Neither advocate nor oppose
What should be the attitude of Marxists to Keynesianism? Arthur Bough responds to Mike Macnair
In his recent two-part article on Keynesianism, Mike Macnair argues that (a) Keynesianism is inherently nationalistic, (b) it is internally incoherent, (c) it did not actually work during the post-war boom, (d) the conditions causing the post-war boom are not reproducible, and so (e) Keynesian policies cannot work today.
He concludes that Marxists should not support Keynesian solutions. Instead, he argues the need for the adoption of a set of minimum demands, and the rebuilding of working class organisations on a European-wide basis. Despite arguing that Keynesian/statist reforms cannot work, and that capital has no reason to concede them, he argues for raising demands for continued and expanded provision of things such as education by the state.
Inflation and wages
Mike says Keynes emphasised his agreement with the marginalists on the necessity to reduce real wages. The real question is whether it is essential to Keynes’s theory, and whether the contradiction Mike feels exists is real or not. Mike is correct to say that Keynes talks about wages being “sticky downwards”, and argues that a means around this is via a degree of inflation. But is this the same as arguing for a reduction in real wages? Not necessarily.
In the depression, prices fell significantly. Wages also fell, but not by as much as prices. In fact, little of that had to do with workers resisting the fall via strike action, because they were usually not in a strong enough position to do so. Rather it was due to frictions and rigidities in the labour market. For example, employers, having trained workers, tend to hoard them and continue paying existing levels of wages where possible rather than risk losing them. There was also the fact that, during this period, in parts of the country, such as the Midlands and south-east, new industries like motor manufacture, electronics and pharmaceuticals arose which paid quite high wages to their new, relatively skilled workers. It was to get round this kind of situation that rises in inflation were intended to provide a solution.
However, this does not necessarily mean a reduction in real wages. It depends on what happens to the value of labour-power: ie, on changes in productivity and the price of wage goods. Keynes’s point is that capital needs to obtain the benefit of this change in a higher rate of profit, which can only arise if wages fall accordingly. In fact, the whole basis of Fordism, of which Keynesianism was, in a sense, an ideological reflection at the level of the state, is that it is possible to share the benefits of this higher productivity. Indeed, what Ford recognised was that, not only did raising the wages of his workers mean that he was able to retain them, having trained them, but a steadily rising standard of living for those workers was a precondition for creating the kind of mass consumer market required to absorb mass-produced consumer goods. The prevention of falls in nominal price levels - which is extremely damaging to oligopolistic industries - was one of the main functions of central banks, such as the US Federal Reserve, which was set up in 1913.
And, if we look at the experience of where Keynes’s ideas were applied during the 1930s - in the US, during the ‘new deal’ - we see something very much like that. Alongside the public works programme, Roosevelt also introduced minimum wages, as well as legislation to strengthen the power of trades unions. In fact, there was nothing new in this. As Marx points out in Capital, even during the 19th century industrial capitalists had recognised the need for the state to protect them from themselves. That was why Wedgwood and other potters petitioned parliament to introduce a maximum working day, because competition was destroying workers.
Engels made the same points in his various prefaces to The condition of the working class in England, where he writes that the big capitalists became the champions of those very social democratic ideas that workers had proposed earlier in the century, that they were able to accept the costs involved in improving conditions in the factories, etc, because these were now insignificant compared with the ability to extract relative surplus value. In fact, these kinds of social democratic reforms favoured the big capitalists precisely because they could accommodate them, whereas their smaller brethren could not. It facilitated the concentration of capital. When Churchill introduced a minimum wage and wages councils in 1909, he stated: “The good employers must be protected from the bad ...” In fact, its not Uncle Joe Stalin who workers had to thank for their rising living standards in the 1950s, as Mike argues, but Henry Ford and Frederick Taylor.
