Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts

Wednesday, January 25, 2017

Trekonomics

 The New Statesman in December 2016 had Yo Yushi visit a Star Trek convention in Birmingham where he recalls amongst other things," In a 1988 episode of The Next Generation, the captain of the USS Enterprise, Jean-Luc Picard (Patrick Stewart), lectures a 20th-century executive who has been defrosted from cryogenic preservation about the Federation’s economic beliefs.  

“A lot has changed in the past 300 years,” he says. “People are no longer obsessed with the ­accumulation of things. We have eliminated hunger, want, the need for possessions.”


  The businessman protests that without money his life would have no purpose. Picard responds that “the challenge” of life is merely to “improve yourself”, and to “enjoy it”. If that sounds striking today, it was doubtless more so when the episode first aired in the United States, just a year after Gordon Gekko’s “greed is good” speech in Wall Street gave the free-market Washington consensus its most abiding slogan.

 Socialists of our kind have been ahead of this learning curve for over a hundred years.  Although not the main theme, or even a minor one, it is clear from the characters’ behaviour and occasional asides (at least in the first two series) that it’s a money-free world. Set in the 23rd and 24th centuries, scarcity no longer exists as anything material needed to meet human needs can be produced by ‘replicators’. This prompted one trekkie, Manu Saadia, to write Trekonomics: the Economics of Star Trek that appeared earlier this year and which sparked a discussion on ‘post-scarcity economics’.

  Actually, ’post-scarcity economics’ is a contradiction in terms as academic economics defines itself as the study of how societies and individuals allocate scarce resources. The opening chapter of a typical American textbook (Economics by Byrns and Stone) is headed ‘Economics: The Study of Scarcity and Choice’. Paul Samuelson, in his much more widely-used textbook of the same title, invents ‘The Law of Scarcity’:

‘If an infinite amount of every good could be produced, or if human wants were fully satisfied, it would not then matter if too much of a particular good were produced. Nor would it then matter if labor and materials were combined unwisely… There would then be no economic goods, i.e., no goods that are relatively scarce; and there would hardly be any need for a study of economics or ‘economizing’. All goods would be free goods, like air.’

 This is not a ‘law’ but a definition and an odd one at that. In its normal sense ‘scarcity’ means there’s not enough of something, that it’s in short supply. But economics defines it as a situation where Samuelson’s ‘infinite amount of every good’ cannot be produced, i.e. as the absence of sheer abundance.

 For Byrns and Stone  ‘a world in which all human wants are instantly fulfilled is hard to imagine.’ But this is just what Star Trek  does imagine and what its creator, Gene Roddenberry, insisted should be a background assumption. It is thus a direct challenge to economics and economists.

 Accusing Roddenberry of espousing ‘utopian socialism’, a certain Gardner Goldsmith asserted that a ‘no-money society’ was a fantasy:

Like Roddenberry, many thinkers have tried to envision a world in which there is no need for money, no market exchange, and no property. And every one of those thinkers, whether be they followers of John Lennon, Michael Moore, or Karl Marx, has overlooked one key insight: man’s nature does not change.’

 As if we hadn’t heard that one before! Paul Krugman made a more intelligent point that, while replicators might be able to produce material things in demand, they wouldn’t be able to provide services.

 Star Trek is of course fiction. But Roddenberry’s assumption raises the question of what humans would do (besides exploring space) if they didn’t have to work to satisfy their needs. Provide services for each other perhaps?

 Even in 2-300 years time humans will still have to put in some work to satisfy their needs, if only to maintain the replicators. But this doesn’t undermine the case for a society based on common ownership of the means of production where exchange and money would therefore be redundant and where people work at what they do best and take according to their needs.

 Scarcity has already been conquered, not in the economists’ eccentric sense of the absence of sheer abundance, but in the sense that the resources, technology and human skills already exist to produce enough satisfy likely human needs and wants. No need to wait for the invention of replicators to establish this down here on Earth in the 21st century.

Adapted from a Cooking the Books article in The Socialist Standard


Friday, March 07, 2014

Money cranks

Major C.H. Douglas
Money Crank
Economic crises always have a falling-out-among-thieves with  different capital sectors seeking advantage for themselves by fixing capitalism’s problem on others. Many of todays radical economists pin-point the central cause of the problems of capitalism is to be found in the sphere of the circulation of commodities - a financial banking and consumer spending crisis, rather than at the point of production, where the Marxist locates it. They seek  to solve the social problem of capitalist production without changing the existing relations of production. Currency reformers of the Ellen Brown and Positive Money type wish to save capitalism by making changes in the monetary system alone and  reform capitalism by an alteration in the monetary mechanism. They ignore the industrialist capitalist and concentrate their attacks upon the bankers. They  propose to socialize credit and leave the capitalists in control of industry. It is a dream of reform shrinking away  from any genuine revolutionary consequences  hope to attain their heart’s desire by legislative measures , as simply and easily as signing a decree. Their practical political programs reflect a timidity that trembles at the prospect of  revolution. They sincerely desire to abolish all the miseries of exploitation, but without upsetting the existing social relations of production and without compelling anyone but a handful of bankers to yield up their present privileges. We are assured banking reform is not socialism but ‘economic democracy’.

