Competition Rules?

Editorial from the September Socialist Standard

It used to be that business news concentrated on the performance of the economy and the pearls of wisdom of business leaders. In recent years however the business pages of newspapers have slowly become filled with allegations and investigations of price-fixing, cartels, insider dealing and corruption.

Last month, in headlines which made front pages round the world, British Airways was fined over £300 million for price-fixing – agreeing with their competitor to fix the price of fuel surcharges at an artificially high level. “The world's favourite airline”, that old advertising slogan for BA, will perhaps not be making a re-appearance anytime soon.

In the dock alongside them of course should have stood one of the UK's favourite capitalists, Sir Richard Branson of Virgin Airlines, except he turned Queens' evidence and snitched just in time. According to the bizarre rules which usually seem to affect businesses differently from every one else, by blowing the whistle on the dirty dealings of BA (and themselves) they are automatically free from prosecution no matter how dirty their hands.

The very idea that these two bastions of free enterprise should have been colluding to effectively “defraud” their valued customers might have shocked some. After all here is what British Airways customer policy states: “The well being of our customers is extremely important to us”. Virgin's customer charter is the same although it seems a little prescient “We put customer service and commitment to our passengers at the heart of what we do. We strive to get it right, first time, every time. But occasionally things don’t go as planned”.

Remember of course that Branson and Virgin for many years played the part of the plucky little David complaining against BA's Goliath abusing its monopoly position with airports to try and keep Virgin out of the Atlantic market.

The news headlines related primarily to the size of the fine rather than any surprise that these business practices actually go on. These are not exceptions, occasional one-off incidents worthy of a news item. Corruption is an inherent part of capitalism. And what is known about is obviously only the tip of the iceberg.

And we maybe should not even pay much attention to those states trying to regulate their own capitalists – they are just as guilty. US Democrats have recently been trying to legislate (“Nopec”) against OPEC, the oil-producing and exporting countries, on the basis that these countries, instead of competing for market share on the basis of price, agree production rates with each other in order to keep the price high for all. In capitalism maintaining production takes second place to maintaining profit.

World socialists aren't much bothered which activities of capitalists actually comply with its own laws or not, except perhaps to draw attention to the inconsistencies of the system and to show how it doesn't even live up to its own ideology: the “free” market just doesn't do what it says on the tin.

World socialists don't want the "free" market system. But neither do we have any confidence in a supposedly regulated market system. There will never be enough consumer rights ombudsmen, Offices of Fair Trading or anti-trust legislation to police capitalism. The buying and selling system provides just too much reward. Instead a cosmetic pretence is maintained that the market system is dynamic and competitive. A veneer of fairness is maintained to encourage us all to carry on participating in the game, on the basis that there is some sort of level playing field in capitalism. But the real battle has never been one fought between capitalists, but rather, against them and their system.

So which side are you on ?

Princess Di and Lord Louis - under the socialist microscope

Knowing that readers around the world will suffer in the wake of the media-generated tsunami of tears on the 10th anniversary of Diana's death (31 August 1997), it seems prudent to comment today instead, some 28 years after the passing of another parasite, one Louis Mountbatten. Both were victims of capitalism and had much in common. They were members of the ruling class, generally performed well in this capacity (but not without some criticism from their fellows) and died spectacularly.

The Socialist Standard of October 1979 traced the royal lineage of Mountbatten in surprisingly amusing detail: "..[He] was by descent a member of a kind of condottieri of minor German royalties who ranged over Europe in the nineteenth and early twentieth centuries seeking new positions, new countries, and with (with luck) new thrones....Montbatten came from the line of the dukes of Hesse. Already very well connected, the Hesse royal family came into contact with the British royal family's circle of acquaintance, and two of the four sons of Alexander and his Polish countess...decided to become British and make their fortunes in the UK; Prince Louis of Battenburg was chosen as the husband for another of Queen Victoria's granddaughters, and Prince Henry was accepted as the husband for Queen Victoria's youngest daughter. Honours quickly flowed in: Louis became Admiral of the Fleet, personal aide-de-camp to Victoria, Edward VII and George V, and First Sea Lord.

