Manufactured Scarcity

Book Review from the December 2008 issue of the Socialist Standard

Green Capitalism. Manufacturing Scarcity in an Age of Abundance. By James Heartfield. www.heartfield.org .2008

James Heartfield is associated with the former Trotskyist (British) Revolutionary Communist Party (RCP) which used to publish Living Marxism (LM) and has moved on considerably since “the collapse of Communism” at the end of the 1980’s and the dissolution of the formal RCP organisation in 1997. These days the so-called “LM network” produces the edgy www.spiked-online.com website and organises debates and events under the auspices of the Institute of Ideas and a myriad of propaganda campaigns expedited largely through a robust, sometimes entertaining, and not ineffective style of media entryism.

One area this current has been particularly interested in over the last two decades is in promoting a full-on critique of the reactionary imperatives of the politics of “Environmentalism”. In Green Capitalism James Heartfield reminds us that the profit system is essentially a system of rationing, which is now, in certain circles and in a variety of ways, being dressed up as “greenwashing” by Big Business and Governments – as the contemporary ruling elites reinvent scarcity in an age of abundance.

Heartfield rightly presents the capitalist mode of production as an epoch in which the force of human ingenuity has sought to ameliorate the exigencies of life through technical breakthrough with the result that happiness is the condition for most of us in Western societies. I do, however, take issue with the notion that one out of any of the 300 workers at the Lombe silk works on the Derwent in 1721 or the 5000 wage slaves at Arkwright’s Mill in Cromford in 1771 woke up for work every day with a sense of unmitigated joy. Whilst those long deceased exploited workers are no longer “variable Capital”, my modern-day neighbours don’t seem to enthuse much about the conditions of their means of living whilst having a sup on a Friday night in the local pub, either. Nevertheless, the material gains we have made in the interim between the first factories and 21st century capitalism are impressive.

In a summation of capitalist economics Heartfield tackles the neo-classical economists and suggests they were in effect “Rationers by Trade“ (my phrase not his) but you get the point. Notwithstanding that, the book opens with a great sense of optimism and opines succinctly upon the gains made by the working class under capitalism. The author explains carefully the concomitant progressive and destructive forces at play within the profit system and hints at transcending towards a more rational form of society founded upon technological progress.

This work sets out to show how modern Environmentalism came about as a consequence of ruling elites ideas about scarcity. Heartfield‘s argument is that, in Western society, the myth of the “fragile” planet emerged as a consequence of the retreat from production in the original heartlands of industrial capitalism.

Much of the Green Capitalism provides an excellent exposition of the fools’ errand of “Environmentalism” and the levers of power behind that aspect of the moribund profit system. Meanwhile, at times the prose is poor and plodding, and some of the referencing is both points-scoring and unnecessary to make the more essential issue clear. Do we really need to be lectured about Trotsky’s ideas on production? Some of this stuff would leave the general reader all at sea in very short order. Whilst a final extraordinary point is clearly made: the world population grew from 791 million in 1750 to 5.9 billion in 1999, as a consequence of advances in agriculture, transport, sanitation, industry. Many of that number exist at the level of subsistence – and it should not be that way! So, from an editorial perspective the narrative simply peters out – a bang and a whimper! Where is the alternative?

Notwithstanding that, this book has much to recommend it, not least for cocking a timely snook at both the modern-day misanthropes who see mankind as a plague upon the planet and the long-dead ‘dismal scientists’ of neo-classical economics who could not comprehend a theory of productive growth through collective endeavour. Heartfield puts a well aimed, populist boot into the modern-day Green Capitalists – Branson, Goldsmith, Charles Windsor, Al Gore, Bill Clinton, Lord (Peter) Melchett, and makes reasoned argument that Western Capitalism has got to go Green for the sake of exploiting new sources of profit.

There is an argument that modern socialists need to take on the Green catastrophists and promote technology and real democracy to face down the spectre of Austerity Capitalism in the 21st Century - in order to kill the pernicious profit system once and for all.

-Andy P. Davies

Five benefits of not having money

From the Socialist Standard

Socialist society will have no need for money. This will profoundly affect all aspects of life.

Removing money from the current economic equation would strike most people as impossible, unthinkable, absolutely imponderable. Everything we do, every transaction we make, from a simple cup of tea to sending a space probe to Mars, from birth to death and at every step in between, money has become a necessary part of getting what we require. It has become an accepted, entrenched method of acquiring anything and everything but it wasn't always so and in a genuine socialist system money will be shown to have been an unnecessary, wasteful and divisive way of ordering world communities.

When initially presented with the notion of a world without money the first imperative is the willingness to contemplate a huge paradigm shift, to put aside all familiar long-held views and preconceived notions and to enter into an adventure of discovery that there is a place for all at the table, that it doesn't entail regression to the Dark Ages and that the welfare and progress of people doesn't have to come at cost to the environment.

