Thursday, 31 October 2019

Theories of Surplus Value, Part III, Chapter 24 - Part 10

Unlike Ricardo, Jones understands that a falling rate of profit, in agriculture, does not mean that productivity in agriculture is declining – diminishing returns. But, his explanation of this falling rate of profit falls into the same error as the Ricardians, as arising as a result of a fall in the rate of surplus value. Jones writes, 

““A fall of Profits is no Proof of the decreasing Efficiency of agricultural Industry” (p. 257). 

“… profits depend partly on the amount of the produce of labour, partly on the division of that produce between the labourers and capitalists; and […] their amount, therefore, might vary from a change in either of these particulars” (p. 260).” (p 409) 

So, Jones, here, still accounts for the fall in the rate of profit on the basis of the fall in the rate of surplus value. Either wages may rise, as a result of the market conditions, causing the market price of labour-power to rise, or else changes in social productivity cause the value of labour-power itself to rise. The Ricardian theory basically proceeds as follows. Capital expands, the demand for labour-power rises, causing wages to rise. The rise in wages and increase in the workforce causes the demand for wage goods to rise. Rising productivity in industry means that manufactured wage goods can be produced at lower cost, and so that facilitates a fall in wages, and rise in the rate of surplus value. However, the largest component of wage goods is food, and the increased demand for food necessitates cultivation of less fertile land. So, agricultural productivity falls, the value of agricultural products rises, and this causes the value of labour-power to rise by more than the fall in the value of manufactured wage goods causes it to fall. That means wages rise, and the rate of surplus value falls. 

The rise in wages is then first a consequence of a change in the demand and supply for labour-power, which causes its market price to rise. But, the longer term effect is from a rise in the value of labour-power, as the increased demand for wage goods leads to production on inferior land etc. that results in a fall in social productivity. This secondary effect not only affects food production. As manufacturing industry produces more wage goods, it requires more wool, cotton, coal, iron etc., and production of these additional primary products also requires the use of less fertile lands, mines and quarries. This not only passes through into higher prices of manufactured commodities, but it also raises the value of the circulating constant capital, i.e. it causes a rise in the value composition of capital. Furthermore, these higher agricultural prices cause rents to rise, thereby further squeezing profits. 

“This is the reason for the incorrect law which he elaborates: 

“When, abstracting from the effects of taxation, an apparent diminution takes place in the revenues of the producing classes considered jointly” (what revenue means is not explained here, [whether ] value in use or value in exchange, amount of profit or rate [of profit]), “when there is a fall in the rate of profits, not compensated by a rise of wages, or a fall of wages not compensated by a rise in the rate of profits”, (that is precisely what Ricardo’s law says, and it is wrong) “there has been, it may be argued, some decrease in the productive power of labour and capital”… (p. 273).” (p 409) 

A Socialist Campaign For Labour and Europe - Part 2

In 2010, I argued that we needed a Socialist Campaign for Labour Victory, modelled on the SCLV created in 1979. That model arose on the same basis as that described in Part 1. In other words, as socialists we call for a vote for Labour, as the Workers' Party, but we cannot do so on the basis of Labour's record, or official programme, which is inadequate, and in some respects, reactionary, for example, today, in respect to its pro-Brexit stance. In 1979, the SCLV won wide support from CLP's, DLP's, and trades unions. One of its supporters was a certain Jeremy Corbyn. The model contrasted with the position taken by other socialists. The SWP, for example, which was perhaps the largest organisation on the left, at the time, studious avoided involvement in the Labour Party, remaining in splendid and sterile, sectarian isolation from the political struggle that was taking place, inside the Labour Party, during that period. But, come the election, the SWP completely collapsed its position, and called uncritically for a vote for Labour. One of its leading members, Paul Foot, commented at the time that “for the next few weeks we will be the best supporters of Labour.” 

The other basis of the campaign was that, win or lose, the fight goes on. If Labour were to win the election, then the fight of progressive social-democrats and socialists inside the party would continue, to support workers fighting against job losses, and pay restraint, to oppose cuts in public spending, to oppose immigration laws and so on. And, were Labour to lose that would still be the case. It would be necessary to utilise the foundations created to thereby move the Labour Party forward, now in opposition to the Tories, and to rebuild on a firmer footing ready for the next election. 

A programme for a Labour Victory, today, should be founded on these same principles. As I wrote in 2010, with hindsight the programme of the SCLV still rested, in too large a degree, on statism. The fundamental basis upon which we should proceed is rather that outlined by Marx, of workers self-activity, self-organisation, and self-government. Marxists should facilitate workers in that endeavour by providing them with the lessons of the past, both of success and failure, to avoid making the same mistakes. The role of the state, in so far as workers' parties gain control over the government, should be restricted to simply formalising what the workers themselves have created, and to removing any obstacles in the way of the workers' own self-activity and self-government. For example, if workers take over a bankrupt firm and turn it into a cooperative, then the government should legalise the workers action, in the same way the government did in Argentina, after the workers took over a number of companies and turned them into cooperatives. The government should act to do, at a state level, what workers would otherwise have to implement piecemeal at a local level. For example, as Marx said in relation to education, it is wholly objectionable that the state should itself be involved in providing education, but it is sensible that the state should establish minimum educational standards, and appoint inspectors to ensure they are being implemented in each school. 

In the past, I've described how this might operate not just in relation to education, but also in relation to other services, such as healthcare, social care, and housing. On the one hand, the provision of the services can be undertaken by worker cooperatives comprising teachers, healthcare workers and so on. These would have to meet the above nationally determined minimum standards in the services they provide. But, it is also necessary to both prevent rent-seeking activities by these cooperatives, and to ensure that the workers involved in providing these services begin to see what they provide not as simply a commodity, but as a use value, which requires breaking down the alienation of labour that the market and commodity production and exchange creates. It is necessary that they have a human relation with those for whom the service is provided. 

Assembly line of a Fordist Education Factory
On the one hand, that involves increasing the role of the student within the school, as the immediate consumer of the service. Students need to be put in a wholly different relation to the school and the teacher than currently exists within the Fordist education factories provided by the capitalist state. On the other hand, those that pay the cost of the provision of this service are not the students themselves, but their parents. It is necessary to involve parents in education provision to a far greater extent, and the obvious way of doing that is via the creation of commissioning cooperatives, whereby parents form together in an area and establish their own cooperative, so as to commission the education service to be provided to their children. This commissioning cooperative would act to collect the funds to pay for the education, but would also set the terms of the service they expect to be provided, which, in most cases, will be higher than the minimum standards set by the state. This model can be used in relation to health and social care too. 

In relation to housing, we should be in favour of council tenants forming similar cooperatives, and for the housing to be transferred to the cooperative from the council. We should favour the creation of construction and maintenance cooperatives, that could then work with these Housing Cooperatives to enable additional housing units to be built, and scheduled maintenance work to be undertaken on the terms dictated by tenants, and to the standards they require, subject, of course, to that meeting certain minimum standards. In that way, cases like the Grenfell Tower disaster could be avoided. Workers themselves, both as producers and consumers of goods and services, thereby, are united, helping to both undermine the alienation of labour, and the illusions created by commodity fetishism

But, of course, not all workers are equal. Some workers are unemployed, some are on low wages. The creation of housing cooperatives, building cooperatives and so on, itself creates the potential for unemployed workers to be employed locally, in these organisations, producing goods and services that are socially useful, in exchange for wages. But, similarly creating a worker owned and controlled social insurance scheme, would provide the resources to ensure that unemployed workers could be retrained, or given socially useful work in the community in return for benefits. In the meantime, we should demand that the existing state benefits system provide workers who are not in employment with a decent level of income, sufficient to cover the reproduction of their labour-power, including the upbringing of children. We should also demand that workers in work get a minimum weekly wage. What good is a £10 an hour minimum wage if you only get to work 5 hours a week? We should set a minimum weekly wage of £400, and rising in line with wages or prices, whichever is the greater. 

