Monday, 2 December 2019

Labour Manifesto – Public Services Funding (1)

There is a fundamental problem with Labour's programme. It is the problem that afflicts all social-democratic programmes. The problem is that it suggests that goods and services (wage goods) can be provided, but that someone else will pay for them. It is a necessary consequence of an ideology based upon provision of public services by the capitalist state, which that state funds out of taxation. At the heart of this problem lies the fact that social-democracy, as a bourgeois, reformist ideology, based upon Ricardian/Fabian economics, does not understand what basic economic categories such as capital, wages, or taxes are. 

If we take wages, for example, then as Marx describes, at length, in Capital and elsewhere, they are the phenomenal form of the value of labour-power, and the value of labour-power is determined by the value of the commodities required to reproduce labour-power. In other words, it is the superficial appearance that the value of labour-power assumes having been mediated by the laws of competition, by the interaction of demand and supply in the market.  If we look at the value of total output, it resolves into three funds. The first fund is that which reproduces the value of constant capital consumed in production. That is it reproduces the value (current reproduction cost) of the raw materials consumed in production, plus the value of wear and tear of fixed capital consumed in production, so that these use values can be physically replaced “on a like for like basis” (Capital III, Chapter 49) out of current production. The value contributed to output by this constant capital, is always equal to the value that must be withdrawn from current output, because these are one and the same thing. The value of the consumed materials and fixed capital, is equal to its current reproduction cost, not its historic price. Precisely for that reason it cannot form any part of surplus value

The rest of the value of total output is the consequence of the new value created by labour. It divides into two components/funds. The first fund is that which reproduces the labour-power consumed in production. It is the wage fund. The second fund is what is left over after the wage fund is deducted. It comprises the surplus value, which is used to provide for the unproductive consumption of capitalists, and other unproductive sections of society. It also provides the fund from which the accumulation of capital is undertaken. Capital is a social relation, because all of the “things” that are generally considered to comprise “capital”, i.e. means of production, such as factories, machines, raw materials, and wage goods can be found in other modes of production, but without them being capital at all. What makes all of these “things” capital, is the fact that, under capitalism, these “things” are only advanced to production on condition that the labourer provides free labour, i.e. produces surplus value which is appropriated by capital. This remains true even where capital is owned by the state, or even by the workers themselves, as is the case with a cooperative, or as is the case with socialised capital in the form of a joint stock company. 

As Marx puts it in Capital III, Chapter 27, 

“The co-operative factories of the labourers themselves represent within the old form the first sprouts of the new, although they naturally reproduce, and must reproduce, everywhere in their actual organisation all the shortcomings of the prevailing system. But the antithesis between capital and labour is overcome within them, if at first only by way of making the associated labourers into their own capitalist, i.e., by enabling them to use the means of production for the employment of their own labour. They show how a new mode of production naturally grows out of an old one, when the development of the material forces of production and of the corresponding forms of social production have reached a particular stage... The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.” 

If we take all of the things that are provided as Public Services, in the main, they are wage goods. That is they are goods and services required to reproduce labour-power. They are paid for out of the wage fund. If these goods and services were not provided as Public Services, then, in so far as they are necessary for the reproduction of the labour-power required by capital, workers would have to buy them out of their wages, in the same way that they buy other vital items required for the reproduction of their labour-power, such as food, clothing, heating and so on. Similarly, wages would then have to be high enough to cover the purchase of these goods and services by workers, or else labour-power would not be sufficiently reproduced, the supply of adequate labour-power would fall, and so wages, as the market price of this labour-power would rise. As Marx puts it, in Value, Price and Profit, 

“As to the limits of the value of labour, its actual settlement always depends upon supply and demand, I mean the demand for labour on the part of capital, and the supply of labour by the working men... 