1. Work

It is well recognised by experts in the health arena that work is one of the most stressful areas of life for reasons such as long hours, extended travelling time to and from place of employment, risk of job loss, lack of security of tenure including competition both within and without, inflexible working practices, difficulty getting release for major personal events such as bereavement, long-term illness of a spouse or partner, or even short-term care of a sick child. Loss of employment can put stress on the whole family, sinking it into debt, causing day-to-day difficulties with the budget and in many cases leading to loss of the home.

When money is not required in exchange for work and when, instead, all contribute their skills, expertise and/or manpower in return for open access to the requirements of life then we can begin to see a different motivation enter the whole concept of the "work" scenario. A moneyless world will free up millions of workers now tied to some very stressful occupations dealing only in (other people's) money – banking, mortgage brokering, insurance; those occupied in the collection of rates, taxes and utility payments; those in security work such as guards and armoured truck staff engaged only in protecting and moving money and other "valuables" – millions of workers who, when considered logically, currently fulfil no useful function and contribute nothing to society that improves that society.

Right now, worldwide, are millions of would-be workers who are sidelined in one way or another, without employment or scratching on the edges of a black economy and in some of the more "developed" countries we find some termed "scroungers" in current-day parlance.

Within the capitalist system there has to be a pool of workers unable to find work in order to keep the bargaining power in favour of the employers who strive to keep wage levels down, whereas if there is a shortage of suitable labour the bargaining power switches to the employees who try to force wage levels up. The fact that a few "developed" countries have systems which pay a percentage of workers to remain unemployed (receive benefits) is a price the capitalists are prepared to pay to maintain the tensions in society. Encouraging the employed to think that they are the ones subsidising the benefits system maintains one fissure within the working class. Also, allowing a large number of unemployed to be without benefits would cause too many problems for the capitalists with possibilities of mass looting, rioting and damage to their property

When all work is seen as legitimate and deserving of recognition, from the humblest occupations – collecting and sorting waste, stacking shelves in our stores, keeping the utilities working even in the worst weather, repairing our shoes – to those which are perceived as more elite – heart surgeons, ground-breaking scientists or cutting-edge technicians; when all are respected for their contribution simply by having the same right of access to the commonly produced goods, humankind will have truly developed to a higher level. This change in emphasis regarding human worth would, as a matter of course, give all the opportunity for further personal development in areas of individual choice which leads to the second topic for consideration.

2. Increased Leisure Time

With so many extra hands on deck working hours will be able to be considerably reduced which, with the knowledge that one's work is not tied to the ability to feed and clothe the family, to house them and provide all the other requirements of life, is to remove the stress at a stroke.

Decreased time, but working for the common good rather than increased time working only for personal remuneration. Less working time was the oft-repeated refrain in the early days of the technology era. Workers were to benefit from machine-operated production systems, computers would be able to handle many of the mundane operations previously done manually, the working week would be much reduced, maybe even leading to job-sharing and part-time employment. In fact this state of affairs never materialised and more employees found longer working hours became part of their conditions of employment, earlier agreements having been gradually eroded to the benefit of the employers.

In socialism, with millions released from wage slavery in the then redundant financial sector free to be a part of the production, distribution and services sectors, with the black economy and "illegals" no longer threatening paid workers (pay being redundant) there will be a huge reduction in individual necessary work time. When there is no profit incentive the emphasis will be on the production of quality goods from quality materials and no one need choose an inferior item based on cost. Providers of utilities such as electricity and gas, water and communications will be able to have sufficient workers to install, service, repair and develop their installations more efficiently and effectively. If there is work that no one is prepared to undertake then an alternative will need to be found democratically.

Without the constraints that we have today the workplace will become a different place, one of cooperation not competition, where we work for the benefit of all, not for the profit of a few.

The lines between work and leisure may well be much more blurred than in today's scenario. People will have time, time to be creative, to learn different and multiple skills and to enjoy the time they spend working. Leisure activities seen as hobbies now – vehicle maintenance, gardening, DIY home improvements, baking, the making of all kinds of hand-made items, giving or receiving educational and training courses – could well form part of one's service to the community, bringing a greater satisfaction and contributing to individual development generally, one of the aims of socialism. With more leisure time available it is also highly likely that more 'work' would be created in the leisure area, whether sports complexes, theatrical and music productions and educational courses in the widest sense and with unlimited opportunities for the active participation of those who choose it.

3. Housing

Adequate shelter, a "right" for all enshrined in the United Nations Charter, is still unavailable to millions (billions, probably). There is absolutely no automatic right to housing within the capitalist system. All must pay. To pay, all must work. It is no matter that you work long and hard and that your children work long and hard and don't go to school. All that matters is that you have enough to buy or rent or build. Maybe you did have enough before the housing market bubble burst and the "worth" of your house went down while the interest rates went up. Well, tough! Look around you. See the empty houses and FOR SALE and foreclosure signs. These people must be living somewhere now. There is always housing stock available – if you can pay the going rate.

