Tag Archives: Marxism

Communist University 2012 – August 20-26

Communist University 2012

The Communist Party of Great Britain’s annual school takes place in a world in great flux. Given its explanatory power and practical programme, Marxism has huge potential in this period – a potential that is irresponsibly squandered by the sectarian in-fighting and opportunism of the Marxist groups. Communist University points a way out of this mess. Come and join the discussions over the week of August 20-26 2012 in south London.

Full details can be found on the CPGB website.


Fundamentals of Political Economy – weekend school January 21-22

Fundamentals of Political Economy, January 21-22, 11am-5pm. Room 2b, University of London Union, Malet Street, London. Cost: £10 waged, £5 concessions. Email office@cpgb.org.uk to reserve your place.

In 2008 the banks crashed. States round the world bailed them out by borrowing money. Inevitably, this did not get rid of the crisis but rather gradually transmuted it into a crisis of the creditworthiness of individual states: today the crisis of Eurozone state creditworthiness threatens a new bank melt-down (which may already have happened by the time of this weekend school).

The ‘solution’ demanded by governments and the media is austerity. Creditors – ‘savers’ –  must not be made to accept the losses: the working class, both in and out of paid work, must do so. Predictably, the result is an economic downward spiral – as seen in Greece, but coming now to the rest of Europe.

The ‘Occupy’ movement has represented a cry of rage but not put forward a clear alternative. The broad left, including the far left, has committed itself to Keynesian ideas – that states should borrow more and spend more and hope by doing so to grow ‘their way out’ of the crisis.

Understanding the unfolding crisis and proposing real alternatives requires us to grasp Karl Marx’s critique of political economy. But while education in the basics of Marx’s ideas was commonplace on the far left in the 1970s, today it has withered away: there are academics and theorists who ‘do’ political economy, while left activists and groups ‘do’ only campaigns.

Our school aims in a small way to contribute to beginning to overcome this gap in the education of the left. We are therefore seeking to address fundamentals rather than to tackle the analysis of the crisis directly.

Fundamentals of Political Economy, January 21-22, 11am-5pm. Room 2b, University of London Union, Malet Street, London. Cost: £10 waged, £5 concessions. Email office@cpgb.org.uk to reserve your place.

Topics and speakers:

Moshé Machover

1. The Labour theory of value – Moshé Machover

The labour theory of value and how it should be understood is the fundamental centre of Marx’s critique of political economy: the basis on which all else is built.

Academic and long-standing militant Moshé Machover coauthored with Emmanuel Farjoun Laws of Chaos: a probabilistic approach to political economy (1985), pioneering an approach which has been used by some Marxist theorists and criticised by others. He gave a paper explaining the approach to the Historical Materialism Conference this year, which is recommended reading.

2. Money and finance capital – Hillel Ticktin

Hillel Ticktin

The financial system is at the centre of the present crisis. But what is the underlying basis on which the luxuriant overgrowth of financial institutions and instruments has grown up?

Hillel Ticktin is the editor of Critique journal. He has written numerous articles on finance capital and the ‘financial turn’ of the 1980s and its consequences and on the shape of the present crisis.

Werner Bonefeld

3. Political economy and the state – Werner Bonefeld

Keynesian and nationalist ‘solutions’ to the present crisis rest in the last analysis on the illusion that the nation-state stands above classes and can ‘manage’ the monetary and financial system so as to overcome the crisis. How does the state relate to the capitalist economy?

Werner Bonefeld is one of the founders of the ‘Open Marxism’ school of Marxist theory. His work on the state and political economy has been published in Critique, Capital and Class and elsewhere.

Mike Macnair

4. Against Keynesianism – Mike Macnair

John Maynard Keynes’ General Theory of Employment, Interest and Money (1936) was a muddled partial critique of the ‘orthodox’ economics of his day while remaining within the fundamental ‘orthodox’ ideas of marginal utility and equilibrium – though full of striking phrases. Its assumptions are deeply nationalist. Keynesianism is popular among opponents of the policy of austerity because it seems to have ‘worked’ in the 1950s and 60s. It seemed to do so, in reality, because of the results of World War II.

Mike Macnair is a regular writer for the Weekly Worker, among other issues on the present crisis and its implications.

Marx’s spectre haunts the wealthy and powerful

The ruling class has no workable strategy for rescuing the system, argues Hillel Ticktin (originally published in the Weekly Worker)

Worshipping the market

The depression – called some years ago the ‘third great depression’ following on the long depression at the end of the 19th century and the great depression of 1929 onwards – is now official, as it were. Martin Wolf ’s recent article in the Financial Times produced a series of statistics showing that the present downturn has already lasted longer than previous downturns in the last century. His arguments are, of course, statistical and bound within orthodox economics, even if he leans to a moderate Keynesian analysis.[1]

Engels had predicted that downturns would become worse at the end of the 19th century, but he was proved wrong because of the turn to imperialism on the part of the great powers. However, it is clear that his observation of the underlying tendency was basically correct. In turn, the various depression-era economists of different persuasions now look more credible. The Keynesians, however, may have had their day, given the refusal of governments and a section of the ruling class to move in their direction.

The earlier interventionist policies in 2008-09 have now been replaced by stringency and austerity. It is not that the insights of the Keynesians have not been recognised, but their policies are regarded as too dangerous to follow. Hyman Minsky has had his moment. Perhaps the greatest triumph of the Keynesians since the adoption of the Bretton-Woods agreements has been the recognition that their policies would work, but are so dangerous to capitalism itself that they have to be avoided at all costs.

It is paradoxical that the situation is so dangerous that the rich have to pretend that their wealth is playing no role in capitalism. We not only have the absurdity of trillions of dollars being held privately in various banks, but we now have one bank, the Bank of New York Mellon, charging for the trillions it holds, knowing it cannot be invested anywhere.[2] “It is the world’s largest custodian serving the world’s largest investors.”[3]

The problem the Keynesians attempted to solve lay in the difficulty of selling due to low incomes. Today, the rich are not even spending their money on yachts or luxury cars or castles, but saving it, and the amounts are so great that governments cannot compensate for their lack of investment without taxing the rich, who are financing political movements against taxation. Finance capital itself has been so concentrated that in the USA six investment/commercial banks – Bank of America, Citigroup, Morgan Stanley, Goldman-Sachs, JP Morgan Chase and Wells Fargo – hold assets worth 60% of US GDP, and “dominate the financial industry”.[4] At the same time, the government is implementing austerity measures directed against the majority of the population. The rich have got richer and the government is making the poor poorer. In the USA, at least, it is abundantly clear that the government could solve its fiscal problem through a rise in taxation on the wealthy.

