Burnham's Dead Cat Bounce - Part 6 – (Digression) The Era of Speculation and Gambling (3) – Capital, Profit and Capital Gain (Cont'd)

Part 6 – (Digression) The Era of Speculation and Gambling (3) – Capital, Profit and Capital Gain (Cont'd)

This is significant, because rather than the predicted “underdevelopment”, it is, since the 1980's, a large number of these third world economies that have industrialised in even greater proportion to the “deindustrialisation” of the “imperialist centre”, a trend, I identified and analysed back in the early 1980's, which has been confirmed.

Adam Smith recognised the flaw in the Mercantilist argument, and picked up on the insight of the French Physiocrats that surplus value is created in the process of production and only realised in exchange. In that, Smith and the other Classical Economists are in advance of today's bourgeois economists.

Orthodox bourgeois economics, today, as I set out nearly 20 years ago, sees profit arising as a result of exchange, rather than simply being realised in exchange. The basis of this “profit”, is claimed to be the existence of a “consumer surplus”. Again, the basis of this “consumer surplus” is deemed to be the fact that different consumers “value” the same commodity differently – subjective valuation – because they derive different levels of utility (use-value) from it. But utility (use-value) and value are two different things. Its like trying to derive the length of a piece of wood from its weight!

It doesn't matter what the aggregate utility of X is compared to that of Y. If the social cost of production (in essence the social labour-time required for their production) is the same, they will have the same value and consequently exchange 1 for 1. If the aggregate utility (demand) for X is three times that of Y, then any higher price for X will simply result in surplus profits for producers of X, resulting in a shift of capital and labour from production of Y to X, and a fall in the price of X to that of Y. Consumer preference (utility/use-value) i.e. demand, determines the proportion of available social-labour-time devoted to the production of X and Y, but it does not determine the amount of social-labour time required to produce a unit of each, and consequently their value, or relative value one to the other.

So, we are, then, left trying to explain profit in value terms. Adam Smith uncovered the source of surplus-value in production, but, having failed to draw out the conclusion, saw profit arising as a consequence of a shortage of supply of capital, and excess supply of labour. He saw that as the basis of profit disappearing. Walras arrived at the same conclusion.

By contrast, the vulgar economists of the 19th century rather than trying to identify the source of “profit”, simply accepted that it existed and tried to justify it. But, whether its claimed that the capitalist is entitled to profit for having taken a risk, for having provided their capital, or for having “abstained”, none of these moral justifications for its appropriation explain where it comes from to begin with. The wages of sin may be death, but that does nothing to provide a scientific understanding of cirrhosis of the liver, or syphilis.

As an aside and comparison, you might, in the abstract, believe that, morally, a people without a land should have the right to a homeland, but the truth is always concrete. In the real world, today, where the globe has already been divided into nation states, it is only possible for a “people without a land” to obtain a homeland of their own by depriving some other people of their land. New land does not just appear as a means of satisfying an abstract moral desire for it. It is why Lenin and the Bolsheviks argued,

“That is why the proletariat confines itself, so to speak, to the negative demand for recognition of the right to self-determination, without giving guarantees to any nation, and without undertaking to give anything at the expense of another nation.”

(The Right of Nations to Self-Determination)

They also understood that the bourgeoisie and social-imperialists used the concept of “self-determination” to justify social patriotism, and so rejected it.

“Instead of the word self-determination, which has given rise to numerous misinterpretations, I propose the perfectly precise concept: "the right to free secession"...

... Unlike the bourgeois democrats, we call for the brotherhood of workers of all nationalities, and not the brotherhood of nations, for we do not trust the bourgeoisie of any country, we regard them as our enemies.”

(Lenin – The Revision of Our Programme)

As Trotsky put it, in terms of a practical application,

“... the facts of every passing day demonstrate to us that Zionism is incapable of resolving the Jewish question. The conflict between the Jews and Arabs in Palestine acquires a more and more tragic and more and more menacing character. I do not at all believe that the Jewish question can be resolved within the framework of rotting capitalism and under the control of British imperialism...

The very same methods of solving the Jewish question which under decaying capitalism will have a utopian and reactionary character (Zionism) will, under the regime of a socialist federation take on real and salutary meaning. This is what I want to point out. How could any Marxist or even any consistent democrat object to this?”

(Trotsky - On The Jewish Problem.)

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 29

In other words, central banks and bourgeois economists, after 2008, defended QE on the basis that they were seeking to prevent deflation and depression, but it is quite clear that their actions were only intended to prevent a deflation of astronomically inflated asset prices, following the bursting of the latest speculative bubble, and were only concerned to prevent a prolonged depression of those asset prices. Their actions, in fact, created a deflation of commodity prices, and acted to severely impede economic expansion of real economic activity, for the reasons I have set out above, and that Marx sets out in Capital, Theories of Surplus Value, and elsewhere. A farmer, miner or builder, who must pay out £1 million to the landowner, for land, rather than £100 thousand, before they can even employ their productive-capital, sees that as £900,000 of their money-capital that cannot be used productively. It is £900,000 of potential money-capital that does not get used productively, but just goes as revenue/absolute rent to the landowner.

As I have set out, elsewhere, the same is true of all of the other inflated asset prices. Inflated share and bond prices, mean that the costs of providing pensions rises astronomically, because the monthly contributions into the funds, now buy far fewer shares and bonds. So, if wages rose so that workers could pay the required higher monthly contributions, in line with the value of their labour-power, that would mean a reduction in surplus value/profits. In fact, in the 1990's, as this began to manifest, in conditions where workers were still weak after their defeat in the 1980's, their wages did not rise accordingly, and rather, as asset prices rose spectacularly, inflating the money value of pension funds, this was sold to workers as meaning that there was plenty of money to pay their pensions, and companies, as well as public sector employers, even reduced or stopped making their contributions to the funds.

This sums up the delusion, and why it had to end. The idea that there was plenty of money in the pension funds was based on these inflated asset prices, and so the fantasy that rather than paying pensions out of the revenues accruing to those assets (interest/dividends, and rents), they could be paid by simply, instead, cashing in some of the assets, and so realising the huge nominal capital gains they had produced. It is referred to as “taking profits”, which again confuses profits with capital gains, a delusion encountered previously, and exposed by Marx, in relation to Ramsay and the use of historic pricing. As I have set out before the TSSI, makes precisely this same mistake. In my response, I set out the difference between capital gain and profit, as Marx does, and the reality that lower asset prices facilitate increased capital accumulation. (See also: this post)

Of course, having, in the 1990's, told workers that this inflated value of the assets in their pension funds meant there was plenty of money to pay their pensions – again confusing money with the actual commodities it has to buy to sustain workers in their retirement – when those asset price bubbles burst, and huge black holes in the pension funds appeared, all of the narrative about the inadequacy of pensions being due to “gold plated public sector pensions”, or workers daring to live a little longer, began to appear.