Another of the Battenburg boys seemed to have hit an even bigger jackpot. In 1879, the Bulgarian capitalist class established its de facto independence from the Turkish sultan and invited Prince Alexander of Battenburg to become the country's monarch as Prince of Bulgaria. Immediately, Alexander's younger brother, Prince Francis..turned up as a colonel of Bulgarian cavalry, only to swear undying allegiance to Bulgaria as soon as he could find it on the map. After Alexander had enjoyed only seven years as front man for the Bulgarian ruling class, however, Russia decided the country was getting too big for its boots and kidnapped Alexander, forcing him to abdicate. This nasty experience subdued him, and he returned to Hesse, still financially well provided for, and settled down there as an ex-monarch. Prince Francis, however, was not beaten yet. He married the daughter of Nicholas I, King of Montenegro; but his efforts to learn the Montenegrin national anthem were in vain, as the country, and its royal house with all the perks attaching to it, disappeared during the First World War.

These royal adventurers often fought loyally for 'their' countries, despite relatives on the other side. Nor did they worry too much about how repressive or otherwise the regime they served turned out to be: relatives of the British royal family ran anti-Semitic pogroms and jailed or executed opponents in Russia and elsewhere, and other relatives of the British royal family fought for the Nazis in the last war - Prince Charles has a German cousin, born in the 1930s, named Adolf after Hitler. The international background of this stratum of ex-German royalties contrasts strangely with the jingoism and chauvinism -'my country, right or wrong' - which each state shoves down its workers' throats in war and peace...." Earl Mountbatten (the name change was a direct result of the anti-German hysteria in 1914 Britain) was one of Prince Louis of Battenburg's four children.

Diana Spencer had the right qualifications to become Princess of Wales: she was the daughter of an Earl and Viscountess, a virgin and Protestant. She, with the help of Charles, produced two offspring. She also served the interests of her class by way of her charity 'work' and other reformist diversions (such as he campaign against landmines, an activity which was not appreciated by all members of her class: one Tory Peter Viggers, a member of the Commons Defence Select Committee remarked 'This is an important, sophisticated argument. It doesn't help simply to point at the amputees and say how terrible it is') and ultimately in her premature death. This event received comment in the Socialist Standard (October 1997): "..Which person in modern human history has received the most attention from, and been the subject of more media predictions by astrolegers, numerologists, spiritualists, soothsayers and other crystal ball gazers, than Princess Diana? And furthermore, why did not a single one of these professional fraudsters prophesy Diana's fatal accident? And just as bizarrely, why has no-one apparently noticed this? The British media, increasingly including the TV media, feeds the working class a meaty daily diet of tricksters and charlatans who claim to have the future in their hands. And yet when further incontrovertible evidence emerges of their complete inability to do what they claim they can, we don't hear a peep from their media pimps. How odd...."

Mountbatten played a more conventional role, 'working' as an aide-de-camp and Viceroy of India. Indeed, his "...personal record of prominent positions in the service of British capitalism, particularly the titanic struggles (so costly in destruction and in human suffering) of the British state earlier this century against its rivals, together with his close relationship to the royal family, ensured him the panegyrics which duly appeared in every national newspaper on his death..." His 'work' did not go without criticism, which included his masterminding of the Dieppe raid of 1942 which resulted in the heavy loss of life and the hasty partition of India in which perhaps half a million people died. Thirty years later he was one of twenty-two people killed by the IRA in the capitalist struggle over Northern Ireland.

By way of conclusion, it needs to be said that "Socialists are unremittingly hostile to hierarchy and privilege..but that does not mean we have no sympathy at all for those outside the working class who are also sometimes victims of a mad, uncontrollable system..." But, if "you support and work for capitalism, violence - committing it and suffering it, as Mountbatten did - is likely to be part of the deal."

RS

The Second International and War: a correction

The latest issue of Socialist Worker (25 August) carries an article on the Stuttgart Congress of the Second International which took place a hundred years ago. According to the author, John Riddell, the Congress “took a bold stand in the struggle against capitalist war”.

