The Causes of Capitalist Crisis

Members’ Bulletin 4 The Causes of Capitalist Crisis

1 This fourth members’ bulletin on the causes of capitalist crisis contains a response by Geoff Jones, a comrade in Wales, to the document ‘what is the cause of the capitalist crisis?’ which was published in MB2.

It also includes a reply to the EC statement ‘the causes of capitalist crisis’ which was published in MB 3. The reply to the EC statement was delivered to us in two halves, and has slightly different signatories to both halves. The authors of the document have claimed that the EC has delayed unreasonably in publishing the first half of their reply. We do not accept this, and therefore include the email correspondence between the authors and the EC for comrades information.

As with previous bulletins please make sure this is made available to members of your branch.

Hannah Sell For the EC

Contents:

By Geoff Jones page 3 Comments on ‘Causes of Capitalist Crisis’ (11 comrades document)

Between EC and 11 comrades regarding their page 4 Email correspondence document

Endorsing the whole document: Steve Bush page 7 In defence of Marx’s (E&W), Sandra De Andrade (E&W), Steve Dobbs law of the tendency of the (E&W), Pete Glover (E&W), Georg Kumer (Austria), Rae Lewis-Ayling (E&W), Wayne Scott (Scotland), rate of profit to fall Bruce Wallace (Scotland). Endorsing only the first part: Alec Price (E&W), Allan Coote (E&W). page 26 building a Endorsing only the second part: Dave Moran (E&W), Ryan Thorpe (Canada), Steve White (E&W). revolutionary party in the Endorsing all of the first part and sections a to h,k twenty first century and x of the second: Jordan Martinez (US)

2 crete processes rooted in the world economic and Comments on ‘Causes political structure. I assume that the comrades would accept that this has developed since Marx’ and Engles’ of Capitalist Crisis’ (11 time. Two major changes that immediately spring to mind are the collapse of the Stalinist states and their comrades’ document) immediate opening up as a source of cheap labour, 1. I should like to make some brief comments on this and the capitalisation of the Chinese economy to pro- document. I comment on seven points in appropriate duce cheap consumer goods. It is obvious that both paragraphs, but my major problem is with its extraor- will have a massive effect on capitalists’ rate of profit. dinary abstract and rambling presentation, particularly in regard to the work of Andrew Glyn. Only when As Trotsky(3) pointed out: it comes down to practicalities do the most important questions arise. A general point: although Marx’ anal- “As regards the large segments of the capitalist curve ysis is couched in terms of values, all figures quoted of development …., their character and duration are are in terms of prices.This problem of the transforma- determined not by the internal interplay of capitalist tion of values into prices (see for example Morishima forces but by those external conditions through whose & Cataphores (1)) may well have to be considered in channel capitalist development flows. The acquisition any detailed discussion. I shall not deal with it here, by capitalism of new countries and continents, the dis- but add a historical note at the end. covery of new natural resources, and, in the wake of these, such major facts of “superstructural” order as 2. Paras11-16 The comrades are oversimplifying Marx’ wars and revolutions, determine the character and the discussion on crisis which was not necessarily com- replacement of ascending, stagnating or declining ep- pletely consistent. Itoh(2) makes this point more ochs of capitalist development.” clearly than I can. And it is no use complaining about a ‘battle of quotations(para119)’ when this seems to be 7. Para 171. The comrades seem to have no concept of the method employed in the document itself. what is meant by ‘transitional demands’. On the slogan of ‘Nationalise the Banks’, workers’ reaction has moved 3. Para 28: Comrades appear to take exception to the in a relatively short time from ‘You must be mad.’ to statement that “..it is completely false to blame the cri- ‘Dead right, mate.’ and in debate we must build from sis on the fall in the rate of profit alone”. I assume that there. Nobody (I assume) believes that this could take the comrades are quoting accurately, but cannot see place via ‘Act of Parliament’ without a huge ground- their problem, even in their own terms. If someone is swell of a workers’ movement, which would inevitably thrown off a cliff, it is certainly true that their death is and in no time at all involve the takeover of large parts due to the law of gravity, but not due to that law alone. of the remaining capitalist economy. (It wouldn’t be Who did the throwing and for what reason is also rel- as simple as Portugal in 1974 where the bank workers evant. took over their bank and found themselves almost by accident in charge of most of the rest of the economy!). 4. Para 43. Can we have some factual evidence? Also the difference between a ‘law of a tendency’ and a ‘ten- 8. The comments of paras 162-172 seem to me to be wil- dency’ as apparently voiced by unnamed comrades in fully perverse. I fully concur with paras 15-31 of the debate, seems mere quibbling. ‘Defence of the Transitional Programme’ document

5. Para 81. Comrades appear to counterpose to our pic- 9. One final point. I have never read work by Kliman, but ture of capitalist stagnation over a number of years, a it seems ironic that he allies himself to an organisation picture of growth followed by apocalyptic collapse in whose basic founding principle was a denial of the the short term. If they believe their perspective is cor- LTRPF! rect, they should be concretising this, both in terms of practical evidence and in terms of our programme. 10. A historical note. Tony Cliff, Chris Harman and others Should we be preparing for mass food riots, armed in- set up the IS (later SWP) on the theoretical basis of the surrection...? ‘permanent arms economy’ which meant an end to the capitalist boom-slump cycle. They got their ideas from 6. Para 92. This is an extraordinary schematic depiction work by a Prussian statistician Ladislaus von Bortkie- of ‘counter-tendencies’. Counter-tendencies are con- wicz, who married Marx’ transformation of value into

3 prices(C III Part 1) to the two sector model of the capitalist economy (C II chXX). Von B added a third sector Email correspondence (Luxury goods) and showed that it was possible for the rate of profit in money terms to continue to expand, between the EC and or at least not to decrease (see Sweezy(4)). Cliff and co. identified the luxury goods sector with the billions ‘the eleven’ regarding spent on armaments hence ‘permanent arms economy’. I’m not sure when they quietly ditched this posi- the publication of the tion.(By the way, Von B’s analysis is fallacious because he only considered simple reproduction not expanded document including in reproduction). Geoff Jones (Socialist Party Wales) this e-bulletin:

Refs: 15 November 13 Steve Dobbs to Hannah Sell Dear Hannah, • 1)Michio Morishima & George Catephores: Value, Exploitation and Growth (McGraw Hill 1987) Please find attached the Eleven comrades’ latest contribution to the debate on the cause of capitalist crisis, entitled In • 2)Makoto Itoh: Value and Crisis, (Pluto, 1980) Defence of Marx’s Law of the Tendency of the Rate of Profit to Fall: A Reply to Lynn Walsh and the Socialist Party Executive • Leon Trotsky : The Curve of Capitalist Deverlopment Committee, for the next Members Bulletin. www.marxists.org/archive/trotsky/1923/04/capdevel. Comradely, htm Steve

• Paul Sweezy: Theory of Capitalist Development, (Dobson 1946) 21 November 13 Hannah Sell to Steve Dobbs

Dear Steve,

We will circulate the eleven’s reply to the EC statement ‘causes of capitalist crisis’ in a future members’ bulletin. However, we will do so once you have completed it. You state that what you have submitted is “the first part” of your reply and that in part two, which we have not yet received, you “will take up the political differences and implications” of the EC’s analysis. However, it is not a Marxist approach to separate economic analysis from political conclusions. Please send us your document when it is complete.

In the meantime, of course, this remains an internal discussion and your half-document should not be published via social media or other means. Comradely, Hannah For the EC

22 November 13 Steve Dobbs to Hannah Sell

Dear Hannah,

Thank you for replying. However, it is completely unaccepta-

4 ble to refuse to circulate the latest document on the basis that completely unacceptable. The polemic itself has only recent- “it is not a Marxist approach to separate economic analysis ly been recognised within the party (although not formally in from political conclusions” any written public material such as Socialism Today and The Socialist), and has only just got started. As long as our disa- Firstly, this completely contradicts the EC’s approach to the greements have not been satisfactorily replied to (and they debate. The “Reply to Andrew Kliman” (which was published haven’t), the polemic, in both written and discussion form, publicly online) primarily dealt with the economics, and af- should and will continue. terwards a subsequent second document from the Scottish EC was produced covering the alleged politics around the We believe that comrades have the right to see all documen- transitional programme. Therefore, the economics and po- tation produced by both sides prior to any debates taking litical conclusions were actually separated by the two EC’s place. Instead, the Party has produced and circulated 3 EC across two contributions. We therefore do not see how the documents (Reply to Kliman, In Defence of the Transitional EC can do this, yet the 11 comrades cannot. Programme and A reply to ‘What is the cause of the current capitalist crisis?’), whereas the 11 comrades have produced 2 Secondly, Marx did largely separate out his in-depth eco- documents, yet only one has been circulated. nomic analysis (Capital) from his political analysis (Com- munist Manifesto, Socialism: Utopian and Scientific, The In addition, we believe, along with our General Secretary, Civil War in France, 18th Brumaire of Louis Napoleon etc). that all documents should be made public “in order to allow So again, we do not see how we are opposing the “Marxist all workers to see and, if needs be, to participate in the dis- approach”. cussion of vital issues”. Comradely, Thirdly, we do not accept that “this remains an internal dis- Steve cussion and your half-document should not be published via social media or other means.” This completely contradicts our General Secretary Peter Taaffe’s position when he stated 28 November 13 Hannah Sell to Steve Dobbs in an article replying to the IMT, which incidentally only re- surfaced on the CWI website last week: Dear Steve,