Rather than QE accelerating economic growth, and combatting a deflation of commodity prices, it caused a deflation of commodity prices, and artificially reduced economic growth, as the other side of the coin to inflating asset prices, and sucking potential money-capital into the purchase of those assets. The proof of that can be seen in the fact that, after 2010, far from acting to stimulate growth, and despite interest rates being at the lowest levels in history, they actively sought to reduce growth by introducing measures of fiscal austerity! There was a simple reason. Increased economic activity, rising demand for labour and capital, in the early 2000's is what had caused interest rates to rise, and sparked the 2008 global financial crash.

Its true that they rose to levels, which, historically, were still very low, but they rose from even lower levels that meant that, in relative terms they rose significantly. It was this big relative increase in interest rates, in conditions where asset prices were at such astronomical levels that caused them to crash in 2008. As with the situation with land prices discussed earlier, the price of these assets is a function of the capitalised revenues they produce. Lower interest rates cause asset prices to rise as simply a consequence of the capitalisation of the revenues. But, in conditions where revenues – be it profit of enterprise, interest, rents, or even wages – go into a speculative frenzy of buying of assets, more than into an actual investment in real capital accumulation, the consequence must be that the asset prices can only be maintained, by ever lower interest rates. So, we ended in the madness of huge amounts of debt – around $20 trillion, worldwide - with a negative yield!

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Burnham's Dead Cat Bounce - Part 5 – (Digression) The Era of Speculation and Gambling (2) – Capital, Profit and Capital Gain

Part 5 – (Digression) The Era of Speculation and Gambling (2) – Capital, Profit and Capital Gain

If share X costs £1 to buy, and pays a dividend of £0.10 per share, that is a yield of 10%. If the dividend remains £0.10 per share, but the price of the share rises to £2, it is a yield of only 5%. Speculators – which is what the ruling-class, today, are – can simply move money to where a higher yield is available. So, they might sell the shares of X and buy the shares of Y, or else buy bonds, land or property. The consequence of that, however, is, then, just to raise the prices of these other assets, and, thereby, to reduce the yield on those assets. The speculators that bought early, get both the higher yield, and a capital gain, when they sell.

A problem for the ruling-class owners of fictitious-capital, and its ideologists, in this respect, as Marx describes in Capital I and III, is that they do not really understand what capital is, and so, also, do not understand what profit or interest is. In Capital I, Marx goes into great detail in examining the claims of the bourgeois economists who, in the 19th century, simply represented the arguments of the private industrial capitalists. Those arguments never explained what profit was, or where it came from, but amounted to just a moral justification of its existence and appropriation by the capitalist.

In other words, even after the ideas of the Mercantilists were superseded, the bourgeois theories that replaced them were no better. The Mercantilists argued that “profit” came from “unequal exchange”. Marx notes that the Mercantilists were not as stupid as some of their later critics claimed. The Mercantilists like James Steuart, described profit as “profit on alienation”. In effect, profit arises as a consequence of the exchange of commodities, so that the seller makes a profit by selling commodities above their value. Marx sets out why this cannot be true for profit as a whole. Sellers are not only sellers but also buyers. If all sellers sell commodities at, say, 10% above their value, then, those same sellers, in aggregate, as buyers of commodities, likewise, pay 10% above their value. In aggregate, what sellers gain as sellers, they lose as buyers.

Marx points out, however, that its no coincidence that the ideas of the Mercantilists arose, and became predominant in the Netherlands and Britain, in the 17th Century, when those countries were the leading mercantile powers, and were establishing their colonial empires. As Marx notes, Mercantilists, such as Steuart, realised the limits of the idea of profit on alienation, but it could quite clearly be seen that, if you are a major colonial power, like the Netherlands or Britain, you could buy “low” from producers of food and materials, in the colonies, process those commodities, and, then, sell them “high” back to those colonies, the balance of trade being made up in money (gold or silver).

This “unequal exchange” would amass large amounts of wealth in the coffers of colonial powers. But, there was, clearly, a limit to that as well. In the period after WWII, as anti-colonial struggles spread across the globe, Stalinists and Third Worldists sought to utilise this Mercantilist theory of profit to describe the “development of underdevelopment” in the economies of the Third World. As a consequence of “unequal exchange” between the “imperialist” centre, and the third world periphery, value was incessantly dragged away from the latter and towards the former, thereby, denying the latter of the surplus value required for capital accumulation and development, whilst, supposedly, explaining the continued growth in the imperialist heartlands, rather than its predicted decline and crisis.

As an explanation of imperialism and imperialist capital, rather than as an explanation of colonialism and merchants capital, it was nonsense. Industrial capital does not make profit from “unequal exchange”, but from the creation of surplus-value in production, and imperialist capital is industrial capital par excellence. Large-scale industrial capital (imperialist capital) does not make profit from unequal exchange, but, similarly, from an ever-expanding scale of production, an ever-expanding exploitation of labour, on a global scale (i.e. capital accumulation and development, rather than underdevelopment), and the need, thereby, to create a global capitalist economy.

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 28

As I have also set out, without that huge rise in existing house prices, there would, also, have been no rise in new house prices, because, as with every other commodity, over time, rises in social-productivity leads to falling unit values. The process with houses is that set out by Marx, in relation to average industrial profit and rent. The large majority of property transactions – around 70% - are in relation to existing houses. It is the price of these houses, therefore, that determines the market price of all similar, new houses. Suppose, the cost of building a house, of a given type, breaks down as follows. Materials and wear and tear of equipment used in construction £10,000; Wages £5,000; Profit £6,000. Suppose the average industrial rate of profit is 33.3%, so that, the builder makes a surplus profit of £1,000, and this is rent appropriated by the landowner, here, capitalised as a one-off payment forming a capitalised rent/price of the land.

In this case, the house sells for £21,000. The land price accounts for >5% of the price. Now, suppose that speculation drives up existing house prices, which, as noted, determine the market price of all new, similar houses. In the 1980's, we noted that, in Britain, as a result of such speculation, house prices quadrupled. So, existing houses of this type, would now be selling for say £90,000. Even if we assume no change in social productivity, so that the values of materials, equipment, and labour-power do not fall, as, in reality, they would, the builders clearly have a huge incentive to build, because, now, the cost of building is £15,000, whilst the house sells for £90,000, giving a profit of £75,000, as against the average industrial profit of £5,000, a surplus profit, now, of £70,000, as against £1,000, previously. The builder, however, cannot build, unless they have land to build on, and so, the landowner, now appropriates this £70,000 of surplus profit as capitalised rent, in the price of the land. Its not higher land prices that lead to higher house prices, but higher house prices that lead to higher land prices, just as higher surplus profits lead to higher rents.