No, it didn’t.

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

The Banks Couldn't Save Themselves

We have been going for over a hundred years and over that period have come across all sorts of theories as to the cause of and solution to the problems facing society and wage and salary workers in particular. One set are those who say that the answer lies in some reform of the monetary system and who are known, perhaps ungenerously, as "currency cranks". They go back a long ago way, and were even found amongst the Chartists in Britain in the 1830s and 1840s.

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

Turmoil at the Stock Exchange

“FRESH TURMOIL IN EQUITY MARKETS” read the headline of the weekend Financial Times (11/12 August) after a week of dramatic falls in share prices on the world’s stock exchanges. “GROWTH THREATENED BY MARKET TURBULENCE, SAY ECONOMISTS” reads the one in today’s Times, which reported the principal of one hedge fund are saying “Nobody has yet mentioned to me the possibility of a stock market crash and I find that surprising”.

So, what’s it all about? Is this a prelude to another 1929 and 1930s slump? Or is it a purely financial crisis that will hardly affect the real economy?

Although the current turmoil is centred on financial markets, especially stock markets, in most respects its origins lie in the housing sector in the US where financial institutions have been selling “sub-prime” mortgages, i. e. to those with poor credit records and who are therefore more likely to default – and have been. The US housing market bubble – now being paralleled in the UK and elsewhere – has come to an end and mortgage defaults have escalated.

Financial institutions in the US and elsewhere are now coming under pressure because of their exposure in this market but the main issue at present is that no-one knows the extent of the problem, mainly because much of this debt has been packaged together and sold on to financial institutions other than those originally lending the money.

Some hedge funds and other financial instruments that have invested in this debt in the hope of higher than average returns for their investors have got into trouble. In the case of some funds run by BNP Paribas, they have simply been unable to calculate their value because of the current volatility of this sector of the financial markets, leading to even further fear and uncertainty.

The most serious knock-on effect has been a tightening of credit – banks are reluctant to lend money, even to one another. It is this that has been affecting stock markets in particular.

The easy credit that has helped financial merger and acquisition activity the last two or three years (especially by private equity firms) propelled the stock markets of the world upwards. This is because private equity groups, by changing the legal status of the firms they take over from public to private companies, have been taking firms off the stock market and so reducing the supply of shares available as a whole; also, easy credit has helped companies buy back their own shares, to the same effect – reducing the supply of shares and so, in accordance with the law of supply and demand, pushing up share prices.

It is the end of this easy credit and the positive stock market conditions it has promoted that is now bothering the financial markets more widely. In truth, after the massive stock market falls of 2000-2003, most stock markets are not over-valued but are being affected by a contagious fear that has spread from the housing sector via the credit markets.

But this is one of the problems with the capitalist market economy – the lack of planning and the instability inherent in the system can have far-reaching and unpredictable consequences. Just how far-reaching only time will tell, but given the underlying problems into the UK housing market alone, this period of market fear may have some way to run yet.

DAP

Emptying The Ocean With a Teaspoon

Apparently the hugely publicized “Product Red” campaign fronted by Bono and other celebrities spent $100 million on promotion but only brought in $18 million last year. Something of a flop! The idea behind the campaign was to raise money (and awareness?) for AIDS treatment in Africa through a partnership – participating multinationals aiming, by showing their caring attitude, to attract consumers willing to buy “Red” branded products of all kinds. Let’s be gracious and give Bono and the other celebrities the benefit of the doubt and assume their intentions were purely altruistic. They wanted to use their personalities positively to motivate people to give and make a difference.

Corporate Watch monitored the whole affair and scathingly commented on the debacle thus, “Capitalism failing to help the world’s poorest people AGAIN then, Bono? . . . . . Shopping isn’t the solution. Just give directly and bypass American Express, Gap et al.” (Is there a tinge of altruism here too?) But no thanks to the punters who (misguidedly) supported the campaign and no guidance either as to what they could do other than shop less and contribute more directly to charity.

