SNNS 28

 

Anti-Duhring, Part II, Political Economy, X – From The Critical History - Part 15

If the value of gold itself had not fallen, as a result of new discoveries, an increase in its supply could, at most, only result in a temporary fall in its market price. That fall in its market price would reduce the profits of gold miners, or even result in losses. The least profitable would go out of business, gold production would fall, supply would contract, and its market price would rise.

What Hume saw was the effect not of a rise in the supply of gold and silver, but a fall in its value, as a result of the new discoveries. Hume writes,

“‘It is easy to trace the money in its progress through the whole commonwealth; where we shall find, that it must first quicken the diligence of every individual, before it increases the price of labour." (p 304)

Engels notes,

“In other words, Hume is here describing the effect of a revolution in the value of the precious metals, namely, a depreciation, or, which is the same thing, a revolution in the measure of value of the precious metals. He correctly ascertains that, in the gradual process of readjustment in the prices of commodities, this depreciation "increases the price of labour" — in ordinary language, wages—only in the last instance; that is to say, it increases the profit made by merchants and industrialists at the cost of the worker (which he, nevertheless, thinks is quite in order), and thus “quickens diligence”.” (p 305)

The same is true in modern economies, where central banks facilitate rising prices via increased liquidity, which ultimately, then, leads to workers demanding higher wages, which is, then, presented as the cause of the inflation. Similarly, protectionism, whether via import controls, or tariffs, results in higher domestic prices, but it is only after those prices have risen that workers are left having to respond to them in demands for higher wages.

“But he does not ask himself the real scientific question, namely, whether and in what way an increase in the supply of the precious metals, their value remaining the same, affects the prices of commodities; and he lumps together every “increase of the precious metals” with their depreciation. Hume therefore does precisely what Marx says he does (A Contribution to the Critique of Political Economy, p. 173).” (p 305)

In other words, this is Marx's criticism of The Quantity Theory of Money, as presented by Hume, and later adopted by Ricardo, Lord Overstone et al, and enshrined in the 1844 Bank Act. But, an examination of Marx's argument, here, shows precisely what is wrong with the attempt by some socialists, today, to have Marx apply this argument to the increased supply of money tokens/currency.

The whole point, here, is that Marx posits the question in terms of the value of money. If there is no change in the value of gold, there is no change in the value of money, where gold is the money commodity. An increased supply may, temporarily cause its market price to fall, just as the market prices of all commodities fluctuate as a result of short-term changes in demand and supply, but that is all. If the value of gold does not change, then, as Marx describes, in "A Contribution To The Critique Of Political Economy", the only other way a change in prices can occur is if the quantity of gold contained in the standard of prices, for example the Pound, is changed, or as described earlier, if 6d of silver is attempted to be passed off as a shilling.

But, it is precisely this latter which occurs where the currency is debased, depreciating in the case of a fiat currency, by printing it in excess. In that case, it is precisely this quantity of these money tokens thrown into circulation that causes their depreciation and leads to an inflation of prices.

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Forward To Part 16

Anti-Duhring, Part II, Political Economy, X – From The Critical History - Part 14

“Herr Duhring can only repeat his predecessors errors concerning Hume’s actual theory of money according to which money is a mere token of value, and therefore, other things being equal, commodity prices rise in proportion to the increase in the volume of money in circulation, and fall in proportion to its decrease.” (p 304)

Today, many socialists have heard that Marx rejected this Quantity Theory of Money. Given the association of Monetarism, as propounded by the likes of Milton Friedman, with right-wing ideas and governments, and the opposition to the ideas of Monetarists by the Keynesians, who have a corresponding relationship to more social-democratic governments, it is not too surprising that many such socialists have conflated the two things. But, again, it reflects only a confusion in relation to money as against money tokens/currency, and one that was encouraged by a Stalinism that was itself collapsing into social-democracy, and adoption of Keynesian rather than Marxist economics.

“But after propounding the above theory, Hume himself raises the objection (as Montesquieu, starting from the same premises, had done previously) that

nevertheless “’it is certain” that since the discovery of the mines in America, “industry has increased in all the nations of Europe, except in the possessors of those mines”, and that this “may justly be ascribed, amongst other reasons, to the increase of gold and silver”.

His explanation of this phenomenon is that

“though the high price of commodities be a necessary consequence of the increase of gold and silver, yet it follows not immediately upon that increase; but some time is required before the money circulates through the whole state, and makes its effect be felt on all ranks of people”. In this interval it has a beneficial effect on industry and trade.” (p 304)

Marx describes this, also, in Capital II. What, in fact, was happening? It is not that an increase in the supply of gold and silver – money – of itself resulted in a rise in prices. Take money out of the equation and assume only an exchange of commodities. The basis of this exchange is an exchange of equal values, say 1 metre of cloth for 1 kilo of wine. If the supply of cloth and wine are in balance to meet the demand for each, a rise in the supply of one of them may result in a temporary fall in its rate of exchange. For example, if more cloth is supplied, either some of it is unsold, or 1 metre of cloth is exchanged for less than a litre of wine to clear the market. But, it does not change the value of cloth, and the result is that less cloth is, then, produced and brought to market.

The only way that this increase in supply of cloth can be sustained is if the value of cloth itself falls, i.e. if less labour is required for its production. If, then 2 metres of cloth has the same value as 1 litre of wine, the supply of cloth can be sustainably increased, and a new exchange rate of 2:1 is established. Price is only a specific form of exchange-value, the exchange value of commodities against money. So, if gold is the money commodity, it is not a question of more gold being supplied, but this increase in supply being a consequence of new gold discoveries which reduced the value of gold, i.e. less labour is required for its production.

This gold, whose value is lower, is supplied into European markets, as described above. At first, the lower value of this gold is not manifest in those exchanges. It exchanges at its old value, and so the gold miners are able to buy, say, British cotton cloth, and this demand for cloth stimulates textile production. But, over time, this influx of gold circulates within the British economy. The textile producers buy more cotton, more machines and so on, and pay for it with this gold. Their suppliers now buy more inputs with the gold paid to them. Eventually, this increased supply of gold has had an effect throughout the economy. The effect is two-fold; first it leads to an increased demand, and consequently an increase in production; secondly, it results in the new value of gold becoming manifest as an increase in prices. But, that is only so because the increased supply of gold was also an increased supply of gold at a lower value.

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Forward To Part 15

Like Trump, Blue Labour View Democracy As An Inconvenience - Part 2 of 2

We could point to the numerous examples of where Greens have also allied with Tories in local councils, or on their own, when in control, have acted as dutiful managers of the local capitalist state, and attacked workers interests, but a more stark example is of where the petty-bourgeois, ideology of Green politics leads, as seen in other countries. Those of us whose earliest political activity goes back to the days of May '68, remember the name of the leader of the French students - “Danny The Red”, aka Daniel Cohn-Bendit.

Despite the “red” label, and media popularisation of him, at the time, as a socialist revolutionary, Cohn-Bendit was not a “red”, but a petty-bourgeois anarchist. There were two main factors for the failure of 1968. One was the counter-revolutionary role of Stalinism, which was powerful in the workers movement, and acted to restrict the actions of workers, engaged in rolling general strikes, in favour of parliamentarism, and the second was the role of anarchists and syndicalists, who opposed the Stalinists' betrayal, but who promoted the ideas of spontaneism, and failed to build the required organisational structures to confront the bourgeois state, and create an alternative to it. Groups like the SWP have continued to make that same mistake ever since.

