Conservative Social Democracy v Reaction (1)
The power of bourgeois democracy, for capital, as Lenin indicates, in the quote given earlier, is that not only does it allow the bourgeoisie more actual direct control over the political regime, without all of the disadvantages of rule by a bureaucratic or military, and usually inefficient and corrupt, elite, but it does this whilst giving the appearance of being government by and for the whole nation. It presents the nation as being merely - the people - thereby removing from this view the reality, that "the people" do not exist, because the nation is, in fact, comprised of classes, each of which has antagonistic interests one from another. The most complete version of that only arises with the social-democratic state, in which the workers, eventually, are allowed to vote. The state, which is far more than this superficial outer garment, represented by the political regime, by this means becomes identified with this superficial covering, the political regime. The state itself, thereby, is given the appearance of being the state of the whole nation, and thereby impartial. Its symbol is the rule of law, the concept that everyone within the state, including the lawmakers, are equally subject to the law.
In fact, even this claim is bogus. In Britain, the Monarch is considered to be above the law, because the law is said to be her law. That is why the Monarch does not have to have a number plate on their car, does not have to pay tax, and cannot be prosecuted. In fact, until quite recently a number of bodies such as the Post Office, which were claimed to be the property of the Monarch, also enjoyed this same Crown immunity from prosecution. But, similarly, we have seen in the US, recently, a similar claim that the President is above the law, and cannot be prosecuted whilst in office. The reason Mueller did not advocate legal action against the President was not lack of evidence of wrongdoing, but the convention established by the Department of Justice that sitting President's should not face prosecution.
But, more significantly, the rule of law begs the question, who's law. The law, after all, does not just descend from the sky, like the Ten Commandments handed to Moses. In fact, even looking at the full set of rules and laws set out by Moses, of which the Ten Commandments are only part, it is clear that, rather than being some magically derived holy writ, what they actually are is a set of laws designed to entrench the power of a ruling class, and to enhance its privileges, as this new ruling class emerges as part of the process by which gentile society is dissolved, and class society takes its place. For example, We read in Exodus 21:12,
“He who strikes a man so that he dies shall surely be put to death.”
However, things were not the same if you happened to be a slave or servant. We read in 21:20
“And if a man beats his male or female servant with a rod, so that he dies under his hand he shall surely be punished (i.e. not put to death).”
Even then,
“Notwithstanding, if he remains alive a day or two he shall not be punished, for he is his property.”
And although we find in 21:32 that a person, whose ox killed someone, could be killed this did not apply if the person killed was a slave. Then the ox owner merely had to compensate the slave owner for loss of property. Why would a fair and compassionate God write such laws that treated slaves and freemen differently? Because these laws like everything else in the Bible were not written by God, they were written by human beings, written hundreds, and in the case of the Old Testament thousands, of years after the events they are supposed to describe. The words it contains are no more the Word of God than the words on the back of a Corn Flakes packet. The Ten Commandments were basically laws to protect the property of the rich.
The rule of law depends upon there being laws, and those laws are created by the ruling class; those laws are interpreted and enforced by the state of the ruling class, via its judges and by its bodies of armed men.
In the earlier part of the 19th century, this was quite blatant. If we take employment law, for example, if an employer broke a contract of employment, this was deemed to be a civil matter. The worker had to take the employer to court, and even if they were able to do that and won, they could at best expect to receive some minimal amount of compensation. However, if a worker broke a contract of employment, this was considered a criminal matter. The worker was prosecuted by the state, and often sent to gaol. At a local level, employers often comprised the local magistrates, so, in any cases between workers and employers, its not hard to guess which side the magistrates came down on. That was noticeably the case with breaches of the Factory Acts. Only when this reached such a level that it meant that there was no level playing field for employers across the country, does it result in the employment of additional Factory Inspectors, and attempts to implement common rules across the country, by the state.
