Monday, 26 November 2012

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.”

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
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.


George Carty said...

Didn't most people who bought houses on flood plains only do so because they were the only houses they could afford?

Boffy said...

If the only car I could afford to buy was one that was a death trap, and kept costing me money I would decide not to buy a car, but to continue walking, cycling, using Public Transport, and renting a car when that was needed.

People do not have to buy houses they cannot afford. They can continue to rent, for example. They can live with parents, and so on. The houses built on flood plains were not all built in one go, and sold in one go. Its been a process over a long time.

The reason people cannot afford a lot of housing is not because the cost of building houses has risen. It is because people have been prepared to borrow large amounts of money (they often can't afford to pay back at normal interest rates), to pay over inflated prices for houses they couldn't afford. That meant land prices were then forced up.

If people refused to pay over inflated prices for houses, they would fall - which will happen before too long anyway - then land prices would also fall, which will cut the cost of building new houses.

When I got married I was 20 and my wife was 18. neither of us had well paid jobs. At the time I was getting £25 a week, which was not great even for the 1970's. We would like to have bought a house to, but couldn't afford. So we lived in a flat for 3 years, had no car, no TV, bought clothes from jumble sales, lived on baked beans, and walked everywhere.

Three years later, we'd saved over £5,000 (equal to about £80,000 today), and bought our first house for cash. Its about making choices. I never thought anyone should bail me out for putting up with living in a cold damp flat for 3 years!