They find the scapegoat in the money supply and the credit monopoly of finance capital. They often “prove” the existence of “the banker’s conspiracy” by exposing the Federal Reserve. They insinuate that bankers deliberately instigate panics and crises. They do pay no heed to  credit crunch as a symptom and evidence that the crisis is already under way, instead of being the fundamental cause of its occurrence, and pass over the fact that bankers, like other capitalists, can only invest money where there is the prospect of profit. The financial magnates are as helpless as any other capitalist group to start or stop a general capitalist crisis, although they have induced temporary credit stringencies for their private purposes. They hold a basic belief that money is not (or should not be) a commodity, but a system of worthless tokens (fiat money). They mistake the superficial forms of modern money (its paper dress as currency or its phantom bookkeeping existence as checks) for its inner nature. They completely fail to comprehend the function of money in a commodity producing society, and particularly under capitalism. As the general equivalent of value, money is not only a commodity but the king among commodities, destined to reign so long as capitalism endures.

Nor do these currency cranks fully comprehend  that money is subject to all the laws of capitalism. Chief among these laws is the necessity of transforming money into capital, and using capital to appropriate surplus value. The financier accomplishes this by loaning money to the industrialist or the merchant, who, in their turn, appropriate their share of surplus value directly from the working class. The self-same capital is used for exploiting purposes by both groups of capitalists, and yet the new economists  condemn the bankers alone. Their position amounts to this: the capitalist may exploit the working class, but the finance capitalist must not exploit his brother capitalists.

At the bottom of it all is the fear of the small businessmen of the Frankenstein monster of  the Big Banks. The monopoly of credit is the means by which large corporations exploit the lesser capitalist groups. They charge the banking industry with the creation of debt although that process is only a special case of the continuous transformation of social wealth into private property under capitalism. First, the power of creating credit is to be taken away from the private bankers and vested in the state. Either by nationalization of the banks or the creation of the North Dakota State Bank model. The scheme is utterly utopian. If credit was nationalized, as it is for all practical purposes in many capitalist countries today, it would simply put a more powerful weapon in the hands of the monopoly capitalists who control the state, and be used, as it is in those countries, to protect the profits of national capitalists against foreign competition. It appears radical in form but proves to be reactionary in substance. Its propagandists  pander to all the confused prejudices of the impoverished ‘middle’ classes, providing a pseudo-socialist covering for their outspoken hatred of finance capital, their nationalism and, in many cases, their anti-semitism.

 The fundamental cause of capitalist crises is to be found in the antagonisms of capitalist production and this cannot be repeated too often until it eventually sinks into the minds of those who want capitalism with a humane face.

Sunday, December 22, 2013

Marx and Economix


Marx saw the aim of the working-class party as the preparation for and organisation of revolution – the overthrow of the ruling class of capitalist – and the organisation of a new system of production, socialism. A working-class party explains why, so long as capitalist production, continues, the struggle between classes must also go on, while economic crises and wars inflict terrible sufferings on the workers; but that the conflict and sufferings can be ended by changing the system of production, which involves the overthrow of the capitalist class.

Capitalism evolved out of feudal times. The typical feudal form of production was production for local consumption: food, clothing and other articles were produced by the serfs for themselves and for their feudal lords. Any surplus was sold in exchange for articles brought in from other countries or from other parts of the country. But the main part of production was still for consumption by the producers and the lord who had feudal rights over it.

When the feudalism began to break up that this form of production gradually gave way to production for profit, which is the essential mark of capitalism. Production for profit required two things: someone with enough resources to buy means of production (looms, spinning-machines and so on); and, secondly, people who had no means of production themselves, no resources by using which they could live. In other words, there had to be “capitalists,” who owned means of production, and workers whose only chance of getting a livelihood was to work the machines owned by the capitalists.

The workers produced things, not directly for themselves or for the personal use of their new “lord,” the capitalist, but for the capitalist to sell for money. Things made in this way are called “commodities” – that is, articles produced for sale on the market. The worker received wages, the employer received profit – something that was left after the consumer had paid for the articles, and after the capitalist had paid wages, the cost of raw materials and other costs of production.

What was the source of this profit? Marx pointed out that it could not possibly come from the capitalists selling the products above their value – this would mean that all capitalists were all the time cheating each other, and where one made a “profit” of this kind the other necessarily made a loss, and the profits and losses would cancel each other out, leaving no general profit. It therefore followed that the value of an article on the market must already contain the profit: the profit must arise in the course of production, and not in the sale of the product.

There has to be some factor in production which adds value greater than its cost (its own value). What is meant by “value.” In ordinary language, value can have two quite distinct meanings. It may mean value for use by someone – a thirsty man “values” a drink or a particular item may have a special  “sentimental value” for someone. But there is also another meaning in ordinary use – the value of a thing when sold on the market, by any seller to any buyer, which is what is known as its “exchange value.” What gives products their normal “exchange value” on the market? Why, for example, has a yard of cloth more exchange value than a pin?