For an Anarchist like Cohn-Bendit, his individualist, petty-bourgeois mindset, also consistent with the collapse of large sections of the left into a reactionary, petty-bourgeois, moralism and “anti-capitalism”, led him inexorably into the Greens, the epitome of that kind of reactionary “anti-capitalism”, as a synonym for opposition to large-scale industrial capitalism, in favour of utopian notions of the small business myth, alternative paths of development and so on. In Germany, the Greens, now ally with the conservative bourgeois parties, and support NATO, etc.

Those who limit their horizons purely to an opportunist, “lesser-evilism”, focused on parliamentarism, can always find excuses for voting for anti-working class parties, on the basis that they are the least dirty shirt in the laundry basket. Doing so does nothing to change the conditions that lie behind such a restricted choice, other than to make it worse, by tarring those that do so with the brush of those parties, and further alienating the workers. It is that approach that has opened the door to Le Pen, to Farage, to Trump, to the AfD, and so on.

The same can be seen in the US, now. The liberal bourgeois politicians and media, in recent days, have seized on the fact that voters have turned increasingly away from Trump, and the Republicans, with some Republican politicians, also, peeling away, at the margins. The liberal bourgeois see this as decisive, but they fail to understand the nature of fascism as a movement of the petty-bourgeoisie. They assume that seeing this electoral support slipping away from him, Trump's days are numbered. But, for Trump, who has laid his cards openly on the table, in setting out his desire to utilise his “magic powers”, as he calls them, granted by The Insurrection Act, they fail to understand that, such fascist regimes, always, reach a point where they can no longer rest upon constitutionalism, and the vote, and so, simply resort to the use of force.

"It is stupid to believe that the Nazis would grow uninterruptedly, as they do now, for an unlimited period of time. Sooner or later they will drain their social reservoir. Fascism has introduced into its own ranks such dreadful contradictions, that the moment must come in which the flow will cease to replace the ebb. The moment can arrive long before the Fascists will have united about them even half of the votes. They will not be able to halt, for they will have nothing more to expect here. They will be forced to resort to an overthrow."

(For a Workers’ United Front Against Fascism)

Trump is already doing that in Minnesota, and with clear plans to do the same elsewhere. It is sensible for the workers in Minnesota and, elsewhere, to be restrained, and minimise the ability of Trump to do that, just as, Lenin and the Bolsheviks argued against workers, in Russia, engaging in premature actions, in July 1917, which ended up with Kerensky utilising those actions to lock up the Bolshevik leaders. But, Lenin and the Bolsheviks did not make that argument because they wanted the workers to content themselves with constitutionalism. They did so because, as with Marx's advice to Parisian workers in 1870, they believed it was premature, that the workers needed to build their own organs of power, their own tested leaders and so on.

The ordinary citizens of Minnesota have shown tremendous courage and principle. But, it is largely unorganised and leaderless. They have engaged in a “General Strike”, but it was largely a passive, petty-bourgeois affair, with small businesses, shops, and schools closing their doors - they would have had few customers anyway. It is not like the political General Strike of masses of industrial workers, in the large enterprises seen in 1917, or in France in 1968. As Trotsky went on to note,

“the main strength of the fascists is their strength in numbers. Yes, they have received many votes. But in the social struggle, votes are not decisive. The main army of fascism still consists of the petty bourgeoisie and the new middle class: the small artisans and shopkeepers of the cities, the petty officials, the employees, the technical personnel, the intelligentsia, the impoverished peasantry. On the scales of election statistics, a thousand fascist votes weigh as much as a thousand Communist votes. But on the scales of the revolutionary struggle, a thousand workers in one big factory represent a force a hundred times greater than a thousand petty officials, clerks, their wives, and their mothers-in-law. The great bulk of the fascists consists of human dust.”

(Trotsky – Germany Is The Key To The International Situation)

Large corporations in Minnesota are, now, coming out to oppose Trump's actions, and to demand that the confrontations be tempered. Trump does not represent the interests of large-scale industrial capital.  At some point the permanent state is likely to move more decisively against Trump for that reason, but, in the meantime, it and the ruling-class will rely on their usual levers of power in the financial markets, use of the courts etc., as well as relying on the masses of workers doing the fighting for them, so long as they do not begin to assert their own class interests.

Having won the Presidency, and control of Congress with the votes of the petty-bourgeoisie, including some of them now opposing Trump and his fascist goons in Minnesota, Trump will increasingly have to rest, not upon their votes, but on his ability to mobilise violence via a hardcore of fascist thugs. Even the bourgeois liberals continue to present the recruitment into ICE of such thugs as being purely a matter of managerial incompetence, and failure to check their credentials, to train them and so on. No, Trump and the hard core fascist ideologues, like Miller, pulling his strings, have deliberately recruited those thugs, as their personal paramilitary force, separated from the hierarchy of the permanent state' bodies of armed men, and the discipline from above of the generals, who serve the interests of the ruling class. Many of those recruited are the very thugs convicted of actual insurrection on January 6th that Trump has, since, pardoned.

Workers in the US certainly should not gift Trump the justification for introducing the Insurrection Act, by engaging in violent acts, but they should not think that refraining from confronting the fascist thugs of ICE will prevent that from happening anyway. The workers in the US need to confront the ICE Gestapo in an organised and disciplined manner, the right granted to them under the Constitution, as the right to bear arms as part of a well regulated militia. The mistake of Alex Pretti, murdered by Trump's Gestapo, was not to be armed, but was to be armed, and to act as an individual in confronting them. The working-class of Minnesota is far larger than the forces that ICE can mobilise. A Workers Militia, armed, disciplined and organised that defends its own communities, and confronts the ICE thugs, in large numbers, would not suffer that same fate. But, it takes time to organise such militia, and to organise the democratic structures required to control it, to arm it, and so on. It is only that fact that causes us to advise caution at the present time.

But, the advice of the bourgeois liberals to rely on passive resistance and on the constitution will lead to disaster. There is no reason that Trump cannot cancel elections, or that, like De Gaulle in 1968, or Khameini, today, in Iran, where the protests have disappeared from the headlines, as a result of the mobilisation of mass violence against them, the elections may be held in such conditions as to ensure his success. Starmer and Blue Labour can only look on in admiration.

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Like Trump, Blue Labour View Democracy As An Inconvenience - Part 1 of 2

 Like Trump, Blue Labour View Democracy As An Inconvenience

At the weekend, as the Bonapartists of Blue Labour met to block Andy Burnham from standing in the Denton & Gorton By-Election, one of their spokespeople, and original conspirators to put Starmer in the driving seat, using the backing of various shady millionaires, and their money in off-shore tax havens, set out how they see democracy. Steve Reed appeared on TV to tell us that they thought Burnham could not be allowed to stand, because it would mean an election, also, for Manchester Mayor, and they did not want to cause the voters of Manchester to be “inconvenienced” by having to vote!

