HA-JOON CHANG: Caveat Emptor!

 

          Known through his Guardian contributions but also for his bestseller 23 Things They Don’t Tell You About Capitalism, Ha-Joon Chang is a lecturer in economics at Cambridge University. In terms of theory he would appear to be something of a Left Keynesian, believing that capitalism should be tempered by enlightened state intervention and brought towards a more equitable society. Meanwhile, he is an engaging writer well-suited to the task of providing Economics: The User’s Guide, a Pelican Introduction, for the layperson (2014).

Up to a point.

          Amongst those he thanks in his Acknowledgements are Leftwing and sometime fellow Guardian columnists Seumas Milne (now working to get Corbyn’s Labour elected) and Aditya Chakrabortty, as well as eminent Marxist economist and Leftwing Greek politician Costas Lapavitsas, author of Profiting Without Producing (2013).

          For all that, Ha-Joon Chang is surprisingly ill-informed about Marx and Marxism, one of his thumbnail sketches of all the various economic schools from Classic Political Economy to the Austrian School, Keynesianism and Neo-Classicism, etc. For each, he weighs up their various pros and cons. His verdict on Marxism: ‘Fatally flawed, but still useful: theories of the firm, work, and technological progress.’

          The worst flaw: ‘Above all, its prediction that capitalism will collapse under its own weight has not come true.’

          Marx was not in the habit of ‘predicting’ anything, and certainly not that any capitalist ‘collapse’ is inevitable. Capital will end with its expropriation from its owners by the proletariat, capital’s ‘gravediggers’, but this is more of a threat and rallying-cry than a prediction.  Otherwise capital as a system might linger over a long period of time, but the proletariat is the only class or factor that can destroy it. Marx was not a revolutionary activist for nothing. He saw history as class struggle, and in our time the only means by which socialism would come about. Marx did not predict when and where socialist revolution would come about. (In later life he became interested in the revolutionary potential of the Russian peasantry and even learned Russian from scratch to follow the literature more closely.) Meanwhile, the idea that capitalism can destroy itself without class intervention is contrary to Marx’s entire outlook. And such intervention is to be fought for, not ‘predicted’. His critique of the capital system was to enable workers to understand its workings in its entirety: to fight your enemy, you must know it.

          Chang: ‘The collapse of the socialist bloc has revealed that the Marxian theory of how the alternative to capitalism should be organised was highly inadequate. The list goes on.’ Not in this book. (All citations from 131-132.) Marx spurned utopians with their theories of how a future society should be created, keeping well away from such prognostications himself. It was up to the workers to self-organize a new society on the basis of ‘from each according to his abilities to each according to his needs’. Marx’s ‘theory’ here is indeed highly inadequate because it doesn’t exist and never did. Marx did not do fanciful system-building. 

          In any case the ‘socialist bloc’ was state capitalist, not socialist. That is, it was an exploitative system. Workers in Soviet Russia, like everywhere else, produced surplus value from unpaid labour-time which accrued to state enterprise as opposed to private. After the fall, in 1991, the transfer of state ownership to private was both swift and corrupt.

          Neither Lenin nor Trotsky had any illusions that they were creating socialism in Russia after 1917. They looked to impending Western socialist revolutions to give their own a kick start. When these failed to attain ascendancy, Lenin and the Bolsheviks had to improvise in a desperately isolated situation, the alternative being the anarchy of a power vacuum. It was Stalin who drove through industrialisation, at a furious pace, on the non-Marxist slogan of ‘socialism in one country’. At huge and tragic human cost it worked: Russia was modernised to the point where it would defeat Germany in World War II (and indeed send the first unmanned space vehicle, Sputnik I, into orbit in 1957 – not the first ‘manned’ one, as Chang writes on p. 95). But industrialisation was initially achieved on the basis of mass forced labour, whether ‘free’ or enslaved. It was never socialism, let alone Marxian socialism, whatever the ideology put forward.

