Thursday, July 31, 2008

How Capitalism Works (part 1)


THE REASON THE natural and industrial resources of the world are not used to provide the abundance they are capable of producing is to be sought, not in the realm of technology, but in that of economics.

Economics is basically the study of what happens when wealth is exchanged — that is when it is either bartered for other wealth or bought and sold for money. It is not the study of the production and allocation of wealth as such, but the study of its exchange and how this affects decisions about production and allocation.Exchange is not to be confused with allocation.

Allocation (sometimes called distribution) is about the use which people make of the wealth they have produced: how much they consume immediately. How much they store for future consumption. How much they use to build up or renew their stock of tools and machines. "Allocation" is used here in preference to "distribution" because the latter has acquired other meanings which can cause confusion; it sometimes means transportation (which is really part of production)— but worse shops, which are exchange institu¬tions, have taken to calling themselves the "distributive trade".

In some past societies the amount and kind of wealth that was produced and allocated were decided according to some prearranged plan, even if this "plan" was just a set of tribal customs or some other unwritten code of social behaviour. Wealth was allocated directly for individual and communal use so that the sole aim of production could be said to have been direct allocation, or use.

In societies where the bulk of the wealth is exchanged after it has been produced (and before it is allocated) the production and allocation of wealth is no longer decided according to human plans or customs. The decisions are of course still made by people but within terms of reference outside of their control. Economics is the study of these terms of reference or, perhaps, of the laws or economic forces which come into operation once production for exchange becomes widespread.


An exchange institution is a body set up to take economic decisions; that is, decisions about the production and allocation of wealth in an exchange economy. A shop (where products are sold) or a bank (where money is deposited) are obvious examples. Not so obvious perhaps is the "enterprise" or firm, an institution for making decisions about the use of the large-scale, collectively-operated workplaces where the bulk of the world's wealth is produced. The enterprise is the key modern exchange institution since, apart from the sale of human energy for wages and the purchase of consumer goods by wage-earners, exchange today takes place overwhelmingly between enterprises.

An enterprise is an institution which seeks continually to increase the monetary value of its assets (the instruments of production, the raw materials, the stocks and the cash, including the wage fund, it controls.) The monetary value of these assets is sometimes called "capital"; hence "capitalism" as the name for the modern exchange economy. The aim of inter-enterprise exchange is profit, the difference between production costs and sales receipts.

Enterprises aim to increase their capital through making profits, the ratio of the increase in capital to its original value being the rate of profit.

The internal structure of the enterprise— who makes the decisions? Who gets the profits? —varies from State to State according to their differing historical and political conditions. The two most common types of enterprise are the joint-stock company and the nationalised or state industry.

In the joint-stock company the key decisions are made by a board of directors elected by and responsible to the shareholders who supplied the money to buy the assets of the enterprise. The profits are shared between the share¬holders as dividends and the directors (and sometimes the top managers) as fees and high "salaries".

The assets of a state enterprise are usually controlled by a management board appointed by the government. Its profits can be. and are. shared in a great variety of ways. They can. for instance, simply be handed over to the government to use to pay interest to those who have lent it money. Or they could find their way into the pockets of the state-appointed managers, once again through inflated "salaries". Or they could be used to maintain in comfort and privilege those who control the state.

What is significant about the enterprise from an economic point of view is not its internal structure but its role as the mechanism through which the laws of the market are transmitted tc those who make the decisions about the production of wealth— whoever they may be and however they may be chosen. The internal structure of the enterprise could be, and in a few cases is, quite different from either private or state enterprises. The workers could elect their own management committee or workers' council, but not even this would make any difference to the enterprise's economic role. The workers' council would still have to take decisions in accordance with what the market dictated. Real control by the producers over the production and allocation of wealth is not possible within an exchange economy.


The production of wealth is now a process involving millions of men and women in even,' part of the world. What used to be the division of labour between individual skilled workers has become, with the development of modern technology, a division of the work of production between hundreds of thousands of collectively-operated workplaces (farms, plantations, mines, ships, docks, railways, factories, offices, warehouses) spread all over the world. Indeed, it is no exaggeration to say that every article produced today is the product of the world labour force co-operating within this world-wide division of labour.

Wealth production is no longer individual or local or national; it is social and worldwide. A single world society already exists but, because the workplaces of the world are controlled by enterprises, it takes the form of a world exchange economy.

The fact that there is only one, worldwide exchange economy is obscured by the political division of the world into states, each with the power to issue its own currency, impose tariffs, raise taxes and pay subsidies. The different economic policies of these states mean that conditions in the world market vary and give rise to the illusion that rather than there being one world economy there are as many "national economies" as there are states. But although states can. and do, try to change world market conditions in their favour, because of the worldwide character of the pro¬ductive process they do not have the power to isolate exchange within their frontiers from exchange outside. Far from it. World market conditions are in the end the most important factor states have to take into account when formulating their policies. They, like enterprises, have to work within the terms of reference of the exchange economy. Of course, states do have the power to make laws about the production and allocation of wealth, as about any other human activity, but enforcing such law is another matter. So is their economic effect.

