Cooking the Books 1 – Marx and the City

The spectre of Marx seems to be haunting financial journalists. Patrick Hosking, the Times’s Financial Editor, opened his column on 7 December with: ‘Karl Marx was right about one thing. There are some remarkable contradictions at the heart of capitalism’. He instanced venture capitalists wanting to have their business quoted on the stock exchange when they chose their particular business model to avoid the regulations involved in being quoted. His explanation was materialist enough: it was because they wanted to convert their capital into shares that they could sell and rake in millions. Marx would not have regarded this as a capitalist contradiction, but would have seen it as normal financial capitalist behaviour once stock markets had emerged on a large scale, with the possible chance to engage in some dodgy dealing.

For Marx, the main contradiction within capitalism was, as explained elsewhere in this issue, that capitalism was essentially a system of capital accumulation out of profits but that the process of capital accumulation itself led to situations where profits fell, so interrupting accumulation. Such ‘crises’ would eventually be overcome and capital accumulation proceed only to be again interrupted at some future point by another crisis.

Engels pointed to another contradiction – that while production was a vast society-wide cooperative effort involving different producers in different places, the products were owned and controlled by a section only of society; a contradiction that could only be resolved by both the means of production and the product becoming the common property of society as a whole.

The previous week Chris Dillow began his column in the Investors’ Chronicle (2 December):

‘Like it or not, we need to think about class conflict because this is central to the question of where inflation is heading.’

He wasn’t talking about inflation strictly speaking (as a rise in the general level of prices caused by government policy) but about a rise in the price of a wide range of goods due to demand for them exceeding supply. Even the Bank of England is expecting prices to rise to a rate of as much as 5 percent in the not-so-distant future, but they are not worried as they expect this to be just a temporary misalignment between supply and demand which the market will correct. Agreeing with this analysis – and as if to answer in advance an article in the Times of 7 December by Paul Mortimer-Lee, the deputy director of the National Institute of Economic and Social research, headed ‘Bank should fire a warning shot to stop runaway wage rises’ – Dillow argued that the current increase in prices is not the result of ‘changes in class power’.

He is correct, but it is hard to think of any situation in which the working class would have the power to bring about a widespread rise in prices. Some, like Mortimer-Lee, invoke the 1970s when prices were rising at a much higher rate than today, sometimes in double-digits, with governments desperately trying to stop this by wage restraints and wages freezes. But this wasn’t workers triggering off a wages-prices spiral by using their ‘class power’ to push up wage costs and their employers responding by putting up their prices. It was workers trying to catch up with rising prices caused by governments creating extra money and thereby depreciating the currency. Rising prices started it, not ‘runaway wage rises’.

Dillow recognises that there is a class struggle going on between the capitalist class and the working class. That’s the big contradiction at the heart of capitalism and the only one that can bring it down.

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