"A Muslim cleric in Saudi Arabia has called on women to wear a full veil, or niqab, that reveals only one eye. Sheikh Muhammad al-Habadan said showing both eyes encouraged women to use eye make-up to look seductive. The question of how much of her face a woman should cover is a controversial topic in many Muslim societies. The niqab is more common in Saudi Arabia and the Gulf, but women in much of the Muslim Middle East wear a headscarf which covers only their hair. Sheikh Habadan, an ultra-conservative cleric who is said to have wide influence among religious Saudis, was answering questions on the Muslim satellite channel al-Majd."
(BBC News, 3 October) RD
The Glasgow & Edinburgh Branches Blog. Towards a better understanding of the world, in order to change it.
Monday, October 06, 2008
old and in debt
After a lifetine of labour and drudgery what do we hve to look forward in thetwilight of our years - more debt .
A study of over 60s who sought help from CAS found debt levels had risen to £17,767 since 2004, but more than a quarter had a debt of over £25,000. The report, Growing Old Together: Older CAB Clients and Debt, claimed that average debt levels for this group were 29 times their monthly income.
The research found that household bills, such as council tax and utility bills, created the most anxiety for older people and that they were using credit to pay them
Saturday, October 04, 2008
City scandals
INSIDERS AND OTHERS
We can see today how easily stock markets can tremble when investors get the jitters over, say, the mere rumour of a small increase in interest rates or some other trivial matter. Imagine what those jitters will be like when the socialist movement begins to grow. V. V.
A Glasgow comrade gives an insight to share dealings of yesteryear.( or “Is it this year?” )
Did you get your British Gas shares ok? What's that, you didn't bother? Well, neither did most other workers who had the chance, and no one knows how many of those who did buy the shares will hold on to them. It was estimated that on the day after the sale, around one tenth of the shares had already changed hands as small-time buyers sold out to the big institutions like insurance companies and pension funds. This is what happened with British Telecom shares. When they were first sold in 1984 the number of individual shareholders was 2.3 million. By May 1986 the number was down to 1.6 million, a drop of over 30%, and this figure is certain to fall still further as time passes.
Nevertheless, interest in the stock market is a lot higher than ever it was before. Until recently most people only ever saw the stock market quotations in the newspapers if they accidentally turned over two pages at once, but the saturation coverage by the media of the government's privatisation programme has changed all that. Also, the fear of unemployment has ensured that many employees of quoted companies follow the share price of those companies as a guide to their job prospects.
However, the workings of the stock market remain a mystery to the vast majority of people and this helps preserve the silly notion that financiers, stockbrokers and the like who do understand it are brainier than the rest of us. Actually, it's not nearly as difficult as it seems One of the main reasons why someone not involved in finance finds it baffling is the frequent use of several different words to describe one item. For example, government "stock , which pays a fixed rate of interest, is also called "gilts" (gilt-edged) or "consols" (consolidated) while "securities" is simply the a11-embracing name for stocks and shares of all kinds.
Different types of shares have different rights and rewards. The "ordinary" shares are the ones which actually own the company. Holders of these have full voting rights and receive a variable dividend depending on the company's profits, if any, and what the directors decide to pay out. These shares are also referred to (more confusion) as "equities". "Preference" shares usually have no vote but entitle holders to a fixed dividend ahead of the ordinary shareholders assuming there is something to pay out. "Debentures" are loans made to companies by investors who receive fixed-interest whether the company makes a profit or not.
Until October 1986 members of the London Stock Exchange had to be British-born. And although they would angrily denounce "who does what disputes in factories, shipyards, etc.. they had their own restrictive practice. This meant that only those who were brokers could buy and sell securities for the public and they made their money by charging clients a fixed commission. "Jobbers", on the other hand, bought and sold on their own account but could only deal with the public through the brokers and made a living from the difference between the prices at which they bought and sold. So brokers couldn't act as jobbers and vice-versa. Since October membership of the Exchange is open to other nationals and the difference between brokers and jobbers is abolished along with fixed commissions. Now the price on deals is negotiable
All of these changes, known as "de-regulation", are the result of the Big Bang" we have all heard so much about. The idea is to make the London Stock Exchange more competitive with its main rivals in New York (Wall Street) and Tokyo. After all, if customers can have their business carried out more cheaply in New York or Tokyo then that is where they will make their deals and the new computerised communications technology makes that easy to do. This new technology also means that dealers in London will now transact business in their offices and the Stock Exchange floor will be almost deserted from now on
Any stock market must protect its reputation for honest dealing If investors think that they may be ripped-off then they will take their business elsewhere and this is why the New York and London Stock Exchanges are trying to curb "insider dealing". The most notorious insider is the Wall Street speculator, Ivan Boesky, who for years had apparently anticipated the rise in price of various securities which he bought on a huge scale. Hailed as a genius, Boesky had simply been using confidential information passed to him, for a cut, by people who were professionally engaged in takeover bids which would push up the price of the shares involved.
It is hard to imagine that Wall Street didn't know what Boesky was up to. No one can consistently tell in advance what the market will do. The anarchy of capitalist production sees to that. When every company in every industry is making its plans independently of all the others, and when all of them are subject to forces beyond their control such as decisions taken by foreign governments or even their own, then how can future market trends be forecast with any certainty? The truth is that large-scale insider dealing has been the norm for a long time and will continue in the future whatever steps are taken to eliminate it. So much for the claim frequently made on behalf of the capitalists that their high returns are justified because they are the risk takers''. Not if they can help it, they're not!
What about the other claim that the capitalists are the wealth creators" because of their activities in the stock market? The real wealth of society consists of human beings using their physical and mental energies plus the resources of nature to produce the goods and services society needs. This wealth is legally owned by the owners of the enterprises whose workers have produced it. All the workers receive in return for their efforts is a part of the total value produced in the form of their wages and salaries. The remainder, surplus value in the form of dividends and interest, belongs to the owners of the various stocks and shares. These securities are merely legal title to this surplus and it is this title which is being traded when securities are bought and sold. So capitalists create not a scrap of wealth and stock exchanges are only the places where surplus value is divided between them.
Even so, the enormous power of the capitalists makes them seem invincible and many workers, even against their wishes, cannot see how capitalism can ever be toppled. But the power of the capitalists does not lie in the amount of pounds, dollars and francs they own. It lies in the fact that the vast majority of workers still see production for profit as the only possible method of producing and distributing society's wealth. If that idea should weaken due to the growth of socialist consciousness in the world's working class then the power of the capitalists would not look so invincible at all.
We can see today how easily stock markets can tremble when investors get the jitters over, say, the mere rumour of a small increase in interest rates or some other trivial matter. Imagine what those jitters will be like when the socialist movement begins to grow. Who will be willing to invest then? Capitalism depends for its continued existence on working-class support for it. When that support crumbles then so too will the power of the capitalists. V. V.
Socialist Standard February 1987
We can see today how easily stock markets can tremble when investors get the jitters over, say, the mere rumour of a small increase in interest rates or some other trivial matter. Imagine what those jitters will be like when the socialist movement begins to grow. V. V.
A Glasgow comrade gives an insight to share dealings of yesteryear.( or “Is it this year?” )
Did you get your British Gas shares ok? What's that, you didn't bother? Well, neither did most other workers who had the chance, and no one knows how many of those who did buy the shares will hold on to them. It was estimated that on the day after the sale, around one tenth of the shares had already changed hands as small-time buyers sold out to the big institutions like insurance companies and pension funds. This is what happened with British Telecom shares. When they were first sold in 1984 the number of individual shareholders was 2.3 million. By May 1986 the number was down to 1.6 million, a drop of over 30%, and this figure is certain to fall still further as time passes.
Nevertheless, interest in the stock market is a lot higher than ever it was before. Until recently most people only ever saw the stock market quotations in the newspapers if they accidentally turned over two pages at once, but the saturation coverage by the media of the government's privatisation programme has changed all that. Also, the fear of unemployment has ensured that many employees of quoted companies follow the share price of those companies as a guide to their job prospects.
