have adjusted their appeal accordingly, to focus on that constituency. It is why, in the Budget, they were prepared to introduce the “Granny tax” in order to pay for the cut in the 50p tax rate. It is why they made some adjustments in their plans to remove Child Benefit from high rate tax payers. But, even here, they seem to be incompetent.

Its obvious why an appeal to high rate taxpayers, earning over £150,000 a year based on cutting taxes might be popular. But, of course, not all these people are the same. A relatively successful small capitalist might earn £100-150,000, and might well welcome the tax cut. On the other hand, given that the other side of the tax cut is the austerity, then if that small capitalist, say, supplies schools with materials, they may not at all see such a trade off as worthwhile, if it sends their business into bankruptcy, for lack of orders from schools. And, of course, the Local Government or Civil Service Department Head, or the Headmaster of a Medium sized school earning that amount will have a different view, because their salary and position itself depends on the continuation of the empire beneath them. One or two might welcome the cuts, if they were looking to take early retirement, but that will not apply in general.

If you are going to launch the kind of class war that the Liberal-Tories have embarked upon, itself a farcical repetition of Thatcherism, as I set out in History Repeating As Farce, then you should at least ensure that the forces of the class camp in which you are fighting, are securely lined up behind you. The Liberal-Tories have not even been able to do that, which is why we have seen more than a week of headlines attacking their incompetence.

Wednesday, 28 March 2012

Making The Workers Pay? - Part 3

In Part 2, I examined one of the many contradictions inherent in Capitalism. Faced with the drying up of the Latent Reserve based on the rural population, Capitalism finds its previous methods of reliance on the extraction of Absolute Surplus Value – lengthening the working day, intensifying the pace of work – no longer suffice. For one thing, they simply lead to the workers dying off even more quickly. It is forced to regulate itself, and place State imposed limits on these things in order to conserve the supply of Labour-Power. It is also led to introduce means of improving the health, and longevity of the workers. All of these measures, in turn become engrained in the determination of the Value of Labour Power. That being so, Capital is led to try to find ways of ensuring that the production of these necessities is done in the most efficient manner. In other words, the emphasis already begins to shift away from the extraction of Absolute Surplus Value, and towards Relative Surplus Value – increasing the amount of Surplus produced, by continuously reducing the amount of time required to produce the workers needs.

Of course, there are other measures introduced by Capital to try to overcome the fact that the Latent Reserve is drying up. It seeks other forms of Latent Reserve, so it uses female and child labour, and encourages immigration, but even these Latent Reserves become exhausted. The more effective means of dealing with the problem for Capital is the same solution it finds for reducing the Value of Labour Power – the increasing replacement of labour-power with machinery, which massively increases the productivity of the workers, and thereby continually creates a relative over-population. But, this process too is inherently contradictory. For one thing, in order to produce the machines, an increasing proportion of the population has to become more technically sophisticated. While on the one hand, therefore, old craft skills dwindle, other skills such as engineering increase. Increasing technology in production becomes enmeshed with increasing technicalisation of society in general, which in turn means that workers need to become more educated.

To begin with, Capital is happy for workers to make their own provision, which the workers did in Britain through their Co-operative and Mutual Societies, their Trades Unions etc. But, as these organisations develop as independent power bases within society for the workers, the Capitalists realise the danger this represents. Increasingly, just as they had introduced State regulation of their own activities, so the Capitalists see the need for State control over Education, and later Health, Social Services etc. i.e. the modern Welfare State. The Welfare State also resolves other contradictions faced by Capital. By the end of the 19th Century/beginning of the twentieth century, production was being carried on at a huge scale, and the rapid adoption of new forms of technology, such as the introduction of electricity, the internal combustion engine, and all that they made possible laid the basis for mass production.

Henry Ford, realised a number of things. Firstly, the more his workers did their jobs, the faster they became at them. To maximise that, it was necessary to retain them, otherwise the time spent to train them was wasted. To retain them, he increased their wages significantly, introducing the $5 day, and introduced a range of welfare measures that made the workers feel as though they were all part of a Ford family. Secondly, he realised that if the vast amount of mass produced goods were to be consumed, and thereby allow the Capitalists to realise the profits from them, then workers would need to have sufficiently high wages to be able to buy these goods. The two things went together. Higher wages for the workers would help retain them, and would make it possible for them to buy the newly produced commodities. So long as the workers' productivity increased faster than the increase in wages for the workers, both wages and profits could rise! This was the basis of Fordism, which dominated the relations between workers and bosses in the developed economies after WWII.

Just as with the mass production of consumer goods then, Capital sees the need for the mass production of those other commodities required for the production and reproduction of Labour-Power, Education and Health. There are a number of reasons why Capital sees its State as the best means of ensuring this. Firstly, the scale means that the State is best placed to mobilise the necessary resources, that individual Capitalists might not be able to achieve. Secondly, private Capitalists will only provide such commodities if they make adequate profits, and left to their own devices, workers might not be prepared to pay enough to generate such profits. Thirdly, the State can impose minimum standards, and impose its own curriculum. That is important for Capital, because already, the education being provided by workers themselves could challenge the ideas of Capital. The struggle for independent working-class education waged by the Plebs League at the beginning of the 20th century was a clear example of that. Fourthly, the State, by use of the Tax System, could force the workers to set aside the necessary amount from their wages to cover this minimum amount of education that Capital required them to consume, in order to become the kind of productive workers it now required. Finally, the scale of operation that the State could conduct on this basis meant that the same kind of principles of mass production that Fordism was introducing, could be utilised in the provision of the commodities of Health and Education, and both schools, and hospitals were organised, essentially as factories for producing and repairing workers.

China, illustrates another aspect of this problem for Capital. China has built its economy on producing masses of manufactured goods for export. Increasingly, it needs to develop its own domestic market. The wages of Chinese workers have risen sharply, but a large part of them goes into savings. That is because, without a Welfare State, Chinese workers have to set aside money to cover unforeseen events such as sickness, as well as to cover periods of unemployment, retirement, children's education and so on. The consequence is that far more is saved than is actually required to cover these expenses. That is limiting for Chinese Capital, which now wants to stimulate an increased amount of spending, and a lower savings rate. The introduction of a Welfare State will not only mean that the Chinese State will then collect those payments itself as taxes, but it will have a more direct control over the provision itself. At the same time, Chinese workers will then reduce their savings, and increase consumption.

Its not surprising then that, Germany, which was one of the first modern economies to move rapidly to the introduction of more technological production, was also the first country, under Bismark, to introduce a National Insurance Scheme, and the beginnings of a Welfare State. And all developed economies, even those like the US which has been able to rely on a large amount of immigration to provide it with a large Latent Reserve Army of Labour, and which has a highly developed individualist culture, have introduced some form of Welfare State.