What needs to be pointed out to both punters and Corporate Watch is that charity has its price too. In this capitalist world just how much of your donation is used for what it was intended and how much is swallowed up with administration, wages, and transportation costs etc. etc? How much charity from how many individuals for how many more years will rid the world of its inequalities, starvation, health epidemics and poverty? Faced up to the answers are stark. The statistics are available for all to see. No amount from growing numbers of donors for ever and a day will put an end to the ever increasing disparities. The one and only answer is a total system change. Has Corporate Watch considered looking into that?

JS

The Scramble For The North Pole

Last Thursday a Russian mini-submarine descended to the seabed two-and-a-half miles under the North Pole. But this was not just a scientific expedition and achievement. The main aim was to plant a Russia flag there. In other words, to claim the sovereignty of the Russian State over the area.

Why? Why do you think? Oil of course:

"The US Geological Survey estimates that some 25 per cent of world oil reserves are located north of the Arctic Circle" (The Times, 3 August).

Until recently extracting these reserves was not a realistic prospect but the beginning of the melting of the polar icecap as a consequence of global warming has made this more possible, if not yet practicable. Hence the posturings and the manoeuvrings of the countries bordering on the Arctic Sea -- the US (Alaska), Canada, Norway, Denmark (Greenland) and Russia.

It's unlikely to come to war and will in all probably be settled through diplomatic negotiations and an agreed carve-up and sharing of the profits made from exploiting the seabed resources of the area. But Russia's move confirms that diplomacy is not just a question of abstract "right" but that "might" also enters into it. Which is why universal disarmament is a pipe-dream under capitalism.

Ironically -- or maybe alarmingly -- access to the oil reserves of the Arctic has been made easier, through the melting of the Arctic icecap, due to the very burning of fossil fuels that has contributed to global warming. If these reserves, too, are burned that would contribute even more to global warming and to the melting of the icecap -- and to rising of sea levels everywhere.

In 1970, when mining the seabed became a practical possibility, President Nixon (of all people) proposed that "the natural resources of the seabed" should be regarded as "the common heritage of mankind". Of course all he meant was that the profits of seabed mineral extraction should be shared amongst all the capitalist states of the world.

But the phrase is a good one. Making the natural and industrial resources of the planet "the common heritage of mankind" -- of all the people of the world rather than of all the capitalist states of the world -- is the only basis on which these resources can be used rationally and for the benefit of all.

ALB

Democracy for Daddies

On Sunday, over here in Japan, there was a national election for the upper house of Parliament. That evening I was watching TV with my 5-year-old daughter as the results came in. I suppose it all looked rather exciting to her less jaded eye, as the winners and their supporters celebrated with three cheers of banzai in flower-filled rooms.

I was curious how much of this spectacle my daughter understood, so I asked her:

“What is an election?”

This question posed little difficulty, and she quickly informed me that an election is when we choose people. And the ones we chose are those smiling men and women on the TV.

I was impressed by her answer, and the absolute confidence with which she delivered it, but I decided to pursue the matter a little further:

“So, why do we choose these people?” I asked her.

Now, my daughter is not the sort of person to let a complete absence of knowledge on any subject hinder the joy of theorizing, but this time I had stumped her. She circled her wagons with the observation that we do this “because it is an election,” but even she seemed aware of how flimsy that statement was.

This was clearly the moment for me, the parent, to “enlighten” her on the subject of elections. But as I opened my mouth to speak, I realized the difficulty of the task.

Deciding to push ahead anyway, I informed her, in a semi-serious tone, that an election involves choosing a handful of people around the country who will make important decisions for us, like whether to build a road or not. And that if we liked the decisions they made we could choose those people again in the next election, but if we thought they made bad decisions we could choose other people.

I’m not sure if my explanation made any sense to my daughter, to be honest. But it echoed in my own ears, reminding me of how limited democracy is under capitalism.

