Capital I, Chapter 15 - Part 11

C. Modern Manufacture

Marx then gives extensive examples of these kinds of employment and the abuses associated with them. As Marx says, many of these have already been elaborated in the Chapter on the Working Day. More still are given by Engels in The Condition Of The Working Class In England and for that reason, I do not intend detailing them here.

E. Passage of Modern Manufacture, an Domestic Industry into Modern Mechanical Industry. The Hastening of This Revolution by the Application of the Factory Acts to those Industries

“The cheapening of labour-power, by sheer abuse of the labour of women and children, by sheer robbery of every normal condition requisite for working and living, and by the sheer brutality of overwork and night-work, meets at last with natural obstacles that cannot be overstepped. So also, when based on these methods, do the cheapening of commodities and capitalist exploitation in general. So soon as this point is at last reached — and it takes many years — the hour has struck for the introduction of machinery, and for the thenceforth rapid conversion of the scattered domestic industries and also of manufactures into factory industries.” (p 442)

In 1861, around 1 million people were employed outside the factory system, in manufacture and domestic production of clothing alone. Many of these, Marx says, are workers that had been “set free” as a result of the introduction of machines into factories.

“The production of wearing apparel is carried on partly in manufactories in whose workrooms there is but a reproduction of that division of labour, the membra disjecta of which were found ready to hand; partly by small master-handicraftsmen; these, however, do not, as formerly, work for individual consumers, but for manufactories and warehouses, and to such an extent that often whole towns and stretches of country carry on certain branches, such as shoemaking, as a speciality; finally, on a very great scale by the so-called domestic workers, who form an external department of the manufactories, warehouses, and even of the workshops of the smaller masters.” (p 442-3)

Now, the raw materials were provided by machine industry and the mass of the workers to process them, workers that had been replaced by it. This vast reserve army was now available for capital to attract or repel according to the needs of market conditions.

“The decisively revolutionary machine, the machine which attacks in an equal degree the whole of the numberless branches of this sphere of production, dressmaking, tailoring, shoemaking, sewing, hat-making, and many others, is the sewing-machine.” (p 443)

That is perhaps fitting because thousands of years earlier, one of the most important tools developed was the bone needle, which made it possible for the first time, to create fitted clothing as opposed to merely draped animal skins.

As with the introduction of machinery elsewhere, the wages of the machine workers rises compared to that of the domestic hand workers. The more highly skilled, usually male workers sinks, unable to compete with the machines. The majority of the machine workers are young women and girls. The elderly women and young children are driven out.

On the one hand, Marx describes the rise in London, in the ten years up to 1864, of starvation which coincided with the introduction of the sewing machine. That, as a result of those thrown out of work. On the other, these new machinists worked in poor conditions, and for long hours, though not as long as for those previously employed in domestic production.

Exactly how the sewing machine changed the production in each area depended on how it was previously organised i.e. on the basis of manufacture or handicraft, simple co-operation and so on, and this varied from one type of product to another.

“In tailoring, shirtmaking, shoemaking, &c., all the forms are intermingled. Here the factory system proper.” (p 444-5)

As more capital is invested in sewing machines so these machines produce a glut of commodities. The domestic workers are expropriated as they sell their own machines. This leads to an overproduction of machines. The machine makers then turn to renting machines, thereby destroying the small scale machine owners. In the meantime, continual changes in the production of machines reduces their value,

“...and their ever-increasing cheapness, depreciate day by day the older makes, and allow of their being sold in great numbers, at absurd prices, to large capitalists, who alone can thus employ them at a profit.” (p 445)

On the one hand this process of concentration into larger workplaces drives towards the introduction of steam power to drive a large number of machines, but at the same time, the introduction of steam provides another advantage over the small producers, further stimulating concentration.

“Thus England is at present experiencing, not only in the colossal industry of making wearing apparel, but in most of the other trades mentioned above, the conversion of manufacture, of handicrafts, and of domestic work into the factory system, after each of those forms of production, totally changed and disorganised. under the influence of modern industry, has long ago reproduced, and even overdone, all the horrors of the factory system, without participating in any of the elements of social progress it contains.” (p 446)

Marx sets out the basis of Engels' later comment in the 1892 Preface to “The Condition of the Working Class”, that the large employers embraced the Factory Acts as a means of destroying their smaller competitors.

“This industrial revolution which takes place spontaneously, is artificially helped on by the extension of the Factory Acts to all industries in which women, young persons and children are employed. The compulsory regulation of the working-day as regards its length, pauses, beginning and end, the system of relays of children, the exclusion of all children under a certain age, &c., necessitate on the one hand more machinery and the substitution of steam as a motive power in the place of muscles. On the other hand, in order to make up for the loss of time, an expansion occurs of the means of production used in common, of the furnaces, buildings, &c., in one word, greater concentration of the means of production and a correspondingly greater concourse of workpeople. The chief objection, repeatedly and passionately urged on behalf of each manufacture threatened with the Factory Act, is in fact this, that in order to continue the business on the old scale a greater outlay of capital will be necessary. But as regards labour in the so-called domestic industries and the intermediate forms between them and Manufacture, so soon as limits are put to the working-day and to the employment of children, those industries go to the wall. Unlimited exploitation of cheap labour-power is the sole foundation of their power to compete.” (p 446-7)

The equivalent today, in Britain, is the extent to which Welfarism subsidises the worst employers. So long as bad employers can pay low wages, and still attract workers, whose income is bolstered by transfers from other workers, in the form of Child Benefits, Tax Credits , and so on, those – usually small, inefficient – employers will do so. That in itself holds back the clearing out of these types of inefficient capital, and their replacement with efficient, more high value production, able to pay better wages to its workers.

A similar process was described by Marx in relation to earthenware manufacture, where employers objected to the limitation and pausing of the working day, on the grounds that it was not compatible with the production process.

“In 1864, however, they were brought under the Act, and within sixteen months every “impossibility” had vanished.

'The improved method,” called forth by the Act, “of making slip by pressure instead of by evaporation, the newly-constructed stoves for drying the ware in its green state, &c., are each events of great importance in the pottery art, and mark an advance which the preceding century could not rival.... It has even considerably reduced the temperature of the stoves themselves with a considerable saving of fuel, and with a readier effect on the ware.'