That about sums up Blue Labour's Bonapartist mentality. Democracy, even the feeble version of democracy that is bourgeois-democracy, and involves the mass of the population only in passively and ineffectually placing a cross on a ballot every few years, is an “inconvenience”. For the likes of Blue Labour, the ideal voter is like the woman interviewed several years ago, who, when told the Tories were to hold another election, proclaimed “Not another one”. Not a right, not something to be cherished or valued, or fought for, but an “inconvenience”, a nuisance that interrupts the intended torpor of the voters, very periodically, and so unnecessarily involves them in the political life of the country, that the bourgeois politicians would prefer they keep out of, so as to let the politicians just continue on their own merry way, unencumbered by such things as accountability.

It is a far cry from the fight to be able to vote that many across the world still face, not to mention from the ideas and struggles of those that created the modern form of bourgeois-democracy – social-democracy - in Britain, in the 19^th century, starting with the combined struggle of industrial workers and bourgeois for the right to vote, and to do away with the “rotten boroughs”. It is a far cry from those that created the labour movement out of which the Labour Party itself developed – the Chartists – who demanded annual parliamentary elections.

Blue Labour have, of course, used the same corruption of ideas and even of bourgeois-democracy to justify their refusal to countenance any new vote on Brexit, despite the fact that every poll, every actual election shows that the large majority of the electorate recognises that Brexit was a a huge mistake, and that, if they had a vote, today, they would vote to reverse it, and to re-join the EU. Blue Labour say, instead, the voters voted once, and that is it for ever more, or at least until we deem it advantageous to us, to allow them to vote again! That is not even bourgeois-democracy, let alone social-democracy, but simply the Hobbesian justification for absolutism.

Blue Labour supplement their appalling, anti-democratic justification for blocking Burnham by other similar arguments, such as the cost of holding the election, which is the argument used by every authoritarian in history. On that basis, you would postpone all elections for much longer, so as to further reduce the “inconvenience” and cost to voters of living in a supposed democracy! Why not go the whole hog, and, like Trump, proclaim that because you are doing such a grand job, there is no need for elections at all.

Blue Labour, also, argue that if Burnham stood in Denton and Garton, he might lose, but also, they might lose the Manchester Mayoral election. Again, if fear of losing elections is justification for not holding them, it tells us a lot about the authoritarian, undemocratic ideology of Blue Labour. More significantly, its necessary to ask, why, they might lose those elections. Its only 2 years since they were telling us what strategic geniuses they were, and were crowing about the huge parliamentary majority they had, despite winning much fewer votes than Corbyn's Labour in 2019. The reason they expect to lose is that, in that two years, not only has the fraudulent nature of that election win been exposed, but the policies of Blue Labour, ever since, in attacking workers, pensioners, the sick and disabled and poor families has seen their support crater even further.

Compared to Starmer and Blue Labour, compared to the likes of Streeting, or Mahmoud, or Rayner, Burnham is popular. If anyone could win the by-election, it is him. If even he could not win it, the blame for that would clearly lie, not with Burnham and his brand of mildly progressive, social-democratic politics, but with the fact that Blue Labour is such a toxic brand, across the country, that any individual Labour candidate, no matter how popular, or distanced from it, will be tarred with the same brush and suffer the consequences. No Labour MP is now safe, as a result of the toxic nature of Starmer's Blue Labour. They will all see their voters either sit on their hands, or as with Caerphilly, will move en masse to more progressive sounding parties, be it Plaid, SNP, Greens, or even Liberals.

As I pointed out months ago, if Labour did not replace Starmer and kick out his Blue Labour cabal, before the Spring elections, it would likely be too late to save Labour. They will be eviscerated in the local and regional elections, and, as Burnham himself says, will probably, now, lose the by-election. If voters in Denton and Garton want to keep out Reform, they will have to vote for the Greens, and that reality will impose itself across the country in coming months. It is not, of course, that either Burnham, or the Greens, or Plaid or SNP, really represent a progressive alternative. They do not. But, it is an indication of the reactionary nature of the petty-bourgeois, nationalist politics of Blue Labour that they appear so.

In the past, the argument of Marxists was that, even though Labour's politics moved periodically from Left to Right, and then, back again, the justification for working within it was that it was based upon the working-class, and its organisations such as the trades unions etc. But, Blue Labour has based itself not on the working-class, but the reactionary, nationalist petty-bourgeoisie. Starmer has neutered democracy within the party, by expelling huge numbers, and alienating thousands more. In electoral terms, the large majority of workers no longer look, now, to Labour, as their natural party, but look instead to these other parties such as Plaid, SNP, Greens, who present themselves in the same colours that Labour, as a social-democratic party used to promote. The trades unions have failed to check that abandonment of the working-class, and of social-democracy by Blue Labour.

When Labour get smashed in the forthcoming elections, and as the Greens and other parties appear as realistic, progressive alternatives, there will be a great temptation – as happened under Blair and Brown – to focus on these other parties. It can be seen already, in the support being given to the populist Polanski of the Greens, by sections of the Left. It is to again invite disappointment and disaster. The Greens, Plaid, SNP, and certainly the Liberals, are not the solution. They are not based on the working-class. Their ideas are not those of the working-class, and its class interests.

The fact that all these parties, basically, themselves middle-class parties, based on the progressive, professional middle-class – as social-democracy has always done – appear progressive, simply shows the degeneration of the Labour Party as a consequence of Blue Labour. The SNP used to be called “Tartan Tories”, and it was the SNP that opened the door to Thatcher in 1979, by bringing down Callaghan's government. The Liberals, of course, joined Cameron's Coalition in 2010, rather than support Brown. Within days, they swivelled from their opposition to austerity to fully backing it, in government. They opened the door to the Brexit vote.

Forward To Part 2

Anti-Duhring, Part II, Political Economy, X – From The Critical History - Part 13

In fact, North's exposition is a classical Liberal advocacy of free trade, both in relation to foreign trade, and the domestic economy.

“certainly “something extraordinary” in the year 1691!” (p 302)

Duhring belittles North, complaining that he was a merchant, and that his work received no approval. Engels replies.

“Indeed! How could a book of this sort have met with “approval” among the mob setting the tone at the time of the final triumph of protectionism in England? But this did not hinder its immediate effect on theory, as can be seen from a whole series of economic works published in England shortly after, some of them even in the seventeenth century.” (p 302)

Its an indication of the extent to which things have deteriorated that, today, the same false ideas are propounded as 350 years ago, whether it is in relation to protectionism/Brexit/tariffs, or in relation to the confusion over money prices and interest rates.

As Lenin noted, in relation to the progressive nature of even Russian liberals, compared to the reactionary, petty-bourgeois ideas of the Narodniks, the liberal ideas of the likes of Petty, Locke and North, appear relatively progressive compared to the reactionary, petty-bourgeois nationalist ideas not only of the likes of Trump, Farage, Starmer et al, but, also, of the so called “Left” Brexiters.

“The “treatment of history in the grand manner”, which chalks up against Marx the unpardonable sin of making so much fuss over Petty and the writers of that period in Capital, simply strikes them right out of history. From Locke, North, Boisguillebert and Law it jumps straight to the Physiocrats, and then, at the entrance to the real temple of political economy, there appears — David Hume. With Herr Dühring's permission, we restore the chronological order, with Hume before the physiocrats.” (p 302-3)

Engels details the extent to which Hume copied the views of Vanderlint.

