ALB
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I have now read their pamphlet and it is clear that they are full-blown “credit creationists”. Not cranks who think that a bank can create credit out of thin air. They accept that a single bank on its own can’t:
“The key point here is that Barclays does not need to have £100 in its vaults when it grants Eve an entitlement to £100. However, Barclays must be able to get its hands on £100 when payment in actual money is demanded, i.e. when satisfying payment demands with promises to pay does not suffice.”
Precisely. So making a bank loan does not create any new money by the mere strike of a pen or keyboard, as the real currency cranks claim. All that is created is a promise to pay.
Their argument is that the “banking system”, with the central bank at its centre, can. This is given some plausibility in that the central bank can create money at will and that it gets this into circulation via the commercial banks.
Extra money can be needed for all sorts of reasons, such as an increase in transactions or of the population, so providing this is one of the functions of a central bank. However, if the central bank issues more new money than the economy requires the result will be a fall in the purchasing power of the monetary unit, resulting in a rise in the general price level.
They seem to accept this definition of inflation but argue that it is not due to the central bank issuing too much money but to capitalist firms wanting to borrow too much (in relation to some “heap of commodities”) and the banking system creating the money to lend to them. In other words, a variation of the conventional view that the Bank of England plays merely a passive role and just makes available the amount of money demanded by the economy.
This leads them to a new theory as to how capital accumulation works. Under the heading “Credit is the foundation of capitalist growth” they write:
“This allows businesses to turn their growth and their competitive behaviour upside down. They no longer simply advance their own money, reap the profits and turn those into bigger advances for even bigger profits. Rather, they borrow money against interest, expand their business with this loan, pay the interest with a part of the profit then made and pocket the other part themselves.
Capital growth is not constrained by the profits already made, but only by the business outlook, how promising they are as debtors to those willing and able to extend credit. This alters the calculation for businesses in that profits are no longer the basis for growth. Rather, debt is the basis for this growth and profits must justify the creditworthiness to acquire debt.”This would seem to make debt and interest the driver of capitalist production, turning upside down the traditional Marxian explanation which makes interest a subdivision of profit rather than profit a subdivision of interest-bearing credit.
And there are plenty of firms that, to expand, use their own reserves (from past profits) or raise more capital on the stock exchange, rather than borrowing from a bank.
Anyway, there is something odd about their theory.
I think you are probably right that the Republican politicians are just vote-catchers trying to use voters’ resentment at the government spending money for a war in a faraway land while they suffer from rising prices.
It does seem to be sign of the times that, while those calling themselves (falsely of course) socialists are rallying support for one or the other side in the Ukraine war invoking vague slogans like “anti-imperialism” and the “right to self-determination”, the opposition to the war is being expressed by isolationists and populists.
Another reason why reformists are worse than useless.
This sounds as if it might offer sone hope too from the point of view of bringing the killing and destruction to a quicker end, but then it could be just another politician’s promise:
I don’t know how reliable these figures are (or could be under the circumstances) but if they are, they offer sone hope, with a quarter wanting negotiations to bring the war to an end as soon as possible — higher for women and for those living in the fighting zones.
https://news.gallup.com/poll/403133/ukrainians-support-fighting-until-victory.aspx
I thought allowing the market to operate freely was what Truss, Kwarteng and their advisers from the Institute for Economics Affairs wanted. It did and trashed their economic nostrums.
So now we have the proof that freemarketeers are no more capable of making capitalism work the way they want than are the interventionist reformists. Capitalist market forces, not governments, decide what happens. They control what governments can do, not the other way around.
Here’s another Tory, the MP Robert Halfon, telling it as it is or at least as it appears to him. Accusing Truss and her freemarketeers of trashing “blue collar conservatism” (whatever that is, but it doesn’t sound worth preserving), he said:
“I worry that over the past few weeks, the Government has looked like libertarian jihadists and treated the whole country as kind of laboratory mice on which to carry out ultra, ultra-free market experiments.”
Actually, at the time the Party gave Lenin full credit for realising — and saying — that in the circumstances capitalism was the only way forward for Russia. It showed that, on this point, he did understand Marx’s theory of history (as opposed to many of his admirers in Britain and other countries that what was being established in Russia was socialism).
Where we criticised him was his illusion that a socialist revolution had been imminent in Europe immediately after the first world slaughter and the undemocratic, dictatorial nature of Bolshevik rule.
His obituary in the March 1924 Socialist Standard was more nuanced than some of our later articles on him:
When they sent Head Office a copy, they added a covering note:
“Hi there,
We assume (and reference in the piece) that you’d disagree with this piece. Let us know if you’d like to discuss this disagreemnt. FWIW We don’t think it is terribly important politically, but clearly cared enough to write up our thinking, so happy to discuss 😄
Cheers”.”Not read it yet, but they seem to think that there is a difference.
“Mohammed El-Erian, the chief economic adviser at Allianz, the asset manager, said the UK’s mini-budget was an example of a country exacerbating existing market volatility via misguided policies.” (Times today)
“Ignorant and mistaken bank legislation, such as that of 1844-45, can intensify this money crisis. But no kind of bank legislation can eliminate a crisis.” (Marx, Capital, Volume 3, chapter 30)
Do we need to revive this thread as another one possibly hits the dust?
At least it shows that freemarketeers are equally at the mercy of how capitalism works as leftist reformists. The Institute of Economic Affairs, from where Truss got her ideas, is just as unrealistic in thinking that capitalism can be controlled as Labour left wingers.
The present fiasco is further confirmation that governments can’t control capitalism, but that they are just navigating by sight in the choppy waters of capitalism..
Using inflation to mean an increase in consumer price indexes (rather than its original and more helpful meaning if an over-issue of the currency), he is right. The increase in the rate of increase of these indexes did start before the Ukraine war and was attributed mainly to supply problems in the aftermath of the covid epidemic and was expected to slow down and stop when these supply problems were overcome. But the Ukraine war, and the economic war the West declared on Russia has made it worse and longer lasting.
The US has raised its interest rates which has attracted more lenders. This has led to the dollar (which is the main currency in which states now hold their reserves) going up in value compared with other currencies.
The revaluation of the dollar means in effect a devaluation of all other currencies and so makes the imports they have to pay for in dollars (such as oil and gas) more expensive. So the “Global South” is being affected in the way Ross says. But not just them.
Incidentally, he is wrong about Keynes when he writes:
“As John Maynard Keynes explained, it is much easier to cut real wages by high inflation than by directly reducing money wages.”
Keynes did not advocate high inflation but a mild inflation that workers wouldn’t really notice. Obviously workers would recognise a high inflation and react, as they are now.
Jeremy Corbyn is the only British MP to speak out against the government’s war policy in Ukraine. In every other NATO country, including the US, there is a significant minority of parliamentarians opposed (except in the revanchist Baltic states who now have a free hand to oppress their 20-25% Russian-speaking minorities).