This is one very obvious benefit of not having money. The recent economic crisis has focussed many home-owners' minds. Why should anyone be secure one month and the next find themselves in queer street?

Can anybody justify one individual's multiple home ownership while others live in slums, in cars, in cardboard boxes on the streets? Please! When the majority of us have eventually decided that this scenario is unacceptably obscene we can at last begin to move to a humanitarian way of ordering our societies. Housing for all. Decent housing for all. Materials that are free and belong to all of us. Our architects, builders, plumbers, plasterers, electricians, etc. etc. will all work for free – they also need homes to live in. New housing can be built to the best specifications using appropriate materials, incorporating adequate insulation and services with regard to environmental protection and best use of alternative energy.

Respect for people and respect for the environment. Decisions made democratically as to best use of urban space vacated by the money businesses; by communities wanting to refurbish or upgrade their older stock. The balance between urban and rural will no doubt change. In some parts of the world there will be a mass exodus back to productive farmland, reclaimed for local use and consumption rather than continuing to grow cash crops for export. Decisions will be taken based on the well-being of communities and determined by the requirements of those communities and there will be no constraints or limitations linked to profit for a third party.

4. Health care

As a result of huge stress reduction, no more worrying about salary or wages from the job, no more worrying about keeping up the payments on the house, increased leisure time – all these various factors will surely result in improved relationships all round and, quite soon, a healthier workforce.

At present there are huge variations in standards of health care around the world and also massive discrepancies in availability and monetary cost to the recipients, Universal health care simply dos not exist. Again it is tied in to the ability to pay.

Let's remove this barrier to good health and care of the sick by removing the money element and offer all services, treatments, drugs and medicines free of charge. Hospitals and clinics then will be free of top-heavy budget management and will be able to access resources, whether manpower, equipment or drugs, according to their requirements and not limited by financial constraints. Medical researchers, now mostly tied to global corporations and limited by them in the areas of their research, will be able to concentrate on eradicating disease and providing the best remedies for all comers, not just those with insurance. World diseases such as malaria, tuberculosis and polio will soon be a thing of the past when money, too, is history.

Work and training in one of the many varied avenues of health care will be open to those from the pool of post-money redundant sectors. With the shift from a market economy to societies geared to fulfilling human needs there will probably be more priority given to preventive medicine and appropriate information on suitable diet and healthy living, which leads us to consider the topic of food.

5. Food

Currently the growing, processing and distribution of food is largely dominated by transnational corporations solely in the pursuit of profit. The consumer appears to have a huge choice of goods and numerous decisions to make at each aisle of the supermarket but often the choices are superficial, not actually the choices being sought. For instance, notice the difficulty of buying a processed food which doesn't contain soya. The soya has probably been genetically modified and the labelling could be unhelpful. The choice becomes buy in ignorance or acceptance, or do without.

It's well known that products are laced with added sugar, salt, monosodium glutamate etc. to create a certain dependency and craving for more.

Last year's problems of melamine-laced pet foods which caused animal deaths in the importing countries were followed this year by melamine-laced milk products causing infant deaths and multiple illnesses in China, spreading fear to importing countries. There can be only one reason for food to be contaminated deliberately (apart from a mass assassination attempt or the desire to spread fear among the population) and that is in the pursuit of greater profit.

Africa, a net exporter of food until the post-colonial days of the 1960s, became a victim again, indebted to the World Bank and IMF. Recipient of highly subsidised dumping of food from rich countries (US and Europe) the result has been that the countries there have to grow cash crops for export in order to pay off some of the growing debt creating food shortages for the domestic population, many of whom had been forced off ancestral lands (for the growing of cash crops) and who were then without the means of subsistence. There have been a number of studies which reveal there is no problem feeding a world population considerably larger than today's. There is an enormous wastage of food in the rich world. The major problem for the hungry in the poorest countries is lack of cash.

Food, if regarded simply as fuel for the body, should be clean – free from contaminants, chemicals and the like; fresh – the more local the better; and nutritious. Free food for all would come with the bonus of knowing there would no longer be any incentive to adulterate ingredients. The question of "FAIR TRADE" wouldn't arise as all along the line farmers, producers, pickers, packers and distributors would have the same motivation to provide good clean food knowing they have the same access as the consumers. This has to be a win-win situation. Another winner in this scenario would be the environment.

JANET SURMAN

Banks, money and thin air

An urban myth is circulating on the internet that banks have been creating money out of thin air.

Those who have seen the cult film Zeitgeist and its sequel Zeitgeist Addendum, popular amongst conspiracy theorists and others suspicious of governments and banks, will have heard recounted the argument that banks can somehow create money out of thin air by the stroke of a pen or, these days, by the touch of a computer keyboard.

