The purpose of this article is to show the explanatory power of Marxist analysis in looking at the dynamics of capitalism. The laws of motion of the system affect all our daily lives profoundly. Having a basic grasp of these laws of motion helps us to understand how changes in social being produce changes in consciousness and thus to participate in the fight for a better society – socialism.

This is not yet another attempt to repeat Marx’s analysis. This has been done thousands of times, including by the present author (See Brooks, Sewell and Woods-What is Marxism?). At best surveys of that kind will take the reader back to Capital which is, of course, the definitive treatment.

Neither is it an attempt to ‘prove’ the labour theory of value, as Marxists have been challenged to do over and over again. It is intended rather to show the dramatic effects that the operation of the law of value has on working people’s lives.

Chapter 1: The problem of value

Value

Marx begins his analysis in Capital Volume I with the commodity. The commodity is first a useful thing. That does not mean it has to be a material thing, as Marx makes clear. But use values are incommensurable. How do we compare apples with oranges?

Secondly it is an exchange value, which means it can be compared and exchanged with other commodities. To possess this quality of exchangeability commodities must possess a common property they share with one another – value. What does this common property consist of? Marx concludes that, “If then we leave out of consideration the use value of commodities, they have only one common property left, that of being products of labour” (Capital Volume I, p.128)

This approach to the problem of value is daunting to the first time reader, as Marx himself recognised. We intend to approach the issues in a different way. When his friend Kugelmann raised the difficulty of his approach in 1868, the year after the publication of Capital, Marx replied as follows:

“The chatter about the need to prove the concept of value arises only from complete ignorance both of the subject under discussion and of the method of science. Every child knows that any nation that stopped working, not for a year, but let us say, just for a few weeks, would perish. And every child knows, too, that the amounts of products corresponding to the differing amounts of needs demand differing and quantitatively determined amounts of society’s aggregate labour. It is self-evident that this necessity of the distribution of social labour in specific proportions is certainly not abolished by the specific form of social production; it can only change its form of manifestation. Natural laws cannot be abolished at all. The only thing that can change, under historically differing conditions, is the form in which those laws assert themselves. And the form in which this proportional distribution of labour asserts itself in a state of society in which the interconnection of social labour expresses itself as the private exchange of the individual products of labour, is precisely the exchange value of these products.” (Marx-Engels Selected Correspondence, p.209)

This is our starting point:

• All societies have to work in order to live.
• All societies have to allocate the labour available to them according to their priorities.
• In a market economy this proportional allocation of the products of labour is regulated through the exchange value of commodities.
• The exchange value of commodities is determined on average by the (socially necessary) labour time required to produce them.

Socially necessary labour time

Corresponding to the twofold nature of the commodity is the twofold nature of the labour that produces it. Concrete labour produces specific use values, but use values are incommensurable. Marx shows that the substance of value is abstract labour. Abstract labour may be regarded as labour from the general pool of labour power available to any society. The magnitude of value is determined by the amount of labour time necessary to produce the commodity. Equal quantities exchange for one another. Marx goes on to qualify this at once:

“Some people might think that if the value of a commodity is determined by the quantity of labour spent on it, the more idle and unskilful the labourer, the more valuable would his commodity be, because more time would be required in its production. The labour, however, that forms the substance of value, is homogeneous human labour, expenditure of one uniform labour power. The total labour power of society, which is embodied in the sum total of the values of all commodities produced by that society, counts here as one homogeneous mass of human labour power, composed though it be of innumerable individual units. Each of these units is the same as any other, so far as it has the character of the average labour power of society, and takes effect as such; that is, so far as it requires for producing a commodity, no more time than is needed on an average, no more than is socially necessary. The labour time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time…

“We see then that that which determines the magnitude of the value of any article is the amount of labour socially necessary, or the labour time socially necessary for its production.” (Capital Volume I, p.129)

• The value of a commodity is determined on average by the socially necessary labour time involved in its production.

Market forces

The amount of socially necessary labour time to make the commodity is proportional to its price. We are treating money here as the monetary expression of labour time. Labour is not consciously allotted to different purposes. The division of labour is implemented through private exchanges mediated with money.

Let us look at how the allocation of labour is determined through the exchange process under capitalism which is, after all, an unplanned system. How many commodities of each type shall be produced? How much labour time shall be allocated to the production of each? These matters are decided by the impersonal forces of the market. The exchange of commodities is not just a private matter concerning the owners of the commodities. In fact every individual act of exchange is subject to objective economic laws that go to shape the dynamics of the entire capitalist system.

Exchange is the way that a vast global division of labour is established under capitalism through the world market. Capitalism is an unplanned system. Too many of some sorts of commodities are continually being produced, so prices fall below their value in the glut. Too few are produced of others so prices rise above their value with the shortage. How could it be otherwise, since nobody knows how much is the ‘right’ amount to fulfil demand at any point in time? So the capitalists just go ahead, get the commodities produced, and hope they can sell them. Some make fortunes, others fail.

Commodities are usually sold above or below their value, subject to the forces of supply and demand. Only accidentally or occasionally are they actually sold at their value. But value is the axis around which the day to day movement of prices oscillates. Marxists do not deny the importance of supply and demand. For us these surface forces are the executors of the fundamental laws of motion of capitalism identified by Marx. As John Stuart Mill put it, the palpitations of the waves upon the surface of the sea do not negate the fact that there is a sea level and that it varies according to the pull of the tides.

• The law of value is executed by the forces of supply and demand in an unplanned society where commodity production is universal.

What drives capitalism?

The establishment of this average socially necessary labour time is no abstract process outlined in books. In introducing the concept, Marx offers the following example:

“The introduction of power looms into England probably reduced by one half the labour required to weave a given quantity of yarn into cloth. The handloom weavers, as a matter of fact, continued to require the same time as before; but for all that, the product of one hour of their labour represented after the change only half an hour’s social labour, and consequently fell to one-half its former value.” (ibid p.129)

The determination of value by the amount of socially necessary labour time means that the quicker the commodity can be produced, the less it will cost. The speed with which the commodities can be produced depends on the productivity of labour. The power loom wiped out the handloom weavers on account of its greater productivity.

The formation of the socially necessary labour time for weaving cloth predominantly by power looms was a huge and dramatic incident in the early history of the British working class movement. It was an event, stretching over decades, which caused the impoverishment and ruin of hundreds of thousands of handicraft workers and their families. And the determination of socially necessary labour time in this devastating and revolutionary fashion is a continuous process under capitalism, causing upheaval and destroying livelihoods as it goes on.

What are the mechanisms driving this apparently impersonal operation of market forces? They are twofold: the need for the capitalists to exploit the working class more and more effectively; and the impulsion caused by competition between the capitalists themselves. As we shall see these processes are interrelated.

• Capitalism is driven by competition between capitalists and by the need all capitalists feel to exploit their workers more effectively.

Chapter 2: Exploitation

Exploitation and class society

All societies, as Marx reminded Kugelmann, have to work for a living. All societies have to allot the products of the total labour among their members. Marx calls the labour required to produce the goods that make up the subsistence of the toilers necessary labour.

When the productivity of labour rises sufficiently to produce a surplus over and above the subsistence needs of the population, the question will be posed: who is to enjoy this surplus? The ruling class in all forms of class society is that section of the population that grabs and appropriates the surplus. Exploitation in all forms of class society is nothing else but the extraction of surplus labour by the ruling class from the toiling and exploited classes. Under capitalism this exploitation is hidden behind a veil, a veil that Marx was committed to pierce:

“Capital has not invented surplus labour. Wherever a part of society possesses the monopoly of the means of production, the labourer, free or not free, must add to the working time necessary for his own maintenance an extra working time in order to produce the means of subsistence for the owners of the means of production, whether this proprietor be the Athenian devotee of the good and the beautiful, Etruscan theocrat, Roman citizen, Norman baron, American slave owner, Wallachian Boyar, modern landlord or capitalist.” (Capital Volume I, pp.344-5)

Marx cites the Reglement organique written by the Boyars (landlord class) of what is now Romania to show that exploitation was central to their class society and to any class society. The Reglement was a kind of rule book specifying how much corvee (an obligation to perform unpaid labour) must be performed by the peasantry. The ‘beauty’ of this document, from Marx’s point of view, is that the principle of exploitation is spelled out and transparent. As he points out in the passage above, the ruling class in all forms of class society legitimises its exploitation through its ownership of the means of production. One difference between capitalism and the rule of the Boyars is that the right to snaffle unpaid labour from the peasantry is written down in a book!

“The comparison of the greed for surplus labour in the Danubian Principalities with the same greed in English factories has a special interest, because surplus labour in the corvée has an independent and palpable form. (ibid p.345)

“The necessary labour which the Wallachian peasant does for his own maintenance is distinctly marked off from his surplus labour on behalf of the Boyar. The one he does on his own field, the other on the seignorial estate. Both parts of the labour time exist, therefore, independently, side by side one with the other. In the corvée the surplus labour is accurately marked off from the necessary labour.” (ibid p.346)

In practice the Reglement allowed for unlimited exploitation. “The 12 corvée days of the Reglement organique cried a Boyar drunk with victory, amount to 365 days in the year.” (ibid p.348)

In all forms of class society the wealth (mass of use values) is produced by the toilers. The product of their labour divides into necessary labour (labour that goes to their subsistence) and surplus labour (the fruits of exploitation enjoyed by the ruling class).

We shall return to the specific form of exploitation of the working class later.

• Exploitation is a common feature of all forms of class society.
• It involves a division in the labour performed by the exploited class into necessary labour for their own maintenance and surplus labour, appropriated by the ruling class.

Workers and peasants

There are obvious differences between those who work for a wage under capitalism and the wretched Wallachian peasantry. We can assume that the extraction of a surplus from the peasants by the boyars was closely accompanied by the threat of physical force. Exploitation certainly does take place under capitalism. In contrast to pre-capitalist class societies it is not in principle accompanied by extra-economic compulsion. It classically occurs through what appears to be a contract over wages freely entered in to by both parties, as with other relations under capitalism. It happens through impersonal market forces.

That is the theory. In practice the capitalist class has never hesitated to use force when it suits their interests. Marx explains that the process of primitive accumulation examined below, the creation of the modern working class, “is written in the annals of mankind in letter of blood and fire.” (Capital Volume I, p.875) The dawn of capitalism also saw an obscene florescence of outright slavery as the direct counterpart to the emergence of wage labour. And capitalism created the world market through the colonial exploitation of three continents.

The capitalist state does have has a role in guaranteeing the profits of the capitalist class. “The modern representative state,” according to Engels, “Is an instrument of exploitation of wage labour by capital.” (The Origin of the Family, Private Property and the State, p.168) The state guarantees the rights of private property, which disproportionately benefits the capitalists, who own much more property than the workers. The state may intervene in the wage bargaining process, for instance to enforce a minimum wage or to pass anti-union laws. But the worker is usually exploited through the wages contract, without the direct intervention of the state.

It is actually this asymmetry of ownership that makes the wages contract a one-sided affair. The capitalist class, like every ruling class before it, has a monopoly over the means of production.

How this situation came to pass is a long story. Marx calls this process primitive accumulation, the accumulation of the preconditions for capitalist production. This consists on the one hand of the piling up of fortunes in the form of money. The Wallachian boyars, of course, measured their wealth in land.

Secondly primitive accumulation involves the complete separation of the toilers from independent access to the means of production. In the case of peasants, that means the loss of their own plot of land. The workers then have no option but to labour for a wage for the capitalist class, who have progressively acquired a monopoly in the means of production.

The capitalists own the factories, mines, farms and offices, the means of making a living under capitalism. The wage workers are formally free. Unlike the Wallachian peasants, they don’t have to work for a particular boss. The peasants in Romania were serfs, regarded as being as much an appurtenance of the land as a hedgerow, and their unborn children were regarded in the same light. We ‘free’ wage workers rightly see this as a monstrous form of slavery. But, as we can see from Marx’s description, the peasant household has access to its own field. We can assume that, despite the insatiable exactions of the landlords, in normal times the family can feed and clothe themselves at a modest level. Barring famines, their livelihood is more secure than that of a wage worker. Unemployment is not a threat; the word doesn’t even occur in their lexicon.

The difference between workers and peasants is that the workers are ‘free’ in two senses; they do not have to work for any particular capitalist. And they are free from any share in owning the means of production. They have no choice but to work for a capitalist, since the capitalists between them monopolise the means of production.

• Unlike peasants, workers are free in a twofold sense; first they are not obliged to work for a particular capitalist.
• Secondly, since they have no right of access to the means of production, they have to sell their labour power to a capitalist in order to maintain themselves.

Chapter 3: The case of Henry Ford

We shall illustrate the dynamics of capitalism by looking at the history of a man and a firm – Henry Ford. We are fortunate in being able to make use of Upton Sinclair’s book The Flivver King. The Flivver was a popular name for the Model T Ford which, together with the Volkswagen Beetle, was the most iconic and important car of the twentieth century. Sinclair wrote his book in 1937 as part of a drive to unionise Ford Motor Co. Although the characters in the book such as Abner Shutt, his family and neighbours, are fictitious, Sinclair drew his information on Ford-America from the public domain. It is not only accurate but sharply observed, informed as it is by a socialist perspective.

Labour power

Workers are told they are paid for the work they do. After all, they are free agents. If they don’t like the boss, they can collect their cards and go somewhere else. There seems to be no exploitation in the wages contract. If you work overtime, you get paid more for more work. If the firm falls on hard times and has to impose short time working, you will lose money. If you are paid for piece work, the harder you work the more you get paid. What could be fairer than that?

Marx described the standard of living enjoyed by the exploited in class society as their means of subsistence. Does this apply to the wages that workers earn in capitalist society as well? Marx rooted the exploitation of wage labour in the fact that, despite appearances, workers are not actually paid for the labour they perform. They are paid for their labour power, their subsistence:

“We mean by labour power, or labour capacity, the aggregate of those mental and physical capabilities existing in the physical form, the living personality, of a human being, capabilities which he sets in motion whenever he produces a use value of any kind.” (Capital Volume I, p.270)

So the capitalist buys a capacity, not a predefined lump of work. What does he get for his money? He gets labour. Labour is the use value of labour power. How much labour he gets out of that capability is up to him. Like the Wallachian boyar, he is forever thinking up ways to squeeze more out of this labour power. That drive, and the resistance to it, forms the central thread of much of the remainder of this narrative.

Throughout Capital Volume I Marx assumes that workers are paid by the day, though he carefully examines other forms of payment such as piece work in Part Six: Wages. He does so for two reasons. The first is that most British workers in the nineteenth century were paid by the day. The second reason is that, whatever the form of wages such as payment by results, they really represent a subsistence for the workers.

In comparing the British factory workers of his time with the Romanian peasant, Marx uses the following example to show how the identical process of exploitation is going on:

“Suppose the working day consists of 6 hours of necessary labour, and 6 hours of surplus labour. Then the free labourer gives the capitalist every week 6 x 6 or 36 hours of surplus labour. It is the same as if he worked 3 days in the week for himself, and 3 days in the week gratis for the capitalist. But this is not evident on the surface. Surplus labour and necessary labour glide one into the other. I can, therefore, express the same relationship by saying, e.g., that the labourer in every minute works 30 seconds for himself, and 30 for the capitalist, etc.” (ibid pp.345-6)

In Marx’s hypothetical example above the worker works 6 hours ‘for himself’, that is to reproduce values sufficient to be exchanged for money equivalent to his wages. He then works 6 hours in the 12 hour day he works for 6 days a week to produce surplus labour. Under capitalism this surplus labour is called surplus value. The rate of surplus value, the rate of exploitation, in this case is 100%. As we shall find out later on, not all this goes directly to the capitalist who directly employs the workers. It goes to feed the entire class of exploiters.

The process of exploitation is veiled. Henry Ford didn’t wave a copy of the capitalist equivalent of the Reglement Organique at the workers like a Wallachian boyar. All we see in the factory of the Henry Ford Motor Co. is cars coming off an assembly line. In fact some cars are sold so as to pay the workers’ wages and more cars are sold to be turned into surplus value. This is how the workers are paid for their subsistence. For part of their working day, working hour, working minute or for any piece of work they perform they are in effect working for themselves. The rest of the time they produce a surplus for the boss class, surplus value.

• Whatever the form of appearance of the wages contract, workers are not paid for the work that they do but for their labour power.

Subsistence and class struggle

What does subsistence mean in this case? The subsistence requirements of an American worker working for Ford are certainly different from those of a Wallachian peasant. The Shutts, at one point in Upton Sinclair’s narrative, are a four car household. In fact this was the only way they could get around Detroit at the time. Cars were a necessity, which is not to say that every working class household could afford one. Sinclair’s book is full of incidents where, in hard times, the car has to be sold or is repossessed.

Marx of all people was least inclined to ignore the class struggle. He knew that workers aspired to share in the greater and greater quantity of wealth they were creating. “In contrast, therefore, with the case of other commodities, the determination of the value of labour power contains a historical and moral element.” (ibid p.275)

Upton Sinclair records the fact that in January 1914 Henry Ford introduced a minimum wage of $5 per day for his workers. Sinclair notes that, so far from being a unilateral act of philanthropy, Ford was grappling with massive problems of absenteeism and labour turnover, caused in large part by the relentless speedup imposed at the Ford plant. Sinclair also tells us of the regime of spies and busybodies that were part of the Ford way of life at Highland Park. The book recounts the daily struggle for a decent existence by the Shutt family and their fellow workers. For instance in 1930 when Henry Ford magnanimously unveiled his plan to raise the basic wage to $7, “There were only a few soreheads to point out that since Henry had established his five-dollar minimum, sixteen years back, the cost of living in the Detroit area had nearly doubled, so that the new seven-dollar wage was far less than the old one had been.” (Sinclair p.73)

American workers at this time were the most prosperous in the world. Yet the workers at Ford were still scrambling to keep up with the cost of living. Savings they built up in good times disappeared during layoffs and recession. Workers in the USA were still being paid a subsistence, though with, “A historical and moral element.” (Capital Volume I, p.275)

Meanwhile Henry Ford, who Abner Shutt had first encountered as an enthusiast trying to build a horseless carriage in his neighbourhood workshop, had become a billionaire, the richest man in the world. And he had done so from their unpaid labour.

• Wages paid for the workers’ labour power do not just provide a bare physical subsistence, but contain a historical and moral element.

Ford and socially necessary labour time

The law of value states that the value of a commodity is determined on average by the amount of socially necessary labour time involved in its production. That means that value is inversely related to productivity. The more productive the workers are, the less value the commodities they produce will contain, and the less they will tend to cost. This law is executed by competition between capitalists. It was Henry Ford’s genius that he didn’t see the motor car as a toy for the rich, as so many of his contemporaries and rivals did, but as a tool for the masses. He had to sell cheaper than the competition. The best way to do that was to make his cars cheaper, by means of mass production techniques. Labour saving tools and machinery are so called because they economise on the expenditure of labour time, and therefore allow each commodity to contain a smaller amount of value and to cost less.

“In 1909, before the assembly line method was introduced, just over 12,000 Model T Fords were sold at around $950 each; by 1916 sales had risen to 577,000 while the basic price had fallen to $360. This achievement was partly a result of pronounced economies of scale of speed (the average time for assembling a chassis falling from 12.5 man hours in June 1913 to 1.5 man hours in January 1914). (Schmitz–The Growth of Big Business in the United States and Western Europe, 1850-1939, p.63)

Schmitz talks of ‘economies of scale and speed’ (a term he borrows from Alfred Chandler). What does he mean but the coercive operation of the law of value? Why should the price of the Model T have fallen from $950 to $360 in seven years? Because it took much less labour time, socially necessary labour time, to produce one.

Writing of the panic of 1907, Sinclair observes, “It cut down the Ford sales slightly, but not much, for this new product was more and more wanted, and among the hundred million people of America there are always some who can buy what they want. Henry Ford, planning tirelessly, would find new ways to give it to them more cheaply. In the year after the panic he produced 6,181 cars, a little over three per worker; but within three years he was managing to get thirty-five thousand cars out of six thousand workers. (Sinclair p.21)

Here Sinclair calculates the effect of rising productivity on the price of the cars directly in labour time. One worker in 1910 is now producing nearly six cars in a year. The productivity of labour has doubled in three years.

• Raising the productivity of labour means that workers produce more use values in a given time.
• Since the value of the commodities is determined by the socially necessary labour time involved in their production, they will get cheaper as productivity rises.

The division of labour

“The work of assembling the flywheel magneto, a small but complex part, was put on a sliding table, just high enough to be convenient for the workers, who sat on stools, each one performing one operation upon a line of magnetos, which crept slowly by. In the old way, a man doing the work of making a magneto could turn out one every twenty minutes; now the work was cut into twenty-nine operations, performed by twenty-nine different men, and the time per magneto was thirteen minutes and ten seconds. It was a revolution

“They applied it to the making of a motor. Done by one man, it had taken nine hours and fifty four minutes. When the assembling was divided among eighty-four different men, the time for a motor was cut by more than forty percent.” (Sinclair p.26)

No doubt when Upton Sinclair penned this passage he was aware as to how strikingly it resembles the example given at the beginning of Adam Smith’s book, The Wealth of Nations. Smith showed how the division of labour in a pin factory means an enormous increase in the productivity of labour in making pins:

“To take an example, therefore, from a very trifling manufacture; but one in which the division of labour has been very often taken notice of, the trade of the pin-maker; a workman not educated to this business…could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty.”

Then Smith outlined how the division of labour works:

“One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations.”

Smith observed the effect at first hand in a small pin factory. The improvement in productivity was dramatic:

“Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day.”

We would expect the price of pins to fall as a result, since they are composed of so much less socially necessary labour time than before, just as the price of cars fell steadily as productivity improved in the motor industry. The other thing to note is that the workers become more and more productive as a natural result of the division of labour. Yet under capitalism the benefits accrue entirely to the owners of the means of production.

• The division of labour raises the productivity of labour, but the benefits accrue to the capitalist.

Rising productivity and the car industry

The effects of enhanced productivity in the car industry were not confined to Henry Ford and his plant. At the dawn of motor production dozens, hundreds of enthusiasts were tinkering with prototype horseless carriages in sheds and workshops. If this reminds the reader of the early days of Silicon Valley, it should do. The transition from craft to mass production methods is a natural and normal part of the innovation process under capitalism.

In the UK alone 221 firms began motor manufacture between 1901 and 1905. S.B. Saul observes that 90% of these had left the industry by 1914. (The motor industry in Britain to 1914) The USA had a much bigger home market for cars and was a more advanced capitalist country by this time. The same process of the concentration of capital advanced there with seven league boots.

Later professionalisation of the trade meant the transition from amateur enthusiasts, such as Henry Ford had been in the beginning, to the production of relatively expensive motors by craft methods, till Ford’s mass production methods began to dominate the industry. What happened to the pioneers of car production? Unless they managed to find a niche as a sports or luxury model (The Model T was a very basic design, which made it easy to mass produce, and it was much ridiculed as a result.) they were bound for extinction. “One capitalist always kills many”, as Marx says (Capital Volume I p.929). Henry Ford’s advances in assembly line production struck down many aspiring motor manufacturers.