1. He treats money as a mere token of value
   
   
2. He argues there can be no permanent favourable or unfavourable balance of trade
   
   
3. He teaches an equilibrium of balances brought about naturally
   
   
4. He propounds free trade
   
   
5. He sees wants/consumption as the driver of production
   
   
6. He wrongly attribute bank money and government securities the influence on commodity prices
   
   
7. He rejects credit money
   
   
8. He makes commodity prices dependent on wages
   
   
9. He copies Vanderlint's “whimsical idea that the accumulation of treasure keeps commodity prices down.” (p 303)

Duhring had, previously, intimated that Marx had misunderstood Hume's theory of money. In fact, there was no such misunderstanding, and the misunderstanding resides with those that do not understand the difference between money and money tokens/currency. Hume was also guilty of this error, as, later, was Ricardo. By equating money with currency, i.e. a money token, Hume, and later Ricardo, confused a depreciation of the currency/money token, as a token of value, consequent upon an increase in the quantity of such tokens in circulation, with a reduction in the value of money itself, as a consequence of an increase in its supply. For Ricardo to make this error, as Marx notes, is particularly surprising, because it requires him to abandon his own labour theory of value, in relation to the determination of the value of the money commodity, e.g. gold. He is left determining the value of gold not by the labour required for its production, but solely on the basis of its quantity relative to other commodities, as Hume did.

Back To Part 12

Forward To Part 14

Predictions For 2026 - Prediction 3 - Inflation Returns - Part 7 of 7

We are not yet at the stage of the cycle equivalent to the 1970's, i.e. a crisis of overproduction of capital. Over the last 40 years, central banks have inflated the currency supply, not to provide support for profits against rising relative wages, via rising prices, but to provide a safety net for asset prices, first following the asset price crash of 1987. As Money-capital was terribly devalued, in the way Marx described, because of the delusion that money-capital could simply produce interest/dividends out of thin air, so too the manifestation of that, in the form of crashes in asset prices had to be countered by a devaluation of the standard of prices.  In addition, in a world of sharply rising productivity, which caused the value of commodities to fall significantly, from the 1980's on, it acted to prevent actual falls in the prices of commodities, which risk creating damaging price wars amongst large-scale producers.

But, we are at a stage, equivalent to the early 1960's, in which a period of intensive capital accumulation, after WWII, with rising productivity, came to an end, and a period of extensive accumulation, with slower productivity growth began. Today, in western economies, the large rise in the size of the petty-bourgeoisie, which is different to the conditions in the early 1960's, means that productivity growth was already sluggish, because this petty-bourgeoisie, with its pygmy capital is, by definition, inefficient. It is, however, one source for large-scale capital, in the period ahead, to ease some of its labour supply issues, as the historical trend of the petty-bourgeoisie being driven out of business and into the ranks of wage-workers resumes. Its why the petty-bourgeois, small business agendas of the likes of the Tories, Reform and Blue Labour are doomed to fail.

Lockdowns and the subsequent inflation of the currency supply used to cover the reckless hand out of replacement incomes to households, as I said at the time, marked a turning point. The inflation of the currency supply to boost asset prices, then became an inflation of commodity prices, and so, necessarily of wages. The effects of the ending of the process of globalisation as the protectionists of Trump, Reform, Blue Labour took office, inevitably caused productivity growth to slow even more, or even go into reverse. The rate of turnover of capital was reduced, so reducing the annual rate of profit, globally. Costs of circulation rose, cutting the growth of profits. The most obvious example is Trump's use of tariffs, which has imposed huge costs on the US economy, and on the profits of US companies.

At the same time, decades of austerity have left the infrastructure of many economies in the developed world in tatters, which itself imposes a drag on productivity compared to the newly industrialising economies in China, India and other parts of Asia, for example, where, brand new infrastructure is arising alongside other capital investment. As I have noted for some time, the main imperialist competitor to the US is the EU, and that is now manifest. The EU has more objective reasons to orient towards the other major imperialist bloc, which is Eurasia.

The world is divided into these three competing imperialist blocs of North America, the EU and Eurasia. Rachel Reeves can bleat all she likes, at Davos, that the UK is not there to be buffeted around, but the reality is that the UK is an irrelevance in the current world. Its survival depends upon being inside the EU imperialist bloc, and its vain attempts to continue its alliance with US imperialism, 3000 miles away across the Atlantic is not only doomed but is counterproductive, because it only isolates it from its allies in the EU.

The EU has already recognised that it must respond, and part of that response involves not just military spending, but also large-scale infrastructure modernisation, and real capital accumulation of the kind that only newly industrialising economies have pursued over the last 40 years. The EU spends more than 60% of its arms budgets on US produced weapons.  It relies on US technology in almost every sphere, and that has hindered its own technological development, in every sphere.  An independent EU arms industry, energy industry, space industry, computer industry and so on, will require large amounts of spending on R&D, and on an extensive accumulation of real industrial capital.  That means that interest rates will rise. A reflection of that is already seen with the rise in Japanese interest rates, and bond yields. The corollary is falling asset prices, which means that central banks will again inflate currency supply to try to bolster those asset prices. If Trump succeeds in gaining control of the Fed, that process will be brought forward and intensified.

But, the other changes noted above, compared to the last 40 years, means that any such increase in liquidity will also simply feed through into higher commodity prices, including higher wages. Central banks will again try to protect profits by increasing liquidity to raise prices, but these are not the conditions of the last 30-40 years.

Back To Part 6

Predictions for 2026 - Prediction 3 - Inflation Returns - Part 6 of 7

As early as 1987, even as the conditions of rising rates and masses of profit were in place, asset prices crashed, starting in the US, as Reagan, under the guidance of the likes of Laffer and Kudlow, slashed taxes for the rich, turning the US from being the world's largest creditor to its largest debtor, with a consequent impact on global interest rates. The delusion was sustained, and the confusion of the nature of money with money tokens/currency, and of both with money-capital, was manifest in the response of central banks, led by Alan Greenspan and the Fed.

In the late 70's, and early 80's, as workers saw their relative wages rise, as a consequence of a growing shortage of labour, in order to protect profits, central banks increased liquidity to enable firms to raise prices, creating an inflationary spiral. That was a manifestation of the crisis of overproduction of capital. By the mid 1970's, it was obvious that Keynesian orthodoxy could not, now, deal with this situation, when, as a consequence of the squeeze on profits, the least efficient firms began to go bust. Even then, the accumulated strength of the labour movement in its large battalions, was able to resist the assaults upon it, as witnessed by the victorious miners' strikes in Britain in 1972 and 1974, the latter removing the Conservative government of Heath from office. The incoming Labour government of Wilson sought to utilise the old tools and appeals of social-democracy, of shared interest between capital and labour, and its intermediary in the trades union bureaucracy, to manage the crisis, by bureaucratic means, imposing the Social Contract, to limit pay and price rises. It inevitably collapsed in 1978/9. Similar clashes occurred across Europe, and in North America.