The riots in Britain – preceded as they were by student protests and semi-riots – were rationalised away by the Conservative government, loyally supported by a rightwing press. No level of state repression, under the British prime minister’s name of ‘tough love’, against a recalcitrant population will alter the growing, though inchoate, demand for ‘regime change’ under conditions of growing inequality. The question is not whether there will be a powerful movement for the replacement of the market by a society rationally planned in the interests of the ordinary population, but how much longer it will take to develop. Marx’s spectre of communism is very much the ghostly presence feared by the wealthy and powerful, even if they do not understand what shape it will take.

No doubt the crisis will continue to take on a series of forms, from the initial financial implosion to the present-day threat of sovereign default and continued low growth. The present euro crisis is insoluble because it is a microcosm of the general crisis, which itself has no solution. However, its forms are specific. We have the expression of German nationalism, representing the first time that the German bourgeoisie feels it can shake off the heritage of the last world war and Nazism, and express its interests directly and clearly. The clash between France and Germany, Sarkozy and Merkel, has been relatively low-key, but it is there nonetheless. However, the Germans have found that it is not easy. The less prosperous countries of the euro zone are not prepared to accept German dictation of the economic terms of survival.

There is no obvious reason, in any case, why the terms of trade between Germany and any particular country in the European Union should be what they are. Why are agricultural goods relatively cheap, compared with machinery or automobiles? Only believers in the market accept market prices as fair, just or somehow correct. The commentators effectively argue that those countries whose industry is less developed should adopt a tight fiscal policy, given their need to import industrial goods from Germany. Such a policy cannot work under any circumstances. The only result, to be welcomed, will be the establishment of a uniform policy of economic repression sufficient to proletarianise the ‘middle class’ and drive the working class across the euro zone to forms of direct action.

The persistent failure of the euro zone to adopt a credible policy is indicative both of its divisions and of the real lack of a solution.[5] However, the German bourgeoisie really has no choice, unless it wants to lose the common market, stable economic relations with its neighbours and a relatively low-value currency. The proposed expulsion of Greece with its subsequent default would impoverish the population even further and create havoc among European banks, and is therefore a crazy solution. Even if the banks are saved before that event, and the default cauterised as a result, the knock-on effect on the bonds of the other countries – by now including practically all the Mediterranean members, plus Ireland – will be enough to make Germany avoid that way out. Apart from anything else, it will force the formation of a French zone, as opposed to a German one. As the country which will lose most, apart from Greece, the German bourgeoisie cannot take that line.

In reality, because a default or an exit from the euro zone will be globally destabilising, Greece is in a strong position and its government could have taken a much stronger line. Its government, however, is pusillanimous, reflecting the nature of its bourgeoisie, which has sent its money out of the country. Indeed, the way the bourgeoisie uses tax havens to shelter its money or to avoid tax or both plays a big role in the destabilisation of much of the world economy.

India and China

There is little that is politically more absurd than the constant reference to the importance of China and its role as the next big power. The similar reference to India is equal nonsense. It is argued that China and India or perhaps one or the other can save the world from its crisis. If it was not so commonly held, one could ignore it.

As regards India, we hear that “per head energy and protein intake has been falling for the last two decades, as the majority of the population is unable to afford enough food”.[6] Pankaj Mishra argues that the propaganda about India is closer to the myths produced by another country (presumably the USSR), “where statistics were shamelessly manipulated and a tiny, privileged elite dominating both political and economic life lorded it over the rest”.[7] The fact is that levels of productivity in China or India are a fraction of that in the USA, and they have no chance of catching up with the west, under capitalism.

In the case of China, it seems that it cannot now play the role that it did in 2008-09, when it expanded the money supply in order to avoid a contraction and so played an important role in avoiding a deeper downturn. Its growth rate is predicted to halve. “Finance is not the only area in which Beijing’s ability to launch a counter-cyclical economic stimulus has ebbed. The ability of local governments, if asked again by Beijing, to boost investments is questionable.”[8]


On the one hand, the capitalist class thinks that it has dispensed with a communist/socialist alternative with the end of Stalinism. On the other hand, it also knows that the despair of the white- and blue-collar workers can and will turn to action in order to overthrow a social system which has outlived its time, in order to replace it with one controlled from below. The ruling class prefers to believe that such a society will be worse than capitalism, though there have always been some who are realistic enough to realise that the current inequality of wealth in the midst of massive poverty is insupportable.

In other words, the ruling class is divided, but all sections are concerned with the need to defend the system. At the same time, as in any time of global change, parts of the ruling class or its employees have begun to question their positions. In the UK, Marx has been quoted and some of his words supported by a series of establishment figures. None of them have become Marxist, and all would perhaps find reasons why Marx was wrong to want socialism, and indeed, no doubt, is still fundamentally wrong. Charles Moore,[9] biographer of Lady Thatcher and former editor of the rightwing Daily Telegraph, George Magnus of UBS, [10] former advocate of the new right in the 80s, John Gray,[11] philosopher and leading light in the founding of a new private university in London, and Sam Brittan,[12] long-time leading commentator at the Financial Times, are some of the figures reported in the press commenting on Marx or the left. Lord Skidelsky, biographer of Keynes, wrote: “as more and more people find themselves with enough, one might expect the spirit of gain to lose its social approbation. Capitalism would have done its work, and the profit motive would resume its place in the rogues’ gallery.”[13]

When the present crisis was in its earlier phase, we previously quoted an advice from JPMorgan,[14] to the effect that Marx might have had a point. The News International newspaper, The Times, wrote a sneering editorial in October 2008 in which it said that the world moves in mysterious ways and the fact that Marx’s Das Kapital had become a bestseller in Germany was particularly mysterious. It referred to the fact that Sarkozy, president of France, was photographed reading that work and that Pope Benedict had praised Marx’s analytical skills. The then German finance minister, Peer Steinbrück, as befits a social democrat, was apparently less taken with Marx, but was prepared to concede that some of his thinking was “not that bad”.[15] However, it was implied that this was little more than a fashion which was bound to pass. Three years later, it seems that Marx has come to the fore yet again and News International is suffering its own crisis.