The Welfare State, and the ability through it to produce an increasingly more educated working class also helps resolve a further contradiction faced by Capital. As Marx sets out in, Capital, Chapter 13 one of the consequences of the increasing substitution of machinery for Labour-Power is that the proportion of Surplus Value to the total amount of Capital laid out is steadily reduced. This is his “Tendency for the Rate of Profit To Fall”. The basic argument is this. If we have Constant Capital (Machines, Buildings, Raw Materials) worth £10,000, and we have Variable Capital (Labour-Power) worth £1,000, then, if there is a 100% Rate of Surplus Value/Exploitation, the Rate of Profit will be 1000/10,000 + 1,000 = 9.1%. Because, it is only the Labour Power that creates Surplus Value, it is only by increasing the amount of Labour-Power employed, or increasing the Rate of Exploitation that the amount of Surplus Value can be increased. But, as Marx points out, Capital has a tendency to reduce the amount of Variable Capital to Constant Capital, at least on a proportional basis. Consequently, if the amount of Labour-Power employed remains the same, but the amount of Constant Capital increases, the Rate of Profit must fall, because the total amount of Capital laid out will be higher, whilst the amount of Surplus Value will remain the same. So, we might have C 14000 + V 1000 + S 1000, which gives now a Rate of Profit of 6.66%.

In the following Chapters, Marx shows how the same causes of this falling rate of profit, can, amongst other factors, offset it. For example, it is usually only possible to increase the proportion of Constant Capital to Labour Power (the Organic Composition of Capital) if not just more, but better machines are introduced. But, this means that the productivity of Labour rises, and with it comes falls in the prices of the goods which make up the Value of Labour-Power, consequently the Rate of Surplus Value rises. He writes,

“In relation to employed labour-power the development of the productivity again reveals itself in two ways: First, in the increase of surplus-labour, i.e. , the reduction of the necessary labour-time required for the reproduction of labour-power. Secondly, in the decrease of the quantity of labour-power (the number of labourers) generally employed to set in motion a given capital .

The two movements not only go hand in hand, but mutually influence one another and are phenomena in which the same law expresses itself.”

But, the process by which the working-class become more educated also becomes a powerful means of offsetting the Falling Rate of Profit. The measurement of labour-time is undertaken in units of Abstract Labour, but as Marx points out, what is actually used to produce commodities is not Abstract Labour but Concrete Labour i.e. the Labour of the Engineer, the Software Designer and so on. Marx describes that Concrete Labour which is skilled, or otherwise more valuable as Complex, so that an hour of Concrete Labour of say a software designer, might be equal to 10 hours of Abstract Labour. It is clear how this acts as a powerful countervailing factor to the Falling Rate of Profit because, although a smaller number of actual workers may be employed, the amount of Labour-time these workers actually provide can be high, measured as Abstract Labour Time. I have described this process in my blog The Tendency For The Rate Of Profit To Rise.

What is also significant in this, is that it shows how, in advanced economies such as those in the UK, the role Education plays is significant – which is why there have been attempts to increase the number of people going to University. It illustrates another of those contradictions, which Capitalism faces. Capitalism cannot simply, “Make the Workers Pay”, by reducing the availability of Education – even Higher Education – without damaging its own ability to generate profits, without being forced to abandon higher value production, and the higher profits, and competitive advantage that go with it. But, likewise, for all the reasons that led the Capitalists to establish the Welfare State in the first place, there is little point in spending huge amounts of social labour time, educating workers, so that they are capable of this high value production, if those workers either die early, or are away from work sick for long periods. Consequently, although individual Capitalists – particularly small Capitalists – might seek to reduce State Spending on Health and Education, in the hope of reducing their taxes, from the perspective of Capital as a whole such a strategy is doomed to failure. The small Capitalists are more likely to support such a policy because, they generally rely on being able to pick up the small number of trained workers they need, those workers having previously been trained by larger employers, without having to pay for their training themselves.

Back To Part 2

Forward To Part 4

Monday, 26 March 2012

Cash For Cameron - Cut The Crap

Shock horror - the Tories take money from rich people, and pursue policies in favour of rich people; who would have guessed??? Why is anyone surprised that a Party, which was set up by members of the Aristocracy, and then replaced the Liberal Party, as the natural home of the country's Capitalists, and their supporters amongst the Upper Middle Classes, takes money from those people, and that it pursues policies in their interests?  Its like expecting the Manchester United Fan Club, to organise events to support Manchester City!!!

The real reason the media is full of all this faux surprise and disdain is because the commoditisation of politics means that we have to be fooled into believing that political parties are there to respond to the views of the electorate. But, that was never the basis on which Political parties were formed. They were formed by groups of people who wanted to push a particular point of view, a particular set of ideas about how society should be organised. That being the case, especially in a "First Past The Post", "Winner Takes All" system, like in Britain, that means that the Party who wins has a mandate to pursue that set of ideas it was propounding, and that means on behalf of that section of society whose interests it was appealing to.

No one should be more surprised that the Tories take money from rich people, who then get the ear of the Government, than that the Tories, and their Liberal clones, last week, pushed through a Budget that also favoured the rich, and further attacked ordinary working people. Society is not divided into just two Classes, but it is divided into two great "Class Camps", as Marx put it in the Communist Manifesto. That is the Camp of Capital and the Camp of Labour. The Liberal-Tories represent the former, and Labour should represent the latter. There is nothing wrong, or surprising, then in the rich, and the representatives of Capital, giving money to the Liberal-Tories in return for them pursuing policies in their interests, any more than there is anything wrong with workers, through their union subscriptions, or through individual subscriptions, paying money to Labour for the same reason.

As the saying goes, "You pays your money, and you makes your choice." If you are a worker, and you vote Liberal-Tory, then why on Earth would you expect a Party, set up by the rich, and financed by the rich, to pursue policies in your interest??? The lesson is simple. If you are a worker don't vote for them! What you might expect, however, is that Labour, financed by, and supported by, the Trades Unions, would in the same way act on your behalf. The experience, of course, does not support such a belief. That is not because, rich people like Bernie Ecclestone, also donate money to Labour. It is because the Labour Party was set up by the Trades Unions who themselves, rather than setting themselves in opposition to Capital, saw their role as assisting in its success as the only means by which workers could also prosper.

