Breakdown, crises and the door to revolution

Posted on August 8, 2022 by irishmarxism

Karl Marx’s alternative to capitalism part 49

Arguments based on Marx’s 1859 Preface are often considered to be ‘reductionist’ or ‘determinist’, robbing the oppressed of their agency.¹ Productive forces are reduced to technology which drives accumulation, while in reality the order is the reverse – it is accumulation that drives technology and this accumulation is the growth of capital, of relations of production that involve the existence primarily of two classes which are involved in struggle.

People inhabit the forces of production and drive it forward and people inhabit the relations of production and perform the roles appropriate to the classes that are included in them.

The forces and relations of production therefore provide the grounds on which such agency makes sense and can be accounted for. Of course, they also involve constraints on such agency, but if they didn’t, they wouldn’t provide any sort of explanation at all.

This approach can be contrasted with real determinist arguments based on the idea of the inevitable breakdown of capitalism, which subject it has been said ‘is one which has plagued students of Marx for at least a century . . . veritable rivers of ink have been spent in an effort to fill up this gap in Marx’s theoretical system.” (Martin Nicolaus, The Unknown Marx, New Left Review 1/47 March – April 1968. P55)

Marx does not hold a breakdown theory of capitalism but since as long as capitalism exists it will continue to develop through its contradictions, these contradictions must develop to certain limits.

First, he notes in Capital Volume III, that:

`As soon as formation of capital were to fall into the hands of a few established big capitals, for which the mass of profit compensates for the falling rate of profit, the vital flame of production would be altogether extinguished. It would die out.’

Elsewhere, in the Grundrisse:

‘To the degree that large-scale industry develops, the creation of real wealth comes to depend less on labour-time and on the quantity of labour expended, and more on the power of the instruments which are set in motion during labour-time, and whose powerful effectiveness itself is not related to the labour-time immediately expended in their production, but depends rather on the general state of science and the progress of technology…. ‘

‘As soon as labour in its direct form has ceased to be the great wellspring of wealth, labour- time ceases and must cease to be its measure, and therefore exchange-value the measure of use-value. . . . With that, the system of production based on exchange-value collapses. . . . Capital is its own contradiction- in-process, for its urge is to reduce labour-time to a minimum, while at the same time it maintains that labour-time is the only measure and source of wealth.’

‘Productive forces and social relations—both of which are different sides of the development of the social individual—appear to capital only as means, and only means to produce on its limited basis. In fact, however, these are the material conditions to blow this basis sky-high.’ (Marx, Grundrisse pp 592–94, quoted in Nicolaus pp 58–59)

Marx did not expect capitalism to last long enough to get to this stage of its development and anticipated the contradiction between ‘productive forces and social relations’ to precipitate its replacement long before it. The continued expansion of capitalism and growth of what is conventionally called service industries means that neither lack of competition or an approach to the limit of labour in production has resulted in either of these limits being nearly approached.

In 1850, shortly after the failed revolutions of 1848, Marx wrote:

‘While this general prosperity lasts, enabling the productive forces of bourgeois society to develop to the full extent possible within the bourgeois system, there can be no question of a real revolution. Such a revolution is only possible when two factors come into conflict: the modern productive forces and bourgeois forms of production . . . A new revolution is only possible as a result of a new crisis; but it will come, just as surely as the crisis itself.’ (The Class Struggles in France: 1848 to 1850’)

These have not been the constraints that successive generations of Marxists have thought placed unwanted boundaries on their objectives. Instead, the contradiction between the forces and relations of production is viewed as objective conditions already being in place with only purely subjective ones required to come into line through the effects of capitalist crises. These objective crises express the fetters on the development of the forces of production and the social relations in which they are encased and are assumed to rapidly advance the subjective requirements for revolution.

For Marx however, economic crises are ‘always but momentary and forcible solutions of the existing contradictions. They are violent eruptions which for a time restore the disturbed equilibrium.’ (Capital Vol III). They are therefore not only ‘the most striking form in which advice is given it to be gone and to give room to a higher state of social production’, but their ‘violent destruction of capital’ is ‘a condition of its self-preservation.’ (Grundrisse)

Far from signalling stagnation of the forces of production, these forces are most developed just as crises erupt. And as we have noted before, concomitant with the growth of the forces of production is expansion of the relations of production: of the capitalist and working classes, upon which is dependent the struggle for socialism.

Socialism thus becomes more relevant and feasible as crises worsen but not because they get worse but because of what this says for the development of the forces of production. There is no final crisis and therefore no final breakdown we can look towards as a resolution to capitalism and advent of socialism; even if nothing lasts forever. Crises allow capitalism to seek an equilibrium, while also demonstrating its historical redundancy and potential for replacement, but neither is automatic, and while the former has occurred often, the latter has unfortunately not.

Crises may therefore be the occasion for political revolution – conquest of state power by the working class – through stimulation, but the success of political revolution does not fundamentally depend on them or on their severity. The objective conditions for this we have explained and there is no neat dividing line between these and the subjective conditions constituted out of the class struggle and the capacity, readiness and willingness of the working class to defend and advance its interests through political revolution.

The lack of correspondence between the two has not only involved ripeness of objective conditions and backwardness of the subjective, but also the development of some important subjective conditions in advance of objective constraints on successful revolution.

‘Only once in his life did he speak with a tone of achievement and a sense of accomplishment about one of his works. Only once did he announce that he had written something which not only encompassed the whole of his views, but also presented them in a scientific manner. That occasion was in the Preface to the Critique of Political Economy.’ (1859). Martin Nicolaus, The Unknown Marx, New Left Review 1/47 March – April 1968 p42.

Back to part 48

Forward to part 50

Karl Marx’s alternative to capitalism – part 9 crises and contradictions iii

Posted on August 24, 2016 by irishmarxism

economic crisis Capitalism’s crises are the expression of its contradictions, among which must be those that provide grounds for resolution through working class creation of a socialist society. While the absence of crisis at any time does not mean that the system’s contradictions have been removed, it signals that they must at least have been temporarily contained or limited while continuing to develop, without erupting into violent disruptions of the system. Marx reacted to the return to some sort of prosperity following a crisis as a signal that socialist revolution was for the time being off the agenda.

For capitalism the eruption of economic crisis is also the means by which the contradictions of capitalist accumulation are (temporarily) resolved, by reducing the costs of raw materials and machinery etc.; destroying competitors by making the least efficient firms go bust; increasing unemployment, so putting pressure on workers to increase the pace of work and reducing wages; and by prompting the state to lower legal protections for workers or lower corporate taxes etc.

Only in a crisis does it seem obvious that capitalism is unable to cater for the needs of the majority, and to a degree that stimulates mass resistance and opposition, so what then may result is a political crisis of its rule. There is less reason to expect the working class and other oppressed parts of society to seek an alternative to the system if it is not in some sort of difficulty.

On the other hand if workers are not prepared to react to crises by defending gains and can’t be radicalised sufficiently to achieve overthrow of the system, or have the social and economic power to do so, then socialists must accept that the limits placed on the scope of working class action at such times do not yet include the system’s overthrow.

While economic and political crises signal the possibility of an alternative and a possible opportunity to create one there is no longer a view that they point to the inevitable triumph of socialism. Crises can awaken workers to politics, can propel them to political organisation, push them to fight and make them seek out alternatives but if this is true of the vast majority and such development only takes place on the eve of revolution then it is only a minority who enter the fight with some idea of what that fight is, about how it might be won and what constitutes victory. These are rather weak grounds on which to expect success.

As I noted in the last post – what attitude workers take to crises, how they understand them, who they blame and what solutions they seek are strongly conditioned by their previous experience prior to and outside capitalism’s difficulties. This strongly determines the outcome of crises

“There are no permanent crises” Marx said, which means that such crises in themselves cannot be the grounds for socialism since these grounds must be continuous and persistent conditions within the capitalist system. Crises therefore cannot be confused with the contradictions of capitalism that provide the source for anticipating its replacement.

So if not permanent crises, is it the nature of the stage of capitalism that warrants the claim that the possibility of socialism exists, as Marx claimed. It would appear that for the majority of Marxists the answer is yes: we have been living within the highest stage of capitalism for the last one hundred or more years, set out most famously by Lenin in his short book – ‘Imperialism, the highest stage of capitalism’.

