Though Cowards Flinch

The Communist Party of Great Britain has published the draft of a new programme. Apparently the first completely new one since 1952. Of course back then everyone knew what sort of economic system the communists stood for. Now some 20 years after the fall of the USSR they do not even seem to know themselves.

There are certainly positive aspects to the programme, it is pro European, breaking with the narrow nationalism that some previously associated with communism have espoused. It is pro-democracy, but being pro-democracy was la mode for all CP successor parties in Europe post 1989.

This generally meant adopting a quite uncritical attitute towards Western constitutional arrangements. The authors here are a bit better, proposing a number of constitutional reforms, but they are all fairly mild ones, placing them slightly to the left of the Liberals.

But let me concentrate on their economic aims, since socialism has always been about running the economy in a different way – politics has been the means to that end.

It is no secret that the principle founder of communism, Karl Marx gave the best years of his life to the writing of Das Kapital, his analysis of how capitalism worked.

Marx argued that the value of commodities derived from the labour required to make them, and that under capitalism only a portion of the value created by workers is paid to them as wages. He said that employees are only paid for the first part of the working day, in the second half they work for their employer for free. Property incomes like profit, interest and rent, arose from the unpaid labour. By exploitation he meant this process by which people are forced to do unpaid work.

Marx’s concept of exploitation is completely absent from the draft programme. The word exploitation is used. It says that backward countries are viciously exploited that nature is an object of exploitation, that the economy is distorted by exploitation. But this is just using the word as a general term of moral condemnation.

Does this matter?

Yes, because without an understanding of exploitation and how it is inherent in the wages system the authors are unable to explain

a) why it is in the immediate interest of workers to abolish the wages system
b) how to go about doing this.

Instead the economic objectives they set are either very modest, or very vague. So they say, “The political economy of the working class brings with it not only higher wages and shorter hours. It brings health services, social security systems, pensions, universal primary and secondary education …”

While it is true that the labour movement has aimed at all these things, it somewhat understates the objectives of socialists.

Paradoxically, the old Clause 4 of the Labour Party written by the Fabian Webb gave a much clearer and more explicit summary of Marx’s aims than anything that today’s authors achieve in a lengthy draft:

“To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service.”

Here we have the elimination of exploitation ( full fruits of industry ), egalitarianism ( most equitable distribution ), common ownership, and – stretching it a little – a consciously planned economy.

Today’s CP comes out as basically against public ownership. Their section on the economy starts out by condemning nationalisation.

“From the point of view of world revolution, programmes for wholesale nationalisation are today objectively reactionary. The historic task of the working class is to fully socialise the giant transnational corporations, not break them up into inefficient national units“

Their point may some validity in the most technically advanced industries : aircraft, cars and semi-conductors spring to mind, but these are only a part of the economy. Having initially damned nationalisation, the authors backtrack and say that they support it for banking and the basic infrastructure. In which case why not say that they favour nationalisation apart from those industries where development costs are too high for individual countries to afford them?

But no, they are basically against public ownership, for they later say : “universal nationalisation, forced collectivisation and flat-wage egalitarianism are ruled out – historic experience certainly shows that they lead to disaster.”

Presumably they want to distance themselves from what the Warsaw Pact communists did. But forced collectivisation, in Britain?

In a country where the peasantry was dispossessed by the landlords three centuries ago?

It is just put in as a scare to distract readers from their new objection to public ownership and egalitarianism.
Which country has ever applied the ‘flat wage egalitarianism’ and found it to be disastrous?

When has nationalisation led to disaster?
It is pretty clear that the denationalisation of industry in the East Block after 89 did result in a disastrous recession, but what disasters followed nationalisations in the 40s?

I am not saying that nationalisation is the only route to common ownership. There are other more direct and radical courses that can be taken.

What I object to is the way the authors make the sort of unsubstantiated and emotive criticisms of socialist economic practice  that one is used to from neo-liberals.