In the same way that workers do not exercise control over their unions, or Consumer Co-operatives, because they fail to take an active part in their functioning, so they have failed to take an active part, on a mass scale in the functioning of their Party, and with the obvious consequence, as Roberto Michels set out in his Iron Law Of Oligarchy, that the central bureaucracies, of these organisations, assert their own interests. Those interests are closely connected with the need to continue to function within the existing system. Of course, that is not an argument against building Workers' Parties, or Trades Unions, or Worker Owned Co-operatives - or even participating in Consumer Co-operatives - to fail to do so would be Ultra-Left sectarianism. It is an argument for Marxists to insist on building all these organisations from the ground up, as mass organisations, whose focus is away from bargaining within the existing system, and towards the direct action, and self-organisation, and self-government of the working-class, based on direct participatory democracy, that Marx put forward, and which becomes necessary for workers if they are running their own Co-operative enterprise, their own Co-operative Housing, Community etc.

The worst thing that could come out of this would be if it led to the State financing of political parties. Already, the large salaries paid to MP's, by the State, ensures that those drawn into it, are largely careerist politicians, who see the joining of a Party as being like catching a bus. They choose which colour bus to catch based on which they think will get them to where they want to go most easily. If these career politicians no longer had to rely at all on having a Party machine behind them, made up of Party activists, who do have some ideological basis for joining a particular Party, then they could separate themselves completely, in order to operate in a world which was indeed one in which politics had become just another commodity to be sold to voters.

It is not the fact that the Tories take large sums of money from rich people that is shocking here. In large part, many of those rich people are likely to be as disappointed as Trade Union members in their donations to Labour. For the real Capitalists, the owners of the biggest companies like Microsoft, there is no need to pay money to have dinner with Cameron or any other politician. It is more likely to be the other way around, and certainly Governments fall over themselves to hand over money to get these companies to invest in their economies. In the end, it is the interests of these Big capitalists that win out, not the small fry, who feel the need to hand over the odd £1/4 million, in the hope of gaining some personal favour. What is shocking is the fact that the supposedly sophisticated media, of a developed country like Britain, have acted with such surprise at it being revealed.

What is a reason for outrage is not the fact that the Tories have been found out to be taking this money but the fact that, throughout Sunday, David Cameron, and Party Chairman, Michael Fallon, appeared on TV News reports asserting that the comments by the Party Treasurer, were just bluster, and could not have happened. But, today we find out that it HAD happened as Cruddas had said. Money had changed hands, and meetings in Downing Street had taken place, and contrary to what Fallon seemed to be suggesting - though in the interview with Andrew Neill, on the Sunday Politics he was very evasive - these meetings had not been recorded. In fact, this morning, Downing Street are insisting that they will not provide details of these meetings!

This seems remarkably similar to the proceedings, only a couple of weeks ago, when it came out that David Cameron's association with Charlie Brooks had led to him riding the Police horse he had been lent by the Metropolitan Police. At first, Cameron denied any knowledge of the horse, let alone having ridden it. Then a couple of days later he had to admit he had done so. Now we are told that these meetings did not take place, and could not have taken place, then we find out they did, but we will not be told the details of them! That is, above anything, just typical of the political incompetence of the Tories, an incompetence that has been apparent in much of their actions from the time of the Election. The last example of it was over the way they dealt with the "Granny Tax" in the Budget.

If I were a Tory donor, my main concern would be not getting value for money from such a bunch of amateurs.

Saturday, 24 March 2012

Northern Soul Classics - Chains Of Love - Chuck Jackson

Continuing with the pre-Allnighter greats from the late 60's Torch. I bought this on "Soul Sounds" even before I had a record player! It was the first of the classics by Chuck Jackson I collected, before moving on to all the others on Wand he released. I'm also including his live version, because he just still sounds so good on it!

Thursday, 22 March 2012

Clegg & Cameron Mugged My Granny!

The Liberal-Tories could not have been much clearer in where their loyalties lie. On the one hand they have looked after the interests of the Upper Middle Classes, and Small Capitalists with their cut in the 50p Tax Rate, on the other they have added to their previous attacks on the vast majority of society with additional attacks on Pensioners.

Clegg, Cable, Alexander, Cameron and Osborne claim that their budget has looked after the poor by taxing the rich. It is nonsense. First, of all the really rich, those who own the vast majority of the means of production, those who measure their wealth in billions, not just a few million, will have gained from this Budget, because the cuts in Corporation Tax, will push up the share prices of all those companies these billionaries own collectively. But, secondly the Taxes the Liberal-Tories claim bring in more tax than the 50p rate, do no such thing.

If someone buys a £2 million house the Stamp Duty they pay will now have gone up, which means they will have to pay an extra £100,000. However, they will only pay this once, when they buy the house. But, many of those liable for the 50p rate will save £40,000 from the cut in the rate. They will save that every year. So, someone only needs to stay in their £2 million house for a couple of years, and they will have got their additional Duty back!

But, worse is the attack on Pensioners. What has surprised me, though has been the response of the IFS after the Budget on this matter. The Liberal-Tories claim that they have not taken any actual cash from pensioners. But, no one is ever bothered about whether nominal losses have been made. Everyone is concerned about whether their actual incomes have gone up or down in real terms. And, there is no doubt that, as a result of these changes, Pensioners incomes will have gone down in real terms.

Pensioners get an additional allowance on top of the Personal Allowance that everyone gets. This year, the Liberal-Tories have frozen the Pensioners Allowance. That means that, as the pension rises, to cover the rise in inflation, the allowance does not rise with it, so a part of the rise is taken away in additional tax. The Liberal-Tories have tried to get around this by claiming that Pensioners have had the biggest Pension rise for years.

Of course, what the Liberal-Tories do not point out is that the reason there has been the biggest paper rise in Pensions for years, is because of the failure of their economic policy elsewhere. The Liberal-Tories have presided over a huge rise in inflation over the last few years, because along with the Bank Of England, they have pursued a policy of low interest rates fuelled by massive money printing. That has led to a collapse in the value of the Pound, which has pushed up Import prices. On top of that, the other Liberal-Tory policies such as increasing VAT, pushing up Tuition Fees, and other charges has also meant that everyone has faced rapidly rising prices.