However, the workings of the stock market remain a mystery to the vast majority of people and this helps preserve the silly notion that financiers, stockbrokers and the like who do understand it are brainier than the rest of us. Actually, it's not nearly as difficult as it seems One of the main reasons why someone not involved in finance finds it baffling is the frequent use of several different words to describe one item. For example, government "stock , which pays a fixed rate of interest, is also called "gilts" (gilt-edged) or "consols" (consolidated) while "securities" is simply the a11-embracing name for stocks and shares of all kinds.
Different types of shares have different rights and rewards. The "ordinary" shares are the ones which actually own the company. Holders of these have full voting rights and receive a variable dividend depending on the company's profits, if any, and what the directors decide to pay out. These shares are also referred to (more confusion) as "equities". "Preference" shares usually have no vote but entitle holders to a fixed dividend ahead of the ordinary shareholders assuming there is something to pay out. "Debentures" are loans made to companies by investors who receive fixed-interest whether the company makes a profit or not.
Until October 1986 members of the London Stock Exchange had to be British-born. And although they would angrily denounce "who does what disputes in factories, shipyards, etc.. they had their own restrictive practice. This meant that only those who were brokers could buy and sell securities for the public and they made their money by charging clients a fixed commission. "Jobbers", on the other hand, bought and sold on their own account but could only deal with the public through the brokers and made a living from the difference between the prices at which they bought and sold. So brokers couldn't act as jobbers and vice-versa. Since October membership of the Exchange is open to other nationals and the difference between brokers and jobbers is abolished along with fixed commissions. Now the price on deals is negotiable
All of these changes, known as "de-regulation", are the result of the Big Bang" we have all heard so much about. The idea is to make the London Stock Exchange more competitive with its main rivals in New York (Wall Street) and Tokyo. After all, if customers can have their business carried out more cheaply in New York or Tokyo then that is where they will make their deals and the new computerised communications technology makes that easy to do. This new technology also means that dealers in London will now transact business in their offices and the Stock Exchange floor will be almost deserted from now on
Any stock market must protect its reputation for honest dealing If investors think that they may be ripped-off then they will take their business elsewhere and this is why the New York and London Stock Exchanges are trying to curb "insider dealing". The most notorious insider is the Wall Street speculator, Ivan Boesky, who for years had apparently anticipated the rise in price of various securities which he bought on a huge scale. Hailed as a genius, Boesky had simply been using confidential information passed to him, for a cut, by people who were professionally engaged in takeover bids which would push up the price of the shares involved.
It is hard to imagine that Wall Street didn't know what Boesky was up to. No one can consistently tell in advance what the market will do. The anarchy of capitalist production sees to that. When every company in every industry is making its plans independently of all the others, and when all of them are subject to forces beyond their control such as decisions taken by foreign governments or even their own, then how can future market trends be forecast with any certainty? The truth is that large-scale insider dealing has been the norm for a long time and will continue in the future whatever steps are taken to eliminate it. So much for the claim frequently made on behalf of the capitalists that their high returns are justified because they are the risk takers''. Not if they can help it, they're not!
What about the other claim that the capitalists are the wealth creators" because of their activities in the stock market? The real wealth of society consists of human beings using their physical and mental energies plus the resources of nature to produce the goods and services society needs. This wealth is legally owned by the owners of the enterprises whose workers have produced it. All the workers receive in return for their efforts is a part of the total value produced in the form of their wages and salaries. The remainder, surplus value in the form of dividends and interest, belongs to the owners of the various stocks and shares. These securities are merely legal title to this surplus and it is this title which is being traded when securities are bought and sold. So capitalists create not a scrap of wealth and stock exchanges are only the places where surplus value is divided between them.
Even so, the enormous power of the capitalists makes them seem invincible and many workers, even against their wishes, cannot see how capitalism can ever be toppled. But the power of the capitalists does not lie in the amount of pounds, dollars and francs they own. It lies in the fact that the vast majority of workers still see production for profit as the only possible method of producing and distributing society's wealth. If that idea should weaken due to the growth of socialist consciousness in the world's working class then the power of the capitalists would not look so invincible at all.
We can see today how easily stock markets can tremble when investors get the jitters over, say, the mere rumour of a small increase in interest rates or some other trivial matter. Imagine what those jitters will be like when the socialist movement begins to grow. Who will be willing to invest then? Capitalism depends for its continued existence on working-class support for it. When that support crumbles then so too will the power of the capitalists. V. V.
Socialist Standard February 1987
Reading Notes
- More definitions from the Devil’s Dictionary:-
- Infidel – In New York, one who does not believe in the Christian religion. In Constantinople, one who does.
- Idiot – A member of a large and powerful tribe whose influence in human affairs has always been dominant and controlling.
- History – An account mostly false, of events mostly unimportant, which are brought about by rulers mostly knaves, and soldiers mostly fools.
- Heathen – A benighted creature who has the folly to worship something that he can see and feel.
-for socialism John Ayers
- Infidel – In New York, one who does not believe in the Christian religion. In Constantinople, one who does.
- Idiot – A member of a large and powerful tribe whose influence in human affairs has always been dominant and controlling.
- History – An account mostly false, of events mostly unimportant, which are brought about by rulers mostly knaves, and soldiers mostly fools.
- Heathen – A benighted creature who has the folly to worship something that he can see and feel.
-for socialism John Ayers
Friday, October 03, 2008
GOD AND MAMMON
"God squared up to Mammon last week as the two most senior figures in the Church of England rode into battle against City traders. John Sentamu, the Archbishop of York, condemned as "bank robbers and asset strippers" the dealers who made millions by betting that shares in HBOS would fall in price. ... In The Spectator, Rowan Williams, the Archbishop of Cantebury and a self-confessed "hairy lefty", praised Marx for his attacks on capitalism and said more regulation was essential. Was all this criticism a little hypocritical, though? Ekklesia, the liberal Christian think tank, pointed out that the Anglican church used speculative methods for its own investments when it set up a currency hedging programme in 2006, in effect short-selling sterling....This year the church, with billions invested in stocks and shares, returned a record profit of 9.4%." (Sunday Times, 28 September) RD
BABY, IT'S COLD INSIDE
"The number of households in fuel poverty in the UK rose to 3.5 million in 2006, government figures show. The figures from the Department for Environment and the Department for Business show this is an increase of one million on 2005 levels. Fuel poverty is defined as households who spend more than 10% of their income on fuel. The Unite union said thousands more people are likely to suffer from fuel poverty this winter. The figures include around 2.75 million homes classed as "vulnerable" -containing a child, elderly person or someone with a long-term illness. The number of homes in fuel poverty in England rose from 1.5 million in 2005 to 2.4 million in 2006, including an extra 700,000 vulnerable households."
(BBC News, 2 October) RD
(BBC News, 2 October) RD
Thursday, October 02, 2008
Food for Thought
- The current market meltdown is no mystery to socialists, just the normal operation of the capitalist mode of production. Booms and busts are created by the anarchy of production and will continue as long as capitalism lasts. Still, it’s amazing to see the wild market gyrations,and even more to witness the attempted bailouts. During the week of September 15-19, The Toronto stock exchange lost 515 points on Monday, lost 27 points on Tuesday, lost 349 points on Wednesday, gained 186 points on Thursday, and gained 848 points on Friday, after $180 billion had been pumped into the global financial system by the world’s central banks.Unfortunately, by September 29th., the markets lost $1 trillion, making $4.2 trillion in losses for the year and the American government is considering a $700 billion bailout, and that’s on top of several rescue attempts for large financial institutions.(AIG Insurance CO. got $85billion). Of course, that’s all in the casino economy, not the real one, but the worker will get hit again through job losses as the recession deepens and through his/her small investments or pension fund losses. Even Sir Isaac Newton was moved to remark, after losing a fortune in the South Sea Bubble,
“ I can calculate the movement of the stars, but not themadness of men.”
- Meanwhile, the excesses continue. CEO of the failed Lehman Brothers Walked away with $34 million in salary this year, and the CEO of AIG collected $14 million for overseeing the demise of his company (CBC radio). Richard Gwynne (Toronto Star, 26/09/08) reported that the pay of corporate executives increased from 27 times that of an average worker in 1973 to 400 times as much today. That means the executive has earned, by afternoon tea on the first day of the year, as much as the worker will get for a year’s toil!