For the capitalist builder, the incentive to build, becomes severely dented, once this process results in all of their surplus profit being appropriated by landowners, in the form of higher rents/land prices.. In their calculation, they see that, now, before they can build any houses, they must lay out this hugely inflated price of land to the landowner. Economically, as Marx describes, rent is not a cost of production, just as interest and taxes are not a cost of production, they are all deductions from industrial profit/surplus value. But, the capitalist does not see it that way. The builder, sees that, they could sell a house of the given type at a current market price of £90,000, but, now, must first lay out, £70,000 to buy the land. They must lay-out a further £15,000 for the construction of the house, leaving them with a profit of £5,000. Instead of seeing this in terms of making the average industrial profit of £5,000, on the productive-capital they lay-out (£15,000), the builder looks at having laid out, £85,000, in order to get a profit of just £5,000. As Marx noted, this is the pernicious role that rent plays in holding back production.

This also explains why so many builders sought to keep down the selling price of the houses they built, by not buying the land, and so selling houses, leasehold rather than freehold. The attempts, now, to limit the amounts that can be charged, each year, for leasehold properties, will only further deter, new house-building on that basis.

Using potential money-capital to build new houses, rather than using it to just bid up the price of existing houses, by inflating speculative, monetary demand, would, also, have employed more construction workers, increased demand for bricks, cement and so on, as well as for workers in those industries. In short, the liquidity that central banks injected to inflate asset prices that had crashed, as bubbles burst, starting in 1987, would have flowed into real economic activity, and would, then, have led to higher commodity prices, rather than higher asset prices. The major caveat to that, of course, is that, the use of this money, as money-capital to increase supply of commodities, does not lead to a rise in their price, if the increase in their supply, is at least equal to the increase in the quantity of currency/credit thrown into circulation, as Marx sets out in A Contribution To The Critique of Political Economy.

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Burnham's Dead Cat Bounce - Part 4 – (Digression) – The Era of Speculation and Gambling (1)

Part 4 – (Digression) – The Era of Speculation and Gambling (1)

In the 1980's, conservative social-democracy encouraged workers to buy shares, houses and private pensions. As the prices of those assets rose, whilst the surplus of labour meant that wages grew slowly, it was not too hard to sell. As many workers also found themselves unable to get decent full-time jobs, and were encouraged into precarious self-employment, leading to the growth of the petty-bourgeoisie referred to earlier, this kind of individualist, mentality was further reinforced, even though it was delusional and self-destructive.

And, self-destruct it did. In 1987, as a debt spike, in the US, caused interest rates to rise, asset prices crashed around the world, including the prices of all those privatisation shares workers had been encouraged to buy etc. (An example of the delusion and hysteria was shown when, just prior to the BP privatisation, in October 1987, the market price of BP shares dropped significantly below the privatisation offer price, and yet retail speculators insisted on buying the overpriced shares.)

In Britain, workers who had lived comfortably in their council houses for decades were encouraged to take on debt to buy them. As interest rates spiked, and they could not meet the mortgage payments, they were evicted. Large proportions of the council housing stock passed not to former tenants, but to private landlords, who picked them up cheap.

But, unlike previous asset price crashes, the fact that so much of the ruling class's wealth and power was, now, tied up in this paper form, and that so much had been put into selling the delusion/lie that wealth could be created out of thin air (the same delusion is purveyed by MMT), the state was led to intervene not to rescue real industrial capital, but to prevent the collapse of those asset prices. Every time it did so, it simply intensified the underlying contradiction, which, as Marx describes, in Capital III, comes down to the antagonistic interests of interest-bearing capital (fictitious-capital) and industrial capital.

The interest of interest-bearing capital is to maximise the revenue it obtains as interest/dividends, as a deduction from industrial profit. The interest of industrial capital is to maximise the profit of enterprise/retained profits, so as to maximise the potential for capital accumulation. The collective owners of industrial capital, in the era of imperialist capital, are the “associated producers” within each company, as Marx describes them, i.e. the workers and managers. That imperialist capital is “socialised capital”, which replaced the monopoly of private industrial capital, in the process described by Marx as “the expropriation of the expropriators”.

But, other than in the worker cooperatives, the “associated producers”, i.e. the collective owners of this socialised industrial capital, are legally prevented from exercising control over that capital! The ruling-class, as it abandoned its functional role in production, and became a class of merely parasitic coupon-clippers, ensured that its state created company laws that continued to enshrine control over that capital in their hands, rather than in the hands of its collective owners.

It was this “property question” that workers had to address, but, instead, the political leadership of the labour movement, in the 20th century, ignored Marx and Engels analysis and advice, instead simply organising the workers to continue an unwinnable struggle to just improve the price of their labour-power. Consequently, when the process, described earlier, led in the 1980's and after, to asset prices rising faster than profits, the natural response of the ruling-class, as a class of rentiers, was to use that right of control to increase the share of profits that went to interest/dividends, and so reduce the share available as profit of enterprise/retained profits to fund capital accumulation.

Moreover, the same process extended to the rents extracted, and to the taxes appropriated by the capitalist state. Asset prices, be it the price of shares, bonds, property/land rose, but, as profits rose more slowly, yields, be it on financial assets or rental yields, fell. They fell, even if the actual level of interest/dividends, rent etc. did not, simply because of the rise in the price of the assets.

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 27

If workers had control of their money paid into their pension funds, they would be far more likely to see the benefit of using that money to actually invest in real capital accumulation, the use of the money to buy additional machines and buildings, and to employ additional workers, rather than to simply inflate existing asset prices.

They might, of course, use that money to finance the expansion of worker-cooperatives, especially as the shareholders that control corporations have been more concerned to inflate their own share prices, and to use that control to hand money to themselves than to invest in real capital accumulation. So, its no wonder that the ruling-class has created a legal structure that prevents workers from exercising their legitimate, democratic right to control their own pension funds, blatantly in defiance of even basic bourgeois norms of property law. Now that would be a struggle to “take back control” that would be worth supporting.

Its not just that workers having control of their own pension funds would expose all of the things described above of the vast sums siphoned off as fees and commissions, of the fact that shareholders have preferred to inflate asset prices rather than invest in real capital accumulation and so on. Even without control of our pension funds, a basic democratic demand, here, should be to “open the books” of those pension funds, and all of the banks and finance houses that control them. A Workers Inquiry would itself be a mobilising process, because we all know what kinds of practices would be uncovered by it, as even the Panorama investigation all those years ago lifted the lid on.

