Tag Archives: the State

The promissory notes and the working class

Posted on by

The response of the mass media to the deal on the promissory notes was one of considerable praise to a Government that had won a deal that “appears as good as could have been hoped for”.

The world of finance is notoriously complex so in simplifying the deal for a mass audience the media felt free to simply lie.  Thus the headline in the Irish Times said that the ‘Bank debt deal to cut borrowing by €20bn and ease next budget’.  The small print revealed it would only reduce the amount paid in the next decade and the debate after the deal has revealed that there is no certainty that the next two budgets will be any less severe than planned.  The Troika and others are demanding the original targets are adhered to and being a poster boy of austerity might demand it.  The uncertainty surrounding important aspects of the deal leaves open to doubt many of the claimed benefits.

But one thing is very clear: the bank debt was unsupportable despite the responsibility of all the parties for placing it on the shoulders of the Irish people and something had to be done to prevent a disorderly bankruptcy.  This would have been caused by inability to raise the financing required to run the State at remotely affordable interest rates.  The average maturity of the main sovereign debt of about €80bn is around six and a half years, which has to be renewed by borrowing this amount again to pay it off – ‘rolling over’ the debt.  Combined with a possible promissory note repayment of over €28bn averaging five years and continued deficits this looked close to impossible.

Not that anyone dared point out that the deal exposed the lie of the Government parties, of the previous administration, and of the current Governor of the Irish Central Bank that the deb was ‘manageable’.

Ignoring this also allowed the media to largely stay clear of why this deal was necessary in the first place.  The Irish State had decided it would protect the investors in two thoroughly rotten institutions, run recklessly by their owners, by promising them that the Irish working class would pay off their gambling bets.

The Irish State never asked workers whether they wanted to, or whether they thought it was a good idea, but conceived the original bank guarantee in the middle of the night, as a scheme concocted without even the presence of cabinet ministers who were supposed to make up the Government.  In effect it decided to pledge money it didn’t have to people we still did not know and get everyone else to pay for it, including generations not yet born.

As ever we are bombarded with propaganda that cuts must be made in wages and services; increases must be applied to taxes, charges and working hours and all because we need to be competitive.  Yet billions that could not possibly be afforded were pledged and paid that bankrupted the State.  This in turn necessitated a ‘bail-out’ by the EU and IMF, which is akin to a blood transfusion to a dying patient so that she can work to earn money to pay the vampire.

As the Croke Park deal is ripped up and more draconian conditions inserted – not ‘extended’ as claimed – on the back of demands for austerity, no austerity is to be inflicted on the capitalist gamblers.  While money can be wasted on dead banks money must be cut out of wages and services because ‘we’ can’t afford it.

This is the logic of the capitalist system but it is hidden not just by the mass media and politicians but by the opaque workings of the capitalist system itself, made more complicated by the complexity of the financial system.  This complexity is useful because when it is more difficult to understand and appreciate what is going on it is more difficult to fight against it.  Only vague ideas that you are being screwed do not help give you confidence to say stop!

That is the importance of understanding as much as possible what the promissory note deal involves.

When the State guaranteed the liabilities of the banks in September 2008 it claimed the problem was one of liquidity, that is the banks were basically sound but were in danger because they would not lend to each other.  There might also be a withdrawal of money by depositors.  This was the purest rubbish and the gamblers who had put their money into Anglo-Irish Bank and Irish Nationwide didn’t buy it.  They took their money and ran.  Deposits in these institutions, packaged together as the Irish Bank Resolution Corporation (IBRC), fell from €65.8bn at the end of 2007 to €1bn at the end of 2011 while the value of debt securities funding the IBRC fell from €30.85bn to €6.3bn during the same period.

So if the IBRC was bust where did the money come from to give to the depositors and holders of the IBRC debt?  The answer is that it came in the form of Exceptional Liquidity Assistance (ELA) from  the Central Bank of Ireland (CBI).   This ELA funding to the IBRC was zero in 2007 and €40.1bn at the end of 2011. ELA is money so the question is where did it come from, how did the CBI get it?

In many ways the CBI may be thought of as the Irish branch of the European Central Bank (ECB).  The ECB has strict rules about money creation (money printing) so the local branch in Ireland could not just print Euros (metaphorically speaking) although this is one of the things Central Banks can do.

Nevertheless the CBI was able to give money in the form of ELA to IBRC which then paid off its depositors and holders of debt securities.  Since this bank and building society were broke the state nationalised them making all their reckless speculation our reckless speculation and making their debts everyone else’s debts.  Because the State didn’t have the money either to pay back the speculators they issued IOUs to the Central Bank of Ireland in return for their money’ the ELA.

The result was that the CBI gave money to the State in the form of IBRC and the State gave the CBI promises to pay this money back with interest.  Although the two institutions that became the IBRC had issued loans which were due to be repaid many of these were worthless so only through the state intervening could the capitalist investors in these institutions get their money back.

The promissory note IOUs were the promise by the State that through tax increases, wage cuts and public service cuts the working class would ensure they got their money.  This is what prevented the ELA being simply money printing and thus prevent the CBI holding worthless pieces of paper.

So the cuts to wages and public services that are justified by the claims that we need to be competitive are partly in order to pay the debts of a very uncompetitive bank.  So uncompetitive it is now dead, having been in a zombie-like state for the last few years.  When the State pays part of the promissory note IOU to the CBI the Irish Central Bank has ‘taken the money out of circulation’, again to ensure the problem is not solved by printing money.  In other words the money workers paid through austerity is simply burnt (again metaphorically speaking).

What could be more uncompetitive than maintaining dead banks on life support through burning money by putting real people on the dole and cutting services such as education?  The promissory note episode is one object lesson in the irrationality of the capitalist system.

This course of action could not have been taken by the Irish Central Bank and the Irish State without the approval of the European Central Bank and the European Union and its Commission.  For them the over-riding concern has been the protection of the European banking system just as the main objective of the Irish State has been the protection of the Irish banks.  Nationalist complaints that the Irish have made sacrifices for everyone else, much trumpeted by trade union leaders, has to ignore this.

If Irish workers have paid more so far it is because the Irish banks have been weaker and more rotten and Ireland remains a subordinated country which is dependent on foreign money for its speculative bubbles.

If the Irish State’s attempt to save the banking system required the ultimate liquidation of the IBRC this is because there was, in the end, little left to save after all the depositors and holders of its debt securities had been paid.  Again only the workers, in this case of the two institutions, are threatened with picking up the bill through redundancy.

For the Irish State this promissory note device to ensure that it did its best for European banks (and its own) had some advantages and disadvantages.  Of course inability to actually afford it is one big disadvantage but if it can get workers to accept austerity then this is not such an insurmountable obstacle.

The ECB does not want to lend money to institutions that cannot pay it back and since IBRC was bust its actions in approving the lending by its local branch raised some controversy.  If for example it lent to a bank that went bust and which didn’t pay back the money lent this money would then have entered the economy (through those people the bank did pay back, its employees or new loans) and this would amount to money creation/printing.  This can create inflation and low inflation is the primary objective of the ECB.  A strong currency allows a state, or in this case the Eurozone, to command greater resources on the world stage and is thus integral to the project of a strong EU imperialism.

The ECB thus regularly monitors (every few weeks) its ELA so their approval or otherwise was always hanging over the Irish State, although even without this it remains under close and regular scrutiny.

An advantage of the promissory note arrangement that will be lost at some stage with the new deal is that because the State owes the money to the Irish Central Bank profits by the ICB on the loans can be returned to the Irish State.  Given the high interest rate of over 8 per cent this is important.

Because a lot of the ELA created by the Irish Central Bank has ultimately been paid by IBRC to banks and institutions in other EU states the ECB has had to lend money to the ICB so that the reserves of the Irish Central Bank do not decline dramatically.  The ECB charges the ICB for this money but at a low interest rate so that the difference between this low interest rate charged to the ICB and the higher interest rate charged by the ICB to IBRC is a profit which can go to the Irish State.