The working-class was, in the end, defeated, as it has been in the past, during such cycles, by the operation of capital itself, and which, as Marx described, shows the fundamental fallacy of social-democracy. Marx noted the point made by Ricardo that, its only when relative wages rise to a point at which they impinge on profits (The Profits Squeeze, described by Glyn and Sutcliffe) that capital has any incentive to replace labour with technology/machines. The classic example referred to by Marx is that, when labour was so cheap and abundant, in the 19th century, women were used to haul canal barges, rather than even use horses!

It is not technology and the resulting increased productivity that is the starting point for higher wages, but higher wages that, eventually leads to capital investing in technological innovation. As Marx and Engels set out in Capital III, Chapter 15, it is only when a new piece of technology costs less than the wages of the labour it replaces that capital is incentivised to introduce it. And, before technology can even be introduced, it must be developed, there must be some incentive to engage in the costly business of invention. The maxim of historians is “necessity is the mother of invention”, but, under capitalism, the necessity is always one driven by profit.

That is why, also, as Marx sets out, although there is continual technological development, often in one sphere and then another, it is only at specific points that a generalised technological revolution takes place that substantially raises productivity and replaces labour, and the basis of that is a crisis of overproduction of capital relative to labour, and the squeeze on profits that results. That process began in the 1970's, and reached a peak in 1985. It was this wide range of new base technologies based on the microchip that revolutionised production in all spheres, and, although battles continued for a while, the fact that capital was no longer faced with a shortage of labour, as technology created a relative surplus population, it meant that capital now, again, had the whip hand. The period of stagnation of the 1980's, was not a crisis of overproduction of capital, but the manifestation that such a crisis, which characterised the 1970's, had been overcome by capital, at the cost of labour.

Having done so, capital no longer needed its state to increase liquidity so that firms could raise prices to defend profits against rising wages. This process, in which wages rose, as a normal consequence of the operation of the capitalist system, as the demand for labour rose faster than its supply, which, then, results in firms raising prices, creating a wage-price spiral, is presented as the cause of inflation. But, as described earlier, this is not just back to front, it is also a fallacy. Wages are also a price, a price for the commodity labour-power. Like any other such price they can rise because the value of labour-power itself rises, or because of the effects of demand and supply for labour-power. As a price, they are also a function, as with all prices, of the value of the standard of prices. If the value of the standard of prices/currency falls, then, all prices will correspondingly rise.

As Marx set out, in Value, Price and Profit, the value of commodities is not determined by wages, but by the labour required for their reproduction. It is the difference between the new value created by labour (which resolves into v + s), and the amount paid to workers as wages (v) that forms the surplus value (s) appropriated by capital. If wages rise, as a proportion of (v + s), a rise in relative wages, this only reduces the amount by which workers are exploited, the amount they hand over gratis to capital. It does not change the value of the commodity they produce, it simply reduces the amount that capital appropriates as profit, and consequently by others as interest, rent and taxes. 

As Marx sets out in Capital III, even if the mass and rate of profit remains the same, however, that does not mean that the mass and rate of rent, interest or taxes remains constant. Rent, interest and taxes are deductions from profit, after, that profit has been realised by industrial capital, after the industrial rate of profit has been determined. Just as relative wages can rise, relative to profit, so to, after profit has been realised, rent, interest and taxes can rise as a proportion of it, leaving a smaller proportion for profit of enterprise/retained profit available for capital accumulation. Prices can only rise, in these conditions, if the state, via its central banks facilitates a rise in liquidity, reducing the value of the currency, and that is what happened in the 1970's, and early 80's.

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SNNS 27

 

Ayatollah Trump's Murderous Regime - Part 4 of 4

As I wrote some time ago, it is entirely rational for Greenland to be a part of the US. That does not mean that Marxists call on the US to annex it. We support the progressive development that the disappearance of nation states, and the formation of much larger multinational states represents, but we seek to achieve that by voluntary association, not war. If the US were to offer enough money to each and every one of the 60,000 Greenlanders, I am sure that such a voluntary association would be possible. If I were a Greenlander $10 million would buy my support, and pay for a quick relocation to sunnier climes.  But, of course, Trump, in so far as he talks about such a purchase, is not referring to the Greenlanders, but to their Danish overlords, just as the EU bourgeois politicians insist that its not the national self-determination of the Greenlanders they uphold, but that same right to sit at the bargaining table for the Kingdom of Denmark.

It has, however, also exposed all of the nonsense spouted by British and EU war mongers, who seek to increase military spending on the back of stirring up hysteria about an imminent Russian invasion. Its not Russia, and certainly not China, threatening to invade Greenland (or the rest of Europe, including the Baltics) but the US, just as its the US that invaded Venezuela, and talks about seizing the Panama Canal, and so on. As I noted a short time ago, Trump will annex Greenland, and despite all the hot air, the EU will do nothing, because as Trump's aides have said, what are they going to do, go to war with the US?

Trump's confusion of Iceland with Greenland in his Davos speech (a confusion ridiculously denied by his apologists) simply shows what is next on his mind, as a quick look at a map and the position of Iceland and Greenland shows.  Having seized Greenland, Trump will seize Cuba, and begin applying pressure to Mexico, as well as increasing economic pressure on Canada. Canadian military strategists some time ago decided very quickly that if the US invaded there is little Canada can do about it.

Given the pathetic response of Starmer and Blue Labour, the question has also been asked of what if Trump decided to annex Britain. The stated aim of Trump's regime is now to undermine Starmer and install Farage. But, given Farage's mild criticism of Trump's Greenland policy, it may be more likely that Trump, especially if he reconciles with Musk, would begin to throw his support behind the likes of Yaxley-Lennon, and his White Christian nationalist religious zealots. But, even before then, a more likely target is Ireland. US imperialism is already heavily invested there, and without US multinational capital, Ireland will suffer a severe economic setback. Musk is already threatening Ryanair, following a row with its CEO, Michael O'Leary, and suggesting he will simply buy the company. Iceland is another obvious target for Trump.

What is clear is that reliance on EU imperialism against any such expansionism by Trump is a dead-end. The EU can do what I suggested some time ago, and recognise that US imperialism is its rival, not its benefactor. Rationally, the EU should speed up its development into a centralised multinational state, and develop its trading relations with the rest of Eurasia, on its borders. The petty-bourgeois nationalist regime of Trump will damage the long-term interests of US imperialism, rather than saving it from its continued, long-term, relative decline. Rather than imposing tariffs on US exports to Europe in response to Trump's tantrums, workers in Europe should seek to build their own class solidarity with workers in the US, Canada and Mexico.

In Britain, the pathetic, reactionary nature of Starmer's petty-bourgeois, nationalist Brexit regime shows why workers need to kick him out, and build their own mass party, to demand a re-entry into the EU immediately, and to begin the struggle for a workers' Europe.

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Ayatollah Trump's Murderous Regime - Part 3 of 4

Only when Trump comes to directly threaten the interests of EU imperialism, by sharing his plans to annex Greenland, and to impose tariffs on imports from any EU country that does not accept his plans, do the EU politicians begin to bleat lamely. Interestingly, and contrary to the claims of Starmer and the British media, even the lame bleating of the EU, in the face of Trump's threats were enough to force him to capitulate as before (TACO).  But, as before, he is likely to return to those threats.