- In Dubai, they have created a $1.5 billion tourist island, shaped in the form of a palm tree and with hotels that have $25 000 per night rooms.- Against all this talk of trillions and billions we learn that the UN has finally committed $3 billion over the next seven years, about $400 million per year, to the elimination of malaria. Malaria kills one million peoplea year, mostly infants, none of whom have any shares on the stock market and thus do not qualify for a trillion dollar bailout.
- The bleeding of manufacturing jobs in Ontario continues apace as Toyota cuts a shift and 1200 jobs its Woodstock plant. They may get something but it won’t compare to the CEOs parachutes.
- An article in the Toronto Star (19/09/08) reported that a national poll showed that nine out of ten Canadians thought it was “very” or “somewhat” important that the federal budget help the poor. Yet, Canada’s percentage of low-income people has never been lower than 10 percent in the last 40 years, and 150 000 to 300 000 people sleep on our streets or in shelters.They are still waiting for the ‘trickle down effect’ from the rich and famous.
- Haiti, battered by several hurricanes in the past weeks has to rely on star power to get aid. Actor Matt Damon and musician Wyclef Jean flew in to publicize the plight of the islanders. Give them credit for trying but if they have to wait as long as the Make Poverty History campaign, it will be a long recovery.
- Prisoners appearing in court in Durham Region (just east of Toronto)have had their cheese sandwiches cut to a granola bar and juice box to save money. They are finding it hard to concentrate on proceedings. A lawyer commented, “ In a 12-hour period, the prisoners are being fed the nutritional equivalent of what I scatter in the yard for the birds in the morning.” (Toronto Star).
- Ontario Premier, Dalton McGuinty has made bold strides to fight the economic crisis. After making poverty a priority, but doing next to nothing, he announced last week that trying economic times mean ‘adjustments’ to the programme. Say no More! - An agency to help new immigrants to settle in our region and servicing 40 000 people has had its funding cut by the federal government and two thirds of its workers laid off. The foregoing is to emphasize the fact that when the needy are in trouble, there is never any money, but when the multi-billionaire corporations are mired in a mess of their own making, trillions magically appear to their rescue, somewhat similar to the vast amounts of money that appeared at the outbreak of WWII after a decade of deprivation and starvation for the workers who were constantly told there was no money for them and their families. As I said at the beginning, this is the normal operation of the capitalist mode of production.
John Ayers
“ I can calculate the movement of the stars, but not themadness of men.”
- Meanwhile, the excesses continue. CEO of the failed Lehman Brothers Walked away with $34 million in salary this year, and the CEO of AIG collected $14 million for overseeing the demise of his company (CBC radio). Richard Gwynne (Toronto Star, 26/09/08) reported that the pay of corporate executives increased from 27 times that of an average worker in 1973 to 400 times as much today. That means the executive has earned, by afternoon tea on the first day of the year, as much as the worker will get for a year’s toil!
- In Dubai, they have created a $1.5 billion tourist island, shaped in the form of a palm tree and with hotels that have $25 000 per night rooms.- Against all this talk of trillions and billions we learn that the UN has finally committed $3 billion over the next seven years, about $400 million per year, to the elimination of malaria. Malaria kills one million peoplea year, mostly infants, none of whom have any shares on the stock market and thus do not qualify for a trillion dollar bailout.
- The bleeding of manufacturing jobs in Ontario continues apace as Toyota cuts a shift and 1200 jobs its Woodstock plant. They may get something but it won’t compare to the CEOs parachutes.
- An article in the Toronto Star (19/09/08) reported that a national poll showed that nine out of ten Canadians thought it was “very” or “somewhat” important that the federal budget help the poor. Yet, Canada’s percentage of low-income people has never been lower than 10 percent in the last 40 years, and 150 000 to 300 000 people sleep on our streets or in shelters.They are still waiting for the ‘trickle down effect’ from the rich and famous.
- Haiti, battered by several hurricanes in the past weeks has to rely on star power to get aid. Actor Matt Damon and musician Wyclef Jean flew in to publicize the plight of the islanders. Give them credit for trying but if they have to wait as long as the Make Poverty History campaign, it will be a long recovery.
- Prisoners appearing in court in Durham Region (just east of Toronto)have had their cheese sandwiches cut to a granola bar and juice box to save money. They are finding it hard to concentrate on proceedings. A lawyer commented, “ In a 12-hour period, the prisoners are being fed the nutritional equivalent of what I scatter in the yard for the birds in the morning.” (Toronto Star).
- Ontario Premier, Dalton McGuinty has made bold strides to fight the economic crisis. After making poverty a priority, but doing next to nothing, he announced last week that trying economic times mean ‘adjustments’ to the programme. Say no More! - An agency to help new immigrants to settle in our region and servicing 40 000 people has had its funding cut by the federal government and two thirds of its workers laid off. The foregoing is to emphasize the fact that when the needy are in trouble, there is never any money, but when the multi-billionaire corporations are mired in a mess of their own making, trillions magically appear to their rescue, somewhat similar to the vast amounts of money that appeared at the outbreak of WWII after a decade of deprivation and starvation for the workers who were constantly told there was no money for them and their families. As I said at the beginning, this is the normal operation of the capitalist mode of production.
John Ayers
Wednesday, October 01, 2008
COMPETITION
As a follow up on Williams' words, I recommend this article from the Socialist Standard on Competition, a view from a Glasgow member.
THE FREE MARKET
Competition
Some comedian once asked "If it's true that all the world loves a lover, why are there so many policemen in Hyde Park?" A good question but a better one for workers to ask themselves is "If competition is such a wonderful and desirable thing, why does everybody try so hard to avoid it?". For example, when solicitors lose their monopoly in house conveyancing, opticians lose theirs in selling spectacles, or shopkeepers hear that a supermarket is to be built nearby, do they say "Good! Just what we need: the icy blast of competition"? They do not, instead they protest bitterly and do everything they can to preserve the status quo.
This dislike of competition is shared by all business, big and small. In 1980 the world's largest corporation, American Telephone and Telegraph Company (AT and T) lost an anti-trust action brought against it by a much smaller rival, MCI, who were awarded 1,800 million dollars. AT and T have a near monopoly in the manufacture of vital equipment which MCI needed but they refused to sell them any. In Britain the giant British Oxygen Company, which had a turnover of £ 1,700 million in 1983, was exposed for trying to close down a small competitor whose turnover was only £150,000 - less than a third of the salary of BOC's chief executive. The competition of even such a minnow was more than BOC could tolerate.
The big three in the British drugs industry, ICI, Glaxo and Beecham's, are putting every obstacle in the way of small competitors who want to market half price, unbranded versions of some of the big three's most profitable drugs. Although these drugs are patented the law provides for “licences of right” to be available to other companies but does not specify what royalties are to be paid. The big three use this loophole to ensure that would be competitors have to sell for little less than themselves.
The airline industry is notorious for eliminating competition. Remember how big Atlantic carriers, including British Airways, forced Freddie Laker out of business? Now they have a new target in their sights. Richard Branson's one-aircraft Virgin Atlantic airline. Branson's attempt to take over where Laker left off by providing cut-price fares between Britain and America was countered by BA, Pan-Am and TWA who all reduced their fares to equal Virgin's. Predictably Branson howled "unfair" but why should the game be played by his rules? If he really believes in free market competition then he cannot complain if the big airlines slash their fares too. Branson's problem is that his rivals have much greater resources than he has and can easily outlast him in a protracted fares battle.
Dislike of competition has also been shown by the cross channel ferry companies. They are trying to persuade the government and potential investors that the channel tunnel will be unsafe to use and unprofitable. If the tunnel scheme goes through then these champions of the free market want to remove competition
between themselves by integrating their services in order to offset the expected loss of business. If this is not allowed then they will seek compensation from the government. Whatever happened to "standing on your own two feet"?
