Michael Roberts' Fundamental Errors, V - The Tendency For The Rate of Profit To Fall Is Not The Cause of Crises - Part 8 of 8

The logic of Roberts position, is indeed, catastrophist and implies that we should see a permanent state of crisis. Anyone who has read his blog – with the telling URL “thenextrecession” - will indeed, be familiar with his perennial claims that this “next recession” is at hand, always, when it fails to materialise, as with the predictions of the Endtimers, with their sandwich boards around Hyde Park Corner, to be simply rolled forward to the next year. It was seen in his prediction a few years ago, about the inevitability of a “post-Covid Slump”, resulting from the fall in the rate of profit, just as the ending of lockdowns led to a massive boom.

The reality is that, Marx, nowhere attributes the crisis of overproduction of capital to the tendential law. In Theories of Surplus Value, he sets out that the overproduction of commodities is most clearly associated with periods not of falling rates of profit, but of rising rates and masses of profit, which stimulates investment to meet the needs of a rapidly expanding market, but, which, then, expands that production even faster than the market demand. Again, I've set out, Marx's explanation shows why this has a number of different aspects, such as disproportions arising in the expansion of supply in one sphere, relative to that in another. Marx also, notes, that, similarly, higher profits mean at least a relatively smaller proportion of the total social product consumed by workers, leaving a larger proportion of surplus product. The Ricardian author of the “Inquiry” says,

“... and if it be said that this, by diminishing consumption, increases glut, I can only answer, that glut […] is synonymous with high profits…” (op. cit., p. 59).”

Marx responds,

“This is indeed the secret basis of glut.”

(Theories of Surplus Value, Chapter 20)

That is the condition in periods of stagnation such as the 1870's/80's, and 1920's/30's, and 1980's/90's, but it also continues into the subsequent periods of prosperity and boom, as real wages expand, whilst relative wages fall, as in the period of the 1950's, for example. This cannot be described as a crisis of overproduction of capital during such periods, as the rate and mass of profit rises, often significantly. This rapidly increased mass of profit, such as in the 1930's, and 1980's, cannot be applied to accumulate capital, for various reasons that I have described in my book, and elsewhere. For example, these periods are associated with new technological revolutions whose aim is to resolve the problems of a previous, actual overproduction of capital, and squeeze on profits arising from labour shortages, and rising wages. So, not only are workers laid off, as a result of these machines replacing them, in a period of intensive accumulation, but even as the economy expands, any given increase in output can be accomplished with relatively fewer workers.

The amount of labour employed, thereby falls relative to output, i.e. the conditions described by Marx as leading to the long run tendency for the rate of profit to fall, which comes about not as the cause of the crisis, but as part of the means of its resolution! What does this long-run tendency mean, then, given that such a period is characterised not by a fall in the rate of profit, but a significant rise? It means only, if anything at all, that taking one long wave cycle as against another, the average rate of profit, over the cycle, will tend to fall. It most certainly does not mean that the rate of profit falls, and, thereby, causes the crisis. The crisis is caused by a shortage of labour, rising wages and, thereby squeezed profits – a fall in the rate of surplus value. It is resolved by a technological revolution that replaces labour, raises productivity, lowers wages, and the value of constant capital, increasing the rate of surplus value, and rate of profit.

As the workforce grows more slowly, during such a period, therefore, the demand for wage goods grows more slowly, with a consequent effect on aggregate demand. There is no point in accumulating additional capital, if there is no demand for any great increase in the supply of consumer goods. This was the condition recognised by Sismondi, as Marx notes, in Theories of Surplus Value, Chapter 9, and was subsequently plagiarised by Malthus, and forms the basis of the under-consumptionist theory of Keynes a century later. The excess supply of realised profits, brings about a fall in the rate of interest, as described by Marx in Capital III, Chapter 30. This fall in the rate of interest creates a rise in asset prices that also encourages financial speculation, and bubbles, as seen in the 1980's.

That is, the, the basis of subsequent financial, as against economic crises, such as the global financial crisis of 2008. But, that, as they, say, is another story.

Back To Part 7

Anti-Duhring, Part I, Philosophy, V. Natural Philosophy, Time and Space - Part 4 of 6

Infinity is a concept full of contradictions, such as that it is, itself, composed of purely finite terms. But, these finite terms are, themselves, mathematical constructs, which, in reality, are only approximations, required for purposes of categorisation and delineation, in order to calculate. In the real world, there is no such clear delineation, but rather fuzziness at the boundaries, where quantity turns into quality, and where uncertainty and probability reign supreme.  One test of whether we live in a computer simulation, it has been suggested, is that, any such simulation, based upon mathematics, would require, at the most minute scale, to be comprised of discrete segments, rather than being continuous.  At the boundary of these discrete segments, there would be detectable breaks, and jumps.

“The limited nature of the material world leads no less to contradictions than its unlimited nature, and every attempt to eliminate these contradictions leads, as we have seen, to new and worse contradictions. It is just because infinity is a contradiction that it is an infinite process, unrolling endlessly in time and in space. The removal of the contradiction would be the end of infinity. Hegel already understood this quite correctly, and for that reason treated the gentlemen who chop logic over this contradiction with well-merited contempt.” (p 63-4)

In Duhring's argument, time has a beginning, the equivalent to 1 in a numerical sequence, and as noted, our current space-time, likewise, has a beginning, the Big Bang. However,

“The subject at issue is not the concept of time, but real time, which Herr Dühring will by no means rid himself of so cheaply. In the second place, however much the concept of time may be converted into the more general idea of being, this takes us not one step further. For the basic forms of all being are space and time, and being out of time is just as gross an absurdity as being out of space.” (p 64)

The only modification that the concepts of space-time, which is itself incorporated in Engels' statement, here, long before it was theorised by Einstein, necessitates, is this distinction between our current space-time, i.e. post Big Bang, as against what preceded it, and what follows it. Engels is wrong when he says of our present space-time,

“time, does not in itself consist of real parts” (p 64)

After Einstein, we know that time, as space-time, can be stretched like a fabric, along with space. But, this does not undermine the substance and significance of Engels argument.

“According to Herr Dühring time exists only through change; and change does not exist in and through time. Just because time is different from change, is independent it is possible to measure it by change, for measuring always requires something different what is to be measured. And time in which no recognisable changes occur is very far removed from not being time at all; rather it is pure time, untouched by any foreign admixtures, that is, real time, time as such. In fact, if we want to grasp the idea of time in all its purity, divorced from all foreign and improper admixtures, we are compelled to put aside, as not being relevant here, all the various events which occur simultaneously or successively in time, and in this way to imagine a time in which nothing happens. In this way, we have not let the concept of time be submerged in the general idea of being, but have thereby for the first time arrived at the pure concept of time.” (p 65)

In other words, it is time as an abstraction from any specific manifestation, such as our current space-time, just as Marx, in arriving at the concept of labour, as the essence of value, sets out that it is labour in the abstract, not any specific manifestation of labour, such as wage-labour, slave-labour, or corvee-labour, and so on.

Back To Part 3

Far Right Supporter of AfD, Trump, Farage et al Slaughters Five in Magdeburg

When a car ploughed into a crowd at a German Xmas Market, in Magdeburg, killing five people, including a young child, and injuring more than 200, the media immediately assumed the perpetrator was an Islamic terrorist, though they never openly claimed that to be the case.  The various right-wing populists, were even more overt in their presumptions on social media, and that was amplified when the new came out that the driver was a Saudi doctor.  But, they were all wrong, as Owen Jones has set out in this video.