The natural and industrial resources of the world are now controlled by profit-seeking private and state enter¬prises. In every state only a small minority can draw on these profits as a source of personal income. Whether or not they have title deeds to prove it, they are in practice the owners of the means of production. This applies equally to profit-taking politicians and managers and to shareholders and bondholders. Collectively these owners form a class with exclusive control — a monopoly — over the means of production. This class monopoly is the basis of modern society.


The personal income of those excluded from the means of production is the wage (or salary) they are paid by the enterprise which employs them. These wage-earners form a class of propertyless people since, collectively, they do not own the means of production. As individuals of course most of them do have some personal possessions and savings, but these cannot be used to produce wealth.

It is because they are members of a propertyless class that they are compelled by economic necessity to work for wages. This is the only way they can get money to buy the things they need to live. The wage relation which arises between the owning and the non-owning class is a basic feature of the present exchange economy. The use of wage-labour to produce the wealth of society signifies that human skill and energy has become an article of exchange due to the exclusion of the producers from the means of production. The existence of wage-labour means the existence of production-for-profit and vice versa: they are two aspects of the same social relationship.

The law of wages says that wage-earners tend to receive from their employer a sum of money sufficient to pay for the goods and services they have to buy in order to maintain their working skill and to raise and keep a family at the same standard. It also says that any sum of money regularly paid to wage-earners from a source other than their employer and any goods and services regularly provided free by employers or anyone else means that employers need pay wage-earners a smaller sum than they would otherwise have to.

In terms of goods and services, what this means is that other things being equal, over a given period of time the wage-earners' standard of living is fixed at the amount of goods and services they need to maintain their skills and their families. Except within very narrow limits they can get no more and no less than this. So any attempt, say by the state, to raise their standard of living by providing free services or money payments is bound to fail. The operation of the law of wages will tend to ensure that the overall standard remains the same by causing a reduction in the sum of money paid by the employer. Similarly any reduction in the amount in a pay packet caused by increasing taxes, either on the goods they buy or directly on their wages, will be self-defeating. The law of wages will tend to bring about a corresponding increase in the sum paid by the employer.

Actually this is an oversimplified picture since the law of wages is not an automatic process; it operates only through human activities, through the struggles between the wage-earners and the profit-seeking enterprises that employ them over the size of the wage packet (or salary cheque). Indeed this struggle is the operation of the law of wages and to the extent that the wage-earners cannot, or do not, struggle then their living standards can be reduced. Other factors, like the levels of output and unemployment and the depreciation of the currency, also complicate the picture, sometimes considerably, but the broad outline remains accurate: the wage-earners' standard of living cannot be improved by state subsidies nor can it be reduced by taxation.

This is not to say that the amount of goods and services the average wage-earner gets can never be altered at all. It can be, by two factors. First, by a change in the average skill of the worker. In the 19th century when the skilled handicraftsman was being replaced by a mass of less skilled machine-minding factory hands, often wo¬men and children, the average degree of skill did fall, and with it the wage-earners' standard of living. In the 20th century, on the other hand, with the spread of universal education the average degree of skill, and with it the standard of living, has tended to rise. Second, the amount of goods and services needed to maintain wage-earners and their families is not something that could be calculated ;n precise terms by a team of doctors and scientists. Social factors enter into it too. People's tastes and habits in regard to food, dress, housing, transport and entertain¬ment vary from place to place and change as advancing technology makes new products available. And when, as in a prolonged period of high employment, wage-earners have come to regard as necessities what were once luxuries then what they need to maintain themselves and their families has not only changed but has also increased.

The law of wages does not rule out such changes m living standards but, by their very nature as long term trends, they are increases that cannot be brought about by the actions either of the state or of the wage earners themselves.


But why are wages fixed at a certain level? Wages are a price, the price of the skills and energies wage-earners sell to enterprises, and like all prices are not fixed arbitrarily. Prices, in a roundabout way. reflect the amount of human effort that had to go into producing an article from start to finish. So wages, the price of human energy, are an indirect reflection of the amount of work that has to be done to produce all the goods and services needed to keep a human being alive and fit to work.

Wages are the form taken in an exchange economy of the amount of wealth that must be consumed to create and maintain the supply of human energy for the work of production, while profits are the form taken by the surplus wealth produced over and above this. The restriction on the amount of wealth allocated to the class of wage earners is the inevitable outcome of human energy being an article of exchange.

(ALB. Socialist Standard, January 1979)

to be continued...

Wednesday, July 30, 2008

Workers against the Bolsheviks

Book review from the July 2008 issue of the Socialist Standard

The Russian Revolution in Retreat, 1920-24. Soviet workers and the new communist elite. By Simon Pirani, Routledge, 2008.

