The Brexit Vote

The confusion of the left on the question of the European Union was shown by an event at my alma mater, the School of Oriental and African Studies, London University, on 16 February. It also revealed a more general absence of critical faculties among many of those who do not like the way the world works today. Tariq Ali was promoting his latest book, The Extreme centre: A Warning. He made the standard complaints about the lack of any political alternative to ‘neoliberal’ politics in most major countries, and he also tied this theme into the question of the vote on Britain’s membership of the EU (now set to be on 23 June 2016). I have not read his book, but based upon what he said in his presentation, I would make the following comments, ones that also set out how to understand the forthcoming UK vote on EU membership.

Firstly, as an old hand at these events, it was surprising that Tariq Ali did not reflect upon the lack of any widespread opposition to what he calls the ‘neoliberal extreme centre’. He did hope that the rise of Jeremy Corbyn to the lofty pinnacle of the British Labour Party leadership showed that the Labour Party was not actually dead, and he also cast a positive gloss on the popularity of the Scottish National Party as a sign of some popular opposition. My problem with this searching in the dustbin for a gem is that it does not understand that much UK public opinion is welfare-nationalist at best – ‘save our NHS’ – or that any materialist analysis would have to draw the conclusion that this opinion is because the mass of people see that this is where their immediate economic interests lie. A prime piece of evidence for my perspective is that half the British public voted for the Conservatives or UKIP in the 2015 general election, while the Labour Party had ‘controls on immigration’ as one of the policy demands carved into the infamous stone monolith of Ed Miliband, the former Labour leader. Instead, Tariq Ali gave credence to the implausible notion that the British media are responsible for right wing opinions.

Secondly, Tariq Ali made a telling point, almost as a confession. He had formerly been in favour of Britain’s membership of the EU, but now he had grave doubts. There seemed to be two connected reasons: what ‘EU policy’ had done to Greece, Spain and other countries was unacceptable, and the EU-driven policy was a machine for implementing the wider policies of financial capital, not those of the mass of people. Just consider what this position amounts to. It identifies a policy driven by the EU as the problem, not recognising that it results from capitalists in each country trying to restore their viability in the global market, still more that it is one that the richer countries are imposing on the poorer in order to get some of their money – bank loans, etc – back. So, it becomes a policy decision that progressive forces could change, not one that is inevitable unless the market logic of capitalism is overturned. It is not a question of ‘the EU’ demanding nasty policies; these are the consequence of the crisis that these economies face. The ECB, EU Commission, etc, are the messengers, and the message is that your economies are uncompetitive in the world market!

Thirdly, the political confusion of Tariq Ali, and many others, on the question of the EU is based on accepting the alternatives such a vote gives the electorate. There will be a ‘Yes’ or ‘No’ answer to leaving/staying in the European Union. But the terms of the debate are already set. Each side is based on what is best for Britain: whether to stay in a ‘reformed’ (on capitalist terms) EU, although the changes are minimal, and so keep the UK’s global bargaining power, or whether the UK should strike out on its own into what might be a more enticing, faster growing, wider world. The debate only reflects an anxiety of the British ruling class since at least 1945: what to do about a Europe in which the UK could only realistically play a manipulative, tactical role, when it is a minor country with much wider global interests. I have covered these issues previously on this blog (see, for example, here). There is no basis upon which the Stay or Leave vote could be construed as being in favour of something else, anti-capitalist, given the lack of any progressive alternative in the UK. For this reason, I will not be voting Yes/No on which is the best way to save British capitalism.[1]

Tariq Ali’s confusion also goes further. In the SOAS meeting he noted that there was a political problem of many of Europe’s right wing parties – for example, the Front National in France – being in favour of welfare spending. ‘And so are we!’ Well, the unacknowledged problem comes down to the fact that western welfare spending is based upon the privileges that rich countries have in the world, something that his kind of analysis is reluctant to recognise. The attack on welfare spending today results from the chronic stagnation of most economies, ones that are just about buoyed up by huge levels of debt, but which debt also calls time on the previous status quo. Rather than recognise this, Tariq Ali bemoaned the attacks on the welfare state and the ‘breach of the consensus’ that had previously been achieved. So much for the analysis of an anti-capitalist who sees unfavourable policies as a result of decisions that could be changed within capitalism. I heard nothing from him to suggest that what he called ‘neoliberal’ policies could not be changed by a more enlightened policy under capitalism.

The rich country welfare system represents part of a deal/consensus that is now being broken by many governments. Policies that are called ‘austerity’ have not been implemented much in the richer countries, though they will be in the next couple of years. However, the political reaction, especially in northern Europe, is often to bolster reactionary nationalists that want to restore the status quo ante against the ‘hordes’ of migrants and other unwelcome drains on the national wealth and welfare that rightfully ‘belongs’ to the ‘legitimate’ recipients. This is the basis of a reactionary trend in European politics today. While this is exacerbated by the flows of migrants into Europe from the destruction of the Middle East and North Africa, such events only harden the views of those in Europe (and the US) whose states have done so much to cause the damage. It is heartening to see the humanity of many people in Europe helping refugees, especially in Germany. But the problem remains that the overwhelming majority of the population in European countries takes a different view of the world and their economic interests in it.