Workers, in a large company, might, of course, begin to ask the question why, when that money is available, the company directors do not use it for such expansion, but even if, at first, they don't ask that question, a labour and cooperative movement utilising such funds, of itself, exposes the reason. As I have set out elsewhere, one reason that the vast amounts of money tokens/credit thrown into circulation by central banks, to prop up asset prices did not lead to commodity price inflation is precisely that all this liquidity was diverted, directly, into the purchase of those existing assets. Indeed, the very fact of those inflating asset prices, over the last forty years, and actions of central banks to maintain it, created not just moral hazard but, also, a fear of missing out, in which currency was drained from general circulation into this speculation.

If all of the additional liquidity that found its way, for example, into a demand for existing houses, and so hugely inflated their prices had, instead, been directed into the building/supply of additional houses, so raising the supply rather than the demand, the astronomical rise in house prices would not have happened. In fact, analysis shows that contrary to popular belief – which also fuels racist claims about migrants taking houses – the number of homes per head of population is greater today than it was in the 1970's, before house prices began to soar.

As Moneyweek point out,

“The population has gone up, of course. But the housing stock has risen too. In fact, according to an interesting report from economic research group Fathom Financial Consulting, while the rate of building decreased over the last decade, the quantity of ‘housing per person’ has risen by nearly 50% since 1970, and is still increasing.!"

The astronomical inflation of house prices is not the result of physical supply not rising enough to meet population growth, or new household formation – and is certainly not caused by migrants taking up these already overpriced homes – it is the result of speculative demand for existing houses, driven by the huge liquidity injections that central banks have made since the late 1980's. House prices did not rise because the value of houses, as a commodity rose. Indeed, as with all commodities, on average, the unit value of them falls over time, as a result of rising social productivity. Nor, indeed, as set out above, did they rise because the physical supply did not rise in the same proportion as the physical demand from population growth. They rose, because of a huge rise in the monetary demand – as Marx notes in Capital, the only effective demand is monetary demand – a demand that was inflated, by repeated depreciation of the currency/standard of prices. The price of houses rose, not as a commodity, but as a speculative asset, just like money flocking to the purchase of shares, bonds, Bitcoin, or paintings.

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SNNS 67

 

Northern Soul Classics - Agent Double O Soul - Edwin Starr

 

Burnham's Dead Cat Bounce - Part 3 – Different Labels, Same Cans of Beans

Part 3 – Different Labels, Same Cans of Beans

Those believing that the exposure of Reform's racism will destroy it are deluding themselves. That information is already priced into its support. In fact, the current media attention may even win it back some of the support it lost to Restore from those who saw Reform as not racist enough! Reform may see its support in polls drop as a consequence of the current media attention, but only as a consequence of its “softer” racist wing responding to a changed political “vibe”. Whether even they actually vote Reform, when it comes to elections, or for Badenoch's rapidly Rightward moving Tories is another question.

What is clear is that despite retaining the name - “The Conservative Party” - it is dead. It is, now, simply simply a version of the old Tory Party. The Conservative Party of the 20th Century, which cohabited within the same organisational structure as that Tory Party, and dominated it, has become impossible. Its ideology, and its membership and voter base is, now, the property of the Liberals, and Blair-Right wing of the Labour Party. Ironically, Blair himself, as he cosies up to the likes of global authoritarians such as Trump, Netanyahu etc., in search of making a quick buck, has himself abandoned that ideological ground. Blair is no longer a Blair-Right.

As I have set out before, the problem for that Conservative social-democracy (neoliberalism) is that it is based on the interests of the ruling-class owners of fictitious capital (interest-bearing capital). For most of the 20th century, and particularly during the heyday of social democracy after WWII, (1945-75), the expansion of real industrial capital (large-scale socialised capital) meant a growing mass of profit, and, out of that profit, a growing mass of those other revenues that are deductions from it, i.e. interest/dividends, rent, profit of enterprise and taxes.

The ruling-class owners of fictitious-capital, and their state, were content to see a continuous rise in their revenues (interest/dividends, and taxes), even if, over time, the share of the total profits going to these revenues declined, as a greater proportion had to be utilised as profit of enterprise/retained profits to fund capital accumulation. The latter itself was a consequence of the usual long-wave cycle process, whereby capital accumulation moves from intensive to extensive accumulation, productivity growth slows, the demand for labour rises faster than its supply, so relative wages rise and relative profits fall. That process – the profits squeeze – culminated in the mid 1970's – a crisis of overproduction of capital relative to labour.

The solution to that crisis, as in previous long-wave cycles, was a technological revolution, which replaces labour with fixed capital/machines/technology. In the 1970's/80's, that base technology was the microchip. But, as I have set out, elsewhere, the consequence of this was that the burgeoning profits and rate of profit of the 1980's and 90's, led to the supply of loanable money-capital rising faster than the demand for it, so interest rates fell, and asset prices rose sharply.

As asset prices soared, the ruling-class owners of those assets (shares, bonds, land), and their state, became transfixed by this apparent creation of wealth out of thin air. That delusion, and equation of capital gains with “profit”, spread into popular consciousness, seen in the growing fascination of homeowners with the constant rise in the market price of their homes, even though such nominal rises in price made them, in real terms, worse off!! Their only real consolation was the schadenfreude that those who were not homeowners were made even worse off by such price rises, though even that should have been tinged by the thought that amongst this latter group would be their children and grandchildren.

By the mid 90's, the entire focus of conservative social democracy (neoliberalism), reflecting this delusion, had shifted away from the accumulation of industrial capital, and, thereby, expansion of profit, as the basis of growing revenues (interest/dividends, rent, taxes, profit of enterprise), as well as growing wages as employment expanded, and on to the growth of these asset prices. The era of speculation/gambling had begun.

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 26

Engels, a century before had pointed out.

“The history of these Unions is a long series of defeats of the working-men, interrupted by a few isolated victories. All these efforts naturally cannot alter the economic law according to which wages are determined by the relation between supply and demand in the labour market. Hence the Unions remain powerless against all great forces which influence this relation. In a commercial crisis the Union itself must reduce wages or dissolve wholly; and in a time of considerable increase in the demand for labour, it cannot fix the rate of wages higher than would be reached spontaneously by the competition of the capitalists among themselves.”

(Condition of The Working Class in England p 243)

Similarly, Marx had confirmed,

“I think I have shown that their struggles for the standard of wages are incidents inseparable from the whole wages system, that in 99 cases out of 100 their efforts at raising wages are only efforts at maintaining the given value of labour, and that the necessity of debating their price with the capitalist is inherent to their condition of having to sell themselves as commodities. ... the working class ought not to exaggerate to themselves the ultimate working of these everyday struggles. They ought not to forget that they are fighting with effects, but not with the causes of those effects; that they are retarding the downward movement, but not changing its direction; that they are applying palliatives, not curing the malady. They ought, therefore, not to be exclusively absorbed in these unavoidable guerrilla fights incessantly springing up from the never ceasing encroachments of capital or changes of the market.”