Further to this, the other Marxist leader of the Russian revolution wrote a political programme for his supporters in 1938 in which he clearly characterised the nature of the epoch during which he lived:

“The economic prerequisite for the proletarian revolution has already in general achieved the highest point of fruition that can be reached under capitalism. Mankind’s productive forces stagnate. Already new inventions and improvements fail to raise the level of material wealth. Conjunctural crises under the conditions of the social crisis of the whole capitalist system inflict ever heavier deprivations and sufferings upon the masses. Growing unemployment, in its turn, deepens the financial crisis of the state and undermines the unstable monetary systems. Democratic regimes, as well as fascist, stagger on from one bankruptcy to another.”

“All talk to the effect that historical conditions have not yet “ripened” for socialism is the product of ignorance or conscious deception. The objective prerequisites for the proletarian revolution have not only “ripened”; they have begun to get somewhat rotten. Without a socialist revolution, in the next historical period at that, a catastrophe threatens the whole culture of mankind. The turn is now to the proletariat, i.e., chiefly to its revolutionary vanguard. The historical crisis of mankind is reduced to the crisis of the revolutionary leadership.”

This political programme, The Transitional Programme, became the guiding strategy for those Marxists who rejected the distortion of socialism by Stalinism in the Soviet Union and who stood in the revolutionary tradition of Marx.

The view that socialism was retarded not so much by capitalism itself, or the political forces that defended it, but by other factors can easily be appreciated in a world in which the most powerful forces claiming to be Marxist ruled over vast parts of the globe. In these countries workers held no political power except through a bureaucracy that ruled in its name and unilaterally claimed to be its leadership. As long as this was the case the struggle for genuine socialism had to counter the claims of Stalinism that the degenerate bureaucratic dictatorships in the Soviet Union and Eastern Europe were the future socialist society which Marx foresaw. In this sense, the view that the crisis facing socialists boiled down to who was able to claim the mantle of leadership might seem to have not a little currency; if only because if Stalinism was socialism then the majority of workers and many Marxists weren’t interested.

Trotsky’s predictions of catastrophe should also be viewed in light of the headlong march towards world war, a war that would exceed the death and destruction of the Great War that had ended only twenty years before. In fact this second world war had already begun with already catastrophic results for the Chinese people. When we consider that the possible number of deaths due to World War II is as high as 80 million people it is no exaggeration to have stated in 1938 that “a catastrophe threatens the whole culture of mankind.”

What matters today is whether the context in which this happened now prevails, or has prevailed ever since it was written in 1938; in other words that “the economic prerequisite for the proletarian revolution has already in general achieved the highest point of fruition that can be reached under capitalism.”

If this were so then the series of posts of which this one is a part, dealing with Marx’s alternative to capitalism growing out of capitalism itself, would have little need to go beyond a political analysis of the class struggle and specifically how and why the working class still allows itself to be politically led by political forces opposed to the revolutionary overthrow of capitalism.

to be continued

Back to part 8

Forward to part 10

Karl Marx’s alternative to capitalism part 8 – crises and contradictions ii

Posted on August 6, 2016 by irishmarxism

A view common among Marxists is that socialism will arise out of a crisis of capitalism. This is believed for a number of reasons. The most fundamental is the view that socialism will arise from the contradictions of capitalism and these contradictions give rise to repeated crises; crises of overproduction, of profitability and of class relations. Economic and political crises point to the inevitable triumph of socialism as every such capitalist difficulty signals the possibility of an alternative and the opportunity to create one.

A more common sense way of understanding it is that if capitalism continued to deliver the goods then why would anyone fight to change it?

These contradictions include the contradiction between capital and labour in which capital accumulates and grows through augmenting itself with the value created by labour for which labour is not remunerated in wages. These contradictions also include the tendency for the development of the forces of production to conflict with the relations of production within which they develop. The productive forces of machinery, technology and other means of production and productive relations determined by the ownership of these means of production by capitalists and the exclusion from ownership of those who create and work with these means of production, the working class.

The contradictions are the tension between the more and more effective socialisation of production and its private capitalist appropriation. Production is more and more subject to a division of labour with hundreds if not thousands of components produced and shipped from all over the world before final assembly in one location. This final product such as a computer can then join thousands of other products in creation of another final product such as a car. The workers who produce this final product likewise consume commodities created from all across the world which are themselves assembled from products created across the globe. A vast meshed network of companies, of communications and transport has been created by capitalism that requires an enormous degree of co-ordination and planning by millions of workers to ensure this all takes place, and takes place profitably.

Yet this production is sold on a market in competition with other similar products from other companies or in competition with very different goods that could equally be bought instead. Only after the fact is it recognised whether the labour employed in producing these goods has been wasted. If the prices obtained for them do not result in sufficient profit the capitalists will close down, reducing production and reducing the market for goods generally as workers are laid off and supplier companies equally reduce employment. If this happens on a big enough scale economic crises result.

Were imbalances in production to arise in an economy under workers’ collective ownership this production would be rebalanced without making workers suffer for any misallocation. It would be in the interest of everyone to reallocate this labour to produce goods or services for which there is more need. With capitalist appropriation however, despite the socialised nature of production, despite the enormous cooperation and scale of planning required, it is only the private profit of individual capitalist companies that counts. And if this means closing down productive assets, wasting resources and creating unemployment well . . production is only for profit under capitalism. It is competition not cooperation which predominates, competition between companies for sales of commodities and competition between companies to extract the maximum surplus from their own and other workers.

For Marxists this global economic result arises from the very nature of the commodity itself and its simultaneous existence as a use value and as a value. As a commodity it must have usefulness for it to be purchased by anyone but it must also have a value that can be exchanged with other commodities and money. At the end of the day it is the value in exchange that matters for the capitalist because it is from this aspect of the commodity that profit is derived.

A more common way of describing this is that production is for profit and not for use; commodities are produced only in so far as they procure a profit but which are only purchased in so far as they are useful. Goods and services are produced which are profitable but which only a tiny minority of the world’s population find useful while goods useful to millions are not produced because they are not profitable.

The craziness of this has been on display in Ireland, which has had an enormous economic boom largely built in its last years upon housing and other property production. A boom that eventually turned to bust not because everyone had a decent home, or the commercial fabric of society had been completely renovated, but because the prices demanded by developers and construction firms could no longer be afforded by those expected to buy or rent. Prices collapsed, building firms went bust sacking tens of thousands of construction workers; developers went bankrupt, their loans could not be paid and the banks that lent them the money then also went bust, unable to remain solvent given the scale of the bad loans on their books.

The capitalist State then stepped in to assure the banks’ solvency by guaranteeing their loans and when it was proved that it could not afford to do so it too went bust; so the European Commission, European Central Bank and the International Monetary Fund also stepped in to ensure that the State could make good its guarantees to the banks – in exchange for the State cutting the tripe out of state services, increasing taxes, lowering public sector wages and reducing public sector employment. The State survived all this by spreading its debts across the generations so that even in 2050 the children and grandchildren of the boom generation will be paying for the boom and the bust.

At the peak of the boom 90,000 houses a year were being built by employing around 274,000 workers. Last year fewer than 13,000 new homes were built while demand is running at 25,000 a year. There are over 1,000 families homeless compared to 400 at the beginning of last year while there are an estimated 90,000 families on waiting lists for social housing. But this is happening in a country that has 230,000 vacant homes, some in “ghost estates” in far-flung towns where few Irish people now wish to live — if they ever did.

This is reported in Ireland and elsewhere as if this was a peculiarly Irish problem, but not only have there been property booms across the world but housing and property booms are only the most visible manifestations of classic crises of overproduction that have been a feature of capitalism for almost two centuries. Visible because the commodities overproduced sit there staring everyone in the face for years. This is not an Irish problem, although it has to be said that the Irish are very good at doing it with houses, but is a classic capitalist problem of desperate need not being addressed because to do so would not deliver the requisite profit.

It has been reported by the Society of Chartered Surveyors in Ireland that it costs €330,000 to provide a standard family home, a figure that appears to have changed little despite the deep recession! Construction costs account for less than half of this figure with the rest made up of fees, levies, site acquisition costs, finance costs, and tax and profit margins. Developers would rather hoard land they over-paid for in the boom because to do otherwise would mean them accepting a loss. This would then hit the banks who everyone is pretending are now fine and no one wants a repeat of the 2008 crash. So the process of the previous boom and bust is repeated for the sake of avoiding another one.