Keynes believed that the deficit spending by the state should be recovered, once full employment had been restored. In effect, what his theory amounts to is a compulsory deduction of surplus value in the short term to fund state investment, which is then recouped in the following period. That can be accomplished by various means. Unused surplus value can be taxed, or, more usually, the government can run a deficit, borrowing the difference. The additional borrowing means higher average interest rates in the longer term, which constitute a deduction from surplus value and require higher future taxes to pay back borrowing, again implying a deduction from surplus value. But, if the intervention cuts short the recession, and the destruction of capital this entails, the total sum of surplus value remains higher. This is one reason that capital is prepared to accept such a strategy during a period of long-wave boom, but why it cannot work in a period of long-wave decline.
During a period of long-wave boom, any recession tends to be seen as temporary. By intervention, the state is able to cut short the recession, because a proportion of surplus value that might otherwise have left the circuit of capital is forced back in as state investment. The incomes and employment this creates then cause firms and individuals to confirm their view that the recession is temporary. Individuals feel more confident to consume, and reduce savings; firms, on the back of rising demand, are more prepared to invest. However, in a period of long-wave decline this becomes increasingly difficult. The main reason for the conjunctural shift from long-wave boom to decline (which is not an actual decline, but only below-average growth) is that the growth in the sphere of exchange value has slowed down.
The main driver of this is the fact that the range of industries and products that drove the previous boom have become mature. Businesses increase production, but find it more difficult to sell their products at prices that guarantee a sufficient level of profit to ensure that capital can be reproduced. In a long-wave boom, this problem is overcome by the fact that capital can move to a range of new industries and products that arise due to the innovation cycle. It can also move geographically to new markets and economies where new sources of labour-power can be exploited. But in a period of long-wave decline this is more difficult. As Marx puts it, if an additional investment of capital produces no more, or even less profit than before it was invested, then there is an absolute overproduction of capital.
At the height of the long-wave boom, this is intensified by the fact that the expanded scale of production means that demand for labour-power and constant capital are at a relatively high point, thereby pushing up wages and the cost of capital. Trade within economies and between economies becomes constrained. When the state draws off surplus value now to invest, the duration of the recovery it promotes is shorter, and the strength of the recovery is diminished. Increasingly, it is the recovery that is seen to be temporary. As a consequence, any upturn in demand is seen by firms, not as a basis for renewed optimism and investment, but as an opportunity to raise prices, leaving supply at existing levels - this is facilitated the more the economy is dominated by large oligopolistic enterprises. In turn, where the Keynesian fiscal stimulus is accompanied by an increase in money supply, this rise in prices is also a cue for workers to demand compensating wage rises. The consequence is the kind of stagflation that arose in the late 1970s.
But, even were it the case that Keynes was arguing for a fall in real wages, is this incompatible with his argument that what is required is to stimulate aggregate demand? Clearly not. If, the fall in real wages/consumption arising from that is less than the increase in wages/consumption consequent upon a rise in employment, then clearly the ‘consumption’ element of aggregate demand can rise, and can also stimulate further rises in aggregate demand via the multiplier in investment and further increases in employment. In fact, part of Keynes’s argument, in relation to so-called “animal spirits”, similar to the argument Trotsky put forward in Flood tide, is that this increase in employment changes both workers’ and businesses’ confidence and willingness to spend.
Contrary to Mike’s argument that Keynesian interventions did not work during the 1950s-60s, it is quite clear that they did. Mandel cites the comparison between the 1929-32 depression, and the recession of 1957-58 in the US. The latter lasted just a year, whilst the former lasted more than three years. As Mandel states,
An attentive study of the successive recessions since World War II permits the effects and limits of the anti-crisis techniques to be indicated clearly. They can prevent neither the outbreak of crises nor their initial gravity. But they can muffle their effects over time: ie, they can prevent their cumulative development into a ‘snowball effect’.
And this was confirmed after the financial crisis of 2008. That crisis was worse even than the 1929 crash, both in terms of scope and intensity. Its consequences for economic activity were equally powerful. If Mike’s thesis were correct, then, just as in 1929, we would have expected to see that Keynesian intervention was powerless. But the opposite was true. As in 1957-58, a coordinated Keynesian intervention, on an international level, combined with a similar monetary intervention, ended the recession within just over a year.