“The CWI operates on the basis of democratic centralism We discussed your letter (received on November 22) at yes- with full rights for all its members and sections with, in fact, a terday’s EC meeting. We note again that your response to greater emphasis at this stage on the need for discussion and the EC statement, ‘A reply to What is the cause of the current debate rather than the formal aspects of centralism. capitalist crisis?’ (carried in the third Members Bulletin produced in the debate so far), included the statement that “we The present split in the IMT has been kept under wraps – hid- will take up the political differences and implications” of the den from some of their members – up to the present time of EC’s analysis in an as yet uncompleted part two. writing. Yet all the political disputes in the CWI on a number of issues in the 1990s and the ‘noughties’ were public discus- We cannot see how it is ‘unacceptable’ to ask you to complete sions, and documents were made public while the discus- both parts of your document so that they can be distributed sion was going on. Current debates are publically aired, for together in one Members Bulletin. The fact that you refer to instance, in our journal ‘Socialism Today’ on such issues as ‘political differences and implications’ means that you have China. This is done in order to allow all workers to see and, some outline ideas at least on what those ‘differences’ might if needs be, to participate in the discussion of vital issues. be. Surely the party has a democratic right to know what they Nothing like these democratic discussions takes place in the are, how profound these differences may be etc, and how I M T.” they relate to the arguments you make about the tendency of the rate of profit to fall? Do you therefore accept you are going against the agreed method of the CWI, as explained by our General Secretary, Please let us know when you expect to complete your docu- by refusing to make the “documents... public while the dis- ment. Alternatively let us know if it is the case that you will cussion [is] going on”? not be able to supply part two in the foreseeable future so that we can then timetable the production of Members Bul- Given that the Scottish EC have written to Bruce Wallace to letin No.4 with what you have presented so far. declare a “moratorium on further organised debate”, and I imagine the E&W EC will also have that perspective, this is Finally we would repeat once again that the National Com-

5 mittee, the custodian of the party’s procedures between congresses, has decided that, at this stage, the debate should remain as an internal discussion and should not be con- ducted through public social media and other means. The EC sees no compelling reason to overturn that procedure at this stage and we would expect the eleven signatories to your documents to accept the NC’s decisions on the conduct of this debate. Comradely, Hannah For the EC

12 December 13 Hannah Sell to Steve Dobbs, Steve Bush, Pete Glover, Allan Coote, Sandra De Andrade, Rae Lewis-Ayling, Alec Price

Dear comrades,

The EC sent the email below* to the authors of the ‘further contribution to the cause of capitalist crisis debate’ document via Steve Dobbs on 28 November but we haven’t yet had a response. Could you please let us know how you propose to proceed regarding the points made in the email. Comradely, Hannah For the EC

*A copy of the email sent by the EC to Steve Dobbs on 22 11 13

12 December 13 Steve Dobbs to Hannah Sell

Dear Hannah,

You will receive the second part of the reply prior to Christ- mas. Comradely Steve

13 January 14 Steve Dobbs to Hannah Sell and Philip Stott

Dear Hannah and Phil,

Please find attached the latest document to circulate with our 2nd document that has not been circulated yet.

Please let me when will you be circulating these documents.

Also, please can you confirm the details of the proposed Lon- don debate on Sunday 19th? Comradely, Steve

6 In Defence of Marx’s Law Honesty in Debate 11. When there are profound theoretical differences with- of the Tendency of the in the Marxist movement that pose sharply contend- ing arguments, it must be remembered that the aim of Rate of Profit to Fall: these clashes of ideas is to elucidate, clarify, explain and finally raise the level of understanding of the most conscious members of the working class. The aim A Reply to Lynn Walsh and should never be to confuse the questions at issue and specifically to misinterpret, or worse, misrepresent the the Socialist Party Executive arguments of either side. Committee 12. It is the duty of serious Marxists to faithfully and hon- estly represent the argument of their opponents as it is Marx’s explanation of the Law of the Tendency of the Rate presented. Only then can it be methodically criticised, of Profit to Fall has been all but ignored as the underlying in an honest and comradely manner, even if those crit- cause of this crisis, and indeed all post-war crises, by Lynn icisms are sharp. This is the spirit and intent of Marx- Walsh and the Socialist Party EC. It has been side-lined, ism. like a fifth wheel on the profit-laden wagon of capitalism. According to Lynn and the EC, it explains nothing, it influ- 13. Lynn says that our initial document, What Is the Cause ences nothing: It is the do-nothing Law of an abstract ten- of the Current Capitalist Crisis? “fails to respond to dency that works over such long periods it never material- most of the criticisms we made of their ideas in our first ises in real life. By removing its relevance, we believe Lynn document”. The reason for this is simple: Our docu- Walsh, through his latest document, has attacked a key ment was written at around the same time and was not foundation of Marxism. This document is a defence of that intended as a reply to the statement of the EC’s “Reply Law and its central role in Marx’s theory of capitalist crisis, to Andrew Kliman” (2013). Our document stands on and is endorsed by the following members of the CWI: its own, although we did have the time to address a few relevant points made in the original EC statement. Steve Bush (E&W), Allan Coote (E&W), Sandra De An- However, we feel it is also necessary to respond to the drade (E&W), Steve Dobbs (E&W), Pete Glover (E&W), latest contribution from Lynn. Georg Kumer (Austria), Rae Lewis-Ayling (E&W), Jordan Martinez (US), Alec Price (E&W), Wayne Scott (Scotland), 14. Unfortunately, Lynn’s attempted reply to our docu- Bruce Wallace (Scotland). ment is, in our opinion, not an effort in the spirit of Marxism to answer the criticisms that we have put for- 14th November 2013 ward. It is a serious document which makes a coherent argument, and in this sense we welcome its appearance. However, it is profoundly flawed on a number of levels. Given the length of Lynn’s document, we feel it is necessary to reply to him in two parts. This document, the first part, is a reply to what we consider Lynn’s economic arguments and his misinterpretation of the work of Karl Marx. In a forthcoming document we will take up the political differences and implications of Lynn’s analysis.

A New Amalgam

15. Lynn makes clear the method which he intends to employ by attributing false arguments to the authors of our document from the very first page. For example, Lynn states: “The Eleven distance themselves from Kli- man: “… none of the supporter of this document en-