Although governments try to encourage competition within their own frontiers they assist their own industries to avoid it in international trade by loading the dice in their favour. The governments of the EEC protect their own farmers from competition from abroad by erecting tariff barriers and subsidising their production. These subsidies produce such mountains of food that the EEC can sell it on world markets at rock-bottom prices---butter sales to Russia are an obvious case. The American government denounces these subsidies because they keep inefficient EEC farmers in business whereas American farming is extremely efficient and could easily undercut EEC farming if only it were given the chance. In 1983 the American government played the EEC at it’s own game by using subsidies to sell flour to Egypt which had been an EEC market. Did the EEC say “fair enough”? It did not, instead it threatened to retaliate by dumping farm produce in American markets in Latin America. Does this mean that the United States is all for free trade? Only in those industries where it can win, such as farming. It is a different story when it comes to steel and textiles so they protect those industries with barriers against Imports. Most serious is the penetration by Japan of American home markets in cars, electronics and consumer goods. The United States’ trade deficit with Japan was over 50 billion dollars last year and members of Congress, business leaders and trade unions are demanding legislation aimed at reducing Japan’s exports to the United States.
Needless to say the Japanese are not in favour of this but they want to have it both ways - free trade for their exports but every obstacle placed in the way of imports from other countries. For example, Scotch whisky is subject to a level of taxation which makes it much more expensive than home produced spirits. Why don't these other countries simply keep out Japan's exports? They are afraid that such a move would spark off worldwide tit-for-tat protectionism with the resulting collapse in world trade. The cure would be worse than the ailment and the Japanese government is taking advantage of this fear.
Groups of governments sometimes band together into a cartel or price-fixing ring to avoid competition among themselves. For years the Organisation of Petroleum Exporting Countries (OPEC) shared out most of the world oil market. Each member-nation was allocated an agreed production quota of oil and no more. This year there has been a drastic fall in oil prices caused by the world slump, resulting in a sharp fall in demand, plus the entry of North Sea oil which is not controlled by OPEC. This fall in price has meant less income for OPEC members and some of them have been breading the agreement by increasing production to try make good the lost revenue.
This is what usually happens with governments or companies which organise themselves into a cartel. They are all for cartel when trade is booming and they can carve up the market but when trade is bad they will break ranks and look after themselves. OPEC has just reached a temporary agreement and the price of oil has started to rise again but no one knows what will happen in 1987.
Nevertheless, western governments do try to avoid monopolies within their own countries. As the executive committee of the national capitalist class a government must look after the interests of that class as a whole and not just one section of it. If a monopoly was allowed in an industry then the other capitalists will feel that they may be held to ransom when they purchase from the monopoly. But surely the soon-to-be privatised British Gas is a monopoly, the very thing the government wants to avoid? There are two reasons for this contradiction. The first is that the gas industry cannot really be split up into several competing companies for practical reasons, among them the cost of setting up alternative nationwide installations. The second is the political factor which is that the government sees wide share ownership as a vote catcher at the next general election end the privatisation of British Gas gives it the opportunity to achieve this aim.
This episode has provided an example of the double standards used by politicians. Tory MP Michael Forsyth, a free market zealot. argued that privatised gas would not be a monopoly as it would have to compete with electrcity, oil and nuclear power. This is like arguing that if some company owned the entire meat industry it wouldn't be a monopoly because it would have to compete with fish and chicken.
Both the American and British governments think they have a method of reversing what they see as the drift towards monopoly by stimulating competition. This is called de-regulation and is aimed at providing the incentive and opportunity for new companies to come into the market by removing whatever obstacles stand in their way. This has happened in the American airline industry since 1978 and the initial effect was an explosion of new, small companies and a drop in internal air fares. But the drift towards what is actually fewer and bigger economic units cannot be permanently reversed. Since 1978 sixty-three American airlines have gone bust and the big airlines are swallowing up the small fry in order to add the busy and profitable internal routes to their shakier international operations. The result is that airfares in America are on the increase again. This is what happens with cut-throat competition. It cuts profits to the bone so that when business drops off companies get into trouble and the conditions are created for the very thing de-regulation is supposed to curb - mergers and the drive towards bigger and fewer companies.
Companies sometimes need to grow if they are to survive. How could a company meet its competitors if it merely stands still while they grow? This need partly explains the recent merger-mania which saw huge companies being taken over by others. Guinness, the British drinks giant, justified its plan to take over Distillers in order to meet the challenge of American and Japanese rivals like Seagram's and Suntory with full-page newspaper adverts which said "It will take our combined strength to defeat adversaries such as these"
This is also why Britain's biggest electronic engineering company, GEC, wants to take over its main British rival, Plessey. James Prior, GEC's chairman, explained that although GEC is Britain's biggest private employer with 180,000 workers, it is dwarfed by the likes of General Electric in America and Siemens in West Germany. Plessey rejected GEC's bid and instead offered to buy GEC's interest in the System X digital telephone exchange system. Their chairman pointed out that neither company had won any worthwhile export orders for the system and since 10 per cent of the world market is required to be profitable it would, he added, make sense to merge the two interests --- under Plessey, naturally -to meet international competition.
How does this fact of life in capitalism square with the government's obsession with promoting small businesses and its frequent use of the Monopolies Commission to prevent the mega-mergers which are necessary to enable British capitalism to compete internationally? The simple truth is that many of those who are heavily into capitalism, like some of the free marketeers, don‘t under-stand the basic laws of the system, one of which is that while small may be beautiful in business, big is infinitely more successful.
The supporters of competition claim that it is of benefit to society because it eliminates wastefulness. In fact it is the cause of massive waste of humanity's time and energy. For example, thanks to the elimination of their competitors, there are now only three makers of large jet aircraft engines in the world outside of the so-called communist bloc. They are Rolls-Royce and the two American companies, Pratt and Whitney and General Electric. All three employ numerous scientists and technicians in the competition to produce an engine for a particular type of aircraft. Of the three engines produced one may be a little cheaper in price, the second may use a little less fuel and the third may need a little less maintenance but really all three engines are practically identical. So true is this that the one which wins the orders is probably chosen more for political reasons than any other and this is why British Airways have recently chosen Rolls-Royce engines for its new aircraft.
And just look at the hordes of companies eagerly competing to supply us all with double glazing, fitted kitchens, and the like, with armies of salespeople chasing after the same order and all of them selling exactly the sarne product. This spectacle is repeated all over the world as millions of useful human beings engage in this wasteful duplication of effort. just how does this benefit society?
So competition isn't what it's cracked up to be. Even the capitalists and politicians only regard it as a necessary evil in the scramble for profit and avoid it whenever they can. Certainly it has nothing to offer the workers except the opportunity to become one another’ s enemies over their exploiters' quarrels and which have nothing to do with them. Socialists work for a society in which the watchword will be co-operation and where capitalism’s competition will seem as strange and awful as we regard cannibalism today.
V.V.
Socialist Standard January 1987
THE FREE MARKET
Competition
Some comedian once asked "If it's true that all the world loves a lover, why are there so many policemen in Hyde Park?" A good question but a better one for workers to ask themselves is "If competition is such a wonderful and desirable thing, why does everybody try so hard to avoid it?". For example, when solicitors lose their monopoly in house conveyancing, opticians lose theirs in selling spectacles, or shopkeepers hear that a supermarket is to be built nearby, do they say "Good! Just what we need: the icy blast of competition"? They do not, instead they protest bitterly and do everything they can to preserve the status quo.
This dislike of competition is shared by all business, big and small. In 1980 the world's largest corporation, American Telephone and Telegraph Company (AT and T) lost an anti-trust action brought against it by a much smaller rival, MCI, who were awarded 1,800 million dollars. AT and T have a near monopoly in the manufacture of vital equipment which MCI needed but they refused to sell them any. In Britain the giant British Oxygen Company, which had a turnover of £ 1,700 million in 1983, was exposed for trying to close down a small competitor whose turnover was only £150,000 - less than a third of the salary of BOC's chief executive. The competition of even such a minnow was more than BOC could tolerate.
