The Racism Of Starmer's Blue Labour Party

The current brouhaha over Stamer's, Trump style, attack ads against Rishi Sunak, reflects only the latest manifestation of the inherently racist nature of Stamer's Blue Labour Party. That racism inevitably flows from his collapse into reactionary, petty-bourgeois nationalism, and jingoistic flag-waving, in a crude attempt to both win the votes of reactionaries, and a confused attempt to represent the interests of British capitalism.

The attack on Sunak, on the question of jailing paedophiles and rapists, deliberately plays to well established racist tropes based around the role of Asian men and grooming gangs. The intention is quite clear. In many of those Northern “red wall seats”, where Starmer, wrongly, believes that Labour lost in 2019, because of support for Brexit, from a section of working-class bigots, that bigotry was also given vent in relation to the issue of grooming of young, vulnerable girls by Asian gangs.

Of course, grooming and the abuse of girls and young women, is not at all, or even mostly, the preserve of Asian men, but you would not know that from the media coverage. Starmer seeks the support of those bigots, and so, as well as collapsing into Brexit jingoism, he is also using these well established racist tropes that stereotype Asian men. Of course, he doesn't need to claim, or even imply, that Sunak is himself a rapist or involved in such grooming, only that he is part of facilitating it, and condoning it, being soft on it, and so on. The well established racist trope does its work from there. It says, Asian men are involved in grooming, Sunak is an Asian man, draw your own conclusions.

In fact, Labour did not lose those red wall seats because of being opposed to Brexit. For one thing, it was clear, in 2019, that Corbyn had returned to his 1970's/80's anti-EU, economic nationalism, and, at the point that was most clear, in the Spring elections, Labour was annihilated, with 60% of its own members voting for other, pro-EU parties. It was that which set it up for defeat in the General Election, where its performance was only improved by belatedly trying to row back on that pro-Brexit stance.

The reality is that the large majority of Labour voters opposed Brexit (around 70% of its 2017 voters), wherever in the country they lived. By contrast, those petty-bourgeois and lumpen elements that backed Brexit, had never been part of Labour's core vote. They were, are and will continue to be Tories, or support agendas to the Right of the Tories. Scrabbling after their votes, lost Labour more of its core vote than it could gain, and that continued after Starmer himself collapsed into Brexit nationalism. It has only been the more recent travails of Johnson and Truss that even put Labour back in the running. But, Sunak has reversed some of that, already, hence Starmer's grabbing the race card to use against him, in order to try to prise away the votes of the bigots.

Dianne Abbott's suspension is another manifestation. Abbott's comments equating anti-Semitism with the prejudice faced by red-haired people was idiotic and crass. But, its actually the same kind of identity politics that Starmer's Blue Labour engages in too. It is the mirror image of it, because Starmer's identity politics homed in on anti-Semitism, because it was identified as the weak spot of Corbyn and his supporters.

Abbott's attempt to set up some kind of hierarchy of racism and prejudice, is, in fact, what Starmer and those that used anti-Semitism as a weapon against Corbyn and his supporters also did, except they reversed it, placing Anti-Semitism at the number one spot in that hierarchy. Essentially, that is what Jackie Walker was expelled for, as she refused to accept that hierarchy, and the privileging of Anti-Semitism by Starmer and Co., as she pointed to the fact that its not only Jews that had faced a holocaust, but also millions of black, brown and yellow skinned people who had died as part of a global slave trade run by European colonial powers, like Britain.

If its right to suspend Abbott, for trying to set up such a hierarchy of racism and prejudice, then it is also right to suspend all those who did the same thing in trying to set up Anti-Semitism as the pinnacle of such a hierarchy, and, thereby, necessarily, reduced the holocaust against millions of other human beings, to being of less significance, which, of itself, is inherently racist behaviour. But, of course, the Labour Party has that racism ingrained within it when it comes to the racism and suffering of those millions of colonial slaves, because, for most of its existence, its ideology and leadership, being thoroughly bourgeois, and committed to defending the interests of the British ruling class, acted to bolster the Empire, and thereby, its treatment of those colonial slaves.

In the 1920's, during the Chinese Revolution, when Britain attempted to cling to its imperialist advantages, and had its gunboats sitting in the Yangtse, and other Chinese waters, as it had done, during the Opium Wars, nearly a century earlier, the Labour leaders, along with the right-wing leaders of the TUC that had just betrayed the British workers during the General Strike, said nothing about the role of British imperialism in China. Even after WWII, when US imperialism was acting to dismantle the old European colonial empires, in the interests of its own multinational corporations, Britain still attempted to cling to its colonial possessions in Africa, and the Middle-East, and so on, and the leaders of the Labour Party played the part of loyal servants of the Crown.

So for a party in which racism is so ingrained, and institutionalised, its use by the leadership for its own ends is not at all surprising. The British Empire may have fallen, but its memory lingers on, in all of those reactionary bigots that voted for Brexit, and its to them that Starmer seeks to appeal with his pro-Brexit position, and his jingoism and flag-waving, and medievalist forelock tugging to the Monarchy. Similarly, the Empire has fallen, but the new Empire of financial capital has risen in its place, dominated by the US, to which Starmer must pay tribute, even whilst seeking to represent the specific interests of some undefined, peculiarly British capital, which can, in reality, only be the dwarf capital of the British petty-bourgeoisie.

And, of course, the outpost of that US imperialism in the Middle-East is Israel, which fitted perfectly with Starmer's use of anti-Semitism as the weapon with which to beat Corbyn and his supporters over the head. Yet, the Israeli state, based upon Zionism – a racist and colonialist ideology – itself represents everything that those old colonial empires signified, and which the anti-colonial revolutions were intended to destroy. Defending the Zionist state, entails defending Zionism, and, consequently the racist, colonialist ideology that underpins it.

What Corbyn and most of his supporters were guilty of was not Anti-Semitism, but anti-Zionism. By equating the two, Starmer was able to kill two birds with one stone. First, it removes any ground for anyone in the LP to attack the racist, colonial nature of the Zionist state, by equating any such attack as being an attack on all Jews – even, apparently, if those making the attack are themselves Jews! - and secondly, it created a vague basis upon which to accuse Starmer's opponents of being anti-Semites, no matter what their actual record of fighting racism and fascism, in the past, compared to the generally abysmal record on that count of their accusers.

But, slipping into this approach was easy for the racists within the Blue Labour leadership, because not only is the vague nature of the charge of “Anti-Semitism”, requiring no evidence of any actual hatred of Jews, but simply criticism of the Zionist state, the stuff of all witch hunts, but the idea of a hierarchy of prejudice, in which you are able to privilege concern at the hostility against the oppressor, as against concern for the oppressed, is the Holy Grail of apologism and propagandism. It is seen each time the spokespeople of Zionism appear on TV to justify the destruction of large swathes of Gaza, by Zionist military technology, in response to the firing of dozens of ineffective rockets on to Israel. The expulsion of large numbers of Labour members for speaking out against the racist, colonialist nature of the Zionist state, and its oppression of millions of Palestinians, by claiming that their attacks amount to Anti-Semitism, is just an extension of it.

But, of course, what that policy by Starmer and his supporters in Blue Labour amounts to is yet more ingrained racism, and a concern for the interests of the colonialist oppressor over the interests of the oppressed. It is impossible to defend Zionism, which is the ideological basis of the state in Israel, without simultaneously denying the interests of the Palestinians, and other non-Jews, oppressed by it. It is to claim that the racism and oppression those Palestinians face is somehow not worthy of the name compared to anti-Semitism, despite the fact that, when it comes to Israel itself, it is not Jews facing such discrimination, but non-Jews!

