Inequality in the UK and the upcoming budget 2014

As the UK government prepares to present an annual budget designed to cut welfare benefits further for the working poor and squeeze real incomes for the average earner, Oxfam reports the country's five richest families now own more wealth than the poorest 20% of the population. In its report, a Tale of Two Britains (mb-a-tale-of-two-britains-inequality-uk-170314-en-1), Oxfam said the poorest 20% in the UK had wealth totalling £28.1bn – an average of just £2,230 each. The latest rich list from Forbes magazine showed that the five top UK entries were the family of the Duke of Westminster, David and Simon Reuben, the Hinduja brothers, the Cadogan family, and Sports Direct retail boss Mike Ashley – between them had property, savings and other assets worth £28.2bn. These are Britain's own top oligarchs (aside from the Russian ones that live in London). Indeed, the 100 wealthiest people in the UK have as much money as the poorest 18 million – 30% of all people. The total wealth of these oligarchs rose £25bn last year to £257bn to surpass the £225bn held by the poorest 30% of British households. And remember household wealth consists of the ownership of a house or flat, pension fund and other possessions like cars. Total household wealth in the UK is £10trn, with the top 10% having £967bn and the bottom 10% just £13bn. The bottom 10% really have no wealth at all except old cars and a few personal possessions. Imagine a room with 100 hundred people. 90 people are so short they can hardly reach the door handle to get out. Another nine people are only high enough to get a drink from the table. But one person is so huge that his or her head hits the ceiling and bursts through it. Such is the scale of inequality and concentration of wealth. Even the top 10% of wealth holders really own only their house that they live in along with maybe a reasonable pension. It's the top 1% or even the top 0.1% who really have wealth in stocks, bonds and commercial property and businesses etc. You see what really matters is not personal wealth but the ownership of the means of production. That gives you power as well as wealth - this is what oligarchs have. What is decisive for capitalism is surplus value (profit, interest and rent), not wage income or spending. Control of that surplus is key. The main feature of the last 100 years of capitalism has not been growing inequality of income. The main feature has been a growing concentration and centralisation of wealth, not income. And it has been in the wealth held in means of production and not just household wealth. What will we see in The chancellors budget tommorrow afternoon ? Well very little to help the poor it goes without saying. I'd predict some more tax cuts including a raising of the tax bands again to £12 k which will be championed by the government in raising the poorest tax thresholds whilst doing nothing to help them with the cost of living. We are also told there will be a extention of the rather fruitless "help to boy" scheme the tories have pushed which has inflated the propety bubbled even more rather than actually helped anyone. This coupled with plans to build a new Garden City in Ebbsfleet in Kent totalling around 15,000 homes is a drop in the ocean to the amount of homes we do need. I am not sure which type of homes these will be but i am sure they wont be cheap and available to all. Now we know from marxist economics that rising inequality is not the cause of economic crisis under capitalism even though inequality cannot and should not be ignored. This is more a consequence of a crisis than a cause of one in the first place. A correlation between rising inequality, slower growth and economic recession does not prove causation. , that instead rising inequality has been a consequence of capitalism trying to avoid slumps from declining profitability by trying to squeeze more out of the workforce in increased surplus value - during the neoliberal era. We can safely say that whatever George Osborne comes up with any rhetoric or fiddling the figures tommorrow we know that inequality will continue to grow under capitalism as it struggles to pull itself out of a crisis one of the deepest for hundreds of years if not ever.

