Where We’ve Been, Where We Are, and Where We’re Going - Part I – Where We’ve Been

Cyclicality

I’ve set out in many previous blogs how the World Economy got to where we are. I want to develop some of the main points.

Have you ever walked up a mountain? One of the things you notice is that you see a point that you think is your goal, but in fact when you get there you find that in fact the path continues. It might flatten or even decline for a while before once again rising into the distance. The curve of Man’s economic development is like that. If you could see the whole thing, you would see it rises to a peak, but on the way it is made up of a whole series of separate slopes sometimes up, sometimes down, sometimes flat for a considerable period. Each of these in turn has similar characteristics.

One of the things Marx elaborates, though he was by no means the first to observe it, is that in Man’s history there are distinct breaks and changes, which lead to a more rapid period of development than that which had gone before. Not only can we think about the changes between the Stone Age, the Bronze Age, and the Iron Age, all of which have their particular consequence for production, but anthropology breaks Man’s prehistory down into what Engels described as Hunter Gatherers, Barbarism, and Civilisation. New productive developments produce new ways of producing, which, combined, revolutionise production, bringing forth a new burst of human productive potential and range of economic activity.

For most of human history and pre-history this process is slow, it is often random and consequent on natural factors, largely outside human control. Moreover, the fragmented nature of human societies means that developments in one place do not quickly, if at all, get transferred to other societies. There is some evidence that there were connections between the ancient civilisations in South America and in Egypt, hence the similarities of the pyramids, probably through trade, but these are exceptions. At the same time that civilisation was thriving in Mesopotamia and the Nile delta, in Northern Europe people were still at the stage of hunter-gatherers. We now know that although some of the Native peoples of North America crossed the Baring Straits from Siberia, whilst others crossed like Eric the red to Greenland, the earlier settlers came from France. At a time when the Arctic Ice Sheet came much further South, they crossed the Atlantic in relatively small boats that they used for fishing, and as hunter-gatherers they clung to the ice sheet and ice flows, living by fishing and hunting on the ice until they completed the crossing. The hunting and gathering techniques they took with them from France remained unaltered for thousands of years as those of the North American tribes, until the much later European settlement and colonisation.

It is very difficult then to identify any periodicity in these technological and productive developments. It is only when Capitalism arises, when man becomes a far more conscious determinant of this development, particularly through the application of science that randomness becomes less significant within the process. Moreover, it is the consequence of producing for the market which plays a significant role in creating a more identifiable periodicity as a result of an increasing synchronisation of economic activity. Take, for example, the situation of societies based largely on peasant production. Suppose some new form of plough is developed. The peasant may desire such a tool if it makes his labour easier or more productive. But, he is under no competitive compulsion to acquire it. He is likely to wait until his existing plough needs to be replaced before buying, or spending his time constructing, such a plough. It can take many years or decades before such a plough becomes the standard. A capitalist cannot do that. If a new machine is introduced which halves the labour-time required for production, even capitalists who have recently retooled are compelled to introduce it, or else find that their products are not competitive, cannot be sold, or else their profits are greatly reduced. Investment cycles then tend to be synchronised for all companies, and these tend also to become linked to innovation cycles, which in turn are linked to other cycles within the capitalist economy.

Moreover, the nature of Capitalism is to be far more expansive than previous systems so that it spreads relentlessly over the globe, and as it does so, it draws all other economies into this complex of cycles, forcing them to become also syncronised with its ebbs and flows.

See Also:World Economy

Kondratiev

This was the recognition of the Russian economist and statistician, Kondratiev. He identified that alongside the already known business cycles, there were also longer cycles, which lasted between 40-60 years peak to peak. It was within these longer cycles that some understanding of things such as innovation, exploration and the larger types of fixed investment could be understood, and these things, which are highly significant for Capitalist production also act upon other forms of economic activity. To go back to the example of the mountain each Long Wave is like a section of the path. Even in a stretch that is more strongly upward sloping, their will be parts of the path that are flat or even sharply falling. In a Long Boom like that after WWII there were periods of recession or less strong growth. Similarly, in the period of the Long Wave that rises less than the average, there will be years of boom. Taken together, just as with the mountain path, the trajectory remains upward.

Kondratiev also theorised that the different conjunctions, the inflexion points where one part of the cycle ends and a new one begins, also create the conditions, which lead to various social and political phenomena such as wars and revolutions. Periods of strong economic growth typically lasting 20-25 years create a relative shortage of labour power. Wages rise, workers become more confident, more militant, better organised. Capitalists are more inclined and more able to concede to demands. When the boom ends e.g. 1914-20 or late 60’s/1974, the bosses have more reason to resist, industrial struggle becomes more intense, increasingly, militancy is not sufficient. Workers need a political response, and without it they are necessarily defeated, become weaker and demoralised. Similarly, in periods of boom Capitalist states compete economically, but when the boom ends and profits are not so readily available they are forced to compete for markets, raw materials, and outlets for the more profitable employment of their Capital by other means, including War.

When Kondratiev first produced his theory in the early 1920’s, it was subjected to many criticisms. Its one thing to look at history and identify such patterns, its another for these patterns to actually represent the manifestation of objective factors. For it to be a theory it has to be predictive of future events. Moreover, the fact that the duration of the cycle as between 40-60 years meant that it was open to the criticism that Kondratiev had, with such a small sample, simply adjusted the duration to fit the facts. This latter objection can be answered with the reply that the Business Cycle, which everyone accepts exists, was taken as being between seven and twelve years, a greater proportional divergence than the 40-60 years of the Long Wave.

See Also:Kondratiev

As I have set out elsewhere, many other economists such as Joseph Schumpeter adopted Kondratiev’s ideas and developed their own take on it. Today, Stock Market analysts use derivatives of it such as the Elliot Wave. Trotsky disputed Kondratiev’s ideas, because he considered them determinist. Like Lenin, Trotsky believed that politics dominates economics. In fact, Kondratiev was proved right. By the 1920’s, the turn of the Long Wave put workers throughout Europe on the back foot. They were fighting defensive struggles and usually losing. That had its effect on workers consciousness and on the workers’ organisations. Militancy was no longer enough, and the political solutions the workers had at their disposal were inadequate.

Post War Boom and Bust

I first became interested in Kondrtiev’s ideas in the late 1970’s. If his theory were correct then the end of the Long Wave decline that began in 1914-20 should have come some time between 1934 (20 years from 1914), and 1950 (30 years from 1920). In fact, most theorists would put the commencement of the new boom as beginning in 1949. If Kondratiev's theory were correct it would mean the end of that boom some time between 1969 and 1979. No one doubts the existence of a post war boom. For Marxists, stuck in a view of Capitalism in its death throes – carried over from that assertion of Leninism and Trotskyism in the 1920’s and 30’s – the continuation of that boom into the 1960’s posed some problems, which could only be addressed by searching for some peculiar cause for it, be it the conditions created by post-war reconstruction, the ability of imperialist powers to grow on the basis of a super-exploitation of neo-colonies, the role of the “Permanent Arms Economy”, the ability of monopoly capitalism to manage crises, or even of a super-imperialism under US hegemony to fulfil that function on a global scale. But, such explanations were only necessary if the post-war boom was seen as something exceptional. It wasn’t as Kondratiev had shown. The Capitalist economy had seen previous periods of similar expansion of similar duration. What the Marxists saw as the peak of Capitalist rise in the 1920’s and 30’s, was merely just a peak amongst many on its overall upward trend. The decline from that peak did not signify its collapse, but merely presaged the next new rise. If Marxists spent time trying to provide such explanations for a long time, it is ironic that by the time the actual decline does begin they are by the same token required to dismiss it. After all, if all those theories were right then this couldn’t be a prolonged crisis could it?

