Thursday, 31 July 2014

After Obama, What Next? - Part 9

Trotsky in his writings on Britain, after the betrayal of the General Strike, by the union and labour leaders, set out the approach to the United Front - “with the workers always, with the reformist leaders sometimes.” To the extent that the reformist leaders are moving forward, we can give them critical support. But, even when the reformist leaders are not moving forward that does not relieve us of the duty of “sticking with the workers” in the mass organisation, led by those reformist leaders. We cannot simply skip over the stage of the workers in these organisations breaking with the leaders and moving beyond the bourgeois social-democratic ideology.

In the US, that currently means that Marxists have to be active members of the Democrats, in order to gain the ear of the mass of workers that still look to that party as its representative. To the extent that the Democrat party leaders advocate policies of fiscal expansion, such as those set out above, or policies such as Obamacare, which represent a forward movement, Marxists can give them critical support, and oppose the efforts of conservatives to reverse them. But, our support for the workers in these organisations, be they trades unions, or social-democratic parties is not in any way conditional upon the official positions of these organisations and their leaders.

In fact, in every important respect, the official position of these organisations is irrelevant to our activity. We are not parliamentarists, who believe that it is necessary to commit organisations to particular positions, and for those parties and organisations to implement them from above. We are revolutionary socialists who believe that workers have to act themselves here and now, to change the material conditions of their existence, and in so doing to build up their own self-government. Marxists in the US, can be active in the trades unions and in the Democrats to be building worker owned and controlled organisations, providing social insurance, for example, that can provide health insurance for workers within the context of Obamacare. They can be working with workers in the healthcare industry to establish co-operative healthcare provision that can then work with these social insurance co-operatives.

In fact, building on the work being done by the International Co-operative Alliance, such co-ops could link up with similar co-ops in Canada and Mexico. They can link up with co-ops in the pharmaceutical industry, or those in biotechnology, such as have been set up by the Mondragon Co-ops, to break the hold of the big US drug companies.

Housing co-ops are common in the US, even amongst the rich. Marxists in the US, working through the political machinery provided by the Democrats, at a local level, can turn these organisations outwards into the local communities, to build further such co-operative structures, at a block and community level, thereby drawing in new worker activists.

Programmes for urban renewal, undertaken by such community co-ops, can then be drawn up and construction co-ops, employing unemployed workers, and providing skills training, can then be established to carry it out. The United Steelworkers have joined with the Mondragon Co-ops to draw up a new structure of trade union/co-op working, and to spread worker-owned co-ops across N. America. A similar link up with trade union locals, in the construction industry, could facilitate such a development.

These kinds of programmes of working-class self-activity, can be undertaken whatever the position adopted by the party leaders. Moreover, to the extent they grow, and pull in new worker activists, they provide the example of the kind of alternative co-operative society that could be built in place of capitalism. It also provides the basis for transforming the nature of the party, and taking it beyond the bourgeois limits placed on it by the current leaders.

Marxists should be adopting this approach now, as the best means of moving the Democrats forward, and establishing the basis for defeating the forces of reaction and conservatism in the coming Congressional and Presidential elections.

As things stand, the most likely outcome is for Hillary Clinton to win the Democratic nomination. She is likely to stand on the same kind of social-democratic agenda as she did previously. Given the divisions in the Republican party, the continuing role of the Tea Party, and the demographic shifts in US society, the likelihood is that she will win the Presidency.

But, that cannot be guaranteed. Obama and the Democrats failure to face down the Republicans, and the consequent lacklustre growth in the US economy, has seen his popularity decline significantly. A hard core conservative and populist vote will be mobilised by the Tea Party against the Democrats. Unless they can provide a bold and confident agenda that provides workers with a sufficient reason to turn out and vote, the Democrats could lose due to apathy.

That would be bad for US workers, but it would also be bad for big US industrial capital. A Republican victory in either Congress, or for the Presidency would see the US suffer from the same insane policies of austerity that have been implemented in the UK and peripheral Europe.

It would be likely to send the US economy into an unnecessary recession, at a time when it should be recovering more strongly. It would mean a further relative deterioration of the US economy relative to China. The underlying interest of big capital is then to resist such a development. However, economic interest does not map directly on to political perspective. That is why Marxists do not rely on blind economic forces driving history in our direction, but seek to create history via the agency of the working-class, acting consciously to change our existing material conditions, and thereby the ideas that flow from it. 

Wednesday, 30 July 2014

Capital II, Chapter 17, - Part 15

2) Accumulation and Reproduction on an Extended Scale

“Since accumulation takes place in the form of extended reproduction, it is evident that it does not offer any new problem with regard to money-circulation.” (p 348)

Accumulation occurs because a portion of the realised surplus-value assumes the form of money-capital, as opposed to simply money, used for unproductive consumption, by the capitalist. So, the question of where the money-capital comes from is already resolved. The question then is only that previously asked in relation to simple reproduction, which is where the money itself comes from. With simple reproduction, the total amount of value, to be circulated, in the economy, remains constant, and it was seen that the proportions in which this is divided i.e. how much is wages and how much is surplus value, does not change how much money is required to achieve that. The only requirement for additional money is to replace that used up by wear and tear.

But, with expanded reproduction, the actual amount of value to be circulated itself increases. So, money, in addition to that to cover wear and tear, has to be put into circulation.

The increase in the value of commodities being circulated is not due to a rise in their prices. It is due to an increase in the quantity of commodities being circulated. That increase is not due to a rise in productivity, which would have resulted in a greater quantity of commodities but the same amount of value. It is due to an increase in the amount of production – capital employed.

There are three means of providing the additional money required.
  1. Increase the velocity of circulation 
  2. Make use of existing money hoards
  3. Buy additional gold from producers 
The first is achieved by a number of methods. An improvement in economic conditions may itself speed up circulation, as people pay more promptly etc., and improvements in transport and distribution reduce circulation time. But, improvements in banking, the ability to net off payments via clearing houses, the increased use of commercial credit, etc. will all increase money velocity, so that a given amount of money will facilitate a larger volume and value of transactions.

The second may again arise automatically from an increase in trade. A shop may accumulate money in its till, which it will use to replenish its stock when it sees the need to do so. When trade improves, it may use that money more frequently to buy in stock. But, in general, money may sit idle in bank deposits when trade is depressed, and only be drawn into activity when trade improves. Small cash balances owned by workers and small traders may be inadequate to finance productive activity, but when trade improves, banks may amalgamate them into larger funds, able to be used productively.

Finally, where these methods have still not been adequate, the value of money tokens will rise above the value of the money-commodity – here gold. In that case, an incentive arises to import gold to use as money. The fact that capitalism has to expend considerable social labour-time in the production of precious metals for this purpose, represents a large waste of social wealth. That labour-time could have been used to produce real wealth. It is a big overhead, or faux frais of production, as Marx calls it, for capitalism. So, the more it is able to avoid it, the better. The improvements in banking etc. that speed up the velocity of circulation, the introduction of credit and paper money tokens, reduce the need for precious metals, and thereby free up labour-time for other activities.

“To the extent that the costs of this expensive machinery of circulation are decreased, the given scale of production or the given degree of its extension remaining constant, the productive power of social labour is eo ipso increased. Hence, so far as the expediencies developing with the credit system have this effect, they increase capitalist wealth directly, either by performing a large portion of the social production and labour-power without any intervention of real money, or by raising the functional capacity of the quantity of money really functioning.” (p 350)

Marx points out that it is, therefore, absurd to claim that capitalist production could continue on its present scale without credit.