          Chang is reasonably informative on some aspects of Marx’s contribution to ‘economics’ (though Marx's study remained within ‘political economy’, not the truncated form known to us as ‘economics’). But, just as the word ‘critique’ appears in the title of his major political economic writings, Marx was a forensic tearer-down of a system, not the builder of a new one. For him socialism would be what the triumph of a non-exploitative proletariat made it. And, to be frank, Chang’s conclusion on Marx’s ‘flaws’ is shoddy thinking: raising an old canard that is easily disposed of.

         

         

Socialism means never having to say you’re sorry…

                  (apologies to Erich Segal, Love Story, Hollywood 1970)

 

          Capital profit after sales is drawn from surplus value, that is, what remains when wages, production costs and obligations have been met. This in turn derives from how much value the workers produce which does not return to them in the form of wages for the whole time worked. Labour-power is the commodity a capitalist buys which increases value in production; raw materials and machines simply pass on their own value with nothing added (and machines depreciate). The value of labour-time is made up of the socially-necessary cost of the individual worker, including sustenance, shelter, clothing, transport, education etc. – and the raising of future workers. The worker works for say, ten hours but is paid back his or her value for, say, five of these hours. The value created during the rest of the hours goes to the employer. Because unpaid labour-power alone grows value in the production process, it is the basis of capitalist profit. Workers produce surplus value because of the difference between their wages and the value that their labour-power produces.

          To optimise the productivity of this effort, and to withstand competitors over – say – sale prices, productivity per worker is generally increased when supplied with ever-more efficient and up-to-date machines (means of production – ‘dead labour’ in Marx’s terminology) but this will likely reduce the number of workers needed unless there is a growth in output due to increased demand. Automation is feasible so long as there are areas within the economy as a whole which are not automated, and as long as we need human workers to build the robots. With total automation surplus value diminishes; such living workers that are left will be more drastically exploited therefore to maintain surplus value ( as at Amazon - more of this anon). To compete with rivals over market prices, capitalists are forced into ever-greater modernisation and automation to achieve higher speeds in greater output, and so to saw off the branch of the tree they are sitting on. And so expansion must be rampant, because one answer to a decline in surplus value-created profit is to increase the scale of the operation and either expand the market or expand the company’s share of the market, frequently by buying out rivals or creating mergers. There is also the profit in buying cheap and selling dear as found from foreign trade. Another means is to keep wages static or reduced so that more surplus value accrues to the capitalist, requiring perhaps the prohibition of strikes and/or unions, or by expanding production into the low-wage economies of developing countries or backward regions of one’s own. Many products we consume are made by poorly-paid women, as well as children: illegally in countries where child labour laws exist but are not enforced.  For example, Amazon’s supplier Foxconn exploits children in the manufacture of Alexa in China, a flouting of Chinese labour laws. (Guardian, 9^th August 2019).

          The capitalist paradox is that the goods made or services produced have to be sold to a plenitude of buyers on the market, by and large the selfsame workers who, in a Western country like the UK, make up about 80% of the population. The capitalist needs to beat down wages as best he or she can, but at the same time relies on the beaten to buy the goods, otherwise the capitalist is likely to be ruined. Gluts appear when unsold goods lie piled up in factories or warehouses, or airline tickets cannot be sold. Indeed, with the resulting unemployment, the remaining workers have no bargaining position and so the embattled capitalist must cut their wages further. Or, what amounts to the same economic result, we have usually temporary full employment through sub-low wages, no fringe benefits or pensions, and insecure contracts, with fragmentation of the workforce.

          The ‘answer’ to ‘under-consumption’ lies in easy credit for workers to enable them to carry on purchasing. Consumption is a form of production, producing the ‘demand’ for the goods and services created by the workers themselves. But the usury involved can be merciless, perhaps up to £1000% p.a. – another form of ‘production’ exploitation by the merchant-capital end of capitalism, which pre-dates industrial capital. But recourse to ‘easy credit’ has a limited lifespan before towering debts set in. The collapse of the sub-prime mortgages in the USA which led to the near-collapse of the financial system in 2008 is a good example of this. And sub-primes are back!