(Value, Price and Profit)

Trotsky had based himself on that same analysis.

“... a boom is a boom. It means a growing demand for goods, expanded production, shrinking unemployment, rising prices and the possibility of higher wages. And, in the given historical circumstances, the boom will not dampen but sharpen the revolutionary struggle of the working class. This flows from all of the foregoing. In all capitalist countries the working-class movement after the war reached its peak and then ended, as we have seen, in a more or less pronounced failure and retreat, and in disunity within the working class itself. With such political and psychological premises, a prolonged crisis, although it would doubtless act to heighten the embitterment of the working masses (especially the unemployed and semi-employed), would nevertheless simultaneously tend to weaken their activity because this activity is intimately bound up with the workers’ consciousness of their irreplaceable role in production.

Prolonged unemployment following an epoch of revolutionary political assaults and retreats does not at all work in favour of the Communist Party. On the contrary the longer the crisis lasts the more it threatens to nourish anarchist moods on one wing and reformist moods on the other. This fact found its expression in the split of the anarcho-syndicalist groupings from the Third International, in a certain consolidation of the Amsterdam International and the Two-and-a-Half International, in the temporary conglomeration of the Serrati-ites, the split of Levi’s group, and so on. In contrast, the industrial revival is bound, first of all, to raise the self-confidence of the working class, undermined by failures and by the disunity in its own ranks; it is bound to fuse the working class together in the factories and plants and heighten the desire for unanimity in militant actions.)

(Flood Tide)

This could equally have been written in relation to the 1980's, as the 1920's. I remember, in the early 1980's, speaking to a member of the SWP, who confidently predicted that the stagnation and rising unemployment being experienced would never lift. He clearly had not read Marx's analysis of capital, and his statement that “there are no permanent crises.” Moreover, as Marx, Engels and Trotsky set out above, the “economic crisis”, of the 1980's, in other words, the start of a period of slower growth/stagnation, and the related unemployment, did not represent a crisis for capital, but for labour! The period of crisis for capital arose in the 1970's, as it became overproduced relative to labour, resulting in relative wages rising, and relative profits falling. (Workers & The Profits Squeeze, as Glyn and Sutcliffe described it).

The continual catastrophist dream of a never ending, and deepening economic malaise, in which booms are responded to, not as Trotsky does above, but as being a temporary nuisance, as they look forward to “The Next Recession”, which they hope will be different from all the ones that went before, and somehow bring on the revolution, is a delusion, and simply reflects the impotence of those that cling to it, as an alternative to them actually formulating any adequate Marxist strategy of real class struggle, to take the movement forward.

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Burnham's Dead Cat Bounce - Part 2 – A Relief Rally Is Always Short-Lived

Part 2 – A Relief Rally Is Always Short-Lived

The reality of that was seen, after 2024. As Starmer moved further and further to the Right, so Labour's vote fell. A small part of it went to Reform, but for every Labour vote that went to Reform four votes went to the Greens, Liberals and others to Labour's “Left”. In part, all that is happening, now, is a partial unwinding of that.

Blue Labour did not win over any of the petty-bourgeois reactionaries from Reform, and so had few to lose back to them. They had lost votes to the Greens, Liberals, SNP, Plaid and Independents, and Burnham has simply won some of them back. In many ways, as in 2024, that backwash of support to Labour is what, in financial markets, is called a “Relief Rally”. Left inclined voters, in 2024, voted Labour, not out of any conviction, but because even a Starmer, Blue Labour government seemed a better prospect than a continuation of the Tories. That feeling of relief soon dissipated, when the reality of Starmer's government proved to be just as bad as what had preceded it.

It has to be said, therefore, that the chances are that this will be repeated as Burnham takes the reins. The improvement in Labour's standing in the polls looks like what, again, to use the stock market terminology is a “dead cat bounce”. Labour had dropped so far, so fast that the change of Leader was bound to lead to a bounce from the bottom. But, as I wrote in Part 1, one poll at the weekend put Labour only on 32%, still below the level it had at the General Election. According to Professor John Curtice, the average, currently, puts it only on 29%. That is a far cry from the 40% Labour had in 2017, under Corbyn, when, remember, Labour still lost the election.

Burnham's ratings are flattered currently not just because of the factors set out above, but, also, because the intense media attacks on Polanski and the Greens, have accelerated some of the backwash of votes to Burnham's Labour. In Scotland, the resurgence of the SNP, largely at Labour's expense, has been unaffected. According to Curtice, and I agree, Burnham is unlikely to call an election any time soon, because he is unlikely to win large numbers of seats in Scotland, and that means on the current standing Labour would be likely to get less than 300 seats in parliament, requiring some kind of deal with the Liberals, Greens, SNP and so on. But, that poses further problems for Burnham's Labour. Unless he can demonstrate that he is not just Starmer with better PR, his honeymoon will be short-lived, and the Greens and others will be back eating Labour's lunch.

The reality, already is seen in that Burnham plays with words, be it on Palestine, and the Zionist genocide, be it in relation to Trump/NATO and the illegal war against Iran, or be it in relation to the EU, but the underlying stance remains the same. Burnham repeats the same nonsense about getting closer to the EU, but without committing himself to a wholehearted campaign to re-join; he continues to shy away from condemning the genocide committed by the Zionist state against Palestinians, and even fuelled further attacks by Zionists and settler-colonialists in the West Bank, by attacking the Green Party resolution that recognised the reality that Zionism is racism; he has further backed Trump/NATO's illegal war against Iran by, now, also backing the brutal feudal regime in Saudi Arabia, in its war against the Houthis in Yemen. If Netanyahu loses the election in Israel, Burnham and others will no doubt take their cue to end the minimal sanctions currently imposed and swing behind the new government, even though it, too will be a government of genocidal racists and colonialists.

A similar backwash of support has happened on the Right, as some Reform voters have returned to the Tories. Reform has seen attrition on both flanks. On the one hand, it has been hoist by its own petard, as Rupert Lowe's Restore outfit has split away some of its Right flank. At the same time, as Farage has been exposed in the media, in relation to his funding etc., and, now, the ruling class and its media pile in with their investigations into the activities of Reform's members, not to mention the daily disasters of Reform led Councils, former Tories have drifted back to Badenoch, as she has moved further to the Right. Now, of course, that rightward drift of Badenoch drives away more Conservative voters towards the Liberals, which is no doubt why questions are being raised about the adequacy of Ed Davey's leadership, as the Liberals seem to have been singularly incompetent in winning over Conservative voters, over the last seven years, in conditions where their pro-EU stance should have enabled them to fill their boots.