Moreover, all of these other explanations involved an abandonment of Marxist theory.  The idea that the capitalist economy requires a lack of physical capital, or needs to engage in reconstruction, or requires a permanent diversion of surplus value into arms spending, in order to grow more rapidly, represented a going over of Marxists economists to Keynesianism.  It has nothing to do with Marx's explanation of capital accumulation, as set out in Theories of Surplus Value.  The explanations provided by Stalinist and Third Worldist economists, were even worse.  They explained not just continued, but stronger economic growth in the developed capitalist economies as resulting not, as Marx had set out, from continued growth in the mass of surplus value, accumulation of capital, and consequent rises in productivity, but by super-exploitation and unequal exchange.  In other words, a collapse into Mercantilist ideas that even predate Adam Smith, let alone Marx!

When I first became interested in Kondratiev’s theory in the late 70’s, the crisis had become apparent, yet there was no reason to suspect that it was not just a recession more severe than previous ones, and which Capitalism would deal with as it had done with previous post-war downturns. But, as Mandel sets out in “The Second Slump”, this was not like the previous post-war recessions. The Keynesian intervention was largely ineffective, indeed possibly counter-productive, leading to stagflation. The relief was short-lived with a new downturn in 1981. The policies of Reagan and Thatcher were not the cause of the prolonged nature of high unemployment and slow growth, it was the prolonged nature of the downturn – the 20-30 year down phase of the Long Wave – which meant that Keynesianism had to be abandoned in favour first of the economics of Mises and Hayek, and then of Friedman.

If Kondratiev had been confirmed by the end of the Long Wave Boom in the late 60’s, and certainly by 1974, then he still needed to be confirmed in the duration of the downturn. A look back over that period shows that after the Second Slump of 1974, which continued into the late 70’s, a further downturn begins in 1981 and persists for several years. These are the years of the Peoples March for Jobs, of 3 million (probably actually 5 million) unemployed in Britain, with similar figures elsewhere. By the mid 80’s, the workers militancy that continued in largely defensive struggles through the 1970’s (mirroring the struggles of the 1920’s), was defeated – the Miners Strike in Britain, and similar strikes elsewhere, the sacking of the US Air Traffic Controllers etc. – and policy switched from Miseanism to Monetarism. Increased Money Supply and Supply Side economics boosts profits, but also creates an asset price bubble. In 1987 the consequences – the ballooning of the US Twin Deficits acting as a spark – causes the October Stock market Crash, which is larger in percentage terms than 1929. Two years later the other asset price bubble – property – is also bust, with a new recession beginning in 1991. In this new recession the world’s second largest economy, Japan, suffers a serious deflation that lasts in spite of zero interest rates for 15 years. In Britain, house prices do not recover their 1990 levels until 1996 (later if inflation is taken into consideration). In the US real wages continued to fall, whilst workers sought to cover the fall by working an average two weeks more a year than they were in the 1970’s, and by going more and more into debt. In most of the developed economies, but most notably in the US and UK, what in the 1980’s had been theorised as “De-industrialisation”, sees former long-term manufacturing employment replaced by lower-paid, insecure, often temporary jobs.

The Appearance of Affluence and the Great Ponzi Scheme

Yet, from the late 80’s and certainly through the 90’s an appearance of affluence arises precisely in these latter two countries. Official figures appear to show high rates of growth, and productivity. This appears more marked when compared to mainland Europe where different economic conditions have not led to the same adoption of the “Anglo-Saxon” model. In Europe a greater degree of state intervention and protection of national industries – particularly in France and Germany – means that the effects on workers is not as pronounced, but the cost appears to be slower growth, and persistently higher rates of unemployment. But, the appearance belies the reality. In the US, the figures for productivity growth are largely a fiction, demonstrated by the fact that even in the most productive State – California – productivity per man hour remains lower than in France. With an increasing amount of employment in service industry it becomes increasingly difficult to measure productivity in output terms meaningfully, and as the “Austrian” economist Kurt Richebacher has demonstrated the US growth figures were equally a fiction bloated out of all proportion by the use of hedonic pricing. Nor could the unemployment statistics be believed. In both the US and UK changes were introduced which reduced the reported figures. That is not to forget the nature of these jobs compared with those lost. More importantly, the growth that does occur is built largely of a fiction – of a huge Ponzi scheme, in which wealth appears to continually expand out of thin air, just as long as everyone has confidence it will continue to do so. Capital, having migrated and grown in China, India and other new dynamic economies, produces commodities, which are exported – at very low prices adding to the appearance of affluence – to the very countries that once produced them. In order for the workers who once produced these goods to them they have to have jobs. In place of their former jobs they now increasingly have jobs selling and distributing these very commodities, or else in other service jobs providing for the increasingly varied consumer needs of their fellow workers. A very few find jobs in high value industries such as technology or finance, but these are the exception – though they create an illusion of affluence in a “Loadsamoney” society. As most of these jobs provide services only to the home market, they produce no exported counter-value for the imported manufactures. A trade-gap increasingly develops, and so these jobs can only be financed by borrowing money – from the very Chinese and others from whom the manufactures are being bought. Moreover, with falling real wages workers can only continue to consume and give the appearance of affluence if they make up the shortfall with their own borrowing. It is precisely in the countries of the “Anglo-Saxon” model that this fiction of affluence arises on the back of this almost fanatical obsession of consumption financed by debt. Its no wonder that the term – ridiculous for anyone that thinks about it – “retail therapy” arises, summing up its absurdity, a culture is created in which anyone that does not go into debt to finance the purchase of vast quantities of consumer junk is considered unusual. Feeding this madness is the other consequence of the huge amounts of liquidity fed into the system to maintain the fiction – the return of asset price bubbles in the Stock market and Property Market. These allow the victims of the scheme to further delude themselves by giving the impression of affluence through higher paper prices of their houses and portfolios, leading them to indebt themselves further by borrowing even more against these assets.

Its by no means the first time such manias have occurred. The banker John La persuaded the French Government that it could solve its economic problems through printing paper money. At first his scheme worked. Increased money supply promoted economic activity, sucking up unused resources. But, then the printing of more and more money had the inevitable result, the money became increasingly worthless and once confidence in the money disappeared – the only thing that allows a Ponzi scheme to work, and a Bubble to inflate – the whole scheme collapsed. Similarly in Britain, the 19th Century saw the “South Sea Bubble”, as well as a “Railway Mania”. In Holland there was even a “Tulipomania”, in which tulips were exchanged for fantastically inflated prices until the Emperor was found to not be wearing any clothes. All of these phenomena have the same result. Eventuially, there are no bigger fools left to buy at a higher price. Confidence collapses quickly, and prices even more so.

