05.11.2015

Plutocracy: capital buys support

Overcoming the power of capital

Mike Macnair asks why leftwing administrations cannot halt the long-term trend to the right

In this short series of articles I aim to respond to the fairly extensive body of criticisms - in our letters pages and elsewhere - of Weekly Worker authors’ arguments in the last two years against Syriza taking office. We are accused us of promoting ‘defeatism’ or ‘do-nothingism’, or of defending a variant on John Holloway’s Change the world without taking power. Recently, some comrades have raised the same issue in a different form: what would our attitude be to the question of a Corbyn-led Labour government in 2020?

At the same time, the issue of a hypothetical Corbyn-led Labour government in 2020 is immediately posed in two ways. The first is that Corbyn, and the creators of the Momentum movement to back him, are emphatic that their eyes are on 2020 and a strategy for Labour victory in that election.1 The commitment to fight for a Labour government in 2020 is not just about what to do in 2020, but about what to do now. Hence Momentum’s - sensible and useful - campaign for voter registration; but hence also a standard Brit left emphasis on economic issues and ‘anti-austerity’, setting less ‘mainstream’ constitutional issues on one side.

Conversely, on October 19 Blairite peer Lord Warner resigned the Labour whip, saying: “The Labour Party is no longer a credible party of government-in-waiting.”2 Warner is, of course, a former civil servant who subsequently became and still is a paid lobbyist for health service privatisation, so that his departure from the Labour Party is, if anything, unduly belated.3

But his underlying argument is the standard view of the Labour centre and right (and the ‘realistic’ left): that the only way to achieve anything for the people the Tories shit on is to form a government; and that if Labour is to have a chance of doing so in 2020 it must seek a political coalition, including voters well to its own right, and must show that - as Warner is - it is open to the demands of business; thus Labour must eschew the sort of leftism shown in Corbyn’s leadership campaign. The question of government is thus not merely a hypothetical one for the future, but poses present political choices.

I am not going to respond in detail to individual criticisms of our arguments on this issue, though I may refer to some of them. I will primarily be concerned with the short-term positive alternative to the two strategic lines widely accepted on the left: the one, of the centre-left, of seeking to form a government in order to introduce what used in the 1900s to be, and might still be, called ‘palliatives’; the other, of the far left, of promoting street action and strikes for ‘moderate demands, militant action’ in the hope that the ‘militant action’ will lead to an insurrectionary general strike, the creation of workers’ councils, and so on.

It is worth, however, starting, in this first article, by discussing the underlying reasons why taking governmental office should be regarded, under present conditions, as a problematic aim. There are, broadly, three reasons, the first of which is a straightforward fact (an empirical observation), while the other two are explanations of this fact.

As will already be seen from my classing the centre-left as part of the left, I do not take as a starting point for this argument a presumption of ‘revolutionary politics’, or even of Marxism. Rather, I start with the idea it could possibly be that a policy of reform government could work; but present reform government policies (including Syriza’s, that of the ‘Euro-lefts’ more generally and that of Corbyn and those around him) fail to answer the immediate empirical objections to this policy, which can be made on the basis of the experience of politics in the last 70 years. The Marxism comes in as a part of explaining why this is so.

Rightwards

The empirical fact is that the experience of reform governments, when it has not led to their immediate overthrow in coups, and so on, has generally led to their replacement by governments of the right, which have involved a ratchet effect, in which politics have generally moved, increasingly, further to the right. The British example is exceptionally clear, because we started with the 1945 Labour government, which introduced major reforms, and we did not experience either a coup (as in France 1958 or Greece 1967) or prolonged systematic exclusion of a mass communist party from government (as in Italy). Wilson 1964-70 was plainly to the right of Attlee 1945-51; Wilson-Callaghan 1975-79 was plainly to the right of Wilson 1964-70; Blair-Brown 1998-2010 was even more plainly to the right of Wilson-Callaghan 1975-79. Equally, among the Tories, Heath 1970-74 was notoriously to the right of Macmillan and Hume 1957-64 (‘Selsdon man’), Thatcher 1979-90 was equally notoriously to the right of Heath. Cameron, in spite of politically correct news management initiatives, was always in reality, and has become increasingly visibly, well to the right of Thatcher.

