Money Week and the Minimum Wage - Part 2

Moreover, raising the Minimum Wage is also consistent with the Government's own stated, but never acted on, commitment to rebalancing the British economy. Thatcher's shopkeeper mentality meant that in the 1980's, British industry was gutted. Much of it went overseas, and capital moved into areas like Finance and Retail. Having defeated the unions, wages were driven down, forcing workers into ever more debt. A low wage-high debt economy was developed, encouraged by financial deregulation and continually lower interest rates that stoked a massive property and asset price bubble. That model has now hit the buffers. There is no potential to extend debt any further, as households face massive, and widespread defaults, the property market is living on borrowed time, and the same applies to the Bond and Stock Markets. The illusion of all this paper wealth is about to be brought back into alignment with reality. Wages could never be lowered sufficiently to compete with China, and in any case, China is itself farming out to lower wage economies in Vietnam, Indonesia and elsewhere. Import prices are rising while wages continue to fall. Rebalancing and restructuring of the economy is the only way out. Short of a very widespread socialist transformation, it would be a necessary solution for a Workers State in Britain too, as it tried to pay its way.

In fact, an increase in the Minimum Wage plays into that strategy too. Marx points out that David Ricardo had been the first one to note that Capital only invests in new machinery when wages have risen above a certain level. As Marx points out in Value, Price and Profit the natural response of Capital faced with rising wages, is indeed to invest in new machines, new techniques and so on to raise productivity. What applies here to individual companies applies equally to the economy as a whole. The more the economy itself is comprised of high value, productive companies, the more profitable that economy will be, the more it will be capable of sustaining higher living standards.

Of course, the Capitalists, particularly the small capitalists who are generally the ones that rely on paying low wages, and providing poor conditions, will complain that they cannot afford to pay higher wages, that it will drive them out of business etc. They always have. They said the same thing about the introduction of the Ten Hour Day more than 100 years ago. They complained that the restriction on the hours they forced workers to work would mean their business could not function, just as today they argue that they cannot comply with the Working Time Directive. What these arguments amount to are the usual calls from Capitalists to have their businesses protected. It means they want to avoid having to make their businesses more efficient, and simply to keep drawing their profits at the expense of the workers health and living standards.

But, in many cases, as Marx demonstrates, in doing so they frequently undermine their own interests too. Marx refers to the Staffordshire earthenware manufacturers who made all these kinds of arguments as to why the Factory Acts limiting working hours would destroy them. But, when the Acts were applied to them, they found new innovative ways of producing, and far from being bankrupted, their productivity rose, their output increased significantly, and so did their profits!!! So, raising the Minimum Wage, is in fact a means by which these lazy, inefficient capitalists, who rely on paying low wages, and providing poor conditions to their workers, will be forced to become more innovative, to introduce new technologies etc. in order to be able to pay their workers better wages. In doing so, that in itself moves the economy in the direction of the restructuring it needs to become competitive.

Its obvious that the Government is moving in the direction of encouraging this restructuring even if they are not moving in the direction of raising the Minimum Wage – though there has been some talk of piecemeal support for the Living Wage. Universities Minister, has been given some funding, and has been talking about the Government backing particular industry sectors. One reason for that is illustrated by the example of what happened with Graphene. It is a new wonder material that is just one atom of carbon thick, and has amazing properties in relation to its flexibility, conductivity etc. that opens up the possibility of all sorts of amazing new products. It was developed by scientists at Manchester University, who gained a Nobel Prize for their work. But, few of the patents for its use have been taken out in Britain. Most have been taken out in China!