As a basis for discussion I would put forward the following. 
  • Scrap the anti-union laws, and for positive trades union law to enable workers to organise effectively. Wage rises should at the very least keep up with price increases. The same should go for State benefits, grants and pensions. Set up Committees of Workers and Pensioners to calculate an accurate workers cost of living index.
  • Bring Britain into line with other European countries. Start now with a 35 hour week and an end to overtime. Resolve the problem of the WASPI women. No to any extension of the pension age, instead reduce the retirement age to 60, with the goal of 55. Back date the pension payment to the WASPI women.
  • All firms threatening closure should be occupied, and placed under Workers Control. As the capitalist government in Argentina did with the Zanon factory. A Labour Government should legalise the take-over and make the workers the legal owners to run as a co-operative. If the bosses can’t run the factories the workers can.
  • Scrap all immigration controls. Race is not a problem; racism is. There is free movement of capital around the globe so capitalists can maximise their profits. We need the same right of free movement for workers to maximise their earnings. The labour movement must mobilise to drive the fascists off the streets. Purge racists from positions in the labour movement. Organise full support for black self-defence. Create workers defence groups on each estate under the democratic control of Estate Co-operatives, TRA’s or other democratically constituted workers bodies as they arise.
  • Make the bosses pay, not the working class! Workers Co-operatives should get the same lavish funding that the State has given to the Banks, which continue to pay out billions in bonuses. For democratic control of the £1 trillion in workers pension funds, so that it can be used in the workers interests not in the interests of the bosses against workers.
  • All hospitals, and other health provision to be brought under local democratic control. For democratically elected Boards of Health workers and patients in each hospital. Place control in the hands of elected Health Boards, or Town and Parish Councils, which should be given control over other aspects of local, public sector provision.
  • Freeze rents and Council Tax. The Labour and Co-operative movement should mobilise its resources on a national and local level to create a National Construction Co-operative, founded on a federation basis. Co-operative communities should meet their housing and other construction needs through the co-op, which could immediately also begin to train unemployed workers and youth with the skills needed to deal with Britain’s housing crisis.
  • End the chaos, waste, human suffering and misery of capitalism now – in Britain and throughout the world – show the urgent need to establish rational, democratic, human control over the economy, the decisive sectors of industry are already social property; remove the unjustified control of this property by shareholders. Labour should amend company law on corporate governance to prevent shareholders having any votes in the company, and should make all boards fully elected by the workers and managers of the company. We need to mobilise the existing resources of the Co-op Bank, and Co-operative Movement in general, to develop a dynamic Co-operative Movement to finance the development of Workers Co-operatives, and we further need to use the billions of Pounds in workers' pension funds to invest in real capital accumulation, and to end their use for financial speculation by the banks and fund managers that currently control these funds. We should use these funds to create new cooperative firms, particularly in labour intensive, high value, high profit areas of the economy, as part of a single co-operative federation, established initially on a national basis, but extending its links to the co-operative movement in the rest of Europe and the world.
  • We need a political revolution in the cooperative movement to bring it under workers' control. All retail cooperatives should be converted into worker owned and controlled cooperatives. We need to build a cooperative movement across Europe alongside creating an EU wide Workers Party, and trades union movement.
  • The strength of the labour movement lies in the rank and file. Our perspective must be working class action to transcend the limitations that capitalism necessarily encounters. We should build on its foundations, and put a working class socialist system in its place – rather than having our representatives run the system and waiting for the crumbs from the table of the bankers and bosses. But, we cannot wait for some future government to bring that about, or for some single revolutionary event. We have to begin to create the society of tomorrow today, by taking back into workers ownership and control as many aspects of our lives at work and at home as we can now.
  • The capitalist police are an enemy for the working class. Support all demands to weaken them as the bosses’ striking force: dissolution of special squads (Special Branch, MI5 etc), and, in the meantime, for public accountability etc. Democratically controlled neighbourhood cooperatives can not only ensure that they are well maintained etc., but can also organise their own policing. That is particularly important where local communities see the police as an enemy in their midst. Democratically constituted communities that find themselves in need of support to deal with criminal gangs, knife crime and so on, should be able to call on workers in other communities to assist them. We demand that all workers have the right to paid leave from work to engage in such neighbourhood policing activities and training, in the same way they do for jury duty.
  • We recognise the difference between the police and armed forces as organisations of the capitalist state aimed against the working class, and the ordinary members of those organisations, who are themselves workers. We support democratic rights for all members of the police and armed forces, including the Right of Democratic Assembly, and the right to elect immediate commanding officers. Soldiers should have the right thereby to determine what level of training and equipment is required for any activity, and to demand that it be provided before that action is undertaken.
  • A real defence of British workers and their freedoms begins by not attacking workers in other countries, but focusing that defence here in Britain. Bring the troops home from Afghanistan, Syria and Iraq, and every other outpost of British Imperialism.
  • For universal military conscription under democratic trades union control. Using workers defence committees on estates as the basis, develop local workers militia, initially linked to and trained by the existing workers in the armed forces, but ultimately as a replacement for the standing army.
  • Free abortion and contraception on demand. Women’s equal right to work, and full equality for women. 45 years after the passing of the Equal Pay and Equal Opportunities Acts, women remain unfairly treated in the workplace and in the home. This shows that statist measures, such as passing Acts of Parliament, requiring certain types of behaviour, is ineffective without workers having the power to enforce those rights. That power only comes with ownership and control of the means of production. The development of workers co-operatives providing that ownership and control would be an immediate way to enforce equal pay and opportunities.
  • Start improving the social services rather than cutting them. Stop cutting jobs in the public sector. But, recognise that, as state capitalist enterprises, these services are there to meet the needs of the bosses not workers. The evidence of that is the extent to which most of these elements of the welfare state were developed during The Depression by the Tory Chancellor Neville Chamberlain. All of them are run by state capitalist bureaucrats, and suffer all the attendant problems of inefficiency and expense that goes with it. As a beginning, we need Official Committees of Social Workers to introduce Workers Inspection, and Control. We need Committees of Carers to oversee the work of facilities. But, ultimately real control can only come if these services are taken out of the hands of the bosses’ state, and placed directly in the hands of workers.
  • It is essential to achieve the fullest democracy in the labour movement. Automatic re-selection of MP’s during each parliament, and the annual election by Annual Conference of party leaders. Annual election of all trade union officials, who should be paid the average for the trade. These measures are essential if we are to have a leadership of the labour movement, which is responsive and loyal to the interests of the working class. Yet again we go into an election with right wing Labour MP's getting a free pass. That is totally unacceptable.
  • The expenses scandal lifted the lid on the corruption of bourgeois democracy, but it has only told a fraction of the truth. Open the books on bourgeois democracy. We need an elected committee from the labour movement to audit all MP’s expenses, salaries and other earnings. But, we also need to know about all the other members of this club. Full disclosure of all top journalists earnings and connections with the bosses along with those of the media monopolies they work for; full disclosure of the earnings and links of the top civil servants, the judges, and military top brass. For elected committees of Workers Inspection to open the books of the biggest companies to uncover the truth about the billions pocketed by the top bosses and the tax they avoid paying.
  • Scrap the Monarchy and House of Lords. Complete the bourgeois democratic revolution, and vest all legislative and executive power in the House of Commons. For annual elections to Parliament, and the right of recall so we can kick the bums out when they fall down on the job.
  • Capitalism is a global system, we need a global workers movement to fight it. To begin with we should at least develop an effective European Labour Movement. Socialists inside the LP, and other workers parties throughout Europe, should combine to fight for a single European Workers Party linked to a single European Trade Union. Scrap the European Commission and other unelected bodies, and vest power in the European Parliament. 
In order to achieve even the progressive social-democratic agenda described above, it is necessary for Britain to Remain in the EU. We do not argue that for the same reason that David Cameron did in 2016, or that the Blair-rights and Liberals do today. There is no basis upon which socialists could stand on a platform with Tories, or Liberals, or Blair-rights, simply upon the superficial basis that they both seek a vote to stay, because the more important point is that they seek to stay on diametrically opposed grounds. 