It seeks to justify the racism and colonialism of Zionism, not on the basis of any current oppression of Jews in Israel, but solely on the basis of the Holocaust that happened 80 years ago, in Europe! And, of course, to perpetuate that basis is precisely why it has to be set at the top of an hierarchy of discrimination, by those that seek to apologise for the actions of the Zionists. What those who seek to single out anti-Semitism, and that Holocaust against Jews, as somehow special, and separate from the racism and oppression of others do is precisely the same thing that Abbott did, and for which those same people have attacked her.

Stamer's racist Blue Labour Party seeks to apologise for and defend the racism of Zionism, and the Zionist state, and so is itself guilty of racism when it comes to its attitude towards Palestinians, and all those oppressed by the Zionist state, it defends. It does that as part of its attempt to represent the interests of British imperialism and its alliance with US imperialism. Its racist attitude, in relation to Palestinians, is combined with its racist attitude towards Muslims and Asians in Britain, as it seeks to win the votes of bigots in mainly northern urban areas. The two things are, in reality, incompatible, and held together only by this underlying racism. To represent the interests of the British ruling class, and the dominant form of large-scale, industrial capital, it is necessary to abandon that narrow nationalism and jingoism that is signified by Brexit, and yet it is on that basis that Starmer has attached his reactionary and racist wagon, in the hope of scrounging the odd bigot's vote.

Michael Roberts, AI and Catastrophism - Part 5 of 6

What machines and technology do, is to raise productivity, and whilst the effect of this is to create precarity and misery for those that are actually thrown out of work by it, for a time, it acts to raise living standards overall, to raise the rate of profit, and to stimulate new spheres of production and consumption, and an overall extension of the market, and of employment. Marx, in Capital noted this difference, between machinery that replaces actual already existing workers, throwing them on the dole, and machines that only replace theoretical numbers of workers that would have been required to undertake a given amount of production.

“If it be said that 100 millions of people would be required in England to spin with the old spinning-wheel the cotton that is now spun with mules by 500,000 people, this does not mean that the mules took the place of those millions who never existed. It means only this, that many millions of workpeople would be required to replace the spinning machinery. If, on the other hand, we say, that in England the power-loom threw 800,000 weavers on the streets, we do not refer to existing machinery, that would have to be replaced by a definite number of workpeople, but to a number of weavers in existence who were actually replaced or displaced by the looms.”

(Capital I, Chapter 15)

In actual fact, by raising productivity, it means that the value of labour-power is reduced, and so surplus value is increased, and the value of constant capital is also reduced, so that the rate of profit is raised, and a release of capital available for accumulation is also created. It creates the conditions for a significant increase in capital accumulation, and also of employment.

“This first period, during which machinery conquers its field of action, is of decisive importance owing to the extraordinary profits that it helps to produce. These profits not only form a source of accelerated accumulation, but also attract into the favoured sphere of production a large part of the additional social capital that is being constantly created, and is ever on the look-out for new investments. The special advantages of this first period of fast and furious activity are felt in every branch of production that machinery invades. So soon, however, as the factory system has gained a certain breadth of footing and a definite degree of maturity, and, especially, so soon as its technical basis, machinery, is itself produced by machinery; so soon as coal mining and iron mining, the metal industries, and the means of transport have been revolutionised; so soon, in short, as the general conditions requisite for production by the modern industrial system have been established, this mode of production acquires an elasticity, a capacity for sudden extension by leaps and bounds that finds no hindrance except in the supply of raw material and in the disposal of the produce.”

(Capital I, Chapter 15)

This is also why Michael Roberts' concern over fixed capital investment as a proxy for economic expansion is wrong, because, as Marx sets out, here, capital can utilise existing fixed capital as the basis of a considerable extension of output. What does occur is the introduction of lumpiness in fixed capital investment, so that existing levels suffice for a given period, followed by large clumps of investment when the existing fixed capital is no longer adequate, particularly apparent in infrastructure in roads, rails, power grids, telecommunications and so on.

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Social-Imperialism And Ukraine - Part 23 of 37

The USC respond to the charge of being on the side of NATO and the Tories, by saying,

“Socialists cannot decide our policy by putting a minus where the ruling class or its dominant faction puts a plus. We have to develop an independent working class policy.”

Quite true, but that is not what the USC do. They see Putin as the main enemy, and place a minus sign where he places a plus. They operate on the basis of my enemy's enemy is my friend, and so end up aligned with Putin's enemy, NATO/Ukraine. There is nothing independent, nor working-class, about that. Socialists should, of course, oppose Russia's invasion, but that does not require support for Ukraine's capitalist state, nor its reactionary government, nor for NATO. Our means of opposing Russia's invasion is to support independent, working-class action against it, and, in particular, encouraging the development of a genuinely revolutionary working-class movement in Russia.

In terms of resisting Russia's invasion in Ukraine, that should take the form not of support for its capitalist state, but of the development of a truly revolutionary working-class movement there too, independent from the Ukrainian state. Indeed, in order to effectively defeat the Russian invasion, Ukrainian workers need not only their own independent revolutionary organisation, but to oppose and overthrow the Ukrainian capitalist state itself, which will never undertake a genuinely anti-imperialist struggle, how could it, when its on the side of the biggest imperialism in the world, NATO, and wants to be a part of it!

The importance of that is shown in the USC's statement,

“In any case, we are not simply in the same camp as the Ukrainian government, let alone its foreign imperialist allies. Our starting point is solidarity with the Ukrainian people as a whole against Russian imperialism.”

That is what the Stalinists said in the 1920's to justify their popular front with the Kuomintang of Chiang Kai Shek.  Trotsky rightly ridiculed it.

The word "people" is abstract and used by liberals to gloss over the fact that this “people” is comprised of antagonistic classes. All such use of the term “people” has been used by liberals to present the interests of the bourgeoisie and its state, as being synonymous with those of everyone in society. It is a bourgeois deception. The interests of Ukrainian workers are not those of the Ukrainian bourgeoisie whether in time of peace or war. The actual war being conducted is one by the Ukrainian capitalist state, and it is with that that the USC are standing in solidarity.

And, the USC further illustrate that when they say,

“The Ukrainian labour movement as a whole, virtually unanimously, supports Ukraine’s war of self-defence and liberation. The Ukrainian trade unions are far from tiny, with millions of members. The more radical unions support and participate in Ukraine’s war too.”

In WWI, trades unions overwhelmingly supported the imperialist war conducted by their respective ruling classes too. Is the USC saying that that legitimised those imperialist wars?! That sounds like populism and tailism, not Marxism. Again the same argument was used to legitimise the KMT, and their subordination to it.  Indeed, those trades unions organised labour battalions to go and fight in those wars, and also, after the war, those same forces went on to fight alongside the White Armies in Russia, to try to overturn the Revolution, and kept schtum when it came to British imperialism's role in the Chinese Revolution, with its gunboats sitting in Chinese rivers and territorial waters.

