“Income Tax, National Insurance, VAT, car tax . . . it all adds up. In fact, in 2009 the average Briton had to work 134 days before they had earned enough to pay their taxes”.

The source was given in the small print at the bottom of the page as the Mad Marketeers of the Adam Smith Institute who each year calculate a “Tax Freedom Day” as the day when people supposedly begin to keep the income they “earn” instead of it going to the taxman. According to the small print, “This is calculated with the total tax paid each year by a taxpayer on average income, including indirect taxes, local taxes and National Insurance contributions.”

Actually it is not calculated in this way at all. What is calculated is total government tax revenue as compared to “net national income”, but instead of presenting this as a percentage – 36.7 percent – it is presented as a number of days out of a year (134/355 is the same as 36.7/100). At no point does a figure for the “average income” of the “average Briton” enter into the calculation. This is merely the tendentious and populist way of expressing the result of calculating government tax revenue to national income.

Even if we leave aside the Marxian contention that taxes on wages and salaries are passed on to employers and so ultimately fall on profits. not all taxes are paid by individuals. There are some two million capitalist firms in Britain and these pay taxes (corporation tax, business rates, etc). The Adam Smith Institute gets round this problem by saying that such taxes “ultimately are paid by the owners of each business”. This is to admit that it is not just the income from work that is involved, so that it is illegitimate to talk, as does the HSBC advertisement, of people having to “work” so many days a year to pay taxes.

The Adam Smith Institute’s expert is more cautious, claiming only that their so-called Tax Freedom Day is “the day when the average Briton earned enough to pay his annual tax bill” This is to play on the ambiguity of the word “earned” as, if challenged, they would no doubt reply that this is not just income earned from work (which is what most people including HSBC’s advertising firm would think is meant) but also income so-called “earned” from owning savings.

Adam Smith himself pointed out, in the opening sentence of The Wealth of Nations (he wasn’t as bad as the Institute that’s hi-jacked his name), that labour is the source of the whole of a country’s national income:

“The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consist always either in the immediate produce of that labour, or in what is purchased with that produce from other nations.”

This being so, the share of profits in national income is a product of labour, in fact of the unpaid labour of workers. In 2008 the share of profits in National Income was 24 percent. This is the same as 88/365, so it could be said that the “average worker” works 88 days out of 365 to produce profits for their employer. In which case 29 March would be what might be called Profit Freedom Day. It will be much later than this, except that the concept is misleading in that, as Marx pointed out, workers produce surplus value every minute they work. So there’s no day when they’re not exploited for profit.

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These elections are taking place in the middle of the biggest economic and financial crisis since the 1930s. In a world that has the potential to produce enough food, clothes, housing and the other amenities of life for all, factories are closing down, workers are being laid off, unemployment is growing, houses are being repossessed and people are having to tighten their belts. And for once the main parties are being honest in offering more of the same, competing with each other as to which of them is going to impose the most “savage cuts”.

Capitalism in relatively “good” times is bad enough, but capitalism in an economic crisis makes it plain for all to see that it is not a system geared to meeting people’s needs. It’s a system based on the pursuit of profits, where the harsh economic law of “no profit, no production” prevails. The headlong pursuit of profits has led to a situation where the owners can’t make profits at the same rate as before. The class who own and control the places where wealth is produced have gone on strike – refusing to allow these workplaces to be used to produce what people need, some desperately. So, as in the 1930s, it’s poverty in the midst of potential plenty again. Cutbacks in production and services alongside unmet needs. Why should we put up with this? There is an alternative.

But that’s the way capitalism works, and must work. The politicians in charge of the governments don’t really know what to do, not that they can do much to change the situation anyway. They are just hoping that the panic measures they have taken will work. But the slump won’t end until conditions for profitable production have come about again, and that requires real wages to fall and unprofitable firms to go out of business. So, there’s no way that bankruptcies, cut-backs and lay-offs are going to be avoided, whatever governments do or whichever party is in power.

What can be done? Nothing within the profit system. It can‘t be mended, so it must be ended. But this is something we must do ourselves.

The career politicians, with their empty promises and futile measures, can do nothing for us. We need to organise to bring in a new system where goods and services are produced to meet people’s needs. But we can only produce what we need if we own and control the places where this is carried out. So these must be taken out of the hands of the rich individuals, private companies and states that now control them and become the common heritage of all, under our democratic control. In short, socialism in its original sense. This has nothing to do with the failed state capitalism that used to exist in Russia or with what still exists in China and Cuba.

THE SOCIALIST PARTY is putting up a candidate, here in Vauxhall, to give you a chance to show that you don’t want capitalism but want instead a society of common ownership, democratic control and production just for use not profit, with goods and services available on the basis of “from each according to ability, to each according to needs”.

If you agree, you can show this by voting for us. But more importantly get in touch with us to help working towards such a society after the election is over.

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In August 1918 the Socialist Standard pointed out that, while there were industrial towns in Russia, the country was largely agricultural with about 80 per cent of the population still living on the land. The answer to the question whether “this huge mass of people” (about 160 million), which indeed included some industrial and agricultural wage slaves, was “convinced of the necessity and equipped with the knowledge requisite for the social ownership of the means of life?” was “No!”; beyond the fact that the leaders in the November movement claimed to be Marxian socialists there was no justification for terming the upheaval in Russia a Socialist Revolution.

Our analysis of the situation was based upon Marx’s definition of capitalism as a relation of wage-labour and capital and on the conditions necessary for that relation to be ended and replaced by socialism. Before “the Communistic abolition of buying and selling, of the bourgeois conditions of production”, as the Communist Manifesto put it, can happen, there must be a sufficient development of the productive forces, and the class which has to sell its labour power in order to live – the working class – must fully understand what is involved and be ready to take the necessary political action.