Back To Part 14

Forward To Part 16

Tuesday, 29 July 2014

After Obama, What Next? - Part 8

The reality of this reliance of big industrial capital on social-democracy lies behind Obamacare, just as it lay behind the expansion of welfarism in the US in the 1960's, under Johnson's “Great Society” measures, and before that with Roosevelt's “New Deal”. If US big capital is to overcome its current malaise and the challenges the US faces from rising economies in Asia, and elsewhere, it will require something equally sizeable, and to ensure the election of social-democratic governments to implement them, it will need to offer adequate incentives to workers to vote for these parties to bring it about.

The outlines of what big capital in the US requires, to meet these challenges, can be seen, and as in the past, some of these requirements also offer the potential to provide the necessary incentives to workers to vote for parties proposing measures to bring them about.

For example, US capital has gained a considerable competitive advantage, in the last year or so, as a result of the development of fracking, which has made available large supplies of oil and gas, at much reduced prices, thereby reducing the cost of constant capital in many industries. This may also explain the more recent shift in US foreign policy in the gulf away from the gulf states.

But, this advantage may be short-lived. The costs of oil extraction from fracking may rise quickly, and the ultimate supplies may not be that great. The US, as with other economies, needs a revolution in energy production that will require large scale investment in research and development. That level of investment in development usually comes only from the state, until its outcome can be shown to be profitable. (The example of space technology is classic here, where it is only now 60 years after the first space programmes, that private capital is beginning to take over the development of space ports, space tourism and so on.)

The US, like most of Europe, requires considerable amounts of capital expenditure to repair and upgrade its social capital. Almost every week, there are reports, in the US, of bridge failures, for example, This is just a manifestation of the fact that during the period of long wave downturn, the policy of conservative governments was to seek to rebuild the rate of profit on the basis of low wages and high levels of private debt. The increase in public debt arose, not because of large scale borrowing to finance investment, but because of tax cuts for the rich, and to cover increased revenue spending on welfare as unemployment and poverty rose, and as low-paying small employers were subsidised out of the public purse via the extension of in-work benefits.

Global interest rates are starting to rise, as a result of the shift in the Long Wave cycle from the Spring to Summer phase. But, they are still at historically low levels, as they were after WWII. This provides an historic opportunity for governments to undertake long-term borrowing, issuing 30 year and even 50 year bonds with interest rates on them locked in to these low rates, to cover specific infrastructure investment.

In the US, that would cover a nationwide programme of rebuilding bridges, roads, and rail; the complete refurbishment of its electricity distribution, to provide a smart grid; the development of the kind of 21st century communication network an economy like the US requires. In many ways, this is the kind of programme that Roosevelt implemented with the New Deal. But, Truman and Eisenhower were thereby also locked into this social democratic framework. In fact, that social-democracy was given its international aspect first as a result of the agreements reached at Bretton Woods, though some of the necessary basis was also laid at Potsdam and Yalta, by locking in western communist parties to a reformist function where they simply acted as a left-wing pressure groups on the main social-democratic parties.

In Britain, despite the debt to GDP ratio being at 250%, the same approach was taken, borrowing to finance the development of the welfare state, and to nationalise bankrupt staple industries, so as to provide the necessary social capital for investment and restructuring. And again the incoming Tory government in 1951, had to operate within this social-democratic framework. Leading to the term Buttskillism. Expenditure on the welfare state increased, and the majority of nationalised industries were retained in state ownership to ensure the required investment continued to be made.

In Western Europe, a similar effect was achieved by the first major example of social democracy and Keynesianism at an international level, via the Marshall Plan. So, even when conservative governments were elected, they could only be so by acting as social democrats. If social-democratic parties are able to learn the lessons of history, then in the US and Europe, they will seize the historic opportunity that current low levels of interest rates provides, to draw up big bold plans for such large scale investment. Labour should join with other EU social democrats to propose such a programme across the EU, that would reinforce its growing integration, at a material level. But, an ideological struggle by social-democracy globally is required to defeat attempts of reactionary and conservative forces to prevent further progress by their insistence on austerity and similarly backward looking solutions. This is all the more necessary as forces like the conservative parties are not the most reactionary forces that have to be addressed. More reactionary forces such as those of religious fundamentalism of all sorts, feed off the success of other conservative forces, and present an even greater threat.

Monday, 28 July 2014

The Law Of The Tendency For The Rate of Profit To Fall - Part 26

Fall In the Value Of The Variable Capital (10)

In Part 25, it was shown that the value of labour-power may fall as a result of the cheapening of wage goods from things such as the removal of tariffs and other impediments to trade. But, the main cause of a reduction in the value of wage goods arises from the rise in the social productivity of labour, i.e. from the same cause of the tendency for the rate of profit to fall. Any rise in productivity will tend to cause the value of wage goods to fall, and not just a rise in productivity affecting the production of wage goods directly.

For example, an improvement in productivity in the transport industry, will reduce the cost of transporting commodities to markets, which will thereby reduce prices; an improvement in productivity in the energy industry will reduce the value of all commodities, which require energy for their production, which is pretty much all commodities; an improvement in productivity in machine production industries will reduce the value of machines used in a range of industries, including the production of wage goods; an improvement in productivity in extractive industries for metals etc. will reduce the value of commodities which comprise metals, and so on. Moreover, all of these will tend to have secondary effects, so that, for example, a reduction in the value of energy will not only directly affect those industries producing wage goods, but will also affect the machine producers that provide those industries with their machines, it will affect the transport industry that delivers commodities to markets, and inputs to producers, and so on. 

The consequence then is that the value of labour-power falls, because less labour-time is required to reproduce it. The value of variable capital thereby falls, but this in no way represents a rise in the technical composition of capital, causing the organic composition of capital to rise, and the rate of profit to fall. In fact, the opposite may arise. In some industries, it may be the case that a fall in the value of labour-power, acts as a disincentive to replace labour with machines, as was seen earlier, because the machine must be cheaper, i.e. require less labour for its production, than the paid portion of the labour-power it replaces. For example, Marx gives the example of the use of women to pull canal barges, because their labour-power was so cheap that it was more profitable than using horses! As was stated earlier, the real determinant is not the organic composition of capital c/v, but the relation of c to the new value created by the labour power, i.e. c/v+s.

If v falls because the value of labour-power falls then not only will s/v rise, but for the reasons set out above, its possible that c/v+s may also fall, as this cheaper labour replaces machines, or animals in the production process. In that case s/c+v will rise on two counts, first the relative fall in the technical composition of capital, and secondly the rise in the rate of surplus value.

But, in conditions of rising social productivity this can only arise in specific industries. By definition, it cannot apply across the whole social capital, because the basis of that rising social productivity is that relatively less labour-power is being employed to process a greater quantity of material, and it is this, which is also the basis of the fall in the value of labour-power. But, this has a number of consequences, some of which have already been considered. I will examine these next.

Sunday, 27 July 2014

Should Sanctions Be Put On The United States?

Its estimated that there are now more than 1,000 civilians, mostly children, that have been murdered by Israeli forces in Gaza. The Israeli state only survives because of the financial, military and political support it receives from the United States. The weapons being used to murder Palestinian children at the rate of one an hour, including the F-16 warplanes, that rain down death and destruction, on a massive scale, are themselves provided by the US. Russia may or may not have provided weapons to the East Ukrainians, resisting the military offensive, launched against them by the regime in Kiev; there is no doubt that the US is providing the arms to the Israeli regime that are being used to carry out what the UN itself has described as War Crimes. If there is a case to impose sanctions on Russia, there is then an even greater case for the imposition of sanctions on the United States.