Capital acting as a barrier to itself

Many economists and Marxists too have struggled with the reasons for crises in the capitalist system. Well the whole system is based on contradictions which become greater and greater as the system develops into a more advanced economic system. As a Marxist I follow the writings of Karl Marx not dogmatically but by applying his theories to the current situation today. I am a big supporter of Marx’s theory of the tendency of the rate of profit to fall and believe firmly that this is where Marxists and economists alike should be focusing their studying time. I’ve just finished the section the 3 chapters which I think are crucial in Marx’s capital Vol 3 are chapters 13, 14 and 15. In the first chapter 13 Marx sets out his theory of the tendency of the rate of profit to fall in a superb fashion going on in the other two chapters to explain what counter actions could be put in place to slow or decrease the fall of the rate of profit to fall whilst upholding that this can only ever be temporary and eventually the economic crash is not far away and counter measures o stem the crisis like we are seeing right now will only delay the eventual slump and depression. Capitalists area always having to update and improve their modes of production speed up the process buy more effective and efficient machinery and this as a result takes away the role of a labourer or two this as we know diminishes the rate of surplus value due to the need to improve production forces yet the source of a capitalist profit from the embodiment of human wage labour is reduced to the addition of new machines causing the rate of profit to fall s a result. This is a natural process as to remain competitive the capitalist must cut his production costs in terms of his constant capital and his means of production. The e rules of competition require the capitalist to constantly try and out do his competitors to steal a march in the market and to eventually drive out his competitors he does this in several ways. Karl Marx writes in his supplementary remarks in chapter 15 of volume 3 “While the circulating part of constant capital, such as raw materials, etc., continually increases its mass in proportion to the productivity of labour, this is not the case with fixed capital, such as buildings, machinery, and lighting and heating facilities, etc. Although in absolute terms a machine becomes dearer with the growth of its bodily mass, it becomes relatively cheaper. If five labourers produce ten times as much of a commodity as before, this does not increase the outlay for fixed capital ten-fold; although the value of this part of constant capital increases with the development of the productiveness, it does not by any means increase in the same proportion. We have frequently pointed out the difference in the ratio of constant to variable capital as expressed in the fall of the rate of profit, and the difference in the same ratio as expressed in relation to the individual commodity and its price with the development of the productivity of labour. [The value of a commodity is determined by the total labour-time of past and living labour incorporated in it. The increase in labour productivity consists precisely in that the share of living labour is reduced while that of past labour is increased, but in such a way that the total quantity of labour incorporated in that commodity declines; in such a way, therefore, that living labour decreases more than past labour increases. The past labour contained in the value of a commodity — the constant part of capital — consists partly of the wear and tear of fixed, partly of circulating, constant capital entirely consumed by that commodity, such as raw and auxiliary materials. The portion of value deriving from raw and auxiliary materials must decrease with the increased productivity of labour, because with regard to these materials the productivity expresses itself precisely by reducing their value. On the other hand, it is most characteristic of rising labour productivity that the fixed part of constant capital is strongly augmented, and with it that portion of its value which is transferred by wear and tear to the commodities. For a new method of production to represent a real increase in productivity, it must transfer a smaller additional portion of the value of fixed capital to each unit of the commodity in wear and tear than the portion of value deducted from it through the saving in living labour; in short, it must reduce the value of the commodity. It must obviously do so even if, as it occurs in some cases, an additional value goes into the value of the commodity for more or dearer raw or auxiliary materials over and above the additional portion for wear and tear of the fixed capital. All additions to the value must be more than offset by the reduction in value resulting from the decrease in living labour. This reduction of the total quantity of labour going into a commodity seems, accordingly, to be the essential criterion of increased productivity of labour, no matter under what social conditions production is carried on. Productivity of labour, indeed, would always be measured by this standard in a society, in which producers regulate their production according to a preconceived plan, or even under simple commodity-production. But how does the matter stand under capitalist production? Suppose, a certain line of capitalist industry produces a normal unit of its commodity under the following conditions: The wear and tear of fixed capital amounts to ½ shilling per piece; raw and auxiliary materials go into it to the amount of 17½ shillings per piece; wages, 2 shillings; and surplus-value, 2 shillings at a rate of surplus-value of 100%. Total value = 22 shillings. We assume for the sake of simplicity that the capital in this line of production has the average composition of social capital, so that the price of production of the commodity is identical with its value, and the profit of the capitalist with the created surplus-value. Then the cost-price of the commodity = ½ + 17½ + 2 = 20s. the average rate of profit 2/20 = 10%, and the price of production per piece of the commodity, like its value = 22s. Suppose a machine is invented which reduces by half the living labour required per piece of the commodity, but trebles that portion of its value accounted for by the wear and tear of the fixed capital. In that case, the calculation is: Wear and tear = 1½ s., raw and auxiliary materials, as before, 17½s. wages, 1s., surplus-value 1s., total 21s. The commodity then falls 1s. In value; the new machine has certainly increased the productivity of labour. But the capitalist sees the matter as follows: his cost-price is now 1½s. For wear, 17½s. For raw and auxiliary materials, 1s. For wages, total 20s., as before. Since the rate of profit is not immediately altered by the new machine, he will receive 10% over his cost-price, that is, 2s. The price of production, then, remains unaltered = 22s., but is 1s. Above the value. For a society producing under capitalist conditions the commodity has not cheapened. The new machine is no improvement for it. The capitalist is, therefore, not interested in introducing it. And since its introduction would make his present, not as yet worn-out, machinery simply worthless, would turn it into scrap-iron, hence would cause a positive loss, he takes good care not to commit this, what is for him a utopian, mistake. The law of increased productivity of labour is not, therefore, absolutely valid for capital. So far as capital is concerned, productiveness does not increase through a saving in living labour in general, but only through a saving in the paid portion of living labour, as compared to labour expended in the past, as we have already indicated in passing in Book I (Kap. XI II, 2, 5. 