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Northern Soul Classics - Lovers Holiday - Peggy Scott and Jo Jo Benson

 

Friday Night Disco - Did My Baby Call - Steve Mancha

 

Michael Roberts, AI and Catastrophism - Part 4 of 6

Roberts' cites Engels comments in The Condition Of the Working-Class that machines not only caused jobs to be shed, but also created new jobs in other spheres, but feels forced to counter it, by quoting Marx's comment, in Capital III, which, whilst reinforcing Engels' comments about the development of new jobs and spheres, also details the fact that those actually thrown out of work, at that time, were thrown into destitution and starvation. Roberts comments,

“The implication here is that automation means increased precarious jobs and rising inequality.”

Is that true? No. If we take the first introduction of machines, it required that capitalist production had reached a reasonable level of development and scale of production. Something like the power loom certainly impoverished the independent, self-employed hand loom workers, but for those now employed as machine minders of the power looms, their jobs and livelihood was, if anything, more secured, by the cheaper prices of cloth, and expansion of the market that resulted. Its also certainly true that the wages of these machine minders were less than the previous incomes of the hand-loom workers, but those incomes, as with all such craft labour, itself represented a higher degree of income inequality between workers. And, the reduction in the value of wage goods meant that all living standards/real wages rose. As Engels points out, in his Preface to the Poverty of Philosophy, capitalism brings about an equalisation and homogenisation of labour, resulting from competition, reducing it all towards a single universal labour.

Machinery and automation, Marx says, in opposing Proudhon, does away with “craft-idiocy”, and brings about greater equality.

“This is what the state of affairs in modern industry amounts to in the last analysis. It is upon this equality, already realized in automatic labour, that M. Proudhon wields his smoothing-plane of “equalization,” which he means to establish universally in “time to come!””

And, at the time he was writing, Marx says, that this was most clearly the case in the US, where the greatest use of machinery, and the modern factory was to be seen. And, what was true of the function of capitalism, was also true in relation to imperialism, as Marx, Engels, Lenin and Trotsky also set out, as industrial capital settled across the globe in search of exploitable labour-power. The Stalinists, and petty-bourgeois liberals and third worldists, with their theory of unequal exchange, and underdevelopment as the basis of imperialism, denied that, and continue to deny it, arguing that the concept of combined and unequal development was unknown to Marx.

Trotsky, responding to this claim by the Stalinists, noted,

“The law of uneven development of capitalism is older than imperialism. Capitalism is developing very unevenly today in the various countries. But in the nineteenth century this unevenness was greater than in the twentieth. At that time England was lord of the world, while Japan on the other hand was a feudal state closely confined within its own limits. At the time when serfdom was abolished among us, Japan began to adapt itself to capitalist civilization. China was, however, still wrapped in the deepest slumber. And so forth. At that time the unevenness of capitalist development was greater than now. Those unevennesses were as well known to Marx and Engels as they are to us. Imperialism has developed a more “levelling tendency” than pre-imperialist capitalism, for the reason that finance capital is the most elastic form of capital.”

(Speech To The Fifteenth Congress)

Well, it may be argued, but does it not lead to an even greater inequality between capital and labour. Not according to Marx, who, in Capital III, Chapter 27, writes,

“The capital, which in itself rests on a social mode of production and presupposes a social concentration of means of production and labour-power, is here directly endowed with the form of social capital (capital of directly associated individuals) as distinct from private capital, and its undertakings assume the form of social undertakings as distinct from private undertakings. It is the abolition of capital as private property within the framework of capitalist production itself.

Transformation of the actually functioning capitalist into a mere manager, administrator of other people's capital, and of the owner of capital into a mere owner, a mere money-capitalist. Even if the dividends which they receive include the interest and the profit of enterprise, i.e., the total profit (for the salary of the manager is, or should be, simply the wage of a specific type of skilled labour, whose price is regulated in the labour-market like that of any other labour), this total profit is henceforth received only in the form of interest, i.e., as mere compensation for owning capital that now is entirely divorced from the function in the actual process of reproduction, just as this function in the person of the manager is divorced from ownership of capital.”

The functions of the capitalist become those of paid managers, whose wages fall significantly due to competition in the labour market. Profit is the property of the company, and the private capitalist, now become coupon-clipping money-lender is only entitled to a small portion of it as interest/dividends.

“In the last instance, it aims at the expropriation of the means of production from all individuals. With the development of social production the means of production cease to be means of private production and products of private production, and can thereafter be only means of production in the hands of associated producers, i.e., the latter's social property, much as they are their social products.”

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Chapter 2.C Theories of The Medium of Circulation and of Money - Part 17 of 20

Price is only the exchange value of commodities expressed as a quantity of the money commodity, say gold. The gold is itself only a proxy for a universal/general commodity, and the labour that produces it, and, thereby, a proxy for universal, abstract labour. So, in fiat currency regimes, price is merely the exchange value of commodities expressed as a quantity of the standard of prices, which in turn, is merely a unit representing a quantity of social labour-time.

If we consider the situation in respect of metallic money, therefore, the starting point is the exchange value of commodities.

“We know that if the exchange-value of A expressed in terms of B falls, it may be due either to a fall in the value of A or to a rise in the value of B; similarly if, on the contrary, the exchange-value of A expressed in terms of B rises.” (p 183)

The money commodity, say gold, is simply one commodity that is separated from the others, so that it becomes the indirect measure of the value of all other commodities. Prices may rise, therefore, either because the value of commodities rise, relative to the value of gold, or because the value of gold falls, relative to the value of commodities. But, according to Ricardo's theory, the changes in prices were attributed solely to the value of money, and this value of money was no longer determined on the basis of Ricardo's own value theory, the labour theory of value, but, on the basis of the physical quantity of gold, relative to the aggregate value of commodities.

“Prices therefore rise and fall periodically, because periodically there is too much or too little money in circulation. If it is proved, for instance, that the rise of prices coincided with a decreased amount of money in circulation, and the fall of prices with an increased amount, then it is nevertheless possible to assert that, in consequence of some reduction or increase – which can in no way be ascertained statistically – of commodities in circulation, the amount of money in circulation has relatively, though not absolutely, increased or decreased.” (p 183-4)

Ricardo believed that, even with a purely metallic currency, these changes in prices must occur, because of alternating periods when there was either too much, or too little currency in circulation. When there was too much currency in circulation, the value of gold fell and commodities rose, so cheaper commodities would be imported, and gold exported, thereby removing its excess. When there was too little currency in circulation, the value of commodities would fall, and gold would rise, so exports would rise, relative to imports, and gold would come into to cover the difference. So, Ricardo believed that a self-correcting mechanism existed, and the rises in prices would be neutralised by subsequent falls in prices, and vice versa. This fails to account for actual changes in the value of gold itself, or for changes in the value of the standard of prices resulting from a change in its material composition.

But, there were not only purely metallic coins in circulation, but also bank notes, redeemable in gold. As described previously, the laws relating to these money tokens are the same as for gold itself. In other words, only as many of them can be put into circulation as the gold they represent. In terms of redeemable notes, if the currency falls in value, relative to gold, the notes will simply be redeemed for gold. If they rise in value, against gold, banks will issue more notes.

Again, as Marx describes, this does not apply to fiat currencies, where no such redemption for gold is possible, and where the notes must then remain in circulation leading to inflation. In the case of inadequate paper currency, Marx sets out in Capital III, how, in conditions of economic expansion, this is dealt with even if central banks fail to provide the required liquidity. In other words, it is accomplished by capitals themselves by the creation of commercial credit, i.e. originally the creation of Bills of Exchange, and today, simply extended periods of settlement on invoices. This also becomes an important element of currency regulation, because as such transactions form an increasing proportion of economic activity, the amount of commercial credit, and so liquidity, rises and falls along with the volume of such transactions.