But very few people can afford houses at these prices and single people and those on even average incomes can’t afford them and would drown in a sea of debt if, or rather when, interest rates increase (although of course no one is thinking of this now). Instead the solutions put forward by the Government include grants to first time buyers, which will simply increase prices by the amount of the grant, or subsidies to developers, who will probably pocket the money while maintaining their asking price. In short, the same policies pursued during the boom. As the table below shows the huge debt already built up is a big constraint on any solution that seeks to stuff working class people with even more credit.

Housing 2

The solution is to build affordable houses by expropriating the land holdings of developers and re-employing many of the construction workers who were made unemployed in the crash. However, this calls for a radical break with the prerogatives of private property which is a more entrenched religion in Ireland than theCatholic Church.

From the point of view of our look at Karl Marx’s alternative to this sort of mess there is another striking question that arises. Just how do such crises lead to replacement of the system that produces them with a new one called socialism?

Yes, capitalism leads to these crises and yes, they would not arise within a socialist society, but what is the mechanism by which this contradiction leads from the former to the latter? What leads workers from recognising there’s a crisis to understanding that it’s a result of capitalism and agreeing that socialism is the answer, and then fighting to introduce it? All while their starting point is not so much a very conscious rejection of socialism so much as a recognition/acceptance of capitalism because it is the system that actually exists, works (however badly) and places them in a subordinate position within which, by and large, they are powerless to effect very radical change, either as individuals or even as individuals that are part of collective organisations.

A lack of understanding of what socialism actually is and little confidence that the world can be changed, or that they must do it themselves, are not even the first condition of this problem but the result of the more basic conditions within which workers live. Is there a contradiction at this more basic level of workers’ everyday lives that can provide the experience that they can learn from either directly or indirectly; that capitalism does not have to be accepted and that an alternative can actually exist, already exists even if in an underdeveloped form that must be developed further?

In all this it is clearly the development of political consciousness that is key. Only through its development will workers become active makers of their own future, seeking greater and greater control over their lives and thus greater and greater control over society. But Marxists believe that it is material conditions that generate consciousness and it is not at all clear that conditions of crisis can generate socialist consciousness. They have not done so in Ireland. Some of the first posts on this blog were a record of how previous capitalist crises generated reactionary solutions and the growth of xenophobic and racist solutions today are testament to this.

Marxists do not believe that the rational superiority of socialism on its own will lead to socialism. Or rather, to be more precise, Marxists do not believe that rational argument about the superiority of socialism over capitalism will bring it about. It plays a vital part in the work of socialists in the workers’ movement but rational argument is ultimately only powerful if it corresponds to the rational development of capitalism itself.

If capitalism tended more and more to a state antithetical to socialism, to a position that was further and further away from the possibility of collective workers’ ownership of the means of production, then ultimately no amount of rational argument about the putative superiority of socialism would matter because it could not arise in the real world. And if it could not arise in the real world the argument as to its superiority would not be rational either. A world built on unqualified love between all members of humanity may appear a rational argument, as opposed to the hate and oppression of the existing one, but it is not rational because we all know such a society cannot exist.

Crises are ephemeral, they are the means by which capitalism resolves its contradictions, even if only temporarily. They generally weaken the working class and its movement and they often present opportunities to disorient them. They invite immediate solutions when many workers generally experience capitalism as individuals or are not grouped in organisations that are by their nature capable of providing answers. What attitude workers take to crises, how they understand them, who they blame and what solutions they seek are strongly conditioned by their previous experience prior to and outside capitalism’s difficulties. Generally this experience does not prepare them for taking conscious control of society, which is the essential challenge posed by the greatest crises.

Capitalist crises therefore give expression to the contradictions of capitalism but are not themselves the contradictions upon which the alternative higher form of society will arise. History is replete with subordinate classes’ willingness to fight against their oppressor classes, such as the countless rebellions by Chinese peasants against their ruling dynasties or medieval peasants against their feudal lords. But even when the contradictions involved in their class antagonism burst through in successful rebellion no stable society was created by these victorious oppressed class because the class contradiction evoked no mode of production resting on the unified class interests of the victorious class.

Even when the class of feudal lords disappeared from history it was not a peasant mode of production that was eventually built on the bones of their feudal rule. Similarly, when the working class in Russia succeeded in overthrowing the Tsarist state and the capitalist economy in Russia it failed to create a new socialist society because the material conditions would not allow a new socialist mode of production to grow and develop.

So basing the alternative to capitalism on the crises of capitalism is not enough. Developing consciousness of the need for an alternative is not even enough. The contradictions that exist must contain within them the potential for a new socialist society to arise out of them. In other words, it is not enough that there is contradiction but that the contradiction is resolved, in this case in a new and higher form of society. And for this to be the case the nature of the contradiction has to contain the potential for this to occur.

It is not that the contradiction creates a clean slate upon which something new can be built but that the new arises from within the development of the contradiction itself. Clearly the nature of this is therefore key, for its development must not only contain the end of the old but the beginning of the new at one and the same time. Consciousness by the working class of the necessity for a new society is necessary for it to happen because it must be its creation but this is only possible if the process exists in reality.

Back to part 7

Forward to part 9

Syriza and Ireland

Posted on January 22, 2015 by irishmarxism

This Sunday the Greek people will go to the polls in an election that could see the beginning of the end of austerity in Europe. That anyway is the view of some on the left across Europe.

The potential election of a Coalition of the Radical Left (Syriza) Government, promising a radical reduction in the debt burden, has the potential to galvanise and set an example to the rest of the PIIGS. It could incite a combined movement in Portugal, Ireland, Italy, Greece and Spain that would reduce the debt of these countries which has been a prime driver of austerity. Through radically reducing the requirement to service and pay down enormous debts such a step could launch a definitive movement away from neoliberalism towards a radically different Keynesian social democratic alternative.

The elections in Greece will be followed this year by elections in Spain, in which a like-minded Podemos movement has grown, and in Portugal, and may also be joined by an election in Ireland despite the claims of the current Government that it will run in office until 2016. Of the five PIIGS therefore at least three and possibly four may see elections this year. Even elections in Britain could see the ousting of the Tory devotees of austerity and neoliberalism. In fact the policy that might inspire the PIIGS is not confined to them but might apply right across Europe. And Syriza is in the vanguard of this movement.

Is such a scenario a real possibility?

Let us notice what makes such a claim plausible.

Firstly the proposals of Syriza are not solely on behalf of the Greek people although as a Government it will be able to negotiate only on their behalf. Syriza proposes a European Debt Conference modelled, with delicious irony, on effective debt forgiveness of (West) Germany in 1952. This was carried out explicitly in order, or so it was claimed, to normalise relations between Germany and its creditors and to promote economic development. That deal wrote off half of the debt, stretched repayment of the rest and for the first few years provided only for payment of interest, which was also limited.

Syriza proposals are more limited. Their policy could be based on an academic paper which proposes that half of the debt would be bought up by the European Central Bank (ECB) with either an interest holiday or interest charged on the remaining debt at a low rate. The debt taken on by the ECB would not be written off but would be paid back only when the remaining debt left to the country had been reduced to 20 per cent of Gross Domestic Product (GDP). In effect economic growth and inflation will have eroded the real value and real impact of debt repayment.

However in one very important sense the proposals are much more radical than the German precedent, because the Syriza proposal is that this plan applies to every country in the Eurozone with debt over 50 per cent of GDP (all but three countries). The Irish state for example would see its debt reduced from 108 per cent of GDP to 50 per cent, saving €3.7 billion each year in interest payments, so reducing the need for cuts or tax rises and facilitating greater state spending and investment.[i]

It has been estimated that this would reduce sovereign debt in the Eurozone area by about €4.5 trillion. It is asserted that this would not risk inflation because the ECB debt purchases would be funded by massive borrowing from private banks. There would be no money printing since the money is borrowed. And sure why worry about inflation when deflation is so clearly the enemy? And who pays the interest on these loans?

Well, it is recognised that there will be losses in paying back the private banks, between €50bn – €60bn in each of the first 5 years, and €1trilion over 40 years, but it is argued that the borrowing costs of the ECB would be low and that renewed economic growth would compensate. It would be cheaper than the current policy of austerity and expansion of the ECB balance sheet required to bail out the banks.