409/398). [English edition: Ch. XV, 2. — Ed.] Here the capitalist mode of production is beset with another contradiction. Its historical mission is unconstrained development in geometrical progression of the productivity of human labour. It goes back on its mission whenever, as here, it checks the development of productivity. It thus demonstrates again that it is becoming senile and that it is more and more outlived.] [1] Under competition, the increasing minimum of capital required with the increase in productivity for the successful operation of an independent industrial establishment, assumes the following aspect: As soon as the new, more expensive equipment has become universally established, smaller capitals are henceforth excluded from this industry. Smaller capitals can carry on independently in the various spheres of industry only in the infancy of mechanical inventions. Very large undertakings, such as railways, on the other hand, which have an unusually high proportion of constant capital, do not yield the average rate of profit, but only a portion of it, only an interest. Otherwise the general rate of profit would have fallen still lower. But this offers direct employment to large concentrations of capital in the form of stocks. Growth of capital, hence accumulation of capital, does not imply a fall in the rate of profit, unless it is accompanied by the aforementioned changes in the proportion of the organic constituents of capital. Now it so happens that in spite of the constant daily revolutions in the mode of production, now this and now that larger or smaller portion of the total capital continues to accumulate for certain periods on the basis of a given average proportion of those constituents, so that there is no organic change with its growth, and consequently no cause for a fall in the rate of profit. This constant expansion of capital, hence also an expansion of production, on the basis of the old method of production which goes quietly on while new methods are already being introduced at its side, is another reason, why the rate of profit does not decline as much as the total capital of society grows. The increase in the absolute number of labourers does not occur in all branches of production, and not uniformly in all, in spite of the relative decrease of variable capital laid out in wages. In agriculture, the decrease of the element of living labour may be absolute. At any rate, it is but a requirement of the capitalist mode of production that the number of wage-workers should increase absolutely, in spite of its relative decrease. Labour-power becomes redundant for it as soon as it is no longer necessary to employ it for 12 to 15 hours daily. A development of productive forces which would diminish the absolute number of labourers, i.e., enable the entire nation to accomplish its total production in a shorter time span, would cause a revolution, because it would put the bulk of the population out of the running. This is another manifestation of the specific barrier of capitalist production, showing also that capitalist production is by no means an absolute form for the development of the productive forces and for the creation of wealth, but rather that at a certain point it comes into collision with this development. This collision appears partly in periodical crises, which arise from the circumstance that now this and now that portion of the labouring population becomes redundant under its old mode of employment. The limit of capitalist production is the excess time of the labourers. The absolute spare time gained by society does not concern it. The development of productivity concerns it only in so far as it increases the surplus labour-time of the working-class, not because it decreases the labour-time for material production in general. It moves thus in a contradiction. We have seen that the growing accumulation of capital implies its growing concentration. Thus grows the power of capital, the alienation of the conditions of social production personified in the capitalist from the real producers. Capital comes more and more to the fore as a social power, whose agent is the capitalist. This social power no longer stands in any possible relation to that which the labour of a single individual can create. It becomes an alienated, independent, social power, which stands opposed to society as an object, and as an object that is the capitalist's source of power. The contradiction between the general social power into which capital develops, on the one hand, and the private power of the individual capitalists over these social conditions of production, on the other, becomes ever more irreconcilable, and yet contains the solution of the problem, because it implies at the same time the transformation of the conditions of production into general, common, social, conditions. This transformation stems from the development of the productive forces under capitalist production, and from the ways and means by which this development takes place. No capitalist ever voluntarily introduces a new method of production, no matter how much more productive it may be, and how much it may increase the rate of surplus-value, so long as it reduces the rate of profit. Yet every such new method of production cheapens the commodities. Hence, the capitalist sells them originally above their prices of production, or, perhaps, above their value. He pockets the difference between their costs of production and the market-prices of the same commodities produced at higher costs of production. He can do this, because the average labour-time required socially for the production of these latter commodities is higher than the labour-time required for the new methods of production. His method of production stands above the social average. But competition makes it general and subject to the general law. There follows a fall in the rate of profit — perhaps first in this sphere of production, and eventually it achieves a balance with the rest — which is, therefore, wholly independent of the will of the capitalist. Three cardinal facts of capitalist production: 1) Concentration of means of production in few hands, whereby they cease to appear as the property of the immediate labourers and turn into social production capacities. Even if initially they are the private property of capitalists. These are the trustees of bourgeois society, but they pocket all the proceeds of this trusteeship. 2) Organisation of labour itself into social labour: through co-operation, division of labour, and the uniting of labour with the natural sciences. In these two senses, the capitalist mode of production abolishes private property and private labour, even though in contradictory forms. 3) Creation of the world-market. The stupendous productivity developing under the capitalist mode of production relative to population, and the increase, if not in the same proportion, of capital-values (not just of their material substance), which grow much more rapidly than the population, contradict the basis, which constantly narrows in relation to the expanding wealth, and for which all this immense productiveness works. They also contradict the conditions under which this swelling capital augments its value. Hence the crises. References Karl Marx capital volume 3 Penguin edition http://www.marxists.org/archive/marx/works/1894-c3/ch15.htm

