A Contribution To The Critique of Political Economy, Chapter 2.3 Money, b. Means of Payment - Part 4 of 8

In these new relations, described by Marx, a legal contract exists between creditor and debtor. The commodity owner, and the buyer establish the price of the commodity in money, and it is this debt that is then written into the contract. But, now the function of money, as means of payment, rather than as measure of value/unit of account, potentially comes into conflict.

Either side of this contract may fail to perform. If A has paid £100 to B, for the supply of commodities to that value, in a month's time, commodities which, currently, B does not possess, then, in a month's time, for numerous reasons, described by Marx in Capital II, B may not be able to supply them, or the value of those commodities may have risen, as a result of input prices rising, and so on. Alternatively, the value of money/money tokens may have fallen so that, in order to replace the components of those commodities, B now requires £120, so that the £100 paid is no longer sufficient to reproduce their capital.

Conversely, A may have supplied £100 of commodities to B, giving them 30 days to pay, but, in 30 days, B may not be able to pay, or else, again, the value of inputs has risen, value of money/money tokens has fallen, so that, when B does pay the £100, it is equal to only £80 in real terms, relative to the capital to be reproduced. This is why speculative assets, like gold, silver, Bitcoin etc., can never act, now, as means of payment, because of the large fluctuations in their own price.

Marx describes one consequence of this, in Capital, in relation to the development of industrial capital. Landlords set rents in money prices, on long leases, but, when new gold discoveries reduced the value of gold, this caused an inflation of commodity prices. The money rents landlords received, from tenants, remained fixed, until new leases were established, so their money incomes fell relative to the prices of all the commodities they required for consumption.

The growing number of industrial capitalists, in the towns, sold their commodities at these higher money prices to landlords, thereby, squeezing the landlords, and transferring wealth from the countryside to the urban bourgeoisie. In addition, as the industrial capital expanded, in the towns, so the demand for agricultural materials and food, for urban workers, also expanded. This increased the revenues of tenant farmers, and creates the same process of differentiation in the countryside, into bourgeois and proletarians, that had already occurred in the towns, and also described vividly by Lenin in relation to Russia.

As soon as the landlords are squeezed, by this process, they are led to sell land to cover their debts. Land becomes a commodity, with a price, though it has no value. Some is bought by the more affluent peasants, becoming capitalist farmers, and some by the urban bourgeoisie, who become rent farmers, employing capitalist farmers and managers on this land. Its this process that gives the impetus to capitalist production entering agriculture, using its more rational and effective methods, to meet the growing needs of capitalist industry, but, which also requires the rationalisation of the land-holding via the Enclosure Acts.

“The difference between means of purchase and means of payment becomes very conspicuous, and unpleasantly so, at times of commercial crises.” (p 141)

In such conditions, D who owes £100 to C, fails to pay, but, now, C, who had no difficulty themselves, lacks the money to pay B, who also cannot, now, pay A. There may have been no overproduction by A, B, or C, but overproduction by D, an inability to sell their output at prices that enables them to pay their suppliers, leads to a cascade of failed payments, what Marx describes as a crisis of the second form, in Theories of Surplus Value. Now, C cannot reproduce their consumed capital, because, although they sold it, at its value, they do not receive payment from D, and the same applies to B and A.

D lays off workers, and may go bust. At best, they reduce their purchases from C and other suppliers. So, now D's workers have no income, or reduced wages, meaning they must reduce their own consumption. Even if all those capitals that supplied them with wage goods produce at the same level, they will have overproduced, relative to this reduced demand. The same applies to all those capitals that supplied inputs to D. They must reduce output, or else overproduce. In turn, they reduce wages, and their own demand for inputs. Consequently, all capitals, even if they produced at their old levels, would have overproduced, and as they reduce their output, so this extends further, as aggregate demand is reduced.

But, as Marx says, this crisis was not the result of credit or lack of money. It is the result of D having overproduced, and so being unable to pay, which then created this crisis of the second form.

“If the crisis appears, therefore, because purchase and sale become separated, it becomes a money crisis, as soon as money has developed as means of payment, and this second form of crisis follows as a matter of course, when the first occurs.” 

(Theories of Surplus Value, Chapter 17, p 514)

To pay, money is needed, and, to have money, it is necessary to have sold.

“The evolution of the circulation process thus turns selling into a social necessity for him, quite irrespective of his individual needs. As a former buyer of commodities he is forced to become a seller of other commodities so as to obtain money, not as a means of purchase, but as a means of payment, as the absolute form of exchange-value. The conversion of commodities into money as a final act, or the first metamorphosis of commodities as the ultimate goal, which in hoarding appeared to be the whim of the commodity-owner, has now become an economic function. The motive and the content of selling for the sake of payment constitutes the content of the circulation process, a content arising from its very form.” (p 141-2)

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Martin Thomas On Inflation - Part 25 of 25

Martin says,

“If the low inflation of World War Two owed something to tight government controls over high finance, then maybe this low inflation, paradoxically, owed something to the increased autonomy and power of high finance, which absorbed revenues which would otherwise have augmented inflation.”

But, it was not revenues that were the basis of inflation, and nor could it be unless you accept the orthodox, bourgeois view of inflation as arising from an imbalance of aggregate demand and supply. In the 1980's, increased rates of profit, and increased masses of profit, relative to the demand for money-capital certainly were the basis of falling rates of interest. Falling rates of interest, are certainly, also, the basis of rising asset prices, via the process of capitalisation. But, that is not inflation. Falling rates of interest should lead to increased capital accumulation, and so economic activity, leading to increased employment, and, thereby, rising wages. But, rising wages do not cause inflation, they cause falling profits, as Marx describes in Value, Price and Profit, arguing against Weston.

In fact, the falling rates of interest in the 1980's and 90's, did not lead to increased capital accumulation, as Marx would have expected, as set out in Capital III, Chapter 23, because of the role of the ruling class as now owners of fictitious, rather than real capital, and their focus on obtaining capital gains on that fictitious capital.  Where Marx's expectation was met, in that regard, was in the huge rise in the size of the petty-bourgeoisie, at that time, as unemployed workers became self-employed, and as small employers could utilise cheap unemployed labour, in increasingly precarious manners.  That did contradict Marx's longer-term perspective of the historic decline of that petty-bourgeoisie, a trend that has affected political developments over the last 30 years, as with the rise of petty-bourgeois nationalism, Brexit and so on. 

This illustrates not only the parasitic nature, of the global ruling class of owners of fictitious-capital, but the extent to which they have become a fetter on the further development of capital itself. What actually created the asset price inflation of the 1990's and after, was not revenues, but the actions of central banks in creating excess liquidity, directed specifically into those asset markets, just as the creation of excess liquidity, directed into households, as income replacement payments, and now feeding into the real economy, is the cause of current commodity price inflation.

The following statements are correct.

“The capacity of governments to counteract by increasing taxes and cuts in public spending is reduced by several factors, including the fact that cuts already made in public spending to try to recoup from the emergency measures of 2008-9 have damaged public infrastructure to a degree where even by capitalist calculations it needs restoration. Even a capitalist government with no concern but to make its territory attractive to footloose global capital wants to offer that global capital efficient public services, a "reserve army of labour" kept in work-ready condition, etc.”

As I stated earlier, austerity had already run its course. If anything, states need to increase spending on infrastructure, as well as on education and training, the latter being useless without workers themselves being kept in good health.

