State IOUs

There was a strange element in Eddie Ford’s article on Greece (‘Robbing Peter to pay Alexis’, April 23). Eddie refers to the potential of the Greek government introducing a dual currency or new drachma. He argues that this would be like the issuing of assignats by the French revolutionary government at the end of the 18th, beginning of the 19th century, and that consequently, such a course would “would almost certainly be the road to disaster - just as it was during the French Revolution”. This needs to be examined.

Eddie’s argument is that the cause of this is that such a currency, like the assignat, would not be backed by gold or silver. It’s true that the assignat was not backed by gold. In fact, the reason for its issue was that the government had no gold or silver to back the currency, and so issued assignats backed instead by church property. As the assignat was supposed to pay interest, this made it more like a bond than simply a bank note, but, as the government could simply issue these notes as IOUs, they essentially acted as bank notes.

What I find odd is that Eddie should consider that there is something odd, or necessarily disastrous, in such a course of action, such as would lead Greece into disaster, if it follows a similar course. It’s not clear why Eddie thinks that there is a problem in such a currency not being backed by gold or silver. It’s true that Bank of England banknotes (IOUs) carry the words, “I promise to pay the bearer”, but in reality the days when the Bank of England had any requirement to honour that promise by handing to the bearer a pound of sterling silver or its gold equivalent are long, long gone! A Bank of England banknote like pretty much all equivalents is fiat currency: that is, notes and coins that circulate on the basis of nothing more than the authority of the issuing state.

In fact, the vast majority of money is not even created by the state, but by the private banking system, through fractional reserve banking and the creation of credit, and that money is backed by assets far less robust than gold or silver, and far more like the church property that stood behind the assignat. Vast swathes of bank capital, for example, consist of massively inflated property portfolios and other forms of fictitious capital. In fact, as a result of past bailouts of the private holders of Greek debt, the European Central Bank itself has a sizeable chunk of its own capital made up of what are likely to be pretty worthless Greek bonds, which if Greece defaults will put a hole in the ECB’s capital assets that will need filling from somewhere.

In 1847 and 1857, Marx and Engels made clear their opposition to the kind of fetishism of gold and silver as money that Eddie seems to exhibit here, as put forward by the Currency School, as well as a similar attitude adopted by John Stuart Mill. The real issue is not whether the currency is backed by gold, silver or other assets, but whether the nominal value of currency is more or less than is required to meet the needs of circulation. Even that is not absolute, because monetary stimulus itself can be a necessary means of bringing additional capacity into production, so that the value of commodities being circulated increases in line with the value of currency circulation. That is in addition to the conditions Marx and Engels described in 1847 and 1857, where a concern to limit the currency to an artificial relation to gold caused a credit crunch and financial crisis, which in turn caused a 37% drop in economic activity. This was only ended by the suspension of the 1844 Bank Act and the rapid injection of liquidity.

The cause of inflation in relation to the assignat was not that it had no such relation to gold or silver, but that far too many were printed, so that their nominal value way exceeded the value of commodities to be circulated. The requirement of any fiat currency is not that it is backed by gold or silver, but that it is not issued in such excessive quantity as to cause high levels of inflation. The requirement for any form of IOU issued by the state, whether it is a banknote or a bond, is that holders of those notes feel confident that the state has the ability to honour them. In the end, that does not come down to whether that state has large reserves of gold or silver, but whether it has large amounts of capital.

The ability of a state to redeem its bonds or to pay the coupon interest on those bonds depends upon the amount of capital within the state for two reasons. Firstly, the state pays the interest and ultimately redeems the bond from the income it receives in taxes. But the amount of revenue the state receives in taxes depends upon the level of economic activity occurring within the state. In order for taxes to rise, economic activity must increase, and that requires an accumulation of productive capital, so that additional surplus value is produced. Secondly, in the short term, a state can pay the coupon interest and redeem outstanding bonds, even if its income is not rising, providing there are large amounts of capital accumulated within the state, so that the payments are made by liquidating a proportion of this accumulated wealth.

But there is a correlation here too, as in fact Greece has demonstrated over the last five years. If currency circulation is curtailed, then, as happened in 1847, the consequence can be a financial crisis and a sharp contraction of economic activity itself. But the contraction of economic activity reduces the ability of the state to obtain revenue in taxes and thereby to honour its obligations. That has been seen in Greece and every other country that has had austerity inflicted upon it, including the UK, whereby the debt-to-GDP ratio rises rather than falls.

