[Speech delivered at a meeting entitled “Labour: a Party in Service to the Banks” on 18/02/2015, in Newcastle Upon Tyne.]

Labour’s support for the British banking system – its unswerving allegiance to usury Capital – cannot be explained away by any number of sophisms. The break between “old” & “new” Labour – which occurs mystically at some point in the early 1990s, with apparently no explanation – is senseless. It means nothing. The very idea that Blair ushered in a new era of money grabbing or a new form of swindling Labour politician betrays both a startling lack of imagination & a willing blindness to history.

The British Labour Party is now, always has been & always will be a party of Imperialist plunder. As such, it is inevitably & necessarily a party committed entirely to the interests of the banks & the City of London. It cannot be anything other. The question which now presents itself to us is why.

In order to understand this we must find answers to 2 questions: “what is the class basis of the Labour Party?” & “how does this relate to the banks?”. This may only be answered historically. Take, for example, the term “bank”. It is somewhat amorphous; its meaning is uncertain. The manner in which I refer to banks takes its basis in a specific function in the process of Capitalist accumulation, a function which Lenin located within the stage of Capitalist parasitism over nations: Imperialism. In other words, the term is defined as the result of history.

I intend to address these 2 questions concretely, via their material & historical bases. It is only in this context that the term “banks”, or the role of the Labour Party may, in fact, appear as anything other than senseless.

The Labour Aristocracy:

Privilege, Industry & Parasitism

1848. The potential for insurrection, revolution & perhaps even Socialism posed by the Chartist movement has been quelled. British Capitalism has the world at its feet. Its greatest assets are its productive industry, birthed by the violence of the Industrial Revolution, & its colonies, which it plunders ruthlessly.

It is, perhaps, quite difficult to envision the extent to which British industry operated. Some figures are illustrative. During the 3rd 1/4 of the century, annual rates of industrial expansion averaged 2-3%, whilst productivity rose much higher. By 1870, Britain produced 51.5% of the world’s coal & 40.5% of the world’s pig iron. In 1880, Britain produced 1.29m tons of steel, 31% of the world total. (All figures are sourced from Robert Clough, Labour: a Party Fit for Imperialism: Second Edition (2014), pp.17-21.) We are, in context, dealing with a monolith of industry. 1 can easily see how Britain became known as “the workshop of the world”.

It is important to consider the effect that this had upon the British working-class. Between 1850 & 1875, the expansion of British Capitalism was able to improve conditions & wages amidst its proletarian population. Clough illustrates this very clearly: ‘[While] wages as a share of national income declined, real wages rose substantially – perhaps by as much as a third. By far the greater part of these increases accrued to a privileged stratum of skilled workers and craftsmen […] This stratum, some 10 to 15 per cent of the working class, earned a weekly wage approximately double that of unskilled workers.’ (pp.17-18.) It is this section of the working-class, privileged by its wages & other variables, which we term the labour aristocracy. It forms the economic & political basis for the Labour Party & for opportunism in Britain.

It is worth a pause, here, to understand the severity of meaning within this analysis. Marx & Engels viewed the proletariat as the only essentially revolutionary class in Capitalist society: ‘Of all the classes that stand face to face with the bourgeoisie today, the proletariat alone is a really revolutionary class’ (Karl Marx & Friedrich Engels, ‘Bourgeois and Proletarians‘, The Communist Manifesto (February, 1848).) This is due to its relationship to Capital. The proletariat does not own the means of production – the factory, the mill, whatever it might be. The proletariat, therefore, has nothing to sell but their ability to work, their labour-power. In selling their labour-power to a Capitalist, the proletariat generates surplus-value, or profit, for the Capitalist. This is achieved through exploitation: ‘one part only of the workman’s daily labour is paid, while the other part is unpaid’; ‘[part] of the labour contained in the commodity is paid labour; part is unpaid labour. By selling, therefore, the commodity at its value, that is, as the crystallization of the total quantity of labour bestowed upon it, the capitalist must necessarily sell it at a profit.’ (Karl Marx, Value, Price and Profit (June, 1865).) The proletariat, as a class, has no interest in the continuing existence of Capitalism: the proletariat is exploited, the proletariat is not awarded the full value of its produce. This is what leads Marx & Engels to conclude The Communist Manifesto with the statement ‘The proletarians have nothing to lose but their chains. They have a world to win.’