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Michael Roberts, AI and catastrophism - Part 3 of 6

Roberts, of course, presents his petty-bourgeois pessimistic view, in which capitalism is in a long recession. In fact, in the period after 1999, it was far from being in any such recession. I have set out previously why GDP is only a measure of new value created, and even then has to be modified for the effects of the tie-up or release of capital. It is not a measure of total output, and so also GDP growth figures are not a measure of actual output growth either. However, with that caveat, in 2000, world growth was 4.5%, in 2001, 2.0%, in 2002 2.3%, in 2003 3.1%, in 2004 4.5%, in 2005 4%, in 2006 4.4%, and in 2007 4.4%. Only in 2008/2009, as a consequence of the GFC, did world growth fall sharply, but then, in 2010, rose again sharply to 4.5%.

Its true that in the period since 2010, the growth has been anaemic, with 3.3% in 2011, 2.7% in 2012, 2.8% in 2013, 3.1% in 2014, and 2015, 2.8% in 2016, 3.4% in 2017, 3.3% in 2018, 2.6% in 2019, falling sharply by 3.1% in 2020, as a result of lockdowns, but rising by 5.9% in 2021, as those lockdowns started to be lifted. In short, the average up to 2008, was around 4%. What accounts for the slower growth after 2010? It is not, as Roberts maintains, some fundamental problem with the rate of profit – which has in any case been relatively high – but has been a deliberate attempt by the ruling class of speculators, and its state, to restrain that growth, which led to rising wages in the period prior to 2008, and also led to rising interest rates that caused the huge asset price crash of 2008. It shows that their interest is no longer coincident with that of capital itself, at least in the short-term.

Given that, after 2010, governments almost everywhere implemented harsh policies of fiscal austerity, which reduced aggregate demand, is it any wonder that growth rates fell? In fact, that austerity was not driven by a need to reduce borrowing to prevent interest rates surging to very high levels either. Even with the massive borrowing to bail out the financial sector after 2008, yields on government bonds were lower than they are today, and at historically low levels around 3%. The austerity was a deliberate attempt to slow growth, so as to prevent wages growing and to be able to reduce yields even from these historically low levels – even going down to zero and below – so as to inflate asset prices.

Moreover, not only did governments deliberately scupper economic growth with that austerity, but they also continued a policy of QE, pumping liquidity directly into those asset markets to goose prices, and they introduced other measures to inflate property prices by direct measures such as Help To Buy, and so on, all of which drained money and money-capital from the real economy into that speculation. When even that was not enough to restrain growth, which began to pick up again, they introduced the physical lockdowns of economies under cover of COVID.

Roberts also conflates crisis (overproduction of capital) with recession (stagnation), whereas these are two different things and phases of the cycle, as Marx describes in Capital. The period of crisis is the period of overproduction of capital, i.e. where capital has expanded relative to the available labour/social working-day, to a degree where any further expansion means that not only can absolute surplus value not be expanded (and may contract, as workers demand a shorter working-day), but also relative surplus value does not rise, and starts to fall, because a shortage of labour pushes wages higher.

The period of stagnation/long recession, follows such a period of crisis, and arises because capital responds to the crisis by innovation, introducing new labour saving technologies that create a relative surplus population, reducing wages and boosting profits, and also reducing the value of labour-power, raising surplus value, but also reducing the value of fixed capital via moral depreciation, so boosting the rate of profit. Its what occurred in the late 1920's and 30's, and again in the late 1980's and 90's. If we were in a period of stagnation or long recession, it would signify that capital has already gone through a period of crisis, preceding it, and would be seeing rising not falling rates of profit, currently. And, because such periods are characterised by this rising rate and mass of profit relative to capital accumulation, they are also characterised by falling rates of interest, as against the rising rates of interest currently being seen.

If we really were in such a period of stagnation/long recession, capital would not need AI or any other technology to provide a solution, because it would have already gone through that stage to overcome the crisis of overproduction of capital/profitability in the preceding period. In fact, that period occurred in the 1980's/90's. It was seen in the rise in unemployment and slower growth of employment during that period. But, that too, also illustrates a further fallacy in Roberts' argument, because, although it results in a rise in unemployment, and slower growth of employment, employment itself still grows, as capital also still accumulates. The difference is that the ratio of output to capital, and output to labour rises. It is also marked by the development of new spheres of production, themselves spheres in which the rate of profit is higher. The reason for the development of these new spheres is set out by Marx in his concept of the Civilising Mission of Capital.

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No We Don't Have To Accept We Will Be Poorer

The Bank of England Chief Economist, has provoked a furore with his comment that UK households have to accept that they will be poorer. Part of his comment is an attempt to defend the Bank against the charge that it has created the current inflation as a result of its policy of QE, particularly during lockdowns. He has instead tried to claim that the higher prices are for things like natural gas, and food, which Britain imports, whose prices have risen by more than things that Britain exports, creating a trade deficit, leading to people being poorer. Some, but not much of that is right. What is more, its quite clear, as its been profits that have also been rising that, already some households have not accepted they should be poorer. Nor should workers.

I've set out in numerous posts that the argument that QE, and all the previous 40 years of liquidity injections into the economy, did not cause inflation is simply unsustainable. For millennia, every time that states devalue the currency it has led to higher prices. It is bound to do so, because the currency (standard of prices) is the unit of measurement of the value of commodities, in the same way that a yard or a metre is the unit of measurement of length. If you make the measuring stick shorter, then the thing you are measuring increases in proportion to it, even if it has not itself changed. A look at hyperinflation, wherever, it has occurred, has happened only when states have printed more and more money tokens, and it has been ended, when they have withdrawn them all, and introduced a new higher standard of prices.

A look at the astronomical inflation of asset prices (shares, bonds, property etc.) during the 1980's, 90's and 2000's went along with the increases in money tokens and credit that central banks pumped into economies, particularly from the mid 80's onwards. Indeed, given the huge rise in productivity that occurred, as a result of the microchip revolution of the 1980's, and other developments, which massively reduced the value of commodities, those prices should have fallen, had the value of currencies been held stable. Instead, they continued to rise, even though nothing like the huge rise in the prices of assets, whose prices rose as a result of huge levels of speculation, in the hope of obtaining large capital gains.

Also, a look at the spike in the prices of commodities that occurred after the ending of lockdowns, a period when huge amounts of liquidity had been pumped out to households, in the form of furlough payments, leaves little doubt that its cause was this ocean of liquidity that was now released into the economy, as soon as those households were enabled to use it. And, contrary to Pill's argument about it all being down to the rising prices of imported goods like food and energy, the area where prices are now rising fastest is in services, which are produced domestically. Its true, of course that the prices of food and energy, globally, has risen, but that can't explain a rise in the general level of prices.

The rise in global food and energy prices is itself in part due to the inflation caused by devaluing currencies. If those global prices are measured in Dollars, then the fall in the value of the Dollar, resulting from printing more Dollars, is one cause of those rising prices. For Britain, that is made worse, because the value of the Pound also fell relative to the value of the Dollar too. One big reason for that was Brexit, and so, yes, its quite true for Pill to note that, as a result of Brexit, and the fall in the value of the Pound that followed it, Britain, as a whole, became relatively poorer. It means that it has to sell more of everything, in order to get the same amount of foreign currency it received before, and which it needs to buy goods and services from overseas. But, also, one reason for the Pound being devalued was itself the printing of additional £'s, and creation of additional credit.