The New Long Boom

As I have written several times before, Kondratiev was proved right again. The very things his theory predicts occurred. The end of the down-leg is characterised by a number of things. Firstly, there is a final blow-off of debt. That occurred with the Asia currency crisis of the late 90’s and the Russian Rouble crisis of 1999. It is probably only the position of the US economy, and role of the dollar as reserve currency that prevented the dollar and US economy being drawn into that maelstrom at the time. Secondly, the prices of primary products – raw materials, foodstuffs – hit their low point. That too occurred in 1999. That marked the end of the Long Wave downturn, just as Kondratiev’s theory predicted, 25 years after its beginning. The world economy began a strong new Long Wave Boom from that point. After the debt blow-off, the Asian economies and Russia saw their economies grow rapidly, and their cash reserves grow enormously. World Trade began to grow rapidly. Having hit a low of $250 an ounce Gold rose to over $1,000 an ounce, whilst industrial metals like Copper rose even more in price alongside prices of foodstuffs. Meanwhile, new base technologies developed in the preceding innovation cycle, began to be introduced both as means of production, and embedded in new consumer products – in particular the Internet, and mobile technologies. Finally, as the new dynamic economies such as India and China consolidate their positions, changing the relative weight as against the old dominant economies, the baton is passed in preparation for the next cycle to the next generation – the Lion economies of Africa such as South Africa, Kenya, Angola, Congo etc., which now have growth rates even surpassing some of the Asian Tigers, many utilising their resource base, and even, as with Angola, taking advantage of high food prices for large scale investment in what are highly fertile soils with huge agricultural potential.

That is the background to the economic development that led the world to its current situation.

Forward To Part II - Where We Are

1929 And All That

I'm still in Spain, but had to post something given the recent events. Much more to come when I get back

Some time ago, I had gone with my family to Ullswater in the Lake District. We decided to walk up Helvellyn. After about an hour’s walking, bouncing down the mountain towards us came a guy who lives just around the corner from me, and who I see frequently similarly running towards me, while I am out in the fields walking the dog. Our paths crossed in the same manner with no words spoken, but simply an acknowledging glance between us.

The point? Two events that appear to  be similar are in fact completely different. Our occasional crossed paths back home are not unexpected. We live close together and many people walk in the fields, especially if they are walking the dog or out for a run. With similar routines, it is no surprise that if you meet someone once, you meet them again. The crossing on Helvellyn was completely different. On that particular day and time, either of us could have been anywhere else in the world.

There are two points of relevance here. First, the superficiality of taking events or phenomena that appear the same as actually being the same, and second, the problem that economists and social scientists have with randomness. I do not wish to talk about the latter here, but will come back to it in another blog. All I will say about it is to repeat a comment made recently by hedge fund manager Hugh Hendry on CNBC. Asked for a prediction, he said: “I can tell you what will happen in five years, possibly even two, but I can’t tell you what will happen tomorrow, next week or next month.” This might seem odd, but it is not.

In the longer term, the consequences of randomness are removed. It is possible to analyse laws of motion and predict how things should develop, but tomorrow, some random event can cause consequences that no-one could predict.

However, my main concern here is with the former point. The recent chaos on the financial markets has been compared with the 1929 Wall Street crash. It is a false comparison. If the 1929 crash has any comparison, it is with 1987, not 2008. Contrary to popular belief, the 1929 crash did not cause the Great Depression of the 1930s. In fact, the world economy was already in trouble by the time the crash occurred; in fact it played a part in the crash. The long-wave boom that began at the end of the 1880s had ended in 1914, and was the spark for the Imperialist War. A brief post-war boom soon collapsed and recession set in during 1921. Europe remained in economic crisis during the 1920s.

The US, as a dynamic new economy, and benefitting from the introduction of mass production and commercial credit escaped, or more correctly, as Kondratiev pointed out, it was out of synch. The US grew, exported and on that basis was led to cut interest rates and expand money supply, creating an asset price bubble, including a Stock Market bubble. But, that growth could continue for only so long, especially in a world where the major economies were in recession, and it turned into an overproduction of Capital, where commodities could no longer be sold at a profit. That is he realisation, the catalyst, which pops the bubble. The result, the financial crisis, the seizing up of credit and Capital markets, reacts back on the real economy, just as the severity of the present Crunch is beginning to do now, but there the similarity ends.

Its true that the US and UK, in particular, have experienced asset price bubbles in the last ten years just as did the US in the 1920’s, but again the similarity disguises a significant difference. In the 1920’s the US was a young, dynamic economy, similar to China today. Its asset price bubble was a consequence of that – just as China is experiencing a similar bubble today – whereas the asset price bubbles of the US and UK have been the consequences of economic weakness.

In the 1920’s, mass production, Fordism and Taylorism enabled the US to export its cheap production all over the world. Its exports brought it a huge influx of gold. Under the Gold Standard, this meant that its domestic interest rates had to fall, and its money supply increase. This was the mechanism by which trade imbalances were to be resolved. The result should have been an increase in the price of US commodities – inflation. That didn’t happen because although Money Supply increased rapidly the output of commodities rose even faster. In Marxist terms the total value of Exchange Value rose, but the quantity of use values rose faster so that the Exchange Value of each Use Value fell. Then it was the huge productive potential of the US that brought that about, today that of China. Consumers could sate their demand for these Use Values, supply could expand faster than demand. The excess liquidity found its way then not into raising these prices, but into other sectors of the economy, into assets.

In the US and UK over the last 20 years, however, liquidity rose, not due to economic strength and dynamism, not in response to an influx of wealth from exports – quite the contrary, both countries racked up huge trade deficits – but its very opposite. Money Supply rose as called for by Friedmanite economics to counteract economic weakness, and the threat of recession as they suffered during the Long Wave downturn. As Samuel Brittan hints in the Financial Times recently Friedman and Keynes are not opposites but twins. Friedman argued the Depression was caused by too restrictive a monetary policy by the Fed. Neo-liberalism has been just as interventionist as its predecessor but has masked it through the use of monetary policy rather than the more overt Keynesian measures. Now even that mask is thrown away, and even Brittan talks about large doses of Keynesian state intervention.

The difference between the US and Europe in the 1930’s is also instructive. As the depression struck the US it was in a different situation to Europe, which had been in recession throughout the 1920’s. The militancy of European workers, built up during the period of the Long Wave boom from the late 1880’s to 1914, had led to decisive clashes as that boom ended; revolution in Russia, Germany, Austria, Hungary; huge strike waves across Europe; the General Strike in Britain. But, the weakened economic and social position of workers put them on the back-foot as the 1920’s proceeded. It was militant, but not sufficiently class conscious as its collapse into nationalism in 1914 had demonstrated. That lack of class consciousness was partly a consequence of the inadequate Lassallean, statist nature of the Workers Parties that passed themselves off as Marxist of the reformist or revolutionary variety.

