Sunday, December 4, 2016

Italians reject reforms. Renzi resigns.

In what has been described by some as the “Third Domino”, Italian Prime Minister Matteo Renzi is to resign after a referendum voted no on his constitutional reforms today. The other two domino's are the Brexit vote and the election of Trump in the US and they are seen as the rejection of the status quo also.

The possibility now looms that Italy could, like the UK, seek to exit from the EU as one of the leading opposition parties, the Five Star Movement has talked of a referendum on EU membership and is supported by another antiestablishment party, the Northern league. The BBC is reporting the early percentages as the Yes vote at 39-43% and the No at 57-61%.

I am not deeply aware of all the issues but from what I have read there is concern about increased centralization of power with these reforms and the strengthening of the executive branch of government.   Italy also has significant debt issues and the economy is still 12% smaller than when the financial crisis began in 2008. Both immigration and the size of the government bureaucracy are issues.

As always though, supporters of the reforms Renzi wants saying they will make Italy more competitive is a warning to workers as is the call for less government. “More competitive” means lower wages, benefits and a reduction of the power of workers and our unions in the workplace.

Right wing parties and politicians like France’s Marine Le Pen of the Front Nationale are ecstatic, "The Italians have disavowed the EU and Renzi. We must listen to this thirst for freedom of nations," Le Pen is reported as saying.

These developments are an attempt to put a break on capitalist globalization and on the part of the capitalists of various nations, (and some workers) a return to the independence of the sovereign nation state, or more accurately, the political formation we call the nation state within the framework of a global economy. This contradiction, the existence of nation states with an global economy, Marx pointed our 150 years ago, that the nation state is an obstacle to the development of a globally integrated economy and that this contradiction cannot be resolved with the framework of capitalism. World wars are the result of competing nation states as are more regional ones that we see in the era of nuclear weapons. In the last analysis national economies cannot escape being dragged in to the world economy, it is an inevitable process under capitalism. But this contradiction, this tension, cannot be undone except through the elimination of capitalism and the creation of a democratic socialist federation of nation states.

For workers in the advanced capitalist countries these developments are also a rejection of capitalist globalization which they see as destroying their living standards allowing capital to seek cheaper labor, or the migration of cheaper labor to higher waged countries undermining wages.  As workers living standards have declined, the wealth at the top increases as the body politic is mired in corruption. People see no way forward if things stay as they are.

Here in the US, given the absence of any offensive at all from the heads of organized labor, a con man like Trump has been elected president in what are some of the most undemocratic of all bourgeois elections, and all bourgeois elections are undemocratic. We are serious on this blog when we write that the heads of the workers’ organizations at the highest levels are responsible for the rise of Trump in the US as they have the resources to offer an alternative but have not. They have cooperated with capitalism and its representatives and are cooperating with the con man Trump. For the labor leadership, there is no other choice as mobilizing the power of their own members and the working class in general can only lead to chaos.

We saw the same with Syriza and Tsipras in Greece who when the Greek working class made it clear they were prepared to fight austerity imposed on them by the EU and the World Bank, capitulated immediately rather than launch a Europe wide campaign to drive back the offensive of global capital.

All is not bad news as far as elections go today, as we have seen a huge shift in to the Labor Party in Britain and the rise of Corbyn.  On Italy’s northern border in Austria, Alexander Van der Bellen an environmental candidate defeated far right candidate Norbert Hofer by a 53.3 percent to 46.7 percent today. Had the right-winger won and the potential for an Austrian exit from the EU been on the cards, the EU, would have been thrown it to a severe crisis and still may be. Instead, "I will be a pro-European president of Austria open to the world." Van der Bellen said, giving the EU figures like Merkel some breathing room.

Friday, December 2, 2016

Economics: The long depression and Marx’s law

Buy This Book

The long depression and Marx’s law – a reply to Pete Green

by Michael Roberts

Pete Green has now taken up the cudgels in the debate that Jim Kincaid and I have begun over the causes of regular and recurrent crises in capitalist production and in particular the Great Recession.  He makes a welcome and considered critique of my views, as expressed in my book, The Long Depression and in recent discussions at the Historical Materialism conference in London earlier this month.  I think he raises some new and important points in his critique, which, as he says, will require further debate and research.

Like Pete, I cannot deal with all arguments in this short reply on my blog but I’ll do my best to take up some key ones, but it still makes this post long enough!

Pete starts by saying he is not going to dispute the data on the rate of profit that I have presented, mainly for the US, but also for other economies.  But apparently he “shares Jim Kincaid’s scepticism about reliance on US national income accounts as source for corporate profitability”.  Actually, I am not sure Jim is sceptical of the official data.  Indeed, he has said that I have used the data accurately and as Pete says, “there is no adequate alternative available for those engaged in empirical investigation”.

And that is what the bulk of my research is: engaging in empirical investigation to verify or otherwise particular theories or laws.  In my view, too many Marxist economists have ignored empirical work and concentrated on interpreting (and re-interpreting) Marx’s writings and ‘what he meant’, rather testing his laws of motion of capitalism to see if they best fit the facts.

Luckily, I am not alone in doing empirical investigations – Andrew Kliman has done prodigious analysis, Anwar Shaikh’s new book is a gold mine of empirical studies, G Carchedi has also tested Marx’s law with the evidence.  And there is a host of new young scholars internationally doing such work.  Carchedi and I will be publishing a book of these research projects next year that empirically support Marx’s law of profitability.

But Pete wants to “step back” from any debate over the stats and consider the “theoretical framework” of my book.  He does not think that Marx’s law of the tendency of the rate of profit to fall is “sufficient for an explanation of the cyclical fluctuations that have characterised capitalism”.  Why not?  Well, it seems that, while he does not deny “the logical coherence” of Marx’s law of profitability and its relevance to “whole period since the 1960s”, using the law to explain regular crises or “fluctuations” is “over-reductionist” and “two-dimensional”, especially in reference to the latest crises (ie the Great Recession?).

So Pete reckons that Marx’s law of profitability is logically coherent but irrelevant to an understanding of crises.  It’s ‘overreductionist’ (or maybe just reductionist?) to claim its relevance to crises.  There are more dimensions than two (presumably the tendency and the counter-tendency?), he says.

This does not seem the way to approach the relevance of Marx’s law to crises.  Pete says that the law is not “sufficient” to explain crises.  But does he think it “necessary”, which is not the same thing as sufficient?  If he does; how does it fit in?  You see, I think we must start with Marx’s approach, which was to abstract from reality the underlying essential (necessary) laws of capitalist motion and then add back concrete features of capitalism to reach the immediate.  In only that way can we identify the causes of crises under capitalism.  In that sense, Marx’s law can be seen as the underlying or ‘ultimate’ cause of recurrent crises, which can be triggered by ‘proximate’ events i.e. (oil price crisis, stock market bubble, real estate crash etc).  Then we have ‘sufficient’ causes.  For more on this, see my paper, Presentation to the Third seminar of the FI on the economic crisis

This approach thus makes it transparent that a financial crash or credit crisis is not the essence of crises in capitalism, but their surface manifestation.  Jim Kincaid has done a new post in which he outlines what Marx said about the 1847 crisis in Britain making the point that the falling rate of profit plays no role in Marx’s account”, considering only the financial speculation and credit crunches.  Jim claims that for Marx, “The fall in the rate of profit of these businesses is only a transmission mechanism.  What matters are the causes of bankruptcy and business collapse.

At this point, I am reminded of what Marx said a little later in 1858 during the first great international crisis of the 19th century: “What are the social circumstances reproducing, almost regularly, these seasons of general self-delusion, of over-speculation and fictitious credit?  If they were once traced out, we should arrive at a very plain alternative.  Either they may be controlled by society, or they are inherent in the present system of production.  In the first case, society may avert crises; in the second, so long as the system lasts, they must be borne with, like the natural changes of the seasons”.   Dispatches for the New York Tribune, Penguin p201.

