Views on the News

THE BIG BUCKS BUSINESS                            

    Capitalism is a complex social system and nowhere more complicated than in the banking business. Recent criminal procedures have exposed such as currency fixing wrangles and the Libor scheme and we now learn that five banks have been collectively fined £2bn by UK and US regulators for failing to control business practices in foreign exchange trading operations. 

                             

    'HSBC, Royal Bank of Scotland, Swiss bank UBS and US banks JP Morgan Chase and Citibank have all been fined. A separate probe into Barclays is continuing. The UK's Financial Conduct Authority (FCA) and the US regulator, the Commodity Futures Trading Commission (CFTC)  issued the fines. Separately, the Swiss regulator, FINMA, has penalised UBS 134m Swiss francs.' (BBC News, 12 November) The fines follow a year-long investigation by regulators into claims that the foreign exchange market - in which banks and other financial firms buy and sell currencies between one another, was being rigged. 

                              

    Think how wasteful this social system is. Behind these high-powered organisations with the magic initials - such as FCA, CFTC and FINMA hundreds of highly trained accountants and lawyers will spend years acquiring all the necessary legal and financial skills to trip up their ducking and diving bankers. This is all necessary because of the the tremendous amount of wealth involved in banking.The massive market,in which $5.3 trillion worth of currencies are traded daily, dwarfs the stock and bond markets.                                            

    The FCA fined the five banks a total of £1.1bn, the largest fine imposed by it or its predecessor, the Financial Services Authority. The US regulator, the Commodity Futures Trading Commission,  has fined the same banks a total of more than $1.4bn (£900m). The CFTC said its investigation found certain foreign exchange traders at the banks had coordinated their trading with traders at other banks to attempt to manipulate benchmark foreign exchange rates and all these massive scams occurred between 1 January 2008 and 15 October 2013.        

    'Earlier this year, FCA chief executive Martin Wheatley said that the currency rigging scandal was "every bit as bad" as the manipulation of Libor, the key global interest rate used to price loans, mortgages and set returns on investment products.Several senior traders have already been put on leave and the Serious Fraud Office is in the process of preparing potential criminal charges against those alleged to have masterminded the scheme.'                                          

    Inside a socialist society human beings won't have to waste their lives counting other peoples' money or perpetuating a cheating, lying, pernicious society based on private property. Banks like war, poverty and world hunger will just be a distant unpleasant memory of an out -dated system.

( BBC News, 12 Nov)                                                                                                                                                                                                                               

MARXLESS AND CLUELESS 

                                

    John Gray, political philosopher and author of False Dawn: The Decline of Global Capitalism has written an interesting essay on capitalism, entitled A Point Of View: Why Capitalism hasn't triumphed, but like most political philosophers he has got most it wrong.       

    'In boardrooms, banks and governments the belief has taken root that the advance of capitalism is irreversible. The market-based system that developed in the West has spread to nearly every country in the world. Central economic planning of the sort that existed in the former Soviet Union Mao's China no longer exists as a titled separate economic system.' (BBC News, 8 November) Gray doesn't hold to that view and rather strangely states the most likely upshot is that the future will be like the past, with the world containing a variety of economic systems. He concludes it won't be determined by some imaginary process of social evolution. It will be human decisions, interacting with the uncontrollable flow of events, which lead the world into an unknown future. Like most  philosophers he prefers vagueness to science.  

 

    The basic flaw in Gray's treatise is that he dwells at length on the works of the likes of Herbert Spencer (1820 - 1903)and completely ignores the works of Karl Marx. As he states the notion that societies and economies evolve isn't new. A version of the idea was presented by Spencer, a Victorian prophet of the unfettered free market whose far-fetched ideas somehow keep re-emerging. Spencer believed that different types of society competed with one another as species do in the natural world, and suggested that two types of society, which he called "militant" and "industrial", were competing in his own day. Spencer was sure the end-result of social evolution could only be that capitalism would prevail. It was only the rise of Bismarck in Germany and the outbreak of the Boer War, that Spencer began to suspect that militant societies might get the upper hand. Perplexed by the course of events, he spent his last years baffled.      

                                 

    The next red herring that Gray pursues is that of  Beatrice and Stanley Webb but they came up with a different notion of  social evolution. Shocked at the scale of poverty in London, Beatrice abandoned belief in laissez-faire and converted to a form of state capitalism that she wrongly described as socialism. She continued to believe that society was evolving - towards central planning. Along with her husband Sidney, she became an ardent admirer of Stalin's Russia and together they produced a book, The Soviet Union: A New Civilization. We all know what a disaster that turned out to be.     

