Tilting At Windmills - Part 5 of 6

Mercantilism, Colonialism and Imperialism

Mike also continues this oddly Mercantilist view in his comment about the UK's “visible” trade deficit, as though it is only physical commodities (which comprise the components of visible trade) which represent value and surplus value. But, that is complete nonsense. The vast majority of the value of UK output, as with most other developed economies, today comes from service industry. In the UK, service industry comprises 80% of GDP! Huge amounts of this complex labour, employed in the UK economy, is then employed in this service industry, and produces large amounts of surplus value, on the same basis as set out above, and some of that surplus value is realised in the export of those services.

Even if the labour is not productive-labour, i.e. productive of surplus value, this does not at all change the situation, because as Marx points out, in Theories of Surplus Value, against those who made this mistake, just because labour is not productive of surplus value, does not mean that it does not produce value.  As he points out, a cook, I employ to produce my meals, is not productive of surplus value, but the reason the cook gets paid, for the labour-service they provide to me, is precisely because they provide me with a product that has value, i.e. my meal.

A prostitute may or may not be a productive labourer, depending only on whether they provide the product of their labour to clients directly, as such a labour service (unproductive), or by selling their labour-power, itself as a commodity, to a capitalist brothel keeper (productive), but the fact remains the same, in either case, that their labour produces value, and it is that fact that enables it to exchange for an equivalent amount of value in money.

A nation of prostitutes could just as easily exchange the value of the product of its labour (invisible earnings) for other commodities it imported, as can a nation of widget producers.  A nation of very skilled prostitutes, whose labour is in high demand, and considered very complex labour, can thereby command a lot of value in money or commodities in exchange for it, from other countries that wish to trade with it.

Mike is led to his Mercantilist (surplus value comes from unequal exchange) and Physiocratic (only material commodities represent value) argument, because he wants to cling to the 100 year old concepts in relation to imperialism put forward by Lenin, and more specifically the Stalinist misrepresentation of those concepts. But, Lenin's theory was wrong 100 years ago, when he set it out in “Imperialism”, and it is even more obviously wrong today! We shouldn't be too tough on Lenin, for that, the pamphlet was written as a political tract and polemic during wartime, and not as a piece of in depth, economic analysis. It described conditions that were already in the process of dissolution. The description of a world divided into colonial empires, was a description of colonialism not imperialism.

It was during the period of Mercantilism, of the symbiotic relation between the feudal landed aristocracy, and merchant and money-capital, that the great colonial empires were established, not under imperialism, and the dominance of industrial capitalism. Feudal landlords sought additional foreign lands from which to draw rents, merchant capital sought foreign markets from which to obtain materials, and into which they could sell manufactured commodities, whilst interest-bearing capital sought to extract interest by financing such activities. That, indeed was a period of Mercantilism, and the extraction of surplus value, on the basis of unequal exchange. But, by the end of the 19th century, with the rise of large-scale industrial capital, it is already past its peak, precisely because this large-scale industrial capital extracts surplus value on a mammoth scale via relative surplus value, and a continual expansion in the number of workers it can draw into wage slavery.

Lenin and Trotsky made the same mistake Mike is making. They saw the period of long wave boom that ran from 1890-1914 as unusual, just as Mike sees the post war boom as unusual. They mistook the period of long wave downturn that followed it, for the period of decay and decline of capitalism itself, and on the back of their own fleeting and illusory success, in carrying through the revolution in Russia in 1917, came to the false conclusion, perpetuated by others, that socialism would be ushered in from above, by sheer force of political will, harnessed by an elitist group of professional revolutionaries in control of the state apparatus.

As late as the 1930's, Trotsky was arguing on the erroneous basis of Lenin's theory of imperialism that Churchill would be happy to let Hitler take over Europe, provided Hitler kept his hands off India, and the rest of the British Empire. But, the opposite was the case. Hitler actually did offer to leave the Empire alone, if Britain did not intervene in Europe. Churchill wisely rejected the offer, for the simple reason that a huge European state, organised on the basis of a developed industrial capitalism, would quickly have overwhelmed British industrial capitalism, whether it had cheap raw materials coming in from its colonies or not. It is a reality the Brexiteers do not seem to have even grasped today. (See my 1982 WSL document on the  EEC in that respect)

This Time Its Different!

For Mike, the period after WWII, was an anachronism, and the higher living standards of workers, creation of the welfare state, and so on, during that period, can be explained in no other way than by the fact of these anachronistic conditions, the fact that imperialism has to buy off workers for fear of them being attracted to the vision of the USSR and so on. Yet, at other times, Mike wants to portray the USSR as anything but any kind of pole of attraction for western workers that would have caused imperialism to lose any sleep! 