In turn that weakness of the class became reflected in those parties, the degeneration into Stalinism and the steady rightward drift of Social Democracy. The basis was laid for the suppression of the European Proletariat. Where it did fight back as in Germany and Spain, it was crushed by fascism, or cowed by the threat as in France. The fact that European Capital had been in crisis for more than ten years, its decrepit nature compared with the US meant that its options were limited. The onset of the crisis in the Us saw a similar outburst of militancy, and a sharp rise in support for the CP and other left organisations. A stronger, more dynamic US was able to respond by adopting the the ideas of Keynes whilst Britain rejected them, and went instead for throwing the full weight of the crisis on to the defeated workers. Only Germany, which had emerged alongside the US as the second new dynamic economy, and on the back of an atomised proletariat, and a certain degree of statisation and economic direction introduced Keynesian measures. Even then, by 1937, in both the US and Germany, recession returned and unemployment began to rise again. Only War and war production meant that these two intervened, and without that they too would probably have abandoned such policies in favour of those adopted by Britain and other capitalist states.

Compare that with the post-war period. As Mandel recounts in “The Second Slump”, there were a number of recessions during the post-war boom of 1949 – 74. Each was cut short compared to previous periods as a result of Keynesian intervention. How explain this? Keynesian intervention requires state spending. The state can only spend if it taxes. Borrowing does not change this, it merely defers that taxation to some future date when the borrowing has to be repaid. But, Marx tells us that taxes are a deduction from Surplus Value. If the state intervenes by spending it does so by – at least in the short term – making the bosses pay to resolve their crisis. It may do so for a number of reasons. Firstly, it may feel that it has to do so to buy off a revolutionary upsurge. A left Social democratic regime can be its best option before having to resort to fascism. Secondly, as with the US in the New Deal, or as in the post-war boom period – and now – such intervention can be a lesser evil than risking undermining faith in the bourgeois regime and bourgeois ideology through a prolonged or severe crisis. If it is a matter of a recession within the context of a period of prolonged growth then once the crisis is over reforms can be clawed back, profits restored, state intervention rolled back. This after all is the basis of Keynesianism. It assumes that over the longer term the intervention is cost free because the increased economic activity utilising unused resources provides the basis of the higher tax revenues that pay back the previous deductions from surplus value.

That was not the case for most of Europe in the 1930’s. It was not true in the 1970’s – 90’s. When the crisis began in 1974 most Governments attempted Keynesian intervention. But, the boom had already been faltering in the late 60’s prompting earlier interventions. Those repeated interventions together with the rising share of Public expenditure in GDP arising from the introduction of welfarism – even in the US – meant that an ever increasing amount of intervention was needed. Moreover, deductions from Surplus value remained as deductions reducing Capital accumulation and the rate of profit. As Governments borrowed their borrowing crowded out private Capital causing interest rates to rise, the cost of capital to rise, and the rate of profit to fall further. Keynesianism could no longer provide a solution to a short term problem, because the problem was no longer short term. The US had also been involved in a huge volume of unproductive expenditure in the form of the Vietnam War. It paid or it by printing dollars, effectively paying its creditors in “funny money”, thereby passing the cost on to them. That led deGaulle to demand payment in Gold, which led in turn to Nixon closing the Gold window in 1971, making the dollar no longer convertible into Gold. It created the conditions in which Gold, as real money, soared in value compared to increasingly worthless paper currencies. In the space of less than ten years Gold rose staggeringly from just $30 an ounce to $800 an ounce.

It was not long then before Keynesianism was abandoned. Governments, instead of increasing spending, cut it. The other reason the Capitalist state does not like Keynesianism during such periods is that it has other consequences. Workers become less militant if they believe that job prospects are worsening. They are more concerned to retain their employment than to fight for higher wages. By preventing a rise in unemployment Keynesian policies work against this natural process that allows the bosses to depress wages. In the Us, the New Deal stimulated further militancy, for instance. Moreover, the best organised workers are often those employed in the Public Sector, the very area increased by state spending. In such conditions in the early 1980’s Capital cut spending and launched a class war against a working class, which whilst militant was, if anything, far less class conscious than it was in 1920 or 1930, and which was effectively leaderless. The ruling class had no need of recourse to concessions or to fascism. By the mid 80’s Capital had won, and could begin stabilising the system. Its main concern was and is to maintain the rate of profit. Its best means for doing that was not Keynesianism but Monetarism. By increasing money supply it prevented falls in nominal prices which are disastrous for monopoly capital. Indeed, inflation meant falling real wages, as well as deferred wages – pensions – and the social wage. Unemployment and inflation could remain relatively high whilst the Rate of profit rose. I have written at length elsewhere on how this increase in liquidity was needed to effect the transition of production to the East, and how this led to the asset price bubble.

Its no wonder then that now the Thatcherite class warriors such as Brittan can come out in favour of Keynesian intervention. For the last nine years the world has been at the beginning oof a powerful 20-30 year Long Wave boom equivalent to that of 1890 -1914, or 1949-74, except this time probably far more powerful and extensive drawing into the industrialised world the Lion economies of Africa. That context means that huge reserves of surplus value are available to be tapped to solve the current financial crisis – a crisis, which for all its ferocity and scope is only now twelve months in beginning to have an effect on the real economy, and that still muted (The IMF still forecasts world growth of 4% way above the 2.5% below which it considers the world to be in recession). No this is not 1929 nor the prelude to a 1930’s Depression. It is a severe financial crisis caused by the excessive liquidity produced by the US, UK and Japan over the last twenty years. The Capitalist state will intervene to do what is necessary to end it using both Monetarist and Keynesian policies.

The working class should learn from that. For years people calling themselves Marxists demanded the nationalisation of the banks and finance houses. Marx himself in his Critique of the Gotha programme condemned such Lassallean statist demands. Socialism is about the working class acting itself to resolve its problems not calling on its main enemy the capitalist state to act on its behalf. Nor does covering up such cringing at the feet of the bourgeois state with a demand for workers control improve things as Marx elaborated. The socialism of those that raise such demands is only skin deep he said. In fact, its now the most right-wing “neo-liberal” governments that are carrying through this demand. That should tell us how progressive leet alone Marxist such demands are.

Of course, Marxists do not prefer private ownership to state ownership, but that gives us no reason to argue for that lesser-evil rather than to argue as Marx did for workers ownership of the means of production, for workers to buy up and take over the running of enterprises as workers co-operatives. As Marx pointed out such demands to the bourgeois state simply sow illusions in it amongst the working class, whereas the job of Marxists is to promote the self-activity of the workers raise it up economically, socially, and ideologically until it can achieve the necessary class consciousness to become the ruling class. The working class has to liberate itself through its own actions by establishing its own property in the form of co-operatives, and its own democratic forms built up on the back of those property forms. It most certainly cannot sub-contract that job to some State, let alone the state of its class enemy.