“And class struggle probably plays a role, as in the 1970s. It would be easier for governments to quell inflation if workers passively "soaked up" the price rises by way of accepting lower living standards. But history gives no grounds for confidence in bourgeois governments to tame embedded inflation in any short time scale and without great social cost, whatever concessions workers make.”

Its not class struggle, but only distributional struggle, but, the point is that there is no reason why workers would, currently, simply soak up falls in real wages. As with austerity, they have already done that for 12 years after 2010. But, unlike the 1970's and after, rather than being at the start of a new Innovation Cycle, in which technology begins to undermine the position of labour, we are at a point, like the early 1960's, in which still high rates of profit give no great incentive for capital to engage in such a new period of development, and so where capital accumulation takes the form of extensive accumulation, productivity growth slows, and employment expands at a relatively faster pace, as witnessed by global labour shortages, higher Quit Rates, high levels of job vacancies, and so competition between capitals for labour, pushing wages higher – and, as I have set out elsewhere, by more than the headline figures of hourly wages indicate.

As with the 1960's, that means that workers should not, and will not, rely on governments taming inflation, but will take matters into their own hands collectively via strikes, and individually by simply moving to better paying jobs. Neither the Brexitories of Sunak, nor those of Starmer have a solution, and both seek to have workers soak it up. They will not, bringing workers into conflict with both of these reactionary petty-bourgeois parties, and requiring them to also rebuild their own political alternatives. As workers take matters into their own hands, and raise wages, the state will try to protect capital by increasing liquidity once more to enable firms to raise prices to cover rising costs, ensuring that inflation will continue. Already, the speculators are looking to central banks relaxing monetary policy once more, in the hope of inflating asset prices. As in the 1960's, liquidity will increase, but not by enough to protect profit share, and in inflation adjusted terms, asset prices will falls, as they did then.

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A Contribution To The Critique of Political Economy, Chapter 2.3 Money, b. Means of Payment - Part 3 of 8

As Marx notes in Capital III, quoting testimonies to parliamentary committees on the Bank Act, and the financial crisis of 1847, the Bank of England could control note issuance, meaning that it created an artificial shortage of currency, which would encourage a credit crunch, by tending to make firms require cash rather than credit, and, as they sought to obtain cash, by having bills discounted, this raised the discount rate. However, as various testimonies stated, in a period of rapid economic growth, where firms were keen to be able to expand, and so extend commercial credit to customers, and similarly, obtained such credit from their suppliers, the reduced note issuance by the Bank is simply replaced by an increases quantity of commercial credit, in the form of Bills of Exchange, etc.

“"5306. If there should not be currency to settle the transactions at the clearing house, the only next alternative which I can see is to meet together, and to make our payments in first-class bills, bills upon the Treasury, and Messrs. Smith, Payne, and so forth." — "5307. Then, if the government failed to supply you with a circulating medium, you would create one for yourselves? — What can we do? The public come in, and take the circulating medium out of our hands; it does not exist." — "5308. You would only then do in London what they do in Manchester every day of the week? — Yes."”

In times of declining activity, that may not happen, but, in times of economic expansion, the commercial credit expands automatically. For, example, if A normally sells £100 of commodities, per month, to B, giving them 30 days to pay the invoice, when activity increases, and B buys £150 a month from A, with still the same 30 days to pay, that is an automatic increase in commercial credit of 50%. Similarly, A will increase their purchases of materials etc., from their suppliers, also obtained on commercial credit. But, also, as activity expands, and revenues to firms expand, as payments from increased sales flow in, they may also feel it is worthwhile to extend the grace period for payment, to encourage additional sales, obtain additional customers, and so on.

In Theories of Surplus Value, Chapter 21, Marx examines the work of Hodgskin. Hodgskin, a working-class advocate, was keen to downplay the role of capital, and highlight the role of labour. Arguing against the notion that profits were the consequence of saving up, by capitalists, of those commodities required as means of production and means of consumption, he notes, in relation to the circulating capital, rather than it consisting of saved up commodities it consists of co-existing labour. In other words, he says, the bread the worker consumes, each day, had usually been baked by labour on the same day, and that was true of many such commodities.

Marx pursues this analysis to demonstrate that the accumulation of circulating capital does not occur as a build up of such stocks, which, whilst rising absolutely, decline relatively, but as precisely this expansion of coexisting labour. The labourers producing outputs in one sphere are simultaneously producing inputs, used by coexistent labour, in other spheres. The accumulation of circulating capital, thereby, consists of an expansion of this coexistent labour, including the production of the increased mass of wage goods required by an expanding number of workers. In economies, where, now, 80% of employment, new value and surplus value production comes from service industry, this is even more clearly the case.

In such periods, as with those faced today, as against the stagnation in the 1980's, attempts to curtail this credit, by central banks, will face significant obstacles. Reducing note issuance, M0, and bank credit, may have little impact on this commercial credit, which operates outside it. Restrictions on bank credit may impact consumer borrowing, but, in periods of expansion, workers have more wages (even if hourly wage rates fail to keep up with inflation) and savings (which higher inflation encourages them to use for consumption) to use for day to day spending. Higher borrowing rates, or tighter credit may impact spending on large items, such as the purchase of houses, but, in such periods, the consequence, then, is to cause asset prices not consumer prices to fall.

Similarly, firms may have more profit to use to fund capital accumulation, but may also resort to share or bond issuance to obtain money-capital. Again, the consequence of the higher rates is to impact these asset prices, as an increase in supply of these assets reduces their price, and, in respect of shares means that, for any given amount of profit, earnings per share is reduced, so that for any given price-earnings multiple, share prices are reduced. It is then asset prices not commodity prices that are reduced. So, in these conditions, when a central bank seeks to reduce consumer prices by reducing currency, it might only be able to do so by raising its rates, and restricting bank credit to such a severe degree as to cause a recession. But, a) that may simply result in stagflation, and b) it would cause asset prices to fall catastrophically long before consumer prices.

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Hersch & The Social Imperialists (4/4)

Pirani tries to brush aside the fact that the US had tried to prevent Nordstream 2 from its inception, despite opposition to that from the EU, as set out in the quote from Wikipedia above, and most clearly expressed in Biden's comment that “If Russia invades … there will be no longer a Nord Stream 2. We will put an end to it.” Pirani claims that this was a harmless statement by Biden that the US would simply try to persuade and cajole Germany and the EU to scrap the project. And, that Pirani says, is what happened. Well, not quite, of course, because, the explosions took out not just Nordstream 2 but also Nordstream 1. Moreover, Nordstream 2 had been completed, and all that Germany did was to cancel it being brought into operation. So long as it was functioning, it along with Nordstream 1 could be brought on stream, and supply cheap and plentiful Russian gas to the EU, and that is precisely what the US wanted to stop!

Pirani says,

“Any serious account of what led up to the explosions would have to explain this vital reversal of German policy. Hersh does not mention it.”

But, the reason Germany prevented Nordstream 2 coming on stream has been described. Massive US pressure, and sanctions, and a belief that any war would be short lived, probably ending before the Winter started, with Russia capitulating, and placing the EU in a much stronger bargaining position. Yet, despite the vast amounts of weapons poured into Ukraine, it failed to push back Russia from the East, despite repeated claims by imperialism and its apologists like Paul Mason that Russia was about to be rolled up, and instead, Russia consolidated its hold over the majority Russian areas, as it had done in South Ossetia and Abkhazia in 2008, and in Crimea in 2014.