The fact that they are looking at Marx shows, in the first instance, a collapse of confidence, first displayed in 2007-08. This, in turn, can have three possible meanings. The first is that Marx is simply a convenient icon to express their fear of the long-term damage done to the system. It does not necessarily indicate anything about their support for the market. The second is that they recognise that the market has had its day, though they do not necessarily see an alternative. The third possibility is latent in the other two. It is that they have begun to shift politically towards the left, without supporting any party, but it is yet to show itself. Here the problem is the absence of any significant Marxist party, to speed up the process.

Murdoch scandal

The ruling class has lost confidence in areas of life beyond the economy, however basic that is. The whole ‘Murdoch scandal’ is much more than a question of the illegal hacking of phones.

One of the prime movers in the British parliament, Labour MP Tom Watson, had this to say in an interview on the question: “When I was first elected I was a completely naive and gauche politician. You look at the pillars of the state: politics, the media, police, lawyers – they’ve all got their formal role, and then nestling above that is that power elite who are networked in through soft, social links, that are actually running the show.”[16] This could have come from Bernard Shaw’s play Major Barbara and the sentiment is very much at the heart of any Marxist political understanding of modern society, which now stands vindicated through a direct investigation of one of the threads the ruling class uses to rule. The involvement of the police, civil servants, members of parliament and journalists, all apparently connected to the Murdoch family, simply confirms a picture long held by Marxists, and often regarded with contempt by liberals.

It is clear that both bourgeois ideology and the parliamentary political system are in trouble. In one country after another, scandals of various kinds are rocking the system. One has only to look back at Marx’s description of Europe in 1848, France in particular, to realise that the eruption of so-called scandals today is part of a more general discontent in society, which is leading to increasing division in the ruling class and an increasing loss of confidence.

In this situation, the UK leads the pack, though demonstrations and organised forms of protest may be more frequent and more powerful in other countries. The nature of the student demonstrations and the English riots over the summer of 2011, whatever their immediate background, are unprecedented in English history. As the former global imperial power and junior partner to its successor, the United States, the British ruling class has propagated an ideology based on the view that it has been the founder of modern democracy, taking it over, as it were, from the ancient Greeks (by contrast, the ruling class ideology in the United States rests more on the so-called ‘American dream’, of meritocracy winning out, even though there is much made of democracy). Hence the recent scandals of members of parliament enriching themselves through claims for expenses, and the clear connections between politicians, policemen, journalists, private detectives and the Murdoch empire have struck at the heart of that ideology.

Under increasingly harsh economic conditions, with the media constantly talking about reckless and consequently illiquid and insolvent banks, whose executives, unbelievably still earn millions in annual salaries, the ruling class and government have to find arguments to support the existing socio-economic system. Yet every day seems to provide reasons for changing it. The immediate implications of the ongoing Murdoch scandal lead to a demand for a more open and democratic political system, the control of companies and indeed the press by those who do the ordinary work, rather than a dictatorship of a single individual, like Murdoch, or the CEO of a bank or industrial firm. This is not socialism and it is not viable, or likely to happen, under capitalism, but it is the kind of question that arises and blows open the ruling ideology, in however inchoate a way.


It is almost as if the ruling class has decided to commit suicide. It is going for an economic policy which is at best utopian and at worst catastrophic. Austerity for the vast majority and increasing riches for the ruling class is only a viable policy under conditions where there is absolutely no challenge to the system, and ordinary workers are so weak, both healthwise and in terms of organisation, that they pose no threat.

There really is no alternative to the replacement of the capitalist system by a genuine socialist system, which in the end is the only rationally ordered or planned system, in which decisions are made and controlled from below, not decided from above, however benign the ruler. Twist and turn as the beneficiaries of the system might, they have run out of strategies to delay change. As we have argued before, the ruling class has used finance capital/imperialism, world wars, cold war-welfare state and finance capital again as modes of survival. Finance capital has now imploded, while the colonies are now politically if not economically independent, the cold war is over and world war is no longer possible. The return to the welfare state without the cold war and Stalinism would only be the first step to loss of control, as became evident in the 70s of the last century.

Furthermore, it is clear that the global reach of the American empire is shrinking. The imperial power of the United States is in decline – and the decline of the leading capitalist power, without a successor in sight, can only herald the more rapid decline of the social system.

One might have predicted that there would have been a successor. There has been one such eventuality, after all, with the USA replacing the UK. However, Europe is engulfed in its own crisis, which is only expressing on a national scale the kind of inequality which exists in the society as a whole. There is no prospect of another country conquering the world, whether by force of arms or through finance capital, even if it had the industrial and military might of the United States without its debts. China, the country usually cited in this connection, is not in that position, and it does not even have the same drives or the same intensity of those drives, as modern capitalism.

So are we now witnessing the last days of the greatest empire the world has seen, the last days of a system which brought the world to a level of productivity so great that it made abundance for all a real possibility? The system was overthrown in Russia in 1917, and the world has been waiting for the potential replacement to show itself in a form other than Stalinism ever since. Delay is as good as a temporary defeat. In the end, Stalinism has been crucial to the preservation of capitalism, but it is no more and cannot be resuscitated. It is true that it is playing a negative role in Greece at this time and in a number of other countries, including China. It is less true of western Europe, however.


As we approach the socialist future, the subjective plays an increasing role, as one might expect. In socialism, society is increasingly transparent and planning decisions are made by the population. The economy ceases to stand above mankind, and turns into the administration of things. Although we still live under capitalism, in spite of itself the ruling class has to rule and not leave the economy and society to an apparently impersonal market. However it is done – through governmental administration, through the parliamentary system, through the bureaucracy of the firm or through partially hidden ruling class institutions – the system is increasingly controlled.

In other words, before it comes to an end, there has to be a social-political form which stands in opposition to current political-economic forms. That does require a socialist party with intimate links to the working class. It has to be part of the majority of the society. It has to be trusted and it has to be internally democratic. There has to be a shift in consciousness towards socialism, in which the various doubts and slanders are discussed and dealt with.