Paul Mason recently wrote,

“Let’s be clear: targeting civilians, and failing to avoid civilian casualties during military attacks, are both indictable as crimes under the fourth Geneva convention. The indiscriminate firing of rockets into Israel has been described as a war crime by Amnesty International. By midday Sunday, anybody following the Gaza events on Twitter would have enough evidence to ask the same question about Shujaiya.”

In fact, the UN Human Rights Council has voted to investigate Israel for these War Crimes, and as is always the case, in such votes, only the US voted against the motion. Compare that with Russia's support for the UN motion calling for an independent inquiry into the shooting down of flight MH17. Yet, it is the US that is proposing sanctions on Russia, not vice versa! Since that resolution, the UN itself has seen one of its schools, in Gaza, shelled by Israeli forces, with another large scale loss of life of Palestinian children. But, all US politicians, like John Kerry, can do is to express their “concern” at such blatant acts of murder.

As Paul Mason reported, whenever such brutal attacks occur, the US media automatically mobilises a massive propaganda machine to defend the war crimes of the Israeli regime. 

“My colleague, Matt Frei, tweeted that CNN’s Wolf Blitzer interview with Netanyahu was less a grilling more “a warm bath and a back rub”.”

Indeed, they are so sycophantic that you fully expect one of them to say, “While I'm already down here on my knees, can I offer you a blow job?” 

Channel 4, and other European media outlets have shown film of innocent civilians being shot by Israeli snipers, and then shot again when they have been on the ground. When others have sought to recover their bodies the snipers have shot at them too. As a result bodies have had to be left lying on the streets for days. Yet, the US is calling for sanctions on Russia because the Ukrainian separatists did try to recover bodies from the wreck, despite being under bombardment and mortar attack by the Kiev regime whilst they did so. Whatever the inadequacies of the separatists, its only because they acted to recover those bodies that they are now back in the Netherlands, whilst the bodies of dozens of murdered Palestinians remain on the streets, in the sweltering heat of Gaza.

But, of course, its not just the role of the US in providing the weapons of mass destruction used by Israel to murder Palestinian men, women and children. The US itself is directly responsible for the murder of hundreds of civilians by its own direct and deliberate military acts of aggression. Even without considering the hundreds of thousands of people who died because of the US's illegal war in Iraq, or the thousands murdered as a result of the US involvement in Libya, or its provision of weapons both directly and through its Gulf state allies to the jihadists in Syria, the fact is that the US itself directly every day kills civilians with its drone attacks. Those murders are often not reported, because they occur unseen, but even when some large scale death of civilians results from one of these attacks, they have now become so regular, and the US response that it was an “accident”, that it is simply “collateral damage” become so routine, that it is no longer news. Yet, when MH17 is possibly shot down, possibly by irregular Ukrainian forces, the US insists that this is so heinous that it can only result in sanctions being imposed on Russia.

So given the much larger scale murder committed by the US than by Russia, over such a long period that it can now only be described as pathological, should sanctions be imposed on the United States? No Marxist could propose such a course of action. Sanctions are imposed by one or more states against another. They are in essence a form of war themselves. Instead of being an act of military aggression, they are an act of economic aggression, that is often a precursor to actual military aggression. It is the waning economic power of the United States as a global player, and its increasing loss of political and strategic power around the globe, as new forces such as China, and the BRIC economies rise to challenge it, that is behind the US attitude to Russia.

The calls for action against Russia come just as Russia and other BRIC countries have come together to establish an alternative to the IMF, which is dominated by the US. It comes as Russia is forging a closer relation with the world's largest economy China, and working towards the establishment of a Eurasian economic zone similar to the EU. It comes as China is increasingly the dominant power in Africa, and the US is only now racing to try to catch up, with China already having signed trade and other deals with large numbers of economies in the US's own back yard in South America.

Marxists do not support the actions of cold war, trade war, or outright war by one capitalist state against another, whether that is the US against Russia or vice versa. Our concern is to work towards the unity of the workers of all these countries against their own ruling class, and that is not aided by supporting sanctions against the economy upon which those workers depend for their livelihood. That is also why sanctions and boycotts against Israel are wrong. The problems of the Middle East whether they be those arising from the creation of the state of Israel, or those arising from the Sykes Picot Agreement are problems arising from top down solutions imposed by capitalist states. The solution to those problems does not flow from further such top down action by states. It can only be created by the direct action of workers uniting across borders.

Saturday, 26 July 2014

After Obama, What Next? - Part 7

Just as the bourgeoisie as a whole needed the support of workers to defeat the landed aristocracy, so the tiny numbers of the big industrial capitalists are unable to defeat the much larger number of small and medium capitalists, and those that share their outlook, without the support of workers.

The British Liberal Party reflected that compromise, and the de facto alliance between these industrial capitalists and workers, and the US Democrats reflect it also. For a time, parties like the Labour Party and European social-democratic parties appeared to represent something different, but in reality, all they represented was a greater strength of the interests of workers within that compromise. In respect of the Labour Party, its commitment to the maintenance of capitalism, as the basis of furthering the interests of workers was never in doubt, and the interests of workers were always subordinate to those of big capital.

That is now simply more manifest, in the policies and actions of European social-democratic parties in general, and this was facilitated by the split in the international labour movement, into the Second and Third Internationals. There is then no real substantive difference between these parties and the US Democrats. They are all bourgeois workers parties, in the sense that they are parties with a bourgeois ideology, specifically geared to the interests of big industrial capital, that depend upon the support and activism of workers in order to win elections.

Ultimately, big industrial capital requires the election of these social-democratic parties, or for the social-democratic wings of conservative parties to be strong enough to represent its interests, as against a reversion to more primitive forms of capital. The economic power of big capital can usually outweigh the measures undertaken by conservative governments to benefit small capital, but, at times, the measures undertaken by those governments fundamentally threaten big capital. The austerity measures undertaken in the UK and parts of Europe, and advocated by the Tea Party in the US, have weakened the economic recovery after 2008. The US bore most of the cost of undertaking the required fiscal stimulus, therefore. But, the other consequence has been to strengthen conservative forces in Europe, even more, as a result of the resulting economic weakness.

Not only has this strengthened right-wing populism, but it has strengthened nationalistic tendencies, thereby undermining progress towards a single European state, which is a fundamental requirement of big industrial capital. If it is to be achieved, big industrial capital will require social-democratic governments across the dominant states of the EU, it will require co-ordinated fiscal expansion across the EU, to boost economic activity and employment, so as to undermine the tendency towards economic nationalism, and thereby create the material conditions to swing public opinion behind the need for greater political integration and the creation of a single federal state. Either that, or as happened in the US, it will be brought about forcibly by war.

Northern Soul Classics - I'm Coming To Your Rescue - The Triumphs

One of the 100 mile an hour dancers played last Saturday at the stoke nighter.  Another great night.  My only complaint is that a number of DJ's starting with Kev Roberts had so much bass on everything that it drowned out the actual music to a dull thud.  That apart great night, some great dancing, and my new dancing shoes were brilliant.

Friday, 25 July 2014

Capital II, Chapter 17 - Part 14

With the simple circulation of commodities, C – M – C, the money form of these commodities is only transient. C assumes the form of M only as part of this exchange, prior to being consumed, just as M is only a means towards the purchase of C, to complete the metamorphosis.

The assumption of the money form is a necessary part of that process. In the same way, under capitalist production, a portion of the capital must always be in the money form, prior to the purchase of productive-capital. Similarly, a portion of surplus-value must always be in the money form, whether it is waiting to be used to buy additional productive-capital, or individual items of consumption for the capitalist.