By August, all of the hubris and hot air pumped out by NATO propaganda was being deflated, and it was apparent that this was going to be a forever war, much as with NATO's involvement in Afghanistan. Why would the US think a reversal of Germany's policy might occur? Well the prospect of surviving the Winter, the fact that tens of thousands, across Europe, were protesting about the effects of EU sanctions on Russian energy supplies to the EU, and fact that millions of workers were striking for higher wages and against a soaring cost of living are fairly obvious candidates!

Pirani brushes aside Biden's comments about ensuring that Nordstream 2 could not go ahead, but also fails to deal with the comments of Nuland, who was herself significantly involved in the 2014 US backed coup in Kyiv. As Wikipeida, again, notes,

“In a U.S. Congressional hearing on 26 January 2023, Nuland expressed her approval of the 2022 Nord Stream pipleine sabotage: "Senator Cruz, like you, I am-and I think the administration is very pleased that Nord Stream 2 is now, as you say, a pile of metal at the bottom of the ocean."”

You don't have to take the word of a single anonymous source, in relation to US motivations and actions, when these statements are themselves a matter of public record, and stand out pretty much like someone accused of murder having been caught on camera, threatening to do in the victim, especially when the suspect has a history of violence, and widespread interference into the affairs of others. Nor does Pirani deal with the statements from Radoslaw Sikorski, quoted by Lazare, in which he tweeted “Thank, you USA”, in response to the explosions.  If you are assessing the likelihood of culpability, in response to Hersch's argument, then surely you need to take into consideration these statements by other US actors, otherwise all you have done is engage in sophistry against the argument presented by Hersch.  What would be the point of that other than essentially to act as an apologist for US imperialism.  The point is not whether his argument lives up to all the requirements of semantics and philosophical logic, which might be relevant to some academic analysis, but whether it tells us anything useful about the event itself.

The fact that Sikorski assumed it was the US that was responsible doesn't mean he was right, but his connection to Applebaum, means he probably had inside information that it was. The fact that Cruz and Nuland could express that happiness that Nordstream was a pile of metal, does not itself mean they did it, though, in that case, you would have to ask why, initially, they tried to blame Russia for it? But, its not just these sources that make these assumptions, based upon the facts, the logic, and inside information. Whatever they might now try to throw at Hersch, it is even more difficult for them to do so against Jeffrey Sachs, a long-time stalwart of US imperialism, who was sent by US imperialism to Russia, following the fall of the USSR, and acted as one of its representatives in the dismantling of state property, and introduction of Friedmanite, free market policies.

But, in his Bloomberg interview some weeks ago, that I have previously cited, Sachs himself notes that nearly all US journalists privately acknowledged that it was the US that carried out the attack, but that they could not openly say so. Moreover, he notes, its only in the West that the idea that it was the US is questioned, and in all his dealings across the globe, he says that people, more or less took it for granted that it was the US that was responsible.

And, for good reason. Russia had no reason to blow up its own pipelines, from which it sought to obtain large amounts of revenue from selling gas to the EU. Contrary to Pirani's argument that it had already voluntarily reduced its supplies to Europe, the truth is that it was NATO/EU sanctions and boycotts that had reduced that supply, and led to Russia demanding payment in Roubles, a demand that the EU decided not to accede, and so cut off its supplies. Russia had every reason to believe that the EU would be likely to reverse its position, as it would have difficulty finding adequate and cheap supplies of gas elsewhere, and indeed, nearly all analysts, think that, the EU has dodged bullet, having massively overpaid for gas to build up stockpiles last year, as a mild Autumn, carried over into a mild Winter, so far.

But the EU, has not been able to provide adequate infrastructure to replace cheap Russian piped gas with more expensive LNG transported by ship half way across the globe, and has, thereby, only deferred a potential crisis, next Winter, even if it escapes it in the remainder of this Winter, which still has around six weeks to run. As the IEA note, it could face a shortfall for gas equal to around 14.5% of its total consumption, and even that assumes a reduction in consumption of around 13-20%. With China reopening, and the global economy set to expand again, with demand for energy rising sharply, global gas prices are likely to rise significantly, and even supplies of LNG will be highly fought over. So, Russia would have had every reason to think that the EU would come back in 2023, seeking a return of its cheap and plentiful supplies, a possibility that Russia would have denied itself had it blown up its own pipeline, rather than just do the obvious thing of turning off the taps!

Pirani's argument that Gazprom was effectively forced into doing economic damage to itself by the political demands of Putin, simply echoes the NATO propaganda that, much like the propaganda against Hitler during WWII, relies on suggestions of mental instability, and irrationality. If we ask the obvious question who benefits, then the answer is clearly the US, not Russia, and certainly not the EU. The US blowing up the pipeline would be an equivalent of Operation Catapult, conducted by Britain against neutral French ships in WWII. Britain sank a French battleship and five other ships, and killed 1,297 French servicemen in an attack, designed to stop them falling into enemy hands, after France signed the armistice with Germany and Italy, in 1940.

Pirani concludes,

““Left” organisations and personalities retail Hersh’s Nord Stream story uncritically, because it is what they want to hear. Dogma beats inquiry. Innuendo and false claims beat solidarity with the victims of Russia’s scorched-earth war on populations, in Syria in 2014 and 2017, and Ukraine in 2022-23.”

Putin's Russia is certainly no friend of the working-class, and he's right that certain sections of the Left operate on the basis of a cretinous my enemy's enemy is my friend, an “idiot-anti-imperialism” that overrides any concern to fight for socialism rather than to fight against imperialism. But Pirani, and the section of the petty-bourgeois, moral socialism he represents are no better, and indeed, in many ways worse. They claim to be supporting those “victims”, but the reality is that the war in Libya in 2011, and in Syria in 2014, was a consequence of the US and its feudal Gulf allies arming and training jihadists to launch revolts against the existing regimes that the US sought to remove.  Those jihadists were certainly no friend of workers.

Similarly, in 2014, the US financed and organised the coup in Kyiv to remove the pro-Russian Yanuvovich, which then set in motion the train of events leading to the present war.  But, neither US imperialism, nor those right-wing, fascistic elements it supported in Kyiv were or are friends of the working-class either.  The nature of the Kyiv regime as corrupt and undemocratic was described in Part I, using available global metrics, and has been emphasised since in the attacks that Zelensky's regime has launched on Ukrainian workers and trades unions, Ukrainian socialist organisations, and even the liberal media.

The role of the Nazis of the Azov Battalion and Right Sector, promoted by Zelensky, within the state is well known, and these forces are also no friend of the working-class, or even basic liberal values, however much Biden and the social imperialists might want to hide their faces from that reality.  The lauding of Ukrainian Nazis like Bandera and so on, the engaging in what amounts to Holocaust denial, in relation to the role of Ukraine in WWII, the statues, the naming of roads and public spaces in honour of those Nazis is emblematic of the reactionary, anti working-class nature of this regime, which is far from any concept of a radical, let alone revolutionary liberating force to which socialists might give any support.  It is the equivalent of the Iraqi clerical fascists in 2003, or the Libyan jihadists in 2011, or ISIS in Syria.