The rise in productivity made possible by assembly line techniques inevitably means that smaller and weaker laggard capitals fall by the wayside. They simply can’t keep up with the industry leaders and innovators. The scale of production inevitably rose with the vastly increased output from the new plants.  By the 1930s the US auto industry was completely dominated by three mass production giant firms – Ford, General Motors and Chrysler. But though there were far fewer firms in the industry, the big three in Detroit still saw each other as rivals. Every Ford sold meant an American citizen who would not be buying a Chrysler or a GM car any time soon. Competition remained the driving force of the accumulation of capital.

“Henry Ford might insist, as he continually did, that competition was wrong, and that he did not believe in it; but the fact was that he was competing at every moment in his life, and would continue to do so as long as he made motor-cars. In a hundred different plants scattered over the United States efforts were being made to beat him. In the long run, the successful ones would be those who contrived, by one method or another, to get the most out of a dollar’s worth of labor.” (Sinclair p.27)

So this competition was not just a contest between capitalists as to who could make and sell cars cheapest. It was also at bottom, as Sinclair notes, a contest in squeezing more and more surplus out of the working class.

• Competition between capitalists produced dramatic increases in productivity, the scale of production and falls in the price of cars.

Surplus value in practice

Where did Henry Ford’s profits come from? From his workers – where else could they possibly come from? The workers at Ford, like the peasants in Romania, were being exploited. That means that some of the value added in production went to reproduce the elements of their wages. And some of the value they added went to make Henry Ford rich. Surplus value is the unpaid labour of the working class.

Upton Sinclair did not have the information to work out the rate of exploitation at Ford. Business secrecy is protected precisely so such details won’t leak out. But the facts speak for themselves. At the beginning of the tale Henry Ford lives in the same neighbourhood as Abner Shutt. By the 1930s he is the richest man in the world, a billionaire.

In 1909, we are told, Ford was selling 12,000 cars at $950 each. Some money from those cars he sold went straight to pay the workers’ wages. Some went to pay for other expenses – the cost of depreciation on the plant, electricity, tyres upholstery and the rest. And some went into Henry Ford’s pocket. This was a surplus, just like that appropriated by Etruscan theocrats, Norman barons and the rest of them. It was surplus value. It was unpaid labour, the fruits of exploitation.

In the hypothetical example Marx used in comparing the exploitation of factory workers in Britain, he suggested that the workers worked six hours to produce the elements of their own subsistence and six hours in producing surplus value. There are two factors that veil the reality of this exploitative relationship: the first is that the nature of the wages contract suggests that the workers are being paid for their labour; in fact they are being paid for their labour power, for their keep.

The second is that (unlike the Danubian peasant) the wage worker doesn’t actually produce all the commodities that they buy with their wages. In the usual way they will specialise in producing a single commodity all day. Usually they will be a detail worker in the production process. Neither will they normally spend part of their time producing goods their boss will consume. They find themselves part of a vast worldwide division of labour imposed by the market, in which commodities produced by the workers of the world are all exchanged against money and pass from continent to continent.

What is the rate of surplus value in the UK today? From the government ‘Blue Books’ used long ago by Marx we can find data that, though rough and ready, can give us a clear idea of the rate of exploitation. We choose the year 2007 as the last set of statistics likely to be unaffected by the crisis. (Crises usually hit profits harder than wages.) All figures are at current market prices.

Gross Domestic Product                         £1,401.042m

Compensation of employees                    £744.857m

Surplus value                                           £656.185m

The formula for surplus value is S/V, where S is surplus value and V is variable capital, the sum laid out by the capitalist on wages. Surplus value is derived simply by deducting employee compensation (which we identify as the wages bill for the country) from GDP. Everything apart from employee compensation counts as surplus value. In the figure for surplus value I have therefore included the following categories:  Operating surplus, Taxes, Government supply, and a mixed, mysterious category called Mixed income, which is a little less than 6% of GDP for that year.

This gives a rate of surplus value of 88%.

Assuming a working day of 7 hours, the workers work on average about 3 hours 43 minutes for themselves and 3 hours 17 minutes to produce surplus value.

(From United Kingdom National Accounts: Blue Book 2007, Office for National Statistics)

Why include taxes as part of the surplus value? Here is the traditional Marxist justification for the procedure

“‘Taxes!’ A matter that interests the bourgeoisie very much but the worker only very little. What the worker pays in taxes goes in the long run into the cost of production of labour power and must therefore be compensated for by the capitalist.” (Engels, The Housing Question, p.36)

• The working class is exploited by the capitalist class, who extract a surplus from them.
• The form taken by the surplus extracted from the workers is surplus value, the unpaid labour of the working class.
• The worker also spends time on necessary labour, producing commodities that are sold to pay their wages.

Chapter 4: ‘Getting the most out of a dollar’s worth of labor’

Raising the rate of surplus value

As we have seen, in the battle to make more profits the capitalists need to compete against their rivals. They sell cheaper by making cheaper, raising the productivity of labour in the process. All the time they are engaged, as Upton Sinclair puts it, in the search “to get the most out of a dollar’s worth of labor.”

The extraction of surplus value gives us the basic anatomy of capitalism as a system of exploitation, as a form of class society. But, since the search for surplus value is never ending, it also provides us with the framework to analyse the dynamics of capitalism.

The rate of surplus value or rate of exploitation is given by the formula S/V, when S is surplus value and V is variable capital. For instance, when Marx gave the example of the British factory worker compared with the Romanian peasant, he suggested the former worked six hours for himself and six for the capitalist. In that case the rate of surplus value (S/V) would be 6/6 or 100%. How can the capitalists raise the rate of exploitation? Marx deals with two main methods: these are raising absolute surplus value and increasing relative surplus value.

“The surplus value produced by prolongation of the working day, I call absolute surplus value. On the other hand, the surplus value arising from the curtailment of the necessary labour time, and from the corresponding alteration in the respective lengths of the two components of the working day, I call relative surplus value.”  (ibid p.432)

• The capitalists are impelled by competition among themselves, and by the need ‘to get the most out of a dollar’s worth of labor’, to increase the rate of surplus value, the rate of exploitation

Absolute surplus value

The search for absolute surplus value is dealt with magnificently in Chapter 10 of Capital Volume I, entitled The working day. If workers are paid by the day, as most were in the nineteenth century, then what could be simpler than for the boss to demand that they work more and more hours for their recompense?  In terms of our earlier example, if  the bosses manage to force the workers to work a 14 hour day instead of 12 hours, while still paying them the same daily wage then the rate of surplus value (S/V) rises to 8/6 = 133%.

As is often the case in the early stages of an industrial revolution there were masses of desperate people prepared to work for a pittance. No doubt bourgeois economists would put down the possibility of super-exploiting these workers by extending the working day without limit to the forces of supply and demand. The supply of labour exceeded the demand, so the ‘price’ of the workers fell.

In a sense they are right. Supply and demand is important, specially when it is you who are supplying yourself and being demanded (or not) by the bosses. Marx was very much alive to the opportunities provided by recession for the capitalists to try to drive wages below the value of labour power which, as we know, is a level ultimately decided by class struggle. Upton Sinclair was equally aware of this, as he shows in his book. Both men also knew that periods of boom and relatively full employment provided the working class with the best opportunity to advance the level of real wages.

Upton Sinclair does not deal with the production of absolute surplus value as a way of raising the rate of surplus value in his book. The length of the working day was taken as a given in early twentieth century America by most sections of the working class. Workers were by and large paid by the hour. But the main reason for its unimportance to the likes of Henry Ford comes from the obvious advantages of assembly line production, speedup and other techniques to raise the rate of exploitation.

That does not mean that the extraction of absolute surplus value has ceased in modern capitalism. We can all list the occupations where workers are expected to work all the hours to make up a living wage. The mere payment of wages by the hour does not rule out the setting of an hourly rate at such a low level that vulnerable workers are forced to work far longer than the norm established by the better organised sections of the working class.

The extraction of absolute surplus value does not require much initiative or entrepreneurial skill. All the employer needs is the whip hand over the workers. But it was a very successful means of raising the rate of exploitation in the early years of the British industrial revolution In the end the decisive victory over this process of lengthening the working day was achieved by the British working class itself, pressing for the legal limitation of the working day.

Marx also observes that the capitalist enthusiasm for overworking their employees was in danger of killing the goose that laid the golden eggs. He quotes the Reports of the Inspectors of Factories as advising that, “The Ten Hours’ Act, in the branches of industry subject to it has ‘put an end to the premature decrepitude of the former long hour workers’” (Capital Volume I, p.416)

• The capitalist gains absolute surplus value by making the worker labour longer for the same wages.
• That means the worker spends more time in producing surplus value and a smaller proportion of their labour time on necessary labour.

Relative surplus value

If the worker is paid by the day and we regard the working day as fixed for the time being, there is only one other way the capitalist can raise the rate of exploitation. Since the working day is divided into a paid part and an unpaid part, the capitalists must reduce the hours that the workers labour to produce the elements of their own maintenance. This will automatically increase the hours they produce surplus value. And the way to do that is to raise the productivity of labour.

The extraction of relative surplus value is a much more complex process than that of absolute surplus value. It is not a conscious outcome of the calculations of the capitalists. Marx says that in essence it consists in shortening the amount of time the workers labour to produce the elements of their wages. But, as we know, the workers do not spend time in the workplace producing all the things they need to subsist on in their natural form. So how does this process work? The impetus comes from the need for capitalists to compete with one another and thus to raise the level of productivity of their workers.

The outcome of increased productivity means that commodities are produced with less socially necessary labour time. In monetary terms they are cheaper. We now have to consider what the effect of cheapening commodities has on the economy as a whole. One possibility is that they are wage goods, commodities that by and large are bought by workers with their wages. If they are wage goods, what will happen when they get cheaper? Will the workers enjoy a higher and higher standard of living through the falling price of necessaries? Our answer is, ‘not necessarily’. Falling prices do not always afford the workers a rising standard of living. The issue is determined by the balance of forces between worker and employer, by the class struggle.

It is quite obvious that workers in advanced capitalist countries have made big gains in their standard of living compared with 200 years ago. There are many more goods in the notional basket of commodities that make up the elements of their maintenance than was the case in the reign of Queen Victoria. Many of these new wants were not even invented at that time. To be fair to Henry Ford, part of his vision was that ordinary working people, wage workers and small farmers, would be able to afford a car made by the methods of mass production he pioneered. It is also the case that for workers and farmers at that time their Model T Ford was not a luxury for riding out on Sunday. It was a necessity for getting to work or sending their crops to market.

• Relative surplus value is gained by making the worker labour more effectively, more productively, in a given time.
• This means that the worker spends more time producing surplus value and less time on necessary labour.

Raising the productivity of labour

Marx’s analysis of the extraction of relative surplus value in Capital remains the core of our analysis here. If productivity doubles throughout the economy then prices will halve. If we assume that workers’ living standards remain the same in real terms then, if they formerly worked four hours to produce the elements of their subsistence and four hours producing surplus, they now only need work two hours to produce the basket of goods they need to subsist upon. That means they can work six hours for the boss in an eight hour day. The rate of exploitation has jumped from 100% (S/V = 4/4) to 300% (S/V = 6/2).

Here is the classic position outlined by Marx:

“The cheapened commodity, of course, causes only a proportionate fall in the value of labour power, a fall proportional to the extent of that commodity’s employment in the reproduction of labour power. Shirts, for instance, are a necessary means of subsistence, but are only one out of many. The totality of the necessaries of life consists, however, of various commodities, each the product of a distinct industry; and the value of each of those commodities enter as a component part into the value of labour power…Whenever an individual capitalist cheapens shirts, for instance, by increasing the productiveness of labour he by no means necessarily aims at reducing the value of labour power and shortening, by as much the necessary labour time. But it is only in so far as he ultimately contributes to this result that he assists in raising the general rate of surplus value. The general and necessary tendencies of capital must be distinguished from their forms of manifestation.” (ibid p.433)

Just to emphasise the last point. The capitalist does not set out to reduce the labour time necessary to reproduce the elements of the workers’ subsistence. All he seeks is to steal a march over his competitors. Yet raising the rate of surplus value is the ultimate outcome of the capitalists’ acts. Marx does not derive the laws of motion of capitalism from the motivations of the capitalists. On the contrary he sees the motivations of the capitalist as a product of their position in capitalist society.

• The production of relative surplus value is an unconscious process, driven by competition between capitalists.
• The overall result of this competition is to raise the productivity of labour and make commodities cheaper.
• This reduces the necessary labour time performed by the worker, and therefore raises the rate of exploitation.

Vanishing super-profits

Capitalists compete with one another. The overall result of this competition is that productivity rises and prices fall. Naturally this is a process that takes place unevenly in real time. The first capitalists who introduce a labour saving technique can sell the commodity at a price corresponding to the prevailing socially necessary labour time. This is set at the standard level of productivity then established within the industry. Since the innovators have actually had the commodity produced with less labour time (i.e. in principle cheaper) they can make a super-profit for a period of time by selling their goods above their individual value, at the prevailing industry norm.

As their competitors hasten to retool with the new technique, the value of the commodity (the socially necessary labour time required to produce it) will gradually fall to a new, lower average and the super profit will disappear. Thus the pursuit of a higher rate of profit is like chasing a will o’ the wisp.

Here is an example showing graphically how the value of a commodity is determined by socially necessary labour time in the longer term, and how raising the productivity of labour drastically reduces the value of the commodity and its monetary expression, price.

The first ballpoint pen was produced for sale by the Reynolds International Pen Company in 1945:

“The price was set at $12.50…In the early stages the cost of production was estimated to be around $0.80 per pen…By early 1946 (Reynolds) employed more than 800 people in its factory and was producing 30,000 pens per day”

Rival firms sprang up. So, “Reynolds introduced a new model, but kept the price at $12.50. Costs were estimated at $0.60 per pen.”…“Fortune reported fears of an impending price war in view of the growing number of manufacturers and the low cost of production.”…“By Christmas 1946 approximately 100 manufacturers were in production, some of them selling pens for as little as $2.98.”…

“In mid 1948 ballpoint pens were selling for as little as $0.39 and costing about $0.10 to produce. In 1951 prices of $0.25 were common. Within six years the power of the monopoly was gone for ever.”

This example is taken from Richard G. Lipsey-An introduction to positive economics, p.393, a standard economics textbook. Lipsey is an opponent of the labour theory of value. The whole of his book is intended to provide an alternative explanation of economic phenomena. Yet this example shows graphically how the law of value is the regulator of production under capitalism.

The search for super-profits not only generalises the use of new technology throughout the capitalist system; it also opens up new areas of the globe to capitalism. The conquest of new markets is usually associated with the reaping of super-profits, with a higher rate of profit. For instance when British capitalists began to export machine woven cotton to the rest of the world, local handloom weavers were wiped out because they could not compete on price. Locals in the rest of Europe, Asia, Africa and the Americas would compare the price of the imported cloth with prices associated with the productivity of handloom weaving and find the British products cheap.

This is the usual good fortune of industrial pioneers under capitalism. They can sell for a time at a price above the individual value of their product but below the norm established by the former level of productivity, the prevailing social value. Eventually the level of productivity associated with the new technology will become the norm all over the world and super-profits will disappear. This was a painful process that involved the destruction of the livelihoods of millions of handloom weavers all over the world. Even when the lower prices associated with the productivity of machine woven cloth became the norm, the sheer mass of profits from a market of the whole world made the Lancashire cotton magnates very rich. The result of this search for super-profits in new and distant markets binds the world together within the capitalist market.

• Capitalists compete with one another to make commodities cheaper.
• If they can sell their commodities cheaper as a result, they will make a super-profit for a time.
• Capitalists also try to make a super-profit by invading markets not yet completely subject to the laws of capitalism.
• The outcome of their endeavours is to extend the global reach of the capitalist system.

The logic of capitalism

This is how Marx explains the effects of this search for super-profits:

“On the other hand, however, this extra surplus value vanishes, so soon as the new method of production has become general, and has consequently caused the difference between the individual value of the cheapened commodity and its social value to vanish. The law of the determination of value by labour time, a law which brings under its sway the individual capitalist who applies the new method of production, by compelling him to sell his goods under their social value, this same law, acting as a coercive law of competition, forces his competitors to adopt the new method.” (Capital Volume I, p.436)

The net result of this competitive process, unknown to the competitors, is that commodities in general will be produced with progressively less labour time and therefore be represented with a smaller quantity of value. That is surely progress for humanity at least in principle, even if it is an unconscious result of the striving of the capitalists for super-profits.

In the twenty-first century we all take for granted many things that were no part of the Shutts’ subsistence basket in the 1930s. So what? The working class has gained some share in the enormous outpouring of commodities we have contributed to. We are more dependent than ever upon wage labour on account of the ruling class’s grip upon our livelihoods for us to make a living. The shackles of wage slavery have still to be struck off.

The motivation of the capitalists in searching for super-profits is not to raise the rate of relative surplus value but to steal a march on their competitors. The intention of the individual capitalist and the outcome of the working of the law of value are two completely different things. The law of value actually works through continual attempts by capitalists to negate its operation. The analysis of the production of relative surplus value is a classic illustration of the general position taken by Marx, that the laws of capitalism operate behind the backs of the individual economic actors, whether workers or capitalists:

“It is not our intention to consider, here, the way in which the laws, immanent in capitalist production, manifest themselves in the movements of individual masses of capital, where they assert themselves as coercive laws of competition, and are brought home to the mind and consciousness of the individual capitalist as the directing motives of his operations. But this much is clear; a scientific analysis of competition is not possible, before we have a conception of the inner nature of capital, just as the apparent motions of the heavenly bodies are not intelligible to any but him, who is acquainted with their real motions, motions which are not directly perceptible by the senses.” (ibid p.433)

• When the new technology and higher level of productivity associated with it are taken up generally within the industry, the super-profit will disappear.
• The laws of capitalism operate behind the backs of individual capitalists and independently of their will.
• The result of the search for super-profits is to raise the overall level of productivity and the global reach of capitalism.

Intensity of labour

The production of more absolute surplus value is achieved by making the worker labour for more hours for the same wages over the working day. The capitalist also strives to make the wage earners work harder in the time they are at work. “Increased intensity of labour means increased expenditure of labour in a given time” (ibid p.660).

To achieve this, the capitalist needs to control the labour process. As we have seen in the case of Ford, this is accomplished by mass production methods that turn the workers into an appendage of the machinery.

The principal ways the capitalists can make the labour of one hour worth more to them than before is by making the workers produce more use values in a given period of time; they do this mainly by making their workers supervise more machines and by speeding up the assembly line. This intensification of labour and the accumulation of capital that raises the productivity of labour through the mechanisation of the labour process are two processes that go hand in hand.

“There was always a clamor from the sales department to get more cars. When the plant was turning out a thousand a day, those who had the job in hand knew that by increasing the speed of the assembly line one minute in an hour, they would get sixteen more cars that day. Why not try it? A couple of weeks later, after the workers on the line had accustomed themselves to the faster motions, why not try it again?

“Never had there been such a device for speeding up labor. You simply moved a switch and a thousand men jumped more quickly. It was an invisible tax, like the tariff, which the consumer pays without being aware of it. The worker cannot hold a stopwatch, and count the number of cars which come to him in an hour. Even if he learns about it from the man who set the speed of the belt – again it is like the tariff in that he can do nothing about it. If he is a weakling, there are a dozen strong men waiting outside to take his place. Shut your mouth and do what you’re told!” (Sinclair p.27)

• The capitalists also strive to increase the intensity of labour, to make the workers perform more labour in a given time.
• Two classic methods of raising the intensity of labour are speeding up the assembly line and making the worker mind more machines.

Chapter 5: The dynamics of capitalism

The general formula for capital

Marx contrasted the circulation of capital with that of commodities under petty commodity production. The sellers in petty commodity production aim to exchange a commodity they own (and which they probably produced) for money. For their purposes this is simply an intermediate step. It’s stage one. They don‘t want to hang on to the money but to exchange it for another commodity. In effect they intend to exchange a use value they don’t want for one they do want. Money is just an intermediary. Characteristically they exchange an exchange value they own for a commodity of equal value.

Marx labels this as a C – M –C exchange. He contrasts this with the circulation of capital. Let us assume capitalists start with money. Their intention is to end with money, more money than they started with. There is no point for them in exchanging a commodity worth £100 for another worth £100. But that is what the traders of commodities usually do in the C – M – C circuit. For the capitalists the exchange of commodities, and the production of those commodities, is purely incidental to the production of surplus value. So the circuit of capital is M – C – M’, where M’ is a greater sum of money than M with which the capitalist started.

As Marx often had occasion to point out, capital is not a thing. It is a social relation. Capital goes through different forms of existence in its circulation process. Let us begin our analysis with money capital. Whereas the boyars start with land as the basis of their social power, the capitalists begin with money. The capitalists lay out their money on means of production and labour power. Then production can begin. As we know the surplus value is actually generated in the production process by the labour power of the workers being set to work to produce necessary and surplus labour. It must then be realised, the value created turned back into the money form and the circuit completed.

But the necessary labour has not at the stage of production been translated into wages for the workers; nor has the surplus labour become surplus value jingling in the pockets of the capitalists. The firm will usually specialise in producing one or a narrow line of goods. Whether these be motor cars or ice lollies, they have to be sold in order for the values congealed in the commodities to be realised. The production of surplus value and its realisation are two acts separate in time and in place. There are no guarantees that surplus value that has been produced can be realised. Yet, till the commodities have been realised, the circuit of capital has not been completed and capitalist production cannot continue.

Purchase and sale represent the unity of two processes. Yet these two processes can be ruptured and become independent of one another. The result is crisis. As Marx puts it, “The independence of the two correlated aspects can only show itself forcibly as a destructive process. It is just the crisis in which they assert their unity, the unity of different aspects.” (Theories of Surplus Value Volume II, p.500)

This gives us the possibility of crisis. We shall follow this up in more detail in Part 2: The Marxist theory of crisis.

• Under capitalism the aim of the capitalist is to start with money and end up with more money.
• Capital performs a circuit: from money; to production; to commodities produced; to money once more.
• Surplus value must not just be produced. It also has to be realised through the sale of the commodity so that the capitalist can begin the process of exploitation again.

Constant capital, variable capital and surplus value

So far we have dealt with the determination of the value of commodities and the decisive role of the productivity of labour in this process. We have also dealt with the division of the working day (or working time generally) into paid labour and unpaid labour, surplus value. We have seen that the battle over this division is never-ending, the objective basis for the class struggle.

As we know, Upton Sinclair was not allowed to look at Henry Ford’s account books in order to establish the rate of exploitation. After all he was preparing a novel, whose whole purpose was to aid the union drive at Ford which, if successful  (and it was), would curtail Henry Ford’s ability to extract more and more surplus value from his workforce without let or hindrance.

We postulated rates of exploitation such as 100% in the examples we have given. If we could give Henry Ford the right of reply, he would no doubt explode that his rate of profit was nothing like as high as we have suggested. And he would be right.

The division of the working day which gives us the rate of exploitation can be represented by V (variable capital) and S (surplus value). By variable capital we mean the money the capitalist lays out in wages. We work out the rate of exploitation with the formula S/V.

But the capitalist doesn’t just have to purchase the services of working class people before the production of surplus value can commence. Earlier we suggested a random list of other expenses Henry Ford might have to pay: the cost of depreciation on the plant, electricity, tyres, upholstery and so forth. So the overall rate of profit on capital outlaid will generally be lower than the rate of surplus value (rate of exploitation).