I think I have shown that their struggles for the standard of wages are incidents inseparable from the whole wages system, that in 99 cases out of 100 their efforts at raising wages are only efforts at maintaining the given value of labour” 

All that public service provision does, as with Welfarism in general, is to ensure that variations within the working-class itself are evened out, so that all sections of the class are able to obtain the minimum levels of these goods and services required for the reproduction of labour-power, so that capital itself can be reproduced. Public service provision ensures that a range of these goods and services that might otherwise not be provided to every member of the working-class, at prices that they could afford, are thereby provided instead by the capitalist state, which thereby acts in the interests of capital as a whole, which requires this reproduction of labour-power. Moreover, for some of these goods and services, certainly in the twentieth century, the large, national scale of production required, was most effectively undertaken by the capitalist state itself, which was able to organise production of things like education and healthcare on mass production/Fordist lines, and to ensure that workers set aside a minimum portion of their wage fund for this purpose, by the legally enforced deduction of taxes and national insurance to cover the provision of these goods and services. 

In essence, the working-class, as a whole, collectively buys the education, healthcare, social services, and so on required by it as a class, and thereby ensures that these are provided collectively to each member of that class, including those whose wages, ill-health, unemployment and so on, would otherwise have meant they would have been unable to afford them. That it does so, by paying for them, superficially, via the taxation system, merely hides the true reality that this is a purchase of wage goods, and funded out of society's wage fund, i.e. out of that fund of new value created by workers which is always destined for the reproduction of labour-power. 

Welfarism has other benefits for capitalism. Firstly, in the 19th century, workers themselves recognised the need to provide these kinds of goods and services collectively. They created trades union funds to cover a range of eventualities from strike funds to emigration funds, to welfare funds to provide for periods of sickness and unemployment, as well as education funds to be able to educate themselves, and political funds to pursue independent political representation. They also created Friendly Societies that provided similar kinds of social insurance provision, and their cooperatives provides worker owned and controlled healthcare and education. The bourgeoisie recognised an obvious danger, as workers began not only to take over factories and run them cooperatively, but also began to create all of these other forms of independent self-government. By creating National Insurance schemes that workers were compelled to contribute to by law, they diverted all of these funds out of the control of workers, and placed them directly at the disposal of the capitalist state. Marx warned workers against allowing such developments in The Programme of the French Socialist Party, and Engels wrote of similar proposals put forward by German Socialists in The Erfurt Programme, 

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

Welfarism prevents independent working-class self activity and self-government. It diverts that part of the wage fund that workers would use, under their own ownership and control, for such purposes, thereby creating its own forms of social provision, under new systems of workers' democracy, establishing basic forms of workers' state in opposition to the capitalist state, and instead places it directly under the control of the capitalist state. It enhances the power of the capitalist state over society, and its control over the reproduction of labour-power. It enhances its own ideological control, by presenting this welfare state as in some sense neutral, as even a concession from capital, and so also reinforces the idea that the capitalist state itself is neutral, and can be controlled by workers, simply via the election of social-democratic governments. Via the schools and universities, the capitalist state even more reinforces bourgeois ideology, as these education factories instil bourgeois ideas in the heads of those that pass through, training them to become useful automatons in the great capitalist production machine. 

The idea that these Public Services can be paid for by someone else other than the working-class itself, is an absurdity so long as capitalism continues to exist.  Indeed, it reinforces bourgeois ideology because it implies that this social wage, and so also the nominal wage are paid for and provided advanced by capital.  But, as Marx, Hodgskin, Jones and others demonstrated, the wage fund is itself created by the workers themselves.  It is the workers who produce the wage goods that they consume, it is the workers that in he process create the new value that capital appropriates, and out of which it then returns only a part to the workers as wages, keeping the rest itself as profit.

At certain times, the accumulation of capital accelerates at such a pace that it outstrips the supply of labour-power. That happened in the late 1840's, in the early 1910's, and again in the late 1960's/early 1970's. This causes wages to rise, and profits to be squeezed, causing a crisis of overproduction of capital. Marx again refers to such situations in Value, Price and Profit. For example, in the early United States capital was exported from Europe, but there were few workers, so wages were high, and workers saved from these wages, so that they could buy land and become peasant farmers. It meant that US capital had to respond to these high wages by more rapidly introducing labour-saving machinery, as well as encouraging rapid immigration, and freeing Southern slaves so that they could be turned into wage slaves in the Northern industrial cities. 