One of the consequences of the fall of state capitalism in the USSR at the beginning of the 90s has been the opening up of the archives of the old regime, including those of its secret police. This book is a fascinating study, based on the minutes of meetings of soviets and factory committees as well as police reports, of the fight put up by factory workers in Moscow in the period 1920-24 to defend their interests under, and at times against, the Bolshevik government. Pirani also describes the beginnings of the emergence of members of the Bolshevik Party as a new, privileged elite.

In 1920 and 1921 during the civil war and its immediate aftermath, conditions in Russia were dire. Workers were paid in kind, but the rations often arrived late and were sometimes reduced. This led to protests and strikes, which the Bolshevik government was prepared to accommodate as long as these were purely economic and did not challenge their rule. The government was particularly edgy in 1921 at the time of the Krondstadt Revolt, whose demands for free elections to the soviets and a relaxation of the ban on private trading, had the sympathy of many workers. In fact, in the still not entirely unfree elections, to the local soviets that year members of other parties (Mensheviks, Socialist-Revolutionaries, anarchists) and non-party militants made gains at the expense of the Bolsheviks. Pirani concentrates on these "non-partyists" who seemed to have been factory militants who wanted to concentrate on economic issues, but with an acute understanding of the balance of forces and what could extracted from the government.

In 1923 the government cracked down on the other parties, including their factory activists, and stopped them carrying out any open activity. Pirani notes that "no non-communist political organization worked openly in Moscow again until the end of the Soviet period". The non-partyists survived a little longer while the Bolsheviks tried to co-opt them into their party. What political opposition there was was confined to dissident Bolsheviks, inside and outside the party, some of whom adopted a pro-working class stand over wages and conditions, but eventually they too were silenced and many of them joined the members of the other parties in the labour camps of Central Asia and Siberia.

Lenin's attitude was typical of the one he had displayed twenty years earlier in his notorious pamphlet What Is To Be Done? : that workers were not to be trusted to know their own best interest; judging this had to be left to an intellectual elite organised as a vanguard party. Pirani summarises part of Lenin's speech to the 11th Bolshevik Party Congress in 1921:

"Lenin argued that the Russian working class could not be regarded as properly proletarian. 'Often when people say 'workers', they think that that means the factory proletariat. It certainly doesn't', he said. The working class that Marx had written about did not exist in Russia, Lenin claimed. 'Wherever you look, those in the factories are not the proletariat, but casual elements of all kinds.'"

Pirani comments that "the practical consequence of this was that political decision-making had to be concentrated in the party". This distinction between the actual working class (who cannot be trusted) and the "proletariat" (organised in a vanguard party who know best) has been inherited by all Leninist groups ever since and used to justify the dictatorship of the party over the working class.

Pirani's book should be read by those who think, or who want to refute, that the state in Russia under the Bolsheviks could ever have been described as "workers". The workers there always had to try to defend their wages and conditions against it, even in the time of Lenin and Trotsky.

Adam Buick

Tuesday, July 29, 2008

Tourism: can it be green?

From the July 2008 issue of the Socialist Standard

For those 'green consumers' who have adopted the principles of a green lifestyle eco-tourism fits neatly with the now familiar slogan to 'Think Globally – Act Locally' as a counter to environmental destruction. The adoption of a green lifestyle can include: Buying only organic food; keeping a record of your carbon footprint; using bio-degradable products; ensuring your savings and pension fund is 'ethically' invested in bio-diversity products or sustainable projects; supporting 'fair trading'; participating in recycling schemes; be sparing on the use of plastic bags; and even endorsing the Body Shop empire. The solution is presented as an individual act rather than the collective action of individuals struggling for social change to put a stop to environmental destruction. Of course you can do all of these, but you shouldn't think that such activities will necessarily lessen the impact on the environment.

For instance, despite the claims of the eco-tourism operators that their priority is sustainability and biodiversity, the green consumer lifestyle facilitates the opening up of a new market where environmental concern is transformed into a commodity. When the market is presented as the saviour of the environment then green consumers, and eco-tourists in particular, need to be aware that they cannot disregard the logic of production for profit. Nevertheless, for socialists the idea of adopting a green lifestyle is not to be derided, because – despite these shortcomings - it is a tentative step towards working with nature, rather than against it.

By increasing our understanding of the interaction between the natural environment and the impact of human activity society will be in a better position to minimise the damage on natural resources, and be able to arrive at rational judgements on whether or not any interference in the natural environment is justified and warranted. But be warned that such environmental concerns are not on the capitalist agenda. For the priority under capitalism is to make a profit by exploiting the environment through market forces.

We travel for relaxation. We travel for adventure. We travel to escape the familiar and venture into the unknown. Tourism brings in money and creates employment: one in 16 jobs worldwide is directly or indirectly related to tourism. In Thailand, tourism is the leading source of foreign exchange. And although tourism can help to maintain a country's interest in its own cultural and artistic heritage and, at it its best, can foster genuine friendships between different members of the human family this all comes with a price attached.