As a number of economists have pointed out, there is no reason why Greece could not print electronic euros through its banking system if it was cut adrift by the ECB. All private banks print electronic euros, pounds and dollars, etc all the time by the creation of deposits. Such a course of action would be far better than creating a new drachma, because any additional electronic euros printed by a Greek central bank to meet the needs of the state would be only a small proportion of total euro circulation and unlikely to lead to inflation, especially given current disinflationary conditions and the money printing being undertaken by the ECB itself.

Creating a new drachma almost certainly would be massively inflationary for exactly the same reasons. It is another reason that Greece needs to remain within the EU and euro zone, but also another reason why the solutions to the problems of Greece and other countries within the zone can only be resolved on an EU-wide basis. The most precious resource for Syriza at the moment is time, but it is only a resource if it is used to build a European-wide movement designed to address those issues and to oppose austerity with an alternative vision of how the economy can be run.

Arthur Bough


If the advent of the permanent crisis (collapse) of capitalism is decades in the future, as opposed to an ongoing reality (and also opposed to its being chimerical), this conclusion has fundamental implications.

First, the subjective factor has not appreciably lagged behind the objective possibilities, which are unripe for international revolution. Second, the transitional programme - a response to a supposed permanent capitalist crisis - is premature, consequently untested in practice. Third, the working class isn’t suffering a crisis of leadership, nor are left stupidity and sectarianism the main factors holding the working class back. Fourth, the present is a backward period in the history of a still immature class, not a descent into barbarism.

Various standards have been proposed to define ‘decline’. Mike Belbin recommends the yardstick of capitalist public dependence (Letters, April 16). In modern capitalism, markets fail to create sufficient public goods (sufficient for capitalist needs, and good for capitalists, that is), but, ideologically, it’s ambiguous whether this trend toward economic activity outside the market is a limitation or an adaptive strength. The economic significance is that a larger portion of surplus value must be allocated to support the producers of public goods needed by the ruling class, a fact that presumably helps explain why the collapse is predicted to occur well before variable capital becomes vanishingly small. But to call this trend the capitalist decline is to change the subject.

Comrade Belbin asks about the concrete manifestation of the post-collapse world. We have a model: what the entire Second International thought was a collapse, indeed, must have exhibited the symptoms. The difference would lie in greater universality (the United States rose toward hegemony during the inter-war period), greater duration and the comparative unavailability of war as a capitalist solution.

The exhaustion of capitalist possibilities was incontestably not contemporaneous with Marx. A reappraisal of what’s imminently attainable is not a call to quietism or reformism.

Stephen Diamond

Wrong party

I have read the Socialist Resistance document on the Green Party (March 2015) and I think you were really unfair in attacking both in one of your recent ‘Notes for action’ email bulletins. Essentially, SR’s analysis is that the Green Party is a progressive and even a pro-working class formation. That has got to be right.

Yes, a structural relationship with trade unions and the labour movement is an important factor in assessing whether or not a party is working class, but by no means the only or most important. I think trade unions are really important, as mass democratic organisations of the working class, which organise workers in their place of work to bargain more effectively with employers. But it is a sad fact that trade unions only represent a minority of the total workforce, with only around six million members, overwhelmingly in the public sector, far distant from the production of surplus value. And if a structural relationship with trade unions is the most important criterion, only the Labour Party in the modern capitalist world would qualify as a working class party - a nonsensical position.

Of far more importance must be the politics and the policies of the political party: do they clearly and decisively seek to advance the interests of the working class as the creators of wealth and as the majority of the population, as opposed to and at the expense of the owners of wealth, the minority capitalist class?

Of slightly less importance is the class origin and composition of members of the political party, although a genuine working class party should clearly have a significant number of working class members and leaders. I would suspect that by this measure the Green Party would outshine the Labour Party.

I agree SR fudges this in a somewhat Menshevik manner by defining working class as all those who sell their labour-power. A better definition would identify those more directly involved in the production of surplus value, their relations to the means of production and the degree of control they have over their working conditions.

The Green Party 2015 manifesto is without question pro-working class, in that its policies taken as a whole would clearly benefit the vast majority of the working class and most of its sections and indeed wider strata. It very clearly targets ‘the one percent’ of the richest and most powerful who dominate the economy and governance, and talks of designing and building an economy and society which will work in the interests of the great majority of the population, who have to work for a living or who are dependent on state benefits. It talks of workers’ rights, vibrant and democratic trade unions, and the rights to take industrial action and to picket.