Yet, even more than a day after the slaughter undertaken by this far-right fanatic, the mainstream media have failed to elaborate these details, despite extensive coverage.  On the day of the attack, Sky News, maintained almost blanket coverage, even though nothing was happening, but, now, when its clear that the attacker was a far right, anti-Muslim extremist, who supports the likes of the AfD, Trump, Musk, Farage and co., they have suddenly reduced their coverage.

Yet, the coverage they and the BBC have provided, has not only failed to set out the political nature of the attacker, as a supporter of the far-right, but has positively hidden and obfuscated those facts, which flatly contradict the line it was pursuing initially.  Now they talk about the aims and beliefs of this right-wing terrorist being "unclear", whilst they attach this to repeated statements about him being a Saudi, and being "unhappy with the treatment of Saudi migrants to Germany", again for the casual listener, suggesting some kind of Islamist pro-migrant basis for his actions, whereas the opposite is the case, as his repeated social media statements attest.  To the extent they have noted that he is an ex-Muslim, they have also worded his views in terms of him being "Islamophobic", which in the welter of other comments and obfuscation, can be misheard, or misunderstood by the general viewer.

If this had actually been an attack by some Islamist terrorist, as they first assumed, then, we would have been treated to an endless stream of his previous social media comments in the most graphic detail.  But, this is now symptomatic of the outright distortions and even lying of the mainstream media, in the West, when it comes to reporting on what is happening in the Middle-East, to an even greater extent than in relation to his biased reporting when it comes to the war in Ukraine and elsewhere, as western imperialism gears up for WWIII.

The extent of that in relation to the biased reporting of the BBC in relation to the Middle East, has again, been set out by Owen Jones.  The existence of a "free press", in western societies, is still a benefit for workers and socialists compared to the lack of such rights in various authoritarian states in Eastern Europe, and in The Middle East.  It means, for now, that we can write about these activities without the threat of a midnight knock from the secret police.  But, a "free press" does not at all mean a truthful press, nor an accountable press, let alone any kind of equality.  The mass media is owned by billionaires as a plaything, but they also own and control the platforms upon which social media exists.  They can control the algorithms to direct readers to or away from certain ideas, or remove and ban content altogether.

In the analogue age socialists used to insist on using the freedom of the press to create our own workers press; we needed to have updated that with the demand for a workers broadcast media in the age of the TV, but, now, in the digital age, we have the opportunity to step over that and demand that we create our own workers digital platforms, our own search engines and so on, with algorithms designed to direct readers to socialist ideas that expose the reality of the exploitation of workers across the globe, of our common interests as a global working-class, and particularly, now, our interest in resisting the steady march to war that imperialism is, once more, engaged upon.

Review of Predictions For 2024 - Prediction 5 – Labour Wins The Election and Attacks Workers

Prediction 5 – Labour Wins The Election and Attacks Workers

The prediction that the Tories would not go until the end of 2024, or into 2025, before calling the election was confirmed. The reasons set out as to why they would not do that were also confirmed, and have been further confirmed, since the election. As the UK debt crisis grows, inflation is ticking up, and growth, is flat to negative, all of which are inseparable from the effects of Brexit, which become starker by the day, and for which the Tories bear responsibility, but one that Blue Labour has now lifted from their shoulders, to bear itself.

In the prediction, I noted,

“The purpose of announcing a March Budget is to front-run a series of proposed tax give-aways, but without actually having to introduce them. They hold out the promise to voters, if they vote Tory, whilst putting Labour on the spot to say whether they would reverse them etc. Labour is already in a bind of its own making when it comes to tax and spending, as its sums don't add up, and the vague “aspirations” and “values” do not fill the gap in hard cash.”

That seemed pretty obvious to everyone, other than Blue Labour, and its Treasury team led by Reeves, who seemed blind to the existence of the £20 billion gap in the Tories budget that I, the IFS and many others wrote about on many occasions. Only after the election, did Blue Labour “discover” this “black hole”. But, as the prediction noted, having boxed themselves in, even to be able to fund their own meagre spending plans, having to, then, cover this additional £20 billion would, inevitably mean attacking workers, which they have done.

Even before they won the election, the nature of Blue Labour, as a reactionary, petty-bourgeois nationalist party, antagonistic to the interests of both workers and large-scale capital was clear. They represented a continuation of the worst aspects of the Tories, just in a different coloured set of clothes, most obviously symbolised by their continued adherence to the idea of Brexit. 

The Tories have, of course, attacked Blue Labour for having “given” inflation-busting pay rises to “the unions”, nearly every word of which is untrue. First of all, the pay rises the government agreed to were those recommended by independent pay review bodies, which the Tories were failing to implement in order to cover their deficits at workers' expense. The actual cost of that, in the longer-term, was greater than paying up, because of the losses due to strikes and so on. Secondly, with a labour shortage, and workers simply leaving those jobs for higher paid jobs, elsewhere, Blue Labour was left with little alternative, as the pay rises simply amounted to rubber-stamping what was happening in reality. Thirdly, the idea that the pay rises were “inflation-busting” was also untrue, because they are multi-year agreements, which do not even, as an average, cover the inflation over the period involved, let alone make up for the fall in real wages of those workers over many previous years. Fourthly, the pay rises were not given to “unions”, but to workers doing those jobs.

So, the idea that this was Blue Labour, in some way, operating on behalf of workers, rather than attacking them, is false, and simply opportunism from the Tories, in line with the traps they had set for them. That Blue Labour allowed those traps to be set, by refusing to acknowledge, prior to the election, the existence of huge deficits, is just its own opportunism, in trying to avoid the question of the need to raise taxes, for fear of losing votes. Of course, the other option to that, was to address the question of Brexit, and the £40 billion cost to the Exchequer from it, but that would have gone to the heart of the petty-bourgeois nationalist nature of Blue Labour itself.

So, instead, we have had the removal of pensioners Winter Fuel Payments, which hits the poorest pensioners hardest, and we have the disgraceful betrayal of WASPI women that Blue Labour lyingly stood side by side with before the election, much as the Liberals did with Student Fees, prior to the 2010 election. We have also had the continuation of the two-child benefit cap. In addition, we have a continued freeze on income tax thresholds, which have fallen in real terms, significantly, as a result of the high levels of inflation over recent years. That means that income tax on workers wages rises as a result of fiscal drag. Yet, its clear that, even now, the sums do not add up, and Blue Labour will have to come back for further tax rises, and/or cuts in spending, which will result in further attacks on workers.

Back To Review of Prediction 4

Michael Roberts' Fundamental Errors, V - The Tendency For The Rate of Profit To Fall Is Not The Cause of Crises - Part 7 of 8

In my book on Marx and Engels' Theories of Crisis, I pointed to the same phenomena in relation to containerisation, for example.

According to this World Bank Report, using data from the McKinsey Report, the productivity in 1965 of dock labour (prior to containerisation) was 1.7 tons per hour. Post containerisation, in 1970, that had risen to 30 tons per hour. The average ship size went from 8.4 GRT to 19.4 GRT, insurance costs fell from £0.24 to £0.04, and capital tied up in transit halved from £2 per ton to £1 per ton. Today, 90% of goods are transported by container, in an integrated road, rail and sea system. As the report suggests, the reduction in cost, and increase in speed, has also had a significant effect in stimulating the circulation of commodity-capital in the process.

