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Anti-Duhring, Part I Philosophy, X – Morals and Law. Equality - Part 5 of 24

I have described, elsewhere, the reasons why that has happened, and its implications. What this indicates, however, is that the market capitalisation of a company's shares is not even directly related to its profits, with any given market rate of interest. Certainly, if a company's profits double, its potential to pay twice as much in dividends rises accordingly, but, whether that potential is realised is another matter. Similarly, the fact that the proportion of profits going to dividends has risen from 10% to 70% shows the opposite is also true, i.e. the profits of a company may not rise, and yet the amount it pays in dividends may do so.

Of itself, that rise in dividends, irrespective of profits, for any given market rate of interest, causes a rise in the capitalised value of the shares. If I have £1 in the bank, paying £0.10 in interest, I have no incentive to buy a £1 share providing the same £0.10 in dividends, particularly given the risk involved in share ownership. But, if the share provides £0.20 of dividends, I do have an incentive to buy the share. Money, moving from bank deposits to bid for a limited number of these existing shares, thereby, pushes up the price of those shares to £2, where the dividend of £0.20, now, again, only represents a yield of 10%.

But, as I have also described, the opposite is also true. If market rates of interest fall, in a secular trend, as they did from around 1982 onwards, the capitalised value of shares, and other assets rises. Then, any given amount of dividends means a lower yield, also, on those shares. If the market rate of interest falls from 10% to 5%, a dividend of £0.10 produces a capitalised value of the share of £2, rather than £1, even though no rise in the company's profits or dividends has occurred. The dividend yield, also, now falls to 5%. However, the shareholders, specifically those with a controlling interest, are unlike other creditors, or asset owners, or people with savings in a bank. The shareholders, because they appoint Directors of the company to look after their interests, can simply increase the level of dividends.

The Directors are themselves, usually, holders of considerable numbers of shares, and so benefit from such decisions, and they often have remuneration packages that include share options, to buy shares at a fixed price, which they can choose to exercise when the share price rises above it. Its true that, if the company profits are used to pay excessive amounts of dividends to share holders, rather than being used to accumulate additional real capital, the company itself will become uncompetitive, and, eventually, fail. However, the Directors of the company are not bothered by that, as against the situation of the actual day to day managers of the company, or even the position of the old private capitalists. Marx notes,

“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...

Conceptions which have some meaning on a less developed stage of capitalist production, become quite meaningless here. Success and failure both lead here to a centralisation of capital, and thus to expropriation on the most enormous scale... Since property here exists in the form of stock, its movement and transfer become purely a result of gambling on the stock exchange, where the little fish are swallowed by the sharks and the lambs by the stock-exchange wolves.”

(Capital III, Chapter 27)

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Anti-Duhring, Part I Philosophy, X – Morals and Law. Equality - Part 4 of 24

As I have set out elsewhere, and which I cannot go into further, here, however, its necessary to, also, understand the nature of modern imperialism, and of the role of the global ruling-class, in its characteristics and interests, which also reflects the maturity of the contradictions within the modern social-democratic state. The dynamic of imperialist capital, as described by Lenin and Trotsky, is the need to produce on an ever larger scale, and so to continually require ever larger single markets, and states. But, the nature of large-scale, socialised capital, in the form of the corporation, is that control over that capital rests not with its collective owners – the associated producers, i.e. workers and managers – but with a select group of creditors, i.e. the shareholders.

When we examine the takeover of companies, therefore, what we see is not the purchase of the capital of one company by another, but the purchase of a controlling portion of the shares of one company by another. In effect, that is more akin to the behaviour of feudal landowners than the processes of centralisation and concentration of capital described by Marx, Engels, Lenin and Trotsky and others. There was no objective basis driving one feudal lord to take over the domain of another, in the same way that competition between capitals leads to such concentration and centralisation, to survive.

The reason feudal lord A takes over the domain of B is not that any economies of scale etc., and rise in productivity is obtained, but solely that, in doing so, the total amount of feudal rent and taxes they obtain increases proportionately. In terms of share ownership, if the dividend yield is given, there is similarly no significant economies of scale, or increased productivity for the individual shareholder, whether they own 1,000 shares or 1 million shares. The only benefit, as with the landlord, is that with a yield of 5% the first produces £50 of revenue, and the second £50,000 of revenue. The real advantage, however, comes from the fact that, with a very large shareholding, the shareholder gains control over the real capital of the company. They get to appoint Directors, who act in the interest of those shareholders, and not the interests of the company, and its real capital.

Take the point made earlier in relation to takeovers. If the market value of shares in company A is £10 million, with 10 million shares issued, it is usually only necessary to have control of around 30% of shares to exert control, because the other 70% of shares are in diffused ownership, with many of the small shareholders never bothering to vote. With £3 million, therefore, its possible to have control of a company with a market capitalisation of £10 million. In fact, this market capitalisation is only the current value of its shares, but the company will have assets, real capital, usually, way in excess of that.