The objection to such State backing has always been that it distorts the market, but also that the State is very bad at picking winners. The first objection fails, because every State in the world always has, and continues to support capital within its borders. Most new developments in the US are the result of backing by the US State in one form or another. The second objection falls because in fact, the State is no better or worse at backing winners than are individual capitalists. The argument usually rests on picking as examples nationalised industries like British Leyland, or British Coal. But, these companies were not picked as “winners”! Nearly all of the industries nationalised in Britain were taken over not because they were seen as winners, but because they were already capitalist losers! The State took them over, as it took over the banks in 2008, because Capital had bankrupted them, but they were seen as too important for the wider economy to allow to disappear. But, if we look at that section of Capital that its apologists usually refer to as the most dynamic, the new, small to medium enterprises, their success is far from stellar. About half of all new companies go bust within the first year, whilst within the first five years, 75% have gone to the wall!

A look at countries that have developed rapidly like Japan, South Korea, Singapore and China shows a high degree of state direction. In Japan, the State intervened not only to back particular companies in sectors like electronics and cars, but it also intervened to encourage consolidation of firms within these industries, into huge globally dominant producers. Singapore, as well as pumping huge amounts of state funding into creating a modern economy with ultra high speed broadband, has played an active part in moving production up the value chain, by encouraging higher wages, and encouraging lower value producers to make way for higher value industries. Although, China has now a massive capitalist sector of its economy, in many ways it resembles Lenin's model of the kind of State Capitalist economy he sought to create under the New Economic Policy. China's Stalinists have succeeded in attracting the kind of foreign investment that Lenin sought and failed. Large State owned enterprises in strategic sectors continue to be controlled by the Stalinist State, and the most important of these are probably the Banks, which operate under State direction, in accordance with the Five Year Plan, to direct investment into the required areas of production.

But, of course, none of these solutions have anything to do with Socialism, they are not the solutions that Marxists advance. Marx was a vociferous opponent of “State Socialism”. A powerful State exercising control over the levers of economic power, even in a society that has abolished Capitalists will inevitably use that control to exercise control over the workers themselves. There is no way to plan production in an economy by committee whether that committee is democratically constituted, or made up of bureaucrats. Economies can only be planned as part of a long term process based on re-establishing human relations between workers as producers and consumers, a process of developing co-operative enterprises, and co-operative consumer organisations that can gradually co-ordinate and integrate their activities, and their own plans. Simply trying to impose planning on the existing conditions will necessarily result in the kind of bureaucratism that deformed the USSR and other Stalinist states.

Planning already exists in a significant degree in capitalist economies. As Engels pointed out, firms began to plan their production even in the 19^th century. Capitalist States use control over Monetary and Fiscal Policy to plan at a macro-economic level. But, all of this planning, including any planning to restructure the economy, will be done in the interests of Capital, not workers.

Nor is a higher Minimum Wage a socialist solution either, any more than are higher wages in general. They reflect merely a lessening of the workers exploitation, and possibly as a result, the driving of capital towards a more rational, more developed form.

The real solution resides in workers themselves taking over the means of production, and in place of the current entrapment of workers in the National Insurance Scheme, in its replacement by a worker owned and controlled Social Insurance Scheme, that can provide workers with decent Pensions at earlier retirement ages, which the Mondragon Pension Scheme demonstrates is quite achievable; that provides them with a civilised level of unemployment benefit, in return for valuable work to meet the needs of workers rather than capital, and thereby prevents them being forced to sell their labour-power to capital below its Value; and which provides workers with civilised levels of Sickness and Incapacity Benefits without the kind of intimidation imposed upon them by the Capitalist State system. All of these would be means by which workers could then abolish in work benefits, and force employers o have to pay wages at least equal to the Value of labour-power. It could be further advanced, if in addition the Trades Unions, created a huge single employment agency that operated as a monopoly supplier of Labour to Capital.