Exchange value is measured in terms of money; an article is “worth” a certain amount of money. But what makes it possible for things to be compared with each other in value, whether through money or for direct exchange? Marx pointed out that things can only be compared in this way if there is something common to all of them, of which some have more and some less, so that a comparison is possible. This common factor is obviously not weight or colour or any other physical property; nor is it “use value” for human life (necessary foods have far less exchange value than motor cars) or any other abstraction. There is only one factor common to all products – they are produced by human labour. A thing has greater exchange value if more human labour has been put into its production; exchange value is determined by the “labour-time” spent on each article.

But, of course, not the individual labour-time. When things are bought and sold on a general market, their exchange value as individual products is averaged out, and the exchange value of any particular yard of cloth of a certain weight and quality is determined by the “average socially necessary labour-time” required for its production.

If this is the general basis for the exchange value of things produced under capitalism, what determines the amount of wages paid to the actual producer, the worker? Marx put the question in precisely the same way: what is the. common factor between things produced under capitalism and labour-power under capitalism, which we know also has an exchange value on the market? There is no such factor other than the factor which we have already seen determines the exchange value of ordinary products – the labour-time spent in producing them. What is meant by the labour-time spent in producing labour-power? It is the time (the average “socially necessary” time) spent in producing the food, shelter, warmth and other things which keep the worker from week to week. In normal capitalist society, the things necessary to maintain the family of the worker have also to be taken into account. The labour-time necessary for producing all these things determines the exchange value of the worker’s labour-power, which he sells to the capitalist for wages.

But while, in modern capitalist society, the time spent in maintaining the worker’s labour-power may be only four hours a day, his power to labour lasts eight, ten or more hours a day. For the first four hours each day, therefore, his actual labour is producing the equivalent of what is paid to him in wages; for the remaining hours of his working day he is producing “surplus value” which his employer appropriates. This is the source of capitalist profit – the value produced by the worker over and above the value of his own keep – that is, the wages he receives.

The term “exchange value” has been used, because this is the basis of the whole analysis. But in actual life things hardly ever sell at precisely their exchange value. Whether material products or human labour power, they are bought and sold on the market at a price, which may be either above or below the correct exchange value. There may be a surplus of the particular product on the market, and the price that day may be far below the correct exchange value; or, if there is a shortage, the price may rise above the value. These fluctuations in price are, in fact, influenced by “supply and demand,” and this led many capitalist economists to think that supply and demand was the sole factor in price. But it is clear that supply and demand only cause fluctuations about a definite level. What that level is, whether it is one penny or a hundred pounds, is clearly not determined by supply and demand, but by the labour-time used in producing the article.

The actual price of labour-power – the actual wages paid – is also influenced by supply and demand; but it is influenced by other factors as well – the strength of trade union organisation in particular. Nevertheless, the price of labour-power in ordinary capitalist society always fluctuates around a definite level – the equivalent of the worker’s keep, taking into account that the various grades and groups of workers have varying needs, which are themselves largely the result of previous trade union struggles establishing a standard above the lowest minimum standard for existence. The labour-power of different grades of workers is not, of course, identical in value; an hour’s work of a skilled engineer produces more value than an hour’s work of an unskilled labourer. Marx showed that such differences were in fact accounted for when articles were sold on the market, which, as he put it, recorded a definite relation between what the more skilled worker made in an hour and what the labourer made in an hour.

How does this difference in value come about? Marx answers: not on any “principle” that skill is ethically better than lack of skill or any other abstract notion. The fact that a skilled worker’s labour-power has more exchange value than the labourer’s is due to exactly the same factor that makes a steamship more valuable than a rowing-boat – more human labour has gone to the making of it. The whole process of training the skilled worker, besides the higher standard of living which is essential for the maintenance of his skill, involves more labour-time.

Another point to note is that if the intensity of labour is increased beyond what was the previous average, this is equivalent to a longer labour-time; eight hours of intensified labour may produce values equivalent to ten or twelve hours of what was previously normal labour.

What is the importance of the analysis made by Marx to show the source of profit? It is that it explains the class struggle of the capitalist period. In each factory or other enterprise the wages paid to the workers are not the equivalent of the full value they produce, but only equal to about half this value, or even less. The rest of the value produced by the worker during his working day (i.e. after he has produced the equivalent of his wages) is taken outright by his employer. The employer is therefore constantly trying to increase the amount taken from the worker. He can do this in several ways: for example, by reducing the worker’s wages; this means that the worker works a less proportion of the day for himself, and a greater proportion for the employer. The same result is achieved by “speeding up” or intensifying the labour – the worker produces his keep in a smaller proportion of the working day, and works a larger proportion for his employer. The same result, again, is achieved by lengthening the working day, which increases the proportion of the working day spent in working for the employer. On the other hand, the worker fights to improve his own position by demanding higher wages and shorter hours and by resisting “speeding up.” Hence the continuous struggle between the capitalists and the workers, which can never end so long as the capitalist system of production lasts.

 Also to be noted is that the “surplus value” created by the worker in the course of production is not all kept by his employer. It is, so to speak, a fund from which different capitalist groups take their pickings – the landowner takes rent, the banker takes interest, the middleman takes his “merchant’s profit,” and the actual industrial employer only gets what is left as his own profit. This in no way affects the preceding analysis; it only means that all these capitalist sections are, as it were, carrying on a certain subsidiary struggle among themselves for the division of the spoils. But they are all united in wanting to get the utmost possible out of the working class.

