Another Pro-Austerity Government Falls

The Irish government is just the last in a long line of pro-austerity governments to fall. That process began where the contradictions were most acute – in Greece. That process required a number of iterations of one pro-austerity regime being replaced, by another nominally less pro-austerity government, which then fell as it too implemented austerity. When it came to the supposedly social-democratic PASOK, it appeared to have reached its apotheosis. The gutting of its support, led to a new term “de-pasokification”. Since that time, one government after another that have occupied the political centre-ground, as it has existed for the last thirty years, has fallen. It indicates the lunacy of the Blairites, in their various manifestations across Europe who want to continue to pretend that nothing has changed, and to try to present those old failed policies, as a route to success.

Of course, the actual process in each country has been different. In Ireland, much as in Britain, prior to 2015, the domination of politics took the form of the two large pro-austerity parties, Fine Gael and Fianna Fáil. Unlike in Britain, the main division of these two parties goes back to the divisions of the Irish Civil War after independence. As some commentators have noted, this election, more than others has started to configure Irish politics, more along that of other European states, as one between Left and Right. The reason that the two main parties are unlikely to form a grand coalition, has nothing to do with any major ideological differences in relation to the economy.

As in Britain, one party could pose as an austerity-lite version of the other; as in Britain, that did little to attract voters to either; even between the two main parties, they could not scrape a majority of support between them. As in Britain, the main reason the two main parties were able to hold on to the vote they did, is partly due to inertia, and partly due to the fact that they faced no real credible opposition, as others have been pointing out for several weeks.

In Britain, the left for years has been impotent. Not only was it racked with the sectarianism that pulled apart the workers movement from the start of the 20^th century, but even its most radical manifestation amounted, for all of its rrrevolutionary verbiage, to nothing more than statist, left-social-democracy, or Fabianism. At its worst, it amounted to nothing more than sectarian party-building, mixed with radical trades unionism. In Ireland, the largest of the alternative parties – Sinn Fein – itself stands more in that same Irish tradition of communalism than of European class based politics. It only presented its own version of austerity-lite solutions, which offered no real way forward for Irish workers. As for the rest, despite the advantages they had over the British Left, because of the Irish electoral system, they mirror the same problems of the British sects, to which many are linked.

The importance of the Irish election then, like many others across Europe, lies not in the solutions it has provided, but in the solutions it has rejected. The process of de-pasokification in Greece, led to the election of Syriza, as the Greeks realised what was becoming increasingly obvious, which was that austerity was not a solution to economic problems, but was in fact, causing those problems. In the period between 2000 and 2008, economic growth in the EU was robust, as it was across the globe, as the new long wave boom progressed through the Spring phase. Th economies of places like Greece were flattered, because of the low interest rates which flowed from the masses of loanable money-capital flooding into global capital markets, as the rate and mass of profit soared, but also because of the creation of the Eurozone.

That meant that global economies were significantly divergent, as I have pointedout in the past.

On the one hand there were dynamic, efficient economies like China that were building up huge amounts of productive-capital, as well as accumulating huge quantities of loanable money-capital. On the other hand, there were economies like the UK and US, that were in relative decline, that had seen significant de-industrialisation, and which relied on being able to borrow from the surplus countries, such as China to fund their continuing consumption, now of manufactured commodities produced in China and other emerging economies. To add to that bifurcation, within economies like the US and UK, there were some new dynamic industries, but their economies had been shaped by two decades of low wages, and cheap credit, which also fuelled the development of a rentier economy, based on financial speculation on stock, bond and property markets. That in turn, sucked in speculative money-capital, from global money markets, and made the financial services industry in those countries both into a major foreign exchange earner, as well as an important employer within the national economy, with a consequent effect on government tax revenues.

In Europe, that bifurcation was also fairly stark between a rich north, with modern globally competitive industries, particularly in Germany, and a poor South, which provided a market for northern produced goods, and in return provided capital transfers to the north, in the shape of increasing debt. In fact, Ireland was a partial exception to that division. On the one hand, it suffered the same credit fuelled asset price bubble as Greece, Spain and elsewhere, and yet the Irish economy was one of the most modern in Europe, having built itself up on the basis of new technology industries during the 1980's and 90's. That, indeed is the reason that the Irish economy rebounded so quickly, after the financial meltdown, and the Eurozone crisis of 2010.

Those crises, were, in fact, financial crises of the kind seen before in history. In previous times, such financial crises led to a major write down of asset prices, and provided sufficient liquidity was available to prevent a credit crunch curtailing economic activity, they were generally beneficial, by clearing away large amounts of debt. But, what has been peculiar about these financial crises, has been that so many resources have been put into maintaining these prices of fictitious capital, whilst at the same time, draining the real economy of its lifeblood. The economy in Europe has been hit by a policy driven double whammy of austerity to suck aggregate demand out of the economy, and thereby discourage productive investment and employment, whilst at the same time flooding that same economy with huge amounts of liquidity, which was intended for no other purpose than to reflate the already astronomical asset price bubbles, and thereby to drain even more potential capital from productive investment, in favour of short term, speculative capital gain.

The resultant policy of extend and pretend, reached ludicrous proportions, when everyone knew that an economy like Greece was being crucified by such policies, that the debt was not going to be repaid, and yet no one was allowed to suggest turning that widely held knowledge into appropriate policy action. Instead, the Greeks were told to keep doing what was already killing their economy, to keep borrowing more money, not to invest, but simply to be able to repay existing debt interest payments to the banks, so that more of those banks did not go bust, on top of those that had already collapsed. Yet, long after this obvious truth was virtually universally accepted, when Syriza attempted to draw the obvious conclusions from it, with the overwhelming backing of the Greek people, conservative politicians across Europe, insisted they keep drinking the poison.

It is partly, because of the ludicrousness of that, and because of the strength of the conservative opposition to Syriza's social-democratic alternative that they have so far retained the support of the Greek people. There is a significant difference, as Lenin pointed out between those politicians who genuinely seek to pursue one set of policies, but who are forced by the balance of power to enter into a compromise, and those for whom compromise is a way of life, and an excuse to adopt the policies they supported all along. The real test for Syriza lies not in the compromises it has so far been forced to accept, but in how it uses the breathing space it has gained from those compromises, now to link up with other social-democratic forces across Europe, such as Podemos, the Left Bloc in Portugal, the Corbynistas in Britain and so on to begin to change that balance of power, and make possible a different set of solutions.

What the Irish elections demonstrate again is that process of the collapse of the political centre. It is based upon real changes in the global economy. It is a process again represented by significant bifurcations. A look on the surface shows yields on the sovereign bonds of economies in Europe and North America at record low levels, as loanable money-capital floods into them in search of a safe haven. At the same time, yields on a range of high risk (junk) bonds, and the insurance costs of protecting against default have risen sharply. That also matches the problems some small businesses have in obtaining money-capital at all, not to mention the astronomical interest rates that many private households face for borrowing.