The liberal, Democrat politicians in the US, such as Governor Newsom of California, have relied on the US capitalist state to fight their battles against Trump, with varying degrees of success, given the craven nature of many of these officials, and given that Trump has stacked some of them with his appointees. Now, rather than risk unleashing the forces of the US working-class, by appealing to them, Newsom prefers to lament the failure of his fellow bourgeois politicians in the UK and EU to come to the aid of the Democrats, and US ruling-class.

Starmer continues to act as Trump's mouthpiece in Europe, though the words are muffled as they appear from deep inside Trump's arse, where Starmer has been stuck for the last year, as he tries to reconcile his continued, disastrous support for Brexit, with the increasing irrelevance of Britain, and its dependence on the EU for its economic survival. Starmer's gut wrenching sycophancy is only exceeded by that of the slimey head of NATO mark Rutte, a truly cretinous human being even compared with fictional characters such as Dickens' Uriah Heep. LBC's, Simon Marks made clear what is wrong with the continued argument of James O'Brien that, given Brexit, Starmer has no option but to try to appease Trump.

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Ayatollah Trump's Murderous Regime - Part 2 of 4

As I have described previously, the last 40 years has seen a large rise in the numbers of the petty-bourgeoisie. It has grown by 50%, and its social and political weight has grown accordingly. In many ways, it has parallels with the growth of the industrial working-class at the end of the 19th century. In Britain, which was the classic example, the working-class, after 1848, aligned with the industrial bourgeoisie, represented by the Liberal Party that itself emerged out of the struggle over the Repeal of The Corn Laws. The organised workers, via their trades unions, sat in parliament as Lib-Lab MP's. But, the rapid expansion of the working-class, and particularly its consequence in the development of mass trades unions of unskilled workers “New Unionism”, increasingly made that untenable, and the trades unions split to create the Labour Party.

The petty-bourgeoisie has always formed the mass base of the Conservative Party, and the core of its vote. But, as with the Labour Party as a party of workers, the Conservative Party, as a party of the petty-bourgeoisie, never pursued those interests. It was always, like the Labour and Liberal Parties, forced to represent the interests of the ruling class, i.e. of large-scale industrial capital. The petty-bourgeois, Tory wing of the Conservative Party, having won control only to face that same reality in the face of the disaster of Brexit, and, its farcical culmination in the shape of the Truss government, have tried to reconcile their fantasy with reality, via a typical “stab in the back narrative”, and the creation of their own independent “Brexit” party, now rebranded in its more honest, racist and jingoist livery.

Trump represents the same development in the US Republican Party. The huge economic power of the US means that the contradiction between illusion and reality takes longer to assert itself, and the huge military/strategic power of the US enables Trump to support his regime by leaning on the allies of US imperialism in Europe and Asia to bear the cost, which is now becoming manifest as Trump attacks those allies in Europe, but the process will play out all the same. What is being demonstrated at the same time is the thoroughly corrupt and decadent nature of the ruling-class itself, in the face of these attacks by Trump's petty-bourgeois regime, in pursuit not merely of the interests of the petty-bourgeoisie, but just of his own personal interests, and narcissistic psychology.

The ordinary citizens of the US, still without any adequate political leadership of their own, have shown more backbone, principle and strength of character than all of the bourgeois politicians and their institutions combined. As a consequence, Ayatollah Trump has unleashed his own, newly recruited, fascist thugs, many of them ones he pardoned, after they had been found guilty of insurrection on January 6th 2021, kitted up with the military equipment of ICE, to kill and terrorise them, in the manner of the Iranian regime. The Iranian regime is a clerical-fascist political regime, that of Ayatollah Trump a comical-fascist regime, marked by its farcical coup attempt 5 years ago, and by the demented, moronic rants of Trump and his sycophants, today, that simply bring the US itself into disrepute, across the globe. But, as Austin Powers noted, even clowns and carnies can be frightening, as well as nuclear weapons. Trump embodies both, a demented clown with his finger on the nuclear button.

In the past, we saw moralists, third-campists, and other social-imperialists justify the role of US imperialism and its allies in acting as some kind of “lesser-evil”, on the world stage. The Zionists and pro-imperialists of the AWL, for example, sought to justify an attack by the Zionist regime on Iran's nuclear facilities, by pointing to precisely this kind of irrational zealotry of the mullahs that might lead it to use nuclear weapons. So, who do they now want to bomb the US, given the irrational Trump has his finger on the button?

Similarly, having sent his fascist goons to murder innocent civilians on the streets of Minneapolis, Trump's regime follows the play book of the Zionists, by simply lying, and claiming that Rene Good was a terrorist!. Clearly absurd, but no more absurd than the same claims made by his predecessor Biden that the students on campuses across the US protesting against genocide in Gaza, were all, also, anti-Semitic supporters of Hamas, nor the claims of Starmer's Blue Labour government that the supporters of Palestine Action are members of a terrorist organisation!!

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Ayatollah Trump's Murderous Regime - Part 1 of 4

Over the last few weeks, Iran has experienced the latest round of mass protests against the reactionary regime of the Ayatollahs that have broken out, sporadically, ever since they seized power, in 1979, following the overthrow of the equally vicious regime of the Pahlavi's, installed by US imperialism, as it overthrew the elected government of Mossadegh in 1953. As in the past, those protests have been met by severe repression and violence by the regime. During the same period, the regime of Ayatollah Trump, in the US, has been similarly murdering and attacking innocent civilians on the streets of Democrat controlled cities.

The political regime of the Ayatollahs, in both cases, Iran and the US, is a regime resting upon a large petty-bourgeoisie. The same has been true in Britain, for the last 15 years, and in Russia, as well as in China. These political regimes, as with all political regimes that rest upon the petty-bourgeoisie/peasantry, are Bonapartist, taking advantage of the weakness of the ruling-class. Marx analysed these relations and phenomena in relation to Bonapartism in France, and Trotsky updated that analysis to respond to the particular form of Bonapartism that is fascism and Stalinism. Trotsky, also, made the point that, in terms of the political regime, as against the state itself, the political regime of Stalin was distinguished from that of Hitler, only by the greater brutality of the former.

Fascism, as Trotsky describes, is not a description of the class nature of the state, but is a description of the form of political regime/government, just as is bourgeois democracy, or proletarian democracy. The political regime is merely a superficial appearance, whereas it is the objective material reality of social relations, i.e. the dominant forms of property, themselves based upon the dominant forms of production, that determine the class nature of the state. Fascism is the ideology of the petty-bourgeoisie, and like the petty-bourgeoisie/peasantry itself, it is necessarily wracked by contradictions, because the petty-bourgeoisie/peasantry is far from being an heterogeneous class. It is why, as Marx explained, the petty-bourgeoisie/peasantry can never itself become the ruling-class.

To the extent it ever seizes control of the political regime, it does so as a result of the weakness of the main classes of modern society – bourgeoisie and proletariat – and, even then, can only do so by lining up behind a “strong man” who imposes some kind of order upon them. But, as I set out in relation to the Chinese Revolution of 1949, which was really a Peasant War, led by Mao Zedong, control of the political regime does not change the fundamental laws of society and history. Such regimes are forced, in the end, to choose between bourgeois property or proletarian property forms (even in grossly deformed manifestations), or else, as with Pol Pot, to become failed states, as with many across the globe, in poorly developed countries. As long ago, as Engels “The Peasant War in Germany”, Marxists understood this distinction, and reality.