Tony Norfield, 20 February 2016

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[1] For the record, I will probably turn up and scribble something on the ballot paper. Pointless, but amusing for me, at least.

Saving the Whale

In recent weeks, a couple of dozen sperm whales have ended up on beaches in the UK, Norway, France and Germany, when normally these huge animals spend their time in the deep ocean, not in the relatively shallow North Sea. Marine scientists are puzzled as to why this has occurred. Occasionally this happens, but very rarely on this scale, and this is possibly the biggest instance for a hundred years. As odd as it may seem, there might be a connection between the unusual beaching of whales in several countries and military submarine activity.

My speculation on what has happened is based upon a comment made by one scientist on a news programme that these whales might have ‘got lost’, or for some reason went the wrong way. These whales use echolocation for hunting and for communication, with signals sent at very low frequencies – for different purposes at 0.5, 5 and 15 kHz. I would guess that the most likely cause of the disorientation of the whales is due to an increase in military submarine activity!

Military submarines often use similar frequency communication (usually below 20 or 30kHz). These signals could have led to the directional mistakes made by the beached whales – they tend to travel in groups, so disorientating a few would lead to more getting lost. Assuming that it would take the whales a while to travel to the wrong location, this would suggest that over the past several months there has been a big increase in submarine activity, something that would turn a one-off blunder by a whale with squid indigestion into a major event affecting many.

No country will advertise its military surveillance operations, especially those that need not be acknowledged when below the waves. One recent NATO report argues that there has been an increase in Russian submarine activity, while questions about the value of the UK’s Trident programme, based in Scotland, could also have prompted the Royal Navy to increase theirs. So, if you really want to save the whale, you have to be an anti-militarist too!

Tony Norfield, 5 February 2016

Capitalism, Imperialism, Profit and Finance

The following notes are designed to assist anyone who has tried to analyse developments in global capitalism. Even if the reader has not, then the points made will highlight some issues that should be borne in mind when examining what is written or discussed on these topics.

1. Imperialism and world economy

Any attempt to understand things from the perspective of a national economy is bound to fail. Even the US, the world’s largest economy, can only be understood by looking at how it fits into the world economy. For example, the US dollar is world money, not just the national currency of the United States. Its importance and role depends upon the scope of US power versus other countries, both in economic and political terms. However, even the position of the dollar can be challenged by international developments. It is not an unchanging hegemony; nor has it been in place for all time. Signs that US power has limits are seen in the collapse of ‘The Project for the New American Century’ in 2006 and the political shambles of US policy in the Middle East and North Africa. However much destruction might be in US interests from a tactical perspective, it is hardly a recipe for continued hegemony.

Far less can the UK, France, Germany, China, Iran, Turkey, Brazil, etc, etc, be understood unless their positions in the world economy are taken into account. Their government and corporate policy choices are decided with this in mind. Nevertheless, a key point is that a small number of countries have a monopolistic position in the delivery of most key goods and services and, of the 200 or so countries in the world, there are only around 20 who count for anything in the hierarchy.

For this reason alone, Keynesian economic theory is useless for an analysis of the world economy (see here for a fuller discussion). Quite apart from its errors in understanding the profit-driven nature of capitalism, it focuses only on flows of income, rather the origin of that income and, at most, allows only for international trade balances. Almost always, a Keynesian approach is tied into a nationalist outlook, something that underpins so many apparently radical policies. ‘International’ Keynesianism might appear to be an exception to this, but it is a utopian technocrat’s toolbox. The OECD, or G7 meetings, might recommend changes in economic policy by different countries to benefit world economic growth, but everything still comes down to whatever is in the interests of the capitalist countries concerned.

2. Nationalism and imperialism

Attempting to ‘save’ the national economy to make things better for its inhabitants, for example, by calling for import controls or other forms of government regulation, is a reactionary policy. Firstly, it endorses the existing power of the national capitalist state to determine what will happen. Secondly, it raises national salvation above solidarity with people in other countries who are facing similar problems. This is particularly an issue for progressive people in the imperialist countries that have a dominant position in the world economy. If radicals make any concessions to those who are seeking to defend their privileges in a bankrupt system, rather than to show how the system is indeed bankrupt and must be overthrown, then they have only a short step from this to supporting imperialist aggression. The records of many wars stand in evidence.

I would possibly make one exception here. If, following a popular seizure of state power, that new government enacts policies to defend itself, then it could be seen as a legitimate, though temporary means of securing progressive gains. But if a radical in a rich country calls for such measures, while not mentioning the precondition of a popular seizure of state power before, then you know you have found an apologist for imperialism.

3. The ‘real economy’, finance and profit

There are different kinds of capitalist company and different ways in which they try to make a profit. All profit, rent or interest derives from the surplus labour performed by workers, but the process of capitalist market exchange hides this and makes it appear as if ‘making money’ in business is simply a result of special talent or, perhaps, luck, irrespective of the kind of business concerned. So, producing a good or service as a commodity in the market, buying and selling these commodities, being a real estate agent, lending money or dealing in foreign exchange, bonds and equities can all look, from a capitalist market perspective, as much the same kind of profit-making business. That view upsets common sense. So economists have come up with the notion of a ‘real economy’ of making things versus the rest of the economy, especially versus a ‘financial economy’. However, this distinction ignores both how capitalism is not bothered about making anything except profit and how all the major ‘real economy’ companies are heavily involved in the financial sphere, from stock market takeovers to financial dealings of all kinds.