At the same time, China which pumped trillions of dollars into global money markets itself now has a debt to GDP ratio of more than 200%, with its non-performing loans rising sharply. As its own asset prices fall, and the Yuan depreciates, it faces the need to repatriate some of its own money-capital. The same is true of all those rent based economies in the gulf, and elsewhere, which poured loanable money-capital into global capital markets from the revenues they received from high primary product prices, pumped up by the huge increase in global demand resulting from the onset of the long wave boom after 1999. Now those economies, like Saudi Arabia, are themselves having to become large scale borrowers of money-capital, simply to cover their own expenditure.

All of that is causing the demand for money-capital to rise relative to the supply, and thereby pushing up the average rate of interest, which thereby causes the prices of revenue producing assets to fall, as a result of capitalisation. Hence the falls seen on global stock markets over recent months. The strategy of the political centre, for the last thirty years, was founded upon the idea that this paper wealth could keep increasing for ever, simply by trading pieces of worthless paper, at every higher prices. That dangerous illusion has come to an end, and with it the basis of the political centre.

In Ireland, as in Britain, the junior partner in the pro-austerity government got crushed. Just as the Liberals have been wiped from the face of British politics, so has Labour in Ireland. It demonstrates the lunacy both of those who would have Labour link up with the Liberals in Britain, and of the Blairites, who still want to pursue that same austerity-lite agenda that saw the Liberals in Britain, and Labour in Ireland get crushed! In reality, the UK election of 2015, was just as much a part of that trend seen across Europe. It is being portrayed as a vindication of Tory policies, but the opposite is the truth. The reality of the 2015 election is that a pro-austerity government majority of around 80, was reduced to a majority of just 12. It saw a slightly less pro-austerity Labour Party gain seats in England and Wales, and increase its vote share faster than the Tories, and a more vocally anti-austerity SNP, more or less sweep the board in Scotland.

The challenge now is to provide the ideas and the strategy to replace that of the old political centre. For socialists, that problem is in some ways easier. For socialists, the task remains the same at all times, to foster the independent development and self-government of the working-class, and the expansion of worker-owned property, along with the social relations that arise from it. But, that is a long-term strategy. For now, socialists have to also give critical support for social-democracy in its struggle against conservatism, and that is a more difficult feat. It requires the overcoming of all the national prejudices that social-democracy has itself fostered over its history; it requires the forging of a new Europe wide social-democracy.

Capital III, Chapter 27 - Part 11

Marx concludes the chapter with a number of further important remarks on the role of credit. Firstly, he spells out the error of those who believe that capitalist crises stem from credit, or the replacement of gold money by credit.

“The credit system appears as the main lever of over-production and over-speculation in commerce solely because the reproduction process, which is elastic by nature, is here forced to its extreme limits, and is so forced because a large part of the social capital is employed by people who do not own it and who consequently tackle things quite differently than the owner, who anxiously weighs the limitations of his private capital in so far as he handles it himself. This simply demonstrates the fact that the self-expansion of capital based on the contradictory nature of capitalist production permits an actual free development only up to a certain point, so that in fact it constitutes an immanent fetter and barrier to production, which are continually broken through by the credit system. Hence, the credit system accelerates the material development of the productive forces and the establishment of the world-market. It is the historical mission of the capitalist system of production to raise these material foundations of the new mode of production to a certain degree of perfection. At the same time credit accelerates the violent eruptions of this contradiction — crises — and thereby the elements of disintegration of the old mode of production.” (p 441)

In other words, the underlying cause of crises of overproduction is that capital continually expands its technical capacity to produce more and more use values. But, this capacity grows faster than the capacity to absorb all these use values at prices that reproduce the capital consumed in their production. Crises temporarily resolve this contradiction by devaluing capital. Meanwhile, new types of use value are developed so that excess capital is absorbed in their production, and new markets thereby expand for their consumption, until the limits are reached once more.

Under the monopoly of private capital, the degree to which expansion of production occurs is limited, because, as the rate of profit falls, the private capitalist is more likely to exert caution over extending production further, because they will be keen not to lose their capital. But, for socialised capital, control rests with the professional manager, who may be more concerned with expanding the business, and their empire within it. As the professional manager is paid wages, and as the shareholder receives interest on their money-capital, which may expand in mass, by a greater amount than it falls as a rate, there will be a tendency to keep expanding production, even when the rate of profit falls to very low levels. Credit facilitates this process.

“The two characteristics immanent in the credit system are, on the one hand, to develop the incentive of capitalist production, enrichment through exploitation of the labour of others, to the purest and most colossal form of gambling and swindling, and to reduce more and more the number of the few who exploit the social wealth; on the other hand, to constitute the form of transition to a new mode of production. It is this ambiguous nature, which endows the principal spokesmen of credit from Law to Isaac Péreire with the pleasant character mixture of swindler and prophet.” (p 441)

Back To Part 10

Forward To Chapter 28

Back To Capital III Index

Euro-sceptic Trade Myths

Euro-sceptics used to argue that Britain outside the EU could have the same kind of relation to it as currently exists with Norway and Switzerland. That argument never had legs. Firstly, both Norway and Switzerland are more the size of London than of Britain, so comparing them to the position Britain would be in, is not tenable. But, it has also been pointed out that both Norway and Switzerland, in order to obtain the relation they have, have had to basically accept EU conditions and costs, but without having any say in the formulation of those conditions. So, the euro-sceptics have tried a different tack, arguing that Britain would be able to negotiate the same kind of relation as countries like Canada. It is no better as an argument.

First of all, the euro-sceptics seem to forget that Canada itself is part of a similar arrangement as the EU, via its membership of NAFTA, the North American Free Trade Area, which in itself is an indication that the world is increasingly being divided up into these large economic blocs, just as in the 19^th century, the economic development that came along with capitalism, created the need for the establishment of the nation state, of the merging of separate regional economies and currencies, and the establishment of common rules and laws for the rational functioning of capital within a single market. But, also the truth is that the relation of Canada and other economies to the EU, is itself not the same as either the relation of Norway or Switzerland to the EU, and certainly not the same as that currently enjoyed by the UK within the EU.

In fact, the half-hearted relation of the UK to the EU already means that it does not enjoy the same benefits that it would within a single federal EU state, similar say to the United States of America. For example, over the last couple of years, the pound has been strong. Yet, even with all of the travails of the Eurozone debt crisis, with the ECB introducing money printing, and so on, the pound is not even back to the level against the Euro it was at back in 2007, when the Euro stood at around £0.66, compared with £0.78 today. In the intervening period, that rate has varied considerably with the Euro rising to near parity with the pound in 2009. For UK businesses buying from and selling to the EU, swings in the value of the pound, in these ranges, moving by more than 50%, over just a couple of years, impose considerable costs and uncertainty. No wonder that in the aftermath of Dave's Dodgy Deal, and the potential for Brexit, the pound dropped sharply in value against both the Euro and the dollar.

Just think of the costs you incur on going on holiday in changing your Pounds into Euros, and back again. The commission alone in such transactions can swallow up 10% of your Pounds, quite apart from any changes in the actual exchange rate. For businesses that conduct billions of pounds of trade in a year, that cost of paying money-dealers commission on such transactions would be a huge additional cost, were it not for the fact that the very scale of the transactions means they can use foreign exchange dealers who charge lower commissions. But, the fact of any commission at all, is a charge that British business faces in addition to the costs of all businesses operating within the Eurozone.