It is recognised that this may not be enough in the short term for some countries so that, for example, in order to prevent continued austerity in Greece the ECB would have to take over the debt that would be required to be issued in the next five years. This would also be required because over 50% of outstanding debt has to be paid back within the next 5 years in Italy, Spain, France, Holland and Belgium and to cover this new debts would have to be taken on.

For Marxists the point is not that some monetary scheme has been devised that will solve capitalisms’ problems. Nor is it the point that Syriza will go into negotiations and cannot expect, as in all negotiations, to get its original plan agreed, even discounting some conscious intention to betray the hopes of its supporters in order to accept the logic of capitalism.

The significance of the proposals is that it provides a concrete platform around which workers across Europe can organise and struggle together, and a series of elections that can be a focus for such struggle. This is not to invest illusions in either elections or Syriza, who are condemned by some for having shifted from a policy of debt repudiation to one of simply extending repayment under more favourable terms. If a practice of simply condemning the limitations of reformist politics were the answer we would no longer have the problem.

The Syriza programme is one that workers and socialists can support because it reduces the burdens they face and would deal a big political and ideological blow to austerity and the parties who have peddled it. It would deal a real blow to reactionary political parties seeking nationalist or fascist solutions. Through a successful campaign workers could gain strength and confidence to build up their organisations, their own social and political power and their own confidence and class consciousness. The latter is the role that Marxists can play by advancing a programme that does all these things.

The victory of Syriza would allow an opportunity to directly organise workers on an international programme on an international basis. It is remarkable that this significance has been somewhat missed. So, for example, the call promoted by the Fourth International correctly argues that “their victory will be ours, but their defeat too” but appears to fail to appreciate that this can be so because other European workers will not just be in solidarity with Greek workers but can actually be part of the same struggle, demanding the same deal for their country, so that “our victory will be ours and our defeat will be ours too.”

This is made tactically easier by Syriza not proposing either to leave the Euro or leave the EU. There can be no pretext that the demands of Syriza can be dismissed because they no longer want to belong to the club.

These policies have been condemned as examples of betrayal of earlier more radical promise but they are not just tactically recommended. As argued before in the various posts on ‘The Left Against Europe’, the growing unity of capitalism provides the material basis for the international unity of the working class. This is why a united international struggle against austerity is more immediately and concretely possible in the Eurozone than one against similar policies pursued more or less independently by separate capitalist states each with their own currency.

So to return to our question – is such a scenario possible?

It is possible to argue that it is, for the simple reason that the Greek debt is too big to be paid back anyway. Some means of addressing it is required and the Syriza route is eminently preferable for workers than the slow death march of austerity and repeated minor debt ‘haircut’ so far embarked upon.

The second is that by the very fact that the Syriza plan is reformist there is no necessity for a life and death struggle by the forces of capitalism to defeat it. The Syriza plans do not call the system into question, which both sets limits to what it can achieve but also provides scope for negotiations between a Syriza Government (and other PIIIGS Governments should they be elected or so inclined) and the IMF/ECB /EU/German State alliance.

The rallying of the Greek workers behind Syriza is one of many proofs that a revolutionary overthrow of Greek capitalism is not currently on the cards and is not therefore a realistic immediate alternative. The revolutionary alternative today consists of preparing for such an eventuality tomorrow.

Not by either passively or even ‘aggressively’ preparing for socialist revolution but by the cumulative development of the power of the working class suggested above, with the certain knowledge that a revolutionary break with the capitalist state and system will be required.

To condemn Syriza for negotiating with capitalism when it cannot be overthrown is a bit like condemning trade unions for negotiating a pay award when they should be overthrowing the wages system.

The third has been pointed out here – Syriza will be damned if it does not get some sort of result and the executor of that judgement may be the fascists of New Dawn. It is not only Syriza who has an interest in ensuring this doesn’t happen.

‘Ireland is not Greece’ we have been told repeatedly over the past five years or so. If Syriza is anyway half successful Ireland will look pretty stupid if it isn’t.

[i] It is interesting that the authors go beyond the argument that this is some sort of socialism saying that “The left ought to be strategically against privatizations, having at the same time as an ultimate target the gradual historical replacement of “state control” by democratic forms of social control (unfortunately this type of discussion has not been adequately developed within the left).”

Why have the Irish not revolted? Part II

Posted on October 6, 2013 by irishmarxism

In my first post I qualified the view that there was something particularly weak in the resistance of Irish workers to austerity but argued that nevertheless an explanation is needed. To develop this further we need to ask what this austerity has involved.

Some commentators would have a ready explanation. In terms of the share of taxation in Gross Domestic Product (GDP), in terms of the share of Government spending in GDP and overall deficit as a percentage of annual value added there has not been ‘savage austerity’ so there has been nothing to rebel against.

Here unfortunately we have no choice but to enter the world of economic statistics where only the naive can expect clear objectivity and accuracy.

A post on the Irish Economy blog records that (adjusting the statistics for the well-known effect of foreign multinationals in the Irish State significantly overstating economic performance) living standards measured in GDP per person (in Purchasing Power Parity values) declined by 14 per cent from 2007 to 2011. This is a bigger decline in living standards than in Portugal where the fall was only 1.6 per cent, in Spain where it was 4.9 per cent and Greece where it was 8 per cent. In terms of national income (another measure) the drop was bigger – 20 per cent – and it will have fallen further since then. It would appear that the relative quiescence of Irish workers needs additional explaining.

But does it?

Any Irish statistic that uses GDP is immediately suspect for the reason above but not only because of this. GDP is a measure of value added which means the 2007 figure will include property produced at vastly over-inflated values. Houses and offices built and priced at one value will have been shown subsequently to have been worth 50, 60 or 70 per cent less, or sometimes to be completely worthless. A moment’s thought reveals that this is not a characteristic simply of Irish statistics but of measures of capitalist production everywhere.

When we think of the effects of the banking industry on measures of economic growth we again see that this measure is seriously distorting, not only because of the difficulties of capturing accurately what is happening, but because of the nature of capitalist production. This takes place through the production of commodities whose real value is only realised after production. The value of these commodities is elaborated through the workings of the market which reveals the socially necessary value of output in a cyclical fashion.

For economists wedded to capitalism recessions are always the result of exogenous shocks outside the system or of purely irrational behaviour within it, which amount to the same thing. For Marxists the cycle of boom and bust is how the values of commodities are established and then re-established in a constant process. By nature therefore there can be no precise measure of value produced at any one point in time or over any one period.

In figures for GDP the distinction between use value and exchange value is absent never mind any accounting for how really ‘socially useful’ the use values produced are – ghost estates and weapons compared to commodities actually consumed by workers. This is to be considered on top of the well-known criticisms of measuring living standards by GDP.

There are alternative measures we can review but before we leave behind this discussion we should appreciate that what we have been looking at is not simple mismeasurement of economic activity but one form of the appearance of real contradictions within the system.

From the point of view of our particular investigation we can make two points. That a critical review of some of the figures means the boom was not as boomier (to quote Bertie Ahern) as some statistics might appear to show and the recession not as sudden and complete a reversal as might first appear. The expectation of more or less immediate revolt might therefore be less justified? Other evidence however might suggest that such a view should be considered a relatively minor factor.

Secondly, the constant reporting of such economic statistics plays an ideological role such that workers must accept real changes to their lives on the basis of these statistics. Workers are subject to such pressures not just in the recession but also in the boom – encouraged to get into unsustainable debt for example. To the extent that they do the latter they are then under ideological assault to accept that they, along with everyone else, ‘partied’ and went on a ‘mad borrowing’ frenzy, as Taoiseach Enda Kenny has put it.

Some commentators might argue that a recognition of ‘guilt’ has played a role in short-circuiting resistance but the existence of such undoubted views is as much a result of demoralisation as a cause of the lack of resistance.

There are other statistics we can look at to see if there are material reasons for the lack of opposition apart from this particular ideological one.

What appears a more relevant statistic is called Actual Individual Consumption which encompasses goods and services consumed by households including government services such as education and health provision. This would appear to show that between 2008 and 2011 living standards in the Irish State fell more than in Spain and in Portugal but less than in Greece or Iceland.

Actual Individual Consumption

State	2008 index	2011 index	Percentage fall
Ireland	109	100	8.3
Spain	99	94	5.1
Greece	104	94	9.6
Portugal	84	82	2.4
UK	123	118	4.1
Iceland	122	107	12.3

This measure is made up of a component of GDP so is subject to some of the criticism above. We have already seen that three different measurements of living standards result in reductions in living standards of 20 per cent, 14 per cent and over 8 per cent, depending on dates and the measurement adopted.