It is a disgrace that the Left allowed the Liberals and Blair-right, as well as Remainer Tories to establish the People's Vote campaign as a conservative social movement that occupied the ground of opposing Brexit. That is the ground that a progressive, internationalist Labour Party should have monopolised for itself, over the last four years. It has marginalised the Left, and demoralised a large proportion of that new generation of young activists that came in behind Corbyn in 2015. That is seen in the fact that 60% of Labour's 2017 vote deserted it in the local elections, and EU parliamentary elections in 2019. The same 60% say they will not vote Labour in the next election. Indeed, 60% of Labour members themselves voted tactically for other Remain supporting parties in the European Parliament elections. Corbyn's nationalist programme has seen him lose a large part of that support, with the biggest decline being amongst the 18-25 year-olds. The party has lost around 100,000 members. Corbyn's reactionary nationalist agenda has allowed the Liberal corpse to be resurrected, and to prosper to a degree whereby it could even overtake Labour in these elections, unless Labour radically changes its position, to become the most militant opponent of Brexit. 

The pro-EU Tories, Liberals and Blair-rights seek to stay only in so far, as they see it as a means of furthering the interests of the dominant sections of British capital. Socialists seek to remain because they see it as fundamental to maintaining the unity and solidarity of workers across Europe, of undermining the petty, narrow minded nationalist divisions that can be thrown up to divide workers, and which are used to pursue a race to the bottom of conditions, of the kind that Cameron's “reforms” were all about, and which would intensify were Britain to actually leave on the basis that the likes of Rees-Mogg seek to achieve. Socialists see remaining in the EU as central to opposing the reactionary nationalist ideas of individual national roads to socialism that Stalinists, and left reformists have put forward in the past, which further the illusion that somehow socialism can simply be legislated into existence by a national parliament, and implemented from on high by the capitalist state. 

Marxists do not, therefore, hold any illusions that social-democratic forces such as those of Syriza, Podemos, or Corbyn are socialist. They are not proposing the kind of 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, that is required for socialism.  But, we do recognise that, however confusedly and inadequately, 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, 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, the failures of Syriza, and Podemos, and of Corbyn also illustrate why this must be critical support, and why we must vociferously oppose the tendency to establish a cult of personality around the leaders of these movements that is thoroughly unhealthy, and inevitably leads to disappointment and demoralisation. Those that similarly formed a cult of supporters around Chavez, are an example of that same phenomenon. 

In part 3, I will look at how the principles and demands outlined for a Socialist Campaign for Labour can be incorporated with a Socialist Campaign for Europe, and the specific tactics to be employed around these demands and principles in the forthcoming election.

Forward To Part 3

Back To Part 1

Wednesday, 30 October 2019

A Socialist Campaign For Labour and Europe - Part 1

As socialists we support Labour as the Workers' Party, the mass political organisation of the working-class. But, our support for the Labour Party is by no means uncritical. The Labour Party, like the trades unions on which it rests, is bourgeois. That is to say, its ideology is bourgeois, even though its membership, and voters, like the trades unions, is comprised of workers. That is inevitable, because both Labour and the trades unions, exist within capitalism, and capitalism not only automatically reproduces the classes consistent with the rule of capital, it similarly reproduces the ideas that flow from such a social relation. As Marx puts it, being determines consciousness. The trades unions, for example, see their role as bargaining within that system, not abolishing it. Their job is to try to get higher wages – a higher price for the commodity labour-power – or better conditions, not to abolish the wages system itself. And, that same ideology pervades the Labour Party, as well as every other social-democratic party. Those parties see their role, like that of the trades unions, not as abolishing capitalism, but of bargaining within it, the most obvious manifestation of which is welfarism, which has become the new “opium of the people”. Instead of seeking to abolish capitalism, and with it the causes of the deprivation and other social evils that afflict the working-class, these social-democratic parties merely seek to ameliorate that deprivation and those social evils, by offering alms to those that suffer from it, in the way that was done, in the past, by religion. It limits itself in this way, because, ultimately, social-democracy sees no other way of improving the lot of workers than by making capitalism work more efficiently, so that, as the pie gets bigger, workers get a larger portion, even though the proportion of the pie they receive gets increasingly smaller, and the proportion that capital obtains gets increasingly larger. 

It has to see things in that way, because, so long as capitalism continues, that is true. Those social-democratic governments that have sought to increase the proportion of the pie going to workers, and thereby reduce the proportion going to capital, by so called redistribution, have simply run up against the fundamental laws of capital, so that capital accumulation slowed, capital relocated to other countries where the rate of profit was higher, and so on, so that the overall result was slower growth, or recession, leading to rising unemployment, and lower wages, which ultimately means that social-democratic governments have to reverse course, or are thrown out of office by the electorate. Indeed, this basic law of capital is one reason that even progressive social-democracy is not possible in a single country, but must be implemented across a range of countries simultaneously, for example across the EU. 

But, as socialists, we are not sectarians who demand that the Labour Party and the workers on which it is based, are already imbued with socialist consciousness. If they were, then we would have no role to perform, and capitalism would already have been abolished, and socialist construction would be underway! We give critical support for Labour and other social-democratic parties, precisely because we recognise that being determines consciousness, and that consequently, arriving at a socialist consciousness is a process that requires a lengthy journey, with feedback loops whereby, material changes arise, which then change consciousness, and that, as consciousness changes, so the consequences of that result in further material changes, which results in further changes of consciousness, and so on. The process of evolution by natural selection did not manifest itself by a rapid leap from the amoeba to the human being, but involved a very long process of small changes and transformations, whereby quantitative changes turn into qualitative changes. Marx's theory of historical materialism, is a similar theory of the evolution of social systems, and the development of new modes of production. One of the most obvious examples of that is the creation by workers themselves of cooperatives. Cooperatives become possible, as Marx says, precisely because of the material changes that occur within capitalism itself, as the labour process first becomes cooperative, as a result of the division of labour, and then that the laws of capital accumulation leads to capital becoming concentrated and centralised, so that ultimately the private ownership of capital becomes incompatible with capital accumulation, and capital itself becomes socialised capital in the form of the cooperative and joint stock company. As Marx put it in his Inaugural Address to the First International, 

“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 labour 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.” 

In the worker owned cooperatives, workers, from the start, exercise control over the capital of the firm, but Marx points out that the joint stock companies, what today we call the limited liability company, or corporation, is likewise socialised capital. That is the capital of the company belongs to the company itself, not to any private owners, though we are continually misled into the belief that this capital belongs to shareholders. It doesn't. Shareholders are merely creditors of the company. That is they are people who have loaned it money, in return for which they have been given share certificates, indicating that they are entitled to a market rate of interest on the money they have loaned, and which they receive in the form of dividends. If social-democracy acted consistently, it would, as a start, insist that bourgeois property law be enforced, and prevent shareholders from exercising control over this capital which they do not own, and would instead argue for a continuation of the bourgeois political revolution of the 19th century, that established the right of workers to the vote, and would now extend that right to workers exercising control over the capital of their companies. 