But Mike accepts neither the existence of the long-wave cycle nor the fact that capitalism is currently in a period of boom. He argues that the duration of the cycle is so flexible as to mean it could just be down to fitting the statistics to meet the criteria. Kondratiev argued that the cycle lasted between 40 and 60 years, with an average of 54 years. But, as has been pointed out by others, the normal trade cycle in the 19th century varied between seven and 11 years. On a pro rata basis that is a greater degree of variation than that of the long wave! Mike says that proponents of the long wave do not agree on whether we are currently in a boom or downturn, but this is no argument. Marxists disagree about their definition of fascism, but that does not mean that fascism does not exist.
The simple fact is, as I have previously set out, the data quite clearly shows that we are in a period of boom, and that is quite marked over the last 10-12 years. If there is one piece of data I have seen recently which not only bears that out, but shows it is a boom greater than anything in previous human history, it is this. Of all the goods and services produced in the history of mankind, nearly 25% have been produced in just the last 10 years!
One requirement of any hypothesis is that it should be able to predict future events. Kondratiev argued that the long-wave boom that began in the early 1890s ended in 1914-20. On his periodisation the new boom should have begun around 1940-50. It is generally accepted that the last boom began in 1949. Similarly, on his periodisation, that boom should have ended around the mid-1970s. The ‘second slump’ is generally accepted as beginning with the crisis of 1974. Finally, on that periodisation a new boom should have begun around the late 1990s. I have provided data previously showing the marked change in the growth of global trade around 2002, as well as the bottoming of primary product prices in 1999, the secular rise in gold prices from that point, etc.
A look at the rise in primary product prices, from copper to food, since 1999, which long-wave theory predicts, indicates just how powerful the boom has been, and the extent to which it has created massive new demand in the global economy, as tens of millions of new workers have been created every year. The further consequence of that has been the stimulation of economic activity in primary producing countries, including the development of agricultural production in parts of Africa on an industrial scale. In the past, neo-classical economists argued, in the same way that Mike does, that crises arose due to the effects of exogenous causes. They could never explain why these exogenous causes always seemed to occur in such regular cycles!
On the point about Keynesianism and nationalism, I have some sympathy with Mike’s argument in relation to the position of the left Keynesians. But there is no reason that Keynesian intervention has to be nationalistic. In fact, the adoption of Keynesian positions after World War II was far from being nationally based.
The whole basis of the new international state bodies established at Bretton Woods, such as the International Monetary Fund and World Bank, was precisely to be able to implement Keynesian intervention and regulation at an international level, primarily in the interests of the US industrial multinationals. It was Fordism at an international level. On the one hand, the IMF was intended to provide liquidity, whilst the World Bank provided the basis for restructuring and investment. The strategy for economies that ran structural deficits was clear. These economies needed to restructure, in order to create a sector of the economy that was large enough to either provide import substitution or produce goods for export that would be globally competitive. That is why IMF lending was always accompanied by demands for austerity that would reduce levels of domestic consumption. One of the clearest examples of it was the Marshall Plan.
We saw something similar after 2008. Largely under the leadership of Gordon Brown, the leading capitalist states introduced massive Keynesian intervention on a coordinated, international level. All of those economies that continued this policy - including the UK into 2010 - saw their economies recover, and in the case of the US continue to recover.
If the European Union were to follow the example of the US and adopt a similar Keynesian stance, in what way would that be nationalistic? Over the last 10-20 years, the EU has developed an economic bloc with the Middle East and North Africa, (which is one of the reasons the area’s growth increased significantly, creating the large middle classes in Egypt and elsewhere that have spawned the Arab spring), and has proposed a similar Marshall Plan for that area, particularly to help secure bourgeois democracy. There seems little reason why, given the necessary political agreements, such an approach cannot be adopted across southern Europe, the Middle East and north Africa as a strategic plan for growth.