7 dorse Kliman’s political conclusions”. Their document All Economic Laws are Tendencies mainly reiterates and elaborates on their criticisms of our economic analysis.” 20. Lynn makes an immediate mistake in suggesting that we are dealing with just a “tendency”. Marx refers to 16. We are not “distancing ourselves” from Kliman’s politi- The Law of the Tendency for the Rate of Profit to Fall. cal conclusions because we never agreed with them in It is indeed a “Law” but its manifestation is as a “ten- the first place. We think his economic analysis is valu- dency”. We must repeat Marx’s view of this law which is able, but even Kliman states that the differences he has “in every respect the most fundamental law of modern with us are “huge”. In “A Reply to Andrew Kliman”, Lynn economy, and the most important for understanding Walsh and Peter Taaffe attempted to amalgamate the the most difficult relations. It is the most important political views of Andrew Kliman and a member of the law from the historical standpoint.” (Marx, Grundrisse Eleven comrades, Bruce Wallace. This was a complete p.800). It is the “most fundamental” Law for Karl Marx, distortion in the first instance. However, having already but just a tendency for Lynn. In fact, we would go fur- answered this distortion in our original document, Lynn ther. Lynn, if he were to be honest with the members, now attempts a new and rather bizarre amalgamation does not believe that the LTRPF has any significant rel- of the ideas of the Eleven with somebody else: evance to this crisis or any other crisis. We challenge him to make that link. If Marx’s Law has no meaning in 17. “It is clear from their arguments that they regard the explaining this crisis, Lynn must explain to members LTRPF as a more or less invariable ‘law’ – in fact, as what relation the LTRPF has to crisis. In effect, Lynn ‘The Law’ – rather than a tendency. In effect they pre- has erased this aspect of Marxism without even a dis- sent the LTRPF as a breakdown theory (rather than a cussion. theory of recurrent crises), analogous to the idea of breakdown put forward by Heinrich Grossman in the 21. With the exception of The Law of Value, all of Marx’s inter-war period.” laws of motion of capitalism are “tendential”, meaning they are conditional or effected by other factors and do 18. Henryk, not Heinrich, Grossman’s 1927 “The Law of not operate as either more, or indeed less, “invariable”. Accumulation and the Breakdown of the Capitalist For example, Marx wrote “Such a general rate of sur- System” was a valiant attempt to identify a breakdown plus-value — viewed as a tendency, like all other eco- theory in Marx, but was unconvincing. However, had nomic laws — has been assumed by us for the sake of we believed in Grossman’s ideas, we would have at- theoretical simplification.” (Capital Volume III p.275). tributed him in our document! Neither a commit- In this context, it seems absurd for Lynn to attempt to ment to his ideas, or indeed a direct reference within “downgrade” the LTRPF from a Law to a tendency. the document, can be found to the theory of capitalist breakdown or the “final crisis of capitalism”, which 22. It is precisely the variability of the operation of Marx’s even Grossman didn’t believe in. Why should Lynn laws that make them complex and difficult to elabo- make this assertion and on what evidence? rate in practice, even when the basic concepts are relatively simple and straight forward as befits the theo- 19. This is a rather strange assumption by Lynn, as in retical discoveries of a genius. our citations and references we included the work of Grogan (2012) who reviewed all theoretical explana- 23. Additionally, the use of the term “The Law” in our tions available for capitalist crisis, including those of document was merely shorthand in preference for the the Keynesian economists. Grogan, also referring to clumsy acronym LTRPF. That Lynn should attempt, the Marxist economist Paul Mattick, had this to say: along with others, to attribute some hidden motivation “At the end of the day, both Grossman and Matttick fail or meaning in this shorthand is obtuse in the extreme. because they fail to integrate the financial system in its intimate and indispensable role in the reproduction of capitalist social relations.” Lynn should have checked Persistent Straw Man Argument the evidence and references we provided before he jumped to completely illogical and ludicrous conclu- 24. We do not argue for the invariability of the law, and sions about the position and beliefs of the Eleven. At the assertion of Lynn that; “In effect [we] present the no point in our document do we state, imply or de- LTRPF as a breakdown theory (rather than a theory of scribe the LTRPF as an “invariable law” that must lead recurrent crises)” is utter nonsense, as we clearly stat- to an irreversible collapse of capitalism. ed in our previous document: “To overcome the crisis,

8 capital and the value of capital must be destroyed in 31. “62. The problem for the Eleven is they have a schema order to restore the rate of profit. Subsequently, the that does not match reality. They say there is a continu- rate of capital accumulation can increase and thus the ous decline in the rate of profit: so how can there be a economy can grow again. The rate of profit is thus tem- surge in corporate profits?” porally restored to some degree for a period, and the process repeats. This explains the regular occurrence 32. Having dreamed up an imaginary conception in his of “boom and bust” under capitalism.” In other words, own mind that has absolutely no bearing on what we we explained that The Law is a theory that explains re- argue in our document, Lynn seems to think that if he current crises within capitalism. remorselessly and invariably repeats the same incan- tation ad nauseam it proves that something is true, 25. Has Lynn actually read our document? Where is the thus allowing him to triumphantly declare: reference to the inexorable, invariable fall in the rate of profit? The truth is there isn’t any. Lynn cannot find 33. “79. The Eleven claim they are defending the Marxist one because, if he had, he would certainly have cited category of the LTRPF. However, they have turned it it. But he cannot cite it because it doesn’t exist. We fur- into a rigid, categorical imperative, with more in com- ther stated: “The Law explains why the falling rate of mon with Kant than Marx. Their doctrinaire method profit drives the system towards crisis and also how it has nothing in common with the Marxist method. If is to be overcome.” Marx were still around to see this ‘orthodoxy’, he would once again comment: “All I know is that I am not a 26. However, Lynn repeats his unsubstantiated assertion Marxist.” ad nauseam throughout his document; usually prior to producing a statement that disproves that there is 34. We ask comrades to consider whether this is either a “an inexorable, invariable fall in the rate of profit”. It is misinterpretation or a misrepresentation of our posi- quite an achievement from Lynn to serially disprove tion. something that doesn’t actually exist. Below is a small selection of quotations from Lynn’s document to high- Failure to Understand Basic Categories of light this bizarre straw man: Arithmetic

27. “The Eleven’s interpretation of Marxist theory is that 35. We feel we must draw attention to Lynn’s failure to ac- the LTRPF is a remorseless, inexorable and irreversible tually understand basic arithmetical categories that trend, accompanied by the steady erosion and even- distinguish between the “average rate” of profit and tual exhaustion of the counter-tendencies outlined by its “trend”. The “average rate” of profit is measured by Marx.” Marxists as a return on invested capital over time, expressed as a percentage. Here, for example, is the rate 28. “Nevertheless, Marx rejected the idea that under capi- of profit of US capitalism since records began: talism there would be a continuous rise in the organic composition of capital, and consequentially a continuous fall in the rate of profit…… In reality, the Eleven treat the falling rate of profit as a “permanent effect”, as ‘The Law’, as the continuous movement towards breakdown.”

29. In paragraph 33 Lynn refers to a report by Goldman Sachs and states; “We should, of course, treat this analysis critically, but Goldman Sachs’ picture of profitability corresponds more closely with the actual movements of the world economy than the “persistently downward trend” claimed by the Eleven.”

30. “56. The surge in corporate profits goes against the Eleven’s preconceived conception of a persistent fall in the rate of profit. They are unable to accept the reality, consistently reported in the financial press.” (Source: M. Roberts)

9 36. As can be noted, the actual rate of profit goes up and 40. “[The data] shows the ultimate cause of crisis, i.e. the down during specific historical periods, and this is tendency of the organic composition [of capital] to rise precisely why The Law is the “most important from the and thus the tendency of the average rate of profit to historical point of view”. There are long periods where fall over the whole secular period. The two trends move the rate of profit rises and others where it falls. Within necessarily in the opposite direction, as in Marx’s the- distinct shorter periods, there are oscillations in the ory. But at each moment and for shorter periods the rate of profit, with uneven temporary ups and downs. organic composition of capital [of capital] determines the movement of the average rate of profit through its 37. However, the trend in the average rate of profit is meas- interaction with the countertendencies. ured during specific historical periods which calculate the average between peaks and troughs to determine 41. (1)There is not a mechanical, inverse relation at each the overall trend in the rate of profit over that specific point in time between the organic composition [of historical period. So the trend in the rate of profit isn’t capital] and the average rate of profit. an actual rate of profit as such, but merely tracks the average rate upwards or downwards over a lengthy 42. (2) The secular downward tendency keeps driving the period of, say, fifty years, which is independent of the economy towards crisis even when in the shorter pe- actual rate of profit over shorter periods. riod its effect is temporarily suspended and reversed by the countertendencies.” 38. What we know from economic research is that the average trend rate appears to be cyclical and can be up- 43. In other words, during short periods of a few years wards or downwards, sometimes for decades; hence there can be an upsurge in the average rate of profit, Marx’s reference to “long periods” of time. This is what despite the long term trend being downwards. Lynn ei- economists call the “secular” period and hence the ther fails to understand the difference between the ac- secular trend in the rate of profit. Just to show how tual average rate of profit and its trend, or he is wilfully simple this is we will draw on work done by Guglielmo misrepresenting it. This is a fatal, basic mistake and is Carchedi for the US economy: instructive of Lynn’s confusion and misunderstanding as to what the Eleven comrades are presenting. US average rate of profit (ARP) and the organic composition of capital (C/V) for the productive sectors, 1948-2009 44. During short periods there are surges in profitability, but they are not sustained for extended periods. Hence the evidence that Lynn produces which shows short term increases in the rate of profit, or more likely the gross mass of profit made by the capitalists, is completely invalid and utterly irrelevant in relation to the long term operation of The LTRPF.

45. Prior to the period measured by Carchedi, there was an extended period of an upward trend in profitability during the war and the first part of the post-war boom. Initially, the decline in profitability was gradual until the crisis of the 1970’s, but the rate of profit has since never recovered to anything like those levels.

Source Guglielmo Carchedi ‘Behind and beyond the crisis’ (2012) 46. Lynn has ignored all of the sources from the economists we cited in our document who all confirm this 39. The secular period measured is 60 years. The grey up- analysis, and instead has concentrated on “refuting” ward line represents capital accumulation, the piling our subsidiary supportive evidence from Deloitte up of more means of production. The black downward which we will address later. To conclude on Lynn’s ba- line is the average rate of profit in the US economy. The sic misunderstanding on the issue of our alleged ad- dotted line represents the mean average trend in the herence to a “remorseless, inexorable and irreversible rate of profit. That trend is in constant fall over the en- trend” and our inability to “accept the reality, consist- tire period measured, despite frequent upward surges ently reported in the financial press”, what exactly is in the rate of profit. As Carchedi explains: Lynn referring to?