An alternative is a more generous public social and health provision which would put steady purchasing within the workers’ reach. But capitalist gain from healthier market sales as a result is nullified by the state’s taxes needed to pay for it. From the capitalist point of view, this is Peter (the capitalist) being robbed to pay Paul (the worker). The bulk of taxes needed to fund this provision – if one includes corporation tax – falls on the employer class. Of individuals, 43% of adults in the UK pay no income taxes (up from 38% in 2010), while individual adults in the top 1% pay 27% of the whole income tax revenue. (Daily Telegraph, 6th August 2019). Of course poll taxes like National Insurance and VAT on commodities and services hit all classes but most adversely the low-paid.

Public incursion into the economy has wider implications. State profits from public enterprises are ploughed back into the state coffers, unavailable to private investment. When the East Coast Line was returned to public ownership, the service became more efficient and the Treasury was the recipient of the profits, having previously been the loser in making over enormous subsidies to private investors. It worked well as a public railway, but the point was that it shut out the private investor, which made the East Coast Line’s return to private ownership as soon after the mess from previous privatisations had been cleared up absolutely necessary from the capitalist viewpoint. With the long-term decline in the overall rate of profit, state funding of railways, health, social services, housing and so on is seen as the competitor for dwindling private investment opportunities.

At one time – for example with civic ‘gas and water socialism’ from the so-called Progressive Era in turn-of-the-20^th-century America and the urgent need for vast infrastructural repair in post-World-War-II Britain – the state took on production activities beyond the investment capabilities of private capital, and indeed was a necessary supplier to the latter in terms of cheap energy (business, as in pre-privatising Britain, usually gained lower rates for energy supplies from the state suppliers than did domestic users) while mass cheap public transport was necessary if the workforce were to arrive at the factories and shops on time! But in time, as traditional areas of private investment failed to soak up increasing capital accumulations, new opportunities had to be found, at home and abroad; at home they presented themselves as the already-formed and functioning (and often profitable) state-run facilities. ‘State’ capitalism becomes absorbed by actual private capital, with the added advantage that taxes can be appropriated as ‘subsidies’ to privatised companies from the state after their privatisation, and so less ‘wasted’ on social goods and services. ‘Subsidies’ also include elaborate legal forms of tax avoidance.

Meanwhile, capitalist expansion and the world market in the post-war years were sufficient to bring in a higher rate of profit than today’s, even though the highest tax-rate in the three decades after the war was the equivalent of 93 pence in the pound in Britain and similar to the dollar in the USA! Now capitalism in both countries can barely struggle along, it seems, on a top tax rate of 40%.

          In this context, Labour’s aim to bring back – at least in part – the socialism of Attlee’s Labour (1945-51) looks quixotic or cranky to today’s neoliberal world – and dangerous. Social wealth is not necessarily capital wealth, except where for example council housebuilding is undertaken by private contractors. A public park or playing-field is absolutely valueless because the land is not being monetised for production, private housing or even privately-run fairgrounds. Capital must therefore buy up as much green space as possible for investment purposes. Everything ultimately should be privately owned, if publicly subsidised – even the Houses of Parliament if this were ever to be pushed through (for say, luxury apartments). For capitalists social-democratic Labour’s present plans represent the thin edge of the wedge for a larger demonetisation, which spells doom for capital and capitalism. The present Right-wing urgency to monetise everything in sight is propelled by capital’s now-chronic fall in overall rate of profit. Capital survives by expansion and ever-further exploitation: so Labour has got to be steamrollered over (for a programme that looks mild by comparison to the post-World War II Labour agenda) or else Labour must itself reverse the trend to monetisation by turning demonetisation into the new ‘trend’. This it can only do if it is genuinely a mass movement of colossal proportions.