Increasingly, 'alternative travel' as eco-tourism is known in the tourist trade, is being marketed as the only way to see the world these days. And as more and more people venture off the beaten track to experience unique cultures and unspoiled nature, ecotourism is considered the fastest growing market in the tourism industry, with an annual growth rate of 5 percent worldwide. According to the World Tourism Organisation this represents 6 percent of the world gross domestic product and 11.4 percent of all consumer spending.

Whereas, previously, you enjoyed the values of the natural environment by joining the Ramblers or Youth Hostel Association, now its considered more adventurous (and expensive) to take part in white water rafting down remote rivers, or to go native in the Australian bush, stay with the indigenous people in the Amazonian rainforest, enjoy the delights of the local wildlife and the taste of organic food at an eco-lodge in India. These eco-travellers are setting out on foot safaris in Africa, camping in the Mexican rainforest, and trekking to hill tribe villages in Thailand. You can also have a holiday in a tree-house in Costa Rica and enjoy the delights of a ropeway through the jungle canopy. And if none of these at to your taste what about some whale watching in Victoria B.C. where you can disrupt the breeding habits of the grey whale and walrus?

There are many more such holidays on offer and they are increasing by the day. At the last
count taken in 2007 ten percent of the global travel market is now eco-tourism. And though the 21st century is considered an era of environmental sensitivity and climate change remains firmly on the global conscience, with remote locations becoming more and more accessible many countries are beginning to promote their natural wonders to bring in the eco-minded tourist. But in doing so the market system is faced with a conundrum of trying to preserve natural resources and also try to accommodate the vast numbers of tourists they will attract.

The ideal of eco-tourism, as defined by Martha Honey, the executive director of the International Ecotourism Society, reads like a travel agents dream:

"Travel to fragile, pristine and usually protected areas that strives to be low impact and usually small scale. It helps educate travelers; provides funds for conservation; directly benefits the economic development and political empowerment of local communities; and fosters respect for different cultures and human rights."

However, this ideal in many instances fails miserably to achieve its aim and in fact contributes to environmental destruction. For the reality is that in terms of human impact eco-tourists are no different – other than in scale – to the everyday tourist on a package holiday to the Costa Bravo. This is what an official for the World Wildlife Fund told Leo Hickman about on the impact of tourism in Thailand:

"The tsunami was nothing compared to the impact of tourism. It is a much larger, long-term problem. . . . I was born in 1972 and when I was eight or nine it was still largely virgin rainforest here on the island. By the late 1980s, though, it was mostly developed. We have now lost so much of the biodiversity and primary forest and the soil is destabilising in many places. The construction of hotels upstream is creating a lot of sediment in the water and this causes damage to the coral reefs when it washes out to sea. It also affects the mangroves on the east coast. A lot of our waste water – about 40 per cent – is still being pumped out to sea on the west coast where all the resort areas are.

Land is now so expensive here due to tourism; the cost of living is even higher than Bangkok – it has meant that many local people have been forced to sell off their ancestral home and have now lost their only real asset. There is even competition for schools here for the first time. And there is a lot of overfishing here; this is for export rather than for the tourists per se, but lobsters are now being brought in from Burma to meet the tourists' appetite for these vulnerable creatures. The corals are also damaged by tourism. Snorkellers actually cause more damage than divers because they touch the coral more often…." (Leo Hickman, The Final Call – In Search of the True Cost of our Holidays, 2007).

In Costa Rica, whose parks are wildly popular with the millions of people who visit the country each year, the behaviour of some wild animals has been altered - some monkeys attack and bite tourists when not fed. Along the trail to the Mount Everest base camp in Nepal, deforestation is getting worse as locals cut down trees to heat meals and to provide hot showers for foreign eco-trekkers. And Mount Everest itself is becoming infamous for the amount of discarded rubbish left on the routes towards the summit. Some estimates put it at over 2000 tons which don't include the remains of a helicopter. And in the lower regions of the Himalayan foothills the popularity of backpacking is not only causing serious soil erosion but water pollution.
And what has happened in Nepal is only one example where eco-tourism is becoming transformed into eco-vandalism through the insanity of the profit system. Another example is what is happening in Kerala in India which is marketed either as, 'God's own country', or as, the 'Gateway to Paradise'. Kerala is a unique water region famous for its lakes, rivers and back waters and distinct wildlife and fauna and is also an attractive stopover or base for the eco-tourists who visit the nearby National Reserve. However, what is not marketed by the Kerala Tourist Board is the lack of sewerage facilities and rubbish collection for its thousands upon thousands of houseboats and hotels and so called eco-lodges. Before Kerala became invaded by tourists the indigenous population ensured their impact on the natural environment was sustainable or recyclable. Now water courses are becoming heavily polluted with sewerage and the plastic debris of a throwaway society.