What this means in terms of the current benefits of the new deal is that the move to a lower interest rate on the Government bonds that replace the promissory notes is not a gain since the effective rate of interest actually paid on the notes is the rate charged by the ECB to the Irish Central Bank and not that charged on the promissory notes.  As explained the profit generated by the latter is taken by the Irish Central Bank and returned to the State.

In the next post I will look at the new deal to replace the promissory notes.

The reality of the Good State

Posted on by
Reply

images (1)
Some readers of this blog might think that I’m labouring the question of nationalisation and state ownership and its identification with socialism. While I believe it is a question of fundamental political importance its practical significance has been vividly illustrated in the last few days.

mag6

In Britain the report from the fifth investigation into Stafford hospital has been delivered, prompting David Cameron to say that he was”truly sorry” for what had happened, which was “not just wrong, it was truly dreadful.” Previous investigations had already established in harrowing detail the abuse and neglect that took place from 2005 to 2008.

Between 400 and 1,200 more deaths took place than would have been expected between these years, although it is stated that it is impossible to say whether all of these patients would have survived had they received better treatment. Receptionists were left to decide which patients to treat, inexperienced doctors were put in charge of critically ill patients and nurses were not trained how to use vital equipment.

The National Health Service, so beloved of the British nation that it featured in the opening ceremony of the Olympics, has been damned from top to bottom.

Trust management ignored patients’ complaints while local GPs and MPs also failed to speak up, the inquiry said.

The local primary care trust and regional health authority were too quick to trust the hospital’s management and national regulators were not challenging enough.

Meanwhile, the Royal College of Nursing was highlighted for not doing enough to support its members who were trying to raise concerns.

The Department of Health was also criticised for being too “remote” and embarking on “counterproductive” reorganisations.

The findings of the report cannot be regarded as an aberration as it follows repeated damning judgments of care provided in Britain, especially care of the elderly, and news that five other hospitals are to be investigated following Stafford.

Yet the NHS is the crown jewels of the social democratic state.

The inquiry’s head said that patients “were failed by a system which ignored the warning signs and put corporate self-interest and cost control ahead of patients and their safety.”

Many on the left speak and act as if the only problem with the health service is a lack of cash but this is much less than the full story and money will not deal with what has been referred to as the cultural changes that are required.

Working class people in Britain and Ireland are all too aware of the shortcomings of the health services. While those in Ireland may wish for their own NHS those in the UK know its limitations and going to hospital is more and more regarded as something you really don’t want to do unless you have to.

Those with elderly relatives in care are all too aware of the possibility of mistreatment.

Only yesterday Channel 4 news reported on the death of an elderly person left with no domiciliary care for 9 days when the service she was receiving was closed by immigration police, who had raided the office of the private organisation providing the care. When the care provided by this organisation stopped the council never picked up on the elderly woman who had no relatives. She went without her medication and died hungry, thirsty and alone.

Two days ago the illegal charging by the Irish State of people in long-term care again became news. As early as 1976 the State, through the Department of Health, knew its charges were illegal. In 2005 the Government attempted to make them legal retrospectively although this was stopped by the Supreme Court.

The Government knew exactly what it was doing. The Minister of Health Mary Harney said that “more than 300,000 people were charged illegally during 28 years. This was entirely wrong. They were old, they were poor, they suffered from mental illness, they had intellectual disabilities, they were physically disabled. As vulnerable people, they were especially entitled to the protection of the law and to legal clarity about their situation.”

And yesterday the report on the Magdalene Laundries was released, which revealed some of the State’s role in the incarceration of thousands of women in institutions run by Catholic religious orders, compelled to work for nothing and stigmatised as ‘fallen women.’ “A very Irish form of slavery” as the Sinn Fein TD Mary Lou McDonald put it. Over one quarter of the women were put there by the State. The last laundry only closed in 1996.

The State again attempted to cover up and lie over its role.

In 2009 the Minister of Education Batt O’Keefe said that “the Magdalene laundries were privately owned and operated establishments which did not come within the responsibility of the State. The State did not refer individuals to the Magdalene laundries nor was it complicit in referring individuals to them.” Not true.

In 2011 Sean Aylward, secretary general of the Department of Justice, speaking in Geneva at the UN Committee Against Torture said “the vast majority of women who went to these institutions went there voluntarily or, if they were minors, with the consent of their parents or guardians.” He knew this because he had met some of these women.

Yet not one of the five women he had met had entered the laundries voluntarily or with the consent of their parents or guardians. Over eighty three per cent who entered the laundries were put there.

What all these examples demonstrate is that the capitalist state cannot be relied upon to provide services that working people, especially the most vulnerable, require. Some, like the Magdalene laundries, are now easy to denounce but none are models of socialism. Far from uncritically defending these services socialists must educate and agitate for a workers’ alternative to how they are currently organised and managed. The very last thing we want to do is proclaim these services as exemplars of socialism and the state that runs them as the font of this socialism.

Budget 2013 and the alternative

Posted on by
Reply

6122011-budget-2012-second-day-14-630x491The 2013 budget is going to introduce tax increases and spending cuts of €3.5 billion.  Michael Noonan smiled when holding up the budget document to the cameras while Brendan Howlin looked serious.  Nevertheless RTE reported that Labour TDs were pleased claiming that their fingerprints were all over it.  And so they are.  Their footprints, where they walked all over many vulnerable sectors of society, are also all over the budget.

There has essentially been only one defence of these austerity budgets and that is that the Government has had no choice.  No choice because there is no economic alternative and no choice because the State has lost its economic sovereignty and is basically doing what it is told to by the Troika of European Commission, European Central Bank and International Monetary Fund.

In this budget they have felt compelled to come up with a new defence – it is nearly over. This was trumpeted by Michael Noonan and also claimed by the Labour leader that “It is the budget that is going to get us to 85% of the adjustment that has to be made, and will therefore put the end in sight for these types of measures and these types of budgets”.

This hardly looks credible, which is not good news, because what it essentially means is that the austerity measures implemented have both been insufficient and haven’t worked.  The economy has contracted and stagnated even as the austerity measures have been insufficient to bridge the deficit.

For 2012, the deficit has turned out to be around €500 million larger than planned but because of upward revisions to data from earlier years, the deficit target, set as a percentage of GDP, will still be hit. This assistance in meeting the ‘target’ will not be available in 2013.

At the end of 2013 the deficit will be 7.5% of GDP.  In 2008 (excluding that related to the banking bail out) it was 7.3% rising to 11.5% in 2009. All the austerity budgets have achieved so far is a reduction of 4% – less than half way to eradicating the budget deficit never mind 85% of the way.  Even by 2017 the IMF forecasts the deficit will be 1.8% so the debt will still be getting bigger.

As with all these budgets there have been cuts to capital expenditure with another €500 million reduction targeted for 2013. In 2008, capital expenditure was close to €10 billion. In 2013, it will be under €3.5 billion. Public capital expenditure has been slashed by 66% which wipes out, and more, the so-called stimulus measures announced earlier in the government’s PR/con exercise that claimed to be promoting jobs.  This means the infrastructure of the state, economy and society will disintegrate more or less quickly.

The sheer madness of the austerity agenda is demonstrated by the fact that the €3.5 billion in cuts and tax increases will be wiped out before they are even implemented by the €3 billion payment of the promissory notes for the Anglo-Irish bank, which no longer exists, and repayments of €2.45 billion of bonds for Irish Life & Permanent. On top of this there is the rising interest cost of the debt, which will increase from €5.7bn in 2012 to €8.1 billion in 2012-13.