In spite of every prophecy, the cost-price of earthenware did not rise, but the quantity produced did, and to such an extent that the export for the twelve months, ending December, 1865, exceeded in value by £138,628 the average of the preceding three years.” (p 447)

How many firms that survive in Britain today, only on the basis of the low wages and poor conditions of their workers, would have to invest in and develop more efficient methods if the income of those workers were no longer supplemented by transfers from other workers?  In fact, according to a report in the FT recently, 10% of British firms are "zombie" companies, essentially bust, unable to generate enough income to repay the capital sum on their loans, and only able to pay the interest because of unsustainably low interest rates and forbearance by banks afraid that calling in the loan would mean losing most of their money.  These inevitably small firms, emply around 2 million workers, who will also be on very low wages, and poor conditions.  It amounts to not only 2 million workers tied up in inefficient production, explaining the recent ONS data about the number of workers who are under employed, and why the economy is shrinking, but unemployment has not risen, but also large amounts of Capital tied up that could be employed elsewhere in the economy more effectively in high value production, paying workers higher wages, and providing them with better conditions.  It also means that the bank lending to these companies is locked up, that could have been available for recapitalising the bank, or for lending to more profitable companies.

A similar regulation occurs in respect of the peaks and troughs of employment during the year. Marx describes how, in addition to the normal business cycle, improved means of communication had led to buyers giving orders at short notice, to suppliers, for large orders. Together with changes in fashion, this meant suppliers needed to quickly employ workers, and work them for long hours, to complete the orders. Then these workers would be laid off, cast back into the reserve army.

But, the introduction of the Factory Acts prevented this overwork during given periods, which meant work over the year itself had to be spread out, and this was itself more compatible with the needs of large scale machine industry, that production should be more or less at a steady rate, and continuous.

“The thoroughly conscientious investigations of the Children’s Employment Commission prove that the effect of the regulation of the hours of work, in some industries, was to spread the mass of labour previously employed more evenly over the whole year that this regulation was the first rational bridle on the murderous, meaningless caprices of fashion, caprices that consort so badly with the system of modern industry; that the development of ocean navigation and of the means of communication generally, has swept away the technical basis on which season-work was really supported, and that all other so-called unconquerable difficulties vanish before larger buildings, additional machinery, increase in the number of workpeople employed, and the alterations caused by all these in the mode of conducting the wholesale trade. But for all that, capital never becomes reconciled to such changes — and this is admitted over and over again by its own representatives — except “under the pressure of a General Act of Parliament” for the compulsory regulation of the hours of labour.” (p 450-1)

Back To Part 10

Forward To Part 12

The Crisis Is Reaching A Turning Point

A couple of years ago I wrote about the bifurcations in the global economy, some of which are also mirrored within national economies.  Those bifurcations have not only continued, but have intensified.  On the one hand, China and other dynamic economies continue to grow at amazingly rapid rates.  China, despite attempts by the government to slow it down, and the effects of a global cyclical downturn, continues to grow at around 8%.  These economies have also built up huge reserves of cash, which they have lent out to economies in Europe, and North America, that have not been growing so rapidly.  Within national economies, large companies have also built up huge cash piles, and are able to utilise historically low interest rates to borrow even more, should they choose.  At the same time, hugely indebted smaller companies and individuals in these old economies now find it impossible to borrow, and in any case are trying to reduce their borrowing.

On the one hand, we have some extremely dynamic and profitable companies - much of the growth in the US, and in US employment has been in high value added production - and on the other we have a large number of "zombie" companies.  According to the FT recently, around 10% of firms in Britain are zombie companies.  That is they are companies that are essentially bust.  They are unable to generate sufficient income to repay the capital on their loans, and only manage to pay the interest, because of the low level of interest rates, and forebearance by the banks, afraid they might not get their money back at all!  If interest rates rise only slightly, or if things get only marginally worse, these zombie companies are likely to drop like flies, thereby exposing the zombie nature of the economy created by the Liberal-Tories.  If 10% of UK firms went bust, that means around 2 million people that would be added to the dole queue!!!

A similar situation exists in Europe, with a bifurcation between Northern Europe and Southern Europe, the latter also being extremely zombified, and only kept going by low interest rates, huge amounts of money printing, and state welfare from the North.  The chances of these zombies exploding is still quite significant.  Until Europe grasps the nettle, begins to establish a fiscally, politically as well as monetarily integrated state, its problems are likely to drag on.  That will also require, a significant fiscal stimulus, and directed invested to the periphery to stimulate real growth.  But, that remains essentially a political rather than economic crisis.

But, the signs are there that even without such a change, the strength of the Long Wave Boom, might just yet rescue these economies.  The US, which from 2008 has followed a policy of Keynesian fiscal expansion as well as Friedmanite Monetary stimulus, has continued to grow.  As I've pointed out before, for at least the last thirty years the global economy has had a three year cycle.  That cycle coincided with the 2008 Financial Meltdown, and a new slow down began towards the end of 2011.  It was due to end by the end of 2012, beginning 2013, and that looks like it is happening.

The US, whose growth and employment had been growing rapidly, once again slowed down at the beginning of the year.  Part of that was also due to Republicans in the US frustrating some of Obama's stimulus policies, as well as concern by sections of US Capital over political stalemate, and what the consequecne of that might be for the debt Ceiling, and the Fiscal Cliff.  But, the latest US growth figures show that its cyclical downturn has ended.  Not only have employment figures, as well as Consumer Confidence numbers improved in recent months, the latest data out today shows that the economy itself is growing again, quite rapidly.  The original figure for Q3 GDP was 2%, but the revised figure, out today, has raised that to 2.7%!!  That is a significant quickening in growth, and goes along with yet another improvment in the payroll numbers.

With the US again looking like the cyclical downturn is over, with China once again returning to stronger growth, and large areas of the world still experiencing rapid growth, it seems clear that not only is the Long Wave Boom still in place, but its strength is sufficient to override the particular problems of specific regions, such as Europe.  Of course, that could still be derailed.  If European politicans fail to address the political crisis, there, if Cameron's Government insists on pursuing austerity, and thereby leads to the onward march of the zombies, that could manifest itself in a huge crisis, which would necessarily ripple out into the global economy.

But, the more the US, China. and the other main drivers of the gloabl economy resume strong growth, the less likely that is.  That growth is itself likely to help deal with the question of US debt, along with some of it being inflated away.  It is also likely to lead to renewed growth in Germany, and otehr northern European economies, which will give them increased head room to deal with the problems of peripheral European debt.  Again some of that could be inflated away by an ECB engaging in the same kind of money printing that the Bank of England and Federal Reserve have done, which would also bring about a much needed lowering in the value of the Euro.