In Libya, where Russia was not involved, it has led to a failed state, and warlordism for the last 12 years, and pretty much the same would have happened in Syria, had not Russia and Iran, with support from Kurdish militias been involved to defeat the jihadists. But Pirani says nothing about that, because he is as much an uncritical supporter of US imperialism, as those he criticises are uncritical defenders of various “anti-imperialists”.

The war in Ukraine is not about defending the rights Ukrainian victims of Russia, but a war between a vile and corrupt Russian capitalist state, under Putin, and a vile and corrupt Ukrainian capitalist state, under Zelensky, backed by, and whose strings are pulled by, a powerful and corrupt US/NATO imperialism, seeking to maintain its global domination in the face of a rising challenge to its hegemony, economically by the EU and China, and militarily and strategically by China, in an increasing symbiotic relationship to Russia, and other parts of Central Asia. Pirani's argument is just another element of the uncritical support that the social imperialists are providing to US/NATO imperialism in that war, the other side of the coin to the pro-Putin “anti-imperialists”.

The job of socialists is to oppose our own imperialism, not to act as its attorneys, as Pirani and others of that moral socialist milieu have done. For us the main enemy is at home, and we reject the notion that any capitalist state has a right of self-defence, which means only supporting the bourgeois-defencist principle of “defence of the fatherland” that was the basis of the split in the socialist movement in 1914. We argue only for the right of workers to defend themselves against capitalism and the capitalist state. We argue the position of revolutionary defeatism, not for national self-determination, but for the self-determination of the proletariat, as Lenin put it.

Its not the workers of Ukraine in a war against Putin, but the Ukrainian capitalist state backed by the massive power of NATO imperialism. Indeed, the Ukrainian workers are being attacked by the Ukrainian state in the interests of Ukrainian and imperialist capital, as we speak. It is against that state that they should direct their attention, just as the Russian workers should direct their attention against the Russian state. They have more in common with each other than they do with their respective ruling classes.  Workers of the World Unite, the only war should be the class war.

Back To Part 3

Northern Soul Classics - Let Her Go - Otis Smith

 

Friday Night Disco - Move Me- Move Me - Shirley Brown

 

Hersch & The Social Imperialists (3/4)

Pirani says,

“Nord Stream 2 would have made no difference to the amount of gas, or the amount of Russian gas, available to Germany or anywhere else. It would only have given some commercial advantage to Gazprom, by enabling it to bring more gas to Germany along a shorter, non-Ukrainian route.”

But, again, this is a sleight of hand. Firstly, a pipeline clearly does not increase the amount of gas produced, and available, only the capacity to transport what is available. A train line does not increase the amount of coal produced by coal mines, but if the trains and track lack capacity to transport the coal that can be produced, then that does act to restrict the amount of coal that can be sold, and, thereby, the amount that miners can produce, without it piling up unused. As Wikipedia says,

“The construction of the pipeline started in 2011, to expand the Nord Stream 1 line and double annual capacity to 110 billion cubic metres (3.9 trillion cubic feet).”

In other words, its true that it did not mean an increase in gas production available to Europe, but it did mean an increase in the capacity to transport increasing amounts that were being produced. The second part of Pirani's sleight of hand, is then to argue that, at the time of the explosion, pipeline capacity itself was not an issue. True, but that is because a) since 2014, the EU had been imposing sanctions and reducing supply along Nordstream 1, and b), after the Russian invasion, in 2022, those boycotts had stepped up further, and sanctions had limited supply, as seen with the issue over the turbines, and so on. NATO/US imperialism clearly did see Nordstream 2 as a problem, which is precisely why, even in 2014, it had been trying to prevent it going ahead.

As, again, Wikipedia notes,

“In June 2017, new US sanctions against Russia targeting the pipeline were passed by a 98-2 majority in the United States Senate due to concerns that President Trump would ease existing sanctions on Russia. The sanctions were sharply criticized by Germany, France, Austria and the European Commission who stated that the United States was threatening Europe's energy supplies. In a joint statement, Austrian Chancellor Christian Kern and German Foreign Minister Sigmar Gabriel said, "Europe's energy supply is a matter for Europe, and not for the United States of America." They also said: "To threaten companies from Germany, Austria and other European states with penalties on the US market if they participate in natural gas projects such as Nord Stream 2 with Russia or finance them introduces a completely new and very negative quality into European-American relations."”

Pirani's argument is like saying there is no requirement to expand rail capacity, because, measuring capacity during a strike, only 10% is being used! He says,

“at the time of the explosions, neither Nord Stream 1 nor Nord Stream 2 were in use. For three-and-a-half weeks before the explosions, no gas had been transported through Nord Stream 1. This was an outcome of Russian policy decisions.”

As described above, it was not an outcome of Russian policy decisions, but of increasing US sanctions, and EU boycotts under US pressure. Obviously, given the sanctions imposed, especially after the invasion, capacity along Nordstream 1 was not being utilised, but the point is that, were the EU to decide, under pressure from mass protests by workers, to end those boycotts, and decide to allow Russia back into SWIFT, or to pay for its energy in Roubles, especially if that coincided with a cold Winter, and EU industries shutting down for lack of energy, then it would need all the capacity it could get, including via Nordstream 2, and that supply would have meant that global gas prices themselves would not have risen, and, would probably have fallen, as increased production could be transported.

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Part 4 Tomorrow

Hersch & The Social Imperialists (2/4)

Pirani says,

“In the seven months between then (February 2022) and the explosions, the western powers piled sanctions on Russia in response to the invasion. The Kremlin retaliated by ordering Gazprom, the state-controlled gas holding company, to reduce gas exports to Europe, and effectively wreck a business it had spent more than thirty years building up.”

Actually, sanctions on Russia began in 2014, and continued to be increased in the 8 years between then and the invasion in 2022. As even Blairite, former NATO Secretary-General, George Robertson has said, NATO, basically goaded Russia into an invasion it had been claiming was imminent for months. Its following a similar course with China. The US began imposing trade sanctions on China under Trump, and like many other policies, Biden has simply continued what Trump started. It has been steadily blocking Chinese companies, and also using its muscle to prevent companies in other countries selling technology to China, or to align themselves with Chinese technology standards. It has shifted its military emphasis to the Pacific, much as it did in the 1930's against Japan, has been using Taiwan as a goad against China and so on. Now, as China says it might provide weapons to Russia, in the same way that NATO has poured weapons into Ukraine, the US says that, if it did, it would provoke sanctions, as though the sanctions have not preceded any such action already. In essence, imposing sanctions first, is just a further goad and incentive for those on which they are imposed to act in the way the sanctions are supposed to be a deterrent!

Day after day, NATO increased the sanctions on Russia, as though the promised invasion had actually happened, with no action against Ukraine for failing to meet its obligations under the Minsk Agreements, or its continued bombardment of the people of the Eastern Ukraine. That is a bit like Boris Johnson reneging on the Northern Ireland Protocol, and then complaining when the EU takes action for the breach. Day after day, NATO's propaganda machine, in claiming that a full-scale invasion was only hours away – reminiscent of the 45 minute claims ahead of the Iraq War – was basically goading Russia into invading, by saying, “go on, then, if you think you're hard enough!”