But, workers, and their most advanced elements, who are to be found inside the social-democratic parties, do not spontaneously arrive even at this level of consciousness. For example, if we take Labour's current position, it clearly does not understand the nature of capital, and in particular this socialised capital. It assumes that it belongs to shareholders, and so proposes to nationalise it, mutualise it, and other such variants. It takes it as read that ownership of the capital is equivalent to the ownership of shares, whereas these are two entirely different forms of property, and in the hands of two entirely different classes. So, Labour proposes all sorts of ill-thought out measures for nationalising companies, by buying out shareholders, a process that is inordinately expensive, and unnecessary, when all it needs to do is to pass legislation changing company law, so as to prevent shareholders exercising control over capital they do not own, and instead to ensure that company Boards are elected by the firm's workers and managers. That is, in fact, only to apply the principle behind the cooperative to the joint stock company, and to extend the principle, long since in operation in Germany, of workers' representatives on company boards, a principle that the EU itself drew up 40 years ago, and that was proposed in Britain by the Wilson government in the 1970's. 

Such a policy would not itself be socialist, but merely social-democratic. To be socialist, it would need to recognise the need for each such firm to begin to end the use of its means of production as capital, to produce profit, and to instead use it merely as means of production, required by the workers to produce the goods and services required by society. But, to do that requires that each firm works cooperatively with other firms both in the same industry, and others, so that instead of competing with each other to produce bigger profits, and obtain larger market shares, they instead work to collectively produce more efficiently to meet society's needs. But again, that is not possible if undertaken in a single country, it can only be undertaken at an international level, because, otherwise, the firms operating within this national border would find themselves still in competition with foreign capital, and being outcompeted by foreign firms. 

The issue, therefore, of a socialist campaign for a Labour government cannot be separated from a socialist campaign for Europe, because these two things are inextricably linked. Even a progressive social-democracy is only feasible on at least an EU wide scale. As socialists, we do not expect workers and their mass organisations to arrive immediately or automatically at this level of class consciousness. It is our task to help them move towards it. We give critical support to social-democracy as a transitional phase towards socialism, a phase through which both capitalism and the working-class must pass, in order to arrive at that level of class consciousness required to create socialism, in the same way that the caterpillar must pass through the stage of being a chrysalis before metamorphosing into a butterfly. 

As socialists, therefore, whilst we argue for a Labour victory in the forthcoming election, we cannot call for a vote for Labour uncritically, or on the basis of Labour's inadequate politics when it comes to either the advancement of a progressive social democracy, or its position in relation to Europe. We cannot, for example, simply support the position of conservative social-democracy, as represented by the Blair-rights, which calls for an uncritical support for the existing EU. As socialists, we see that even progressive social-democracy is impossible outside the EU, but the EU, as currently constituted, is an impediment to the development of progressive social-democracy. The answer to that impediment is not to retreat behind national borders, as the reactionaries propose, which represents an even greater impediment, but is to struggle alongside other workers, socialists and progressive social-democrats, across Europe, to transform it. Our perspective is not a nationalist one that starts from the concept that our aim is to somehow negotiate a better deal for Britain inside the EU, and from which British workers might, then, be offered some scraps, as they fall from the table. Our perspective is one that recognises the working-class as an international class, and that the interests of British workers are identical to those of all other EU workers. We do not accept the perspective of the Blair-rights and other conservative social democrats that the rights and freedoms that EU workers enjoy are the inevitable product of the EU itself – though, in so far as the EU, as a large economic bloc, is able to reduce the competitive struggle that results in a race to the bottom, it does offer such benefits – but that the EU, by reducing this drive of a race to the bottom, and enabling workers across Europe to stand together, as a united working-class, better enables them to fight for those rights, and to fight to transform the EU itself, to create a Workers' Europe

But, for the same reason, nor can we accept the reactionary nationalist agenda which stands behind the position of Corbyn, and the Stalinists that form the cabal around him, which gives tacit support to all of the reactionary nationalism implicit in Brexit, and their demand that a Labour government negotiate a fantasy “Jobs First Brexit”, which only then would they put to the country in yet another referendum. This reactionary nationalism that has its roots in the continued influence of the national socialist ideology of Stalinism, destroyed the project of the Left in the 1970's, and 1980's, and it looks set to do the same thing again. The origin of this reactionary national socialist ideology is the development of the Theory of Socialism In One Country by Stalin in 1924, and its adoption since then by the Stalinist parties, as reflected in the various “National Roads to Socialism”, drawn up as the programmes of the various Stalinist Parties, such as the British Communist Party's British Road to Socialism

In The Revolution Betrayed, Trotsky describes the way that Stalin himself, had initially described why Socialism In One Country was not possible. 

“In April 1924, three months after the death of Lenin, Stalin wrote, his brochure of compilations called The Foundations of Leninism: 

“For the overthrow of the bourgeoisie, the efforts of one country are enough – to this the history of our own revolution testifies. For the final victory of socialism, for the organization of socialist production, the efforts of one country, especially a peasant country like ours, are not enough – for this we must have the efforts of the proletarians of several advanced countries.” 

These lines need no comment. The edition in which they were printed, however, has been been withdrawn from circulation.” 

But, later in 1924, Stalin instead developed his Theory of Socialism In One Country, thereby necessitating the expunging of these earlier writings from existence. As Trotsky puts it, 

“The large-scale defeats of the European proletariat, and the first very modest economic successes of the Soviet Union, suggested to Stalin, in the autumn of 1924, the idea that the historic mission of the Soviet bureaucracy was to build socialism in a single country. Around this question there developed a discussion which to many superficial minds seemed academic or scholastic, but which in reality reflected the incipient degeneration of the Third International and prepared the way for the Fourth.)” (ibid) 

The adoption of this nationalist agenda was initially designed to ensure the survival of the Moscow bureaucracy, by making every other communist party subordinate the interests of the revolution in its own country to that of protecting the Soviet Union. So, when Stalin formed his pact with Hitler, the communist parties elsewhere in the world were instructed to support this pact, thereby becoming apologists also for Hitler's regime. They continued to do so, right up to the moment when Stalin was inevitably betrayed by Hitler, in 1941. Overnight, the communist parties everywhere became ardent patriots, and advocates of imperialist war against Germany, which was now Russia's enemy. In the post-war period, when the USSR adopted its policy of “peaceful coexistence” with imperialism, as drawn up in the agreements between Stalin, Churchill and Roosevelt/Truman, that carved up the world into “spheres of influence”, the consequence was that the communist parties in the West had to forswear any commitment to revolution, and limit themselves to the promotion of purely nationally based, reformist, social-democratic programmes. It meant actively opposing the working-class and other socialists when they went beyond those limits, as occurred in France in 1968, when the French Communist Party actively sabotaged the revolutionary struggles of workers and students. As the proponents of revolutionary socialism, or radical socialist internationalism, grew in strength in the labour and student movements, the communist parties were frequently to be found in alliance with Liberals against them. That Stalinists like David Aaronovitch, who epitomised such alliances in the student movement, in the 1970's and early 1980's, should make the full transition to Blairism is no surprise. 

In calling for a Labour Victory, a socialist campaign must begin from these basic principles of internationalism, and progressive social-democracy. We reject the idea that progressive social-democracy is possible on a national basis, and so reject the Stalinist proposals for a reactionary Brexit dressed up in left-wing verbiage about Lexit, a Workers Brexit, or Jobs First Brexit, and other such twaddle. But, we also reject the Liberal/Blair-right demands for uncritical support for the EU as it currently exists. We start from the demand that Labour rejects Brexit, and commits to revoking Article 50, and taking Britain back into the EU if the Tories take us out. But, we also start from the position that the reason we want to remain in Europe, is in order to fight alongside our European comrades to transform Europe into a Workers Europe. Our perspective is not at all one that begins from the relations between governments, or states in the EU, but one that begins from the relations between workers, and their mass organisations across Europe, committed to a struggle for our common interests. Our perspective is – Revoke, Remain, Rebuild. Revoke Article 50, Remain In The EU, Rebuild the mass organisations of the working class on an EU wide basis. 