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Anti-Duhring, Part III – Socialism, II – Theoretical - Part 25

For the SWP, the political extension of this strategy, which amounts to Economism/Menshevism, did not apply, because, unlike Militant and the Bennite Left/CP, it had no orientation to the Labour Party. The ironic consequence was that, its petty-bourgeois, Third Campist, moral politics meant that, come elections, it was led into a bankrupt “lesser-evilism”. It not only called on voters to just passively "vote Labour", to avoid the Tories winning, no matter how bad Labour's politics had been, and were likely to be, but they, also, were left proclaiming, that “for the next six weeks of the election, we will be the best supporters of Labour.” A bit like the Brexit/Lexit position they adopted later, they excluded themselves from the political struggle within, but then had to simply go along with the rules and decisions that came out of that struggle anyway!

The SWP, instead, pursued its Luxemburgist strategy, by which this mounting wave of industrial struggle – which for the reasons already described, was, by this time, on the wane and undermined by the growing relative surplus of labour – would, somehow, mystically transform itself into a spontaneous, political, revolutionary, class consciousness of the workers, who would, then, storm the barricades and seize state power.

The reality of the Militant position, was, in fact, not too different. Although, they propagandised week after week for the reformist idea that a Left Labour Government could, “nationalise the 200 top monopolies”, its leaders, who had been around in the Trotskyist movement for several decades, must have known that such an idea was preposterous, and had been shown on numerous occasions, when tried, to simply lead to the ruling-class and its state, destroying the government, and, if necessary doing so by means of extreme violence. The example of the coup against Allende's government in Chile, in 1973, was fresh in everyone's minds, were they to have forgotten, all the previous examples. Sections of the ruling-class had even discussed a coup against Wilson's social-democratic government, for goodness sake, so what would they do to a Left Labour government?!

The leaders of Militant must have known that, at the very least, even a Workers Government, would, as Trotsky described, baulk at breaking with the bourgeoisie, requiring a mobilised revolutionary proletariat, already organised in workers' councils/soviets, to control the streets and workplaces, to already be a workers' state in waiting – a condition of dual power. The trouble is that, it was no good the leaders of Militant knowing that, if even their rank and file members did not, let alone if the working-class they sought to lead was not schooled in that reality. Anyone who argued day after day with ordinary members of Militant could see that those members did not understand that reality, and they would try to give chapter and verse from Marx, Lenin and Trotsky on why a “parliamentary road to socialism”, was possible, and so sounding more and more like, simply more militant versions of the CP, and Bennites.

As Trotsky noted in relation to the German Revolution and the Chinese Revolution, in the 1920's, when it comes to revolutionary strategy and tactics, timing is crucial. Calling for General Strikes or for the creation of soviets requires that the workers are on an upward path of struggle, and that, revolutionaries have been preparing the advanced sections of the class for the raising of such demands, so that the workers know exactly what the implications of them are. If you continually call for a General Strike, in conditions where the working-class is not strong enough or confident enough, it will be mere revolutionary phrase-mongering, and demoralising. At best, the workers will not respond, at worst, they will respond in a weak and confused manner and the state will suppress them. All-out General Strikes are political strikes, they are revolutionary acts, which directly pose the question of which class rules in society. Trotsky described the mistakes made in that regard in Germany, in the 1920's.

But, as he set out in relation to the Chinese Revolution, it is pointless to refuse to call for the creation of soviets, as the Stalinists did, until such time as the condition of dual power exists. The soviets implies a revolutionary situation, and the workers need to be armed to defend those soviets, and ensuring that those arms are available and go to the revolutionary workers, not their opponents requires time, planning and organisation.  In other words, instead of leading, the Stalinists ended up “tailing” the working-class, and even the peasantry. The Stalinists, who had adopted the Menshevist “stageist” theory, in which the proletarian revolution could only come after the bourgeois-democratic revolution had been completed, were forced to adopt this stance, because they had tied themselves to the bourgeois-nationalists, of the KMT, and this Popular Front required that the interests of the workers were subordinated to those of the bourgeoisie and petty-bourgeoisie. Stalin repeatedly denounced Trotsky and his supporters – including some Chinese Communists, who did not even know they were supporting the line of Trotsky – for creating conditions in which the KMT and the Chinese bourgeoisie would split with them.

Stalin was still promoting that line just days before Chiang Kai Shek launched his coup in Shanghai, and slaughtered thousands of Chinese Worker Communists. The Communist Party and its fellow travellers have pursued the same Popular Frontist strategy ever since, with just the brief interlude of the period of sectarian madness of The Third Period. But, the strategy of the SWP has followed the same Popular Frontism, in search of building the widest possible coalition of forces on one issue after another, as their answer to everything sank into the idea of building the next ever bigger march or jamboree. The same souffle politics was adopted by the Stalinists and their periphery backing Corbyn, via Momentum, and it suffered the same fate as all the other such ventures, deflating on contact with the slightest external pressure.

The conditions, by the early 1980's, had already turned in favour of capital, as it had responded to the crisis of overproduction of capital relative to labour by carrying through the new technological revolution, based around the microchip. In industry after industry, technology replaced labour, particularly skilled labour, such as in the printing industry. Those that had thought that the old Economistic strategy of industrial struggle could simply continue, and would become even more radicalising for workers, as it sharpened, were guilty of the same kind of catastrophism of Sismondi, and of the Stalinists of the 1920's. Rising economic stagnation, and unemployment acted not to turn workers into class conscious revolutionaries, but to undermine even their ability to maintain wages, to keep their organisations together. Increasingly, it turned workers not against capital, but against each other, as they competed for work.

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Burnham's Dead Cat Bounce - Part 1 – Even A Dead Cat Bounces If it Falls Far Enough and Fast Enough

Part 1 – Even A Dead Cat Bounces If it Falls Far Enough and Fast Enough

Last year, I wrote that, if Labour did not get rid of Starmer, and his reactionary-nationalist, Blue Labour project, it faced destruction. On the one hand, that project sought to compete for the votes of the reactionary petty-bourgeoisie, and its attendant layers, against Reform and the Tories. That was doomed. On the other hand, in pursuing that doomed project, Blue Labour's reactionary-nationalist politics, in government, not only doomed its economic agenda, they, also, drove a wider and wider wedge between Labour and the organised workers, primarily, the trades unions. They would respond, creating an increasingly powerful, if, at first, confused pole of attraction to Labour's Left.