Similar observations can be made on a shorter timescale about the succession of Social Democrat and Christian Democrat governments in Germany since 1969; about the French governments after Mitterrand’s election to the presidency in 1981; and so on, and on, and on, from country to country - not just in Europe - in a depressing list.

The immediate empirical-predictive conclusion from this observation is that hoping for a Labour (or similar) government to bring in ‘palliatives’ will indeed produce temporary and very limited ‘palliatives’. Even Gordon Brown as chancellor produced that. But it fails to deliver a change in the underlying political dynamic away from the right, and hence will merely prepare the ground for a new and further-right government of the right.

It is commonplace to identify the dynamic towards the right merely with the turn to ‘Thatcherism’, ‘neoliberalism’ and ‘financialisation’ after the 1970s. In reality, however, as my list above indicates, as far as Britain at least was concerned,4 these were merely accelerations of trends already visible in the political dynamics from the 1950s. Financialisation began with the London and offshore ‘Eurodollar’ markets developing from the 1950s;5 Duncan Sandys as Tory minister of housing and local government from 1956 promoted ‘less eligibility’ in council housing (the idea that it should be preferable to buy, and therefore that council housing should be less attractive) as a part of the government’s ‘property owning democracy’ scheme;6 and so on.

Plutocracy

The long duration and persistence of the effect of the political ‘ratchet towards the right’ effect demands that it should be in some way theoretically explained, if we are to address the question of how to deal with it.

The answer has, in fact, two relatively simple elements, which have a common basis. To start with the common basis at an abstract level, the right of ownership of any thing is the coercive subordination of the non-owners to the owner. This becomes obvious when a non-owner interferes with the thing and the owner uses either forcible self-help or state action (police, bailiffs and so on) to stop the interference.

Most of the time the subordinated non-owners tolerate and even accept their subordination - the phenomenon Max Weber misleadingly called ‘legitimacy’. They do so because the overall social order delivers a more or less acceptable living; because it delivers an improvement on previous social orders; in countries like this one, because it delivers a place high in the global social hierarchy, so that even badly-off Brits are a lot better off than (for example) Somalis.

But the availability of coercion has to remain permanently present in the background and is, in fact, a large part of the routine business of courts and cops; the ‘legitimacy’ of social subordination is not enough on its own to protect owners against ‘takings’ by individuals who hope to rise in the hierarchy through theft, etc, and anyhow tends to fail in crises and recessions.

In capitalism, what is fundamentally owned to constitute the system of social subordination is ... accumulations of money. It is a common error of the left to treat the ownership of accumulations of money as secondary to the ownership of industrial capital goods, imagining that finance is subordinated to industry - or that the subordination of industry to finance is a feature of “the highest stage of capitalism” (Lenin) or “parasitic” (Hilferding).

The reality is that, in the first place, the cycle of capital, M (money) - C (commodities) - Cʹ (worked-up commodity product) - Mʹ (increased money) has to return to the money form of Mʹ to be successful. Secondly, the cycle M-C-Cʹ-Mʹ can, even today, take the form of ‘putting out’, that the C-Cʹ is done by ‘self-employed’ people rather than people formally and legally employed as wage labourers by capitalists. Indeed, while wage labour has grown in the ‘developing countries’ at the expense of peasant and artisan production, in the ‘developed capitalist countries’ ‘outsourcing’ since the 1980s7 has increased the proportional share of this type of arrangement of production.