With the debt increasing, even at a reduced rate of increase, the burden of interest payments on it can only worsen.  This makes the debt unsustainable.  A rising interest burden will be a permanent anchor on growth.  This is a problem because the Government is relying on renewed economic growth to get out of the stagnation now in place.  The weakness of Irish capitalism means that it must rely on outside forces for this growth.  Either that or there is some debt relief to lower the amount of debt and the burden of interest payments.

In the meantime particular groups of the working class will suffer real hardship, living standards will decline or at best stagnate and unemployment will be limited only by continuing emigration.  The stresses imposed on society will be expressed in mounting social problems that will often be presented as a simple increase in personal misfortune while increased inequality will coarsen social relations and further weaken social solidarity.  The absence of any radical perspective will see reactionary prejudice become common currency.

Once again the United Left Alliance has put forward what it states is a socialist alternative.  In substance it is the same argument as that put forward last year but with more detail and some development here and there.  There is no need to repeat the analysis presented earlier in this blog including here, here and here.

The ULA is in no position to implement any of its proposals.  The purpose of the document must therefore be an educational one.  What it teaches is therefore the only useful criterion by which to judge it.

It starts out by claiming to be a socialist alternative and its headline is repudiation of the debt, an end to austerity and the need to invest in jobs and services.  All these are undoubtedly the immediate needs of the working class.  The problems start when we look to see how it is proposed these ends might be achieved.

The ULA “proposes to take the burden of the crisis off working people, improve their lives and revive the Irish economy.”  On the other hand it admits that “the budgetary proposals put forward by the ULA can in no way offer a comprehensive solution to the crisis we face.”  How the first claim is reconciled to the second is not explained.

While the debt crisis “resulted entirely from the actions of developers, bankers and the politicians who facilitated them” it is not explained how this can be reconciled to it being “a manifestation of a deep structural crisis of global capitalism.”  It is nowhere explained what this latter statement means, how it explains what has happened or how it explains what solutions are possible.  The Marxism to which the core elements of the ULA claim commitment is founded on claims to present just such answers but they are not here.

It might, with some justification, be claimed that the precise cause of the crisis is also a cause of some debate within Marxism.  Unfortunately any suggestion that a key task of the ULA might be to debate this out so as to inform the politics it espouses would be held up many as a fetish of sectarian or dogmatic individuals who aren’t interested in practically ‘building the movement’, or some other such boorish remark.  Instead while (dumbed down) Marxism is relegated to recruitment meetings for novices the vacuum that is the politics presented to workers is filled with Keynesian, that is capitalist, ideas that are the currency of liberals and the leaders of the trade unions.

Let us see some ways in which this is expressed in the ULA economic alternative.

First the ULA proposes to improve the lives of working people and revive the Irish economy but there are no socialist measures proposed that would achieve this.  Were the proposals to therefore fail (if by some miracle they were tried) it would discredit what passes itself as socialism while if they were to succeed they would go some way to making socialism irrelevant.

The ULA claims that “the alternative we propose will not be implemented by the current parties in the Dail or by the Irish state.”  Yet it proposes that the Irish State increases income tax on the rich, reduces taxation on workers, introduces a wealth tax, introduces a financial transactions tax, increases corporation tax, takes “full control of the banks”, supports small business, invests to create jobs, embarks on a programme of council house construction, creates a new construction company, renationalises all privatised strategic enterprises and establishes a state owned gas and oil company. It declares that “the ULA believes public enterprise and public works must play the central role to redevelop the economy on a sustainable basis.”

The ULA claims that “radical measures that break with the logic of ‘markets’ are required” but the demands on the state above do not do this while it is claimed these measures will “revive” and redevelop the economy on a sustainable basis.”

“There is a need for active struggles to demand policies that prioritise the need for jobs, public services and growth, using public investment and democratic socialist planning to chart a way out of the current crisis.”  What sort of struggles? For what policies? And who will we demand this of?  How would they deliver on it?  What, who and how?  Where and when don’t even arise given the vacuousness of this string of words.

In other words – as a vehicle for education – the alternative budget, when it is not mistaken, as we have explained in earlier posts, is simply incoherent.

What is clear is that the ULA has no strategic perspective.  It calls for socialist planning, but socialist planning is just another term for working class rule, for the working class controlling society.  Yet it proposes the state, the capitalist state, take action in the here and now to solve the crisis and develop the economy on a “sustainable basis”.

This lack of coherence reveals itself in timidity, contradiction and calls for solutions that have already been the means to subordinate and exploit the working class; as when the ULA calls for “full nationalisation with direct public control of the banks” when it is nationalisation and state control of the banks that has been the mechanism to burden workers with the debts of the speculators.

Even when it calls for “direct public control of the banks” this can as easily be defined as the current arrangements as it might by workers control.  So how does such a demand clarify anything?  How does it educate anyone on what they should fight for?

The ULA is currently undergoing an organisational crisis but its real problems are political.  It argues an alternative that is simply not based on the actions of the working class. It is imperfectly aware of this so it substitutes vague calls for action and acknowledgements that what they are proposing is only temporary amelioration.

There is a possible solution to this problem and it involves debating openly and democratically what a socialist strategy should be.  As I have said such calls are resisted.  It therefore falls to those prepared to do so to engage in such a debate so that we don’t just point out what’s wrong but also say what’s right.

Savita Halappanavar and the demand for the Truth

Posted on by
Reply

Minister for Health James Reilly

In this post I warned that the State was going into defence mode in order to protect itself from the fall-out from the death of Savita Halappanavar who, from all accounts, died in agony while the hospital in which we was being treated refused to terminate her pregnancy because this would necessarily result in the death of the foetus. “This is a Catholic country” she and her husband were told.  As a result her life was unnecessarily put in danger and she died.

The response of the Government and many others, including the anti-abortion lobby, is to emphasise the uncertainty around events and to defuse the response to them by calling inquiries which, on the face of it, have no credibility.

Consider the following.

Mr Halappanavar heard nothing from the Irish authorities until he made the tragic death of his wife public.

The Government then announces an inquiry by the hospital group where Savita died and one by the employing body, the Heath Services Executive (HSE).  In effect both bodies would be investigating themselves.

Such is the arrogance and panic of the organs of the State concerned that they include three doctors in the HSE inquiry from the Galway hospital where Savita died!  When I first heard this on RTE news I was struck immediately with complete incredulity. Did I hear that right?  Mr Halappanavar has pointed out that there were five members of the medical staff in the room when he was told that she could not have a termination because “This is a Catholic country”.

The Chairman of the inquiry says he needs these medical staff in order to “find out about their standard practice.”  In other words those investigating the death would be asking themselves what goes on!  This is independent?

As Mr Halappanavar and his legal advice say – the inquiry is private, it is confidential, evidence will not be taken on oath and there will be no cross-examinations.

The Government makes a partial retreat by removing the local medical staff but then puts pressure on Praveen Halappanavar to accept the HSE inquiry.  The HSE know he is unhappy but then claim it is only the participation of the three staff that evoked his concern.

It is then pointed out that he didn’t know about the three internal staff at this time and had in fact objected because the HSE was running the inquiry (into itself) and would not be holding hearings with witnesses.  So he could not have objected on the grounds claimed by the HSE.

Praveen Halappanavar’s solicitor also claims that the medical notes of Savita  given to Praveen have parts missing.  They contain records of requests by Savita for tea and toast and a blanket but no written information about her repeated requests for a termination nor of the consultant saying “This is a catholic country”.

A spokeswoman from the HSE is then quoted as saying that she was sure no notes were withheld for “spurious reasons”.  Indeed.

Yet we are expected to believe that the State and its inquiries will give Praveen Halappanavar and everyone else the truth.