In Zeitgeist Addendum this argument is based on what is stated in an educational booklet published by the Federal Reserve Bank of Chicago. Entitled Modern Money Mechanics it first came out in 1975 and has gone through several editions.

Zeitgeist Addendum begins by describing how it thinks the Federal Reserve Bank (the “Fed”) creates money. If, it says, the government wants more money then, through the Treasury, it creates Treasury bonds which it exchanges with the Fed for currency notes of the same face value; as the government has to pay interest on the bonds this adds to the National Debt and so is “debt money”. Both the Treasury bonds and the currency notes have been created out of thin air.

This is one way of putting it but it is misleading. It is rather the other way round in that the initiative to create more currency comes from the Federal Reserve Bank. Once it has decided that more notes are needed it asks the Treasury to print them (for which the Treasury charges). The normal way these get into circulation is by the commercial banks converting into currency some of the reserves they are obliged to lodge with the Fed. Modern Money Mechanics explains:

“Currency held in bank vaults may be counted as legal reserves as well as deposits (reserve balances) in the Federal Reserve Banks. Both are equally acceptable in satisfaction of reserve requirements. A bank can always obtain reserve balances by sending currency to its Reserve Bank and can obtain currency by drawing on its reserve balance” (p. 4).

In any event, both the Treasury and the Federal Reserve are part of government so we are talking about internal state accounting arrangements. It is, however, true that the new currency has been created out of nothing. Since it is not backed by gold and convertible on demand into a pre-fixed amount of gold, it is what in the US is called “fiat money”, that is, money created by a mere act of State.

Modern Money Mechanics does not in fact have much to say about currency creation but concentrates on what it calls “money creation”. It draws a distinction between “currency” and “money”. This is explained clearly enough on the first page of the booklet where money is defined as currency plus bank accounts with a cheque or debit card; which is M1 in the jargon (“In the remainder of this booklet, ‘money’ means M1”).

Congressman Ron Paul, from Texas, a critic of “fractional reserve banking” and advocate of a return to a gold-backed currency, has an even wider definition of “money”:

“”M3 is the best description of how quickly the Fed is creating new money and credit. Common sense tells us that a government central bank creating new money out of thin air depreciates the value of each dollar in circulation.” (27 April 2006, see http://www.lewrockwell.com/paul/paul319.html).

M3 includes other types of bank deposits and liabilities not included in M1. In claiming that all new money created by the Fed depreciates the dollar he is overstating his case. All the US currency (but, as we shall see, not bank deposits) is created “out of thin air” but an increase won’t lead to a depreciation of the dollar as long as it corresponds to an increase in the amount required by the economy for its various transactions (paying for goods and services, settling debts, paying taxes, etc). It is only currency issued in excess of this that will cause a decline in its value and so a rise in the general price level.

Everybody accepts that cash (currency, notes and coin) is money. Some might be prepared to include cash deposited in banks as well. But Modern Money Mechanics definition of bank deposits is wider than this. It doesn’t mean just deposits by people of the money they already possess but any account for which the holder has a cheque or debit card, i.e. including credit lines granted to those who banks have lent money to (so enabling Zeitgeist to go on talking about “debt money”):

“Checkable liabilities of banks are money. These liabilities are customers’ accounts. They increase when customers deposit currency and checks and when the proceeds of loans made by banks are credited to borrowers’ accounts” (p. 3, emphasis added).

So, when it talks about “money creation” it is not talking about currency creation but mainly about “bank deposit” (in the above sense) creation.

The Federal Reserve booklet goes on to explain what “fractional reserve banking” involves and how it can lead to the creation of more “money” in the sense of more bank deposits. Banks, it explains, have learned that when cash has been deposited with them they only need to keep a part (a “fraction”) of it as cash as a “reserve” to deal with likely cash withdrawals; the rest they can lend out. What this fraction is depends on the circumstances, but historically it has been around 10 percent.

On the booklet’s definition, in making a loan a bank is “creating money” as their loans will take the form of creating a new bank deposit as a credit line which the borrower can draw on as if they had made a deposit of their own money (except they will be paying interest on it). The booklet then asks “What Limits the Amount of Money Banks Can Create” and answers that this depends on the cash reserves it has decided to hold or is required by law to keep.

It is here that Modern Money Mechanics, by suddenly shifting from what an individual bank can do to what all banks together (“the banking system”) can, opens the way to the misinterpretation of people like Ron Paul and the makers of the Zeitgeist films that banks too can create “money” out of thin air. The booklet explains that US banks are required by law to keep a “fraction” of deposits as
“reserves” in its vaults and/or a balance with the Fed, and says:

“For example, if reserves of 20 percent were required, deposits could expand only until they were five times as large as reserves. Reserves of $10 million could support deposits of $50 million” (p. 4).

This is a very misleading way of putting as it could suggest that if banks receive total new deposits of $10 million they can immediately proceed to make loans of four times this. This is not so, and not really what the booklet meant to suggest. What it means is that the banks can immediately lend out only four-fifths of $10 million, or $8 million, and that this circulates throughout the banking system leading in theory to new loans totalling in the end $40 million, bringing total “bank deposits” up to $50 million.