“Apart from this, the circuit of money — that is, the return of money to its point of departure — being a phase of the turnover of capital, is a phenomenon entirely different from, and even the opposite of, the currency of money, which expresses its steady departure from the starting-point by changing hands again and again. Nevertheless, an accelerated turnover implies eo ipso an accelerated currency.” (p 346)

In other words, we have seen that the circuit of money capital proceeds, M – C … P … C' – M'. But, the currency of money involves money spent by A passing to B, who passes it to C and so on. However, if capital turns over more quickly, by its nature, this means that money is also circulated faster. Instead of a capitalist keeping £5,000 of money-capital on hand, they may require only £1,000, releasing £4,000 to circulate. The £1,000 returns five times faster, and is thereby put back into circulation that much sooner, and more often.

This applies whether it is a more rapid turnover of either the constant or the variable capital, the same sum of money being used to purchase an increased value of commodities. Similarly, the faster the turnover, the more often the surplus value is realised, and, therefore, this amount of money being thrown back into circulation to buy additional productive capital or items of individual consumption.

The opposite does not necessarily apply. An increase in the velocity of money does not imply an increase in the rate of turnover of capital. But, it might. If it is brought about because of an improvement in the payment systems, then this might mean that the circulation time falls, because payment for goods sold is faster, making that money available to purchase productive-capital sooner.

Capitalist production, based on wage labour, assumes a sufficient money hoard to enable the payment of wages.

“This is the historical premise, although it is not to be taken to mean that first a sufficient hoard is formed and then capitalist production begins. It develops simultaneously with the development of the conditions necessary for it, and one of these conditions is a sufficient supply of precious metals. Hence the increased supply of precious metals since the sixteenth century is an essential element in the history of the development of capitalist production. But so far as the necessary further supply of money material on the basis of capitalist production is concerned, we see surplus-value incorporated in products thrown into circulation without the money required for their conversion into money, on the one hand, and on the other surplus-value in the form of gold without previous transformation of products into money.

The additional commodities to be converted into money find the necessary amount of money at hand, because on the other side additional gold (and silver) intended for conversion into commodities is thrown into circulation, not by means of exchange, but by production itself.” (p 348)

Wednesday, 23 July 2014

What The US Really Fears

Where money and trade lead, politics follows. The main EU leaders this week seem to have shown that they are not as gullible as US politicians hoped. The drive to impose more and more sanctions on Russia, will only hurt Europe. That is what the US hopes for, just as its policy of fermenting chaos in the Middle East and North Africa has been geared to meet its interests as against those of the EU, and its other main strategic competitors, Russia and China.

Nobody knows what happened with the Malaysian airliner that crashed in Ukraine. It is the same kind of Boeing 777 that Malaysian Airlines lost several months ago in the Indian Ocean, and no one is suggesting that Ukrainian separatists, or Vladimir Putin had anything to do with its loss. The same kind of speculation and conspiracy theory about MH17, could easily be extended to suggest that the two crashes were in fact, linked in some way. For example, could it be a fault in the aircraft, that is being covered up? Very unlikely, I'd suggest, but, without any actual facts, to base an analysis on – let alone impartial facts, as all the “evidence” so far has come from either the Ukrainian Government, or hypotheses from western politicians - it is just as valid a possibility.

Yet, despite the lack of any facts or evidence, western politicians have continued to speak and act, as though Vladimir Putin himself shot down the plane! I have absolutely no time for Putin, or his gangster regime, which is the heir to the gangster regime established by Yeltsin, with the help of imperialism, but opposition to Putin is no reason to play the part of “useful idiot” to US imperialism either. On CNBC on Tuesday, one financial analyst, Roger Nightingale, made what I thought was a sensible point against the line being given by former Labour Minister Mark Malloch Brown. Nightingale said, why were sanctions being proposed against Russia rather than against Ukraine?

In the past, he pointed out, the west has supported calls for self-determination by minority groups, and yet here the call for such independence by people in Eastern Ukraine had been met, by large scale violence by the Ukrainian state. Hundreds of East Ukrainians have died in the violence unleashed on them by the regime in Kiev, and many more have been injured, as well as being left homeless. Even if the separatists did shoot down the jet liner – and given the fact that responsibility for the shootings in the Maidan were probably organised by some of the leaders of that protest, in a false flag operation, that has been used several times, in the past, by the CIA – no one is suggesting that it was done by them deliberately. If they did shoot it down, they did so, because they mistook it for one of the regime's own war planes that has been bombing their homes, for the past months, without one word of condemnation from the west about such flagrant war crimes, against a civilian population.

In fact, the Youtube video that was supposed to show the BUK missiles being driven back towards Russia, has been shown to have been filmed in a part of eastern Ukraine that is under the control of the regime, not the separatists!

The loss of life of the people on the Malaysian airline is terrible, but the use of that loss of life for political purposes by western, and in particular US politicians, is truly sickening. It is completely hypocritical when compared with their own justification of “collateral damage” when it happens as a result of their supposedly smart weapons. The number of civilians killed on this airliner is relatively small compared to the number of civilians killed by US drone strikes, let alone from their air strikes. It is thoroughly hypocritical compared to their lack of comment about the deaths of Ukrainian civilians at the hands of the Kiev regime, or the more than 500 civilians killed in the last week in Gaza, by the US proxy in Israel.

The US attitude to the EU was set out plainly some time ago, when their ambassador to Ukraine said “Fuck the EU”. What the US fears is that the large amount of trade between the EU, particularly its main economies, and even more particularly Germany, will necessarily lead to a growing political closeness and allegiance with Russia, and a drawing away from the US. That is undoubtedly why the US has been engaged in large scale spying and phone tapping of European political leaders, like Angela Merkel. Wherever, money and trade flows, political allegiances are sure to follow. The establishment of every nation state, and of the EU itself, is evidence of that fact.

Russia is the third biggest trading partner of the EU, and the EU is Russia's largest trading partner. Within that the role of Germany is again pre-eminent, whereas the UK has a much smaller trading relation with Russia. Similarly, US trade with Russia is small. So its no wonder that the US and UK are some of the more vociferous in calling for increased sanctions. Throughout, the 19th century, as repeated attempts were made to unify Europe, Britain intervened, realising that a large European state, on similar lines to the US, would quickly reduce the importance of the UK as a global power. Britain's role in WWI, and WWII, should be seen as merely a continuation of that role, and Britain's eurosceptic position ever since should be seen as simply a continuation of that mindset amongst some sections of the ruling elite, especially those that continue to look towards the US rather than the EU.

The US was happy with the development of the EU so long as it acted as a buffer against the USSR, and provided the US with a huge aircraft carrier on which to base its nuclear weapons, during the Cold War, but now, the economic logic is for the EU to expand eastwards, and southwards. Russia is forming a closer and closer relation with the world's largest economy in China, and aiming towards the development of a Eurasian economic zone. It would be crazy for the EU to cut itself off from that development, in favour of a continuing relation with a relatively declining US economy.

The obvious development, as Trotsky and the Comintern argued, back in the 1920's, is for the development of a United States of Europe that would include Russia. Lenin believed that the economic rationale for that was undeniable too, but thought it was politically unachievable when the idea was first raised. Even if such a development is not possible, it would make the same kind of economic sense for the EU to foster a close relation with any developing Eurasian economic zone including Russia, China and the Central Asian republics. But, in just the same way that a unified Europe threatened Britain in the 19th and early 20th century, so such a development would threaten the global hegemony of the US today. That is what it really fears. That is why it is trying to drive a wedge between the EU and Russia.