The big three in the British drugs industry, ICI, Glaxo and Beecham's, are putting every obstacle in the way of small competitors who want to market half price, unbranded versions of some of the big three's most profitable drugs. Although these drugs are patented the law provides for “licences of right” to be available to other companies but does not specify what royalties are to be paid. The big three use this loophole to ensure that would be competitors have to sell for little less than themselves.
The airline industry is notorious for eliminating competition. Remember how big Atlantic carriers, including British Airways, forced Freddie Laker out of business? Now they have a new target in their sights. Richard Branson's one-aircraft Virgin Atlantic airline. Branson's attempt to take over where Laker left off by providing cut-price fares between Britain and America was countered by BA, Pan-Am and TWA who all reduced their fares to equal Virgin's. Predictably Branson howled "unfair" but why should the game be played by his rules? If he really believes in free market competition then he cannot complain if the big airlines slash their fares too. Branson's problem is that his rivals have much greater resources than he has and can easily outlast him in a protracted fares battle.
Dislike of competition has also been shown by the cross channel ferry companies. They are trying to persuade the government and potential investors that the channel tunnel will be unsafe to use and unprofitable. If the tunnel scheme goes through then these champions of the free market want to remove competition
between themselves by integrating their services in order to offset the expected loss of business. If this is not allowed then they will seek compensation from the government. Whatever happened to "standing on your own two feet"?
Although governments try to encourage competition within their own frontiers they assist their own industries to avoid it in international trade by loading the dice in their favour. The governments of the EEC protect their own farmers from competition from abroad by erecting tariff barriers and subsidising their production. These subsidies produce such mountains of food that the EEC can sell it on world markets at rock-bottom prices---butter sales to Russia are an obvious case. The American government denounces these subsidies because they keep inefficient EEC farmers in business whereas American farming is extremely efficient and could easily undercut EEC farming if only it were given the chance. In 1983 the American government played the EEC at it’s own game by using subsidies to sell flour to Egypt which had been an EEC market. Did the EEC say “fair enough”? It did not, instead it threatened to retaliate by dumping farm produce in American markets in Latin America. Does this mean that the United States is all for free trade? Only in those industries where it can win, such as farming. It is a different story when it comes to steel and textiles so they protect those industries with barriers against Imports. Most serious is the penetration by Japan of American home markets in cars, electronics and consumer goods. The United States’ trade deficit with Japan was over 50 billion dollars last year and members of Congress, business leaders and trade unions are demanding legislation aimed at reducing Japan’s exports to the United States.
Needless to say the Japanese are not in favour of this but they want to have it both ways - free trade for their exports but every obstacle placed in the way of imports from other countries. For example, Scotch whisky is subject to a level of taxation which makes it much more expensive than home produced spirits. Why don't these other countries simply keep out Japan's exports? They are afraid that such a move would spark off worldwide tit-for-tat protectionism with the resulting collapse in world trade. The cure would be worse than the ailment and the Japanese government is taking advantage of this fear.
Groups of governments sometimes band together into a cartel or price-fixing ring to avoid competition among themselves. For years the Organisation of Petroleum Exporting Countries (OPEC) shared out most of the world oil market. Each member-nation was allocated an agreed production quota of oil and no more. This year there has been a drastic fall in oil prices caused by the world slump, resulting in a sharp fall in demand, plus the entry of North Sea oil which is not controlled by OPEC. This fall in price has meant less income for OPEC members and some of them have been breading the agreement by increasing production to try make good the lost revenue.
This is what usually happens with governments or companies which organise themselves into a cartel. They are all for cartel when trade is booming and they can carve up the market but when trade is bad they will break ranks and look after themselves. OPEC has just reached a temporary agreement and the price of oil has started to rise again but no one knows what will happen in 1987.
Nevertheless, western governments do try to avoid monopolies within their own countries. As the executive committee of the national capitalist class a government must look after the interests of that class as a whole and not just one section of it. If a monopoly was allowed in an industry then the other capitalists will feel that they may be held to ransom when they purchase from the monopoly. But surely the soon-to-be privatised British Gas is a monopoly, the very thing the government wants to avoid? There are two reasons for this contradiction. The first is that the gas industry cannot really be split up into several competing companies for practical reasons, among them the cost of setting up alternative nationwide installations. The second is the political factor which is that the government sees wide share ownership as a vote catcher at the next general election end the privatisation of British Gas gives it the opportunity to achieve this aim.
This episode has provided an example of the double standards used by politicians. Tory MP Michael Forsyth, a free market zealot. argued that privatised gas would not be a monopoly as it would have to compete with electrcity, oil and nuclear power. This is like arguing that if some company owned the entire meat industry it wouldn't be a monopoly because it would have to compete with fish and chicken.
Both the American and British governments think they have a method of reversing what they see as the drift towards monopoly by stimulating competition. This is called de-regulation and is aimed at providing the incentive and opportunity for new companies to come into the market by removing whatever obstacles stand in their way. This has happened in the American airline industry since 1978 and the initial effect was an explosion of new, small companies and a drop in internal air fares. But the drift towards what is actually fewer and bigger economic units cannot be permanently reversed. Since 1978 sixty-three American airlines have gone bust and the big airlines are swallowing up the small fry in order to add the busy and profitable internal routes to their shakier international operations. The result is that airfares in America are on the increase again. This is what happens with cut-throat competition. It cuts profits to the bone so that when business drops off companies get into trouble and the conditions are created for the very thing de-regulation is supposed to curb - mergers and the drive towards bigger and fewer companies.
Companies sometimes need to grow if they are to survive. How could a company meet its competitors if it merely stands still while they grow? This need partly explains the recent merger-mania which saw huge companies being taken over by others. Guinness, the British drinks giant, justified its plan to take over Distillers in order to meet the challenge of American and Japanese rivals like Seagram's and Suntory with full-page newspaper adverts which said "It will take our combined strength to defeat adversaries such as these"
This is also why Britain's biggest electronic engineering company, GEC, wants to take over its main British rival, Plessey. James Prior, GEC's chairman, explained that although GEC is Britain's biggest private employer with 180,000 workers, it is dwarfed by the likes of General Electric in America and Siemens in West Germany. Plessey rejected GEC's bid and instead offered to buy GEC's interest in the System X digital telephone exchange system. Their chairman pointed out that neither company had won any worthwhile export orders for the system and since 10 per cent of the world market is required to be profitable it would, he added, make sense to merge the two interests --- under Plessey, naturally -to meet international competition.
How does this fact of life in capitalism square with the government's obsession with promoting small businesses and its frequent use of the Monopolies Commission to prevent the mega-mergers which are necessary to enable British capitalism to compete internationally? The simple truth is that many of those who are heavily into capitalism, like some of the free marketeers, don‘t under-stand the basic laws of the system, one of which is that while small may be beautiful in business, big is infinitely more successful.
The supporters of competition claim that it is of benefit to society because it eliminates wastefulness. In fact it is the cause of massive waste of humanity's time and energy. For example, thanks to the elimination of their competitors, there are now only three makers of large jet aircraft engines in the world outside of the so-called communist bloc. They are Rolls-Royce and the two American companies, Pratt and Whitney and General Electric. All three employ numerous scientists and technicians in the competition to produce an engine for a particular type of aircraft. Of the three engines produced one may be a little cheaper in price, the second may use a little less fuel and the third may need a little less maintenance but really all three engines are practically identical. So true is this that the one which wins the orders is probably chosen more for political reasons than any other and this is why British Airways have recently chosen Rolls-Royce engines for its new aircraft.
And just look at the hordes of companies eagerly competing to supply us all with double glazing, fitted kitchens, and the like, with armies of salespeople chasing after the same order and all of them selling exactly the sarne product. This spectacle is repeated all over the world as millions of useful human beings engage in this wasteful duplication of effort. just how does this benefit society?
So competition isn't what it's cracked up to be. Even the capitalists and politicians only regard it as a necessary evil in the scramble for profit and avoid it whenever they can. Certainly it has nothing to offer the workers except the opportunity to become one another’ s enemies over their exploiters' quarrels and which have nothing to do with them. Socialists work for a society in which the watchword will be co-operation and where capitalism’s competition will seem as strange and awful as we regard cannibalism today.