So, Mike says,

“After the Russian Revolution, however, and all the more after 1939-45, a lot of concessions had to be made to the working class, with the result that in some countries (UK included) social democratic parties became more ‘normal’ ‘parties of government’.”

However, as I've indicated many of those “concessions” were implemented prior to 1917. Moreover, after 1945, the most consistent social-democracy, with the introduction of co-determination laws for shared management of socialised capital, was introduced in West Germany, where the working-class was decimated, and under the heel of the western occupying powers!

Mike does not answer the question why it was, as Engels describes, that these kinds of social democratic ideas were already being put forward by sections of industrial capital in the 19th century. Forms of social insurance by capital, and by the state were being introduced in Prussia even in the first half of the 19th century, for example, in the mining industry, and it was on the experience of these that Bismark put forward his own proposals for Germany.

Mike does not answer the question of why it was Churchill in 1909 that introduced the Minimum Wage. He does not answer the question of why it was that even in the 1920's, when British workers were defeated, following the General Strike, when a period of depression undermined their strength, and when revolutionary struggles, across the globe, were being defeated, and reaction was on the march, that Neville Chamberlain drew up the first proposals for a welfare state ahead of the proposals by Beveridge. Similarly, why does Mike think that US car makers and other large scale industrial capital continually complained about the disadvantage they suffered compared to European capital, because of the costs of providing for healthcare and so on, for their workers? Why does Mike think that the Chinese state is looking to introduce its own welfare state?

If we examine a lot of the issues around the provision of healthcare and other services, the real issue is not about reducing the size of the welfare state, but is about the question of how such services can be more efficiently provided as a result of the technological changes that have arisen in the last twenty years that make possible more flexible, neo-fordist solutions, of the type discussed by Aglietta long ago.

State Power and Governmental Office

Another aspect of the weakness of the CPGB's analysis, in relation to the events in Greece, and more generally, is also highlighted in Mike's comments in this section. It is that it confuses and conflates the question of taking state power, and taking governmental office. So Mike does not seem to grasp the idea that a social-democratic state is objectively driven towards measures that defend the interests of socialised-capital, whereas a conservative government, or even a Blairite/Brownite Labour government that is in thrall to conservative ideas, might, in order to gain a governmental majority, propose or pursue policies which are, in fact, contrary to that interest. In fact, Mike has a very mechanistic view of this relation of the role of political parties and the implementation of class interests. As Marx describes in relation to the 1844 Bank Act, governments can simply act in error, having being persuaded to act in a particular way, in the interests of a section of capital, and yet that action can be against the interests of capital in general, and/or the interests of that section of capital they represent.  In 1847, and 1857, the government was forced to suspend the Bank Act, precisely because of its deleterious effect on industrial capital. 

I do not argue that “the dynamic to dominance of industrial capital and hence of its (alleged) ideological representative, social democracy, must still be at work, in spite of all appearances to the contrary,” because I reject the idea that “appearances” are indeed contrary. There has been a period of 30 years during which conservative governments have predominated, and yet, despite that we have seen increasing regulation of economic activities, the ever increasing degree of planning, within enterprises, and of production, across the globe, has intensified, and been matched by a similar rise in co-ordination and regulation of economic activity by states, and transnational state bodies. In fact, contrary to Mike's claim that much of these developments were due to an anachronism arising from the existence of the USSR, much of that process, as part of globalisation, has intensified after the collapse of the USSR. 

The Ratchet To The Right

Mike writes,

“The resistance of the Tories, and their ability to move politics in their direction since 1948, which I see in terms of a ‘ratchet to the right’, he identifies as opposition from “backward-looking sections of capital, from the small private productive and merchant capitalists, and from the private money-lending capitalists ...” 

In fact, again, that is not what I argued. From around the mid to late 1980's, when the long wave cycle turned into its Winter phase, when large sections of industrial capital was migrating to Asia, and after, on the basis of this conjunctural shift in the economy, workers in Western Europe and North America found themselves objectively in a much weaker position – defeat of the British miners, US Air Traffic Controllers and so on – it is certainly true that those sections of small private capital, the various Eddie Shah's, became stronger, and obtained a more powerful voice through Thatcher.