The CPGB seem to be adopting the sort of economic policies adopted by the Chinese CP in the 50s and by the right of Chinese CP subsequently. They say that only those capitalists who ‘rebel’ should have their firms confiscated. This is what CPC initially did, only those capitalists who sided with the Guaomintang lost their property. But since shareholders can not collectively rebel, all public companies here would presumably be safe under a Communist government?

This means that they are happy to see capitalist exploitation continue in the greater part of the economy.

When this policy was adopted by the Chinese in the 50s it was an understandable, if ultimately dangerous, policy given the undeveloped state of their economy. The justification that the capitalists were needed to accelerate industrialisation can hardly be used in Britain. Instead the authors justify leaving most of the economy in private hands on the odd grounds that: “socialisation of production is dependent on and can only proceed in line with the withering away of skill monopolies of the middle class and hence the division of labour.”

Nonsense on stilts!

Production in a capitalist economy is surely already socialised. Production is for society in general via the intermediary of the market. Production is already social. Appropriation is private and not only private, but  privately monopolised by one class.

Bill Gates, Lakshmi Mittal, and Richard Branson are not billionaires because of the ‘skill monopolies of the middle class’ but because capitalist property relations mean that they are the legitimate owners of the surplus value created by workers they employ. Bill Gates is not rich because of his undoubted middle class professional skills. Such skills would at most command him a modest wage differential. He is rich because he can afford to employ tens of thousands of other people with middle class skills to work for him.

The authors confuse three quite distinct issues

1. How to eliminate capitalist exploitation.

2. In what way the market can be replaced as a mechanism of economic coordination.

3. How to eliminate class differences between the working class and the middle class.

Let us look at each of them.

Capitalist exploitation rests on wage slavery and can be eliminated by abolishing wage slavery, as chattel slavery was abolished in the past.
It requires only a legal change to the effect that net value added is the property of employees not employers. When slavery was abolished in 1833 compensation was paid by the state to slave-owners. In the case of an abolition of wage slavery no compensationarises since the employers are deprived of no property, but merely of the opportunity to use property in an exploitative way. Secondary forms of exploitation like interest can be substantially abolished by making interest debts no longer legally enforceable.

Eliminating the market as a coordination mechanism requires the introduction of a society wide system of time accounting. Marx and Engels wrote about this and experiments in how to do it were carried out in Czechoslovakia in the 60s and more recently by Stamher at the Statistischen Bundesampt in the 90s. The technologyit needs is now clearly present in the internet and modern databases.

The authors speak loosely of eliminating the division of labour as if this was either a necessary or desirable goal. Eliminate the division of labour and you eliminate civilised society.

Without a division of labour you regress to the neolithic. What they presumably mean is that they want to see the elimination of lifelong class divisions between mental and manual workers. Well if that is the case they should propose concrete measures to achieve this. Albert and Hahnel for example propose systems of rotating roles,
though a precondition for this is a general raising of educational levels.

I am a Marxian political economist, but in my last posting I found myself in the paradoxical position of having to explain insights of an eminent bourgeois economist which seemed to have been lost in the current political climate. The responses to my posting indicate the extent to which points which were a standard part of economics training in the immediate postwar period are now no longer understood.

I had written:

“But all this evades the real cause of public deficit: the growing financial assets of the international rentier class. This can ultimately be dealt with only by one of 3 expropriation processes”

To which a poster replied

Sorry if this has already been assaulted in earlier comments. But I would need this explained to some degree. In a narrow technocratic sense, the deficit in the UK has emerged because high spending that was reliant on the continued extraction of value from asset-boom based activities was suddenly uncovered. Financial wealth cratered, and so did the government’s – they don’t seem to be in opposition to one another.

We have to understand what is happening in the context of the long historical development of capitalism in Britain.