The peasantry, in the past, when it rose up against its rulers, typically used acts of terrorism, sabotage and wanton destruction, burning buildings and so on. As Marx, Engels, Lenin and Trotsky described, such methods go nowhere, despite what the Anarchists and Populists proclaim. It is only when a large-disciplined and clear sighted industrial proletariat acts as the vanguard that these disparate, heterogenous and disorganised forces of the peasantry and petty-bourgeoisie, can be drawn in behind it. The Bolshevik formula of Lenin and Trotsky of “The Dictatorship of the Proletariat Leading The Peasantry”, summed it up.

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Predictions For 2026 - Prediction 3 - Inflation Returns - Part 5 of 7

What has changed, and characterises the conditions of the last 40 years, is that the ruling-class, as a global class of rentiers, has become dependent upon speculative capital gains on its assets. In the 1980's, the huge rise in productivity from the microchip revolution, led to a massive rise in the rate of relative surplus value, and simultaneously slashed the value of constant capital, both circulating constant capital (materials/components/energy) and notably of fixed capital. That created a huge rise in the rate of profit, but the same factors meant that, as in past such periods, it was followed by a period of stagnation, as the corollary of higher productivity was a slower growth of employment to achieve any given increase in output. In addition, as Marx sets out in Capital III, and in Theories of Surplus Value, this rise in productivity means that even where the physical mass of capital rises, the value of this capital rises much more slowly, or even falls.

The technical composition of capital, as Marx describes, in these conditions, rises but the value composition may fall, meaning a fall in the organic composition of capital. Not only, then, does the rate of profit rise, but it creates a huge release of capital, which may, also, persist year on year for several years, as the new technologies bring above average, year on year rises in productivity, reducing the unit values of the commodities that physically constitute capital. That is what happened in the 1980's and 90's, causing interest rates to fall, and asset prices to rise. The Dow Jones rose by 1300% between 1980 and 2000, whilst US GDP rose by only 256% in that period. The ruling-class, as well as states became dependent on these capital gains on assets, as they basically asset stripped their economies, realising a portion of these capital gains to supplement their revenues.

In addition, a large part of the expansion of industrial capital, in the developed economies, became an expansion of commercial capital, rather than productive-capital. Surplus-value was increasingly produced by low paid labour in newly industrialising economies in Asia, but was realised by commercial capital in the developed western economies, as large areas of previous urban, and industrial land saw coal mines, steel works, tyre manufacture, pottery manufacture and so on, disappear, and be replaced by new retail parks.

The asset stripping of real industrial capital was manifest in the fact that, as the growth in the mass of surplus value/profit eventually slowed, because capital itself was being accumulated more slowly – and more slowly in the developed economies, as it accumulated faster in the developing economies – in order to maintain, revenues from the ownership of assets (rent on land/property, interest/dividends on financial assets, as well as taxes to the capitalist state) the proportion of these, relative to profits, grew whilst the proportion of profit of enterprise/retained profits available for investment, fell. Haldane noted that dividends rose from 10% of profits in the 1970's, to 70% of profits by the early 2000's.

It was the explosion of this contradiction that spelled the end of the delusion that real wealth could be created by continual asset price gains. But, appearance and reality can diverge for a long time, especially where a ruling class, and its state have become fixated upon the delusion, and use their power to cling to it by all means, even as doing so undermines their position even more. So, when reality began to impose itself, and capital continued to accumulate, and interest rates began to rise, causing asset prices to crash, the ruling-class and its state, sought to simply inflate them once more.

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Predictions For 2026 - Prediction 3 - Inflation Returns - Part 4 of 7

The 2008 global financial crash showed that the limiting role of surplus-value on the continued expansion of revenues derived from assets had asserted itself. In Capital III, Marx notes,

“It would be still more absurd to presume that capital would yield interest on the basis of capitalist production without performing any productive function, i.e., without creating surplus-value, of which interest is just a part; that the capitalist mode of production would run its course without capitalist production. If an untowardly large section of capitalists were to convert their capital into money-capital, the result would be a frightful depreciation of money-capital and a frightful fall in the rate of interest; many would at once face the impossibility of living on their interest, and would hence be compelled to reconvert into industrial capitalists.” (p 378)

Marx and Engels noted that a social revolution had already occurred by the latter part of the 19th century. Private ownership of industrial capital had already become an anachronism. Capital was, even by then, socialised capital, the collective property of the “associated producers” within each large company, be it a cooperative or a joint stock company.

“This result of the ultimate development of capitalist production is a necessary transitional phase towards the reconversion of capital into the property of producers, although no longer as the private property of the individual producers, but rather as the property of associated producers, as outright social property. On the other hand, the stock company is a transition toward the conversion of all functions in the reproduction process which still remain linked with capitalist property, into mere functions of associated producers, into social functions...

This is the abolition of the capitalist mode of production within the capitalist mode of production itself, and hence a self-dissolving contradiction, which prima facie represents a mere phase of transition to a new form of production. It manifests itself as such a contradiction in its effects. It establishes a monopoly in certain spheres and thereby requires state interference. 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...

The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.”

(Capital III, Chapter 27)

When Marx and Engels say that socialism is inevitable, this is not a prediction of the future, but a statement of the facts that already existed at the time they said it. This social revolution had already occurred. Production had been socialised, and industrial-capital had, then, been socialised along with it. The collective owners of industrial-capital – at least of large-scale industrial capital, monopoly-capital – were the workers (associated producers), but they did not yet exert control over their own property. The ruling-class, had become a class of rentiers, owners of fictitious-capital, not industrial capital, and they, now, obtained their revenues, not from profits but from interest/dividends as well as rents from the ownership of financial and property assets.

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SNNS 26

 

Predictions For 2026 - Prediction 3 - Inflation Returns - Part 3 of 7

This long period in which Keynesian economics seemed to work, led to ideas about a crisis-free capitalism, which many on the Left, also, adopted at about the time that the conditions which made it possible came to an end. That was the period of the end of the long-wave uptrend around 1974, as a crisis of overproduction of capital set in. The indications of that had been apparent for some time, though are easier to see with hindsight. The more the 1960's progressed, the more it was clear that capital was expanding at a faster pace than the labour supply. All of the productivity gains from the previous Innovation Cycle, which peaked in 1935, and created large surplus populations, had waned. Capital accumulation, which was intensive during the 1940's and 50's, based on the application of that new technology, became extensive, thereby using up labour supplies at a faster pace. It was the other side of slowing productivity growth.

A feature discussed by Marx in Theories of Surplus Value, Chapter 21, became manifest. As capital accumulated extensively, and the demand for labour rose relative to its supply, workers not only demanded enhanced rates for overtime work, but also, began to demand shorter hours, and longer holidays etc., thereby, reducing the scope for expanding the social working-day, and absolute surplus-value. On the contrary, that began to fall, and was no longer compensated by rising levels of relative surplus-value from rising productivity. As capital competed for scarce labour, relative wages also rose, as Glyn & Sutcliffe described, leading to a squeeze on profits, which reaches a crescendo, and crisis of overproduction of capital in the mid-70's. It was this, and the failure of both neoclassical and Keynesian economics to understand the difference between these two types of crisis (overproduction of commodities and overproduction of capital), as well as their failure to understand the difference between money and money-capital, which characterised the period between 1974 and 1987.