The demand for workers control of nationalised or State property is a nonsense as Marx set out in the Critique. Would you hand over control of your car, your house or other property to someone else?? Of course not. Then why should a capitalist class particularly possessive of its property do so? The condition would have to be that workers could exercise power over them, just as you might cede control of your car if someone held a gun to your head. That may be possible with individual capitalists, for a short period of time, but the Capitalist State represents the capitalists as a class. For workers to exercise their collective power over the Capitalists state they have to be able to exercise that power over the Capitalist class, that is they have themselves to have become the ruling class, or to be in a position of dual power. It requires that workers control the state or an alternative state, but in that case such a demand to a capitalist state is meaningless. Rather it is the converse that is true. The problem workers will have as Marx pointed out in his Address to the First International is that as workers develop their co-operatives it is the capitalists through their State which will seek to exercise control over the workers property. It is that basic fact which means that workers will have to fight for political power alongside their development of those co-operatives.

The workers attitude should be that outlined by Engels. Let the capitalists go bust. No bailouts for the capitalists. Workers should then demand control of their pension funds and use their resources to take over the banks and finance houses themselves as with any other potentially viable enterprises, and run them as worker co-operatives, building an increasing national and international network of workers property forms as an alternative to Capitalism.

Socialism For The Rich

One of the anchors, for CNBC's US Squawk Box programme, that covers the opeing of the US Stock Markets, Mark Haynes, frequently refers disdainfully to French socialism. The fact that Productivity per man hour in France is higher than even in the US's most productive state, California, is just one of those facts which the upholders of Free Mrket Capitalism in the US, such as Haynes, care not to know about, or when their attention is brought to it, to believe. Of course, what they refer to in France, or Europe in general, as socialism is nothing of the kind. It is nothing more than state intervention by the Capitalist state, an intervention, which is rather more open than that of the US Capitalist State. That is until last week.

Of course, all the bullshit about Neo-Liberalism was just that. The Imperialist/Capitalist leopard had not changed its spots no matter how much those on the Right, or their dupes within sections of the left might have tried to convince us that this was the case. The fact is that the Capitalist State has intervened more into the economy over the last 30 years than it has done before in its history. Indeed, the extent of that intervention in pumping trillions of Dollars, Pounds, and Yen into the world economy over that period in order to ameliorate the consequences of the Long Wave decline, and to smooth the transition of the world economy into one in which the locus of economic activity has moved steadily Eastwards, is the cause of the current Credit Crunch, which is the necessary corrollary of that previous excess. But, what Neo-Liberalism was about was giving the impression that something had changed that the days of overt State intervention, of welfarism in its most developed form had ended. Western Capitalism needed that impression in order to further impress on workers that they were on their own as individuals, that the State would not step in to prevent mass unemployment and so on, and thereby to press wages and conditions ever lower in ordr that the gap between Western wages and conditions and eastern wages and conditions could the more easily be reduced. And more, in an era of globalisation in which the US strode the wrold like a collossus, the return to the original ideas of Capitalism in its progressive, dynamic phase - on paper at least - the ideas, of Freedom, Democracy and so on, provided the cover under which the US and its allies could fulfill their dreams of global expansion, drawing wider regions of the globe within their orbit and control, and establishing outposts and quiescent regimes in regions of strategic importance in the new rush for resources and markets. Now intervention in Kosovo, Iraq, Afghanistan and so on was nothing to do with imperialist expansion you see, but solely for the purpose of extending democracy and Liberty. It was a very powerful and enticing vision, even sections of the left like the AWL were suckered into it.

But, the dialectic reasserted itself with a vengeance last week. I had suggested it was coming some weeks ago when I warned that a severe financial crisis appeared to be about to break. I suggested last week that the consequences of that crisis would be that the US Governmetn would be forced to intervene in a way that was unprecedented not just to save Capitalismn in the short term, but more importantly to save the ideology that stands on the back of the Capitalist system. Within days that forecast proved correct beyond what I could have imagined. I only hope that thousands of French viewers of CNBC have e-mailed Mark Haynes to welcome him to the socialist club, as Haynes along with all the other financial pundits in the US have had to admit that the State had to act to save Capitalism. They are left like Haynes last week confused and left with the only relevant question as Haynes put it "Why is it that in such situations its the little guy who ends up picking up the tab?"

Why indeed? For a Marxist the answer to that question is obvious. The State is the state of a ruling social class, in this case the Capitalist class. Whatever, the illusions of Liberals or those on the left such as the AWL, that State acts in the interests of that ruling class. Its actions are not motivated by some moral or other concerns. For the last 30 years the State has not intevened by taking over companies etc. because it was not in the interests of Capitalism for it to do so. Rather it intervned on behald of the Capitalist class through monetary policy. Now, as the consequence of that is the Credit Crunch, and the potential collapse of the fianncial system which stands at the heart of modern capitalism it is forced to go back to the methods of overt state capitalism.

The latest nationalisations - this time of the mortgage debt on the books of US based fianncial institutions - is reckoned to amount to some $700 billion. Added to the other bailout packages already committed the total is now calculated to be around $2 trillion. This is an enormnous sum. Already last week the US Government was running out of money, even before this latest splurge. It was forced to line up new credit from European and other states. It will inevitably mean the issuance of an even more massive amount of money tokens into the US economy and thereby into the world economy. That is on top of the hundreds of billions of dollars of liquidity that the US, Britian, Europe, Japan and other central banks pumped into the system last week. In the short term the dollar as risen on the back of the fact that tghe State has acted to prevent - for now - the collapse of the US financial system, but the commitment to such a vast expansion of the money supply implied by the atet developements means that in the not too distant future, the dollar is likely to suffer a severe fall if not collapse. Already, last week Gold - real money - rose $80 an ounce in one session alone, the biggest rise ever, equivalent to 10%. Oil too has begun to rise again.

The fact is that the current package - unprecedented as it is - is unlikely to resolve the problem. The fact is that all the State has agreed to do is to take mortgage debt off the books of these institutions - including in its commoditised form as CD's and other derivatives. But, morgtage debt comprsis only one part of the problem. Many of the people who have prime mortgages also have huge amnounts of other debt; credit card debt, overdrafts, debt to sub-prime lenders and loan sharks. Just look in Britain. Even now you see on TV and hear on radion adverts from these sub-prime lenders offering to clear your debts, by some new debt-busting - in reality debt increasing - loan, fronted by people like Carol Vorderman. You see the prudnetial and other companies encouraging older people to give up the security they have in their home, and to take out some equity-release scam. All of this debt is provided on the back of money-market funds, funds now charging igh rates of interest, and to the very people who are unlikely to be able to pay it back. When this avalanche of debt begins to slide the present Credit Crunch will look like a temporary glitch.

Its likely that in order to deal with this problem the Capitalist State in the West will have to reort to methods of the past. For one thing a huge rise in inflation. But, already some signs of the future course of events can be seen. As I suggested some time ago there would be winners as well as losers. The winners would be those, such as the Sovereign Wealth Funds, which had huge amounts of Capital to invest, whereas the losers would be those that had built up a massive amount of leveraged debt. We have seen Barclays snap up Lehman Brothers, or atleast the most profitable bits, Bank of America has taken over Merrill-Lynch, HBOS has been snapped up by Lloyds, whilst Middle eastern and Chinese SWF's have taken large stakes in US banks when their share prices were decimated. Only the latest package prevented Goldman-Sach, Washingtomn Mutual and other huge US institutions being swallowed up.