As Marx puts it, ‘over-speculation and fictitious credit’ arise from regular crises in the capitalist system of production.  They cannot be eradicated by social action unless the mode of production is replaced.  It is not possible to separate crises in the financial sector from what is happening in the production sector.

Pete refers to the debate between Marxist economists on the cause of crises in the 1920s and 1930s, as described in Richard Day’s excellent book, The crisis and the crash.  As Pete says, the debate was between those who explained cyclical fluctuations as due to disproportionality between departments of production and those who reckoned it was due to the ‘limited consumption of the masses’, ie underconsumption.  As Pete says, “Marx’s tendency for the rate of profit to fall, as a function of a rising organic composition of capital, plays no role at all in these debates.”  But that does that mean the law is irrelevant?  It was no accident that the law was ignored.  Most leading Marxist revolutionaries had not read or seen Volume 3 of Capital where Marx’s “most important law of political economy” is expounded.  And if they had, they were guided away from Marx’s law as a cause of crises by the likes of Kautsky, Hilferding and Luxemburg.

One Marxist economist who had read and digested Volume 3 was Henryk Grossman.  As a result, he was able to present a coherent theory of capitalist crises based on the law, showing the connection between the tendency of the rate of profit to fall and the countertendencies; the relation between the rate of profit and the mass of profit; and thus the relation between profit and crises.  But his thesis, as Rick Kuhn says in his excellent biography of Grossman, was “an economic theory without a political home”.  Grossman also shows in his work, The law of accumulation being also a theory of crises, that those who followed an ‘anarchy of production’ theory of crises could not really provide a coherent argument for regular and recurring slumps or breakdowns inherent in capitalist production.  Indeed, just remove competition and allow monopoly to regulate and the anarchy can be controlled, suggested Hilferding or Kautsky.

Pete brings to our attention the work of Pavel Maksakovsky at that time.  As Pete says, he provides us with the most sophisticated version of the anarchy of production theory of crises.  As usual, Maksakovsky refers to Marx’s law of profitability, but only to dismiss it as irrelevant to the cycles of boom and slump and instead, like those in debate of the 1920s, focuses on Volume Two of Capital with its reproduction schema.  Maksakovksy outlines his theory succinctly in pp136-9 of his book. 

This is a disproportion theory but with the addition of trying to show that the disproportion between the sectors of means of production gets ‘periodically detached from consumption’.  Interestingly, Maksakovsky, correctly in my view, dismisses the idea that excessive credit and financial market busts are the cause of crises (p139), just as Marx did in 1858, but now revived by Jim.  They are only at the ‘superstructural level’ of capitalist society and can never eliminate the cyclical developments caused by the ‘anarchy of production’.  This is worth remembering in the light of the arguments now being presented by many modern Marxist economists that finance is the real cause of crises now and for the Great Recession (see below).

Does the anarchy of production or disproportion of sectors of reproduction hold up to scrutiny as an alternate theory of crises?  I don’t think so.  Grossman demolishes it in his book and in a little known essay on Marx’s reproduction schema (recently edited by Rick Kuhn).  Grossman shows that Marx’s schema do not show a “widening and deepening contradiction” (Maksakovsky) between production and consumption under capitalism and so cannot be the Marxist explanation of recurrent crises.  By assuming in the reproduction schema, accumulation and exchange between the sectors take place at the level of labour values, Maksakovsky makes the same mistake as Luxemburg and others and so finds ‘disproportion’.  But Marx’s reproduction schema are at the level of prices of production after the process of competition.  Rates of profit are averaged.  At that level, there is no inherent disproportion from the reproduction schema.

To deny disproportion as the cause of capitalist crises is not to support Say’s law (or ‘fallacy’, to be more exact) that ‘supply creates its own demand’ –as Pete suggests that I do.  Marx was fierce in his dismissal of Say’s nonsense.  The very process of exchange on the market creates the ‘possibility of crisis’.  But that does not explain the periodic and recurrent crises in capitalist production and investment.

Pete does not like the “clever” flow chart in my book that shows the different possible theories of crisis.  He says I want the readers to follow me down to Marx’s law of profitability, but he has three objections to that path.  Pete admits that in the circuit of capital “production is primary” but then goes onto say that production and circulation are in a “contradictory unity” in capitalism.  So is production not ‘primary’ after all?  Indeed, he refers us to the thesis of David Harvey who argues that capitalism has various ‘bottleneck points’ in the circuit of capital and crises can come from any one of them, not just or even mainly in the ‘primary’ production of surplus value and the accumulation of capital, but also in the ‘secondary’ circulation of capital through credit finance, households and the role of government.  So Pete says we need to have a theory of crisis that “embraces the whole circuit of capital” not just in production.

That’s fine but does this mean that the ‘bottlenecks’ in the circulation and distribution of capital are on the same level of causality as breakdowns in the ‘primary’ production process?  The Marxist answer, in my opinion, is no.  As I said before, in my view, and I think in Marx’s, circulation and distribution are at a lower plane of causal abstraction, or if you like closer to the proximate than the ultimate or underlying causes.  A collapse in the stock market or in real estate prices will not lead to a collapse in production unless there are already serious difficulties in the latter.  There have been many stock market collapses without a slump in production and employment (1987), but not vice versa.

Indeed, I agree with what Jim says summing up his post on the 1847 crisis mentioned above that The rate of profit and the forces which determine it should remain central in our analysis.  Marx’s own account of the 1847 crisis would surely have been strengthened by attention to profitability and its conflicting trends. We need to trace the many ways in which the law of value asserts itself – often in displaced and distorted forms.  But also recognise, and give due weight to, the role of contingent factors in any crisis we examine.”

Pete also wants to drag in the Keynesian “lack of effective demand” as one of the multi-dimensional causes of crises.  I have argued in many places that this ‘cause’ is no such thing.  Pete agrees that aggregate demand is endogenous to investment and profit; “Keynes himself would have agreed”.  Yes, but for the wrong reasons.  The Keynesian-Kalecki thesis puts ‘effective demand’ i.e. investment demand, as the causal factor in the movement of profits.  But Marxist economics says profits call the tune, not investment.  I and other Marxist scholars have shown that the empirical evidence for the Keynesian ‘multiplier’ (a fall in spending leads to a slump) is very weak compared to the Marxist multiplier (a fall in profits leads to a slump).

Pete says I should not ‘conflate’ the underconsumption thesis with the overproduction thesis as the cause of crises.  But then says that the “problem is a relative lack of productive consumption”.  We may be bandying with words here, but that sounds like an underconsumption thesis to me.  I presume this to refer to an excess of investment goods produced over the capitalists’ demand for them.  But crises do not happen because of a lack of “productive consumption”, but because of insufficient profits brought on by falling profitability over time.  And this can be proved empirically.

Andrew Kliman shows in his book, The failure of capitalist production (Chapter 8) that investment growth is always outstripping consumption but it does not lead to recurrent crises, as Maksakovsky ansd Sweezy argued.  The cyclical crisis of boom and slump does not flow from excessive investment over consumption but from insufficient profit from investment.  I await an empirical justification of the Maksakovksy thesis.

Pete says the proponents of Marx’s law of profitability as the underlying and ultimate causes of recurrent and regular crises are neglecting the ‘multi-dimensional’ and ‘complex’ nature of capitalism.  I ignore the uneven and combined development of the world economy as expressed in the global imbalances so “astutely” identified by Keynesian economic commentator, Martin Wolf (or for that matter, I could add Yanis Varoufakis in his book, The Global Minatour).  I also ignore the counteracting factors of globalisation in driving up the rate of profit.  I also ignore the role of finance and growth of financial profits in total corporate profits.

The more I go down these points by Pete, the more I feel that a series of straw men have been erected for my views to be knocked down by him.  These layers of ‘multi-dimension’ have not been ignored by me.  The counteracting factors explain the up and down waves of the profitability cycle in capitalism.  In both my books, I have spent some time looking at these long waves of profitability.  And I discuss the impact of uneven and combine development of capital in the context of the euro crisis in my book.