What Marx called the “formal subsumption of labour under capital” (putting out) is thus not superseded by the “real subsumption of labour under capital” (factory production), contrary to some, though not all, of the expressions Marx used on the point.8 Rather, in so far as it does not merely persist as ‘self-employment’ and so on, it is displaced sideways into the formal subsumption of industry under finance, the formal subsumption of cooperatives under various forms of capital, and the formal subsumption of the ‘third world’ economies under the banks of the imperialist centres and under the global commodities trading firms.

It follows that only money hoards can be truly owned in capitalism. It is this that lies behind the enigmatic statement widely attributed to banker and US treasury secretary Andrew Mellon (1855-1937), that “in a depression assets return to their rightful owners”: the “rightful owners” are the creditors who lent the money with which the assets were purchased, or who lent money on the security of the assets, not the legal “owners” of the assets themselves. They can, indeed, be those who happen to own surplus cash when a crisis arrives and are thus able to buy up the assets of bankrupt firms on the cheap. The ‘ownership’ of land, machines, etc, even that of billionaires or of the great corporations, is in capitalism always like that of the household freeholder-mortgagor: conditional and dependent on short-term access to money liquidity.9

This point moves us into two sides of the underlying reasons for the long ratchet to the right. The first is the nature of the domestic constitutions of the dictatorship of the bourgeoisie, the capitalist states: what it is that means that capital rules politically in individual states. The second is the global character of both money and the dictatorship of the bourgeoisie.

The domestic dictatorship of the bourgeoisie consists in the institutional subordination of the state to the holders of money liquidity. Precisely because the decisive form of ownership in capitalism is ultimately ownership of money liquidity, the dictatorship of the bourgeoisie is not any more precise commitment, for example, to private ownership of any particular sector of industry, or even of any particular proportion of industry, as long as there remains formal subsumption of industry to finance. The state is subordinated to ownership of money liquidity by, firstly, the deficit financing of state activities, which makes the state dependent on its larger creditors; secondly, the ‘rule of law’ and, in particular, the free market in legal services, which yields the average outcome that ‘deep pockets wins’ in litigation.

Thirdly comes either, in dictatorial regimes, direct corrupt payments to officials, functioning as an auction of policies, laws or individual decisions to the highest bidder; or, in parliamentary regimes, votes may be sold (eg, UK 18th century; US 19th century; Japan 1950s-60s); or direct payments to officials may be reduced in scope, and substituted by the combination of advertising-funded media, generating ‘amplifiers’ of speech controlled by the holders of liquidity, together with ‘contributions’ to political parties and payments to professional lobbyists. Either the sale of votes or the advertising-lobbyists-contributions regime produces parliaments which roughly represent the payers in proportion to their payments, and hence compromises in policies, laws and decisions between the several payers of these forms of bribe.

In this context, while it is true that it is not possible to fool all of the people all of the time, it is possible to fool enough people enough of the time to swing a general election once every four or five years most of the time, while there remain backstops (like the monarchy or presidency, or the judiciary) if this mechanism fails.

The consequence is that the extensive economic concessions to the working class, including very extensive nationalisations, which took place after 1945 not only in Britain but also elsewhere, did not touch the core mechanisms of capitalist class rule.10 The capitalists gave concessions on the economic and welfare front for reasons to which we will have to return, while retaining their fundamental levers for the control of political power. Labour, and similar parties, chose not to attack the core mechanisms of capitalist class rule, preferring to prioritise delivering real, immediate economic benefits to their constituents. Hence, subsequently, the capitalists could set in place the ‘rightwards ratchet’ effect.

World money

In one sense deeper, but in practice actually more immediate in its operation against leftist governments, is the problem that the dictatorship of the bourgeoisie is international in character and operates through the power of hoards of world money - in the 19th century and down to 1914-18, sterling, and other currencies exchangeable against sterling; since 1945, US dollars, and other currencies exchangeable against US dollars - and the mobility of capital in the money form.

