ALB
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Best I can do. Perhaps there is someone else here who knows how to post the image directly.
That’s because it appears in a previous issue. Apparently that link takes you to page 3 of the current issue. I’ll see if I can find a way of publishing it here. In the meantime (and until next week) you can read about Jeremy Corbyn’s cat who has died.
Credit Unions are the simplest form of a bank where, as the article explains, its members pay in money which the union then lends out:
“The idea of a credit union has been celebrated as a way of helping people by pooling local savings to then lend to people priced out of bank loans by high interest rates or with a low credit score.”
The high street banks are run on the same principle of borrowing money at one rate of interest and then lending some of it to others at a higher rate.
As banks are supposed to be able to lend more money than they have by waving a magic wand, how come that this bank has failed? Couldn’t it have created some money out of thin air to avoid this?
Answer: No, because banks can’t create money out of thin air.
We tried to join in the discussion in the columns of the Islington Tribune about whether or not the Labour Party is socialist, but they didn’t publish it. Here is what we sent:
Dear Friend,
It is heartening to see people debating the meaning of socialism in your letters pages, even if it is the context of the actions and policies of a Labour government. As the late Tony Benn said: “the Labour Party has never been a socialist party.”He was right, the Labour Party is a consciously and determinedly pro-capitalist party. Since poverty and unemployment are essential, not accidental nor incidental, features of the capitalist system, it follows that any vote or support for Labour is a vote in favour of poverty and unemployment. The policies of the Labour Party can only ever be consistent with ensuring capitalists get enough profit to ensure their system can continue.
To abolish a system based on exploitation, poverty and unemployment requires putting the productive capacity of the world at the disposal of the human community: democratic control of the means of producing and distributing wealth. If any of your correspondents genuinely want socialism, that is the only policy they should be proposing and working towards.
Your for world Socialism,
Bill MartinA bit over the top? Way over the top with its theme of “The Nazi Regime Begins.
Trump, Musk, and fighting the fascist oligarchy.”He does have a valid point about the severe limitations of single-issue protest demonstrations. The quote from Vincent Bevins that “At its most basic level, a protest says, ‘I don’t like this—you fix it’” is a good one.
Luxemburg and the ICC are being entirely consistent with their belief that capitalism cannot exist without outside of the system markets, to conclude that when these markets come near to being exhausted the system will suffer from increasingly severe economic, political and social convulsions.
The trouble is that their basic assumption that capitalism does not generate enough purchasing power to buy all that is produced. It is wrong. The surplus that Luxemburg imagined could not be bought is in fact bought by other capitalists. There is no built-in shortage of purchasing power.
Capitalism certainly suffers from convulsions, always has and always will, but one question of fact that arises is whether or not these are becoming worse. So far we have not seen a world depression worse than that of the 1930s nor a world war worse than that of 1939-45. In fact, in other respects there have even been some improvements, as in the condition of women and a decline in colour prejudice.
From their contributions here, the ICC seems to be switching the emphasis from economic convulsions to other types such as the growing atomisation of social relations and the threat to the global biosystem, which are certainly happening but can be explained without recourse to Luxemburgian economics.
“Today, an oligarchy is taking shape in America of extreme wealth, power and influence that really threatens our entire democracy, our basic rights and freedom.”
This can be recorded just like Eisenhower’s about the USA being dominated by the “military-industrial complex”.
Both describe what the US has long been.
By coincidence this weekend’s Morning Star has a pull-out supplement putting the point of view of the Leninist-Stalinist “Communist Party of Britain” in which one of its leaders, Alex Gordon, expounds a similar essentially financial theory of crises:
“Beyond profits extracted from surplus value, capitalists amass capital via bank credit and stock markets. Fractional reserve banking creates new credit many times the original deposits. Stock markets likewise multiply the value of the original means of production. Marx called this fictitious capital, since it separates from and achieves value far beyond the original productive capital. Fictitious capital feeds the economy and finances debt out of all proportion to the means of production it is based on. When this bubble bursts this is a crisis.”
This is wrong on at least two counts.
First, banks can’t lend more than they have in terms of their own capital, deposits and what they themselves borrow. They don’t create credit out of thin air. Bank loans are an investment of real capital. They are not “fictitious capital”. Neither is money raised by share issues. It, too, is a real investment of money capital.
Second, trading of shares on the stock market does not (when share prices go up) increase the “value” of the capital originally invested in production.
Fictional capital is transforming an income stream into a notional capital sum which if invested or loaned would yield interest of the same amount.
Shares are a form of fictional capital calculated from the expected future stream of income coming from the profits made by the capitalist firm in which they give ownership rights. They are traded in their own right independently of the value of the capital invested in production. An increase in the price of shares is not an accumulation of capital.
Similarly a fall in the price of shares is not a fall in capital accumulation. The reduction or even disappearance of fictional capital is not a devaluation of existing real capital. In fact it will be a reflection of this — the drying up of the source (profits) of the stream of income that is turned into a notional capital sum.
There are sometimes purely speculative increases in the prices of shares. When such a bubble bursts what happens is that the share prices return to a more realistic reflection of the stream of future income their price is based on. The real economy is not affected.