The conditions envisaged by Marx to be necessary for the ending of capitalism and establishing socialism did not exist in Russia in 1917, so why have the events been claimed as socialist?

Russia in 1917

The country had suffered huge losses during the war against the more heavily industrialised Germany, the economy was in a mess and there were food riots. The Tsar had been forced to abdicate in March 1917 – while both Lenin and Trotsky were out of the country – and the situation was confused. There was a provisional government which included capitalist and landowning representatives. In July Kerensky became leader with support from the Committee of the Duma (the Russian parliament) but with increasing support from the councils of Workers and Soldiers – the Soviets. However he continued with the war despite its unpopularity.

There was widespread discontent with soldiers, workers and peasants reacting against the adverse conditions, which the Bolsheviks were able to take advantage of the discontent. They gained control of the Soviets using slogans like “All power to the Soviets”, and crucially “Peace! Bread! Land!” In other words, this was what the war-weary, hungry workers and peasants wanted – they were not after socialism. That there was not a majority ready for socialism would not have concerned Lenin. The situation fitted his vanguard theory that the working class by its own efforts is only able to develop trade union consciousness and needs to be led by professional revolutionaries. There were enormous difficulties including the backward state of the country and the civil war; also the expected uprisings in other European countries did not take place. The development of capitalism was all that could happen and the Bolsheviks as the new rulers would have no choice but to do their best to aid it.

That it was a minority revolution is illustrated by the way in which Lenin dealt with the political situation. The All-Russia Soviet Congress had met in November 1917 and had passed resolutions in favour of peace, ending landowners’ rights to possession of the land, and the setting up of a ‘workers and peasants’ government, headed by Lenin and dominated by the Bolsheviks, pending the election of a democratic ‘constituent assembly’.

However when the Constituent Assembly was elected the Bolsheviks did not have a majority and it was dissolved. Trotsky’s excuses for this are instructive – the election had taken place too soon after “the October Revolution” and news of what had taken place spread only slowly. “The peasant masses in many places had little notion of what went on in Petrograd and Moscow. They voted for ‘land and freedom’”. Precisely, for that, not socialism. So, not only did the Bolshevik takeover not have majority support, majority support for socialism not present either.

By the middle of 1918 the Communist Party (as the Bolsheviks were now called) had firmly established its dictatorship and freedom of the press and assembly were restricted. The All-Russia Soviet Congress had ostensibly taken all power to itself but this was a façade. The Congress elected the 200 members of the Central Executive Committee but the credentials of delegates to the Congress were verified by Communist Party officials. Lenin claimed that what he called “Soviet Socialist Democracy” was “in no way inconsistent with the rule and dictatorship of one person; that the will of the class is at times best served by a dictator” and this was approved by the Central Executive Committee in 1918 (Martov The State and the Socialist Revolution, p.31).

Labour discipline

Raising the productivity of labour was a priority. In an address before the Soviets in April 1918 (The Soviets at Work) Lenin declared that not only was it necessary to halt ‘the offensive against capitalism’, they also had to employ capitalist methods which included strict discipline at work. They should immediately introduce piece work and measures which “combine the refined cruelty of bourgeois exploitation and valuable attainments in determining correct methods of work.” The previously stated aim of equal wages for all was abandoned and a “very high remuneration for the services of the biggest of the bourgeois specialists” was agreed. State control was seen as the “means to establish the control and order formerly achieved by the propertied classes” and he chided those who considered the “introduction of discipline into the ranks of the workers a backward step”.

In January 1920 the Bolshevik government abolished the power of workers’ control in factories and installed officials who were instructed by Moscow and given controlling influence. Democratic forms in the army had also been abolished.

The need to use capitalist methods to control and discipline workers in order to increase production, illustrates the absence of the absolute pre-requisite for socialism – the conscious participation of the majority of the working class.

State capitalism

In 1921 the Bolshevik government adopted a New Economic Policy. In proposing it Lenin argued that permitting some private industry and allowing peasants to keep surpluses were not dangerous for socialism. “On the contrary, the development of capitalism under the control and regulation of the proletarian state (in other words ‘state’ capitalism of this peculiar kind) is advantageous and necessary in an extremely ruined and backward peasant smallholder country…in so far as it is capable of immediately improving the state of peasant agriculture.”

Our criticism of Lenin, Trotsky and the Bolsheviks is not that they did not achieve what was not possible at the time, i.e. socialism. It is rather that they adjusted theory to suit the circumstances: seeing the necessity for capitalist development they claimed that state-monopoly capitalism was socialism. In Can The Bolsheviks retain State Power? Lenin wrote about the “big banks” as the “state apparatus” needed to bring about socialism. “A single state bank…will constitute as much as nine-tenths of the socialist apparatus”.

It was also Lenin who said in The State and Revolution in August 1917 that the first phase of communism was usually called socialism, when Marx made no such distinction between the terms. (In the 1888 Preface Engels refers to the Communist Manifesto as the most international of all Socialist literature). In Marx’s conception of the first phase of communism there was still common ownership, an end to buying and selling, and no money. (Marx mentions the possibility of labour time vouchers despite their obvious drawbacks). What happened in Russia did not qualify even as a “first phase of communism”.

Contemporary Trotskyists still call their aim of state capitalism socialism. The former Militant Tendency (now called SPEW) think that nationalising 150 big corporations would express in today’s language the demand in the Communist Manifesto for the “abolition of private property”. They also support Lenin’s vanguard theory that a revolutionary minority can by their leadership turn protest movements into a ‘socialist’ revolution. So it is hardly surprising that they claim the events in Russia in 1917 to have been a socialist revolution, blaming the backward state of the country, civil war and Stalin for what went wrong.