But behold what wonders Capital is able to perform! The relative privilege of the labour aristocracy, expressed earlier in terms of wage differentials, provides it with an active & material interest in the continuation of the Capitalist system – even if this interest is short-term. Clough gives this apt expression: ‘The labour aristocracy was building itself a stake within the capitalist system’ (Clough, p.18.). This means that a section of the proletariat, through an interest in defending their relative privilege, has sided with the bourgeoisie in its defence of Capitalism. Lenin put this rather directly in his 1916 pamphlet Imperialism and the Split in Socialism: ‘The important thing is that, economically, the desertion of a stratum of the labour aristocracy to the bourgeoisie has matured and become an accomplished fact; and this economic fact, this shift in class relations, will find political form, in one shape or another, without any particular “difficulty”.’

To return, then, to Britain’s economic position in the 19th C. Following the period between 1850-75, when Britain held unchallenged sway as an industrial monolith, British Imperialism began to face increasing challenges toward its productive output. Industrial output grew by 39% in the 1850s & 33% in the 1860s. In the 3 subsequent decades it fell to 20%. Productivity slowed. Whilst this had previously averaged an annual rise of 1-2% in the preceding decades, it feel to a 0.5% increase in the 1880s & a miserable 0.2% increase in the 1890s (Clough, pp.20-21.). In the same period, the productive output of Germany & the US provided a challenge to Britain’s industry. The figures in Table 1, detailing the competition between British, German & US steel production is illustrative of the wider trend.

Table 1. Steel production (in million tons), 1880-1900. Source: Clough, p.21.

1880 1900 Britain 1.29 4.9 Germany 0.69 6.36 US 1.25 10.19

The manner in which this decline in industry manifested itself to British Capitalists was in a falling domestic rate of profit. What investment Capitalists funnelled into domestic industry produced, not a lower amount of profit in concrete terms, but a diminishing increase in profits. Capital has, as its primary objective, expansion; ergo, a diminishing rate of profit leads the Capitalist system in its entirety toward crisis. The manner in which British Capitalism sought to prevent crisis conditions – with all of the political uncertainty that entails & undoubtedly with the spectre of Chartism in mind – was by seeking profitable investment abroad. What resulted was an immense accumulation of Capital overseas. This set in motion a trend which characterises British Imperialism even today: declining productivity in domestic industry & an evermore parasitic relationship to the rest of the world.

Graph 1 displays Britain’s industrial production from 1969-2015 in terms of percentage changes, alongside a line displaying the mean, the central tendency, of these figures – unfortunately, information pre-dating this is difficult to come by. In the same period, overseas assets underwent an enormous growth. In 1968, British overseas assets stood at £11.52bn – £182.74bn, adjusted for inflation (Bank of England, An inventory of U.K. external assets and liabilities: end-1968 (Q4, 1969).). By 2010, this figure had increased to £9.9tr (Office for National Statistics, The UK’s External Balance Sheet (March, 2012), p.3.). This is an increase of 50x, or 5000% – over 100% per annum. The trend is demonstrated by this: a slow, but certain decline in productivity, met by an inordinate rise in overseas plunder.

Graph 1. Industrial production in percentage changes & mean (1969-2015). Source: Office for National Statistics.

It is impossible to overstate the importance of this. Not only is parasitism the fundamental feature of British Imperialism, its development is inexorably linked to the formation & development of the Labour Party. As this change in the composition of British Imperialism began to assert itself, so too did an allegiance between the labour aristocracy & the exploits of Imperial conquest. Britain’s colonial monopoly was the manner by which Britain was able to maintain the conditions of the labour aristocracy throughout the last decades of the century.

This is again expressible in terms of wages. Whilst money wages remained fairly constant, as a consequence of a necessary & vast improvement in transport, commodity prices & especially food prices fell significantly. This meant that real wages rose. In the 1870s real wages rose by 26%, followed by further rises of 21% in the 1880s & 11% in the 1890s. This was, almost entirely, confined to the labour aristocracy. In 1900, skilled workers workers earned an average of 40 shillings a week, whilst unskilled workers could expect an average of 20-25 shillings & women or agricultural workers could expect a mere 15 shillings. On average, unemployment was 3x higher amongst unskilled workers. The mass of the population still suffered in want & need, whilst the privilege of the labour aristocracy was preserved. Britain’s total population numbered around 43m in 1905. 33m of this figure lived in poverty, & of these, 13m in destitution (All from Clough,pp.23-25.)