On the other hand, a change in the real economy such as overproduction in relation to paying demand and so of real and expected profits can provoke a stock exchange collapse, as in 1929 and 2008. In other words, it is a fall in real profit-seeking activity that provokes a stock exchange collapse rather than vice versa.
Debt crisis? Whose debt crisis? In any case this is a quite different theory of capitalist crisis and collapse than we have been discussing up to now. It’s financial rather than economic.
You talk about “the recourse to debt as a solution to the debt crisis” but a state finds itself in trouble precisely when it can no longer do this. Those with money are not going to lend it to a state they know or suspect won’t repay it. A state in this situation has either to declare itself bankrupt or drastically reduce its spending.
What are you expecting? For the US or Britain to go bankrupt?
This article from a recent Socialist Standard deals with the view that capitalism is supposedly based on unsustainable debt:
I think it is better to refer to Luxemburg‘s theory of crises as saying they are caused by underconsumption rather than by overproduction.
Of course her theory that capitalism doesn’t generate enough purchasing power to buy all that it produces does assume that there is overproduction (in relation to paying demand) but she is saying that this is permanent, built into to the system.
The crises of capitalism are caused by overproduction but this only occurs from time to time when during a boom capitalist firms assume that the boom is going to be permanent.
It is the difference between saying that capitalism has a permanent tendency to overproduction and saying that capitalism has a tendency to permanent overproduction.
We and the ICC both agree that capitalism has long since created the material basis for a world socialist society in which the needs of everybody can be met; and that therefore capitalism has no reason, as far as the interest of humanity is concerned, to continue to exist.
We express this by saying that it is obsolete, past its sell-by date and, if we are being philosophical, has fulfilled its historic role and is no longer progressive. And that therefore establishing socialism is at the top of the agenda.
The ICC, on the other hand, ties this to an economic theory that this means that capitalism is incapable of further developing the means of production and is in a state of economic decline, decadence and decomposition and so can no longer offer social reforms as it previously could and that economic crises will get worse and worse until —- unless the working class act – the final big one that will bring about its final economic collapse.
But not only is there no reason in theory to conclude that, having fulfilled its historic role by creating the material basis for a world socialist society, capitalism can no longer function as it did in the 19th century, but the facts also show that it has. Since 1914 capitalism has immensely developed the forces of production (making socialism even more practicable) but has also offered more extensive reforms than in the period before.
And of course there were crises in the 19th century including the big one in the 1880s which led Engels to speculate that capitalism had entered into a period of permanent stagnation.
In other words, despite being past its sell-by date, capitalism as an economic system has continued to operate as it always did, extracting surplus value from the working class and going through cycles of boom and slump without the succeeding slumps being necessarily worse than the previous one. So there is no reason to conclude that the next slump will be worse than that of the 1930s as the ICC is predicting and presumably hoping for as an assumed spur to get the working class to end capitalism.
As it happens, there is an article on this in this month’s Socialist Standard:
Personally I see the problem of overproduction and the problem of capitalisms need for an ‘outside’ to expand into as an underlying tendency which we are now at the extreme limits of
This is what I always understood to be the basic ICC position, based on Rosa Luxemburg’s mistaken underconsumptionist theory that capitalism needs external markets to expand and in fact to exist.
Luxemburg imagined that she had found a flaw in Marx’s analysis but it was her who was mistaken in claiming that, because capitalism did not generate enough purchasing power within itself to buy what was produced, it needed buyers from outside the system to buy the surplus.
The mistaken conclusion that follows from this mistaken view is that, when these external markets have been exhausted, capitalism will begin to collapse. The ICC does not hesitate to draw this conclusion and in fact is arguing that these outside markets have now been exhausted or, as you put it, are at “the extreme limits” of being and as this recent text on their site claims:
https://en.internationalism.org/content/17536/crisis-going-be-most-serious-whole-period-decadence
“This crisis is going to be the most serious in the whole period of decadence”. That’s some claim. I think that’s what they said last time.
What a joke. A treaty that supposed to apply for a 100 years. I wonder who thought that one up.
100 years is a long time during which conditions change a lot. Imagine if Britain had signed a 100-year treaty with some country in 1925 how long would it have lasted? And then think what might happen in the next 100 years up to 2125.
This stupid stunt won’t be remembered even in 5 years.
Decadence means an end to the progressive role of capitalism. Once capitalism is a world system it A) has nothing to be progressive in opposition to B) no longer has a useful role in laying the foundations for communism.
That’s fair enough. But “Decadence” and “Decomposition”, with their connotations of decline, rotting or falling apart, seem over the top as a descriptions of this situation.
Despite having already laid the material conditions for world socialism and so no longer being historically “progressive”, capitalism has continued to grow not decline. At one time the ICC used to deny this, arguing that what appeared to be growth was in fact just replacing what had been destroyed in a world war. I don’t know if they still do.
The fact that capital has continued to accumulate since capitalism became a world system (whether this dates from 1914 or a couple of decades earlier) does not mean that it has not ceased to be historically progressive. It no longer is and hasn’t been for well over a hundred years. What it means is that socialism is now on the historical agenda, irrespective of whether capital accumulation has continued or not, and that this is what socialists say the working class should be striving for as an immediate aim.