Then there is another most important factor in the development of capitalism – competition. Like all other factors in capitalist production, it has two contradictory results. On the one hand, because of competition to win larger sales of products, each capitalist enterprise is constantly trying to reduce production costs, especially by saving wages – through direct wage reductions or by speeding-up or other forms of rationalisation. On the other hand, those enterprises which succeed in getting enough capital to improve their technique and produce with less labour are thereby contributing to the general process described above – the reduction of demand owing to the total wages paid out being reduced.

Nevertheless, the enterprise which improves its technique makes a higher rate of profit for a time – until its competitors follow suit and also produce with less labour. But not all its competitors can follow suit. As the average concern gets larger and larger, greater amounts of capital are needed to modernise a plant, and the number of companies that can keep up the pace grows smaller. The other concerns on to the wall – they become bankrupt and are either taken over by their bigger competitors or are closed down altogether. “One capitalist kills many.” Thus in each branch of industry the number of separate concerns is steadily reduced: big corporations appear, which more or less dominate a particular field of industry. Thus out of capitalist competition comes its opposite – capitalist monopoly.

Friday, July 05, 2013

Marxist Economic Theory

What is Capitalism

Much of the left today have abandoned Marx. Many people who are against certain aspects of capitalism snatch pieces of Marx to give themselves a progressive legitimacy but being anti-capitalist does not really say much. It only begs the questions: how do we describe capitalism and from what angle are we criticizing it?  Much of the Left chooses to divide capitalism between good and bad ones. They replaced Marx's criticism of capitalism with a host of reformist and even reactionary demands peddled under this name. Academics have tried to convert it into a scientific sociology or an alternative economic science for the left wing of the bourgeoisie. Pseudo-socialist presented workers with repulsive examples of despotic societies in the name of socialism, like the Soviet Union, China and Albania. The result is to alienate workers from communism and cut the connection between worker and communism.

 Terminology is important to discussion and bandying words around without fully comprehending their meanings won’t be fruitful. Capitalism is defined in many ways. Each of these definitions of capital leads to a specific political conclusion.

Thursday, May 02, 2013

A crisis of capitalism

The problem of the crisis is gaining the attention of people worldwide. This is because the present crisis is of unprecedented scale, and unparalleled seriousness and tenacity, have struck throughout the world. Representatives of the two classes in society are seriously engaged in the study of this problem with a rare level of seriousness; economists for the sake of somehow forging a path to stable capitalist production, and Marxists to provide a scientific basis for their tactics in this momentous period. As long as bourgeois economists maintain their capitalist perspective, they are incapable of understanding the problem of crisis. We socialists pointed out that it was not the bankers and financiers but the capitalist, system which was at fault.
To-day, the recession is still as intense than ever, at least, in regards for the working class. Workers in countries all over the world are faced with a world crisis of capitalism. Now genuine questions of survival, issues of actual life and death, are in the forefront of peoples minds. The crisis is not a crisis of natural scarcity or shortage. Millions of workers are willing and able to work; but existing society has no use for their labour. The crisis is a crisis of capitalism alone.
Everywhere there is a call for change and for government interventions that lead to a way out. All the leaders of capitalism, economists, financiers, politicians, are at sixes and sevens. All the capitalist spokesmen, Tory, Lib-Dems and Labour speak of “re-organisation,” and “re-regulation", of new policies of this, that and the other, to “save the British economy.” They appeal to the workers to make “sacrifices” to help and impose austerity cuts to ensure that sarifice. They mistakenly imagine that if only British capitalism could be modernised and improved and rationalisation all will be well. But no policy of patching up capitalism can avail. These so-called remedies not only fail to touch the root of the problem, they can only aggravate the disease.
What solutions do the capitalist leaders propose? They propose to throw the cost of the crisis off the backs of the rich onto those of the poor. The working class has met with the smashing of the unions, the driving down of the standard of living simultaneously with the drastic increase in the cost of living. The capitalists have no solution to the crisis. Its measures aggravate the crisis and pave the way for still more deep-seated and profound crisis in the future. The working class must not harbour any illusions about “recovery”. The motive of capitalist production is profit and the only issue of “recovery” for the bourgeoisie is recovery of profits. Such “recovery” will not alter at all the condition of the working class as wage slaves, or change the conditions of the exploited in relation to the exploiters. In fact, the recovery of the profits of the bourgeoisie can only take place on the basis of the further intensification of exploitation, the further impoverishment and ruin of the masses of the people, with a higher level of the permanent army of the unemployed, an increase in the impoverishment and immiseration of the working class. In order to force through its programme for shifting the burden of the crisis onto the backs of the working people, the bwealthy is launching a savage offensive against the rights of the workers.
In the crisis, the banks could not lend money to business which was not producing profits or dividends and banks could not collect on their loans to business. The government kindly issued loans, took up part of the credit of the banks and in return gave interest bearing bonds (quantitive easing) thus providing a juicy investment field for the bankers. Money went to the banks, the insurance companies, the credit companies to help them overcome the crisis.
With a decrease in revenue and an increase in expenses the government had to increase its taxes. It refused to tax the higher brackets of incomes . Instead, it began a series of wage cuts for government employees in the public sector. It cut welfare benefits. It raised VAT on goods needed by the masses.