But, this demonstrates the point. It is typical of the way Capitalism works. Out of this chaos there will be some very, very big winners. Even now, trillions of dollars remains in cash in the hands of investors waiting for the ultimate climactic sell-off - not to mention the trillions sitting on the Balance DSheets of non-financial corporations around the globe - ready to seize huge amounts of Capital on the cheap. The world's greatest financial meltdown yet to come could spell the end of Capitalism as we know it, could spark World War III in a despearate attempt to secure markets and sources of cheap raw materials, or it could spark the greatest investment boom and period of economic growth the world has ever seen. For now, I still favour the latter scenario as most likely.

I beleive its most likely because apart from all of the froth that the furore over the financial crisis represents we still see a world economy whose fundamental are robust. In the last quarter the US economy grew at more than 3%. That is likely toreverse sharply in the curent quarter. Growth in Europe has slowed sharply too, and in Britain and Japan. But China continues to grow at over 10%, as do many other devloping and dynamic economies. Inflation in China has slowed tremendously on the back of a rising RMB, and that has allowed the Chinese State to cut interest rates, as well as introducing a stimulus package - in an economy already growing at 10%! But, even in periods of the Long Boom like the present one there can be serious recessions.

Having said all that Mark Haynes need not worry. This state intervention is not socialism. If it is then it is socialism for the rich. It demonstrates once again the unMarxist nature of the demands of some on the left for the Capitalist State to introduce nationalisation pretending to the working class that such nationalisation represents some form of "socialisation". It is of course nothing of the kind and could not possibly amount to "socialisation" unless that State belonged to "society". It doesn't it belongs to the capitalist class, nationalisation does not amount to "socialisation", it amounts to nothing more than "State Capitalisation". Marxists should oppose it and expose it to the workers for the fraud that it is. Let the Capitalists go bust, and instead of the workers paying for tehir rescue let the workers take over their assets for themselves and run them for themselves as Co-operatives as Marx and Engels suggested.

******

This is probably the last blog for a while. For the next 5 weeks I'm going to be in the midst of the Spanish countryside with no internet connection.

After the Big Bang, The Big Bust

This is just a brief comment. I've had difficulty finding hot spots the last few days.

A Few blogs back I warned of the possibility of a severe financial crisis in the Banking sector. That concern was flagged not just by the on going Credit Crunch, but from the fact that Oil Prices had fallen sharply. Oil Prices have fallen even further now to below $100 a barrel. The reason given for this is fears of a global slowdown reducing demand for oil. There is no doubt some truth oin that, but it is a partial truth.

Back when I posted my initial warning there had been rulours that the cause of the sharp sell-off in oil prices was that a number of Banks and other Financial insitutions were facing a severe liquidity shortage, and were having to sell-off profitable positions in oil and other asset classes, aprticularly commodity futures in order to raise cash. Last week on CNBC a similar poijnt was made by a Financial Analyst from Axa Framlington, Chris Tinker, who said that a number of Hedge Funds and other institutions had been caught in a short squeeze. Over the last year Banks, and Building and Construction company shares have been declining hit by the Credit Crunch and Housing slump, whilst shares in Oil Companies, and other commodity producers such as Miners have been rising sharply as strong world economic growth meant that supply could not keep up with demand. So finance companies have gone long the latter, whilst shorting the former i.e. they have sold shares in them they do not have in the belief that they can buy the shares needed to complete the deal at a later, lower price.

However, in recent weeks shares in Banks and builders have risen as fears over the Credit Crunch receded, whilst oil prices and commodity prices came off their highs as concern over an world economic slow down grew, and as economic actvity in China was deliberately slowed during the Olympics. This meant these companies were caught in a short squeeze i.e. their gamble that prices would fall tuned bad, and they had to scramble to buy shares in Banks and Builders before prices rose further, and this pushed those prices even higher. In order to raise the Capital to cover their short positions they had to resort to forced sales of profitable assets, Oil Futures, and other Commodity Futures which most analysts believe will recover again soon as world economic growth resumes, and as China kicks its production back up after the Olympics.

It was no surprise then that last week the US Government had to intervene to nationalise the two huge mortgage houses Freddie Mac, and Fannie May. Nor was it a surprise that other US Financial institutions soon came into the firing line of the market which looked for the next company to go bust. Lehman Brothers had been touted for some time, and whilst it could possibly have done a deal with A Korean Bank it refused to acept the terms, and then went bust the following day. Barclays also had looked at picking up the Company, and now looks likely to pick up some bits at rock bottom prices as part of the liquidation of the Company. At around the same time after pressure from the US Government and the Fed, the other large US Investment Bank Merril Lynch sold itself to Bank of America. BUt, the contagion is spreading. Analysts now believe that Investment Banks like Merrill cannot survive separate from a large Bank. Other companies such as Morgan Stanley are likely to be next. In the meantime UBS in Switzerland looks to have similar problems, but the bigger risk is AIG the huge US insurer, with a Balance Sheet of over £1 trillion. Its shares have fallen by more than 90%, and although it is receiving financial support from New York State and other sources in a $75 billion package, Bond Traders have signalled that they beleive it is bust by effectively pricing its debt as junk. In similar vein Standard and Poor's has graded the Credit of Washington Mutual another large US finance house as junk too.

The irony is that there is a vast reservoir of cash sitting on the sidelines. Some companies with strong Balance Sheets that have not been so burned by the Credit Crunch - like bank of America are picking up cheap assets. Even today a $3billion taveover of Ciba by BASF took place. As yet, there still seems only marginal carry over of the fianncial crisis to the real economy,and with China cutting interest rates as its inflation rate has fallen in line with the rising RMB the economic downturn still looks to be fairly muted and short lived. However, if the financial crisis does get out of hand that could change. Today even companies such as GE in the US are in the firing line, because in recent years they and companies like General Motors have also diversified into finance. The US Government today made it clear that it saw no reason to save Lehman Brothers. It is watching nervously what happens with AIG, hoping that a Warren Buffett or some other private sector solution will come along. But, in times like these it is sometimes better to do what Barclays is likely to do with Lehman's, wait for liquidation, then buy up what is profitable at a knock down price. The problem with that for the capitalist state is that it could bring trhe whole edifice tumbling down. Not so much in terms of simply the economic crisis that could be much more severe than it would otherwise have been, but the ideological consequence of what it will say to ordianry workers and the middle class about the desirability of free market capitalism. UNder those circumstances they may find that a slight corruption of the free market in terms of a return to the more overt State intervention of the past as opposed to the more subtle state intervention through Monetary policy of the last 30 years is a price worth paying.