How could a socialist society meet people’s needs?

People often wonder how could a socialist society work and would it work. I’m told constantly there is too much greed in society for socialism to ever work. We do live under capitalism a system based on greed for a few by their blind drive for greater profits. But how could production of the things we need and want be different under socialism surely this couldn’t work? I think it could and I’m not utopian I’m a revolutionary who doesn’t just see things as they are now but as a constant process things constantly changing and developing at different rates. In the 300 years or so of its existence capitalism has transformed the planet over and over again. Rail, electricity, the internal combustion engine, flight, space travel, telephones and electronic computers, the list is endless. The world economy is 17 times the size it was a century ago. In 1900 there were only a few thousand cars worldwide. Now there are 501 million. + Despite this, all the technology developed by capitalism has not provided clean water for 1.2 billion people or food for the 841 million who are seriously malnourished. Nor has it prevented the Aids epidemic rampaging through Africa. Upwards of 28 million Africans have the HIV virus and only 30,000 of them can get treatment. Capitalism is capable of spending billions on developing weaponry that is used to bomb the poor of Afghanistan into the rubble, but it cannot solve poverty, hunger or disease. So our alternative is socialism. A socialist economy would have to be a planned economy. This would involve bringing all of the big corporations, which control around 80% of the British economy, into democratic public ownership, under working-class control. Of course, it would not mean bringing small businesses, such as the local shops, many of which are forced out of business by the multinationals, into public ownership. Nor would it mean, as opponents of socialism claim, taking away personal ‘private property’. On the contrary, socialists are in favour of everyone having the right to a decent home and the other conveniences of modern life. A genuine socialist government would not be dictatorial. On the contrary, it would extend and deepen democracy enormously. This would be much more far-reaching than the parliamentary democracies of capitalism where we simply get to vote every few years for MPs who do whatever they like once elected. Instead, everyone would get to take part in deciding how society and the economy would be run. Nationally, regionally and locally – at every level - elected representatives would be accountable and subject to instant recall. Therefore, if the people who had elected them did not like what their representative did, they could make them stand for immediate re-election and, if they wished, replace them with someone else. Elected representatives would also only receive the average wage. Today MPs are a privileged section of society. Their lives are remote from those of ordinary people. This is no accident. From the earliest days of the Labour Party, the ruling class tried to buy-off socialist MPs. Its method is usually subtler than brown envelopes of cash: it is a high salary, a very comfortable lifestyle and the drip, drip of ceaseless flattery about how 'sensible' and 'wise' it is to be 'moderate' and 'realistic'. The result has been that countless numbers of MPs have decided that the best way to emancipate the working class is one by one – starting with them. That is why members of the Socialist Party who become MPs will only take the average wage of a skilled worker. In the 1980s, three MPs (Dave Nellist, Terry Fields and Pat Wall) were elected as Labour MPs on the policies of Militant (the Socialist Party’s predecessor). All took a worker’s wage. Today Joe Higgins, a TD (MP) in the Irish parliament, and a member of our sister organisation in Ireland, takes a worker’s wage and has been described by the tabloid press as "the red that money can’t buy". A socialist government would ensure that no elected representatives received financial privileges as a result of their position but, instead, lived the same lifestyle as those they represented. There is another crucial sense in which democracy would be far fuller in a socialist society. Under capitalism most of the important decisions are not taken in Westminster or local council chambers, they are taken in the boardrooms of the big corporations. By contrast, a socialist government would bring major industry into democratic public ownership. It would be necessary to draw up a plan, involving the whole of society, on what industry needed to produce. At every level, in communities and workplaces, committees would be set up and would elect representatives to regional and national government – again on the basis of recall at anytime if they disagreed with their decisions. Everybody would be able to participate in real decision-making about how best to run society. Many people will argue that this is utopian, that people would not be bothered to participate in such bodies. Yet in every mass struggle - from the Paris Commune of 1871 onwards - the embryos of this type of structure have come into existence. In Britain during the struggle to defeat the poll tax, when 18 million refused to pay the iniquitous tax, hundreds of thousands of people took part in meetings to plan the campaign. While the anti-poll tax unions were only temporary bodies, organised to fight against a single Tory attack, they nonetheless give a glimpse of working people’s capacity to organise. Even today, thousands of working-class people attend their tenants’ associations and other community meetings. And organisations in a workers’ state would be completely different to the toothless bodies that working-class people are currently allowed to take part in - the committees would actually have the power to say how the economy and society is organised. In addition, for a planned economy to work, it would be vital that the working class had the time to take part in the running of society. Therefore, measures such as a shorter working week and decent, affordable childcare would be a prerequisite for society to develop towards socialism. Another argument against a planned economy is that society is now too complicated to be planned. Some people argue that, in the past, when the majority of people's aspirations were more limited, it may have been possible to plan an economy. But that today, when people want washing machines, videos and fashionable clothes, they claim planning just would not work. Yet modern technology would, in reality, make planning far easier than it was in the past. In addition, it would use modern technology to limit the number of hours it was necessary to work. A socialist government could immediately introduce a maximum 35-hour week, with no loss of pay. Capitalism’s remorseless drive for profit means that new technology has been used, not to shorten the working week, but to throw workers on the scrap heap. "We are living in a world of glut, we have too much of everything from grain to cars." This is the real lunacy of capitalism. We have too much grain - which means more than can be sold at a profit - yet in Africa 20 million people are starving. A socialist government would harness technology to lower the number of hours it is necessary to work. This would give working-class people more time to participate in running society. Combined with a massive programme of socially necessary projects - such as increasing the numbers of teachers, doctors and nurses - unemployment could be eliminated. Private ownership of the means of production results in constant duplication. Companies fiercely compete to produce a certain product first and best. Socialism would eliminate this and thereby save a huge amount of resources. There would also be no need for marketing, on which capitalism spends $1 trillion a year. This does not mean, as is commonly claimed, that socialism would result in a lack of choice or poor quality goods: a society where everyone dresses in a grey uniform. It would be possible to have far more choice of the things which people desire to have a variety of (such as clothes, music, holidays etc) than under capitalism. However, society might choose not to have 200 brands of washing powder. All in all a socialist society would run by the mass’s for the mass’s with not just the wealth being shared out as we as socialists do not support sharing out the misery but owning the means of production to produce for peoples needs not profits of a few. With extracts taken from the socialist party’s excellent pamphlet what is socialism http://www.socialistparty.org.uk/WhatIsSocFrame.htm