Pete says that “Unlike some critics,  I am not rejecting the relevance of this or the equally significant role of counter-tendencies raising profitability over the long-term. Indeed I would endorse to a degree Michael’s emphasis on longer waves in profitability but link them more closely to Kondratiev waves”.  But I have done just that in both books – trying to relate these waves to Kondratiev’s!

Pete is right to say that Marx’s law of profitability appears to have different cycles than the so-called ‘business’ or Juglar cycles of boom and slump.  I could not agree more.  In my first book, The Great Recession, I spent much time trying to analyse the connections between the various cycles in ‘capital in motion’ and try to link them together.  I did the same in The Long Depression in a whole chapter.

Pete says that “What can be shown in my view is that when the underlying rate of profit is falling, the business cycle fluctuations are more severe as is evident from the late 1960s to the early 1980s, and when the underlying rate is rising, the amplitude or the severity of recessions is reduced as in the 1990s and early 2000s.”  That almost word for word what I have said in the past.

Pete is keen to tell us that what is new is the “unprecedented rise in the share of financial profits in total corporate profits”. Again this is dealt with in both my books.  Indeed, I try to integrate this new development into an analysis of unproductive investment and fictitious capital as one of the new ‘counteracting factors’ to the law as such.  I even try to measure its impact (see my paper, Debt matters).
Pete finishes by wanting to defend or promote again the Keynesian idea of “a lack of effective demand” as the cause of crises.  He rejects my claim that the Keynesian position is a tautology (‘it rains because it rains’) of a slump not a cause. In retort, he suggests that Marx’s law of profitability is as remote a cause of crises as saying storms and hurricanes are caused by global warming; only worse, the law of profitability as a proven cause is more questionable than man-made global warming.  Pete is not a global warming sceptic but he is falling profitability one.

Actually, his analogy has some merit.  Global warming is an underlying cause of increased storms, floods and extreme weather.  The science of correlations, causation and forecasts strongly supports this.  Similarly, I and others argue that capitalist crises have an underlying cause in the inability of capitalists to stop the overall rate of profit on capital falling as they accumulate and try to increase profits.  This dialectical contradiction also has increasing empirical backing with correlations, causations and forecasts.  By the way, Marx used the analogy of the law of gravity and the movement of objects to place his law of profitability in crises.

I’m afraid the thesis of Maksakovsky has not changed my view that all other theories of crises in capitalism: underconsumption, overproduction, disproportion, bottlenecks in circulation, global imbalances, financial instability, are either wrong or at a lower plane of abstraction, so that, on their own, they do not explain crises.  As Alan Freeman says, Marx’s law remains “the only credible competitor left in the contest to explain what is going wrong with capitalism”.

Thursday, December 1, 2016

Trump and Pence Bailout Carrier. Indianans Will Pay

Here is what Trump said about companies like Carrier and others that receive lots of money in taxpayer subsidies of one sort or another:

"I've been watching these politicians go through this for years," Trump said at a rally in Wilkes Barre, Pennsylvania, on October 10. "I've been watching them give low-interest loans. I've been watching them give zero-interest loans. These companies don't even need the money, most of them; they take the money. There were a couple of instances where geniuses with great lawyers gave them money and then they moved anyway…I mean, the whole thing is crazy."

Read more at Mother Jones.  Trump is a stupid man in a way. He is nothing but a con man and he has conned a lot of people, even his neo Nazi and KKK supporters. He might regret betraying them too. But either way, the Trump euphoria evidenced in the stock markets , will not be repeated in the streets and communities.  He will savage the public sector for sure, not just services, but public sector workers and our unions that make up the bulk of organized labor. He will not bring back those blue collar industrial jobs that were the entrance to the middle class for many Americans. There is going to be a lot of anger directed at Trump.

Tuesday, November 29, 2016

The long depression in Italy

by Michael Roberts

Italy has a referendum this coming weekend.  Italy’s Blairite (Clintonesque) prime minister Matteo Renzi of the ruling the centre-left Democrats called a referendum, British Cameron-style, to ‘reform’ the electoral constitution.  He wants to reduce the size of the upper house of parliament, the Senate, from over 350 senators to just 100 and also have them come from the regions and cities, namely the elected mayors etc.  Most important, he wants to end the ability of the Senate to send back policies or measures passed by the lower house assembly (elected by popular vote in proportional representation – i.e. seats according to the share of the vote).  Thus, the Senate could no longer go on with ‘ping-ponging’ tactics back and forth with the lower assembly.

Renzi has staked his political reputation and his position as PM on winning this vote, like David Cameron did in the UK over the Brexit referendum.  And, according to the opinion polls, he looks as though he is heading for the same defeat as Cameron, throwing another major capitalist state into confusion, uncertainty and paralysis.

But it is all relative – after all, Italian politics and the economy have been in a state of paralysis for decades, with the situation only worsening since the end of the Great Recession.  Italy is now in a Long Depression that it seems unable to escape from.
Italy GDP
The immediate problem is Italy’s banks.  Europe’s banks currently hold €1trn of what are called ‘non-performing loans’, loans that the borrowers are no longer paying interest on and could be about to default on.  Of that €1trn, around one-third is held by Italy’s banks.  These bad debts are like a millstone around the necks of Italy’s finance sector.  The myriad of small Italian regional and large national banks have been lending to small businesses and property companies.  But thousands of these small companies are bust and cannot pay back their debts as the economy stagnates.

As I said in my book, The Long Depression, (Chapter 9) in some ways, Italy is in the most dire position of the top seven capitalist economies.  Italian capital was in the doldrums before the Great Recession.  Profitability has been falling since 2000 and is now down 30% since 2004.  Net investment has dried up and productivity of labour is not just growing slowly, as it is in other major economies, it is contracting outright.  Italy cannot recover because the Long Depression in Europe continues.
Italy ROP
And as a result, its banks are close to bankruptcy.  Banking analysts reckon that up to eight banks, led by Italy’s third largest and oldest, the infamous Monte Pachi, risk failing if Renzi loses the referendum.  That’s because potential investors in these banks, badly needed to recapitalise them if they write off these huge bad debts, won’t cough up.

I made some simple estimates of the likely losses that the Italian banks face (based on the Bank of Italy’s recent financial review).  The banks have lent up to now €2trn to Italians businesses and households.  About €330bn of these loans are ‘bad’ (i.e. won’t be paid back).  That’s about 20% of Italy’s GDP.  The banks have built up reserves to cover these potential losses of about €150bn and they could expect to sell off some of assets of bust businesses over time.  Even so, there would still be a potential loss of about €100bn on the banks’ books if they grasped the nettle and ‘wrote off’ these bad loans.  That would completely wipe out the value of the shares of the investors in many of these banks.  For example, the hit to Monte Paschi would be nine times more than the bank is worth on the stock market right now.  And Italy’s largest, Unicredit, which is supposed to helping the other smaller bust banks like Banco Veneto, would also be wiped out.  Indeed, Unicredit wants to raise €13bn for itself to shore it up.

I reckon that a bailout of the banks would cost at least €40bn, just to put the larger banks back on their feet.  Where is such a bailout to come from?  The Renzi government set up a special fund called Atlante, which was funded by the other larger banks, with a little from the state savings bank.  This raised just €4bn, most of which has already been spent on Monte Paschi to no avail.  But that is not the worst of it.  Under the new EU banking bailout rules, insisted on by Germany, state money cannot be used to bail out the banks.  The bank shareholders and bond holders must take the hit – at least first.

That sounds okay, you might say.  Let the bank shareholders pay.  But here is the rub.  The Italian banks have been engaged in crude mis-selling to all their customers with their savings.  Customers were encouraged to ‘save’ by buying the bank’s own bonds – in other words lending to the bank itself.  So hundreds of thousands of older (not so wealthy) people would now lose all their savings if the banks write off their bad debts and ‘recapitalise’ by writing down their own borrowings (bonds to zero).  This would be political dynamite, apart from causing misery to hundreds of thousands – and it has already happened to ‘savers’ with Banco Veneto and Monte Paschi.