This is perhaps one of the most notable increases in transport productivity, but it should not be missed that, alongside it, many more such improvements continually occur, for example, in increasing the size of carriers, improvements in speeds of carriers, development of additional road and other transport networks and so on. Moreover, alongside these physical improvements in transport speed, through technological development come others. For example, the development of common markets, like the EU, across the globe, has speeded up the movement of goods and services by the removal of various legal barriers - an advantage which Britain will lose as a result of Brexit. The introduction of the Schengen Agreement in Europe, means that time spent at border crossings has been slashed. Even, things such as the introduction of satellite navigation systems, has acted to speed up deliveries.

But, changes in production have also acted to speed up circulation. The introduction of flexible specialisation systems, alongside the introduction of Just In Time, means that the suppliers of the large companies operating such systems, have themselves to introduce similar systems, in order to be able to provide the guarantees to customers that they will be able to provide the inputs of the right type, quality, and in the necessary quantity, at short notice, to be delivered precisely when required. This means that the quantity of commodity-capital at any one time lying fallow is reduced.

The development of the Internet, and of electronic payments systems, has further revolutionised the rate of turnover of capital, with a consequent effect on the average annual rate of profit. But, let us ignore all of these factors set out by Marx and Engels, and clearly visible, today, that not only counter any long-run tendency for the rate of profit to fall, but to actually produce the opposite result. Let us assume that, from the point that capitalist production starts to become dominant, as the Industrial Revolution takes off, from around 1760, that this steady grind downwards of the average annual rate of profit was actually taking place, as Roberts claims. Its, then, still not clear why this continual and gradual decline leads to any crisis of overproduction at all, certainly not one of an overproduction of commodities, which Marx and Engels ascribe to quite different factors, as production outstrips the growth of the market, but, also, not of an overproduction of capital either. Certainly, there is no reason apparent as to why this slow gradual, and continuous decline, would, then, lead to crises being periodic, rather than being a permanent state of affairs.

If we take the overproduction of commodities, there is, in fact, no such generalised crisis until 1825, as Marx and Engels describe. It is, then, that the massive rise in production, resulting from the introduction of steam engines, on a large scale, is unable to find sufficient demand, as the market failed to grow in proportion. So, although, by 1825, we would have had more than 60 years, at the very least, considering that capitalist production itself began 400 years earlier, in which the tendential law should have been operating, and leading to the crisis Roberts attributes to it, but no such previous crisis occurred. It was that which led Mill, Say, and Ricardo to deny the possibility of such a generalised crisis of overproduction of commodities. Earlier crises did occur, but as Marx notes, these earlier crises were not crises of overproduction, but financial crises resulting from banks issuing excess bank notes and so on, or as with the South Sea Bubble.

But, given the claims for the operation of the tendential law, and its significance in relation to crises of overproduction of capital, why, then, after 1825, did we not see a continual period of crisis, rather than periodic crises? Marx certainly rejected the catastrophist notions about it reflecting some “historic decline of capitalism” claimed for it by Roberts. If that were the case, then, the decline should have started from the moment that capitalism came into existence, and with it the “tendency”. We would then have a problem certainly explaining the repeated periods of rapid capitalist expansion and accumulation, in the 18th, 19th and 20th centuries, not to mention the huge technological advances that capitalism has continued to bring with it, up to today.

Back To Part 6

Forward To Part 8

Northern Soul Classics - You've Got The Love I Need - The Undisputed Truth

 

Friday Night Disco - The Hawg - Eddie Kirk

 

Anti-Duhring, Part I, Philosophy, V. Natural Philosophy, Time and Space - Part 3 of 6

As described earlier, the concept of space-time, and its beginning with the Big Bang, seems to disprove this, but only if you conclude that there was nothing prior to it, or after the heat death of the universe. Some theories propose that the Big Bang was only one such Big Bang, itself one of an infinite number of such events, perhaps arising like a series of bubbles with each one being spawned from another.

“The infinite series, transferred to the sphere of space, is the line drawn from a definite point in a definite direction to infinity. Is the infinity of space expressed in this even in the remotest way? On the contrary, it requires at least six lines drawn from this one point in three opposite directions, to conceive the dimensions of space; and consequently we would have six of these dimensions. Kant saw this so clearly that he transferred his numerical series only indirectly, in a roundabout way, to the spaciality of the world. Herr Dühring, on the other hand, compels us to accept six dimensions in space, and immediately afterwards can find no words to express his indignation at the mathematical mysticism of Gauss, who would not rest content with the usual three dimensions of space.” (p 61-2)

The same argument applies to time, necessarily, when we incorporate the concept of space-time. A series in relation to time, requires starting from one, but then, implies that time itself had a beginning. Its true that our current space-time may have a beginning and end, but that does not mean that time itself, as an abstraction from it has a beginning or end.

“We can only get past this contradiction if we assume that the one from which we begin to count the series, the point from which we proceed to measure the line is any one in the series, is any one of the points in the line, and that it is a matter of indifference to the line or to the series where we place them.” (p 62)

Engels, then turns to Duhring's treatment of the “counted infinite numerical sequence”. Engels notes that Duhring's argument rests upon the notion that its possible to count back from any positive number to zero. Engels says,

“When he has completed the task of counting from - ∞ (minus infinity) to 0 let him come again. It is certainly obvious that, wherever he begins to count, he will leave behind him an infinite series and, with it, the task which he is to fulfil. Just let him invert his own infinite series 1 + 2 + 3 + 4 ... and try to count from the infinite end back to 1; it would obviously only be attempted by a man who has not the faintest understanding of what the problem is. Still more. When Herr Dühring asserts that the infinite series of lapsed time has been counted, he is thereby asserting that time has a beginning; for otherwise he would not have been able to start “counting” at all. Once again, therefore, he smuggles into the argument, as a premise, the thing that he has to prove.” (p 62-3)

Duhring's concept of a Law of Determinate Number, therefore, contains, within itself, a contradiction in terms, a contradiction that is, itself, absurd.

“The whole deception would be impossible but for the mathematical usage of working with infinite series. Because in mathematics it is necessary to start from determinate, finite terms in order to reach the indeterminate, the infinite, all mathematical series, positive or negative, must start with 1, or they cannot be used for calculation. But the logical need of the mathematician is far from being a compulsory law for the real world.” (p 63)

Back To Part 2

Forward To Part 4

Review of Predictions For 2024 - Prediction 4 – A Range of New Commodities and Services Flood Into The Market

Prediction 4 – A Range of New Commodities and Services Flood Into The Market

It was of a trickle than a flood, but the indications of the nature of these new goods and services has become clear. As I wrote several years ago, and reiterated in the prediction, a central core of those new goods and services is going to be personalisation. That is the case whether it is in relation to health and social care, or more general personal care. Health care is the most obvious.

The wearable tech is now ubiquitous, in all its variety. Once upon a time, if you saw someone walking down the street talking loudly to themselves, it was an indication they had some mental problem, and probably, to keep your distance. Today, its quite normal, as people talk using hands free communication. Other wearable tech monitors vital signs such as heart rate, blood pressure, blood sugar and so on, not only for the purpose of ensuring that known health problems are monitored, but even just to facilitate the achievement of fitness goals, such as number of steps per day, amount of activity, or conversely, the amount of good sleep obtained. These products and related services are set to expand massively, especially as they become better and more reliable, and are linked to healthcare providers, and to the use of AI, and big data to monitor and predict health of the given individual. One thing Blue Labour has right, if only rhetorically, is looking to such technology as a means of reducing health costs, via a shift to prevention rather than expensive cures and interventions. Whether they will back that up with actual investment, and infrastructure, rather than simply using it as cover for cutting existing healthcare, or privatisation is another matter.