In the early phase the rentier class was small and most capitalists directly owned their own businesses. For them savings and investment were the same thing. The Fairfield family could decide to save by putting their profits into a big new dockside crane for example.

Once you got the dominance of joint stock companies the capitalist class took on two forms : the rentier owners of shares, and the managerial class that actually ran firms. Saving and investment then became separated into two different activities by different groups of people. This was the situation when Keynes was writing. This, then relatively new, structure of the economy had created an inherent tendancy towards instability and recession which became painfully evident after the Great War.

Kenyes attributes this to what he called the ‘pardox of thrift’. If the rentier class chose to reduce its consumption and save, this saving was by itself quite disconnected from investment. Investment decisions were independently made by a distinct group of people – the managers – based on their perceptions of future sales. Instead of decisions to save driving investment, the process went the other way. Investment expenditure
by firms regulated the level of savings. Investment by firms caused national income to rise until it created the savings necessary to finance it.

Any attempt to stimulate investment by encouraging more saving — the orthodox response to the crash of 1929 — would be counter productive. Lower consumption expenditure would reduce sales, firms would have to borrow to meet current costs. They would in consequence cut forward investment and lay people off, and the recession would get deeper.

During the 1930s Keynes was ignored but the Labour government post 1945 took his insights onboard. They established a new economic model in which steeply progressive income taxes and inheritance taxes would diminish the savings of the rentier class with the state would use the resulting revenue to take on a leading role in investment. This model which lasted for some 25 to 30 years gave rise to a period of rapid economic growth in which real wages showed the biggest sustained rise since industrialisation.

The existence of such a large state sector, in combination with a strong trade union movement, had, by the mid-1970s, seriously threatened the continued viability of the remaining capitalist sections of the economy, resulting in a major crisis of profitability. There was a lively debate within British Social Democracy about what to do. Should the crisis be resolved by more vigorous state controls over prices and incomes whilst retaining the existing private sector? Should it be resolved by extending state ownership and using a new state investment bank to fund investment?

The Labour Party was effectively paralysed with indecision and was replaced in 1979 by a radical neo-liberal government headed by Mrs Thatcher. This reversed many of the social democratic changes made after 1945 with the explicit aim of returning to a classical liberal capitalist economy. The immediate impact of her policies was what one would have expected on Keynesian grounds a slump of almost 1930s magnitude. Official unemployment rose to over 3 million, despite repeated massaging downwards of the definitions of unemployment.

Manufacturing industry, and the country’s ability to export manufactured goods was drastically hit.

From the early 90s though a new model of growth seemed to have estabilished itself in the Anglo-American economies, which combined a sharp polarisation of income distribution with rising consumer expenditure financed on credit. This model allowed the savings of the rentier class
to be balanced by the rising indebtedness of the lower classes and the state. The crisis of 2008 hit when the indebtedness of the lower classes hit its limit.

In principle, the US and UK could retain a rentier class with growing savings if they could export capital, — the Cecil Rhodes or Edwardian imperialist model. But to do that they would require a trade surplus. But the policies followed since the 1980s have led to a rundown of real capital stock and the productive skills that would be required for a trade surplus.

The issue of debt has risen to the top of the political agenda. Domestically, all parties are agreed that the level of public and private debt in the UK has risen too far.

Internationally, nations like Greece and Ireland are being forced to carry out drastic cuts in wages and public expenditure in order to satisfy their creditors.

But to listen to the debate one feels that John Maynard Keynes lived and wrote in vain. None of the political participants seem to have any real understanding about what the most original economist of the last century wrote.

Discussion is limited to how soon and how fast to cut public expenditure. The Tories say cut hard and fast, Labour say delay cutting unless it harms the recovery.

Neither side seems to have Keynes’ feeling for the interdependence of thrift and debt. There can be no thrift without an equal and opposite rise in debt. One person’s saving is another person’s borrowing.

If government debt is to be reduced, then some other section of the economy must move from financial surplus to financial deficit to compensate. Which other sector do the political parties propose to move into deficit?