10 47. The financial press are reporting on the current state boom of the 2000s. By my estimate (still to be con- of the economy, and in the US there has indeed been firmed by more data), corporate profits may have hit short term recovery in the rate of profit, or as Lynn a new high, but that has not restored either corporate likes to constantly refer to it as, a “surge”. Far from fail- profitability or overall economy profitability to a new ing to accept reality as reported in the Financial Times, high.” or other serious economic journals of the bourgeoisie, we fully recognise this “reality”. As Michael Roberts, 51. The increase in the mass of profits, unadjusted for in- one of the economists we originally cited reported on flation, of the US capitalists can be seen in the graph his blog in March 2013: below:

48. “The latest data released just before Easter show that US corporate profits reached a record high in 2012. Since the trough of 2008 they are up over 40% and are now 7% above the previous peak in nominal terms set in 2006. Indeed, profits per employee have rocketed to near $16,000, doubling the ratio since 2000.” The temporary recovery in the rate of profit can be seen in the graph below.

(Source: US Bureau of Economic Analysis)

52. That is why in Marxist terms there must be a strict division between the “rate” of profit and the “mass” of profit as they are distinctly different things and that is why the falling rate of profit must be considered within the historical long term perspective. What Lynn (incorrectly) seems to think is that we believe the ac- (Source: M Roberts) tual average rate of profit just drops continuously like a downward ski slope for all time, and has no peri- 49. Profits, that is the gross mass of profit of the US capi- ods of upturn until capitalism collapses. This is just talists, is indeed at a record high in “nominal” terms nonsense, as the rate of profit temporarily recovers i.e. unadjusted for inflation. Is Lynn seriously trying as counter-tendencies kick in. Without the counter- to suggest that we deny these economic facts? There tendencies, capitalism would indeed have collapsed a is a temporary short term “surge” in the mass of profit very long time ago, but then that isn’t the real world. being made by the US capitalists, although such short term data doesn’t tell us much about long term trends 53. We can assure Lynn that nobody believes this preposter- as Roberts clarifies: ously absurd notion that he has invented. If this is how Lynn attempts to establish the credibility of his counter 50. “While the mass of profits in nominal terms and as a critique of our document, then frankly it suggests he has share of GDP has reached a new peak in the US, profit- a completely skewed and biased view of the content of ability (i.e. profits measured against the stock of capital our arguments and distorts them accordingly to fit his advanced for machinery, plant, labour and raw mate- erroneous analysis or, perhaps, he misunderstands the rials) has not returned to the previous peak of 2005 and basic concepts of Marxist economics? 8 certainly not back to 1997 for the whole economy.1997 is the date that I argue we entered a down phase for US 54. This “method” isn’t good enough, even from a purely profitability that eventually undermined the dot.com academic point of view, let alone from the viewpoint boom in the 1990s and the property/shadow banking of the self-testing, self-critical method of Marxism. On

11 this ground alone, a lot of Lynn’s counter criticism is ment) the available data overwhelmingly show a par- meaningless invective which spends most its content tial recovery of profits after the early 1980s trough.” knocking down straw men. 60. Lynn and Peter’s “available data” is one graph from a Mandelite economist in France, “backed up by a half Lynn’s “Evidence” dozen” other economists (who Lynn and Peter fail to name), which has been comprehensively challenged, 55. Unfortunately, Lynn never quite tells us what his views as previously mentioned, and not just by Andrew are on the actual operation of the falling rate of profit Kliman, but by the other economists we also cited. in capitalist production, despite admitting it was so Lynn’s technique is as follows: If the Eleven produce “fundamental” for Marx. Indeed, Lynn quotes Marx evidence it is wrong because it doesn’t coincide with extensively on the importance of The Law: Lynn’s view of what constitutes “real world trends”, but when Lynn produces any evidence it is automatically 56. “21. However, as we have shown, Marx recognised that correct because it supports his arguments. Even if it’s “the same causes that bring about a fall in the general just one graph (which isn’t cited in Lynn’s document rate of profit provoke counter-effects that inhibit this or elaborated upon or supported by more evidence), fall, delay it in part even paralyse it. These do not an- this is transformed into “overwhelming” evidence. nul the law, but they weaken its effects. If this were not One swallow doesn’t make a summer, but for Lynn the case, it would not be the fall in the general rate of one Mandelite graph takes him into the land of the profit that was incomprehensible, but rather the rela- midnight sun. This attitude is reminiscent of US impe- tive slowness of this fall. The law operates therefore rialism’s “overwhelming evidence” that Saddam Hus- simply as the tendency, whose effect is decisive only sein had weapons of mass destruction. Fortunately, under certain particular circumstances and over long we don’t need UN weapon inspectors to prove Lynn’s periods.” (Vol 3, Ch 14, p346) “overwhelming evidence” is sheer bunkum.

57. We agree that its “effect is decisive only under certain particular circumstances and over long periods.” Deloitte’s “Smoothed Out” Trend Indeed it is “decisive”! However Lynn can’t, or won’t, produce a single example of when the fall in the rate 61. Lynn’s approach is again sharply shown up in his “de- of profit has been decisive. Lynn banishes the opera- bunking” of the Deloitte Shift Index data. Lynn dis- tion of The Law into a never-never land where it be- misses this secondary supporting source with a few comes an abstraction that never interacts with the real highly “scientific” remarks: “30.There is no explana- world. When it comes to answering our criticisms, he tion of the statistical methods by which Deloitte have says: “There is no point in repeating our comments on produced this smoothed-out trend.” Here is Deloitte’s the rate of profit statistics given in our previous docu- “smoothed out” trend: ment.”

58. We’re not surprised Lynn doesn’t see any point in repeating his comments because the counter evidence to Andrew Kliman had already been scientifically dis- mantled in a paper by Kliman in 2010, and the ham fisted “Reply to Andrew Kliman” [a reply to a non-existent critique!] has already provoked a detailed refuta- tion from the Marxist economist (Kliman, 2013), where he points out that “Peter Taaffe and Lynn Walsh’s “The Causes of Capitalist Crisis; Reply to Andrew Kliman” is riddled with mistakes—factual, logical, political, phil- osophical, you name it.”

59. Reference to this “evidence” is buried deeper in Lynn’s document. Stating that our evidence is wrong, Lynn says: “They claim there is solid factual evidence for their view, but (as we have shown in our earlier docu-

12 62. “Smoothed out”? This graph shows every oscillation in the very same “discredited” Deloitte: “52. In the UK, the rate of return in the US economy for the past forty- non-financial companies are estimated (by account- five years. It shows a saw-toothed decline in the rate of ants Deloitte) to be holding £731.4 billion (Q3 2011), return on assets. Independent commentators describe the highest level on record. (Press release, 7 February the Shift Index report as “magisterial”, meaning “show- 2012) As with other countries, this figure does not in- ing impressive knowledge”, but Lynn says Deloitte clude cash held in offshore accounts to avoid taxation themselves admit that their findings have been widely at home.” Deloitte accountants are obviously more challenged. Have they? This is what was said about the trustworthy, in Lynn’s view, when it comes to their re- report by Forbes: search into corporate cash hordes, but not in relation to a fall in profitability. 63. “For the most part, however, corporate America has regarded the report with “studied indifference but every now and then, an intrepid critic steps up to chal- Goldman Sachs: Vampire Squid lenge the Shift Index analysis.” Deloitte stood by their data: “after questioning and re-questioning our data 69. Lynn’s bias is evident from the citation of a report from and our assumptions, we came back to the same con- the capitalist “vampire squid” Goldman Sachs “The clusions. Savings Glut, the Return on Capital and the Rise in Risk Aversion”, by Kevin Daley and Ben Broadbent, 27 64. The downward trend in company performance is ac- May 2009 to counter Deloitte’s “dodgy” data. curate; the assumptions are reasonable, and further analysis confirms these persistent trends.” (Shift Index 70. Lynn argues, “35. The Goldman Sachs paper shows 2010,p10) (figure 3) a strong recovery of profits from the mid- 1980s. Thereafter there is a decline down to the mid- 65. Lynn declares,”in other words, they have boldly vali- 1990s, with an oscillation of profits during the subse- dated their own conclusions!” Of course, we should quent business cycle, but again a strong recovery after remind Lynn that the economists and accountants at 2000 to a peak in 2006. They give more importance in Deloitte are professionals and that’s what profession- explaining the crisis which broke out in 2007 to the als do! They aren’t necessarily trying to defend dodgy “global current account imbalances [which] increase data, but have re-examined their own study in the light sharply from the turn of the century until the onset of of criticism, and in their view it remains robust. It’s a the credit crunch” and to the crisis within the financial pity Lynn doesn’t apply the same approach of critical system. We should, of course, treat this analysis criti- reflection to his own position. cally, but Goldman Sachs’ picture of profitability corresponds more closely with the actual movements of 66. However, it isn’t just Deloitte who agree with them- the world economy than the “persistently downward selves as they were also supported by Forbes, who we trend” claimed by the Eleven.” cited: “The decline in ROA (return on assets) is also consistent with the accelerating death of firms in the 10 71. We agree with Lynn here: The GS report should definitely be treated critically, but then of course it already 67. Fortune 500—a trend that has been under way for has been by Marxist economists. The report claims: many decades, as described in the Richard Foster’s “[F]ar from declining…the global return on capital… book, Creative Destruction’’. This isn’t mentioned by has trended up over the past decade or so. Even in Lynn, and his view is that, “The Shift Index reports 2008, by which stage the financial crisis had begun to undoubtedly give the strong impression of a glorified hit profits materially, the global [return on capital] re- sales pitch for Deloitte’s consultancy services.” Fortu- mained above its long-term average.” nately, impressions don’t carry much scientific weight in professional economics. 72. Michael Roberts pointed out the how the GS study differed with a measure of Marxist profitability in his pa- 68. So Deloitte are obviously massaging the figures and per “A world rate of profit: Globalisation and the world defending their data to pitch for clients, despite cor- economy” (2011): porate America treating the Shift Index with “studied indifference”(?), unless of course Deloitte happen to 73. “Investment bank Goldman Sachs analysts, Kevin agree with any of Lynn’s analysis? When it comes to Daly and Ben Broadbent developed a global rate of citing evidence for corporate cash hordes, Lynn cites profit based on data from the ten largest capitalist