As this shift has not occurred, capitalism is not directly threatened at this time. It is clear that there are threads leading to such a movement, but they are as yet only weak and easily broken. In the 1930s Trotsky spoke of a crisis of leadership. In a sense that is what is needed today, but the leadership has to be based on the will of the majority and that is yet to show itself. In the 30s, socialism had more support, making Trotsky’s analysis more understandable, but he was only right in so far as one could say that there was no socialist party to lead. He had underestimated the power of Stalinism.

Where are we?

If there is no direct challenge to capital, that does not mean that it is not in systemic trouble. One cannot read a commentary on present political economy which does not speak of ‘lack of confidence’. This use of the word ‘confidence’ is understood to mean that capitalists do not see how to make money by investing in the economy, as opposed to keeping their money in the bank or under a mattress. Above we discussed the question of confidence in another context – that of the system itself – and I will look at the two meanings and their relation.

Today, cash is king, even though inflation is reducing its value. This is not the usual situation in a depression, when deflation increases the value of the money held, even if no interest is paid. There appears to be no short-term or long-term solution. After all, money could be invested in a long-term project, expecting a return in 15-20 years, if the rich had confidence in the system. Whereas the short term concerns immediate issues, most of which will be resolved one way or another within a finite time, the long term concerns the health of the system, whether it survives or not. In the post-war years there have been relatively long periods when the stock market was depressed, but then revived, as occurred under Thatcher.

The result is that the usual advice given by stockbrokers to middle class, as opposed to rich, clients is to work on a 20-year perspective, which is pretty useless to many of their customers, who are often over 60. There is confidence in the capitalist system, on the one hand, and confidence in the possibility of making money by investing in the economy, on the other.

However, some sections of the capitalist class – small- to medium-size businessmen – do not invest and attribute their market problems to trade unions, government regulation and particular monopolies strangling the market. They see the solution in a long-term clean-out of workers’ organisations, a reduction in the role of the government and the protection of the national market. The financiers of the Tea Party seem to be of this ilk. Their intellectual allies are often fanatical supporters of the capitalist system, which they see as being damaged by its enemies. To a degree their lack of confidence is exaggerated by their ideologically based belief in the market and the threat supposedly posed by others.

The more serious section of the capitalist class, which controls finance and industry, recognises the lack of opportunity and the limits to demand at a time of mass unemployment and the increasing proletarianisation of the middle class. Its problem is that its investments are longer-term and require a limited reflation, but this section is worried that such reflation would become more general and could not be controlled. In other words, it continues to uphold its strategy of the last 30 years, in which it turned to finance capital, and so low growth and anti-welfare state measures. Finance capital, however, has imploded and hence the strategy is no longer viable. This section has been talking, therefore, of investing in industry, but it is worried that this could increase the confidence of the working class, and hence is holding back.

Today, more than ever, business confidence, so-called, is dependent on confidence in the capitalist system itself, even though the individual investor may not think like that. There is no strategy available to the capitalist class which has any kind of realistic chance of success, other than going for the growth of productive industry, but the bourgeoisie is afraid that this will produce a return to the 70s, with a powerful working class demanding concessions, and ultimately the supersession of the system.

As a result, the capitalist class is not only divided, but at sixes and sevens, with no real solution in sight. No leadership is possible because there is nowhere to lead other than to failure, disaster and possible catastrophe for the capitalist class itself. The most successful leader at this time will be the one who is able to understand the dilemma before him or her and takes the longest road to that result.

Conditions mature

The logical outcome of the present impasse is that the rightwing parties in government will lose their majorities. In a relatively short time we may expect that so-called centre-left parties will be in government in Italy, Germany and France. The Greek and Spanish ‘socialist’ parties’ willingness to accept the instructions to go for austerity sets the pattern for all such parties. Their discrediting, en masse as it were, will deepen the general dissatisfaction with the parliamentary-style democratic process, given that existing alternative parties will have cut the standard of living, supported by the media. There are already a number of countries with substantial far-right parties and no doubt there will be more.

Unfortunately, the left has not been able to establish itself anywhere, thus far. In Portugal, where it made a substantial breakthrough in previous elections, its vote halved in the middle of 2011, during the general elections. The attempt by the Revolutionary Communist League (LCR) in France and also the United Secretariat to dissolve itself as a Trotskyist formation and form an anti-capitalist left has failed in France and Portugal. They have, no doubt, learned their lesson.

It is clear that the ruling class has no strategy for the maintenance of the capitalist system. It is not able to rule in the old way. The first condition for revolution, as enunciated by Lenin, is in place.


1. M Wolf, ‘Britain must escape its longest depression’ Financial Times, September 1.

2. BNY Mellon, according to its own website has $1.3 trillion under management and $26.3 trillion under custody or administration: http://www.bnymellon.com/about/companyprofile.html.

3. Ibid.

4. J Cassidy How markets fail London 2010, p354.

5. Wolfgang Munchau argues that the optimum solution is a fiscal union, but that it may not happen or happen in time. Instead he argues that there could be a minimal political solution, but it would be monstrous (‘A euro zone quick fix will create a political monster’ Financial Times October 10).

6. Quoted in P Mishra, ‘India’s Tommy Hilfiger utopia is a bluff that will soon be called across the globe’ The Guardian September 10.

7. Ibid.

8. J Kynge, ‘The cracks in Beijing’s edifice’ Financial Times September 10.

9. C Moore, ‘I’m starting to think that the left might actually be right’ The Daily Telegraph July 22.

10. G Magnus, ‘Financial bust has bequeathed a crisis of capitalism’ Financial Times September 13.

11. J Gray, ‘A point of view: the revolution of capitalism’ BBC News Magazine September 4.

12. S Brittan, ‘Mistaken Marxist moments’ Financial Times August 25. Although Brittan takes a critical line on Marx, he appears to appreciate his depth.

13. R Skidelsky, ‘Life after capitalism’ Project Syndicate 2011: http://www.project-syndicate.org/commentary/skidelsky37/English.

14. M Cembalest and H Olsen, ‘Eye on the market’, item 6 – a commentary written for JPMorgan clients, October 7.

15. The Times October 20 2008.

16. Interview in The Guardian G2, August 3.

Marx’s Capital – a book for our times?

