Bootle’s Wand

 

          From ‘Defending bank chiefs’ profligate pay will just add fuel to Corbyn’s ire,’ Daily Telegraph Business 4^th December 2017 let Roger Bootle, chairman of Capital Economics, start us off:

A note last week from analysts at Morgan Stanley suggesting that the election of a Labour government could be a bigger risk to the City than Brexit has prompted Jeremy Corbyn to give a disarmingly direct response: “When they say we’re a threat they’re right. We’re a threat to a damaging and failed system that’s rigged for the few.”

 

Of course, according to Mr Bootle, Jeremy’s occupation of No. 10 would be an unmitigated disaster for all kinds of reasons,  more especially that he ‘misses many crucial points and pays scant regard to the consequences of proposed actions.’  Well, perhaps he has, perhaps he hasn’t. Mr Bootle is never very clear or precise. It could be that Jeremy Corbyn has indeed paid regard to ‘the consequences of proposed actions’  but they don’t weigh as heavily on him as they might on Mr Bootle’s particular readers.  But let that pass. For, stunningly, Mr Bootle concedes that ‘Yet he does have a point.’ Jeremy Corbyn has a point? What is going on here?

          It turns out to be a politically-charged point, since Jeremy also mentioned that the chief executive of Morgan Stanley, James Gorman, was paid (in sterling terms) £16.7 million in salary last year, which Roger Bootle accepts as true. This is dangerous territory we are getting into, and Mr Bootle is wary: ‘It may be difficult for senior bankers to comprehend this,’ he writes, ‘but there is a widespread feeling in society that they have not earned the huge sums of money that they are paid.’

          If you didn’t know this before, you read it here.

          What’s more, ‘Rage against bankers is not just a UK phenomenon.’ It seems that if anything Americans are even more splenetic over them. But there is an even wider problem: ‘The excesses of capitalism are by no means confined to banking.’ Has Bootle borrowed from a Morning Star editorial? (Our only Marxist daily here, for the uninitiated.) Roger Bootle qualifies this by stating that ‘the privatisation of large swathes of the British economy, first begun under Mrs Thatcher, and disparaged by Mr Corbyn, was an enormous success.’ Some might differ. How ‘successful’, other than in moneymaking terms, have the privatisations of electricity and gas, water and railways, public housing (hence our present desperate housing shortage) and schools actually been? Parents of schoolchildren, as well as probation and prison officers, the homeless and Southern Rail commuters might demur. Not much is left after all these. Bootle has the good sense to concede: ‘But not all privatisations were equally successful. In some cases, what is essentially a natural monopoly is now operated for the benefit of the senior executives and shareholders…This is not proper capitalism, which thrives on competition. This is the capitalism of the robber barons.’

          Odd. I always thought the old robber barons – Rockefeller, Carnegie, Vanderbilt et. al – were intensely competitive, to the point of buying out or ruining all who stood in their way.

          Be that as it may, apparently the only proper capitalism is that which thrives on competition, including that of James Dyson and – Bill Gates, whose Microsoft has thrived on competition, surely not on acquired monopolistic patents. We admire them (and positively adore Rupert Murdoch) but not the likes of bankers, who have simply been making money out of money, not profiting productively. Though, Bootle says, a propos  something-or-other,  it is not the market’s fault that public bodies like the NHS and the BBC have been in effect hollowed out by capital. ‘This is surely for the public sector to sort out.’ Mr Bootle cannot be blind to the fact that such public bodies are publicly accountable, which means to whichever government is in power at Westminster. Perhaps he did not notice, for example, that it is the governments of New Labour and beyond that have forced PFI on public organisations, and Health Ministers who have imposed the ruinous costs on the NHS of internal private enterprise – meanwhile, of course, holding the purse-strings of all these organisations. So a bit of sleight of hand here, as we come to learn of Mr Bootle’s powers and pretentions as a magician.

          So we shall get a Corbyn-led administration, which will virtually destroy the economy. (It’s in great shape now, of course.) but ‘If this happens, it will be largely the fault of the Conservative Party.’

So far, Jeremy Corbyn has been playing the best tunes. This Government needs to make the case for capitalism, including banking, making clear how beneficial it is for the living standards of ordinary people, while highlighting the disastrous performance of most, if not all, socialist governments abroad and most Labour governments here at home.

In other words, better spin like Tony used to do.

          I wish Bootle had been more specific. What does he mean by saying that ‘most, if not all socialist governments abroad’ have performed disastrously? Are we supposed to conjure up Gerhard Schroeder, Mao Zedong, Julius Nyerere, Hugo Chavez, Deng Xiaoping, Franklin Roosevelt, Leonid Brezhnev or Francois Mitterand? Which of these and possibly other ‘not alls’ were the successes? Can socialism in any guise ever have been successful? Surely not in the Daily Telegraph! What, according to Bootle is socialism?  As for ‘most Labour governments’, which are the ‘not alls’ that succeeded? Did the administrations of MacDonald, Attlee, Wilson-Callaghan and Blair-Brown not all end in disaster? (For God’s sake don’t mention Anthony Eden, Alec Douglas-Home, Ted Heath, John Major or David Cameron!) If not which succeeded? We don’t know. Bootle won’t tell us.