The Greens do not actually use the term ‘socialism’, but it is clear their policies and aims can only be realised in a publicly owned and democratically controlled economy, and this principle explicitly runs through most sections of their manifesto. It actually identifies “consumer capitalism” as the basic problem and states that the solution is a “democratically managed economy” (p9). Not a “predatory” or “monopoly” variant of capitalism, but capitalism itself and its very essence.

I did wonder about one of SR’s concluding paragraphs, which indicated that even the election of conservative and rightwing Green MPs (as opposed to the majority of the leadership who are very radical and left) would be progressive, but I guess they are being elected on a pro-working class and left platform, and it is the policies, not characters, which are important.

I have to say I have been impressed by the Weekly Worker’s apparent commitment to your latest intervention in another political party, Left Unity, and it does appear more genuine than some of your previous ‘entries’. I do, however, think there is a contradiction and issue of principle here. Groups like SR genuinely believe in new model parties of the left, which include reformists and revolutionaries, and which embrace modern themes around feminism, identity and sexual politics, climate change, free movement of peoples, internationalism and cosmopolitanism, as well as those motivated by ideas of socialism and class.

So it seems reasonable for groups like SR to be in Left Unity and to advocate approaches which do not limit its potential appeal to just already existing Marxist revolutionaries. That doesn’t mean they are rightwing or ‘resisting socialism’. They are simply defending the aims, purpose and the basis of the party itself.

The role of socialist revolutionaries in Left Unity is not to hijack or take over the party, but to work alongside people of different backgrounds, experiences and perspectives, and to spread their own ideas through personal example, debate, persuasion, adherence to democratic pluralism and freedom for minorities and individuals to express their views.

My understanding is that the Weekly Worker is opposed to such new model parties, and instead has the (opposite?) aim of a single Marxist party, although, to your credit, you do advocate this should be a ‘mass’ party, not another ‘sect’.

So why are you in Left Unity, if fundamentally you want to change it into something completely different? Surely, when becoming members, you had to sign up to its basic founding principles, which were precisely an attempt to be a new model left party in Britain?

I do not see how you can be honest and principled members of Left Unity when you fundamentally disagree with its very basis. I think you should let those who believe in new model left parties get on and do so, and that you should be talking to other groups who share your different aim of a ‘Marxist’ party.

Andrew Northall

Silly questions

Despite being a regular reader, someone who has written many articles over the years, and has been generally supportive of this paper, I find it more than disappointing that you should support the Trade Unionist and Socialist Coalition in Bermondsey, where I am standing as a Republican Socialist. Unless you believe that revolutionary candidates should always stand down for reformists, I can see no justification.

In Bermondsey one socialist candidate is putting forward a revolutionary idea about democracy and its central importance to the working class and the fight against austerity. The other is limited to the anti-austerity politics of the Labour left.

It is understandable that the Socialist Party, the Socialist Workers Party and Socialist Resistance should support the Tusc candidate because it is a reflection of their own deeply held ‘economism’. But it is not obvious why the CPGB should back the Tusc candidate, given your programme and declared revolutionary aims.

Because you have concealed your motives by refusing to recognise significant differences in programme and slogans, I am setting out all the possible reasons, real or imaginary, to help pinpoint the truth.

1. I was asked to join the CPGB in the past and chose not to. Am I therefore being blacklisted by the CPGB? As far as I know, you have not asked Kingsley Abrams to join the CPGB. He has not refused. Does this make him a better candidate or more worthy of support?

2. I have openly criticised the CPGB in the pages of the Weekly Worker on many occasions. Kingsley has never criticised the CPGB and never written in the Weekly Worker. Does this make him a better candidate or more worthy of support?

3. Kingsley was a member of the Labour Party through the Blair and Brown years. I have never been a member of the Labour Party. I have spent those same years opposing the attacks by Blair and Brown on the working class. Does this make him a better candidate than me? Does this make him a better candidate or more worthy of support?

4. In January Kingsley applied to become a Labour Party candidate for parliament. I have never done that. Does this make him a better candidate or more worthy of support?

5. Kingsley will no doubt get many more votes than me because he has the backing of SP, SWP, SR, CPGB and Left Unity. I will get very few votes. Neil Coyle, the Labour candidate, will get most votes. Is Neil better than Kingsley, who is a better candidate or more worthy of support than me?

6. Are you supporting Kingsley, despite the fact that he will get less votes than Neil Coyle, because you back the Tusc programme and policy?