That does not change the costs of continual changes in the exchange rate of the pound to the Euro, and the costs resulting from uncertainty which that creates. It has become received wisdom over recent years to believe that the decision for Britain not to join the Euro was a wise move, but its not at all clear why. Has membership of the Euro affected German economic growth during even the period of the Eurozone crisis? Not noticeably. And, currently, capital has been flowing into the Eurozone's bonds to an extent that even the bonds of states in the periphery have been trading at lower yields than on UK Gilts! The yield on German Bunds has even been negative, as speculators scramble for safety.

A similar thing applies with the UK's exemption from Schengen. Anyone who travels across Europe knows the advantages of being able to move from one country to another without all of the costs and delays of having to have all of the bureaucracy and administration involved in obtaining, passports, visas and other such documents, let alone the time taken going through border controls. Again when it comes to businesses and trade, those costs are even greater. For business time is money, and capital continually seeks to reduce the turnover time of capital. The faster capital can sell the commodities it has produced, and thereby realise the capital consumed in their production, along with the profits they contain, the less capital it has to advance to produce that profit, and so the higher the annual rate of profit it enjoys. A central part in raising the rate of turnover of capital is the circulation time. Removing borders and speeding up distribution has been a powerful means of capital within the EU, raising the rate of profit.

If British capital wants to reduce its costs, reduce uncertainty, and raise the rate of profit, a closer integration in the EU is what it requires, not further separation from it. The arguments over security and terrorism in relation to borders are really meaningless. Most of the terrorist acts in the UK have been undertaken by home grown terrorists, not people who have come in from the EU. In relation to Syria, for example, it is not the UK that has a problem with Syrian terrorists, but Syria that has a problem with UK terrorists. The UK's border controls have not stopped thousands of UK based jihadis travelling to Turkey, and on to Syria, for example.

Moreover, I remember the Black Panther marauding around my own neighbourhood in the 1970's. I also remember the Yorkshire Ripper. In fact, there are UK terrorists, and run of the mill criminals who travel around the UK, from county to county, town to town, all the time. Yet, no one suggests that the answer to this is to close the borders between Yorkshire and Lancashire, between Staffordshire and Shropshire, and so on, to prevent these criminals from being able to move around the country. No one suggests introducing passports for people living in Yorkshire so as to be able to move to Lancashire! The reason is simple, the actual proportion of people moving across these borders who are criminals, let alone terrorists is very small. To close down free movement, simply on that basis would then be ridiculous, and the same applies to the borders between the UK and France, Germany and Belgium and so on.

All of these things, and more give countries in the Eurozone advantages over UK capital, even as things currently stand, let alone were Britain to leave the EU. None of those things either involve the EU imposing any kind of tariff or penalty on the UK, it simply flows from the economic relation of the two, outside a truly single market, and currency and fiscal union. Those advantages will necessarily strengthen the Eurozone, as against Britain, whether the UK stays in or leaves. But, that is not a reason for the UK to leave, it is a reason for the UK to be more integrated within the EU, and the Eurozone.

The Eurosceptics argue that because the EU sells lots of commodities to the UK, they will want to have a free trade agreement with it. Maybe, but maybe not. Over the last few years, countries around the globe have been engaged in a currency war, where each has tried to devalue its currency so as to gain competitive advantage over others. In less benign economic conditions in the 1930's, they each attempted to gain advantage by imposing tariffs and other import controls on the goods of other countries. There is no reason, why in similar conditions, the EU would not impose such controls on British goods and services, because the EU economy of 500 million people, will have no problem replacing British made goods and services.

But, the Eurosceptics, even in current conditions, seem to have missed the point. Yes, of course, Germany will want to continue selling BMW's to the UK. The point is that, increasingly it will not just be the existing BMW's produced in Germany and exported to the UK, it will be BMW Minis produced in Germany rather than Oxford that will be shipped into the UK; it will be increasing numbers of Ford's produced inside the EU and shipped to the UK, rather than produced in Britain; it will be Hondas, Toyotas and Nissans produced in the EU, rather than in the UK that will be shipped here, creating jobs in the EU and not in the UK. In order to pay for all these imports, capital will flow out of the UK and into the EU, thereby increasingly impoverishing the UK economy, and accumulating capital in the EU!

The Eurosceptics do not seem to understand that the consequence of free trade for the UK outside the EU, will be to impoverish it. In order to compete, it will mean pushing down UK wages and conditions even further, much as would have been the case for Greek workers had Greece been forced out of the EU. At least the national-socialists of the likes of George Galloway, as with those who advocated the Alternative Economic Strategy in the 1970's, understand that, and it fits with their ideas of economic autarchy.

Capital III, Chapter 27 - Part 10

Marx, in sharp contrast to the narrowly economistic and also apocalyptic approach of some of today's left, notes the severe limitations of trade union struggle, whilst pointing out that capitalism itself provides the tools and social forms for resolving the workers problems, i.e. the development of worker owned co-operatives, and their extension via the mobilisation of credit.

“At the same time, and quite apart from the general servitude involved in the wages system, the working class ought not to exaggerate to themselves the ultimate working of these everyday struggles. They ought not to forget that they are fighting with effects, but not with the causes of those effects; that they are retarding the downward movement, but not changing its direction; that they are applying palliatives, not curing the malady. They ought, therefore, not to be exclusively absorbed in these unavoidable guerilla fights incessantly springing up from the never ceasing encroachments of capital or changes of the market. They ought to understand that, with all the miseries it imposes upon them, the present system simultaneously engenders the material conditions and the social forms necessary for an economical reconstruction of society. Instead of the conservative motto: “A fair day's wage for a fair day's work!” they ought to inscribe on their banner the revolutionary watchword: “Abolition of the wages system!"”

(Value, Price and Profit)

This was their approach of building socialism from the bottom up, on the basis of the direct action of the workers themselves, engaging in conscious action to create a new form of society, rather than simply rebelling against the existing form of society, which is all the politics of much of today's left amounts to.

Instead of offering workers simply a depressing outlook of continually repeated struggles against the existing order, Marx wanted to provide them with the uplifting prospect of creating tomorrow's society today, with their own hands. When members of their own party, in Germany, therefore, proposed instead the statist solutions of nationalisation and state control, Engels responded vociferously.

“Fourthly, as its one and only social demand, the programme puts forward -- Lassallean state aid in its starkest form, as stolen by Lassalle from Buchez. And this, after Bracke has so ably demonstrated the sheer futility of that demand; after almost all if not all, of our party speakers have, in their struggle against the Lassalleans, been compelled to make a stand against this "state aid"! Our party could hardly demean itself further.”

(Engels – Letter to Bebel March 1875)

And, he adopted the same opposition when the German socialists, in the Erfurt Programme suggested the creation of a welfare state.