Once again, this illustrates the fact that, for the imperialists and their apologists, history only begins at the point of the Russian invasion. The decision not to go ahead with Nordstream 2, was clearly the decision of Germany, under pressure from the US, and its poodle Britain, and not the decision of Russia, which wanted to press ahead with it. But, the sanctions were also well documented to have affected the supply of gas via Nordstream 1 too. When the pipeline was taken down for maintenance, with turbines being sent to Canada, the sanctions prevented them being returned and put back to use, for example. Yet, Pirani does not mention these causes of Gazprom being unable to deliver gas arising from the sanctions themselves. Its true that Russia could have sent gas via Ukraine, but that ignores both the fact that its at war with Ukraine, and that Ukraine in the past is accused of stealing gas from pipelines across its territory.

In addition, The Financial Times warned in February 2022 that proposals to exclude Russia from the SWIFT payments system would threaten the EU's ability to pay for Russian oil and gas. Russia was banned from SWIFT, anyway, showing that US imperialism, with the EU subordinated to it, was prepared to damage the EU economy, simply to advance its own, short-term, military strategic objectives against Russia. It was the difficulties created by that for payments to be collected by Russian exporters, not just for oil and gas, but for other globally traded commodities that resulted in Russia demanding payment in Roubles, for all new contracts. But, even before that, the EU had voluntarily decided to boycott Russian oil, as Ed Morse described in his interview with Bloomberg.

Russia could have continued to supply gas without payment in Roubles, but would then have faced problem in obtaining payment for what it had supplied. What Pirani is suggesting is that, in a war, NATO and its supporters can be free to impose sanctions on Russia, but Russia cannot then be expected to respond to those sanctions, by imposing conditions of its own! You have to have a peculiarly blinkered and one-sided approach to reality to arrive at that kind of world view.  That's not to side with or support Russia's actions, but merely to point out what is likely to happen in the real world!

Pirani basically parrots the US imperialist line, and claims about the effects of Putin's actions on Gazprom. But, the fact is that, in terms of oil, the loser was the EU, which saw its prices rise, as it bought the much more expensive US oil, whilst both the US and Russia gained. The US, or more correctly US oil companies and speculators, gained, because, as Morse points out, it sold lots more expensive oil to the EU, whilst Russia gained, because the price of oil, one of its main exports also rose, sharply, and it was able to replace its EU sales, easily, by selling the oil instead to China, India, and other Asian countries. China, whose economy was in the doldrums due to the idiotic lockdowns, had seen its demand for oil drop, but it bought up Russian oil, refined it, and then sold it back into Europe, at these much higher prices! Its been doing a similar thing with LNG.

The result was a bonanza for Russian oil and gas companies, and not the catastrophe that Pirani suggests, or that NATO imperialism had sought. The Russian economy, which had been predicted to tank, actually saw its GDP fall by less than many European countries, and the Rouble, which had been the target of sanctions, soared. Indeed, during 2022, when the Dollar rose by around 20% against most other currencies, and, in particular those of Britain and the EU, hammered by the high energy prices, the Rouble was one of the only currencies that rose against the Dollar. At the start of February 2022, the Dollar stood at 140 Roubles, and today stands at just over 70 Roubles, a rise in the Rouble of 100% against the Dollar, or a fall of 50% in the Dollar against the Rouble. That was another reason that Russia wanted payment in Roubles rather than in rapidly declining Dollars, and even more rapidly declining Euros!

The EU could have continued to get cheap Russian gas, if they had either kept Russia within the SWIFT system, or else had paid for the gas in Roubles. They chose not to do so, and the price of gas, in the EU rose by more than 1,000%, so whatever Pirani might claim about Russian gas not being particularly cheap, it was certainly much cheaper prior to those sanctions than it was as a result of them. That was a massive self-imposed injury on the EU economy, and one that it, not the US that pressed for it, endured. Pirani says that the price of gas was linked to the price of oil, but, as described, and as Ed Morse showed, the surge in the price of oil itself was a consequence of the self imposed injury the EU inflicted on itself by boycotting Russian oil!

Pirani also engages in what is effectively a sleight of hand, by focusing on Hersch's rather weak argument about the US seeking to close down Nordstream in order to make the EU reliant on US oil and gas. The real reason, was not to make the EU dependent on US oil, and certainly not gas, but rather to prevent it being reliant on Russian oil and gas, at least until such time that the US had again got a foothold in Russia, and control over its resources, at which point it would be happy to have the EU dependent upon US oil and gas companies operating out of Russia!

Politics follows economics, the greatest trade occurs between neighbours, and out of trade arises common interests, political alliances, economic and political blocs and unions, and even states. Germany has always had such a relation with its huge Russian neighbour to the East, as well as with its Western European neighbours in the EU, and the last thing that US imperialism needs is for the EU to develop its own economic and politico-strategic interests, separate from the US/NATO, using Russia as leverage, at the same time that the US is squaring up to China in the Pacific.

There is no shortage of statements from US representatives themselves to that effect. As Lazare notes in his WW article,

““If Russia invades Ukraine, one way or another NordStream will not move forward,” Victoria Nuland warned in January 2022. “If Russia invades … then there will be no longer a NordStream 2,” Biden added on February 7. “We will bring an end to it.” Nuland’s crack last month about “a hunk of metal at the bottom of the sea” provides further confirmation.”

And, he notes,

“Radosław Sikorski - member of the European parliament, former Polish foreign minister and husband of influential US neocon Anne Applebaum - tweeted: “Thank you, USA.” The tweet went viral because it confirmed what everyone already suspected - that the explosion had ‘Made in America’ all over it.”

Much as with the crude, economic-determinist arguments that tried to explain the Iraq War as being all about US greed for oil, being a weakness, so Hersch's argument about US oil and gas sales as motivation is also a weakness, and enabled Pirani to use it, whilst ignoring the real point that what the US really wanted was to prevent the EU resuming its purchases from Russia. In terms of oil, as Morse has described, the US did increase its sales to the EU significantly. Moreover, as far as the ruling class is concerned, it is not oil from the US that is important, but oil produced by companies in which they have large shareholdings, and from which they derive dividends, interest and capital gains, no matter where those companies conduct their operations. Biden was quick to try to get the Saudi butchers to increase oil sales, for example, but, as US imperialism's star is dimming, and as it reaps what it has sown from its own previous military adventures and behaviour, even that resulted in disaster, for him, as the Saudis simply showed him the finger.

The US, no doubt acted out of hubris in a belief that, faced with the overwhelming level of military hardware they were pumping into Ukraine, as they allowed the Ukrainians to act as their human battering ram, and acted with the mobilisation of its global propaganda machine, and all out economic warfare, Russia would be brought to its knees. But, they could be sanguine, when that didn't happen, because, as with the Iraq War, the war in Libya, and in Syria, its not the US that suffers the consequences, along with the peoples of those countries and regions, but the EU, whose borders are destabilised, that has to pick up the tab of massive numbers of refugees and displaced persons. It is the EU that has suffered the massive rise in energy costs, not the US. Its the EU that will end up pumping billions of Euros into trying to rebuild the bankrupt Ukrainian economy, draining those resources from the EU itself, and so weakening it relative to US imperialism.