Besides environmental damage there can be profound social and cultural consequences to travel as well. For example, what is occurring in Northern Thailand, home to many different 'hill tribes,' is a case in point. Uniquely individual in language, customs and dress, these semi-nomadic peoples share a history of ancestor worship and a close relationship with the land. However, with the introduction of eco-tourism they also share the experience of being in something akin to a human zoo. Hill tribe trekking operations sell 'authentic visits' to see 'primitive peoples... But what the eco-tourists are not told is that much of the so called culture on show has a tenuous relationship with the actual culture of the people they are visiting, for in actual fact the 'traditional' culture has been transformed into a commodity to meet the demands of the tourist market. In short the eco-tourist is being sold an illusion that the culture on display is 'authentic'.

The ravages of eco-tourism and tourism in general are becoming so self-evident it raises the question what can we do to lessen the impact of human activity but nevertheless still enjoy a holiday – both at home and overseas? Firstly, it is essential to acknowledge that when market forces literally encourage an irrational human impact on the environment and natural resources, how can you also realistically expect those self-same forces to solve the environmental problems they created in the first place? Therefore, in the search for solutions it's become vital that we look outside of the capitalist box where the social relationships of private ownership of the means of living constrain and restrict our constructive abilities to remedy environmental destruction.

In socialism where the principle of free access underpins the common ownership of the means of living our options and choices on travel and holidays would be extended and influenced by what positive contribution we can make to the country we are visiting. And with package holidays and mass tourism a thing of the past it is most likely holidays in socialism would not be restricted within a timescale of 10 to 14 days of hectic hedonism but transformed into an unique opportunity to stay in a particular location for as long as it takes to understand the history and culture of that region. In effect the transformation in the social relationships from private property ownership to common ownership will radically alter our perception of travel.

Under such conditions eco-tourism will come into its own with visits to particular regions becoming combined with studies on the wildlife, fauna and local culture. On the other hand you may wish to take part in making housing improvements by demolishing shanty towns or transforming a former holiday hotel into flats for the local population. Alternatively you could help out in a health clinic, or even give a hand to clean up polluted waterways. In effect whatever your particular choice of holiday the aim will be to combine it with an understanding that the framework of socialism will assist everybody on the globe in meeting their needs for shelter, food, clothing, education and health. Indeed it's time to start thinking of trashing capitalism not the planet.
Brian Johnson

No trees at Norilsk

Norilsk has a population of 200,000. no trees grow there. In 1930, there was nothing there, except a few reindeers and reindeer-hunters, but shortly after, nickel and other metal deposits were discovered. In 1935, construction of what was to be the city of Norilsk and the Metallurgical Combine began. Hundreds of thousands of kulak farmers and peasants were rounded up and sent there to toil and, in many cases, die in what was called the Frozen Hell. Just how many was not known. In 1953, following the death of Stalin, as elsewhere in many Siberian labour camps, the slaves of Norilsk rebelled and went on a two-month strike. By 1956, the rapid industrialisation of the Soviet Union, and the need for a more sophisticated workforce of 'free' wage-slaves, necessitated the beginning of the end of the Gulag system.

Following the collapse of the Soviet Union, the Norilsk Metallurgical Combine, like many other former Soviet combines and trusts, was privatised, having been purchased 'for a song' by Vladimir Fotanin and his business partner, George Soros.

The Metallurgical Combine became a mining company, MMC Norilsk Nickel, and the principle employer in the area. In 2004 it was reported that every day soot from the company not only turned the snow black, but also sends 5,000 tonnes of sulphur dioxide into the atmosphere, making the air taste sour. The mining company produced one seventh of all Russian factory pollution; it churned out two million tonnes of waste gas, and 85 million cubic metres of dirty water a year, destroying forests for hundreds of miles and even affecting Canada and Norway. At the time, a spokeswoman for the company admitted that only four percent of the population of Norilsk were healthy.

And what of today, in 2008? A recent entry in Wikipedia, updates information on Norilsk and conditions in the area, and from the company.

According to the Russian State Statistics Service, the estimated population of Norilsk in 2007 was 230,000, Norilsk is the centre of a region where nickel (one of the largest deposits on our planet.), copper, cobalt, platinum and coal are mined. Wikipedia reports that the Norilsk area is largely closed to foreigners, with travel permits also required for Russian citizens, ostensibly because of the sensitive nature of the mining, but also because of the ICBM missile silos located in the nearby Putoran Mountains. The nickel ore is smelted on site at Norilsk. And, continues the Wikipedia report:

"The smelting is directly responsible for severe pollution, generally acid rain and smog. By some estimates, one percent of the entire global emissions of sulphur dioxide comes from this one city. Heavy metal pollution near Norilsk is so severe that it is now economically feasible to mine the soil, which has been polluted so severely that it has economic grades of platinum and palladium".
The Wikipedia entry confirms that not a single living tree grows within 48 km of the Norilsk nickel smelter, and that the city was listed in 2007 as one of the ten most polluted places in the world. It is now estimated that four million tonnes of cadmium, copper, lead, arsenic, selenium, zinc and nickel are released into the air every year.'