The market capitalisation of shares is based on the capitalised value of the revenue of the shares, i.e. the amount of dividend each share produces for its owner. If a share produces £0.10 of dividends, and the market rate of interest is 10%, then the capitalised value of the share is £1, if the rate of interest is only 5%, the value of the share is £2. However, the amount paid as dividends is only a fraction of the actual profits produced by the company. As Haldane noted, in the 1970's, dividends amounted to only 10% of profits, as against 70% today.

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Anti-Duhring, Part I Philosophy, X – Morals and Law. Equality - Part 3 of 24

In fact, as Lenin and Trotsky noted, there was no evidence that imperialism retarded economic development compared to free competition. On the contrary, as Marx noted in relation to India, even under colonialism, it brought about the first real social revolution, the investment in railways brought further economic development, and, as railways did everywhere, solidified different regions within the nation state. A large part of economic development, in Russia, resulted from the investment there by large-scale foreign capitals, which is one reason that Lenin sought to encourage them to stay, and more to join them after the revolution. The same was true, as Trotsky set out in China.

Lenin goes on,

“Even if we correct this argument and say, as Spectator says, that the trade of the colonies with Britain is now developing more slowly than their trade with other countries, it does not save Kautsky; for it is also monopoly, also imperialism that is beating Great Britain, only it is the monopoly and imperialism of another country (America, Germany).”

(ibid)

Which indicates that, as against the conditions existing under colonialism, what imperialism signifies is that, the role of industrial capital, as against the role of mercantilism, and the former's basis of the production of surplus value, in production, via the export of capital, meant that these competing imperialist states could be played off one against another, as each sought to obtain access to the reserves of labour-power in these developing economies.

Lenin's argument was the same as that used against the Narodniks 25 years earlier, but he could also see what happened in the US, where the large trusts were broken up in the 1890's. As predicted, each smaller component simply now, itself, became a new monopoly. Sometimes, that occurred by the weaker of these companies succumbing, enabling the others to expand, or, also, occurred as each company engaged in vertical integration, taking over its suppliers and customers, as well as the creation of conglomerates. That also includes, in the form of multinational companies, the taking over of capitals in the same sphere, in other countries, which, of itself, creates the requirement for a capitalist state providing and protecting bourgeois property laws, a level playing field for all capital. In other words, the same dynamic that went with the development of capitalism and produced the nation state, now applied on an international scale, and produces the need for the multinational state, as the minimum adequate form, in the era of imperialism.

Looking at the privatisation of the various state monopolies, in Britain, for example, in water, electricity, telecoms, coal, steel, gas, road and rail transport, the consequence was not a return to some mythical golden era of free competition (even with the assistance of specially created bureaucratic quangos responsible for it) and lower prices etc. In each case, the result was that each of these simply ended up being taken over by other monopolies, or more or less disappeared. Coal production, which at one point employed 2 million workers, effectively disappeared. The original reason was that cheaper coal could be imported, but that was supplemented by the “dash for gas”, which saw coal consumption itself fall dramatically.

Some of the water companies were taken over by foreign utilities companies, some by other UK water companies. Some merged with other utilities companies, providing energy etc., such as United Utilities, forming new conglomerates. Steel production was decimated by foreign competition, and where it was maintained it did so only by the British state giving large financial handouts to foreign steel conglomerates such as Tata and Mittal, to take over that production.

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Anti-Duhring, Part I Philosophy, X – Morals and Law. Equality - Part 2 of 24

To demand, as the liberals and petty-bourgeois, moral socialists do, that monopolies be broken up, in favour of competition between smaller capitals is not only reactionary, but utopian, because, as Lenin notes in “Imperialism”, quoting Hilferding against Kautsky, even if that is done, the competition between these smaller capitals only goes through the same process once more, leading again to the formation of new monopolies.

““It is not the business of the proletariat,” writes Hilferding “to contrast the more progressive capitalist policy with that of the now bygone era of free trade and of hostility towards the state. The reply of the proletariat to the economic policy of finance capital, to imperialism, cannot be free trade, but socialism. The aim of proletarian policy cannot today be the ideal of restoring free competition—which has now become a reactionary ideal—but the complete elimination of competition by the abolition of capitalism.””

(Lenin – Imperialism The Highest Stage of Capitalism)

This contrasts starkly both with the approach of those on the “Left”, who continually seek to advise on how the capitalist state should best organise its affairs, as though this was simply some kind of technical operation, free from class interests, let alone those who pursue the delusion that they can somehow have the capitalist state operate in the interests of workers. It is, also, in stark contrast to the ideas of building an “anti-monopoly alliance”, as a Popular Front with the petty-bourgeoisie, whose international form is the alliance with various bourgeois and petty-bourgeois nationalists in an “anti-imperialist” alliance to oppose the role of multinational capital, globalisation and so on.

Lenin continues,

“Kautsky broke with Marxism by advocating in the epoch of finance capital a “reactionary ideal,” “peaceful democracy,” “the mere operation of economic factors,” for objectively this ideal drags us back from monopoly to non-monopoly capitalism, and is a reformist swindle.