*  * *

          The 1% plus the rest of the better-off 20% might indeed save capitalism as the growth in minority wealth (especially at the higher end of this category) provides expansion in luxury production. This turns out yachts, private jets, helicopters, luxury cars, expensive properties, precious gems, private schools, hospitals and clinics, wines at £100 and £1000 a bottle, prestigiously-labelled cosmetics, accessories and clothes, exclusive resorts, clubs, restaurants and hotels, etc. A certain amount of this may be viewed in TV advertising today. This side of the market could conceivably keep capitalism going forever, whatever the penury of the many. However, tensions appear within the higher classes. Billionaires (growing in numbers if not profusely) can swallow up skilled labour and force up prices that millionaires can no longer access and afford, while those on £100,000 a year will begin to feel themselves pauperised not to speak of those on a mere £60,000 or so. What about army generals, US senators, top-grade civil servants and judges who can no longer access what they had been used to accessing due to the shock-effects of the ever-greater purchasing powers of the seriously rich?  How many revolutions and coups have been instigated around the world by malcontent colonels? What about fascism drawing from the resentments of a middle-class that feels ‘cheated’ out of what it believes are rightfully its own? If I were a millionaire as opposed to how I am presently placed I feel sure I would resent billionaires much more than in fact I do, because billionaires can arrogate to themselves what millionaires felt was within their grasp, or almost. Who is content with the second-best thing when the first-best seems so nearly reachable? Who will never live in ‘Millionaires Row’ in Kensington because it has become exclusively ‘Billionaires Row’? What happens when trillionaires come on the scene? Disputes over property development in high-class neighbourhoods show what happens when the richer neighbour attempts to flaunt what is his by means of seemingly outrageous development. Land is certainly not increasing even if private wealth amongst the 0.01% of the 1% is - exponentially. And with climate change we will see areas such as coastal regions and cities flooded by rising sea levels, which means even less land than now for the accumulated billionaire wealth to get its claws into, at the expense of everyone else. Indeed, true wealth is best characterised by the amount of fossil-fuel consumption it uses per capita. So we should be expropriating our billionaires before they expropriate all of us.  And before the trillionaires arrive.

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     Findings of the Peterson Institute (Washington DC) have shown Phillip Inman that ‘wage stagnation in the US (and therefore probably the UK too) is more likely to be caused by technology hollowing out the market for skilled blue- and white-collar jobs rather than competition with China and the Far East. This tells us there are fundamental issues to confront aside from the loss of access to our biggest trading partner, the EU’. (Observer, August 4^th 2019.)

     I’d suggest that automation poses an existential threat to capitalism in general because it diminishes the profit-side of surplus value, the basis for the enrichment of a system deriving its profit from working human beings. A robot transfers its value to the product but does not make the operation more profitable as a result because a robot cannot be exploited. Those who make them can be, but not after robots start producing themselves. Robots are just one more machine cost. ‘Wage stagnation’ for existing US workers shows this: that there isn’t enough in the kitty to pay proper living wages and show a profit at the same time. Automation is ideal for socialism because it can eliminate soul-destroying work without a need for a profit as a result. The ‘profit’ comes in the form of life fulfilment through creative activities and caring opportunities.  But without socialism an outdated, outmoded capitalist system will become ever more desperately repressive and oppressive in a semi-automated and then more fully automated society. Perhaps the ‘hand-made’ luxury industries might hold out but they could not carry on in a non-capitalist wider context. The system is total or it is not at all. And faced with the need to ‘blow the expense’ in saving the world from burning up, we must socialise all production while democratising how we are to govern ourselves, and we must do this now.

     Meanwhile capitalists are becoming so anomalous that right now it would be in their best interests to turn into Luddites, their worst working-class enemies 200 years ago: smash the machines, before they smash you!