All these other costs apart from wages are regarded by Marx as constant capital. They are constant capital because they pass their value unchanged to the final product. Constant capital is dead labour. When we come to consider the value of the commodity, as opposed to the division of the working day, this can be divided into three parts: constant capital(C), variable capital (V) and surplus value (S).

This notion of constant capital is easy enough to grasp in the case of the tyres. Henry Ford pays the tyre manufacturer $50, or whatever they cost, and adds $50 to the price of the car. Theoretically he could sell cars with no tyres, and the customers could go out and buy tyres for $50. The tyres are the object of a past process of exploitation. The workers in the tyre factory performed paid labour and unpaid labour in making the tyres, just like Henry Ford’s car workers. Then the tyres are sold to Henry Ford at their value (on average). He makes no money out of buying tyres.

It might be more difficult to accept that the cost of the plant is also dead labour and does not produce a surplus for Henry Ford. Doesn’t assembly line production make car workers much more productive than engineers working in a shed, as was the case in the early days of the industry? Of course the assembly line workers produce more cars. But the cars are cheaper, because they contain less socially necessary labour time than motors produced under craft conditions. The workers are now producing more use values, not more exchange value. The same amount of labour time expresses itself in a greater mass of use values.

The assembly line was produced by workers who were exploited just like the Ford workforce. Then it was sold at its value to Henry Ford. Only the depreciation on the assembly line goes into the value of a motor car, not its entire value. If the assembly line cost $10 million and assists in the production of a million cars before it gives up the ghost, then we can say it adds $10 to the value of each car.

The Marxist way of looking at value as being composed of living labour (V + S) and dead labour (C) is not confined to ourselves. Living labour is the value added in the production process. Her Majesty’s Revenue and Customs use the same form of calculation when they send out bills for Value Added Tax. In assessing a motor manufacturer’s liability to pay VAT they may, as a first approximation, bill them for tax on the full sales price of the cars sold.

The car company’s accounts department will at once reply that the costs of tyres, glass, upholstery and all the other components they bought in are not value added. They will not use the expression ‘constant capital’, but that is the basis of their counter-claim. So they will supply copies of the invoices they paid for these items to HMRC, in effect arguing that they are items of dead labour that added no value in the production of cars. VAT is only levied on value added, that it on the new labour (value) added in the production process. And that’s official.

• The capitalist lays out money on constant capital, which passes its value unchanged to the final product.
• He also lays out variable capital to pay the workers’ wages.
• The value of a commodity may be broken down into constant capital, variable capital and surplus value.

The rate of profit

What is decisive in the considerations of the capitalists is not the rate of exploitation but the rate of profit – how much extra they get out compared with what they put in (invest). This is not just the lodestar of individual capitalists. It is a vital regulator of the capitalist system as a whole.

We have already had occasion to point out that the capitalist system is unplanned. How much capital equipment is needed at any point in time? Nobody knows. Nobody calculates. Still it is important for Henry Ford that, when he decides it would be profitable to increase the production of motors at his plant, he should be able to go to the marketplace and buy tyres, upholstery, wood for dashboards and whatever other components he needs in sufficient quantities and proportions to turn out more cars.

Likewise it was important for the workers who came to Detroit that they could be decently housed, clothed and fed. This didn’t happen automatically. Detroit at this time was a vibrant capitalist metropolis sucking in all manner of skills and resources to back up the fast-growing motor industry. How is this proportionality between the different inputs needed for capitalist firms to grow established? How do the use values needed for capitalism to reproduce itself as a system come into existence?

All these skills and resources were attracted to the Detroit area by the search for profit. Capital must reproduce itself. It must find the means to satisfy all its material needs in the marketplace. A vast division of labour is achieved entirely through people buying and selling. But when they are buying and selling, they are oblivious to the actual needs of society, which are unknown to them. They are all looking to their own advantage. Capitalists measure the advantage to themselves in profit, and naturally they look to their own rate of profit compared with that of other capitalist firms.

As we pointed out earlier, commodities are only sold occasionally and accidentally at their value. Usually they are sold at a price above or below their value. If supply exceeds demand, and as a result commodities are sold at a price below their value, this means the capitalists who sell them will have to take a cut in profit. If low profits persist, this can be taken as a signal that the capitalist is in the wrong line of business. Marginal capitalists in the industry are likely to drop away.

Likewise if demand in an industry is booming and capitalists in an industry are making bumper profits, then two things are likely to happen; first the incumbent capitalists will maximise output to the fullest extent to take advantage of the super-profits to be made. They will work their capacity to the utmost, take on more workers and offer overtime to those already on the books. They may plan to expand their output potential. Secondly other capitalists, particularly those that find themselves trapped in low-profit industries, will begin to think seriously about upping stakes and moving to where the serious money can be made.

So the regulator of the division of labour within an unplanned economy is the rate of profit. Low profits in a sector cause exit while high profits attract new entrants. Capital flows are the way in which proportionality is established in an unplanned economy. Naturally the working of these capital flows is as chaotic on the surface as the day-to-day movement of prices.

• Capitalists are guided in their investment decisions by expectations of profit.
• The rate of profit thus serves as a regulator for the capitalist system as a whole.

Chapter 6: How capitalism evolves

The accumulation of capital

Don’t think for a moment that Henry Ford spent all the surplus value extracted from his workers on himself, on fine living. He lived well, as Upton Sinclair testifies. But the majority of that surplus value was accumulated, ploughed back into production. Any capitalist has to decide whether to consume the surplus unproductively or to accumulate it, and in what proportions. This decision is presented here as a choice. But really the individual capitalist and individual firm don’t have much choice. They must accumulate or go under. That is the lesson Henry Ford taught his rivals.

Under capitalism there is no natural limit to the rate of exploitation. Nor is there any limit to the accumulation of capital under the system. There is an impulsion upon the capitalists to accumulate most of the surplus value. Thus they are continually raising the level of productivity and, potentially, making us all richer. This is important. Romania remains a desperately poor country. In part this is the heritage of the rule of the boyars. Feudalism did not develop the productive forces in the way capitalism does. Capitalism has a completely different dynamic from previous forms of class society. It is the dynamics of the system that we are trying to outline here.

We have already seen that, in the hunt for higher productivity, capitalists are forced to accumulate the lion’s share of the surplus value as capital rather than spending it on their personal consumption.

It is obvious to the casual observer that the transition from weaving cloth by handloom weavers to the general use of power looms consists of a progressive replacement of human labour power by machinery in the production process. The transition of the Ford Motor Co. from Henry’s shed to the giant River Rouge plant opened to make the Model A Ford in 1928 is an instance of exactly the same trend.

As a result the scale of production in a firm is likely to expand and the number of firms in an industry to fall over time. Marx calls this the concentration of capital. Rather than the small-scale competitive capitalism that typified nineteenth century capitalism, the system in the twenty-first century is dominated by giant firms. These still compete against one another for market share, but quite often this rivalry may be pursued in different ways from just competing on price. Attempts at product differentiation which can lead to an advertising blitz are just one example of a different form of competition between capitalists.

Alternatively, large corporations can use their financial muscle to buy their rivals out. Big firms that supply one another and become interdependent may also form networks. These in turn can solidify into alliances pitted against other capitalist networks. Informal networks can also turn into friendly mergers or provoke hostile takeovers of rival firms.

Centralisation of capital means the merger of capitalist firms, the concentration of ownership rather than production. Whereas the driving force of the concentration of capital is the ever-increasing scale of production and the rising minimum efficient scale needed to produce and sell competitively in modern business, the centralisation of capital derives from the advantages of joint ownership. Production may be divided into different plants separated geographically, but unified by a common purpose which is drawn up by a common management team.

• Raising the productivity of labour in an industry naturally produces a larger scale of production, bigger units of production and a smaller number of firms. This is called the concentration of capital.
• Capital also becomes centralised through links of ownership rather than production.

The organic composition of capital

Henry Ford achieved his victories over his rivals by spending first and most on machinery in order to raise the productivity of labour. So the proportion of his capital laid out on labour power (variable capital) compared with that invested in plant and machinery (constant capital) was falling as production became more capital intensive. The natural accompaniment to the raising of the productivity of labour under capitalism is therefore the increasing capital intensity of production.

Marx explains that this is a general tendency in capitalist production, “Every advance in the use of machinery entails an increase in the constant component, that part which consists of machinery, raw material, etc., and a decrease in its variable component, the part laid out in labour power.”  (Capital Volume I p.578)

Marx calls this process the rising organic composition of capital. Readers may find it intuitively obvious that the proportion of dead labour to living labour tends to rise over the history of capitalism – that twenty first century workers usually have more machinery behind their elbow than nineteenth century workers. But Marx is not just referring to the mass of constant capital compared to the number of workers. He calls this the technical composition of capital. This ratio cannot be computed because, just as use values are incommensurable, we cannot compare a mass of machinery etc. of different types with a number of workers.

The organic composition of capital is expressed by the formula C/V, where C is constant capital and V is variable capital. It is calculated in value terms. Since price is here the monetary expression of labour time the organic composition of capital is the value of constant capital relative to variable capital, or how much the capitalist lays out on them respectively. The increase in capital per worker is known in conventional economics textbooks as capital deepening. Here are the figures given in Angus Maddison’s Contours of the World Economy 1-2030 AD, (p.305) for the UK and the USA. All figures are in 1990 dollars.

Gross Stock of Machinery and Equipment Per Capita

UK                       USA

1820           92                          87

1870         334                        489

1913         878                     2,749

1950      2,122                     6,110

1973      6,203                   10,762

2003    14,291                   32,240

These figures are, as we see, only a first approximation to the organic composition of capital. All the same they represent a triumphant vindication of Marxist analysis.

• The rising proportion of constant capital relative to living labour in the production process is called the increasing organic composition of capital.
• The increasing organic composition of capital is a fundamental trend in capitalist production.

The tendency for the rate of profit to fall

As we pointed out earlier the rate of profit is calculated by the capitalist as the surplus gained (S) compared with the costs laid out on constant and variable capital (C + V). So the formula for the rate of profit is S/(C + V). Note that, in contrast to calculating the value of a commodity (C + V + S), in this case the whole of the constant capital outlaid is included as costs, not just the constant capital used up in the production of the commodities.

Now there is a fly in the ointment in the progressive rise in the organic composition of capital over time. For the surplus value on which the whole of the ruling class depends for its livelihood comes from the living labour added in the production process. Yet the proportion of living labour compared with dead labour in the production process will tend to fall as the organic composition of capital rises. This will produce a tendency for the rate of profit to fall.

In Part 2: The Marxist theory of crisis we show that in the Grundrisse Marx stated that the tendency for the rate of profit to fall is “the most important law in political economy”. This is not an isolated thought from an unpublished preparatory manuscript. In his economic manuscripts of 1861-3 he repeated this formulation almost word for word: “This law, and it is the most important law of political economy, is that the rate of profit has a tendency to fall with the progress of capitalist production” (Marx Engels Collected Works Volume 33, p.104).

We consider the working out of this law in much more detail in The Marxist theory of crisis. We discuss throughout the course of this book how to apply this basic principle of Marxist economic analysis to the current crisis.

As we have already established, all ‘laws’ in Marx’s sense are tendencies, that is to say they are forces pulling in a certain direction. They are not predictions that always yield a determinate result.

We know that the drive to raise productivity, and therefore for the worker to spend less time on paid labour and more on unpaid labour can raise the rate of exploitation. This rising rate of exploitation is an important counteracting factor to the tendency for the rate of profit to fall. For the moment, observe that the same force, the drive to raise the productivity of labour, which produces the tendency for the rate of profit to fall also produces its own counter-tendencies.

Secondly the same tendency to raise productivity and reduce the relative price that goes prevails in consumer goods industries such as car production (producing ‘wage goods’, the elements that variable capital is spent on) is also at work in the capital goods sector. Though the mass of constant capital per worker has risen enormously over time, the cost of each unit of constant capital will tend to fall. This fall in the price of constant capital is another important counteracting factor to the tendential fall in the rate of profit.

• The rising organic composition of capital produces a tendency for the rate of profit to fall.
• There are also counteracting factors generated by the accumulation of capital. How this tendency and the countervailing tendencies interact is discussed in Part 2.

The tendencies of capitalist production

Ford was progressively employing more and more workers as he grew to be an industrial giant. This is how the accumulation of capital proceeds. Marx deals with it in the long Chapter 25 of Capital Volume I: The general law of capitalist accumulation.

He opens the discussion by asserting that, “A growing demand for labour power accompanies accumulation if the composition of capital remains the same.” (p.762) Of course the accumulation of capital does not usually leave the composition of capital untouched. Theoretically the capitalists could open another wing to their plant or another plant in their firm with an identical organic composition of capital to the others and employing the same technology. Given the continual technical progress under capitalism, that is highly unlikely, except in a ‘mature’ or stagnant industry – and that is not where the biggest profits are to be made.

Though firms are likely to employ more workers as they grow, that leaves out of account the wider picture. Weaving firms employing power looms were no doubt taking on ‘hands’ in the early decades of the development of the new technology, but they were ‘displacing’ vastly greater numbers of handloom weavers. Nor was this process confined to the UK. Traditional handicrafts in India and elsewhere were laid waste by British machine-woven cloths with which the handloom weavers were incapable of competing. Handloom weavers were reduced to penury all over the world. The law of value is no mere theoretical construct. It strikes with the power of a hurricane.

Advances in productivity are an imperative under conditions of capitalist competition. They are expressed in a rise in the relative importance of machinery, in particular in the capital laid out by the magnates of industry. Ford’s early workshops could not possibly have competed with his own mass production plants a generation later. The accumulation of capital therefore is usually accompanied by “a relative diminution of the variable part of capital”, according to Marx (ibid p.772). Whether that leads to an absolute fall in the number of employed workers is uncertain. Marx goes on to explain how capitalism generates a reserve army of labour from its own dynamics.

Capitalism is an unplanned system. In this it resembles a creature with no brain, no central system for thinking and planning. The brontosaurus was such a creature. Unfortunately it is now extinct. In an unplanned system it is always possible that too little or two much might be produced. After all nobody knows how much ‘too little’ or ‘too much’ actually is.

Since the capitalists are actually interdependent, if too little is produced in one industry and too much in another that will cause problems for firms further down the supply chain. This dislocation could set off a more general crisis of the system if profits took a tumble. A crisis of overproduction occurs when capitalists cannot sell their commodities and therefore cannot realise the surplus value that has been produced. Under capitalism trade is not conducted by petty proprietors exchanging products for products for their own satisfaction but by capitalists who are only interested in profit.  It is ultimately because production is not to satisfy human wants but to make profit for capitalists, that a crisis of overproduction is an ever-present possibility.

In a footnote to Capital, Chapter 4 (p.254), Marx highlights this confusion in the outlook of an apologist of capitalism:

“‘The inextinguishable passion for gain, the auri sacra fames,’ (accursed love of gold) ‘will always lead capitalists.’ (MacCulloch: ‘The Principles of Polit. Econ.’ London, 1830, p. 179.) This view, of course, does not prevent the same MacCulloch and others of his kidney, when in theoretical difficulties, such, for example, as the question of overproduction, from transforming the same capitalist into a moral citizen, whose sole concern is for use values, and who even develops an insatiable hunger for boots, hats, eggs, calico, and other extremely familiar sorts of use values.”

Crisis is inherent in capitalism because it is an unplanned system where production is for profit and not human wants. The purpose of this essay is to outline the dynamics of capitalism. We are mainly concerned with the long term trends rather than the fluctuations of boom and slump, which we shall deal with separately. To sum up these trends in a single phrase they are, “the abolition of the capitalist mode of production within the capitalist mode of production itself.” (Capital Volume III, p.569) Capitalism is preparing the material conditions for a higher mode of production – socialism.

• As it accumulates, capitalism naturally tends to generate a reserve army of labour.
• Capitalism naturally produces crises. This is because it is an unplanned system where production is for profit.

Tasks of the working class

But socialism will not emerge of its own accord. It must be fought for. Socialism can only come about by the destruction of capitalism, which has to be the conscious act of millions of working class people. What will cause this questioning of capitalism in the minds of the workers?

There was no revolution against the boyars in Romania, though the serfs lived lives that in many ways were incomparably poorer and more wretched than those of twenty-first century wage workers. Conditions were stagnant, and we can assume that consciousness stagnated as a result. How different is the capitalist system and the lives of the mass of workers who live under it! Capitalism is unprecedentedly dynamic and continually shakes up the lives of its wage slaves. That was the story of the Shutts who lived through the Great Depression of the 1930s, and it’s the same today. Capitalism is incapable of offering its workers a secure existence.

Since being determines consciousness, changes in consciousness are likely to be triggered in changed conditions. This essay is being written as the world is dominated by the effects of a gigantic recession.  Coming after a long period of relatively full employment and rising living standards for most workers in Britain and other advanced capitalist countries, this recession is bound to produce a profound questioning and criticism. Capitalism stands revealed as a system that squanders human and material resources and where the ruling class always strives to make the workers bear the burden of the crisis and other flaws of their system. It is hoped that this essay will contribute to an understanding of the alternative and how to achieve it.

We have seen that the law of value acts as a natural force like a tsunami, disrupting and ruining people’s lives over and over again in good times and (specially) in bad. Capitalism has developed the productive forces enormously. It has taken us to the threshold of abundance, and then slammed the door firmly in our face.

Capitalism also develops a mass working class, who can and will act as its gravediggers. Even now, more than ever, millions of peasants, handicraft workers and small traders are being drawn into the maw of wage labour. There are now more than a billion wage workers. They, together with their families, outnumber the peasantry for the first time in the history of the world. They are an absolute majority of the globe’s population.

The working class, unlike the isolated peasantry of Wallachia, are concentrated together by the concentration of capital. The technology of mass communication developed by capitalism keeps them informed of movements elsewhere and helps them to plan their own resistance. They find that the small victories they win against the boss are achieved by unity in action. They are schooled in solidarity. The world’s working class, faced with the failure of capitalism, will increasingly turn to the ideas and programme of socialism.

• Capitalism is an unprecedentedly dynamic form of class society.
• Capitalism developed the productive forces, and so produced the conditions for a higher form of society – socialism.
• Capitalism also created a mass working class, who can and will carry through the socialist transformation of society.

The historical tendency of capitalist accumulation

What are the general tendencies of capitalist production in broad historical terms? Where are they taking us? Marx sums up his analysis in Chapter 32 of Capital Volume I, entitled The Historical Tendency of Capitalist Accumulation.  After dealing with the process of primitive accumulation, he continues (ibid pp.928-9):

“As soon as the labourers are turned into proletarians, their means of labour into capital, as soon as the capitalist mode of production stands on its own feet, then the further socialisation of labour and further transformation of the land and other means of production into socially exploited and, therefore, common means of production, as well as the further expropriation of private proprietors, takes a new form. That which is now to be expropriated is no longer the labourer working for himself, but the capitalist exploiting many labourers. This expropriation is accomplished by the action of the immanent laws of capitalistic production itself, by the centralisation of capital. One capitalist always kills many. Hand in hand with this centralisation, or this expropriation of many capitalists by few, develop, on an ever-extending scale, the cooperative form of the labour process, the conscious technical application of science, the methodical cultivation of the soil, the transformation of the instruments of labour into instruments of labour only usable in common, the economising of all means of production by their use as means of production of combined, socialised labour, the entanglement of all peoples in the net of the world market, and with this, the international character of the capitalistic regime. Along with the constantly diminishing number of the magnates of capital, who usurp and monopolize all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working class, a class always increasing in numbers, and disciplined, united, organized by the very mechanism of the process of capitalist production itself. The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralisation of the means of production and socialisation of labour at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated…

“The transformation of scattered private property, arising from individual labour, into capitalist private property is, naturally, a process, incomparably more protracted, violent, and difficult, than the transformation of capitalistic private property, already practically resting on socialised production, into socialised property. In the former case, we had the expropriation of the mass of the people by a few usurpers; in the latter, we have the expropriation of a few usurpers by the mass of the people.”

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Opening Session

The Conference began with the singing of a revolutionary song followed by poems of Faiz Ahmed Faiz, Habib Jalib. Then Irshad from the Electricity Union started the political section. Manzoor Ahmad ex-member of the National Assembly and leader of the PPP’s Labour Bureau commenced the discussion. He thanked all comrades who came from far flung areas to attend congress.

He reminded the Conference that while the ‘Revolutionary Struggle’ tendency had started out as an international tendency in concept, it had no links internationally. However, it is already making such links through TANIT (Towards A New International Tendency) as the Conference can see from the banner above the stage. In particular, he welcomed two representatives from TANIT to the Congress, Heiko Khoo and Pat Byrne.

Kabir from the Telecommunications Union read out the messages of revolutionary greetings to the Congress that had been received. These were from Melanie MacDonald from Canada, Wojtek Figel from Poland, Alex from Germany, Nadim from Tunisia (living in Britain), and Jonathan from Sweden.

World Economic and political perspective and character of the present Epoch

After the Opening Ceremonies Manzoor introduced the main speaker for this session, Pat Byrne. Pat is of Irish background born and brought up in Britain, but now living in Turkey. He came from a Labour family and had joined the Militant in 1972. He had been mainly active in the Labour Party and his union. And had participated in the IMT after the split in the CWI. He was an active member of TANIT’s international coordinating committee. After that the first session on World Economic and political perspective and character of the present Epoch started formally.

Pat began (full speech available in text and audio in English with Urdu translation on TANIT and on www.tanit.co and www.karlmarx.net) by referring to the Arab revolution taking place as the conference met. He hailed the courage of the Arab masses in braving attacks and even death to overthrow their dictators. Now revolution was everyone’s lips. But what kind of revolution and what was likely to follow it?

He gave a historical background of the role of the US after the Second World War which had given capitalism such stability. He explained the rise of neo-liberalism and detailed the rise of globalisation and how it was undermining the strength of the advanced countries. He outlined some of the causes of the Great Recession of 2008.

He returned to the question of the Arab Revolution, explaining that it was a political revolution not a social revolution. That the democratic aspirations of the people could not be delivered by capitalist ‘representative democracy’ which he proceeded to critique in detail. He contrasted this with what a real democracy would look like under the genuine control of the majority. That the Arab masses would soon be disappointed with the results of their revolution. A vacuum that we should seek to fill.

He finished by talking about the role of modern communication technologies in the Arab uprisings and their potential for future struggles. That just as the invention of printing helping the bourgeois come to power, the invention of the internet could do the same for the socialist movement, bringing the old slogan ‘Workers of the World Unite’ to reality.

In response to a question about Libya, Heiko spoke and gave some background to the Gaddafi regime. How it had nationalised the oil and gas in Libya and abolished capitalism. This had led to a rise in living standards and welfare services. But the regime was ruling through a bureaucracy and police repression. How the Gaddafi family had looted the resources of the country for themselves. Therefore, we could not support the regime. Nor could we support the Coalition powers in their military intervention. The Western powers hypocritically supported democracy purely for their own gain. We had to base our position on what was in the interests of working people in Libya.

Forty Five written questions were passed to the speaker. In Pat’s reply, he answered the following questions (full speech on audio available in English with Urdu translation on www.tanit.co and www.karlmarx.net):

Subjects he covered included:

What about the Banks? Law unto them – bonuses continue etc.