A couple of years ago, I also wrote that the political crisis in Europe could spark an economic crisis similar to the 1930's Depression, and its spark would be a collapse in property prices.  Again that still remains a possibility, but the EU authorities might have done just enough to buy enough time to resolve those political issues within the context of resumed growth.  Ironically, that is still likely to lead to a property price crash.  In the US, and Ireland, property prices fell by up to 75%, and that has resulted in the property market once again becoming affordable, bringing stability with it.  In Spain and the UK, although actual selling prices have fallen by around 30%, they have not yet corrected by anything like the figures for the US and Ireland, and have at least another 50% to fall - more like 70% from current asking prices.

Part of the reason these prices have not yet corrected, is like the situation with the zombie companies referred to earlier.  Borrowers unable to repay the Capital sum, are enjoying forbearance from banks afraid that if they foreclose they will spark a firesale the consequence of which will be they will never get their money back, and because large amounts of money printing and intervention have kept interest rates at unsustainably low levels.  In Spain that is ending.  Banks bad loan ratios have gone from around 0.5%, to over 10% in a matter of months, as they are forced to take a more realistic view of assets on their books, prior to any bail-out from the EU, which will expose the zombie nature of those banks.  Spanish banks are busy at the moment trying to dispose of those properties they have foreclosed on, ahead of the 6% increase in Spanish Property taxes, and ahead of the introduction of the Bad Bank.  That is bringing prices for these properties down considerably.  My wife spotted a nice villa in Northern Costa Blanca the other day being sold in a bank sale for just €20,000!  There were plenty of others at equally low prices.  That is also pressing down on all other prices.

But, if growth begins to return even fairly modestly, the massive Financial Repression, that has led to huge amounts of money being hoarded, or put into Bonds at ridiculously low Yields (some of them have even issued with a negative Coupon i.e. you are paying to lend out your money) will quickly end.  There are already signs that money is moving from Bonds into Equities.  Any sign that a deal on the Fiscal Cliff will be reached could see a massive move into US Equities, with an equally rapid move out of Bonds.  That means interest rates ill rise sharply over night.  That means the zombie companies, as well as the zombie mortgages will explode.  Borrowers will be unable to pay even the interest on their loans.  The zombie banks, that exist only on the back of the fiction of the value of their loans, and fiction of property prices will then implode.  They will be forced to foreclose on loans or be completely destroyed.  The irony of an economic recovery is that thousands of small businesses will go bust, and property prices will also collapse!

Capital I, Chapter 15 - Part 10

8) REVOLUTION EFFECTED IN MANUFACTURE, HANDICRAFTS, AND DOMESTIC INDUSTRY BY MODERN INDUSTRY

A. Overthrow of Co-operation Based on Handicraft, and on the Division of Labour

Manufacturing does away with the division of labour of handicraft and manufacture. Increasingly, the machine incorporates the several processes that division of labour had established into one continuous process, as was seen with the envelope machine. Wherever, human motive power is replaced by machinery, this sees the introduction of the factory system, because it is only efficient to use this motive power – water, steam, electric etc. - to drive many machines, and carry on production on a large scale.

However, there are exceptions. Agriculture provides one example. The introduction of expensive machinery tends to drive towards larger farms. However, its possible for a number of smaller farms to pool their resources to buy equipment and then share its use. There were even experiments to do this in providing steam power to cottage based weavers.

“In the Coventry silk weaving industry the experiment of “cottage factories” was tried. In the centre of a square surrounded by rows of cottages, an engine-house was built and the engine connected by shafts with the looms in the cottages. In all cases the power was hired at so much per loom. The rent was payable weekly, whether the looms worked or not. Each cottage held from 2 to 6 looms; some belonged to the weaver, some were bought on credit, some were hired. The struggle between these cottage factories and the factory proper, lasted over 12 years. It ended with the complete ruin of the 300 cottage factories.” (p 433)

There were also Hydraulic Power system developed in Manchester, London and Kingston upon Hull, which provided a clean alternative to steam engines, and powered machinery, bridges, cranes, lifts and other machines across those cities – Manchester Hydraulic Power.

Where the cost of the motive power falls, the potential for using it on a smaller scale opens up. For example, the introduction of the internal combustion engine and electric motors makes possible the economic powering of individual machines without this needing to be done on a massive scale.

There are a number of similar developments that can be seen in more recent times. Some remaining areas of domestic production were transferred to “factories” and then back to the home. For example laundry. In the post WWII period, when capital needed more labour power and encouraged married women to enter the workforce, the task of washing clothes was transferred to industrial laundries, like that established by the Co-op. This was supplemented and then replaced by the introduction of laundrettes, which provided industrial scale washers and dryers. But, as the cost of producing these fell, the machines were introduced into the home, and the work returned to the domestic sphere.

A similar situation has occurred in relation to the media. The huge cheapening of equipment means that the development of large scale media production has broken down, with much production farmed out to small scale, almost handicraft or manufacture type production, by small companies or even to individuals – e.g. citizen journalism, blogging etc.

Cheap electric power, able to power the most important machines of the modern age – computers – connected via the Internet, which functions as the transmission mechanism, described by Marx, means that the majority of modern, high value, intellectual production can be done at home, and on the same kind of co-operative basis, based on a division of labour, as happened with handicraft and manufacture. One person having produced film footage can download it, to their computer, send it to a sound engineer, who can add the soundtrack etc., and then send it to and editor and so on.

Book keepers and payroll clerks can sit at home with a computer and process data and so on. Software engineers can work on specific pieces of code. In parts of the world like Singapore, with 1 Gig broadband speeds, even education can now be provided at home, with one teacher able to provide lessons to vast numbers of students.

Moreover, these developments mean that many of the people employed to do this work can be employed on an individual rather than collective basis. In other words, they can be paid for the provision of a commodity other than labour power. This returns such producers to that of the peasant employed in handicraft production.

B. Reaction of the Factory System on Manufacture and Domestic Industries

The methods employed by the factory system, of breaking down the process of production and then applying science to determine how they can be most effectively performed, spreads out into all areas of economic activity.

These changes break down the composition of the collective labourer based on the division of labour under manufacturing. They create the conditions for the employment of women and children as cheap labour, and all the excesses associated with that in the early stages. But, when that becomes more regulated, within the factories, it leaves its scope in the other sectors unaltered. Domestic industries under handicraft or manufacture is quite different to that which applies under machine industry.

“This modern so-called domestic industry has nothing, except the name, in common with the old-fashioned domestic industry, the existence of which pre-supposes independent urban handicrafts, independent peasant farming, and above all, a dwelling-house for the labourer and his family. That old-fashioned industry has now been converted into an outside department of the factory, the manufactory, or the warehouse. Besides the factory operatives, the manufacturing workmen and the handicraftsman, whom it concentrates in large masses at one spot, and directly commands, capital also sets in motion, by means, of invisible threads, another army; that of the workers in the domestic industries, who dwell in the large towns and -are also scattered over the face of the country.” (p 434)

This domestic industry is particularly oppressive because of its nature. In the factory, the machine removes much of the heavy work. The Factory Acts eventually place limits on the conditions, and the number of workers collected together, and organised in Trades Unions, facilitates the workers in defending themselves against encroachments on those limits. Atomised and isolated, the domestic workers lack these safeguards.