The battle of capitalism

Capitalism is a peculiar form of class society. Like previous class societies it involves a minority section of society grabbing the surplus created by the toil of the rest of society. But there are important differences. Previous ruling classes simply seized the surplus, while capitalists get it by buying people's capacity to work (what Marx called 'labour power'). And previous ruling classes used almost all the surplus on their own luxury consumption or on fighting each other. The use of any of the surplus to improve the means of production was spasmodic. Economic growth was usually slow, often non-existent, sometimes negative for centuries at a time. Capitalist ruling classes, however, are driven by economic competition within and between themselves to plough a sizeable portion of the surplus back into expansion of the means of production. There is not merely economic growth, but compulsive accumulation. It is this which has enabled capitalist ruling classes that two and a half centuries ago controlled only fringe areas of north western Europe to engulf the globe today.

Class societies began to emerge in various parts of the world from around 5,000 years ago onwards. Over a period of several centuries, what had once been communal production fell under the control of ruling minorities who ensured it provided them with an increasingly luxurious and leisurely lifestyle. At first they tended to exploit the rest of society collectively, as temple priests or royal households, rather than through private property. On this basis civilisations as diverse as those in the Nile Valley, ancient Iraq, northern China, the Indus Valley, central America, the Andes, Crete, Ethiopia and west Africa developed.25 Over time central control tended to weaken and a class of 'aristocrats', 'gentry' or 'lords' to emerge which exploited direct cultivators in each locality. At the same time, the polarisation of society into classes found its reflection in greater or lesser degrees of disintegration of the old communal forms of agricultural production and the emergence of peasant households as the main productive units. There would then be a continual tussle between the central state administration, with its corps of tax collectors, and the local rulers over who got the lion's share of the surplus which was taken from the peasants in the form of labour services, crops or, sometimes, cash. All these societies had one thing in common--the ruling class, whether made up of lords and aristocrats or of state administrators, took the surplus directly off the peasant producers, without any pretence of exchange of goods.

Such ruling classes increasingly felt the need for products that could not be obtained simply from the local cultivators. They needed materials for palace and temple building, for the making of armaments and for luxury consumption. Such things could often be obtained only by looting distant peoples, or through some sort of exchange with them.

There was some exchange long before the rise of classes. Archaeologists have found artefacts that must have been made many hundreds of miles away among the remains of hunter-gatherer settlements of southern France more than 20,000 years ago, and the circulation of the products of human labour was even more widespread in the agricultural societies that began to emerge ten millennia later. There was no other way, for instance, that the villagers of the river plain of southern Iraq could get metal ores and even wood (since the lower valley of the Tigris and Euphrates was virtually treeless). But the circulation of products in pre-class societies was not trade in the sense that we know the term today. It was not carried out according to strict calculations of profit or loss, but according to traditions of gift-giving and gift-taking, based on customary rites, much as continued to happen in pre-class societies in places like Polynesia right into the 20th century.26

The rise of the ruling classes of the new civilisations transformed this situation. They demanded distantly-obtained products on a scale that could not be satisfied by the old-established customary networks. At the same time, they were rarely prepared to face the hardship and risks involved in procuring such things themselves. People soon emerged who were--in return for a share of the surplus the ruling class had obtained through exploiting the cultivators. So specialised traders got a 'mark-up' by selling to the ruling class goods from a great distance away. Some were individuals from the exploited cultivator class, others from the nomadic peoples living between the centres of civilisation. But regardless of their origins, they began to crystallise into a privileged classes separate from the old ruling classes.

Such merchant classes emerge in similar ways in societies with little or no contact with each other: in second millennium BC Babylon and Egypt; in India, China, Greece and Rome by 300 BC; in Teotihuacan in the Valley of Mexico by AD 200; in the Arabian peninsular by AD 600; among the Mayas of the Yucatan Peninsula by AD 1000; on the northern coast of the Andean region by 1500 BC. Once in existence such a class usually left its mark ideologically and politically as well as economically. The spread of each of the great world religions--Buddhism, Hinduism, Christianity and Islam--was along trade routes travelled by the merchants. The world's major languages often developed out of the vernacular forms by which people communicated with each other along trade routes and in marketplaces. And sections of the established agrarian ruling classes repeatedly found the merchants useful allies in struggles with other sections for dominance: the rise of the Ch'in kingdom and then empire in northern China and of the Mauryan empire in India in the 4th and 3rd centuries BC depended on such manoeuvres, and the Arab dynasties that ruled the Middle East a millennium later owed their success to reliance on merchants as well as tribal armies and landed exploiting classes.