          What Bootle pleads for is making the case for an enlightened capitalism which still allows decent, hardworking rich people to make a lot of money provided ‘they obey the law and pay their taxes’.  (Though they can avoid doing the latter if they choose to be non-domiciled, and if they wait around long enough the highest tax-rates will continue to be lowered.) So here is the solution:

The promotion of capitalism includes restructuring the system to minimise abuses and excesses. Ensuring effective competition holds the key. Unless the Conservatives find a way of pulling this off then we may be destined to appreciate the merits of capitalism only by experiencing its demise.

And that’s it. I can imagine an email winging its way to Roger Bootle from Downing Street: ‘Er, Rog, could you maybe give us some idea of how we could go about this? The Party would be broke without donations from bankers and hedge funds, and from your “robber barons”.’  For Mr Bootle has provided no solution whatever except the magic wand that seems to be passed about from one Telegraph columnist to another.

          And so the best Roger Bootle can offer is that the Conservatives ‘find a way of pulling this off.’ Thanks for nothing, Tories might reply. In any case the government interference of ‘restructuring the system’ sounds a bit socialist to me. What Mr Bootle proposes in generalities looks much like the rather more detailed Labour Party programme which has already been announced and publicised.  Why not take this further?

          Thus I can see now the Tory posters for the next election: ‘Vote Labour, for strong and stable government!’

          This isn’t so silly. During Jeremy Corbyn’s first contest for the Labour Party leadership, the Daily Telegraph mischievously advised Conservatives to sign up for Labour by paying the £3 entry fee in order to vote for Jeremy and so help install an unelectable Labour leader. All they need do now is forget their worries, vote for Jeremy again and then let a victorious Prime Minister Corbyn take the blame for everything that happens subsequently. Much easier than rallying to a clapped-out ideology and cheaper than trying to get the Tory Party elected in these increasingly unelectable times for it. That’s how I would ‘pull this off’!

 

 

 

         

 

 

THE NEW DEVIL’S DICTIONARY

 

ADVERTISING – paid for in supermarkets.

 

AFFORDABLE HOUSING – to make property primarily unaffordable.

 

AMAZON – a tribe of fierce women who became the world’s biggest exploiters of cheap labour.

 

ANTI-SEMITISM – being opposed to Netanyahu and far-Right Israeli politics and illegal land seizures. In Jews, this opposition is called ‘self-hatred.’

 

BENEFIT SCROUNGERS – by no means all of the 800 or so who sit in the most bloated unelected parliamentary chamber in the world collecting £300 a day + expenses for doing nothing. Also a family I know of vaguely but whose name (if not income) momentarily escapes me.

 

BONFIRE OF THE RED TAPE – abolishing health and safety regulation and inspection of construction sites, factories, offices, tower blocks, schools, hospitals and on the road.

 

BREXIT – the spirit of 1940 when Britain ‘stood alone’ backed by Empire and nourished by Bovril. Nowadays will preside – when enacted – over a loss of trade by keeping out of the EU but of course still subsidising cheap rail tickets on the continent. Meanwhile, will seek 51^st statehood of the USA.

 

DEBT – someone else’s asset.

 

DICTATORSHIP – applies to Cuba and Venezuela but not to Azerbaijan, Turkey or Uzbekistan, which have popularly elective assemblies at all levels of government.

 

EMPLOYMENT – zero-hour contracts,   unlimited hours without overtime pay, stagnating and declining wages against inflation (often requiring ‘in-work’ benefits), insecure pensions, unsociable hours and mass mental depression.

 

FAKE NEWS – first inscribed on Assyrian monuments c. 2000 BCE.

 

FREE SCHOOLS – freedom for shareholders and CEOs to make a packet out of the substandard education of children. For a better and – in a special sense – richer Britain.

 

GROWTH – the world economy dies if it does not ‘grow’, until it absorbs the whole planet and then some. If ‘growth’ were the sole object of life, then the success of trees (say) would be that they never stopped growing. Another term for collective insanity. But steady-state capitalism is a contradiction in terms.

 

HATRED OF FREE SPEECH – anti-fascism.

 

IMMIGRANTS – these supply our food by picking and keep the NHS going while also buying up our football teams.

 

JOGGING – brings the computer into green open spaces, which are scarred with deep muddy grooves made by the same anti-social impulses fed in the first place by staring into computers.

 

LIFESTYLE – personalised selfishness.

 

LITTER – the triumph of free enterprise in all directions.

 

NANNY STATE – provides security for all in health and basic needs and so creates a ‘culture of dependency’.

 

PHILOSOPHY – the art of reducing humanity’s deepest and most searching questions to mumbo-jumbo. Scientists build on the success of past scientists; philosophers feed on the shortcomings of past philosophers.

 

PIECEMEAL SOCIAL ENGINEERING (‘Sir’ Karl Popper) – change without upsetting the powerful. A weasel phrase, one of this great philosopher’s best known.

 

POLITICAL MEMOIRS – prop doors open.

 

POLLUTION – the oxygen of modernity.

 

PROGRESS – enslavement.

 

RADICAL TERRORISTS – anti-frackers, especially anti-fracking grannies and blokes in wheelchairs.

 

REFORM/LIBERALISATION – reform of labour so that it can be more cheaply hired and more easily fired.  Advocates ‘labour flexibility’ and ‘labour mobility’ on these grounds.