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

Rather, Marx and Engels saw the process of social revolution as a rather prolonged affair during which time this co-operative production would be extended. For example, Marx wrote, in the Grundrisse,

"As the system of bourgeois economy has developed for us only by degrees so too its negation, which is its ultimate result." (p 712). 

And Engels writes,

“... as demanded by the Paris Commune, the workers should operate the factories shut down by the factory-owners on a cooperative basis. That is the great difference. And Marx and I never doubted that in the transition to the full communist economy we will have to use the cooperative system as an intermediate stage on a large scale. It must only be so organised that society, initially the state, retains the ownership of the means of production so that the private interests of the cooperative vis-a-vis society as a whole cannot establish themselves.”

(Engels – Letter to Bebel, 17th November, 1885)

This process, furthered by credit, leads, Marx says, to “... the implicit latent abolition of capitalist property — mainly with reference to industrial capital.” (p 440)

Back To Part 9

Forward To Part 11

Capital III, Chapter 27 - Part 9

In the same way that Marx and Engels moved away from the old Hegelian notions of their youth, which led them into the elitist, conspiratorial organisations, once they recognised the historical role of the working-class, so Marx's method of historical materialism led him away from the statist conceptions of his youth, which can be seen in The Communist Manifesto.

His historical materialist method led him to the conclusion that the function of communists was not to draw up schemas of how they sought to transform society, from the top down, but to codify and generalise the solutions that history itself was providing, and in particular the solutions that the workers themselves were providing to the tasks before them.

In his Critique of the Gotha Programme, this is apparent, because much of it comes down to a critique of the fact that Lassalle and his followers had not progressed from the old statist, and often elitist conceptions contained in The Communist Manifesto. Time had moved on, since 1848, and history had provided its own solutions to some of the problems it sought to address. Some of those lessons Marx had codified in Capital.

So, for example, Marx criticises the Gotha Programme for its adoption of a form of Lassalle's “Iron Law of Wages”.

“Since Lassalle's death, there has asserted itself in our party the scientific understanding that wages are not what they appear to be -- namely, the value, or price, of labour—but only a masked form for the value, or price, of labour power. Thereby, the whole bourgeois conception of wages hitherto, as well as all the criticism hitherto directed against this conception, was thrown overboard once and for all. It was made clear that the wage worker has permission to work for his own subsistence—that is, to live, only insofar as he works for a certain time gratis for the capitalist (and hence also for the latter's co-consumers of surplus value); that the whole capitalist system of production turns on the increase of this gratis labour by extending the working day, or by developing the productivity—that is, increasing the intensity or labour power, etc.; that, consequently, the system of wage labor is a system of slavery, and indeed of a slavery which becomes more severe in proportion as the social productive forces of labour develop, whether the worker receives better or worse payment. And after this understanding has gained more and more ground in our party, some return to Lassalle's dogma although they must have known that Lassalle did not know what wages were, but, following in the wake of the bourgeois economists, took the appearance for the essence of the matter. 

It is as if, among slaves who have at last got behind the secret of slavery and broken out in rebellion, a slave still in thrall to obsolete notions were to inscribe on the program of the rebellion: Slavery must be abolished because the feeding of slaves in the system of slavery cannot exceed a certain low maximum!”

In fact, as Hal Draper sets out in “The Two Souls of Socialism”, Marx’s onslaught in the Critique is essentially his own manifesto in favour of this bottom up approach to socialist construction, as opposed to the statist approach of Lassalle and the Fabians, which was inherited by Kautsky and the Second International, but also through them, also inherited by Lenin and the Third International, and by much of today's left.

By contrast, Marx's historical materialist method, of identifying the solutions to history's tasks, from those already provided by history, and by analysing its processes, is not only described here in Capital, but was spelled out polemically by Marx in his debates with Weston.

Back To Part 8

Forward To Part 10

Northern Soul Classics - The Drifter - Ray Pollard

Powerful stuff.

Friday Night Disco - Have You Seen Her - The Chi-Lites

Capital III, Chapter 27 - Part 8

If the antagonism between capital and labour is to be resolved positively, therefore, it can only be done on the basis of extending workers ownership and control from the bottom up.

“The co-operative factories of the labourers themselves represent within the old form the first sprouts of the new, although they naturally reproduce, and must reproduce, everywhere in their actual organisation all the shortcomings of the prevailing system. But the antithesis between capital and labour is overcome within them, if at first only by way of making the associated labourers into their own capitalist, i.e., by enabling them to use the means of production for the employment of their own labour. They show how a new mode of production naturally grows out of an old one, when the development of the material forces of production and of the corresponding forms of social production have reached a particular stage. Without the factory system arising out of the capitalist mode of production there could have been no co-operative factories. Nor could these have developed without the credit system arising out of the same mode of production. The credit system is not only the principal basis for the gradual transformation of capitalist private enterprises into capitalist stock companies, but equally offers the means for the gradual extension of co-operative enterprises on a more or less national scale. 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.” (p 440)

This is why Marx believed that the development of the worker-owned co-operatives were the most important development, as he set out in his Inaugural Address to the First International.

“But there was in store a still greater victory of the political economy of labour over the political economy of property. We speak of the co-operative movement, especially the co-operative factories raised by the unassisted efforts of a few bold “hands”. The value of these great social experiments cannot be overrated. By deed instead of by argument, they have shown that production on a large scale, and in accord with the behests of modern science, may be carried on without the existence of a class of masters employing a class of hands; that to bear fruit, the means of labour need not be monopolized as a means of dominion over, and of extortion against, the labouring man himself; and that, like slave labour, like serf labour, hired labour is but a transitory and inferior form, destined to disappear before associated labor plying its toil with a willing hand, a ready mind, and a joyous heart. In England, the seeds of the co-operative system were sown by Robert Owen; the workingmen’s experiments tried on the Continent were, in fact, the practical upshot of the theories, not invented, but loudly proclaimed, in 1848.”

And, in the programme he wrote for the First International, he recommends that workers establish worker owned co-ops rather than retail co-ops.

“It is the business of the International Working Men's Association to combine and generalise the spontaneous movements of the working classes, but not to dictate or impose any doctrinary system whatever. The Congress should, therefore, proclaim no special system of co-operation, but limit itself to the enunciation of a few general principles.

(a) We acknowledge the co-operative movement as one of the transforming forces of the present society based upon class antagonism. Its great merit is to practically show, that the present pauperising, and despotic system of the subordination of labour to capital can be superseded by the republican and beneficent system of the association of free and equal producers.

(b) Restricted, however, to the dwarfish forms into which individual wages slaves can elaborate it by their private efforts, the co-operative system will never transform capitalist society. to convert social production into one large and harmonious system of free and co-operative labour, general social changes are wanted, changes of the general conditions of society, never to be realised save by the transfer of the organised forces of society, viz., the state power, from capitalists and landlords to the producers themselves.

(c) We recommend to the working men to embark in co-operative production rather than in co-operative stores. The latter touch but the surface of the present economical system, the former attacks its groundwork.

(d) We recommend to all co-operative societies to convert one part of their joint income into a fund for propagating their principles by example as well as by precept, in other words, by promoting the establishment by teaching and preaching.