The Labour Party Marxists group are hosting a meeting entitled ‘Marx’s Capital – a book for our times?‘ in Northampton on Thursday December 1st. Their speaker will be Mike Macnair, a leading member of the CPGB and author of Revolutionary strategy. He will discuss what we can learn from Marx, in particular volume one of his seminal work Capital. The meeting is on Thursday 1 December, starting at 7.30pm in Room 17, Sunley Conference Centre, Park Campus, University of Northampton, NN2 7AL. You can download a flyer from the LPM website: http://www.labourpartymarxists.org.uk/?page_id=12. We’re promised plenty of time for debate and discussion. Hope to see you there.

Video: Marxist Geographer David Harvey on the G20, the Financial Crisis, and Neo-Liberalism

Communist Students video: organising school students

This presentation was made at the Communist Students conference in April 2009. If you would like to get involved, or have any questions, then please get in touch. info@communiststudents.org.uk

Budget: spinning, not turning

Capitalism is in decline. If anyone doubts it, the budget should persuade them, writes Mike Macnair

budget-2009-comment-50p-tax-is-political-posturing-$7032220$300The media response to last week’s budget has been dominated by complaints about the proposed new 50p in the pound (50%) tax band for incomes above £150,000 a year. This is a significant symptom of the current shape of the British political order. But it is perhaps equally noteworthy how little actually changes from budget to budget, compared to the level of spin.

Both, in different ways, tell us that British capitalist governments’ room for manoeuvre is now very limited. We are living under a capitalism ‘revived’ by state-based artificial means, which is actually a symptom of capitalist decline – like similar regimes in the later phases of earlier class societies.

50p whinge

Since the ‘credit crunch’ began to bite, the Tory leadership has pursued fairly consistently the theme that Labour has worsened the UK’s position by irresponsible borrowing and public sector spending and that the Tories will bring in a new ‘thrift’ in government. The Tory leadership’s response to the budget was more of the same: Cameron called at the weekend for a “new age of austerity”.1

The basic appeal of this line is to the Tories’ core activist support and electoral vote: the self-employed, small business people and farmers who have to balance their own books; pensioners whose fixed incomes are eroded by tax and rate rises; and traditional rentiers. More broadly, the ideas appeal – like many Tory ideas – to the politics of nostalgia for a pre-capitalist patriarchal world of farmers and small-town artisans. The more generic version – that Labour is incompetent in dealing with the economy – is beginning to catch on in wider layers. Labour has been in office for more than a decade and it is normal to blame the government when things go wrong in the economy.

It is, then, at first sight surprising that the predominantly Tory press has been diverted off this line by what can only be called a sustained whinge from the media about the new 50p tax band. Columnists attacking it directly are backed by the journos finding some businesses, and some celebs like Michael Caine, to say that they will leave the country rather than pay, and some ‘experts’ to announce that the new band will reduce the total tax take due to increased evasion and avoidance.2 The Blairites have joined the chorus, with Tony Blair himself letting it be known that he opposes the idea and Stephen Byers speaking against it.3

The overall effect has been to drown Cameron and Osborne’s message of ‘austerity’ and ‘thrift’ in a chorus of complaint about the ‘return of old Labour’ and the ‘politics of envy’.

Very few people have incomes above £150K to bring them into the new 50p band: around 350,000 out of the UK’s 49 million over the age of 16, or 0.7%, and less than 1% of people eligible to vote.4 Some of the most prominent in the last period have been the ‘City boys’ who are widely held responsible for the crisis.

Hence the media whinge looks on its face like very incompetent electoral politics, and exactly what Brown and Darling were hoping for when they made the proposal. That is, that the Tories will smear themselves as opponents of the rich bearing their fair share of the costs of the crisis. While the Tory leadership itself has been aware of the trap and avoided premature commitments to reversing the change, the Tory press has been less restrained.

So why is it happening? The simplest and most cynical answer is that some senior journos on the national dailies and other ‘media people’ are grossly overpaid (like the City boys), so that the 50p band will actually hit them personally. To say that this answer is cynical is not necessarily to say that it is wrong. But there are more fundamental issues at stake.

Overpaid journos

In the first place, to say that media types on upwards of £150K per year are “grossly overpaid” seems an odd statement. We live in capitalist society, so surely pay is simply fixed by the labour market (or rather the particular branch of the labour market)? And aren’t these media types bringing in readers/viewers/listeners, and with them advertisers, and thereby helping their employers to make large profits, from which the employers can afford the large salaries?

At one level these arguments are simply false in free-market terms. A recent article by John Thanassoulis in The Economists’ Voice argues that the bankers’ bonus culture was a ‘market failure’. The traders in stock and other financial markets would naturally seek the employers offering the largest share in the profits they generated by their market judgements: ie, the best bonuses. Banks were in competition for these traders with hedge funds; but hedge funds, because of their specialisation, did not need to carry the same capital base as banks, so could afford more risk. Hence, in order to remain competitive with hedge funds in the financial markets, the banks were forced to offer traders bonuses which incentivised the taking of ever-larger risks; this led to the banks carrying risks they could not afford. Shareholders, being dispersed and lacking relevant information, could not practically force the banks’ management to take on less risk. Since free-market incentives here create irrational results (‘market failure’), Thanassoulis argues that regulation of financial pay schemes is justified.5

I give this argument not to support it, but simply to make the point that the mere fact that there is a jobs ‘market’ in a ‘labour’ sub-sector does not imply in itself that the prices paid in this sub-market are justified in free-market terms.

In Marxist terms the point is somewhat different. The basic value of labour is the average cost of reproduction of unskilled or semi-skilled labour. Above this, there is a value premium on skilled labour, which reflects the socially necessary cost of reproduction of sufficient labourers having the relevant skill. This value premium includes both the cost of training time and some sufficient incentive payment to induce enough people (mainly youth) to put in the training.

Above this, there may also be a price premium if the existing skills owners have enough control to limit entry. For example, the English legal professions, by insisting on apprenticeships as a requirement of qualification to practise (‘pupillage’ for barristers, ‘training contracts’ for solicitors) are able to create a bottleneck on entry which limits competition. The result is that legal fees and professional incomes are held well above free-market outcomes.