In homes the use of electronic assistants such as Alexa have become more common, with the potential for a much greater extension of their use, but also with the devices themselves controlling a far greater range of personalised services, connecting to health providers, security and so on. One development I have thought might have become more widespread, and its only a matter of time, is a much greater expansion of the number of domestic robots. It is a typical example of how technology developed during an Innovation Cycle, to deal with labour shortages and an overproduction of capital, creates industrial products, which in th later phases of the cycle, become adapted for use as consumer products.

One area that is expanding rapidly, in terms of such range, is that of genetic technologies. It seems like nearly every day, and certainly every week, a new MRNA based vaccine is announced for the treatment of some specific cancer. Again, these treatments are an example of a personalisation, as they are based upon the specific DNA of the cancer cells affecting the given individual. In addition, there are similar genetic technologies being rolled out that restore sight and hearing. And, the growing area of epigenetics, is resulting in a range of technologies to slow down, or even reverse the ageing process of cells.

Indeed, the meme for next year, I believe is going to be “rejuvenation”, and I will be writing about that, in the new year.

Back To Review of Prediction 3

Forward To Review of Prediction 5

Blue Labour's False Narrative On Housing

Blue Labour have said that they intend to build 1.5 million new homes over the life of this parliament. Of course, by that, they do not mean that they, personally, are going to build these houses. Starmer, Reeves and Rayner are not going to become brickies, or even hod carriers. Nor, even, do they mean that they are going to take direct responsibility for the state, either at national or local level, building those houses, as governments did in the past, for example, in the 1930's and 1950's, when the state directly created New Towns, Garden Cities, and local councils built large numbers of council houses. No what they mean is that they are going to set targets for Councils to achieve of houses, which, again, those councils will not build, but that somehow they must ensure private builders produce, in their areas.

As with all of Blue Labour's ideology, and policies this is fraudulent from start to finish. It immediately gives them a scapegoat for when this impossible task is not fulfilled. And, the task is impossible, as, already, the fact that Britain does not have the required number of skilled workers to build those homes illustrates. Of course, one reason it does not have those skilled workers is Brexit, which has cut Britain adrift from Europe, costing it £40 billion a year, in lost taxes, and around 4% of its GDP, but also, denying it the access to the workers required, which was one of the many benefits of free movement. But, even if it had the workers to build the houses, and to produce all of the materials, and so on required in their construction, the task is impossible, given the basis upon which it is being put forward.

The only time that Britain has built large numbers of houses, on the scale being suggested, is in those previous examples of where the state itself committed to building them, and that building was of large numbers of council houses for people to rent. The state was able to build those houses to rent, at affordable rents, because the state itself, bought the land, or simply acquired it via compulsory purchase orders, at realistic land prices, as against the astronomically inflated land prices that exist today. In the post-war period, for example, land accounted for 10% of the cost of building a house, whereas, today, it accounts for around 70%. The reason for that, is huge levels of surplus profit (rent) available to house builders, who can sell new houses at massively inflated prices, equal to those of existing houses, whose prices have been sent skyrocketing as a result of five or six decades of government induced speculation.

Blue Labour, like their Tory predecessors seem to think that prices, whether for houses or any other commodity, are simply a function of supply and demand. So, if prices are “high”, whatever that might mean, it is because supply has not risen to match the level of demand. All that is required, therefore, they believe, is to ensure that supply is increased. But, they never ask the question of why it is that supply has not increased, or if they do, it is only ever in the context that there is some monopoly preventing it, requiring the intervention of some state bureaucracy, such as the Competition Authority, or regulator, to ensure greater competition, or else, as now, with Blue Labour and housing, the problem is seen as other frictions such as a restrictive planning system.

What they never consider is that, in a capitalist economy, supply is provided by firms that seek to make profits, and whether they make those profits or not depends upon whether they can sell all of their production at sufficiently high prices. If producing more houses would simply result in unsold houses at such a price, firms would have to reduce the prices of those houses, and so not make those profits, and might even make losses. So, they are not going to do that. Its one reason that large builders sell houses to buyers “off-plan”, and only undertake the building of the houses, when they have obtained sufficient customers for them.

Now, it might be thought that, given the astronomical level of house prices, and given what was said earlier about “huge levels of surplus profit” available to house builders, that should not pose a problem. But, it does, because its necessary to understand that the price of houses is not determined by the cost of building new houses, but by the prices of existing houses. New houses account for only around 7% of house purchases and sales, in the UK. The rest is the purchase and sale of existing houses, as people move from one home to another. In fact, this is pretty identical to what happens on the stock and bond markets too. Very few of the shares bought and sold on stock markets are new shares. Again the figure is around 7%. The money flowing into the purchase of shares, as with bonds, goes, not to finance the expansion of capital via investment, but goes almost exclusively into the pockets of other speculators.

Speculators can, and do, drive up the prices of shares not because of any demand for shares driven by a potential for additional profits to boost dividends, but simply as a result of a speculative frenzy. When the state provides a safety net for such speculation, as it has done, since 1987, by providing additional liquidity from central banks, whenever, financial markets take a tumble, then, as has been seen, those prices can reach astronomical levels, unrelated to any increase in profits. The same is true with houses. If A and B own assets, be it a house, or a portfolio of shares, or bonds, then, even without any additional participants, the price of their respective assets can be driven up by both of them simply engaging in such speculation. A can offer to buy B's assets at double their initial price, so long as B offers to buy A's assets at an equally inflated price. They simply exchange between them their assets at these inflated paper prices.

That is what has happened with houses. From the early 1980's, Thatcher's government encouraged speculation of all sorts, including housing speculation. The introduction of a discounted right to buy of council houses was part of that process. Council houses provided a degree of security of tenure that also put a constraint on the rents that private landlords could charge in competition with them. By offering council tenants huge discounts of up to 60% to buy their home, the Tories created a huge incentive for such speculation. In fact, many of those tenants that undertook it came a cropper shortly after, because, as interest rates began to rise, they found they could not pay the mortgages they had taken on to buy the houses. But, that simply enabled other speculators to then buy up those houses from them, and turn them into privately rented properties in conditions where speculation was driving prices higher.

For those former tenants who didn't suffer that fate, when they came to sell their former house either because they could move to another house, or because they had died, it was again speculators that were able to swoop in, and buy them up. Around 90% of the council houses sold under Right To Buy, are now owned by private landlords. Again, as with the money that flows into stock markets that simply goes into the pockets of other speculators, rather than financing actual investment in capital, the money received by councils for the sale of their housing stock did not go into building replacement houses, and, indeed, the Tories placed restrictions on them being able to do so. So, the demand for housing was ramped up, whilst the supply of housing was curtailed. Prices rose fuelling even greater speculation, which drive up speculative demand even more.

Yet, as I have set out previously, the narrative that house prices have risen, and are high, because supply has not risen adequately is itself false. There are 50% more homes per head of population, today, than there was in the 1970's, before the huge rise in property prices started. The problem has not been the increase in supply of houses, but the creation of a huge speculative demand for houses. Either speculators have sought to buy them to take advantage of more or less guaranteed capital gains, underwritten both by central bank intervention, and by government policies to goose demand further, or else, individuals simply needing somewhere to live, have been drawn into a fear of missing out, in which they would pay whatever exorbitant prices were current, on the basis that tomorrow those prices would be even higher. That was encouraged by exceedingly low, and artificially sustained mortgage rates.