We choose some people, usually on the lesser-evil principle, who are handed the keys to the bus, while we are piled in the back. Perhaps the election result gives them some idea of the direction we would like to head in, but our political drivers may choose to take a few excursions of their own—or even drive off a cliff or two. And what makes this journey even more thrilling, is that there is an invisible hand that also guides the steering wheel of the capitalist bus, so even our pompous drivers are “in for a ride.” When the dilapidated bus finally sputters or crashes into the station, at the next election, the passengers are often ready for a change, and decide (like they did on Sunday in Japan) to get some new drivers or fill in some of the potholes along the route. Despite such changes, though, we still hand over the keys every time to a few dubious individuals, and dutifully sit in the back of the bus.

But I spared my daughter this explanation and turned off the TV.

MS

There's more to being right about the cause of the war in Iraq

The award winning journalist Johann Hari, the Australian Defence Minister and the Socialist Party are in agreement: the war in Iraq is about who controls its huge oil reserves. We do not, alas, expect to be sending either of them application forms for membership in the near future. Minister Brendan Nelson would fail the Aboriginal question . As for Johann Hari, he has already scored a point for reporting that the "Sudanese government rakes in billions from selling oil to the world and spends it on top-of-the-range hardware [ten 'Russian Mig-29s, one of the most advanced military aircraft on the market'] to trash Darfuri villages", thereby confirming in part what we said (see below) at the time Iraq invaded Kuwait, 17 years ago today, but, it must be noted, ultimately he fails by refusing to jump off the reformist misery-go-round.

ANOTHER WAR FOR OIL

The press have denounced Saddam Hussein as a "mad dictator". A dictator he certainly is, and a ruthless and bloody one at that, but he is no more mad than Thatcher or Bush or Mitterrand. Or, put it another way, since their foreign policies are based on the same principles as his, they are as mad as him.

Iraq is capitalist and its foreign policy is based on the principle that the national capitalist interest must be pursued at all costs. To do this Saddam Hussein has built up the most powerful armed forces his country can afford and has not hesitated to use them. One of Iraqi capitalism's particular problems has been lack of an outlet under full national control to the sea by which to transit its main export, oil. To try to secure this, in 1980 Iraq attacked Iran, then temporarily weakened by the chaos that followed the overthrow of the Shah, so provoking a war which lasted eight years and in which up to a million innocent workers were slaughtered. Now Iraq has attacked an annexed Kuwait.

Would Thatcher or Bush or Mitterrand have acted differently in the same circumstances? Have they never used force to defend the vital interests of their capitalists? They criticise Iraq for developing and using chemical weapons, but their countries have armed themselves with the more deadly nuclear weapons, and each of them has personally declared that they would be prepared to push the button that could destroy the world. Who is the madder? Saddam Hussein or them?

The fact is that under capitalism "Might is Right" and all countries have to base their foreign policy on this principle. The battle of competition on the world market is not just a peaceful economic struggle. The threat of armed force is always present as the competing firms have the backing of their governments. States, with their armed might, exist to promote capitalist interests. At home they do this by trying to create the best environment for profit-making. Abroad their role is to secure access for their firms to raw materials, investment outlets, markets and trade routes.


Normally this jockeying for position takes place by diplomatic means, but all governments are aware that what influences the outcome of negotiations is not the "justice" of any side's case but the amount of force each can potentially deploy to back up its demands. It is always a question of the balance of forces between the sides.This is why all states strive to acquire the most destructive weapons they can afford. It was why Neil Kinnock's hero, the failed labour politician Aneurin Bevan, wanted Britain to have nuclear weapons. Without them, he said, a British Foreign Secretary would be going into the Conference Chamber naked. Which he said he was not prepared to do. Saddam Hussein isn't either, nor is any other leader of any other state.The reason why the Western powers are kicking up a fuss - and planning military action themselves - over Iraq's invasion of Kuwait has nothing to do with this being some brutal "violation of international law" (they have all done this too, when it has suited their interests). It has to do with the threat this represents to their oil supplies. In other words, they are motivated by the same naked capitalist economic interest as Iraq. Iraq wants a secure trade route for its oil exports; they want a secure source of the vital raw material oil is for them. Capitalism is a war-prone society. The armed truce that is all "peace" can amount to under capitalism will always be broken from time to time , as on this occasion, by the destruction and slaughter of real war. To end war capitalism must be ended.

(Socialist Standard, September 1990)

RS