Renzi has been pressing the Germans and EU leaders to relax the rules and allow state funds (ideally European ‘stability’ funds, which are available) to bail out his banks.  But the Germans are stubbornly holding to the rules, particularly as bailing out the Italians, after the Greeks, is anathema in Germany and fuel to fire to the Eurosceptics in the upcoming German election in 2017.

So if the vote goes against Renzi on Sunday, international and Italian investors are going to be very reluctant to stomp up funds to Italian banks when they fear the Italian government will fall and possibly be replaced in an early general election by the populist Five Star alliance, which has already won mayor’s positions in Rome and Turin and is leading in the opinion polls.  Could there be a ‘populist’ leading Italy out of control of the elite, and this time not Berlusconi?  At best, there will be a government unable to act through parliament to implement ‘reforms’ in the interest of capital, namely reducing labour rights; more privatisation and government spending cuts.

It’s possible that Renzi will win the vote against all the expectations as ‘no’ voters don’t bother to turn out.  Even if he does, the problem of the banks won’t go away.  And the problem of the banks is merely a symptom of the failure of Italian capitalism and the paralysis of its political elite.  Italy remains deep in depression and we have not even had a new slump yet.

Monday, November 28, 2016

Capitalism's Savage Legacy

We can't have guns and butter.
By Richard Mellor
Afscme Local 444, retired

As we head in to Christmas and as we are inundated by more ads on TV that we should love our neighbors and go buy them something, we should not remain oblivious to the fact that the US capitalist class is leading the race toward nuclear annihilation.

There is no doubt that US capitalism is losing its global influence and is facing increasing competition for that influence from China in particular and from India and Russia to a lesser extent.

The good news for Russian capitalism is that wages have sunk so low that manufacturers are salivating at the thought of having production facilities so close to Western Europe.  The average Russian salary fell to $558 in 2015 according to Bloomberg BusinessWeek,  a 30% decline from 2015.

Russian wages levels are now “broadly competitive with China’s for the first time since the Czarist era ended a century ago…” BW adds.  Samsung, Ikea and other manufacturers are already increasing investment there.

One lesson for us here in the US is that Trump’s claim to bring back Rust Belt jobs was nothing but an electoral ploy, like most of this degenerate narcissist’s claims. Even if US workers wages were competitive with Russia and China’s, new technology and automation is reducing the need for workers both here and in China as Mick Brooks pointed out on this blog last week. But capital will always flow to the cheaper labor as long as shipping and other costs don’t negate it. The Chinese are too expensive now and production has been moving to Cambodia, Bangladesh and Vietnam.

Meanwhile, US capitalism’s provocative foreign policy is increasing tensions in Eastern Europe as the US has troops near the Russian border, is supporting the fascists in Ukraine (and in the White House or Trump Tower?) and installing missile defense systems in Poland, supposedly as a defense against an invasion from Iran. No one in the world believes this of course but that doesn’t really matter as it’s only important that Americans do or that we are at the very least too occupied with Black Friday and the Superbowl to be aware of it.

At the other end of the world the US is stoking the flames of discontent in South East Asia.  It has been pushing the Australians to be more aggressive with regards to China as US capitalism needs to slow down China’s industrial development. Progress is good as long as the guy at the top has all the guns and all the money.

When I was in Northern Queensland I talked with a number of Australians who were opposed to the US building more military facilities in the Townsville area. It was not because they disliked Americans. But they saw it as a move that would likely drag Australia in to US capitalism’s disastrous War on Terror.

The US has been increasing tensions with China in the same way it has with Russia by surrounding the country with military installations and by increasing its presence in waters China considers its territory.

Chinese analysts are concerned about what they refer to as an, unprecedented military build up in the Asia Pacific region, and are concerned that Obama’s escalation and build up of a US presence in the South China Sea area since 2009 is “dangerously escalatory.”

According to the National Institute for South China Sea Studies, the US “targeted China with 1200 close reconnaissance missions by ships, and aircraft in 2014 up from 200 in 2009”.

The report added that, “American military vessels and aircraft carried out more than 700 patrols in the South China Sea region during 2015, making China the country’s number one surveillance target.” (Financial Times, 11-26-16)
Defense spending in billions of $. Source
Can the reader imagine the nationalist furor and fear that would be whipped up by the corporate controlled media if the Russians or Chinese had troops on the Candian or Mexican border? All capitalist states want a military. The US supplies most of the smaller capitalist states with their weapons of mass destruction as the world’s dominant supplier of such weapons. 

The goal is for US capitalism to retain its number one slot. With competing world powers or states that have the potential to compete with the US like China, all the talk of reform, meaning a shift toward a more market oriented economy and political system, is limited in that a country that heads in that direction like China, must not be allowed to threaten US capitalism’s dominant world rule.  But it is inevitable that China will build its military as its economic influence grows, the same with Russia.

So it’s not that the US capitalist class is any worse necessarily, they are simply the guys with the big stick.  What drives their violence and brutality is not so much individual qualities or some sort of genetic tendency to violence, it is the laws of the system that drives them closer to the precipice of nuclear war.

This doesn’t mean there aren’t cultural traits. Engels attributed the crude and violent nature of the US bourgeois to their history. The British bourgeois for example fought a centuries old ideological war against the feudal aristocracy and its theoreticians in the Catholic Church.  They had to defend their ideas and the righteousness of their economic system. The US bourgeois on the other hand did not have a ruling class that they had to dislodge. Putting it crudely, their rise to power was based on sheer physical violence, they had to build some infrastructure and wipe out a few million of the Native population with their technologically superior weaponry.

We have discussed this issue of eventual nuclear war in the phone conferences some of us around this blog have once a week.  There are currently over 16,000 nuclear warheads possessed by nine countries. We have to exclude Israel as they do not comment on their stockpile and are supported in this by the US., but the average guess is it is in the hundreds.  One might consider why the Iranians are a little leery and object to the fact they have to allow inspections and the Zionist regime or the US doesn’t.

They never built nuclear weapons with the intention of never using them. And admittedly, they have acted as a deterrent to a degree. But there is no way that at some point these are not going to be used. Capitalism is not a friendly humane system of social organization. It is brutal, violent, genocidal. Each nation state for fear of extinction must seek markets, must possess raw materials, must outdo its rivals in this struggle or die. Smaller states must align themselves to their larger neighbors, join the few competing trading blocs under the domination of a superpower, Germany, China, the US or Russia etc. Meanwhile the workers, peasants and dispossessed of these states fight back in any way possible. The suicide bomber is not a person that thinks there is much of a future but a person whose culture, life, existence on this earth is unbearable.

States crumble, become failed states and millions end up as economic or war refugees fleeing to safety, Central Americans in the former case, Syrians, Iraqis. Afghanis or Somalis in the latter.

Two World wars have been fought over markets. We see it, hear the cause of it every day, growth, growth, growth.  What they’re talking about with growth is the expansion of the markets and the process of profit taking and capital accumulation. This is what drives the system and the actions of its major players.

A well-meaning friend praised me, and folks like me, for my passion. But it’s not a question of passion. I am firmly convinced that capitalism will destroy life on this planet if it is not overthrown and replaced by a democratic socialist global society, a world federation of socialist states. In this way social wealth which is a collective product can be allocated collectively based on human needs and not profits. I can see no other way out.

I have grandchildren. I have friends with children. How can I keep quiet when I do not believe a child of five will reach 60, or even 50? I believe this firmly. If the reader disagrees with me, then find the objective evidence that leads you to disagree with me and show it. That god will intervene or you pray that things will change isn’t enough. If praying worked there’d be no starving people in this world, if praying gives you the strength to fight to change the system, that’s a different praying. If you have children it is your obligation to them to think about the world where it is headed and how you can be part of creating a future in which they will be safe and can reach their potential as free human beings.

The working class will struggle to change things but without a theoretical grounding and a leadership that has learned the lessons of history there will be much unnecessary suffering as there is now or there will be failure.