What we can say with certainty is that living standards fell abruptly and significantly due to the crisis and it is not obvious that the severity of the fall in any country determined the relative extent of opposition to austerity. It is necessary before drawing any conclusions to look at what might be at least some of the components of the fall in living standards, not by any means only a result of the effects of Government austerity policies.

By one measure unemployment in the Irish State increased from 3.4 per cent in 2007 to 10.4 per cent in 2012, a tripling of the rate in only five years. The economically inactive, which must contain many who have given up hope of getting a job, increased from 27.5 per cent of the population aged 15 to 64 to 30.8 per cent.

Using a different measurement unemployment in the Irish state was 13.5 per cent in January 2013 compared to 17.8 per cent in Portugal, 26.8 per cent in Spain and 27 per cent in Greece. Clearly the crisis has hit the latter countries much harder than Ireland. It is by no means clear that higher unemployment breeds resistance since its function under capitalism is to facilitate increased exploitation of the working class. The mobilisation of the unemployed is not always for progressive reasons, which is one reason we have noted before that economic crises often breed reactionary movements.

Once unemployed some workers face the prospect of hardship and one measure of this defined as deprivation, or being without two or more basic items, has increased from 11.8 per cent of the population to 24.5 per cent in 2012. The possibility of this is affected by the level of welfare an unemployed personmight rely upon and this is measured by the net replacement rate, or the payments due to the unemployed as a percentage of previous net income. This obviously depends on whether the person has children or is married etc.

Net Replacement rates 2011

	No children			2 children
Country	Single person	One earner Married couple	Two-earner Married couple	Lone Parent	One-earner married couple	Two-earner married couple
Republic of Ireland	50	81	75	64	75	81
Greece	49	54	75	58	63	80
Spain	79	76	90	77	75	89
Portugal	75	75	92	77	76	91

The table shows that Greece has significantly lower replacement rates than the other selected countries for most categories but that the Irish state’s is generally lower than Spain’s and Portugal’s. It would not appear that the prospect of a more significant loss of income as a result of unemployment has spurred opposition in Ireland relative to that in Spain or Portugal.

The other obvious way workers cope with periods of unemployment is falling back on any savings that they have accumulated. The following table shows the movement in net financial assets per person (€) in the various countries:

Country	2007	2011
Republic of Ireland	23,634	26,279
Spain	21,698	16,328
Portugal	19,950	19,750
Greece	19,681	10,105
Euro area (17 countries)	37,289	36,201

The table shows the Irish State to have the highest level of financial assets (though much below the Euro area average) and that this even increased between 2007 and 2011! Since these figures say nothing about the unequal distribution of wealth and we know that many have suffered unemployment, cuts in wages or tax increases, it is clear that certain sections of Irish society are bearing up quite well. In the other countries financial wealth fell and in Spain, but particularly in Greece, fell quite dramatically.

Such average figures hide as much as they reveal. Average household disposable income in the Irish state fell from €49,043 in 2008 to €41,819 in 2011 but this was still significantly higher than in 2004 when it was €38,631. Right wing commentators have often made the observation that incomes have often just gone back to such and such a date and we are all much better off than before the boom kicked off in the first half of the 1990s. This is undoubtedly true for many but doesn’t provide an answer why as a class Irish workers have resisted austerity so weakly, unless the argument is that expectations have very quickly reduced. Is this however another result of defeat or a contributing factor to it, or both?

Averages can obscure because it is precisely the unequal incidence of the effects of capitalist crisis that can have decisive political effects.

Unemployment has increased dramatically but its incidence is not uniform. Employment in construction has collapsed, from 258,000 at the start of 2008 to 102,000 at the end of 2012, a fall of over 60 per cent. Over the same period employment in the state sector fell from 417,000 to 381,000, a fall of 8.6 per cent. The pitting of private sector workers against those in the public sector was a clear strategy of the Government, the employers and the media and it was quite successful.

But this has not been the only divisive effect of the crisis. Rates of unemployment among young people in Ireland, just like other countries, have been much higher than the general rate. In the Irish state the rate of unemployment among those less than 25 years old was 26.6 per cent in April this year while it was 42.5 per cent in Portugal, 56.4 per cent in Spain and 62.5 per cent in Greece. These are truly staggering figures. The rate of long term unemployment has increased from 29.2 per cent of total unemployment at the start of 2007 to 45.5 per cent at the end of 2012. What this should remind us, is that unemployment is a divisive imposition of the effects of capitalist crisis that impacts not only on those without a job but also those in employment. Emigration has returned and is continuing to increase, up from 87,100 in the year to April 2012 to 89,000 in the year to April 2013.

None of these figures illustrates the hardship caused by tax increases and public expenditure cuts that can affect the most vulnerable the most. They do not include the effects on people’s experience of negative equity, the full effects of which have yet to hit home. Here again it is younger people who are more likely to be in negative equity and to be in arrears in their mortgage payments. And of course the figures do not tell us that the results of the crisis and austerity are to be here for a long time.

Over 32 people were unemployed for each job vacancy in 2012, while the figures for Spain and Portugal were 72.6 and 90.4 respectively. The General Government Debt as a percentage of GDP was 117.6 per cent in 2012 while the 2012 EU Fiscal Compact stipulates that where this is above 60 per cent it must reduce by 1/20^th per year. In 2012 the in-year Government deficit was 7.5 per cent which means the debt was not getting smaller but getting bigger. Normally optimistic forecasters are predicting that unemployment, as measured by the International Labour Organisation methodology, was only to reduce from 14.7 per cent in 2012 to 13.9 per cent in 2014.

So what are we to make of all these figures?

The fall in living standards has been significant even if not so sudden or large for some sectors of society as others and not on the same scale as some other countries such as Greece. Certainly the disproportionate effects on young people and rise in emigration have blunted resistance but these factors exist on the same or greater scale in some other countries in Southern Europe where resistance has been greater.

It is not therefore the effects of the crisis themselves that explain the response even if these act to weaken certain social and political reactions. The left wing economist Michael Taft has claimed that the ‘squeezed middle’, the 4^th to 8^th deciles of income earners, suffered declines in direct income in the five years leading up to the crash, gaining only as a result of social transfers.

During the boom the level of trade union organisation fell relatively as union density dropped from 46 per cent of the workforce in 1994 to less than a third in 2007, and only 16 per cent in the private sector.

Thus even during the most favourable circumstances, when workers are best placed to protect and advance their living standards, they were unable to do so with their own strength. During recession such weakness is exposed.

Now they are subject to the vicious laws of the capitalist market and, as we said in the first post, short of overturning the system there is a limited amount workers can do about this without challenging the system itself.

During this post I have said that workers have not resisted austerity but in truth the great mass of unemployment, insecurity caused by mortgage arrears and negative equity, and the drop in personal consumption are not so much the result of the austerity policies of the Government, which of course have made things worse, but of the capitalist crisis. This crisis can in certain circumstances be postponed or ameliorated by the State but it cannot be suppressed and certainly not by a State in bankruptcy.

When even during the boom large number of workers dependency on this state increased rather reduced and rather than their developing their own independent power, it can be little surprise that when the state turns round and kicks them in the teeth they are unprepared.

Some socialists argued again and again during the boom that social partnership, the vehicle by which the Irish trade unions hitched themselves to the State, was to be opposed not mainly because it prevented workers making gains in their living standards that they should but because it rotted away their independent organisation. This has not just organisational consequences but political and ideological ones and it is to these that I need to look at next.

Why have the Irish not revolted?

Posted on September 24, 2013 by irishmarxism

The defeat of the opposition to the property tax and the ability of the Government to impose a second Croke Park austerity deal might lead many to conclude that resistance to austerity has been defeated. Even before this many have commented that while Greece has witnessed violent protests and numerous general strikes the absence of such events from Ireland is notable and remarkable. General strikes have also taken place in Spain and Portugal but not in the Irish State.

The relative electoral success of the United Left Alliance appeared to blind some to this but the collapse of the ULA has simply confirmed what is more generally understood to be the case. More and more it is acknowledged on the Left that we have to face the reality as opposed to perennial false claims that an upsurge is taking place or is just around the corner.