 

ROLLING BACK THE STATE – once one has bon-fired the red tape, we get rid of social infrastructure including health care, education and public transport as well as day-to-day law and order.

 

RUNAWAY BESTSELLER – so over-hyped that, with any luck, it will be sold off in WH Smith’s at half-price within six months.

 

SPENDTHRIFT LABOUR – though not quite so spendthrift as the Tories, who have piled up the national debt higher than Labour ever did chiefly by giving tax-cuts to the better-off and allowing non-domiciled status to the seriously rich.

 

SOCIAL MEDIA – to encourage anti-social behaviour. Amongst other things they promote the grooming, self-harm and suicides of children, and pay as little tax as they can get away with.

 

SOCIOLOGY – substantiates the mythology of ‘society’ as a reified object, like an idol.

 

TRADE UNION BARONS – to be distinguished from press barons, union barons salt union dues away in tax havens and tend to be non-domiciled for tax purposes.

 

TRICKLE-DOWN EFFECT – as the rich get richer the poor get poorer because the rich grab even larger proportions of the available money. What ‘trickles down’ is poverty.

 

VENTURE CAPITALISTS - buy up companies, suck them dry of capital and then sell them off to the lowest bidder, all in a spirit of daring adventure.

 

WEALTH CREATORS – those who steal and mortgage the future of the wealth created by others.

 

….My work here is done!

 

 

With due acknowledgements to Ambrose Bierce (1842-?1914) and his Devil’s Dictionary. He disappeared in Mexico in 1914. If you are still alive, Mr Bierce, preferably in a comfy little hacienda, thanks a lot.

 

 

 

 

 

 

 

 

 

 

 

A Marxist at the Movies (4):

 

QUESTIONS OF MOVIES SPECTACLE

 

          Jon Boorstin’s The Hollywood Eye discusses the role and significance of ‘spectacle’ in Hollywood movies. Spectacle (such as large crowd scenes) is meant to impress the viewer with sheer size as well as create the overall context for the stories of the individual characters. And so we have, for example, the lengthy Italian-Mafia wedding which opens The Godfather, providing a ‘respectable’ social panorama as the setting for the unfolding gangland drama. Or scenes in which Los Angeles is being destroyed by volcano or alien invasion (a city that has probably been ‘destroyed’ more often than most), battle scenes, the Roman Triumph and Colosseum, a towering inferno etc. For Boorstin it is important not to allow the panoramic spectacle to take over the movie: it is at best a means of (relatively briefly) putting the main characters within the worlds they inhabit without showing us ‘the world’ the whole time.

          Spectacle is very much a Voyeur thing (see 2 in this series), satisfying the viewer’s curiosity and amazement about the world and aspects of it.

          This may be being seen as keeping the spectacular and the intimate apart (which is indeed how they are respectively shot in most practice) but Hollywood films with various spectacles are nonetheless required to relate them to the individual dramas being played out here. (Did I really hear the line: ‘I love you but that’s not important right now’ in The Towering Inferno? Something like that, spoken straight, and if I did hear it there it was a bathetic attempt by the scriptwriter to link the inferno with the love-interest as fast as the licking flames would allow.)

          Indeed the spectacle – including potential or actual airplane or shipping disasters – invariably serves as a medium for reconciliation when things turn out okay for the survivors. Father and warring daughter are reconciled; formerly quarrelling passengers embrace each other in tears; a boy learns to become ‘a man’ or a young woman realises empowerment.

          The 1950s film From Here to Eternity (starring, amongst others, Burt Lancaster and Deborah Kerr) seems to me to have flaws that stem from the original novel. The ‘spectacle’ in this case is going to be the Japanese bombing of Pearl Harbor in December 1941, the setting for the film. But its central motif is the illicit love-affair between the US sergeant, Lancaster, and the genteel sex-starved wife of a superior officer, Kerr, culminating in the in-those-days-steamy moment on the beach when they are bathed in waves as they make love – parodied deliciously by Airplane! of 1980 when they are tangled up in kelp as well. There is some power in this slow-burning story of passion, and in other strands as well, for it is also amongst other things a boxing movie. The problem is that absolutely none of this has anything to do with what the dastardly Japanese are planning in faraway Tokyo. It is an ‘alien’ disaster that overtakes them all but it has little connection with the emotional gravity of the movie.  Viewers who knew that the bombing was coming (a well-known event to American audiences in the early 1950s) will have been counting time, as it were, against the big moment whatever Lancaster, Kerr, Montgomery Clift or Frank Sinatra were going through. The same might be said for the majority of classic and not-so-classic sci-fi movies involving either earthquakes, aliens or malevolent asteroids in which the ‘human interest’ or ‘love-interest’ is only rather tenuously or dubiously linked to the big happening. Or vice-versa: there is the Warren Beatty picture Reds – I owe this instance to Slavoj Zisek in his 2008 book In Defense of Lost Causes – about the true-life radical American reporter John Reed whose account of the Russian Revolution Ten Days That Sho0k the World is a key eye-witness one as well as a championing of the Bolshevik cause. Arguably, as Zizek says, ‘the most traumatic historical event of the twentieth century’, but:

How, exactly, is the October Revolution depicted in the film? The couple of John Reed and Louise Bryant are in a deep emotional crisis: their love is reignited when Louise watches John on a platform delivering an impassioned revolutionary speech. What then follows is their love-making, intersected with archetypal  scenes from the revolution, some of which reverberate in an all too patent manner with the love-making, say, when John penetrates Louise, there is a cut to a street where a dark crowd of demonstrating people envelops and stops a penetrating “phallic” tramway… all this against the background of the singing of “The Internationale” … Even the October Revolution is acceptable [‘acceptable’, so Zizek implies, to an American audience] if it serves the reconstitution of a couple.