What has happened in Ireland? Elections, Labour Party, ULA 200 billion Euros debt in a country with only 5 million people.

Why is Left not organising the Arab uprisings?

Will imperialism succeed in Arab countries?

Control of Internet? How to overcome hurdles on internet by dictators?

What will be the benefit of social revolution/socialism?

What are differences between GB Shaw and Marx – with regards to democracy?

The role of leadership? – We are not anarchists

What is the definition of the working class?

What are the roots of terrorism?

What will be the future of capitalists after the revolution? Nowhere to hide – offshore banking.

We do not advocate violence nor are we pacifists. We will defend ourselves and the people against attack.

Muslim versus socialist versions of revolution? Role of religion in politics. Islam was not the motor force of the Arab revolutions. It was a secular movement. In Bahrain it has clearly become mixed up with the movement.

Why do we need a new international rather than the old one?

What about Democratic centralism?

Which conference should we follow – IMT or this one? We should not ‘follow’ either – we want cadres not followers. Study the differences yourself and make up your own minds.

Pakistan Economic and Political Perspective

After an hour’s break, the Conference’s second session on the subject of Pakistan Perspectives was opened by comrade Manzoor.He said that we are not going to abuse anybody. We are going to make a solid analysis so that people can understand what is happening in Pakistan. We don’t want this analysis to be restricted to just the leadership but involve all of you. The state and the system in Pakistan cannot solve its problems. The failure of the Communist Party to make the revolution in the old Hindustan state laid the basis for the problems we have today. Great Britain blamed the failure of the Hindustan state on the problems between the Hindus and the Muslims.

Contributions in the discussion:

By a trade union comrade
We should exchange our ideas with people not here. Only socialist revolution can solve the people’s problem. The PPP must return to its original constitution and slogan: ‘Socialism is our Motto’

By a student
Students are all now talking about revolution. But they don’t know which kind of revolution. The only revolution that can work is a socialist revolution and we are the wing that stands for this.

From a comrade from Karachi
we need more attention towards cadre-building to prepare for revolution. There have been too many movements in the past but they have not been following the correct aim. The workers of the world must be united.

From Sindh comrade and CC member
The PPP have been leaving their traditions and leaving a space where youth are joining other organisations some of them using terrorist methods. This is very dangerous.

President of People’s Student Federation in Punjab
The state is divided and has no direction. Only conflicts are arising and the youth and the ordinary people are victims of this. This system is moving towards destruction by its own hand. Either it will end in anarchy or revolution. There are only two alternatives. The PPP is divided into two main factions – the capitalist wing and the working class wing. The capitalist wing is constantly on the offensive against the working class wing.

Female Media Worker
The media is owned by a few rich people. The people’s views are not represented. Why cannot our views be expressed through the state media?

Railway worker – Chairman of one of the large Railway unions
between 1967-69 the revolution was not completed but diverted into reforms. Everyone is now talking about revolution but what do they mean by this? The media have achieved independence but are following the tune of the multinationals to create a mindset to help oppress the workers further. This media is actually helping the fundamentalists. We the revolutionaries should have our own media, our own stations. We need our own television and radio stations, our newspapers and websites. Our more educated comrades who have more time should spend time on this. I am a working man with no time to read websites and books. This dark night must go away. We are waiting for the red dawn. We are doing our work among the workers. We need the youth to help us. Speeches are fine at conferences but we need revolutionary action.

Student comrade from Kashmir
The Pakistan state is cutting back so much on education. Many institutions are being privatised. Soon it will only be rich children who can afford a good education. The solution is not to take up the gun but books and pens in our hand. Some people say that the PPP cannot make a revolution. That we should break away and form another Party. But the majority of workers look towards the PPP. Of course we can form a pure party with just a few comrades in it. We see so many other small left groups do this. We prefer to remain where the workers are. The working class will make the revolution.
We are not intellectuals. We are active in the broad popular organisations. We can use Marxism to guide us in the struggle.

Manzoor’s summing up

I have received so many questions. There is no time to answer them all but it shows that the comrades are taking great interest in this congress. The collisions between the different factions of the state can provide chances for us – the collision between liberalism and fundamentalism. Neither offer a way out. The murder of the politicians fighting the Blasphemy Law was answered by lighting candles. But this achieved nothing. We needed a mass reaction. If fundamentalism comes into force it will not discriminate between liberals, socialists or moderate Muslims. It will crush all trends and move forward over their bones. Only revolution and the working class can defeat fundamentalism. The ruling class cannot understand how to get rid of these crises.

Talibanisation is taking place in Punjab. Factions of the army support the Taliban. They regard it as a strategic asset. The army and police are more scared than the public. The PPP cannot rule because every day they are under blackmail from other parties or sections of the state machine. They have no space to solve the economic crisis or create jobs. We support the national aspirations of the Kashmiri people as we do of all the nationalities in Pakistan. But the conflict between Pakistan and India over Kashmir is fundamentally about access to water.

Only stressing lines of national independence will not solve the people’s problems. We need jobs, health, and education for the working class. Only if the workers of the different nationalities unite can we go forward. Unless we get rid of this ruling class we cannot achieve any real independence for the nationalities. We must unite as working class irrespective of race, religion, nationality and so on because we all suffer common problems. We must not become divided along these lines in our own movement. Privatisation is not the main threat in such an unstable situation. If somebody tries to privatise any institution we will become a wall against them. Privatisation has failed everywhere in the world. If we lose our offices inside the PPP in the fight against privatisation we will. The media is changing. You can’t block the spread of information any more. Information is spreading in seconds.

Full speech in Urdu & English live translation on audio available on www.tanit.co and www.karlmarx.net)

SECOND DAY
This session began with various performances of music, dance and poetry

The Chinese Economic Miracle- Triumph for Capitalism or the Planned Economy?

The Third Session on CHINA was led off by Heiko.Heiko outlined the birth of the Chinese Communist Party and took us through its struggle in the 1920s up until the revolution of 1949. He then detailed the experience of the Soviet Union after the revolution and the various economic debates that took the country through War Communism, the New Economic Policy, the Left Opposition’s alternative and Stalin’s policy on collectivisation. He then talked about the mistakes of Mao’s Great Leap Forward and the significance of the Cultural Revolution. He then explained that the reasons for the current economic miracle were the combination of planning, public ownership of the largest enterprises and the control of banking and credit. How central planning and investment meant that China did not significantly suffer from the slump in the capitalist world in 2008-9.

He gave examples about the strength of the Communist Party, the rapid growth of the trade union movement now at 240 million, the struggles of the workers and the response of the state. China was a state in transition, neither socialist nor capitalist. There were tremendous contradictions. A state based on dictatorship of the proletariat with a constitution and laws that declare full workers’ rights but where bureaucrats and private bosses trying to deny these rights.
He argued that the best way to proceed in China is to seek to help those communists and trade unionists who are seeking to turn the fine words of the constitution into practice.

Discussion
A comrade from Karachi
We see a great disappointment after Soviet Union’s disintegration and observed a massive decline in the labour movement especially in left politics. But after hearing Heiko’s speech about China there is a ray of hope which can play a positive role to stimulate our youth and working class. Of course, at present China is seen as an economic success story which includes a tendency towards Marxist ideas. We need to spread these ideas worldwide among working class.

Pat intervened with an explanation of some of Jonathan’s analysis as expressed in his document which had been translated into Urdu and circulated to al the comrades. How the ideas expressed in the Soviet Union in the 1920s concerning the need to make the state companies more effective than their capitalist competitors were being implemented in China. How the Command Economy of the Soviet Union could never work, with a central bureaucracy trying to ignore the realities of the market and decide on prices for every commodity and centrally plan everything. The fall of the Soviet Union had led to a disastrous fall in production and terrible hardship for the population.

The Chinese Communist Party leadership saw this and decided to take a different road combining state control and planning with market disciplines. Step by step they embraced the market and are beating the capitalists at their own game. Pat added some examples of his own. How the Chinese state companies are wining because they have virtually unlimited credit behind them, long-term planning and a willingness to take risks and massively invest in technologies etc. In one sector after another they are succeeding in building up their industries.

Finance Appeal
Irshad from the Electrical Workers Union launched a Financial Appeal by explaining that we have been operating for three years without any full-timers. However we urgently need a full-timer to develop our website.
Then followed a stream of comrades with individual financial contributions and pledges from their areas.

Full speech on video available in English with Urdu translation on www.tanit.co and www.karlmarx.net)

Organization

The Fourth Session of the Conference was on organization. It was led off by Comrade Kabir from the Telecomm Union. He pointed out that the uprisings around the world lacked revolutionary leadership. If a socialist revolution was to take place in any one country, the modern methods of communications could allow it to quickly spread across the world. The tragedy is that all the left groups and parties across the world are unable the gain leadership of the masses. The reasons there are so many splits within the left movement is that whenever differences arise they are incapable of discussing them in a mature way – they dismiss any opposition. This is their main problem.

Internally they suffer from leaderships with an Ego problem who are determined to hold onto their positions against any criticism or challenge. The left groups are producing followers not cadres.

In our group, Revolutionary Struggle, we do not want to create a central command structure – we need a system where every comrade can participate. Not implementation of orders but democratic decision-making.

Modern methods of communication are bringing together all humans. The old left Leaderships were trying to keep information centralised in order to keep power in their hands rather than share it with the membership. But modern technology makes this impossible.

Our organisation is only 3 years old. We were thrown out of the IMT. They used abusive language and accused us of working for our own private interests and selling out to the PPP leadership. Now people can see that we are none of this.

The IMT group in Pakistan gives the impression of being a large organisation but in fact it is run by full-timers with very little beneath it. Their branch structure is extremely weak. We must not repeat these mistakes. We must have strong democratic branches.

We have weaknesses. In some regions our work depends too much on key individuals. We need to change this and build a collective organisation in those areas. We don’t need gurus. We need to democratise our paper. All comrades must develop the skills of writing to contribute to it.

Finance – what we have achieved so far has been made in very difficult circumstances because we did not have enough finances. In all regions we need to build a necessary infrastructure to promote our ideas.
Capitalism has lost its progressive role. It now needs to intensify exploitation to overcome its current crisis.
The uprising in the Middle East can be spread to other regions. If it comes to Pakistan we have to ask ourselves: are we ready to lead and direct it in a true direction?

Central Committee Election

A new more democratic system was introduced for the election of the CC. Instead of it being nominated from the leadership as it was in the past, nominations were made from each region. Comrade Manzoor read out these nominations and said a few words about each nominee.

Introduction to TANIT

The Conference’s Fifth Session was an Introduction to TANIT . Pat explained that TANIT came out of a split in the International Marxist Tendency. However, he did not wish to dwell on the IMT which would be the typical behaviour of other groups who tended to focus on such internecine struggles.

TANIT began on the 1^st of April last year with the launch of a simple email list. Since then we have held conferences in Belgium, Germany and Greece. The idea of such frequent local conferences was to allow the rank and file comrades in those countries to participate. This was a break from the past practice of international conferences being held only once a year or every two years and being only open to the leading comrades in each section. Next month we shall be meeting in Sweden.

We have decided to begin by focusing on four main topics: Nature of the Epoch, Transition to Socialism, Attitude towards the broad organisations of working people, and Organisational culture.

We have launched an online Discussion Forum which gives a chance for every comrade to participate in debate, put forward proposals, or amendments to others etc. We will hold a Conference in August in Poland to agree positions on these documents. After the August Conference we will create a website to promote these ideas including audio-visual presentations to better explain our positions.

In these very early days we have participants in about 20 countries. In the main these comrades are in small groups or are individuals. We also have contacts in many other countries. But we have not been recruiting. First we must work out our ideas. Once this has been done sufficiently we will be reaching out to new people and groups.

TANIT is not trying to create some proto-international. A real International can only consist of mass organisations made up of tens of millions of members. Also we are not sectarian against other mass left formations. Thus we will help activists in broad parties to the left of social democracy like the Left Party in Germany, the United Left in Spain, the Scottish Socialist Party and so on. Wherever, the workers are we should be there assisting them achieve a programme of democratic socialism and helping their organisations to unite with other workers mass organisations.

We don’t want to create an international group controlled from one centre. It is ridiculous to think that comrades in an office in London as with the IMT and CWI, can direct the work in countries like Pakistan. Rather we are building an international network – a genuine partnership of socialist left-wing organisations who can share ideas, inspire each other and organise solidarity across the world. We also want to leave behind the old model of narrow organisation where everyone has to agree on every dot and comma handed down to them from a few top leaders. And when you disagree are forced to leave or are expelled.

Pat finished with some personal observations about Revolutionary Struggle:

“This is the first time that I have ever seen a political group like yours dominated not by full-time political ‘experts’ but by the comrade’s active in the mass movement. This is how it should always have been in our movement. Last night I attended the Trade Union Commission. When I heard the demands from the comrades in all the areas for the setting up of the People’s Labour Federation and the great potential this federation has to unite the divided trade union movement and extend it across Pakistan, I saw most clearly how correct it has been for the comrades to continue the struggle in the PPP.

Then I listened to Manzoor’s great contribution. How can such a dedicated comrade who is giving all his time and energy to the struggle be accused of opportunism and careerism. Then I listened to Kabir’s brilliant summary of the various issues involved in organisation and the internal life of your movement. Comrades we have nothing to teach you and everything to learn from you.”

Organisational Session Summing Up (by Kabir)

We now have 1067 members. The Fighting Fund collection resulted in 167,000 Rupees.There was voting on three issues open to all members at the Conference:The political position on Pakistan as put forward by Manzoor .Pat’s report on behalf of TANIT.The CC slate as nominated and read out. All three votes were overwhelmingly in favour with 1-2 votes against on each item.

Comrade Mansoor summed up the Conference

The Conference concluded with the singing of the International, followed by the chanting of slogans: ‘Revolution, Revolution, Socialist Revolution’ and ‘Dark night go away, the red dawn will come’.

The above is based on some notes taken by Pat Byrne. Layout and photos from Amjad. A fuller record by text, video, audio and photos is available on: www.tanit.co and www.karlmarx.net.

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The dominant idea of contemporary bourgeois thinking is that increasing international integration of economic activity, or “globalisation” will lead to prosperity and peace for all. But globalisation is not a concept that helps us understand the world around us. It is an ideological construct used to trumpet capitalist victory – to conceal the crisis-ridden nature of the system and its perpetual failure to meet the needs of the world’s working class.

Contrary to popular usage by the media and various political and economic commentators, ‘Globalisation’ is not an objective or neutral term which simply describes the contemporary world economy.

In many ways it is the ‘big idea’ of modern apologists of capitalism. After the collapse of the Soviet Union we are being encouraged to believe that capitalism has won. And if capitalism won, then that must be because of its own inherent superiority as an economic system. It’s now the only game in town. So goodbye Soviet Union means goodbye to a viable socialist alternative. Ted Grant’s book Russia: From Revolution to Counter-revolution, (Wellred Publications, 1997) argued against that position at length. Here, we concentrate first on globalisation as the ideology of triumphant capitalism.

Globalisation is closely linked to the ideology of neo-liberalism. The two concepts share a sort of division of labour. While globalisation asserts the inevitable victory of market forces over everything that stands in their way, neo-liberalism tells us this is all to the good.

As we shall see, globalisation is quite a slippery notion – more of a buzzword than an explanatory concept. Tony Blair’s Third Way theoretician, Professor Anthony Giddens, has written an entire book on it without defining the term globalisation (Runaway World, Profile Books, 2002).

Bob Sutcliffe and Andrew Glyn, in their article Measures of Globalisation and their Misinterpretation carefully assess the two main alternative meanings that have been attached to the word:

“We do not question that globalisation in one of its meanings – the world wide spread of capitalist relations in production and distribution – has been a major feature of the last 50 years… The globalisation debate, however, is mainly couched in terms of another concept: the increasing international integration of economic activity… It is our opinion that the degree of globalisation in this sense, as well as its novelty, has been greatly exaggerated.” (The Handbook of Globalisation Ed. J. Michie, Pub. Edward Elgar 2003)

John Ralston Saul makes a decent fist of outlining the main interlinked trends predicted from the theory of globalisation:

“The power of the nation state is waning.

“Such states, as we know them may even be dying. In the future, power will lie with global markets.

“Thus economics, not politics and armies, will shape human events.

“These global markets, freed of narrow national interests and inhibiting regulations, will gradually establish international economic balances…

“Such markets will unleash waves of trade. And these waves will in turn unleash a broad economic tide of growth.

“That tide will in turn raise all ships, including those of the poor, whether in the West or in the developing world.

“The resulting prosperity will allow put-upon individuals to convert dictatorships into democracies…” etc, etc. (The Collapse of Globalism and the Reinvention of the World, Viking, Canada, 2005, p. 15)

‘Increasing international integration of economic activity’ is the central tenet of what we shall call the Globalisers, whatever else they believe. It is our contention that capitalism cannot achieve an integrated, balanced development that can eventually lift everyone out of poverty and deliver prosperity for all. In that sense the globalisation prospectus is a fraud.

In addition, all manner of seers, pundits and outright charlatans have attached extra baggage to the concept. Globalisers foresee capital flows opening up to poor countries their first chance to become rich through the transfer of advanced country technology. As the late billionaire James Goldsmith put it, ‘During the past few years four billion people have suddenly entered the world economy.’ We have to ask – where were they before, then?

Some commentators even see national cultural differences being homogenised as in a giant blender by global brands nurtured by these capital flows. With characteristic intellectual laziness Tony Blair joined the club asserting, “Complaining about globalisation is as pointless as trying to turn back the tide.” He and other reformist leaders welcomed the buzzword as an excuse not to fight for better wages and conditions for working people and as an ideology justifying their capitulation to capitalism.

Some of this analysis sounds real enough. The trouble is, workers can and do lose their jobs as firms relocate to find cheaper labour. Multinationals do prefer to pollute the environment if that costs them less, and they can play countries off against each other as a destination for investment by demanding lower taxes or scrapping of labour protection laws. The rhetoric of globalisation seems realistic to workers under threat.

But, as the quote from the Communist Manifesto below shows, these attacks have been going on for a long time. The enemy is not ‘globalisation’ – it is capitalism. The idea that capitalism has a global reach is not the exclusive property of the globalisation theorists. To our knowledge it was first put forward by Marx and Engels in the Communist Manifesto, published in 1848:

“The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country… All old-established national industries have been destroyed or are daily being destroyed. They are destroyed by new industries whose introduction becomes a life and death question for all civilised countries, by industries that work up raw materials drawn from the remotest zones, industries whose products are consumed in every quarter of the globe… The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarous, nations into civilisation.”

At the time this was by no means a statement of the obvious. Only one country, Britain, could be regarded as seriously industrialised in 1848. Britain was then responsible for 40% to 50% of all the world’s industrial production. Even so, an aerial survey of Britain would have shown industry concentrated in a few counties, with vast swathes of the landscape apparently unaffected by the transformative power of capitalism. In its time the Manifesto was a prophetic document.

Concepts of Imperialism

It was left to a later generation of Marxists to assess how the global reach of capital had impacted on the world economy and relations between the classes. In the years before the First World War they came up with the concept of ‘Imperialism, the latest stage of capitalism’, the original title of Lenin’s 1916 pamphlet.

Lenin argued that the competitive capitalism of Marx’s time had been replaced by an economy dominated by monopolies. Likewise, the era of free trade described by Marx had been replaced by the erection of tariff walls. One way to vault over tariff walls was to invest in other countries to produce goods there rather than exporting the commodities into that country. So the export of capital supplemented the export of goods. Those tariff walls were erected to defend hostile national capital blocs arrayed against each other. The imperialist powers divided the rest of the world among themselves as colonies and spheres of influence. All these trends were rooted in the changing ways in which surplus value was produced in the heartlands of capitalism:

“(W)e must give a definition of imperialism that will include the following five of its basic features:

1. the concentration of production and capital has developed to such a high stage that it has created monopolies which play a decisive role in economic life;
2. the merging of bank capital with industrial capital, and the creation on the basis of this ‘finance capital’ of a ‘financial oligarchy’;
3. the export of capital as distinguished from the export of commodities acquires exceptional importance;
4. the formation of international monopolist capitalist associations which share the world among themselves, and;
5. the territorial division of the whole world among the biggest capitalist powers is completed.”

(Imperialism, the highest stage of capitalism, p. 82, Progress Publishers, 1966)

Karl Kautsky, a leader of the mass German Social-Democratic Party and the Second International, widely considered the “Pope of Marxism” in his time, had agreed with and helped formulate the concept of imperialism. But he developed a difference in his 1914 pamphlet ‘Ultra-imperialism’ and in other writings.

In Ultra-imperialism he wrote, “Imperialism is thus digging its own grave. From a means to develop capital, it is becoming a hindrance to it.” The next subhead shows where his thought was going:

“The next phase: ultra-imperialism

“From a purely economic standpoint, however, there is nothing further to prevent this violent explosion” (the outbreak of the First World War) “finally replacing imperialism by a holy alliance of imperialists. The longer the War lasts, the more it exhausts all the participants and makes them recoil from an early repetition of armed conflict, the nearer we come to this last solution, however unlikely it may seem at the moment.” (Ultra-imperialism, September 1914, on the Kautsky archive on www.marxists.org, the Marxist Internet Archive)

Notice the difference between Kautsky’s approach and that of Lenin and co-thinkers, such as fellow Bolshevik theoretician, Nicolai Bukharin. Kautsky sees imperialism as a ‘policy’ adopted by the big powers, in effect as a form of dress adopted by the capitalist nations that could be changed when the weather changed. Lenin and his co-thinkers saw imperialism as a necessity for capitalism at its latest stage of development. They didn’t start with colonial policy, but saw it arising out of capitalist economic development.

Kautsky was not a direct intellectual forerunner of the advocates of globalisation. The latter have always been apologists for capitalism and regard globalisation as ‘the highest stage of capitalism’. Yet his thought shares some of their approaches and attitudes. He believes the capitalist system to be rational, presumably because individual capitalists aren’t usually daft.

As we see from the quote above, he believed that when capitalists looked into the abyss in 1914, they would find a way to shrink back. In fact they plunged right on in. It is probable that all the warring powers, with the exception of the USA, saw themselves as losers after the cessation of hostilities in 1918. Yet they did exactly the same thing again twenty years later.

In his book Collapse, Jared Diamond deals with the collapse of societies in the face of changing environmental and other conditions. One such example was the disappearance of the Vikings who had made their home in Greenland at the beginning of our Middle Ages. They were confronted with a ‘mini-ice age’. (Collapse: how societies choose to fail or survive, Penguin Books, 2005) The reasons for their demise were complex and we don’t have to endorse or even discuss Diamond’s explanation. Here we just note his observation that the Vikings starved because they could no longer keep cattle, while the Inuit survived by fishing.

Had Kautsky been alive at the time, he would have concluded that the Greenland Vikings were ‘bound’ to copy the Inuit in order to stay alive. But they didn’t, and they weren’t all stupid. They were trapped in a mode of production that had served them well for a time, and which they couldn’t break out of when they needed to.