Confusingly, the numerical examples the booklet goes on to give to illustrate this are based not on a 20 percent reserve fraction but on a 10 percent one (which is more or less what the law in the US requires for the kind of bank deposits in question). So, to take its example, if $10,000 is deposited in the banking system, initially say in one bank, that bank can make loans (create credit line bank deposits) of $9000. When it is spent this $9000 will be re-deposited in other banks which can then lend out 90 percent of this, or $8100; which in turn will be
re-deposited in banks, allowing a further $7290 to be lent out, and so on, until in the end and over the period, a total of $90,000 new loans will have been made.

This shows how the Fed can practice “fractional reserve banking” to control the amount of “money” (currency plus bank deposits) in the economy. This is done via “open market operations” as explained in a section headed “Bank Deposits – How They Expand or Contract”:

“Let us assume that expansion in the money stock is desired by the Federal Reserve to achieve its policy objectives . . . [T]he Federal Reserve System, through its trading desk at the Federal Reserve Bank of New York, buys $10,000 of Treasury bills from a dealer in US government securities. In today’s world of computerized financial transactions, the Federal Reserve Bank pays for the securities with an ‘electronic’ check drawn on itself . . . The Federal Reserve System has added $10,000 of securities to its assets, which it has paid for, in effect, by creating a liability on itself in the form of bank reserve balances” (p. 6).

The bank from which the Treasury bills were purchased now has reserves above the 10 percent limit and so can turn the $10,000 into loans, which starts the process described above rolling, leading to an extra $90,000 bank lending.

In theory the Fed could contract bank lending in the same way, but this has never happened. So M1 has gone up and up each year. But what about the currency in all this? It too has gone up but passively and almost automatically. With increased banking activity more currency notes are required, which banks get by converting their reserves into this and which, if it hasn’t enough notes, the Fed just asks the
Treasury to print more. But this has consequences – the depreciation of the dollar and the rise in the general price level Congressman Paul doesn’t like.

But has the banking system really created more “money”? Only if you regard “bank deposits” as money. If you don’t, all that has been shown is that currency has circulated in that the whole process depends on the initial deposit or injection of cash being recycled as further deposits by depositors (as opposed to by banks creating a credit line). So, neither an individual bank nor the whole banking system can lend more than has been deposited with it. By the end of the process, in the
example given, the first loan (out of the first deposit of $10,000) of $9000 has been used and used again for genuine deposits totaling $90,000. But all this assumes an expanding economy, since where is the money to repay the loans and the interest on them to come from without being assured of which the banks would not lend the money in the first place?

So the banking system does not create money to lend out of thin air but can only lend out money deposited with it and then only when economic conditions permit it.

Today, bank deposits are not the only source of what the banks lend. They also borrow on the money market (as has been highlighted by the present banking crisis). This means that their reserves are an even smaller percentage of their total loans, only about 3 percent in fact. This figure is mentioned in Zeitgeist Addendum as if this was now the “fractional reserve” and that therefore banks, or the banking system, can “create” loans of up to 33 times an initial deposit. Another silly mistake.

If currency cranks such as the makers of the Zeitgeist films have got the wrong end of the stick about “fractional reserve banking” and imagine that it means banks, whether singly or all together, can create money or credit out of thin air this is partly the fault of the way that booklets like the one produced by the Federal Reserve Bank of Chicago try to explain it. Of course the Fed does not believe the “thin air” claim, but to refute the currency cranks it would have not only to re-iterate that no single bank receiving an additional deposit of $10,000 can forthwith loan out $90,000, but also spell out that the expansion of credit line bank deposits still depends on people making real deposits of their own, unborrowed money (whether in cash or by cheque or by bank transfer). Which would restore a sense of reality and explode the myth that banks can create loans out of thin air.

ADAM BUICK

Robert Owen: paternalist utopian

This year marks the 150th anniversary of the death of Robert Owen. The Owenites introduced the word “socialism” but Owen himself always opposed the class struggle.

Owen’s key idea, indeed perhaps his only one, was: “Man’s character is made for and not by him”. He thought that it was therefore possible to give a person any character you like. He was, in short, a ‘man moulder’.

Robert Owen was born in Wales. He had little formal education but through hard work and nous (including marrying the boss’s daughter) soon became a big cheese in the cotton spinning business. In 1800, at the age of 29, he moved to New Lanark in Scotland.