In such manner, then, is spectacle provided to serve as mere background (or metaphor) for the all-important love-interest between a particular twosome. The effect is overblown bathos, but it is fully in line with how Boorstin would regard the proper use of spectacle in Hollywood feature films. (To be fair, Boorstin himself does not refer to this film.) That is, ordinary individuals come first: history must be portrayed to fit around them. We might well expect this to come from the Hollywood eye with its tacit embrace of liberal-conservative individualist values.

          For we might contrast Reds with two literary examples of the bringing together of the individual with the socio-political: Tolstoy’s War and Peace and Trotsky’s History of the Russian Revolution. Both these (fortuitously Russian) authors move easily between the doings of various featured individuals and the mass without any sense of an imposition of the individual over the mass. Rather, both are human exemplars of one overall crucial event: the fall-out from Napoleon’s invasion of Russia in the one instance and the lead-up to and outbreak of the October Revolution in the other. Both events swamped the lives of everyone high and low. War and revolution are humanity itself engaged in action in the mass even as individuals go about their own business, which is never only their own business at the time. As from the top to the bottom of British society during the Blitz of 1940-44.

          Consider (in terms of individuals-mass movement spectacle) such Soviet films as Battleship Potemkin, October, Mother etc. which match in celluloid what Trotsky achieved in historical ‘epic’ literature: masses as individual, individuals in themselves containing masses. Or, from another revolutionary perspective, Gance’s Napoleon. Hollywood’s depiction of the Blitz was – Mrs Miniver. A comedown in bourgoisified America from the more collectivist age of the silent era with its European immigrant audiences – and a significant number of immigrant directors, who made silent films the epitome of the integrated spectacle, that is, in the hands of Chaplin, von Stroheim, von Sternberg, Murnau, Mamoulian – together with the native-born Americans Griffith, King Vidor, Buster (The General) Keaton, de Mille etc.

          By contrast, no modern techno-CGI spectacle can save the bathos of Bill being reunited with Jean through the instrumentation of an asteroid. An American middle-class domestic drama played out like this renders the spectacle ultimately boring if indeed it does go on too long – while the spectacle does the same thing to the doings of Bill and Jean, because they can’t match it for spectacle and spectacle as such is not underpinned dramatically by – on their own – them. The Perfect Storm with George Clooney is a much better example of integrated spectacle-individual, tragic and universally relevant. But even Spielberg - of other films - never quite overcomes this problem.

          Thus does Boorstin’s belief in keeping a lid on spectacle say something about the fragility of an individualism whose ideology is threatened by mass happening and action, and in this position is (ironically enough) impoverished. In reality, the individual is the social being, not side-by-side ‘society.’

What’s Happening?

 

          I’m sorry to keep bringing it in, but the Daily Telegraph Business for 6^th November 2017 ran two front-page stories side-by-side which I find perplexing.

          In one, we find warnings being raised by leading financial think tanks that stocks are rising so high (the FTSE closed on Friday 3^rd November at 7,560.35 – a record high) that they are looking very much as they looked on the eve of the Dot.Com  crash of 2000, and – even more ominously – on the eve of Black Tuesday 1929.

          Anything could happen to destabilise the lot at any time: high interest rates could trigger a crash, while ‘unreasonably’ low rates could create a bubble followed by a bust. A crunch in China’s debt markets is only one of any number of things that could also ‘set off shock waves across the world and into US stocks’. (A Donald Trump-tweeted declaration of world war is not mentioned.)

          Time to stuff your mattress?

          Meanwhile, side-by-side with this: ‘Theresa May will today urge business to look to the next decade with “rational optimism” as part of a new chapter for Britain’s economy.’ Apparently Britain is going for ‘a stronger, fairer, better balanced economy…which builds on its strengths and can compete in the world.’ Never mind that the Tories have already had seven years of power presumably to do just this. The response of Mrs May’s CBI audience was lukewarm. Perhaps she reminded one or two there of Herbert Hoover – the US President who kept saying ‘the business of the country is basically sound’ and ‘prosperity is just around the corner’ in response to a Crash which had indeed already taken place.  Is Theresa May the new Hoover? It is her sunny, optimistically vague outlook that gives me the willies more than any dire warnings from the NIESR and BNP Paribas. And with Jeremy Corbyn waiting in the wings as the UK version of the next Roosevelt. (The New Deal wasn’t that bad for business, under the circumstances.)

          When, oh when, will we go for the true ‘rational optimism’ of socialism? The present stock markets suggest more ‘irrational optimism’ than anything else. If only the ‘hidden hand’ of the market had been possessed of a brain.