Similarly, over the last 20 years, the EU has been developing increasing economic ties with its southern periphery in the Middle East and North Africa. It had established a number of trade agreements with these countries, drawing them closer towards becoming at some point associate states similar to the way states in central and eastern Europe had been drawn in. In fact, it was the economic development that resulted from these arrangements that created the material basis for the “Arab Spring”, particularly in Egypt and Tunisia. But, with China increasingly becoming the dominant economic power in the rapidly developing sub-Saharan economies, such developments increasingly threatened another area of the globe over which US hegemony would not run.

The role of the US's agents in the Gulf States, in providing jihadists with the resources to create chaos in those states, has brought any such development to a halt. Chaos may not directly benefit the US, but to the extent that it removes any state from a position where it, or some related state may exert control, it indirectly benefits the US. For the last century, the US has been happy to settle for creating chaos in regimes it could not control. It has usually been able to find “useful idiots” to enable it to achieve that function.

Often the UK, as a very junior partner to US imperialism has fulfilled that role. But, there are always aggrieved parties that will be prepared to sell their services to the US, in order to gain what they hope might be future favours. In the 19th century, Marx and Engels describe how small central and eastern European states sold their services to Russian Tsarism in that way, in the hope of obtaining its favour. Ultimately, it was those kinds of relations that led to the Balkan Wars, and then to WWI.

Today, some of those same countries and nationalities, having suffered under the heel of Tsarism and then Stalinism, are happy to sell their services to the US, and its agents such as the UK, in the hope of obtaining favours, if only the hope of setting up a large military barrier on the border with Russia. In many ways, these are very similar conditions to those that led to the Balkan Wars, and World War I.

The US, for its own global strategic reasons is trying to drive a wedge between the EU and Russia. It has already created the conditions in the Middle East and North Africa, where chaos and instability reigns, and where the EU now has to devote increasing resources to tightening its borders, and warding off the threat off jihadism. The US encouraged similar movements in the 1990's in central Asia, first with its arming and provisioning of Bin Laden and the Mujaheddin in Afghanistan, and then with its relations with assorted central Asian dictators.  It has created chaos in Libya and Syria, and Iraq.

Marxists have no reason to support any of the bourgeois forces involved in these global strategic chess games. But, we do have every reason to oppose such manoeuvres aimed at creating divisions between workers, especially when such manoeuvres have the potential of leading the world increasingly towards war, and the destruction of mankind.

Tuesday, 22 July 2014

After Obama, What Next - Part 6

On all the grounds set out in Part 5, therefore, it can be seen that what is in some ways only a superficial political division between Democrats and Republicans, is at the same time based on real underlying class interests. And it is these underlying class interests that are decisive in looking at what comes after Obama, and what position Marxists in the US should adopt.

The first question is what attitude should Marxists adopt to the Democrats? In reality, it is the same question as what attitude should Marxists adopt towards Labour in the UK, the SPD in Germany and so on. The answer is to “stick with the workers”. 

“As the experiences of the Russian Revolution teach us – remember this in England and America! – the most important thing of all is to stay in the midst of the masses of workers. You will often go wrong with them, but never leave the mass organisations of the working class, however reactionary they may be at any given moment” (emphasis added).

(Zinoviev’s closing speech at the 15th Session of the Second Congress of the Comintern) 

Close to the end of his life, Engels, writing to US socialists, Made this same point, and he related that he and Marx had joined the German Democrats, an openly bourgeois party, because it was the means of gaining the ear of the workers.

“When we returned to Germany, in spring 1848, we joined the Democratic Party as the only possible means of getting the ear of the working class; we were the most advanced wing of that party, but still a wing of it. When Marx founded the International, he drew up the General Rules in such a way that all working-class socialists of that period could join it -- Proudhonists, Pierre Lerouxists and even the more advanced section of the English Trades Unions; and it was only through this latitude that the International became what it was, the means of gradually dissolving and absorbing all these minor sects, with the exception of the Anarchists, whose sudden appearance in various countries was but the effect of the violent bourgeois reaction after the Commune and could therefore safely be left by us to die out of itself, as it did. Had we from 1864, to 1873 insisted on working together only with those who openly adopted our platform where should we be to-day? I think that all our practice has shown that it is possible to work along with the general movement of the working class at every one of its stages without giving up or hiding our own distinct position and even organisation, and I am afraid that if the German Americans choose a different line they will commit a great mistake.” 

London, January 27, 1887

Engels made the same point to Eleanor Marx, to ignore the various British sects such as the SDF and the ILP, and to go directly to where the workers were in the trades unions and in the Liberal Clubs.

But, of course, that did not mean fetishising those organisations. The Marxists activity within them must always be geared to developing the working-class, and thereby to developing the praxis of these organisations, so as better to reflect the needs and interests of the workers. At certain points, this very process, must involve the fracturing of these organisations. Where this happens naturally, with the British workers decisively moving beyond the limits of the Liberal Party, it would be lunacy to oppose this movement, as, for example, the Fabians did, and thereby to fetishise existing structures.

But, it is also lunacy to believe, as some do today, that groups of a few hundred, or a few thousand – usually petit-bourgeois – members of revolutionary sects, can substitute for the real movement of the working-class, and simply proclaim the establishment of a new Workers Party, even if that party is intended to be only a replica of some old workers party.

More difficult is the condition that Lenin and Trotsky found themselves in in 1914-20, when the old mass workers parties were dividing, and the possibility of developing new revolutionary mass workers' parties existed at a time when global socialist revolution appeared to be unfolding. As it turned out, that division of the working class movement, was catastrophic, and created the weakness we have today, but it would have been near impossible to have seen that at the time.

It would be much better to have a workers' party in the US that was more like the social-democratic parties in Europe, but we have to deal with the reality we have. In reality, the US Democrats are not greatly different to European social-democratic parties, which if anything are moving closer to their US counterpart, and that is because they are all built upon that same bourgeois, social-democratic ideology of a compromise between the interests of big industrial capital and the working-class.

The former is based on the more progressive forms of capital – in fact, it is based upon what Marx calls, in Capital III, one of the transitional forms of property between capitalism and socialism.

“The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.” 

It is based on a socialised form of capital, represented by the joint stock company, and its modern form, the corporation and public limited company. As Engels describes in his Critique of the Erfurt Programme, these forms of capital have not only gone beyond private capitalist production, but they have also gone beyond that “planlessness”, that characterised the early forms of capital.

“What is capitalist private production? Production by separate entrepreneurs, which is increasingly becoming an exception. Capitalist production by joint-stock companies is no longer private production but production on behalf of many associated people. And when we pass on from joint-stock companies to trusts, which dominate and monopolise whole branches of industry, this puts an end not only to private production but also to planlessness.”” 

As Marx describes in Capital III, this form of capital necessarily comes into conflict with the less mature forms, as it “expropriates the expropriators”, i.e. the small and medium capitalists.

"The capital, which in itself rests on a social mode of production and presupposes a social concentration of means of production and labour-power, is here directly endowed with the form of social capital (capital of directly associated individuals) as distinct from private capital, and its undertakings assume the form of social undertakings as distinct from private undertakings. It is the abolition of capital as private property within the framework of capitalist production itself.

There is antagonism against the old form in the stock companies, in which social means of production appear as private property;...

Success and failure both lead here to a centralisation of capital, and thus to expropriation on the most enormous scale. Expropriation extends here from the direct producers to the smaller and the medium-sized capitalists themselves. It is the point of departure for the capitalist mode of production; its accomplishment is the goal of this production. In the last instance, it aims at the expropriation of the means of production from all individuals. With the development of social production the means of production cease to be means of private production and products of private production, and can thereafter be only means of production in the hands of associated producers, i.e., the latter's social property, much as they are their social products."