This was the real era of the dark satanic mills. Sans unions and sans factory legislation, the workers toiled endlessly for a measly pittance, existing in a degraded condition in filthy slums. Owen took New Lanark (which it must be said was even at the start one of the better mills) and made it a model factory estate. Nice Mr. Owen became well known as a genial entrepreneur and benevolent philanthropist. At his factory at Lanark he improved hours and conditions, introduced schooling, and banned ‘morally harmful’ out of hours activities (outlawing pubs and books and fining extra-marital sex). He raised the minimum working age from six to ten years. Entertainment for his workers was a little harmless music, some dancing and physical jerks. Military drill was introduced to “give them an erect and proper form, and habits of attention, celerity, and order”. In addition “firearms, of proportionate weight and size for the age and strength of the boys shall be provided for them”. A key element in the workplace was the public display of a block showing the behaviour of the individual (shades of Maoist self-criticism). This was said to be character building but also produced a disciplined and productive workforce. (All quotes are from A New View of Society Owen’s account of New Lanark).

The aim at New Lanark was made absolutely clear in a letter from Owen to The Times in 1834:

“I believe it is known to your lordship that in every point of view no experiment was ever so successful as the one I conducted at New Lanark, although it was commenced and continued in opposition to all the oldest and strongest prejudices of mankind. For twenty-nine years we did without the necessity for magistrates or lawyers; without a single legal punishment; without any known poors’ (sic) rate; without intemperance or religious animosities. We reduced the hours of labour, well educated all the children from infancy, greatly improved the condition of the adults, diminishing their daily labour, paid interest on capital, and cleared upwards of £300,000 of profit.” (quoted in GJ Holyoake’s History of Cooperation).

Like Lord Leverhulme at Port Sunlight, Owen found that treating your workers better makes better workers which makes better profits. The rest of Owen’s life was an attempt to recreate the Lanark Mills experience on a large scale. True later on for different reasons. But Owen never really understood that at New Lanark he was able to impose ‘nice’ upon his workers by their very status as workers.

The end of the Napoleonic Wars brought a period of crisis including mass unemployment. This resulted in a high poor rate. Owen, being a businessman, sought to lower this with a plan for solving unemployment. Again this was the 5 percent philanthropy at work. Concern for the suffering was tempered by profit making – in the form of a lowered tax burden. Some time around 1817 this tax plan became a general scheme for the changing of society.

Essentially society was to be transformed by means of experimental communities. These self-contained and self-supporting complexes were to be built as grand squares, the parallelograms. In the communities the precise form of ownership of property was left open, leaving the way open for ‘community of goods’. However Owen was averse to this. Economics, like the precise form of internal administration in the colony, was unimportant. Education was the key to Owen’s scheme and its purpose was to mould the individual into an ideal social character. Finance was to come by an appeal to the rich and influential. Such was not forthcoming. Owen blamed his failure on his relatively mild criticism of the established church and the family. Doubtless this had some effect but the rich really had no particular interest in solving the problem of poverty. So far as they were concerned the poor could rot.

From 1824 Owen poured his own money into setting up a community in America. New Harmony, in Indiana, failed within a few years, essentially due to lack of discrimination in choosing occupants (the great problem of freeloaders). Without the power that goes with being a factory owner, Owen was unable to make the communists behave as he wished, particularly as, despite his own high opinion of himself, he was not a particularly good organiser, often leaving deputies to deal with problems while he swanned off for parties with the wealthy (Owen was always fond of the Great and Good, dedicating the New View to the appallingly corrupt Prince Regent).

When Owen returned to Britain in 1829 after the dismal failure of his American experiment, he found the situation somewhat altered. Throughout the country the working class was making use of the repeal of the anti-combination laws to set up trade unions. These were as yet little more than local self-help clubs, often carrying out some form of cooperative trading venture. Many of those involved looked to Owen as a source of inspiration. Owen himself had lost virtually all his money and whatever slight influence he may have had amongst the wealthier classes. Bandwagonning a little, he began to associate himself with the various self-help schemes – co-operatives, barter schemes and trade unions. Although so far as he was concerned these were only of use in ‘preparing the public’s mind for community’, this short period (1829-34) was the making of Owen as a figurehead of the old Left.

Within a short time Owen had set up his own cooperative (Association for the Promotion of Cooperative Knowledge), union (Grand National Consolidated Trades Union) and labour exchange (National Equitable Labour Exchange) organisations. The latter functioned as an extension of the cooperative store, surplus coop produce forming the basis of its activities. Essentially goods brought in were valued by a committee and a note issued indicating the amount of labour required to produce the item. This could then be exchanged for other goods in the bazaar of the same labour time value.

The various groups were viewed as fund raisers and mind openers – fronts in modern parlance – rather than useful in themselves. Strikes were certainly not on Owen’s agenda. And when the true class war came to a head in the summer of 1834, Owen bailed out, disassociating himself from the GNCTU. Extreme pressure from employers led to the failure of the union, which brought down in its wake the cooperatives and labour exchanges. The latter were probably fatally flawed in any case due to their limited ability to satisfy needs, most goods making their way there being unsaleable on the open market.