But, the other reason that global food and energy prices have risen is that NATO and the G7 introduced sanctions and boycotts on Russian oil, gas and grain exports. That caused energy prices in Europe to soar, as the EU had to source oil from the US, instead, at much higher prices, and natural gas, via expensive LNG, from global markets, and for which it did not have the infrastructure to deal with. So, it was not necessary to simply accept those higher prices. Much like the austerity that governments imposed after 2010, it was a political choice made by governments, and the British government was at the forefront in demanding the imposition of those boycotts and sanctions against Russian energy exports! Those higher energy prices also impacted the price and availability of fertiliser, which again caused higher food prices globally. That was made much worse by the fact that Russia is the largest exporter of grain into the world market, and all of the sanctions and boycotts introduced on it, reduced that supply, pushing global prices much higher. Again, not something out of the control of governments, but a direct consequence of their political decisions.

So, yes, its quite true for Pill to say that the prices of that imported food and energy is not mainly due to the BOE's QE, but it is not true to say it is something we have to accept, because it is mainly a consequence of political decisions made by the British government, and its allies. But, also those higher food and energy prices, cannot explain the general rise in prices that has occurred. Take four different commodities A, B, C and D. A has a value of 10 hours, B of 20 hours, C of 40 hours and D of 60 hours. If the value of A rises to 20 hours, this does not change the value of B, C and D. What it does do is change the proportional relation of A to B,C and D. Previously, 2A = 1B, 4A = 1C, and 6A = 1D. Now, 1A = 1B, 2A = 1C, and 3A = 1D. In other words, the prices of B,C and D have all fallen relative to A. Their prices relative to each other are unchanged 2B = 1C, 3B = 1D.

The only way that, with a fixed amount of currency in the economy, a general rise in prices could occur, would be if the rise in the value of A, also impacted the value of B,C and D, for example being an input into their production costs. That is certainly true of energy, but, as an input, it only forms a small fraction of the value of most other commodities, and so cannot explain any large rise in those prices. That can only be explained by the fall in the value of the standard of prices, i.e. by the currency being devalued by increased amounts of it being thrown into circulation. Of course, what that rise in production costs does do, even when its passed on into a higher price of the commodity, is to reduce the rate of profit.

If, production costs are £100, and profit is £10, giving a selling price of £110, the rate of profit is 10%. If production costs are £110, and profit is £10, giving a selling price of £120, the rate of profit falls to 9%. In order to keep the same rate of profit, selling price would have to rise to £121, and that is what businesses have done, as all of the excess liquidity in circulation has allowed them to raise their own prices. In other words, those households of capitalists have not had to simply accept that they have become poorer, and nor should workers.

The Bank of England has contributed to that. On the one hand, its policy of QE, especially at a time of austerity, led to a massive inflation of asset prices that really did make workers households poorer. As house prices soared, their wages could no longer pay for those houses, and as more of them then had to go into rented property, that pushed rents higher too. As the prices of bonds and shares soared, their monthly contributions to pension schemes bought fewer and fewer of those bonds and shares, meaning they produced less and less interest/dividends, especially as the yields on those shares and bonds also fell, and so either workers were faced with using more of their wages to save now, or else would face lower pensions later.

Now, the Bank of England is still engaging in QE to bail out the pension funds and finance houses as seen last September, and yet, its policy of raising its interest rates, contributes to the fall in asset prices that created problems for those institutions, as well as raising the cost of workers mortgages. In other words, as I set out some time ago, it, like all other central banks, is responding to inflation with the wrong tools, if it really wants to reduce it. Instead of raising its interest rates, it should be engaging in more QT. That would prevent firms raising prices, so easily. But, it will not do that, because, in current conditions, of labour shortages, wages would rise relative to profits. Current policy is designed to allow prices to rise ahead of wages, and interest rate rises are intended to slow the economy, and demand for labour, to slow the rise in wages and demand for capital, so as to boost profits and asset prices.

Again, those are policy decisions designed to ensure that whilst some households, i.e. workers households have to accept becoming poorer, other households, those of capitalists and speculators certainly do not.

There is no reason why we should accept that. If the Bank of England will not rein in the excess liquidity it has thrown into circulation, and continues to do, so as to reduce price rises, if the government persists with its policy of boycotts and sanctions against Russian exports that has caused global food and energy prices to spike, then workers can only respond by demanding that their wages, benefits and pensions rise, at least, in line with those rising prices, and other costs imposed on them. We need a sliding scale of wages, so that wages are increased, each month, in line with that rising cost of living, which we should calculate ourselves, using committees of workers and labour movement economists. The TUC, should coordinate such action, and ensure a response from all unions to ensure that all employers comply, and that the government is forced to comply in relation to pensions and benefits.

Social-Imperialism And Ukraine - Part 22 of 37

The USC, dealing with the question of danger of nuclear war, say,

“Any conflict involving a nuclear power raises fears of nuclear war, a horrifying prospect for all of us. In Ukraine, there is only one nuclear power involved in the conflict: Russia.”

Clearly, that is not true. Even if you believe that NATO is not involved in any of the fighting in Ukraine, was not involved in blowing up Nordstream and so on, it is still clearly involved, because without it, the war would have ended long ago. Its impossible to deny that NATO, the world's largest nuclear power, has been supplying its side in the war with huge amounts of weapons, as well as intervening via cyber warfare, economic warfare, and intelligence warfare against Russia, not to mention its threats against other countries, like China, if they did not comply with US measures, let alone were they to more actively support Russia.  Indeed, the release of the secret US Defence Department documents shows that they have been intervening, including using Special Forces in active operations inside Ukraine!

They then go on to protest the Russian atrocities that have occurred in Ukraine, and say that this has to be taken into account “against our moral duty to defend civilians”. But that is equivalent to the arguments of Russian liberals like Miliukov in support of Russian intervention in the Balkan Wars. No one denies Russian atrocities, but it is ridiculous for USC to deny atrocities by Ukrainian forces, particularly those of the Nazis involved in its armed forces too, both against Russian forces, and against civilian populations in the East supporting Russia. As Trotsky put it, arguing against Miliukov's partiality in only seeing atrocities by the Ottoman's,

“Did you not hear during your travels – it must be supposed that this would be of interest to you – about the monstrous acts of brutality that were committed by the triumphant soldiery of the allies all along their line of march, not only on unarmed Turkish soldiers, wounded or taken prisoner, but also on the peaceful Muslim inhabitants, on old men and women, on defenceless children?” (The Balkan Wars, p 285-6)

Are not, in these circumstances, your protests against Turkish atrocities – which I am not at all going to deny – like the disgusting conduct of Pharisees: resulting, it must be supposed, not from the general principles of culture and humanity but from naked calculations of imperialist greed?”

And, its in that context that he makes the statement grossly distorted by the AWL,

“An individual, a group, a party, or a class that ‘objectively’ picks its nose while it watches men drunk with blood massacring defenceless people is condemned by history to rot and become worm-eaten while it is still alive.

“On the other hand, a party or the class that rises up against every abominable action wherever it has occurred, as vigorously and unhesitatingly as a living organism reacts to protect its eyes when they are threatened with external injury – such a party or class is sound of heart. Protest against the outrages in the Balkans cleanses the social atmosphere in our own country, heightens the level of moral awareness among our own people. The working masses of the population in every country are both a potential instrument of bloody outrages and a potential victim of such deeds. Therefore an uncompromising protest against atrocities serves not only the purpose of moral self-defence on the personal and party level but also the purpose of politically safeguarding the people against adventurism concealed under the flag of ‘liberation’.” (p 293)

In other words, setting out the responsibility of socialists in the imperialist states of opposing their intervention, and the atrocities that go with it.