Both Lenin and Trotsky thought that democracy was not appropriate to their situation. Having taken power in a minority revolution they had to rule by force. This included the use of secret police – the Cheka. Trotskyists excuse Lenin’s red terror on the grounds that it was the outcome of civil war necessity, likewise with the measures taken to deal with the problems of production. However, it was precisely the conditions and the absence of a majority for socialism that made capitalism the inevitable outcome.

The rule of Lenin supported by Trotsky paved the way for Stalin. The legacy of the Russian Revolution, of Lenin and Trotsky, is that socialism/communism has come to be identified with state capitalism. It was not a victory for the working class, but a tragedy since it brought socialism into disrepute and diverted attention away from the vital need to reject capitalism in whatever form.

PAT DEUTZ

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1968 saw an outbreak of protest in various parts of the World. Much of it was very violent and the main thrust of this protest was in France and in America, where a longer-term campaign was being pursued. To a lesser extent, again, some of them very violent, demonstrations took place in Germany and in this country.

No doubt there were some links between these various protests but it was also true that the background in each country was very different. For example, in America there was the civil rights movement being organised by blacks, and of course there was no element of this in what was happening here or in France. The civil rights movement was beginning to find its feet in Northern Ireland; here again, the background was different with its strong element of catholic/protestant conflict.

In Europe, many of the main activists were Trotskyists or anarchists. In America the hippy movement was much stronger than it was here. One common feature was the protest against the Vietnam War and this was linked with the opposition to nuclear weapons. So if we are to remember 1968 as a year of world wide protest and demonstrations, we must also acknowledge that these were not the actions of a world-wide coherent movement; these events erupted at the same time as a result of different and widely dispersed elements. In retrospect, perhaps the spontaneity of these events gave them their immediate strength, but the lack of any cohesion was their longer-term weakness.

In some ways, the ideas which were coming forward were very welcome, especially ideas being produced by the hippy movement which were a reaction to the soul-destroying life of wage slavery with its pursuit of material things. I remember reading a book by Jack Kerouac in which he railed against what he called the ‘white furniture’ culture. By this he meant that people were selling their human soul in order to acquire refrigerators, washing machines and these sorts of objects on which they mistakenly focused all their hopes for happiness.

Well, of course you could only agree with this outlook, and it was very welcome to see these ideas being popularised. What was slightly irritating was that these ideas were being put forward as if they were some sort of revelation. In fact socialists had been talking about this for years. Since the 1950s we’d had access to the Economic and Philosophic Manuscripts of Marx, and we’d been talking about the alienation of man in practical contexts. We had been talking about the “sterility of the consumer culture” for years and arguing that individual self-realisation could only be achieved on a basis of common ownership, and where you had people working in direct cooperation with each other to provide for each other’s needs.

The trouble was that Jack Kerouac hadn’t been reading the Economic Manuscripts of 1844, he had been reading some ancient Buddhist manuscripts. So, this very useful development of ideas was diverted into some regurgitated version of Buddhism, flower power and the drugs scene.

Socialists like myself had been active for years throughout the 1950s and what we had suffered from was a most appalling complacency. We couldn’t get a meeting or a debate; there was almost no interest in politics; the social aspirations of people seemed to have become totally trivialised. People only seemed to be concerned about buying a television or a second hand car on hire purchase.

So when there were various stirrings, first perhaps with CND, events in Hungary and the Suez crisis, we were able to feel that people did care after all, Of course as these were able to gather momentum during the 1960s this brought about a very changed situation and it was most welcome. Against this it has to be said that there was disappointment as we say this healthy indignation being diverted into lines of action which we argued would be unproductive.

One of the ideas being pursued by many activists in the 1960s was the aim of workers’ control. A lot of people still believe that we can achieve an advance towards socialism as a result of workers taking over their places of work, the factories etc., bringing them under their control and operating them in their own interests.

It’s quite true that in 1968, in France, at one point, over 9 million workers were on strike: industry was at a standstill and hundreds of factories had been occupied by strikers. Some people thought that industry in France was on the brink of being taken over by the workers. In fact this was not the case. For one thing, although it was in the minds of Trotskyist activists, it was not in the minds of the trade unions in France to establish a system of workers’ control. They took over the factories, and others went on strike, so as to press their demands for wage increases and other improvements in conditions. When these demands were largely met, they resumed normal working.

Another reason why industry in France was not on the brink of being taken over by the workers is of course that the forces of the state would never have allowed them to do it. There was the usual heroic talk about smashing the state, but the workers had no intention of smashing the state and even if they did have that intention they would have failed.

It has to be said that in all the violent confrontations which took place between demonstrators and the various police groups, even in France, the force of the state was only used minimally. You had the very vicious CIS—the special riot police—but the armed forces in their tens of thousands, with all the firepower at their disposal, were always in reserve and not brought into use.

At the time, the activists said that the reason for the failure had been the failure of the mass of workers to support the objective of workers’ control. So they came out of it still believing that their theory of revolution had not been tested – many people still believing in the theory today.

What if . . .
So its useful to consider what would have happened if, for example, the Renault car factories had been taken over by the workers who worked in them.

What we assume here is a situation where theoretically, the wage labour/capital relationship operating in the Renault car company would have altered and become a kind of workers’ cooperative, with all the affairs of this car production unit under the control of the workers.