In 1901, as workers in Britain were becoming stronger and more organised the ruling class's judges again intervened, in a similar way. In the case of the Taff Vale Railway Company v Amalgamated Society of Railway Servants the courts ruled that trades unions could be held liable for any loss of profits incurred by companies as a result of strike action. It was a further incentive for workers to create their own party. It showed how, the ruling class, however, can act to create law, independently of parliament via its judges. The law does not just comprise statute law created by parliament, but also common law based upon precedent going back hundreds of years. The ruling class's judges can use this common law so as to effectively create new law, by the way they interpret this common law, as it applies to current cases, brought before them. Statute law should override common law, however, the ruling class's judges have wide powers of judicial review, which allows them to interpret statute law, by claiming, for example, that parliament could not have intended a particular law to have this or that effect. In 1906, the Liberal Government, faced with widespread opposition from the Trades Unions, passed the Trade Disputes Act, reversing the ruling in Taff Vale. But, as workers also saw the need to create the Labour Party to represent their interests in parliament, the ruling class's judges were there again to try to frustrate them. In the Osborne Judgement the courts ruled that because the union had not specifically said that it wanted to seek parliamentary representation, its creation of a political fund for that purpose was illegal, thereby posing a considerable barrier to the main source of funding for the party.
In more recent times, we saw the courts intervene in 1972 by first gaoling the Pentonville Five, and then, faced with a General Strike, intervening again to get them released! In the same year, the Shrewsbury Two were arrested, during the Building Workers Strike, and charged not with having committed any actual offence, but with conspiracy! Again, the ruling class's judges were on hand to interpret the law in favour of the employers and against the interests of workers. In the 1980's, Thatcher faced with Labour Councils across the country resisting her spending cuts, was again able to rely on the courts to rule that setting unbalanced budgets was illegal, and that any Councillor who did not vote against such an illegal budget was themselves personally liable financially. Compare that with the limited liability enjoyed by shareholders, whose representatives on Boards of Directors frequently run companies into the ground, leaving tens of millions of pounds of debt in their wake.
Prior to WWII, the basic economic unit is the nation state itself. So, there is no conflict in the idea that each nation state has its own set of rules, and these rules themselves can be utilised to try to obtain competitive advantage over other states. The state is an instrument of capital in pursuing its interests on a global stage. For workers, this is bad, because it means that it creates a natural tendency for a race to the bottom for wages and conditions.
In Capital III, Chapter 11, Marx explains that a general rise in wages, means that capitals with a higher organic composition of capital, see the price of production of their output fall, whilst those with a lower organic composition of capital see their price of production rise. A simple example shows what this means. Suppose we have just these two sectors in the economy, one with a high organic composition and the other a low organic composition.
c 1000 + v 100 + s 100 = 1200; s` = 100%, r` = 9.09%
c 100 + v 1000 + s 1000 = 2100; s` = 100%, r` = 90.91%
The total advanced capital is 2200, the total profit is 1100, so the average rate of profit is 50%. The price of production in each sphere, then becomes 1100 +50% = 1650.
Now, if there is a general rise in wages, the amount of surplus value will fall, and the rate of profit will also fall. Suppose, wages rise by 10%.
c 1000 + v 110 + s 90 = 1200; s` = 81.82%, r` = 8.11%
c 100 + v 1100 + s 900 = 2100; s` = 81.82%, r` = 75%
Total capital advanced is 2310, and total profit is 990, giving an average rate of profit of 42.86%. So, the price of production in the first sphere is now 1100 + 42.86% = 1100 + 471 = 1571, whereas the price of production in the second sphere is 1200 + 42.86% = 1200 + 514 = 1714. So, the price of production in the first sphere falls, whereas in the second sphere it rises. What is the process by which this occurs? First of all, firms in the first sphere would continue to sell their output at 1650. That means that their actual profits would be higher than the new average profit. They would be enabled to do that, because the wages of their own workers have risen, but more importantly, the wages of workers in the second sphere have risen, and that sphere employs many more workers. So monetary demand for its output would rise far more than its own costs have risen. But, similarly firms in sphere 2 would also initially continue to sell their output at 1650, and because their wage costs have risen considerably, this would mean they now obtain less than the average profit.
The consequence is that capital from the second sphere would migrate to the first sphere where surplus profits are available. As this additional capital accumulates in sphere 1, the supply of its commodities rises, and their market price falls until such time as only the new average profit is being made, and so where prices equal the new price of production of 1571. The opposite happens in the second sphere. So, this process of a rising general wage level, acts to concentrate capital in those spheres with a higher organic composition of capital, and to reduce it in those with a lower organic composition of capital. The former are generally the big socialised capitals, and the latter are the smaller, private capitals. It is a process that increases the concentration and centralisation of capital. Moreover, although it results in a lower average rate of profit, the increased accumulation of capital in the first sphere, means that it often goes along with a greater mass of profit being appropriated in that sphere, and vice versa.