Last year, BBC TV news reported ('Toxic truth of secretive Siberian city') that the mining company accepted responsibly for what it had done to the forests, but insisted they were taking action to cut pollution. Between 2015 and 2020, it expects - hopes? — to reduce sulphur emissions by approximately two-thirds, but "admits it is hard to guarantee because they are still developing the technology". Moreover, the company like all capitalist enterprises, is not likely to try particularly hard to tackle the problem if it would curtail its vast profits. Profits before people — and the planet!


Friday, July 25, 2008

On replacing a bad system

Advocates of reform often make the mistake of reducing capitalism to a logical structure rather than seeing it "holistically" — as a dynamic process. Even as they note its continued evolution, when they talk about changing it, their interest tends to focus on parts and wholes, on mechanical interactions. Hence, they usually assume it will be a massive job from the standpoint of some mythical observer.

That it might conceivably be more of a chain reaction having "emergent properties," where individuals and groups all begin to adopt a massively coherent response at around the same time (without warning or even having a clear picture) analogous to, say, a flock of birds leaping suddenly into flight — is perhaps not so intuitively obvious. Yet it was to just such a torrential outpouring of public opinion that the rigid Leninist bureaucracies of the former Soviet system fell.

This suggests that it might be more useful to understand social change as a continuum of similar patterns that start with some not very sophisticated model and work their way up the scale of complexity to various all-encompassing models, with social change as a question of degree more than of kind. We might then be able to perceive possibilities and even opportunities we might otherwise have overlooked.

Such is arguably the case with a recent New Yorker article by Elizabeth Kolbert. She starts with a detailed account of a successful windmill project on the Nantucket-size Danish island of Sams and counterposes this to a broadly planetary emphasis with an analysis of the Swiss "2,000-Watt Society," focused on the concept of globally sustainable technology. What makes this article interesting is that its argument is sufficiently "whole cloth" that we can borrow from it to draw still more radical (social) conclusions relative to replacing capitalism with socialism. The following four propositions serve to illustrate how this might work.

1) Citing the prediction that eventual damage from climate change will amount to simply wiping out at least five percent of global Gross Domestic Product (GDP) each year, and "if a wider range of risks and impacts is taken into account," that figure could "rise to 20 percent of GDP or more," Kolbert begins with a detailed, concrete description of the island of Sams's successful transition to the use of wind power in providing for its local economy's energy needs. This particular energy reform's distinctive characteristic was in its design: the islanders themselves drove the process. For several years, the project remained the brainchild of its "father," Sren Hermansen, but once it caught on in 1997, it snowballed and rapidly transformed the island economy's energy infrastructure. Kolbert cites an observation by Hermansen that "the hard work starts [with] convincing the first movers to be active."

In a parallel sense, the "first movers" of a socialist revolution are not really its theoreticians (those who self-consciously adopt an object grounded in a set of principles) but those sectors of the working class whose needs, interests and activities are functionally socialist. But whether or not one makes such a distinction, active first movers have to get the ball rolling. Thus, making socialists is an absolutely necessary first step in making a socialist revolution.

(2) On a more abstract plane, exploring issues similar to those that led to the Sams wind-energy project, Kolbert reports that "scientists affiliated with the Swiss Federal Institute of Technology asked themselves what level of energy would be sustainable, not just for an island or a small European nation, but for the entire world. Answering this question led them to found the 2,000-Watt Society." According to a former director of the project, Roland Stulz, the Society "is not a program of a hard life. It is not what we call Grtel schnallen (belt tightening), it's not starving, it's not having less comfort or fun." It is about treating the future as a global common project of human creation. Again, from a still broader perspective, when we rethink our basic assumptions, we are rethinking the future.

(3) Former director of the 2,000-Watt Society Dieter Imboden told Kolbert that as a scientist he could see no technical barriers to creating a two-thousand-watt world. "Nothing has to be reinvented — for an engineer it's not even a challenge." But what does require changing is how people think of themselves. In the analogous socialist context, Imboden's conclusion remains intact: "The problems of the 21st century pose a different, qualitative kind of problem — a paradigm change in the role of science for our society."

(4) "It usually makes sense," Roland Stulz told Kolbert, "to become more intelligent in any human activity. As the former Saudi Arabian oil minister Sheikh Yamani once said, the Stone Age didn't end because there were no more stones. It ended because people became more intelligent."

This is as true for a socialist revolution with its overarching concepts as for a windmill project in a small Danish island community. We might therefore convincingly argue that more than anything else, a socialist revolution has to rest on most people re-learning the ancient survival art of tapping into their own native intelligence.


Saturday, July 19, 2008

Cloudy View from the Summit

Last month’s G8 Summit in the far north of Japan was typical of meetings of the heads of state these days. Held in a remote location, well out of sight and sound of protest marches, and protected by an army of police, the meeting was carefully choreographed to convey an impression of competence and confidence—but in the end only exposed the impotence of government leaders in the face of grave problems arising from their beloved social system.

