Monday, May 09, 2016

A whole lot of cooking going on ..

Regular readers of the Socialist Standard will be familiar with the Cooking the Books column which usually comprises of two succinct separate articles each month dealing with economic matters in an accessible way for the general reader. (Updated December 21  2016 M.C.)


1. Osborne, Mao, Same Struggle

 It was a good idea to twit George Osborne about his new-found love for the dictatorship in China to make the point that, when it comes to finding markets and investment outlets, ideology doesn’t matter. What does instead is the material, economic interest of the capitalist class, and that Osborne, as one of their governmental representatives, served this interest on his recent visit to China, despite it being a dictatorship and, to boot, one that (falsely) claims to be socialist. Read >
2. Capitalism Goes into Space

 The Dutch Marxist, Anton Pannekoek, once wrote that because the Earth’s size was limited so would capitalism be, implying that when capitalism had extended to the whole of the globe it would come to an end. This conclusion might have been reassuring, but it was never a rigorous argument. The Earth’s size has nothing to do with the lifespan of capitalism. But, if it had, Pannekoek had overlooked the possibility of capitalism extending itself beyond the Earth; surprising since he was a professor of astronomy, but he was writing in 1942. >Read 

1. A Parasite on Parasites

 Harry Hyams, who died in December, was one of the ‘unacceptable faces of capitalism’ in the 1970s, though the then Tory Prime Minister Edward Heath had coined the term in relation to another ruthless capitalist. Hyams’ notoriety was based on what he did with Centre Point, for a while the tallest building in London, as described by his obituary in theTimes (22 December):

‘Centre Point was completed in 1966 at a cost of £5.5 million. However, within seven years and still without tenants, its value was estimated at £20 million. In an era of rapidly rising rents, it was worth more as an unoccupied asset.’ Read >
2. But Who Owns the Machines?

 ‘STEPHEN HAWKING Says We Should Really Be Scared of Capitalism, Not Robots’ wrote Alexander C Kaufman, the Business Editor of the Huffington Post, last 8 October. Hawking didn’t actually use the word capitalism but he might as well have done:
‘If machines produce everything we need, the outcome will depend on how things are distributed. Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution. So far, the trend seems to be toward the second option, with technology driving ever increasing inequality.’ Read >

1. Swizz Banking?

 Swiss banking reformers have obtained the 100,000 signatures needed to initiate a referendum to restrict bank lending or, as they put it, to stop banks benefiting from being able to create electronic money out of nothing.

Explaining the apparent logic behind the proposal in the Financial Times (5/6 December), Martin Sandhu wrote:

‘The bank decides whether it wants to make you a loan. If it does, then it simply adds the loan to its balance sheet as an asset and increases the balance in your deposit account by the same amount (that’s a liability for them). Voilà; new electronic money has been created.’  Read >
2. The Face of Capitalism

 'I find it terrible that we allow companies to behave like this', an unnamed Tory minister told Times columnist, Rachel Sylvester (26 January) commenting on the Google tax             row.  'It gives capitalism a bad name'. It's the 'unacceptable face of capitalism' all over again (as if capitalism had an acceptable one).

But those in charge of Google and other corporations operating in many different countries did nothing against either the economic logic or the legal code of capitalism. Capitalism's economic logic is to maximise the 'self-expansion of capital', i.e., to make as much profit as possible to invest as more capital, and it is the legal duty of those in charge of investing other people's money to ensure that the investors get the maximum return on their investment. Read >
1. George Osborne, Paul Mason and Marx
 Speaking in the House of
 Commons on 1 March George Osborne called the journalist and broadcaster Paul Mason a ‘revolutionary Marxist’.
  To which Mason indignantly replied: ‘As to Mr Osborne’s claim that I am ‘revolutionary Marxist’ it is completely inaccurate. I am a radical social democrat who favours the creation of a peer-to-peer sector (co-ops, open source, etc) alongside the market and the state, as part of a long transition to a post-capitalist economy. There’s a comprehensive critique of Bolshevism in my latest book, Postcapitalism: A Guide to Our Future.’  >Read  

2. McDonnell’s Mantra

 Labour Shadow Chancellor John McDonnell is apparently going around repeating the mantra ‘Investment, investment, investment’ as the solution to the woes of British capitalism. Labour activist Michael Burke wrote justifying this in Ken Livingstone’s online Socialist Economic Bulletin  on 25 February. He started off well enough:
‘… contrary to George Osborne (and those on the left who are confused and echo him) it is not possible for consumption, or wages to lead economy recovery.’  Read  >
1. When Supply Exceeds Demand ….

 The capitalist class is not a monolithic block with a single interest. They are united of course in wanting capitalism to continue and a government to enforce their ownership, but beyond that it’s a mass of often conflicting sectional interests of particular groups, industries and firms. An important role of governments is to arbitrate between these conflicting interests.