Mike argues that such a coordinated approach across Europe is not possible. It would only be possible, he says, if Europe itself acted nationalistically, if it adopted various protectionist measures, and if it adopted policies of “financial repression”, such as controls over capital movements. In fact, we already have “financial repression” in its wider sense. That is to say, we see holders of money and money capital being prepared to deposit it in various asset classes (US and other safe-haven government bonds) or accounts (BNY Mellon), where the return on that capital is lower than the rate of inflation. They are doing so, not because of the kind of financial repression (narrow definition) that Mike describes, but simply in order to protect themselves from any large capital loss that might arise from riskier investments in a climate of uncertainty. There is $15 trillion of uninvested money sitting on the sidelines in the US alone.
Contrary to Mike’s argument, there is lots of evidence of similar situations in the past. In the early 1960s and into the 1970s, for example, many people in the UK, US and elsewhere bought houses for the first time. One of the reasons people of that generation appear to have done relatively well is precisely because the capital value of the mortgages they took out on those properties was rapidly eroded by the inflation of the subsequent period, when, although interest rates rose, they did not rise by the same amount as inflation.
What is odd about Mike’s argument in this regard is that there are now so many organisations of the global capitalist class who are arguing the need for some kind of coordinated stimulus to promote growth. Mike is right to say that politicians such as all those social democrats in Britain, France, Portugal, etc, as well as Obama in the US, may not reflect the views of capital or its state. But the fact is that it has been representatives of the US state that have also made such calls to Europeans. It has been the actual bureaucrats of the international state bodies, such as Olivier Blanchard of the IMF, who have openly said that the Tories’ austerity measures are counterproductive, whereas it is the political representatives of these organisations - Christine Lagarde - who have attempted to be more diplomatic. Even conservative organisations like Standard and Poor’s have come out to argue that austerity measures in Europe are killing the potential for growth, which is the only means of paying down debt. I am reminded of what Marx said in the Eighteenth Brumaire:
The parliamentary party was not only dissolved into its two great factions, each of these factions was not only split up within itself, but the party of order in parliament had fallen out with the party of order outside parliament. The spokesmen and scribes of the bourgeoisie, its platform and its press - in short, the ideologists of the bourgeoisie and the bourgeoisie itself, the representatives and the represented - faced one another in estrangement and no longer understood one another ...
Far more fateful and decisive was the breach of the commercial bourgeoisie with its politicians. It reproached them not as the legitimists reproached theirs, with having abandoned their principles, but, on the contrary, with clinging to principles that had become useless.
And, when we come to look at the interests of the dominant sections of capital, it is not at all clear what would be gained by protectionism. After World War II, it was multinational industrial capital that was dominant, and which pressed both for increased free trade and for the establishment of more powerful international state bodies. Over the last 30 years, whilst those multinationals have located more of their production around the globe, and consequently become increasingly separated from any one nation-state, the newly powerful financial capital followed its lead, establishing banks and financial trading platforms on a global basis too. The huge profits of these companies rely on the continuation of the free-trade relations, the ability to move large volumes of capital across borders for their profits. That is not to say that there are not pressures for protectionism, but those pressures come from national electorates pressing down on politicians, from nationally based small capitalists, and from reformists and nationalists in the labour movement, who prefer to blame foreigners for their problems than to wage a revolutionary struggle against the real source of their problems, capitalism.
However, I agree with Mike that Marxists should not advocate Keynesian solutions. Our task is to show that they are capitalist solutions designed to meet the needs of capital, not workers. Moreover, under other conditions, such as those of the 1980s, such solutions cannot work for capital either. We argue for socialist solutions as the only means of providing lasting answers for workers.
But then we have a similar situation to our attitude to the EU and other such developments. Does the fact that we do not call for such capitalist solutions mean that we are opposed to them, or neutral? Clearly, the answer has to be no. If capital has a choice of adopting Keynesian solutions, which raise employment levels, and thereby strengthen the position of workers, why would we oppose that? The situation is rather like that which confronted Marx and Engels in relation to the question of free trade and protectionism. Both were strategies that capital could adopt for its own reasons under different conditions. However, that did not mean that Marxists were agnostic between the two.