The two problems that were the focus of attention at this year’s summit were climate change and price rises. Newspaper headlines quoted the vow of the heads of state to tackle both of these problems, yet the articles underneath admitted that this is much easier said than done.

One obvious reason why the various leaders are finding it difficult to solve such problems is that there is no clear consensus among them regarding the actions to take, which reflects the different and often directly opposed interests and standpoints of their respective nations.
For instance, not only are there differences between “rich” and “poor” nations regarding how to counter global warming, and the role that each nation must play, there are stark differences in the standpoints of the G8 nations regarding this issue, not to mention the political divisions within each nation.

Those same sorts of national and domestic differences came to the surface with regards to the rising food and fuel prices. Not surprisingly, each government has sought to frame the problem in a manner that lays the maximum blame on others. The root cause of the price rise has thus been identified, respectively, as the result of rising consumption in China and India, insufficient production by OPEC nations, or the flood of speculation on the commodities markets and declining dollar.

That is not to suggest, however, that such problems could be solved if only there was a clear consensus among the leaders and sufficient political will. The deeper issue is that the heads of state (with the backing, however tepid, of their electorate) have set out to solve problems that stem directly from the social system (= capitalism) that they are paid to serve and protect. (And it is worth emphasizing that their role is indeed as servants, rather than masters, of this system.) In other words, the reason that our self-styled “leaders” are unable to arrive at solutions is not that they are shortsighted, selfish and stupid—although more than a few fit that description—but that they are naturally reluctant to pursue the root causes of problems if it calls into question the capitalist system.

It does not take much digging, incidentally, to unearth the direct relation between a system of production for profit and a whole range of problems. This is particularly clear in the case of environmental problems. Capitalism is all about capital accumulation and the insatiable pursuit of profit is naturally accompanied by tremendous waste and destruction. If there are profits to be gained, capitalists are not too bothered by the long-term, or even short-term, consequences for other people or future generations. Political leaders lecture about the need to address environmental problems, while turning a blind eye to the role played by this rapacious system of profit chasing.

In the case of rising prices as well, it is rather absurd for politicians to bemoan the problem without fundamentally calling into question a system that revolves around prices and money. Granted, as long as the prices are “reasonable,” many people find this social system unobjectionable, or even natural. But a quick look at economic history reveals that inflation is a not uncommon side-effect of the money-centered capitalist system and that governments have had little success in bringing inflation under control once it picks up speed.

It is not surprising that inflation can be impossible to control, because commodity prices are not under our conscious human control to begin with. Simply put, prices are determined by the market. It is true that a business can set prices at whatever level it wants, but if that level is too far above or below that of their competitors the business runs the risk of losing sales or profit. Ultimately, therefore, businesses will tend to set the prices of their products according to the cost of production plus the average rate of profit. And, on a more essential level, these “production prices” are themselves ultimately determined by the amount of labor (or “socially necessary abstract human labor”) expended to produce the commodities.

In short, the very existence of prices reflects the fact, pointed out by Marx, that we live in “a state of society, in which the process of production has the mastery over man, instead of being controlled by him” (Capital vol. 1). When prices are high, the absurdity of this anarchic social system comes into clearer view, but even in “normal” times our lives remain prey to forces outside of our control. The “solution” to the problem, at least as far as workers are concerned, is not to bring prices back to some acceptable level (assuming that were indeed possible), but to progress beyond this social system where production is just a means of generating profit and distribution is mediated by money.

If the businesses that carry out production are not free to ignore “market forces” and arbitrarily set prices, then it is foolish to imagine that national governments somehow possess the magical power to bring prices under control. To remain in power, heads of state need to convince the public that they are in control of the economic situation, or can at least curb the worst excesses of capitalism. In fact, their “control” over the direction of the capitalist economy resembles that exercised by a rodeo rider over an angry bull during those four seconds before he is tossed from the saddle into the dirt.

The powerlessness of world leaders was highlighted by a comment made during the G8 Summit by a Japanese government source who told Reuters that “there is a limit to what governments can do now” to stem the rising prices. The fact that this bland and exceedingly obvious statement was made on “condition of anonymity” speaks to the insecurity of world leaders who are desperate to pass themselves off as superheroes.


Friday, July 11, 2008

Disaster Capitalism

Book Review from the July 2008 issue of the Socialist Standard

The Shock Doctrine. The Rise of Disaster Capitalism. By Naomi Klein

The author of No Logo has written another book strongly criticising features of capitalism while still arguing for reform of the system rather than for its replacement. In her earlier book Naomi Klein concentrated on the spread of globalisation. In The Shock Doctrine she aims to show that disaster capitalism treats natural and man-made disasters as exciting market opportunities.
She illustrates the main theme and associated sub-themes of the book by events in various countries over the last few decades.

In the USA the attack on the Twin Towers and the Pentagon that came to be known as 9/11 resulted in some 3,000 deaths. It also led to Bush's War on Terror, featuring big strides in privatisation, notably of the security industry. 9/11 exposed the security failures resulting from outsourcing government functions to profit-driven corporations: "the Bush team devised a new role for government, one in which the role of the state was not to provide security but to produce it at market prices."