Realistic assessments of the state of workers’ action have often been drowned out by childish claims that this shows one is insufficiently revolutionary, underestimates the workers , their ability to change their ideas quickly or that such views will not encourage workers to take action. Not in front of the children appears to be the motto. Workers are always ‘angry’ and all it needs is the right campaign, so long as it is active enough, to stir them into action.

Reality is imposing itself and no sound bites along the lines of ‘the darkest hour is just before dawn’ can hide the fact that the economic crisis has resulted in the imposition of austerity on workers without effective resistance. Why is this?

First we must qualify the judgement that Irish workers are peculiarly useless. Commentators have remarked in similar terms about the countries in southern Europe. We have noted before that more or less spontaneous social explosions have not resulted in great advances by the working class. Greek workers have been by far the most combative in terms of general strike action but in hardly anywhere has living standards plummeted so much. I have also noted in one of my first posts that economic crises spurs growth in extreme reactionary forces and we have seen this is in Greece with the rise of the Golden Dawn movement. So Greece is no model to seek to copy.

Secondly Irish workers have fought back albeit within very strict limits. I can still remember the very large demonstration in November 2009 in Dublin, which had many working class people from outside the ranks of the trade unions taking part. The following year public sector trade unions organised a successful strike. At a local level in certain places and at certain times strong campaigns have developed against tax increases or hospital closures. All this and more was reflected in the vote for ULA.

There is however an over-estimation about what workers can achieve within the limits of the capitalist system – a general misconception that workers’ struggles can overturn the laws of capitalism. For example, if a company goes bust and attempts to close down, making all its workers redundant, it is pretty obvious that strike action will not achieve very much.

At this point many on the left propose that the capitalist state protect workers even though these same people have a part of their brain that tells them that the state is a weapon of the capitalist class that cannot be reformed and must be smashed. They also believe that the emancipation of the working class must be achieved by workers themselves but usually object to the idea that, instead of the state, the workers should take over and own and run these workplaces as workers cooperatives.

It is a similar situation at the level of society as a whole and at an international level. The Irish state was and still is bankrupt. It needed a massive injection of money to save the banks and put itself in a position to start reducing its mushrooming debt. Austerity is a means of doing this. Again the Left argues that the state can adopt policies of taxing the rich and spending money on investment that will restore the capitalist economy to economic growth, which will then deal with the problem of the debt.

This is not however the view of socialists. The socialist view, confirmed once again by recent events, is that capitalism inescapably produces economic crises which are dealt with and resolved by the laws by which the system works, including through unemployment and destruction of unsuccessful capital whose markets and sometimes businesses are picked up on the cheap by those remaining. It is not possible for the capitalist system to prevent such crises by adopting policies of more investment, as for example argued by left followers of Keynes.

It is not therefore possible for workers no matter how well organised to prevent the laws of capitalism from working. This at least was the view of Marx and the evidence of history would again confirm this. So workers resistance against austerity may be able to ameliorate austerity but, in so far as they are necessary to lay the foundations of a new upturn, it is not possible for workers to prevent unemployment or wage cuts or tax increases in their entirety or even to a significant degree. In other words it is not possible within the system to prevent capitalism periodically disrupting workers’ lives. That’s why we oppose the system and why we propose a different one called socialism. If we thought capitalism could work better without its nasty effects we wouldn’t be socialists would we?

Yet the left presents austerity as simply one policy option of the Government which it could choose to reject and replace with their own proposals. But even the Keynesian alternative requires ‘counter cyclical’ state action. In other words the austerity measures are simply postponed. All the left’s proposals involve actions by the capitalist state in one way or another – tax changes, public investment, nationalisation etc.

The point in terms of the current argument is not that the Left is misleading workers into accepting reformist solutions that won’t work and this is a reason why resistance to austerity has been such a failure in Ireland. These ideas are more widespread in southern Europe than they are here. No, the issue is that, absent a socialist alternative being created, as long as capitalism exists the laws of capitalism will continue to work and impose themselves. Resistance to austerity will therefore fail and this failure is bound in turn to lead to weakening of the resistance.

We must be careful however not to qualify the problem out of existence when it contains more than a grain of truth. When Greek workers chanted “we are not Irish” on their May Day demonstration in Athens in 2010 they weren’t imagining the relative weakness of resistance in Ireland.

Nor can the question be dismissed by saying Irish workers did fight back – they did, but nowhere near to the extent required for success.

Nor is it credible to blame the poor politics or organisation of the Irish Left.

It is also not adequate to simply say that capitalism wins unless we create socialism. This is obviously true, although its logical implications for reformist strategies and policies are often ignored. But it doesn’t come near explaining why the reformist strategies for resistance have elicited such weak workers’ action. It’s hardly that Irish workers can see through such strategies and are ready for something more radical.

Socialism is not an event or a situation but a movement. Workers will only become capable of building a socialist movement and carrying out revolutionary change if they are also capable of mounting strong resistance to the ravages of capitalism. In Ireland this hasn’t happened and there has been a retrogression of the small socialist movement, although this in itself is not particularly new.

So in Ireland the state has been able to pursue austerity policies that increase unemployment and wage restraint in order to restore its solvency in very much the same way capitalist crises work to restore profitability in the private sector. It has been able to do so without much of the resistance shown in other countries in a very similar situation. This remains to be explained.

To be continued.

Anglo-Irish bank tapes – a rotten bank in a rotten State

Posted on June 25, 2013 by irishmarxism

Revelations by the ‘Irish Independent’ newspaper of taped telephone conversations between two senior Executives in the recently deceased Anglo-Irish Bank have aroused rage amongst a population already angry with bankers.

The expletive strewn – “we have to get the money in . . . get the fuckin’ money in, get it in” – and sometimes juvenile conversation – singing a comedy version of Deutschland Uber Allies – appears to show the two Executives planning to rope the Irish State, through the Central Bank, into bailing out Anglo to the tune of €7 billion, a number “picked out of my arse” as one Executive put it. (The real figure proved to be over four times this amount!)

The cynicism and arrogance on display is summed up by their bragging that their losses are greater but that, once hooked, the state will have to keep on paying – “The reality is that, actually, we need more than that. But you know the strategy here is you pull them in, you get them to write a big cheque and they have to keep, they have to support their money” – while boasting that they would never pay it back.

On last nights’ ‘The Last Word’ radio programme the presenter Matt Cooper asked,in a tone of utter exasperation, whether this was a tipping point in the Irish population’s restrained reaction to the crisis, a crisis that has caused riots in other countries. Would it lead to them . . . demanding a real inquiry into the banking crisis . . . because they needed someone to BLAME. One of the interviewees however explained that inquiries are about finding out the facts.

The Government and opposition politicians have now rallied round a demand for another inquiry and the debate now will focus on what sort of inquiry will result. Already however the call for an inquiry is being predicated on the view that the taped conversations demonstrate that the State was hoodwinked into bailing out the banks, particularly the exceptionally rotten Anglo-Irish.

I’m reminded of the words of the song from Alanis Morissette – “It’s the good advice that you just didn’t take. Who would’ve thought… it figures”. That is because the State was not hoodwinked. The State may well have been lied to, but the State turned round and lied to the Irish people. Now the Irish State wants an inquiry, perhaps, all of five years afterwards so it can blame those already reviled and hated. This, so that it can continue to play the lead role in defending the banks and the economic system they sit upon.

The Irish State, its politicians and bureaucrats, claimed in September 2008 that the banking crisis was simply one of liquidity – the banks weren’t bust, they simply needed some cash to tide them over and then everything would be alright. Basically the banks were solvent.

I claim no great powers of insight or clairvoyance when I say that I knew at the time that this was crap. There were numerous voices, with no inside information, who knew it was crap and said so. The inside information known to everyone that mattered would have proved it. The Irish State was lying to save the bankers, the banks and the system. This should not be a surprise for this is what the State is for.

And not just the local State, because the last five years have revealed that not only was it in support of bailing out banks that could not be saved but this was also the view of the European Union and the US Treasury.

Certainly, blame the banks for reckless and stupid lending but it was not the banks who made their debts the crippling burden on the people. It took the State to do that. Blaming the banks is a way of avoiding this, much harder to accept, reality. Much harder to accept because we have just proved that you can change the government at the top of the State but you won’t change its role. For the bleeding-heart liberals, and I include the leaders of the trade unions in this, this is especially a problem because the State is their only hope of making things better.