None of this would explain senior media types being paid above £150K. What is going on here is that a distribution of profit takes the ostensible form of wages/salary (this is openly recognised in Thanassoulis’s discussion of City traders). But then why should media organisations distribute profit to some favoured employees in the form of salary? It isn’t just media organisations, of course. The ‘fat cats’ of the newspaper cartoons are found in every large-scale business. They are almost entirely receiving profit in the ostensible form of salary; rather less frequently in the form of ‘consultancy fees’.

The immediate answer is that the tax system creates incentives for this form of distribution of profits. Most obviously, companies pay corporation tax on their income before distributing dividends to their shareholders. But, as far as the tax system is concerned, excessive salaries are not a distribution of profits, but a business expense which reduces the company’s tax liability. There are various other ways in which it is tax-advantageous for businesses to distribute profits in the form of salary rather than dividend. It also has the private-law advantage that dividends paid when the company is actually insolvent can be reclaimed by the liquidator in the interests of the creditors, but this is only very exceptionally true of salaries, pension pots, etc.

In a sense, this system is at the expense of the shareholders: even with the tax advantage, high salaries on the scale currently paid to management mean lower dividends. But in the modern world, who are the shareholders? Mostly institutions who hold shares as assets to back insurances, on behalf of pensioners and so on; a few large players; to a very much lesser extent, small private investors (again, largely pensioners). The managers of the institutions have every interest in going along with profits being distributed in the form of salaries; the large players will also hold directorships, etc; the small investors are both marginal and atomised, incapable of effective common action without backing from larger players.

The fact that the tax system works in this way is probably originally an accident. But it creates important social and political effects. In substance, excessive salaries buy loyalty. In terms of the ruling class, what is involved is the displacement of the individual capitalist (now almost invariably no more than a petty bourgeois) by corporate, institutional capitals. The human ruling group in society are now mainly managers who identify themselves with the corporate capitals they manage, since these supply them with a share of profits in the form of ‘salary’.

Overpaid journos are not in the same way part of the ruling group. Their overpayment is more like Thatcher’s immediate decision when she came to power in 1979 to raise police pay by 45%, to secure police loyalty for the conflicts she expected to follow.6 It is this media loyalty which is expressed by the mass whinge about the 50p band.

Loyalty to what, exactly? The answer is loyalty to the existing regime as it has developed: that is, to the corporatocracy – and to the major shift of increased inequality and reduction of the wage share of economic output that has developed since the 1980s, one of whose vehicles has been the reduction of top rates of tax. Overpaid media types may personally lose money through the 50p band. But what animates the great media whinge about it is just as much the fear that a cow that has been sacred since the 1980s – that the rich should pay less tax – might lose its sanctity.

Capital mobility

Like all effective ideology, the great whinge about the 50p tax band contains an element of truth. And this element of truth is that the new band will produce an increase in illegal evasion and the use of ‘legal’ ‘avoidance’ devices, and will produce at least some flight of capital. This, after all, was what happened in the 1970s (and had already begun in the 50s and 60s). The question this poses is how far the UK government – and other governments – are prepared to go to curb these devices.

Tax competition between states has been one of the dominant themes of the last 30 years. An important role in this competition is played by ‘tax havens’ or ‘offshore centres’: small states with small populations, incapable of defending themselves, which live by providing confidential financial services. Direct tax competition between large states is much less significant, because most such states have heavy expenditure commitments which they cannot abandon without collapse or revolutionary overthrow, and therefore cannot risk large-scale and rapid reductions in the total tax take.7

The fact that the tax havens – with the exception of Switzerland – are actually incapable of defending themselves is of some importance. It means that the system of tax havens and tax competition, which is against the interests of the large majority of states, exists because of the support of the US and to a lesser extent the US sidekick, the UK. Without that support, simply closing down the tax havens by military action would be low-cost and high-gain for most states. A significant number are British overseas territories: ie, remaining formal colonies.

The April G20 meeting promised some sort of crackdown on tax havens. But like all the G20’s promises, this was pretty vague, and the few countries targeted felt safe enough in making very limited moves towards cooperation with tax authorities in relation to illegal evasion – which is very narrow.

In this context the media whingers’ threat that the 50p tax band will lead to flight of the rich and of capital means one of two things. One possibility is that the whingers have not yet caught up with the brave new world post-credit crunch. The second, and far more likely, is that there is no brave new world. The G20 promises are mere posturing, like the OECD’s 1998 ‘Harmful tax competition’ report.8 The US and UK states, behind the political facades, continue to back the regime of tax havens and tax competition. Raising taxes on the rich will therefore continue to produce flight, evasion and avoidance.

That this is the case tells us something fundamental about the capitalists’ and their states’ perception of the world post-credit crunch. The immediate panic phase is over. While markets seemed to be in free fall and financial institutions were collapsing left, right and centre, there was all sorts of talk about a decisive break with neoliberalism and the post-1980s world order. As the bailouts and stimulus packages seem, for the moment at least, to have stabilised the financial institutions markets, this talk is coming to an end. We are moving – gradually – back towards ‘There is no alternative’.

This context limits the government’s room for manoeuvre. It cannot seriously tax the rich: that would require a reversal of global policy. Such a reversal would probably have the incidental effect of impoverishing the British state, since London is also – in some respects – an ‘offshore centre’.

It is going to have to raise taxes elsewhere and to make cuts. The problem is where these are going to come. The Budget report provides a long list of £35 billion worth of expected ‘efficiency gains’ to be made in “back-office functions” to preserve “front-line services”; but these are not seriously believed: such claims have been made repeatedly, not only by this government, but also by previous ones.9 Cameron’s promise of ‘austerity’ is mainly a promise of public expenditure cuts; but so far he and Osborne have been studiously avoiding saying what will be cut. This is partly a problem of avoiding political traps.10 But it is also a real problem of lack of room for manoeuvre in relation to government income and expenditure, which has affected Brown and Darling just as much.


The media coverage of budgets has acquired over many years certain routine characteristics. It is all about spin. Government spin to sell itself to the electorate, and opposition spin to undermine the government.

Hence, it does not tell us real facts about government income and expenditure and the choices involved. It tells us about headline changes in tax rates (like the 50p band, or 13p on a bottle of spirits) or about government management of the economy – overall tax, borrowing and spending, and economic forecasts.