What is demonstrated by this is very clear: the labour aristocracy, which had economically aligned itself with the bourgeoisie throughout the period of 1950-1975, had its relative privilege within the Capitalist system preserved. In the context of declining industry, met by the monolithic parasitism of expansion overseas, this meant that the labour aristocracy found the basis for its privileged position within Britain as a direct consequence of the monstrous exploitation of British Imperialism. The material interest of the labour aristocracy is therefore an interest in maintaining Imperialism. In order to maintain their position as a privileged layer of society, the labour aristocracy must necessarily & absolutely defend the worldwide plunder, carnage & fundamental parasitism of British Imperialism.

This section of society – the labour aristocracy – forms the political basis for the Labour Party. Throughout the period discussed, the labour aristocracy were busy building up various organisations: the craft unions, the trade unions, the TUC, the Independent Labour Party. When met by a section of radical liberals & the Fabian society, these forces would combine to form the Labour Party itself. Unfortunately, we do not have time to go into the history of this*. What is significant is that the Labour Party was founded, not as a party of the mass of the working-class, but by a small section of the working-class with their interests directly rooted in the continuation & expansion of British Imperialism.

The Banks:

Instruments of Plunder

The question which remains, “how is this related to the banks?”, must 1st be rooted in a Leninist understanding of the function of banks. Hence, the following quotation from Lenin’s 1916 pamphlet, Imperialism: the Highest Stage of Capitalism:

‘As banking develops and becomes concentrated in a small number of establishments, the banks grow from humble middlemen into powerful monopolies having at their command almost the whole of the money capital of all the capitalists and small businessmen and also the larger part of the means of production and of the sources of raw materials of the given country and in a number of countries. This transformation of numerous humble middlemen into a handful of monopolists represents one of the fundamental processes in the growth of capitalism into capitalist imperialism; for this reason we must first of all deal with the concentration of banking.’ (Lenin, Imperialism: the Highest Stage of Capitalism (1916: 1975, Foreign Languages Press edition), p.31.)

True to his word, Lenin proceeds to demonstrate the concentration of banking. Of special importance for our present purpose are the figures he gives for Britain. In 1910, Britain had in total 7,151 branches of banks. 4 big banks owned more than 400 branches each – from 447-689. 4 more banks had possession of over 200 branches each & 11 more had over 100 (p.35.). This demonstrates, quite clearly, the growth of small firms into monopolies, the concentration of banking into a smaller number of establishments. A further demonstration is provided in figures demonstrating the growth of deposits in banks. In 1880, 8.4bn marks were deposited in British banks; by 1888 this had risen to 12.4bn. Correlating to the information given by Clough over the same period, the rise between 1888 & 1908 is far greater. The number of marks had risen by nearly double, to 23.2bn (p.40. Figures at 1910 levels of inflation.). Not only was banking concentrated in a smaller number of establishments, these banks had monopoly over a far greater amount of Capital. To quote Lenin: ‘Again and again, the final word in the development of banking is monopoly.’ (p.44.)

Important to this process is that the characteristics & function of banking within Imperialist society is defined. Lenin uses the example of an industrialist, using a bank for various operations. As the volume of operations increases alongside the growth of the bank, eventually the industrialist becomes completely dependent on the bank (pp.44-45.)The replication of this process on the level of society results in a 2-fold consideration: ‘The result is, on the one hand, the ever growing merger, or, as N. I. Bukharin aptly calls it, coalescence, of bank and industrial capital and, on the other hand, the growth of the banks into institutions of a truly “universal character.”‘ (p.48.) Through this & further proofs, Lenin comes to conclude that ‘the twentieth century marks the turning point from the old capitalism to the new, from the domination of capital in general to the domination of finance capital.’ (p.52.)

This, inevitably, poses the question what is finance Capital? Lenin locates this term 1st within a quotation from the economist R. Hilferding: ‘A steadily increasing proportion of capital in industry ceases to belong to the industrialists who employ it. They obtain the use of it only through the medium of the banks which, in relation to them, represent the owners of the capital. On the other hand, the bank is forced to sink an increasing share of its funds in industry. Thus, to an ever-increasing degree the banker is being transformed into an industrial capitalist. This bank capital, i.e., capital in money form, which is thus actually transformed into industrial capital, I call “finance capital.” […] Finance capital is capital controlled by banks and employed by industrialists.’ (R. Hilferding, cited in Lenin, p.52.) Lenin criticises this only insofar as the definition is silent on matters of concentration & monopoly. He reminds us that the ‘concentration of production; the monopolies arising therefrom; the merging or coalescence of the banks with industry – such is the history of the rise of finance capital and such is the content of this term.’ (pp.52-53.) The key to understanding these quotes rests in an understanding of monopoly itself, demonstrated elsewhere in Lenin’s pamphlet.