The only reason Pensions have risen is to try to keep up with this massive increase in inflation. But, it has not even managed that, because the Liberal-Tories have linked Pensions to the CPI Rate of Inflation, which is more than 1% point (around 25%) lower than Retail Price Inflation, and the inflation that most ordinary people face, particularly Pensioners is even higher than that.  Moreover, as they have done for the last four years, the Bank of England says that inflation is about to fall.  Over the last couple of months, for technical reasons, as previous large rises drop out of the index, it has fallen slightly.  But, last month even CPI did not fall as much as had been expected.  On top of that, international markets are aware that a military strike on Iran is going to happen in the next few months.  That is why Cameron and Obama agreed to release oil from the Strategic Petroleum Reserves, an agreement, which seems to have been leaked by mistake, because the announcement was quickly retrcted.  But, already Oil prices are hitting new highs, pushing petrol prices in Britain to new records, which feeds through into all other costs.  That has been made worse by the falling value of the Pound, which despite all the woes of the Eurozone, has remained relatively weak, even against the Euro.  On top of that, the UN's Food and Agricultural Organisation, has reported that in the last few months, global food prices are again rising rapidly, as millions of new workers in China, India, other parts of Asia, Latin America, and Africa, begin to have the money to spend to improve their diets.  The massive money printing done in the US, UK, and now in the EU, is finding its way into Bank Deposits of people in these other economies, and from their is feeding these higher higher global prices.  That is why even whilst the economy stagnates in the UK, inflation will continue at high levels, with a particularly bad effect on Pensioners, and those on low fixed incomes.

But, the Liberal-Tory assertions, and the arguments of the IFS are worse than that. It simply is not true to say that these are the first attacks on pensioners, or that they have got off light until now. The reality is that it is pensioners, particularly poor pensioners, who will be some of the worst hit by the Liberal-Tory Cuts, which are the other side of their Tax Cuts for the rich. It is pensioners who will be the biggest losers from attacks on Social Services, and from Healthcare. It is pensioners who are frequent users of the Libraries and Leisure Centres that are being closed down as part of the Liberal-Tory Cuts - and Green Party Cuts in several parts of the country.

And, it doesn't end there. The other side of those low interest rates to bail-out the banks, and which have fuelled inflation, is the fact that Pensioners who rely on savings to top up their income are finding that they can get no interest worth having on their savings. In the meantime, that same inflation means not only that Pensions shrink, but any savings shrink too.

Its true, the Liberal-Tories have mugged our grannies, and their Cuts policies amount to systematic vandalism and looting. The difference with last Summer's riots, is that the Liberal-Tories can do it with trhe backing of the law, and of the Capitalist State.

Monday, 19 March 2012

Making The Workers Pay? - Part 2

The drying up of the latent reserve, constituted upon the agricultural population, is addressed by Capital in a number of ways. Firstly, Capital has to recognise the limitations of a completely free market. It recognises the need for Regulation. That was manifest in the response of Capital, to the rapid wearing out of the working-class, which this initial period caused. In 1863 26 firms owning extensive potbanks in Staffordshire, including Wedgwood, petitioned the government for legislative action to limit working time, to set a maximum working day. And why did they need such legislation rather than voluntary agreement.

“Much as we deplore the evils before mentioned, (i.e. the length of the working day and poor conditions) it would not be possible to prevent them by any scheme of agreement between the manufacturers…Taking all these points into consideration, we have come to the conviction that some legislative enactment is wanted.” (Children’s Employment Commission Report 1. 1863 p 322)

The reason no voluntary agreement could be reached was precisely because free market competition would force each to cheat in order to gain an advantage. It was with this backdrop that the Factory Acts and the Ten Hours Bill were eventually introduced. In other words, the need to ensure the adequate reproduction of Labour Power causes Capital to have to accept that additional expenditure of social labour-time (that is a proportion of society's output) has to be devoted to meeting the needs of workers. So, in addition to things such as the Factory Acts, and the Ten Hours Act, a proportion of society's production is devoted also to improving Environmental Health, to reduce the spread of diseases. Other means of improving workers health, such as the introduction of Public Parks are also introduced.

Yet, the demand for workers who are particularly well educated is not yet sufficient to lead Capital to introduce schooling on a large scale. In fact, the first provision of both Education, and of Medical Care are introduced by workers themselves via their Co-ops. In China, today there is no provision of socialised healthcare, education and other welfare services. One reason that Chinese households save around 50% of their income is precisely to cover these kinds of costs. This illustrates a further problem for Capital. In China, and other developing economies, their development takes place under conditions where significant technological development has already occurred. This has a consequence for even the kind of unskilled Labour-power that is required. For workers just to function at any kind of basic level in such a society requires that they have a minimum level of education, which in turn implies the provision of other requirements, such as somewhere to study, the provision of educational materials, the existence of some minimal standards in which to live, a certain amount of free time, the provision of adequate levels of food and so on. In other words, the very process of Capitalist development itself operates into a feedback loop, which changes the nature of the Labour-Power required, and thereby changes the nature of the wage bundle required for the reproduction of this Labour-Power, with a consequent effect upon the Value of Labour Power itself.

But, what is clear is that they do form a necessary component of Labour Power. Society has to set aside a sufficient amount of Labour-time for their production, and allocate it to the Wage Fund. The workers wages do have to be sufficient to enable them to purchase these goods. As Marx puts it in the Grundrisse,

“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.”

The consequences of that, in relation to China, have been recognised by many economists. On one level of abstraction, in terms of the Capital-Labour relation, it does not matter whether the payment for the commodities of Healthcare, and Education etc. are done at an individual or collective level. In other words, it does not matter whether, as in China now, workers wages have to be high enough to enable them to save enough to cover the costs of education, healthcare, unemployment and retirement, or whether, as in the US, some combination of that with, what amounts to the same thing, the employer paying for those things, via some form of Insurance Scheme, or whether it is deducted from the working-class collectively, via some State run Insurance and Tax scheme.

In all these instances, a proportion of society's production (social labour time) is put aside to cover them, in order to ensure the necessary reproduction of Labour Power. They form an integral part of the Value of Labour Power, whether they are paid for out of wages or out of the Social Wage. The only question for Capital here is, what is the most efficient means of producing these commodities, how can the social labour-time, required for their production, be minimised, and thereby the Value of Labour Power be reduced, and the amount of Surplus Value be increased. So, for example, in the US, Big Capital, competing on a global stage has found that it is being undermined because of the inefficient and expensive nature of private health insurance. The costs of that, born by large employers, through union negotiated Employer run Health Insurance Schemes, has raised their costs, and made them uncompetitive, particularly with European Big Capital, which benefits from more efficient, Socialised Insurance schemes. This was illustrated in an article in the US Business Magazine, Fortune, some years ago, by Matt Miller. He wrote,

“WHAT DO GENERAL MOTORS' WOES, the Medicare prescription-drug law, the state and local health-care time bomb described in the previous story, and Congress's recent refusal to trim soaring state Medicaid subsidies have in common? They're all stones on the path toward the nationalization of health-care spending--an idea that's so easy to slam politically yet so sensible for business that only Republicans can sell it!”