The Budget report does at least have some figures. They are buried in torrents of spin – the full report is 268 pages long and a high percentage of it is NuLabSpeak waffle. The categories are often misleading or insufficiently broken down. It is beyond both my skills and the available time to work out a proper breakdown and reconstruction. The Budget report does at least at an early stage provide outline pie charts of income and expenditure which are some use in indicating the nature of the problem (Figs 1 and 2).

On the income side, the overall tax take in 2008-09 fell by £11.2 billion (2.25%) as a result of the crash, and is expected to fall by a further 8% in 2009-10. Around 45% of income is provided by income tax and national insurance contributions on wages, expected to fall by 4%, while income tax on savings is reflected to fall more dramatically as a result of interest rate cuts – by 75%. Financial sector corporation tax fell by 32% in 2008-09 and is expected to fall further, to 40% of its 2007-08 level this year. North Sea revenues are expected to halve with the crash in the oil price (pp230-232).

Among the property and capital taxes, capital gains tax rose in 2008-09 as gains were reported in advance of a change in tax regime, but is also expected to fall sharply. Inheritance tax fell by 25% and is expected to fall further. Stamp duty receipts fell by 50% with the collapse in the property market and are also expected to fall further in 2009-10 (p232).

Rates and business rates, which fund local government activities, are included in the pie chart at p12, but not in the analysis of the tax take. The most striking feature is that the projected tax take from domestic rates is larger (£25 billion) than that for business rates (£24 billion). Though the document does not discuss this, the reason is that the non-domestic rate multiplier has since 1990, when the uniform business rate was introduced, been set lower than the rate of inflation. The real value of the business rate take has therefore consistently declined, with an increased share of local government spending being loaded on domestic rates. The UBR is also (like domestic rates) sharply regressive: that is, Tesco pays very substantially less per square metre than a corner shop does.

Among consumption taxes, VAT receipts fell sharply and are expected to fall by a further 19%. Petrol excise duty fell due to lower demand for fuel, though less dramatically, and the government expects to recoup the loss by raising the duty. Excise duty on alcohol actually rose in relation to the 2008 projection: evidently people treat booze as a necessity rather than a luxury in a recession (p233). Overall, government tax income is therefore quite badly squeezed, simply by the recession.

Socialist Worker’s response to the budget is to call for the government to “Take all the cash from the super-rich”: “Britain’s 1,000 most super-rich individuals are still swilling around in £258 billion … All their money should be taken off them. This, along with stopping military spending, could be used to fund our jobs and services, and ensure that ordinary people do not bear the brunt of the recession.”11

This makes for a catchy and populist slogan, but is hopeless political economy. Even if the holdings of the super-rich were liquid cash, £258 billion is slightly more than half the annual state tax take of £496 billion projected in the budget. The holding of the super-rich are, in other words, small beer relative to the state budget.

Moreover, the money values of the capital holdings of the super-rich are not “money” which, if “taken off them”, could simply be spent by government on jobs and services. Part is notional values on antiques, jewellery, stately homes, etc, which are only really worth anything as long as there are super-rich buyers for them. The real values among them are capitalised valuations of expected income streams from capital assets – rent on land, dividends on shares, interest on loans – on the assumption that capitalism will go on functioning as it is.

Generalised expropriation would leave the state with the land titles and shareholdings, but destroy the functioning of money as money, so that there would be short-term hyperinflation. What would then matter would be maintaining and controlling the material surplus product. This would pose utterly different ‘accounting problems’ to those of the budget.

Progressive taxation and specifically a graduated income tax are important ideas for communists to be promoting now. The reason is not their effectiveness in raising revenue, but the challenge they pose to the capitalists’ sanctification of property and inequality. To that extent, the 50p tax band is genuinely a positive move, for all that it is a token gesture. But the project of the revolutionary overthrow of the state does not consist in demanding that the Labourites should soak the rich more than they are doing. It is primarily about the working class taking control of the allocation of resources. And this is at the end of the day in the first place about political democracy and democratic control of the giant resources of the state and the corporations, not about super-rich individuals.


The Budget projects expenditure of £671 billion: an overall deficit of £175 billion for 2009-10. Where is the money going? The pie chart on p12 divides it ‘by function’ into 11 categories, one of which is “other”; pp238-39 has slightly more detail on the division between income spending and capital spending and the budgets of particular departments. The functional division probably obscures important facts, but is as far as I can usefully get for present purposes.

By order of size, the categories are as follows. The largest is ‘Social protection’, expected to claim £189 billion. This is another expression for the benefits system providing basic support for the unemployed, long-term sick and so on. The government is raising the total sum budgeted because it expects further large increases in unemployment. But at the same time it is attacking the existing unemployed through efforts to get people off the long-term sick and phoney workfare schemes.

A small note within this. A substantial element of the cost is housing benefit. The reason for the scale of this cost is two Thatcherite measures Blair-Brown have not repealed. The first is deregulation of the private rental sector (abolition of rent control). The effect is that the government, through housing benefit, supports private landlords under the pretence that there is a ‘market rent’.

The second is that local authorities are now required to charge ‘market rents’ for council houses. These are then paid … by the same local authorities in the form of housing benefit. The cost, in turn, falls largely on the central budget through government transfers to local authorities. Jobs are created for clerical workers and managers in housing management and housing benefit offices … by cycling money from government office to government office.

The second largest category is the health service, at £119 billion. Expenditure on the NHS has gone up dramatically in recent years. As with housing, there are budgetary problems attributable to New Labour’s neoliberal commitments and to its centralist control-freakery. These are expressed in the massive increase in NHS managerial costs over the last 10 years; in the amount wasted on league tables, etc, and on applications to special-purpose funds; and the enormous waste (and degradation of the end product) involved in the private finance initiative.

Third is education at £88 billion. PFIs are again relevant here and – because local government is involved – the waste of money and increase in costs produced by compulsory competitive tendering (CCT).

“Other” at £72 billion covers “spending on general public services; recreation, media, culture and sport; international cooperation and development; public service pensions; plus spending yet to be allocated and some accounting adjustments”. It would be helpful to have these disaggregated, especially since the Tory press is campaigning against public sector pensions as unduly generous: public sector pensions do not look like being on their own a really big-ticket item, and reducing them is likely to imply increasing other aspects of ‘social protection’ and ‘social care’ spending.