In part 2, I will examine the demands we should pursue for a Socialist Campaign For Labour and Europe, as well as looking at how we should fight for them, and organise ourselves in the forthcoming election.

Forward To Part 2

Theories of Surplus Value, Part III, Chapter 24 - Part 9

If the capital employed doubles from £100 to £200, rent doubles from £10 to £20. However, if we consider lands of different fertility, although an increase of capital of equal proportions may increase the rents proportionately, the absolute amounts of rents will diverge, dependent upon the different degrees of fertility. For example, if £100 of capital produces £10 of rent on land A, and £20 on land B, £200 of capital produces £20 on A, and £40 on B. Here £40 is double £20, and so has risen proportionally by the same amount, because previously £20 was double £10. But, in absolute terms, the difference has increased from £10 to £20. 

If A produced £10 of rent, and B produced £30 of rent, a doubling of capital from £100 to £200 would mean that A produced £20 of rent, whilst B produced £60 of rent. Now the rent on A rises by £10, but the rent on B rises by £30, i.e. by three times as much as the rise on A. This is the point Marx and Engels make, at length, in Capital III, in relation the effect of a rising, constant or falling marginal productivity of capital, as it applies to the fertility of different types of land, and which, thereby, affects the differential rent already arising from the differences in soil fertility. 

Jones writes, 

““The turnip and sheep husbandry, and the fresh capital employed to carry it on, produced a greater alteration in the fertility of the poor soils than in that of the better; still it increased the absolute produce of each, and, therefore, it raised rents, while it diminished the differences in the fertility of the soils cultivated” (loc. cit.). 

With regard to Ricardo’s view that improvements may cause rents to fall , “it is only necessary to remember the slowly progressive manner in which agricultural improvements are practically discovered, completed, and spread…” (p. 211).” (p 407) 

In relation to the last point, Marx notes that it does not affect the problem as such. It only signifies that improvements do not bring about so quick an increase in supply as to cause market prices to drop. As Marx set out, in his long wave analysis, in Chapter 9, these changes may require many years before they cause market values to fall. Rapid changes in market prices for particular agricultural products can arise as the Cobweb Theorem demonstrates, where high prices in one season cause an increase in production of that crop in the following season. But, that is simply an effect of changes in supply and demand, affecting market prices for that one product, not a change in productivity affecting the supply and market value of all agricultural products. 

Marx sets out the following example. There are three class of land – a, b and c. £100 of capital is employed on each, and they produce output with respective exchange-values of £110, £115 and £120. If £10 represents the average profit, b produces a surplus profit/rent of £5 and c £10. So, total rent is £15. If improvements are made, and now £200 of capital is employed, the output value of each may rise to £220, £228 and £235 respectively. This reflects the fact that the marginal productivity of capital on the better soils is lower than on the worse soils. Had it been the same, output would have been £220, £230 and £240. 

So, the difference between the fertility and surplus profit on the best soil has been reduced, relative to the worst soil. At the same time, however, the surplus profit/rent now amounts to £8 (b) and £15 (c), so that the total rent has risen from £15 to £23. 

“The rate of difference has declined but its amount has increased. This does not, however, constitute a new law, but only shows that the increase of capital employed leads to an increase in rent as in the first law, although the increase in a, b and c is not proportional to their original differences of fertility. If prices were to fall as a consequence of this increased fertility (which is however [relatively] diminished fertility for b and c, for otherwise their product would have to be 230 and 240 respectively), it would by no means be necessary for the rent to rise or even to remain stationary.” (p 408) 

Marx, therefore, sets out a third law which says, 

“if “improvements in the efficiency of the capital employed in cultivation” increase the surplus profits realised on particular spots of land, they increase rent.” (p 408) 

Tuesday, 29 October 2019

Theories of Surplus Value, Part III, Chapter 24 - Part 8

Contrary to Malthus and Ricardo, who argued on the basis of diminishing returns, as more inferior land is brought into cultivation, Jones notes that productivity, in agriculture, rises over time. 

““The average corn produce of England at one time did not exceed 12 bushels per acre; it is now about double” (p. 199). 

“… every successive portion of capital and labour concentrated on the land, may be more economically and efficiently applied than the last” (pp. 199-200). 

Rent will double, triple and quadruple, and so on, if the capital invested in the old land is doubled, tripled, quadrupled, “without a diminished return, and without altering the relative fertility of the soils cultivated” p. 204).” (p 405) 

Jones is, then, in advance of Ricardo, both in that he recognises that rent can rise even as agricultural prices remain constant or fall, and in recognising that additional capital can be invested on the land even if prices are not rising. As Marx showed, in Capital III, capital accumulates on the land, just as it does in any other industry, without the need for prices or profits to be rising. It does so because demand for commodities rises, as the market expands. Each capital seeks to capture a portion of this increasing market, by expanding its own capital. In expanding its own capital, it also provides the basis for the expansion of the market. Even if the rate of profit remains the same, or even falls, it increases its mass of profit, as a result of increasing the capital employed. Similarly, the increased mass of capital employed results in a greater mass of rent, even if the rate of rent remains the same. 

Jones says, 

““… it is not essential to the rise that the proportion between the fertility of the soils should be exactly stationary” (p. 205).” (p 406) 

However, as Marx notes, Jones overlooks the point that, where more capital is employed, and the consequence is rising marginal productivity of capital, on the already more fertile soils, this will increase the disparity between these soils and the less fertile soil, so that the differential rent will increase. But, likewise, 

“On the other hand, a diminution in the differences of the fertility of the various soils must diminish differential rent, i.e., rent arising from those differences. By taking away the cause you take away the effect. Nevertheless, rent (apart from absolute rent) may increase, but in that case only in consequence of an increase of the agricultural capital employed.” (p 406) 

In other words, as Marx set out, in Capital III, building on the work of Anderson, over time, as more capital is employed, on the land, so that the soil is turned from deeper levels, fertilisers applied become bound to the soil, drainage and irrigation is provided, infrastructure is improved, and so on, the advantages of natural fertility, and location, that some lands enjoy, can be reduced, as other lands are improved. That means that differential rents may decline between these different lands, yet rent, in total, may expand, because of this much greater employment of capital, and increase in output. 

Monday, 28 October 2019

Theories of Surplus Value, Part III, Chapter 24 - Part 7

In addition to differential rent, Jones accepts that there may be absolute rent, on the worst soil, but only as a result of a monopoly price. As described earlier, Marx, in Capital III, shows how absolute rent arises as a result of the organic composition of capital in primary production being lower, on average, than in industry. That means the annual rate of profit, in primary production, on average, is higher, resulting in a surplus profit. The surplus profit is not competed away in primary production, because of the existence of landed property. That means that absolute rent can exist without the need for a monopoly price. 

As I have set out elsewhere, however, that does not mean that such absolute rent may not arise due to monopoly prices. Even if the organic composition of capital was higher, on average, in primary production, so that the annual rate of profit was lower, landed property would still exist, and would still only make land available if it was paid a rent, unless in every such case, the landlord acted as also capitalist. So, the supply of land would be restricted, the supply of primary products would be restricted until such time as their market price rose to a level whereby employed capital could produce the average profit, as well as pay the absolute rent. This would be a rent based upon monopoly prices, and would represent a drain of surplus value from elsewhere in the economy. Such rents and transfer of surplus value arise everywhere that restrictions on free movement of capital enables monopoly prices to be levied. 

Jones sets out an example where the average rate of profit is 10%, and £100 of capital, employed in producing corn, creates an exchange-value of £115. Here, £10 constitutes average profit, and £5 differential rent. If, now, £200 is invested, the output value rises to £230. £20 is average profit, and £10 is rent. However, Marx points out, this is true whether the rent, here, is differential rent or absolute rent. 