There is of course no question here that this has happened as a result of a decision by a socialist majority to capture political control and enact the common ownership of all means of production. There has been no social decision to abolish the market and to establish direct cooperation between people in producing goods directly for the needs of the community, with no exchange of any kind and therefore no use of money. What we have assumed, in line with the objectives of the main activists in France in 1968, is that workers have succeeded in taking over the Renault car company together with many other factories.

The present Prime Minister of France (Michel Rocard) was a left wing activist in 1968 and a little later on he said this about workers’ control:

“We must aim at self management, that is, the management of factories by the workers themselves… Workers control can only be imposed in strikes where the balance of forces is overwhelming, that is to say, where the unity of the workers is strongest.”

So we’ve assumed that these workers have successfully confronted the forces of the state and imposed this workers control, which is “the management of the factories by the workers themselves.”

The market would still be operating and these workers would be selling the cars which they put together in the factories and the sale of these cars would give them an income which would enable them to live, to support their families, to buy the food, to pay the rent and the mortgage and all the other costs involved in living in a market system. They would have a lot of other costs as well. Renault cars are not simply made in Renault car factories. In fact, in the main, these factories are only the places of final assembly. Of all the labour required for the production of a Renault are only a small proportion is supplied in these factories where the final assembly takes place. If the car industry in France is anything like British car production, Renault would have hundreds of sub-contractors supplying components.

You only have to think of the materials in cars—various metals such as copper, aluminium and steel, glass, paints, plastics, rubber, to realise that the different kinds of labour required for the production of a car are dispersed throughout a world wide network of productive links. You’ve got copper mining in Zambia, the mining of iron ore in Australia, the plastics pre-suppose the world oil industry, the paints, the world chemical industry, rubber from Malaysia, allocations of energy and world transport. Car production is social production and by that we mean production organised on a world scale.

What this means for these workers in France who have taken over factories where final assembly takes place is that they are the sellers of cars but they also constitute a massive market, a market for all the worked-up materials and components which they have to buy in.

These workers will be in competition with other car manufacturers—Fiat in Italy—Volkswagen in Germany—Nissan in Japan—Volvo in Sweden—General Motors in America—Ford and BMC in Britain. So in order to maintain their livelihoods they will be in intense competition with these other companies, trying to sell as many cars as possible and trying to capture a bigger share of the market at the expense of the capitalists and workers in other sections of the world car industry.

They would have to maintain rigorous efficiency in line with the efficiency of these other companies. In any situation where their costs were disproportionately high resulting in relatively higher prices they would lose sales and there would have to economise and perhaps some workers would have to go. Where there was overproduction in relation to market capacity again there would have to be cutbacks. They could not go on incurring the accumulating costs of producing cars which they could not sell. It would then be a matter of them democratically deciding which of them is going to be out of a job.

However, for the moment we are not concerned with the realistic possibilities, we’re assuming that these workers find themselves in a situation where the market for cars goes on expanding. This being the case they will face the problem of financing expanded production so as to take advantage of it. Perhaps they will raise the capital on the share market. This of course is impossible. No bank or any investor would dream of investing in an outfit which had seized the capital funds of a company.

Functionaries of capital
You can of course see where all this is heading. In the impossible circumstances where these workers have been able to expropriate a company like Renault—and succeeded in managing for their own gain as distinct from the previous owners—they would be responding to the same economic pressures faced by the previous capitalist board of directors. They would be acting as the functionaries of capital; different personalities maybe but exactly the same economic role.

What we’ve actually been describing is a set of mechanisms by which the capitalist structure of production maintains itself as an exclusive capitalist structure. Goods are produced throughout a world wide division of labour organised in different production units. The process through which this structure maintains itself as an exclusively capitalist structure is a process of constant economic selection. Whether or not a particular production unit can continue to exist as part of the structure is constantly tested and is determined by the economic viability of the unit.

In every day terms this is matter of income against expenditure. If income exceeds expenditure then the unit can continue to form a part of the whole structure. Conversely, if expenditure exceeds income then it must disappear from the scene.

This process of economic selection may be temporarily upset by the traumas of political or industrial upheaval. In a period of chaos, you may get a change of the people in power. But when production and distribution re-commences, as sooner or later it must, the economic forces of capitalism are immediately brought back into play, so that daily book keeping, cost effectiveness, and the irresistible pressure to sustain income over expenditure again act to maintain production as a capitalist structure.

The particular ways in which a production unit is organised makes no difference whatsoever to this process of economic selection, It can be the usual capitalist company, it can be a so-called workers cooperative under workers’ control. It can be a monastery producing herbs or honey for sale.

The decision-making procedures can be authoritarian or democratic, it makes no difference to the fact that whatever the production unit is, in order to exist it must be economically viable. This is the process of economic selection by which the present structure of production is maintained as an exclusively capitalist structure.

The idea that workers cooperatives under workers’ control is socialism or is in any way a step towards socialism is an illusion.

Bringing the subject back to 1968 when these arguments were much more in the air of course members of the Socialist Party were encouraged by the fact that a lot of action was taking place. But at the same time there was great disappointment that all this protest was being diverted into this useless activity based on the objective of workers’ control.

The only practical way to get a change from capitalism to socialism is to have a majority of socialists acting democratically to capture control of the state and then from this position of control, to remove the capitalist features from social production through the enactment of common ownership.