By the same token, it is why Capital in the UK has been looking to largely maintain the current National Insurance, and tax system as a means of financing healthcare – as happens essentially in Europe – whilst moving the actual delivery of healthcare out of the hands of State Capitalism, and into the hands of private providers, Mutuals, Co-ops and so on, where again the experience from Europe demonstrates greater levels of quality and efficiency are possible.

Much of the Left sees such a move as part of “Making the workers pay for the crisis”, and certainly, to the extent that any such moves act as a cover for reducing the actual level of healthcare, education etc. provided, that would be true. But, as set out above, in an economy like Britain, where the reproduction of Labour-power requires that workers receive a relatively high level of provision of these commodities, any such reduction is ultimately damaging for capital, because it means a reduction in the quantity and quality of Labour Power available to it. That means that as the Supply of that Labour-power falls its price would rise. The alternatives for Capital are to either pay up sooner or later, in one form or another, for the Labour-power it requires, or to settle for a lower quality of labour-power, which in turn means accepting producing lower value production, and being less profitable and competitive. On the other hand, to the extent that any such improvement in efficiency reduced the cost of this provision, and raised its quality, experience suggests that it would, in fact, be beneficial both to Capital and Labour. That is so because, since the latter part of the 19th century, the social-democratic consensus, the compromise reached between Big Capital and Labour, has seen any increase in Relative Surplus Value, achieved by the reduction in the Value of Labour Power, shared with workers via an increase in real wages. That is one way in which Fordism has ensured a gradually growing market for the results of mass production.

The Left's objection has been based not on any real application of Marxist principles and analysis, but rather on its attachment to the ideas of Lassalleanism and Fabianism, which misleads the workers into beleiving that these forms of State Capitalism are in some sense “socialistic”, or concessions won from Capital. But, in fact, this has nothing whatsoever to do with Socialism, and certainly not Marxism. That can be seen from Engels' response to such ideas in his Critique of the Erfurt Programme of 1891. In the Draft Programme, Point 8 stated,

“Free medical care, including midwifery and medicines. Free burial”

Engels responded,

“8 and 9. Here I want to draw attention to the following: These points demand that the following should be taken over by the state: (1) the bar, (2) medical services, (3) pharmaceutics, dentistry, midwifery, nursing, etc., etc., and later the demand is advanced that workers’ insurance become a state concern. Can all this be entrusted to Mr. von Caprivi? And is it compatible with the rejection of all state socialism, as stated above?”

That re-confirmed Marx's rejection, set out in his Critique of the Gotha Programme, of the idea that Socialists should demand that the State be the vehicle by which the means of production were socialised, rather than the direct action of the workers themselves in setting up Co-operatives. Like Marx, Engels also rejects the idea that such nationalisation and State Capitalism could, in some way, be made “socialist” by the introduction of a demand for Workers Control.

In reality, there is nothing different going on, as far as Capital is concerned, here than where it seeks to reduce the Value of Labour Power, and thereby raise Relative Surplus Value, in the provision of other commodities required for the reproduction of Labour Power. For example, Marx and Engels analysed the drive of the industrial Capitalists for the abolition of the Corn Laws, in precisely those terms. The Corn Laws were a protectionist measure, introduced by the political representatives of the Landlords, which restricted the importation of agricultural products. By this means the price of food was kept artificially high, which in turn enabled the landlords to charge higher rents on land, paid for out of the higher profits of the farmers. But, as a consequence, this meant that the cost of food for workers was kept artificially high. In turn that meant that the Value of Labour Power was maintained at an artificially high level. Industrial Capitalists had to pay these higher wages to ensure the reproduction of the necessary Labour-Power, and consequently, this meant that their Surplus Value was reduced.

The abolition of the Corn Laws meant that the price of food fell. That meant that workers could buy the same amount, or slightly more food than previously, for less money. In Marxist terms, the amount of Labour-time they had to perform in order to produce the equivalent Exchange Value to cover the reproduction of their Labour Power, fell.

Back To Part 1

Forward To Part 3

Saturday, 17 March 2012

Wednesday, 14 March 2012

Newsnight's Blackhole

Last night's Newsnight, argued that, according to Treasury figures, even if the Government succeeded with its austerity measures, the UK would be bankrupt by around 2050. That would be because an ageing population, and shrinking number of young workers, would mean that it would be impossible to pay for all the additional costs of health and social care that this population would need. Of course its nonsense. Paul Mason should know better. Its nonsense for the same kinds of reasons that the Reverend Thomas Malthus was wrong when he put forward similar ideas at the beginning of the 19th Century.

It is wrong because it unjustifiably extrapolates from current data and trends into the distant future. Let's just look at a few of the reasons why that is wrong.

The main argument for these kind of scare stories is in relation to Health Spending. There are several reasons why the idea that Health spending will simply continue to spiral upwards is wrong.

One argument for putting forward this idea is that people are living longer. That is true, but does that necessarily mean that they will require more, and more expensive health care? Part of the reason that people are living longer, is because general levels of health have improved. If general levels of health improve further due to people quitting smoking, adopting healthier lifestyles, suffering less from physical industrial diseases and so on, then it is quite possible that demands on the Health Service could reduce rather than increase. They could live to a decent age, before dying quickly rather than their demise dragging out over a period of illness. It is often suggested that people are living longer, because of the introduction of the NHS, but numerous studies have shown that the main cause of improved health, and longer lifespans has in fact been general improvements in housing, food and other living and lifestyle changes. There is no reason that should not continue. In fact, one of the criticisms that Marxists have of the NHS is that it provides Health as a commodity, as something that is essentially sold to workers (even if it is paid for by a collective payment of taxes out of their wages and consumption), to repair their health, rather than that it addresses the causes of workers' ill health in the first place, whose origins lie in the nature of capitalist society. (See: Why The NHS Cannot Protect Our Health.) Once again, many studies show that a focus on “wellness”, on primary care and prevention are far more effective than the current focus on the provision of mega hospitals, with all of their very expensive equipment, specialists and so on. But, of course, the latter better meet the needs of Health bureaucrats seeking to develop their own empires, and of high paid Consultants, not to mention the Big Capitalists who make billions from providings medicines, medical equipment, computer systems and so on.

Moreover, as I have pointed out elsewhere, although there is now some talk of merging Health and Social Care, particularly in relation to Old People, very little currently exists in this respect. From my own experience, I know that very little is done, with elderly people in Residential and Care Homes, to ensure that they are kept physically and mentally active, which would be a good way of reducing their potential health problems. Still less is done in terms of preventive treatments through physiotherapy etc. to prevent problems arising. Some small steps are taking place in that regard in the joint ventures between the NHS and Local Authorities to create Retirement Villages, but the UK seems way behind even the US in such developments. In the US, a quite considerable number of people retire to places like Florida, where they can enjoy the health benefits of the climate. It would make sense, as part of the UK's membership of the EU, for elderly people here too, to be able to make similar arrangements, by moving to Spain, the South of France etc. Of course, many do, but here, unlike in the US, such a move is more likely to provoke the ire of the gutter press, complaining about people taking their benefit entitlements from the UK, whilst living elsewhere in the EU!