However, suppose that firms in sphere 1 are able to move across a border, for example English firms moving across a border to an independent Scotland. It may be that, in Scotland, the general wage level is lower. So, these firms will be able to enjoy a higher rate of surplus value, and of profit than had they remained in England. But, they will be able to continue to sell their output into England, where the rise in the general wage level still creates the increased level of demand for sphere 1's output. The inevitable consequence is that it encourages a race to the bottom. Firms in England, particularly sphere 1 firms, will now complain they face unfair competition from sphere 1 firms in Scotland. They will want some form of tariff to be imposed, or they will demand the English state compensate them in some other way, as well as leading all English firms to want to reduce wages to those in Scotland. Such a process, inevitably benefits the smaller capitals, because it means that the opposite process then applies to that described above. If the general wage level falls, the average rate of profit rises. The price of production for the sphere 2 capitals falls, and for sphere 1 rises, and that implies that capital moves from sphere 1 to sphere 2.
This applies also where special incentives and privileges are provided to firms operating within designated regions of a national economy. For example, when the Tories introduced Enterprise Zones in the 1980's, in which the firms had various advantages and exemptions, it meant that this same process unfolds. It did not encourage additional capital accumulation, but simply meant that firms relocated from outside to inside the zone, and it meant that firms left outside it, attempted to reduce conditions to the same low level so as to compete. The same applies in relation to Brexit. Johnson and the Tories have already said that their intention is to turn a Brexit Britain into a low cost, tax haven in order to obtain a competitive advantage over Europe. The idea that the EU is going to allow that to happen whilst giving the UK some kind of Canada style free trade deal is wishful thinking by Brexiteers.
But, this illustrates how the policies introduced by Thatcher in the 1980's, and being proposed by Johnson today, are designed to meet the interests of the small capitalists at the expense of the large socialised capitals. It is a policy that is no longer driven by conservative social-democracy, resting on the interests of the owners of fictitious capital, but is a policy driven by reaction, by an attempt to turn the clock of capitalist development backwards, in favour of the interests of those small private capitalists. Given that the Tory party membership and core voter base is comprised of precisely those elements that is not surprising. But, a policy that is reactionary, that attempts to turn the clock backwards is bad for workers. A policy that undermines large socialised capital in the interests of small private capital is reactionary not just because it attempts to turn the clock backwards, but because as demonstrated above, this movement of capital away from the large capitals to the small capitals implies a fall in the general level of wages, and of workers conditions.
In the post-war period, capital, having burst out of the constraints of the nation state, attempted to create institutional frameworks and rules that prevented such conditions from asserting themselves. The EU was one manifestation of that. In the early 1980's, Thatcher continues to pursue the same conservative social-democratic course as her predecessors in supporting the development of the EEC, and its transformation into the EU. It is Thatcher that is one of the strongest proponents of the Single Market, and sees it as a means of increasing competition, thereby imposing further downward pressure on wages. But, as Thatcher comes to rest increasingly on the forces of reaction, to emphasise the interests of small private capital over large-scale socialised capital, so she comes to see the minimum standards for labour conditions, being implemented in Europe, as heading in the opposite direction.
Thatcher's policy of the Poll Tax was another move in that direction. A common theme going back to the cannons of taxation of Adam Smith, and principles of taxation of Ricardo is that taxes should be progressive, i.e. falling most heavily on those most able to pay. The Poll Tax flatly contradicted that principle, being a flat tax, which thereby fell most heavily on those least able to pay. The period of Thatcher's government was a disaster, not just for British workers, but for the British economy. At a time when Britain had large and increasing revenues from North Sea Oil and Gas, which could have been used to retool British industry, to invest in national infrastructure that would have increased economic competitiveness, that could have financed public services, and built up the kind of sovereign wealth fund that other countries like Norway have done to cover future spending, Thatcher instead used these revenues to finance rampant unemployment as a means of undermining workers, their unions, and their wages and living standards.
At the same time it inflated asset prices. The resultant bubbles were manifest in the 1987 stock market crash, and in the 1990 property price crash, when UK house prices fell 40%. But, it was Thatcher's turn from conservative-social democracy towards reaction, manifest in her growing Euroscepticism that was her downfall in the end.
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