As Marx says,
But, in general, the protective system of our day is conservative, while the free-trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free-trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favour of free trade.
To the extent that Keynesian measures demonstrate that, even within the confines of capitalism, there is an alternative to austerity, we should highlight that fact. To the extent that stimulus measures place workers in a stronger position, we should not oppose them. On the contrary, they can act as a basis around which to build a European-wide labour movement. They can form a basis for arguing for common rates of pensions and benefits across Europe, for common lower retirement ages, and so on. Although I believe that workers should not rely on the capitalist state and should build their own alternatives to its provision, I, of course, agree with the comment made by Werner Bonefeld that, given the existence of these large areas of state provision, “If ‘Don’t rely on the state’ means taking away benefits, that is not just brutal, but also profoundly disadvantageous to everybody, because it tends to drive down wages.” But, in the same way that we do not say to workers, simply, ‘Stop working for your employer and set up a co-op instead!’, so we do not argue for abandoning such state provision without first establishing alternatives to it. As Marx put it in the Grundrisse, “As the system of bourgeois economy has developed for us only by degrees, so too its negation, which is its ultimate result.”
But, unlike Mike, I do not fetishise any of these areas of state capitalist provision. I think Marx’s actual position provides us with the basis of how to develop a transitional strategy. Mike is wrong in his interpretation of Marx’s position in relation to education, for example. In the Critique of the Gotha programme, Marx writes: “‘Elementary education by the state’ is altogether objectionable.” And, he makes clear that he is not simply talking about the existing Prussian state here saying, “(and one should not take refuge in the rotten subterfuge that one is speaking of a ‘state of the future’; we have seen how matters stand in this respect) the state has need, on the contrary, of a very stern education by the people.” Marx makes clear his attitude to education in the programme he wrote for the First International, and in the speech he made, cited by Mike.
The working man is no free agent. In too many cases, he is even too ignorant to understand the true interest of his child, or the normal conditions of human development. However, the more enlightened part of the working class fully understands that the future of its class, and, therefore, of mankind, altogether depends upon the formation of the rising working generation. They know that, before everything else, the children and juvenile workers must be saved from the crushing effects of the present system. This can only be effected by converting social reason into social force, and, under given circumstances, there exists no other method of doing so than through general laws, enforced by the power of the state. In enforcing such laws, the working class do not fortify governmental power. On the contrary, they transform that power, now used against them, into their own agency. They effect by a general act what they would vainly attempt by a multitude of isolated individual efforts.
In other words, the workers obtain a law that provides them with a right - no different than the right to belong to a trade union - but, it is up to them to enforce that right by their own action. The details of the right are set out in law, which establishes the minimum requirements, curriculum etc. But, nowhere does Marx contradict himself by calling on the capitalist state to provide this education.
On the contrary, he writes, setting out the employers’ responsibility for providing education:
Proceeding from this standpoint, we say that no parent and no employer ought to be allowed to use juvenile labour, except when combined with education ... A gradual and progressive course of mental, gymnastic, and technological training ought to correspond to the classification of the juvenile labourers. The costs of the technological schools ought to be partly met by the sale of their products. The combination of paid productive labour, mental education bodily exercise and polytechnic training, will raise the working class far above the level of the higher and middle classes.
And, in his speech on education to the International, Marx once again indicates that it is not the state, but civil society that Marx looks to as being the actual provider of education. He describes the situation in Massachusetts:
The question treated at the congresses was whether education was to be national or private. National education had been looked upon as governmental, but that was not necessarily the case. In Massachusetts every township was bound to provide schools for primary education for all the children. In towns of more than 5,000 inhabitants higher schools for technical education had to be provided, in larger towns still higher. The state contributed something but not much. In Massachusetts one-eighth of the local taxes went for education, in New York one-fifth.
