19.05.2016
Social democratic stepping stone
Arthur Bough responds to Mike Macnair
In his recent two-part article1 in response to me Mike Macnair clearly misunderstood what I had written2. Company law is at variance with economic and property laws. Corporate governance and industrial democracy is an arena of political struggle.
A company is made up of “the associated producers” existing within it. Corporate governance should consist of a form of democracy, whereby the company controls the use of its capital. The 1970s witnessed social democratic proposals in that realm - the Bullock report, the European Union’s draft Fifth Company Law Directive, etc. Such laws already exist in Germany and the issue has been raised by Hillary Clinton. Industrial democracy is not against the interests of socialised capital.
Then Mike confuses corporate executives with “functioning capitalists”! Functioning capitalists are workers, members of trades unions, and the Labour Party. Production managers earn £20,000-£35,000 a year and, as the personification of socialised capital, they stand in an antagonistic relation to other wage workers. In the case of the worker-owned cooperatives, that antagonism disappears.
The conflict is between industrial capital and interest-bearing capital - different forms of capital, as sources of different revenues. Productive capital seeks to maximise the profit of the enterprise, whilst minimising rent, interest and taxes. Money-lending capital seeks to maximise interest/dividends, or capital transfers. Dividends and capital transfers undermine the accumulation of capital.
I have made no proposal for any“alliance of workers and the national bourgeoisie”,as Mike claims. Socialism arises from the extension of cooperatives, worker-owned property and workers’ self-government. The bourgeoisie attempts to restrict it. Workers develop their own party in order to engage in political struggle to overcome that resistance. Mike sucks that party from his thumb, proselytising for it, hoping the scales will fall from the eyes of millions of workers.
Conservative forces defend control over socialised capital by owners of interest-bearing capital. Because workers are imbued with bourgeois ideas, the workers’ party, initially, takes the form of a social democratic party. It represents the interests of the socialised capital. As workers defend the interests of their property, this political conflict sharpens.
The major parties seek to build electoral coalitions to win office. They move towards conservatism or social democracy, depending upon what ideas are prevalent at the time, which reflects whether industrial or interest-bearing capital has the upper hand. When unemployment is low, and the demand for labour is high, labour may obtain temporary advantage, also manifest within the realm of ideas, and reflected within such coalitions.
I use ‘social democracy’ and ‘liberal democracy’ as sub-species of bourgeois democracy. Liberal democracy reflects conditions where private capitalist property predominates; social democracy where socialised capital predominates.
As Marx says,
The peculiar character of social democracy is epitomised in the fact that democratic-republican institutions are demanded as a means not of doing away with two extremes, capital and wage labour, but of weakening their antagonism and transforming it into harmony.3
The “functioning capitalist”, and their equivalents within assorted bureaucracies, are personifications of that petty bourgeois mindset.
Stability
Profit derives overwhelmingly from relative surplus value, requiring huge fixed capital investment, which is not undertaken without stable profits over prolonged time scales. The social democratic state provides stability: undertaking macro-economic planning and regulation; promoting social harmony for continuous exploitation of labour-power, via a welfare state to regulate its supply, and to socialise and incorporate the working class via the trades unions and social democratic parties.
Social reproduction sets the constraints within which elected governments are allowed to operate.
Engels makes the same point:
The repeal of the Corn Laws was the victory of the manufacturing capitalist not only over the landed aristocracy, but over those sections of capitalists, too, whose interests were more or less bound up with the landed interest - bankers, stockjobbers, fundholders, etc ... And, practically, that horrid People’s Charter actually became the political programme of the very manufacturers who had opposed it to the last.4
Rent and interest depend on the production of profit, and so on surplus value, produced by labour exchanging with productive capital! Neither capitalist rent nor interest can exist without productive capital. Were the average rate of interest to approach the rate of profit, industrial capital would stop borrowing for investment, and become interest-bearing capital, undermining it.
Interest-bearing capital can only exist on any sizeable scale so long as industrial capital exists, and that makes it dependent on and subordinate to the latter.