13 economies including China and Korea. Using national legedly measures, “the rate of profit”. Husson’s widely sources, they measured the return on physical capital. disputed data measures the “rate of profit” in the USA They found a sharp rise in the global rate of profit from 1950-2008: 1982 to 2006. However, this measure included capital gains or losses from holding an investment and then Rate of profit in the United States 1950 – 2008 (Husson) selling it. This latter is a financial concept; so, in my opinion, not close to the rate of profit, a la Marx.

74. But the Daly-Broadbent study also used a net yield of capital measure, which excludes capital gains. On this measure, they found that the global rate of profit also rose from 1982, but was only a little higher at the peak of the boom in the last decade compared to the trough in 1982. Interestingly, they also show that US profitability followed the same trajectory that I and others have found, namely that the US rate of profit peaked in 1997 and has not been surpassed since. Daly-Broad- bent also concluded that a rising rate of profit in the so-called emerging economies was the key driver of the global rate of profit.”

75. Unlike Deloitte’s data, which measured the rate of return on assets in the US (not the entire world) over 78. Meanwhile this is what Granados measures: forty-five years, the GS average was only from 1982 to 2006 i.e. twenty four years. Kliman’s measures, for ex- Figure 2. Corporate profits (before and after taxes) and fixed ample, are from 1947 and only consider the US; a dis- investment as a share of gross domestic income, quarterly data cussion would be highly technical but GS calculated since 1947 to the Great Recession (Granados) two measures of the return on capital, one of which is vaguely similar to a Marxist measure of profitability and another which isn’t. Their data is highly suspect from a Marxist point of view and doesn’t tell us much in relation to the US, which was the epicentre of the crisis.

Delusional Comparisons

76. In order to dismiss our evidence from Granados’ “Does Investment Call the Tune?, Research in Political Economy, May 2012”, Lynn says it is “ironic” because it “includes a table (p18) for US corporate profits 1950- 2010 which shows broadly the same trends as the chart 79. We find it “ironic” that Lynn apparently can’t tell the given by Michel Husson in his paper, La Hausse Ten- difference between the “rate of profit” and “corporate dencielle du Taux de Profit (The Tendential Rise of the profits” (i.e. the “mass” of profits). This would be a Rate of Profit, January 2010). [See: The Causes of Capi- schoolboy error in and of itself, except for the fact that talist Crisis: A Reply to Andrew Kliman, paragraphs Granados’ graph, while being completely beyond com- 35-46.]” parison with that of Husson for the reason that they are different sets of data, doesn’t even look like Husson’s! 77. We recommend readers compare the tabulated data We think such statements from Lynn, suggesting that of Granados and Husson to disprove Lynn’s assertion. Grandos’ data sets show “broadly the same trends as The problem, of course, is that Granados is measuring the chart given by Michel Husson” is pure invention a completely different thing from Husson! Granados without properly analysing the data. is measuring “corporate profits” not, as Husson al-

14 Selective Blindness the counter-tendencies and their effect) that Lynn says we “nowhere” attempt to analyse! 80. Lynn doesn’t produce much by way of evidence, aside from clippings from the bourgeois financial press. He proceeds to state: Misinterpreting Karl Marx a la Lynn Walsh

81. “The Eleven argue that, at the onset of the great reces- 86. Lynn quotes extensively from Marx in the first and lat- sion in 2007, the law became “strikingly pronounced” ter parts of his document and Marx is liberally (mis)in- and that “the counter-tendencies exhausted them- terpreted to suit Lynn’s own position, as we shall show selves and there was a sudden plunge in the mass of below. profit being made by US capitalism”. Nowhere do they attempt to analyse the counter-tendencies and the 87. Lynn argues: “13. The Eleven reject any role for the way they have been operating in the world economy restricted consumption of the working class, dismiss- during the last few decades.” ing this as an “underconsumptionist” approach. [The Eleven’s] favourite quotation is from Capital Volume 82. Here Lynn displays his complete disdain for the black 2, Chapter 20, page 486, where Marx says: “It is a pure and white evidence in our document. Why should we tautology to say that crises are provoked by a lack of ef- “analyse the counter tendencies” when the evidence fective demand or effective consumption.” However, it was precisely of a sudden plunge in the mass and the is clear that Marx is arguing against the simplistic idea rate of profit being made by US capitalism in 2006 and that a deficiency of demand or consumer goods could not in 2007?! easily be overcome simply by paying workers higher wages. He was answering those who at that time put 83. What is missing throughout Lynn’s document is an at- forward that argument, like many contemporary tempt to grapple with the facts, or even a mention of Keynesians (e.g. Paul Krugman). It is quite clear that the sudden and pronounced fall in the mass of profits Marx was answering the simplistic idea that “the work- in the US economy prior to the 2007-2008 crisis, almost ing class receives too small a portion of its own prod- as if these facts do not exist? The reason for this is obvi- uct, and that the evil would be remedied if it received a ous. Lynn doesn’t believe The Law has anything to do bigger share, i.e if its wages rose…” with the current crisis and is just a “tendency”, hence his blindness to certain economic facts that don’t fit 88. Lynn appears to think that if he prefaces his explana- this schema. As we stated in our document: 13 tion of the meaning of a Marx quote with the phrase “it is clear” or “it is quite clear”, this means his following 84. “In 2006 in the US, a quarter of the world economy, interpretation is the correct one. Unfortunately, this is there was a slump in profits. In the 3rd quarter of 2006 a rhetorical device. It is true that Marx does indeed go the mass of pre-tax profits was $1,865 billion but in the on to criticise those who argue that higher wages could 4th quarter of 2006 this had collapsed to $861 billion, avoid crisis, but what is absolutely clear beyond ques- a fall of more than half (see Brooks, 2012). On its own, tion is what Marx states in black and white at the very such a catastrophic fall in the mass of profits would beginning of his logical proposition: have caused a severe recession, but the slump in profitability and investment detonated an implosion in the 89. “It is a pure tautology” (a meaningless circular argu- bloated edifice of international finance capital, result- ment) “to say that crises are provoked by a lack of ef- ing in an acute financial and economic disaster.” fective demand or effective consumption.”

85. Prior to this, we addressed the counter-tendencies and 90. In the view of Marx, crises are not caused by a lack their influence in being unable to significantly restore of effective demand. It therefore cannot be remedied the rate of profit in the US economy. Yet Lynn can state by increasing wages, but neither can crises be caused that “nowhere do they attempt to analyse the counter- by low wages. However Lynn’s interpretation is that, tendencies and the way they have been operating in while he rejects the simplistic idea that wage increases the world economy during the last few decades”. What can avoid crisis (which the Keynesians argue would), Lynn finds discomforting is mentally edited out and he he does believe in the inversely simplistic idea that moves onto a subsidiary point to state we have failed low wages, a lack of effective money-backed demand to address it. We would refer the serious reader to our and thus lack of workers’ consumption causes crisis, document for comparison (paragraphs 91-98 on both exactly as the Keynesian economists argue!