                     

    Gray emphasises that the idea of social evolution still hasn't gone away, and in some quarters it's as strong as ever. He cites the Nobel Prize winning Austrian economist FA Hayek presenting an evolutionary theory similar to Herbert Spencer's when he said that capitalism would prevail because its productivity could support a larger human population than any alternative. Having blundered about trying to explain the development of capitalism and social evolution Gray does have at least one valid point about Darwinian evolution though.      

    "In fact there's nothing Darwinian about the idea of social evolution. The key feature of Darwin's theory is that evolution has no overall direction. As he put it in his Autobiography, there is no more design in natural selection than there is in "the course in which the wind blows". The evolution of species occurs as part of a process of drift, and the same would be true of societies if they also evolved. Evolution isn't going anywhere in particular, and all talk of societies evolving towards some common end-point - whether capitalism, communism or anything else - involves a basic misunderstanding of Darwinian evolution." (Ibidem)  

                                           

    There is nothing preordained about the development of society, but instead of pursuing the foolish notion that the future will be "a variety of economic systems" Gray would have been better pursing a basic examination of Marx's ideas instead of those of Spencer or Webb. The basic Marxist view of the development of society is that it goes through different systems that fundamentally could be classed as Primitve Communism, Chattel Slavery, Feudalism and Capitalism. We hold that the next social change will be one from Capitalism to Socialism. No matter how much we disagree with Gray on his analysis of social development we heartily agree with his conclusion. 'Whatever happens, it won't be determined by some imaginary process of social evolution. It will be human decisions, interacting with the uncontrollable flow of events, which lead the world into an unknown future.'

(Main source, BBC Online, 8 November)                                                                                        

SILICON SPOOKS               

 Capitalism is an astonishingly highly developed technological society but a socially primitive one. Based on competition rather than co-operation it leads to economic rivalry between nations that often leads to military conflict. Even inside a nation this economic rivalry takes place. Thus we have private firms  pursuing means of keeping their internal communications private whilst their government does everything possible to break their codes.  According to the Economist (8 November)

                                               

"Twenty years ago America's National Security Agency developed a special encryption chip for mobile phones, called Clipper, that came with a digital backdoor so spooks and police could listen in. It was meant as a compromise, but abandoned as the NSA and the FBI, at least outwardly, lost the "crypto wars" against a powerful coalition of internet activists and technology companies.  Most prominently, data on Apple's iPhones are now encrypted, with the owner holding the key, so that the firm will no longer be able to unlock the devices even if ordered to do so by a court. Such innovations were in turn partly a reaction to the revelations by Edward Snowden, a former NSA contractor, which showed that the NSA and GCHQ had resorted to widespread digital surveillance.Since the underlying conflict ”the need to protect online privacy with strong encryption versus the authorities need to eavesdrop occasionally" was not resolved, it is now coming back with a vengeance.        

                                                                        

"On November 3rd Robert Hannigan, the new director of GCHQ, Britain's surveillance agency, accused social networks and other online services of becoming "the command-and-control networks of choice for terrorists and criminals". The same day Michael Rogers, the NSA's new head, raised these questions in a speech in Silicon Valley, albeit in a less strident tone." The statements are a reaction to technology firms reinforcing their products and services with strong cryptography to keep or attract privacy-conscious customers."    Intelligence services and law enforcers certainly want access to communications and content in some cases, particularly to fight terrorism. But it would be a surprise if the NSA had not already found a way to tap, say, WhatsApp, a highly popular messaging service. What is more, the backdoors that agencies would like to see installed could also let  hackers get in too, not least those based in China,  A growing number of foreign firms are already avoiding American providers of cloud computing because they are worried that their data may be siphoned off by the NSA without them knowing about it. " (The full article is here )

Meanwhile commercial considerations run counter to government surveillance.Some sort of compromise between commercial and governments goals will probably be thrashed out. It will be done in secret of course in fact it may have already been done as we live in a secretive double-dealing society.  

                                                                                                                                  

The advance of technology inside capitalism is truly astonishing. 'There is more computer power in some of this years top Christmas toys than the first moon mission experts said. The 12 toys predicted to top children's wish lists feature the most advanced technology available. including voice recognition, photo  editing and video, while some connect directly to the internet and can be controlled via mobile apps and iPads.' (Daily Telegraph, 6 November) Despite these staggering advances this society cannot solve a simple problem like feeding the world's hungry or even providing clean water for millions of dying children - but then there is no profit in that.                

                                                                                                                                                                            

 R. Donnelly

(Glasgow branch)