From here we fall abruptly to a group of items in the £20 billion-£40 billion range: defence at £38 billion; ‘public order and safety’ (police and fire services, etc) £35 billion; personal social services (mainly for the elderly) £31 billion; housing and environment £29 billion; debt interest £28 billion; transport £23 billion; industry, agriculture, employment and training £20 billion.

Cut where?

OK, if you were David Cameron and George Osborne, in charge after the 2010 election (I know this is a pretty repulsive idea), trying to make radical cuts in public spending, which sacred cow or cows of government spending would you slaughter?

The problem is simple. The actual evidence of CCT in local government, of ‘market reforms’ to the NHS, and of PFIs in the NHS, education and transport is that they increase the overall net cost to the taxpayer, while reducing the available frontline services. Their only benefit is profit creation for some construction companies and job creation for sections of the white-collar working class and the managerial middle class.

The compulsory insurance systems of medical care operated on the continent may provide better care, but they are actually more expensive per capita than the NHS was until recent marketising ‘reforms’. No-one (unless they had been paid off by a US health provider company) would wish to introduce the US fully private healthcare system. The unemployed are the obvious target, but in the first place their disposable income has already been squeezed very extensively, and in the second place to attack the housing benefit system would be to attack a significant part of the Tories’ base – the private landlords.

Further, almost any of the radical reforms that might be introduced to cut public expenditure would make the UK a less attractive place to do business: the employer would need to provide private healthcare or education systems, etc and/or – suppose that, for example, the unemployed were to be allowed to starve – to expect massive increases in property crime, communicable disease and public disorder. To make the UK more like a ‘third world’ country in terms of its welfare provision would thus make it unattractive to business, since it would then be in direct competition with actual ‘third world’ countries with their large peasantries and hence labour markets heavily skewed against labour.

Government – Labour or Tory – thus has very little room for manoeuvre. The Tories when they get in will certainly talk the talk of rolling back the frontiers of the state, and may try some pretty extreme measures (like the poll tax last time around). They will almost certainly make us all (except the very rich) worse off – and blame the ‘unfortunate necessity’ on Labour’s ‘poor stewardship’. But it is in the highest degree unlikely that they will actually roll back the frontiers of the state or actually reduce the overall tax burden. They will fiddle at the margins and spin to exaggerate the importance of what they are doing – like Blair and Brown.

Declining capitalism

The Budget report calculates overall UK GDP for 2008 at £1,275.3 billion – consisting of household consumption £830.3 billion, general government consumption £261.2 billion, fixed investment (both government and private) £219.5 billion, change in inventories £1 billion, exports of goods and services £350.9 billion, and less imports of goods and services £388.9 billion (p216). These figures are of limited value, but they give some partial indication of the sheer scale of the role of the state in the economy.

As an economic order declines, the state steps in to fill the gaps created by this decline and keep the old order alive, protecting the privileges of the old ruling class and holding down the subordinate classes. Classical antiquity was an economy of cities; the Roman empire created a system-wide state, but this state created and supported cities until it, too, collapsed.12 By the 16th century real feudalism, both in Europe and in Japan, was in decline. The result was not (except in the Netherlands and Britain) bourgeois revolution, but the creation of the absolutist state, regimes of state-sponsored feudalism, state-sponsored religion and state-sponsored guild corporations.

The real immobility of the budget and the dominance of hype about it on both sides of the political divide show that capitalism, at least in its heartlands, has reached this stage of development. Thatcherism-New Labourism is not a regime of healthy capitalism. It is a regime of state-based, artificial capitalism, like the state-based, artificial urbanism of the Roman empire or the state-based, artificial feudalism of absolutism or the Tokugawa Shogunate. The ship of state cannot turn from its course forward to increased dominance of the economy: it can only spin.

Under these conditions the problem is not to overthrow the decorative elite which signals to the state its own capitalist character – Socialist Worker’s “hyper-rich”. These people are merely ornaments. The problem is to overthrow the capitalist state and win real, working class, democratic control.


1. The Guardian April 27.
2. Celebs: see, for example, Daily Mail April 27; experts: The Sunday Telegraph April 26.
3. Blair: The Sunday Telegraph April 26; Byers: The Guardian April 28.
4. 350,000: estimate on www.thisismoney.co.uk/tax-advice/income-tax/article.html?in_article_id=483056&in_page_id=77&expand=true
49 million: from www.statistics.gov.uk/STATBASE/xsdataset.asp?More=Y&vlnk=1327&All=Y&B2.x=101&B2.y=14
It is right to use the figures for people above 16 rather than the smaller 31 million figure for the UK labour force (between 16 and retiring age) because, of course, certain people above retiring age (like Michael Caine) will have incomes above £150K. The number eligible to vote is somewhat smaller because of 16-18-year-olds and resident non-citizens.
5. www.bepress.com/ev/vol6/iss5/art2
6. The Police Federation’s point of view at www.metfed.org.uk/news?id=326 ; the loyalty point from a Tory point of view: Philip Johnston, ‘Thatcher kept the police onside’ – blogs.telegraph.co.uk/philip_johnston/blog/2007/12/07/thatcher_kept_the_police_onside
7. Most of what will be found by Googling “tax competition” is US-based rightwing advocacy for the merits of tax competition. www.taxresearch.org.uk/Blog/ takes an anti-tax competition line. A 2004 IFS working paper attempts to analyse the extent to which tax changes in OECD countries have been driven by forms of tax competition: www.ifs.org.uk/wps/wp0405.pdf
8. RS Avi-Yonah, ‘The OECD harmful tax competition report: a 10th anniversary retrospective’, University of Michigan Law and Economics, Olin Working Paper No08-013 (2008) argues for some substantial results from the OECD report, but these are really no more than promises about cooperation.
9. www.hm-treasury.gov.uk/d/Budget2009/bud09_completereport_2520.pdf , Table 6.1, pp129-132.
10. Martin Kettle: www.guardian.co.uk/commentisfree/2009/apr/26/conservatives-cameron-cheltenham
11. www.socialistworker.co.uk/art.php?id=17794 , posted April 28, dated May 2.
12. JHWG Liebeschuetz The decline and fall of the Roman city Oxford 2001.