The other argument put forward is that because new discoveries and treatments are being developed all the time, not only can people be kept alive longer, but more things can be treated, and therefore, the demands for treatment keep expanding. But, this is no different from other parts of the economy. New commodities are being developed all the time, and new demand for these commodities is stimulated, but, at the same time, the time required, and the costs involved, in producing the older commodities, continues to fall. At any one time there will be far more existing commodities whose costs are falling than there are new commodities whose costs are high. In fact, it is because of these new discoveries that there is considerable hope that future costs will not continue to rise. Take genetics, and the possibilities it opens up for targeted treatment of a wide range of illnesses. Less than a decade ago, it looked like it would take decades to decode the human genome. But, the continued advances in computing power meant that, in fact it was accomplished in around 18 months, and now the genetic code of many viruses, cancers etc. is being unravelled on a daily basis. Not only has the cost of doing that tumbled, but the treatments it opens up, mean that the costs of these treatments is also likely to be slashed compared with the previous development of medicines whose effectiveness was not so great.

And, of course, that is not just true of medicines. The same rapid increases in productivity that have slashed the prices of many consumer goods mean that the prices of things such as CT and Body Scanners should be significantly reduced too, and used on a large scale, as part of a programme of preventative medicine, they could significantly reduce the instances of illness, and the costs of treating it. If workers themselves directly owned and controlled the Health Service it is likely that they would already be directing resources in this direction, rather than into the big vanity projects developed by the bureaucrats and top Consultants.

This ties into another idea of why Health costs do not, and should not, simply continue to rise. The Health Service, like the Education System, was developed to meet the needs of Capital, for the reproduction of Labour Power. To do that it was developed along the same lines as Fordist mass production. Hospitals and Schools were established as large factories. Schools took in children at one end, and passed them along a conveyor belt until they came out at the other end as Proletarians, produced to operate as a cog in the Capitalist machine. Hospitals helped to ensure that these young workers were brought into the world at least cost, reducing the costs to Capital that previously arose from Infant and Child Mortality, and then acted to repair those workers when they were damaged.

These kinds of mass production were efficient up to a point, but for the same reasons that Fordism came up against limits around 30 years ago, so its application to the provision of Health and other services has met similar limits. Capital searched around for solutions to its problem in relation to other aspects of consumer goods production, and came up with a series of answers. It reduced functions down to core operations, farming out other activities to a range of external suppliers; new technology and robotisation made it possible to replace the conveyor belt with more modular forms of production based around work groups, and flexible specialisation. The same “neo-fordist” solutions have been applied to other service industries, such as Banking, they are now, as Aglietta argued, likely to be introduced into the provision of Health, Social Care, Education etc. and as with its application elsewhere, it is likely to result in an explosion of increased choice, and reduction in costs.

Similarly, the kinds of processes that led to skilled jobs being replaced by machines elsewhere can be introduced. Computer Expert Systems, can for example, replace expensive Consultants diagnosis. In fact, a Computer system is likely to be able to have a database of possible illnesses far greater than any medical professional can store in their head, and be able to simply match symptoms with causes. The application of other technology is already allowing medical specialists to provide their services over long distances, via the Internet and teleconferencing. The development of computing power, and the advance in mobile technology means that everyone could now be monitored 24 hours a day via small implants, or by a mobile device embedded in a graphene strip used as a multi-functional device on the wrist, picking up signs of any problems - in the same way that computer chips in cars now monitor for any defects and report them - and notifying the appropriate medical services instantly.  In the same way that robots are able to replace skilled workers in many areas of manufacture, so surgical robots will be able to undertake many surgical tasks to a far greater degree of precision and consistency than any human.

Finally, we are only just beginning to see the revolutionary transformation of healthcare that the combination of computing power with biology, chemistry and genetics is about to bring about. That applies over a huge range of areas, from the ability to generate replacement organs via stem cells, to the use of new materials being made possible through nanotechnology, to the introduction of new drug delivery systems. In effect, Healthcare is still at the stage of the Model T Ford, and as happened with motor car production, the period ahead is likely to see not just a vast and rapid transformation of quantity and quality of what is available, but a massive reduction in the costs of what is provided.

But, in part these same factors are the other side of what is wrong with the argument put forward by Newsnight. As I've argued in the past, The Big Pensions Lie, the argument that workers have to work longer because they are living longer is a myth, because workers' productivity has increased hugely since the time that Pensions were first introduced, and in fact, even just since WWII. That means that fewer workers are needed to produce the goods and services consumed by those who have retired. We can easily allow people to retire earlier, and enjoy a higher living standard, even with a smaller working population to support them. The reason Capital seeks to make people work longer is because a smaller working population, means it has to pay higher wages, and, therefore, accept lower profits.

But, although productivity has risen sharply, the truth is that the UK economy, even during the period of the Post War Boom has not performed as well as it could have done. Rather like the US, during the 1980's, when much manufacturing went to China and other parts of Asia, Capital, instead of moving into high value areas of production, went into retailing, and into other forms of services. As a consequence productivity did not rise as much as it could have done. But, with the Financial Meltdown, and its aftermath, that model of the economy based around continually expanding retail outlets is no longer possible. Capital will be forced to restructure in these economies, or be destroyed. Assuming the latter is avoided, then the UK economy could see rises in productivity far in excess of what it has experienced since WWII, and that will finance the costs of the Welfare State, and a rising old population.

And, although I have argued that there is no need for workers to have to retire later, the chances are that as people live longer, they may CHOOSE to undertake work of some form or another. Many of the people I worked with, who took early retirement, from the Council, during the 1990's, topped up their pensions by working a few hours a week at B&Q, and other such jobs. Provided, employers are prepared to make it worth their while, and provided Governments do not tax away the benefits of doing so, many workers are likely to adopt such a strategy. And, of course, many retired workers already do work that is not counted in the economic data, because they work in the domestic sector, providing childcare etc. looking after grandchildren and so on.

Malthus made the mistake that he believed that the population would grow geometrically (2,4,8,16) whilst production would only expand arithmetically (2,4,6,8), and so population growth would outstrip the capacity to meet its needs, leading to starvation and so on. The same catastrophist ideas are put forward today by the environmentalists, who not only make the same warnings about resources running out, but who continually talk about the damage to the environment, but who do not seem to have noticed that in many old industrial countries the environment has been substantially improved in the last 50 years! Newsnight make the same mistake.