But in these alliances the merchants were always the junior partners to the rulers, and much mistrusted by them. Merchant wealth came from siphoning off some of the surplus under the control of the old ruling class, and this was resented. So the most powerful merchant could suddenly be thrown into prison, lose his head or be cut in half. He lacked the independent base in production and exploitation to do much more than kowtow to the old rulers.

Marx made a distinction between merchant capital (that profits from financing trade), usurers' capital (that makes profits from interests on lending) and productive capital (that profits from employing workers to operate its means of production). Merchant capital and usurers' capital existed under all the old empires, wherever there was large-scale trade or moneylending. But productive capital made only a rare and fleeting appearance. In ancient Rome, for instance, the most successful 'capitalists' were the 'tax farmers', whose wealth came from the contracting out of tax collecting by the state. In Ch'in and Han China (300 BC-AD 300) the merchants collaborated with the state in running the salt and iron monopolies. In the Arab empires of the Middle East the goods traded by the merchants were produced by peasants exploited by big landowners, by self employed artisans or, occasionally, by state enterprises--not by enterprises run by the merchants themselves.

The system as we know it today could only come into existence because at some point a capitalist class emerged that did directly control production and was therefore able to directly exploit people on its own account, rather than simply being an intermediary between other exploiters.

One precondition for the emergence of true capitalism, as Marx showed, was the separation of the immediate producers (those who did the work) from the means of production, which passed into the hands of the new exploiting class. The producers then had only one way to get a livelihood. They had to persuade the members of this exploiting class to make use of their capacity for labour (their 'labour power') in return for a remuneration sufficient to keep them alive and fit for work. But the level of that remuneration was substantially lower than the value of the goods produced by their work. The difference, the 'surplus', went straight into the pockets of the owners of the means of production. They gained the fruits of the exploitation of labour, even if it was legally 'free', just as much as the old ruling class that exploited unfree labour.

Marx described in Capital the forcible separation of the workforce in Britain from control over the means of production by the driving of people from the land with the enclosures of the 16th, 17th and 18th centuries and the 'clearances' of the 19th century. In many parts of the world the process continued right into the 20th century with the seizure of 'native' lands in places like southern Africa by white colonists--and also with the so called 'collectivisation' of agriculture under Stalinism.

Without such a separation of the workforce from the means of production the spread of production for the market could lead, not to capitalism, but to a new variant of serfdom, the so called 'second serfdom' of eastern and southern Europe, or to the encomienda system in Latin America. The output of production in these regions was directed towards world markets, but the internal dynamic was very different to that of capitalism, with its drive to competitive accumulation.

Productive capitalism was not possible before a certain point in human history. This was when there was a massive escalation of the use of the products of past labour to increase the productivity of present labour, when the use of relatively simple tools began to give way to the first mechanisation, in the broadest sense of the term.36

This could have a fourfold effect. It (1) increased the output--and therefore the potential surplus--to be obtained from a given quantity of labour. It (2) increased the cost of equipment and materials needed to undertake production--and therefore the likelihood that the individual producers would not be able to supply them themselves. It (3) increased the dependence of production on the initiative and commitment of the producer (if only because more care needed to be taken on the expensive equipment) and therefore the advantage of exploiting 'free' as opposed to serf or slave labour. And it (4) increased the importance of trading networks which could supply raw materials and dispose of the increased output.

Where 'mechanisation' had all four effects it separated immediate producers from control over the means of production on the one hand and encouraged the use of 'free' labour by the new class of controllers on the other. It also increased the integration of the whole production process with the market.

All four effects were not always present. Often in the early stages the individual producer still partially owned and controlled the means of production, although becoming increasingly dependent on merchants, landowners or moneylenders for funds and raw materials. In these cases transitional forms to fully capitalist production flourished--for instance, the putting-out system in the towns, share-cropping in the countryside. As we have seen, there were also many cases in which slave or serf labour was used in early forms of industrial production. And in some cases at least, mechanised forms of production were quite compatible with the denial of any initiative to some groups of labourers. This was true on the sugar plantations of the Caribbean in the 18th century and the cotton plantations of the American South through the first half of the 19th century.

Yet once 'mechanised' processes were under way the possibilities of a transition to capitalist forms of production were there. The development of productive capitalism depended on such developments in the forces of production. By contrast, where such developments did not occur, merchant and usurer capitalism were possible, but not productive capitalism.

This explains why capitalism did not develop in the ancient civilisations of the Middle East and the Mediterranean lands or in the pre-Hispanic civilisations of the Americas. In neither case were the forces of production sufficiently advanced for a new class of capitalist exploiters independent of the old ruling classes to emerge.