This is at root, the material basis of the class antagonism reflected in the division between conservative and social-democratic parties.

Monday, 21 July 2014

The Law Of The Tendency For The Rate of Profit To Fall - Part 25

Fall In the Value Of The Variable Capital (9)

As Marx sets out in Capital I, there are two ways in which the introduction of new technology and techniques result in a rise in relative surplus value. Firstly, for an individual capital, if it introduces such new methods, ahead of others, it sells into the market at prices below the market price but above its own individual price of production. It thereby obtains an additional surplus value. It is as though the value of the product of an hour of its workers' labour represents more than the product of an hour of the labour of its competitors' workers, i.e. it is as if this labour stood in the same relation as does complex to simple labour. As Marx points out, this applies also when comparing the capital of a developed and developing economy. This is a point important for further discussion.

The second way that relative surplus value is produced is that the value of wage goods is reduced, by the rise in productivity, so the value of labour-power falls, leaving a greater portion of the working day available as surplus labour. It is this process which reduces the value of commodities in general and which also reduces the quantity of surplus value in each individual commodity, whilst increasing the mass of surplus value.

“Everything that promotes the production of relative surplus-value by mere improvement in methods, as in agriculture, without altering the magnitude of the invested capital, has the same effect. The constant capital, it is true, does not, in such cases, increase in relation to the variable, inasmuch as we regard the variable capital as an index of the amount of labour-power employed, but the mass of the product does increase in proportion to the labour-power employed. The same occurs, if the productiveness of labour (no matter, whether its product goes into the labourer's consumption or into the elements of constant capital) is freed from hindrances in communications, from arbitrary or other restrictions which have become obstacles in the course of time; from fetters of all kinds, without directly affecting the ratio of variable to constant capital.” (Capital III, Chapter 14, p 233)

In other words, these means raise the rate of surplus value without requiring that more fixed capital is employed to raise productivity or resulting in more materials being processed by a given quantity of labour. The clearer example that Marx gives is the repeal of the Corn Laws. By removing such restrictions, the price of food was reduced, which, in turn, reduced the value of labour power, which meant the rate of exploitation could rise. The same amount of labour continued to process the same amount of material as before, but the surplus value was higher resulting in a higher rate of profit.

Anything such as the creation of the EU, or removal of other barriers, which improve free trade, and thereby reduce the cost of wage goods, equally act to raise the rate of surplus value and of profit. As Marx pointed out, with the repeal of the Corn Laws, a lot of other tariffs were abolished , which reduced the prices of other imported materials that constituted constant capital.

“The rise in the rate of surplus-value is a factor which determines the mass of surplus-value, and hence also the rate of profit, for it takes place especially under conditions, in which, as we have previously seen, the constant capital is either not increased at all, or not proportionately increased, in relation to the variable capital. This factor does not abolish the general law. But it causes that law to act rather as a tendency, i.e., as a law whose absolute action is checked, retarded, and weakened, by counteracting circumstances. But since the same influences which raise the rate of surplus-value (even a lengthening of the working-time is a result of large-scale industry) tend to decrease the labour-power employed by a certain capital, it follows that they also tend to reduce the rate of profit and to retard this reduction.” (Capital III, Chapter 14, p 234-5)

The mass of surplus value always tends to rise because the number of workers employed always tends to rise absolutely, even if it declines relative to the total capital, and also because even with a constant number of workers, the rate of surplus value tends to rise. But, whether this rising mass of surplus value results in a rising rate of profit depends upon its relation to the total capital employed.

Sunday, 20 July 2014

Capital II, Chapter 17 - Part 13

Marx goes on to deal with this argument, that had been raised by the Owenite, Weston, within the ranks of the First International. The more extended argument, detailing that debate is given in Value, Price and Profit .

Marx continues, considering the argument about higher wages. Those proposing this argument say,

“This causes a greater demand for commodities on the part of the labourers. This, in turn, leads to a rise in the price of commodities.—Or it is said: If wages rise, the capitalists raise the prices of their commodities.—In either case, the general rise in wages causes a rise in commodity prices. Hence a greater amount of money is needed for the circulation of the commodities, no matter how the rise in prices is explained.” (p 344)

Marx easily dismisses this argument. Higher wages will mean workers demand more necessities, and might demand new commodities, and this may cause their price to rise, in the short-term. But, the fall in surplus-value means capitalists have less money to spend on luxuries. The fall in their demand causes their prices to fall. Profits for producing necessities rises, and for producing luxuries fall. That means more capital will move to producing necessities and less to producing luxuries. This continues until the rate of profit is equalised in both sectors again. The consequence is that the supply of necessaries rises, and so their prices fall back to the original level, and the supply of luxuries falls, pushing the prices of luxuries back up to their original level. 

The overall price level has not changed, but more social labour-time is now devoted to producing necessities, and less to luxuries.

Alternatively, workers themselves may spend some of their higher wages on luxuries. In that case, they exert less pressure on the demand for necessities, and simply replace the demand for luxuries that previously came from capitalists.

“More luxuries than before are consumed by labourers, and relatively fewer by capitalists. Voilà tout. After some oscillations the value of the mass of circulating commodities is the same as before. As for the momentary fluctuations, they will not have any other effect than to throw unemployed money-capital into domestic circulation, capital which hitherto sought employment in speculative deals on the stock-exchange or in foreign countries.” (p 344)

Part of the argument, of those who believe that wages determine prices, is that price is comprised of the costs of production – primarily here wages – plus an amount of profit. So, if wages rise, prices rise as a result. But, again, this is not true as Marx shows.

Firstly, if capitalists could simply increase prices at will, in that way, they would do so whether wages had risen or not. But, capitalists cannot simply raise prices. Conversely, wages would never rise when commodity prices fell, and

“The capitalist class would never resist the trades’ unions, if it could always and under all circumstances do what it is now doing by way of exception, under definite, special, so to say local, circumstances, to wit, avail itself of every rise in wages in order to raise prices of commodities much higher yet and thus pocket greater profits.” (p 344)

The argument that higher wages cause inflation, “is a bugbear set up by the capitalists and their economic sycophants.” (p 344)

The basis of the argument rests on three foundations. Firstly, the money put in circulation is determined by the total value of commodities to be circulated. If more commodities are to be circulated, or if the same number of commodities are circulated, but their value has risen, then more money has to be thrown into circulation. The latter would be the case if productivity had fallen, or if, for example, there had been a bad harvest, pushing up food and raw material prices. This increase in money would then mean that all prices, including wages, might rise.

“The effect is then confused with the cause. Wages rise (although the rise is rare, and proportional only in exceptional cases) with the rising prices of the necessities of life. Wage advances are the consequence, not the cause, of advances in the prices of commodities.” (p 345)

Secondly, a rise in some wages might cause a rise in some prices. Whether or not this is possible depends on a number of factors, such as the price elasticity of demand of the products concerned. Products that are inelastic can enjoy a rise in price without a damaging fall in demand, and vice versa. Whether a product has inelastic demand or not depends on a range of factors such as whether its a necessity, if it has substitutes, how much competition there is between suppliers, and so on. But, also, for some products, wages comprise a small element of costs, so a wage rise might be easily absorbed. Later, in Capital III, Marx demonstrates why it is that, in fact, a general rise in wages will cause the prices of commodities that have a higher than average organic composition of capital, to fall rather than rise.