The reason that competing with Reform and the Tories for the votes of the reactionary petty-bourgeoisie was doomed is that, although the petty-bourgeoisie – the self-employed and small business class – has grown by 50% since the 1980's, which is the other side of the deindustrialisation overseen by Thatcher and Reagan, it still represents only around 35% of the population/electorate. Even add in those attendant layers of lumpen elements etc., and it amounts to little more than the 37% of the electorate that voted for Brexit (37% of the electorate, as against the 52% of those that voted).

Dividing that 37% three ways between Reform, Tories and Blue Labour was never a rational electoral strategy for Labour, for reasons I have set out over the last ten years. Even an even split would give Labour just 12-13% of the vote, which it would need to supplement with the votes of its working-class base. However, in conditions where that base was being aggressively turned away from Labour, by those same petty-bourgeois, reactionary-nationalist politics of Blue Labour, it was driving itself over a cliff.

In fact, there was no equal split. In 2024, unlike 2019, Reform simply replaced the Tories, in seat after seat. Just a change of label on the same can of beans. The Tory voters (I'll set out why the term Tory as opposed to Conservative is relevant, later) saw Reform as their natural home, whilst Conservative voters were driven into the arms of the Liberals, or even Greens. Labour was saved, in 2024, by the fraudulent nature of the first past the post electoral system, and by inertia. Yet, despite Starmer's huge parliamentary majority, it was only just so. In seat after seat, even those it won, Labour's vote fell, not just compared to 2017, but compared to 2019. In many, again even those it won, its vote share fell compared to 2019, and, in pretty much all of them, compared to 2017.

In 2017, Corbyn's Labour secured 40% of the vote, and 12 million votes. In 2024, Starmer's Labour got 32% of the vote and only 9 million votes. (NB. The latest polling, at the weekend, puts Burnham's Labour on 32%, still no better than that of Starmer in 2024.) Its large parliamentary majority was a delusion. Despite Starmerite claims that it was all a clever plan to target resources to where they could win back seats, the reality was that in those Tory seats they won because the Tory vote went to Reform, but not enough of them for Reform to win the seat. Blue Labour did not, other than superficially, win those seats, the Tories and Reform lost them by splitting their vote share.

Blue Labour's parliamentary majority was a souffle. It was vacuous, and bound to quickly deflate on contact with reality. That is what happened. The historically low Labour vote, in 2024, and its historically low vote share, for any government, rapidly fell even further. In national polls, Labour dropped to 24%, and then, even below 20%, reflecting the calculations set out earlier. In actual local elections and by-elections, in 2026, it sank even lower than that, as a confused set of alternatives to its Left sucked away not just its core voters, but, more importantly, its activists. The 2024 argument, “Vote Labour, or get the Tories”, turned viciously against it.

The reality has been that Blue Labour never managed to win over any meaningful proportion of the reactionary, petty-bourgeois vote – just as the truth was that it never lost its core vote to the Tories or Reform in the first place. The votes of the petty-bourgeoisie, when they deserted the Tories, went almost exclusively to Reform, not to Blue labour, no matter how much Starmer and his government sought to adopt the racist, jingoist rhetoric of Enoch Powell and his Faragist legions of today. As in the past, when socialists, social-democrats and liberals sought to respond to a rise in petty-bourgeois populism and nationalism by borrowing from its agenda, it simply legitimised the lies and deceptions of those reactionary parties. The reactionary petty-bourgeoisie, thus comforted in the legitimisation of their bigotry, chose the real thing over their imitators.

Forward To Part 2

Anti-Duhring, Part III – Socialism, II – Theoretical - Part 24

I have set out why there has been that change, elsewhere. It is symptomatic of the fact that the ruling-class during the last century became entirely a class of owners of fictitious-capital. The state, as the state of the ruling-class, acts to protect their interests, and its ruling ideas are those of that class, even when those ideas are based on a delusion that falls apart as each day passes. As capital became increasingly imperialist capital (large-scale, socialised, state-monopoly capital), from the end of the 19th century, the ruling-class itself, in proportion, became a class of coupon-clippers.

As coupon-clippers, dependent on the interest on bonds, and dividends on shares, they continued to have a direct interest in the growth of the profits of the companies which paid out those revenues. The state acted accordingly to ensure the growth of those profits, and accumulation of industrial capital. The heyday of that came in the period after WWII. It actually began in the 1930's, as on the one hand, the 1929 financial crash ruined many of the speculators, and created the conditions for the dominance of an accumulation of industrial capital, of its reflection in a corporatist, progressive social-democratic ideology, and a significant extension of economic planning and regulation by the state. In the US, The New Deal, but, in Europe, Nazi Germany, Nordic Social Democracy, etc. As economies geared up for WWII, that process was accelerated, and it continued after the end of the war.

That heyday ended in the 1970's, for the reasons I have set out earlier, and elsewhere. The period since, then, in particular since the mid 1980's, is the first time when the nature of the ruling-class, as a class made up entirely of owners of fictitious-capital, increasingly divorced from the interests of industrial capital, and, indeed, as Marx describes, antagonistic to it, has asserted itself. Initially, the defeat of the working-class, resulting from the technological revolution of the 1970's/80's, which resolved the crisis of overproduction of capital, and created a huge relative surplus population, and a massive rise in the general rate of profit, caused a fall in interest rates. The supply of additional money-capital from these higher profits, rose significantly. At the same time, the technological revolution, created a huge moral depreciation of the fixed capital stock, and the rise in productivity, also cheapened materials and energy, as well as labour-power. In other words, it created a huge release of capital.

By the time the 80's became the 90's, asset prices had risen significantly. House prices in Britain had quadrupled, and similar rises occurred across the globe. In addition, money that did not find a home in real capital accumulation, found its way into other forms of speculation. In the US, the Dow Jones and S&P 500 rose by around 230%, between 1980 and 1990, whilst US GDP rose, just 108%. In 1987, a global financial crash set the scene for the following 40 years. It is the first time that the consequence of the ruling-class having become a class of owners of fictitious-capital becomes apparent.

The period of social-democracy, in its ascendancy, had been one in which real industrial capital accumulated, profits rose and out of those profits, were paid increasing amounts of interest, rent and taxes. The fact that demand continually expanded during this period, meant that every industrial capital was forced to seek to grab its share of the market, by increasing its output/accumulating capital – the intensive accumulation of the 1930's/40's, turned into the extensive accumulation of the 1960's/70's. The owners of fictitious capital, were subordinated to the needs of capital accumulation, but content in conditions where the mass of their revenues, in the form of interest/dividends and rent, continued to rise, even if, as a proportion of profits, they declined. When that period culminated in a crisis of overproduction of capital, in the 1970's, there were only two options. Either the constraints of capital itself had to be smashed, or else the working-class would be smashed.