Malthus was wrong, as Marx pointed out, because like Ricardo, he assumed that agricultural production was already being conducted on the most fertile land, and because he failed to understand that the productiveness of the land itself could be transformed by the application of Capital to it. As I wrote some time ago, The Great Food Flim Flam, all of these ideas are false. As I set out in my blog Food, Population and development, back in 1953, Colin Clark showed that even with the technology available then it was possible to provide a standard of food consumption equal to that of the Netherlands for a global population of 12 billion. As I write there, that figure is likely to be around 30 billion today. The same argument applies in relation to providing for the needs of an ageing population.

Saturday, 10 March 2012

Northern Soul Classics - What Kind of Lady - Dee Dee Sharp

This was my number one pick in my 6 of the best on Dave Evison's, Northern Soul Radio show many years ago. The brilliant Dee Dee Sharp. First I think released on the Action label that hosted many other great pieces of Northern like "Baby Do the Philly Dog" by the Olympics. I've put up this video version, because of the dancing, though it cuts off short of the end, but its worth checking out full length versions. I'm also including the Producers great instrumental version that was on the B Side of the release on Action.

Thursday, 8 March 2012

Making The Workers Pay? - Part 1

Whenever Capitalism goes into one of its periodic crises, the stock response of the Left is to declare that the solution for Capital will be to “make the workers pay”. This post seeks to examine what that means. It is, of course, a catchy piece of propaganda, but is it true? If it is true, then in what context is it true? Does it mean, for example, that its the same as workers handing over a sum of money or value to Capital, to compensate them in some way? In other words, is it the same as saying, if I want to buy a car I have to pay for it, but in this case it is Capital buying the car, and workers paying for it? Or, is it like, my neighbour is burgled, but I have to compensate him for his loss? In fact, on the basis of a Marxist economic analysis, none of these things are true in any meaningful sense, and cannot be true given the Marxist understanding of the nature of Exchange Value, Surplus Value, Wages and the Value of Labour Power.

Is it true that during a recession workers suffer? Yes, of course that is true. In that sense workers pay a price for the fact that Capitalism is a chaotic system, which proceeds via contradiction, and the resolution of those contradictions via crises. But, what does that mean? If a member of my family unwisely goes to a Party, where a lot of people have the early symptoms of flu, then they are likely to pass it on to me. If I then catch the flu, the misery I suffer means that I am paying a price not for my own actions, but for theirs. But, it can't be said that in any way my suffering represents some kind of payment to them!!! My suffering the flu, is in no way a compensation for the fact that they caught the flu in the first place, and passed it on to me. In fact, it could be the other way around. If they depend upon me in some way, to provide for their needs, then the fact that I too am now laid up with the flu, may mean that I am no longer able to fulfil that function, and so, rather than my illness representing some kind of payment to them, it represents a further cost to them.

The Reserve Army of Labour

This is indeed a good analogy of a Capitalist crisis leading to large scale unemployment. Capitalism, as Marx demonstrated, always needs a Reserve Army of Labour for its efficient functioning. This Reserve Army, in fact comprises, three different types - floating, latent, stagnant - whose importance and function change depending upon the conditions. For example, in economies which are newly industrialising, the Peasantry constitute a latent reserve army. In other words, they are a potential source of workers, should Capital require them. When Britain went through, the Industrial Revolution, it was the revolution in Agriculture, combined with the Enclosure Acts, which forced peasants off their land, which turned this latent reserve army, into an actual reserve army, as those peasants then flooded into the towns and cities, with nothing to sell other than their labour-power. The same has been true, of the industrialisation of China in the last 30 years, which has been made possible by the movement of millions of peasants from the countryside into the towns and cities. As part of answering this question let's look at these three types of Reserve Army, beginning with the Latent Reserve.

i. The Latent Reserve

This kind of Reserve Army is crucial where an economy is industrialising, and where, therefore, what is important is the availability of massive reserves of low paid, labour power, that can be exploited via the extraction of Absolute Surplus Value. That means that this Labour Power can be paid low wages, and worked intensively for long periods of time. But this, as Marx explains, has a cost for Capital. Workers, who receive low wages, eat poorly, are badly clothed, housed and educated themselves, produce low value labour power, labour power whose Use Value is extremely limited. The low value of their Labour Power represented by these low wages, is also reflected in the low value of their output. That in turn means that the only way that Capital can extract maximum profits from this labour is by making it work long hours, and more intensely. But, the more it is worked both extensively and intensively, the more its Use Value is used, or put another way, the more the worker becomes worn out, the shorter the workers' life span. It is only because during this period of industrialisation, there are these vast latent reserves of Labour, that Capital can continue on this basis.

In Capital, Marx goes into great detail to explain this, by quoting from the reports of the Government Inspectorate, and having taken a lot of his information from Engels', “The Condition of the Working Class In England”. He sets out, how in the Potteries, the conditions of the workers were so bad, that it was only by intermarrying with people from the neighbouring rural areas, that the working population were not completely wiped out. The average lifespan for a worker was cut in half compared to prior to the Industrial Revolution. In many of the Northern manufacturing towns, it was only because manufacturers were able to literally buy workers, off workhouse managers, elsewhere in the country, that they could replenish their needs for labour-power.

In Capital, Marx quotes the MP Thomas Ferrand from his speech in the House of Commons.

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

This last reference to “absorbed” relates to comments made by the cotton manufacturers in 1834. Ferrand in his speech gives details of the way in which the intolerable conditions of the workers was affecting their life expectancy. He commented,

“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.” (ibid.)

Faced with this shortage of labour the manufacturers had applied to the Poor Law Commissioners that they should send the “surplus population” to them with the explanation that they would “absorb and use it up” to use their own words. Hence Ferrand’s reference.

We see something similar in China today. So long as the requirement is only for masses of unskilled labour, the Capitalists have no need for workers to be particularly well fed, clothed, housed, educated or maintained via adequate healthcare. They can simply be replaced by new supplies drawn from the countryside. But, as a strategy for growth this is extremely limited, as China has found. Sooner or later, as growth continues to accelerate, this latent reserve is effectively used up. In China, wages are now rising rapidly, with demands for 50% wage increases, as the Supply and Demand balance for Labour Power shifts towards Labour. And the Chinese authorities are responding by supporting those wage demands.

As David Pilling put it in the FT, the authorities are reflecting in their statements a basic reality. He says,

“The years of an endless supply of cheap labour, on which the first three decades of China's economic lift-off was built, are coming to an end. That is partly demographic. Because of China's one child policy, the supply of workers under 40 has dwindled by as much as a fifth. Fewer workers means more bargaining power.”