But there is an even more important reason to agree with the interviewee in the Today FM programme: that the point is to understand. And what we have to understand is that the Irish bankers were not the only bankers to indulge in reckless lending. It happened in the US, in Spain, in the UK and many other places right across the world. It is happening in China today. Criminal speculation is an inevitable part of economic booms under capitalism and cycles of boom and bust are an inevitable part of capitalism.

Blaming excessive credit expansion is fine, except that such expansion is inevitable in a boom – the bigger the boom the bigger the expansion of credit. The problem is the system that makes credit expansion necessary. No amount of regulation in a boom will prevent it. New financial products, such as derivatives, or new institutions, such as a shadow banking system, are inevitable in a system defined by private property in the means of producing the wherewithal to live. Blame greed – ok, but what other social pathology makes sense in the current economic system? Blame the politicians – but how is the state to function without funding from the finance system?

In any new inquiry we will be invited to blame individuals, to which the implied answer is – ‘lock them up’, more power to the state, and individual banks, to which the answer is – ‘close them down’, when the real solution is to dismantle the economic system that makes such events inevitable. Anglo will be made the focus of attention and held up as a rogue bank but Allied Irish cost almost as much and Irish Nationwide appears to have been even more rotten, however hard that may be to believe.

This view that the core and fundamental problem is the economic system and that the financial crisis and all its consequences are a result of it is not widely shared. Yet the crisis demonstrates this dramatically. Understanding this is an important and vital step to putting things right. It is obvious that no State-backed inquiry could arrive at such conclusions. We have had inquiries already which have been more soporific than enlightening. That means the opportunity and necessity exists for the working class, or part of its movement, to launch their own inquiry to demonstrate the truthfulness of these claims.

Trade unionists should demand the unions launch their own inquiry. The Left should campaign for this and if this fails it should launch its own inquiry, inviting evidence from workers in the banks and from left economists who can set out the mechanisms by which capitalism inevitably produces such crises. An open forum of hearings and invitations to give evidence could provide the platform to educate workers and ourselves. It might also invite proposals for alternatives.

In this respect the Left would do well to ponder the lessons to be derived from one part of the taped conversations. In one recording, a Mr Bowe and another senior executive of Anglo, Peter Fitzgerald, are heard laughing about the prospect of nationalisation. They see it as “fantastic” and are delighted at the prospect of becoming civil servants. This, of course, is exactly what happened. Why then would nationalisation be proposed by people calling themselves socialist?

BBC ‘Masters of Money’ considers Karl Marx (Part 2)

Posted on October 7, 2012 by irishmarxism

The BBC programme was called ‘Masters of Money’ and was ostensibly all about money but there was nothing said about Marx’s theory of money, which is fundamental to explaining the current economic crisis.

For mainstream economics money is essentially just paper that can be used to exchange commodities. Provided it is not issued in too high a quantity it will maintain its value and is useful for this purpose. Already we can see a problem. What is the intrinsic value of pieces of paper or metal coins? If it had an intrinsic value its issue would hardly be a problem. It becomes a problem because paper money cannot fulfil all the functions of money precisely because it does not have an intrinsic value.

The massive expansion of credit makes credit too look like money in that it is used to exchange commodities. However at a certain point people want paid with money and not yet more credit. When this happens credit stops being given to some people and we have a ‘credit crunch’ such as developed in the latest financial crisis when banks refused to lend to each other and Governments had to step in.

For Marx money is itself a commodity with an intrinsic value because it too is the product of human labour. Historically it has taken the form of gold. This is why commodity exchange is an exchange of equals because when money is exchanged for a commodity the money is either gold directly or indirectly if it is convertible into gold. The end of such convertibility does not abolish exchange being one of equivalents. Just as credit cannot become real money and this is proved during a credit crunch so paper money is exposed when it is over-issued and creates inflation and when in a crisis capitalist investors look to put their money into something that will preserve the real value of their wealth.

In fact this occurs during booms when speculation on one type of asset after another leads to bubbles – in high-tech company stocks, houses, commodities and now certain government bonds. The price of oil is one barometer of this activity.

Thus just as the massive expansion of credit is not a solution to the problem of capitalist crisis and the contradiction between a limited market and profitable production so also is the printing of money through quantitative easing not a solution. Yet according to mainstream economics there is no reason why printing money should not be a solution. The proof of the pudding is that while quantitative easing has prevented collapse it has not abolished the crisis.

Many companies are sitting on piles of cash including US multinationals holding money outside the US and so evading US taxes. There is an ‘investment strike’ because of the recession which has created unemployment, falling incomes, debt crises for many countries and austerity which promises not a recovery but continued recession. All this is worse in Ireland because it is not mainly the policy of austerity which is the problem but a massive overhang of debt, which must otherwise be repaid, and shrinkage in demand due to lower wages, unemployment and emigration.

We are back to ‘solutions’ that are based on more investment and higher wagers but which ignore that it is the system based on profit which is the cause of the problems.

Two other issues occupied the last part of the BBC programme. The first was whether capitalism would last more or less forever or would be temporary and replaced by something else. The programme accepted that Marx’s analysis of capitalism had a lot of sense to it but it did not, to no one’s surprise I am sure, think that he had any alternative. In fact the very scarcity of his views on this was held up a number of times while recognising that no one else had much of a clue either.

This was more than a little disingenuous. The programme started off with shots of the Berlin Wall being demolished and of pictures of Red Square in Moscow and of Stalin. The presenter recalled that she was at university at the time the Berlin Wall came down and one thing she was aware of was that ‘communism’ had definitively failed. The programme she said would therefore not look at what Marx had to say about communism. To return at the end of the programme and say that Marx had no alternative while excluding what he did say about an alternative is, well, not exactly fair.

Also unreasonable was the nonsense that Marx, although he had been poor, had towards the latter years of his life become a bit bourgeois. This seemed to consist of such things as worrying over the future of his children and taking walks in the park in quite nice areas of London. What a traitor! He hadn’t even been down a coal mine, unlike the presenter who went down one for the programme.

That leaves me a bit conflicted as I worry over my children, like nice walks in the park (sometimes) but have been down a coal mine (once).

More importantly the programme argued that Marx had no alternative and implied that this explains the otherwise puzzling phenomenon, gleefully expressed by ex-Tory Chancellor of the Exchequer Nigel Lawson, that many people were not flocking to the banner of Marxism. The latter is a fact, so is it the result of the former?

In an earlier post on the defeat of the opposition to the austerity referendum I asserted that the Left and the working class generally did not have a real alternative, as opposed to some theoretical one, and that this was fundamentally why many workers had voted for something that was against their interests and which some knew to be the case. The programme actually expressed very well what is meant by an alternative, if I recall more or less accurately, it said that this would be when ‘a compelling alternative would appear.’ What is this ‘compelling alternative’? If we are talking about the replacement of the political economy of capitalism we are also talking about its replacement by the political economy of the working class. What is this?

Marx described the alternative to capitalism this way:

“But there was in store a still greater victory of the political economy of labour over the political economy of property. We speak of the co-operative movement, especially the co-operative factories raised by the unassisted efforts of a few bold “hands”. The value of these great social experiments cannot be overrated. By deed instead of by argument, they have shown that production on a large scale, and in accord with the behests of modern science, may be carried on without the existence of a class of masters employing a class of hands; that to bear fruit, the means of labour need not be monopolized as a means of dominion over, and of extortion against, the labouring man himself; and that, like slave labour, like serf labour, hired labour is but a transitory and inferior form, destined to disappear before associated labour plying its toil with a willing hand, a ready mind, and a joyous heart. In England, the seeds of the co-operative system were sown by Robert Owen; the workingmen’s experiments tried on the Continent were, in fact, the practical upshot of the theories, not invented, but loudly proclaimed, in 1848.”

(http://www.Marxists.org/archive/Marx/works/1864/10/27.htm)

The beginning of an alternative to capitalism arises only when the working class takes action, however small, and is not limited to creation of worker owned and controlled production. The creation of its own organisations to defend itself against capitalism also foreshadows its future control over the whole of society. The creation of its own workers party is the pinnacle of it being conscious of its tasks. Many of the political organisations claiming the banner of the working class and the mantle of Marx replace the centrality of the working class itself with calls upon the state, the capitalist state, to take the action only the working class can take and only which if it does take, can it be considered any step towards socialism.