Is it any wonder that many capitalists showed a larger profit in some of the years of recession than in other more prosperous years?

The capitalists can only look for the solution in fiercer competition and in cheapening their own costs of production, by cutting wages against their competitors, in increasing their own workers’ productivity , in fighting to enlarge their own share of the market. But these measures are pursued by the capitalists in every country. Although one capitalist or another may gain a temporary advantage for a short time, the net effect can only be to deepen the crisis. The net effect of every advance of technique, of every wage-cut, of every cheapening of costs and intensification of production, is to intensify the world crisis for the worker. Increased output is demanded from every worker for less reward. Speeding up and rationalisation are the order of the day, leading directly to worsening work conditions, mounting health problems, and rising numbers of industrial accidents, along with increasing rate of unemployment or underemployment.

Many would-be reformers of capitalism urge that if only the employers would pay higher wages to the workers, enabling them to buy more of what they produce, there would be no crisis. This ignores the inevitable laws of capitalism — the drive for profits, and the drive of competition. The drive of capitalism is always to increase its profits by every possible means, to increase its surplus, not to decrease it. Some economists may preach the gospel of high wages in the hope of securing a larger market for certain capitalist’s goods. But the actual drive of capitalism as a whole is the opposite. The force of competition compels every capitalist to cheapen costs of production, to extract more output per worker for less return, and for wholesale wage-cuts in every industry. All have the same task; to cut down rigidly the standards of the workers at home, to carry through a trade offensive for the capture of markets abroad.

Capitalism has no solution. The most the capitalists can do is to wait amidst the general misery until the universal stagnation of production has run its course and for “demand” to once again return (...to begin a new trade cycle, and lead to a new future crisis.) Capitalism will survive if we let it. Crises can resolve the contradictions temporarily and allow a new period of expansion until the next crisis.

The motive of capitalist production is the securing of maximum profits. Production of goods is in fact an incidental aim of capitalism, as is employment. The bourgeoisie organises production for the purposes of increasing profits. When conditions are such that profits can be increased by increasing production, the bourgeoisie does so, and when conditions are such that profits can only be increased by cutting back production to keep up the price, then that is what the bourgeoisie does. Thus if it serves to increase profits to increase the numbers of workers in production, then this is done; but if profits can only be increased by intensifying exploitation, getting more or the same amount of work out of fewer workers, then this is done instead. These fundamental features of the capitalist system cannot be eliminated without removing the capitalist system itself.

This crisis calls aloud for the workers’ socialist revolution. Only the working-class can solve the causes of the crisis by wresting production from the fetters of private/state ownership and profit-making and organise production for social use. The power of producing wealth is greater than ever. It has grown far more rapidly than population, thus disproving all the lies of those who talk of “over-population” as the cause of the crisis. Although capitalism does not use more than a portion of modern productive power, although it wastes most and deliberately cuts down and restricts production in order to increase profits, actual production has grown much faster than population.

Only under capitalism can there be a curse of plenty. Only socialism can bring the solution. Only socialism can cut through the bonds of capitalist property rights and organise production to meet human needs. Once capitalism is overthrown, then and only then can production be organised in common for all, and every increase in production bring increasing abundance and leisure for all. This is the aim of the Socialist Party, the only party that pointed out during the present period that there is no alternative for the working class other than socialism.

Thursday, May 24, 2012

The Swindled Scots Again


A previous post concerned the Darien Scheme. Not many Scots however know of Gregor Macgregor, Prince of Poyais, Poyais being not far up the Central American coast from Darien. Gregor MacGregor was born in Glengyle in Stirlingshire and claimed direct descent from Rob Roy. He was a soldier and mercenary who fought in the South American wars of independence. 

Upon his return in 1820 to Britain, he claimed to be cacique ["prince"] of Poyais, a Central American country that MacGregor promoted to investors and colonists. Poyais, was an independent nation on the Bay of Honduras. He claimed that a native chief King George Frederic Augustus the First had given him the territory of Poyais, 12,500 sq. mile of fertile land with untapped resources. Gregor presented himself as His Serene Highness Gregor I, Prince of Poyais and his beautiful wife as the Princess of Poyais. No-one questioned their bona fides; instead they were welcomed into the ranks of the elite and were the toast of society. MacGregor published a 350-page guidebook entitled Sketch of the Mosquito Shore, including the Territory of Poyais. It described Poyais in glowing terms and concentrated on how much profit could be made from the country's ample resources. Poyais was said to possess an already existing infrastructure with civil service, army and democratic government , gold and silver mines and large amounts of fertile soil ready to be settled. The capital, St Joseph, even boasted an opera house. The region was even free of tropical diseases. But now he needed settlers and investment and had come back to the United Kingdom to give people the opportunity. At the time, British merchants were all too eager to enter the South American market that Spain had denied to them. The Lord Mayor of London organised an official reception in London Guildhall. MacGregor was also introduced to Major William John Richardson and he made Richardson Legate of Poyais. He also moved to Oak Hall, Richardson's estate in Essex, as befit his station as a prince. An office for the Legation of the Territory of Poyais was opened in the City of London and MacGregor enhanced his popularity with elaborate banquets and invited dignitaries like foreign ambassadors and government ministers.