          On the one hand if you prognosticate disaster you help it along by creating a self-fulfilling prophecy. If, on the other, you stamp out pessimism disaster happens anyhow behind your back. Better to be complicit, or a fool? Thus are financial experts caught in this bind. Meanwhile they are finally earning their money by the sweat of their brows (Mrs May, by contrast, only ‘perspires’), coming up with such formulations as that the economy is looking great but is heading for a crash of monstrous proportions, or that the figures are ambiguous showing that while we are heading for a fall off the cliff, the global economy has never looked better. A Great Depression to come with greater prosperity for all. The best they seem to be able to do these days by way of ideologically preserving the system (which is their job) is to send out ‘mixed messages’. It would be better for them to throw down some bones for a more intellectually-rigorous look into the future: as we know, astrologers and medicine-men are never wrong.

SPIVVY BANKS

 

          This blog picks up from the last one, ‘Owen Jones and Banks’.

          It’s derived in part from Observer financial columnist Phillip Inman (‘All hail British banks: self-absorbed, short-termist and spivvy’, Observer 29^th October 2017). Mr Inman draws from a new report issued by the IPPR Commission on Social Justice: ‘Financing investment: Reforming Finance Markets for the Long Term’. The Commission includes business leaders, people from the charity Citizens UK, the Archbishop of Canterbury and various academics. Let’s look at salient facts cited by Mr Inman:

          Loans to UK businesses account for just 5% of total UK bank assets (compared to 11% in France, 12% in Germany and a 14% average across the Eurozone).

          Property loans to businesses and individuals in the UK account for more than 78% of all loans to individuals and non-financial businesses.       Strip away real estate, and loans to UK businesses account for just 3% of all banking assets.

          Hedge funds are just as bad. These plus high-frequency traders collectively make up 72% of trades on the London market. The IPPR accuses them of ‘paying themselves on performance against rivals and over short time-scales, “not long-term value-creation”’.

          What is Inman’s context for this? ‘Britain is in the midst of an investment crisis, a productivity crisis, an income crisis and an inequality crisis – and all are so entrenched that they are beyond policies that tinker or No. 10’s “nudge unit”.’  So do something about it! Line all the bankers and hedge-funders up against the wall facing certain death by firing squad until they beef up their 'long-term value creation'!


          Alas, banks and hedgers do not create value. ‘Long-term’ value comes from workers in the employ of production bosses, not from the likes of these, who are only financial intermediaries. The financial sector functions (ideally) to circulate existing value more efficiently, not to make value abracadabra-style.  Bankers are likely to reply that business is not approaching them to any great extent, let alone an optimal one. Banks loan to those who borrow in order to make investments, but what happens if (outside of property) borrowing itself has fallen off? It’s not as if banks were inherently anti-business. But they can’t force businesses to borrow. As we know it is a sound principle that one never borrows from a bank if one cannot afford to. In contrast to smaller businesses (and ‘zombie’ ones) that may be staring at the possibility or likelihood of insolvency, larger corporations are sitting on piles of their own cash as it is. It would seem likely, on this account, that we are witnessing what JM Keynes long ago railed against as the enemy of any capitalist economy: hoarding.

          Here is a big problem with money: money is a circulating medium, to be sure, but due to its own fetishistic existence money can also be withdrawn from circulation altogether and still retain its fetish-value. If it is safer to hoard money than to invest it, this is what capitalists will do – as they did in the Great Depression of the 1930s. Indeed if they hoard enough cash less money will be in circulation, which neatly avoids hyper-inflation, since ‘too-much-money’ here isn’t doing anything! Capitalist economies that run out of things to invest in either safely or profitably or preferably both can revert to a kind of Aladdin’s Cave economics: but all they require, unlike the misers of old, is money itself, not necessarily  in the form of gold and precious jewels, though perhaps with the odd Rembrandt. Heavy taxation on hoarding will not de-fetishize money itself.

          So – hoarding works!

          But hoarding – as with its opposite, potential insolvency – is certainly the antithesis of banking, which is grounded in making profit through borrowing and lending for investment, i.e. the circulation of money as capital.

          The Right will chime in here to say that it is the fault of trade unions, red agitators, Remainers, Jeremy Corbyn & Co. who so disrupt business confidence that substantial business withdraws into its various Aladdin’s Caves. The true culprits in all this are not banks but red agitators (some in Remainer disguise) poisoning the minds of the populace! But decently-functioning capitalism is predicated upon endless investment, endless growth, regardless of either actual buying-power or a finite planetary environment. The Great Recession of 2007-08 was not caused by red agitators but by – and this is an invariable cause of crises – more and more money chasing fewer and fewer reliable or affordable prospects until it went for unreliable ones. Banks to be sure were heavily implicated for having spread the results of the disaster all around the world, but were not the root cause, which was a misfiring of investment in unreliable dealings. Banks facilitate deals but do not create growth of themselves. Banks certainly have not helped themselves in terms of exoneration, but this is fundamentally due to their essential powerlessness in given situations, for they are middlemen, not drivers. They do not make attractive martyrs and never have. But it turns out that lambasting banks – as lambasting red agitators – is an ideological safety-valve for the whole system. In the 1930s both financiers and reds were widely held to be to blame for the Depression, a unifying thesis then being an anti-Semitism that saw a world conspiracy hatched between them. (The anti-Semitism is not present in today’s scenario. In its place we have Muslims and immigrants in general, who are at least in position to be blamed for everyone else’s woes.)