The courageous stand by Praveen Halappanavar has stripped the State inquiry of any credibility and it cannot now perform the function assigned to it by the State.  The huge march in Dublin has demonstrated the anger and determination of many not to accept the death of Savita or accept that it might happen again.  So far the anger of many women and men, along with Praveen Halappanavar’s determination, has forced the State to retreat and put serious pressure on the Government.  The pressure is particularly strong on the Labour Party, which claims progressive credentials.  Fine Gael on the other hand has always been a reactionary tribe. It is so far an open question how far and for how long a more or less spontaneous reaction can threaten this Government and advance women’s rights.

The emphasis on legislating for the X case, while this would be an advance, also runs the real risk of duplicating the uncertainty which already exists but which thereby provides the certain barrier to women’s realisation of their right to control their own bodies.  A limited, confused and contradictory constitution and legal view is just as liable to bring forth another limited, confused and contradictory piece of legislation, and would the Government really mind that?

The spontaneous eruption of women and men claiming their rights has an unrivalled quality of energy, hope and passion but the force and determination of organisation and strategy is, as time goes by, much more likely to bring what is required.

Politicians are manoeuvring to avoid the blame or claim the leadership of the demand for women’s rights.  The not-so-united United Left Alliance has put two separate amendments to the Sinn Fein motion in the Dail calling for legislating for the X case, putting a large question mark over its ability to perform this latter role.

This role is not to seek immediately to lead this spontaneous movement but to help it find organisation, a strategy, its own leadership and to fight for a women’s right to choose as the only certain route to establishing the rights of women.

The Left, with its history of political sectarianism, would have to change its instrumental approach to campaigns if this were to happen and they become able to play this role.  There are reasons why it might not do so but there are many, many more why it should.

 

 

 

Marxism and the State

Posted on by
Reply

In a previous post I said that I would be looking at the Marxist view of the State and in this post I will look at some aspects of Karl Marx and Frederick Engels’ original view.   For them the possibility of socialism was not that it best met some general principles of justice or equality but that it was based on the actual social and political development of the existing capitalist system.  If there were no developments within capitalism that might form a real foundation for achieving the former ideals then these ideals were practically worthless.  The question however is on what developments within capitalism is the potential for socialism based?

It is undoubtedly the case that the state plays a greater and greater role in capitalist society and that as this system has developed so has the role of the state.  That this has been so despite decades of rhetoric by the most ideologically rabid supporters of capitalism against the state ranks as only further proof of its central role.  The state also played a major role in the creation of the capitalist system although its importance may be subject to historical debate.

On this basis the majority of the socialist movement has come to identify socialism with this state either through state ownership, regulation, taxation or state expenditure on ‘public’ services.  In the form of Stalinism it has taken the shape of the most gargantuan forms of state power which has assumed prerogatives in social life that have associated the liberatory content of socialism with the totalitarian nightmares of Orwell’s 1984.

This has nothing to do with Marxism.  In fact the intellectual journey by which the young Marx came to ‘Marxism’ involved an utter and complete opposition to the state, as formulated by the German philosopher Hegel, which Marx carried out through his ‘Critique of Hegel’s Philosophy of Right’.  Marx’s view of socialism was not an ideal state which society must seek to achieve but the movement of a class to achieve political power as the means by which to ensure its own and humanity’s social liberation.  Socialism is therefore the movement of the working class to achieve power, not the actions of a state and especially not a capitalist one!

For Marx therefore the active germ of socialism is not expressed under capitalism by the growth of the state but by the growth in the social and political power of the working class, which itself is based on the objective development of the capitalist system.  The growth of the state does not in itself herald the new society because Stalinism has demonstrated that a society based on even the state of a superpower is not a historically viable social formation.

The Marxist view of the increasing role of the state was explained by Engels in relation to his native Germany under the Chancellor Bismarck:

“. . . only when the means of production and distribution have actually outgrown the form of management by joint-stock companies, and when, therefore, the taking them over by the State has become economically inevitable, only then — even if it is the State of today that effects this — is there an economic advance, the attainment of another step preliminary to the taking over of all productive forces by society itself. But of late, since Bismarck went in for State-ownership of industrial establishments, a kind of spurious Socialism has arisen, degenerating, now and again, into something of flunkyism, that without more ado declares all State-ownership, even of the Bismarkian sort, to be socialistic. Certainly, if the taking over by the State of the tobacco industry is socialistic, then Napoleon and Metternich must be numbered among the founders of Socialism.

If the Belgian State, for quite ordinary political and financial reasons, itself constructed its chief railway lines; if Bismarck, not under any economic compulsion, took over for the State the chief Prussian lines, simply to be the better able to have them in hand in case of war, to bring up the railway employees as voting cattle for the Government, and especially to create for himself a new source of income independent of parliamentary votes — this was, in no sense, a socialistic measure, directly or indirectly, consciously or unconsciously. Otherwise, the Royal Maritime Company, the Royal porcelain manufacture, and even the regimental tailor of the army would also be socialistic institutions, or even, as was seriously proposed by a sly dog in Frederick William III’s reign, the taking over by the State of the brothels.”

In the development of capitalism increased socialisation of production that anticipates and presages socialism is reflected in the increased role of the state and in this sense only is it progressive in that it signals the development of society towards socialism.  This does not mean that socialists should give any political support to this increased role of the state never mind put it forward as socialist in itself.  The development of capitalism has created and continues to create massive misery and exploitation through driving people from the countryside to cities and is progressive because it creates a working class which is the bearer of a new society but no one thereby claims that socialists should support this process politically.

This again is presented by Engels:

“But, the transformation — either into joint-stock companies and trusts, or into State-ownership — does not do away with the capitalistic nature of the productive forces. In the joint-stock companies and trusts, this is obvious. And the modern State, again, is only the organization that bourgeois society takes on in order to support the external conditions of the capitalist mode of production against the encroachments as well of the workers as of individual capitalists. The modern state, no matter what its form, is essentially a capitalist machine — the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers — proletarians. The capitalist relation is not done away with. It is, rather, brought to a head. But, brought to a head, it topples over. State-ownership of the productive forces is not the solution of the conflict, but concealed within it are the technical conditions that form the elements of that solution.”

Support for nationalisation as a socialist measure is a short-cut, a short-cut to nowhere:

“It is a purely self-serving falsification by the Manchesterite [laissez-faire] bourgeoisie to label every intervention into free competition as `socialism’: protective tariffs, guilds, tobacco monopoly, statification of branches of industry,…, royal porcelain factory. We should criticize this, not believe it. If we do the latter and base a theoretical argument on it, then it will collapse along with its premises” (Engels quoted in Draper, Karl Marx’s Theory of Revolution, 1990,p.96)

From the glorification of the power of the state comes the betrayal of socialism in the form of nationalism which is why it is so apt that this is often expressed in the demand for nation-alisation, as if the more of this demanded the more radical is the socialism.

This type of ‘socialism’ is often also associated with ethical considerations of justice and equality and the view that this can be achieved through state action.  This opens up the possibility of the latter becoming prettified beyond all recognition.  So vast bureaucracies become socialist institutions and means tested, inadequate benefits dispensed through pipettes become a whole new model of society.

If statisation is the advance of socialism then reforming this state is inherently the way forward and electoral success to reach the ‘pinnacle’ of this society becomes the most natural means to its attainment.  Calls for widespread nationalisation, defence of the welfare state without the least criticism of it, demands on the capitalist state to do things it simply will not and cannot do and rank electoralism are all consistent with each other and hallmarks of many of today’s ‘Marxists’.  As Marx was himself compelled to say of some of his ‘followers’, if this is Marxism I am no Marxist.

In his career Marx came across this approach to politics, which is all too familiar today, in the shape of the German Ferdinand Lassalle, who sought state aid for workers cooperatives as the germ of a future socialism, of which the workers were not yet ready to openly fight for.  Today some demands for nationalisation and state redistributive policies are designed to manoeuvre workers into a movement for socialism without even mentioning the word never mind traducing its real content.