V.V.
Socialist Standard January 1987
William’s Words
William Morris on competition in the capitalist mode of production.
“And first, please to understand that our present system of society is based on a state of perpetual war. Do any of you think that this is as it should be? I know that you have often been told that the competition, which is at present the rule of all production, is a good thing, and stimulates the progress of the race; but the people that tell you this should call competition by its shorter name of war if they wish to be honest, and you would then be free to consider whether or no war stimulates progress, otherwise than as a mad bull chasing you over your own garden may do. War, or competition, whichever you please to call it, means at the best pursuing your own advantage at the cost of someone else’s loss, and in the process of it you must not be sparing of destruction even of your own possessions, or you will certainly come by the worse in the struggle. You understand that perfectly as to the kind of war in which people go out to kill and be killed; that sort of war in which ships are commissioned, for instance, “to sink, burn, and destroy”; but it appears that you are not so conscious of this waste of goods when you are only carrying on that other war called commerce; observe, however, that the waste is there all the same.”(From the pamphlet. “How We Live and How We Might Live”, page 19) John Ayers
“And first, please to understand that our present system of society is based on a state of perpetual war. Do any of you think that this is as it should be? I know that you have often been told that the competition, which is at present the rule of all production, is a good thing, and stimulates the progress of the race; but the people that tell you this should call competition by its shorter name of war if they wish to be honest, and you would then be free to consider whether or no war stimulates progress, otherwise than as a mad bull chasing you over your own garden may do. War, or competition, whichever you please to call it, means at the best pursuing your own advantage at the cost of someone else’s loss, and in the process of it you must not be sparing of destruction even of your own possessions, or you will certainly come by the worse in the struggle. You understand that perfectly as to the kind of war in which people go out to kill and be killed; that sort of war in which ships are commissioned, for instance, “to sink, burn, and destroy”; but it appears that you are not so conscious of this waste of goods when you are only carrying on that other war called commerce; observe, however, that the waste is there all the same.”(From the pamphlet. “How We Live and How We Might Live”, page 19) John Ayers
A SCAREY FUTURE?
"In Norway the anti-immigrant Progress Party is now the largest in the land. Like other right-wing parties in Scandinavia, it has enjoyed surging support since the Islamic cartoon affair two years ago. In Switzerland, Christoph Blocher's Swiss People's Party won the general election last year after a campaign condemned as racist by UN monitors. In Poland the League of Polish Families, a member of the coalition government until a year ago, campaigns for the elimination of Jewish influence in business and the professions. The Vlaams Belang in Belgium is strongly anti-immigrant. Even in ultra-liberal Denmark, the nationalist and anti-immigrant Danish People's Party is now the third largest party. In Italy, Silvio Berlusconi's Party of Freedom is sandwiched in the ruling coalition by the anti-immigrant Northern League and the post-Fascist National Alliance." (Independent, 26 September) RD
Tuesday, September 30, 2008
More on Child Poverty Levels
Research by the Campaign to End Child Poverty found that in 174 of the 646 parliamentary constituencies across the UK, more than half the children live in poverty or are in families struggling on low incomes. An estimated 98% of children living in two zones in Glasgow Baillieston - Central Easterhouse and North Barlarnark and Easterhouse South - are either in poverty or in working families that are "struggling to get by".
Of the 13,233,320 children in the UK, 5,559,000 - more than a third - live in low-income families or families in poverty.
"A child in poverty is 10 times more likely to die in infancy, and five times more likely to die in an accident. Adults who lived in poverty as a child are 50 times more likely to develop a restrictive illness such diabetes or bronchitis." Campaign director Hilary Fisher said
The research was compiled from Government statistics and also includes the numbers of children in families on Working Families Tax Credit.The campaign classes households as being in poverty if they are living on under £10 per person per day.
Of the 13,233,320 children in the UK, 5,559,000 - more than a third - live in low-income families or families in poverty.
"A child in poverty is 10 times more likely to die in infancy, and five times more likely to die in an accident. Adults who lived in poverty as a child are 50 times more likely to develop a restrictive illness such diabetes or bronchitis." Campaign director Hilary Fisher said
The research was compiled from Government statistics and also includes the numbers of children in families on Working Families Tax Credit.The campaign classes households as being in poverty if they are living on under £10 per person per day.
Monday, September 29, 2008
TIME UP AT IBROX
LUXURY Swiss watch brand Ebel will this week announce a sponsorship deal with Rangers football club that will include the launch of a limited edition watch selling for almost £7,000.
Rangers' blue is used on the dial and the logo is engraved into the oscillating weight seen through the sapphire crystal case back.
Martin Bain, Rangers' chief executive, said: "International brands are now looking at football clubs that offer partnerships which go beyond local exposure."
The club commissioned a global research agency to look at Rangers' exposure across the world last season and found that it reached more then 73 million people in Europe alone. "Importantly, we can now tell brand owners exactly who was watching, in which countries and at what time," said Bain.
Rangers' blue is used on the dial and the logo is engraved into the oscillating weight seen through the sapphire crystal case back.
Martin Bain, Rangers' chief executive, said: "International brands are now looking at football clubs that offer partnerships which go beyond local exposure."
The club commissioned a global research agency to look at Rangers' exposure across the world last season and found that it reached more then 73 million people in Europe alone. "Importantly, we can now tell brand owners exactly who was watching, in which countries and at what time," said Bain.
The ABC of Inflation
The number of fake £1 coins in circulation has doubled in the last five years and now stands at more than 30 million. This means one in every 50 pound coins in circulation is counterfeit.
The Royal Mint said it was illegal to make or use counterfeited coins.
However what happens when world governments behave like counterfeiters? Nowadays the pound is an inconvertible paper currency and enormous additional amounts have been printed and put into circulation. It is legal but the consequence is inflationary. This article from the Socialist Standard in October 1972 explains some of the fallacies.
The ABC of Inflation
THE LABOUR PARTY and the Tory Party accuse each other of being responsible for the continuing rise of prices, but there is absolutely nothing to choose between the records of the two parties. Measured by the government's own Retail Price Indexes, the Labour government 1945-51 scored a 28 per cent rise and the Labour government 1964-70 another 30 per cent (of the 1964 level); while the Tories marked up 50 per cent between 1951 and 1964 and another 17 per cent (of the 1970 level) between 1970 and June 1972. Added to the 32 per cent rise recorded between 1939 and 1945 under the National government (admitted to be an understatement), the present price level is at least four times what it was before the war.
In 1944 the three parties-Tory, Labour and Liberal -in the National government committed themselves to do what they could after the war "to stabilise prices", and at each of the eight general elections Labour and Tories both repeated the promise-and it hasn't meant a thing.
Individual prices can rise (or fall) for several different reasons. Good harvests will reduce prices and bad harvests will raise them. Booming trade increases demand and sends prices up, bad trade will send them down again. Even against the present trend of rising prices metal prices fell heavily last year as demand slackened off-the price of copper fell by 40 per cent. Improved methods of production, by reducing the amount of labour required, will operate to lower prices, while the exhaustion of easily accessible seams of mineral ores (coal and metals) will operate the other way because mining at greater depths or in less rich seams requires more labour to produce each ton.
During the nineteenth century when all of these price factors operated the general price levels in Britain went up in some periods and down in others, or remained nearly stationary, but the extent of the movement up and down was always within a range of about 25 per cent either way-nothing like the 300 per cent added since September 1939. Wages also rose and fell during the nineteenth century; sometimes in line with the movement of prices, sometimes by more or less, and occasionally wages moved in the opposite direction to prices.
Fallacies
All sorts of explanations have been offered for the abnormal rise of prices since 1939 as compared with the up-and-down movements of prices in the nineteenth century. Most of the so-called explanations take the form of blaming some group or other for being "greedy"; bankers, or manufacturers, or retailers or trade unionists. It is an explanation that a glance at certain facts will show to be nonsense. Did the copper companies reduce their prices by 40 per cent in 1971 because they had suddenly become less greedy? Between 1948 and 1968 prices rose by 100 per cent in Britain, but only by half that amount in America and Switzerland: are the British twice as greedy? In the nineteenth century did the whole population go through alternating phases of being more greedy and less greedy? Between the end of 1920 and the middle of 1933 prices fell by over 50 per cent. The fall was continuous for thirteen years. What had happened to greed?