One thing is certain. There are no guarantees in this world and there is no such place as heaven.

Sunday, November 27, 2016

Cuba: An analysis of the Revolution and Castro's Role

Regular readers will be aware that some of us  around this blog were expelled from Socialist Alternative, the US affiliate of the Committee for a Workers' International (CWI). We have many criticisms of the CWI as it's leadership refuses to openly learn from and admit mistakes that leads to further confusion and splits,  but that doesn't mean we did not agree with much of the historical and political analysis of the CWI. I first read this pamphlet on Cuba below in 1985. It opened my eyes to the revolutions in the former colonial world that followed the Russian Revolution and the negative influences of Stalinism. It also confirms the validity of Trotsky's Theory of Permanent Revolution----why the capitalist class in the colonial countries is incapable of developing modern "democratic" societies. It is still a valid analysis of the Cuban Revolution today as when it was first written.

While critical of Castro, and in general agreement with the analysis below, we will not join the frenzied imperialist assault on Cuba or Castro. Fidel Castro did not send death squads in to Central and Latin America to assassinate leaders, murder peasants and overthrow democratic regimes on behalf of US corporations.  Cuba did not pour dioxin on Vietnamese peasants. The revolution improved the lives of the vast majority of Cubans. US capitalism with it's Cuban exile agents will be salivating at the prospects of a free Cuba, were health care is available to anyone that can pay for it. RM

The article can be found on the CWI website.

Cuba: Socialism and Democracy

by Peter Taaffe

Reprint of Cuba: analysis of the revolution

This pamphlet was first published in three articles in Militant, on 27 January, 3 and 10 February, 1978. They were published together as a pamphlet, ‘Cuba: Analysis of the Revolution’. Some minor alterations were made in order to render the analysis of the Cuban Revolution more precise.

The Cuban Revolution

Events in Africa and the Caribbean have once again forced Cuba back onto the world stage. Having pressed South African forces to invade Angola in an attempt to defeat the revolution, US imperialism then foamed at the mouth when Cuban troops and material were used to support the MPLA. This probably turned the war in favour of the MPLA and resulted in the elimination of landlordism and capitalism in Angola.

At the same time, Cuba has become a pole of attraction for those countries of the Caribbean, like Jamaica and Guyana, which have been devastated by the world slump of 1974-75. To the masses of Latin America, moreover, in the vice of military dictatorships and plagued by hunger and famine – as in Argentina and Chile – Cuba seems to be a haven of progress and tranquillity.

In the advanced industrialised countries also the charismatic figures of the Cuban Revolution, like Fidel Castro and the murdered Che Guevara, contrast favourably in the eyes of some sections of youth looking to end capitalism as against the grey figures like Brezhnev and Kosygin. Even Arthur Scargill, when challenged by David Frost on a recent TV programme, gave Cuba as a model of the society he was aiming for.

Can Cuba act as a guide either for the workers and peasants of the backward countries or the labour movement in the advanced capitalist world in the struggle against capitalism? What is the nature of the Cuban regime? These questions can only be answered by examining the causes and subsequent development of the Cuban Revolution.

Before the revolution, Cuba was a paradise for the rich – a playground particularly for American tourists – but a nightmare for the workers and peasants. In 1950-54 the average per capita income in Delaware, the richest state in the United States of America, was $2,279, while in Cuba it was only $312, ie $6 a week. Even in Mississippi, the poorest state in the USA, average per capita income stood at $829! Fifty-four per cent of the rural population had no toilets at all – not even a privy, and malaria, tuberculosis and syphilis were rampant. There was 25 per cent illiteracy and a similar percentage were unemployed at any one time, ie one in four of the population. Fewer children proportionately of school age went to school in the 1950s than in the 1920s, yet Havana in 1954 had more Cadillacs than any other city in the world!

At the same time, the land was concentrated in a few hands, in huge latifundia. One hundred and fourteen farms, or fewer than 0.1 per cent of the total number, encompassed 20.1 per cent of the land. Eight per cent of the total number made up 71.1 per cent of the land while at the other end of the scale 39 per cent of the total number of farms were made up of small peasant holdings of less than one acre – but they encompassed only 3.3 per cent of the land.

Imperialism dominates

Moreover, the Cuban economy was dominated by the giant American monopolies. Thus the share of US firms was 90 per cent in the telephone and electric services, about 50 per cent in public services and 40 per cent in raw sugar. Bound with iron hoops to the American economy, Cuba was compelled to concentrate on one main crop, sugar, for the American market. Most of Cuba’s sugar was exported to the US under a fixed yearly quota and set prices.

Crowning the whole system was the dictatorship of the gangster Batista. It was estimated that between his second seizure of power in 1953 and his overthrow in 1959, upwards of 20,000 died at the hands of his soldiers and torturers.

Cuba in the 1950s had not been able to carry through the tasks of the capitalist democratic revolution, ie land to the peasants, freedom from the stranglehold of foreign economic and political domination and the development of industry along modern lines. The experience of the Russian Revolution – brilliantly anticipated by Leon Trotsky’s theory of the permanent revolution – demonstrated that only the working class in the backward countries is able to lead the nation in completing these tasks. Once having come to power and having carried through the capitalist democratic revolution, the working class of Russia went over to the socialist tasks – nationalisation of the commanding heights of the economy – and also provided the spark for the beginning of the international socialist revolution.


Contrary to this experience and the methods of Lenin and the Bolsheviks, the Cuban Communist Party – in line with most of the Communist Parties of Latin America today – stood for an alliance with the so-called ‘progressive national bourgeoisie’ as the means of completing the ‘anti-imperialist patriotic and democratic revolution’. But the Cuban capitalists invested in land and the owners of the big latifundia in industry. No serious land reform could be carried through with the support of the Cuban capitalists. Nor were they capable of leading a struggle against US imperialism upon whom they leaned for defence against the Cuban masses. The hunt for the mythical ‘progressive national capitalists’ led the Cuban CP into actually supporting Batista soon after he first took power in 1933.

To begin with, party leader Blas Roca condemned Batista as "that national traitor in the pay of the imperialists". But in 1938 the CP Central Committee had discovered that Batista had "ceased to be the leading figure in the reactionary camp"! This magical transformation had been occasioned by the fact that Batista had been granted ‘democratic’ credentials by none other than US President Franklin Roosevelt. Moreover, the humble origins of ‘Sergeant Batista’ meant that he now received the benediction of the CP leaders. Batista reciprocated by legalising the CP in 1938 and four years later he took two CP ministers into his Cabinet! Blas Roca – who was later to sit in Castro’s Cabinet – appeared on the same balcony as Batista in 1942 to receive the cheers of the Cuban masses. Notwithstanding their support, Batista was forced out of office in 1944. Fidel Castro, on the other hand, was denounced by the CP in 1947 as a "gangster"! Even later, when the CP was compelled to change its attitude towards Castro, they still doubted that Batista would be overthrown by the guerrillas, and in November 1958 called for a "democratic coalition government".

Batista’s second coup in 1952 provoked widespread opposition in Cuba and particularly from the students and intellectuals, like Fidel Castro and his brother Raúl. With 120 followers they launched an attack on the Moncada barracks on 26 July, 1953. This was defeated, and Castro was first imprisoned and then released only to go to Mexico to organise a guerrilla force which landed in Cuba in 1956. In a heroic three-year struggle they launched a guerrilla campaign which, with the support of the impoverished peasantry, resulted in the defeat of the overwhelmingly numerically superior Batista’s force. Some of Batista’s soldiers and even officers were won over to the side of the guerrillas.

In 1961, faced with a life and death struggle with American imperialism, Castro was to claim that "he had always been a Marxist-Leninist at heart". At the same time, as KS Karol ironically remarks in his book Guerrillas in Power:

"Some of his comrades who were even less entitled to that label, claimed they had all the time been Marxists without knowing it while others had never been anti-Communist and were therefore open to conversion".