(e) In order to prevent co-operative societies from degenerating into ordinary middle-class joint stock companies (societes par actions), all workmen employed, whether shareholders or not, ought to share alike. As a mere temporary expedient, we are willing to allow shareholders a low rate of interest”.

Back To Part 7

Forward To Part 9

A Socialist Campaign For Europe - Part 5 of 5

For A United States of Europe

In 1979, socialists faced a similar problem. Today we seek to argue for a vote to stay in Europe, but without giving any credence to the conservative arguments put forward either by Cameron, or by social-democracy. Back in 1979, the dilemma was to argue for a Labour victory in the election, but without supporting either the record of the Wilson/Callaghan government or the programme on which Labour was fighting the election. The solution to that problem was the creation of the Socialist Campaign for a Labour Victory, one of whose supporters at the time was Jeremy Corbyn.

We need a similar approach today in relation to the EU Referendum. To the extent that left social democrats are prepared to support such a socialist campaign, we should welcome them. But, the starting point for such a campaign ought to be a rejection of any concept of British exceptionalism, or the idea that the interests of British workers can be viewed separately from the interests of other workers across Europe.

We ought to make the foundation of the campaign not just a campaign for a vote to Stay In, but an ongoing campaign for a further development of Europe towards a United States of Europe, as the basic framework within which to fight for a European Workers Government, and a Socialist United States of Europe. A basic element of A Socialist Campaign for Europe, in the referendum, should then be the inclusion within it of socialists from across Europe, a focus not just on the concerns of British workers, but of workers in Greece, Portugal, Spain, Ireland, Poland, Hungary and all other EU countries, and how those concerns can only be addressed on a common basis of struggle.

That would mean linking up with existing campaigns such as Another Europe is Possible, or that proposed by Yanis Varoufakis.

The existence of the Syriza government in Greece, of Podemos in Spain, of the Left Bloc in Portugal makes that easier, because it demonstrates the possibility of linking up, at least social-democratic forces, across Europe on the basis of opposing austerity, but it also demonstrates why even such a limited objective can only be achieved by building a movement across Europe. Cameron has opened a Pandora's Box that should be used by socialists to drive the wedge within conservatism even wider, and the hammer that will drive in that wedge should be a united working-class campaign across Europe, during the referendum campaign and continuing after, for the deepening of the existing EU, for its democratisation, and the establishment of common rights and benefits for all workers within its borders, for the establishment of a single fiscal regime and treasury to finance it, as part of the establishment of a United States of Europe.

Back To Part 4

Capital III, Chapter 27 - Part 7

The old, private capitalist enterprises are antagonistic to the new forms of socialised capital, because what are social means of production exist in the former still openly as private property. Yet, in reality, within the socialised forms of capital, control over these social means of production are not under social control either, but only under the control of an increasingly small number of very wealthy people, or their representatives, whether via joint stock companies or the capitalist state.

“There is antagonism against the old form in the stock companies, in which social means of production appear as private property; but the conversion to the form of stock still remains ensnared in the trammels of capitalism; hence, instead of overcoming the antithesis between the character of wealth as social and as private wealth, the stock companies merely develop it in a new form.” (p 440)

The joint stock companies appear to resolve the antagonism between capital and labour, therefore, because the capital employed as means of production, is no longer the private property of capitalists. The means of production are the property of the enterprise, not the shareholders. The shareholders are merely the owners of share capital, which they acquire as a result of lending money-capital to the enterprise, and for which, in return, they are paid interest, in the form of dividends.

This is illustrated by the fact that businesses can use their profits to buy back the shares they have issued, as a means of obtaining money-capital. In theory, a firm could buy back all of the shares it has issued, so that it would have no shareholders at all. In that case, the firm itself as a corporate entity, would own the means of production, and to the extent that there were no other owners of the business, and only workers of various kinds, the antagonism between labour and capital within the business would have been resolved. In theory, these workers, from the highest manager to the lowest unskilled worker, could then share the firm's profits exclusively amongst themselves, much as happens with John Lewis.

But, such situations are exceptions. Although also, in theory, workers can buy shares in companies, to the extent they do so individually, they lose the benefit of their greatest strength – their massive superiority in numbers.

A look at the data on the ownership of wealth shows that a minuscule percentage of the population, in developed economies, owns a preponderant amount of wealth, and that the wealth is held predominantly in the form of loanable money-capital and financial assets.. For example, Bill Gates alone has an equivalent amount of wealth to that of the poorest 40% of the population in the US combined.

It is estimated that to exercise control over a company, it is only necessary to own around 30% of the voting shares. That is because, of the other 70%, a large proportion will be held in a large number of disparate hands, many of whom will not bother to vote, and of the rest, these will be divided so that the 30% holding will be able to obtain a majority vote. In fact, in Britain, workers do own a considerable amount of this fictitious-capital. Workers pension funds amount to around £800 billion, which is equal to the share value of around 75% of the FTSE 100. But, as with the vast amount of state capital, which theoretically belongs to workers, they are allowed no control over it.

Back To Part 6

Forward To Part 8

A Socialist Campaign For Europe - Part 4 of 5

Socialism and Social Democracy

In short, socialists should support remaining in Europe, and indeed measures to further develop Europe, whilst clearly demarcating themselves in that campaign not only from pro-EU Tories and Liberals, but also from the social-democrats. Where the social-democrats, phrase their argument in terms of what is good for British workers, in staying in Europe, socialists reject such an approach, and start from what is in the interests of all workers. We reject the ideas about EU workers being denied in-work benefits, as migrants, even for a limited time, because it is nationalistic. It divides workers on the basis of their nationality, and thereby creates a two-tier workforce in each country. In so doing, just as such arrangements for public sector pensions created a two-tier workforce in the civil service some years ago, it divides workers, weakens them, and opens up the door to a wider attack on workers benefits, and rights.

The next stage for the Tories will be to extend the proposals so that all British workers are denied benefits, unless they have contributed to the tax and national insurance scheme for some minimum length of time. The devastating effect that would have on those who suffer some form of disability, and who can never obtain employment, in the first place, so as to make such contributions, and on those communities where permanent structural employment means that large numbers never obtain work, or at best only obtain sporadic work, can easily be seen.

The socialist objections to in-work benefits, and indeed to welfare benefits in general, are quite different to these nationalistic arguments. Marxists oppose in-work benefits, because they represent a subsidy to inefficient, low paying capitalists. Not only are they objectionable on that basis, but they also result in a misallocation of capital, away from where it could accumulate more rapidly, and thereby provide greater employment. The Marxist objection to the welfare state, in general, is that it is a construct of the wider capitalist state, under its control, and designed to meet the needs of capital, not workers. In fact, this is one obstacle to developing European wide solutions, because such welfare states, are currently established within the framework of the nation state, and thereby counterpoised to those of every other nation state, including within the EU.

Marx and Engels opposed the introduction of National Insurance, and welfare states for precisely these reasons, and argued instead for the workers to defend and extend their own forms of social insurance, through their trades unions, and Co-operative and Friendly Societies. Such independent workers provision, can always then be geared to meet the workers' interests rather than those of capital, it is directly under workers control, and is not bound by national borders.