And rather like Britain at this stage of its Industrial Revolution, the limited requirements of Capital in relation to the nature of that Labour Power is reflected in other ways. For example, Capital having no need for workers to be particularly healthy or educated, does not see why it should pay for such things as part of the Value of Labour Power. So wages are not set at a level that enable such things to be bought, because these commodities, as components of the wage bundle required for the reproduction of Labour Power, do not constitute, a necessary expenditure of Social Labour Time. It is only as this Latent Reserve becomes used up, that Capital is forced to look to other ways of maximising the Labour-Power available to it, for exploitation. This takes a number of forms.

Forward To Part 2

Sunday, 4 March 2012

Inflation & Interest Rates Up, Wages & House Prices Down

In the last year, the Misery Index – Inflation Rate plus Unemployment Rate – has been soaring, as I predicted it would. Despite the Tories assuring us that slashing State Spending would create a private sector boom that would produce an avalanche of new jobs, all their austerity has done is to send the recovering economy back into recession, and sent unemployment heading up towards 3 million. That is despite the fact that, so far, the Liberal-Tories have only implemented 6% of their planned austerity measures! Despite the Bank of England promising us that inflation would fall – a promise they have been making continuously for the last 4 years – inflation rose even more, fuelled by their low interest policy and money printing, and its consequent policy of devaluing the pound, which has pushed up import prices for things such as fuel and food. Last month's fall in the inflation rate, which was largely technical due to the falling out of the calculation of last year's VAT rise, looks likely to be short lived, as oil is heading back up to record highs, and petrol prices are already at record highs. Now Interest Rates are rising too, whilst wages are frozen, and falling sharply in real terms, whilst house prices are beginning to collapse by up to 50%.

According to the BBC, Banks and Building Societies are set to raise Mortgage rates by a whacking 14%, from 3.5% to 4%. That will come as yet a further blow to a rapidly falling property market on top of the removal of the Stamp Duty holiday that has been in place. Already, as the property website Propertysnake is showing, even Asking prices for houses are being cut by as much as 50%. Propertysnake monitors changes in asking prices across the country. Its very useful, allowing you to put in a postcode, and see exactly how much prices are falling for actual houses in that area.

With wages frozen, benefits being cut, and rapidly rising inflation cutting into workers' living standards, its now wonder they have no money left to keep the huge property bubble inflated. With rising unemployment, and now sharply rising interest rates, all of the conditions are in place for a repeat of the collapse of the property market that occurred in 1990. But, this bubble is bigger, meaning the collapse will be bigger too.

Before the election, the Tories had promised to introduce a fuel price stabiliser that would cut fuel duty whenever the price of oil rose. Now with diesel prices already over 140p per litre, and headed for 150p, the Tories cannot cut fuel duty much further without risking blowing a hole in their Budget. There are several reasons for the rising price of oil. For one the world is probably at a stage of Peak Oil production, so with demand rising rapidly in China and other developing economies, Supply cannot rise fast enough to meet it. Secondly, as the interview on Fareed Zacharia with Ronen Bergman spelled out today, Israel is planning to launch a strike on Iran some time this year. With a developing Cold War by proxy in the Middle East, as western imperialism lines up behind the Sunni Feudal Monarchies of the Gulf, and their allies, and Russia and China line up behind Iran, Syria, and oppressed Shia populations in the Gulf Monarchies, such an event is likely to spark an extensive regional war at the very least, and something wider at worst. The fact, that clerical-fascist regimes have now come to power in Iraq, Egypt, Tunisia, Libya, and could well come to power in Syria and elsewhere, make the future even more uncertain. Even if the Straits of Hormuz did not get closed, such a conflict would mean that oil production and distribution in the region was severely curtailed. Under such conditions, the current price looks likely to be far from taking full account of the necessary risk premium. A serious dislocation would be likely to send Oil to anything between $200 and $400 a barrel. Thirdly, apart from those factors, the policy of the Bank of England over recent years of printing money has pushed up inflation in general, and by devaluing the pound has had a direct effect on increasing the price of imported oil.

On top of that, as I predicted a while ago, interest rates are now also rising, despite the policies of the Bank of England. That is because the interest rates charged by the Banks and Building Societies are more determined by what they have to pay in the money markets to borrow money. Over the last 6 months or so, those rates have been rising rapidly, because, as happened with the Credit Crunch of 2008, the Banks are now worried about their own financial health. The interbank rates that banks charge each other has soared, as banks worry that they might not get their money back, and scramble to boost their own cash holdings. When the ECB pumped out €500 billion in the Long Term Refinancing Operation (LTRO) at the end of last year, it helped ease that situation. Banks were able to offload some of their dodgy Bonds to the ECB, in return for cash at 1% interest rates. Its basically Money printing, and the ECB acting as lender of last resort by any other name.

The idea of the LTRO was that these banks would then use the money they borrowed to buy up the Bonds of their own Governments in what is termed a “Carry Trade”. That seemed to work to an extent as the Yields on Italian and Spanish Bonds fell, though they are hardly at low levels even now. They have just repeated the exercise. Over 800 Banks across Europe borrowed money. But, for the last few months, European Banks have also been depositing record amounts with the ECB itself overnight. The ECB points out that its not the same Banks who are depositing the money that are borrowing the money. The message from that seems clear. Of those 800 Banks, a large number seem to need the money to bolster their own liquidity and solvency. That also seems to be the analysis of the Credit Ratings Agencies, who continue to downgrade European Banks.

The other reason for that is that across Europe, and within the UK, many Banks are in a position similar to that of Japanese Banks in the 1990's, or US banks after the Sub Prime crisis. They are zombie banks. They have large amounts of loans outstanding on property that is listed at unrealistic prices. Once those property prices are rectified, once the loans of the Banks begin to be properly written down, many of those Banks will be seen to be bankrupt. Bloomberg had a story setting that out on Friday. They write,

“Investors view the 182 billion euros of bonds tied to Spanish residential-mortgage backed securities as being among the least creditworthy in Europe, trailing securities from the U.K., Netherlands and Italy. The outlook for the collateral is expected to worsen as mortgage arrears rise with increasing unemployment and house prices continue to fall, Moody’s Investors Service said in a report last month.”

As austerity across Europe causes these property prices to collapse, as well as causing economic activity to go back into recession, no amount of money printing by Central Banks will lead to higher borrowing to reflate these bubbles, and consequently, the Banks will go bust in large numbers. All the ECB has done is to buy Sovereign debt in Greece, Italy, Portugal, and Spain some temporary relief, but only at the cost of throwing the burden back on to the Banks.