“This exploitation is more shameless in the so-called domestic industry than in manufactures, and that because the power of resistance in the labourers decreases with their dissemination; because a whole series of plundering parasites insinuate themselves between the employer and the workman; because a domestic industry has always to compete either with the factory system, or with manufacturing in the same branch of production; because poverty robs the workman of the conditions most essential to his labour, of space, light and ventilation; because employment becomes more and more irregular; and, finally, because in these the last resorts of the masses made “redundant” by modern industry and Agriculture, competition for work attains its maximum.” (p 435)

Back To Part 9

Forward To Part 11

The Political Economy of Flooding

Whether the incidence of flooding, such as that we are seeing currently is to do with global warming or not, it is clear that it is having serious consequences for those affected by it. No one can fail to feel great sympathy for all those whose homes are being flooded, often not for the first time. The issues surrounding it raise a number of questions.

Firstly, a huge amount of money is being spent through the Environment Agency on “flood defences”. These seem to be more effective in some places than in others, but the more important question that should be asked is whether this money should be being spent at all, or if it is, who should be funding it. In the United States, there is considerable evidence, over a long period of time that the construction of flood defences is counter-productive. Huge amounts of money, for example, were spent on flood defences along great stretches of the Mississippi. The consequence, was, however, that it merely made flooding elsewhere along its length, worse, or resulted in flooding in areas that previously did not suffer from it. In fact, it was decided that the better solution was to remove the flood defences, in order to allow the river to flood naturally, into its flood plain. That has benefits in depositing natural nutrients to the soil, rather than those deposits building up as silt elsewhere, itself contributing to a flooding problem.

That, of course, leads to the question of damage to property in the flood plain. But, for years, people realised that it was not a good idea to build houses or businesses in a flood plain, precisely because they were likely to get flooded! Businesses that were established were ones that could take advantage of it being a flood plain, for example appropriate forms of agriculture. In reality, the cost of providing flood defences, to prevent rivers from doing what they naturally should do – dissipate their excess water into the flood plain – is a direct subsidy by society, to capitalists who decide to build houses, or businesses in these high risk areas. Usually, these capitalists decide to build houses etc. in these areas, because the land is cheap, which means they can make bigger profits. But, the land is cheap, precisely because it is a flood plain! Why should the rest of us, subsidise these capitalists out of our taxes, for taking irresponsible decisions about where to build? The news, yesterday covered the story of a hospital whose Operating Theatre was flooding, because the hospital had been built on top of a stream!  Who would have ever thought that if you build on top of a stream, you might suffer from flooding!

The vast sums of money that go into flood defences would be much better spent in providing vital services to those who suffer from life's iniquities for no fault of their own. For example, I can quite happily accept that it is a good thing to have some form of social insurance scheme (preferably one created by and controlled by workers themselves) which provides healthcare for people who fall ill, or who lose their job, and to provide for them in old age. However, I see no reason why I should subsidise others for failing to take account of the consequences of their actions, and who simply expect others to pick up the tab!

If someone decides rashly to borrow £100,000 in order to buy 100,000 lottery tickets in the mistaken belief they might win the jackpot, I see no reason why I along with other workers should compensate them for their almost inevitable loss of that £100,000. After all, if they won, they would not be sharing their winnings with the rest of us. If, a builder decides to build a housing estate on a flood plain, and can't sell any of the houses, because no one wants the risk of regularly having their house flooded, I equally see no reason why workers should compensate that builder for their gamble either, because, if the builder did sell those houses, again they would not be sharing their profits with the rest of us.

A field of unwanted Trabants. 

Marx describes this in Capital. It is the concept of socially necessary labour. In other words, labour is only socially necessary, only creates value if it is expended on production that is demanded, that finds a buyer in the market. If it doesn't then the labour expended was not socially necessary, it created no new value. In fact, compensating those that make such mistakes is the worst thing that can happen, because it means that the mistake is not recognised, and can, therefore, continue rather than being corrected. It means that Capital continues to be wasted. A similar thing happened with the economies of the USSR and Eastern Europe under Stalinism. These economies produced vast amounts of products that were of little or no value, even though they consumed large amounts of labour in their production. They had little value, because the labour they consumed was not socially necessary labour. That was for several reasons. Firstly, large amounts of goods were produced that nobody wanted, but which were required to meet the bureaucratic planning targets. Secondly, even where products were produced that were demanded they were of the wrong type, for example, jeans that nobody wanted compared to a pair of Levis. Thirdly, the quality of the goods produced was shoddy, so that nobody would pay the price.

That situation could continue, because the bureaucrats who controlled this production had nothing to lose from producing poor quality goods that no one wanted. Even if their output could not be sold, they would continue to be paid, and their enterprises would continue to be paid by the State. The same thing occurs with State Capitalism. Businesses that go bust, are sometimes nationalised, and so the fact that those businesses went bust because they were producing things no one or not enough people wanted, is ignored, the businesses are compensated by other workers via their tax contributions, and thereby the waste of resources is allowed to persist. The same applies with the way that poor quality of provision continues with the NHS.  That is also what happened with the Banks.

As with the example above, the Banks were allowed to gamble for years. When those gambles paid off, the rewards went to the Banks bosses, and some of the highly skilled traders who produced the profits and capital gains, as well as to the banks' shareholders. When the banks gambles failed, instead of the bank bosses, the traders and the shareholders suffering the consequences, they were bailed out by the State! In fact, as I said at the time of Northern Rock, and as I've said at the time of the Irish Bank collapses, the banks should have been allowed to go bust, and the shareholders in those banks should have lost all their money.

The deposits of all the savers who put their money in those Banks in the not unreasonable belief that they were taking no risk with their money, should have been protected, and having become worthless, the workers of those banks should have taken them over, along with all their assets in the form of mortgages and loans, and run them as co-operatives. It is unlikely that any such gambling would have been undertaken again in the near future, and the shareholders of other banks would have an incentive to keep control of the bureaucrats running them. Had that collapsed the share prices of other companies with shareholdings in those banks, then as I pointed out in relation to a default by Greece, that need not have a negative consequence for workers. If share prices fall that in no way affects the productiveness of the machines and other capital equipment of the firms whose share price has fallen. Consequently, it implies no real diminution in the capacity to create real wealth. Moreover, the profits created will then represent a higher proportion of this now devalued paper capital.