Again, a reflection of that is the huge shift in the nature of households, in which single person households have doubled, since the 1970's, from around 21% to 41%. It is this speculative frenzy, made possible by central bank and government policy that has artificially inflated demand for houses, and pushed up prices. It is the prices of these existing houses that determine also, the price of new houses, and those prices are way above the costs of production, which is the basis of the huge surplus profits for builders. However, what distinguishes house building, as with agriculture, or primary product production, from other forms of production, is that the landowner is able to withhold the use of their land, unless they have this surplus profit handed over to them as rent. In the case of house building that rent may take the form of actual rent, as manifest in the sale of houses as leasehold rather than freehold, or else takes the form of a capitalised rent, manifest in the price of the land, for freehold properties.

So, as Ricardo and Marx set out, in relation to agricultural rent, the fact of these high prices, and profits does not lead to a corresponding increase in production and supply, because the landowner simply appropriates the surplus profit as rent (price of the land), reducing the builder's profit down only to the average rate of profit. That the landowner might themselves be a large builder does not change that, because they had to buy the land from an existing land owner to begin with, at these inflated prices. As they see house and land prices continuing to rise, underpinned by state and government policies, they have no reason to build more houses than they know they can sell profitably, because, in addition to protecting those profits, they know they can also make capital gains on the land they own, by sitting on it. Only if they came to believe that land prices were going to fall, causing them to make capital losses, would that change, but there is nothing in Blue Labour's narrative, nor in its policy that would cause them to believe that. Quite the contrary.

Blue Labour's narrative continues to be that of the Tories of the need to make home ownership affordable by having low mortgage rates. But, low mortgage rates do not make houses more affordable. They simply act to push up house prices, and, again, to then push up land prices. In pushing up land prices, they push up that cost of building new homes, which means that the price those homes sell at, in order to produce an average profit for the builder is also raised. So, it is no use Blue Labour proclaiming that it is going to build 1.5 million houses, and that all that is standing in the way is NIMBYISM, and a restrictive planning system, because its own policies are acting to limit the number of houses that builders can sell at prices that will produce the average profit.

If they want to achieve their supposed target, they need to reduce land prices, and to reduce land prices, higher interest rates are required, or else, as with the post-war government, they need to compulsorily purchase building land at much lower than current prices. Alternatively, they could buy up land in the Green Belt, at agricultural land prices, and, then, redesignate it as building land. Again, as with the post-war government, the simplest route from there is to build a large number of council houses to rent, which again has to be coupled with scrapping the Right to Buy. That would provide decent homes for large numbers of people who can't afford to buy, and who are currently being ripped off by private landlords. It would, act to reduce those private rents too, and encourage many of those landlords to sell up, which would, in turn act to reduce existing house prices, as that stock of privately owned, rental properties came on to the market. Those falling house prices would act to cut land prices, and so, would make the cost of building new houses much lower.

But, Blue Labour, like the Tories continues to be in thrall to the idea of inflated asset prices, and so long as that continues the idea of increasing housing supply will remain a delusion.

Michael Roberts' Fundamental Errors, V - The Tendency For The Rate of Profit To Fall Is Not The Cause of Crises - Part 6 of 8

So, its possible to argue that, in this first flush of capitalist production, capital, slowly, spreads from these high organic composition/low profit spheres, into other spheres of production, where capital does not currently exist, and, as it does so, it moves into spheres of production where the rate of profit is higher, bringing an increase in the general rate of profit itself. Indeed, that continues to be the case, as Marx sets out in Capital III, Chapter 14.

“...new lines of production are opened up, especially for the production of luxuries, and it is these that take as their basis this relative over-population, often set free in other lines of production through the increase of their constant capital. These new lines start out predominantly with living labour, and by degrees pass through the same evolution as the other lines of production. In either case the variable capital makes up a considerable portion of the total capital and wages are below the average, so that both the rate and mass of surplus-value in these lines of production are unusually high. Since the general rate of profit is formed by levelling the rates of profit in the individual branches of production, however, the same factor which brings about the tendency in the rate of profit to fall, again produces a counterbalance to this tendency and more or less paralyses its effects.”

In fact, as I've set out, elsewhere, it need not be the case that in these new spheres, wages are low. Precisely because many of these new spheres of production, and services are high-tech/high value spheres, they employ relatively small numbers of highly paid/highly skilled workers, whose labour is itself complex, i.e. one hour of their labour is equivalent to tens, hundreds, or even thousands of hours of simple labour. Many of these spheres are those which, in Marx's time, were insignificant. Think of the billions involved in the media industry, in entertainment, including professional sports, the computer games industry and so on.

In addition to these new spheres of production, with low organic compositions and high rates of profit, which act to raise the general rate of profit, there is also, the investment of capital overseas, in economies where low levels of economic development, and capital accumulation, mean low levels of organic composition, and so higher than average rates of profit, which also acts, thereby, to raise the global average rate of profit. Moreover, as I have set out elsewhere, when Marx talks about the general rate of profit, he means the average annual rate of profit, and that annual rate of profit is determined not just by the organic composition of capital, but also, by the rate of turnover of capital. That expansion of global trade, involved the introduction of ever increasing amounts of technology to transport and communications, which speeds up the rate of turnover, and so, also, the average rate of profit. As Engels put it,

“[The two large centres of the crises of 1825-57, America and India, have been brought from 70 to 90 per cent nearer to the European industrial countries by this revolution in transport, and have thereby lost a good deal of their explosive nature. The period of turnover of the total world commerce has been reduced to the same extent, and the efficacy of the capital involved in it has been more than doubled or trebled. It goes without saying that this has not been without effect on the rate of profit.]”

(Capital III, Chapter 4)

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Forward To Part 7

Blue Labour Political Incompetence Stirs Up A WASPI's Nest

In the latest instalment of the political incompetence of Blue Labour, having withdrawn the Pensioner's Winter Fuel Allowance, they have now again hit the working-class, by refusing to compensate WASPI women, for having lost out as a result of changes made to their pension age. The average payment would have been around £30,000, being the amount by which they have previously lost out. Who is now likely to immediately seize that gift horse presented to him? Nigel Farage. Expect a statement from him in the next 24 to 48 hours, after he gets back from hobnobbing with his billionaire friend Elon Musk.

Of course, if they have any sense, the Liberals, Greens, and others will seize on this opportunity to press home the advantage, at a time when the disastrous policies being pursued by Blue Labour has reduced the party to the ranks of the also rans, according to the latest polls. The total cost of the compensation would be a one-off £10 billion, so, besides the fundamental issue of fairness involved in compensating these women, its not as if the cost of doing so would break the bank. At a time when the rest of Blue Labour's policies have sent the economy into recession, not to mention the £40 billion a year cost of their continued pursuit of the nightmare that is Brexit is inflicting on the economy, a £10 billion boost into the households of these pensioners, especially had they organised it to occur before Christmas, would not only have removed the bitter taste from their Winter Fuel fiasco, but would have seen much of that money fed straight back into the economy, in immediate spending, boosting aggregate demand.

Much of that spending (about 20% of it, in fact), would have gone back into government coffers in VAT receipts, and another large part would have gone back to the government in the form of corporation and income taxes. Rather like the failure to immediately spend some money by giving Councils up front funding to fix the potholes that are causing the country's road system to collapse, the supposed economic genius, Rachel Reeves, doesn't seem to be able to even score in an open goal, and pick the low hanging fruit in front of her eyes. Why?