15 91. Lynn effectively attempts to turn Karl Marx into a own opinion, but it certainly does not correspond to Keynesian throughout his analysis of the texts. For ex- that held by Marx. ample, in our previous document we cited a famous quote from Marx on the falling rate of profit: “[T]he rate of profit being the goad of capitalist production...,its Biased Reading and Editing fall checks the formation of new independent capitals and thus appears as a threat to the development of the 96. Straying into the chapters on the Law of the Tendency capitalist production process. It breeds over-produc- for the Rate of Profit to Fall in Capital has some inher- tion, speculation, crises, and surplus-capital alongside ent dangers for those who believe, contrary to Marx, surplus-population.” Marx (1894) that a lack of consumption causes crisis. Lynn alights on a lengthy quote from Marx stating: 92. At the hands of Lynn, this is interpreted in true Keynes- ian fashion: “10. In other words, long-term problems of 97. “16. Moreover, in Volume 3, Chapter 15, Development profitability give rise to overproduction (a deficiency of the Law’s Internal Contradictions, Marx explicitly of money backed demand for goods), speculation (the points to the importance of consumption. “The con- housing bubble, speculation on commodity markets, ditions for immediate exploitation [the extraction of etc.), and crises (giving rise to mass unemployment).” surplus value from workers in the production process] and for the realisation of that exploitation [the conver- 93. This is truly amazing. The falling rate of profit (which sion of surplus value into money-profit through the according to Lynn hasn’t actually fallen) causes, in his sale of commodities] are not identical. Not only are version, “a deficiency of money-backed demand for they separate in time and space, they are also separate goods”. Yet nowhere in any of Marx’s writings does he in theory. The former [the extraction of surplus value] make this point. This is pure invention by Lynn and is a is restricted only by the society’s productive forces, the spin on Marx’s ideas that lays the basis for him later to latter [the realisation of profits] by the proportional- argue that the crisis was mainly caused by the inability ity between the different branches of production and of workers to buy back what they produce, which as by the society’s power of consumption… And this is we previously showed, Marx emphatically rejected as determined… by the power of consumption within a vulgar economics or worse. given framework of antagonistic conditions of distribution, which reduces the consumption of the vast majority of society to a minimum level, only capable Lack of Consumption: “never the cause of crisis” of varying within more or less narrow limits.” (p352)”

94. Just to re-emphasise Marx’s position, in our previ- 98. We would note that the parenthetical remarks in brack- ous document we quoted from “Theories of Surplus ets have been added by Lynn to the text and aren’t in Value”: “The general possibility of crisis is the formal the passage in the Penguin edition. Also, Lynn doctors metamorphosis of capital itself, the separation, in time the quote to suit his underconsumptionist position. We and space, of purchase and sale. But this is never the prefer the quote and nothing but the quote. What does cause of the crisis. For it is nothing but the most gener- Lynn miss out? After the line “And this is determined”, al form of crisis, i.e., the crisis itself in its most general- he goes on to give a truncated part of the quote which ised expression. But it cannot be said that the abstract Lynn edits in his true one-sided approach. This is what form of crisis is the cause of crisis. If one asks what its Marx wrote in full: “And this is determined neither by cause is, one wants to know why its abstract form, the the absolute power of production nor by the absolute form of its possibility, turns from possibility into actu- power of consumption but rather by the power of con- ality” (Marx, 1863) sumption within a framework of conditions of distribution which reduces the consumption of the vast majori- 95. We find it necessary to repeat this quote because Marx ty of society to a minimum level, only capable of varying completely rejected the idea that causation of crises within more or less narrow limits”. (p352) had anything at all to do with purchase and sale i.e. “effective money-backed demand” in Lynn’s parlance. 99. In short, Marx sees consumption playing a subsidiary It is, in the words of Marx “never the cause of crisis”, role, but by no means the decisive one in terms of the but Lynn thinks it is! Lynn is, of course, entitled to his formation of crisis. This type of editing out of “unpal- atable” qualifications (from Lynn’s underconsumptionist point of view) and nuance by Marx in order to

16 bolster his own view is unforgivable in terms of pre- Similarities to Sweezy senting the ideas of Marx in an honest fashion. Lynn then argues: 104. Ironically, the above quotation from Marx was used by the late American economist Paul Sweezy as his ma- 100. “17. In the US and other advanced capitalist countries jor supporting evidence to back up his idea that crises since 1980, workers suffered not only from stagnant were caused by the lack of consumption of consumer wage levels, the result of direct exploitation at work, goods in his 1942 book “The Theory of Capitalist De- but their “power of consumption” was restricted by velopment”, the founding theoretical work of the un- the neoliberal political framework – regressive taxa- derconsumptionist Monthly Review School. tion which exacerbated extreme income inequality, rising costs for education, health and insurance, and 105. This interpretation has come in for sharp criticism in more recently the mortgage scams associated with the terms of the ambiguity and actual meaning of the pas- housing bubble which burst in 2007-08.” sage, which depends on your underlying theoretical assumptions. In Lynn’s case, he believes that crises 101. Keeping in mind that Marx had denied that crisis is can be caused by a lack of effective demand, just like caused by lack of consumption, Lynn interprets Marx the Keynesians, so he interprets the passage through here as pointing to the lack of the “power of consump- this lens. tion” of US workers, but this is only one part of consumption in society as a whole, as Marx states: “….The 106. In fact, this passage, as interpreted by Lynn and latter by the proportionality between the different Sweezy, is directly contradicted by Marx’s introductory branches of production and by the society’s power of remarks on crisis in “Theories of Surplus Value” (1861- consumption”. 63), which are actually clearer than the above passage, an unpolished manuscript edited by Engels. “Clearly” 102. Lynn then argues with another added parenthesis in Karl Marx totally rejected the notion that crises had 16 brackets: “18. Marx continues: “It [realisation] is further restricted by the drive for accumulation, the drive 107. anything to do with the consumption of the working to expand capital and produce surplus value on a larg- class, even though Marx recognised this was an inte- er scale.” There is, says Marx, a competitive struggle gral part of the reproduction of capital: among capitalists to improve production and extend its scale, as a means of self-preservation. “The market, 108. “But the whole process of accumulation in the first therefore, must be continually extended, so that its re- place resolves itself into production on an expanding lationship and the conditions governing them assume scale, which on the one hand corresponds to the natu- ever more the form of a natural law independent of the ral growth of the population, and on the other hand, producers and become ever more uncontrollable. The forms an inherent basis for the phenomena which internal contradiction seeks resolution by extending appear during crises. The criterion of this expansion the external field of production. But the more produc- of production is capital itself, the existing level of the tivity develops, the more it comes into conflict with the conditions of production and the unlimited desire narrow basis on which the relations of consumption of the capitalists to enrich themselves and to enlarge rests.” (p353) These comments by Marx, in one of the their capital, but by no means consumption, which three chapters in Volume 3 dealing with the LTRPF, from the outset is inhibited, since the majority of the make it absolutely clear that he regarded the demand population, the working people, can only expand their for consumer goods as an integral part of the process consumption within very narrow limits, whereas the of reproduction and expansion of capital.” demand for labour, although it grows absolutely, de- creases relatively, to the same extent as capitalism de- 103. Marx does indeed regard the demand for consumer velops. Moreover, all equalisations are accidental and goods as an integral part of the process of reproduction although the proportion of capital employed in indi- and expansion of capital. However, it is only one part vidual spheres is equalised by a continuous process, of the integral reproduction of capital and an increas- the continuity of this process itself equally presuppos- ingly smaller part as capital expands. What Lynn’s use es the constant disproportion which it has continu- of this lengthy quote does not “clearly” support is the ously, often violently, to even out (Theories of surplus idea that crises are caused by a lack of effective worker value: On the forms of crisis. Chapter 17. 6. Crisis ‘In- consumption, as this contradicts Marx’s emphatic re- troductory remarks’ paragraph 2).” jection of the idea.