MacGregor also claimed that one of his ancestors was a rare survivor of the Darien Scheme, the failed Scottish attempt of colonisation in Panama in 1690s. In order to compensate for this, he said, he had decided to draw most of the settlers from Scotland. For this purpose, he established offices in Edinburgh Glasgow and Stirling. In Scotland, MacGregor began to sell land rights for 3 shillings and 3 pence per acre. The average worker's weekly wage at the time was about £1, which meant that the price was very generous. The price steadily rose to 4 shillings. Many people hoping to make a new start in the new country signed on with their families. MacGregor successfully raised a £200,000 loan on behalf of the Poyais government, in the form of 2,000 bearer bonds worth £100 each.

The Legation of Poyais chartered a ship called the Honduras Packet. Its cargo also included a chest full of Poyais Dollars, the Poyaisian currency MacGregor had printed in Scotland. Colonists were assured the only legal currency in their new home would be the Poyaisian dollar and so, before departing, they exchanged their old Scottish and English pounds for this new currency. What did they care for old money from the old country anyway? A wonderful new world of plenty awaited them. On 10 September 1822 the Honduras Packet departed from the Port of London with 70 would-be-settlers aboard. They included doctors, lawyers and a banker who had been promised appropriate positions in the Poyais civil service. Some had also purchased officer commissions in the Poyaisian army. A Scottish shoemaker was equally entranced at the thought that he was to be the Official Shoemaker to the Princess of Poyais. On 22 January 1823 another ship, the Kennersley Castle, left Leith for Poyais with 200 would-be-settlers. It arrived in the appropriate place 20 March and spent two days looking for a port. Eventually the newcomers found the settlers who had sailed on the Honduras Packet.

The bond issues, land sales, and currency of the Territory of Poyais were all part of a scam. Poyais was an imaginary country. What the settlers found was jungle. "St Joseph" consisted of only a couple of ruins of a previous attempt at settlement abandoned in the previous century. There was no settlement of any kind. Standing where the towering buildings, opera house and banks of the shining capital of St Joseph were supposed to be were instead four rundown shacks. There was no Poyaisian army, no royal family, no civil service, not even one solid building. The great, prosperous nation of Poyais had all been an elaborate illusion, a heartless fraud committed on men and women from hard-working backgrounds who had dared to hope for a better life in the Americas. The monumental fraud had enlisted the credulity not only of adventurers but also of earnest bankers, profit-hungry land agents, and an old-boy network of aristocrats. A bull market had raged and the banking houses were abuzz with the news that Sir Gregor MacGregor was offering acreage in the New World at bargain prices. So convincing was MacGregor that he had duped them all. 180 of the 270 would-be settlers perished during the ordeal. Fewer than 50 came back alive to Britain. MacGregor himself, however, had already left for France where he had plans to send French emigrants to Poyais.

MacGregor published a new constitution of Poyais and changed it into a republic with himself as the head of state. In August 1825 he issued a £300.000 loan with 2.5% interest through the London bank of Thomas Jenkins & Company and the trading organization "Compagnie de la Nouvelle Neustrie" was commissioned to further the affairs of Poyais. Recruited settlers were required to buy 100 francs worth of the company shares. When French officials noticed that a number of people had obtained passports in order to voyage to a country they had never heard of, they seized the la Nouvelle Neustrie ship. Some of the would-be-emigrants realised that something was not right and demanded investigation of the affair. MacGregor was arrested with others but was acquitted at his trial and released.

MacGregor returned to London. This time he claimed that he had been elected as the head of state, the "Cacique of the Republic of Poyais", and opened a new office in Threadneedle Street in the City, without any diplomatic trappings and in much a smaller scale than before. He issued a loan worth £800.000 as 20-year bonds again with Thomas Jenkins & Company as brokers. In 1828 MacGregor tried to sell land from Poyais at the price of 5 shillings per acre. In 1831 MacGregor promoted a "Poyaisian New Three per cent Consolidated Stock" as "the President of the Poyaisian Republic". In 1834 he was living in Scotland and had to issue a new series of land certificates as payment for unredeemed securities. In 1836 he wrote a new constitution for the Poyaisian Republic. The last record of any Poyais scheme is in 1837, when he tried to sell some land certificates.

 Such a scam could never happen again in Scotland, could it?

 The Bank of Scotland and the Royal Bank of Scotland effectively went bust during the recession. At best, there were appalling management failures with an obsession with growth taking precedence over prudent banking practice. At worst, the banks were out-of-control and riddled with fraud and criminality, having been primed by its management teams to deliver maximum short-term profit growth with maximum reward for executives, irrespective of whether the banks had a chance of surviving long term — or whether its customers were harmed. The Financial Services Authority turned a blind eye to the blatant wrongdoing and recklessness, accused by many of acting as a cheerleader for the big banks, if not an accomplice.