It is characteristic not only of capitalism, but also of medieval Europe and the Islamic regimes,11 that the material division of labour extends beyond state boundaries: that is, that tools and necessary raw materials are manufactured in the territory of one state and shipped to that of another state, so that a blockage of these supplies has knock-on, disruptive effects on a larger scale. The processes are coordinated through the international use of money, which requires exchangeability of moneys beyond state boundaries - whether by assessment against commodity gold and silver or (as happens in modern times) by comparison relative to the power of states as such.12

Hence the point made by Marx that money is only fully money in capitalism so far as it is world money.13 We see this working out in practice where, as in Germany in 1921-23 or Zimbabwe in 1999-2009, a state prints so much money that it becomes unacceptable to foreign creditors, or disruptive financial sanctions are imposed: the result is that, through disruption of economic functioning, domestic holders of land or commodities also demand increasing amounts of it, producing hyperinflation and economic chaos. The dictatorship of the bourgeoisie here is the dictatorship of capital as an international class of holders of world money.

Though hyperinflation looks like, and is, an extreme case, international financial sanctions, and even those imposed merely unilaterally by the USA, can be violently disruptive of the economy even at lesser levels: as in Iraq in the 1990s, Iran in the 2000s, Venezuela and Argentina in the recent past, and so on.

Most recently, Greece’s attempt to negotiate an end to the obviously irrational deflationary policy of the Euro-institutions has been met not only with stubborn refusal to move one inch, but with demands for capitulation to more extreme impoverishment as the penalty for having the temerity to elect an ‘anti-austerity’ government. Now that the Portuguese election has produced a left majority, the president has insisted - understandably, in the light of the outcome of the Greek case - that the right wing should continue in government as a minority, in order to ensure continued compliance with the requirements of the ‘institutions’.

Further, if money is ultimately world money, capital in the money form can ‘flee’ from only mildly hostile actions by governments. Both Wilson 1964-70 and Wilson-Callaghan 1974-79 experienced ‘sterling crises’ when ‘the markets’ - meaning large-scale holders of money hoards on a world scale - disapproved of local policies. The second, the International Monetary Fund crisis of 1976, required ‘structural adjustments’. Flights of capital, while not reaching this level, put sufficient political pressure on to force a sharp right turn from the Mitterrand administration in 1983, and from Hollande’s even milder left rhetoric in 2013.

Again, the point is that capital retains controls which can allow it to force a leftwing government onto a rightwing course, if the government is not willing to go all the way down to autarky and Kriegssozialismus (‘barracks socialism’ or ‘war communism’); and, in doing so, to create disillusionment which will demobilise the left’s ‘core’ voters, and move ‘soft’ voters over to the right. Britain, having a massive deficit in food production and a considerable dependence on imports for other forms of production, is almost as vulnerable as Greece or Iraq to such tactics.

Concessions

Once we see that money capital retains the power, both through the constitutional order and by its international character, to enforce what has actually happened - the long process of ratchet towards the right - the question posed becomes not one of explaining this dynamic to the right, but, on the contrary, explaining why there were concessions to the working class at all, especially in 1945-48, and why the process of taking them back has been so prolonged.

The pattern of concessions in Britain consists, very roughly, of a number of distinct periods. The late 1840s saw the repeal of the ‘Corn Laws’, cheapening food at the expense of landlords and farmers, and the Ten Hour Act limiting the working day and other Factories Acts providing limited protection in relation to industrial accidents. It is pretty clear that these were a response to the development in the late 1830s-40s of the radical forms of Chartism, though 1848-49 also saw major repression of Chartism as such: carrot and stick were combined.

The late 1860s-early 1870s saw an extension of the franchise to a section of skilled workers and the lower middle class; the decriminalisation of trade unions; initial steps towards statute overriding judicial bias in favour of employers in industrial accidents; and some significant reforms to local government and the poor law. What was involved in these steps was a response to the involvement of a section of British trade unionists in the campaign in solidarity with the north in the American civil war, their subsequent involvement in the First International, the ‘Sheffield outrages’ (violent strikes) and the contemporaneous militant campaign for the suffrage.