PIETER LAWRENCE (from a talk given in May 1988)

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The big set piece debate was on militarism and anti-militarism. Some of the French delegates wanted the Congress, in the words of a motion proposed by Gustave Hervé, “to answer any declaration of war, from whatever side it may come, by military strike and insurrection” (an anticipation of Lenin’s “turn war into a civil war”, though Lenin didn‘t vote for it). This was opposed by August Bebel on behalf of the German party. There were good grounds for opposing it, in particular because if not enough workers were socialist-minded and the representatives of capital still controlled the State it was likely to lead to a bloodbath. But it was not on this ground that Bebel opposed it. Basically, he didn’t want to rule out the possibility of Social Democrats supporting a so-called “defensive” war. Nor was he against a country having armed forces; he just wanted them to be organised democratically as a “citizens army”. So, he wasn’t an “anti-militarist” even in theory.

In his reply, Hervé declared that he “could not believe that people who call out everywhere our beautiful motto of the International: ‘Proletarians of all Countries unite!’ would go on interpreting it in practice by ‘Proletarians of all Countries, massacre one another!’”

Most of the other delegates supported Bebel, and the composite resolution that was finally adopted committed the Social Democratic MPs merely to using “the means which appear to them the most efficacious” to prevent a war breaking out and that, if it did, “to intervene for its being brought to a speedy end”. Far from being “a bold stand in the struggle against capitalist war”, it was a blank cheque for what happened when the First World War broke out in August 1914 and the Social Democratic MPs of the warring countries lined up behind their government in support of the war.

The SPGB had already seen through Bebel in an article in the June 1907 Socialist Standard entitled “Bebel and Hervé. German Party Leader as a Jingo“. While not endorsing Hervé’s slogan of “Rather Insurrection than War”, the article commented favourably on his general analysis that:

“All Socialists call themselves internationalists, and this, to every Socialist, means to be in favour of the international union of the workers.
“But there are two very different ways of understanding this international union; there is the patriotic way, and the anti-patriotic way.
“The patriotic internationalists say: ‘Present day countries, such as history has made them, are moral entities whose existence is useful to human progress. However imperfect they may be, however inhuman even they may be for proletarians, the latter have in each country the duty of defending them when attacked. We are internationalists, but if the country in which we chanced to be born is attacked we will defend it to the death’.
“This in plain language means simply; ‘Workers of the world unite; but if your rulers order you to massacre your comrades, do so!’
( . . . )
“The workers are disinherited and illtreated in every existing country.
“All nations are equal, or nearly so, in this respect, particularly now that the capitalist regime renders more and more uniform the material, intellectual, and political conditions of life for the labouring class in all countries; and now that the introduction of the capitalist system in Russia will compel even Tsarism to accord to the Russian workers the essentials of political liberty.
“No country at the present day, is so superior to the others that the workers of that country should get themselves killed in its defence.”

It only remains to add that when the First World War broke out, the SPGB stuck to this position and opposed the war. Hervé, sadly, turned coat and became a super-patriot joining in the chorus of ‘Proletarians of all Countries, massacre one another!”.

ALB

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They argue that banks are the problem: that they can create credit (money, purchasing power) by a mere stroke of the pen, which enables them to exploit the rest of society through charging interest on this. With our knowledge of how capitalism works — how surplus value, the source of all rent, interest and profit, is created by workers at the point of production — we have always argued that this is not the case. Banks are just intermediary financial institutions, borrowing money from some to lend to others. They have no special powers to create purchasing power out of nothing. They merely redistribute it. Only the government can create extra token money.

The present financial turmoil, in which some banks are heavily involved through taking over dodgy loans to not very credit-worthy house buyers in the US, confirms this. One person with practical experience of how things work, Steve Russell, “investment director at Ruffer, the London-based asset manager”, was quoted by the FInancial Times (11/12 August) as worrying about the effect on banks: “The more serious issue is the risk to the day-to-day business of borrowing money and lending it out. Just being able to make a reasonable margin on that business could be hard”.

If banks really did have the special power to create money for themselves by a mere stroke of the pen, how could they ever get into such trouble? All they would need to do would be to take a pen and create a credit line to to cover their losses or expected losses.

But they didn’t because they can’t. Instead, governments, through their central bank which alone can put extra money tokens into circulation, have stepped in to lend the banks money to meet their potential obligations. More often than not this has been enough to calm the situation and prevent a stock market “correction” turning into a “crash”. In fact, whenever a central bank has refused to do this then a crash has resulted. Not that any amount of central bank intervention can avoid a crash if there’s overproduction (in relation to the market, not real needs of course) in some key sector of the economy. But this doesn’t seem to be the situation at the moment.

So, the banks are not the villains of the piece. It’s the whole capitalist system which duplicates the actual process of production by a superstructure of profit, money, interest, etc which stands in the way of the rational use of the means of production to satisfy people’s needs. Once these means are owned in common, then there’ll be no need not just for profit but not for money or banks either.

ALB

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Will ministers eventually say, as they did after the killing of Jean Charles de Menezes and after the raid on that house in Forest Gate when another innocent man was shot, that it’s better to err on the side of safety? Better a few innocents are shot than a terrorist act in which hundreds die?

Whatever the truth, the “security alert” last month in which a terrorist attack was said to be “imminent” allowed the state to project itself as the defender of the public. It is no such thing. The state is controlled by pro-capitalist politicians who pursue policies they consider to be in the general interest of British capitalism, even to the extent of putting the lives of the general public at risk.

The present government, led by Blair, has decided that it is in the best interest of the British capitalist class to tag along behind the US government’s global pretensions, especially its so-called “War on Terror”, which is really a struggle with certain Middle East states and disaffected Arab elites and their supporters for control of that oil-rich region.

The US government is committed to furthering the interests of US capitalism, which don’t necessarily coincide with those of British capitalism, and there are pro-capitalist politicians in Britain, some apparently within the cabinet, who think that Blair might have gone too far in his pro-US stance. But it is not up to us as socialists to judge which politicians best represent the interest of the British capitalist class.