To the extent that such welfare states exist, however, Marxists support social-democrats in attempting to democratise them, whilst pointing out the limitations of achieving that outside workers ownership of the scheme. In response to the arguments of the nationalists, who object to migrant workers obtaining these benefits, we argue that such a welfare state can now only rationally exist on the basis of common benefits and entitlements for all workers across Europe. Such a European welfare state, and system of common benefits, can only exist on the basis of those benefits being paid from a central European budget, which requires the establishment of a single European state, with a single Federal Budget, and fiscal arrangements. Rather than less Europe, and division, the arguments of the nationalists, in these examples, point to the need instead for more Europe, for a single European state.

That same argument applies in relation to the Minimum Wage. The consequence of the conservative arguments for exceptionalism and division inevitably lead to increased competition, and a race to the bottom. In Capital III, Chapter 11, Marx sets out why higher wages are in the interests of the larger capitals with a higher organic composition. But, its also obvious that any such large capital that thinks it can sell into a market where prices of production are influenced by these higher wages, whilst itself benefiting from lower wages on its own production, will seek to do so, so as to make surplus profits. Similarly, they will seek to locate into those areas where they think they can obtain other similar benefits, which is why they have been attracted in the past to Enterprise Zones and so on. The limitation on this, is whether these other factors lead to a lower overall level of social productivity. For example, low wages often go along with low levels of skill for workers, low levels of tax go along with decrepit infrastructure and so on. These do not matter for the more backward forms of capital, but they do for the more advanced forms. Competition by nation states, or regions on this kind of basis, thereby tend to lead to a development of these backward forms of capital, and a fetter on the development of the more advanced forms.

Minimum wages are only palliatives and insurance required within capitalism. They are social-democratic measures, rather than socialist solutions, based upon the transformation of the productive and social relations. But, socialists can support such social-democratic measures, not only on the basis of providing protection for workers, for so long as capitalism continues, but also because they encourage the development of the more progressive forms of capital, required for the development of socialism. The introduction of a common Minimum Wage, across Europe, could act as a powerful incentive for capital, across Europe, to invest in means of raising productivity, particularly if that is combined with measures introduced by a centralised European state to renovate the infrastructure in less developed areas of the EU. Instead of loans to indebted countries like Greece, which merely ensure that repayments are made to global banks, and do nothing to resolve the problem of lack of capital, in those economies, even a social-democratic programme for Europe, would be framed in terms of something akin to the Marshall Plan after World War II, and would aim to create the basis for the accumulation of the kind of productive-capital, in those economies, which could be globally competitive, and thereby allow those economies to pay their own way without such loans. The EU, in fact, has more than sufficient resources as a whole, to facilitate such a programme of fiscal expansion, which would also quickly end the levels of unemployment currently existing within the periphery.

Back To Part 3

Forward To Part 5

Capital III, Chapter 27 - Part 6

“Aside from the stock-company business, which represents the abolition of capitalist private industry on the basis of the capitalist system itself and destroys private industry as it expands and invades new spheres of production, credit offers to the individual capitalist; or to one who is regarded a capitalist, absolute control within certain limits over the capital and property of others, and thereby over the labour of others. The control over social capital, not the individual capital of his own, gives him control of social labour.” (p 438-9)

Those who exercised control over this social labour, such as Ian McGregor at the NCB, or Michael Edwards at BL, are the same capitalist bureaucrats who occupy similar positions on the boards of other huge corporations. Within state capitalist enterprises their control rests upon the massive amounts of credit that the state itself mobilises. And, this fact, that the state can mobilise these huge resources, whilst those who ultimately have to pick up the tab for it, the workers and middle class, as taxpayers, have no means of exercising control over its use, leads not just to bureaucracy and inefficiency on a mammoth scale, but also to outright swindling. The old apology for capitalist profits that they were a reward for savings and abstention, are here revealed as “equally sordid”, because these bureaucrats enjoy lavish lifestyles, on the basis of their control over social labour, not because they have saved, but because the mass of society has saved for them!

Engels interjects.

[“Just as all France recently saved up one and a half billion francs for the Panama Canal swindlers. In fact, a description of the entire Panama swindle is here correctly anticipated, fully twenty years before it occurred.”] (p 439)

And Marx continues,

“The other phrase concerning abstention is squarely refuted by his luxury, which is now itself a means of credit. Conceptions which have some meaning on a less developed stage of capitalist production, become quite meaningless here. 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.” (p 439)

Under direct production, the individual peasant producer owned the means of production, as private property, and their production was private production to meet their own private needs. Under private capitalist production, the means of production become the private property of the individual capitalist. But, production becomes socialised. It is collective, co-operative labour that carries out production, within the factory, and is itself reliant on social production outside the factory, to provide means of production and means of consumption. Moreover, the production itself is no longer to meet private needs, but to meet social needs.

With the development of socialised capital, the ownership itself ceases being private ownership and becomes collective, socialised ownership, whether in the form of the joint stock company, co-operative or state capitalist enterprise.

Marx makes the same point here as that made by Engels in his Critique of the Erfurt Programme, where he writes,

“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'.”

Marx states this point as follows.

“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.” (p 439-40)

But, this process too is contradictory. On the one hand, the joint stock companies open up ownership of the means of production to the whole of society. Yet, the former concentration of wealth, represented by the monopoly of private capital, is replicated within socialised capital by the concentration of ownership of stocks and bonds in the hands of a relatively diminishing number of money-capitalists.

“However, this expropriation appears within the capitalist system in a contradictory form, as appropriation of social property by a few; and credit lends the latter more and more the aspect of pure adventurers. Since property here exists in the form of stock, its movement and transfer become purely a result of gambling on the stock exchange, where the little fish are swallowed by the sharks and the lambs by the stock-exchange wolves.” (p 440)

Back To Part 5

Forward To Part 7

A Socialist Campaign For Europe - Part 3 of 5

The Collapse Of The Political Centre

A Return of the colonels? 

All across the globe, today, we see that the ideas that ruled for the last thirty years are in tatters. The money drugs of low official interest rates, and money printing that boosted asset prices at the expense of real productive investment, have thereby made things worse, rather than better, and they are now even incapable of achieving their original intention of blowing up these stock, bond and property bubbles. Real productive investment, as Marx showed long ago, is a fundamental requirement for capitalist growth, without which the payment of rent and interest, and capital gain is impossible, and that requirement is reasserting itself. That accumulation of real productive-capital can now only rationally be conducted on the scale of the EU, and within the kind of social-democratic framework that such conditions have generated in the past. It is a requirement of this socialised productive capital, which stands diametrically opposed to the interests of fictitious capital, and of the conservative political forces that have reflected its interests over the last thirty years.

Either social-democracy will take up the reins or else, it will fall to more reactionary forces to pursue the interests of that productive-capital, which is why national-socialist parties have always been able to stand on a platform of economic radicalism. Bismark in Germany, Louis Bonaparte in France, and similar figures across the globe fulfilled that role of state directed industrial policy. The same has been seen in the middle east, in Egypt, Libya, Syria, Iraq, as well as in Latin America. Hitler fulfilled a similar function via the use of Keynesian stimulus, and national economic planning.