Mike explains US and UK wealth by the mercantilist argument that surplus value is the product of unequal exchange and a transfer of value; that their wealth is not the result of their phenomenal ability to accumulate capital, but of grindingly poor countries somehow continuing to transfer increasing amounts of value to them, century after century! Yet some of those grindingly poor countries have also managed to grow, and are far from Mike’s picture of being “fundamentally colonised economies”.
The genealogy is the idea about capitalism having reached the end of the road, only able to increase metropolitan workers’ living standard by a superexploitation of those in the periphery. Marx demonstrates why the higher level of productivity in more developed economies ensures their real wages are higher, and yet the rate of surplus value and profit is greater than in less developed economies: “The more intense national labour, therefore, as compared with the less intense, produces in the same time more value, which expresses itself in more money.”5
More productive British labour acts like complex labour, compared to Somalian labour. Despite much higher real wages, the British worker is far more exploited than the Somali worker. Mike’s comments about the UK’s“visible” trade deficit, are physiocratic. Service industry comprises 80% of GDP! Huge amounts of complex labour employed in service industry produce large amounts of surplus value.
The interest money-lending capitalists obtain from their overseas assets is different to the profits made by the financial services industry. There is no difference in the profits obtained by selling services than any other commodity.
Mike clings to Lenin’s erroneous Imperialism, the highest stage of capitalism. By the end of the 19th century, colonialism was past its peak. Big industrial capital extracts surplus value on a mammoth scale via relative surplus value, and a continual expansion in the number of workers drawn into wage-slavery.
Lenin and Trotsky saw the period of long wave boom from 1890-1914 as unusual, just as Mike sees the post-war boom as unusual. They mistook the period of long-wave downturn that followed for the period of decay and decline of capitalism.
For Mike, workers’ higher living standards, the creation of the welfare state, etc, can only be explained by the fact that imperialism had to buy off workers potentially attracted by the USSR. Yet Mike also wants to portray the USSR as anything but a pole of attraction that would have caused imperialism to lose any sleep!
Many “concessions” were implemented prior to 1917. Social democratic ideas were already being put forward by sections of industrial capital in the 19th century. Churchill introduced the minimum wage in 1909. In the 1920s, with workers in retreat, Neville Chamberlain drew up proposals for a welfare state. After 1945, it was in West Germany that the codetermination laws, etc, were introduced! The Wilson/Callaghan governments saw the introduction of measures of workers’ democracy, greater social democratic planning and strategy than did the Attlee government. After 1948, there was no “ratchet to the right”. Up to the early 1980s, Tory governments also supported the welfare state. They followed Keynesian orthodoxy to cut short recessions, to maintain full employment -‘Buttskellism’.More recently, US car makers complained about their disadvantage, compared to European capital, because of the costs of providing healthcare and so on for their workers. China is introducing its own welfare state.
Social democracy’s need to extend planning and regulation has been met by the growth of transnational organisations, such as the EU and similar economic blocs; and by the power to intervene and regulate by the International Monetary Fund, World Bank, World Trade Organisation and other ad hoc bodies such as the G20, despite the existence of conservative governments, for much of the intervening period. Much of that process, as part of globalisation, intensified after the collapse of the USSR.
Economic development in emerging economies has been premised on the use of planning and regulation, and growing international economic cooperation. It is that which caused conservative objection to the EU. Yet Cameron was forced to limit his ‘reforms’ to a request for minor tinkering with the EU’s regulations.
Mike confuses and conflates state power and governmental office. His view of political parties and the implementation of class interests is mechanistic and assumes the policies introduced by governments are identical with the wishes of the state, and the interests of the socialised capital it represents.
From the late 1980s, large sections of industrial capital were migrating to Asia. Workers in western Europe and North America found themselves in a much weaker position. Sections of small private capital became stronger, obtaining a more powerful voice through Thatcher.
The rise in the rate of profit, on the back of falling wages, caused interest rates to fall, and the prices of fictitious capital to rise. Huge capital gains in stock, bond and property markets strengthened the position of those social strata traditionally associated with conservatism - the landed and financial oligarchy. It created the conservative ideas, adopted by New Labour, about the ability to get rich from speculative gains, and borrowing on the back of them.
State macro-economic planning and regulation shifted from Keynesian fiscal intervention to Friedmanite monetary intervention, illustrated by the repeated intervention by Alan Greenspan, every time the US stock market hinted that it might fall.