The truth is that Castro, up to this stage, had been no more than a radical middle-class democrat whose ideal was democratic capitalist America. Thus, to the American journalist Herbert Matthews, in an interview during the struggle against Batista, he declared:

"You can be sure we have no animosity towards the United States and the American people… we are fighting for a democratic Cuba and an end to dictatorship." [New York Times, 24 February, 1957]

Moreover, in a document of Castro’s movement – the 26 July Movement – in 1956, it stated that it adhered to "Jeffersonian philosophy" and subscribed to the "Lincoln formula", and proclaimed the desire "to reach a state of solidarity and harmony between capital and labour in order to raise productivity".

Even after he had ousted Batista, Castro declared on 6 March, 1959, to the Association of Bankers, that he desired their collaboration. He also added, according to the US ‘News and World Report’, that he had "no intention of nationalising any industries". Perhaps this was a ‘crafty ruse’ merely meant to fool the landlords and capitalists? On the contrary, all the evidence shows that Castro and his supporters never started off their struggle with a clear socialist programme and perspectives as had Lenin and the Bolsheviks in Russia.

Lenin based himself on the working class. He anticipated that the workers would lead the poor peasantry in a struggle against Tsarism. Castro and Guevara relied on the peasants and the rural population. The working class only entered the struggle through a general strike in Havana when the guerrillas had already triumphed and Batista was fleeing for his life. The dominant role of the Russian working class with the conscious management and control of the state and industry which they exercised through workers’ and peasants’ councils – the most democratic institutions ever seen – led to a powerful movement of the working class of the world rallying to the cause of their Russian brothers. They attempted to emulate the Russian Revolution in their own countries.


The fact that Castro came to power through a predominantly rural movement shaped the whole character of his movement. It was only a peculiar combination of circumstances which resulted in Castro – who to begin with never envisaged going beyond the framework of a capitalist democracy – presiding over the expropriation of the landlords and capitalists.

On the one side, was the utter bankruptcy of Cuban capitalism to show a way out of the impasse of society. At the same time, there was the colossal pressure of an aroused peasantry and the working class. With the defeat of Batista, the peasants moved to occupy the land and the working class clamoured for wage increases and the reinstatement of those sacked under the previous regime. Thus, in the spring of 1959, 6,000 workers of the Cuban Electric Company declared a slowdown in order to achieve a 20 per cent rise in wages, and 600 workers who had been dismissed in 1957-58 began a strike before the presidential palace. The masses were armed and formed into the militia. Meanwhile, the representative of American imperialism, Eisenhower, panic-stricken by the radicalisation of the Cuban masses, sought to pressurise and blackmail the Cuban government into submission.


This came to a head over Russian crude oil which was to be delivered to Cuba under a trade agreement between the two countries signed in January, 1960. In June the three big oil companies (Jersey Standard, Texaco and Shell), under pressure from the US government, refused to refine the Russian oil. But the Cuban government then ‘intervened’ (a form of supervision) and put the oil through. The companies retaliated by refusing to deliver oil from Venezuela. Cuba then agreed to take all its oil from Russia.

The Eisenhower administration hit back in July by cutting the remaining 700,000 tons of Cuban sugar due to be delivered under the quota agreement. This was calculated to bring the Castro regime to its knees. But Russia immediately stepped in and agreed to take the 700,000 tons of sugar. At the same time, on 6 August, the Cuban Telephone Company, the Electric Company, the oil refinery and all the sugar mills – which up to then had only been ‘intervened’ – were all nationalised. In the next four months, in a rapid succession of blows and counter-blows, all Cuban and American big business was taken over.

In September, the Cuban subsidiaries of United States’ companies were taken over. Cuban companies were taken over in October and by the end of 1960 capitalism had been eliminated in Cuba. US imperialism retaliated by declaring a complete trade embargo and preparing for a military intervention to crush the Cuban Revolution.

The pressure of the masses, the weakness of Cuban capitalism, and the miscalculations and blunders of American imperialism, all combined to push the Castro regime into expropriating landlordism and capitalism. We thus witnessed in Cuba a verification of Trotsky’s theory of the permanent revolution in a caricatured form. The capitalist democratic revolution could only be carried out against the resistance of the capitalists in Cuba and internationally. This, in turn, compelled Castro to lean on the masses and to go over to nationalise big business and establish a planned economy. There was no conscious foresight nor a worked-out perspective, as with Lenin and Trotsky in the Russian Revolution. Indeed, if Castro could have been shown before the revolution a film of his subsequent development he probably would have condemned it as a monstrous fabrication!

The Soviets, with democratic control and management of the state, together with the consciousness on the part of the masses that the fate of the revolution was bound up with the victory of the world revolution, were decisive in provoking the revolutionary movement of the working class in Europe and the world following the Russian Revolution. Because they could see their own class in power, despite the monstrous slanders of their rulers, the workers of Europe and the world came to the assistance and tried to emulate their Russian brothers in the stormy events of 1918 and 1919.


The Cuban Revolution had the effect of an earthquake – particularly in Latin America. But because of the forces involved – a predominantly peasant army – and the absence of conscious control and management by the working class and poor peasants, the Cuban Revolution could not have the same effect as the Russian Revolution. A workers’ state had been established – almost in the jaws of American imperialism – but a deformed workers’ state, with power concentrated in the hands of a layer of privileged officials.

Saturday, November 26, 2016

Will Trump Deliver for the Rust Belt Voter?

U.S. factories produce twice as much stuff as they did in 1984, but with one-third fewer workers.
Mick Brooks explains why Donald Trump's plan to re-industrialise America's heartland is a false promise.

Rust Belts
by Mick Brooks

There has been a massive deindustrialisation of formerly industrial areas, not only in the USA but in all the advanced capitalist countries. There are two causes suspected for being responsible for this process. They are increasing productivity and the relocation of industry.

Marx saw the accumulation of capital as the motor of capitalist development. Driven by competition among themselves, capitalists are forced to accumulate a large part of the surplus produced by the working class in order to undercut their rivals. Commodities are produced cheaper because productivity has increased and they embody less labour time. Capital accumulation consists of the increase in constant capital (especially plant and machinery) relative to living labour in the production process. The extreme instance of this is virtually complete automation in the modern factory.

This increase in productivity inevitably means that fewer workers will be needed to produce the same amount of commodities. Here is an example from a study of US steel minimills. Over the period 1963 – 2002 the output of steel from these minimills remained broadly stable. Over the same period 75% of US steel workers lost their jobs. Output per worker had gone up five times over. There is no evidence that these jobs relocated to Mexico or anywhere else. They just disappeared.

So the problem is not, as Donald Trump would like you to believe, reducible to trade. And protectionism is not the answer.  Nor is the problem confined to the USA. It has been going on in all the advanced capitalist countries. The first stage in the deindustrialisation of the American rust belt was actually the removal of manufacturing industry to the ‘right to work’ states in the South.
Manufacturing is much more amenable to these startling increases in productivity than services.

I dislike the expression service sector – bond dealers and corporation lawyers have little in common with care workers and shop assistants except that none of them works in industry. Rising productivity is much more difficult to achieve in services. I don’t think bar staff are pulling pints in pubs any faster than they did 200 years ago. In many cases measures of productivity are meaningless. For instance a teacher may teach a larger class (more outputs for the same input), but of course they are giving less attention to each pupil.

In the case of steel production deindustrialisation in the USA has not been caused by the relocation of industry elsewhere. In other instances, it has.  John Smith’s recent book ‘Imperialism in the Twenty-First Century’ gives some examples. In the first chapter he deals with the T-shirt, the iPhone and the cup of coffee. What has happened in all three cases is that the production process has been broken down into what are called value-chains. Routine processes are shipped abroad to take advantage of cheap labour. Other aspects, such as research and marketing are retained in the USA.

In some figures I have seen, wages in countries like Bangladesh are 3% of the US rates. Low wages provide the incentive to relocate, particularly for labour intensive industries. This has always been the case. The difference, as Richard Baldwin explains in ‘The Great Convergence’, is that the revolution in communications has enabled low wages to be harnessed to the latest technology transferred to poor nations: “South Carolina workers are competing ...with the nearly unbeatable combination of US know-how and Mexican wages.”