17 109. Paul Sweezy suggested that interruptions in the pro- tion- is the immediate purpose and determining mo- duction process were due to a restriction on the vol- tive of capitalist production. Capitalist production, ume of consumer demand, which in turn was re- therefore, should never be depicted as something that stricted by the capitalists ‘’tendency to accumulate’’. it is not, i.e. as production whose immediate purpose However, this was a sweeping assumption. If consum- is consumption or the production of means of enjoy- er demand is restricted by the tendency to accumu- ment for the capitalist. This would be to ignore its spe- late, this can be compensated by demand for produc- cific character, as this would ignore its basic inner pat- tion goods (factories, raw material, and machinery). tern.” (Capital, Vol III, pp. 351-352) Problems of realisation (sale) may only happen (the main assumption) if accumulation does not happen. 114. Thus Lynn’s interpretation is pure spin and is com- Yet in the passage cited and interpreted by Lynn (and pletely unconvincing if a critical approach is adopted. completely clarified by the quote above), there is noth- He accepts the false notion that capitalist production ing to suggest this, and in fact the opposite is the case; is for consumption and completely misses its “inner capital accumulation (economic growth), through the pattern”. coercive force of competition, leads to consumption being squeezed by capital accumulation (more means of production). So even if workers consumption is de- Straying into Dangerous Territory clining relative to the expansion of the economy, there is no reason why this should lead to crisis which is, in 115. Later, Lynn cites another passage from the chapters on fact, the case, as we cited in our document from Global The Law of the Tendency for the Rate of Profit to Fall: Economic Intersection (2013): “110. In Volume 3 (Ch 15, p363) Marx describes the effect of a breakdown in the credit system: “This distur- 110. ”Let’s start with the obvious. The claim that income in- bance and stagnation paralyses the function of money equality unconditionally leads to under-consumption as a means of payment, which is given along with the is untrue. In the US we’ve seen inequality accelerate development of capital and depends on those presup- since the 1980s, and until 2007 we had robust demand, posed price relationships. The chain of payment obli- decent growth.” Laying the blame for the crisis on a gations at specific dates is broken in a hundred places, lack of worker’s consumption is just contrary to the and this is still further intensified by an accompanying facts and obviously false for cast iron logical reasons.” breakdown of the credit system, which had developed alongside capital. All this therefore leads to violent and 111. Let us repeat this point just to emphasise it for Lynn… acute crises, sudden forcible devaluations, an actual “The claim that income inequality unconditionally stagnation and disruption in the reproduction pro- leads to under-consumption is untrue.” It is ironic that cess, and hence to an actual decline in reproduction.” Lynn consistently accuses the Eleven of not acknowl- edging the real world, when he cannot accept this real 116. 111. This passage clearly applies to the crisis of world fact! 2007/08, when the chain of payment obligations broke in a hundred places, accompanied by the breakdown 112. Neither can it be claimed that one extract from Lynn’s of the credit system, leading to violent and acute cri- quote; “But the more productiveness develops’’, sug- ses, and actual stagnation and disruption of the repro- gests that this means a lack of or reduction of demand duction process…” for consumption goods means that growth will be limited by consumption. As Sweezy put it, “demand for 117. Indeed the quote does clearly apply to the credit the final fruit of this production, namely, consumption crunch, but in what context does Marx write these goods’’. Of course, Marx denied that this was the aim words? Marx is explaining the “The Internal Contra- of capitalist production as it was production for profit dictions of the Law” and this quote comes from a sec- alone, not to meet consumer demand, and capital was tion titled “Surplus Capital alongside Surplus Popula- self-expanding value or “accumulation for accumulation”. Here Marx is drawing out how the falling rate of tion’s sake”. profit leads indirectly to major financial crises.

113. As Marx was at pains to stress: “It should never be for- 118. Lynn, however, doesn’t believe the rate of profit fell gotten that the production of this surplus value- and historically in the 1980’s, 1990’s and 2000’s. In Lynn’s the transformation of it back into capital, or accumu- view, the rate of profit (and definitely the mass of prof- lation, forms an integral part of surplus-value produc- it) was restored, and the capitalists were making super

18 profits. For him, “real world trends”, supported by his stated that… “The recourse to financialisation under “overwhelming evidence” (i.e. one discredited graph the neo-liberals clearly failed, and it is no coincidence and some bourgeois press clippings), showed that that the nature of the credit crunch and financial panic profits were expanding enormously, and the underly- was so severe.” ing “tendency” in the economy was the lack of money- backed consumer demand, despite Marx’s emphatic views to the contrary. Yes we agree “[t]his passage “Quantity Changed into Quality”? clearly applies to the crisis of 2007/08” because, taken in context, the beginning of the section starts with the 122. We have dismissed nothing on finance, which is an- words: “As the profit rate falls…”!!! (p359) other invention by Lynn. We must draw attention to the contradictions in Lynn’s document. Lynn says 119. Lynn’s document merely confirms our original point, that: “93. The sheer scale of the growth of finance cap- but also that specific passages are torn out of context, ital indicates there has been a change in the form of selectively edited on occasion and not fully explained. capitalism.” However, Lynn had stated just a paragraph Sometimes ambiguity is applied to specific quotes to before that the Eleven were correct that the growth of distort their meaning. In cases where there is some finance had “not fundamentally changed the charac- ambiguity, Lynn interprets them with bias towards his ter of capitalism”! own underconsumptionist position. We repeat that this method is unscientific and a fundamentally dis- 123. Which version is to be believed? Lynn appeals to the honest approach for any serious Marxist. very size of the financial sector as somehow proving his point and suggests this is a dialectical argument: “94. This is more than just a “surface feature”. Quantity Lynn on Financialisation changed into quality. Moreover, the global money supply also increased exponentially from the beginning of 120. Lynn claims that “[o]n the issue of financialisation and the 1980s to the present time.” neoliberalism, the Eleven say there is “nothing new”, “despite the rampant growth” of finance. Financialisa- 124. Of course, the quantity of finance in all its forms has tion is merely the continuation of a long-term trend, increased exponentially as Lynn explains, but that is not in any way a new phase or stage in the develop- all that is explained. He doesn’t tell us about how it has ment of capitalism.” qualitatively changed capitalism. Lynn holds a completely contradictory position. According to Lynn, the 121. This is in fact a misquote, as we actually wrote “we “form” of capitalism has changed, but not its “charac- challenge the idea that there was anything specifi- ter”, yet “quantity [has] changed into quality”. So which cally “new” in this phenomenon despite its rampant is it? Lynn must answer this question. growth.” We hold by this position and Lynn appears to agree with us partially: “92. The Eleven are correct, of 125. We are informed that “these trends were massively recourse, in saying that financialisation and neoliberal inforced by the collapse of the Soviet Union and other trends have not fundamentally changed the character Stalinist states after 1989”. We agree that the growth of of capitalism” but he then suggests that…“However, finance is a “trend” but not a new “form” of capital- they are incorrect in dismissing these trends as merely ism. Lynn gives a potted history of the response of the “surface features”, merely the stocking up of “fictitious” capitalists to the crisis of the 1970’s and specifically the capital.” Again, Lynn is a master of putting words into Volker Shock that increased interest rates to squeeze our mouths because, whilst the growth of finance was out inflation, coupled with monetarist policies. This definitely a surface feature, we certainly did not dis- was a necessary antidote for the US capitalists to the miss this trend because it was a decisive factor in the failure of Keynesian policies, but it was forced on them unfolding of the crisis as we emphasised in our origi- because of the crisis of profitability of US and world nal document: “139. The debt fuelled artificial booms capitalism. of the neo-liberals, however, merely displaced the core contradictions of the system in time and space onto 126. The underlying economic problem for capitalism had the financial superstructure, stocking up combustible been the falling rate of profit and that was due to the fictitious financial material for a renewed major cri- exhaustion of the post war boom. Monetarist policies sis of epic proportions.” So much for “dismissing” the averted a 1930’s style crash but did not, just as in the growth of finance as merely fictitious capital” and we 2007-2009 crisis, overcome the underlying cause of

19 capitalism’s inability to expand capital accumulation; control of the neo-colonial world and prefers indirect falling profitability. The roots of the current crisis lie in control through economic exploitation. However, fi- the 1970’s yet Lynn attempts to argue that 1980 some- nancialisation and globalisation hardly constitute a how represents an epoch making change? Lynn must “new form” of capitalism. Both Kautsky before the answer this question- is there a fundamental change? First World War, and Bukharin after, tried to argue that capitalism had actually moved to a new stage of ultra- 127. This is the real position of the radical left Keynesians imperialism. Lenin was scathing on this point but his and even some avowed Marxists like Husson et al. remarks could equally be applied to the apostles of fi- Their argument is that financialisation and globalisa- nancialisation: echoing Karl Kautsky, Lynn argues in tion did indeed lead to a new “form” of capitalism, a reality for a new stage of capitalism that transcends capitalism where the problem of capitalist profitabil- imperialism. ity (i.e. The Law) had been overcome, although with increased dangers of financial crashes. In their view, 132. “If Marx said of manufacture that it was a superstruc- potential crises took on a specific character of a crisis ture on mass small production, imperialism and fi- of financialised capitalism. nance capitalism are a superstructure on the old capitalism. If its top is destroyed, the old capitalism is 128. The difficulty with this explanation is that the prob- exposed. To maintain that there is such a thing as inte- lem of profitability was not overcome at all. The rate gral imperialism without the old capitalism is merely of profit never recovered to the pre-1970s highs. Lynn, making the wish father to the thought. … Imperialism however, consistently argues otherwise, and one rea- is a superstructure on capitalism. When it collapses, son why evidence is desperately being sought to prove we find ourselves dealing with the destruction of the that there was a restoration of profitability in the 1980s top and the exposure of the foundation. (Lenin 1919 and 1990s is in order to counter the evidence that the cited in by Grogan 2012)” underlying cause of the current crisis was the continued, persistent long term decline in the trend rate of 133. The capitalist class are still bound within their own profit in the US, that originated from the crisis of the nation states and therefore the basis for imperialism 1970s. is still in existence. Financialisation has not decisively altered the relations between the classes or between bourgeois nation states. It has, of course, made capi- A Semantic Straw Man Argument talism more complex and difficult to fathom but, as Lenin emphasised above, “imperialism and finance 129. A new straw man is created in the shape of Lenin’s capital are a superstructure on the old capitalism” book “Imperialism: the Highest Stage of Capitalism”. and we still face the old capitalism, the exploitation of Lynn indulges in some semantics to try and catch out the working class for profit, in the foundations under- the Eleven. neath.