Frederick Engels and Eduard Bernstein penned a critique of this sort of approach:

“If the masses could not yet be interested in the actual end of the movement, the movement itself was premature and then, even were the means attained, they would not lead to the desired end. In the hands of a body of working-men not yet able to understand their historical mission, universal suffrage might do more harm than good, and productive co-operative societies – with State-credit could only benefit the existing powers of the State, and provide it with a praetorian guard. But if the body of working-men was sufficiently developed to understand the end of the movement, then this should have been openly declared. It need not have even then been represented as an immediate aim, to be realised there and then. Not only the leaders, however, but every one of the followers that were led ought to have known what was the end these means were to attain, and that they were only means to that end.”

Today calls on the state to do good are presented as the means to win workers’ votes, which will ultimately lead to socialism, while the goal is considered too advanced to be put forward clearly, put to them as something that they must do and only they can achieve.  The avoidance of socialism and its real content today goes under the name of anti-capitalism or under the banner of broad left parties and alliances which hide what its sponsors claim they really stand for.

Let’s be clear about what the nature of Marx and Engels’ argument was.  It has been compared to their attitude to reforms.  Thus while they were in favour of many reforms to the capitalist system, the purpose of such reforms was to place the working class in a better position to carry out the revolutionary overthrow of capitalism.  It was not because such reforms of themselves were the means to bring socialism into effect.

So today socialists should not reject demands on the state or recoil from calls for nationalisation where these might be appropriate.  These proposals should not however be considered the basic mechanism for the transition to socialism; the all-encompassing framework for the programme that becomes its heart, body and soul and the all-embracing grounds on which the socialist argument takes place.  However as we have noted before this is exactly the role that the capitalist state plays today in the politics and programme of the left.  In a number of posts this has been explained; from the demands that the state tax the rich to investment to create jobs and nationalisation as if this were socialism itself.

The difference can quite easily be seen,on the one hand, in opposition to austerity, cuts in public services and opposition to privatisation, which should all be supported, and, on the other hand, putting forward as the socialist solution massive state investment  as the answer to unemployment, economic insecurity, inequality and low standards of living.  While such a policy by the capitalist state might be better for workers in that it provides some protection and better grounds for workers’ own organisation it is not itself the workers’ own alternative.  Nationalisation, state investment and taxation are not solutions and certainly not socialist ones.  All this has been explained in previous posts.

One other thing must also be explained.  Opposition to austerity must be supported, be part of the Marxist programme, because this is something to be carried out by workers themselves.  Keynesian programmes of state-led investment hand everything over to the state to achieve.  It remains in control, dictates how much and what is to be done, when, where and how.  It is precisely to remove all this from state control that is the task of the working class.

This is what Marx meant when he said that “every step of real movement is more important than a dozen programmes” which has been re-translated today so that state reformist electoral programmes are mistaken for real movement.  This denial of the primary role of workers’ own activity is reflected also in these organisations sectarian organisational practices and electoralism which are simply the everyday practical out-workings of a programme that signals dependence on the state for solutions that should come from the workers themselves.

Thus for Marx, support for workers cooperatives in ‘Capital’ is distinguished from Ferdinand Lassalle’s state aid for producers’ co-operatives  – “as far as the present co-operative societies are concerned, they are of value only insofar as they are the independent creations of the workers and not protégés either of the governments or of the bourgeois.”

For Marx and Engels “the emancipation of the working classes must be conquered by the working classes themselves.”  This is the starting point for today’s struggle for socialism, not faith in the benign actions of the capitalist state.

How deep is the division created by partition?

Posted on by
Reply

In an article in the ‘Irish Times’ a couple of weeks ago Andy Pollak, Director of the Centre for Cross Border Studies and a former Irish Times journalist, takes up the observation that “interest among people in the Republic these days in Northern Ireland is minimal.”  “As somebody who lives in the South and works in the North, my experience in recent years, as the economic and financial crisis has come to dominate public discourse, is that southerners largely don’t want to know any more.”  Since previous interest was taken mainly to be revulsion at the violence and gratitude that it was “up there” and not “down here” this might not seem a new issue.  In fact both reflect how deep is the division that partition has created after nearly a century of existence.

Pollak quotes the young woman in the audience of the RTÉ Frontline programme during last October’s presidential campaign who attacked Martin McGuinness: “As a young Irish person, I am curious as to why you have come down here to this country, with all your baggage, your history, your controversy? And how do you feel you can represent me, as a young Irish person, who knows nothing of the Troubles and who doesn’t want to know anything about it?”

First we must say that this is indeed a strong illustration of the division that exists between North and South of the border; all the stronger because of the happy ignorance that is displayed.  On the other hand this happy ignorance demonstrates that the division which she articulates is really an expression of the unity that she is so ignorant of.

Happy ignorance?  Well yes.  The young woman speaks of coming “down here to this country” which is actually the same country, while being a different state.  She mentions “all your baggage, your history, your controversy” without appearing to be aware that the State she lives in shares much of this baggage, history and controversy.  After all, is she not aware of the history that includes the War of Independence, the Civil War (mainly in the South) and baggage that includes Catholic Church domination of society that involved systematic and widespread abuse of thousands of women and children that still resonates today?  Is she not aware that ‘the troubles’ had its worst single episode of violence in the Southern State carried out partly by agents of the British State?  Happy in her ignorance because she herself declares she “knows nothing of the Troubles and . . . doesn’t want to know anything about it.”

The disconnect between this young woman’s understanding and real history is perhaps an example of the invention of nations that don’t exist, or sometimes later do come into existence.

Pollak says that “opinion polls over the past decade or so show that a bare majority of people in the Republic now say they want a united Ireland: for example, in the 1999-2000 European Values Survey, just 54 per cent of people favoured unity.”  He quotes one University College Dublin student as saying: “Neither of us want Northern Ireland: neither us nor the UK government. I’d say if you asked the majority of Irish people – yes, nationalists, out of a sense of allegiance, might say they wanted a united Ireland – but it’s really far more trouble than it’s worth.  I mean, to integrate Northern Ireland into this State – why would you be bothered? The status quo satisfies everyone.”

Let’s take this statement bit by bit as well. The UK state doesn’t want Northern Ireland?  A very common opinion but one that is impossible to square with the experience of the British State spending billions of pounds and engaging in a long counter-insurgency campaign in order precisely to keep hold of the Northern State.  We will not go into the reason why here but let us recall that Britain left previous parts of empire extremely reluctantly.  Why hasn’t it left this bit if it actually wants to in this case?

So “yes, nationalists, out of a sense of allegiance, might say they wanted a united Ireland – but it’s really far more trouble than it’s worth.”  What trouble might this be?  Well we know that just as partition was imposed on the Irish side of the Treaty negotiations on the basis of the threat of immediate and terrible war so we know that partition today must be unquestioned because of the perceived threat of loyalist violence.  A loyalist violence that the last thirty years have shown the British State is quite happy to support and sponsor.

Uniting Ireland? “Why would you be bothered? The status quo satisfies everyone.”  This is the decisive question.  Let’s start from the end and go to the start – “the status quo satisfies everyone.”  This is the status quo that includes the literal bankruptcy of the Irish State and its admitted loss of sovereignty over its economic affairs.  The more or less complete loss of respect and legitimacy of fundamental pillars of the Southern State – politicians, Catholic Church and crucial State institutions.  Yet  “the status quo satisfies everyone!!?”

I would bet that many UCD students are very far from satisfied with the status quo but that they don’t see their dissatisfaction with the Southern State as having anything to do with partition.  If it’s not part of the problem then why would opposition to partition be seen as part of the solution?  What we have is graphic demonstration of the division of the Irish people that partition has caused that satisfaction is expressed in a State which many are in despair of because its problems are not seen as having anything to do with the other bit of the country divided.