James O'Brien asked a similar question in relation to Brexit, and basically acted as apologist for Starmer's government by saying he didn't know what else he could do, given that any concession given to the EU would cause the right-wing media to go into full furious rants about treason. 

But, they will do that anyway, and so what if they do? O'Brien claims that Starmer does not have “front page o phobia”, so, in that case, why would he care if they rant even more? The real reason that Starmer can't say anything about the catastrophe of Brexit is that for the last 5 years, he has himself embraced it! Long before becoming Prime Minister, Starmer was selling the bullshit about the possibility of negotiating a beneficial “Labour Brexit”. Starmer has stolen all the clothes of the Tories, not just on Brexit, but in his own full English jingoism, flag-waving, xenophobia, immigrant bashing and so on.

Starmer gambled that core, progressive Labour voters would vote for him anyway, despite all of the reactionary, nationalist, Tory agenda, and so he only had his eyes on the mirage of winning over Brexit voters in the “Red Wall”, most of whom were never Labour voters to begin with, and few of whom would be won over by his late conversion. The General Election proved that as those reactionary Brexit voters, deserted the Tories, not for Blue Labour, but Reform, and in the meantime, Starmer's reactionary agenda drove away progressive Labour voters in their tens of thousands to the Liberals, Greens, Independents and others, a tidal wave that is set to grow even more dramatically in the coming months.

Anti-Duhring, Part I, Philosophy, V. Natural Philosophy, Time and Space - Part 2 of 6

The second conclusion set out by Duhring from this is the “Law of Determinate Number”. He says,

“the accumulation of identities of any actual species of independent things is only conceivable as forming a determinate number”. Not only must the number of celestial bodies existing at any point of time be in itself determinate, the total number of all the tiniest independent particles of matter existing in the universe must also be determinate. This latter requisite is the real reason why no combination can be conceived without atoms. Every actual state of being divided invariably has finite determination, and must do so if the contradiction of the counted uncountable is to be avoided. For the same reason, not only must the number of the earth's revolutions round the sun up to the present time be finite though unstatable, but all periodical processes of nature must have had some beginning, and all differentiation, all the successive manifold elements of nature must have their roots in one self-identical state. This state may have existed from eternity without contradiction; but even this idea would be excluded if time in itself were composed of real parts and instead of being merely arbitrarily divided up by our minds through the positioning of possibilities.” (p 59)

To give Duhring his due, this is set out by him 50 years before Einstein described space-time in terms of a fabric of space, and nearly a century before the Big Bang theory similarly posited a counting back to an initial beginning of that space-time. He continues,

“The case is quite different with the real, and intrinsically differentiated content of time; this real filling of time with differentiable facts of a certain kind and the forms of being of this sphere are countable precisely because of their differentiation. If we imagine a state in which no change occurs and which in its self-identity offers no differences whatever in the order of succession, the more specialised idea of time is transformed into the more general idea of being. What the accumulation of empty duration would mean is quite unimaginable.” (p 59)

What neither Duhring nor Engels could conceive, at this point, is the role of Quantum Mechanics, and the reality that what appears as a steady state, at the macro-level, is a seething flux of instability at a sub-atomic level. Even Einstein could not accept the existence of uncertainty based on probability at the quantum level, famously saying, “God does not play dice with the Universe.”, and yet not only has Quantum Theory been proven over the last century, without it, almost the whole of modern electronics would be impossible without it. We now have the development of the first Quantum Computers, in which the bits rather than being either zeros or ones, are both simultaneously.

But, as Engels notes, although Duhring takes credit for these discoveries that “deepened”, and “sharpened” the understanding of space and time, the ideas had, in fact, been taken, line for line, from the work of Kant, in 1781, in The Critique of Pure Reason. Einstein is usually credited with overturning elements of Newtonian Physics, in his Theory of Relativity, for example, in relation to gravity, but Kant had begun his career by resolving the problems involved in Newton's steady-state model, by proposing the idea of an evolution of the Universe from an initial impulse, into the development of stars and galaxies etc.

“So that Herr Dühring's fame rests solely on his having tacked on the name — Law of Determinate Number — to an idea expressed by Kant, and on having made the discovery that there was once a time when as yet there was no time, though there was a world.” (p 60-61)

Kant, however, also set out, on the same basis, the opposite conclusion, that there is no beginning or end to space and time,

“and it is precisely in this that he finds the antinomy, the insoluble contradiction, that the one is just as demonstrable as the other. People of smaller calibre might perhaps fuel a little doubt here on account of “a Kant” having found an insoluble difficulty. But not so our valiant fabricator of “fundamentally original conclusions and views”; he cheerfully copies down as much of Kant’s antinomy as suits his purpose, and throws the rest aside.” (p 61)

The point, here, is not whether the one conclusion of Kant was right and the other wrong, as subsequent observation of the Universe has confirmed, but that no conclusion could be demonstrated true or false, purely on the basis of pure reason. It required observation of the real world to make that determination.

“The problem itself has a very simple solution. Eternity in time, infinity in space, signify from the start, and in the simple meaning of the words, that there is no end in any direction neither forwards nor backwards, upwards or downwards, to the right or to the left. This infinity is something quite different from that of an infinite series, for the latter always starts from one, with a first term. The inapplicability of this idea of series to our object becomes clear directly we apply it to space.” (p 61)

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Review of Predictions For 2024 - Prediction 3 – E.V.'s Reach An Inflection Point

Prediction 3 – E.V.'s Reach An Inflection Point

That seems to have been vindicated in China, where more than 50% of new car sales, are of EV's, compared to just 6.3% in 2020. China accounts for around 60% of the EV's on the road, across the globe. It also accounts for about 60% of all existing charging stations, showing the link between the provision of infrastructure and adoption. It is that scale that has allowed China to massively reduce the cost of EV production, and of the provision of the required infrastructure, as against the protectionist claims of the US, and EU about dumping. The reason the US and EU are not competitive, in EV's, as against China, is simply that they have held back their own development of EV's, partly as a consequence of their measures of fiscal austerity that prevented the necessary spending on infrastructure, first for a standardised charging network, and, secondly, in investment in the electricity production and delivery that needs to stand behind it.

The protectionist tariffs being imposed in the US and EU against Chinese EV's, will only mean that their own development of EV production, and of the necessary charging infrastructure will be delayed further, leading them to fall even further behind, and lose even more competitiveness against China, as has always happened with such protectionist measures. Despite that, in the first half of 2024, global EV sales rose by 22%, compared to just a 3.7% growth of car sales in total. As noted in the prediction, many people are now able to use an EV for their daily requirements, charging it at home, or at work. The latter is also the basis for the growth in the commercial EV market. This continual increase in electricity demand, will, force electricity suppliers to increase their own production, and the state will have to ensure adequate infrastructure in the grid, or face increasing blackouts and brown outs.

The fact that the US and EU have chosen to hide behind an increasing protectionist wall, will not prevent China expanding its own production, and so increasing its technological and competitive advantage. Nor will it, on that basis, prevent it from, thereby, dominating the global market in Asia, Africa, and Latin America, where it has already been increasing its investments and trade. Indeed, the vehicles, and other manufactures, it would have sent to the US and EU, will, now, simply be diverted to these other expanding markets, whilst the US and EU consumers will face higher costs, which they will have to compensate via higher wages, squeezing US and EU profits as a result.