In the same way the big firms that emerged at the beginning of the twentieth century made a very good living by a strategy of alternate alliances with some rivals and murderous competition with other. These firms were also bound up with their nation state. The state became involved in these disputes and this led, in the end, to a war which was catastrophic for the system as a whole, causing massive destruction of productive forces and human life.

Bukharin explains that peaceful alliances prepare the ground for wars and in their turn grow out of wars; the one conditions the other, producing alternating forms of peaceful and non-peaceful struggle on one and the same basis of imperialist connections and relations within world economy and world politics. (Imperialism and World Economy, Merlin Press, 1972)

In other words it is not all down to the ‘choice’ of the capitalists. Bukharin’s impressive pamphlet was written a year before Lenin’s. Lenin endorsed it with an introduction. It seems likely that Lenin only wrote his own work because Bukharin’s manuscript was lost, and was not recovered till after the October 1917 Revolution.

We hope we have disposed of the argument that capitalism will stop war because it is in the interests of capitalists to do so. But this is only an application of the argument of Kautsky, (and of the Globalists today) that capitalism is a rational system. Kautsky was putting forward the idea that imperialism was not the highest stage of capitalism (as Lenin’s 1916 pamphlet was later subtitled) but would be succeeded by a higher (ultra-imperialist) stage which would not need to feed on war.

Lenin had analysed capitalist development as inevitably uneven, contradictory, crisis-ridden and bloody. We believe these are basic features of the system and will remain so till it is overthrown. And it is because of this that we regard globalisation theory today that denies this as completely misconceived.

Lenin used Marxist analysis to argue against the theory of ultra-imperialism. The first question to address to Kautsky was – what was the future of capitalist development? Would it move from conflict to harmony? Lenin denied there was any real sign that ultra-imperialism (the equivalent to ‘globalisation’ of 1914) was the future. Certainly Kautsky’s 1914 perspective that the imperialist powers would cut a deal to end the War was falsified:

“If the name of ultra-imperialism is given to an international unification of capital (or, more correctly, state bound) imperialisms which ‘would be able’ to eliminate the most unpleasant, the most disturbing and distasteful conflicts such as wars, political convulsions, etc., which the petty bourgeois is so much afraid of, then why not turn away from the present epoch of imperialism that has already arrived – the epoch that stares one in the face, that is full of all sort of conflicts and catastrophes? Why not turn to innocent dreams of a comparatively peaceful, comparatively conflictless, comparative non-catastrophic ultra-imperialism.” (Lenin’s introduction to Bukharin’s Imperialism and World Economy p. 12)

For Lenin, Kautsky was dreaming, not facing up to reality. But his mistake was part of a wider error in method:

“If the purely economic point of view is meant to be a ‘pure’ abstraction, then all that can be said reduces itself to the following proposition: development is proceeding towards monopolies, hence towards a single world monopoly, towards a single world trust. This is indisputable, but it is also completely meaningless as is the statement that ‘development is proceeding’ towards the manufacture of foodstuffs in laboratories. In this sense the ‘theory’ of ultra-imperialism is no less absurd than a ‘theory of ultra-agriculture’ would be.” (Imperialism, p. 87)

Capitalists would like to manufacture food in labs. They find nature a nuisance and an obstacle. They still don’t make food in labs, though they use laboratory techniques. So ‘ultra-agriculture’ can be called a tendency, not an accomplished fact. And, for the same reason, we still haven’t got one world trust, though concentration has advanced with giant steps since Lenin’s time.

Lenin is ridiculing Kautsky’s rationalist interpretation of capitalist development, which ignores contradiction as fundamental. He sees that as the nub of his error. The same is true of the Globalisers today.

There is a tendency at work for the concentration of capital. Lenin does not deny it. But a tendency is not the same as a linear trend. It is a force at work in the economy, giving rise to counteracting tendencies. To identify a trend does not allow us to predict the future, as positivists believe.

The whole perspective of globalisation is based on mechanically identifying forces at work and attempting to predict the end state they will tend towards. Marxism, on the contrary, allows us to understand the tendencies at work and explain the processes going on beneath the surface. The quote from Lenin clearly shows the difference between our approach and that of the Globalisers.

The second question is this: let us assume it is in the interests of capitalists to have peace rather than war, i.e. peace is rational (and remember war can be very profitable for some capitalists). How does an anarchic system generate a power that can impose agreement? Who decides, and how do they decide?

Kautsky’s answer was that a deadlock could occur between two evenly matched imperialist powers. When each realises they could not overwhelm the other, they would eventually come to an accommodation. Again, Kautsky displays the fallacy that, because most capitalists have a well-developed sense of self-preservation, disasters can’t happen under capitalism.

First it is possible that each side may regard itself as potentially the stronger. This produced the ‘one more heave’ mentality of the generals on both sides that sent millions to their deaths in the trenches. Two evenly matched imperialist blocs can produce bloody deadlock, not agreement.

Nor is this just a case of capitalists ‘getting their sums wrong’. Individual capitalist firms decline and fall as part of the competitive process. They cannot choose to walk away from the industry where they have made their living for generations even though they know their competitors have the upper hand.

The same is true for imperialist powers. Bukharin explains why such a deal will break down. Ironically capitalist economists use the same method of analysis to explain why price-fixing rings are likely to break down in industry. Kautsky asserts that imperialist blocs will do a deal if they are equally matched.

Bukharin points out that this means a “relatively equal level of development of the productive forces.” (ibid. p. 136) But the dynamics of capitalist development continually destroy such temporary states of equality. “Where the difference in economic structure is considerable, where there is, as a consequence, inequality in the cost of production, there the (more efficient) state capitalist trust finds it unprofitable to enter into an agreement.” (ibid. p. 136)

He then introduces state policy as an extra factor in preventing competition on ‘a level playing field’. “The stronger state secures for its industries the most advantageous trade treaties and establishes high tariffs that are disadvantageous for the competitors.” (ibid. p. 137)

The Bolshevik theorists of imperialism had a very different view of the state’s role from the Globalisers, who believe it will become increasingly irrelevant in the present era. As we shall see, Lenin was right and remains right.

Actually world imperialism did achieve a period of stability after the Second World War. This was not because two warring blocs were caught in deadlock, as Kautsky suggested in his theory.

On the contrary, as Paul Hirst and Grahame Thompson point out in their article The Future of Globalisation: “This” (stability) “was only possible because of Allied military victory and the unassailable economic dominance of the USA. Globalisation was restored by military force and national policy, it was not a ‘natural’ state of affairs.” (in The Handbook of Globalisation, p. 18)

Moreover, US hegemony allowed economic growth, so American dominance no longer seemed ‘unassailable’. The concordat between rival imperialisms therefore increasingly creaked and cracked over time.

Forward to the past!

Globalisers present the present era of capitalist development as entirely new. Capitalism is progressively eliminating barriers to its unfettered development. Trade is becoming more and more free, and therefore more important in driving all the national economies forward. The ‘factors of production’ have been freed to go wherever they can be used to the optimum.

We’ve been here before. The period from about 1870 to 1914 was one when all the advanced countries embraced free trade, and trade was said to be an ‘engine of growth’. Millions of people left Europe and opened up the interiors of North America, Latin America and Australasia. Capital was free to go where it willed. And lots went abroad. The UK’s foreign investments were reckoned to be £4,000 million by 1914. In that year Britain, the leading imperialist power of the time, was receiving a fantastic 9% of its national income from earnings on capital invested abroad – £200 million a year.

After the First World War the open economy seemed to implode. “The 1913-50 period saw a relapse into neo-mercantilism, with the blockades involved in two wars, the discriminatory policies, higher tariffs, quantitative restrictions, exchange controls and other autarchic measures that were sparked off by the Great Depression of 1929-32. As a result, trade grew at half the pace of output from 1913 to 1950.” (Angus Maddison Dynamic Forces in Capitalist Development: a long-run comparative view, Oxford University Press, 1991)

Arguably the period since 1950 has only seen the slow and painful removal of the barriers to capitalist penetration that had been erected since 1913. Maddison, a formidable economic statistician, is quite clear that the ‘Golden Age’ of capitalist development was the period 1950-73, when much of the paraphernalia of state intervention was still in place. Certainly growth in the ‘glorious era’ of globalisation that followed has been less impressive. In a book, ironically entitled Why Globalization Works, Martin Wolf shows in his Table 8.1 that the economy grew twice as fast in the Golden Age as in the succeeding ‘era of globalisation’ (cited in Saul p. 20).

Finance capital and capital export

For the Globalisers the explosion of global financial flows shows capitalism has at last created one world. Certainly the figures are impressive. Over the last ten years the trade in foreign exchange on the London market has gone from $464 billion to $753 billion per day! London is a bigger forex market than New York or Tokyo. This is called the ‘Wimbledon effect’ – we stage the most impressive tennis tournament in the world. The only trouble is, we never win it. Over the same period the turnover of those arcane financial instruments, derivatives, shot up from $74 billion to $643 billion a day.

Looking at the financial markets, globalisation appears as an accomplished fact. Vast funds can be shifted in nano-seconds. Central Banks have little control over their exchange rate, which is mainly driven by the whim of the markets.

Economists usually distinguish between direct and portfolio foreign investment. Portfolio investment means buying shares or other pieces of paper in firms operating abroad, without taking a controlling stake. But this changes nothing of the underlying economic reality. The same workers get up and go in to the same factory. The only difference is that some of the surplus value is spirited abroad.

Foreign direct investment (FDI) is the work of multinationals, a much more significant feature of the world economy than in Lenin’s time. But how important is it, and in any case does it change the rules of the game?

Andrew Glyn concluded, “(I)f FDI flows continued at the current rate, the share of capital stock represented by FDI would rise to around 13 per cent in both the developed and developing countries.

“Is 13 a large or a small percentage?…

“There are a number of reasons why the significance of FDI may be less than these figures suggest. One is that recent flows of FDI to developing countries have been concentrated in very few of them; one-third of the higher figure is accounted for by China alone. And much FDI into China comes not from developed countries but from other overseas Chinese capitalists in other Asian developing countries, so it does not correspond to the common image of FDI as Western multinationals expanding throughout the world. In addition, not all FDI consists of the construction of new production facilities by overseas companies, which typically represents a clear increase in competition. Well over half of FDI inflows into OECD countries represent cross-border mergers and acquisitions…” (The assessment: how far has globalization gone? in Oxford Review of Economic Policy, Vol. 20, No. 1, 2004 p. 6)

The explosion in world trade may also be less important than it looks if ‘trade’ between countries is actually semi-finished goods passing between different branches of the same multinational. According to Sutcliffe and Glyn’s careful survey, “Intra firm transactions may account for about one third of international trade, a figure which has been circulating for at least 30 years, though with very little empirical backing.” (ibid. p. 73)

What about free movement of labour? Can workers move to where the living is easier, in the way the yuppies move money? Control over the migration of labour is a universal fact of life in the advanced capitalist countries. For the working class, the world is not our oyster.

Capitalist rationality and world poverty

Yes, it is in the interests of the system to turn four billion hungry people in the third world into ‘consumers’. Why, then is there no sign of the system being able to achieve this? What do our opponents say? The World Bank begins by patting itself on the back that many have been lifted out of poverty over the past decade or so. It goes on to admit, “Still inequality, and the absolute numbers of people living in poverty, has grown. But most of these poor live in rural areas and in countries that are only weakly connected to the rest of the world.” (http://rru.worldbank.org/spotlight/globalization.aspx)

The World Bank seems to believe that all things come to those who wait. Our argument is that capitalism will cherry pick profit opportunities in certain areas around the world that will be bombarded with investment funds, while the rest (for instance Africa, population 850 million) can go and rot. Africa is poor because it is kept poor and underdeveloped by imperialism.

The World Bank argues that there are conflict-ridden areas where capital dares not venture. ‘Globalisers’ say that if we just pack in the violence and invite in foreign investment, we’ll all be rich! This is the opposite of the truth. The former Yugoslavia became an economic ruin wracked by civil wars that led to 250,000 deaths.

This did not happen because the country was ignored by global finance, but precisely because Yugoslavia came to its attention. In a doomed effort to develop the economy in a small backward country, the ruling bureaucracy invited in the foreign banks. During the 1980s, Yugoslavia became a happy hunting ground for finance capital. Public sector firms borrowed in a futile attempt to build ‘socialism in one country.’

Ten years later the country was on the rack of austerity, in the maw of global capital. Unable to strike an oppressor they could not see, tragically the peoples of Yugoslavia were turned against each other by nationalist politicians backed by rival imperialist powers. The result was a horrible civil war. Backwardness is often not a result of economic isolation but a consequence of capitalist meddling, not a natural result but a creation of imperialism.

Capitalism and the nation state

Globalisers argue that ‘market forces’ (capitalism) are now sweeping all before them. What used to get in the way? The main power in any land apart from the capitalists is the state. Now, the Globalisers say, the government has to bow the knee. First they do not explain why the balance between the two basic powers that affect the way we live our daily life has fundamentally changed. Why, if states could pass laws thirty years ago that regulated firm behaviour, can they no longer do it now? In fact they can.

The globalisation theorists start with a lazy juxtaposition between capitalist economy and state. Actually the state is a creation of the needs of the capitalist class and is constantly reshaped by their changing needs. In turn the state is itself an economic actor, a power affecting economic behaviour. The two are not polar opposites. They interpenetrate each other.

This relationship, which continues to the present day, was fully explained by the Bolsheviks. As Bukharin points out, “The fact is that the very foundation of modern states as definite political entities was caused by economic needs and requirements. The state grew on the economic foundation; it was an expression of economic connections; state ties appeared only as an expression of economic ties.” (Imperialism and world economy, p. 63)

But the relationship is a contradictory one. “If we thus consider the problem in its entirety, and take thereby the objective point of view, i.e. the point of view of the adaption of modern society to its conditions of existence, we find that there is here a growing discord between the basis of social economy which has become world-wide and the peculiar class structure of society, a structure where the ruling class (the bourgeoisie) itself is split into ‘national’ groups with contradictory economic interests, groups which being opposed to the world proletariat, are competing among themselves for the division of surplus value created on a world scale.” (ibid. p. 106)

Capitalists resent the extortions of the state. Nevertheless, the capitalist class need the state to defend its interests. “We have seen above that capital’s connection with the state is transformed into an additional economic force. The stronger state secures for its industries the most advantageous trade treaties, and establishes high tariffs that are disadvantageous for the competitors. It helps its finance capital to monopolise the sales markets, the markets for raw materials and particularly the spheres for capital investment.” (ibid. p. 137)

Let’s fast forward to the present day. We see this interaction between economic power and state power is still a central feature of modern imperialist rivalry. Hirst and Thompson are correct to, “conclude that globalisation in the sense conceived by extreme economic liberals and their radical critics has not happened. The world, far from being an integrated system dominated by ungoverned market forces divides into three major trading blocs dominated by nation states.

“NAFTA is centred in the USA, Japan is a bloc-sized national economy and the European Union is an association of states. Each bloc follows distinctive policies and has distinctive problems and institutions of economic management. Most major companies hail from one of the three main blocs, and most companies have the bulk of their assets and a majority of their sales within one of the blocs.” (Hirst and Thompson ibid. p.23) Hirst and Thompson had earlier produced two editions of an important book called Globalisation in question (Polity Press, 1996 and 1999). Though they are social democrats, Lenin and Bukharin would have had no problem understanding the world they describe.

Modern capitalist commentators will argue that this stuff about the economic importance of the state is all old hat. The era of globalisation (usually dating from the 1970s) has seen a withdrawal of the state from capitalist economy. The ideology of neo-liberalism, which became dominant about the same time, advocates privatisation and a return to nineteenth century laissez-faire. The rule of naked force in international relations, we are told, has been replaced by the rule of law through multilateral institutions – the World Bank, the International Monetary Fund and the World Trade Organisation.

On the contrary. If wretched “third world” governments have been forced to privatise their utilities (giving ownership up to imperialist firms) and to cut down tariff barriers (opening home markets to advanced country products and impoverishing local producers), that is not through ‘choice’. The irony is that the withdrawal of the state from economic intervention in poor countries has been achieved though the naked economic power of the imperialist countries, buttressed by the threat of armed force.

This transformation is a triumph of state power, not its negation. The multilateral institutions in turn propose a world governance of rules all right – rules that are formulated precisely in order to disarm poor countries and strip away their defence against imperialist exploitation.

Nor has the withdrawal of the state from economic ‘interference’ been an unqualified success. The period since the Second World War can be divided into two parts. As mentioned before, the period from 1950 to the first global recession in 1973 can be regarded as a Golden Age for capitalism. Yet it was an era where the state intervened extensively in economic life.

For instance all countries operated strict exchange controls until Thatcher scrapped Britain’s in 1979. Till then, the dizzy speculation in national currencies was kept under control. Advanced capitalist countries without exception were said to be operating economic policy according to a Keynesian consensus, determined to let the state step in when markets failed. So an extensive public sector underpinned capitalist profiteering. As we pointed out earlier, Martin Wolf shows that the economy grew twice as fast before the era of ‘globalisation.’

The present period does not exhibit the peaceful, harmonious settlement of imperialist disputes visualised in Kautsky’s theory of ultra-imperialism and in globalisation theory. It is true that the USA became an economic hegemon which no other imperialist can challenge. That supremacy is already under threat from China. But US hegemony since the Second World War has not guaranteed peace and harmony, and imperialist rivalry has not been snuffed out.

Bukharin’s analysis of the impossibility of rival imperialist powers developing a stable system of world governance and Lenin’ portrayal of contradiction and crisis as the way capitalism necessarily develops, hold up a mirror to the present – and the future.

J.R. Saul’s book is titled The Collapse of Globalism. But this is not what is actually happening. Saul is making the point that capitalist domination of the globe is increasingly encountering resistance. This resistance calls itself ‘the anti-globalisation movement’, but is essentially a movement against capitalism, or at least environmental degradation, super-exploitation, third world debt and other symptoms of modern capitalism in all its glories.

Capitalism has come up against its own contradictions, contradictions the Globalisers were anxious to deny existed. Poor capitalist nations such as India and Brazil are using the forum of the World Trade Organisation to advance their own national interests. But the whole point of the WTO for world imperialism is that it is used as a steamroller against the interests of poor nations. Put simply, capitalism cannot deliver the goods globalisation theory promised. That is why the theory is coming apart at the seams.

To conclude, globalisation is not a concept that helps us understand the world around us. In part it has been stretched out of shape by theorists who have tried to fill the concept with different contents. It is an ideological construct used to trumpet capitalist victory – to conceal the crisis-ridden nature of the system and its perpetual failure to meet the needs of the world’s working class.

March 2006

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by Walter Held

The coalition government of Angela Merkel of CDU, CSU and FDP in Berlin, known by the colours of these parties as black-yellow, has lost a significant amount of its support since the election victory of September 2009. Four Regional Land elections in 2011 have documented the melting away of the coalition’s voting strength signalled mainly by the huge decline in the suport for the more rightwing FDP, first in the northern metropolis of Hamburg in February, then in the south-eastern Sachsen-Anhalt  and now in two south-western states, the Rheinland Palatinate (RP) and Baden-Wuerttemberg (BW) on Sunday 27th March.

The background was, of course, the efforts to recover from the deep economic crisis affecting all major capitalist countries. The CDU and Bavarian CSU had been in coalition with the social democrats (SPD) up to September 2009; the SPD came out of that period of crisis and cuts and anti-working class legislation with its worst result in postwar German history with only 23% of the votes, cementing the social democrats’ loss of 6 million (!) votes over a nine year period, half of its electoral support. Fully one-third of the party’s members left in the period, disappointed with the SPD’s neo-liberal line. Many dropped out of political activity but numbers of activists joined the Linke, the Left Party boosting its membership overall to 70,000 and its electoral support throughout most of Germany, with the party gaining seats in regional parliaments in 13 of the 16 federal states.

But the Linke has only a very small share of the vote in the older western federal states, often only just clearing the 5% hurdle imposed before any seats are allocated. In the new eastern states, the Linke enjoys a quite different level of support, often between 20% and 30% because of its roots in municipal councils. Thus, in Sachsen Anhalt, the Linke is the second  largest party, evidence of the fact that the Linke is not one, but two political parties with the eastern party acting as a tribune for the regional and local interests of the old GDR area, much as the CSU lobbies heavily for its constituency, Bavaria.

In Hamburg, the SPD did reconquer a majority of votes in February. But in Sachsen-Anhalt it came in third behind the CDU and the Linke after a bout of coalition with the local CDU.

As if to insult the voters again, the miserable SPD leadership is choosing to renew a coalition with the CDU in that Land, rejecting calls by the larger Linke to form a red-red coalition with a programme of reforms! Disappointed with the SPD overall, the two latest Land elections display what has happened to a mass of protest voters; abandoning the SPD in large numbers in RP and many in BW, those who wanted to show their opposition to Merkel’s policies have voted for the Green Party in record numbers. Sensationally, in BW the Greens actually overtook the SPD to become the second largest party and are now probably in a position to take the leadership and the First Minister post in that Land, breaking the CDU’s hold which has lasted for over fifty years.

What the Greens have done is to initiate and ride the wave of anti-nuclear power feeling which, although latent but growing for years, has suddenly been massively fuelled by the Japanese fiasco in Fukumshima. Indeed on the Saturday prior to the latest Land elections up to 200,000 people demonstrated in Germany’s four largest cities against nuclear power.  Taken together with other local issues such as the unpopular redesign of the main railway station down in Stuttgart, the Greens have been in the forefront of organising protest demos, sit-ins, marches and steady propaganda work for decades, whereas the tired old SPD has been pursuing policies against the interests of the broad population and confining itself to routinist parliamentary committees and manoevres.

Only recently, having been been thrust out of the Grand Coalition with Merkel in 2009, has the SPD begun to reawaken and has been present on demonstrations and rallies, for example against the threatened closure of the Opel car factories and other issues. The Linke, by contrast, has been stagnating for years on the sidelines, unable to develop policies which appeal to the new generation or to break out of 5-8% of voting strength, viewed with suspicion by most workers and seen as either utopian or destructive or a potentially new edition of Stalinism.

No surprise then, that the Greens have been able to recruit thousands of young middle-aged and younger, often well educated and conscientious, people to its flag. In fact the Greens are highly inconsistent in their politics as has already been and will again be shown in the coming period. They abandoned their antiwar stance in Afghanistan, they half-heartedly oppose the plans for Stuttgart, they even took part in a coalition government in Hamburg with the CDU until thrown out in February.

So it would be wrong to see them as a new left party or even as a reliable protest party. They purged most of their own leftwing years ago. And while they preach some good reforms such as abolition of student fees, their policies on the economy are thoroughly procapitalist and at best keynesian reformist. Their record in a neo-liberal coalition government with Schroeder appears to have been forgotten. The fact that such a party can make such large gains is testimony to the bankrupt position of the SPD in almost all areas. The still-tainted Linke derives no benefit from this scenario.

There is, however, some cause for optimism that a left wing is beginning to form in and around left positions in the social democracy. Local and regional ad hoc groups involving SPD and Linke and some Green councillors and members of citizens’ neighbourhood groups are beginning to join together to move against the cuts which are starting to cause closures of public services such as libraries, swimming pools, libraries etc.  And it is certainly true that the old workers’ organisations can only regain their former strength by shaking off the paralysis of Schroeder’s neoliberal policies and returning to representing the real interests of the rank and file movement.