But back to Britain today we are currently living in a finance based capitalism based on merchant capital. This has been the more favoured system since the 1960's when Harold Wilson the labour prime minister decided to favour finance capital over industrial capital. This was due to various things really the fact that the workers were getting strong in the industrial field with mining strikes frequent and workers gaining confidence this had to be smashed and a turn to more finance capital where union uptake was sparse and fragmented. The battle for the more dominant form of capitalism was born out and today we survive on a service/finance capitalism system where little value is produced rather than money is transfered and borrowed and delt with. This as Marx tells us produces no long term value as it doesnt have much labour value embodied in what finance capital produced if at all.

In the coming period we may see another battle between finance and industrial capital as i've explained on another post the finance capitalists may be forced to take the wrap for getting the people striking and rioting. To quell this anger the financial sector may be tempered down a bit to relieve the anger but industrial capitalism which may come back into play in the future with an experiment in Greece taking place right now to see if Greek workers will accept very low wages if so they may become competitive with the likes of China in terms of wages.

I cant see this happening myself so a huge class struggle will braek out bigger than what we have at the moment. It is just the start of this crisis in capitalism and the ruling class's have very little answer to the problems they find themselves with.

The only way out of this crisis as we continue to say is a socialist answer a planning of the economy based on needs not greed of a few.

The bankrupcy of economic prosperity

As capitalism lurch's from one crisis to the next we are left wondering is this system the best that we can use for all ?

Fact that capitalism has periodic and systemic faults built into it with many contradictions deep rooted that it finds hard and often cannot solve itself in my view renders capitalism a bankrupt system. A system based on exploitation and greed by the few over the many. It simply cannot provide for all of society. What Marx called the army of reserve workers is a tactic created by the capitalists to keep a hold on workers wages by pitting workers in work to those out of work with the statement if you dont want to take a pay cut to keep your job we have hundreds and thousands waiting in reserve who will be willing to work for less than you do. This is a threat and the threat of the doll queue keeps the working class's wages down so the profits of the rich continue to rise as their crisis deepens.

Built into capitalism as i said are periodic booms and busts as they are known to many. Upturns and downturns. These can be caused by various contradictions in the modes of production and so on. But within each boom therea re the seeds sown for the next bust and vice versa. This is the nature of capitalism the circumstances for the next crash are already there when production begins to pick up again. Its a continuous cycle of deepening crisis's in capitalism.

Let us briefly sum up our sketch of historical evolution.

I. Mediaeval Society — Individual production on a small scale. Means of production adapted for individual use; hence primitive, ungainly, petty, dwarfed in action. Production for immediate consumption, either of the producer himself or his feudal lord. Only where an excess of production over this consumption occurs is such excess offered for sale, enters into exchange. Production of commodities, therefore, only in its infancy. But already it contains within itself, in embryo, anarchy in the production of society at large.

II. Capitalist Revolution — transformation of industry, at first be means of simple cooperation and manufacture. Concentration of the means of production, hitherto scattered, into great workshops. As a consequence, their transformation from individual to social means of production — a transformation which does not, on the whole, affect the form of exchange. The old forms of appropriation remain in force. The capitalist appears. In his capacity as owner of the means of production, he also appropriates the products and turns them into commodities. Production has become a social act. Exchange and appropriation continue to be individual acts, the acts of individuals. The social product is appropriated by the individual capitalist. Fundamental contradiction, whence arise all the contradictions in which our present-day society moves, and which modern industry brings to light.

A. Severance of the producer from the means of production. Condemnation of the worker to wage-labor for life. Antagonism between the proletariat and the bourgeoisie.

B. Growing predominance and increasing effectiveness of the laws governing the production of commodities. Unbridled competition. Contradiction between socialized organization in the individual factory and social anarchy in the production as a whole.

C. On the one hand, perfecting of machinery, made by competition compulsory for each individual manufacturer, and complemented by a constantly growing displacement of laborers. Industrial reserve-army. On the other hand, unlimited extension of production, also compulsory under competition, for every manufacturer. On both sides, unheard-of development of productive forces, excess of supply over demand, over-production and products — excess there, of laborers, without employment and without means of existence. But these two levers of production and of social well-being are unable to work together, because the capitalist form of production prevents the productive forces from working and the products from circulating, unless they are first turned into capital — which their very superabundance prevents. The contradiction has grown into an absurdity. The mode of production rises in rebellion against the form of exchange.

D. Partial recognition of the social character of the productive forces forced upon the capitalists themselves. Taking over of the great institutions for production and communication, first by joint-stock companies, later in by trusts, then by the State. The bourgeoisie demonstrated to be a superfluous class. All its social functions are now performed by salaried employees.

III. Proletarian Revolution — Solution of the contradictions. The proletariat seizes the public power, and by means of this transforms the socialized means of production, slipping from the hands of the bourgeoisie, into public property. By this act, the proletariat frees the means of production from the character of capital they have thus far borne, and gives their socialized character complete freedom to work itself out. Socialized production upon a predetermined plan becomes henceforth possible. The development of production makes the existence of different classes of society thenceforth an anachronism. In proportion as anarchy in social production vanishes, the political authority of the State dies out. Man, at last the master of his own form of social organization, becomes at the same time the lord over Nature, his own master — free.



extracts from socialism utopian and scientific chapter 3 history of materialism by Frederic Engels

Contradictions in capitalism : part 2 market increasing competition ?