          Let me wind up first with a quote from Istvan Meszaros’ seminal work Social Structure and Forms of Consciousness vol. I (p. 52):

          The only rationality that capital needs – and, of course, also dictates and successfully enforces – is precisely the “strictly economic” and operational rationality of the individuals engaged in the process of its enlarged reproduction regardless of the consequences.

Yet – amusingly enough, to some of us – our capitalists apparently these days don’t even stick to pure operational rationality in order that the whole system be reproductively enlarged. Let me quote again from Inman:

          This spivvy trading arena has the knock-on effect of making short-term demands on the boards of listed companies. Such is the pressure to avoid being caught in traders’ headlights that in a survey of more than 400 executives, some 75% said they “would sacrifice positive economic outcomes” if it helped smooth their profit figures from one quarter to the next.

This does not look like a banking problem – except in the sense that banks aren’t getting the business. And it looks less like capital’s operational rationality and more like a fish swallowing its own tail. Of course Meszaros’ fundamental contention – as opposed to the ‘laws’  of ‘marginal utility’ economics - is that the capital system as such is essentially irrational. This might equally be said of many if not all suicides.

 

 

 

Owen Jones and Banks

 

          Owen Jones is a passionately left-wing journalist, chiefly for the Guardian newspaper, who campaigns eloquently and honestly for the just causes, of which there are rather too many under this miserable Tory government, or excuse for a government. True, Owen was a little wobbly over Jeremy Corbyn at one time, but Jeremy’s success in getting votes for Labour has brought Owen into line, along with various erstwhile Blairites  who smell power in following Jeremy these days, together with increasing numbers of business interests gravitating towards Labour if only because they don’t hold out much hope of Tories winning the next election, whenever that may be. So Owen Jones is essentially a camp-follower, but a nice one.

          Owen writes, with his usual persuasiveness (Guardian 20^th October 2017) on the urgent necessity of nationalising the UK’s banking industry. According to a recent poll half of the electorate are in favour of this. The idea is that banks, ‘an essential public utility’, are doing much less for the economy and much more for their own shareholders than even a number of responsible economists would like to see. According to a think tank called the New Economics Foundation, the troubled Royal Bank of Scotland could be run by a management board, with ‘a board of trustees [to] ensure the bank was accountable to the broader economy and customers, not shareholders.’  Meanwhile, according to Owen, ‘Labour is right to call for a German-style public investment bank, backed up by similar publicly run local banks.’  In Germany, KFW, the government-owned development bank, ‘is crucial in developing national infrastructure as well as the renewable energy revolution.’

          I would sound a note or two of caution here. Britain is not Germany, which is already – and has been for a long time – an industrial powerhouse compared to Britain with the latter’s reliance on ‘invisible earnings’: i.e. FIRE – finance, insurance and real estate. In Germany, too, there persists a long-time economic ideology entirely different from the traditionally British laissez-faire approach: ordoliberalism, a theory and tradition of state management and promotion of private (and public) enterprise for the good of the nation. In the 19^th century Germany – in the earlier decades – was woefully backward compared to ‘the workshop of the world’ Great Britain and, as in France, the gradual consolidation of the state and state power both protected and promoted the rapid development of German (and French) industry and railways. By just past mid-century Germany had overtaken Britain in the production of chemicals, an overtaking industrial process that was to continue, indeed up to the present time.

          With help from the largest (poorly-paid) Turkish population outside Turkey, Germany continues to dominate the continent industrially and in general economically, though France is rapidly catching up.

          Meanwhile what do we have in Britain? The most spectacular failure of a bank in recent times was, in fact, the Co-operative Bank, which ended up on its knees after years of incompetent (or confused) management and is now in the hands of American financial interests who are running it like any other commercial bank – that is, not according to ‘co-operative’ principles and practices. This example shows in part that co-operative financial organisations are not easily able to compete and survive against a brace of aggressively capitalist ones.

          A bank is predicated on borrowing cheap and lending dear. That is its basis in profitmaking, its raison d’etre, in fact. Banks must be profitable, as embodied in returns to shareholders, so that others might also profit. And when they aren’t profitable, governments must step in to shore them up. It is a sound principle that one never goes to a bank to borrow money if one cannot afford to. Banks are the antithesis of charitable or non-profit organisations. You can be sure that the German banks are doing well enough out of their strategic lending, itself based on a situation much more favourable to ‘ordoliberal’ industry in the first instance than exists in Britain or is likely to for a long time to come, if ever.

          Owen Jones is quite accurate and right in his broad estimation of the economic basket case that is Britain today. But this is a process of decline that has been going on for more than a hundred years. It is not about to be positively transformed by benevolent and ‘co-operative’ banking: that is, in a situation where our financiers dominate the landscape anyhow whatever their involvement in a long death struggle. You don’t set up capital to run without a healthy profit, let alone at a loss: capital must always make a (good) profit or it is not capital at all. Banks, whoever runs them, must make a healthy profit or go under in time; banks are ‘capital’ organisations in the strict sense that ‘capital’ itself is their stock-in-trade. Only the abolition of the built-in contradiction of capital will render us the world we need, but I doubt if Owen Jones has the stomach for what that takes.

         

Look Familiar?