After the New Orleans flood disaster in 2005 the public school system was almost completely replaced by privately-run charter schools. The teachers' union was shredded, the teachers were fired, and only some were rehired at reduced salaries. "Katrina was not unforeseeable. It was the result of a political structure that subcontracts its responsibility to private contractors."
In Chile in 1973 General Pinochet seized power by a coup d'état against the previously elected regime which was called "socialist" but was really welfare-state capitalism. Before the coup Chile's US-trained economists had tried to introduce a policy of privatisation, deregulation and cuts to social spending peacefully. When that policy was democratically rejected the ruling class resorted to the use of force. Pinochet's battle was one-sided: more than 3,200 disappeared or were executed, 80,000 were imprisoned and 200,000 fled the country. Government spending was cut by 25 percent, accompanied by a package of pro-business policies.

The Falklands war in 1982 was fought between Britain and Argentina over possession of some tiny islands off the Atlantic coast. It cost several hundred military lives. It also served to boost the reputation of Mrs Thatcher as the Iron Lady. She went into Churchillian battle mode: after defeating "the enemy without" (the Argentine forces) she turned her attention to what she called "the enemy within" – the trade union movement and particularly the National Union of Mineworkers. Between 1984 and 1988 the Thatcher government privatised, among others, British Telecom, Gas, Airways, Airport Authority and Steel.

Klein takes 57 pages and quotes over 200 sources to analyse the complex, chaotic and profit-driven situation in Iraq. Here are some highlights:

"Develop the private sector, starting with the elimination of subsidies… investors could take 100 percent of the profits they made in Iraq out of the country, they would not be required to reinvest, and they would not be taxed… [the Iraq experiment] transformed the invasion, occupation and reconstruction into an exciting, fully privatized new market… BearingPoint, an offshoot of the major international accounting and consulting firm KPMG, was paid $240 million to build a 'market-driven system' in Iraq." (pp342-8)

In 2005 a hugely destructive tsunami caused much loss of life, suffering and hardship for many people, especially in Sri Lanka. When the emergency subsided and fishing families returned to where their homes once stood, they were greeted by police who forbade them to rebuild. Hotels were encouraged to expand onto the valuable oceanfront where fishing people had lived and worked. An $80 million redevelopment project was to be financed by aid money raised in the names of the victims of the tsunami. Loans from the World Bank and IMF were offered in exchange for agreements to open the economy to privatisation and public-private partnerships.

Stan Parker

Saturday, July 5, 2008

Feeding the World?

President Bush in an interactive business session had argued that while prosperity in countries like India is good, it triggers increased demand for better nutrition, which in turn leads to higher food prices.The comments came close on the heels of US Secretary of State Condoleezza Rice’s controversial statement that ‘apparent improvement’ in the diets of people in India and China is among the causes of the current global food crisis.

The Truth

Biofuels have forced global food prices up by 75% - far more than previously estimated - according to a confidential World Bank report.

The figure emphatically contradicts the US government’s claims that plant-derived fuels contribute less than 3% to food-price rises. It will add to pressure on governments in Washington and across Europe, which have turned to plant-derived fuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil. Senior development sources believe the report, completed in April, has not been published to avoid embarrassing President George Bush. The report confirms a British finding that the rush to develop biofuels has played a “significant” role in the dramatic rise in global food prices. And an estimates their impact as 20-30% rise.

“Political leaders seem intent on suppressing and ignoring the strong evidence that biofuels are a major factor in recent food price rises,” said Robert Bailey, policy adviser at Oxfam.

Production of biofuels has distorted food markets in three main ways. First, it has diverted grain away from food for fuel, with over a third of US corn now used to produce ethanol and about half of vegetable oils in the EU going towards the production of biodiesel. Second, farmers have been encouraged to set land aside for biofuel production. Third, it has sparked financial speculation in grains, driving prices up higher.

“It is clear that some biofuels have huge impacts on food prices,” said Dr David King, the government’s former chief scientific adviser.

However , the Indian apologists for capitalism should not feel too smug.

More than 1,300,000 tonnes of food grain rotted in storage stock-piles over the last decade in India according to a recent report.

“This amount of food grain could have fed over 10 million people in a year,” said activist Dev Ashish Bhattacharya.

-Reposted from Mailstrom

Oil and War

“A group of American advisers led by a small State Department team played an integral part in drawing up contracts between the Iraqi government and five major Western oil companies to develop some of the largest fields in Iraq, American officials say. The disclosure, coming on the eve of the contracts’ announcement, is the first confirmation of direct involvement by the Bush administration in deals to open Iraq’s oil to commercial development and is likely to stoke criticism. In their role as advisers to the Iraqi Oil Ministry, American government lawyers and private-sector consultants provided template contracts and detailed suggestions on drafting the contracts, advisers and a senior State Department official said.” (New York Times, 30 June) RD