The EU, still historically subordinated to US imperialism, also suffered from the same hubris, and no doubt believed that the injury it was inflicting on itself, in boycotting Russian oil and gas, would be short-lived, and more than compensated, if Putin was destabilised, and a western puppet put in place, again, as had happened with Yeltsin, when under US instruction, Chubais sold off state assets on the cheap, creating the present day state of oligarchs, and mafia capitalism, whilst Russian workers and pensioners were left destitute, and eating food scavenged from waste bins. It no doubt, saw the possibility of a great expansion to the East, and a bonanza of cheap and plentiful natural resources. Moreover, as it was forced to abandon the lockdowns of the previous two years, and as all of the money tokens handed to citizens flooded into the real economy, driving up inflation, a temporary period of sharply higher energy prices, to soak up that liquidity, rather than stimulating rapid economic growth, that threatened to crash asset prices, would do no harm for it at all.

But, its hubris was misplaced too. Despite hundreds of billions of Dollars worth of the most advanced NATO military hardware being dumped into the bottomless pit of Ukraine, it was still incapable of pushing Russia out of Eastern Ukraine. On the contrary, Russia consolidated its position further, dragging NATO and the EU into a never ending war, that will suck it dry. And, with global labour shortages, EU workers did not simply accept their fate of having to cover ever higher energy bills, and other cost of living rises out of their wages, but began to take to the streets, and to take industrial action for higher wages, instead. That was a game changer, because, now, it meant that those higher costs were becoming a direct reduction in profits, and as economies continued to grow, as all of the additional workers continued to spend, so interest rates rose, and that means that the assets that now form the main form of wealth of the ruling class, were set to fall sharply in price.

As EU firms faced squeezed profits, as workers demand higher wages to cover higher energy prices, as they face a squeeze on the rate of profit, as the cost of constant capital rises, and as they saw a growing mass mobilisation of those workers across Europe opposing those rising costs, and increasingly recognising that the cause of them was the boycott of Russian energy supplies, and sanctions, so the US must have been scared witless that EU governments would crack, and restore energy purchases from Russia, as indeed, they had been doing by the back door in buying Russian oil and LNG via China, all along. 

That would break the EU from the US, and its gig would be up, handing an historic defeat to the US, and its global hegemony, at the very time it was gearing up for war with China. Its in that light that the statements from Biden, Nuland, and many others that Nordstream would be stopped have to be understood. And, of course, as Lazare notes, the imperialists could not allow any suggestion that it had been the US that was responsible, and had to mobilise all of their propaganda resources, and those of the social imperialists, because what would it say to the workers of Europe, for it to be admitted that US imperialism undertook an act of war against it, for its own short-term strategic interests?

Back To Part 1

Part 3 Tomorrow

Hersch & The Social Imperialists (1/4)

No its not some recently discovered Northern Soul band. Renowned investigative journalist, Seymour Hersch, who was involved with Woodward and Bernstein in uncovering the Watergate scandal, exposed the My Lai massacre in 1970, uncovered Henry Kissinger’s role in the overthrow of Salvador Allende in 1973, and more recently exposed US torture at Abu Ghraib, has, however, provoked the ranks of the social imperialists into a frenzy, as a result of his article, “How America took out the Nord Stream pipeline”.

Because of his history, the article by Hersch is not so easily discounted, as the social imperialists have been able to do with the writing of pro-Putin apologists. However, along with the mobilisation of the vast propaganda machine of western imperialism, they have given it their best shot. They have been aided, as Daniel Lazare points out, in the WW, by the fact that, in recent times, Hersch's record has been somewhat dented, and, in the present case, his evidence relies on a single unnamed source. Given imperialism's attitude to whistleblowers such as Manning, and Assange, it is, of course, no wonder that any source wishes to remain anonymous, and why few such whistleblowers come forward. Many of Hersch's original big stories came from single unnamed sources, and, as they unfolded, were validated. He's only just started on revealing this story.

Nevertheless, if you are going to claim that it was definitely the US, with or without assistance from one or more of its NATO allies, that did it, rather than just present the very substantial evidence to that effect, and let intelligent readers make up their mind, you really need to have more than one such witness, and preferably ones you can prove exist – though, how Watergate would ever have originally been exposed without the single anonymous witness that was “Deep Throat”, you would have to question. Sometimes throwing the grenade in the water is the fastest way to getting the fish to jump out.

There is a difference between making an assertion of fact, and simply pointing to the evidence for and against a proposition. In 1952, Betrand Russell wrote an article on religion for “Illustrated” magazine, though it was never published. In it, he compares the argument of those that assert the existence of God, and who respond to atheists, by demanding they prove that God does not exist, with an assertion that there is a teapot orbiting the Sun, too small to be seen by telescopes, and that those who make the assertion, then require sceptics to prove that there isn't!

The imperialists, and the social-imperialist apologists, are rather like the Christians cited by Russell, in that they have so ingrained their ideology into the mindset that they are the force of good in the world, whose motives and actions can only be questioned by eccentrics and evil-doers that they only have to claim that it is Russia that blew up the Nordstream pipelines, or to claim that its preposterous that the US is responsible, for it to be accepted. Initially, that is exactly what they claimed. But, of course, not only have they failed to prove that Russia was responsible, as they initially claimed, and upon which they have fallen deadly silent for months, but the large mass of evidence leads any rational person to the conclusion that the most likely culprit is the US, with or without assistance from one or more of its NATO allies.

Hersch did not need to prove conclusively - though it would have been better if he could – that the US was responsible. All he needed to do was to provide the mountain of evidence to that effect, and let his readers decide, much as they did in relation to Watergate. Of course, given the history of Watergate, its no wonder that the Biden Whitehouse, already unpopular, attacking US rail and dockworkers, shaping up for a war with Russia and China, has been desperate to rubbish Hersch's claims, and the social-imperialists have been quick to come to the side of Biden and the imperialists, in that venture. And, as they rush to the aid of the imperialists, in attacking Hersch, they have also been keen to prevent any challenge to their own responses to Hersch.

NATO imperialism, and its social-imperialist apologists and supporters are, of course, also aided by the fact that Russia is a vile, corrupt, right-wing regime, whose own actions, and lies are manna for the propaganda machine of the West. But, the fact that the Russian regime is a bunch of vile, corrupt lying butchers, does not remove the requirement to consider the facts and the evidence in relation to the likely culprit. After all, the regime of Zelensky that NATO is using in its proxy war against Russia, and which the social-imperialists are providing uncritical and fawning support to, is equally as vile, lying and corrupt, and anti-working-class as that of Putin! Nor is NATO backward when it comes to lying, and acting as a vile reactionary force across the globe to pursue the interest of US imperialism, even at the expense of the US's allies.

As Irish Marxism set out last year,

“The right wing US think-tank The CATO Institute has an annual ‘Human Freedom’ index, a combination of separate indices for personal and economic freedom. Its 2021 report shows that Ukraine is the third worst country out of 22 in Eastern Europe while the Russian Federation is the worst. Over 165 countries Ukraine is number 98 while Russia is 126. The freest country at number 1 is Switzerland, which scores 9.11 for human freedom while Ukraine scores 6.86 (75% of the Swiss score) and Russia scores 6.23 (or 68% of the Swiss score). We are expected to support the war of Ukraine with 75% of the ‘human freedom’ of the freest against Russia with 68%. The war of 7%. It is relevant to note that while in 2021 Ukraine ranked 98th, it ranked higher at 82nd in 2008, so that relatively it has gotten worse, but so has Russia from 112th to 126th.