 

Paris, 1830 to 1848:

 

Under [King] Louis Philippe it was not the French bourgeoisie as a whole which ruled but only one fraction of it – bankers, stock market barons, railway barons, owners of coal and iron mines and forests, a section of landed proprietors who had joined their ranks – the so-called financial aristocracy.  It sat on the throne, it dictated laws in parliament and made official appointments from the ministries to the tobacco bureaux…

*

 

          As a result of its financial difficulties the July monarchy was from the very beginning dependent upon the big bourgeoisie, and this dependence became the inexhaustible source of increasing financial difficulties. It was impossible to subordinate the state administration to the interests of national production without balancing the budget, without balancing state expenditure and state revenue. And how was it to establish this balance without damaging interests which were, every one of them, pillars of the ruling system, and without organizing the redistribution of taxes, which meant shifting a considerable part of the tax burden on to the shoulders of the big bourgeoisie?...

 

*

 

…The fact that the state deficit served the direct interests of the ruling fraction of the bourgeoisie explains why the extraordinary state expenditure in the last years of Louis Philippe’s reign was more than double the extraordinary state expenditure under Napoleon [I], indeed almost reaching the annual sum of 400 million francs, while France’s total average exports rarely reached 750 million francs. The enormous sums of money which thus flowed through the hands of the state gave rise, moreover, to crooked delivery contracts, bribery, embezzlement and roguery of all kinds. The wholesale swindling of the state through loans was repeated on a retail basis in public works. The relationship between parliament and government was reproduced in the relationship between individual administrative departments and individual entrepreneurs.

          In the same way that it exploited government spending in general and government loans in particular, the ruling class exploited the construction of railways. Parliament heaped the main burdens on the state and secured the golden fruit for the speculating financial aristocracy. We recall the scandals in the Chamber of Deputies when by chance it came to light that all members of the majority, including a number of ministers, were stockholders in the same railway projects which, as legislators, they subsequently had carried out at state expense. ..

*

The July monarchy was nothing more than a joint-stock company for the exploitation of France’s national wealth, whose dividends were divided among ministers, parliament, 240,000 voters and their adherents…

*

          While the financial aristocracy made the laws, controlled the state administration, exercised authority in all public institutions and controlled public opinion by actual events and through the press, the same blatant swindling, the same mania for self-enrichment – not from production but by sleight-of-hand with other people’s wealth – was to be found in all spheres of society, from the Court to the Café Borgne [a synonym for the low dives of Paris]. The same unbridled assertion of unhealthy and vicious appetites broke forth, appetites which were in permanent conflict with the bourgeois law itself, and which were to be found particularly in the upper reaches of society, appetites in which the wealth created by financial gambles seeks its natural fulfilment, in which pleasure becomes crapuleux [debauched], in which money, filth and blood commingle. In the way it acquires wealth and enjoys it the financial aristocracy is nothing but the lumpenproletariat reborn at the pinnacle of bourgeois society.

 

Drawn from Karl Marx: The Class Struggles in France: 1848 to 1850

(Surveys from Exile: Political Writings vol. 2, Penguin 1973.)

Louis Philippe (1773-1850) was King of France from the July Revolution of 1830 to the February Revolution of 1848. His reign, succeeding the last Bourbon monarchy, of Charles X, ushered in the rule of France by the haute bourgeoisie, marking the emergence of capital as the dominant power for good and all.

Any resemblance between that reign and modern Great Britain in the 21^st century is purely coincidental…

 

 

 

• FICTITIOUS CAPITAL –
  How finance is appropriating our future
  by Cedric Durand  Transl. David Broder
  (Verso, London 2017)
   