Back To Review of Prediction 2

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Michael Roberts' Fundamental Errors, V - The Tendency For The Rate of Profit To Fall Is Not The Cause of Crises - Part 5 of 8

How could it be that a tendency for the rate of profit to fall that is both so small, and visible, if at all, only over long periods, measurable only against the average in one cycle as against another, and which is, by definition, thereby, gradual be the cause of periodic crises of overproduction, either of commodities or of capital? It is inconceivable. The law explains why, at any one time, and as part, itself, of a process, capital migrates from low profit spheres to high profit spheres, but not that it migrates out of production in aggregate.

Even the process of migration between spheres, Marx explains, is usually not a question of it being physically reduced in the one sphere, and moving to another, but simply of it accumulating faster in one sphere rather than another, so that as the economy, and capital accumulation increases, a greater proportion is accumulated in the high profit spheres, and and a smaller proportion in the low profit spheres. By this means, supply of commodities in the former rises relative to the increased demand in that sphere, whereas, in the latter, supply falls relative to the rise in demand, so that prices and the rate of profit, in the former, fall, whilst, in the latter, they rise.

In Theories of Surplus Value, Chapter 17, Marx does not equate a crisis of overproduction of commodities with a crisis of overproduction of capital. Although the latter necessitates the former, he sets out why the former does not necessarily require the latter. As already noted, a crisis of overproduction of commodities is inherently possible in all commodity production and exchange, whether based on capital or not. Indeed, independent commodity producers, frequently, throughout history, overproduced commodities, and went out of business. They became debt slaves, serfs or paupers.

It was precisely the fact that such overproduction could arise, that enabled capitalist production to, eventually, take hold, because, once markets were of a sufficient size, in the towns of the Middle Ages, so that larger-scale production becomes efficient, it means that these failed producers can be employed by their more successful neighbours, or by merchant capitalists, who become industrial capitalists. The means of production become capital, and the failed producers become wage-labourers, employed by it.

Its for that reason, as Engels sets out in his Supplement to Capital III, on The Law of Value, that it is actually in those spheres of production where the organic composition of capital is high – and so the rate of profit is low – that capitalist production first occurs. It is in those spheres, where the commodity producer must be able to sell, and, thereby, reproduce the value of the constant capital that any failure to sell all of their output at its value, most obviously leads to failure. At a time when most such producers, still had access to a small plot of land to meet their need for food, they could always reproduce their own labour-power, but that was not the case with expensive materials and so on. So, any such failure, means that they would become prey to the merchant capitalist, or to a more efficient neighbour, able to provide those means of production, on condition of them becoming a wage-labourer, and providing an amount of free labour.

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Forward To Part 6

Anti-Duhring, Part I, Philosophy, V. Natural Philosophy, Time and Space - Part 1 of 6

Part I, Philosophy, V. Natural Philosophy, Time and Space

Engels quotes Duhring's dissatisfaction with his predecessors, also, in the realm of natural philosophy, such as Schelling, whose adherence to the concept of the “Absolute”, involved the “hoodwinking” of the public. Duhring says,

“Fatigue has saved us from these “deformities”; but up to now it has only given place to “instability”; “and as far as the public at large is concerned, it is well known that the disappearance of a great charlatan is often only the opportunity for a lesser but commercially more experienced successor to put out the products of his predecessor under another signboard, again” . Natural scientists themselves feel little “inclination to make excursions into the realm of world-encompassing ideas”, and consequently jump to “incoherent and hasty conclusions” in the theoretical sphere. (p 57-8)

The phrase about one charlatan being replaced by another is, of course, one we can all recognise, especially in the realm of bourgeois-democratic politics, where the same ideas are endlessly recycled, but only with the difference that, from time to time, they appear in a red and, at other times, a blue packaging. Engels also suggests that Duhring, himself, is just another such charlatan.

Engels begins with a critique of Duhring's argument in relation to the concept of infinity. Simply stated, Engels notes that Duhring does not distinguish between infinity as it relates to numbers, as against infinity as it relates to reality, i.e. space and time, or, as we would, now, say, after Einstein, space-time. Of course, there is some debate, today, as to whether, any such distinction exists, i.e. whether mathematics is the underlying basis of the real world, rather than just a means of conceptualising, and modelling it. That is often posed as asking whether mathematics is created or discovered? In fact, this rider, following Einstein, introduces a modification, required to Engels' argument, specifically in relation to The Big Bang theory, developed by Hawking and others, as against the steady state theory of Hoyle.

Duhring's argument, and this is also, the basis of the argument by Hawking, is that, if you take any infinite, positive number. It is possible to count back from it to zero. In which case, this zero is a starting point. But the concept of infinity implies no starting or end point. In relation to the Big Bang theory, Hawking et al argued that, if the universe was expanding, what is called “inflation”, and, from measurement of galaxies, it was known it was, then, it must, at some point in the past, have been contracted and compressed into an infinitely small, and dense point, where space-time did not exist, because both space and time come into existence simultaneously.

At the time Engels was writing, obviously, this was not known, and so Engels argument is based on the idea that time has no beginning or end, and, likewise, space extends, indefinitely. But, this, really, only requires a modification of Engels' argument. Einstein's theory of relativity, and concept of space-time, is now pretty well established and confirmed by experiment and observation. Similarly, the concept of the Big Bang, and inflation is well established, and confirmed by the identification of the residual cosmic background microwave radiation from it. However, this still leaves the question of what existed before the Big Bang?

In fact, according to Roger Penrose, the evidence from the cosmic background radiation, now indicates that the inflation occurred prior to what is considered as the Big Bang.

Obviously, however concentrated, this singularity is still contained within something, and, it did not simply spring into existence from nothing. Current theories to explain that go beyond Einstein's theory into the realm of Quantum Mechanics, to the notion of multiple universes and realities, etc. For example, we do see some exotic particles that appear to simply pop into and out of existence from nowhere, but theories suggest that this is a function of their moving between different dimensions and so on.

When we talk about history, what is meant is the history of humanity from the point of its civilisation. Yet, humans existed prior to civilisation, just as other animals existed prior to humans; the Earth existed prior to plants and animals, and so on. All of these had their own “history”, their own reality, and process of development. To say that our current universe, and its space-time had a beginning, in the Big Bang, and an end in its heat death, is not the same thing as saying that there is nothing before or after it, or beyond it.

“The first conclusion drawn from this conception of infinity is that the chain of causes and effects in the world must at some time have had a beginning:

“an infinite number of causes which should have already fallen into line one behind the other is inconceivable, just because it presupposes that the uncountable has been counted”

And thus a final cause is proved.” (p 58-9)

Back To IV World Schematism

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Northern Soul Classics - You Really Made It Good To Me - Ty Karim

 

Friday Night Disco - Pride - Earth, Wind and Fire

 

Review of Predictions For 2024 - Prediction 2 – Asset Prices Continue to Fall In Real Terms

Prediction 2 – Asset Prices Continue to Fall In Real Terms

As inflation has fallen during the year, its affect on real asset prices has been reduced. Property prices have gone through phases of rises and falls, in response to every movement of bond yields, and, thereby, of mortgage rates. As noted, at the end of 2023, there was a lot of anticipation of central banks cutting rates, which led to rising asset prices, but, as also predicted, those anticipated cuts by central banks repeatedly failed to materialise, and the paths of future cuts were subsequently postponed. Consequently, bond prices fell, and yields rose, until mid year, when the Federal Reserve began to cut its rates more aggressively, and the ECB, despite more persistent inflation, began to follow suit. That caused bond prices to rise, periodically reversed, as continued strong payrolls numbers and growth contradicted the idea that an economic slowdown was a requirement for lower inflation. But, the opposite has also been seen. That is, having fallen significantly, as a result of a relative tightening of liquidity (QT), inflation plateaued and has shown signs of rising once more, despite a moderation in the pace of economic growth.