It means that workers contributions into their Pension Schemes can buy more of these shares, giving them a bigger stake, and thereby also a bigger pension. Pensions are paid out of the revenues of invested funds, not from Capital Gains.

But, by the same token there is no reason to bail out builders, or money capitalists who advance capital to those builders, who gamble by building houses in flood plains or other high risk areas. Of course, we are invited to see things not as bailing out these capitalists, but of the poor home buyers who bought the houses. But, those buyers only bought, because they too have been conditioned to believe that they can take decisions without regard for their consequence. I see no reason why someone who knowingly buys a house in a flood plain should be subsidised by the rest of us, who wisely chose not to, any more than we should compensate the person who loses their money on the lottery or some other form of gambling.

I'm happy that a gambling addict should be entitled to treatment for their condition. I'm happy that someone who loses their house due to flooding should be rehoused in a Council house, but I see no reason why they should be compensated in any other way out of public funds.

Even less do I see a reason why the insurance companies should also be subsidised out of public funds, in order to provide cheaper insurance for houses built in the flood plain. If buyers did not buy, and insurers did not insure houses in the flood plain, builders would soon stop building there, when they went bust, because they couldn't sell their houses. Then, society could also divert the billions of pounds spent on unnecessarily preventing flooding, into areas where it is really needed in the NHS, etc. Of course, if people wanted to buy houses in the flood plain, and pay the cost of repairing flood damage, or the higher cost of insurance premiums, out of their own pocket, that would be up to them.

In the 19th Century, workers provided their own
welfare provision via Friendly Societies.  They rightly
did not trust the Capitalist State to provide for them.  Marx,
 Engels and the First International demanded that State
keep its hands off the Friendly Societies for that reason,
and opposed the creation of National Insurance Schemes by it,
 that drained the workers own funds.

A similar thing applies to other areas of life. For example, if we had a worker owned and controlled Social Insurance scheme, as advocated by Marx and Engels, workers would be well advised to arrange it so that the Insurance Premiums discouraged unhealthy behaviour, by levying higher rates on smokers, those grossly overweight and so on. That is not just because otherwise, workers would soon find that their funds ran out, but because workers should attempt to create a health system that does not sell health as a commodity, repairing health when it is damaged, but which attempts to prevent ill-health to begin with. That is not just because it is far more efficient, but more importantly because a socialistic health policy should do so for the well-being of the workers. In doing so, as Marx sets out, we unavoidably are forced to make choices.

Marx discusses this in the Critique of the Gotha Programme. He writes, of the first stage of Communism, that although workers of the same type would continue to be paid the same wages, this apparent equality, means a real inequality, because no two workers are the same. One worker will be able to work faster or for longer than another; one worker will have several children to provide for, whilst another will not.

“Hence, equal right here is still in principle -- bourgeois right, although principle and practice are no longer at loggerheads, while the exchange of equivalents in commodity exchange exists only on the average and not in the individual case.

Marx saw no reason why, even
in the first stage of Communism,
simply having children to provide
for, should entitle workers to some
additional payment out of society's
social fund.  Its Utopianism to believe
 that Capitalism can provide a higher
level of equality than even the first
stage of Communism.  "Right can never
 be higher than the economic structure
 of society and its cultural
 development conditioned thereby." 

In spite of this advance, this equal right is still constantly stigmatized by a bourgeois limitation. The right of the producers is proportional to the labour they supply; the equality consists in the fact that measurement is made with an equal standard, labour.

But one man is superior to another physically, or mentally, and supplies more labour in the same time, or can labour for a longer time; and labour, to serve as a measure, must be defined by its duration or intensity, otherwise it ceases to be a standard of measurement. This equal right is an unequal right for unequal labour. It recognizes no class differences, because everyone is only a worker like everyone else; but it tacitly recognizes unequal individual endowment, and thus productive capacity, as a natural privilege. It is, therefore, a right of inequality, in its content, like every right. Right, by its very nature, can consist only in the application of an equal standard; but unequal individuals (and they would not be different individuals if they were not unequal) are measurable only by an equal standard insofar as they are brought under an equal point of view, are taken from one definite side only -- for instance, in the present case, are regarded only as workers and nothing more is seen in them, everything else being ignored. Further, one worker is married, another is not; one has more children than another, and so on and so forth. Thus, with an equal performance of labour, and hence an equal in the social consumption fund, one will in fact receive more than another, one will be richer than another, and so on. To avoid all these defects, right, instead of being equal, would have to be unequal.

But these defects are inevitable in the first phase of communist society as it is when it has just emerged after prolonged birth pangs from capitalist society. Right can never be higher than the economic structure of society and its cultural development conditioned thereby.”

Critique Of The Gotha Programme

So, its obvious that within Capitalist Society it is Utopianism to believe that a higher degree of equality could prevail, or that these choices conditioned by the Law of Value could be averted.

In the same way, workers who owned and controlled their own social insurance scheme would rightly implement the principle of Socialism outlined in the above by Marx,

“He who does not work, neither shall he eat.”

Rather than Marx's revolutionary strategy of workers
developing their independence from Capital and its State,
by relying on their own self-activity, creating their own
enterprises and structures in opposition to Capital,
the Fabians and their co-thinkers beleived that Socialism
could be built with the help of that State - or even by that State -
by redistributing income.  Unfortunately, redistributing income
does not work.  It does not redistribute the ownership of
the means of production, which determines income distribution, and
it ends up not a redistribution from Capitalists to workers
but simply one group of workers giving some of their income to
a worse off group of workers.  Not surprisingly, that changes nothing,
and the better off workers end up getting pissed off, and voting for
Tories.
 

That is they would expect those provided for out of those funds during periods of unemployment, to do work in return for it. This is not the same as the Workfare Systems of Welfare Capitalism, which expect workers to do work for Capital in return for payments of dole. This is work done for the benefit of workers, and their communities, thereby establishing a workers economy in opposition to that of Capital.

The same applies in relation to other forms of Welfare Benefits. Unfortunately, the infection of the Labour Movement with various forms of bourgeois Liberalism, of Lassalleanism and Fabianism have undermined these aspects of Marx’s teaching. For example, if we look at Marx’s statement above,

“Further, one worker is married, another is not; one has more children than another, and so on and so forth. Thus, with an equal performance of labor, and hence an equal in the social consumption fund, one will in fact receive more than another, one will be richer than another, and so on.”