The rise in the rate of profit, during that time, on the back of falling wages, caused interest rates to fall, and the prices of fictitious capital to rise. It was symbolised by the Financial Big Bang, and deregulation of financial services. It created the basis for huge capital gains in stock, bond and property markets, thereby strengthening the position of those other social strata that are traditionally associated with conservatism – the landed and financial oligarchy. It also created that set of conservative ideas, adopted by New Labour, about the ability to get rich on the basis of these speculative gains, and borrowing on the back of them. State intervention shifted from Keynesian fiscal intervention, to Friedmanite monetary intervention, as the means of implementing macro-economic planning and regulation. It was certainly not an indication that the idea of planning and regulation had been abandoned in favour of some neo-liberal free market. In fact, the repeated intervention by Alan Greenspan, every time the US stock market even hinted that it might fall showed the opposite.

Buttskellism

But, in the earlier period, after 1948, it is also not even true that there was the “ratchet to the right” that Mike describes, even in terms of the rhetoric, and the means of intervention and regulation adopted. During all of the period up to the early 1980's, Tory governments found themselves having to provide the same kind of support for the NHS and the rest of the Welfare State that Labour advocated. They too were bound by the need to abide by Keynesian orthodoxy to cut short any of the recessions that occurred during that period, in order to maintain full employment. It led to the coining of the phrase “Buttskellism” being the conjoining of the names of Tory R.A. Butler and Labour leader Hugh Gaitskell. Ninety per cent of the legislation proposed by Labour administrations were simply taken over by incoming Tory governments, and vice versa!

That is simply the other side of the coin to the situation I referred to earlier of New Labour, in order to build an electoral coalition to win office, adopting conservative ideas and rhetoric, as they hold sway. In the post-war period, it was social-democratic ideas that held sway, and had to be adopted and adapted to by conservative parties, in order to build a winning electoral coalition.

Mike phrases what he claims is my position in relation to Marxists' attitude to social democracy in a rather odd manner. According to Mike my position is that “we should not criticise the realism of proposals to implement social democratic policies through taking government office under present conditions.” 

Actually, what I said was that social democratic policies are not hostile to industrial capital, and so it is not unrealistic for social democratic parties to pursue such policies. But, such policies may be opposed by those sections of capital which see those policies as immediately against their interests. The owners of bonds will not be happy if debt is written off, or bond prices collapse. Shareholders will not be happy if stock markets fall, as central banks stop intervening to pump liquidity into capital markets. Landowners will not be happy as rising interest rates cause property prices to collapse. And conservative politicians will reflect those concerns by opposing social democratic governments that try to introduce measures, which threaten to have such consequences.  The fact, that large parts of the electorate were also duped into the belief that they became wealthier simply on the back of rising house prices, and stock and bond prices, and its effect on their pensions, even though actually the opposite was the case, was one reason that New Labour, was led into such positions too.

Rent v Capital Gain 

Yet, as I pointed out, not even that opposition is a given. Engels in Anti-Duhring, describes a condition of state-capitalism in which a class of rentier money-capitalists simply sit back and clip coupons, taking interest on the bonds they own, as providers of money-capital to the state. In the end, all that these rentier capitalists are concerned with is the maximisation of that interest. And that interest is ultimately maximised when industrial capital is able to grow, and to maximise profits, out of which that interest is paid.

Rather than the period after WWII, up to the mid 1970's, being an anachronism, it is the period over the last 25 years which in many ways has been an anachronism, because it has been a period, where instead of being concerned with maximising that interest on money-capital, or rent on land, i.e. yield, the owners of this fictitious capital have instead been concerned with maximising speculative capital gains, a process which is unsustainable, and has only been sustained thus far as a result of the unprecedented levels of state intervention to keep asset price bubbles inflated.

Yet, the reality is that even the representatives of that interest-bearing capital realise that the current situation is not sustainable, and that the current bubbles will, in the not too distant future burst. They understand the concept of “extend and pretend”, as it is applied not just to an economy like Greece, but also to the vast amount of private household debt that exists across Europe and North America. In the case of Greece, huge amounts of debt already was written off, in the hope of maintaining the process of “extend and pretend” for a while longer, and thereby not suffer an even greater write off of debt.

The Return of Keynes

Those representatives have themselves also begun to state more openly that monetary policy has come to the end of the line, and that a return to Keynesian fiscal stimulus, of some form of large-scale, coordinated capital investment programme across Europe is required. The IMF's leaked negotiations in that regard, in relation to Greece, are an illustration of that, as the IMF has basically announced to the EU leaders - “Over to you.”

In fact, it is precisely because that money-capital is subordinated to industrial capital, that ultimately, social-democratic measures that bring about a rejuvenation of industrial capital, remove the fetters on capital accumulation that current conservative policies have inflicted, and thereby make possible a huge rise in the mass of profits, will simultaneously benefit that interest-bearing capital too. It will lose a large part of its current inflated paper valuation, but will see a significant rise in its revenue, as yields rise.

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