It is this pro-US capitalism policy option that has put the “British public” in danger by making them legitimate targets in the eyes of the Islamist opponents of US domination of the Middle East. It is just plain ridiculous for government ministers to try to deny this. What makes it worse is that neither the attack on Iraq nor (even less) giving Israel more time to bomb Lebanon enjoyed majority popular support.

But no government can leave such a vital decision as to whether or not to go to war to a popular vote. This is because the role of governments is to be “the executive committee of the ruling class” and, as the interests of the capitalist ruling class are at variance with those of the rest of us, such a decision cannot be left to us as there is no guarantee that our decision will coincide with what the ruling class judge to be in their interest. In fact, in the case of war, people spontaneously tend to be against it.

It is true that, as most people do support capitalism, if a government launches an effective enough propaganda barrage it can generally persuade people to support a war. But this takes time and decisions about war cannot wait. Blair is on record as saying that as a leader it is his duty to give a lead on going to war, even against majority popular opinion. In Britain, until recently and still formally, going to war was a government decision that didn’t require even parliamentary approval.

Democracy and war are in fact incompatible. States have to have a minimal degree of popular support to function, but this need not extend much further than allowing the populace to decide every few years which group of pro-capitalist politicians are to staff the state and, exercising “leadership”, use it to further national capitalist interests.

Truth may be the first casualty of war, but civil liberties come a close second.

Whether real or manufactured, “terror plots” and “security alerts” provide a pretext for a state to further erode civil liberties inherited from a more liberal past, as the string of laws introduced by the Blair government to increase the powers of the state bears witness.

It can’t be denied that there is a conflict going on involving attacks on innocent civilians on both sides. In Iraq, Afghanistan and Lebanon the US and /or its allies bomb villages and villagers. In America on 11 September five years ago and in Britain last 7 July, the other side killed innocent workers at or on their way to work. Socialists condemn both sides. And we don’t swallow the propaganda that the state is there to protect us.

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Ever fearful that foreign governments might, among other things, introduce labour and environmental legislation detrimental to US investments, Washington has opposed the principle of democracy on almost every continent, even helping to overthrow democratically elected governments whenever it felt its interests threatened (e.g. Iran in 1953, Guatemala 1954, Congo 1960, Ecuador 1961, Bolivia 1964. Greece 1967, Fiji 1987).

Nor have its methods been peaceable. Indeed its agents in the CIA have carried out assassination of prominent individuals with as much indifference as its embassies have supported right-wing death squads and bloody coup attempts throughout Central and South America. Across the world, the US has backed dictators of every hue, turning a blind eye to their horrendous affronts to the democratic process.

We are now to believe that the US, presently occupying “sovereign Iraq” (for President Bush has declared Iraq is now “sovereign”), a country with sizeable oil reserves, and which has lost 100,000 of its people since the US-UK invasion, will see that free and democratic elections take place on 30 January. Bush has since informed the people of Iraq – the same Iraq in which the CIA helped Saddam Hussein pull off the military coup that originally brought him to power: “We will help you build a peaceful and representative government that protects the rights of all citizens. And then our military forces will leave.”

John Negroponte, the US Ambassador in Iraq, has been adamant that the US will not allow a delay in the 30 January vote. Speaking to reporters he stated that the elections would go ahead and that the security situation would be improved by then, and went so far as to say that conditions in 15 of Iraq’s 18 provinces were already safe enough for elections to be held.

He said: “I think once they realize that the elections will go forward as planned, then they [Sunni opponents of the election] are going to have to deal with that reality” (Washington Post, 1 December). However the Sunni resistance looks set to spiral, his comments coming just after it was reported that US deaths in Iraq in November matched the post-invasion record set in April – 135 troops dead.

In Washington and London, the claim is that the ongoing attacks by insurgents are an all-out attempt to disrupt the coming elections, when in truth the overriding fact is that many Iraqis still see the US as an army of occupation whose presence they have a right to oppose. An opinion poll carried out in September by the US-led Coalition Provisional Authority confirmed that opposition to the US presence was widespread. It revealed that just 2 percent of Iraqi Arabs – that is, minus the Kurdish population – agreed wholeheartedly with the occupation. If anything, this shows that in spite of the age-old hostilities between Sunnis and Shiites, one thing that could unite them is their hostility to an occupying army of 138,000 – a figure set to increase before the election.

Securing the peace in Iraq in time for the elections has so far meant installing a pliable puppet regime, and implementing Order 39, which the Economist (25 September 2003) described as “a capitalist’s dream” and which opened up the Iraqi economy to complete foreign takeover. It has meant the deliberate bombing of homes, hospitals and religious buildings by squadrons of bombers and helicopter gun-ships, turning cities into rubble (Fallujah was napalmed), cutting off water, electricity and medical supplies and spreading hunger and disease.

A comprehensive new study by the British-based charity organisation Medact, which looks at the impact of war on health, reveals that acute malnutrition among Iraqi children between the ages of 6 months and 5 years has increased from 4 percent prior to the invasion to 7.7 percent since the invasion and that about 400,000 Iraqi children are suffering from ‘wasting’ and ‘emaciation’ conditions of chronic diarrhoea and protein deficiency.

Despite such facts as these, Washington would have it that people in Iraq are being irrational in not supporting US-organised elections.

As we go to press, Sunni, Shiite and Kurdish politicians are at odds over whether elections can take place on 30 January as planned. Iraq’s 60 percent Shia majority, who clearly suffered worst under Saddam’s reign, are keen for the elections to go ahead on time, knowing they are likely to consolidate the increased power they have enjoyed since overthrow of the essentially Sunni president Saddam. However, as rebels have continued their assaults on other towns since the fall of Fallujah, a campaign led by Sunni politicians has gathered momentum, with Shia leaders claiming that a postponement of the election date would only play into the hands of the insurgents.