In other words, if two workers do a 30 hour week, they will be entitled to 30 hours of Value from the social consumption fund. But, because one worker will have children, and the other will not, the latter will effectively be better off, because what they take out will not have to cover any children. It is clear that this applies with all the more force under Capitalism. Workers are entitled to make a choice to have as many children as they like, but they have no right to demand that other workers compensate them for that decision, via the payment of additional benefits, such as Child Benefit, Tax Credit and so on. In fact, as Marx makes clear in Capital, what such payments do, is to subsidise Capitalists, and in particular the worst Capitalists, who are thereby able to get away with paying wages insufficient to sustain the workers needs. For example Marx writes about, the way the hand loom weavers were sustained in misery for years as a result of the payment of relief out of Parish Funds.

“The competition between hand-weaving and power-weaving in England, before the passing of the Poor Law of 1833, was prolonged by supplementing the wages, which had fallen considerably below the minimum, with parish relief. “The Rev. Mr. Turner was, in 1827, rector of Wilmslow in Cheshire, a manufacturing district. The questions of the Committee of Emigration, and Mr. Turner’s answers, show how the competition of human labour is maintained against machinery. ‘Question: Has not the use of the power-loom superseded the use of the hand-loom? Answer: Undoubtedly; it would have superseded them much more than it has done, if the hand-loom weavers were not enabled to submit to a reduction of wages.’ ‘Question: But in submitting he has accepted wages which are insufficient to support him, and looks to parochial contribution as the remainder of his support? Answer: Yes, and in fact the competition between the hand-loom and the power-loom is maintained out of the poor-rates.’ Thus degrading pauperism or expatriation, is the benefit which the industrious receive from the introduction of machinery, to be reduced from the respectable and in some degree independent mechanic, to the cringing wretch who lives on the debasing bread of charity. This they call a temporary inconvenience.” (“A Prize Essay on the Comparative Merits of Competition and Co-operation.” Lond., 1834, p. 29.) (Note 1, p 406)

And, as Marx makes clear, the consequence of this subsidy to Capital, is that it fails to introduce new, more efficient means of production, relying instead for its profits on low wages and poor conditions. We should not subsidise Capitalist builders who cut costs by building in the flood plain; we should not subsidise low paying inefficient employers, by supplementing workers wages with Benefits paid for by other workers' taxes; we should not subsidise capitalist banks that go bust; we should not subsidise other firms that go bust. We should build our own worker owned and controlled alternative.

Turkey, Israel, NATO and Patriot Missiles

Turkey has asked NATO to provide it with Patriot Missiles, for deployment on its southern border – Reuters. The reason being given is Turkey's concern about a possible threat from Syria. I doubt this is the real reason.

For one thing, there is no reason that Syria would launch an attack on Turkey. It would be suicide, at a time when the Syrian regime has enough problems to deal with. On the contrary, it is Turkey, which has been probing Syria's borders. That is what caused one of its jets to be shot down several months ago. Syria is conducting operations along its border with Turkey against rebel forces, and that has led to several strikes within Turkish territory, as well as apparently the rebels themselves firing mortars into Turkey to try to provoke a Turkish response against Syria. But, that is hardly the same as a serious Syrian attack on Turkey that would justify the deployment of Patriot Missiles.

Nor is it likely that a desperate Syrian regime, about to be toppled would simply fire off missiles hither and thither. As things stand, if the regime's back was really against the wall, Assad and his family could probably escape to Russia, and so would many of its other top officials. The bigger problem in relation to Syria's stock of chemical weapons and missiles, would be rather that the jihadists who would then take over, would then have control of them. That would be likely to pose a bigger problem for Israel than it would for Turkey!

Turkey, the once Colonial Power of the region, is seeking to once more become the dominant regional power. It has been pushing for the establishment of a no-fly zone over Syria. Given that the US and others have shown little interest in themselves getting involved, the establishment of a “No-Fly Zone”, would give Turkey the legitimacy to take the lead in implementing it, thereby furthering its own regional ambitions. Its possible that under those circumstances, Turkey might want to have the additional security of Patriot Missiles for defence were such a “No-Fly Zone”, as they tend to do, develop into an actual offensive campaign by Turkey. Its what the installing of Patriot Missiles in Turkey – a NATO member - by NATO, signifies. It would signify NATO giving the go ahead for such a campaign, for Turkey to become NATO's chosen agent in the region. For Turkey, seeking to expand its role, as against Israel, that is important.  Its unlikely that Turkey wants the missiles to defend against Syrian air attacks.  Although, Raytheon the maker of Patriots say they are an effective measure against planes, a contributor from the Royal United Services Institute in a TV discussion, the other day, said they are not designed for use against planes, and are too expensive for such use.

But, for Turkey, as suggested recently - Oppose Turkish Intervention In Israel-Palestine – there is another reason for wanting Patriot Missiles installed on its border by NATO. If Turkey is to pursue its Neo-Ottoman strategy, it must be able to assume the role of leading Muslim forces in the region. As Israel launched its murderous attacks on Gaza last week, Hamas held talks both with Qatar, and with Turkey. But, it has been President Morsi that has stolen the limelight. Important functions have been transferred to Cairo, and it was Egypt that negotiated the deal between Hamas and Israel. If Turkey is to pursue its ambitions, it will be lead increasingly to step up to the plate in opposing Israel. Turkey will not want to do that without feeling that it has NATO standing behind it. Demanding Patriot Missiles is part of providing itself with that backstop. It is Turkey saying to Israel, NATO is standing behind us, don't think of picking a fight.

Increasingly, Turkey will be led to be the champion of the Palestinians, and consequently the opponent of Israel. That far more than any sideshow with Syria, is likely to determine future relations.

Northern Soul Classics - Sitting In My Class - Ronnie McNeir

Time for one of those classic floaters from the 70's.

Capital I, Chapter 15 - Part 9

7) REPULSION AND ATTRACTION OF WORKPEOPLE BY THE FACTORY SYSTEM. CRISES IN THE COTTON TRADE

Here, Marx describes, in more detail, the contradictory nature of the effects of the introduction of machinery. On the one hand, there is no doubt that, for it to be worthwhile, to introduce a machine, the labour-time, required for its production, must be less than the labour-time it replaces. As previously seen, under capitalism, that is less than the labour-time that is paid for. To this extent the effect can be no other than to reduce the amount of labour employed to produce a given quantity of some particular commodity, including that employed in producing the machine.