Those same dynamics have created the existing split between the Tories and UKIP. That is likely to intensify, as the EU referendum proceeds. The divisions that opened up between the Tories and Liberals over the AV referendum, will be as nothing compared to the divisions that will open inside the Tory Party, because, unlike with AV, the division over Europe reflects real, material differences of interest within capital itself. I wrote some time ago that if Syriza buckled in Greece, it would be Golden Dawn that would fill the vacuum, and, in the same way, I wrote conditions in the UK mirrored those described by Marx in “The Eighteenth Brumaire of Louis Bonaparte”, which led to the rise of a Bonapartist dictatorship, with Boris Johnson playing the lead role.

Marxists do not, therefore, hold any illusions that social-democratic forces such as those of Syriza, Podemos, Corbyn or Sanders are socialist. They are not proposing the building of an independent worker owned property, and independent organisation of workers-power and democracy, increasingly standing in opposition to capitalist property, and the capitalist state, or workers self-government as Marx described it. But, we do recognise that they represent the rational interests of socialised capital, looking forward, whereas the conservatives look backwards, in their representation of forms of property that have had their day, even within the confines of capitalism. It is that objective reality, that underpins the collapse of the political centre, and which means that its only resolution, currently, within capitalism, resides with a rejuvenation of social-democracy, or else with the rise of some form of fascism or Bonapartism.

It is on that basis that Marxists give critical support to social-democratic forces such as Syriza, Podemos, Corbyn and so on. To the extent that these forces can link up across Europe, and extend their influence, the more the objective reality exerts itself against the current appearance of the hegemony of conservative ideas and power.

But, one of the reasons that Marxists can only give critical support to these social-democrats is precisely the limited nature of their own position, which continually lags behind the development of the working-class, and its own forms of property. Socialised capital, in the form of corporations have existed as multinationals for more than sixty years. Some co-operatives operate on an EU or wider international basis. Yet, social-democratic parties and trades unions continue to reflect the dominance of nationalist ideas, despite the oft claimed “internationalism” of those parties. They work together on a loose basis within the EU Parliament, and some half-hearted attempts to build a European trades union movement have taken place. But, as the current moves to loosen the ties in the British Labour Party indicate, with proposals to essentially create an independent Scottish Labour Party, rather than strengthening and drawing closer across borders, the lingering statism and nationalism, that lies behind their ideology continually pulls them apart.

Not only, therefore, should Marxists have no truck with sharing a platform with Tories and other nationalists – we can leave that to the likes of national-socialists and demagogues of the ilk of Galloway – but, we should also have no truck with sharing platforms with those social democrats who frame their arguments in nationalist terms either. There is no more reason to stand side by side with Labour politicians like Hilary Benn, for example, who have welcomed parts of Cameron's reactionary package, and who have only demarcated themselves from the Tories over the removal of workers rights and benefits, by presenting themselves as a pale imitation of the Tories, just as they have done over austerity. Marxists are in favour of staying in the EU, not because it is in the interests of British workers to do so, still less that it in the interests of Britain to do so, but because it is in the interests of workers full stop. It is in the interests of building unified workers' organisations across Europe, of undermining the ability of our enemies to sow division on nationalist grounds, and it is in the interests of building socialised capital, and worker-owned property across Europe.

Back To Part 2

Forward To Part 4

Capital III, Chapter 27 - Part 5

Engels goes on to describe the way that this process thereby leads from competition to monopoly – not the monopoly now of the private capitalists, but the monopoly of giant socialised capitals – in the form of the trusts and cartels, and in the ultimate form of the state capitalist enterprise. In Chapter 15, Marx had written,

“The rate of profit, i.e., the relative increment of capital, is above all important to all new offshoots of capital seeking to find an independent place for themselves. And as soon as formation of capital were to fall into the hands of a few established big capitals, for which the mass of profit compensates for the falling rate of profit, the vital flame of production would be altogether extinguished. It would die out.” (p 259)

But, the process he and Engels are now describing, of the development of these huge socialised capitals, amongst which, today, we would also include the multinational and transnational corporations, are ones where the mass of profit compensates for a reduced rate of profit. They do dominate the formation of new capital.

And so, Marx is led to write of this process, unfolding before his eyes, even then in 1865,

“This is the abolition of the capitalist mode of production within the capitalist mode of production itself, and hence a self-dissolving contradiction, which prima facie represents a mere phase of transition to a new form of production. It manifests itself as such a contradiction in its effects. It establishes a monopoly in certain spheres and thereby requires state interference. It reproduces a new financial aristocracy, a new variety of parasites in the shape of promoters, speculators and simply nominal directors; a whole system of swindling and cheating by means of corporation promotion, stock issuance, and stock speculation. It is private production without the control of private property.” (p 438)

As Marx says, this process is necessarily contradictory. On the one hand, labour and ownership, which existed directly for the direct producer, and also existed for the functioning private capitalist, is abolished by the joint stock company. The workers are paid a wage, but even the functioning capitalist, the manager, is now just a worker paid a wage too. The firm's capital belongs to no one individually, but belongs to the company itself, as a legal corporate entity, in its own right. It is the property of the “associated producers”, i.e. all of the workers, from the manager down to the unskilled labourer. On the other, as socialised capital, every worker from the manager down to the day labourer, can buy shares, either in the company they work for, or some other, and thereby claim a share of the profits of that company, as interest on the money-capital they advance.

Money-capitalists have to periodically keep their
bureaucrats in check.

On the one hand, everyone is a worker within the company, but on the other, as Marx set out earlier, the contradiction implicit in this leads money-capital, in the form of the main shareholders, to establish their own tiers of management, above the actual managers, whose sole function is to monitor the managers, in the interests of the shareholders. In turn, these Boards of Directors, whose remuneration is in inverse proportion to the amount of time and work they contribute, form a sort of capitalist bureaucracy, with its own interests, and which, as was seen at Enron, Tyco etc., will, if left unchecked, further its own interests at the expense of the company and the shareholders.

And, as events at the Co-op Bank showed, in Britain, its not just the capitalist joint stock banks where this problem exists. Wherever such bureaucracies exist, which generally means wherever ownership and control is separated, they will always tend to pursue their own interests. Where that separation of ownership and control is most pronounced, in state capitalist enterprises, is where the bureaucracy is most enabled to pursue its own interests, and where inefficiencies that flow from that are most pronounced.

Back To Part 4

Forward To Part 6

A Socialist Campaign For Europe - Part 2 of 5

The Fantasy of Social-Democracy in One Country

The reality is that Socialism is only feasible on at least a European wide scale, which is why the argument that Britain should leave so that some currently non-existent, future left government could implement a left, social-democratic, statist programme, unimpeded by the EU apparatus is itself nonsense, and indeed reactionary. One reason that conservative politicians and the conservative media wanted to present the situation in Greece as “stay in and accept austerity, or reject austerity and get out”, was precisely for this reason. The last thing those conservatives want is the idea to take hold that it is possible to argue for staying in the EU, and fighting against austerity, on the basis of an EU wide struggle for a return to the kind of social-democratic principles upon which the EU was founded.