Marx’s main concern about the system in Massachusetts was that, being local, it failed to provide equal standards across society. To get round that he proposed not provision of education by the state, but only that it set national standards. He writes:
Education might be national without being governmental. Government might appoint inspectors whose duty it was to see that the laws were obeyed, just as the factory inspectors looked after the observance of the factory acts, without any power of interfering with the course of education itself.
And this education was to be limited in scope to only what could be taught without ideological bias:
Nothing could be introduced either in primary or higher schools that admitted of party and class interpretation. Only, subjects such as the physical sciences, grammar, etc, were fit matter for schools. The rules of grammar, for instance, could not differ, whether explained by a religious Tory or a free thinker. Subjects that admitted of different conclusions must be excluded and left for the adults to such teachers as Mrs Law, who gave instruction in religion.
In all of this I think we can see just how hostile Marx was to the state (and not just the existing state), which is in stark contrast to much of today’s left. In the Eighteenth Brumaire, rather than looking to enhance the role of the state, he writes:
All revolutions perfected this machine instead of breaking it. The parties, which alternately contended for domination, regarded the possession of this huge state structure as the chief spoils of the victor.
The way he sets out his ideas here, I think, provides a template for the way we should design our own minimum programme: ie, to the extent that we make demands upon the state, it should be only to remove its foot from our neck, to exclude it as much as possible from interference in aspects of social life, and to create general laws that act to provide workers with a legal framework of rights within which to undertake their own self-organisation and activity.
It is around this self-activity that Marxists need to develop a transitional programme that both meets the immediate practical needs of workers across Europe, and which subverts existing property forms and relations, and which thereby creates the material conditions upon which new social relations and ideas can develop.
Central to this is to stop treating the working class as a victim, and return to the idea that it is a conscious agent in its own history: indeed is the revolutionary agent of historical progress. That means ceasing seeing every consequence of the contradictions of capitalism as a threat to be obstructed, and instead seeing it as an opportunity to be seized. Capitalist enterprises that are going to be closed should not be seen as something to be saved, but as an opportunity for workers to regain the means of production for themselves. The inability of the capitalist state to provide the vital services required by the working class should be seen as an opportunity for the workers to see that they can provide these services better under their own ownership and control.
Marx recognised in his analysis of the state that it continually attempted to set itself free from civil society, and to stand over it. That is what Bonapartism is. It can only be held in check by a strong and secure ruling class. But the working class can never be in that position. In respect of the capitalist state it is an oppressed class and, even after the revolution, its position as ruling class is necessarily neither strong nor secure. By the time it is strong and secure, the need for such a state no longer exists. It can never be in the interests of workers then to make the state strong by ceding to it increasing amounts of economic power, from which it derives social and political power. Lenin seems to have realised that too late in relation to the Russian Revolution. In 1923, in his speech ‘On cooperation’, he said:
We went too far when we reintroduced NEP, but not because we attached too much importance to the principle of free enterprise and trade - we went too far because we lost sight of the cooperatives, because we now underrate cooperatives, because we are already beginning to forget the vast importance of the cooperatives ...
It is in this respect that I also think that Mike constrains the role of cooperatives by rejecting the idea that they can perform a progressive function, and be successful with the continued operation of the market. Marx, in the Critique of the Gotha programme, for instance, argues that it is not the existence of the market that is the problem, but the fact that the means of production are monopolised in the hands of the capitalists. In Capital, he argues for the gradual extension of cooperatives by the use of commercial credit. Lenin, too, in his speech above saw the market continuing for some considerable time - up to 25 years - in the form of New Economic Policy, and saw competition playing an important role, acting as a whip to generate greater efficiency, which is why he attempted to get foreign, large capitalist enterprises to invest in Russia.