However, the machine has other consequences. It raises relative surplus value, and it cheapens commodities so that an increased level of demand for them may arise. In both these ways a new demand for labour-power can arise. So, Marx writes,

“Nevertheless, in spite of the mass of hands actually displaced and virtually replaced by machinery, we can understand how the factory operatives, through the building of more mills and the extension of old ones in a given industry, may become more numerous than the manufacturing workmen and handicraftsman that have been displaced. Suppose, for example, that in the old mode of production, a capital of £500 is employed weekly, two-fifths being constant and three-fifths variable capital, i.e., £200 being laid out in means of production, and £300, say £1 per man, in labour-power. On the introduction of machinery the composition of this capital becomes altered. We will suppose it to consist of four-fifths constant and one-fifth variable, which means that only £100 is now laid out in labour-power. Consequently, two-thirds of the workmen are discharged. If now the business extends, and the total capital employed grows to £1,500 under unchanged conditions, the number of operatives employed will increase to 300, just as many as before the introduction of the machinery. If the capital further grows to £2,000, 400 men will be employed, or one-third more than under the old system. Their numbers have, in point of fact, increased by 100, but relatively, i.e., in proportion to the total capital advanced, they have diminished by 800, for the £2,000 capital would, in the old state of things, have employed 1,200 instead of 400 men. Hence, a relative decrease in the number of hands is consistent with an actual increase.” (p 422-3)

In previous chapters, its also been seen, how Capitalist development means that, as it expands, the amount of constant capital grows relative to labour-power. But, again this is a contradictory process. There are times when capital expands purely quantitatively on the same technical basis i.e. just more factories are built, more firms arise, and so the demand for labour grows in the same proportion. But, at other times, of more feverish development, that I would term a Long Wave Boom, a rash of new technological developments are introduced rapidly. Capital expands not just quantitatively but qualitatively. There may be a sharp reduction in the amount of labour-power employed relatively, as new technologies displace existing workers, some existing firms, or even entire industries, which may disappear. (That was true e.g. about all those people employed in industries related to horse-drawn carriages, that disappeared as motor vehicles were introduced.) But, this occurs simultaneously with a large increase in the absolute quantity of labour-power employed, as whole new industries are developed, and the total level of social production expands at a faster rate.

Marx wrote,

“This first period, during which machinery conquers its field of action, is of decisive importance owing to the extraordinary profits that it helps to produce. These profits not only form a source of accelerated accumulation, but also attract into the favoured sphere of production a large part of the additional social capital that is being constantly created, and is ever on the look-out for new investments. The special advantages of this first period of fast and furious activity are felt in every branch of production that machinery invades. So soon, however, as the factory system has gained a certain breadth of footing and a definite degree of maturity, and, especially, so soon as its technical basis, machinery, is itself produced by machinery; so soon as coal mining and iron mining, the metal industries, and the means of transport have been revolutionised; so soon, in short, as the general conditions requisite for production by the modern industrial system have been established, this mode of production acquires an elasticity, a capacity for sudden extension by leaps and bounds that finds no hindrance except in the supply of raw material and in the disposal of the produce.” (p 424)

As I have set out elsewhere, the solution to the last of these constraints – the disposal of the produce – can be and is resolved, by the continual introduction of new types of Use Values that can be sold as commodities. This is also what Marx talks about in the Grundrisse, when he speaks about the “Civilising Mission of Capitalism”, which forever has to create these new types of Use Values, for that very reason, to be sold to workers, and by that very process continually extends the workers horizons. The limitation here essentially becomes a technical one of having sufficient new Use Values to be introduced to absorb the Surplus Capital, so as to avoid overproduction. Again, this is the essential feature of the Long Wave. In periods of boom, technological developments create sufficient new base technologies to allow that to happen, in periods of Long Wave downturn, they do not.

It also has other consequences. In these periods, when workers are thrown out of employment, it creates a drive towards emigration, which was seen in to North America, India, and Australia. Combined with the existing colonial empires, this provided an impetus for these colonies to become mainly sources of the required raw materials, as well as markets for the manufactured goods. In a way, this replicates the previous division between town and country, and the social division of labour built on it. But, it now creates this social division of labour at a global level. I have described elsewhere - Imperialism, Industrialisation and Trade – how the development of capital created yet another new International Division of Labour, particularly after WWII.

The seeds of that development could, however, be seen at the time Marx was writing. For example, he writes, of the United States in 1866,

“The economic development of the United States is itself a product of European, more especially of English modern industry. In their present form (1866) the States must still be considered a European colony.”

But, by the time of the Fourth German Edition, Engels had appended to this note,

“Since then they have developed into a country whose industry holds second place in the world, without on that account entirely losing their colonial character.” (Note 2, p 425)

The same kind of development has occurred in many former colonies, in the latter part of the 20^th Century, and continues to spread into the 21^st Century. Today, it is Africa's turn to experience rapid industrial development.

The reason for the scramble for sources of cheap raw materials and for markets for goods stems directly from the competition between relatively large numbers of companies, each producing essentially homogeneous commodities (i.e. one yard of cotton drill is essentially the same as any other), and each forced to try to expand its market share on the basis of lower prices.

“The enormous power, inherent in the factory system, of expanding by jumps, and the dependence of that system on the markets of the world, necessarily beget feverish production, followed by over-filling of the markets, whereupon contraction of the markets brings on crippling of production. The life of modern industry becomes a series of periods of moderate activity, prosperity, over-production, crisis and stagnation. The uncertainty and instability to which machinery subjects the employment, and consequently the conditions of existence, of the operatives become normal, owing to these periodic changes of the industrial cycle. Except in the periods of prosperity, there rages between the capitalists the most furious combat for the share of each in the markets. This share is directly proportional to the cheapness of the product. Besides the rivalry that this struggle begets in the application of improved machinery for replacing labour-power, and of new methods of production, there also comes a time in every industrial cycle, when a forcible reduction of wages beneath the value of labour-power, is attempted for the purpose of cheapening commodities.” (p 425-7)

In contrast to Lenin's argument in Imperialism: The Highest Stage of Capitalism, it is, if anything, this pre-monopoly stage of capitalism which explains the drive to secure colonial possessions, and indeed, as Bill Warren has pointed out in “Imperialism: Pioneer of Capitalism”, it was during this pre-monopoly stage of capitalism that the world WAS divided up into colonial empires.

In fact, as Engels sets out in his Critique Of The Erfurt Programme, by the end of the 19^th Century, the development of large companies and corporations brings to an end this period of privately owned capital, but also of the “planlessness” described here by Marx. From the beginning of the 20^th Century, with the economy being dominated by a relatively small number of huge corporations, the nature of competition within this more “planned” capitalism changes. In place of destructive price competition, these oligopolies seek to increase their profits by an increased focus on innovation, as a means of reducing costs. They seek to defend and extend their market share on the basis of a similar use of innovation, to distinguish their own brand from other commodities, of a similar type, by a focus on raising quality and choice, a distinction they attempt to heighten via extensive use of advertising and marketing.