That the domination of the Southern State by outside powers, who have dictated that their banks must be protected by the Irish people bailing them out, is not connected at all with the political rule in the North of the foremost political power in Europe most enmeshed with banking is the result of a number of factors.

The first is that such is the seeming power of these outside forces they seem almost like a force of nature, or if not, then an unalterable fact of life.  The second is that when there has been opposition either to the Northern State or to how the Southern State exploits its citizens this opposition has made no attempt to link the two questions.  The third is the more or less complete absence of any force that wants to do this.

Instead workers have been able to react only to the more immediate appearances of their oppression. This appearance is framed as a political question by the State, which is often the mechanism for enforcing it and sometimes by the putative opposition putting forward the state under different governance as the solution to oppression.

This importance of the state in distorting socialist politics has been a theme of the blog so far.  For most people, including what passes for militant opposition, the necessity of fighting two States is one too many.  In fact consistently fighting one is one too many.  That is how deep the division created by partition is.

Survey on Scottish Independence

Posted on by
Reply

Having written the post on Scottish independence and a United Ireland last week, by coincidence this week the British Social Attitudes survey reported on attitudes to Scottish independence in Scotland and the wider UK.  It has prompted me to note a couple of other issues that should be taken into account by socialists when considering this question.  The survey reported that 32% of people in Scotland support Scottish independence, nine points higher than in 2010 but two points lower than in 2005.  So we have seen a significant increase but still very much a minority view which historically has been the case.  Since no majority demand for independence is being made just why would socialists support it?

The creation of new nation states is not a demand of socialists and may be supported only if it has some progressive social and political content – such as removal of oppression – that (unfortunately) takes a nationalist form.  As the reality of a referendum vote becomes nearer the reactionary content of the demand for Scottish independence becomes clearer, including low corporate taxation, retention of the monarchy, staying in NATO, retention of the pound sterling and financial regulation from London.

The demand for independence also feeds on what is a positive impulse – that the closer the levers of state are the better, which is why the survey also recorded that 43% of people in Scotland wanted Holyrood (seat of the devolved administration) to make “all” decisions.  The higher figure emerged in a question in which the word “independence” was not used, and where a second option on so-called devo-max – more power short of independence – was given.  The report also said that people were, on balance, relatively favourable to the concept of independence.

The report also recorded that those in England surveyed who said Scotland should leave the UK had increased to 26% from 14% in 1997.  This might be linked to the view that Scotland gets more than its fair share of public spending, which increased to 44% from 32%.  From such views it is not an enormous leap to believing that the problem of cuts in services can be ameliorated by reducing the spending in Scotland.  Such are the divisive results of playing with nationalism.

Some supporters of Scottish independence justify this support by claiming that Scotland is a more left wing country and that it would have a more left wing government if not encumbered with the Tory majority in England and Wales.

There are two problems with this argument.  The first is that setting up the answer as a nationalist one is not progress, especially as we see more and more that the content of independence is reactionary.  Secondly the argument accepts that English workers can just, how shall we put it, get stuffed by their Tory majority.  The thought of seeking to use the claimed left majority in Scotland to leverage a wider left majority, it’s called workers unity, doesn’t appear as a consideration.  This has negative effects on English workers’ consciousness which again is more or less ignored by left wing Scottish nationalists.  The evidence of this we see above.

The argument has been advanced that what is at stake is the integrity of the UK state and that socialists are not defenders of this state.  This is quite true.  It is claimed that what is involved in Scottish independence is precisely this question.  This is only half true.  It is also claimed that the objective of socialists is to break up the UK state.  This is not true.  The objective is to create a workers state.  Scottish independence means not only breaking up the UK state but putting forward the creation of a smaller capitalist State as the solution.  A socialist one? This is not true at all.

The SNP-run Scottish government is planning to hold a referendum on independence in autumn 2014.  Socialists should oppose Scottish independence in this referendum.

The State and Stockholm Syndrome – Part 2

Posted on by
Reply

Today the State is inflicting attack after attack on working people but just like sufferers of Stockholm syndrome many people keep coming back to ask it to protect them.

It is not that this is an idea with no rational content at all.  It does have a basis in reality but not one that justifies the political positions of some of the Left.

Last week on RTE news some disabled people were interviewed protesting outside the Dail at cuts to personal assistance, without which they might be forced into hospitalisation or else left to suffer appalling neglect.  Their protest was a powerful demonstration of the enormous dependence some of the most vulnerable have on the State and the capacity of that State to mistreat them appallingly.  While the media and others basked in the achievements of Irish athletes in the Paralympics in London the Irish State was preparing to shaft disabled citizens at home.  The protests succeeded in getting a U-turn on the proposed cuts and a rare but welcome victory.

This is but one example of the welfare state which is what the Left has in mind when it defends the state.  Where the right wing scream private good and public bad the left has often responded by defending public services and with declarations of the evils of the private sector.

Opposition to welfare cuts and to cuts in education and health services should not however imply any wider defence or support for the state or ‘public sector’.  The public sector is a large bureaucracy that has no democratic content, often providing poor and inefficient services.  The state training agency FAS is just one outstanding example of the corruption and wastefulness of the provision of services by the State. These are run by a capitalist state, in the interests of capitalism, by bureaucracies totally unaccountable to working people.  Why on earth should there be any inclination to defend what we are not responsible for? What we have no control over? That should rightly be criticised by us for its often bureaucratic waste of our money?

And this is the point. It is working people who pay for the welfare state, not the rich and not capital.  In a paper written some years ago the Marxist economist Anwar Shaikh sought to examine the argument that excessive welfare provision caused economic stagnation and unemployment.  In the course of this he demonstrated for six major countries (US, UK, Australia, Canada, Germany and Sweden) that this was not the case.  His central finding has relevance to our own argument, which was “that social benefit expenditures were financed out of the taxes paid by recipients of these very expenditures: in other words, by and large, social welfare expenditures were self-financed.”

The capitalist state taxes workers and then bribes them with their own money while liberals loudly declare that taxation is somehow progressive, even left-wing, and should be increased to improve welfare servicers and boost the economy.  Workers are expected to uncritically support this as if ‘the State’ is paying for something when it is actually they that are doing so.  The key question of ownership and control of the services provided by the state is ignored and the debate is framed in terms of the supposed ‘socialist’ position of ‘tax and spend’ and the right-wing position of cutting taxes and privatisation.

This framework has been used by the right to push privatisation, presenting it as the only alternative.  But it isn’t, and opposition to privatisation is not itself an alternative to the failures of health system or education systems that consistently betray those most in need of their help.  Too often the woeful character of state services has been defended in some misguided belief that defending state ownership is defending the workers delivering the services.  Such an error is rarely made when the unsatisfactory nature of services or products produced by workers in the private sector comes under similar attack.  It is against this background that the State seeks to divide private sector workers against public sector workers and portray the trade unions, often accurately enough, as primarily interested only in the latter because that is where their own bureaucratic power base resides.

While socialists must oppose privatisation as a solution to the inefficient provision of services we should never confuse this with support for or excuses for poor State delivery of services.  Too often the attacks on the working conditions of those employed to deliver these services are made prior to privatisation, or prepared prior to privatisation, by the state itself.  Nor is it true that state ownership guarantees better delivery of services.  The appalling neglect of older people in care for example has taken place under both private and state provision.

So what we have then is the provision of welfare state services which workers pay for but which are delivered often bureaucratically, with no democratic control and often in oppressive ways, such as the means-testing of welfare recipients.  Many workers delivering the services conscientiously do their best but this is despite rather than as a result of how they are organised and managed.  Simply demanding more welfare ignores all this and ignores that it is workers who pay for it.