So the BBC programme on the alternative of Karl Marx got his essential teachings wrong but unfortunately, through empirical impressions, got the current weakness of the socialist alternative right. The programme itself however is an indication that this alternative is as necessary as it ever was.

BBC ‘Masters of Money’ considers Karl Marx (Part 1)

Posted on October 2, 2012 by irishmarxism

As part of its ‘Masters of Money’ series the BBC 2 programme, which looked at the ideas of John Maynard Keynes and Friedrich Hayek, finished by looking at the economic ideas of Karl Marx. The overall verdict? It could have been a lot worse.

There were of course huge simplifications that erased exactly what Marx was saying. These could have been avoided, and the dismissal of communism and what Marx had to say about it was on a par with cold war contempt, but despite this there was a coherent argument through the programme.

It was very much the creature of a mainstream bourgeois economist albeit one who thought there were important insights to be found in Marx, particularly his perspective on the inequality of capitalism and its instability. It avoided some cheap shots and pointed out that Marx appreciated the revolutionising of production achieved by capitalism and its dynamic development across the world. The presenter Stephanie Flanders repeated the often made observation that Marx’s description of capitalism is more true now than when it was first made. She also correctly observed that profit is the soul of capitalism and made some correct remarks about the compulsive nature of the drive for profit within the system.

There were some strange observations which tried to tie the relevance of Marx’s views to particular periods which excluded the post war boom and included the 19^th century but excluded the great depression of the thirties. The whole point of the programme however was to assert the relevance of his views today and if it did no more than this then it must be judged positively.

There were some problems that, had they been addressed, would have made for a much better exposition of Marx’s ideas. The first is that the programme avoided what Marx thought was his greatest economic discovery – the nature of surplus value. This is the discovery that the economic value created by capitalism is the result of human labour and can be measured by the labour time necessary for its production. The source of capitalist profit is the result of the difference between what the capitalist pays for this capacity to labour and what this labour actually produces. This explains how a surplus can be produced and a profit arise when the exchange of commodities, including labour power, is the exchange of equivalents. It is not a question of workers being cheated when they receive a wage in return for their labour power or of unequal exchange of commodities.

This is not a particularly difficult concept to explain but it does very clearly reveal the exploitation of the working class and exposes all the hypocritical justifications of the system.

The second problem is not what was left out but what was included, that Marx held that the absolute level of wages would be held down under capitalism. This doesn’t sit well with the programme’s acknowledgment of Marx’s view that capitalism develops the forces of production. Who did Marx believe would buy the goods created by the development of these productive forces? This of course was the central tenet of the programme: that for Marx this was precisely the problem.

Marx’s argument was held to be that the tendency to lower wages reduced the ability of workers to buy the goods they produced. Increasing wages would only reduce profits, the objective of the system, so this is not a solution. As a temporary ‘fix’ the system expanded credit to make up the shortfall in wages and allow all the goods produced to be purchased. The explosion of credit therefore explains the current economic crisis emanating within the financial services industry. The programme was actually quite good when it cut to the right-wing talking heads who pooh-poohed the idea that low wages contributed in any way to the crisis. They looked neither comfortable nor convincing, or maybe that was just me.

The programme argued that Marx’s criticism went much deeper than any other but actually the programme didn’t go deep enough. Not altogether its fault since there is widespread debate among Marxists about the causes of the current crisis and even about the fundamental mechanisms of what might be called ‘classic’ capitalist crises.

What can be said however is that the description of the crisis given in the programme and the role of credit and wages is only how the crisis manifests itself, not how it is caused. To explain the latter would require one to start with the idea ignored – surplus value.

If low wages restricting the market were merely the problem the question would not be so acute. The capitalists who had diddled the workers could simply purchase what the workers did not. Everything would then be sold. The problem is worse because the workers create added value over and above what they are paid, over and above what is required to maintain production and also above the conspicuous consumption of the capitalists, and this additional value produced must find a market. Why can’t this too be solved by the capitalists buying the difference?

The answer is that it can but the question then is what is the result of this? Additional value appropriated by capitalists can expand their luxurious lifestyles but the driving force of the system is not this but profit. To increase this means expanding production both to garner extra profit and destroy competitors. This means the capitalist must employ the additional value produced by the workers to further invest in more workers and also machinery, raw materials etc to expand output. The problem is intensified as production increases, new markets are sought for the things that are produced and the amount of surplus value (unpaid labour) created is expanded.

In the longer term the rate of profit comes under pressure as the capitalists replace workers with machines in order to produce more cheaply or even to produce some goods at all (some high-tech ones for example). However because profit comes from workers the value of production comprised of workers labour declines and so does the proportion made up of surplus value, from which profit comes. Fewer workers will create proportionately less surplus value while the cost of machines and raw materials etc increases relatively, so reducing the rate of profit. The capitalists with the lowest productivity and lowest profitability can be forced into bankruptcy. Of course to some extent this too can be offset by lower wages but the increasing sophistication of production means that paying peanuts will not allow the ‘monkeys’ to engage in the skilled labour required. This is a long term tendency but one we can see in operation through the economic history of the west and in the rapid economic development of Asia. It implies that profit plays a smaller and smaller relative role in production which calls into question a system in which this is the whole purpose of its existence.

The regular periodic crisis, including the current crisis, is the route by which this longer term tendency operates. The compulsion to produce more and more surplus value also produces these more regular booms and busts. The drive to expand the creation of surplus value means increased accumulation of workers, machines and materials and the expansion of markets to purchase the additional production. In an economy dedicated to the needs of the population such increased production can be consciously planned and coordinated and its limits set by society as a whole. Under capitalism no such limits are acceptable.

The limits on production of surplus value are therefore not set by the needs of society or by the limits of the purchasing capacity of workers and capitalists. To break from these limits credit is expanded to bridge the limitations on consumption that are the result of the limits of production. Through credit capitalism seeks to satisfy the capitalist desire to expand production through the accumulation of more and more surplus value. Credit expands the market for increased surplus value production.

This can produce fantastic economic booms of the sort we have seen in the last decade or so in Ireland and across much of the globe, from China to Brazil. The attempt to expand real production and to create an even larger market for it must at some point necessarily collapse for the same reason that credit is originally introduced. Just as increased credit is an attempt to increase profit so the collapse of credit is the result of credit no longer being able to expand profitable production.

Workers must pay back debt at some level and beyond a certain point this becomes impossible because of the limits to their real incomes determined by real production. The same is true of the capitalists. Ever more convoluted attempts to expand credit beyond the capacity to pay it back – through creation of yet more credit – is doomed to collapse as the ever expanding amount of debt requires greater and greater repayments to keep it going. The fantastic expansion of the financial services industry is testament to how big such an exercise can become. A glance at the size of the balance sheets of the Irish banks in comparison to the size of the whole economy reveals the scale of the overproduction and credit expansion that can arise.

In Ireland and the US the limits were reached when workers could no longer pay for inflated housing or capitalists pay for inflated office and other building construction. A surplus of such properties is eventually created, overproduction appears, prices collapse, capitalists cannot sell except at a loss and those who built the houses and offices go bankrupt, workers in construction are made unemployed and the banks which financed it all go bust. At such points it can appear that the problem is that workers wages are not big enough to buy all that has been produced and that this is the problem. Solutions are proffered by Keynesians who say that what is need is yet more investment to take the place of that which has just collapsed. But as we see, these solutions do not address the underlying problem and provide a ‘solution’ only by postponing the collapse and stoking up a bigger tsunami when the boom busts later.

In these circumstances blame is also placed on the institutions which created the massive credit explosion – the banks – especially since such booms inevitably involve hugely speculative, criminal and stupid behaviour during a time when everyone thinks they should be getting rich quick. No one needs regulation during a boom when money is being made and afterwards the call is made that we have to have stricter regulation when again, but for opposite reasons, no one needs regulation. Regulation becomes the alibi for the systematic failures of the system. Left wing critiques which focus on the banks play into the hands of those who want to ignore or are simply ignorant of the system itself being responsible for the bust. That the bust is so spectacular is simply a result of earlier failure to burst the bubble. For a longer and bigger boom the price paid has been a longer and bigger bust but either way capitalismproduces booms and crashes. Keynesian solutions to extend the boom can simply create bigger crashes.

Forward to Part 2

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