The head of the Shiite Supreme Council for the Islamic Revolution in Iraq, Abdul Aziz al-Hakim, has insisted that the elections go ahead. He has been backed by 42 mainly Shia and Turkmen parties who have issued a statement to say moves to delay the elections were illegal.

Conversely, Adnan Pachachi, a former Sunni minister, is heading a group of 17 political parties asking that the 30 January vote be delayed by six months because of the violence, fearing the insurgency in Sunni towns will discourage people from voting, thus disenfranchising them. Significantly, the two major Kurdish parties have also signed up to the delay

Alawi, the interim leader appointed by Washington to run Iraq, has said that in centres of resistance like Fallujah elections could be “delayed” until stability existed there, without the vote being invalidated, or in other words Washington-style democracy would will be available in the first instance only to those who did not resist the occupation by US forces.

Alawi, it seems, has no real control over the situation, and though it is said he has the power to cancel the election if he wished, there still exists the US hand-picked seven-member commission set up to run the elections, which can bar any candidate or party from standing and which will be deciding who is and who is not eligible to stand as a candidate.

Under the rules, the Iraqi electorate will vote for a 275-member Transitional National Assembly. Political parties will submit a list of candidates and every third name has to be a woman’s. Those Parties with alleged connections to militias are disqualified from taking part, along with former leading members of the Baath Party.

The US hopes to have 150,000 troops in place in time for the election, evidence if ever it was needed that the crisis in Iraq is escalating. It was not so long ago that Bush was boasting how US troops had been greeted as liberators and projected that the country could be policed with 50,000 troops by the end of 2003. Now military analysts are cautioning that the Iraq army and police force will not be in a position to police the country for another ten years. So much, then for Bush’s claim that once a legitimate Iraqi government is up and running the troops will be on their way home.

And as for the post-election situation, make no mistake, any government elected in Iraq will be permitted to function only so long as it kowtows to the dictates of Washington. Whatever, government is elected to ‘rule’ Iraq on 30 January it will only be allowed to do so with the endorsement of the White House.

Here in Britain, Bush’s sidekick, Tony Blair, is likewise looking forward to a post-election regime in Iraq that has no real say on foreign investment. Moreover, Blair is desperate for elections to take place in Iraq for the simple reason that he needs something resembling a foreign policy success to present to voters in the run up to the election. Indeed any good news at all at the moment would be welcomed by New Labour.

The essential goal of the Bush regime in the Middle East remains the same as that of preceding administrations going back to WWII, and that is to reinforce control of the region’s oil reserves and the profits that arise from them. Furthermore, Washington is well aware that control of Middle East oil gives the US enormous leverage over its economic rivals, Europe, Japan and China, all of whom are more dependent on Middle Eastern oil than the US. China in particular is expected to have the same oil demands as the US within 25 years.

That Iraq has huge oils supplies is the sole reason the US cannot allow a government – freely elected by its people and one advocating a US departure – to exist.

JOHN BISSETT

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Thirty countries covering a quarter of the world’s population are officially in recession. Even defenders of capitalism are now compelled to use the term “world economic crisis”.

It had to happen. Given the chronic state of overcapacity
and potential overproduction in relation to the market in all the key sectors of global industry-electronics, computers, vehicle production, pharmaceuticals, shipbuilding, steel-the boom in Asia had to come to an end sooner or later. It already had in Japan, by far the biggest economy in the region and in fact the second biggest in the world after the US. Now the rest of East Asia-Korea, Malaysia, Thailand, Indonesia, Hong Kong and other so-called tiger economies-has followed.

It is difficult to believe that at the beginning of the decade Kinnock, when leader of the Labour Party, went into the 1992 general election holding up the Japanese model of incestuous government-corporation partnership as the way forward for Britain. Those who pointed to the relatively rapid rate of capital accumulation in East Asia to deny the socialist contention that world capitalism has been in a depressive state since the end of the post-war boom in the early 1970s have also had their come-uppance. Marx was right. They were wrong. There can be no such thing as a permanent boom. That’s only a dream peddled by smooth-talking politicians and ageing Keynesian professors.

Marx was right

Marx, the first person to provide a convincing analysis of how the capitalist economic system worked, concluded that, whereas capital accumulation-or economic growth, if you like-was a key feature of capitalism, this did not take place smoothly. Capital accumulation proceeds by fits and starts, periods of relatively rapid growth being followed by periods of contraction and stagnation. The graph of long-term growth under capitalism is not a straight line moving up from left to right but a jagged line with peaks and troughs, with each peak normally higher than the previous one. Marx argued that this cyclical pattern of growth was not just accidental but was inevitable under capitalism-it was the way capitalism functioned and developed, its “law of motion” as he put it-with each period of rapid growth ending in a slump and each slump preparing the conditions for the next round of growth.

The history of capitalism since Marx’s day has amply proved the validity of this analysis. In order to maintain or increase their share of the market and realise the surplus value embodied in their products, capitalist firms are compelled by competition to reduce their costs by improving their productivity, in particular by the introduction of more productive machines. This leads to an increase in overall productive capacity. During the period of recovery that follows a slump this poses no problem as the market is beginning to recover and expand again.