The second index is that of ‘Transparency International’ which reports the perceived levels of public sector corruption in 180 countries/territories around the world. It scores these countries out of 100, with the lower the score the more corrupt a country is perceived to be. The 2021 publication reports that the least corrupt countries included Denmark, Finland and New Zealand, scoring 88 each. Ukraine is 123rd on the list while Russia is 139th. A better indication of the difference is that Ukraine scores 32 out of 100 while Russia scores 29, meaning that the former scores 36% of Denmark etc. while Russia scores 33%. Not a pile of difference; 3 to be exact.”

Hundreds of billions of Dollars, Euros and Pounds is being poured into the Ukrainian money-pit, and with these levels of corruption, can anyone seriously doubt that large amounts of it, is finding its way into the private pockets and offshore bank accounts of Urrainian officials and oligarchs, just as happened with all of the billions that went on COVID procurements and so on.  All of it money coming out of taxes that ought to go to rebuilding shattered infrastructure in the US, Britain and the EU, not into further destroying property by wars between competing and corrupt capitalist  states.

A few days ago, I came across this post from the pro-imperialist AWL supporter Jim Denham. It is a re-blog of a post from Simon Pirani at the People and Nature blog, and also on the website of the US petty-bourgeois socialist sect New Politics. So, I made a brief comment to the effect above that whether Hersch had proved his assertion or not, the fact remains that all the evidence points to it being the US, and nor is it just Hersch that has said so, as I have set out in my own posts over recent months. The head of commodities trading at Citigroup, Ed Morse, pointed out months ago that the cause of soaring oil prices had been the decision of the EU, under US pressure, to boycott Russian oil supplies, leaving EU countries needing to buy up more expensive US oil instead. Moreover, even if you could write off Hersch as some kind of pro-Putin eccentric, despite all of his reputation, its not so easy to write off a stalwart of US imperialism such as Jeffrey Sachs!

But, these straightforward posts never appeared either at Denham's blog, or at Pirani's blog. I posted a second comment at Pirani's blog, in response to a comment from someone else, noting this reluctance to deal with criticism. Several days later, I received an e-mail from Simon Pirani, saying that my comment had not been published, because it did not relate to his post. Obviously, I questioned that, and received a further reply saying all he had received was the second comment, and that if I wished to submit a comment I could.

Yet, my first comment had initially been flagged as awaiting moderator approval, so where had it gone? I've pointed this out, and yet it still didn't appear.  Secondly, I had copied and pasted the comment to Denham's blog, and it had disappeared too, which has also happened with other comments I posted there in recent weeks, on this subject. All of this is reminiscent of the experience I had with the bureaucratic-centrists of the AWL, and their systematic censorship, which led me to begin this blog in the first place.

As with the Catholic Church, it appears that the apostles of imperialism can suffer no hint of challenge to their faith, for fear of being tempted into the realm of heresy themselves. So, let us follow the example of Martin Luther, and post our challenge to them on the doors of our own church of reason. I will do so, by responding to Piran's argument, which itself responds to, or purports to respond to, the arguments of Hersch.

 

Part 2 Tomorrow

Jobs, Wages, Sales, Inflation, Profits, Interest Rates and Asset Prices

The data continue to confound the ruling class speculators and their ideologists and media propagandists, as well as frustrating the catastrophists, who had foretold of a post pandemic slump, as the latest instalment of their permanent crisis theory, in which the next recession is always at hand.

The US non-farm payrolls, for last month, as previously noted, soared by more than half a million. But, week after week, the number of US initial jobless claims, also continues to come in at less than 200,000, and often below the estimates too. Indeed, the trend for jobless claims has been steadily downward, rather than upwards, dashing the hopes of the speculators, and those like Larry Summers, who hope that the rate hikes introduced by the Federal Reserve would cause firms to slow down, and start sacking workers, so that pressure on wages and interest rates would abate, so that asset prices could be inflated again.

US wages are also rising at over 5%, which with the increased number of workers, increased number of hours, and all of the liquidity sitting in bank accounts, left over from lockdowns, means that the US consumer is still spending too. The figures for US Retail sales (ex autos), published last week, showed it rising by 2.3%, month on month, in January, and that is the largest increase since March 2021. Retail sales are now back above the trend from before lockdowns.

 

As all of this liquidity continues to flow out into the real economy, its clear that employment is a leading indicator in current conditions, whereas the sentiment indicators, have become increasingly divorced from the real economy. The sentiment indicators, suggesting declining activity, have been repeatedly shown wrong, because those that contribute to them are simply reflecting impressions taken from a doom laden media that has been forecasting recession and slow down for months.

And, the latest US producer prices data, also, shows that with employment rising, wages rising, sales rising, and economic activity increasing, it continues to pass through into the demands for inputs, and now, second or third round effects on producer prices begin to feed through, even before we get the main effects of rising primary product prices, as China comes out of lockdowns, and its economy gets into full swing. US Producer Prices rose by 0.7%, month on month in January, the most in seven months, and nearly double the estimate of 0.4%. Producer prices mostly affects goods inflation, which has been declining in recent months, whilst services inflation continues to increase.

This spike in producer prices suggests that, what has been said before about waves of inflation, is playing out, as the ground is being set for a new wave of goods price inflation, in coming months.

Meanwhile, for consumer price inflation, the data showed that it remains far higher and stubborn than had been predicted. Estimates were for it to drop to 6.2% year on year, but if fell only from 6.5% to 6.4%, and month on month, it rose by 0.5%, compared to just 0.1% the previous month. And, core inflation appears to be even more sticky.

That is tricky for the Federal Reserve, which had been looking to step down the level at which it was hiking rates, having moved from 75, to 50 basis point hikes in recent months, and down to just 25 basis points in February, with speculators hoping it might have been the last, and even that it might cut rates later this year. That looks impossible, with even thought that it might have to go back to a 50 point hike at the next meeting, and certainly that it will continue hiking for longer, and reach a higher terminal level.

But, even that is still being underpriced. Stock markets have basically gone nowhere in recent weeks, despite the potential for continued higher rates. The speculators continue to hope that firms will lay off workers, wage pressures will be reduced, and so the pressure on profits will be reduced. But, there is no indication of that happening, and the reality is that material conditions have changed fundamentally. In the US, Biden has used the power of the state to impose terrible wage deals on rail workers, and has sought to do the same with dockworkers, but US workers, like workers across the globe have had enough, and sense firmer ground beneath their feet, as economies expand, and relative labour shortages have developed. As firms see sales continuing to grow, especially in service industry, they continue to need additional workers, and are having to pay up to get them.

Those rising wages impose on profits, but, so far, firms have been able to utilise the excess liquidity that central banks have created to simply raise prices. Rising prices of materials and energy has led to a tie-up of capital, which appears to be a slower growth of profits, because a portion of surplus value is used, now, to replace consumed constant capital, at these higher prices, rather than appearing as realised profit, or dividends/interest and so on. With prices rising faster than hourly wages, even as total wages rise, therefore, a part of this tie-up of capital is covered by an increase in the rate of surplus value. But, much as happened in the early 1960's, a comparable period to that we are now in, workers will begin to close that gap, and then go beyond it.

As noted a few weeks ago, Rolls Royce workers in Britain won a 16.9% pay rise, and London bus workers at Abiello, have won an 18% pay rise. The struggle of US dock and rail workers is not over, despite the attempts of Biden and the Democrats to suppress them, and across the US, large numbers of workers are unionising in areas they have previously been unorganised, and are demanding pay rises to compensate for the high levels of inflation. As US workers, like those in other countries win these pay rises, squeezing profits, firms will again, seek to compensate by raising prices, and the central bank will accommodate them by increasing liquidity further, causing inflation to rise in yet another wave.

