Energy and Finance
Paul says,
“The only sector where it is imperative to suppress market forces completely is wholesale energy.” (p 279)
I am sceptical. Energy production and distribution has previously been in the hands of the capitalist state. It used its control, as part of overall economic policy, cutting or raising prices for short-term reasons rather than longer term aims, and objectives. The Plan for Coal was a farce, and, in general, pricing was geared to provide a subsidy to large industrial energy consumers. The UK government has introduced subsidies for solar power generation, encouraging householders to install solar panels, on the basis of generous feed-in tariffs, and then slashed them. In Spain, where many villas in areas away from mains electricity, installed their own solar panels, battery back-up, and generators, they then found the government sought to raise taxes and so they were required to connect their own power generation to the grid, at huge cost to themselves.
Generally speaking, the capitalist state is not to be trusted, let alone relied upon. We should, wherever possible, provide our own energy, via worker-owned cooperatives, local mutual energy systems, and household energy production based upon low-energy housing, renewable energy production, and community self-government.
Paul sets out a number of proposals in relation to the financial system.
“Nationalise the central bank, setting it an explicit target for sustainable growth, and an inflation target on the high side of the recent average.” (p 281)
That assumes that “sustainable growth” is a policy objective that is in the gift of the central bank, which it isn't. It also assumes that goal is consistent with the inflation goal, which its isn't, necessarily. Inflation is a monetary phenomenon. It arises in monetary systems based on a money-commodity, such as gold, when the value of that money-commodity falls sharply, as happened when Spain brought back gold from South America, or, as when the Californian and Australian gold rushes occurred. In fiat currency systems, it arises when more notes or coins are put into circulation than is required for circulation of the value of commodities. Then the value of each note or coin is reduced, so that money prices rise.
In conditions where social productivity rises sharply, which is the condition at the heart of Paul's assumptions, the value of commodities in circulation falls rapidly. If the money in circulation remains constant, money prices, thereby, fall. To prevent prices falling, more notes must be put into circulation, and to have some level of inflation, even more money has to be put into circulation. But, sa Marx points out, once this currency is thrown into circulation, there is absolutely no control over where it goes. If we take the conditions that arose in the 1980's, the consequence of printing money was that it went into buying financial assets and property. The more these assets rose in price, creating large speculative capital gains, the more this acted as a magnet for money in the rest of the economy. The more money was drained from circulation in the rest of the economy, the more this had a deflationary effect on consumer prices, which also acted as a disincentive to capital accumulation, which contradicts the goal of sustainable growth.
Far better is to have the central bank raise official interest rates whenever financial assets and property prices begin to rise, so as to deduce their capitalised prices, and prevent speculation, which drains money and money-capital away from the real economy. It should be reinforced with the reintroduction of quantitative credit controls, such as existed prior to 1986.
Once again, in none of the proposals for the financial system does Paul raise the property question. Many of the issues he seeks to address by bureaucratic means, regulation and state control would disappear if these institutions operated under workers' control. There is a misconception in relation to the banks and financial institutions that they represent money lending capital, rather than socialised capital. Most of these banks and financial institutions are themselves socialised capital, because they are joint stock companies. They should be subject to industrial democracy as much as say a car company. These companies only represent financial capital in relation to their function, as investment banking institutions. As far as their normal banking operations are concerned they operate only as money-dealing capital, moving money from A to B, as an intermediary, in the same way that merchant capital does. Their profits from such activity is no different to the profit obtained by merchant capital. Similarly, where they act to take in savings deposits from which they make loans, this again is the role of a money-dealer, acting as intermediary, and the profits are made on the difference between the savings and lending rates.
However, banks can also create money via the credit multiplier, because they are able to lend a multiple of the value of their deposits. If the loans made are excessive, and/or of bad quality, this can lead to the failure of the bank. In the case of the UK Co-op Bank, when it took over the Britannia Building Society that proved to be the case. This illustrates that the form of cooperative is important. The Britannia was a mutual with close links to the trades union movement, but, like the Co-op Bank, it was not under the control of its workers. It was nominally under the control of its savers and borrowers, but that kind of passive democracy simply results in real control residing with the permanent bureaucracy of the organisation. Its why, some time ago, I wrote that this situation needs to be addressed within the Co-op.
If these organisations were under the control of their workers, and working closely with the rest of the cooperative and trades union movement, not only could such situations be avoided, but a powerful lever of credit could be mobilised for the expansion of the worker-owned and controlled sector of the economy.
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