It is quite possible for cooperative enterprises to compete against each other through the market and yet still develop increasing levels of cooperation between them, as I set out in ‘The economics of cooperation’. That is, through a cooperative federation it is possible for competition to drive up efficiency, with the workers of each enterprise obtaining the benefits, in part through a share of the firms’ profits. But, through a system of benchmarking and sharing of best practice, these benefits can be quickly extended throughout the cooperative sector, and can provide the basis for increasing integration of production plans, etc. In fact, for so long as these cooperatives are operating in a capitalist environment, they will have to accept the continued existence of the market, and learn to operate efficiently within it. That is all the more true, if we seek to build such a cooperative sector, and cooperative federation, on a European basis.
The policy of austerity being pursued by rightwing, populist governments are detrimental not just to the interests of workers, but also to big industrial capital. To the extent that industrial capital seeks instead to pursue a policy of fiscal expansion, we should critically support such a course, pointing out its limited nature, as a capitalist solution. We should raise demands that can unify workers across Europe, such as demands for equal pensions and benefits, retirement age, working conditions, minimum wages etc.
At the same time, we should raise political demands that strengthen the position of workers to defend themselves and fight for the above. That means demands to remove restrictions on trade union activity and to provide additional rights. It means demands to extend political rights. That includes demands for consistent democracy within the nation-state, and within the EU.
But, we recognise that all of these demands are limited within the realms of capitalism. Real revolutionary change can only arise upon a change in ownership of the means of production. Until such time as the working class in its vast majority has become sufficiently class-conscious as to seize ownership of the means of production, such changes can only occur on a piecemeal basis. At every opportunity, therefore, we should encourage workers to establish cooperatives.
The recent agreement between the biggest US trade union, the United Steel Workers, and the Mondragon cooperatives to extend worker co-ops across North America, and to develop a new trade union model for co-ops, is a useful development in this direction. These cooperatives should be united through a Europe-wide cooperative federation. Such federations already exist, such as the International Cooperative Alliance. Mondragon provides on a smaller scale the kinds of development that such a cooperative federation could achieve, and at the same time meet some of the ideas developed by Marx. Mondragon with a turnover of more than €16 billion also has its own university, its own social security scheme and provides far better pensions for its workers than any capitalist state scheme. This indicates the way, in which workers could begin to claw back the control that the capitalist state has established over these important areas of workers’ lives.
As with their activity in the trade unions, in community organisations, etc, it is necessary for Marxists to work in such organisations in order to develop them on the basis of an adequate politics, tied in to the class struggle. In order to carry out such work effectively, a fundamental requirement is the establishment of mass workers’ parties, and of a Europe-wide mass workers’ party.
1. ‘Promoting the national economy divides workers’ Weekly Worker February 9; ‘Global fight for reforms’, February 16.
2. Suppose, using Marx’s notation, there is a production function such as C 10,000 + V 1,000 + S 1,000 = E 12,000. This gives a rate of profit of 9.1%. Assume that the 1,000 V is equal to a wage bundle amounting to 1,000 units. Now, if productivity or other factors bring about a reduction in the value of this wage bundle such that it can be produced in half the time, we would have C 10,000 + V 500 + S 1,500. Here nominal wages would have fallen by half, but the real wage would have remained the same: it would buy the same 1,000 units.
3. So, if we then had, C 10,000 + V 750 + S 1,250, real wages would have risen, whilst the rate of profit would also have risen to 11.63%. It would be quite possible to achieve these value relations without nominal wages falling from 1,000 to 750, through an appropriate level of inflation.
8. Comparing just the first nine months of each crisis shows the difference. Giving the 1929 figures first, we find: Employment -6.5%, -4.2%; GNP -5.5%, -4.1%; Industrial production -15.9%, -13.1%; Volume of retail sales -6.1%, -5.1%; Orders for durable goods -26.5%, -20% (E Mandel The second slump London 1976, p63).
10. ‘The crisis is financial; it is not economic’ Weekly Worker October 13 2011.
11. Payden and Rygel ad on CNBC.
15. ‘The ordoliberals and Adam Smith’s invisible hand’ Weekly Worker February 23.