Jones writes, setting out the basis of differential rent and its growth, as a result of an expansion of cultivation, 

““In small communities corn may be constantly at a monopoly price… In larger countries too […] corn may […] be at a monopoly price, provided the increase of population keeps steadily ahead of the increase of tillage […] however […] monopoly price of corn is […] unusual in countries of considerable extent and great variety of soil. In such countries, if the produce of the soils in cultivation sells for more than will realise the usual rate of profit on the capital employed, other lands are cultivated; or more capital laid out on the old lands, till the cultivator finds he can barely get the ordinary profit on his outlay. Then […] tillage will stop, and in such countries […] corn is usually sold at a price not more than sufficient to replace the capital employed under the least favourable circumstances, and the ordinary rate of profit on it: and the rent paid on the better soils is then measured by the excess of their produce over that of the poorest soil cultivated by similar capitals” (loc. cit., pp. 191-92). 

“All […] that is necessary to effect a rise of rents over the surface of a country possessing soils of unequal goodness, is this: that the better soils should yield to the additional capital employed upon them in the progress of cultivation, something more than the soils confessedly inferior to them; for then while the means can be found of employing fresh capital on any soil between the extremes A and Z, at the ordinary rate of profit, rents will rise on all the soils superior to that particular soil” (p. 195).” (p 404-5) 

Marx comments, 

“It is one of Jones’s merits, that he is the first who clearly brings out the fact that once rent has come into being, its growth will on the whole [provided no revolution in the mode of production takes place] result from the increase of agricultural capital, that is, of capital employed on land. This may be the case not only if prices remain the same but even when they fall below their former level.” (p 405) 

The Rule of Unelected Ruling Class Judges - Part 16 – The Financial Crisis of 2008

The Financial Crisis of 2008 

Financial crises are closely correlated to conjunctures within the long wave cycle – 1962, 1974, 1987, 2000. These crises are a function of changes in the rate of interest. Falling rates of interest cause asset price bubbles to inflate, which burst. Rising rates of interest cause existing bubbles to burst, or cause a revaluation of asset prices in a downwards direction. But, on this basis, why then did the 2008 global financial crisis occur in 2008, which was not such a conjuncture? A simple answer would be that not all financial crises occur at these conjunctures. Interest rates can spike higher, within a secular downward trend for interest rates, and cause a flash crash of asset prices. Such crashes are usually quickly reversed, because the short-term causes of the spike in rates, reverses itself, and asset prices continue upwards, unless some other factor intervenes. But, this picture has been distorted since 1987, because of the intervention of central banks. 

The price:earnings, or p/e, ratio for shares, as its name suggests, comprises two components, the price of the share, and the earnings, or profit, per share. In other words, if a company makes £1 million of profit, and there are 1 million shares, the earnings per share is £1. If the price of a share is £10, then the p/e ratio is 10:1. So, the price of the share can be affected by one of two things. Either the earnings per share might change, or the p/e ratio might change. If profits rise, and the p/e ratio remains the same, the price of the share will rise proportionate to the rise in profit per share, and vice versa. If profit per share remains constant, but the p/e ratio rises, then the share price will rise proportionate to the change in the p/e ratio. In reality, the p/e ratio can change for a variety of reasons, but the underlying factor is the rate of interest. If the rate of interest falls, the capitalised value of the earnings per share rises, causing the share price to rise, and vice versa. The same is true with bonds. If share prices did not rise, when interest rates fall, then the yield from shares would rise relative to bonds, causing speculators to sell bonds and buy shares, which would then cause share prices to rise.  This is why, often, when there is bad economic news, share prices rise, because speculators anticipate that interest rates will fall.

In a period of a secular fall in interest rates, this encourages an expansion of this p/e multiple, and also causes bubbles to form. The larger the bubble, the bigger the crash, when any short-term spike in interest rates occurs, but, as the secular trend resumes, prices can again start to rise. In a period when there is a secular rise in interest rates, it is not a question of asset prices rising rapidly, or bubbles forming – as seen earlier, between 1965-1985, when interest rates are rising, asset prices fell in inflation adjusted terms – that causes financial crises, but the fact that the secular trend in rates is recognised as having reversed, so that all asset prices are re-rated accordingly. 

As I pointed out in my book, Marx and Engels' Theories of Crisis; comparing the 1847 financial crisis with the 2008 crisis, in 1847, the Bank of England intervened by suspending the 1844 Bank Act, which had created a credit crunch, which had led to the crisis. That financial crisis had had effects on the real economy too. According to Marx, it led to a 37% fall in UK economic activity. However, Marx and Engels point out that simply by suspending the Act, the credit crunch was ended, those hoarding cash stopped doing so, and it flowed into general circulation. Interest rates fell, and economic activity resumed. Indeed, the boom that had begun in 1843, quickly re-established itself in 1848. The manifestation of the crisis had come from the bubble in railway shares. But, once the financial crisis was over, and the economic boom resumed, it did not result in the bubble in asset prices resuming along with it. 

Similarly, in 1929, when Wall Street crashed, the deflated bubbles did not reflate. It took until the 1950's for the Dow Jones to get back to its pre-crash level, even in nominal terms. After the crash, US property prices also crashed. The New York mansions of tycoons were sold off for ten cents on the Dollar, and these prices did not quickly recover either. What is common to these two events, and different in 2008, is that no additional money is put into circulation. In 1847, the Bank Act is suspended, and liquidity, already in existence, is released, bringing the credit crunch to an end. In 1929, the Federal Reserve actually tightened monetary policy. The consequence is that the asset price bubbles are burst. Those that had speculated in these assets got their fingers very badly burned, but, as Marx points out, this is really just a matter of one group of speculators losing money to another group of speculators. It has no real relation to what is happening in the real economy. Indeed, as Engels described in relation to 1847, the very fact of the speculation in railway shares was diverting profits, in other companies, that could have been productively invested, into gambling in the stock market. When the bubble in share prices burst, the spur to the gambling was removed, so that funds could once again be used in the real economy, to finance real capital accumulation. 

1929 is the equivalent of the crash of 1987. Both come at the conjuncture between the end of the crisis phase of the long wave, and start of the stagnation phase. But, after 1929, following a sharp Depression, economic activity began to increase again from around 1933. This increase in economic activity is not rapid, because this is a period of stagnation within the long wave cycle. It is marked by intensive accumulation within all of the old spheres of activity, and a slow accumulation of capital in new high value, high profit spheres of the economy, such as motor cars, petrochemicals, domestic appliances, and so on. This creates the conditions for the new upswing in 1949. 

But, when asset prices crashed in 1987, the authorities panicked. Not surprisingly. Even compared to 1929, the amount of fictitious capital had expanded massively, as the post-war boom saw an explosion of socialised capital, and a corresponding rise in the quantity of shares and bonds issued to finance it. A much greater proportion of the ruling class now consisted of those who lived as coupon clippers living from the interest on their bonds, and dividends on their shares, even than in 1929. For more than thirty years, they had been able to rely on a steady stream of revenue, and the slow appreciation in the value of their assets. Moreover, the economic model, by the late 1980's, was one which now relied on these rising asset prices, as the means to provide the collateral for further borrowing by households, to sustain consumption. Households had just been convinced to buy privatisation shares, to borrow money to buy council houses, or to buy houses that were quickly rising in price, to put money into private pension schemes, and to invest in mutual funds of various kinds. Allowing all of these things to go down the pan would have put a large dent into the ideology of a share owning and property owning democracy that Thatcher and Reagan were promoting. In reality, 1987, like 1929, was a reaction to the blowing up of a bubble in the previous period. But, in 1987, the authorities responded by cutting official interest rates, and putting additional liquidity into the system. 