The Trade Disputes Act 1906, limiting legal liability for strikes, was the Liberals’ response to the creation of the Labour Party. Linked was the Trade Union Act 1913, reversing the ‘Osborne judgment’, which attacked trade union funding of the Labour Party, and responding to a wave of strikes, militancy and political syndicalism.

1918 saw the extension of the right to vote to most men and some women. This created the conditions for Labour to become a potential government party. There were also a series of concessions to the working class in the form of co-determination and ‘corporatist’ arrangements, continued from the war; the latter were rapidly withdrawn (leading to the series of struggles down to the 1926 general strike, after which yet more concessions were withdrawn, including partial withdrawals of the Trade Disputes Act 1906 and Trade Union Act 1913. It is perfectly clear that the concessions of 1918 responded, on the one side, to the Labour and trade union backing for the war effort and, on the other, to the global political threat posed by the Russian Revolution.

The same pattern re-emerged, on a larger scale, in World War II and 1945-48. On the one hand, as in World War I, Labour and the trade unions backed the war. On the other, the whole historical period, including the 1929 crash, the depression, the pro-Nazi ‘appeasement’ policy and the war, massively discredited the old political order. Moreover, the hope (present among British policymakers down to the 1943 battle of Kursk), that the war between Germany and the USSR would destroy both, decisively failed and the USSR, with large-scale assistance from the USA, came out of the war as a victor on a large scale, while mass communist parties emerged in Italy, France, Greece (where the British backed the right in a civil war) and elsewhere.

Labour, in this context, saved the British constitutional order by organising the arrangement of massive concessions to the working class. They did so initially against US wishes - and paid for their policy with the US refusal to make concessions on British war debts, forcing ‘austerity’ all through the 1945-51 Labour government.14 More generally, however, the system of concessions became part of a general scheme adopted by the US to ‘contain communism’: that is, that US state policymakers judged, probably rightly, that, even if Joseph Stalin might be happy to leave the boundary between ‘east’ and ‘west’ where it was, any attempt to return to the pre-war economic and social order would be likely to result in revolution in western Europe and, indeed, in Britain.

The next 40 years were the period of the ‘cold war’. The ‘socialist bloc’, Soviet tanks on the Elbe and mass communist parties in France and Italy, and so on, were fundamental global political facts. In this context, capitalists did not cease seeking to roll back the concessions of 1945-48; but until the 1980s they had to approach the question cautiously, to gradually undermine the versions of ‘socialism’ offered by the ‘socialist bloc’ states, and the ‘mixed economy’ ideas of the western social democratic or Labour parties, rather than to attack them frontally; for example, by creating the Eurodollar market, initially on a small scale, and encouraging the development of ‘offshore’; by promoting freehold-mortgage with tax, etc, incentives, while squeezing the housing repair and building budgets of the local authorities, and pushing them to build cheaper and less attractive dwellings.

If we look at this pattern over the last 170 years, it should become clear that capitalists do not give concessions because you ask them nicely - or, indeed, because there are ‘Keynesian’ or similar arguments that it would be good for capital to give the concessions; or because you offer to guarantee them against revolution by commitment to Fabianism.

They give concessions because they perceive, rightly or wrongly, that there is a risk facing them of the overthrow of their actual political power and hence the guarantees of their property rights. This threat does not have to be terrorism, like the ‘Sheffield outrages’, or a strike wave, like that of around 1910. It can be the development of a political alternative, one which poses the question of power, albeit not even immediately: like the Chartists, or the First International and the suffrage campaign, or in Germany the pre-1914 Social Democratic Party. The threat forces the capitalists to use carrot as well as stick to retain control; or, put another way, it allows reformers, like Labour, to use the stick of the ‘extremists’ to their left as well as the carrot of their own willingness to compromise to induce the capitalists to ‘deal’.