Results in Hamburg

Feb 2011 (2008 in brackets)

CDU 21.9% (42.6%)  SPD 48.4%  (34.1%) Greens 11,2% (9.6%) Linke 6.4% (6.4%)

Results in Sachsen Anhalt

March 2011 (2006 in brackets)

CDU 32.5% (36.2%) Linke 23.7% (24.1%) SPD 21.5% (21.6%) Greens 7.1% (3.6%)

Results in RP

March 2011 (2006 in brackets)

SPD 35.7% (46.6%) CDU 35.2% (32.8%) Greens 15.4% (4.6%)

Results in BW

March 2011 (2006 in brackets)

CDU 39% (44.2%) Greens 24.2% (11.7%) SPD 23.1% (25.2%)

———————————

29th March 2011

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We did not conquer India for the benefit of the Indians.

We conquered India as the outlet for the goods of Great Britain.

We conquered India by the sword, and by the sword we should hold it.1

Lord Brentford, former British government minister, speaking in 1930

It must be clear from everything that we have written in this book that we think that imperialism is the fundamental cause of war in the 20th and 21th century. Of course, there are many different factors behind every individual war, but imperialism underlies them all. Yet, so far we have not defined what exactly we mean by the term imperialism. In this conclud­ing chapter we want explain what we mean by imperialism. And what the alternative is.

Imperialism

At the end of the 19th century capitalism entered a new stage, which it has not surpassed yet. It is this new stage that we call imperialism. Important contributions about what distinguished imperialism were made by a liberal, J A Hobson, and a social democrat, Rudolf Hilferding. In 1916, Lenin made a thorough analysis of the statistics and other evidence on the development of capitalism.2 Here we concentrate on three of the main features that he analysed. Together they are the economic driving forces behind colonisa­tion, the struggle for the division and re-division of the world by the major powers, and war.

Firstly, the development of finance capital is a defining feature of imperialism.

In the capitalist economies Marx described in the mid-19th century, there was more or less free competition between many capitalists. Most compa­nies were small. But in the Communist Manifesto, as early as 1848, Marx and Engels foresaw that competition would inevitably lead to a concentration of capital. Some businesses succeed better than others. Small businesses are swallowed up or eliminated by larger ones; companies join forces in order to maximize their impact. Mergers and acquisitions result in a few dominat­ing giant companies.

Lenin wrote about the strikingly high degree of concentration that occurred in the international electrical industry between 1900 and 1912. At the turn of the century, there were 28 electrical companies in Germany, divided among 7-8 different groups. Twelve years later, the industry was completely dominated by AEG (Allgemeine Elektrizitäts-Gesellschaft). A similar develop­ment in the US gave General Electric total control of the American elec­tricity industry. Other key industries such as oil, coal, steel and chemicals underwent similar processes.

As large sums of money were needed for investment in the means of pro­duction – factories, machinery, raw materials – the banking system developed rapidly. Banks, too, became larger and fewer. Bank savings were lent to companies wishing to invest. Thus the capitalists who controlled the banks acquired ever greater power. In exchange for providing credit, they were able to command seats on company boards, shares, and agreements to enter into a partnership with other companies controlled by the bank. Banking capital merged with industrial capital and became finance capital.

Giant conglomerates, or syndicates as they used to be called, concentrated enormous sums of money and numerous industries in the hands of the fi­nance capitalists. In 1912, for instance, John D Rockefeller and J P Morgan dominated the entire American banking system.

Even today, big companies are constantly merging or buying one another. Volvo, for instance, the flagship of Swedish industry, has been part of the Ford group. Ericsson’s mobile phones are made by a company set up in partnership with the Japanese electronics giant, Sony. These mergers and acquisitions achieve benefits of scale and specialisation, commonly referred to nowadays as ‘synergy effects’ and ‘focusing on core activities’. The larger the company, the better it is able to dominate the market, as do Microsoft, Intel and Cisco.

Economic concentration can be seen everywhere. 51 of the 100 largest economies in the world are not nation-states but companies.3 The 500 larg­est companies control about half of world trade and about 90% of foreign investment.4 A few people at the top of these giant companies wield enor­mous economic power. They do not hesitate to use this power to influence and blackmail elected governments. If they want war, they can get it.

Secondly, the concentration of money and power meant that the national market became too small.

Competition ascended to the international level. In the Communist Mani­festo, Marx and Engels wrote: “The need of a constantly expanding mar­ket for its products chases the bourgeoisie over the entire surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere. The bourgeoisie has, through its exploitation of the world market, given a cosmopolitan character to production and consumption in every country.”

Competition between capitalists from different countries led to power struggles, the prize being the division of the world and the redistribution of its wealth.

Imperialists competed to acquire colonies. The French historian Driault wrote in 1907: “In recent years, all free territories in the world, with the ex­ception of China, have been occupied by the European and North Ameri­can powers. Several conflicts and shifts of influence and power have already occurred, and these presage more violent upheavals in the near future. For haste is of the essence: those nations that have not yet seized a share risk never being able to do so and thus missing out on the prodigious exploita­tion of the earth.”5

As capitalism did not develop simultaneously or equally around the globe, there was never any fair fight for markets between capitalists of various countries. Britain was the first country to be industrialised and therefore the first to become a major capitalist power. In the mid-19th century, when the British government introduced free trade, the country was seen as the ‘workshop of the world’. British capitalists imported raw materials from other countries and sold them finished industrial products at a size­able profit. However, neither the US nor other European states (especially France and Germany) was happy about this arrangement. Protected by cus­toms barriers, they built up their own industries and were soon capable of competing with Britain. By the end of the 19th century there were several major capitalist powers.

Every shift in the balance of economic strength between the great powers meant that political power had to be re-aligned globally. Some labour lead­ers, such as Karl Kautsky in Germany argued that what he termed “ultra-imperialism” could bring about stability and peace. Giant companies would enter into agreements with one another and therefore be more interested in peace than in war. Kautsky launched this theory in an article written a few weeks before the First World War.6 By the time it was published, in Septem­ber 1914, it had already been overtaken by events. Agreements on prices or the carving up of markets never last long. Changes in power relations constantly lead to new showdowns. This struggle is sometimes conducted peacefully and sometimes by violent means. Any country, anywhere in the world, can become a scene of conflict, as competition is truly global.

Thirdly, imperialism leads to and thrives on the export of capital.

In the rich countries a “surplus of capital” arose.7 This capital was export­ed. Today such exports are called foreign direct investments. Economists estimate that foreign direct investments by the most developed countries prior to the First World War were at least as extensive as they are in the modern ‘globalised’ world. The proportion of GDP exported by the de­veloped countries may even have been larger then than it was at the end of 20th century.8

Most capital was invested in other imperialist countries, thus challenging other imperialists on their home turf. But there was also a strong incentive to invest in the Third World. Wages and other costs were (and are) lower there, and companies were able to squeeze even more profit out of the workers. Af­rica, Asia and Latin America could also supply them with cheap raw materi­als. Foreign direct investments was the principal means by which imperialism exploited so called underdeveloped countries, whether they were colonies or not. The fact that most colonies became independent by the end of the Sec­ond World War did not change the basic character of imperialism.

When capital is exported from one developed industrial country to another, this contributes to trade and growth. However, export of capital to Third World countries normally leads to poverty and distress. How come it can make such a difference whether factories are built by domestic or foreign capital in the Third World?

Capitalism in the rich European countries emerged as a result of interaction between agrarian and industrial development. The agricultural revolution in 18th century Britain paved the way for the industrial revolution of the 19th century. Rural labour, food and capital was freed to build towns. The towns in turn mechanised agriculture.

A super-modern factory (that exports its products mainly to the developed countries), operating in a feudal or even more backward environment, is simply a solitary island in a sea of poverty and under-development. And actually reinforces backwardness.

The Mexican case

Mexico is a recent example of this kind of development. Since signing the NAFTA free trade agreement with the US and Canada in 1993, Mexico has seen capital flood across its borders as never before, drawn by the promise of cheap labour. Previously the fifteenth largest economy in the world, Mexico became the ninth largest by 2003. So far, it sounds good.

But 85% of all foreign investment has ended up in the six Mexican states closest to the American border. There, in what are called maquiladora in­dustries, workers assemble components made in the US or Canada, and finished products are re-exported. Only 3% of the components come from Mexican subcontractors. Infrastructure and education have hardly devel­oped at all.9

Goods followed the influx of American capital into Mexico. Mexican im­port of pork, for instance, increased by more than 700% between 1993 and 2003. Mexican agriculture suffered badly from the avalanche of imported American produce, delivered by giant farms equipped with the latest tech­nology and heavily subsidised by the US state. Mexican rural areas have been devastated. Even domestic producers of toys, shoes and other indus­trial goods have had difficulty surviving.

Yet, Mexico has been in a relatively privileged position compared with other countries of the Third World. It has been able to export freely to the US and to Canada, with easy access to their markets. In spite of this, only a few of the very largest Mexican companies have benefited from the situation.10 In 1999, the total number of employees in the Mexican industrial sector was slightly lower than in 1985, and after 1999 the situation deteriorated further.11 During the first few years of the new century, 850 maquiladora fac­tories closed down, and employment elsewhere in the industrial sector fell as a result of the general downturn in the world economy and the switch to factories in China.12

As large numbers of unemployed and desperate people are constantly available for employment, wages in the maquiladoras remained low. After ten years of investment, wage costs were still USD 1.47 an hour for a worker on an assembly line in a maquiladora industry, which was a tenth of the wage costs in the US.13 Other workers have fared even worse. Average pay fell by almost 70% between 1980 and 2001. And during the first two years of the pro-business Fox regime, between 2001 and 2003, wages declined further.14 The working environment and job security are in a miserable state. Almost a million Mexicans have left their homes and found work in these maqui­ladores. In the process, they have lost all legal protection.

One tragic effect is the creation of a large-scale murder industry. Since 1993, four thousand women and girls have disappeared in Ciudad Juarez, one of the new industrial towns on the American border. Many of them have been found raped, tortured and murdered. Some were as young as six. Newly arrived women have been systematically singled out because their disappearance often passes virtually unnoticed. Far from pursuing the mat­ter through the courts, their impoverished families in other parts of Mexico have usually not even had the means to collect the bodies. This is not the work of one or several serial killers. When murder is committed on such a scale, and only one person is prosecuted (despite the fact that many of the women disappeared in the town centre in broad daylight), a lot of money is clearly involved.

Journalists and independent investigators have begun to detect the outline of a cartel of rich businessmen, politicians at all levels, police officers and drug rings. They have organised themselves systemati­cally to supply those with the right amount of money with the means to vent their hatred of women without fear of reprisal.15

In order to get away from the appalling situation, many in Mexico have taken advantage of an opportunity that most people in the Third World do not have – they leave. In the 1990s, three and a half million Mexicans emi­grated legally to the US. At least a further four million moved there illegally. Thanks to these emigrants, imperialism has not proved a complete disaster for Mexico. Despite having the worst jobs in the US, the migrants managed to send home more money in 2003 than foreign investors spent in Mexico that year – USD 14 billion as against USD 10 billion.16

In India the same imperialist processes have been at work. Despite foreign investments and a relatively rapid growth rate for some time, poverty has increased. From 1981 to 2004 the number of people in abject poverty (on less than USD 2 a day) increased by 242 million.17

The picture is clear. In the Third World, imperialism creates industrial en­claves while ransacking the rest of the country. It either creates huge slum areas where jobless people try to eke out a living for themselves in one way or another – as in large parts of Latin America – or locks countless people into an ancient feudal system, as in India and Pakistan. Or both.

The domestic bourgeoisie in Third World countries is so weak that it neither can nor wants to struggle for land reform. Nor do they want to challenge foreign capital, on which they have become dependent. The imperialists themselves do not want to see progress in rural areas. Under-development is one of the reasons why they can pay low wages.

Loans, aid, and import controls as imperialism

There are others forms of capital exportation, besides direct investment, that can enslave poor countries – credit for example. In the early 20th cen­tury, it was France in particular that lent money internationally, primarily to Russia, and profited from the interest. In 1913, a banking magazine, Die Bank, wrote: “In such international business dealings, the lender always gets something back, whether it is a trade policy advantage or a coal station, the construction of a harbour, a fat concession or an order for artillery”.18 In the 1990s, the IMF and the World Bank adopted the same approach. They have lent huge sums to developing countries and then used the debt as a lever to get economic policies that benefit imperialism.

Aid is also export of capital. Economic assistance to the Third World may be tied or not tied. Tied aid programmes oblige recipient countries to spend their money on equipment and expertise from the donor countries. In prac­tice, this means giving big companies export assistance. In the 1990s, tied aid comprised about 65% of the total volume of aid.19

The industrialised countries have erected trade barriers to protect them­selves from those goods that the developing countries are able to export. At the same time as they insist that poor countries dismantle their import controls. The rich world subsidises its farmers to the tune of USD 300 bil­lion every year while charging import duty on agricultural products from developing countries. Japan, for example, has imposed a 1 000% import charge on rice. And although it is more expensive to produce cotton in the US than in Africa, it is the Americans who export most. The reason is that American cotton growers received USD 4 billion in government subsidies. Likewise, import charges on articles like shoes and textiles are high. On average, tariffs applied by rich countries on the types of goods that poor countries produce are four or five times higher than the tariffs on goods usually imported from other rich countries. 20

To sum up, the concentration and integration of industrial and banking capital into finance capital, the internationalisation of capital and the ex­port of capital – these three developments began to exert their influence at the end of the 19th century. Capitalism entered its imperialist phase, distin­guished by cut-throat international competition and the plunder of weaker countries. This was the principal cause of war during the last century.

Who rules?

Ultimately, it might be argued, it is governments that rule, not big busi­ness. Whether governments come to power by democratic or other means, surely it is governments who make the decisions about taxes, laws, and war and peace?

The question is, however, who or what decides the decisions a government ultimately makes? Who influences whom? Who controls whom?

Rudolf Hilferding argued that as imperialism developed, the captains of industry acquired a new view of the state.21 Previously they had embraced liberalism, arguing in favour of minimal state intervention in order to en­courage competition. But now they needed state machinery to help them fight foreign competitors, protect domestic markets, and pave the way for exports. They also wanted the state to be strong enough to protect their interests abroad and intervene abroad to create investment opportunities, even at the risk of conflict.

Although most big companies operate globally nowadays, they have usually not severed their ties with their ‘own’ country. There are of course some more or less stateless companies, particularly in small countries like Sweden, Switzerland and the Netherlands (but also in Britain, where few large com­panies survived the Thatcher years). However, on average two thirds of the sales and assets of the largest companies in the world are to be found in their country of origin. Furthermore, almost all of them have their head of­fices, their research and development facilities and their core production ‘at home’.22 This is not due to any loyalty to their country of origin: it is useful to have a government behind one nationally as well as internationally.

That the US government acts in the interests of American big business is hardly a secret after George W. Bush’s government, but that the Swedish government also acts in the interest of imperialism may come as a surprise.

Swedish imperialism

Internationally, Sweden has a reputation of being an anti-imperialist force. Some people even believe it to be a socialist country. Although ex-Prime Minister Göran Persson supported the USA during the Afghanistan War and refused to openly criticize the Iraq War that began in 2003, the myth has survived. The truth is that Sweden is still what the Swedish Left used to call “a small but hungry imperialist nation”.

Capital is so concentrated in Sweden that one family, the Wallenbergs, own most of what is worth owning. In 1997, the Swedish business daily Dagens In­dustri explained: “The Wallenberg sphere has never had such a big influence on Swedish business as it has today. By means of multiple voting rights, con­trol over blocks of shares, and loyal managers, it has built up an impregnable power base. Just a few years ago, there were those who ventured to challenge this business empire, but today the Wallenbergs are in complete control.”23 Whatever the politics of the government, it has to come to terms with this fact – unless it is prepared to break with capitalism.

More than half of everything produced in Sweden is exported. Wallen­berg’s companies have three quarters of their sales outside Sweden. Exert­ing a decisive influence on conditions and policies in Sweden, they seek to gain the same kind of control in other countries. This is usually more difficult. Internationally they have considerably less clout than in Sweden. They may be able to exert a degree of influence on policies in small neigh­bouring countries such as the Baltic States, but their influence in countries like Germany, the US and Japan is almost negligible.

The Wallenbergs and other Swedish capitalists depend on the Swedish state to promote and defend their economic interests in the outside world. And in Sweden it is hardly a secret that the government adjusts its policies to ‘market’ demands, not only domestically but also abroad. The Social Democratic leadership helped Wallenberg by manoeuvring Sweden into the EU, despite widespread opposition from rank-and-file party members. The Wallenbergs’ most important markets are in the EU. In addition, the Wallenbergs wanted to join the EU to gain allies. Together with other Euro­pean capitalists, particularly the German capitalists, they are stronger in the global struggle over markets against American and Japanese capitalists. The Swedish bourgeoisie has traditionally had strong ties to Germany.

The previous Social Democratic government have also organised major trade-delegations to strategic markets such as Indonesia, South Africa and China. It was not by chance that Göran Persson praised Chinese ‘stability’ when he visited the country. Trade visits to China are backed up by export funding programmes and foreign aid.

In November 2003, Stockholm’s Social Democratic Finance Commis­sioner Annika Billström visited Shanghai. She was there as “an expert aide to financier Jacob Wallenberg”.24 After meeting with top executives in Shanghai, she travelled with Jacob Wallenberg to a conference in Beijing for Swedish companies with interests in China, among them Ericsson, Volvo and Investor.

Successive Swedish governments, unlike, say, US governments, have long dressed up their foreign policies in ‘internationalist’ clothing, but that does not hide the fact that they end up acting in the interests of Swedish impe­rialism.

Transform the Labour Movement

With an enemy as mighty as imperialism, the struggle for peace is not for the feint-hearted. But the problem is not one of strength and courage.

The international working class is stronger today than ever before. It in­cludes not only those who work in factories, but also those employed in service occupations of various kinds, in both the private and public sec­tors. Countless white-collar workers are labouring under the same pressures and are paid the same low wages as traditional blue-collar groups. All are wage-earners. Industrial workers alone numbered 115 million in the rich­est countries of the world in 1994, according to the OECD definition of a worker. That is three million more than in 1973, despite the oft-cited ‘de-industrialisation’ process. In the Third World (including the former Stalinist countries), the number of industrial workers rose from 285 million in 1980 to 407 million in 1994!25

Before or during every war described in this book, the working class has shown itself prepared to take action against warmongers. In Sweden dur­ing the Union crisis, in Russia during the First World War, in Germany in the thirties, in Italy and Greece during the Second World War, in India in the struggle for independence, in the US during the Vietnam War, in South Africa in the fight against apartheid, in northern Iraq during the Gulf War, and all over the world prior to the Iraq War. But the story of the workers’ own struggle has been concealed, because it was most often betrayed by its leadership.

There is no point in hoping that the leadership of the Labour Movement will go away, if one simply ignores it and organizes the struggle for peace outside the Movement. Any successful struggle must involve the Labour Movement – the workers’ parties and the trade unions. Otherwise it will not acquire any real strength.

It is necessary to understand that despite the many betrayals, the work­ing class has consistently gone back to its organisations. Not because of its leaders but despite its leaders, and against them. Unions and workers parties are the instruments whereby the working class can change society, and a tug-of-war between right and left is constantly in progress in these organisations. Individuals cannot push the Labour Movement to the left, but a radical youth movement or a union movement can.

Those young people who were at the head of the anti-war protests in 2003 could have played a key role in the radicalisation of the Labour Movement. Just as young people did in 1905.

An independent united working class

But waging a struggle against the leadership of the Labour Movement in order to be able to unite the working class across national borders – both ideologically and organisationally – is not enough. The peace program of the working class must be completely independent for the movement to succeed. What does that mean for all those who took to the streets to demonstrate against the war on Iraq in 2003 and all those who since then want to struggle for peace?

To be independent it is necessary not to fall into the trap of choosing between evils, which have been formulated by our enemies. In a TV broadcast from the giant anti-war demonstration in February 2003, a reporter stuck a microphone in a young girl’s face and demanded that she choose between George Bush and Saddam Hussein. After some hesitation, she said “Sadd­am Hussein”. She probably chose him because he represented Iraq, and it was Iraq that was under threat from American bombs. In point of fact, however, the reporter’s question was absurd. One does not have to support Saddam Hussein (or Usama bin Ladin or the North Korean regime, for that matter) simply because one distrusts Bush.

When oppressed people fight for national and social freedom, one must of course take their side. But this does not mean supporting those in power in any way (capitalists, generals and other members of the elite), since they represent an obstacle to the liberation of the working class and landless peasants.

As it is almost always those in power who set the agenda and whose propa­ganda gets through, there is a strong pressure to take positions on artificial grounds. For or against. Good or evil.

A favourite trick of the elite in their attempts to place people in one fold or another is to mix incompatible concepts: red-and-brown, Islamic Com­munists, Trotskyite Nazis, and so on. Also, by demanding in practice that those who criticise must be prepared to take responsibility for everything that other critics stand for, they try to silence the debate.

It was perfectly possible to oppose the war in Iraq without supporting Saddam Hussein. In fact, Saddam’s dictatorship made it much easier for US imperialism to lay its hands on Iraqi oil. Resistance against the US invasion disintegrated because he was in power. In the end, nobody thought he was worth defending.

Socialism

Our goal has never been to stop just one war. Millions of people are dy­ing, still more are suffering and the environment is being destroyed on a monstrous scale. Immense sums that could be channelled into healthcare, education and food production are being squandered on weapons. But things don’t have to be this way. If the working class manages to revitalise the Labour Movement, it can take power in society, abolish imperialism and end all wars.

Time and again, working class people in different countries have joined together to throw off the yoke of capitalist oppression and exploitation. Often, young people have been the most enthusiastic and most active par­ticipants in the struggle for a better and fairer world.

But outbreaks of struggle occur suddenly and do not last for ever. As a rule, most people consider themselves fairly powerless in society. For how much power does an individual citizen have compared with the business leaders, media magnates and elite politicians of this world? In everyday life, it is difficult to feel that one is part of a wider collective or that work­ers together have enormous power. But that power is always present, and sometimes, when strikes or large demonstrations take place, those who are involved come into contact with it. When groups of workers begin to move in a certain direction, defying all obstacles placed in their way, things begin to happen – fast.

A socialist revolution in one country could count on an enormous amount of support from the working classes in other countries. It would awaken hope and inspire others to join the struggle and bring about a similar de­velopment in country after country. It would pave the way for a democratic federation of socialist countries throughout the world. This would put an end to imperialism and to war. For there is no reason why workers around the world should come into conflict with one another when they have the opportunity to make use of all the technological gains and all the fantastic resources that the earth has to offer to satisfy all human needs in harmony with nature.

An International Labour Movement which engages in active struggle, which is democratic, and which pursues a socialist course can provide the answer in humanity’s search for justice, peace and a better life.

THE PROLETARIANS HAVE NOTHING TO LOSE BUT THEIR CHAINS. THEY HAVE A WORLD TO WIN.

PROLETARIANS OF ALL COUNTRIES, UNITE!