7. How is it that you claim to support republicanism and yet back Tusc, which is not republican and has no policy on democracy?

8. Is it simply because I am an openly declared anti-unionist? Is it because I am standing out against the rise of English anti-Scottish chauvinism, as promoted by Simon Hughes, David Cameron and Ed Miliband (Scottish National Party beyond the pale)?

9. Is it because the CPGB is a sectarian group whose approach is determined by the perceived short-term advantage of the CPGB rather than the revolutionary interest of the working class?

10. Is it because the CPGB has abandoned its programme to make a short-term deal with Tusc and LU? Can you explain what advantage you might get from this deal or what benefit they have promised you?

Ever optimistic that Marxism will prevail over sectarianism.

Steve Freeman
Bermondsey and Old Southwark


‘Getting the Soviet Union right’ (November 7 2013) is a good article, and its author, Jack Conrad, clearly has some talent. However, there is an oversight to which I would like to draw your attention. It appears to me that there is a contradiction between two different parts of your article, as illustrated in these two quotes from, respectively, the beginning and the end:

Quote 1: “Any Marxist, socialist or revolutionary who has sat in a pub, worked in a factory, waited at a bus stop, canvassed for a leftwing candidate or sold papers on a big protest demonstration - and talked to so-called ordinary people - will have been asked an elementary but nonetheless profound question: ‘What about Russia?’ Almost without exception it comes with an instant follow-up: ‘If things went so disastrously wrong in the USSR, why will you lot be any different?’”

Quote 2: “Clearly we must reject guilty evasion, apologetic excuses and the twisting of facts to fit the label. Marxists have an obligation to come up with a coherent, scientific, fully theorised explanation of the Soviet Union.”

The contradiction concerns which question it is most important to answer. At the beginning, you identify the question as “why will you guys be any different?” At the end, the question has become: ‘What happened in the Soviet Union, and how are we supposed to describe the rat-bastard version of whatever it was that called itself scientific socialism?’

These are two entirely different questions. Both are important, but the first (correctly understood) is far more important than the second.

What people really want to know (which is closer to your first question) is: ‘Why should we think that, if we overthrow the class rule of the bourgeoisie, things will be different this time?’ The correct answer (somewhat described, and somewhat hinted at, in your article) is that we intend that the revolution will take place in circumstances where the revolutionary government will not be forced to suspend democratic rights for an extended period of time in order to survive. The simple reason for this is that, without democratic rights, extended to the population at large, the revolutionary state will, within a relatively short period of time, degenerate into a counterrevolutionary state.

No-one can say with precision what circumstances of instability and popular discontent might force a revolutionary state to suspend democratic rights. However, in a modern society, with a modern economy, the linkage between (1) the democratic rights of speech and organisation, (2) the unfettered use of the internet and (3) productivity and economic development is quite strong, and is growing stronger with each decade, as the revolution in communications continues to unfold. Any government which finds it necessary to clamp down, in a major way, on the internet, will also find that it is crippling its ability to remain economically competitive. In a world in which imperialist countries still remain, this would make it difficult for a revolutionary government to defend itself.

Of course, many people point to the example of China. The Chinese government has (so far) been able to effectively censor the largest population of internet users in the world, while also achieving the highest sustained economic growth in a large economy that the world has ever seen. But, even in China, this state of affairs cannot last forever, and is unlikely to last more than another 10 or 20 years or so.

So, the short answer, as described above, is relatively simple: if a revolutionary government ends up in a situation where it feels forced to shut down democratic rights for an extended period of time, then it will also be forced to cripple the internet, and cripple the growth of productivity, and will almost certainly be doomed. The short answer, therefore, is that we need to avoid that situation - because otherwise we are fucked.

On the other hand, as long as the democratic rights of speech and organisation exist, then the working class will have the means to self-organise and prevent the corruption of the party in power or (failing that) replace the party in power with one which is not corrupt.

The second question - ie, how to describe the fucked-up situation that came about in the Soviet Union - may be more difficult to answer, but is also less important. Most political groups essentially evade both questions 1 and 2. They essentially respond to both questions by saying ‘shit happens’ and urging one and all to move on to more ‘practical’ questions. But it has long become a practical necessity for the movement with the goal of overthrowing capitalism to address these questions. If it fails to do so, then it is not deserving of the attention and respect of the working class. It is as simple as that.