The coalesence of banking Capital & industrial Capital, the domination of finance Capital – these factors result in the banks playing a dominant role within Imperialist society, directing investment & guiding monopolies. The era of finance capital, of monopolies is built upon an important facet of Capitalism: the separation of the ownership of Capital & its application:

‘It is characteristic of capitalism in general that the ownership of capital is separated from the application of capital to production, that money capital is separated from industrial or productive capital, and that the rentier who lives entirely on income obtained from money capital is separated from the entrepreneur and from all who are directly concerned in the management of capital. Imperialism, or the domination of finance capital, is that highest stage of capitalism at which this separation reaches vast proportions. The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the financial oligarchy; it means the singling out of a small number of financially “powerful” states from among all the rest’ (p.69.)

Finance Capital is, therefore, Capital controlled-owned by an increasingly powerful financial oligarchy & employed by industrial Capitalists – primarily monopolists.

A further characteristic of Imperialism – 1 of the utmost importance for our purpose – is the export of Capital. In a sense, this aspect of Imperialism has already been highlighted in our elaboration of Britain’s overseas assets. Lenin is equally clear upon this point: ‘Typical of the old capitalism, when free competition had undivided sway, was the export of goods. Typical of the latest stage of capitalism, when monopolies rule, [that is, Imperialism] is the export of capital.’ (p.72. Italics in original.) The need to export Capital abroad is rooted in overaccumulation. 1stly, it is important to understand that whilst ‘ development and motion are absolute’ (Lenin, ‘On the Question of Dialectics‘, Philosophical Notebooks.), they are uneven. In an economic sense this can relate to different branches of industry: ‘Uneven and spasmodic development of individual enterprises, of individual branches of industry and individual countries is inevitable under the capitalist system.’ (Lenin, Imperialism, p.72.) Capitalism inherently leans towards investment in areas which yeild the most profit. As the rate of profit tends to fall, Capital begins to accumulate. There is not & cannot be a profitable outlet for Capital investment once a certain point of development has been reached. These leads Capitalists to investing in less developed countries, where the rate of profit is higher & accumulation can begin anew:

‘As long as capitalism remains what it is, surplus capital will be utilised not for the purpose of raising the standard of living of the masses in a given country, for this would mean a decline in profits for the capitalists, but for the purpose of increasing profits by exporting capital abroad to the backward countries. In these backward countries profits are usually high, for capital is scarce, the price of land is relatively low, wages are low, raw materials are cheap. The export of capital is made possible by a number of backward countries having already been drawn into world capitalist intercourse; main railways have either been or are being built in those countries, elementary conditions for industrial development have been created, etc. The need to export capital arises from the fact that in a few countries capitalism has become “overripe” and (owing to the backward state of agriculture and the poverty of the masses) capital cannot find a field for “profitable” investment.’ (p.73.)

This process of exporting Capital must, necessarily, be fullfilled by banks. An industrial Capitalist may only realise their Capital investment in a given location – their Capital investment relies upon physical commodity production. This is not so for the owners of finance Capital. The separation of the ownership & realisation of Capital reaches a global scale in the stage of Capitalistic Imperialism. The banks, therefore, serve as a means of Imperialist plunder, whereby advanced or dominant Capitalist countries may exploit the rest of the world.

We have already shown that the Labour Party, as the political representation & manifestation of the labour aristocracy’s narrow interests, must necessarily be a party of of Imperialism. In our present understanding, where banks serve as tools of Imperialist plunder, they must also, necessarily, be a party in service to the banks. In to protect the relative privelege of the labour aristocracy, 1 must protect the banks; the 2 actions are inseparable.

The General Election, 2015

May is approaching; the bourgeoisie are laying out their stalls. As this introduction hopefully describes quite clearly, the Labour Party will not be of any service to the working-class as a whole in Britain or internationally. They will serve the needs of British Imperialism in whatever manner they can. Presently, British Imperialism requires austerity, war & racism. It requires violent attacks upon the international proletariat. An alternative to bourgeois politics must be built & it cannot be done so without a fundamental & irrevocable political break with the Labour Party. Our place is on the streets.

* For a detailed analysis of the formation of the Labour Party, please see the 1st chapter of Clough’s Labour: a Party Fit for Imperialism.