In 1835 Owen renewed the attempt to found a community. This time the attempt was made through a distinctly working class body. This was variously named the Association of All Classes of All Nations (1835-39), the Universal Community Society of Rational Religionists (1839-42) and the Rational Society (1842-46). At its peak in 1841 there were 70 or so branches spread throughout Great Britain. In key centres, such as Manchester and London, meeting halls were built (the Halls of Science) and regular indoor and outdoor propaganda meetings held under the auspices of ‘Social Missionaries’. By late 1839 the efforts bore fruit with the opening of a community at Queenwood in Hampshire. This became known as Harmony.

Harmony was however distinctly unharmonious. Owen regarded the whole enterprise as a means towards the perfection of humanity, a great experiment in making people nice. The workers however saw Owenism in general and the community in particular, as a way of abolishing their own poverty. Conflict was inevitably the result, with control of the enterprise swinging back and forth between the paternalist Owen and the self-organising proles. The true downfall of Harmony however was really Owen’s responsibility. Having selected a hopeless site in the chalk uplands, he proceeded to build a hopelessly ornate ‘super workhouse’, burdening the society with unsustainable debts. In the summer of 1845 Harmony was sold off. Further details of the Harmony scheme can be found in Edward Royle’s excellent Robert Owen and the Commencement of the Millennium (Manchester University Press, 1998).

Historically the attitude to the Owenites of the 1830s and ‘40s has been determined by the semi-religious millennial language that was used and group dismissed (e.g. by GDH Cole) as nothing more than a sect. Although there were elements of this, Owen as the secular saviour leading his chosen people to the glorious paradise of Community, the reduction is a rather unfair slur. Many contemporary organisations, including the Chartists, used flowery language. And the image of Owen as unquestioned leader was certainly far from the truth.

Owen has further been criticised for paying no attention to the main mass movement of the day – Chartism. Chartism was a movement for political democracy and as such was irrelevant to Owen’s aim – setting up experimental communities. It must also be said that so far as the starving worker of the day was concerned the issue of mere possession of the vote in itself would not have brought them food. The demand for the ballot was resisted by the upper class largely because it was believed anti-capitalist measures would follow in its wake. Owen recognised, unlike most Chartists, that political democracy is not the solution in itself to capitalist misery. He did not however recognise that it could be a means to this very end.

After 1845 Owen went into a form of retired senility. Seances, bumpreadings and other such garbage were the order of the day. Perhaps his greatest contribution of these years was his autobiography The Life of Robert Owen by Himself, published in 1857. Although obviously biased it is a great from the horse’s mouth source.

The principal practical result of Owen’s life was the setting up of utopian communities. The Owenite communities, both the official ones detailed above and the numerous examples in which Owen had no hand, failed to demonstrate Owen’s theories of character formation, which was of course their main aim, because they never became properly established. What they do demonstrate however is how easy it is for such a community to fail. And since such communities would primarily be a demonstration of cooperation, providing a haven for a few from capitalism, the amount of enthusiasm and resources invested was surely wasteful.

Perhaps surprisingly, although Owenism was unfruitful in achieving its specified aims its by-products were far from inconsiderable. The Rochdale Pioneers, founders of the modern cooperative movement, were Owenites and the modern secularist movement can also trace its ancestry back to the Owenite movement of the 1840s.

The importance of the Owenites is that they marked a watershed; for the first time a complete change in the nature of society was contemplated by a section of the working class. We also owe them our name. Although previously in use, the name ‘socialism’ was adopted by the Owenites in 1837 to describe their aims and within a few years Owenism and Socialism were synonymous. The connection was so strong that Marx and Engels were forced to have a Communist Manifesto rather than a socialist one. The meaning of the phrase has altered much since then, primarily due to the influence of Marx and Engels, however the underlying assumptions of Owen and the Owenites that human nature is not eternally fixed and therefore a better world is possible remains the basis of socialism.

KAZ

This is what Marx wrote about the credit system, all those years ago...

Reposted from Socialist Courier


The credit system reproduces a new financial aristocracy, a new kind of parasite in the guise of company promoters, speculators and merely nominal directors; an entire system of swindling and cheating with respect to the promotion of companies, issues of shares and share dealings.

The credit system...accelerates the material development of the productive forces and the creation of the world market, which it is the historical task of the capitalist mode of production to bring to a certain level of development, as material foundations for the new form of production. At the same time, credit accelerates the violent outbreaks of this contradiction, crises, and with these the elements of dissolution of the old mode of production.

The credit system has a dual character immanent in it: on the one hand it develops the motive of capitalist production, enrichment by the exploitation of other’s labour, into the purest and most colossal form of gambling and swindling, and restricts ever more the already small number of exploiters of social wealth; on the other hand however it constitutes the form of transition towards a new mode of production.

Capital Volume III - Chapter 27 - The Role of Credit in Capitalist Production

On the Republic Window Sit-In

The occupation of the Republic Window and Door factory in Chicago has ended.