Many are happy to pay because they care about the services provided and have in the past or will in the future benefit from them.  The provision of unemployment insurance etc. limits the devastation to living standards consequent on redundancy or sickness.  It puts a floor under the minimum wages capitalists can demand, which is why they always want it reduced; but fundamentally it is necessary because a pool of unemployed is necessary for capitalism and this pool must be of sufficient quality to take up employment when it is available.  Welfare capitalism is necessary for the capitalist system as a cost effective way of preserving the quality of labour power.  It is not fundamentally about delivering on the human needs of people.

The large growth of the capitalist state sector, from an average in the OECD (advanced capitalist countries)  of 27 per cent of gross Domestic Product in 1960 to 42 per cent in 1988 (statistics from Shaikh paper), has been the material and ideological power base of social democratic ideas that the capitalist system has been or can be reformed, if not into socialism, then at least something ‘different’ or along vague lines of ‘another world is possible’.   The limited standards of the services provided and endemic insecurity under which welfare recipients live are one testament to the limits and precariousness of this social democratic vision of reform.

Workers expected to row in behind demands to defend a large state should be aware that this sector has grown in recent years because of the state’s role in preventing a financial collapse pushing the whole capitalist system over a cliff. In Ireland, as in many other countries, workers are having to pay for it through tax increases and service cuts.  The last thing workers need is the idea that the State is something neutral that can be captured to represent its interests.  Yet this is the present perspective of much of the Left who have diagnosed the current situation as first of all a ‘crisis of working class representation’.  That is, a crisis of the social democratic illusions that once had hegemony over many workers, although to a much lesser degree in Ireland, who have suffered mainly from capitalist populism.

This dependence on the State as part of the fundamental programme of the Left is the ideological explanation for the electoralist strategy now so much a feature of the Left.  It is no accident that the need for a United Left Alliance was suddenly seen before the general election.  Having made the electoral intervention the need for unity was then considered by some as no longer so strong and the promised progress to a real party has evaporated.  We know when it will come back, if it’s not too late.

If this is at least one of the ideological origins of the chronic electoralism of the Left it must still be explained why this has happened given the parallel ideological notion that what the Left organisations want is a revolution in which the working class seizes state power.[i]

Whatever about the belief in revolution this has not been a practical proposition for many years: during the Celtic Tiger boom or the social and political defeat of workers during the previous couple of decades.  So, while often preaching revolution in the future, as a matter of pure practicality it has done what is actually possible.  Given its ideological confusion on the role of the state and having no conception of revolutionary politics outside of a contest for state power the Left has degenerated into electoralism.

The contest for state power by the working class in a long period where the working class has not been interested in such a project has become a reformist contest for state power which resolves into just getting elected to parliament.

The real Marxist attitude to the state, as opposed to dependence on the state for solutions, which I have looked at here, here and here for example, will be the subject of future posts.

[i] I realise that the Socialist Party has political roots which eschew this traditional Marxist view in favour of a perspective of a Left electoral victory, leading to majority in Parliament passing legislation nationalising big industry with the support of mass mobilisations, this allowing the introduction of what they believe to be socialism. But this has always been a relatively hidden revision of Marxism that is disguised by what is presented as a rather rigid orthodoxy.

A Case of Stockholm Syndrome* – The Left and the State

Posted on by
Reply

In two recent posts, here and here, I have criticised proposals of the United Left Alliance (ULA) that rely on dealing with unemployment through a state investment programme.  I have also made criticisms of tax plans of the ULA, which again rely on state action for their implementation.  The state is clearly extremely important to the left alternative proposed by the ULA.

The Socialist Party in the general election called for nationalisation of all the banks and their being run democratically under public control and management. It demanded that the state take the economy and natural resources into democratic public ownership in order to plan the development of a real manufacturing base.   It called for a government based on working class people that implements socialist policies and puts people before profit.  All eight of its proposals involved state action or the need to get the left into the state and into government.

The ‘Alternative Economic Agenda’ of the People Before Profit Alliance was constructed in a similar manner.  It has eleven separate elements and again all rely on the state taking action on behalf of the working class or ‘people’ in general.  Their demands include creation of one good state bank; creation of a State Construction Agency for infrastructural investment; expansion and reorientation of the public sector away from a corporate agenda and general reliance on the state to develop the economy.

These demands for the State to take action to defend working people must be taken at face value.  It is not possible that these demands are raised in order to expose the State and rid workers of their illusions in it because very few workers actually expect the State to take over the economy and run it for the benefit of working people.  The illusions peddled are those of the Left itself, for what is presented is the ideal objective which they aim for and which workers are called upon to endorse.  Except of course that state ownership is not socialism and the Left knows it, or rather will claim to know it.  The problem is that the means – capitalist state ownership – is supposed to lead to an end that is not capitalist state ownership.

When I say that the left knows that capitalist state ownership is not socialism I mean that it knows well the statements of  James Connolly including – “state ownership and control is not necessarily Socialism — if it were, then the Army, the Navy, the Police, the Judges, the Gaolers, the Informers, and the Hangmen, all would all be Socialist functionaries, as they are State officials — but the ownership by the State of all the land and materials for labour, combined with the co-operative control by the workers of such land and materials, would be Socialism… To the cry of the middle class reformers, ‘make this or that the property of the government,’ we reply, ‘yes, in proportion as the workers are ready to make the government their property.’ Workers’ Republic, 10 June 1899.

Engels put it similarly in ‘Anti Duhring’ published just over twenty years earlier -“… since Bismarck adopted state ownership a certain spurious socialism has made its appearance here and there even degenerating into a kind of flunkeyism which declares that all taking over by the state, even of the Bismarckian kind, is itself socialist. If, however, the taking over of the tobacco trade by the State was socialist, Napoleon and Metternich would rank among the founders of socialism. If the Belgian state, for quite ordinary political and financial reasons, constructed its own main railway lines, if Bismarck… took over the main railway lines in Prussia, simply in order to be better able to organise and use them for war, to train the railway officials as the government’s voting cattle, and especially to secure a new source of revenue independent of immediate votes – such actions were in no sense socialist measures. Otherwise the Royal Maritime Company, the Royal Porcelain Manufacturer, and even the regimental tailors in the army, would be socialist institutions.”

We only need to recall that the enormous austerity that working people are suffering is due to the state’s budget deficit and the state’s debt burden to understand what Irish workers should think of ‘their’ state.  It wasn’t the collapse of the banks that placed this debt on the backs of the workers, it was the State that placed this debt on the backs of the workers through guaranteeing all their liabilities and then effectively nationalising them.  Yet nationalisation of the banks has been a left demand for years and still is today.  Yet this nationalisation is precisely the mechanism used by the State to bail out the capitalists involved directly and the whole system indirectly.

Nor is such a purpose unusual for nationalisation.  In fact I can’t offhand think of a nationalisation that wasn’t meant to benefit capitalism and didn’t place a burden on workers.  The rhetoric about dependence of many working people on the state for jobs is no different in essence from that of the supporters of Sean Quinn who have been dependent on him in the past for employment.  Anyone on the left who argues that the State is somehow democratic and has duties to working people no longer believes that the capitalist state is above all the defender of the capitalist system.  That this is what is its defining role.  But for the Left it would appear that holding the belief that the capitalist state is both a defender of capitalism and cannot be reformed and that it can provide all the things that are demanded in Left manifestos are not two mutually exclusive ideas that cannot both be true.

I am reminded of F Scott Fitzgerald’s remark that “the test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.”  Some in the left appear to go one better and actually sincerely believe two opposed ideas at the same time.  My view is that this is dysfunctional.

*Stockholm syndrome, or capture-bonding, is a psychological phenomenon in which hostages express empathy and have positive feelings towards their captors, sometimes to the point of defending them. (from Wikipedia)

to be continued.