Policies and capital
I have never suggested that every increase in the size of the state is equivalent to a social democratic policy. It does, however, indicate the contradiction that interest-bearing capital faces, because the alternative to subsidies such as housing benefit is higher wages and lower property prices, directly hitting the owners of fictitious capital.
Social democratic policies promote industrial capital, so it is realistic for those parties to pursue them. Such policies may be opposed by sections of capital, which see them as immediately against their interests, where they cause capital losses from falling bond, stock and property markets. Conservative politicians will reflect those concerns. But rentier capitalists ultimately need the maximisation of yield, and that requires industrial capital to grow, to maximise profits, out of which interest and rent is paid.
The last 25 years has been the anachronism. Instead of concern for yield, the owners of fictitious capital have been concerned with maximising speculative capital gains, which is unsustainable - and only sustained, thus far, as a result of the unprecedented levels of state intervention to keep asset price bubbles inflated.
The representatives of fictitious capital realise the situation is not sustainable. ‘Extend and pretend’ has been applied to Greece, and the vast amount of private household debt across Europe and North America. Huge amounts of Greek debt were written off, in the hope of maintaining ‘extend and pretend’ a while longer, and thereby not suffering an even greater write-off of debt.
Mike argues that social democratic governments across Europe would still be hopeless, because they would face the other power structures of the EU commission, and so on. It is a counsel of despair with no possibility of any intermediate stages, no concept of process.
It is “politically harder”,but not impossible,forconservative forces to take over worker-owned, cooperative property. That is the reason to develop workers’ self-government alongside, and as a means of defending, socialised property. Worker-owned property has to be linked with the trade unions and other workers’ organisations, and the ideas about worker-owned property and workers’ self-government carried into the workers’ party, as a means of transforming it. Workers brought into that party, organised around those ideas, develop new cadres of elected representatives able to challenge any attacks by conservatives upon it.
A European movement, around support for social democratic measures that oppose austerity and promote the notion of an EU-wide fiscal stimulus, is a stepping stone towards building such a European workers’ party. Mike desires a workers’ party, but is reluctant to engage in any of the necessary practical actions and struggles, by which it would be forged in the fire of class struggle, out of the existing materials.
Mike confuses commercial credit with bank credit. Commercial credit involves firms not demanding immediate payment from each other for the commodities supplied. He confuses the money-dealing operations of the banks with their money-lending operations. The money paid into customers’ accounts is the property of the depositor. The bank merely transfers it to someone else. It does not advance credit or loan-capital by such operations, but acts as a merchant, moving around other people’s funds! It is quite clear that the money from realised profits, etc, deposited in companies’ accounts belongs to the industrial capitalist, not to the bank or any money-lending capitalist.
A country with lots of capital can always obtain liquidity. I did not refer to such countries printing money on a large scale. I did point out that such large scale money-printing, or indeed the provision of large amounts of money-capital via the provision of loans, would not solve the problems of Greece, because those problems consist of a shortage of capital, not of money or money-capital.
I made no assumption that “physical assets amount to capital”. The argument that, no matter how much money or money-capital Greece had, it would not resolve its problem of a lack of capital, is only comprehensible on that basis!
Prior to 2008, the global economy already was experiencing economic growth and dynamism. Within the confines of the long-wave cycle, factors such as the actions of governments can and do play a role. Conservative governments and central banks have acted to reflate huge asset price bubbles and, in Europe, undermined the accumulation of productive capital by austerity. Once those effects are removed, that dynamism, together with economic growth, will resume and the basis of it is already discernible.
Notes
1. ‘Two strategic illusions’, March 24 2016; and ‘Social democratic corporate management’, March 31 2016.
2. My ‘Making inroads into power of capital’ (January 21 2016) was itself a response to Mike’s two articles published in November 2015.
3. K Marx The Eighteenth Brumaire of Louis Bonaparte: www.marxists.org/archive/marx/works/subject/hist-mat/18-brum/ch03.htm.
4. F Engels The condition of the working class ion England: www.marxists.org/archive/marx/works/1892/01/11.htm.
5. K Marx Capital Vol 1, chapter 22.