There is a commonality in the analysis of both the neoclassical/Austrian School economists and the Keynesian/post-Keynesian economists. It is the failure to understand the nature of money and of capital. The neoclassical/Austrian School economists believed that all that was required was to increase profits. That could be done by reducing wages, or reducing taxes, or interest rates. But, as previous similar periods showed, if their goal was to bring to an end a crisis of overproduction of commodities, and persistent stagnation of the economy, that would not work, basically for the reasons Sismondi had set out, and which Ricardo, Mill, Say et al had rejected.

Falling wages means that a large part of aggregate demand is undermined, and, although, in periods of frantic economic activity – booms – firms might use higher profits to invest in expansion speculatively, they do not do so in conditions of economic stagnation. Similarly, in such conditions, if the rate of interest is reduced by central banks with the intention of stimulating investment, it becomes, as Keynes noted, following also Marx's analysis set out in Capital III, like pushing on a piece of string. Nor does cutting aggregate demand by cutting state spending, so as to cut taxes work, in such conditions.

Firms rather than using increased profits for expansion, increase their holdings of money-capital. Of itself, this increase in the supply of money-capital from realised profits, relative to the demand for that money-capital for investment (investment/real capital accumulation not acquisition of fictitious-capital/speculation) causes interest rates to fall, and so causes asset prices to rise (capitalisation), which gives an incentive for such speculation. In previous long-wave cycles, such periods of stagnation, are also characterised by intensive rather than extensive capital accumulation.

For the Keynesians, they believed that if the state intervened, as it had done repeatedly after WWII, to stimulate aggregate demand, then, firms would respond to the rising demand, invest in new capital, and so the economy would rebound. The post-Keynesians, and supporters of MMT, basically see this operating not by the state raising taxes or borrowing, but by creating money out of thin air, by increasing liquidity, monetising the debt of the state used to expand the economy. They see this as no different to what the state did using QE, to bail-out the banks. The refrain being if the central banks could “print money” to bail out the bankers, why not to finance capital investment in infrastructure and so on. In the post-war period, when Keynesian state spending expanded massively, and huge amounts of infrastructure as well as welfare states were created, that is exactly what they did, just as similarly happened at the start of the Industrial Revolution. But, assuming that can happen now fails to understand the nature of capital, and the role of the capitalist state, including its central banks.

It also misunderstands what has happened in the last 40 years, in the developed western economies, in which the ruling-class has become characterised not just by its ownership of fictitious-capital (shares, bonds, derivatives) but by its reliance for its wealth and power on speculative gains on those assets, rather than on the revenues accruing to them, as interest/dividends. The scope for increased interest/dividends (and rents) is limited by the accumulation of industrial capital, and so on the expansion of surplus value/profit. In other words, if the rate of surplus value is constant, the mass of surplus value, out of which interest/dividends, as well as rents and taxes are paid can only increase if the mass of capital employed, itself increases.  But, any increase in capital accumulation threatens rising interest rates, from still historically very low levels, and a consequent crash in asset prices.

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Predictions For 2026 - Prediction 3 - Inflation Returns - Part 2 of 7

Keynes failed to recognise what Marx had recognised, and set out in Capital and Theories of Surplus Value, which is the difference between a crisis of overproduction of commodities, and a crisis of overproduction of capital. Engels, even before Marx, had written about the operation of the market continually resulting in an overproduction and underproduction of commodities. It can never be the case that, particularly with a plethora of small capitals, still less of smaller independent commodity producers, supply exactly corresponds with demand for any commodity at its market value. Indeed, as Marx notes, its this very fact that inevitably leads to the least efficient independent commodity producers failing, and ultimately, them being turned into wage labourers, employed by other producers, and their means of production, thus being turned into capital. These repeated overproductions of commodities, are not an overproduction of capital, during all of that time when capital itself did not exist! They create part of the required conditions for industrial capital to come into existence – i.e. they create a supply of free labourers, and the centralisation of the means of production.

In Capital II, in particular, Marx sets out a series of scenarios in which such crises of overproduction of commodities can arise, which amounts to a break in the circuit of industrial capital. I have discussed them in my book, Marx and Engels Theories of Crisis. These breaks in the circuit of capital have nothing to do with an overproduction of capital itself. An overproduction of capital, as Marx sets out, in Capital III, Chapter 15, as well as in Theories of Surplus Value, Chapter 21, is an overproduction of capital relative to labour, such that any increase in capital results in a fall in the rate of surplus value, and consequent sharp fall in the rate of profit. An overproduction of commodities can, and often does, arise when the rate and mass of profit is high or rising. Consequently, when there is no overproduction of capital.

In Theories of Surplus Value III, Marx quotes a supporter of Ricardo,

“...I can only answer, that glut […] is synonymous with high profits…” (op. cit., p. 59).”

Marx comments,

“This is indeed the secret basis of glut.” (p 121)

An overproduction of capital, by contrast, arises when, after a long period of economic expansion, and rising consumption (both personal and productive) no further such expansion is possible on the basis of capitalist production, because neither absolute nor relative surplus value can be expanded, and capitalist production only takes place if the additional capital produces additional surplus-value/profit.

As Marx notes, in Theories of Surplus Value, Capital and elsewhere, a crisis of overproduction of capital, inevitably means, also, a consequent overproduction of commodities, because capital, is itself composed of commodities. Marx's point, here, was to set out the way that the Ricardians were inconsistent in recognising the possibility of an overproduction of capital, whilst clinging to Say's Law, and its claim that supply creates its own demand, so that there can never be a generalised overproduction of commodities. It does not mean the latter cannot exist without the former.

In the post-war period, the global rate of profit was high, and yet there were several global cycles in which commodities were overproduced. As Mandel notes, in The Second Slump, Keynesian intervention was able, during this period, to cut these crises short, and did so in the context of a continuation of the post-war, long wave boom. Keynesian state intervention raised aggregate demand, and prevented capital and labour from being unemployed. In the context of a continuation of economic growth, it was able to do so by not even increasing the proportional deduction of tax from surplus-value, which would have reduced future capital accumulation.

As Marx sets out in Capital III, if the average rate of profit is 30%, a capital of £1 billion implies surplus-value of £300 million. But, rents might amount to £50 million (5%), interest/dividends £50 million (5%) taxes £50 million (5%), leaving profit of enterprise of £150 million (15%).  So, if the economy continues to grow, rather than contracting due to a recession, so that capital expands to £1.5 billion, suppose this required the state to spend £20 million to stimulate demand. The total surplus-value grows to £450 million. Of this, rent increases to £75 million (5%), interest to £75 million (5%), whilst taxes would only have needed to rise to £70 million, or 4.7%, down from 5%. Profit of enterprise rises from £150 million (15%) to £230 million (15.3%). Even if the state kept the rate of tax at its previous level of 5%, so that taxes rose to £75 million, thus increasing its additional spending by £5 million as well as paying back the £20 billion of borrowing used to stimulate demand, the burden of taxation would not have risen, and the mass of profit of enterprise available for capital accumulation would have grown from £150 million to £225 million.

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