Concluding words of the Communist Manifesto 1848

______________________________

1 Michael Nicholson: Mahatma Gandhi, 1991

2 Imperialism: the Highest Stage of Capitalism, 1916

3 Joseph J. Savitsky and Shahid Javed Burki: Globalization and the Multinational Corporation,

2001

4 Dr Graham Lister: Global Health and Development, 2000. This is a UK government review

commissioned by the Department of Health.

5 Quoted in V. I. Lenin, Imperialism: the Highest Stage of Capitalism, 1916

6 Karl Kautsky, Ultra-imperialism, 1914, http://www.marxists.org/archive/kautsky/1914/

09/ultra-imp.htm

7 V. I. Lenin, Imperialism: the Highest Stage of Capitalism, 1916

8 Paul Hirst and Grahame Thompson, Globalisation in Question, 1996

9 Business Week, 22 December 2003

10 ibid

11 www.macroscan.com/fet/apr02/chart/Continuing_Paradox/chart4.gif

12 Business Week, 22 December 2003

13 ibid

14 According to a study by Universidad Obrera de México (UOM).

15 Norma Edith Ramírez: Ciudad Juarez: Rich, Corrupt and Murderers, 2003

16 ibid

17 World Bank: Shaohua Chen and Martin Ravallion: Absolute Poverty Measure for the

Developing World 1981-2004, 2007

18 Quoted in V. I. Lenin, Imperialism: the Highest Stage of Capitalism, 1916

19 E. Childers: Demokratisera FN, 1998

20 The Economist ,4 September 2003

21 Das Finanzkapital, 1910

22 Paul Hirst and Grahame Thompson: Globalisation in Question, 1996

23 Dagens Industri, 5 February 1997

24 Dagens Nyheter, 2 November 2003

25 Kim Moody: Workers in a Lean World, 1997

About the authors

Kerstin Alfredsson joined the Young Social Democrats (SSU) in Jämtland, northern Sweden, in 1970, at the age of 14. She has been active in the Swe­dish Labour Movement ever since. Today, she belongs to the local branch of the Social Democratic party in Gubbängen, Stockholm. She has worked for many years as a librarian and has two children.

Jonathan Clyne became politically active at the age of 15, in the Italian mo­vement against the Vietnam War. After moving to England in 1975, he joined the Labour Party Young Socialists. In 1980, he moved to Sweden and joined the Young Social Democrats. Today, he is a member of the Social Democratic Party in Stockholm. He worked as a chef for ten years before becoming the editor of the Marxist paper Socialisten. He has three children.

Lena Ericson Höijer joined the Young Social Democrats in Stockholm in 1972, at the age of 16. She began working as a home help and became a lo­cal shop steward with the General and Municipal Workers Union in 1979. She has since held a number of union posts including editor of MT, the union journal in Stockholm with a circulation of 90 000. She is an active member of her local Social Democratic branch and also of the local Social Democratic Women’s Association. She has one child.

As the authors of this book, we welcome a dialogue with our readers. Please send us your views, whether favourable or unfavourable. We would also be happy to help organise study circles based on the book’s theme, or to give talks, or to put you in touch with others who share the ideas in the book.

kerstin@zbok.se

jonathan@zbok.se

lena@zbok.se

Or phone Jonathan Clyne at +46 707 600508

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In several posts in 2010, I argued that the people of Europe were going to have to pay for the bailout of the banking system in the Europe through a significant reduction in their living standards (by higher taxation and inflation, lower incomes, rising unemployment and reduced public services.

It started with the Greeks (see my post, Greek countdown, 1 February 2010).  The socialist government there agreed to take a E110bn in loans from the European Union and IMF to fund the buyback of its maturing government bonds and future government borrowing.  It had to do so because capitalist bond investors (who are mainly Greek and European banks and pension funds) were refusing to buy any more Greek government debt unless the prices they paid were slashed.  In other words, the government would have to pay an 8-10% interest rate on their borrowing, a level that was just way too much forcing the government to borrow even more to pay for it!

Under the bailout, the Greeks were now able to fund their repayments to the banks, insurance companies and pension funds of Europe by using the loans from the EU-IMF.  So the financial institutions got their pound (kilo) of flesh.  But of course, this bailout was at a heavy price to the Greek people.  The Greek government agreed to slash public services, raise taxation and sack tens of thousands of public sector workers. The jobless number in Greece has now hit 14.8% and youth unemployment has rocketed to 39%!  Graduate unemployment is at 70%.

Then it was the turn of the Irish (see my post, Irish eyes are no longer smiling, 25 November 2010).  In December, the outgoing government was forced to accept an EU-IMF package of E85bn to cover their government borrowing and to further bail out the Irish banks.  The reckless borrowing of the Irish financial sector which had led to the banks growing to nine times the size of the Irish economy, nearly as much as the corrupt Icelandic banks.  In both islands, these banks, with the corrupt connivance of their politicians brought their economies to their knees.

The Irish banks received E46bn in new capital from the taxpayer (equivalent to one-third of annual Irish output).  But it has not proved to be enough.  It now seems that the banks will need another E35bn shortly, taking the bailout up to the equivalent of 60% of Ireland’s GNP.  The government debt level as a result will reach 140% of GNP.  This is so high that, as usual, investors in Irish government bonds want interest on these loans at over 10% a year to cover their risk.  That is so high that as fast as Ireland’s economy grows, all the extra income is sucked away in paying interest to the banks and other financial institutions that have just been bailed out!

So the Irish people now have a 17% unemployment rate, a 10% cut in public sector jobs, massive reductions in services, increased charges for health and education; and significant and permanent impairments of pension entitlements.  It’s the same story as in Greece.  The people who are paying for Ireland’s banking mess are not the bankers, but the very people who suffered from it.  Such is the logic of capitalism: socialism for the rich and capitalism for the poor.

On 24 March, the political leaders of Europe will meet to agree on a permanent plan for dealing with the debt crisis caused by the banking collapse and the ensuing Great Recession.  Their plan, as drawn up by the Germans and French, is that there must be no default on paying back the loans from the banks of Europe.  And to make sure there are no defaults in the future, European governments are being asked to sign up to a commitment to balance their budgets, drive down their debt levels, ‘increase competitiveness’ through measures to privatise their publicly-owned assets and to ‘liberalise’ their economies.

The Greeks, for example, have had to agree to sell off public assets worth E50bn including Hellenic Post, Hellenic Railways, Athens Public Gas, the Pireaus port authority, Athens airport, Thessaloniki water, and ATEbank, to name but a few.  The Greek people are being told to sell off their best publicly-owned assets at ‘fire sale’ prices to meet the demands of the bankers and Europe’s capitalist politicians.

The question posed in this post, as in previous ones, is why should the people of Europe (the Greeks, the Irish, perhaps soon the Portuguese, along with all those in other countries where ‘fiscal austerity’ is being applied in doses) pay for the failure of the banking system and the ensuing crisis in capitalist production?  Those who lent money to the governments of Europe got paid handsomely for it – the returns of bond investment over the last 25 years have been even better than investing in the stock market.

But those profits are supposed to be payment for taking risks.  Now when things go wrong, the banks still want to be paid in full.  The argument is that if the debts of the Greek and irish governments and their banks are not honoured, then other European banks will go bust and other European governments will have to bail them out in their own debt crises.  The whole European thing could implode.

But this argument is bogus.  It is based on the premise that banking should continue on the basis of making speculative profits out of investing in bonds, stocks and other ‘financial weapons of mass destruction’ (as multibillionaire investor Warren Buffett has called it) rather than as a service to the public by providing credit to small businesses and householders.  It is also based on the premise that the capitalist economy -  production for profit -  must survive at all costs.

There is an alternative.  The debts of the distressed governments and their banks are no longer affordable.  So the bondholders will have to accept a default on their loans.  If that puts them in trouble, they should be taken over by their governments and run as public services financed by the taxpayer.  It is ludicrous that the banks should be restored as going profitable capitalist concerns at the expense of people’s incomes, jobs and livelihoods.

And there is no reason to do so.  Instead of Europe’s leaders agreeing to a programme of fiscal austerity, privatisation, lower pensions and longer working lives, they should be agreeing to public ownership of the banks and a Europe-wide plan of using those banking resources to restore economic growth through public investment.   Fat chance!

What would worry the leaders of European capitalism who meet on 24 March would be the development of what they like to call ‘fiscal fatigue’.  In other words, sufficiently large numbers of people, Middle East-style, refuse to allow the imposition of cuts or pay higher charges and taxes to sort the banking mess.  If political movements develop to force the Greek, Irish or Portuguese governments to oppose the EU austerity plan, then it could be stopped in its tracks.

Unfortunately, so far, the Greeks and Portuguese continue to rely on so-called socialist leaders who are bent on meeting EU demands, while the Irish people have just elected a right-wing government backed by Irish Labour, having thrown out the previous right-wing government that presided over the mess.

16 March 2011

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The imposition of a no fly zone over Libya, backed primarily by France, Britain and the United States, and the invasion of Bahrain by Saudi Armed forces, mark a new stage in the tumultuous revolutionary events in the Arab world. The joyous revolutionary victories secured by mass protests on the streets and squares of Egypt and Tunisia have given way to bloody and ferocious conflict drawing in national and international military forces.

In the past the Imperialist powers were happy to see dictators in power throughout the region, provided they appeared to serve the economic, political, military and strategic interests of European and US capitalist states. It was European powers that colonised, plundered and divided the peoples of the region; leaving a legacy of artificial lines from which nations were carved out of the sand.

After the Second World War the United States wove a complex web of intrigues in the region. This involved the staunch defence of its local allies through massive financial and military aid, but each adventure produced poisonous fruit.

In Saudi Arabia, the US supports the rule of a feudal theocracy composed of 7000 members of a Royal Family enriched by oil. This oil is used to back US economic policies throughout the world. This intimate Saudi-US relationship was behind the battle to expel Soviet forces from Afghanistan in the 1980s, at that time they created the basis of Bin Laden’s network which later attacked the USA. This in turn led to the continuing war in Afghanistan.

In Iran, the west supported the Shah’s dictatorship until it was overthrown by revolution in 1979. This spawned the creation of the Islamic Republic, a theocratic reaction combining modern technologies of power, medieval barbarism and anti-western rhetoric.

In Iraq, US policy supported Saddam Hussein for decades, in the war against Iran and in the ferocious repression of the Iraqi people. Untold millions suffered due to this US policy and then due to two US led wars in which Saddam was recast as a ‘madman’.

Since 1948, Israel was backed by western powers despite the systematic abuse and repression of the rights of the Palestinian peoples. More recently the United States and European governments backed the Egyptian and Tunisian dictators to the hilt until their final hours.

Colonel Gaddafi was an untouchable pariah until a few years ago. He led an officer’s coup in 1969 and proclaimed a path independent of Moscow or Washington during the Cold War. He engaged in all manner of peculiar zigzags in international and domestic policy much to the ire of the Western powers. He supported various rebellions and terrorist groups around the world, and created a peculiar eclectic fusion of socialistic and Islamic ideas, compiled in the ‘Green Book’.

In economic policy he nationalised oil and banking, this provided the material basis of the regime. Libya became a planned economy based on fossil fuels. This flow of wealth from the ground into public coffers enabled living standards to rise rapidly. To this day housing, education and healthcare are free and basic foodstuffs are subsidized. But power is also based on arbitrary and dictatorial methods developed by the entourage and police apparatus of Gaddafi’s bureaucratic state, camouflaged in the garb of ‘rule by peoples’ committees’.

There is barely any private capitalism in Libya, foreign investment and privatisation are marginal to the core economy. However, such deals provided Gaddafi, his family, and some officials, with a means to plunder resources from lucrative contracts and kickbacks.

Bureaucratic corruption and the kleptocratic tendencies of the ruling family, helped to generate protests when the winds of revolution blew in from Tunisia and Egypt.

The first wave of unrest in Benghazi immediately suspended the local regime in mid-air and insurrections seemed to sweep away state power in several cities. Initially, Gaddafi appeared utterly confused and lost, a reminder of the haunting video images of the fall of Ceausescu in Romania in December 1989. Ceausescu looked bewildered when the people turned on him and his apparatus of repression. So too Gaddafi appeared lost and ‘mad’.

In Tripoli, the regime held onto power due to the passive acquiescence of significant layers of the masses. This is not simply due to fear of the powerful and repressive state. It stems also from extraordinary economic growth in recent years[1], and the continuing dominance of state ownership and control of the economy that guaranteed this.

The uprising in Benghazi has characteristics similar to post-Ceausescu Romania in 1990. The collapse of the state and the seizure of control over everyday life by committees and militias mean this resembles a political revolution; but likewise it may open the path to a social counter-revolution, the battles will decide.

In the explosion of discussion and debate that accompanies revolutionary upheavals, the progressive tendencies will seek to defend and extend social gains developed under public ownership, democratize administration and control, and further internationalise the Arab revolutions, breaking down the barriers between the peoples of the region.

The imperialist powers also see an opportunity following the collapse of state power in Benghazi. They began their machinations starting with a veritable cacophony of attacks on the “madman” Gaddafi.  Many of these same spokes-persons for democracy were only yesterday making lucrative deals with Gaddafi and praising his ‘moves to the market’, his statesmanship, his wisdom etc. Naturally, Gaddafi felt personally affronted and betrayed by this, where is the “honour among thieves?”

When Tunisians and Egyptians were being shot just a few days ago, western leaders acted as if paralysed into a deafening silence. They condemned violence and killings in the abstract, laying no blame on Ben Ali, or Mubarak, and calling for peace. Likewise when the Saudis’ invaded Bahrain a few days ago, in order to crush the protests there, western leaders were as one, in their silence.

However when Gaddafi’s state uses violence, a flurry of diplomatic, political and military forces flocked together bellowing for war, in the name of liberty, justice and universal rights!

This sudden unity of purpose by France, Britain and the United States, is nothing but a cynical use of the internal conflict in Libya to regain western prestige in the Arab world, and acquire control over oil and gas supplies. The people of the whole region face a cruel and perilous battle for peace, freedom and plenty in the struggle for genuine democratic control over politics, economics and society.

19 March 2011

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Are the Islamists “ready for their close-up”? In an article published on Al-Jazeera.net (10.3.11) the writer D. Parvaz, extensively quoting observers on Islamism and the Arab world like Ed Hussain, Tareq Ramadan, George Joffe, and Amina Elbendary, poses this question and points to the misrepresentation of the Islamists by the West. A West, he says, that tends to “put all the people in the same box.”

He distinguishes Al-Nahda in Tunisia and the Muslim Bortherhood (MB) in Egypt among the Islamist movements to assert that they played no role in the revolutions in both countries. And also to paint the features which reflect that they are moderate organisations. He concludes that even if these two countries end up with Islamist governments, it would not be “a catastrophe” as people do not want a religious-based system.

However, in this long article, we cannot find one word or hint as to the economic programme of the Islamists. Indeed the analysis does not mention whether the “moderate Islamists” have an economic programme and solutions to socio-economic issues which have been the root of the revolutions.

Are the “moderate Islamists” moderate in their economic alternative, too? Do they have different economic policies from the ones the Iranian regime has pursued, for example? More importantly, there is no background behind the reasons why the Islamists are “moderate.” Have they been always “moderate”?

Today the Islamists have not been in the forefront of the revolutionary movement that is sweeping the Arab world. The field has been taken by the youth, the women and the labour movement. This has obliged the Islamists to change and try to adapt to the new situation, but at the same time they do not wish the movement to become too radical. Their project is to ameliorate the situation within the confinement of a liberal capitalist environment, but with some care for the poor and the unemployed, etc.

From the Government Square in Tunis to Tahrir Square in Cairo, the economic issues have been sidelined in most recent analyses. The focus has been on political issues whereas the workers themselves have been fighting for better wages, independent unions, etc. Surely the economic aspects are fundamental?

In the Tunisian revolt in December 2010 in Sidi Bouzid economic and social slogans prevailed. In the case of Egypt, the roots of the Revolution are socio-economic and are in many ways a continuation of 2005 middle class Kifaya Movement and 2006-2008 strike waves by workers. It was during this that the April 6 Youth Movement emerged, so named, because the mostly educated young activists initiated a general strike in support of the textile workers on 6 April 2008.

It is also not correct to consider Ben Ali and Mubarak as secular leaders, as D. Parvaz does. Both of them used religion and religious institutions for their own interests; they both repackaged the language of religion to marginalise the Islamists. Mubarak went further when he opened the TV stations for Islamic preachers as well as using the morality police against “offenders of the moral codes, the homosexuals for example, as well as against the trash-recycling pig farmers, single women, Shia’ and Christians.” Ben Ali, on the other hand, was even given the tile of “the protector of the motherland and religion” (Ha’mi Alhima’ wa Eddeen).

Some analysts describe Rachid Al-Gahnnoushi, the leader of the Tunisia Al-Nahda Movement, as “a progressive.” Al-Ghannoushi claims to defend democracy and he is for a democratic constitution and his model is the Justice and Development Party (AKP) in Turkey. He believes that “The successful AKP experience has influenced Islamists everywhere.” The AKP advocates and defends the liberal free market economy, maintains close relationships with the Zionist state of Israel, and Turkey is still a member of NATO despite an apparent weakening of the army. So much for “a progressive” defending “a progressive” ruling party! The rise of the AKP was fuelled by the emergence of a conservative middle class that undermined military rule, and it remains an integral part of the Turkish bourgeoisie.

Turkey still refuses to remove repressive labour laws that limit workers’ rights; nearly 20 per cent of the population of Turkey lives below the poverty line. According to a 2009 report by the Turkish Statistical Institute approximately 15 million people (out of a population of about 88 million) are struggling to obtain the basic necessities of life, 6 per cent of children between the age of 6 and 17 are working an average of 51 hours a week! The majority of Turkey’s wealth is in the private sector.

Since his return to Tunisia, Al-Ghannoushi has barely addressed the economic alternative for Tunisia. In an interview with “International Movement for a Just World” (www.just-international.org) he stated: “In the economic sphere Islam is closer to the left-wing outlook, without violating the right to private property. The Scandinavian socio-economic model is closest to the Islamic vision.”

The “left-wing outlook” Al-Ghannouchi refers to is the Social Democratic project, but this Social Democratic Welfare State project is in crisis throughout Europe. It is questionable how much of the social-democratic welfare model will remain in Western Europe in 5 years time. There have been general strikes to protect the rights of the majority in Greece, Portugal, France, and Spain. There is a general malaise across Europe. Is this really a model North Africa can create or should aspire to?

Europe faces massive privatisation, attacks on the welfare system, involvement in wars abroad and anti-immigration policies at home. If it happens that the average Scandinavian countries is slightly better off than the average German for example, it does not mean such a model can be emulated in North Africa. In fact even in the case of Sweden, one third of the national wealth is owned by one family.

If this is the private property that Al-Nahda’s leader is defending then his economic project is constrained within the framework of the existing division of wealth and power. A system established under the dictatorship of crony capitalism serving a tiny minority. What Al-Ghannoushi advocates is class collaboration, a collaboration that unites “the nation”, “rich and poor.”

Such unity is the unity of an aspirant democratic bourgeoisie eager to cuddle up and unite with the bourgeoisie of the dictatorship. Under these plans those who robbed and plundered the people for generations will have their ill-gotten gains cleaned by “the democratic process” and this in the name of peace and unity! Nothing better expresses the willingness to collaborate with the bourgeoisie than what Al-Ghannoushi said after he was amnestied in 1987: “I have trust in Allah and in Ben Ali.” Later, Al-Nahda, an nearly all the political parties signed “The National Pact” with Ben Ali’s regime

In an event organised by the School of Oriental and African Studies (04 February 2011), Mohamed Ali from the Islam Channel replying to a question on development and employment said: “the question is not about creating employment, but about creating wealth.” Ali did not elaborate on this and such a statement is unclear. However, if he means that creating wealth precedes employment or that priority should be given to wealth, then this is a reversal of fundamental facts and reflects a whole outlook on economic laws. In fact, wealth is created by human hands and brains. Providing useful employment creates wealth, not the other way around, the wealthy only invest to make profits from the sweat and toil of the poor.

The Trabelsi family had the wealth but did not create employment for the unemployed. The banks and capitalists in the West sit on the money instead of investing it in employment until they find a profitable means of exploiting the people. Simultaneously, the world has an ever rising number of US Dollar Billionaires; the interests of their economic empires tend to dominate politics. This is true even in well-established West European democracies, as the sinister and clown-like antics of Silvio Berlusconi in Italy reveal.

In the 1950s to 1980s the Muslim Brotherhood represented disenchanted elements of the national bourgeoisie. In fact one can argue that these people are tainted with Mubarak’s “pluralism.” The “new-old” guard of the Brotherhood have participated and benefited from the recent “economic boom.” These leaders now own cell-phone companies and real estate developments, for example, and have joined the upper-middle class.

Politically, the MB has suffered internal divisions, and this is one of the reasons that they tail-ended the revolutionary movement. In Tunisia, Abd Al-Fattah Morou, a leading and historical figure in Al-Nahda Movement has been expelled from the Movement and he is in the process of forming what he calls “an Islamist centre party.”

With its core drawn from worse-off middle class layers, the Islamist movement succeeded in mobilising significant numbers of a discontented population using the language of religion, cultural purity and identity, as a substitute for politics. The failure of the modernisation project in the 1960s and 1970s bred and mobilized ‘middle class over-achievers’ who were marginalised economically, politically and culturally. The failure of the left and the nationalist project, and the support of imperialism for the Islamist movement, saw the latter filling the vacuum.

When Anouar Assadat took over after the death of Nasser in 1970, he helped to prop the MB up in order to use them to counter the left Nasserists and the radicals. They were completely drawn into the “Opening” , the economic policy of privatisation pursued by Assadat. As a result the MB saw an increase in the influence of men who belong to “the new bourgeoisie.” At the same time these men condemned and attacked corruption by expressing piety, which effectively found ground among the petit bourgeoisie, the MB’s main base.

Essam El-Errian, a member of the guidance council of the MB, expressed the Brotherhood’s demands in a statement published by the New York Times (09 February 2011), “In more than eight decades of activism, the MB has consistently promoted an agenda of gradual reform… We have repeatedly tried to engage with the political system, yet these efforts have been largely rejected based on the assertion that the Muslim Brotherhood is a banned organization…”. Clearly, the MB does not challenge the whole regime in Egypt, it merely wants recognition and believes in reform.

In fact, the MB demonstrated that it was ready to accept Mubarak’s regime if the latter met people’s demands; they wanted the regime to stay but without Mubarak: “The Mubarak regime has yet to show serious commitment to meeting these demands or to moving toward substantive, guaranteed change,” pledged El-Errian.

Like their brothers in Tunisia the MB leadership believes in class collaboration. On 17 March Aljazeera.net reported that the MB, with a certain number of political parties, has agreed on an initiative: “For Egypt.” The initiative’s mission is to push for constitutional amendments and to draft an electoral programme for the coming parliamentary elections. MB leader, Mohamed Badie, said that the initiative comes as a conclusion of the revolution. Let’s remember that before 25th January the MB refused to take part in the revolutionary movement that had already gathered pace without the Brothers.

In fact, the initiative aims at limiting the revolution to a set of reforms. For instance, what the MB and the other parties, including a nationalist leftist party (Hizb Attajamou), which are part of the initiative have agreed upon is: an investigation of the plunder carried out by the regime, restructuring the budget, less taxation on the small investors, implementing the court’s decision in relation to the minimum wage and the writing off of the farmers’ debts towards the Agricultural Bank. The initiative also calls for the creation of a fund to support the martys’ families and an independent institution of Al-Zakaat (a fund to help the poor).