But, in any case, the consequence of a rise in some prices here is a fall in the prices of other goods, as effective demand rises for one and falls for the other. Finally,

“In the case of a general rise in wages the price of the produced commodities rises in branches of industry where the variable capital preponderates, but falls on the other hand in branches where the constant, or fixed, capital preponderates.” (p 346)

Saturday, 19 July 2014

An Historical Property Value Calculator

I bought my first house, for cash, in 1977. Having saved up, and lived on baked beans for three years, buying clothes from jumble sales etc., we eventually had the £5,000 needed to buy the three-bedroom town house, with small gardens to front and back. At the time, my wages came to £2,500 a year. As a comparison, if I were the same age and doing the same job today, my wages would be around £15,000 p.a. or six times as much. If the house were six times as much, it would be around £30,000, therefore. It isn't. A similar house today would sell for around £80,000, even in the weak local market. In other words, it would be nearly three times as much as it should be, had it risen in line with wages. But, there is no reason it should have risen by that much. In general, wages should rise by more than prices, in line with the rise in productivity.

I sold that house in 1988 for £22,500. In the meantime I'd added some value by taking out walls, putting in a bathroom and modern kitchen and so on. But, even assuming I'd added 10% extra in value, to take the initial value to £5,500, that still represents a four fold increase in price in just eleven years. In fact, this demonstrates a fact I discovered a while ago, in looking at the rise in various asset markets, over the last sixty years, which is that, although its thought that the main rise in these markets has occurred over the last ten to fifteen years or so, this is not the case. The main rise in asset markets occurred during the 1980's, as the conservative governments in the US and UK, under Thatcher and Reagan, attempted to build low-wage/high debt economies, and particularly from the second half of the 1980's onwards, injected large quantities of liquidity into the newly deregulated financial markets, thereby sparking an explosion of debt, and debt fuelled asset price bubbles.

An example of that is that the Dow Jones Index rose from 1,000 in 1982 to 10,000 in 2000, a rise of 1,000 %, whereas, between 2000 and today, the Dow has only risen from 10,000 to 17,000, a rise of just 70%. Between 1950 and 1960, UK house prices rose by 31%, between 1960 and 1970 they rose by 96%, reflecting the "dash for growth" of Reggie Maudling, and the so called Barber Boom. But, between 1970 and 1980, they rose by 380%, and rose a further 154%, between 1980 and 1990. By comparison, they rose by 70% between 1990 and 2000, and a further 60% between 2000 and 2011. This demonstrates that the real crisis in UK housing was created in the 1980's and 90's, as a result of the policies adopted by Thatcher. All the massive money printing has been able to do, since then, is to keep that bubble inflated, and to reflate it, whenever it has burst. It also shows that the argument that the high prices are due to shortage of supply is nonsense. It would have required that the main period of short supply was during the 1980's and 90's.  The extent of this inflation of asset prices in the 1980's and 90's can be judged by the fact that this was a period of economic stagnation, and of stagnant or falling real wages.

To illustrate the effect of this, let me relate it back to my own experience. Having sold my first house in 1988, for £22,500, I bought a three bedroom detached house for £30,000. Working backwards then, the 1977 value of that house would have been around £7,500, and, in fact, I know that is the price they were sold for at that time, because I saw them being built. Then, working forward to today, on the basis of a six fold rise in wages, would give a current price of around £45,000. In fact, when I sold the house, at the start of 2010, I sold it for £150,000 or more than three times that amount. This gives an indication of just how much current house prices are out of whack with where they should be, on any kind of rational historical basis. In fact, as stated above, even this overstates where house prices should be, because rationally wages should rise by more than prices.

If we assume a 2% p.a. rise in productivity then between 1977 to today, we should expect wages to have risen by around double the rise in prices during that period. In that case, the house price should only have risen from around £7,500 to about £22,500, or about a sixth of what it was. As prices of assets always revert to the mean over the long term, and usually have to go through a period when they drop below it, this gives an indication of just how much the drop in house prices will actually be when it happens. It means that prices will need to drop by between 80-90%, or near the same amount they fell in Japan when the asset price bust happened there in the 1990's.

A few weeks ago, the Open University had a programme on BBC, narrated by Sandi Toksvig, about property. It set out that, of the price of a £200,000 house, between £50,000 and £100,000 of the cost was the price of the land. A further £50,000 was the actual cost of construction of the house. The rest was made up of the costs the builder has to pay, to the local Council, to cover the Section 106 Agreements, to provide roads, schools, and other amenities, as well as social housing, plus the profit of the builder. This shows how significant the price of land is to resolving the housing crisis. Builders interviewed made the point I set out a few weeks ago in, Building More Houses Will Note Cure The Housing Crisis, that they will not build houses unless they know that there are customers for them, at prices that provide the builder with normal profit.

Because, high land prices force up the price of new build houses – because all the other above costs, other than the actual construction cost, tend to be calculated as percentages on the cost price – this necessarily makes new houses unaffordable for large numbers of people, so demand is constrained. At the same time, supply is constrained, because the builders will not build large numbers of additional houses for which there is no effective demand.

The programme illustrated this by referring to John Prescott's challenge to builders to produce a low cost home, setting aside the cost of the land. Builders, architect designed homes, that could be sold for £60,000, not counting the land, which it was proposed would remain in the ownership of the state. But, in fact, it was shown that when the houses were sold, they were not sold for £60,000, but for £300,000 including the land!

Even Tory Minister Nick Bowles has pointed out - Would You Pay £47 For A Chicken? – that if the price of chickens had risen by as much as houses in the last 30 years, then you would be paying £47 for a chicken, as opposed to the £5-6 they cost in the supermarket, and by the same token, a jar of coffee would cost £20. That gives a similar figure for how much house prices are overvalued as that I arrived at above, of about 8 to 9 times where they should be on an historical basis.

As the Bank of England has eventually realised that this could mean a serious problem, as global interest rates are rising, and inflation is also likely to be rising too, it has started to use its macro-prudential tools, and to give the warning, to those able to read the Kremlinology, that its time to get out of the water, before the shark attack. Unfortunately, even the supposedly savvy investors of the bond and equity markets, seem to have been so inoculated, by years of central bank money printing, that they either don't believe or don't recognise the warnings they are being given. The chance that home buyers who have been led to believe that house prices only go one way – up – will recognise those signs is pretty remote.

Central banks have tried, in recent years, to obtain the results they require, by sending out such messages, rather than actually implementing measures to bring them about. Mario Draghi has succeeded in getting banks across Europe to take money, through the LTRO, and use it to buy the bonds of peripheral European countries, to force down the yield on their bonds, by warning that the ECB would do “whatever was necessary” to bring that about. In fact, as money has also moved out of emerging markets, it has moved into peripheral European bonds to such an extent that they now, ridiculously, have yields lower than in the US! Carney is trying to do the same thing. He is trying to say, there is going to be a property crash, so stop bidding up property prices now, and keep out of the market. That avoids him having to raise interest rates for now, or to impose more stringent rules on mortgages than have so far been introduced.

Its not likely to work. There has never been an occasion where property bubbles have been deflated gradually.  Given the massive bubble in UK property built up over 40 years, its impossible to see how it can end well, as in much of the country we seem to have hit the limits of how many more “bigger fools” can be pulled into the market to buy overpriced housing. Despite “Help To Buy” and other measures to keep the bubble inflated, in many parts of the country, the bubble is barely being kept inflated despite all the furious pumping by the state.

According to Moneyweek the solution, as I've suggested, requires not building more houses but reducing the price of building land. But, as I've also suggested, the price of building land will not be reduced unless either land is nationalised, or else, the bubble in property prices is burst.

The Moneyweek article refers to this survey

It shows that domestic buildings cover just 1.1% of the land area of Britain. So much for the idea that we are an overcrowded island! Including roads and other non-domestic buildings, only 4% of the land mass is built on. As Moneyweek state,

“If England’s 20 million homes cover just 1.1% of its land, you could increase the housing stock by 20% – 4 million homes – and only build on another 0.2% of land. Surely, we can find the space to do this.