The current crisis in the British steel industry is a case in point. Tata, the India-based capitalist conglomerate which owned the Port Talbot steelworks (which shows that capitalism is international and that the Leninist theory that imperialist Britain exploits capitalist India is nonsense – they’re all in it together), wanted to dispose of it as it wasn’t making a profit. In fact it was said to have been making a loss of £1 million a day. No capitalist firm is going to put up with that for long.  Read  >
2. … and When Demand Exceeds Supply

 There is a housing shortage in London. Or rather, paying demand for accommodation in London exceeds supply for sale, which is not necessarily the same thing. There are probably enough buildings in London to house everybody, certainly enough so that nobody need be homeless or live in accommodation without basic amenities. The Times (12 April), for instance, reported:

‘A growing glut of luxury homes in inner London could encourage developers to turn them into offices, according to a report that says the total floor space of top-end apartments in the pipeline would be enough to cover Hyde Park.’
1. The EU and the Price of Food

 In the argument over whether to Leave or Remain in the EU is in the better overall interest of British capitalism, which the media and politicians are urging us to get embroiled in, the Remain side would arguably seem to have the stronger case – from a capitalist point of view that is, of course.

British capitalism benefits from unrestricted access to the single European market and also from having a say in drawing up its rules and regulations. It also benefits from being part of a large trading bloc in negotiations with other states and blocs, on the same principle behind trade unionism that ‘unity is strength’: you can get a better deal when negotiating as a group rather than individually. Read >
2. Mises is Irrelevant

 The 'Weekly Worker' (28 April) carried an interesting article by the Trotskyoid Hillel Ticktin which, unusually for someone from his political background, gave a good description of socialism which (also unusually) he called socialism:

‘A distinguishing mark of socialism is that distribution would operate according to need, rather than input … people will be able to walk into a distribution point and pick up what they need.’

‘In a socialist society you would expect workers to work in the way that they judge is correct. Since a worker’s incentive under socialism is not money, they work as best they can in order that they not only fulfil what they are doing for the collectivity, but for themselves. You would expect that they would work as well as they can, without any need for discipline from outside.’ Read >

1. No Basic Change

 In June Swiss voters – they get the interesting things to vote on – rejected a proposal to introduce a basic income from the state for everyone as of right whether they are working or not. Perhaps surprisingly, only 23 percent voted for with an overwhelming 77 percent against.
According to the Times (6 June), critics denounced the proposal as a ‘Marxist dream’. We don’t think Marx did dream of a basic income. What he had in mind was the abolition of the wages system and its replacement by ‘from each according to ability, to each according to need’. This would mean that, after cooperating to produce things and provide services, people would have free access, without having to pay, to what they needed to live and enjoy life. Read >

2. Saving Private Capitalism

American capitalism is, apparently, suffering a ‘crisis of faith’, at least according to a 5-page article featured on             the front cover of Time magazine (23 May). The author, Rana Foroobar, quotes the findings of an opinion poll which she finds ‘startling’:
‘… only 19% of Americans aged 18 to 29 identified themselves as “capitalists”. In the richest and most market-oriented country in the world, only 42% of that group said they “supported capitalism”. The numbers were higher among older people; still, only 26% considered themselves capitalists. A little over half supported the system as a whole.’

One of the questions must have been odd if it invited people to identify themselves as ‘capitalists’ in the same sort of way that they might have been asked if they were socialists. A capitalist is not someone who believes in capitalism. It is someone who has enough capital to be able to live without             being obliged to sell their labour power for a living. In America that will be well under 5 percent.  Read >

1. Crocodile Tears for the ‘Have-nots

Commenting the day after the result of the vote for Brexit, Times Economics Editor Philip Aldrick wrote:

 ‘Working class Britons have treated this momentous referendum as a protest vote to register their anger with globalisation, immigration and elitism’.

 He was using ‘working class’ in the occupational sense of manual and industrial workers whereas, in the economic sense, it refers to all obliged by economic necessity to try to sell their mental and physical energies to an employer for a wage or a salary. In other words, nearly everybody except for capitalists and other rich people, making up well over 90 percent of the population. Nearly half of these who took part in the referendum voted for things to remain as they are. Read >

2. Lies, Damned Lies and Statistics

 It is generally recognised that during the referendum campaign the Brexit side relied on lies – about how much Britain paid to the EU, about how the EU worked, about Turkey being about to join – over and above the usual empty promises of politicians as to how things would be better if they won. The Remain side relied more on misleading statistics.

 In April the Treasury released a study purporting to show that a ‘Vote to Leave would make British households £4,300 worse off’ by 2030 (Independent, 18 April). The Remain side immediately translated this into a poster proclaiming ‘£4300 cost to UK families if Britain leaves the EU’. This figure was misleading because it was based on the assumption that Britain left the single market as well as the EU institutions; which does not have to be, and might well turn out not to be the case. Read >

Negative Interest?

 ‘NatWest has become the first bank to warn business customers it may charge negative interest rates on money held in current accounts’, reported the Daily Telegraph (25 July). But how can there be negative interest rates? Why would anyone lend money for a period only to get less back at the end of it?

Interest is the price of borrowing money and is governed by supply and demand, more by demand in fact. The rate of interest (or, rather, rates as there are different ones depending on the risk of non-repayment) reflects the state of the economy. When business is slack, due to a lack of enough profitable investment opportunities, the rate is low because supply, as from companies not reinvesting profits, is more than what other companies want to borrow. In times of recovery and boom, when profit prospects are seen to be good,  it is the other way round. Demand exceeds supply and the rate tends to rise. Read >
Who Funded the Brexit Campaign?