I believe jobs in mass production of labour intensive industries such as textiles and clothing have disappeared for ever from the advanced capitalist countries, though luxury manufacture may cling on. It is obvious to me that no amount of protectionism or tearing up of trade treaties by Donald Trump or anyone else will reverse that process in view of the huge wage differentials between nations.
Though big chunks of industry have been relocated to less developed countries in search of cheap labour. The world has not deindustrialised. More manufactured goods are produced globally than ever before. 

How important is technology compared to trade in shedding jobs? Though calculations are difficult the Financial Times survey on 23.11.16 (‘Cut out of the Factory Revival’) quotes Michael Hicks of Ball State University, that 13% of manufacturing jobs were lost to trade from 2000 to 2010, while the remainder were lost because of productivity increases.

Two hundred years ago every country in the world saw about half of the population directly engaged in farming or related activities to produce food and other agricultural products. Now it is 3% or less in all the advanced capitalist countries – and some of the agricultural processes are in fact quite industrial in nature. The proportion of the workforce engaged in agriculture in less developed countries is not much higher, and is falling fast as agribusiness displaces peasant production. The reason has been the rising productivity in agriculture.

The same process has been going on in many manufacturing activities. The era of the first industrial revolution, when some factories in the advanced capitalist countries employed more than ten thousand workers, has gone. These conditions persist in countries such as China, but for how long? The cost-cutting process is relentless. Wages have risen sharply in China, and capital is looking elsewhere for still cheaper labour.

Marx defined productive labour as the labour of those directly producing surplus value. As he says, “To be a productive labourer is, therefore, not a piece of luck, but a misfortune”. Following Ricardo, he saw the increase in productivity among productive workers as inevitably leading to a relative increase of unproductive workers in the economy, because fewer and fewer productive workers can produce a bigger and bigger surplus to maintain them. This is what has been happening. Unproductive workers in this sense doesn’t mean ‘useless’ – it means those such as teachers and nurses who don’t directly produce surplus value for a boss:

“Assume that the productivity of industry is so advanced that whereas earlier two-thirds of the population were directly engaged in material production, now it is only one-third...Equally distributed, all [that is, the whole population] would have 2/3 more time for unproductive labour and leisure.” Bang on, Karl. 

“But in capitalist production everything seems and in fact is contradictory... Those two-thirds of the population consist partly of the owners of profit and rent, partly of unproductive labourers (who also, owing to competition, are badly paid...It can be supposed that—with the exception of the horde of flunkeys, the soldiers, sailors, police, lower officials and so on, mistresses, grooms, clowns and jugglers—these unproductive labourers will on the whole have a higher level of culture than the unproductive workers had previously, and in particular that ill-paid artists, musicians, lawyers, physicians, scholars, schoolmasters, inventors, etc., will also have increased in number.” (Theories of Surplus Value Part I)

So, instead of the rise of productivity allowing us all to work shorter hours it causes relatively secure, well-paid jobs to be destroyed and  replaced by precarious employment where people are scuffling about trying to make a living the best way they can. Sound familiar?

Is there anything we can do to preserve jobs? The relocation of industry to the South represented a conscious decision by American capitalists to exploit different levels of worker protection in different States of the USA. Likewise farm wages have been reduced in Britain. Here’s one way how. Jobs in Lincolnshire harvesting vegetables are advertised in Poland and not in Lincolnshire or anywhere else in the UK. The Corbyn-led Labour party is pledged to end this transparent racket. So trade union and political pressure can help but we should recognise that we are up against powerful processes to seek out the cheapest cheap labour in the world which are an inevitable trend in modern capitalism.

The FT feature of 23.11.16 goes into more detail. US manufacturing has lost 5 million jobs (30% of the total) since 2000, but manufacturing output in 2015 is 32% up on its 2007-9 nadir. The article gives the case of Eastman in Buffalo where labour represents only 3% of total costs. Here is where reshoring might work, but it is not going to create the millions of jobs needed to revive the American rust belt. The Reshoring Initiative claims 265,000 jobs have been created since 2010 in the USA, but that only represents 5% of the jobs lost in the country since 2000.

It is a fantasy to argue for the reshoring of routine, unskilled jobs such as those in the furniture or clothing industries back to the USA. Apart from anything else, it would deprive workers in less developed countries such as Bangladesh of such precarious, poorly paid employment as they have. It would be the reverse of an internationalist policy. We can argue, even under capitalism, for the need for skills retraining and an orientation to a high skills, high paid workforce within the economies of advanced capitalist countries.
In 1930 Keynes wrote an essay, ‘Economic Possibilities for our Grandchildren’. In it he speculated about what we would do with all our leisure time after working a three hour day. It hasn’t happened!

A radical reduction in the number of hours worked should be a principal demand for the labour movement.

Thursday, November 24, 2016

Scenes from Standing Rock

Inequality: Top 1% of adults own 51% of the world’s wealth

by Michael Roberts

Top 1% of adults own 51% of the world’s wealth; top 10% own 89%; and bottom 50% own only 1%.

The top 1% of the adult wealth holders in the world own 51% of all global wealth, while the bottom half of adults own only 1%.  Indeed, the top 10% of adults own 89% of all the world’s wealth!  This is the new figure reached for 2016 by the annual Credit Suisse global wealth report.  Every year, Credit Suisse presents this report, authored by Professor Tony Shorrocks, James Davies and Rodrigo Lluberas, who used to do it for the UN.  I report on the results each year and it is usually the one of the most popular posts I write.

The last time that I discussed the Credit Suisse results, the top 1% had 48% of global wealth.  So, in the last year and a half, global inequality on this measure has risen yet again.   The shares of the top 1% and top 10% in world wealth fell between 2000 and 2007: for instance, the share of the top percentile declined from 50% to 46%. However, the trend reversed after the financial crisis and the top shares have returned to the levels observed at the start of the century.

The Credit Suisse researchers reckon these changes mainly reflect the relative importance of financial assets in the household portfolio, which have risen in value since 2008, pushing up the wealth of many of the richest countries, and of many of the richest people, around the world. Although the share of financial assets fell this year, the shares of the top wealth groups continued to edge upwards.  At the other end of the global pyramid of wealth, the bottom half of adults collectively own less than 1% of total wealth.
The main reason for this huge inequality is that there are so many poor (in wealth) people in the world.  You see, it does not take that much to get into the top 1% of wealth holders.  Once debts have been subtracted, a person needs only $3,650 to be among the wealthiest half of the world’s citizens. However, about $77,000 is required to be a member of the top 10% of global wealth holders and $798,000 to belong to the top 1%.  So if you own a home in any major city in the rich North on your own and without a mortgage, you are part of the top 1%.  Do you feel rich if you do?  This just shows how poor the vast majority of people in the world are: with no property, no cash and certainly no stocks and bonds!

The research shows that 3.5 billion individuals – 73% of all adults in the world – have wealth below $10,000 in 2016. A further 900 million adults (19% of the global population) fall in the $10,000–100,000 range.   The poor in wealth are concentrated in India and Africa and the poorer Asian nations, with 73% of those in the bottom wealth holders.  But there are also significant numbers of people who are wealth poor by global standards in North America and Europe, with 9% of North Americans, most with negative net worth, in the global bottom quintile and 34% of Europeans in the global bottom half.  These people not only have no wealth, they are in debt.

And who is getting better off?  Well, it is not Indians.  India has just 3.1% of ‘middle-class’ people globally (wealth of $10-100k) and that share has hardly changed.  In contrast, China accounts for a huge 33% of middle wealth people, ten times that of India – and that proportion has doubled since 2000.  What this tells you is that China’s unprecedented economic expansion has taken hundreds of millions out of poverty, even if inequality of wealth has risen.