But, so long as Capital survives, even these measures will be unable to overcome the whip hand that Capital exercises over labour. Capital will continue to be able to extract profits even if it pays workers the Value of their Labour-Power. The more it advances productivity, the more it will create a relative surplus of Labour, undermining any monopoly the workers try to establish. Only if workers themselves become the owners of the means of production can they prevent that. We can begin, as Marx advised, by setting up Co-operatives, particularly where workers are faced with the loss of their jobs. They could act themselves having taken over these firms to rapidly adopt more efficient techniques, to move their production to higher value products, which will enable them to enjoy higher wages. But, on a piecemeal basis that can offer no overall solution, and in any case, Capital will seek at every stage to destroy such worker owned enterprises, and take them back into its fold. Only if all these enterprises are brought into a single Co-operative Federation, itself integrated totally into the Labour Movement, as one weapon in its armoury against Capital will we have any possibility of fighting off those challenges.

Another tool, would be for such a movement to demand control over the money in our pension funds – around £800 billion in Britain. That should become part of the workers Social Insurance Fund, as should the money built up in the State National Insurance Fund – which in fact, does not exist, because the Government has done a Robert Maxwell and used our Pension Fund to cover its current expenditure on things like wars in Afghanistan and Iraq. On that kind of basis the position of workers would be strengthened considerably over what it is today. It would put the Trades Unions in a much stronger position to negotiate with the capitalists. But, it would also bring about a dramatic change in workers consciousness. It would mean that workers would begin to see in practice a different way of running society. They would gain confidence from owning and controlling their own significant elements of economic activity and control over their own lives. That would feed through into their political representation and aspirations. It would mean it feeding through into their expectations of the Labour Party, and it would either develop and respond to those aspirations, or else it would be replaced by a new Workers Party created by these workers, just as the Liberal Party was replaced by the Labour Party under similar changes in workers consciousness.

Under these circumstances, some of the elements of Trotsky's “Transitional Programme” begin to become relevant. Under these conditions of widespread workers self-activity and self-government, workers can respond to unemployment by demanding a sliding scale of hours, which would require that workers were able to exercise day to day control over the workplace. The fact that workers on a wide scale already exercised such control over their own co-operatives would place them in both a materially, and ideologically stronger position to do that. The existence of widespread workers democratic organisations within each neighbourhood, built up on the back of their co-operatives, and reflected in a flowering of things like Trades Councils, would facilitate the workers supporting each other in such ventures in the way that, in the 1920's, the Workers Councils movement did in Italy. At its peak, it means that the workers could demand the establishment of a Workers Government that would act to defend the interests of workers, taking over capitalist enterprises, and converting them to Co-ops etc.

But, that is a long way from where we are today. Under current conditions, raising Transitional Demands amounts either to what Marx called “Revolutionary Phrase-Mongering”, or else it is really just a reformist charade. Outside a revolutionary situation, as Trotsky set out, there is no way that the bourgeoisie or its State is going to agree to any meaningful “Workers Control”, without which the other demands for a “Sliding Scale of Hours or Wages”, for a Workers Government etc. are meaningless. Given that we quite clearly are in nothing like a revolutionary situation, raising these demands now is indeed just revolutionary phrase-mongering. Again as Trotsky points out, if Capital were to agree to some kind of Workers Control, it would be the kind we have seen before, such as Mondism, whereby the Capitalists do a deal with the Trades Union bureaucrats to exercise control not over Capital, but over the workers!!!

Those who use Trotsky's Transitional Programme, under current conditions, therefore, to raise these demands demonstrate that they do not understand its methods at all. Rather than a set of tools to be used under specific conditions, where the workers are themselves in a condition of transition from left reformism to revolutionary consciousness, they see it instead as some kind of Talisman, or Philosopher's Stone, which they can use to simply pull off an incantation that will transform the workers consciousness as if by magic! Trotsky once said that the Transitional Programme was like a bridge taking the workers from that reformist consciousness to a revolutionary consciousness. The problem is that at present, the workers are at a level whereby they do not have a road to get to that bridge, in fact, they do not even have a path, to get to a road, to get to the bridge! Our task is to first build the path, and construct the road, before we can offer workers the opportunity to cross the bridge.

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