Adam Smith believed that because capital would grow more quickly than the supply of labour, then wages would naturally rise, and profits would eventually disappear. Capital did indeed grow more quickly than the labour supply, but this growth of capital, in the form of the quantity of raw materials processed by a given quantity of labour, was a consequence of ever rising social productivity caused by the introduction of new types of labour-saving equipment, and this very process was, thereby, also the means by which the cyclical crises of overproduction of capital was overcome. It meant that, as this labour-saving technology replaced labour, a relative surplus population was created, and this caused the rise in wages to be reversed, which also thereby caused profits to rise. Marx notes, 

“Take, for example, the rise in England of agricultural wages from 1849 to 1859. What was its consequence? The farmers could not, as our friend Weston would have advised them, raise the value of wheat, nor even its market prices. They had, on the contrary, to submit to their fall. But during these eleven years they introduced machinery of all sorts, adopted more scientific methods, converted part of arable land into pasture, increased the size of farms, and with this the scale of production, and by these and other processes diminishing the demand for labour by increasing its productive power, made the agricultural population again relatively redundant. This is the general method in which a reaction, quicker or slower, of capital against a rise of wages takes place in old, settled countries. Ricardo has justly remarked that machinery is in constant competition with labour, and can often be only introduced when the price of labour has reached a certain height, but the appliance of machinery is but one of the many methods for increasing the productive powers of labour. The very same development which makes common labour relatively redundant simplifies, on the other hand, skilled labour, and thus depreciates it.” 

(Value, Price and Profit) 

Whenever a situation arises in which the growth of capital causes a shortage in supply of labour-power (extensive accumulation), which causes wages to rise and profits to fall, capital always automatically responds in this way. Firstly, a more slowly expanding or even contracting mass of profit means that the fund available for capital accumulation itself provides a barrier to further expansion, and economic growth. Secondly, as with the early United States, it results in attempts to increase the size of the workforce, and thereby the social working-day. Immigration is encouraged, as happened in Britain in the post-war period; overtime working is encouraged; women are encouraged to join the workforce; children are encouraged into employment; older people are encouraged to remain in employment; in developing economies, peasants are encouraged to leave the land and move to the towns and cities. But, when all of these things have been used, the final weapon of capital is always to introduce new technologies to replace labour, to create a relative surplus population, unemployment, and thereby to reduce wages. 

The first experiments in introducing welfare states came in precisely these times when there were relative labour shortages. They began in Prussia in the first part of the 19th century, and were extended by Bismark, as the German economy expanded rapidly at the end of the 19th century. In Britain, the first proposals were drawn up at the start of the 20th century. The basic outlines of the Welfare State was set down by Neville Chamberlain, as Tory Chancellor in the 1920's, and was simply codified by the Liberal Beveridge in the 1930's, and implemented by the Attlee government in the 1940's. Again, this rise in the social wage accompanied the relative shortage of labour that developed in the post-war period. But, this social wage cannot be separated from the nominal wage. Both are paid for out of the wage fund, and the same laws apply to the social wage as applies to the nominal wage. The total wage has to be funded from the wage fund, and if it rises to a degree, due to a relative shortage of labour, that it begins to squeeze profits unsustainably, then capital will respond in the way it always does, by looking for ways of creating a relative labour surplus, and thereby reducing wages. 

It is simply not possible, therefore, for Labour to claim that it can increase the social wage, i.e. increase spending on the provision of Public Services whilst paying for this increase from sources other than the wage fund, i.e. by in some way securing the funds for such spending from capital. Were it to do so, then not only does it face the problems of capital flight, of strikes by capital, and so on, but it will face the normal problem that capital will simply invest in labour-saving technologies, creating a relative surplus population, unemployment, and thereby reducing its nominal wage costs. Now, this shift of emphasis by capital on to investment in these new labour-saving technologies is indeed required, and the means by which the UK's appalling productivity can be remedied, but that is a different matter. The fact remains that any rise in the social wage will be paid for in a fall in the nominal wage. It will not be paid for by capital. 

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