The fact is that sellers always try to get as big a price as they can, "as much as the market will bear", and if they can get more or are forced to take less it is because external circumstances over which they have little or no control determine that it shall be so.
Two popular beliefs are that prices go up because wages go up, or vice versa. It does not occur to those who hold one or the other view that wages are prices - the price the worker gets for the sale of his labour power, his mental and physical energies, to the employer. So, properly stated, their two propositions become the single useless assertion that prices go up because prices go up.
If they re-stated it in the form that one group of prices (wages) go up because the other group of prices go up-or vice versa-they overlook the truth that both groups of prices go up because of common external factors which affect both of them, more or less to the same extent. To illustrate this we can note that in summers when more Londoners visit the country the harvests are good. Nobody asks whether it is the London visitors who make the corn ripen, or whether it is the ripened corn which attracts the visitors. It just happens that a long hot summer both produces the good harvest and attracts visitors to the country - the sun is the common cause of both.
Paper & Prices
The new factor which has operated to push up prices abnormally since the war-the "sun" in relation to prices and wages-has been the continuous and accelerating "depreciation of the currency". In the nineteenth century the amount of notes and coin in circulation was controlled by the device, enforced by law, that the pound sterling was a fixed weight (about a quarter of an ounce) of gold, and Bank of England notes were always convertible on demand into the corresponding weight of gold. Nowadays the pound is an inconvertible paper currency and enormous additional amounts have been printed and put into circulation. In 1939 the total of notes and coin in the hands of the public was £454 million. It is now over £3,500 million and rising steadily, an amount far in excess of whatever increase would have been necessary in line with the actual increase in production and sales of goods.
Karl Marx, whose study of the subject has never been rivalled, enunciated the economic law in the form that if the amount of inconvertible paper currency exceeds the amount of gold that would be needed if gold coins circulated, the excess simply operates to push up prices. Before Keynesian doctrines were swallowed by most of the modern economists and politicians, this relationship between excess issues of inconvertible notes and the price level was generally accepted by economists (including Keynes). In 1919 the government deliberately put a stop to the issue of additional notes and this played a large part in the subsequent fall of prices. Now the political parties and the trade unions have deceived themselves, against all past experience, into the belief that what they call increasing "money supply" leads to greater production and the maintenance of "full employment".
Facing Facts
Not quite all of the economists and financial authorties have swallowed the "new economics". One exception is the First National City Bank of New York which, in its Monthly Bulletin for January 1970, ridiculed the notion that rising prices are due to greed or to the wage demands of trade unions:
Most of the blame for inflation is misplaced. For although inflation has a hundred faces, it has but one essential cause : overly expansive and erratic monetary policy that has pushed up the quantity of money more swiftly than the quantity of goods and services.
Governments, even if they perceived the truth of this, are afraid to repeat the restrictive policy applied in 1919 because they think it might lead to a big depression and much heavier unemployment. The economist Lord Robbins, speaking in the House of Lords on 5th July, said:
I know of no case in history where inflation of the order of magnitude of that from which we are now suffering has been stopped by measures of this sort without that sort of effect.
The government's view, according to Patrick Jenkin, Chief Secretary of the Treasury, is that while curbing the money supply would affect prices it would do so only after a considerable time lag:-
"The immediate effect would be increased unemployment and reduced output. As a solution, it was politically, wholly unacceptable". (Financial Times 17 July)
They Lord Robbins and Jenkin, are equally afraid that continued and accelerating depreciation of the currency may end with the kind of monetary collapse that Germany experienced between the wars.
Most workers believe that if only prices came down or were at least stabilised their chief troubles would be over. They should remember that while it is true that at present hundreds of thousands of workers cannot afford to buy a house on mortgage, exactly the same was true between the wars when prices of houses and prices in general (and wages) were only a fraction of what they are now. For the workers capitalism means hardship whether prices are high or low or falling or rising. H.
Socialist Standard October 1972
The Royal Mint said it was illegal to make or use counterfeited coins.
However what happens when world governments behave like counterfeiters? Nowadays the pound is an inconvertible paper currency and enormous additional amounts have been printed and put into circulation. It is legal but the consequence is inflationary. This article from the Socialist Standard in October 1972 explains some of the fallacies.
The ABC of Inflation
THE LABOUR PARTY and the Tory Party accuse each other of being responsible for the continuing rise of prices, but there is absolutely nothing to choose between the records of the two parties. Measured by the government's own Retail Price Indexes, the Labour government 1945-51 scored a 28 per cent rise and the Labour government 1964-70 another 30 per cent (of the 1964 level); while the Tories marked up 50 per cent between 1951 and 1964 and another 17 per cent (of the 1970 level) between 1970 and June 1972. Added to the 32 per cent rise recorded between 1939 and 1945 under the National government (admitted to be an understatement), the present price level is at least four times what it was before the war.
In 1944 the three parties-Tory, Labour and Liberal -in the National government committed themselves to do what they could after the war "to stabilise prices", and at each of the eight general elections Labour and Tories both repeated the promise-and it hasn't meant a thing.
Individual prices can rise (or fall) for several different reasons. Good harvests will reduce prices and bad harvests will raise them. Booming trade increases demand and sends prices up, bad trade will send them down again. Even against the present trend of rising prices metal prices fell heavily last year as demand slackened off-the price of copper fell by 40 per cent. Improved methods of production, by reducing the amount of labour required, will operate to lower prices, while the exhaustion of easily accessible seams of mineral ores (coal and metals) will operate the other way because mining at greater depths or in less rich seams requires more labour to produce each ton.
During the nineteenth century when all of these price factors operated the general price levels in Britain went up in some periods and down in others, or remained nearly stationary, but the extent of the movement up and down was always within a range of about 25 per cent either way-nothing like the 300 per cent added since September 1939. Wages also rose and fell during the nineteenth century; sometimes in line with the movement of prices, sometimes by more or less, and occasionally wages moved in the opposite direction to prices.
Fallacies
All sorts of explanations have been offered for the abnormal rise of prices since 1939 as compared with the up-and-down movements of prices in the nineteenth century. Most of the so-called explanations take the form of blaming some group or other for being "greedy"; bankers, or manufacturers, or retailers or trade unionists. It is an explanation that a glance at certain facts will show to be nonsense. Did the copper companies reduce their prices by 40 per cent in 1971 because they had suddenly become less greedy? Between 1948 and 1968 prices rose by 100 per cent in Britain, but only by half that amount in America and Switzerland: are the British twice as greedy? In the nineteenth century did the whole population go through alternating phases of being more greedy and less greedy? Between the end of 1920 and the middle of 1933 prices fell by over 50 per cent. The fall was continuous for thirteen years. What had happened to greed?
The fact is that sellers always try to get as big a price as they can, "as much as the market will bear", and if they can get more or are forced to take less it is because external circumstances over which they have little or no control determine that it shall be so.
Two popular beliefs are that prices go up because wages go up, or vice versa. It does not occur to those who hold one or the other view that wages are prices - the price the worker gets for the sale of his labour power, his mental and physical energies, to the employer. So, properly stated, their two propositions become the single useless assertion that prices go up because prices go up.
If they re-stated it in the form that one group of prices (wages) go up because the other group of prices go up-or vice versa-they overlook the truth that both groups of prices go up because of common external factors which affect both of them, more or less to the same extent. To illustrate this we can note that in summers when more Londoners visit the country the harvests are good. Nobody asks whether it is the London visitors who make the corn ripen, or whether it is the ripened corn which attracts the visitors. It just happens that a long hot summer both produces the good harvest and attracts visitors to the country - the sun is the common cause of both.