Even if you give each home a large garden, you’re still talking less than 1% of English land to increase the housing stock by 20%.”

In some areas, there is more land taken up by golf courses than by residential property. The majority of all this land that is being underused, is still in the hands of the landed aristocracy, of people like the Prnice of Wales, and Duke of Westminster. Moreover, in these conditions, it also pays the builders to accumulate large land banks rather than to build houses on them.

Carney realises that the burst in this property bubble is inevitable and will be very nasty. He's telling the banks in so many words, to start to pull in their horns even further, despite the government's desire to get them to lend more, to keep the bubble inflated, to bolster its own election hopes. But, the bubble is so big, as the above figures demonstrate – even the OECD and IMF a couple of years ago said that UK property prices were 40% over valued against the historical average – that when it bursts, the banks will be taken down by it. That is why they have tried to keep the bubble inflated for as long as possible.

Northern Soul Classics - Turning My Heartbeat Up - MVP's

I'm turning my heartbeat up ready for the stoke Nighter tonight.  Can't wait.

Thursday, 17 July 2014

The Law Of The Tendency Of The Rate of Profit To Fall - Part 24

Fall In the Value Of The Variable Capital (8)

The lesson from the examples set out in Part 23 appears to be that, on the basis of absolute surplus value, the increase in the rate of surplus value offsets the increase in the constant capital (material processed) so that the rate of profit rises, but its ability to do so is increasingly reduced where the organic composition of capital is already high, and the rate of surplus value already high. The increase in the constant capital is assumed to rise here in the same proportion as the increase in the working day, but, in fact, as Marx points out, this is not accurate, because although twice as much material may be processed, the actual increase in wear and tear of fixed capital is likely to rise, in practice, by a smaller proportion. An increase in the working day, is, therefore, a powerful means of increasing the rate of profit, even as it increases the organic composition of capital.

“But notably, it is prolongation of the working-day, this invention of modern industry, which increases the mass of appropriated surplus-labour without essentially altering the proportion of the employed labour-power to the constant capital set in motion by it, and which rather tends to reduce this capital relatively.” (p 233)

However, as seen in Capital I, there are limits on the extent of the working day that form the basis of a normal working-day. If workers work beyond it, they are unable to work as intensively and their own wear and tear increases, raising the value of labour-power, and reducing the rate of surplus value. If they work more intensively, the same thing applies, and they are unable to work so extensively.

Moreover, for any particular concrete labour there are limits to how long the working day can be prolonged. For example, suppose the examples given are for coal miners working an 8 hour day. Its possible that this day could be extended to 16 hours, to obtain the results set out in the examples. But its not possible to go beyond that, because the miners require some time to rest, sleep and recuperate.

Marx describes other means by which this effect can be obtained, however, such as the employment of women and children. By employing the labour of the entire family, for little more if anything in wages, than was formerly paid to a male worker, capital is able to raise the amount of labour exploited in a single day, by simply employing more workers for the same amount of variable capital.

If one worker previously worked for 10 hours providing 5 hours of surplus labour, for a wage of £5, they provided £5 of surplus value. But, if six members of their family are now employed for the same amount of wages, 60 hours of labour are provided, and now 55 hours constitute surplus labour, producing a surplus value of £55. However, as was seen in Capital I, the effects of this process on the longer term supply of labour-power were eventually recognised by capital and its representatives, which together with the actions of workers and their trades unions, limited such practices via the Factory Acts. Instead capital found a much more effective means of raising the rate of exploitation, via relative surplus value arising from increases in productivity resulting in a reduction in the value of labour-power.

Wednesday, 16 July 2014

After Obama, What Next? - Part 5

The major division that exists today, in practice, in the US and in Europe, is not a division between capital and labour – that division is the fundamental division, but it is not practically the current major division – but a division between conservatism and social democracy; between progress, or at least the status quo, and reaction; between small capital and those that share its outlook and want to turn the clock back to a less mature form of capitalism – and in cases, even further back than that – and the big capital and organised working-class, that for the last more than 100 years has reached a working compromise, based on the idea that only by development of big capital could the organised workers ensure a general improvement in its condition. That is the basis on which modern bourgeois social democracies rest.

Although the division between Democrats and Republicans, Labour and Tories is then a thoroughly bogus division between two essentially bourgeois camps, and whose verbal and personal animosity often assumes the greater ferocity, the more the division between those camps is ideologically narrowed, on the other hand, this division is just as real as that which existed between the political representatives of the landlords and the capitalists, in the 19th century.

In those battles, Marx was unreservedly on the side of the latter, whilst advocating that workers needed to maintain their independence from both. When that division became the division described above, between small capital and big capital, Engels made clear that he came down decisively for the latter. It is an indication of the lack of progress of the Labour Movement that the main division remains on that ground. But, a condition of moving forward is that the labour movement not only maintains its independence, but also resists attempts to reverse the progress already made.

Lenin, for example, in “Imperialism”, argues that, although socialists would not advocate monopolies, they oppose attempts to break up monopolies, as a reactionary step, designed to promote a less developed form of capital.

Most of the policies that Obama and other social democrats advocate would not be proposed by Marxists, but to the extent they are progressive, Marxists would defend them against attempts by conservatives to reverse them. Of course, Marxists would argue that the best means of defence is attack, that the best way of defending existing progress, is to go beyond it. For example, Marxists would not have advocated the establishment of the NHS, as a state capitalist form of healthcare provision – Engels specifically opposed including a demand for such welfarist programmes in the Erfurt Programme – but we defend it against conservative attempts to go back to more reactionary forms of healthcare, based on individual private provision. However, in the process, we argue that the best means of preventing such a reversal is to take the NHS out of the hands of the capitalist state, and put it directly into the ownership and control of workers by the establishment of worker owned co-ops, that provide workers' social insurance, and also deliver the health and social care itself. Similarly, the best means of preventing councils selling off council houses, is to legally transfer council estates directly to the collective ownership and control of the tenants that live on them.

In his article on Political Indifferentism, for example, Marx sets out why socialists could not refuse to defend things like free state education where it was established, because it represented real progress for workers. Nevertheless, Marx continued to argue that the state had no place in education. We defend free, universal education by arguing for going beyond existing state education, to the provision of education by working-class communities themselves, under their own ownership and control, with the state reduced to only defining minimum standards for teachers, etc.

Trotsky argued that we would not have argued for the Kaiser to create a single European state, but had that been accomplished by World War I, nor would we have called for it to be dismantled. We would take it as the new starting point, from which workers would fight for their own interests and further progress to the creation of a Socialist United States of Europe.

In the same way, Marxists would not advocate Obamacare. We propose that workers need to organise their own social insurance via their own worker owned and controlled co-operatives, and the provision of their health and social care by the same means. But, we advocate this as a means of going forward from the present situation, and a condition for that is to oppose the attempts of conservatives to move back from the current situation.

Marxists do not believe that Keynesian state intervention can provide a solution for workers, for the fact that capitalism is a system racked by contradictions, and prone to crises that repeatedly throw large numbers of workers into poverty. We propose that workers take over the means of production and establish worker owned co-operative property, organised on at least a national, and preferably international level, via a co-operative federation, which could increasingly plan its output at an international level, in co-ordination with the needs of society.  But, given a choice between the use of fiscal stimulus by governments, or simply a refusal to implement fiscal austerity, as opposed to conservative proposals to implement austerity measures, we defend the former and oppose the latter, for the simple reason that the former strengthen the position of workers, and the latter weakens it.