The Fordist model, adopted by developed economies in the 20^th Century, particularly after WWII, attempts to extend this planning principle, developed within the enterprise, to the economy as a whole. Welfare States provide a high degree of regulation of workers income and expenditure, so as to avoid large swings in aggregate demand; central banks via monetary policy, help prevent deflation, and falls in nominal prices, which are destabilising and destructive of oligopoly profits; the incorporation of the Trades Unions, via collective bargaining and mutuality agreements, ensure continual rises in productivity and relative surplus value, in return for annual real wage increases, thereby creating stability, and steadily rising aggregate demand.

This is not to say that by these means capitalism has become crisis free. Far from it. The same tendency towards overproduction, that Marx indicates above, in relation to 19^th Century privately owned, competitive capitalism, applies even more to 20^th and 21^st Century, collectively owned, monopoly capitalism, but the manifestation of that tendency is necessarily different. In the former, it leads each enterprise to seek to overcome the limitations of the market, by trying to win a larger share of it, by even more production, and lower prices, which acts to only accentuate the overproduction, and intensify the collapse. In the latter, it leads to enterprises reducing their output in a planned way, slowing their investments, and laying workers off, in order to reduce their costs, and prevent falls in prices.

Andrew Kliman in his book “The Failure of Capitalist Production” is absolutely correct in this regard, when he writes,

“This explanation of why prices fall has nothing to do with the irredeemably flawed notion that technical progress causes 'overproduction' – the production of too much output in relation to demand which in turn forces companies to slash their prices. Companies' decisions about how much output to produce are based on projections of demand for the output. Since technical progress does not affect demand – buyers care about the characteristics of products, not the processes used to produce them – it will not cause companies to increase their levels of output, all else being equal.”(Note 4, P 16)

But, of course, this very process of reducing the level of planned investment, and so on has the effect of reducing aggregate demand, which in turn leads to a downward spiral, unless checked by some form of action by the State in the form of Keynesian fiscal, or Friedmanite Monetary stimulus, or both. Yet, even the effectiveness of these measures, as was seen in the 1970's and 80's, is limited by the Long Wave conjuncture. During the Long Wave downturn, they are likely to lead to “crowding out”, or to stagflation rather than robust growth. Where they do promote growth, as happened in the 1990's, it is inflationary growth, leading to its own problems, which are witnessed today, in the huge debt overhang affecting Europe and North America.

The consequences of this are even more severe for those sectors of the economy where these 19^th Century relations still persist i.e. in the small business sector.

Marx continues,

“A necessary condition, therefore, to the growth of the number of factory hands, is a proportionally much more rapid growth of the amount of capital invested in mills. This growth, however, is conditioned by the ebb and flow of the industrial cycle. It is, besides, constantly interrupted by the technical progress that at one time virtually supplies the place of new workmen, at another, actually displaces old ones. This qualitative change in mechanical industry continually discharges hands from the factory, or shuts its doors against the fresh stream of recruits, while the purely quantitative extension of the factories absorbs not only the men thrown out of work, but also fresh contingents. The workpeople are thus continually both repelled and attracted, hustled from pillar to post, while, at the same time, constant changes take place in the sex, age, and skill of the levies.” (p 427-8)

And, this uncertainty and disruption continues to characterise capitalism today. Changes within the structure of capital, and the uneven development of capital, and of the employment of technology within it, continually change the nature of the demand for labour-power.

The kinds of changes that occurred in the 19^th century, with large numbers thrown off the land, and into long hours of factory work, have been mirrored over the last thirty years by the large numbers thrown out of relatively stable employment in manufacturing industry, into unstable, temporary, and casual employment in service industry, as it has become dominant.

Marx describes the continual fluctuations between prosperity and depression, in the years between 1815 and 1860 in the textile industry. These fluctuations often occurred from one year to the next as opposed to the more prolonged trade cycle witnessed in later years. During this period, new businesses, often run by former overlookers, would be set up, during periods of prosperity, only to be crushed when it ended, partly due to being under capitalised. In order to save money, capitalists would buy cheaper cotton, and use cheaper ancillary materials, only to find this raised costs because of the poorer quality, and because it caused the machines to break down. They would try to recoup this cost from workers wages, pushing them below the value of labour-power. This was abetted by the fact that employers also owned workers' cottages, and deducted rent directly from wages. This was also the period of the Truck System, when employers paid wages in tokens only redeemable at the company owned shop. It was in response to this, and the poor quality of goods available to them, as a consequence of this monopoly, that workers established their own Co-operative stores, and agitated for laws against the Truck System. Ironically, today the Trades Unions defend the modern Truck System operated by the Capitalist State in the form of the Welfare State.

As Engels describes, in his later prefaces to “The Condition of The Working Class in England”, another consequence of the development of capital beyond these early small scale forms of capital, was that the bigger capitalists abandoned these kinds of “penny-pinching” measures as counter-productive. They embraced the Factory Acts and even Trades Unions. In so doing they strengthened their own position. As Engels put it,

“And in proportion as this increase took place, in the same proportion did manufacturing industry become apparently moralised. The competition of manufacturer against manufacturer by means of petty thefts upon the workpeople did no longer pay. Trade had outgrown such low means of making money; they were not worth while practising for the manufacturing millionaire, and served merely to keep alive the competition of smaller traders, thankful to pick up a penny wherever they could. Thus the truck system was suppressed, the Ten Hours’ Bill was enacted, and a number of other secondary reforms introduced — much against the spirit of Free Trade and unbridled competition, but quite as much in favour of the giant-capitalist in his competition with his less favoured brother. Moreover, the larger the concern, and with it the number of hands, the greater the loss and inconvenience caused by every conflict between master and men; and thus a new spirit came over the masters, especially the large ones, which taught them to avoid unnecessary squabbles, to acquiesce in the existence and power of Trades’ Unions, and finally even to discover in strikes — at opportune times — a powerful means to serve their own ends. The largest manufacturers, formerly the leaders of the war against the working-class, were now the foremost to preach peace and harmony. And for a very good reason. The fact is that all these concessions to justice and philanthropy were nothing else but means to accelerate the concentration of capital in the hands of the few, for whom the niggardly extra extortions of former years had lost all importance and had become actual nuisances; and to crush all the quicker and all the safer their smaller competitors, who could not make both ends meet without such perquisites. Thus the development of production on the basis of the capitalistic system has of itself sufficed — at least in the leading industries, for in the more unimportant branches this is far from being the case — to do away with all those minor grievances which aggravated the workman’s fate during its earlier stages.”

1892 Preface To The Condition Of The Working Class in England

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