The USC continue,

“But what if the policy of ending Western arms to Ukraine is adopted? It seems more than likely that Russia will continue with the war, and could well do so until the achievement of its initial aim, namely the occupation of all Ukrainian territory and the installation of a ‘friendly’ government.”

Why does that seem more likely? That is not what happened in Georgia in 2008. Its very unlikely the initial aim was the occupation of all Ukrainian territory, not only because it would have been militarily impossible, which Putin would know, but also because had that actually been the intention Russia would have had to mobilise multiple times the actual forces it did, and much more weaponry, and would have had to have hit much harder right from the start. Russia, in fact, followed the same play book as NATO in Kosovo, and with the similar goal. Having consolidated in the East and South-East, its far more likely to defend that position, and will use defenders advantage to mince any Ukrainian counter-offensive.

Back To Part 21

Forward To Part 23

The Resilience of UK Demand

Pundits continue to be surprised that demand in the UK economy remains strong, despite rapidly rising prices. That resilience, is not what the ruling class of speculators, or its representatives in the state and financial media want to see. They want to see at least a slow down, or even recession. In the US, Larry Summers has been open about wanting to see unemployment rise to over 5%. They hoped that high prices, particularly for things like energy would quickly soak up households' spending power, so that they would spend less on other goods and services, slowing the economy, once more, as fiscal austerity had been used to do, in the past, so that the pressure on the labour market would ease, wages would fall and profits rise, whilst, also, interest rates would fall, and boost the price of the financial assets that are now the form in which that ruling class owns its wealth. There are a number of reasons why their hopes have been dashed.

The pundits point to the fact that prices are rising by more than the rise in hourly wages, meaning that real wages are falling. That would suggest that workers have less money to spend, and so should reduce their consumption levels, slowing the economy. But, as I've set out before, there are a number of problems with this idea.

Firstly, if you think prices are going to rise, there is a good reason to bring your spending forward, on all those things you can buy, now, and which are durable, even if you consume them later. For example, you might buy in large amounts of tinned goods, now, consuming them over the next few months, or if you were going to be thinking about buying a washing machine, TV, or car, you might bring that decision forward a few months, to buy it, now, at today's lower prices. And, that doesn't apply just to households. It applies also to businesses, especially, given that, as a result of a combination of Brexit, lockdowns, and so on, supply chains became dislocated, and so firms need to hold larger inventories than they did previously, to ensure continuous production.

With rising interest rates and falling house prices, where households might reduce demand is for property, which has been seen, both because they may find they can't afford properties at their currrent prices, and because, as property prices fall, there is a clear incentive to wait for them to fall further, so as to buy at those lower prices. That process is at an early stage, but it means that there is still a lot of money in the possession of households that might have gone to house purchase that is now available to fund other types of consumption. The pundits tend to associate lower property and asset prices, with a negative wealth effect, causing consumption to fall, but, as set out above, and as I have described elsewhere, in looking at how liquidity flows from assets into the real economy, in reality, when asset prices fall, it creates a release of capital and revenue available for consumption, both personal and productive.

Lower land prices means farmers or builders have a release of capital to be used to employ more workers, machines and so on. Lower share and bond prices, mean pension funds can buy more of these assets to fund future pension liabilities, meaning firms have to use less of their profits, and workers less of their wages, to fund pensions, leaving more profits and wages for consumption, both personal and productive, and so on. The higher interest rates that have gone along with higher inflation, have brought about that shift from assets to consumption, but its still at an early stage.

Secondly, although prices are rising faster than hourly wages that doesn't mean that household incomes are rising slower than household expenditure. There are a whole series of reasons for that. The rise in hourly wages does not, for example, take into account the payment of numerous other bonuses, allowances and so on. In the 1990's, local councils found that they could not retain or recruit a number of types of workers such as environmental health officers. However, they were restricted in being able to raise wages. What they did was to introduce a number of other incentives, such as the provision of lease cars, on favourable terms, to employees in those jobs.

As firms have found difficulty in retaining and recruiting workers following the ending of lockdowns, there have been a plethora of signing on bonuses and other such ad hoc payments, and non-wage benefits that contribute to incomes. In the current wage bargaining rounds, we have seen nurses offered a one-off lump sum pay rise, in addition to the smaller increments to hourly wages, for example. The purpose of these payments, is also not just to recruit and retain workers in those spheres.  By massaging the hourly earnings figures in a lower direction, it adds to the ruling class propaganda that workers are still in a weak bargaining position, that wages are failing to keep up with prices, and so on, and so presses down on all other negotiations. The advantage, then, also of the one-off payments, such as that offered to nurses, is that the employer can try to ensure that, in future negotiations, it, indeed, is not integrated into the wages of the workers.

There is another reason why the hourly wage data doesn't reflect the position of household incomes, and that is a compositional effect. If we take the wages of a series of types of workers, such as brickies, bakers, bus drivers and bin men, it may well be that the hourly wages of each of these groups of workers rises by say 5%, but suppose we take a series of other types of workers such as cleaners, cooks, care workers and cab drivers, whose hourly wages also rise by 5%, does this mean that household incomes from all these workers rise by an average of 5%? The answer is no, because it depends on the absolute level of wages of each group, and the number of people employed in it. Suppose the average hourly wage of the first group is £10, and of the second group £8. If 20% of the workers in the second group, get jobs in the first group, then their hourly wage will rise, not by 5%, but by 25%!

Given that, with an increasing shortage of labour, workers have been able to move to better paid jobs, the rise in the hourly wage for different types of jobs, becomes a distraction and distortion. And, indeed, as I've set out before, the average increase in wages for someone simply moving jobs, is around 14%. That clearly does not apply to the whole workforce, who do not move to better jobs, and who remain in their same job, but for a sizeable proportion of the workforce, it is the case, and represents a significant increase in income, over and above inflation, and so income available for additional consumption. That also, over a period, puts pressure on hourly wages too, because employers seeing that their workers are able to move to other better paid jobs, face increasing problems recruiting and retaining labour, unless they also raise wages. For all those types of business that have relied on poorly paid workers, they have to, now, become more efficient, usually meaning that large numbers of such small zombie companies go out of business, and a consolidation takes place of their capital.

And, looking at household incomes, as against individual hourly wages this is also important, because most households are not comprised of single individuals. If, just a third of households see someone within that household move to a better paid job, paying on average 14% more, that is the equivalent of all households seeing a rise of around 5%, on top of the overall rise in hourly wages, so that this represents a rise in overall household earnings above the rise in household expenditure due to inflation, enabling additional consumption.

The most obvious and dramatic form of that is where households see one of their members go from unemployment, or part-time employment, to full-time employment. A household that had one member earning £30,000 a year, and now has one earning £31,500, plus another earning £20,000 a year, has obviously seen an increase of household income of around 66%, way in excess of the 10% increase in their household expenditure due to inflation. Whilst, its true that employment levels have only got back to those preceding the lockdowns, the point is that they have risen dramatically compared to those during lockdowns, giving an immediate and significant boost to current household incomes available for consumption.