Paper & Prices
The new factor which has operated to push up prices abnormally since the war-the "sun" in relation to prices and wages-has been the continuous and accelerating "depreciation of the currency". In the nineteenth century the amount of notes and coin in circulation was controlled by the device, enforced by law, that the pound sterling was a fixed weight (about a quarter of an ounce) of gold, and Bank of England notes were always convertible on demand into the corresponding weight of gold. Nowadays the pound is an inconvertible paper currency and enormous additional amounts have been printed and put into circulation. In 1939 the total of notes and coin in the hands of the public was £454 million. It is now over £3,500 million and rising steadily, an amount far in excess of whatever increase would have been necessary in line with the actual increase in production and sales of goods.
Karl Marx, whose study of the subject has never been rivalled, enunciated the economic law in the form that if the amount of inconvertible paper currency exceeds the amount of gold that would be needed if gold coins circulated, the excess simply operates to push up prices. Before Keynesian doctrines were swallowed by most of the modern economists and politicians, this relationship between excess issues of inconvertible notes and the price level was generally accepted by economists (including Keynes). In 1919 the government deliberately put a stop to the issue of additional notes and this played a large part in the subsequent fall of prices. Now the political parties and the trade unions have deceived themselves, against all past experience, into the belief that what they call increasing "money supply" leads to greater production and the maintenance of "full employment".
Facing Facts
Not quite all of the economists and financial authorties have swallowed the "new economics". One exception is the First National City Bank of New York which, in its Monthly Bulletin for January 1970, ridiculed the notion that rising prices are due to greed or to the wage demands of trade unions:
Most of the blame for inflation is misplaced. For although inflation has a hundred faces, it has but one essential cause : overly expansive and erratic monetary policy that has pushed up the quantity of money more swiftly than the quantity of goods and services.
Governments, even if they perceived the truth of this, are afraid to repeat the restrictive policy applied in 1919 because they think it might lead to a big depression and much heavier unemployment. The economist Lord Robbins, speaking in the House of Lords on 5th July, said:
I know of no case in history where inflation of the order of magnitude of that from which we are now suffering has been stopped by measures of this sort without that sort of effect.
The government's view, according to Patrick Jenkin, Chief Secretary of the Treasury, is that while curbing the money supply would affect prices it would do so only after a considerable time lag:-
"The immediate effect would be increased unemployment and reduced output. As a solution, it was politically, wholly unacceptable". (Financial Times 17 July)
They Lord Robbins and Jenkin, are equally afraid that continued and accelerating depreciation of the currency may end with the kind of monetary collapse that Germany experienced between the wars.
Most workers believe that if only prices came down or were at least stabilised their chief troubles would be over. They should remember that while it is true that at present hundreds of thousands of workers cannot afford to buy a house on mortgage, exactly the same was true between the wars when prices of houses and prices in general (and wages) were only a fraction of what they are now. For the workers capitalism means hardship whether prices are high or low or falling or rising. H.
Socialist Standard October 1972
$3.5 BILLION IN 2 DAYS
"Warren Buffett's Berkshire Hathaway Inc (BRKa.N) (BRKb.N), which has avoided major acquisitions in the financial sector in recent months, may have had a $3.5 billion two-day paper profit on six major banking and financial services investments. The two-day rally in financial shares, which drove the broad S&P Financials Index (.GSPF) up 24 percent, came as the government announced sweeping measures to rescue the financial system and restore confidence in shaky markets." (Yahoo News, 19 September) RD
THE TOP 400
"Microsoft founder Bill Gates has recovered his spot at the top of the US money heap, displacing investor Warren Buffett as America's richest person, Forbes magazine's latest list reveals. With 57 billion dollars net worth Gates again leads the list of 400 richest individuals in the world's wealthiest country. He displaced Buffett who briefly held the position this year but who has seen his Berkshire Hathaway investment group's shares slip 15 percent since February and is now worth 50 billion. According to Forbes, whose list was published late Wednesday, the golden 400 have 1.3 billion dollars net worth or more." (Yahoo News, 18 September) RD
Sunday, September 28, 2008
PROFITS ARE THE PRIORITY
"Trade inequality has seen rich countries dumping subsidised food on to African markets, while erecting barriers themselves. Now prime African farmland is being switched from food to fuel – on the most food-insecure continent on the planet. Making matters worse is the prospect of African governments selling off prime farmland to wealthy countries such as Saudi Arabia, creating the horrifying prospect of fortified farms exporting food from starving countries. The agribusiness giants who have developed and patented genetically modified crops have long argued that their mission is to feed the world, rarely missing an opportunity to mention starving Africans. Their mission is, in fact, to make a profit."
(Independent, 8 September) RD
(Independent, 8 September) RD
ROCK AGAINST RELIGION
"In a region controlled by senile dictatorships and fundamentalist faith, the unemployed young – who make up 65 per cent of the population – have very few windows through which to yell their rage. Metal gives it to them. Reda Zine, one of the founders of the Moroccan heavy metal scene, explains: "We play heavy metal because our lives are heavy metal." The point of the music is, he says, to rage against "the vampires of intolerance and superstition". The guitarist of Iran's hottest young metal band, Tarantist, agrees: "Metal is in our blood. It's not entertainment, it's our pain, and an antidote to the hypocrisy of religion that is injected into all of us from the moment we're born." The police states are responding by beating heavy-metal fans with heavy metal bars. In Egypt, the dictatorship of Hosni Mubarak – funded by the US and EU – has ordered mass arrests of metalheads for "undermining the faith of Muslims", and Mahmoud Ahmadinejad is following close behind. But still millions of young Muslims and atheists defiantly sing along with Metallica: "No need to hear things that they say/Life is for my own to live my own way." (Independent, 8 September) RD
Saturday, September 27, 2008
MORE SILLY IDEAS
"The pastor whose prayer Sarah Palin says helped her to become governor of Alaska founded his ministry with a witch-hunt against a Kenyan woman who he accused of causing car accidents through demonic spells. At a speech at the Wasilla Assembly of God on June 8 this year, Mrs Palin described how Thomas Muthee had laid his hands on her when he visited the church as a guest preacher in late 2005, prior to her successful gubernatorial bid. ...Pastor Muthee founded the Prayer Cave in 1989 in Kiambu, Kenya after “God spoke” to him and his late wife Margaret and called him to the country, according to the church’s website. The pastor speaks of his offensive against a demonic presence in the town in a trailer for the evangelical video “Transformations”, made by Sentinel Group, a Christian research and information agency. “We prayed, we fasted, the Lord showed us a spirit of witchcraft resting over the place,” Pastor Muthee says. After the spirit was broken, the crime rate dropped to almost zero and there was “explosive church growth” while almost every bar in the town closed down, the video says." (Times, 16 September) RD
BRAINWASHED
"More than half of Americans believe they are protected by a guardian angel and two in three are certain that heaven exists, according to a study of US religious beliefs released Thursday. The survey, conducted by researchers at Baylor University in Waco, Texas, asked 350 questions about religion to 1,648 adults across the country. Fifty-five percent said they believed they were protected from harm by a guardian angel, a figure that researcher Christopher Bader said came as a surprise. "To find out that more than half of the American public believes this was shocking to me. I did not expect that," he said. Sixty-seven percent said they were "absolutely sure" heaven exists and 17 percent believed it "probably" does. Seventy-three percent of Americans believe in hell, it found.
(Yahoo News, 18 September) RD
(Yahoo News, 18 September) RD
Friday, September 26, 2008
IF YOU'VE GOT IT, FLAUNT IT
"While most of us are tightening our belts, they are planning to increase spending, taking advantage of the falling price of everything from property to private jets. About 80% of those worth £50m or more plan to spend more this year, according to a survey by the US-based wealth analysts Prince & Associates. Take Alwaleed. The small fortune he dropped on the Airbus is, it turns out, pocket change. The 53-year-old recently bought the Savoy hotel in London for £250m and is spending a further £100m giving the grande dame of the Thames the kind of makeover that would make Demi Moore blush. He is also doing up his other favourite five-star bolt holes, the George V in Paris and the Plaza in New York. But there’s no place like home. His £500m palace in Riyadh is constantly being remodelled and enlarged. At the last count it had 317 rooms, including 20 kitchens that can cater for up to 1,000 people."
(Times, 21 September) RD
(Times, 21 September) RD
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