Moreover, it should be noticed - having regard to the point made above that capital rules partly through its international mobility - that working class threats serious enough to elicit concessions from capital are usually international in scope. Chartism was part of the same international movement as the revolutions of 1848. The First International was similarly international; so was the syndicalist movement and strike wave of the early 20th century; so - obviously! - were the events of World Wars I and II and the impact of the Russian Revolution. Both the capitalist class and the working class are international classes, and the struggle between them - including the struggle for reforms, or to withdraw reforms - is international in character. The idea of national roads to socialism was never anything but a delusion.

The implication of all this for the question of government is not that we rule out under any conditions forming, or participating in, government. Still less is it that we suggest that reforms are a waste of time and we should seek nothing but revolution (whatever that means), or that we should seek only to build cooperatives and social movements, or that we should not make compromises in order to achieve reforms. It does tell us, however, that we need to find a way to break the pattern of political dynamics of ratchet to the right (centre-left government, rightwing government, centre-left government further to its right, rightwing government further to the right, and so on). Breaking that dynamic will, I suggest, be a matter of making it appear to the capitalists that substantial concessions to the working class are the less unpleasant alternative.

This, in turn, will depend on what Labour, the trade unions and so on, do in opposition, and in addition, on the extent to which the movement is clearly and openly committed to action on a European scale before the question of power is posed in a single country.

It will also involve disaggregating the several things that left governments are expected to do - in particular distinguishing law reform from budgetary redistribution - and thinking explicitly about the things which a mass workers’ party could do, both in parliaments and outside them, from opposition. This will be the task of the second article.

mike.macnair@weeklyworker.co.uk

Notes

1. Eg, Corbyn himself, quoted at http://labourlist.org/2015/10/jeremy-corbyn-campaigners-set-up-new-momentum-group (October 8).

2. The Guardian October 19 2015.

3. Wikipedia, ‘Norman Warner, Baron Warner’.

4. There is a similar rightwards ratchet effect in the history of US politics since 1945. France saw a coup in 1958, creating the Gaullist strong-state regime; in Germany and Italy Christian Democratic parties reigned supreme through the 1950s-60s; in all three countries the working class was held back, relative to the US and England, until the explosion of the late 1960s, but the ‘ratchet effect’ has operated to take back working class gains made in 1968-75.

5. Eg, S Battilossi, ‘The Eurodollar revolution in financial technology’ (2009): http://core.ac.uk/download/pdf/6450090.pdf (pp5-7).

6. RM Page Clear blue water? The Conservative Party and the welfare state since 1940 Bristol 2015, pp46-47 (and following).

7. Outline history in C Lonsdale and A Cox, ‘The historical development of outsourcing: the latest fad?’ Industrial management and data systems Vol 100, No9, pp444-50.

8. Eg, www.marxists.org/archive/marx/works/1864/economic/ch02a.htm.

9. This is a radical contrast with the medieval social orders, in which the ownership of land and private jurisdictions was fundamentally protected by the constitutional order, while money claims were insecure, having only limited enforceability against land and jurisdictions.

10. This is true even of the nationalisation of the Bank of England in 1946, which left untouched the deficit financing model of state finances and the market in public debt instruments.

11. On medieval Europe, see, for example, P Spufford Power and profit: the merchant in medieval Europe London 2006; On Islamic, see the entries under ‘Trade, African’, ‘Trade, Indian Ocean’ and ‘Trade, Mediterranean’ in JW Meri and JL Bacharach Medieval Islamic civilization Vol 2: L-Z, index,Abingdon 2006.

12.Eg, P Spufford Money and its use in medieval Europe Cambridge 2008.

13. Discussion in R Vasudevan, ‘From the gold standard to the floating dollar standard’ Review of radical political economics Vol 41, pp473-91 (2009).

14. Discussion in B Steil The battle of Bretton Woods Princeton 2013; though the US policy Steil discusses was not only directed against the British Labour government, but also against any revival of the British empire.