Certainly this has been an inspiring event. One hopes the sit-in will inspire even more inventive methods of fighting for working people.

However, we must also take into account what was “won”. The workers received the monies owed them. They lost their jobs. The employer had taken monies from the Republic plant and bought a competitor in Iowa.

That’s a victory? Perhaps in the present conditions it is. But it’s rather sad to crow success when you are getting what’s legally owed you.

Now the UE union - perhaps the best union in the US - is discussing restarting the factory perhaps as some sort of cooperative. While one wishes the workers the best, would this be an improvement? They will still be subject to the laws of supply and demand. How will they be successful when the former company wasn’t? As the downturn continues will they cut their own wages? Cut their own hours? Or perhaps just lay themselves off.

Cooperatives or worker owned businesses may be more “fair” for the workers than a privately held company like Republic Window. Can’t fault them for trying, right?

But ultimately you can’t wish justice or fairness - or seek room for fairness - in what is a fundamentally unfair society. Even a cooperative business must accept the logic of capitalism or perish.

An example of this contradiction is the famous Mondragon Cooperatives of the Basque country of Spain. These cooperatives we established in the 1940s and consist of more than 80,000 worker-owners. They were a huge inspiration for the 1970s cooperative movement here in the US as well as many anarcho-syndicalists who have long argued for “self-management” .

But the Mondragon Cooperatives have to function within the system. They thrived under the fascist dictatorship of Franco. They have also expanded, buying factories in Poland. But the Polish workers are not owners as the Basques are. This year the Polish employees of Mondragon went on strike and the Mondragon Cooperatives moved to break the strike and the workers’ unions.

I’m raising the problems of the Republic sit-in not to belittle the efforts made there. Nor is it a call to workers to sit on their hands or become isolated academics. The point needs to be made that UE is trying to replicate past strategies - sit-ins, cooperatives, etc. which are tired. Inspiring or not, the strategies have serious flaws. They are focused on the immediate and have no long term vision or goal.

Perhaps with a little class consciousness, some radical understanding of how capitalism functions, the workers at Republic Windows could have inspired a much more radical and powerful workers movement - one to abolish capitalism.

Cuba’s wage system

The Cooking the Books column from the October 2008 issue of the Socialist Standard

Earlier this year, when in June the Cuban government, now under Fidel Castro's brother Raul, announced a new system of wage payments, the Guardian (13 June) wrote that Cuba had "abandoned its egalitarian wages system". This brought a response (20 June) from Helen Yaffe, author of Ermesto Che Guevara: The Economics of Revolution:

"In reality, there has never been an 'egalitarian wage system' (i.e. one where every worker was paid the same): Che Guevara himself devised a new salary scale, introduced in 1964, with 24 different basic wage levels, plus a 15% bonus for over-completion".

In other words, Cuba never had practised wage equality, not even when Guevara was Minister of Industry. Not that socialists favour equal wages. As long as the wages system – the sale of people's working skills for money – exists there will be a different price for the different types of skill. We want the abolition of the whole wage system, an end to the buying and selling of people's working abilities, and the application of the principle "from each according to their ability, to each according to their needs".

Yaffe made a claim about this too:

"Like Marx himself, Che recognised the socialist principle: 'From each according to his ability, to each according to his work' – which your article associates exclusively with Raul. Cuba has never claimed to be communist and therefore never embraced the principle 'from each according to his ability, to each according to his need', which expresses the attainment of communist society".

While it is true that Marx thought that it would not have been possible to implement "to each according to needs" immediately had a "co-operative society based on the common ownership of the means of production" been established in his day, he never drew a distinction between a socialist society (where this principle couldn't yet be applied) and a communist society (where it would be). He actually spoke of two "phases" of the same society, which he called "communist society". Engels and the later socialist movement adopted the term "socialist society", but both terms referred to the same type of society; they are interchangeable.

In any event, the temporary measure until distribution according to needs became possible which Marx mentioned in the private notes he wrote in 1875 known as The Critique of the Gotha Programme was a system of "labour-time vouchers". This would probably have proved unworkable but it was not the same as "to each according to their work". It would have been "to each according to their working time", with people being given a consumption voucher based on the time spent at work not for the particular kind of work they did. There wouldn't be 24 different levels, just one. An engineer and a cleaner who put in the same number of hours would get the get the same number of consumption vouchers. In this sense it would have been "egalitarian".

But what Lenin, Stalin, Castro and Guevara called "socialism" did not even correspond to Marx's "first phase of communist society" since it was based on the state, not the common, ownership and control of the means of production, the majority remaining propertyless and having to sell their working skills to live. As the state was controlled by the leaders of a minority vanguard party, these leaders became in effect the employers of the excluded majority. As employers they had to devise some system of pricing the different kinds and qualities of labour-power they purchased. Hence schemes such as Guevara's and the one just introduced in Cuba. This was state capitalism, not socialism/communism.