The End of the World is Nigh

The Big Bang Machine

Some people think that tomorrow might be the end of the world. In the early hours of tomorrow the Large Hadron Collider at CERN in Switzerland will be turned on. The LHT accelerates particles to within a fraction of the speed of light in order to collide them together at immense energies with the intention of creating new particles. It is hoped that the results of these experiments will either confirm or repudiate the basic assumptions of physics that have operated for some decades now through what is known as the Standard Model. In particular, it is hoped that the experiments will produce if only for a fraction of a second the elusive Higgs Boson, a particle theorised as having existed right after the Big Bang, and which is the particle whose existence is necessary to prove the existence of the Higgs Field which is supposed to explain how matter achieves mass.

But, some scientists have argued that the experiments are dabbling in things not properly understood, and could create phenomena, which could destroy the planet. One common theory is that of the creation of micro black holes, which could grow due to their immensely dense mass to consume all other surrounding matter. Some of these ideas are discussed on Wikipedia here.

I'm not a physicist so I'm not qualified to say whether any of these ideas hold water or whether the response to them from the majority of scientists, which states that the risks put forward do not constitute good science are valid. Similar concerns have been raised in the past, and science does have a habit of undertaking activities that might be dangerous. For example, when the nuclear bomb was being developed the scientists working on the programme themselves did not know whether the chain reaction started by the explosion would be contained or not. From what I do understand of the contending views being put I think it unlikely that these experiments will mean the end of the world, but to an extent that is besides the point. As the above Wiki article points out Britain's own Astronomer Royal, Martin Rees, has speculated in a recent book that mankind has a 50-50 chance of destroying itself. The important issue surely is that science has now reached such a level that in a whole series of disciplines the consequences of error can spell catastrophes on a scale never previously possible. Just look at the way CFC's in a few short years of their extensive use led to the creation of the Ozone hole. It is surely time that the working class demanded that science be brought udner far greater democratic control, that some degree of workers inspection be developed to prevent a small minority who ultimately work in the interests of Capitalist society do not destroy the whole of mankind.

The Big Bucks Machine

In a CNN report today it was disclosed that Sarah Palin, the Republican Vice Presidential candidate, is not only a Creationist - which was disclosed last week - but that she was a member of a Christian Fundamentalist Church in Alaska known as The Assembly of God. The nutters in this cult not only gibber away like cretins supposedly speaking in tongues, but are also Endtimers. There are soemthing like 10 million Endtimers mostly on the Christian Fundamentlaist Right in America, and they had some influence on US politics under Bush, though he mostly relied on their votes rather than subscribed to their views.

The Endtimers are a frightening group of religious zealots. Were they just a small group somewhere their views would be frightening enough. That there are 10 million of them in the world's most heavily and nuclear armed country, a country where 70% of the population still believe that the world is less than 7,000 years old as the Bible bashers claim, and that Man walked on the Earth at the same time as the dinosaurs is even worse. That in such a country one of these nutters is possibly going to be in a position to have her finger on the nuclear trigger if the aged John Mccain were to pop his clogs by natural or other causes is far more frightening than the thought of either the world coming to an end through the experiments at CERN or the possession of a nuclear bomb by Ahmedinejad. Every year thousands of Entimers ffrom the US, UK and elsewhere visit Israel. They encourage conflict between Israel and Palestine hoping that sch a conflict will escalate into the Armageddon prophesied in the Bible, which will bring about the End of Days, and the Second Coming of Christ through which these religious lunatics hope to be saved.

See:Channel 4 - The Doomsday Code

It is necessary to do everything possible to stop Palin and McLean being elected. Of course, I'm not suggesting, even as a topic for discussion, that the fact that the world's most heavily armed nuclear power - and the only one to ever have used its nuclear arsenal (twice) - might under Palin bring about the end of humanity should lead to some pre-emptive strike against the US's nuclear capability or against the Republican candidates. Unlike others supposedly on the Left I can think of many socialist reasons why such actions would have to be condemned. Rather its necessary to build a working class in the US and internationally that is strong enough to remove such threats to human existence.

A Response to Mike McNair on Marxist Theory and the USSR

This is a preliminary response to Mike McNair's reply to our earlier discussion here.

1. I would not disagree that it is necessary to update Marx and Engels analysis in line with new information. However, I think its important to be careful about what new information is taken as valid. They may have had access to only 1% of the historical information now available, but to what extent is that other 99% the product largely of bourgeois science, and not necessarily 100% reliable. For instance, if we take anthropology, Leacock herself, in the introduction to “The Origin”, points to the fallacy of many studies into primitive peoples. Especially, in those areas of science that look into past societies there is a strong tendency of bourgeois social science to simply impose bourgeois norms on to non-bourgeois societies, to use categories such as class, Capital, productive forces and so on as though these were completely ahistorical. That said it is undoubtedly the case that science moves on, and new data is uncovered that allows us to deepen our understanding, and even to challenge some previous assumptions. The question as you say is how far the changes in the actual data and historical account undermine the core theory. As far as I can see they do not.

2. We might want to challenge the actual historical account of how the average rate of profit was formed – I have been doing some work on this myself in recent years – and prices of production, but does this invalidate the Labour Theory of Value, or even the concept of the Average Rate of Profit and prices of Production? Again I don’t think so. If we understand those two concepts in the way Marx did as something which exists in the background as the result of the drive of Capital to maximise profits not as some actual average rate of profit ever achieved, but as a moment within a dynamic process wherein Capital moves from one sphere to another in search of higher rates of profit, then the essential core of Marx’s theory remains. Indeed, I have suggested myself that in modern Capitalism we should update Marx’s theory. I have suggested that modern Capitalism is a version of State capitalism. But this State Capitalism does not operate through the State as such, but through the Stock Market, and its relationship to the State. We have a State Capitalist class that represents perhaps just 0.1% of the population, which has a controlling stake in the main means of production. It often retains some relationship to some particular Capital – for example Bill Gates and Microsoft – but its wealth is so great that it cannot be confined within such bounds. It owns shares across the Capitalist economy, and owns Government debt. The Stock Exchange acts in the same way that the State would do in a truly State capitalist economy – allocating Capital to where the highest rate of profit can be had. But, the movement of Capital is not that which Marx described, but now the movement of fictitious Capital, of instantaneous movements of share Capital in accordance with evaluation of current rates of profit now determined by current and future price earnings ratios, modified in accordance with risk premiums etc.

3. On the State. Does it matter that the State first appeared in Mesopotamia rather than Ancient Greece? The fact remains that in Mesopotamia and the other examples you cite what we had was the process that Engels describes. We had the breakdown of communal societies and the rise of class societies. In China we have the rise not of class societies, but of caste societies. The fact remains that the state arises as a specific institution with a particular purpose – to defend the interests of the ruling class or caste against the rest of society.

4. I don’t think in the same way that the historical evidence you cite in regard of the AMP or of the State under caste based systems changes anything within the core theory of historical materialism either. Surely, the significant aspect of the AMP is not the closed village community, but the need for a strong centralised state to undertake the kind of civil engineering products these societies required. It is this which gives the State its central function within such societies and leads consequently to the importance of those individuals that hold positions within this State. Consequently, it becomes necessary for these functionaries to be able to establish their power not through ownership of the means of production, but through its control. This is essentially what distinguishes caste based societies to class societies. But, whereas class societies reproduce themselves through ownership of the means of production and through inheritance of property, caste based societies can only achieve that through passing on control, and that means passing on social positions not property through birth. In order to do that such societies need completely different sets of mores, taboos, and laws to class societies. The Indian Caste system is a more classic version of that, whereas in contrast in China and other parts of Asia conflicts arise over control some degree of social mobility creates competing power centres, and so there are repeated overthrows of one Dynasty only to be replaced by another, whilst the basic social structure remains intact. I haven’t read it for some time, and don’t have access to it at the moment, but as I recall Mellotti’s “Marx and the Third World” deals succinctly with these issues.