It worked. The financial crisis came to an end, and as stated earlier, stock markets ended up 50% higher from their lows. But, this success only created a precedent which was followed on every subsequent occasion that this rapid upward trajectory seemed to be faltering. And, so, when central banks came to try to withdraw their monetary stimulus, as the Federal Reserve did in 1994, it immediately sparked a negative reaction in the bond markets, and usually, from there the stock markets too. In 1994, the bond market sell-off quickly resulted in a reversal of course. Further shocks to the system, such as the Asian currency crisis of 1997, the Rouble crisis of 1998, prompted further monetary stimulus, and, as seen earlier, monetary stimulus was injected even as a precaution to possible negative shocks, such as any shock resulting from Y2K. 

All of this stimulus enhanced the blowing up of asset price bubbles that would, in any case, have been expected in such a period of stagnation within the long wave cycle. That is why the Dow Jones rises by 1300% between 1980-2000 compared to a 250% rise in US GDP over the same period. It is why, in the 1990's we see technology shares rise at an even more rapid rate, and why property prices go into a similar hyperinflation. Comparing 1929 with 1987, after 1929, asset prices remain deflated, but available money-capital goes into real productive investment that lays the basis for the long wave postwar boom. After 1987, money is printed to reflate asset prices, and every time the resultant bubbles burst, more money is printed to reflate them. Its not that lots of new value and surplus value is not created after 1987, it is, and the rate and mass of profit expands significantly, itself pushing interest rates downwards, which creates the normal, corresponding rise in asset prices, but, by not allowing bubbles in asset prices to burst as they occur, the central banks necessarily inflate asset prices artificially, and act increasingly to divert available money-capital into such speculation, and away from productive investment. 

This is part of the answer to the question that Paul Mason posed in Postcapitalism as to why the expansion of new industries, in the fifth long wave cycle, has not been as great as might have been expected, given the high rates of profit that these new industries offer. The other reason, as I described back in 2010, was that, the existence of very large oligopolies in the old industries, meant that there were frictions of capital leaving these old spheres to enter new ones, and these old conglomerates were able to survive low rates of profit on their productive activity, by living off their huge balance sheets, as well as leveraging those balance sheets to turn themselves into financial companies themselves. General Motors, for example, created GMAC as its financial arm which provided credit in a range of forms besides just car finance. It entered the mortgage market, in the US and Europe. Its UK mortgage arm was bought by Bradford and Bingley, in 2008, just before the latter itself itself had to be rescued, as the global financial crisis unfolded. 

At the end of every period of stagnation, in the long wave cycle, there is a financial crisis as bubbles in asset prices, caused by falling interest rates are burst. Such a financial crisis was normal for 2000, therefore, as a new long wave uptrend began in 1999. But, the inflation of asset prices in 2000, was not the normal inflation of such bubbles, as seen in previous long wave cycles. It was one that had been significantly enhanced by repeated doses of liquidity to reflate burst bubbles over the previous 13 years. The response of authorities, in 2000, was to repeat the same prescription. This was similar to the way that, in the post-war period, the social-democratic state had responded to every recession by using the traditional Keynesian prescription of fiscal stimulus. Again, that reflects the fact that, during that period, it was the interests of this real socialised capital that dominated. In 2000, it was the interests of fictitious capital that dominated, and the prescription was one that responded not to any problem in the real economy, but which only existed within the realm of fictitious capital. It was monetary stimulus to promote a reflation of asset prices, even if such reflation acted against the best interests of the real economy, which it did. 

After 2000, this injection of liquidity is enhanced, as central banks injected additional liquidity in response to the attacks of 9/11. As seen earlier, it had taken until 1996 for UK house prices to recover their 1990 levels, as interest rates had remained high during the first half of that period. But, after 1996, they once again soared, increasing 150% by 2007. The Dow Jones, hit new highs in 2006 and 2007, and apart from Japan, similar rises in stock markets could be seen across the globe, including now, in the new financial markets established in China. 

The next conjuncture when such a financial crisis would be expected should have been around 2012-13. At that point, the long wave cycle turns from the Spring Phase to the Summer Phase. In this Summer Phase, the period when intensive accumulation of capital predominates comes to an end. All of the old technology has been mostly replaced with new technologies. Any additional capital accumulation then consists of adding more of this new technology, and adding additional labour along with it, accordingly. That naturally means that the rise in social productivity slows. Moreover, the relative surplus population that exists at the start of the Spring Phase, has been used up. The ability to add women workers, and migrants has come to an end, overtime, increased in the previous period, has reached its limits, and, in fact, begins to decline as workers hourly wages rise, so they feel less need to work additional overtime. 

As hourly wages rise, and proportionally more labour is employed, as a result of less rapidly rising productivity, so the wage share rises. This means that the demand for wage goods rises, encouraging firms to expand production, to retain or increase their market share of this increased market. Firms are forced, by competition, to increase output, to meet this rising demand, whilst, simultaneously, their profits are squeezed, because absolute surplus value cannot now be increased so rapidly, and rising wages start to squeeze the rate of surplus value. They have proportionally less profit to finance their expansion from internal resources, and similarly less profits get thrown into the money markets to be loaned out at interest. The demand for money-capital rises, relative to its supply, and consequently interest rates rise, and asset prices decline, marked by an initial financial crash as this change in conditions manifests itself. 

But, this crash did not happen in 2012-13. It happened in 2008, five years early. Why? Quite simply because all of the liquidity injections of the previous period had created artificial conditions. Asset prices were already at astronomical levels in 2000. They crashed, but instead of those bubbles staying burst, the authorities blew them up again, sending prices to even higher levels. This created a hyper-sensitivity to any changes which might then cause these bubbles to burst. The new long wave upswing that began in 1999 was very powerful, as I have set out previously. In 2007, I pointed out that the global economy was booming, inflation was rising, and so were interest rates

As I pointed out there, Bridgewater Associates had noted, 

“that for the first time since 1969, there is not one single economy in the world in recession. The IMF has just increased its forecast for world economic growth yet again. China where the Government has been trying to slow economic growth for fear of overheating has just put in economic growth yet again of over 10%, but that is put in the shade by the world’s fastest growing economies. Azerbaijan is forecast to grow by 26% this year, as is Angola as a result of the current high price of oil, Mauritania which does not have oil, but has gold and other raw materials is forecast to grow by 18%.” 

It can be seen in the increase in global trade etc. 

Between 1980 and 1990 global trade rose from around $4,000 billion to around $6,000 billion, remaining flat until around 1994. Between 1994 and 2000 it rose from around $6,000 billion to $12,000 billion. But, the sharpest rise was most notably after 2002 where it rose from around $12,000 billion to around $28,000 billion by 2007. (Source: WTO Thomson Datastream

25% of all goods and services produced in Man's entire history, were produced in the first decade of the 21st century. And, along with this powerful global economic boom went growth of the working-class, which became the largest class on the planet for the first time. The global working-class doubled between 1980-2010, and rose by 30% in the first decade of the 21st century alone. It led to rapidly rising wages and living standards for millions of workers in developing economies rescued from the idiocy of rural life, and with a consequent effect on the demand for food and other wage goods. The diet in China improved significantly. 

In 2005, Chinese consumption of meat was 2.4 times what it was in 1990, milk 3 times, fruit 3.5 times, vegetables 2.9 times, fish 2.3 times, whilst its consumption of cereals, mostly rice, fell by 20%. The large rise in demand from China, and other developing economies, was part of the reason for the spike in global food prices, at the end of 2007 and beginning of 2008. Demand for food rose so sharply that shortages began to appear, which, along with the price spikes, caused riots in a number of countries in 2008. 