The executives who ran HBOS and RBS were supposed to be the best and the brightest. They were selected from the finest schools and the top universities, well qualified in business and accountancy. How exactly do the people running these operations invest? Do they watch everyone else and then do the exact same thing, following instinct of the herd? Do they figure that they have some form of immunity and get away with what others can't? Surely, they understand the business cycle. Surely, they understand what a bubble is. Surely they could see what was going on, when it was going on, and where it was leading before it went there? If they didn't, how come others did? The financial world was full of information about the coming crash before it happened. Most in the money community knew the market was bound to come tumbling down. But, just what are the chances of those with their snouts deep in the trough ever questioning the system? Little to none. Not in a million years will they ever question the fundamentals of the system, even though it blows up in their faces every decade or so. Despite all the sophisticated best-practices and the cleverest financial technology capitalism is fatally flawed. The system will eventually rebound from the present recession. The bankers with their spread sheets, their risk analysis, their clever accounting methods will once again seek out their "opportunities" in the next bubble. And then express their surprise when that too bursts.

At some point, the system has to be questioned. The idea that people can trust in more and more regulatory authority to foil the "few" bad pennies and rotten apples is sheer wishful thinking. What must come out of this mess is not a restructured financial and regulatory environment but a fundamental questioning of the whole concept of capitalism. It is no exaggeration to say that the global financial sector tolerates and even encourages systematic fraud. The behaviour that caused the sub-prime mortgage bubble and financial crisis of 2008 was a natural outcome and continuation of a criminalised pattern, rather than some kind of economic accident. There have been very few prosecutions and even less criminal convictions of senior executives. Similar to MacGregor, the bankers have walked Scot-free from the legal process.

The economist, Nouriel Roubini, in Crisis Economics recalls Gregor MacGregor and reminds us of the recurring nature of economic crises. He wrote "...the panic of 1825 reverberated around the world. It began in Britain and had all the hallmarks of a classic crisis: easy money (courtesy of the Bank of England), an asset bubble (stocks and bonds linked to investments in the emerging market of Peru), and even widespread fraud (feverish selling of the bonds of a fictitious nation called the Republic of Poyais to credulous investors)."

Just like many another capitalist swindler, Gregor MacGregor got away with his crimes and found a friendly foreign country to retire to. His name can still be seen on a  monument to honour Venezuela’s heroes of independence. His legacy in his Scotland is very different. The fraud cost more than just the livelihoods of those he fooled, it cost them their lives.

Wednesday, October 08, 2008

The Crunch of the Matter

From one of our comrade fellow bloggers

Quoth Alistair Darling:
"The Financial Services Authority has announced a further increase from tomorrow to the compensation limit for retail bank deposits to £50,000 per depositor, which means £100,000 for joint accounts. That measure will ensure that 98 per cent. of accounts are fully covered."

Now, quoth Iain Duncan Smith:
"At the Dispatch Box, the Chancellor mentioned, quite rightly, that our protection covers about 98 per cent. of all depositors, but he will also recognise that we have significantly more money on deposit than Germany does. The reality is that that 2 per cent. represents a very significant amount of money. What concerns me right now is that, given the febrile nature of the markets—watching little things and then panicking—if they see any flight of capital, even that 2 per cent., towards Germany, it could cause another stampede and another crisis. I recognise the Chancellor's problem about indicating what he may or may not do, but does he not recognise that that 2 per cent. alone is perhaps enough to tip over the markets if they saw a flight of that money to, say, Germany or even Ireland?"

So, what they are saying is that the vast majority of accounts in the UK hold less than £50,000 (£100,000 for joint accounts) in retail banks.What they are saying is that there is an incredible disparity of wealth - but that the very wealthy have the capacity to cause crises by the overwelming might of their money.

Let's be clear, what this means. Economic crises are not natural phenomena, they are the results of the owners of society exerting their influence. They are profoundly political - the wealthy making us dance to their tune. The wealthy on strike.
Capitalism causes a crisis by its very existence, starvation, starvation related diseases, gross poverty, curtailled life-spans, wars - they are all ignored as background noise.
When the capitalists feel the pain, then we are all made to jump.
This isn't a case of being for or against bail-outs - after all, who can blame the man with a gun to his head - but a matter of being for or against capitalism.

Our only demand must be: "End class society!" else this will all happen again. It is not a glitch, it is politics, the political decision of the real voters to vote with their feet.

From our discussion forum
Robert Reich, former Labor Secretary under Bill Clinton has an interesting article in the current New Statesman:http://tinyurl.com/4h4ss8
"The problem lies deeper. Most Americans can no longer maintain their standard of living. Remember, Wall Street's near-meltdown originated with the bursting of the great housing bubble. That bubble had allowed millions of Americans to take money out of their homes byusing their rising home values as collateral for loans. But now the bubble has burst, those homes can no longer be used as piggy banks.…The bubble masked this basic reality: for most Americans, earnings have not kept up with the cost of living. The earnings of non-government workers who are paid by the hour - and who comprise 80 percent of the American workforce - are lower today than they were in 2000, adjusted for inflation. They are barely higher than they were in the mid-1970s"

This fact is so undeniable, that even the `CIA world fact book' (a US foreign policy reference guide - http://tinyurl.com/33l9f8) describes the situation in the US as:
"The onrush of technology largely explains the gradual development ofa "two-tier labor market" in which those at the bottom lack theeducation and the professional/technical skills of those at the topand, more and more, fail to getcomparable pay raises, health insurance coverage, and other benefits.Since 1975, practically all the gains in household income have goneto the top 20% of households."