5. States and ruling classes. I think your first example is wrong. Is it possible that in pre-class societies a bureaucracy existed. Yes, indeed likely if we take this as meaning some need for undertaking administrative functions and even religious ceremony. But, the same will be true of Communist society won’t it? It will be necessary to have some form of bureaucracy to undertake administrative functions. But, that is not the same as a State bureaucracy. Such a bureaucracy is not some independent factor in society ruling in its own interests, and conducting the economy in accordance with some laws of motion separate from those determined by society itself. The potential exists within such a society for such a bureaucracy to turn itself into such an independent factor, and Engels describes that process in Anti-Duhring in respect of primitive communist societies, but such a development must entail such a bureaucracy turning itself into either a ruling class, or a ruling caste. I agree with Trotsky’s analysis that the Soviet Bureaucracy could have turned itself into a ruling caste, I just don’t think it ever actually did, and the facts about its composition, about the laws and mores that existed within this society prove that it didn’t.

6. In relation to your second example this is very similar to the analysis I gave in relation to Cromwell’s State. However, I think there is a significant point here that requires further discussion. I believe that Leninism blurs the distinction between two different things – political power and state power. I would argue that Cromwell’s State remained in large part a feudal State not a Capitalist State. Cromwell as a representative of the nascent bourgeoisie exercised political power through the Dictatorship, and in so far as he held military power exercised State power on behalf of the bourgeoisie. But, the State is not just the exercise of military power, especially the more sophisticated society becomes. Its arguable that the ideological arm of the bourgeois State is far more important today than its bodies of armed men. Cromwell’s State failed because the material conditions within the society were not adequate to provide the human material for a sufficiently strong and class conscious bourgeois class to fill the State with a bourgeois class content. That fact did not stop the bourgeoisie exercising political control. In the same way the Chilean State was bourgeois, but that did not prevent the working class temporarily exercising political control, and to a certain extent political control is surrendered repeatedly to Social Democratic forces, or to Fascism where this meets the needs of the ruling class.

Leninism tends to deny this separation of State and Political power, because to accept the idea that the working class could exercise political power without actually holding State Power is seen as a concession to reformism.

7. On the USSR and serfdom. I think there are many, many problems with this theory. The first problem I think is that it fails to deal with the human element, and what motivates humans to act in various ways. The second and related problem is that I think it is ahistorical. To elaborate. For serfdom to exist in the 18th century, and to persist is rational and explicable. The level of productive forces were such that even in Britain Land and agriculture were the dominant productive forces. Commercial Capital exists and develops not by creating new value, but by buying low and selling high. The Landlords do not exploit labour as serf labour, or as peasant labour because it just takes their fancy to do so. They do so because that is the most efficient means of doing so given the level of productive forces. Once those productive forces change and capitalist production not only becomes possible, but becomes a more effective means of extracting a surplus it is not only a new Capitalist class that develops, but the old Landlord Class begins to utilise its land ownership capitalistically, begins itself to transform itself into a capitalist class.

But, in the Soviet Union this was not true. If we take your bureaucracy that stands as some new ruling class or caste over a vast economy of serfs the first question a Marxist has to ask is why given historical reality does this ruling class decide to exploit labour in this way, a way that is understandable for the conditions of the 18th century, but is incomprehensible in the conditions of the 20th.? We can only assume that the actual human beings that made up this new ruling class or caste were just as interested in maximising the extracted surplus as any other ruling group, so why not do so by Capitalistic methods rather than the methods of serfdom? That was not possible in the 18th century, but it was certainly possible in the 20th.

8. Now I have suggested the theoretical possibility that society could develop in the direction of what I have called “technological feudalism” that is that the changing nature of modern technology and production relations is leading to an atomised working class, and that increasingly production can be undertaken by individual workers sitting at a computer screen in their own home selling the products of their labour rather than their labour power in a Global Internet market place, and that a new Landlord class of owners of this cyber space could develop which charges a rent for use of that cyber space, but that is only a possibility for the future based on a projection of how productive relations might change, it cannot be used as an argument in relation for the existence of a serf class and Landlord class in the USSR.

Plenty of Shiraz But No Socialism

A couple of weeks ago after being told by Jim Denham at the Shiraz socialist blog that he wanted to ban me rather than engage in rational debate I wrote that I would save him the trouble, bevcause for the next couple of months or so I would be touring Europe. It had been my intention to concentrate on some rlaxation and re-writing of my novel. But I was drawn to the Shiraz site by a link about the resignation of Dave Broder from the AWL. Incidentally, I am glad he has been able to make this move in time.

Whilst there I spotted another rant by Jim Denham in response to my letter to the Weekly Worker about Denham and the AWL's position on South Ossetia. Such letter's are now necessary in addition to my comments here because the AWL simply delete my comments to there site - a practice they now seem to be adopting generally to other comrades too - and there hacks like Denham threaten the same response elsewhere.

So I wrote a brief response and submitted it. It didn't appear so I can only assume that Denham has effected his threat to ban me from the site. Interesting, because at the top of the post he had asked me for my opinion on reports of Russian ethnic cleansing in Georgia!!! That seems to be one of his odd ways of arguing, for example lamely claiming that I had been frightened to take up his challenge in the original post - because I had not seen his comments immediately to respond to - and then accusing me of lying when I explained why I had not immediately responded! The charge is ridiculous I am not frightened of Jim Denham on any basis of human existence, or any sphere of human activity. Replying to his lame argument took only a matter of minutes. Now he demands a reply, but prevents me from replying by physically banning me from the site! When that first happened with the AWL they claimed it was a "technical error". They dropped that pretext a short time ago, and Denham simp[ly announces his intention in advance. This from people who claim to want "rational debate". Dave Broder's piece showed how "kitsch" that claim is.

Denham asks what my attitude to reports of Russian ethnic cleansing is in Georgia. The answer is simple. Look at my blogs here. At the time it happened - not a week later as it took the AWL to dream up a form of words to cover their difficulties given their position on Kosovo - I posted my blog "Georgia and Russia out of South Ossetia". Look at all the other blogs that followed that give no support to either Georgia or Russia in this conflict and which instead insisted on the need for a workers solution and for the building of workers unity across borders. Comnpare that with the apologism of Denham's piece in respect of the Georgian agression, an apologism that is symptomatic of the AWL's posiitons over the last few years which have sought to defend the actions of imperialism and its agents - the apologism in advance of an Israeli attack on Iran being just the latest.

The other Minority comrades in the AWL should follow Dave Broder and Chris Ford's example. Get out of this degenerating Stalinist sect now before you are corrupted any further.