The increasing production of China, and other rapidly growing economies, also sucked in larger and larger quantities of raw materials, as well as food. Global GDP rose from around $41 trillion in 2000, to nearly $72 trillion in 2012. Between 2002 and 2010, global fixed capital formation rose from $7 trillion to $14 trillion. From 1999 on, commodity markets turned sharply upwards, as demand for all raw materials, and foodstuff increased sharply as the new long wave boom began. It saw steady increases in the prices of copper, oil, corn and almost every other commodity, as global demand, fuelled by rising economic activity in China, and other BRIC economies, as well as the rising demand of millions of new consumers, in those economies, rose sharply. 

And, this was now a global economic boom, in which economies on every continent now participated, unlike the previous boom from 1949, which was focused on the US, Western Europe and Japan. The consequence was that wages in certain sectors began to rise quickly. In June 2008, I noted that this was already being seen, and conservative social-democratic politicians, like Alistair darling, were concerned about it, as oil tanker drivers quickly won a 14% pay rise. German workers were also winning similarly large pay rises at the time. 

As a consequence, this caused market rates of interest to begin to rise, and this rise in market rates of interest, has a dramatic effect. It means that financial models like that of Northern Rock, based on very tight margins between short-term borrowing costs, and longer term mortgage rates, blow up. Lenders start to go bust, which means that all of those finance houses that have provided this short-term lending become reluctant to lend, as they do not know what counter-party risk they are taking on. Northern Rock goes bust, and a whole series of US financial houses, and mortgage providers follow suit, particularly those involved in providing sub-prime mortgages. This quickly extends to those financial institutions that have bought derivative products based upon these mortgages, i.e. mortgage backed securities, and then extends to those financial institutions that provided insurance to the former financial institutions against the credit risk they were taking on going bad, i.e. the monoline insurers. 

The crisis breaks out in the housing/mortgage sector first, only because the property market had become the symbol of the financial speculation in general, the mass market for that speculation, and the foundation upon which the associated borrowing to finance household debt collateralised upon fictional, highly inflated property prices had itself been based. Even without the sub-prime crisis, the financial crisis itself would have happened eventually, because of the astronomical bubble in financial markets in total, which had to burst, as soon as increased economic activity, and demand for capital caused interest rates to rise. 

2008 occurs five years early because of the continual artificial reflation of burst bubbles, which creates a level of hyper-sensitivity in financial markets to interest rate rises. Interest rates fall to such low absolute levels that even the tiniest absolute rise in rates represents a large proportional rise, and leads to a market sell-off. And, this same solution of printing even more money has been applied as a solution to the financial crisis of 2008. It means that we now have the ridiculous spectacle in which lenders are paying to lend money to borrowers, i.e. we have negative rates of interest! 

By the same token that this brings forward the financial crisis by five years, the measures undertaken to resolve it have dampened the normal cyclical pattern. 2008 did not occur five years early because the conjunctural shift from the Spring to Summer Phase of the long wave came early, but because the Greenspan Put, and continual reflation of bubbles since 1987 had created a hypersensitivity to any upward move in interest rates, and interest rates themselves had become so low that any rise, appeared as a large relative rise, likely to spark off a crash. In 2014, I still expected the normal conjunctural shift to occur, but did not appreciate the extent to which the monetary response to 2008, combined with the imposition of austerity to dampen economic activity, thereby dampened the nature of the Spring Phase of the Cycle, and by dampening it, extended it. If 2008 came five years early, because of these factors, it is not unreasonable to think that this dampening and extending effect of the combination of QE, draining money and money-capital from the real economy, on an unprecedented scale, resulting in around $15 trillion of global bonds now having negative yields, with austerity, reducing aggregate demand in major economies, particularly its largest economy, the EU, as well as Britain, would push out the conjuncture between the Spring Phase and Summer Phase, by at least five years too. 

The extent of this monetary stimulus, and the effect of draining money-capital from the real economy into speculation is shown by the fact that, the Dow Jones that fell to around 7,500 in 2008, now stands at around 26,000, and that is slightly down from its peak. In other words, in ten years, financial markets have again more or less quadrupled. None of this can change the underlying laws of the long wave cycle, however, The fact remains that employment continues to grow, and productivity continues to slow. The demand for wage goods rises simply on the back of a growing workforce, whether or not hourly wages rise, and this increased demand for wage goods means the demand for labour again rises, particularly as 80% of the economy is now covered by service industry, which is relatively labour intensive. The unemployment rate is down to around 4%, which is still high compared to the 1960's, when it was down to between 1-2%. But, it is low enough that it has started to create labour shortages in specific spheres, and to cause wages to rise. 

That started to manifest in 2018, and again interest rates began to rise. The rise in interest rates in 2018, caused US stock markets to sell off by around 20%. But, as they did so, another political factor intervened. In Europe, Brexit created uncertainty that increased the closer the March 29th 2019 deadline date approached. Alongside it, Trump began a global trade war. In addition to sanctions on Russia, Iran, Venezuela and elsewhere, he imposed significant tariffs on imports from China and the EU. China and the EU responded in like manner. This trade war has ramped up in the intervening period, causing global trade and investment to slow accordingly. The result is a corresponding fall in interest rates, and rise in asset prices. However, this is simply a short-term disturbance, even if a significant one, for now. Despite these obstructions, global growth has continued. Trade tends to readjust, and find alternative routes. Brexit, though it might seem never ending, is likely to have a resolution one way or another, and, when it does, it is likely to unlock a series of investment projects, whether they occur in the UK or in Europe. The process that the trade war interrupted in 2018, is likely then to continue. The conjuncture between the Spring and Summer Phase of the long wave will occur, the secular decline in interest rates will be reversed, and asset prices will fall.  Rather like predicting the next major earthquake, it may not be possible to say exactly when it will occur, but we know it will occur, because the movement of tectonic plates makes it inevitable.

This is the material foundation upon which the era of conservative social democracy founders. The rise in asset prices, as the delusional basis of rising wealth, which existed from the 1980's until 2008, has hit its limits. The reflation of the 2008 bubble, and beyond has been possible only at the expense of the most grotesque distortions of the monetary system, reflected in that $15 trillions of negative yielding debt, which requires that lenders pay borrowers to take their money from them! It cannot last, and that is why the conditions for conservative social-democracy, what has euphemistically been called the political centre, no longer exist. That is what brings us to the condition now, in which the material foundation for conservative social-democracy has been destroyed. The fraction of the ruling class that rests upon its ownership of fictitious capital, is in any case too numerically weak to be able to rule politically on its own, without the support of either the working-class, or the plethora of small capitalists. 

But, the interests of the latter are hostile to those of the owners of fictitious capital, which itself rests upon the fortunes of large-scale socialised capital. This is the division that exists in the US between Trump and the political establishment, particularly the Democrats, and in Britain is represented by Brexit. But, the dominant section of the ruling class, whilst needing to defeat the forces of reaction represented by Trump, and by the Brexiteers, is also wary of unleashing the power of the working-class. In the US, they are keen to get Clinton into office rather than Sanders; in Britain, they baulk at the progressive social-democrat Corbyn. They hanker after a return of conservative social-democracy, but it is not possible as a solution from the right or from the left. From the right, the forces of reaction are in the ascendancy, from the left, the forces of progressive social-democracy

The dominant section of the ruling class must steer a middle course, but with no effective political party to represent it. Its not that centrist voters have no party to vote for, but that centrist voters themselves are now in a small minority, society having divided into two great class camps, one moving in the direction of reaction, the other in the direction of progressive social-democracy and socialism. In such situations where such a division exists, and a stalemate arises, the state itself rises above society. It is the conditions in which Bonapartism arises. 

In the final part of this series, I will examine these conditions, and the way this Bonapartism has taken the form of the rule of ruling class judges, under the guise of The Rule of Law.