 After the EU referendum the Electoral Commission released figures on the funds received by the two sides. They showed that the Leave side spent about £17.6 million and the Remain only £14.3 million. These were not contributions from grass-roots supporters but, on both sides, from individual capitalists. Since staying in the EU, and especially the single market, was in the overall interest of the majority section of the British capitalist class, how come that capitalists gave more to Leave than Remain? In fact, who were the capitalists who funded the Leave campaign, and why?

Among the dozen largest Leave donors were: Peter Hargreaves (£3.2m), Arron Banks (£1.95m plus a loan of £3m), Jeremy Hoskins (£980,000), Lord Edmiston (£600,000), Crispin Odey (£533,000), Jonathan Wood (£500,000), Patrick Barbour (£500,000), Stuart Wheeler (£400,000), and Peter Cruddas (£350,000).

What all these have in common (apart from most of them appearing in the Sunday Times Rich List) is that they are involved in hedge funds and other such financial activities. Read >

Dreaming of Ending Poverty

 ‘Ending poverty need not be a utopian dream’, was the headline of an article by Philip Collins in the Times (2 September), subheaded ‘Thomas More’s vision of a perfect society may be outlandish but it reminds us that Britain can change for the better.’
This year is the 500th anniversary of the publication of More’s Utopia in Latin. An English translation appeared  in 1551. More did imagine a regimented society with for instance, as Collins pointed out, everyone having to dress the same. But it is not this aspect that has interested socialists. It’s his imaging a society without private property where there is planned production to meet needs and whose members have free access to what they need ‘without money, without exchaunge, without any gage, pawne, or pledge.’ Read >


Beyond Economics

 This year is also the 50th anniversary of Star Trek. Although not the main theme, or even a minor one, it is clear from the characters’ behaviour and occasional asides (at least in the first two series) that it’s a money-free world. Set in the 23rd and 24th centuries, scarcity no longer exists as anything material needed to meet human needs can be produced by ‘replicators’. This prompted one trekkie, Manu Saadia, to write Trekonomics: the Economics of Star Trek that appeared earlier this year and which sparked a discussion on ‘post-scarcity economics’.
Actually, ’post-scarcity economics’ is a contradiction in terms as academic economics defines itself as the study of how societies and individuals allocate scarce resources.  Read >

The Sinking Pound

‘Hard Brexit fears push sterling to a fresh low’ read the headline in the Times (7 October) reporting that the pound had fallen to its lowest level against the dollar for 31 years. Others are suggesting that it could eventually fall, ironically, to £1 = 1 Euro.
Until 1973 most of the world’s currencies were tied to a fixed rate with the US dollar and so also to each other. If a country wanted to change this it had to get the agreement of the IMF. Governments tried to avoid such a formal devaluation as this was regarded as a recognition that they could not control the part of the capitalist economy they presided over as they had claimed in order to get elected. Read >
John McDonnell Imagines

AT THE end of his speech to the Labour Party conference in September, shadow chancellor John McDonnell offered a definition of socialism. Invoking John Lennon he orated:

‘Imagine the society that we can create. It’s a society that’s radically transformed, radically fairer, more equal and more democratic. Yes, based upon a prosperous economy but an economy that’s economically and environmentally sustainable and where that prosperity is shared by all. That’s our vision to rebuild and transform Britain. In this party you no longer have to whisper it, it’s called socialism.’

Evidently McDonnell hasn’t got much of an imagination as this is something that politicians in the other parties can, and do, subscribe to without calling it socialism. They’re right. It isn’t. Read >

Cashless but Not Profitless

 ‘Apple’s latest ambition is to rid the world of cash’ reads the headline in the Times (20 October), reporting Apple’s chief executive, Tim Cook, saying ‘we would like to be a catalyst for taking cash out of the system.’ The prospect of a ‘cashless society’ has been held out before. Apple’s plan is that people should use its smartphones to pay for things instead of cash or a cheque or even a debit or credit card.
A cashless society is not the same as a moneyless society, for a reason hinted at in a turn of phrase used by Christopher Burniske, described as ‘an analyst of digital currency’:
‘Apple’s is building a payment structure where you can use all kinds of digital means to transfer value.’
Actually, transferring value is not a bad way of describing one of the functions of money, that of being a means of exchanging values.  Read >


Jack London Was Wrong

 The writer Jack London died a hundred years ago last month. He is more known for his adventure stories than for his economics but The Iron Heel published in 1907 has a chapter ‘The Mathematics of a Dream’ in which the hero, Ernest Everhard, sets out to ‘develop the inevitability of the breakdown of the capitalist system’ and ‘demonstrate mathematically why it must break down.’
Everhard summarises his argument:
‘We found that labour could buy back with its wages only so much of the product, and that capital did not consume all of the remainder of the product. We found that when labour had consumed to the full extent of its wages, and when capital had consumed all it wanted, there was still left an unconsumed surplus. We agreed that this surplus could only be disposed of abroad.  Read >