During the lead-up to the crisis there were 3 surplus sectors : the rentier class, the company sector, and the overseas sector. These sectors were building up their financial assets. There were two deficit sectors: the state, and households, particularly working class and middle class ones who were building up their debts to the banks and credit card companies.

If the state and debtor households are to start paying off their debt, which of the other 3 sectors is to move into deficit to compensate?

Cutting public sector wages and can temporarily shift borrowing away from the state. Its first effect is to force public sector employees either into debt, or force them to run down their relatively small savings. But employees are much less credit worthy than the state, and quickly cut their consumption, throwing the deficit in turn onto the company sector and the import sector. Firms are more creditworthy than private individuals, but still less creditworthy than the state. Firms will respond with futher layoffs and wage cuts.

Falling tax revenues, increased unemployment benefits, throw the deficit back to the borrower of last resort : the government. In the meantime the productive economy has gone down the tube.

It was against this insane commonsense response to public debt that Kenyes polemicised in the 1930s.

The only sectors onto whom the deficit can be sucessfully shifted are the rentiers and the overseas sector. The rentiers could be taxed at sufficiently punitive rates to run down their financial assets. In compensation the public debt would fall, since the public debt is nothing more than a liability to this class, and within a given national economy, the public debt can only be run down by diminishing the assets of the rentier class.

The only way the assets of the overseas sector can be run down is by eliminating the trade deficit and running a trade surplus. This would imply a much more stringent devaluation of sterling than has so far occurred, which would be no bad thing from the long term working class interest here since it would slow the outward migration of manufacturing jobs.

The UK can do this, deficit countries within the Euro can not. Within the Eurozone, orthodoxy has no real alternative way of dealing with public debt but a race to the bottom like that which impoverished the world after the great crash of 1929.

But all this evades the real cause of public deficit: the growing financial assets of the international rentier class. This can ultimately be dealt with only by one of 3 expropriation processes

1)The Denis Healy solution : tax them till the pips squeak.
2)The Weimar solution : pay them off with newly created state currency to inflate away the debt.
3)The Biblical solution : anounce a jubilee and cancel all debts.

This is a guest-post by Dr. Paul Cockshott of Glasgow University. It reports back from a high-level conference held in Berlin as part of an on-going series of discussions between European political movements and elements of the governments of Venezuela, China and other countries that claim to propose an alternative to the ‘Washington Consensus’. Dr. Cockshott’s wider political views can be viewed in the online copy of his book, Towards a New Socialism.

On Friday the 19th of this month I attended a conference in Berlin that had been called under the sponsorship of The World Association for Political Economy (WAPE), Scientists for a Socialist Political Economy (SSPE), Transcend International and the Rosa Luxemburg Stiftung (RLS) to discuss the issue of how it might be possible to transform the EU economy into a socialist economy.

WAPE is a body set up about 3 or 4 years ago apparently at the initiative of the Chinese Academy of Social Science to act as a forum for socialist political economy which could be an alternative to the Washington Consensus of neo-liberalism. SSPE is a smaller group of co-workers accross Europe and Latin America working towards the same goal. Transcend International, is led by Johan Galtung, a very eminent social scientist and founder of the peace studies movement. The RLS is a well established left-social democratic thinktank in Berlin.

Speakers included Hans Modrow a former DDR president, and Heinz Dieterich, a prominent Mexican/German sociologist who reputedly had considerable influence on Chavez. What is interesting here is that it brings together elements of the Chinese government with other “anti-Washington consensus” nations like Venezuela, in the context of Left reformation in Europe. The Rosa Luxemburg Stiftung is a subsidiary of Die Linke, the party set up to challenge the older German Social Democratic Party.