But, the ability to fund consumption is not solely down to the rise in incomes either, but is affected by savings, and, during lockdowns, because expenditure was artificially curtailed, whilst incomes were maintained via furlough and other such payments, household debt was reduced, meaning that balance sheets were put in a position to finance current consumption, including also from savings. Here also is a further factor, arising from rising interest rates. Although a large proportion of UK households have little or no net savings (about 25%), a considerable proportion do, and as interest rates have risen, so have rates on deposits. Again, the fact that these rates are negative in real terms, compared to inflation, does not tell the whole story.

If you have £100,000 of savings, which now pays you 3% interest, compared to near zero in the last few years, that is still £3,000 of interest you now have that you didn't, and which you have to spend, in addition to what other increase in your income you might have received. Again, overall, the rise in interest rates will act to reduce demand for property, leading to falling property prices, but is not likely to reduce demand for consumption goods much, if at all, as they are bought out of income not borrowing. The fall in asset prices releases capital and revenue for consumption, and the rise in interest rates leads to higher revenues for savers, who then have money to also spend on additional consumption. One of the areas where this is significant is in relation to the large number of pensioner households, especially as these have a higher proportion of their wealth in financial assets.

The government's triple lock means that state pensions have been indexed linked to inflation, so, unlike hourly wages, these incomes are, at least, rising in line with prices. But, again, the devil is in the detail. Suppose you are a pensioner household of two, with combined state pensions of £15,000, and expenditure of £12,000. With a 10% increase in both that means that pension income rises to £16,500 and expenditure to £13,200, so saving rises from £3,000 to £3,300. If, however, your expenditure was £16,000, you go from needing to dip into savings, borrow, or do additional work amounting to an additional £1,000, to being short of £1,100. In general, pensioner households do not have mortgages, or if they do, they will be relatively small, and consequently, they are not hit by the rising interest rates. On the contrary, having paid off mortgages and so on, they are most likely to have accrued savings, and so benefit from the rise in interest rates on savings. They do not, however, generally, benefit from the other effects listed earlier, of having household members going from unemployment to employment, and so on. However, as labour shortages persist, that remains also a further potential for such households to boost incomes and so expand consumption.

In Britain, a large proportion of workers are employed by the state. The NHS is the largest single employer in all regions of the country. But, the state accounts for around 40% of economic activity, with large numbers employed as civil servants, local government workers, teachers, police and so on. These workers also have inflation linked pensions, and that contributes to the protection of those pensioner households, from the effects of inflation on their consumption. If we take the pensioner household example above, and now add in this works pension, so as to obtain a household income of £30,000, the effect becomes fairly obvious. With expenditure of £15,000, and 10% inflation, savings now go from £15,000 to £16,500, and if such a household has £100,000 of savings, with 3% interest, now on those savings, that is an additional £3,000 available for consumption, or an additional £4,500 a year, in total.

In the 1950's, and early 60's, which is the equivalent of the period we are in now, the growing economy did not initially manifest itself in rapidly rising hourly rates of pay. The same has been seen in other periods, as described by Marx in Capital, and Theories of Surplus Value. Marx described, how, as capital required more labour, and having used up reserves of peasants, and others thrown off the land, it turned to employing women and children. If to reproduce labour-power, a male worker previously needed to earn a wage of £10 a year, to provide for a family including their wife and four kids, as the demand for labour rose, the capitalist could actually reduce the male worker's wages to, say, £6 a year, whilst employing his wife and two kids, paying them £5 between them – though often the money was just paid to the male worker for the employment of the family labour. The consequence, however, was that the household income rose by 10%, from £10 to £11.

After WWII, this was seen again. Male workers saw overtime rise significantly, but also married women again entered the workforce, with this same effect that, hourly wages did not rise rapidly at first, whilst household incomes did rise substantially, funding the big rise in household spending on the new ranges of consumer durables such as washing machines, TV's, fridges, vacuum cleaners and so in, and also later motor cars and foreign holidays. Only in the 1960's, as the potential to increase the workforce and social working-day further, by such means, ran into barriers, did hourly wages start to rise, leading to wages squeezing profits, and, in the 1970's, thereby a crisis of overproduction of capital.

Although the lifting of lockdowns has seen a surge in demand for labour, the actual rise in demand as against supply of labour has been taking place since the start of the new long wave upswing in 1999. I've previously referred to the rise in the US Quit Rate as an indication of that in respect of the US labour market, and in both the US and UK, it is seen in the fact that the number of vacancies in proportion to the number of unemployed workers is historically high. But, a look at the total number of jobs to total workforce, for the UK, also illustrates this point, as seen in the following graph.

(Source John Authers Points of Return Blog)

As can be seen, available jobs remained slightly below the available workers, up to 2008, when the global financial crisis led to a sharp drop in available jobs. But, by 2016, that gap was back to its earlier level, and starting to close noticeably. By 2020, the gap had nearly closed entirely, prior to lockdowns, when it opened again, but following the ending of lockdowns, has not just closed, but has seen the number of jobs exceed the number of available workers, creating the current labour shortages, and pressure on wages. That is also exacerbated by Brexit, and the ending of free movement of labour, but was a process already underway.

So, the expectations of the ruling class of speculators and their representatives, of a significant drop in consumption by households, leading to a drop in capital accumulation and hiring by firms, leading to a drop in the pressure on wages and interest rates boosting profits and asset prices is still unlikely, and as employment continues to rise, and wages do begin to squeeze profits, central banks will continue to make liquidity available so that firms can raise prices to mitigate that profits squeeze, leading to a more persistent level of inflation. Already, we saw the Bank of England do more QE, when it should have been doing QT, in the face of a number of pension funds being threatened by the sharp rise in bond yields, last Autumn, we have seen the Federal Reserve do the same following the failure of SVB, Signature and problems for its regional banks, and we saw the SNB get involved in bailing out its banking system, as Credit Suisse went bust.

The reality is that, despite all the talk about tightening liquidity, vast oceans of it are still swilling around the global economy. Looking solely at additional liquidity created by central banks again gives a false picture. That is being reduced, other than for the examples given above, but that is not the only source of liquidity. As Marx describes, capitalist firms themselves create additional liquidity, via the extension of commercial credit. As economic expansion continues, firms simply invoice more, taking payment for what is sold later, and as each of these transactions cancels out others, so less actual currency is required in circulation to fund any given level of transactions. But, in addition to that, there is a huge stock of liquidity that has been created, most of which was tied up in the purchase of assets, and which can flow out of assets, as asset prices drop, and into the real economy, as I have previously described.

This graph illustrates, beautifully, what I have described on numerous occasions. The expansion from 1959 to 1979, follows a very gradual upward trajectory, as would be expected with the growth of the economy itself. From 1979, there is a marked increase in the slope, which flattened again during the 1990's, but then rises in a pronounced manner, after 1999, as liquidity is injected in response to the Tech Wreck of 2000, and the potential for further falls in asset prices, and again pronounced in 2008/9. The curve steepens further, particularly following the onset of lockdowns, and the introduction of various income replacement schemes by the government. The reduction, now, from QT, is put into perspective, by the tiny dip, compared to the huge preceding upward curve.

In the following charts, we see the further effect of this prolonged increase and accumulation of liquidity, in terms of stock and flow, this time in relation to M2, rather than M3. The huge rise in liquidity in 2020/21, is shown in relation to the left hand chart showing year on year growth, whilst the accumulation of liquidity as a stock, is shown in the right hand chart, again emphasising the previous points about the extent to which this phenomenon is one that has arisen in the last 40 years.