What, in fact, Greece demonstrated, was that under current political conditions, not only is Socialism impossible other than on an EU wide basis, but even consistent social-democracy is impossible other than on an EU wide basis. It was not the interests of capital, which made resolving the situation in Greece – and the same applies for Ireland, Portugal, Spain etc. – impossible, on the basis of cancelling the debt, ending austerity and so on. Quite the contrary, the interests of productive capital, real capital, the capital that creates the surplus value on which all other forms of capital depend for their revenues, and which creates the potential for growth, reside precisely in the cancellation of large amounts of debt, in the bursting of astronomical asset price bubbles, and an end to the destructive policy of austerity, that undermines capital accumulation.

It is the interests of the owners of that fictitious capital, that are served by those policies of austerity, combined with money printing that are being pursued by conservative governments across Europe, in opposition to the interests of real capital. As Marx described such situations in the past,

“The credit system, which has its focus in the so-called national banks and the big money-lenders and usurers surrounding them, constitutes enormous centralisation, and gives to this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner — and this gang knows nothing about production and has nothing to do with it. The Acts of 1844 and 1845 are proof of the growing power of these bandits, who are augmented by financiers and stock-jobbers.”

(Capital III, Chapter 33)

And, in fact, it is precisely this which is the real justification for supporting the taking of governmental office by social-democratic parties such as Syriza in Greece, Podemos in Spain, the Left Bloc in Portugal, as well as the potential of a Corbyn Labour government in the UK. It is obvious that, at the moment, European governments, and thereby the EU Council of Ministers, is dominated by conservative parties. Even the “social-democratic” parties that governed over the last thirty years, adapted to the changed conditions to absorb conservative ideas, just as in the post-war period, conservative parties adapted to absorb social-democratic ideas. This reflects a changed milieu in which these parties fish for votes. But, the strength of Marxist analysis is not to see the world in fixed terms, and to simply accept the superficial appearance of how the world currently looks. It is to understand the underlying objective reality, and how that is constantly changing, creating not only the potential, but the necessity for new social relations, and the ideas and political alignments that flow from them. The subterranean currents as Trotsky once described them.

The fact of the rise of Syriza, as much as the collapse of Pasok, along with the rise of Podemos, of the Portuguese Left Bloc, of Corbyn, of Sanders in the US, are not some kind of accidental and coincidental occurrences. In fact, neither is the rise of the FN in France, of Golden Dawn in Greece, of UKIP in Britain, of Trump and Cruz in the US and so on. They are all consequences of those underlying material changes. They are all a reflection of a feature I have made central in my new novel “2017”, which is “the collapse of the political centre”.

That collapse means that the old economic and political solutions that were pursued by that political centre, over the last thirty years, which have been variously described as “The Third Way”, "neo-liberalism", and so on, are no longer viable. They were dependent upon the idea that what was really just fictitious wealth, reflected in ever more astronomically inflated asset prices, of houses, shares, and bonds was real wealth, that somehow simply grew year after year, and sometimes visibly month after month. All of this fictitious wealth facilitated, as collateral, the increase of ever more private debt, and this ever increasing private debt, was then used to inflate even further all of the prices of the fictitious capital. But, the financial crash of 2000 was an initial tremor, giving warning that this construction was built on shaky ground; and the financial crisis of 2008, was a more powerful shock, giving an indication of the severity of the real financial earthquake, when it comes.

Back To Part 1

Forward To Part 3

Capital III, Chapter 27 - Part 4

In the joint stock company, the functioning capitalist, i.e. the manager, is not thereby the owner of the means of production, but only another worker, though a very skilled and specialised type of worker. As a consequence, labour is completely separated from ownership of the means of production. The capitalist no longer obtains profit because they own means of production, and use it to to employ labour-power, so as to extract surplus value. They rather obtain interest from their ownership of money-capital, which seems to be its innate quality, and totally unrelated to the production process, whereby labour, be it that of the manager or the day labourer, is simply paid for the service it provides.

“This result of the ultimate development of capitalist production is a necessary transitional phase towards the reconversion of capital into the property of producers, although no longer as the private property of the individual producers, but rather as the property of associated producers, as outright social property. On the other hand, the stock company is a transition toward the conversion of all functions in the reproduction process which still remain linked with capitalist property, into mere functions of associated producers, into social functions.” (p 437)

But, this has important economic consequences too. In Capital II, Marx makes clear that although capitalism is characterised by expanded reproduction, at the heart of it remains simple reproduction. This is true in two ways. Firstly, the circuit of productive-capital requires that the physical capital consumed in production, is reproduced.

The circuit P...C' – M'. M – C...P, illustrates this, in that, as Marx says, even if M' is reinvested so as to bring about an accumulation of capital, what really occurs is the establishment of two circuits.

M' divides into M and m. On the one hand, M is the money equivalent of the value of the original C, and thereby reproduces it, even if its value has changed exogenously, during the production process. Meanwhile, m which is the money equivalent of the surplus value produced in the production process, may be consumed unproductively or accumulated.

But, for a private capital, a portion of m must always be consumed unproductively, because the capitalist must live. This is the second reason simple reproduction must remain at the heart of the process. The less developed capitalist production, the greater the portion of m will be required by the private capitalist to cover their necessary consumption, so as to live. For a private capital, therefore, there is a minimum level of profitability that must be achievable, because below it, the private capitalist simply cannot produce enough profit to finance their necessary consumption, let alone invest in expanded reproduction.

But, this limitation does not exist for socialised capital, be it that of the joint stock company or the co-operative. Both of these latter forms only have to reproduce the value of the capital they consume plus a small amount of interest for the money-capital they borrow. This means they are not restricted by the limitations of a falling rate of profit, and can thereby continue expanding production in a way that a private capitalist cannot. As Marx puts it,

“Before we go any further, there is still the following economically important fact to be noted: Since profit here assumes the pure form of interest, undertakings of this sort are still possible if they yield bare interest, and this is one of the causes, stemming the fall of the general rate of profit, since such undertakings, in which the ratio of constant capital to the variable is so enormous, do not necessarily enter into the equalisation of the general rate of profit.” (p 437)

However, Engels points out that it is this fact, of being able to continue to expand production, in this way, whilst the expansion of the market is limited, which results in crises of overproduction.

[“Since Marx wrote the above, new forms of industrial enterprises have developed, as we know, representing the second and third degree of stock companies. The daily growing speed with which production may be enlarged in all fields of large-scale industry today, is offset by the ever-greater slowness with which the market for these increased products expands. What the former turns out in months, can scarcely be absorbed by the latter in years. Add to this the protective tariff policy, by which every industrial country shuts itself off from all others, particularly from England, and also artificially increases domestic production capacity. The results are a general chronic over-production, depressed prices, falling and even wholly disappearing profits; in short, the old boasted freedom of competition has reached the end of its tether and must itself announce its obvious, scandalous bankruptcy.”] (p 437-8)

Back To Part 3

Forward To Part 5