   
            In a previous blog I quoted the Daily Telegraph’s Jeremy Warner as intimating that crisis may well be international finance’s permanent state. However, we got little in the way of explanatory analysis of this and needless to say any Marxian approach would have been shoved aside. You should read this book by Cedric Durand because it puts meat on the bones of the chaotic state of things without requiring any moralising on human greed. And, just as importantly, it is crucial to Marxists brought up on the fundamental Marxian view that profit derives from unpaid labour power worked on commodities that are sold in the marketplace. But how can this be so when we see gigantic profits being made by the so-called 1% from derivatives and all other sorts of fancy financial packages? What does this have to do with unpaid labour time?
            Reading this book we will soon learn that both have to do with what Durand has identified as fictitious capital: ‘Fictitious capital is an incarnation of that which tends to free itself from the process of valorisation-through-production.’
            Marxists have long suspected that capitalists would much rather simply turn money into more money, like the old usurers (M-M’) instead of going through the tedious and risky business of routing profit-making through commodity production as well (M-C-M’). With the ascendancy of fictitious capital this dream is being realised, on a grand scale. If once upon a time in capitalism the real money was in textiles, or railways, or (more recently) oil, today the ‘real’ money is in money.
            After World War II, the Bretton Woods agreement pegged the US dollar at $35 per gold ounce. As even then the dollar was the dominant world currency this continuance of the gold standard anchored all money to a universally-recognised value – that of gold. By the early 1970s the Americans, now horrified by the extent of the amount of US dollars held abroad (due, amongst other things, to the huge expenditures during the Vietnam War) were fearful that if other countries demanded gold for their dollars, the American gold reserves would soon drain away. President Nixon accordingly took the dollar off the gold standard, which meant that money no longer had any anchorage except in what Durand calls social acceptability, that is, with the breakdown of the Bretton Woods system. Other countries took this to mean that money could be printed willy-nilly, and in a short time, what with the early ‘70s oil crises as well, inflation went through the roof – as those of us who lived through the 1970s will recall. (See George Cooper: The Origin of Financial Crises, 2008.) This was only finally quelled by crushingly high interest rates imposed by the Federal Reserve Board until inflation was brought more or less under control by the mid-1980s. This freeing-up of money has over time ballooned one aspect of fictitious capital: ‘total credits to the non-financial sector,’ according to Durand.
            Another aspect of fictitious capital lies in the prodigious sale of derivatives which make claims on commodities that have not yet been produced. Thus the tenuous link with unpaid labour time, only the unpaid labour time has not yet come about. Since it may never come about in many cases, this form of investment is a major source of instability. But it makes claims on the future long before the future arrives. The future of the economy, in other words, is already mortgaged in advance. At least ten times’ more world capital is tied up in derivatives than in production.
            Economic reliance on both insurance and real estate is also a source of fictitious capital. While it may be a form of protection, insurance sells nothing at all. Housebuilding and property speculation may make fortunes for some, but houses and indeed skyscrapers (not to speak of land apart from its yield) can’t be exported - and so when financialised become a big drag on a nation’s ability to invest in the production of goods and services for sale including foreign sale. Houses belong – as they are a necessity – to the public sphere whether under socialism or capitalism.
            Another form of fictitious capital, already identified by Marx in Grundrisse (Penguin, p. 853) as worker ‘exploitation by capital without the mode of production of capital’ is debt interest. That is, profits upon alienation which now burden so many in our working populations as they seek credit – at ridiculous interest – to pay for necessities in lieu of adequate wages. This form is of course usurer’s capital, which pre-dates industrial capital by a long way and has once more become dominant in the formation of fictitious capital.
            Then there is interest drawn from surplus value – that is, dividends as deductions from surplus value.
            What with (a) the lowering of taxes on the rich, (b) the ‘tax-efficient’ convenience of low-tax ‘havens’ around the world, and (c) the enormous bailing-out of banking and other institutions by governments in the 2007-08 financial crisis (and is this to be repeated in the not-too-distant future?) public debt and the private claims upon it has spiralled upwards and is a fundamental aspect of fictitious capital. Its existence is why we shall not be saying goodbye to Austerity any time soon, since governments will continue in various ways to prioritise the shoring-up of the banking system. It might be worth noting in passing that the Fed is not a public institution but a private consortium of the leading US banks.
            Share price on the stock market is calculated on the basis of anticipated profits, and securities will be sold at a higher price than they cost to buy, in other words, capital gains, which are another aspect of fictitious capital. Durand adds that ‘quantitative easing’ by central banks pushes up the prices of asset purchases and – in addition – prompts investors to go for riskier and more remunerative asset classes. ‘This,’ says Durand, ‘allows the realisation of fictitious-capital gains that would otherwise not have existed.’
            Another aspect of fictitious capital is the profit made by financial institutions in the heavy fees charged (for example) on arranging mergers and company buy-outs.
            Meanwhile, prodded by ‘shareholder value’, companies buy back their own shares in the billions to up their share-value on the stock exchange, thus removing or scaling-down the funding that might otherwise have been available for productive development through structural investment.
            While salaries as such might not be considered capital, the size of the salaries of top executives works its way into the fictitious capital complex, though, as Durand says, this aspect is less easily documented than the others. I would say that as non-financial corporations become dominated by their own financial (as opposed to commercial and manufacturing) activities, this in effect turns their CEOs into financiers with a greater involvement in the financial running of the company than over what the company actually makes and sells. In my view this is a factor that has led over the years to the widening of the gap between the salaries of top executives of non-financial companies, so called, and the wages of their ordinary employees. The top men and women are essentially bankers in another guise. We will not see the lowering of their salaries, stock options and pension rights any time soon, either.
            Durand notes the payment of hugely remunerative legal fees for the protection of corporate ‘intellectual property rights’ which itself can stymie independent research and development. There is nothing productive in paying lawyers though the outcome be profitable when lawyers win cases in court (or reach out-of-court settlements).
            ‘The mass of accumulated fictitious capital can, then, assume proportions incompatible with the real potential of economies.’
            And so into a world dominated by state-dependent ‘phoney capitalism’, where productivity (the basis of real wealth) continues to wither – see recent reports. And in which ‘unemployment’ translates into zero-hour contracts, families living on ‘in-work benefits’ while the term ‘self-employment’ comes to mask de facto unemployment or certainly underemployment.
            Durand is clear that the much-vaunted ‘technological revolution’ by itself is not going to change all this for the better. In relation to the dominance today of fictitious capital advanced technology is something of an irrelevance. Irrelevant also are the arguments of neoliberals against Keynesians and bourgeois politicking generally.
            There is bound to be a reckoning sometime in the not-too-distant future, but whether it takes the form of a financial crash of incredible proportions, or the mass immiseration of most of us when governments have to step in to bail out the whole banking and financial system all over again, it is we who will be the real losers. That is, unless we seize the political initiative of expropriation – and seize it globally.  For, as Durand emphasises, fictitious capital must be seen in the context of globalisation.
            Durand presents his case clearly and with irrefutable statistical evidence. Readers may well find him a bit formidable in the magnitude of his scholarship, but bear with him: it is worth it. Reading it twice would not go amiss (it is only 164 pages). Read him, and prepare, as best you might.