Trade with Egypt (or with any other colony or semi-colony) “would have grown more” without military occupation, without imperialism, and without finance capital. What does this mean? That capitalism would have developed more rapidly if free competition had not been restricted by monopolies in general, or by the “connections,” yoke (i.e., also the monopoly) of finance capital, or by the monopolist possession of colonies by certain countries?

Kautsky’s argument can have no other meaning; and this “meaning” is meaningless. Let us assume that free competition, without any sort of monopoly, would have developed capitalism and trade more rapidly. But the more rapidly trade and capitalism develop, the greater is the concentration of production and capital which gives rise to monopoly. And monopolies have already arisen—precisely out of free competition! Even if monopolies have now begun to retard progress, it is not an argument in favour of free competition, which has become impossible after it has given rise to monopoly.

Whichever way one turns Kautsky’s argument, one will find nothing in it except reaction and bourgeois reformism.”

(ibid)

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The Idiocy of Trump's Tariffs (3) - The UK's Mini-Trump

The UK's Mini-Trump

Prior to Brexit, Boris Johnson played the role of Mini-Me to Donald Trump's Doctor Evil. Starmer has simply taken over the role as understudy. Johnson had the similar features, boorish behaviour and so on, whilst Starrner lacks all of the charisma usually associated with such a Bonapartist, but, in terms of political practice, most evident in relation to the adoption of Brexit, and petty-bourgeois nationalism and so on, in search of the support of the votes of reactionaries, there is straightforward continuity.

As I argued at the time of Starmer's leadership bid, he would be the hostage of the Labour Right, a fact that has now been shown in the recent revelations.

He is the puppet of Blue Labour, a clockwork automaton, wound up and set in motion by them, with no ideas or principles of his own, and Reeves seems to have been produced from the same mould. Trump's approach to Britain, of suggesting it might escape the imposition of his tariffs, partly reflects the irrelevance of the British economy outside the EU, partly the fact that the UK's trade is more or less in balance with the US, as against the large EU trade surplus with the US, and partly the fact that, in adopting this stance, Trump seeks to drive a wedge between the UK and EU, for his own advantage.

The UK has, since WWII, acted as the US agent in the EU. The EU is, objectively, the main competitor to the US, even though, currently, in alliance with, and subordinated to it, in the global imperialist competition with China/BRICS+. The UK has acted to keep the EU in that position. Over that time, the UK has oriented economically to its nearest and most important trading partner – the EU – whilst orienting politically, militarily, and strategically to US imperialism. That was most evident under Blair, as seen in relation to the Iraq War, and it is the basis of Starmer and Reeves' attempt to maintain the stance that they will not side with either the US or the EU, which really means siding with the US. It is a position that is no longer viable.

The total value of UK trade with the US is £294 billion. UK exports to the US amount to £60 billion. Total UK trade with the EU, however, is £847 billion, and UK exports to the EU £356 billion. The EU accounts for 42% of UK exports, and 52% of UK imports. So, it is a no-brainer. UK exports to the EU are six times the value of its exports to the US. Indeed, its exports alone are greater than the total value of trade with the US. Starmer's attempt to say that he is neutral between the US and EU, is not sustainable, and Trump's Tariffs simply bring that out into the open more quickly.

UK trade with the EU is dominant, despite all of the constraints placed on it by Brexit. That is inevitable, because of the proximity of the two. If Trump imposes Tariffs on the EU, but not Britain, and Britain attempts to obtain advantage by negotiating some deal with Trump, it will simply provoke a response from the EU. The cakeist idea of negotiating some kind of favourable Brexit was and is, total nonsense, but under conditions of Britain trying to do deals with Trump, at the expense of the EU, it is even more nonsensical. Indeed, the idea put forward by Ed Davey of some kind of UK-EU Customs Union, is also ridiculous. Firstly, the EU has said there is no way such a set up would now be undertaken, without Britain, or any other country joining the EU itself. Secondly, as set out during the EU Referendum campaign, there is no great benefit from being in a Customs Union without being inside the Single Market.

If the UK were in a Customs Union with the EU, it would certainly make Trump's attempts to divide the two impossible, but the main impediments to trade, in these conditions, arise not from the tariffs, but all of the other non-tariff barriers to trade. It is the vast increase in red-tape that has resulted from Brexit that has reduced trade, slowed the movement of goods, and raised costs, for Britain. So Starmer's cakeist solution is impossible, and if he is drawn into the lair of Trump, it will simply extend the damage done by Brexit even further, and make trade with the EU even more difficult.

It may be that Starmer and Reeves do get drawn in the direction of Trump, however. The promise of some freebies, of the possibility of access to Trump resorts, or future jobs, might be all that is required, based on the experience of the last six months. But, also, Starmer and Blue Labour share the same reactionary, petty-bourgeois nationalist ideology as Trump. As we speak, a group of even more far-right, nationalist and racist members of the PLP are demanding that Starmer position Blue Labour to the Right of Reform, in relation to immigration, as they scrabble for the votes of racists and bigots, and, thereby, continue the destruction of Labour, as they push its core, progressive, working-class support in the direction of the, superficially, more progressive Liberals, Greens, Plaid, SNP etc. 

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