Indeed, the number of millionaires, which fell in 2008, showed a fast recovery after the financial crisis and is now more than double its 2000 figure.  There are now 32.9m millionaires globally i.e. adults with more than $1m in property or savings after debt.   Indeed, there are only 140,000 people in the whole world who have more than $50m in wealth.  And there are now over 2000 billionaires – these are the people that really own the world.
Assuming no change in global wealth inequality, another 945 billionaires are expected to appear in the next five years, raising the total number of billionaires to nearly 3,000. More than 300 of the new billionaires will be from North America. China is projected to add more billionaires than all of Europe combined, pushing the total from China above 420.

Credit Suisse estimates that total global wealth is now $334trn, or about four times annual world GDP.  After the turn of the century, there was at first a rapid rise in global wealth, with the fastest growth in China, India, and other emerging economies, which accounted for 25% of the rise in wealth, although they owned only 12% of world wealth in the year 2000. Global wealth declined in 2008, but has trended slowly upwards since, at a significantly lower rate than before the financial crisis. In fact, wealth has fallen in dollar terms in all regions other than North America, Asia-Pacific, and China since 2010. On a per-adult basis, wealth has barely grown at all and median wealth has fallen each year since 2010.  The average adult is getting poorer.

In the past 12 months, global wealth has risen by 1.4% and has barely kept pace with population growth. As a result, in 2016, mean wealth per adult was unchanged for the first time since 2008, at approximately 52,800 dollars.  So the world’s population as a whole has not got wealthier in the last year and a half, while inequality has risen.

For more on inequality of wealth and income and what it means, see my Essays on Inequality.

Obama and Ellen cry, but not for Standing Rock

Not Afghanistan, North Dakota
 by Richard Mellor
Afscme Local 444, retired

Quite a flock, or herd, or is it a “murder ”of millionaires and billionaires gathered in Washington to receive the Presidential Medal of Freedom from the outgoing President Barack Obama.

Most of them were quite generous in their support of Obama’s election campaign. Michael Jordan, worth over $1 billion, made off the backs of South East Asian workers but who refused to meet with them when they came to the US to protest their inhuman conditions in their factories, was one happy billionaire.  Jordan threw a $3 million fundraiser, for $20,000 per person during Obama's 2012 campaign. 

Oprah Winfrey, worth some $3 billion was another recipient as were the Gates’ pair, Bill and Melinda, the richest of them all. Bill’s net worth at around $82 billion could eliminate world hunger practically, but hey; he worked hard for that. Lorne Michaels, Bruce Springsteen, Robert Redford and others were recipients.

Obama could barely hold back the tears handing Ellen DeGeneres her medal. "It’s easy to forget now just how much courage was required for Ellen to come out on the most public of stages 20 years ago,",  Obama said choking up, “…pushing  our country in the direction of justice".

It does take courage to come out like that but unfortunately in the US having the courage to name one’s sexual identity in public becomes the great harbinger of social progress. "Our country" when it comes to whether one can eat or put a roof over one's head is heading in a different direction.

 “Everyone on this stage has touched me in a powerful personal way. These are folks who have helped make me who I am and think about my presidency.” Obama added.

Ellen DeGeneres: Donated $35,800 in 2012 to the Obama Victory Fund and $100,000 in 2016 to the Hillary Victory Fund.  This is the freedom that matters to these people. Obama is the deporter in chief and master of the drones, and Clinton is a warmonger, a ruthless representative of the US ruling class. The recipients have all accumulated their wealth as the material conditions of most Americans have deteriorated along with our social infrastructure..

We have more people in  prison than any other country in the world, a staggeringly high percentage of the incarcerated are people of color.

I didn’t like seeing Kareem Abdul-Jabbar up there, it would have been nice if people like him and others with half a conscience refused them. After all, there’s not much “justice” being handed out up at Standing Rock. Not much Obama love there.
As some of us are aware, there is a near civil war going on in Standing Rock North Dakota as Native Americans, some 188 Canadian First Nations and American Tribes,  along with allies from many communities throughout the US, are trying to halt the Dakota Access Pipeline a 1,172 mile, $3.7 billion pipeline project that will carry oil from the Bakken to the oil tank farm in Illinois.

What we are witnessing here is a tremendous resistance to capitalism’s destruction of our environment including our land and water. Native people are also protecting land that is sacred to them.

We are also witnessing a massive show of not simply police, but a militarized police. This is the future as capitalism is forced to drive the conditions of the US working class downward. The militarization of the police, with the addition of army personnel vehicles to disperse protesters as well as corralling them or creating penned up areas where protests can take place without any possibility of disruption, is the new state of affairs.

This historic struggle in North Dakota confirms that despite a genocidal, centuries old campaign against Native Americans, they are far from a beaten people. This struggle has brought many tribes together and the support from all over the world has been considerable. On December 6th, US military veterans will be there to show their support.

The US mass media, the most censored of the advanced  capitalist countries, gives little or no air time to this historic struggle. It is social media that has been getting the word out.

Unfortunately, while President Obama and Ellen DeGeneres were choking up over a medal, there weren’t any tears or talk of bravery for the Standing Rock water defenders who have been sprayed with tear gas as well as cold water in freezing weather. One tribe member talked of their mothers and grandmothers being dragged away.

No tears from Obama and Ellen for 21 year old Sophia Wilansky who was hit by a concussion grenade and may have to have her arm amputated. She is in critical condition.

But I want to raise what we always raise on this blog. The force in society that bears the most responsibility for this, that must shoulder the blame for the fact that righteous struggles like these either end in defeat or the participants find themselves so outnumbered, is the leadership of organized labor.

I do not have a fetish about this. I do not have a vendetta against the hierarchy that sits atop the workers’ organizations. But we must not let them remain anonymous as workers and all oppressed people are being savaged by the capitalist state. We must not allow them to dodge the bullet, to hide behind this wall of silence.

They have hidden for so long may people, including their own members, the folks whose dues money pays their obscene salaries, cannot even name them, do not even consider them as a force at all. But they are. They head an organization with 14 million workers in it. Workers employed in communications, shipping, airlines., energy, transportation, public services. The LA Labor council has over 800,000 workers affiliated to it and the California Labor Federation two million, and this is the 6th largest economy in the world. US presidential candidates and state governors don't attend union conferences because there's no power there. They want that power contained ans it is the members' job to unleash it, to overcome the obstacle of our own leadership.

My former union Afscme has 4000, locals, the AFL-CIO has 1000 county councils.

We refer to them as the dog that doesn’t bark. Imagine being stranded in the desert with no water, or without food, while one person hoards it, refuses to share it. That person would have to watch their backs, they would not be allowed to remain anonymous.

The labor leadership consciously and deliberately remains silent. They support capitalism, they worship the market; they have the same world view as the bankers that caused the Great Recession and the politicians that are sending militarized forces to crush the Standing Rock water protectors.

All trade unionists must point to them, call them out, not call them names, but at all times flush them out in to the open, make them defend their criminal support of those who are taking back from American workers gains that took generations to win. The role they play has allowed the ruling class to have two political parties while workers have no voice. It is their fault that we do not speak and act as a class in this country. The wars in Iraq and the devastation that is US foreign policy is partially their fault. The US bourgeois and their ideology goes unchallenged.

They are silent on police murders, racism, the savagery that capitalism and the market has brought in to people’s lives.  Sure, they pay lip service occasionally. But they will not use the power under their control to fight back against this savagery so they are responsible for it.

Those in unions must raise this role and challenge the present leadership by building fighting opposition caucuses in the unions to replace them. But at every opportunity the leadership must be pointed to, must be identified and their role laid bare for all to see, union and non union, especially the youth. The balance of class forces can be shifted in our favor but we cannot ignore the labor hierarchy, they will not allow it and we should not do it..

Here are the unions in the AFL-CIO. These are the dogs that don’t bark, that say nothing as folks in Standing Rock are facing a military offensive from the capitalist state. These are the people who have praised our enemies as our living standards have been decimated. As education has been lifted out of the reach of working people, as a roof over our head takes three jobs to put there. As the politicians and bankers stuff their pockets at our expense.