The first required that the working-class had a fully conscious political leadership that understood the real basis of struggle. No such leadership existed. Instead, one of two strategies pervaded the labour movement. The most significant of those strategies was that which simply saw the period ahead as being a more intense continuation of the period that was, now, gone. In other words, it was a strategy based on a bourgeois, trades union consciousness of bargaining within the system for a bigger slice for labour. That had worked since the 1950's, as capital expanded, profits were high, and as the period progressed, labour became increasingly in relative short supply. It was precisely the success of workers in that period – more to do with the expansion of capital than effective trades union militancy – that brought about its demise, for the reasons I have set out, and that Marx describes in Wage-Labour and Capital, and Value, Price and Profit. It was an impossible strategy, at the point that capital had already responded to the overproduction of capital/shortage of labour, by revolutionising technology, and creating a relative surplus of labour!

That strategy was one pursued by the Stalinists in the Communist Party, and their fellow travellers in the Labour Left. In conditions where the historic dominance of those forces was being effectively challenged by the likes of the SWP and Militant, they, also, pursued that strategy. In the case of the Communist Party, Bennite Left, and Militant, the extension of this strategy took the form of a process in which mounting industrial struggle would lead to increased pressure on the Labour Party, via its Left-wing, to, in some form, “take the power”, meaning, in reality, that a Labour government would respond to opposition from bosses, by supporting trades unions, nationalising companies that were closing down, and by continuing the process began in the 1970's, of increased planning and regulation of production. In short, to become a Workers' Government. Unfortunately, not only was such a strategy, at this point, doomed, but, it was also, thoroughly confused and nationalistic, including elements that were inherently racist.  It was a modern version of the Moseley Memorandum, put forward by Oswald Mosely, when he was a Minister in the Labour Government, and which became the basis of the economic strategy he adopted for the New Party, and the British Union of Fascists.

So, elements of this Alternative Economic Strategy, called for import controls, which, of their nature, as with Trump's tariffs, not only lead workers to the conclusion that the source of their problems is not capitalism, but “foreigners”, who are, in some way, doing them down, by producing goods more cheaply, and exporting them to Britain, it also means that, as domestic prices rise, the consequence is either falling real wages, or, to the extent real wages are protected, falling domestic profits, and so less new money-capital available for capital accumulation, causing higher interest rates, a tie-up of capital, slower growth etc. That at a time when the solution for workers across Europe, and indeed across the globe, was to unite, across national borders, against their common enemy capital. Indeed some elements of that strategy not only called for import controls, but also immigration controls, immediately and visibly blaming foreign workers for the problems of British workers.

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SNNS 66

 

Northern Soul Classics - Secret Agents - The Olympics

 

Anti-Duhring, Part III – Socialism, II – Theoretical - Part 23

Of the billions paid into pension funds, each year, even the money that does go to buy shares or bonds, rather than line the pockets of the financial institutions, 70% of it goes to buy up existing shares and bonds, and so to simply inflate their prices, rather than financing additional, real capital investment/accumulation. That is the case with all transactions on the financial markets, which act primarily as casinos where the participants simply gamble on which stock or bond is going to race ahead, and which be left behind. As Marx put it,

“It reproduces a new financial aristocracy, a new variety of parasites in the shape of promoters, speculators and simply nominal directors; a whole system of swindling and cheating by means of corporation promotion, stock issuance, and stock speculation. It is private production without the control of private property.”

(Capital III, Chapter 27)

Marx saw no reason why the regular financial crises/crashes, as against the cyclical economic crises, resulting from an overproduction of capital, or an overproduction of commodities, should be a concern of the workers.

“As regards the fall in the purely nominal capital, State bonds, shares etc.—in so far as it does not lead to the bankruptcy of the state or of the share company, or to the complete stoppage of reproduction through undermining the credit of the industrial capitalists who hold such securities—it amounts only to the transfer of wealth from one hand to another and will, on the whole, act favourably upon reproduction, since the parvenus into whose hands these stocks or shares fall cheaply, are mostly more enterprising than their former owners.”

(Theories Of Surplus Value, Part 2, p 496)

But, of course, now that the ruling-class is comprised entirely of such parvenus, and speculators, rather than industrial capitalists, and, because their entire wealth has become dependent on continually inflating asset/fictitious capital nominal prices, it is no wonder that they use the state to ensure that condition persists, even where doing so, directly conflicts with the interests of real industrial capital. As Marx again put it,

"... the reduction of the money equivalents of these securities on the stock exchange list has nothing to do with the actual capital which they represent, but very much indeed with the solvency of their owners."

(Capital III, Chapter 30)

“Talk about centralisation! The credit system, which has its focus in the so-called national banks and the big money-lenders and usurers surrounding them, constitutes enormous centralisation, and gives to this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner — and this gang knows nothing about production and has nothing to do with it. The Acts of 1844 and 1845 are proof of the growing power of these bandits, who are augmented by financiers and stock-jobbers.”

(Capital III, Chapter 33)

In previous financial crises, such as 1847, 1857, 1929, the state, responded to the events, and threat to production, by ensuring that credit was available for commodity circulation. In 1847 and 1857, as Marx and Engels describe, the financial crash itself had been provoked by the bursting of an asset price bubble, inflated due to low interest rates caused by burgeoning profits, which resulted in the supply of additional money-capital growing faster than the demand for it. The bubble burst when bad bank legislation (The 1844 Bank Act) unnecessarily caused interest rates to rise, because the Bank of England, reduced currency supply, in response to an outflow of gold. The resulting credit crunch led to a sharp curtailment of trade. But, as Marx and Engels note the real nature of the crisis was revealed because, when the Bank of England suspended the Bank Act, so as to facilitate additional currency supply, the crisis ended.

“By such artificial intensification of demand for money accommodation, that is, for means of payment at the decisive moment, and the simultaneous restriction of the supply the Bank Act drives the rate of interest to a hitherto unknown height during a crisis. Hence, instead of eliminating crises, the Act, on the contrary, intensifies them to a point where either the entire industrial world must go to pieces, or else the Bank Act. Both on October 25, 1847, and on November 12, 1857, the crisis reached such a point; the government then lifted the restriction for the Bank in issuing notes by suspending the Act of 1844, and this sufficed in both cases to overcome the crisis.”

(Capital III, Chapter 34)

But, in all these cases, including 1929, although the state facilitated the credit required to end the credit crunch restricting commodity circulation, it did not bail-out the financial speculators who had lost. As Marx notes above, some lost, others gained. In 1929, those like John Templeton, who sold prior to the crash, and, then, ploughed money in after it, when assets could be bought for 10% of their pre-crash prices, gained enormously. In 2008, and after, the opposite has been the case, as central banks have bailed out the speculators, whilst imposing credit restrictions and financial austerity on the real economy.

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