However, as the competitive pressures to increase productive capacity continue, the point is eventually reached when productive capacity in a key industry or group of industries comes to outstrip the market demand for its products. At this point a crisis of overproduction breaks out. As profits fall, production is cut back, workers are laid off and, through the knock-on effect on other industries, the market shrinks, so inaugurating the period of slump. During the slump, the least productive machines are taken out of production and capital is depreciated or simply written off. This purge of under-productive machinery and over-valued capital eventually creates the conditions which allow capitalist growth to recommence, so beginning the boom-slump cycle again.

This is how capitalism has developed and continues to develop, only now that (as Marx foresaw) capitalism is a global system the periods of rapid growth and purging slumps also occur on a world scale. The big slump of the 1930s was a world phenomenon, as was the post-war boom of the 1950s and 1960s which ended in the early 1970s. So of course is the current world economic and financial crisis.

Mad money

Just because the 1930s slump was preceded by the Wall Street Crash of October 1929, some people jump to the conclusion that it is financial crashes that cause slumps. Actually, it’s the other way round: financial crashes usually reflect the situation in the underlying real world of economic activity. Where they occur this is a sign that something has already gone wrong in the real world, that, to be precise, productive capacity and production has come to outstrip market demand or is threatening to. As J. K. Galbraith showed in his book The Great Crash, this is what happened towards the end of the 1920s; when the gamblers on the stock exchange realised that overproduction was occurring they tried to convert their paper wealth into real wealth and provoked a crash. The slump followed but as a result of the preceding overproduction not of the stock market crash, which at most only exacerbated the economic crisis.

It’s the same today in Asia. The financial crisis there is a reflection of the fact that stock exchange and foreign currency gamblers have realised that the countries of East Asia have expanded their productive capacities beyond market demand. This has been obvious for a few years in the case of Japan where overproduction has led to full-scale recession with lay-offs and factory closures. But Korea, Malaysia, Thailand, Indonesia and the others were in the same situation of potential overproduction since a significant part of their growth had been in the same industries which Japan had overexpanded: car and other vehicle production, and electronics and computer hardware.

The reason why governments and central bankers in Europe and North America are so worried about the financial crisis in Asia is that their own real economies are in the same state of potential overproduction as the Asian countries and that this could provoke a financial crash in their countries too. The king is naked here as well.

So far they have managed to avoid this though current indications are not good. Even if these countries avoid a full-scale crash this does not mean that they also have to power to avoid an economic slowdown or downturn. Such slowdowns and downturns can occur without a financial crash. Indeed this to an extent is what has already happened. Since the early 1970s the world economy has been in a period of slow growth, punctuated by falls in production from time to time. This is a reflection of the a lower rate of profit and of the unresolved problem of productive capacity having outstripped market demand in key technologically advanced industries such as aerospace, petrochemicals, pharmaceuticals, and computers.

One consequence of this period of slow growth is that significant amounts of profits are not being reinvested in production but, instead, are being held in liquid form and invested in financial assets with the aim of making as large a short-term profit in as short a time as possible. All the multinational corporations and other big companies now have treasury departments engaged in financial speculation of one form or another whether on the stock exchange, the bond market, currency transactions, commodity markets or dodgy hedges such as derivatives. In France in recent years many major companies have even set up or taken over banks for just this purpose.

This extra demand for financial assets, deriving from non-reinvested profits, has driven up their price, so creating the anomalous situation of a stock exchange boom in what is essentially a depressed economy. Nothing could illustrate more clearly how divorced is the world of finance from the world of reality. Most of the financial transactions that take place on the world scale today are not investments of productive capital-are not used to set up factories or to buy machinery, equipment or raw materials-but are to buy and sell shares or bonds or foreign currencies or commodity futures or property or failing companies to asset strip them.

Such purely financial transactions are utterly unproductive, even from a capitalist point of view. Not only do they not result in the production of a single extra item of wealth but they don’t even increase the amount of surplus value available for sharing amongst the various sections of the capitalist class. It’s a zero-sum game. As socialists have always maintained, stock exchanges are places where capitalists gamble and try to cheat each other with a view to acquiring as large a mass as possible of the surplus value that has already been produced by and robbed from the workforce.

Rising share prices-and despite dramatic falls from time to time, there has been a steady long-term rise in the share price indexes of most stock exchanges-do not represent an increase in real wealth. They merely amount to a rise in the book value of the real wealth-the productive capital of the companies in question-that shares are supposed to represent. It’s a rise in paper values not real value. When a share goes up in price this means that you can get more for it if you sell it. If you don’t sell your shares all it means is that their book value has gone up, but if everybody or even large numbers tried to realise this book value by selling their shares, the real situation would soon reassert itself. The price would fall, bringing down the book value of the corresponding productive capital to its real value.

Is the Big One coming?

Even some supporters of capitalism, among them the arch-speculator George Soros himself, have begun to express concern about where the parasitic and volatile nature of global finance capital may lead the world. At a congressional hearing in Washington on 15 September Soros even spoke of the danger of the “disintegration of the global capitalist system”. We have always been cautious in predicting a 1930s-scale slump, but if even supporters of capitalism are discussing this as a serious possibility who are we to insist that they’re wrong?

One thing is certain, though. Until the problem-for capitalism-of excess productive capacity and potential overproduction in relation to market possibilities is resolved, there can be no return to any period of rapid economic growth as in the post-war boom when growth rates were twice the maximum that has obtained in any of the already industrialised countries since the early 1970s. But the only way this problem can be resolved is by a bigger slump than we have yet seen since the war in which the system would be purged of its excess productive capacity and overvalued capital.

If this does not happen, then global capitalism will continue in its present state of slow growth against a background of high unemployment and declining welfare provisions, staggering on from financial crisis to financial crisis and from mini-boom to mini-slump. Can this really be the end of history?

ADAM BUICK

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