Two days before this initiative, Issam Sharef, the Egyptian Prime Minister, asserted that his country would continue to follow the free market economy, but making sure that social justice be achieved. Now, if for decades the most developed economies on earth have not achieved social justice by implementing free market, i.e. capitalist, economic policies, one would only hope for Moses’ stick to create social justice in a poor country like Egypt.

Politically, the Supreme Military Council (SMC) in Egypt have decided to push forward for a coalition of parties against the secular groups that led the revolution. Quoted by the Financial Times, Hossam Tammam, an analyst who specialises in Islamist groups, said: “There are signs the military may have decided to bet on the Brotherhood as the biggest organised force on the street. The others [small parties and secular groups] may be seen by the army as representing an unwanted and radical transition to democracy.” (FT, 17.3. 2011)

Contrary to the bourgeois and reformist parties and groups, the “unwanted and radical transition to democracy” for the secular-led revolutionary movement means real freedom and genuine democracy: freedom from poverty, jobs, decent healthcare and education and direct democratic participation of the people in decisions that affect their lives. The revolutionary movement raised the slogan “the people want to overthrow the regime.” By that they meant the regime of oppression and injustice, which means the overthrow of the regime’s constitution and its laws, its political apparatus and its repressive machines.

The SMC plan is a move to abort the revolutionary process for the benefit of the Brotherhood and the remnants of Mubarak’s National Democratic Party (NDP)! The MB is in fact taking part in the military-bourgeois and imperialist plan of “orderly transition of power.” The result of which will be a new parliament dominated by conservative forces though the MB had already declared it was not going to field a candidate in the presidential elections.

Like the High Council for the achievement of the Goals of the Revolution in Tunisia which consists of many forces and people that did not take part in the revolution, it is merely another attempt to hijack the people’s revolution, the “For Egypt” initiative will represent the Egyptian bourgeoisie but with the inclusion of some figures from the youth movement and the “left”, to stop the wheel of radicalisation that is still rolling in forms of strikes and formation of workers committees and independent representation, etc.

The regime in Egypt, like others in the region, has allowed Islamic NGO’s and charities to help out the poor. The aim has been to contain social explosion and delay or minimise class conflicts. It is worth noting that after Ben Ali’s flight, representatives from Al-Nahda held talks with the Interim government at least twice, as did the Muslim Brotherhood even before Mubarak stepped down. Thus the Muslim Brotherhood, along with its participation in Parliament as independent candidates, has been giving a hand to the regime to preserve the status quo rather than overthrowing it along with its oppressive system. This is why they were left behind when revolution called.

The Arab revolution began with socio-economic demands and against social injustice and dictatorship, but after the toppling of Ben Ali and Mubarak, the dictatorial institutions of the state have been trying to resist the pressure of the revolutionary people through manoeuvring and cunning. Now the process has been confined to the political arena. The workers and the youth are still trying to keep the process on.

However, the dangers are now bigger than before as reformism is gaining pace. Without extending the struggle to a combination of a socio-economic as well as political revolution, people’s hopes and aspirations will be dashed. Trade unionists, social and political activists from North Africa should assist this process by making direct links with their fellow workers in Europe to exchange information and ideas about their rights and their common struggles.

18 March 2011

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This article was written before the agreement between Fine Gael and the Labour Party to form a coalition government but it’s general argument remains valid.

Ireland is one of the countries that has been hit hardest by the
capitalist crisis. In the late 90s the country became known as the
“Celtic Tiger”. The political leaders of the traditionally biggest party
in the country, liberal Fianna Fáil, turned the country into a neo-
liberal experiment shop. The bank and finance sector was completely
deregulated, big parts of the welfare system was privatized and an
unprecedented campaign for loaning was launched, where ordinary wage
earners were convinced to loan up both on the house and car.

During some years it went well, really well. But also this bubble had to
burst, and the bigger the bubble the longer the fall. Time and time
again throughout history, bourgeois economists have claimed to have
found the solution to the up- and downturns in the economy. The latest
twenty years, it has been the neo-liberal prophets that the leaders of
the world have listened to.

Since the crash of 2008 we know that also this set of economists have
not managed to control capitalism. The experiment has had devestating
consequences for workers the world over, not least in Ireland where
they went from boom to bust in just a few months. Billions upon
billions of public money has been pumped into the banks to avodi a
complete collapse. It has even gone so far that the IMF has had to go
in to save the irish state. But that kind of help doesn´t come free –
now draconian cuts are being prepared in the public services.

It is with this background that Ireland went to the polls on February
25th. It was a total restructuring of the political landscape. Fianna
Fáil was more or less erased from the political map and lost more than
than two thirds of its support. Justly, the party took the hit for not
foreseeing the economical crisis and for selling out the independence of
the country to the IMF. Instead Fine Gael, the other bourgeois party,
stepped up as the biggest party. The party went to the polls promising
to renegotiate the terms for the deal with the IMF and to sanitize the
economy. But as many have said the electoral programmes of the two
parties are similar to each other and both fight for the same
electorate.

But the interesting things about this election was not the bourgois
twins of FF and FG. No, the interesting thing in this election was
that for the first time in many years the workers movement went
forward. Labour Party gets its best result ever and left-nationalist
Sinn Féin have finally got a breakthrough outside of Northern Ireland.
Apart from this, the United Left Alliance (ULA), a coalition of small
leftist parties and independent socialists, went into the parliament
with a bang and got five mandates. The frontal name for the left
alliance is Joe Higgins from the Irish Socialist Party, who was
a member of parliament and then won a seat in the  European parliament.

Even if we will see a continued bourgeois government in Ireland, or
maybe a settlement between Labour and the ”middle of the road-party”
Fine Gael, the elections shows the frustration that has built up in
Irish society after the crisis hit. The collected workers movement has
to come out against a coalition between Labour and Fine Gael, which is
unacceptable, and instead take a firm stance against the crisis
packages and cuts. In the coming years we will see harsh attacks on
public services and the living standards on ordinary people in
Ireland.

Socialists from both Labour, Sinn Féinn and ULA have to gather and
build resistance from below if the attack on welfare is to be
fought. Irish wage earners face an intense battle, but with a
strong workers movement as a megaphone in parliament it can go
forward and build the movement on the streets!

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Could you please tell our readers how the process of restructuring the Polish State Railways was done?

The railway company was functioning as one state company up to September 2000 when the commercialization, restructuring and privatisation of Polish State Railways law came into force. In accordance with this law Polish State Railways S.A. was created along with its subsidiaries. It was all about that PKP S.A. take over the railway debts and the whole burden of restructuring. The “sick mother” was supposed to give birth to healthy unindebted children. Let us add that this law lobbied for a foreign consulting company that gave advice in the privatisation process of British Railways. It was a fiasco. The British paid a lot of money for this re-nationalisation than they did in World War II.

The breaking up of the Polish State Railways was motivated by the need to put Polish railway regulations in line with European Union directives which stated the separation of Railway infrastructure from trains. This time not only trains were separated but also other companies which were important in serving the Railway infrastructure such as for example energy or Railway telecommunications. Besides that the companies that were in charge of transporting passengers and goods were isolated. The Cargo company was trusted with managing the whole stock which it rented to passenger transporters. In a space of ten years of restructuring , locomotives and wagons have been taken from Cargo to passenger carriers, and commuter trains.

How many subsidiaries are in the PKP S.A.group?

No one knows that. For sure there are a number of subsidiaries affiliated with trains. It is worth remembering that when a client buys a ticket he thinks that he is travelling by train, travelling by PKP (Polish State Railways) considering both as one thing.

Railway transport as opposed to road transport is a structure that is inter-dependent. Dividing the railways into many subsidiaries brings complications associated with organising the timetables of trains. We use tracks that belong to Polish Railway lines. The controlling of trains is done with the help of isolated subsidies – Railway Telecommunications. However electricity is provided by the energy subsidiary. All these subsidiaries are interdependent and they cannot operate if they do not cooperate. Their division creates the need for the separate paying of tax and transferring of money. A number of different transporters operate in this kind of infrastructure. However each one of them have their own norms as well as safety in the workplace.

What kind of “complications” associated with train services came about after the breaking up of PKP?

Transporters function in accordance with business law – they must compete amongst themselves. The Intercity squad and the Regional Transporters compete on the Polish railways. The second company introduced InterRegio trains which service the routes between voivodships. The InterRegio routes are made possible with the help of commuter trains (EMUs) which are made for local routes and not for the whole of Poland. On the same route trains go one after the other with a difference of ten minutes or they go unannounced. However it used to be like this, at the station trains for different destinations were available, people could get in and after that the trains would leave for their respective destinations. Nowadays I have a problem with getting to Warsaw because at the station the train for Warsaw leaves ten minutes before the arrival of my regional train. It also happens that the passenger buys a ticket then it happens that it is not valid because it was given by another company.

What processes of restructuring backfired when it came to safety?

The security systems were not consistent with the process of liberalisation. That is why we can expect shortly, very serious complications in this area. At present each transporter gives their own instructions to the train engineer. In reality all norms should be confirmed by the government organ regulating railway line transportation but that does not give any guarantees that they are in agreement with each other. We have one instruction on the technical controlling of railway movement but all the other factors like braking systems and other important instructions set by the transporter personally.

The workers working in the railways, train engineers, train dispatchers and so on are mostly people who have 30 years experience. Let us tell ourselves the truth, the railways function thanks to their work and experience. I do not know how it will be when young people come who are without railway education, (railway schools were closed 10 years ago),trained too quickly, unused to dealing with extreme situations and
taught according to different railway rules. I do not want to be a prophet of doom but honestly speaking it can be a catastrophe.

How are train engineers trained at the present moment?

In line with the Third Railway Package which was accepted by the European Union the train engineer is trained and he gets a licence and a certificate soon after. The licence is given by the government office regulating Railway Transport and the certificate is given by the transporter. The problem is that the European Union set some standards which train engineers are supposed to master but it was not precise on the time frame. The minister of Infrastructure did not consider our regulations. In the regulations book there is nowhere where they address the amount of time needed by the train engineer to master certain topics. The result is that private training firms save on time and make the training shorter.

The Third Railway Package also liquidates the position of train engineer assistant. Up until now that position was very important. The assistant learnt the required skills, he learnt the routines and habits of the train engineers. Nowadays a young person, from the street without the knowledge of any compatible skills will operate the train. Alone.

Some time ago in the Polish State Railways there were the same security standards. Nowadays every transporter employs his own train engineer. It is reaching such a point that private transporters employ train engineers on short term contracts or they hire services from a “one man company offering train engineering services”. There is no central registration of self employed train engineers. It is hard to tell at the moment how many transporters have such train engineers.

In some private railway businesses the working hours of a train engineer are counted from the moment “he gets into the locomotive”. If the train engineer lives in Warsaw and the train is supposed to travel to Gdańsk, the time that the journey takes is not counted as working hours. He rests in the train because he has not yet made it home then gets another phone call with the next task.

Catastrophes are now prevalent on Polish railways, in Korzyb (North Western Poland). There are locomotives made in such a way that the train engineer can only see from one side because from the other side the engine blocks his view. If he wants to go in another direction he must reverse looking behind him. That led to the accident in Korzyb. Sometime ago the assistant sat there and informed the train engineer of any danger. Nowadays that place is empty. Sometime back those kind of situations were regulated by the R1 rules which stated that one man service was only possible in locomotives which had two cabins (those which had cabins from both ends), those which had automatic train braking systems. However in the year 2003 the minister amended the formula which said “single person service is possible for twin cabin locomotives”. The words “twin cabin” were “removed”. After last year’s catastrophe in Korzyb the prosecutor took over but then refused to open an investigation when she did not see the presence of any criminal acts.

You mentioned InterRegio trains. What is the situation at the present moment in the regional transporting company?

The regional transporters are pro-social transporters who should be sponsored if the costs of running trains are more than the income generated from the sale of tickets. A few years ago all the equipment was the property of the Cargo company which subsidised passenger trains leasing locomotives and electric multiple units on some routes. Little financing from the earnings of Polish State Railways Cargo led these companies to lose their position on the market. Successive governments cut funds meant for passenger transporters as they wanted to get rid of them. In the end the government managed to accomplish its mission. The regional transporters company was given to local government. Earlier, commuter trains had been given away to Regional transporting companies, all the locomotives were added to the inter-provincial trains and the wagons were given to Intercity so that the Regional transporters would not have the equipment to service the inter-provincial routes.

The Regional transport company has got 16 owners. Each one of them has 4-5% shares. The largest part is owned by the voivodship Marshal and that is absurd when the passengers in this voivodship are transported by the Mazovian Railway company. The voivodship Marshals in a space of  2 years were unable to work out a collective expansion strategy. To finance the subsidised trains the personal income tax and corporate income tax to the local government was increased. There is no controlling how much of that money reaches the passenger train department. Already after 2 months in business, because of the mistakes committed during the process of subsidising the Regional transport company was around 400 million in debt and it filled the criteria for bankruptcy. Besides that the Regional Transporting companies are the property of local governments – there is no obligation to sign contacts with them. It is not an inside company so the local governments must organize bidding for certain routes. And the bidding is done in different ways. For example the Marshal of the Kuyavian- Pomeranian voivodship announced bidding for the servicing of diesel traction on which around 10% of routes in the region are made. A 10 year contract has been signed with Arriva for which the Marshal gave 40% of all resources. From the information from Arriva which I have, it shows that during the last time when there was a lot of snow there were days when there was not even one train on the routes serviced by this transporter. And there was no outcry in the media but only the exact opposite. The media hyped the rise of competition in the Kuyavian-Pomeranian voivodship. The truth is that when Arriva started to compete in this transporting business it did not have the right equipment and it did not prepare qualified train engineers. The last ones were taken from mines!

The Marshals are obliged to finance trains only in one given voivodship. It also happens that passengers travelling with Regional trains go to small stations which are on the peripheries of the voivodships. From those stops they are then taken to their intended destinations in the next voivodship by bus. We have that situation with the line that is servicing Białystok (In the North East of Poland) and Warsaw. Trains only go up to Czyżew (North East Poland)-which is the border of the voivodship and most travellers would want to travel to Małkini. The problem is that Małkini is already in that same Mazovian voivodship which does not want to fund these trains. In the near future passports will be needed at the borders between voivodships…

I would like to underline that a lot of costs that are encountered by transporters are equipment costs and costs in the everyday running of the company.We have a tendency that, the voivodship Marshals organise their own companies that are Regional transporters. How does that influence permanent costs? If equipment is going to be repaired only in the voivodship then instead of a number of service points that are open around the clock there will be fewer service points. Which are more expensive to manage.

The minister of infrastructure promised us that before the process of subsidising there will be a package of guarantee for the workers. Up to now it is still not in place. The company separated itself from the trade union of railway workers. It announced a Company Collective Bargaining system and it does not want to go along with the rules of of workplaces. For the government the problem is public debt and for us the fate of 15 000 people who work just in Regional Transporting. At the same time the government is presenting commercialisation laws in parliament which are slowly causing the collapse of railway companies. If these laws are passed then Regional Transporters will collapse at once.

And how is the situation in Intercity?

When 2 years ago inter-provincial trains were given to Intercity the capital of the company increased by 300% and capital inflow increased by 50%. Already we had noticed that the situation of this company would get worse in dramatic fashion. 2 years ago the directors went around the country and requested that the train engineers and other workers that they leave Regional Transporters and come to Intercity. And now the president of the same company in a meeting with trade unionists said that he has 50% more people than he needs and they need to retrench some.

The actions which are worsening the results of the company are a lot. The management of the company is blaming everything on the introduction of cheap trains by InterRegio. In my opinion the main reason for the loss of passengers in inter-provincial transporters is the catastrophic state of railway infrastructure. Who would want to travel by train from Warsaw to Gdynia (Northern Poland) when the journey will take 7 or 8 hours. That line has been under renovation for 6 years. On the other lines the commercial speed is not above 40km/h. A train needs more than 1 hour to cover a 60 kilometre distance between Toruń (Northern Poland) and Bydgoscz. The businessmen travelling by Intercity cannot allow that. Let us note that Intercity does not complain on the number of passengers on the Warsaw-Kraków (Southern Poland) route or Warsaw-Katowice (Southern Poland). The infrastructure for the central railway route is in a better state and sometimes rail transport can compete with road transport.

Why were union funds for infrastructure suspended?

That decision made us write an impulsive open letter. 25% of railway lines were closed. At this moment 19 000 kilometres of railway lines are functioning. There were 27 000 kilometres earlier. The president of Polish Railways S.A. says that the company can maintain at most 7,500 kilometres. In the coming years two thirds of railway lines will be closed. The residents of Kraków and Lublin have threatened Grabarczyk that if there will be no bypass then the Civic Platform will be dealt with in the next elections. That is why it was decided that money could be taken from the railways. It is explained that the railway is not in a state to manage these funds. That is a half-truth. I am not saying that Polish Railways prepare for all projects perfectly and on time. I am only making a point on the fact that the government did not prepare the legal and organisational conditions for such a serious investment.

First of all – the Minister of Finance did not give guarantees on credit for Polish Railways which would have financed its own contributions. If that money is not available you cannot get any grants. The law on commercialisation and privatisation was passed but the railway was not given access to its assets. If the government wanted to shorten the long process of enfranchisement, notaries, allotments then the law would have given the railway power over its assets, predicting compensation for its present owners. Legally a huge amount of investment work has to be done just like it was done in road infrastructure. Because there is no regulations which can hurry up investment processes. Railway workers have to ask about everything: if water is flowing from the platform, then it is a “leak” and you have to put a drainage system in place at once and so on…

Even if there is investment in railway infrastructure it is only in trans-European circles which are needed by the European Union. In Poland the lines that are needed are those that go from north to south. There is no railway investment in in Śląsk (South of Poland). If a train goes there at a speed of 10km/h it is possible go to it, open the door and calmly put in some coal, which is done anyway.

In the European Union it was decided that 60% of the budget is directed to road investment ,and 40% to rail transport. In Poland roads and railways are financed at a proportion of 95:5. The railways have to repair on their own and coordinate the process of exploiting railways. The rates on the availability of infrastructure for transporters are some of the highest in Europe. That means that for access to railway lines you need to pay ten times more than you pay for access to a carriageway.

The debt of PKP S.A. has been talked about a lot. How did these debts accumulate?

Because of the use of public transporters without refunding them. Parliament provided some relief but it did not give money. More than 400 000 people worked in the railways. Today there are around 100 000 workers. The railway health service was liquidated, nurseries, tailors…. A whole sector of the economy was restructured without a single zloty coming from the budget. PKP even replaced the employment offices, paying the retrenched workers pre-pension benefits. Also some government companies were in debt-for example the ironworks. Because the ironworks were earmarked for privatisation – their debts to PKP was suspended. The ironworks found a foreign investor and PKP remained with debts. Every year the subsidiaries must raise a 300mln ransom which is then used for paying interest and not debts. I note that debt did not come about because of rail workers. That is a national budget debt in PKP S.A. The rail has been always a trash can where you can always take from and where you can always dump into.

Was any procedure of removing debts in PKP S.A. ever put in place?

A fund was created in which money from the sale of fuel is directed there. It was meant to enable the building of rail infrastructure. However, because PKP is in debt it has been decided that the fund will buy shares of Polish Railways on behalf of the national treasury. Because of that, PKP will then have money to pay its debts. The problem is that in the next few years those funds will cover only one third of the debt. The rest around a billion zloty per year, the Polish Railways must find it on their own. They could take credit but the government’s guarantee is needed. That would in turn increase the public debt. The government would not agree to that. The only options that are left are the selling of assets and privatisation. The best railway companies are preparing for privatization. It is not about increasing capital so that the companies could invest but about the brutal selling of the most valuable assets only to pay debts. That is why for example Polish Railways is being sold to a company with a 20% return.

The infrastructure repair centres have been sold. PKP Cargo the second largest goods transporter in Europe is getting ready for privatisation. Because there is a crisis in Europe – there is no profit in big railway companies. Polish companies will be sold to anyone, for cheap so that the debts can be paid.

Us as trade unionists do not want money from the budget. We just want the creation of a level playing field. We are not against privatisation but we want the money obtained in such a way that it funds rail companies in order for them to become more competitive. I will give an example, for the past few years Cargo has been operating in an open transporting market. However because it is being forced to pay the credit for PKP cargo it is less competitive according to Polish and foreign transporters. German companies have been allowed on the market and they do not have any debts. In addition to that they have access to public funds which finance the buying of equipment and so on. How are we supposed to compete in such conditions?

What does the future hold for the National Railways?

Without the systematic changes of which we talked about nothing will change in the railways. For the government the PKP debt is marginal. The government is spending public debt and reducing the deficit is not important. For us however it is a matter of life and death.

Poland is situated at the centre of communication in Europe. We could compete in the transportation of goods and earn a lot. But the lobbyists in the car industry will not allow that because they want to maintain the inequality between road transport and rail transport. In Poland sometime it is more productive to transport coal by trucks from the mine to the port. The state is interested mainly in road transport but it does not look at the consequences of such politics. How many people die on Polish roads? How many are removed from professional life? How much are the costs of rehabilitation?

For a number of years we have been saying that the processes of restructuring are going the wrong way. Now we are standing over irreversible decisions. If a company collapses or is sold we cannot do anything. The railway workers will have to pay for those decisions. This time they are not at fault in any way-they just do what they are told.

If nothing is done the regional transporters will collapse, equipment will be divided between voivodships which create these companies. The consequences are that there will be more problems when it comes to travelling between voivodships, the costs of exploitation will rise and in regions where there are few travellers trains will be liquidated. In the main towns the only available connections will be those by road. Two thirds of the railways will be closed and the regional transporters will be practically liquidated. That would cause economic problems in regions. If there wont be any railways then there wont be any investment.

What should be done to avoid such a scenario?

Unfortunately no one wants to see a situation where the Polish railways are only limited to the needs of the Polish economy and not the European economy. The most important thing here is the will. If there is no will there are always a million reasons available for not doing anything . If there is a will then there is need to fix all the things that we talked about. First of all we should find a way to liquidate the debts in PKP S.A.

The problem with rail is that trains should not only be colourful, smell good and have good promotion but they must also operate. For that specialists are needed , those who know the processes needed for operating trains. Unfortunately for a number of years the railways have been managed by people who think that they are rectifying the problems by making the trains nice and smelling good, not having the slightest idea of the exploitation processes. They draw some plans where a train goes across the whole of Poland without servicing. On paper everything is ok. Only that in reality nothing is ok. This is not about lack of motivation. Simply they are incompetent people. I wonder what would be if these people went to manage banks.

In what ways are trade unions opposed to this situation?

In 1998 we organised a four day strike of train engineers. We demanded then that the railways be financed on a level of 1% of the GDP. We organised conferences, we prepared even alternatives projects for changing the railways. However the management did not take it seriously. They treat trade unions as boys with dirty fingernails. Our efforts are tossed away and they hire consulting firms. Therefore I am not optimistic but I can assure you that we will fight to the end!

Translation: Marlon Nziramasanga

From Polish Labour Notes  http://english.zwiazkowiec.info/

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