The proposals put forward were a significant break both from traditional western social democracy and from its eastern variant. Instead of seeing the transition to socialism as being something that was to be achieved by nationalisation of industry within the confines of the nation state, the focus was on :
1.The assertion of positive rights for labour against capital.
2.Radical monetary policies.
3.A programme for participatory democracy at the European Union level.

It was proposed that the Euro be tied to labour time. Currently the Euro is equivalent to the value created by about 2 mins of labour. It was proposed that the European Central Bank be put under the direction of a value policy committee – similar in some ways to Brown’s monetary policy committee, except that it would be made up of economists nominated by the parliament plus lay members chosen as a citizens jury by lot. German economists Bartsch and Stamher presented interesting accounts of how they were working on complete national accounts in terms of labour time.

Once the value of the Euro had been stabilised in terms of time, the Euro notes would have their time content printed on them. This would immediately raise the question in the minds of European workers: why am I only being paid 20 or 30 mins for each hour I work? The issue of exploitation would rise to the top of the political agenda.

Instead of firms being nationalised, which raises all sorts of issues relating to expropriation or compensation, I feel the focus should be on directly abolishing wage slavery in a manner analogous to the abolition of slavery in the USA by the 13th amendment. It was suggested that we should aim for a European constitutional right not be exploited. If employees were being paid less than the full value added by their labour, trades unions should have a legal right to claim the difference back from the employers.

Whilst this would make all firms unprofitable, they would not be unviable from the point of view of their then principle stakeholders – their employees. To relieve firms of the burden of debt, there should be general debt amnesty affection all public and private debt other than banks obligation to private depositors up to a maximum of 30K euro. The vast majority of private depositors hold much less than this. The rentier class, who hold millions in deposits would, on the other hand , face the euthansia of which Keynes spoke.

Alongside this were proposals to shift the tax basis of the EU from regressive indirect taxes to progressive taxes on income and property provided that such tax changes were passed by EU wide referenda.

Another significant feature of the conference was the active participation of a Chinese representative who was anxious to impress on us that China should not be thought of as a capitalist country but one that was strongly committed to socialism. What credibility one gives to that is a matter of judgement, but what is new is that the Chinese should be actively seeking to both to translate western Marxist works into Chinese, and that they should be sending participants to European Left conferences.

This was a follow on to the Barqisimeto programme proposed in Venezula in 2009, and a further follow on conference will be in Suzhou City, China in May 29th-30th.

Contributions to the conference are available in full here. Some very important stuff by Carsten on the use of labour accounts in the national accounts. Also Ding’s paper which gives important insights into the progress of Marxist development in China.

Key documents of the Berlin programme are to be translated into Chinese and published in the official Journal of Marxism there.

Many questions arise, but I will concentrate on a couple that Dave has asked me to address. First, how does this set of proposals correspond with the Marxist tradition and secondly how does this apply to the British context.In both these cases I must plead special interest as I was involved in the discussions behind the proposals.

Whilst the downplaying of nationalisation is a break with the Marxist tradition that dates from the 2nd International, it is arguably a return to the ideas that Marx himself had prior to the establishment of that international. Marx criticised the tendency in German socialism that relied on state aid. He argued for an economy in which labour accounts would replace money. The measures proposed in Berlin are very influenced by that, and also arguably by the economic ideas of the Dutch council Left of the 1920s. The aim is the abolition of the wage relation. That comes first, once that is achieved the associated producers can move voluntarily to a planned economy accross Europe.

As to the British context. We are living in an interregnum between the nation state and the continental federation. Already we are sufficiently far down the path, that individual national movements towards socialism in Europe are unviable. The implication is that in the future a pan-European socialist party will have to form to contest politics at the Union level, including pushing for increased democratisation of the EU institutions. So long as parties conduct politics at the national level they are addressing a political forum that lacks the economic power to allow socialist political economy to be put into practice set against supra-national financial practices and institutions.

The very existence of national parties also lends credence to cross class “national” interest whenever European issues are raised and militates against the necessary cohesion of the European labour movement.