Only if they temper the increase increase in liquidity, will they be able to prevent a price-wage spiral, but that will mean, as happened in the 1960's, and into the 1970's, that profits will be squeezed. That squeeze on profits, at a time when firms continue to have to accumulate capital as rising demand for wage goods, pushes the economy forward, means that the demand for money-capital rises relative to its supply, pushing interest rates higher. It means that asset prices have much further to fall, despite the current complacency. In fact, already, with 10% inflation, asset prices are already 10% lower, in real terms than their nominal prices suggest. As in the 1960's, and 70's, those asset prices will fall, both as a result of actual falls in nominal terms, via a series of crashes, and steep declines, and as a result of a prolonged fall in real terms, extending over a couple of decades.

Martin Thomas On Inflation - Part 24 of 25

Adopting the subjectivist standpoint of bourgeois economics and ideology, Martin writes,

“Inflationary impulses were being soaked up by those savings, even though poorer people were reducing their savings (spending more on credit, and in the process further swelling the revenues of high finance).”

That implies that inflation is some kind of psychological phenomenon, driven by these “impulses”, rather than what it actually is, as described by Marx, a monetary phenomenon driven by the devaluation of money tokens caused by excess liquidity. Its certainly true that savings were being soaked up in this speculation, not only in the purchase of shares and bonds, in pension schemes, mutual funds, and individual speculation, as well as in property speculation, by a new breed of buy-to-let landlords, and simply individuals seeking to buy houses for their own use, in the hope either of avoiding a future higher price, or in the hope of themselves making a capital gain, as house prices rose significantly year on year. But, that simply meant that the inflation was manifest in those asset prices, whilst the excess liquidity did not flow into the real economy, and so did not cause an inflation of commodity prices.

Speculation, and near guaranteed capital gains kept liquidity flying around the green zone of assets, acting like a firestorm, such the oxygen of liquidity out of the real economy, and providing the additional fuel to keep asset prices rising.

On the contrary, as I set out some years ago, the very fact of the asset price inflation – particularly when combined with deliberate austerity imposed by governments – acted to actually drain liquidity from the real economy, thereby having a disinflationary, or even deflationary, effect on commodity prices. What we have seen in the last year or so, is the reverse of this, as money tokens were printed, and then pumped directly into the real economy as income replacement schemes, and, although households then built up savings, it is now flowing out into the real economy, causing commodity prices to rise, whilst asset prices are falling as a consequence of rising interest rates, and that creates an incentive for liquidity to flow from assets into the real economy, irrespective of subjectively determined “impulses” or “expectations”. Indeed, the expectations are largely a function of current behaviour being extrapolated into future behaviour.

This bourgeois subjectivist approach is continued in this further comment on the mindset of business managers.

“Market demand grew relatively slowly, while the underlying workplace and labour-time determinants allowed for higher rates of profit; so employers felt less pressure from labour costs, less pressure to increase mark-up, and less confidence that they could sustain sales if they did increase mark-up.”

Except, again, it does not fit reality. From the 1980's, demand grew relatively slowly for the reasons I have given. That is, the technological revolution, meant that labour was replaced, growth in demand for wage goods consequently falls, and falls further as a result of falling wages, offset only by an increase in the use of existing savings, and increase in borrowing. The “savings glut” did not come from workers' excess savings, as household debt trebled, but came from the huge rise in the rate and mass of profit, and release of capital.

It was precisely the weakness of labour, and rise in the rate of surplus value that enabled firms to “increase mark-up”, and is manifest in raised profit margins as well as the rise in the annual average rate of profit. The vast expansion of commercial capital, from the 1980's, and particularly 1990's, as former industrial sites became converted to ever more, ever larger, cathedrals of consumerism, gives no indication whatsoever that any of these capitals felt “less confidence that they could sustain sales if they did increase mark-up.” This was the era of “shop until you drop”, and the idiotic “retail therapy”. The increased mark-up, however, came from the fact that, increasingly, commercial capitals, in developed economies, appropriated their share of the industrial profit created by workers in China and elsewhere, where costs of production were being slashed, and large amounts of cheap, unskilled labour was being exploited, backed by huge amounts of fixed capital.

Back To Part 23

Forward To Part 25

A Contribution To The Critique of Political Economy, Chapter 2.3 Money, b. Means of Payment - Part 2 of 8

In the simple exchange of commodities, C – M – C, the seller alienates the use value of the commodity they sell, but realises its value, as money. But, this money, the price of the commodity, is only ideal, because, to actually realise its price, they must exchange the money for the commodities they actually need, M – C. As Marx sets out in Theories of Surplus Value, and in Capital II, there are numerous reasons why this may not occur, causing this process of circulation to break down.

The seller may not be able to obtain the ideal price for the commodities they sell, so that they lack the money required either for their own consumption needs, or to replace the consumed means of production. Alternatively, they may sell at this price, but then find that the prices of the commodities required for their own consumption, and to replace means of production have risen, or else, they may not physically be available to buy, either at all, or within the required time. (See my book – Marx and Engels Theories of Crisis)

The money, in this simple commodity exchange, is merely a means to an end, not an end in itself. It is the means of achieving C – C, and the real price of the commodities they sell is expressed in this relation, their exchange-value, represented by the commodities they seek to buy. Unless they can achieve this the price they obtain, in money, for the commodities they sell, is only theoretical. Unless they can exchange this money for the equal value of commodities they seek to buy, the money they obtain is merely useless metal, or scraps of paper.

These credit relations between commodity owners are developed early on, where they regularly trade with each other. This form of commercial credit is also to be distinguished from bank credit, whereby financial institutions loan money at interest. As Marx describes, in Capital III, under capitalism, commercial credit becomes central to the dealings of capitals with each other, for example, via Bills of Exchange, which circulate as debt instruments, and are cleared via central clearing houses, but which can also be realised as money early, via discount houses.

In modern commerce, firms simply invoice each other, and the commercial credit takes the form of the grace periods that buyers are allowed within which to pay the invoice. Previously, payment would be made by cheque, and rather like the clearing of Bills of Exchange, the cheques of many different firms, as payment of invoices, would be cleared by the central bank clearing house. Again, all of these payments would be netted off, and so the actual settlement of the net amounts of money, compared to the total value of commodities circulated is small.

Today, this happens via electronic payments, rather than the clearing of cheques, and it is only digital transfers in bank ledgers that are required. Whilst crypto-currencies are worthless, speculative assets, the block chain technology that makes them possible, is likely to have a role in this regard. This vastly reduced the amount of money/money tokens required in circulation to circulate any given value of commodities, but also, therefore, complicates the problem of central banks in trying to control excess currency circulation, in times of rising inflation, because this extension of commercial credit, between capitals is largely outside its control, unless it tightens monetary policy to a degree as to cause a credit crunch, as happened in 1847.

The central bank can reduce note and coin issuance, but that mostly impacts consumers rather than the transactions between capitals, and, in highly banked economies, where consumers also receive and make payments electronically, the issuance of physical notes and coins becomes increasingly irrelevant.

Back To Part 1

Forward To Part 3