Growth has slowed from the frenetic activity that followed the lifting of lockdowns, and which totally disproved all of the catastrophist predictions of a “post Covid slump”, but the growth in the US, and even a Europe hamstrung by the effects of its boycotts of Russian energy, and return of policies of fiscal austerity, has still seen a continued rise in employment. Relative labour shortages have seen firms compete for labour, driving wages higher, and, in certain sections of specific shortage, considerably higher.

At first that took the form of a rise in the Quits Rate, as, particularly, unskilled workers were able to move from one unskilled job to another that paid more. The average pay increase from moving jobs has been around 14%, as against average private sector pay rises of around 7%. Subsequently, it has resulted in a higher level of unionisation, and strikes by workers for higher pay, pretty much identical to the processes set out by Marx in Value, Price and Profit.

As inflation fell, in conditions of rising nominal wages, that meant real wage increases. Together with the fact that rising employment meant that individual workers had higher incomes simply as a result of working additional hours, and households had higher incomes as a result of more of their members being in employment, even with only modest real wage increases, this provides a basis for increased household spending.

It should be noted, here, that, when looking at the aggregate data for earnings growth, the worst affected by this have been not wage-workers, but that large body of the petty-bourgeoisie, of the self-employed. That is the start of a return to the normal conditions over the last 200 years, in which that petty-bourgeoisie sees its already miserable condition squeezed further, as, on the one hand, it cannot compete with larger capitals, and, on the other, cannot simply benefit from higher wages, in conditions where labour is in relative short supply. Indeed, to the extent it employs the odd additional worker, itself, it is forced to sweat them even more, which is why it has been so keen to pursue the removal of protections for workers, manifest in its pursuit of Brexit, and parties such as the Trumpists, Tories, Le Pen and so on.

Truss was forced from government by the global ruling class, as it inevitably attacked the Pound, and sent UK borrowing costs soaring, in response to her 2022, mini-Budget, designed to pursue that petty-bourgeois agenda. Despite that providing an easy political target for Blue Labour, the reality was that, after Truss's removal, the effects on the UK economy quickly dissipated, but that simply restored the underlying trend of rising interest rates that preceded it, so that, by the time Blue Labour won the election, UK bond yields were back to the level of that Truss period.

Now, we have Blue Labour announcing further spending, and borrowing to cover it, rather than raising taxes, and, inevitably, borrowing costs have risen again, though not as sharply as with the Truss mini-budget. To bridge the gap, Blue Labour is, now, proposing to effectively steal public sector workers pensions, in order to use them for high risk investments to fund its utopian plans for economic growth.

The plans borrow a lot from the ideas that underpinned the development of Mortgage Backed Securities, in conditions where, defaults on mortgages brought down the supposed safe components of such securities, and led into the global financial crash of 2008. Of course workers are not to be given any control over these proposed mega funds (which in themselves would be a sensible development) and its unlikely that the government will provide any worthwhile guarantee to underwrite any losses the funds sustain from the required higher risk investments they are being asked to finance. Workers should resist any such development, or themselves risk seeing their future pension payments again going up in smoke, as the next financial crisis wipes them out.

Continued wage growth during the year, therefore, led central banks to ensure that liquidity was sufficient to enable firms to raise prices, to compensate to avoid profits being squeezed, and so the basis of a return of inflation has been put in place. Higher household incomes, together with periodic falls in mortgage rates, as bond yields fell in anticipation of central bank rate cuts, put a floor under property prices, but they have, on average, not exceeded the rise in consumer prices, or wages, meaning a fall in real terms.

House prices are more sticky than land prices, for the simple reason that people buy them as somewhere to live. They have been encouraged to, also, see them, wrongly, as “an investment”, i.e. as the source of a potential capital gain, or at least, in terms of a fear of missing out, not making a capital loss, by not buying when prices were lower. But, fundamentally, people need houses as somewhere to live. If mortgage rates rise, potential buyers see the amount they can pay for a house, decline, but potential sellers need not sell to them at the lower price. They can simply sit on their existing house, although that, also, then, frustrates their own desire to move, and depresses demand for houses. Large builders, can simply sit on building land, in anticipation of a future recovery in prices. Small builders, however, who build speculatively, in the hope of turning their capital over quickly, do have to sell, for that very reason, and so, are more affected by the lower bids that potential buyers submit.

Land prices, as I have set out elsewhere, are determined by rents and by interest rates, i.e. by the process of capitalisation. Higher rates of interest cause land prices to fall, as with any other revenue producing asset. But, that can be countered by rising rents, and part of the determination of rent, is also now, any surplus profit that a builder can obtain from inflated house prices/property prices.

If the cost of production of a new house, excluding the land, is £60,000, and the average industrial rate of profit is 33.3%, average profit is, then, £20,000, giving a price of production of £80,000. However, if the current market price of equivalent existing houses is £300,000, the builder will, also, sell their new houses for that price, obtaining a surplus profit (rent) of £220,000, and the owner of the land, will demand this amount as rent, which is reflected in the land price. It means that the cost of land is then around 70% of the cost of the house (which it currently is in the UK), as against around 10%, in the post-war period. It is why key to reducing house prices, is reducing building land prices, and key to reducing building land prices is bursting the bubble in existing house prices, which requires higher interest rates, and removal of existing subsidies and schemes to artificially boost demand for houses.

The slow grind upwards of the long wave expansion, despite the attempts by the state and central banks to suppress it, continues to push interest rates higher, as the demand for capital rises relative to supply, and that means that slowly that bubble in all asset prices, including house prices, will be deflated. Its easy to see why central banks, as the centralisation of the interests of all other banks and financial institutions, are keen to avoid that erupting again in a property price crash such as that which occurred in 1990, in Japan, where property prices crashed by up to 90%, or in Britain, where house prices crashed by 40%, or as in 2007, and after, where house prices crashed in the US, and parts of Europe by around 60%, prior to intervention by the state. In the last couple of decades, commercial banks have focused the vast majority of their lending on mortgages and loans linked to property. A crash in property prices, as in 2008, would, again, expose the fantasy of many of their balance sheets, just as happened in 2023, when higher interest rates had that effect in the US.

We have now had several months of central banks cutting policy rates, as inflation has fallen, and yet, in the US, bond yields are again, now rising once more, with the 10 Year Bond sitting at around 4.30% and rising, as also, the period of inverted yield curves seems to have ended, without any sign of the recession that such events are said to predict.

The fact that yields are rising, whilst inflation is falling, means that real yields are rising, and are doing so, despite, also, central banks reducing their policy rates, and again, slowing the process of quantitative tightening. Stock markets have risen, partly because hot money that flows out of bonds, is most easily transferred by financial institutions, and large private speculators into them. In part, it is also a gambling frenzy (seen also in the ludicrous rise of Bitcoin to over $100,000), in the US, that a Trump Presidency will, again, cut taxes on the super rich, and on the proceeds of such gambling. Asset markets are always driven by such sentiment and emotion, as the Tulipmania, Railway Mania, South Sea Bubble, and Tech Mania illustrated. But, as Minsky saw, that sentiment is ultimately confronted with reality, and quickly, then, the sentiment turns in the opposite direction, and crashes result.

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