Now, for Reich this becomes a basic under consumptionist theory –that Labour was unable to buy back its produce. In simpler terms, it shows the basic failure of the sub-prime lending model. Lending to labour when wages aren't rising meant the whole of that lending relied on continually rising house prices, as soon as the rise stopped, the pyramid scheme failed.I think the most significant part of this crisis is that it shows how capitalism cannot meet workers' needs. All the talk of irresponsible lending masks the fact that in order to get and keep a roof over their heads, workers resorted to massive quantities of debt... this is where our focus should lie.
Obviously, upping wages would not simply end the problem, because cash strapped firms would be unable to pay them. But I think thisdoes confirm a class centric view that a weak working class is actually bad for capitalism – certainly, for advanced markets. I once read that the US industrialised so rapidly due to the small sizeof its skilled working class – this compelled industrialists toinnovate and improve the intensive exploitation of capital. The converse is true if skilled Labour is plentiful.More pertinently, if productivity has been rising without wage rises to compensate, this too could affect the quantity of money capital kicking around, hence feeding the stock market/banking bubbles...As I say on my blog today, the crisis is nakedly political - what weare calling a crisis is tantamount to strike action by the owners of the world, as they try to protect their investments and their income.I think we need to avoid giving the impression that it is a mechanistic problem, rather than the result of conscious human action in an unequal society...[An] interesting factoid from Alistair Darling's statement yesterday, by guaranteeing accounts up to £50K (£100K in joint accounts) they are guaranteeing 98% of deposits. That's a gross amount of inequality,because the remaining 2% contain collosal amounts of cash, sufficient to cause bank runs by their chasing security and returns.

That 98 per cent of deposits contain less than £50,000 but of the 2 per cent that were above this, they accounted for about half of the total amount desposited. In other words, the top two per cent have as much on deposit as the other 98 per cent put together, yet another confirmation of the Party's case over the years.

Sunday, March 23, 2008

Lest we forget - Hung out to Dry


The richest 10 per cent of the UK population increased their share of the nation's marketable wealth (excluding housing) from 57 per cent in 1976 to 71 per cent in 2003.


Over the same period, the speculative capital that could be deployed or invested by the bottom 50 per cent of the British population fell from 12 per cent to just 1 per cent.


The wealthiest 1 per cent of the population, on current government figures, now control more than a third of all the marketable wealth – and this ignores the vast sums held in offshore tax havens.


The New Economics Foundation has shown that global growth has not aided the poor. In the 1980s, for every $100 of world growth, the poorest 20 per cent received $2.20; by 2001, they received only 60 cents. Clearly , growth disproportionately benefits the rich and further impoverishes the poor.


Real wage increases in the top 13 countries of the Organisation for Economic Cooperation and Development have been below the rate of inflation since about 1970 – a situation compounded in Britain as the measure of inflation massively underestimates the real cost of living.


Thus wage earners – rather than asset owners – have faced a 35-year downward pressure on their standard of living. Indeed, the golden age for the salaried worker, as a share of GDP, was between 1945 and 1973 – and not this vaunted age of liberalisation.

Monday, October 29, 2007

The days grow longer

The unpaid working time we give to our bosses .

Socialist economics is based upon the Labour Theory of Value which is the Marxian explanation of our exploitation . Unpaid labour is the source of all surplus value. Normally , this takes place in the work-shop or office from 8 to 5 but more and more the time of the working day is growing in ways that we are not immediately aware of giving to the employers . When capitalists buy a worker’s labour they buy the worker’s capacity to work for a full day . Nowadays , with factories seldom at your doorstep , workers are forced to travel to and fro their workplaces . This travelling time we also give free to the bosses .

The amount of time that workers spend commuting between home and their workplace has rocketed in the past 10 years, with millions of workers now taking at least an hour to get to the office, new research shows. TUC research found the number of people who travel for more than an hour to get to work has risen by as much as 40% and that around 145,000 people in Scotland are now setting off for work earlier and getting home later than they did 10 years ago and has increased by 1.5 million to 5.5 million across Britain. Not-for-profit group Work Wise UK said Britons face the second longest commutes in Europe, behind the Netherlands, averaging 8.7 miles a day. One-in-ten commuters has a daily journey in excess of two hours, and 3 per cent of employees are "extreme commuters" averaging three hours a day.

TUC general secretary Brendan Barber said: "We work some of the longest hours in Europe, and on top of this have to endure the second-longest daily commute in Europe - on average 54 minutes per day."

Summer School

Summer School 2017

Summer School 2017  21st – 23rd July Fircroft College, Birmingham   These days, con...