Britain has different conditions to the US, and EU, of course. It has Brexit, which has caused its costs of production to rise, and its rate of profit to fall, slowing its potential for growth. Brexit was the project of the petty-bourgeoisie, and, of course, they were not concerned by such factors, based on their interests, and experience of the last 40 years. On the contrary, their inefficient small capitals are threatened both by competition from larger capitals, and by the minimum standards, that the larger-scale capitals, operating at an EU level, take for granted. Brexit protectionism, meant those small British capitals could sustain their higher prices, required to eke out a profit, and they assumed, on the basis of workers' weakness over the last 40 years, that they would simply pass on these higher prices to workers without workers being able to raise wages to compensate. In that they were not alone, because the ruling class speculators, also assume the same thing, not just in Britain.

But, Brexit also simply compounded a problem that capital was facing in that regard, as described above, which is that material conditions have been changing since 1999, and only held back by the effects of fiscal austerity, QE, and lockdowns. That is the using up of the relative surplus population, a slowing of productivity growth, as the effects of the last innovation cycle wane, and so the ability of workers to obtain higher wages. The ending of free movement by Brexit, both increased costs, and reduced the rate of profit, putting further pressure on prices, but also, exacerbated the shortage of labour, and meant that workers were in a stronger position to demand higher wages to compensate for those higher prices.

That is a variant of what has been seen in both the US and EU. In the EU, the effects of the NATO/G7 boycott of Russian oil and gas, looked set to cause it to go into recession, last Winter, but a mild Autumn and Winter seemed to enable it to dodge that bullet. However, the massive rise in EU energy prices to consumers, also led to workers taking to the streets, in protest at that self-inflicted injury, at a time when workers were facing high levels of general inflation, to which they were responding with corresponding wage demands. The protests against the energy boycotts, were often led by the far right, again indicating the bankruptcy of both social-democracy, and sections of the centrist Left that had tied itself to NATO imperialism against Russia~China, in preference to defending the interests of EU workers. The EU, was, however, led to respond, by introducing a wide range of energy price caps, faced with this rising revolt, as did the UK government. That again, was not what would have been anticipated, and acted to keep money in workers pockets to spend on other consumption.

Indeed, the EU has not only avoided recession, but appears to be seeing upward revisions for economic growth in coming months, again dashing the hopes of the speculators. Whilst Britain, has additional problems due to Brexit, it does not stand in isolation, and an increase in EU economic activity will also impact the British economy. However, the other factor is China, which came out of its lockdowns following widespread revolts from its own workers, at the end of last year. Already, that has seen Chinese GDP rise by an annualised 4.5% in the first three months of this year. Much of that growth has also been derived from a rise in Chinese domestic consumption, as against its previous dependence on exports. That also looks set to continue to grow in coming months frustrating all of the predictions of global recession.

Michael Roberts, AI and Catastrophism - Part 2 of 6

So, now let me turn briefly to his arguments about AI and The Law of the Tendency for the Rate of Profit to Fall, and so on. Firstly, as I've set out before, Roberts interpretation of the law, and focus on the ratio of fixed capital to labour, as the basis of the organic composition is wrong. The basis of the law is the rising quantity of circulating constant capital, i.e. raw material to labour, resulting from increased productivity. Only in that sense is the role of fixed capital crucial, because the fixed capital is the cause of the higher productivity. But, in Theories of Surplus Value, Chapter 23, and in Capital III, Chapter 6, Marx sets out why, the value of fixed capital falls relative to output value.

It may be that this fall in the value of fixed capital, relative to output, is itself relative, or it may be absolute. For example, a spinning wheel costing £100, that produces 100 kilos of yarn per year (£1 per kilo), is cheaper absolutely, but more costly, relatively, than a spinning machine that costs £500, but produces 1,000 kilos of yarn per year (£0.50 per kilo). But, the same technological development that results in the spinning machine, may also revolutionise the production of the components of the spinning machine, reducing their costs, and of the production process of the machine itself. So, there is no reason why the spinning machine itself, may not cost only, say, £80, and so not only be relatively (£0.08 per kilo), but also absolutely cheaper than the spinning machine.

What the spinning machine does do, is require 10 times as much material to process, and what Marx says, in setting out the law, in Theories of Surplus Value, Chapter 23, is that, although this material might also be produced cheaper, the increase in the quantity of it processed, is proportionately greater than the fall in its unit value. So, for example, if 100 kilos of cotton costing £1 per kilo is processed by the spinning machine, whilst 1,000 kilos of cotton costing £0.80 per kilo is processed by the spinning machine, then despite this fall in the unit value of cotton, the total amount of its value rises from £100 to £800, and its this that is the basis for a) the rise in the technical composition of capital, and consequently b) the rise in the organic composition, and fall in the rate of profit.

But, this assumes that the unit value of material falls less than the proportionate rise in the quantity processed, which Marx only assumed on the basis that this material, at that time, was largely organic, and subject to the laws of nature not manufacturing.

Even then, Marx noted that, after taking into consideration the effect of rising productivity on cheapening fixed capital, and of reducing the value of labour-power, by reducing the value of wage goods, all of which raise the rate of profit, the relative rise in the value of consumed materials only acted to offset this rise in the rate of profit.

“The cheapening of raw materials, and of auxiliary materials; etc., checks but does not cancel the growth in the value of this part of capital. It checks it to the degree that it brings about a fall in profit.”

(Theories of Surplus Value, Chapter 23)

In other words, the technical composition of capital rises proportionately more than the value composition, falls, so that unit prices of materials fall by less than the increase in the quantity of materials consumed. That would result in a higher organic composition of capital, and fall in the rate of profit. In fact, not only is that not necessarily true, as science has been applied to that production, but also, large quantities of commodities are produced using synthetic, i.e. manufactured materials. Those materials are also more effective, and so on, so that, not only are they absolutely cheaper, but frequently, less of them is required. Take something used in Marx's day, coal to power steam engines.

The development of more efficient boilers and engines, meant that much less coal was required for any given level of power output by the steam engine. More efficient steam engines used in mining to pump air and water, to drive machinery and so on, meant lower costs of production for coal, and so a lower value of the coal also used in steam engines. I have given lots of these examples in the past, to illustrate this point, such as the fact that a modern PC is not only much more powerful than an old mainframe computer, and so relatively cheaper compared to output, but also many, many times cheaper, in absolute terms than a mainframe computer.

In an era where 80% of labour is employed in service industry, rather than manufacturing industry, and so where the processing of material is no longer the dominant factor in the labour process, this law of the tendency for the rate of profit to fall, as social productivity rises, no longer applies. That doesn't mean that crises of overproduction of capital no longer occur, i.e. that profits are squeezed by rising wages, because the function of the long wave cycle means that, existing technologies get rolled out, and more labour is employed, so that, over time, the relative surplus population is used up, wages rise, and profits are squeezed, until eventually that means that capital is overproduced, i.e. it cannot function as capital to produce a greater volume of surplus value, because the employment of additional labour causes wages to rise, reducing the rate and mass of surplus value.

Nor does it mean that the Law of the Tendency for the Rate of Profit to Fall no longer functions in its main role in allocating capital. It still remains the case that those spheres with a higher organic composition of capital – assuming the same rate of turnover – have a lower annual rate of profit, and vice versa, so that capital is allocated away from the former and towards the latter, thereby also establishing prices of production accordingly.

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