I think we can say some things about question 2. First, we must make clear that, however we may describe the Soviet economic and political system, the working class there was not in power. Without the democratic rights of speech and organisation, the working class had no ability to make itself conscious. It was, as your article points out, atomised. This is why the common description of a deformed or degenerated ‘workers’ state’ is bullshit, because this description ignores that the Soviet Union was divided into exploiting and exploited classes.

A basic knowledge of economics tells us that, if the working class did not run the Soviet Union, then what existed there must have been either (1) some form of capitalism, (2) some form of feudalism or (3) some combination of the above. I favour the third explanation, although it tells us a limited amount. It does not tell us if the first explanation was primary and the second explanation was secondary, or the other way around.

A revolutionary Marxist group that originated in Samara, Russia in the 1970s (and organised major strikes at metal-working plants under Soviet rule, as well as under Yeltsin) took the view that the Soviet economic and political system was based not on ‘scientific socialism’, but on scientific feudalism. This explanation struck me as strange when I first made contact with this group around 1999, but seems far less strange today. It seems clear to me that this must be at least part of the explanation.

The Soviet economy and political system was some combination of scientific feudalism and state capitalism. While this explanation leaves unsettled the question of how much of each was in play, it helps ordinary people, as well as activists, understand (roughly) what happened, and helps to cut through the cargo cult worship of central planning and so forth that took root, as the Soviet experiment rotted alive.

And this helps the working class understand how we will avoid the gigantic clusterfuck that took down the Soviet Union: we will have democratic rights and self-organisation. And the working class, for the first time in history, will run the show.

Ben Seattle

Jewish nation

The dialogue between Tony Greenstein and me is becoming repetitious, so I will refrain from replying fully to his letter (April 23). Interested readers can find my position on the main issues expounded in several articles published in the Weekly Worker, especially ‘Hebrew versus Jewish identity’ (May 16 2013).

However, I must correct three factual errors in Tony’s letter. First, he describes one of the parties constituting the Joint List that ran for the Knesset in the Israeli elections of March 17 as “Islamist”. This is incorrect: the party in question is not fundamentalist; hence Islamic rather than Islamist.

Second, Tony alleges that the Joint List “supports a ‘just solution’, not the right of return of the Palestinian refugees”. In fact, its brief platform explicitly calls for “a just solution to the problem of the Palestinian refugees that ensures their right of return according to UN [general assembly] resolution 194.”

Third, Tony claims that “socialists and communists would have opposed the classification of Polish Jews as members of a separate, Jewish nation.” Surely, he cannot deny that the Jewish Labour Bund, a socialist party with mass support among the Jewish working class, insisted precisely on regarding the Jews of Lithuania, Poland and Russia as a nation. Moreover, in the Soviet Union the Jews were officially regarded as nation and were so described in their ID documents. Of course this Yiddish-speaking nation no longer exists following the Nazi genocide and the dispersal of its survivors. For further details, see my above-mentioned article.

Moshé Machover


Is Ralf Hoffrogge to labour and left historiography what the likes of Alexander Filippov are to Russian history (‘Before the great betrayal of August’, April 23)?

I hope so. The lyrics and underlying ideals beneath ‘We follow the path of boldness to which Lassalle led us!’ should be rehabilitated and repopularised by the class-strugglist left as vigorously if not more so than ‘Stalin brought us up - on loyalty to the people; he inspired us to labour and to heroism!’ is being rehabilitated by Russian historians’ take on the Great Patriotic War and building up towards it.

Though Mike Macnair framed Ferdinand Lassalle’s ‘iron law of wages’ agitation as an anti-union stance, with his legal background he should appreciate that not even Lassalle was quite aware of the levels of dispute resolution that exist today, that litigation (employment lawsuits) and arbitration are more adversarial than mere collective bargaining and, ahem, mere labour disputes towards such. Do class-action or group-action employment lawsuits trump union activism now as a better means of gaining working class sympathy?

Beyond such litigation, still within the framework of mere labour disputes, Lassalle’s emphasis on ‘politics’ in political economy and on genuine political action, however crude, placed later Marxist polemics against narrow economism and broad economism to downright shame!

Interestingly, Hoffrogge’s conviction and suggestion that Marx felt alienated because the united Socialist Workers Party of Germany made Lassalle ‘the hero’ instead of himself prefigured Italian working families naming sons Lassalo and only daughters Marxina. I don’t agree with the historian’s personalisation, but nobody should be surprised that organisers and agitators on the national ground would be elevated above faraway exiles who don’t come back.

Jacob Richter