The state of job creation

Posted on by
Reply

In my last post on the politics of the left I questioned proposals on state investment as the answer to unemployment.  In this post I want to look at this further.  The Nevin Economic Research Institute (NERI), an economic think-tank affiliated to the Irish Congress of Trade Unions has published a similar proposal to that of the United Left Alliance (ULA).

Its paper is entitled ‘An Examination of the Effects of an Investment Stimulus’ and its research shows that an investment stimulus of €1 billion would create about 16,750 short term jobs and between 675 and 850 long term jobs.    In the longer term the competitiveness of the economy is increased so that the economy grows, which increases taxation, which more than offsets the interest cost of any loan to fund the investment in the first place.  This means that “overall there is a long-term permanent decrease in the government deficit as a result of an investment stimulus.”  This is what has been referred to often as growing our way out of the crisis and debt problem.  NERI therefore proposes a phased investment stimulus of €15 billion over 5 years.

The net cost per job created, at around €34,500, is nearly the same for both the NERI and ULA proposals.  The paper by NERI sets out more fully its assumptions so it is fair to assume that these are not dissimilar to those of the ULA, which in any case we can also fairly adduce from the ULA proposals themselves.

In order to arrive at its estimates the NERI researchers use an economic model.  Like all models these require assumptions as to how the economy works and therefore how the parameters of various economic variables interact, e.g. how imports will increase given a certain increase in income as employment increases.  This is calculated from historic data from the Irish economy.  The HERMIN model used “combines Keynesian short term features with neoclassical longer term features.”

This is a problem, or rather there are two problems, not perhaps so much for the presumably Keynesian researchers at NERI but for the ULA, whose biggest components claim to be Marxists.  The Marxist analysis of the way capitalism works is very different from the Keynesian or neoclassical one.  Unfortunately, through the budget proposals of the ULA and their similarity to those of NERI, the policy proposals of the ULA display much affinity to Keynesian economics.  We have noted this already in their definition of the problem as being one of insufficient demand, which is also the view of Keynesian economists.

For Marxists this is indeed a feature of the current crisis, indeed of all crises.  Where the difference lies is that Keynesians think that this problem can be put right by state-led investment while for Marxists the lack of sufficient demand is really just one expression of deeper problems but not the fundamental cause of the crisis, which will not be put right by expansion of state expenditure.  This fundamental difference is invisible when the proposals of the ULA and NERI are compared.

For Keynesians the capitalist economy can reach equilibrium, where demand for investment funds and its supply are equal, in a situation where there is nevertheless massive unemployment, both of people and resources.  The autonomous action of the state in increasing investment can solve this problem and bring the system back into an equilibrium that resolves the unemployment problem.  For Marxists state investment can at most postpone the crisis but is not itself an answer.  By contrast the ULA present it as part of the answer.

For Keynesians the autonomous action of the state can provide a solution because the system can reach equilibrium and investment can be the driver of the economy to this equilibrium.  As the Keynesian Minsky puts it –“Investment and government spending call the tune for our economy because they are not determined by how the economy is now working.”  That a model shows state investment to be self-financing when that model contains Keynesian assumptions can hardly be called convincing. Keynesianism believes that “if entrepreneurs can only screw themselves up to do enough investment, it will eventually justify itself, since the income generated will absorb the excess capacity.” (Robin Mathews in ‘The Trade Cycle’)[i]

On the other hand Marxists see this type of statement as an example of bourgeois economists overwhelming tendency to assume that the capitalist economy works like a socialist one; that all production will more or less fulfil a useful role.  After a crisis based on massive construction expenditure that powered a phenomenal boom and then bust, this is just an incredible assumption.  The NERI and ULA proposals are based on further infrastructure spending by the same state that encouraged the last ‘stimulus’. That NERI believes this will lead to long term growth is again built into the neoclassical assumptions of the model.  Neoclassical economics assumes that capitalist markets are totally free and efficient.  A model built on such long term assumptions could hardly show anything else.

Neoclassical economics assumes that production is efficient and finds a market and that growth is the result.  Marxism makes no such assumptions but instead demonstrates the contradiction at the heart of an economy determined, not by autonomous investment, but by the pursuit of profit.  The recent massive overproduction of infrastructure was massively profitable, which is why it continued for so long.  The contradiction between this profitability and real need; the contradiction between the limitless expansion of capital and the limit of the market, was suspended temporarily and resolved temporarily by the expansion of credit.  When this expansion of credit can no longer continue the limits of the market are exposed and massive overproduction , which inevitably involves massive over-accumulation of capital, is revealed.  Keynesianism’s answer is to continue the accumulation because investment will find its own market and in any case can be autonomous within the system, as we have seen.  Marxists believe on the contrary that the accumulation of capital is determined by profit and lack of it may see accumulation shudder to a halt and collapse.

In a contest of economic ideas, between neoclassical economics where crisis are not supposed to happen and are self-correcting when they do, and Marxism, in which overaccumulation driven by super-profits is periodically inevitable, the real world has given a decisive confirmation of the latter. In a contest in which Keynesianism can assume investment creates its own demand and is self-financing and Marxism which points out the contradiction in production between use and profit, the empty office blocks and ghost estates are again striking confirmation of the truthfulness of the latter.  So why oh why would the left want to promote Keynesian solutions?

There is absolutely no reason to believe that a renewed burst of construction spend would not create new imbalances.  Perhaps the left believes that because the state carries out the spend it does not have to earn a profit but this is false for a number of reasons.

First it has to pay for the investment.  If it takes out a loan it will have to pay it back and if the investment does not create tax revenue by promoting further private capitalist investment it will not raise the necessary tax.  In these circumstances taxation would have to come instead from workers or business, which would remove the stimulus that has been created.  If the investment does stimulate or facilitate private investment then this only confirms ULA reliance on the state promoting capitalism as the way out of crisis.

Although the ULA does call for €5.3 billion of state investment in modern industry it calls for much more, €26 billion, to be invested in infrastructural investment.  In fact even some of the modern industry investment is in infrastructure.  Such infrastructural investment is normally not competitive with the main private capitalist industries but complimentary to it, facilitating it to make profits.  By making such spend central to its economic alternative the left, subconsciously no doubt, evidences the inadequacy of its alternative and subservience to capitalism.

An alternative is that state investment is directed to the production of goods and services that people actually need and want and are prepared to pay for.  This would indeed be competitive with private capitalist owned industry but this is not what is proposed by NERI or the ULA.  Instead either taxes or the promotion of private capitalist production through helpful infrastructure is proposed.

In our last post on this we questioned the policy of reliance on state investment given its history of incompetence, even in areas of no great complexity or requiring no great innovation.  The left sometimes excuses this (why?) as the result of subordination of the public sector to private capitalism.  And the answer to this is yes, that is what the capitalist state is for.  It is not for creating competition to private capitalism so why would the left demand that it does?

Even if the specific proposals of the left, in the particular circumstances that Irish workers face, are not practical this is not the main objection to them.  The main objection to them has possibly more force where they actually to work.  For if they worked, even if only temporarily, they would be both a diversion from creation of a socialist alternative and some evidence that this alternative is not needed.  The success of state industry would be the success (temporarily) of state capitalism.

The successful development of capitalism has been facilitated by the state many times and it may be argued that the more recent, and quicker, that development the more it has relied on the state.  This may be true going back through the development of every new major capitalist power from Holland in the 17th century, to Britain in the 18th, Germany and America in the 19th and 20th, the Asian Tiger economies of the late twentieth century and the Chinese of the 21st century.

The socialist alternative is something very, very different from this but the left’s fixation on the power of the capitalist state is strong and we shall look at the question some more.

[i] The quotations above are taken from a new paper that compares the Marxist explanation that the capitalist economy is driven by profit with the Keynesian alternative of the role of investment – ‘Does investment call the tune? Empirical evidence and endogenous theories of the business cycle’ See link.