In this second part of my series on marxists view taht capitailism is a unfair and a system rooted with deep contradictions i will look at the theory taht capitalists will try to tell you to convince you that the market is the best way forward. The arguement they say is that the more we let the market in the more competition there will be leading to greater choice and a cheaper price for the consumer.

I look at the facts behind this and the deep contradiction this is.

Marx assumed that the competitive processes of a capitalist market society would lead to a concentration of capital ownership in fewer and fewer hands. Marx built this claim on the assumption, which he holds in common with laissez faire economics, that a competitive economy must lead inevitably to the elimination of some producers by others, there must be winners and losers and the winners would grow increasingly large. Capitalism, Marx argued, contrary to the general assumption of laissez faire economics, had an inherent tendency towards concentration of capital in oligopolies and monopolies. The concentration of capital involved, first of all, the displacement of the handworker and the craftsworker and increasing domination of factory-based technology. An industrial proletariat of wage workers emerged, and grew larger, as independent producers were eliminated by factory-based competition. Capitalist corporations grew more concentrated and larger, the number of individuals owning the means of production became fewer. The class structure becomes polarized and the economic and social conditions of the two opposed main classes more strongly contrasted, leading to political activation of the working class and prolonged conflict with the dominant bourgeois class through political and industrial organisation.
It is this development of social polarization that provides the unsolveable social or relational contradiction of capitalist society. The social organization of a capitalist society also presented an inherent structural contradiction in the economic dynamics of capitalism. While capitalism revolutionized the means of production by promoting the greatest economic development in human history, its class structure focused the capacity to consume in a tiny minority of the population. The mass social scale of production could not remain compatible with the concentration of wealth in fewer and fewer hands.
The fact that leading the market do as it pleases will bring us stabilitya nd fair competition benifiting us all is a lie to be honest. As the markets develop and under cut each other Marx was right by saying in capitalist society there will be winners and loosers. The more winners thre are will eventually swamp out the loosers and as Marx rightly pointed out the competition will be concentrated between a few big multinationals who dominate the market.

You can see this in practise in the computer market where Microsoft and Windows dominate still the office based computer market and the likes of Apple are squeezed out. Is this the competition and choice the capitalists talk of ?

This would be completely different to socialism where a nationalised industry run by workers for workers on the basis of need not profit. There would be choice but not 100's of choices which lead to waste and poor quality products.

contradictions of capitalism part 1 : over production

In this short but could turn out to be something more i will look at the inherent contradictions that exist in the capitalist system of production and how i feel a chance of system namely socialism can help to get around these issues well and truely for good.

As we sit here worrying for our jobs, pay and benifits i thought i'd look at the system which has caused all this and is still causing this and how it knows no way out.

The first contradiction i will look at is the fact that as capitalism has progressed over there years and has been progressive up to a point. When Margret Thatcher declared in the late 70's early 80's that the harder you work you can move up the scale and improve your life. This was true up to a point as some did make it and were able to buy their own home and such like. But for the majority this was not the case their living standards and pay stayed the same. Much like in America many are promised if they work hard they can achieve anything via the American Dream but for many now it is turning into a American nightmare as debts pile up and cheap credit has been ended.

The fact with capitalism as Karl Marx described over 100 years ago now is still relevant today that capitalism and its sheer blind drive for profit can lead to a over production in its products. Leading to a surplus. Marx identified this surplus as a labour surplus and a surplus of capital wrapped up in too much made of one product or another.

For example when the original banking crisis hit in 2008 Honda actually stopped production of its cars for 6 months as it had made too much cars. Sounds remarkable too many cars but this wasnt for the fact there was no need. There is a great need around the world. But capitalism only produces where it feels it can make a profit. The fact that there is a need for something is neither here nor there. Take for example many drugs are needed to help cure diseases around the world in places like Africa but yet Africa which has been raped for its raw materials over the years for capitalist profit over the years has resulted in desimation in Africa.

Going back to my last point even though there is a need there in places like Africa for cars, food, drugs and things that will improve their lives the fact that in Africa few have much capital to invest in these the capitalists in the west ignore Africa and let it starve effectively as there is no profit to be made there.

Where the system which we as socialists advocate would be far more efficient and useful for the majority not just the few would be that there would be no unessesary waste of materials as everything produced and propriated would be for a need and peoples needs as a whole not just to make profit. Indeed there would be a end to a profit driven society where things were only made if a profit could be made.

In socialism things would be run, managed and controlled democratically by workers. Not greedy capiatlists only interested in profit. Only the workers know how to distribute the resources effectively and to help the many not just the few.

Of course this will take some time to bed into peoples minds as capitalist modes of productions and the means of production has been with the capiatlists for so long now and how labourers have had to sell their labour just to live is so ingrained in many peoples minds it will be hard to overcome these ideas but a mass political understanding of what society needs and how their actions can benifit society by working for the collective not a capitalist only interested in profit.

This is just a basic outline of just one of capitalisms many contradictions and i will try to uncover many more where i feel capitalism has failed the mass's and highlighting its weakness's as a system.