The modern economy has a pervasively financial form, and the key signals for what is profitable, acceptable or viable to capitalism are transmitted through the financial markets – as reflected in a company’s share price, or a company’s or government’s ability to borrow money. This is basically a more developed form of the traditional ‘laws of supply and demand’ for the commodities a company might produce. It remains the case, nevertheless, that it is capitalist production that produces the profit that is shared, in various ways, among the different types of capitalist company.

Imperialism casts a new light on this process too. Access to funding, access to markets, the ability to use super-exploited labour, the ability to close off markets to competitors, or to use the legal system to protect property and patents, are all special privileges of the major countries, to which the weaker, poorer countries have far less recourse. This affects the profits appropriated by capitalist companies. If the analysis you read takes little or no account of it, you are reading the work of an ignoramus or, more likely, an apologist for the imperialist system.

4. Forms of profit and finance

In recent years, one area of my research was capitalist profitability, the rate of profit, etc. The more I looked into it, the trickier it got. Firstly, the available data do not necessarily measure what they claim to measure. For example, if a company registers a large profit, then that looks like what it has ‘made’, when the reality is that its profit is what its market position has enabled it to appropriate, perhaps by depending upon super-exploited labour from its suppliers, or from a monopolistic position in the world economy defended by patents and commercial laws. Secondly, even if these things were not a problem, then there is still the important question of the different ways in which different kinds of capitalist company generate their profits.

Marxist theory makes a big distinction between capitalist companies in the industrial and commercial sphere and those operating in finance. Ironically, government statistics do a similar thing, although legions of mainstream economists do not. This distinction is based upon the nature of the capitalist investment taking place. The investment by industrial and commercial capitalist (ICC) companies is different from financial investment.

ICC companies largely advance their own money, or at least do not borrow much. This is shown in their low borrowing ratios, with borrowing commonly well below the equity investment of the capitalist owners. However, advancing capital in the financial sector is a very different matter, one that has been poorly covered, or understood, by Marxist writers (except, perhaps, for Suzanne de Brunhoff in her Marx on Money, and one or two others).

Financial companies, such as insurance funds, pension funds, asset managers, hedge funds, banks, etc, advance money they are given by others. Banks also have an ability to create their own assets, via the banking system, as another way to ‘advance’ capital. All of this is a very different form of securing a profit than in the case of ICC companies, despite the fact that all of them rely upon the surplus labour performed by the working class.

For the financial companies, the revenues they gain are commonly in the form of interest on loans made or bonds purchased, or as dividends ‘earned’ from the equity securities they own, or as rents from their investments in property assets. For Marxist analysis, this is technically different from ICC profits earned – after paying interest, etc – from the advance of capital by the owners of such corporations.

The distinction is most simply seen by comparing the leverage of financial companies with ICC. Often, the borrowing ratios of the former are more than twenty times higher than the latter. As a result, with the same advance of the owners’ capital, the amount actually invested/lent, etc, by a financial company can be dramatically higher than for ICC investments. This is a practical expression of the fact that the rate of interest, or such ‘financial’ returns, is not the same as the rate of profit. They have very different roles in the capitalist system, as I argue in my new book.

Any notion of financial ‘investment’ gets even more complex with financial derivatives. Here, what is recorded in accounting practice as an ‘asset’ is simply a derivative with a positive market value. If the derivative market price changes so that it is a loss to the holder, then it becomes a liability.

What appear initially as clear concepts of investment, and the rate of profit on that investment, are complicated by the reality of modern finance. Just consider, for example, that corporations quoted on the major stock exchanges pay most attention to their ‘return on equity’ or their ‘earnings per share’, rather than to a rate of profit due on the invested capital. This is the case, even though the capitalist system’s underlying rate of profit ultimately drives the ‘return on equity’, etc.

5. Economic history

The subject of economic history has more or less disappeared from academic prospectuses. However, it is an indispensable for any understanding of the modern world. Luckily, there are books still being produced that delve into archives and bring to light hidden aspects of important past events, ones that usually contradict the standard mythology, whether on the funding of the welfare state in rich countries, the dealings between major powers or of the road to war and oppression. It may seem perverse that the most enlightening critiques of imperialism can come from what would appear to be mainstream or even conservative writers, at least the ones with their wits about them who do not blindly accept what ‘everybody knows’. By comparison, many radicals often just embellish the mythology with invented stories of ‘struggle’ and ignore inconvenient facts, notably the chauvinism of the masses in the major countries. Rather than a ‘struggle’ by the working class for reforms, a story that appears to be anti-capitalist, often the reality was instead that the ruling elites did a deal with the bureaucracy of trade unions and popular political parties to secure a national consensus that would support imperialism.

Tony Norfield, 1 February 2016