130. “The Eleven categorically reject the idea of “a new stage in the development of capitalism”. Does that Once Again on Financialisation mean that they reject Lenin’s characterisation of imperialism at the time of the First World War as a new 134. Financialisation merely represents the bloated and stage in the development of capitalism? Lenin did not obscene growth of that superstructure, and even En- see the development of capitalism purely as the secu- gels noted this phenomenon in a supplement to the lar (long term) unfolding of abstract economic trends.” third volume of Capital in 1894: Lynn throws different terminology around like confetti at a wedding, where words like “stage”, “form”, “trends” 135. “1. The position of the stock exchange in capitalist and “features” are used without ever actually defining production in general is clear from Vol. III, Part 5, es- what they mean. pecially Chapter [27]. But since 1865, when the book was written, a change has taken place which today as- 131. No, Lenin didn’t just consider capitalism developing signs a considerably increased and constantly growing as a series of abstract secular trends and neither do we. role to the stock exchange, and which, as it develops, That’s because Imperialism is the highest stage of capi- tends to concentrate all production, industrial as well talism and we are still in this stage. Imperialism has, of as agricultural, and all commerce, the means of com- course, changed in that it now rarely resorts to direct munication as well as the functions of exchange, in the

20 hands of stock exchange operators, so that the stock ble and overleveraged financial institutions were an exchange becomes the most prominent representative outcrop of the underlying fall in the trend rate of profit of capitalist production itself.” (p.1045) and merely gave the crisis its expansive character.

136. The finance sector is a representation of capitalist pro- 141. The turn to finance was driven, not just by the crea- duction, but it is not capitalist production itself and tion of fictitious capital on the stock market and in never will be. The basic mistake of the financialisation the banking system, but also by recourse to massive theorists is that they make a distinction between the borrowing, especially by US corporations, in order to financial sector and what is called the “real economy”. speculate and to invest. Falling profitability led to slug- However, this presumption is false. There is no discon- gish capital accumulation and the slowing of wage nect between finance and production, but rather an growth. There was less to go round not more. We can integration or penetration into the productive sectors see the process clearly from a graph which charts the itself. The capitalist system is not separated into differ- gradual decline in capitalist accumulation (invest- ent spheres, but is merely alternative expressions of ment) and the growth of fictitious capital in the US: forms of capital as part of a total system.

137. As Lynn correctly explains; “But whether the assets of the financial sector are derived from the profits of production or profits made purely through financial speculation, they all represent a potential claim on the wealth produced.”

138. Indeed, the growth of financial assets is a future claim on value, but it depends ultimately upon one thing: the production of surplus value created by workers’ labour-power which is the only true wealth. Money made from money is not a representative of real wealth. As Karl Marx explained, the capitalists attempt to make money without the annoying intermediary process of actually producing things and “all connection with the actual expansion process of capital is thus completely (Source: M. Roberts) lost, right down to the last trace, confirming the notion that capital is automatically valorised by its own pow- 142. The growth in fictitious capital is certainly unprece- ers” (Marx Capital Vol II p137). dented and it has exacerbated the contradictions in the system, but is fundamentally a direct result of the long 139. Yet this is not a separate process cut off from produc- term historic decline in profitability. This is shown by tion, but is an integral part of the circuit of capital and the evidence of the decline in the extraction of surplus- how capitalism has always worked. The fact that specu- value, the source of profit, in the US economy: lation has reached new dizzying heights with the explo- sion of mortgage backed securities, credit default swaps and other exotic financial derivatives is due to a dimi- nution in the production of surplus value, as the capitalists, unable to make a decent profit in production, turn to speculation in order to turn a higher rate of profit.

140. Similarly, the policies of the central banks in increasing the money supply without limit has been intended to lubricate this frenzy of speculation, and subsequently bubbles are inevitable. However, the crash of 2007-2009 wasn’t fundamentally caused by this speculation, but rather by the major problem faced in the production of actual wealth, capital accumulation and the falling rate of profit. The speculative housing bub- (Source: M. Roberts)

21 143. Nevertheless, the rise of fictitious capital has been ognised that even the most fundamental theory, when remorseless and, far from it being dismissed, it is the applied to reality, is bound to have variants. He recog- very expression of the failure of capitalist produc- nised (Capital, Vol 1, Ch 25, The General Law of Capi- tion to extract enough surplus value. As Forbes com- talist Accumulation, and in Vol 3) that, under certain mented in January this year in an article titled “Big conditions, the strength of the workers could produce Banks and Derivatives: Why another financial Crisis a profits squeeze. Drawing theoretical conclusions is Inevitable”: “the lack of transparency in derivative from the capitalism of his own time, Marx did not con- trading that now totals in notional amount more than sider such a development to be the most likely course $700 trillion. That is more than ten times the size of the of events.” entire world economy”. The continued growth of this fictitious capital means that a future crisis will take on 148. Marx was indeed less dogmatic and viewed each capi- even more frightful and violent financial forms. talist crisis as having unique features, and that is why he argued in Theories of surplus value that; “The real crisis can only be deduced from the real movement of Profits Squeeze Dogmatism capitalist production, competition and credit.” Lynn is correct in saying that Marx definitely didn’t think that 144. Lynn, again, misrepresents the Eleven’s position in high wages could cause the rate of profit to fall or that relation to our criticism of the profits squeeze analy- this was the likely course of events. Marx wrote “noth- sis, originally advanced by the late academic Andrew ing is more absurd then, than to explain the fall in Glyn. Nowhere do we state that the falling rate of profit the rate of profit in terms of a rise in wage rates, even is the cause of every crisis under capitalism. It is, in though this too may be an exceptional case.” (Capital, our view, and that of Marx, the underlying cause of all Vol III, Ch 14, section 5) major generalised downturns on a global scale and the causation of the cyclical periodic recessions. 149. Moreover, even in the section on The General Law of Capitalist Accumulation, Marx makes the point that is 145. Lynn tries to suggest that: “For the Eleven, the LTRPF missed by Lynn: “To put it mathematically: the rate of – narrowly interpreted by them as ‘The Law’ – is the accumulation is the independent, not the dependent, fundamental cause of capitalist crisis. Other possible variable; the rate of wages, the dependent, not the in- causes are dismissed as merely “proximate” (immedi- dependent, variable.” (Capital, Vol 1, Ch 25). We could ate) causes. Thus they scornfully dismiss restricted de- expound our position in a long theoretical digression, mand, that is, insufficient money-backed demand to but there is now growing evidence that the profits valorise existing capital or to realise the surplus value squeeze analysis was a historical curiosity and is an created in production, as “under-consumptionism”, absurd minority viewpoint nowadays primarily held which is like a dirty word in their dictionary.” just by Lynn.

146. However, it isn’t just us who “scornfully reject” the 150. The Marxist economic historian Robert Brenner makes idea of insufficient money-backed demand as being a trenchant criticisms of the profits squeeze explana- cause of crisis, but Karl Marx himself (see our earlier tion in his “Economics of Global Turbulence” (2006). section ‘Misinterpreting Karl Marx a la Lynn Walsh’) Brenner points out that the determination of wage who does so. rates certainly does have a political and social aspect. However it is “one thing to assert that socio-political 147. Lynn now attempts to defend the profits squeeze actions always plays a part in determining the wage, theory as an explanation of the crisis of the 1970’s. quite another to argue that such action can so squeeze This theory proposes that the crisis was one of falling profits as to cause a long-term, system-wide down- profitability, but it was caused, not by The Law, but by turn”. The basic evidence against the profits squeezers, high wages of the working class brought on by militant including the late Andrew Glyn and now Lynn Walsh, trade unions! In this endeavour, Lynn is one singleton is completely compelling and amounts to the follow- thinker of a dwindling band of academic economists ing points: 23 who tried to stick by this idea in the most dogmatic fashion. Attempting to rest on the authority of Marx 151. Profits Squeeze does not explain the universality of Lynn cites him to justify the position: “66. Marx, how- the 1970’s Long Downturn. None of the economies ever, was much less dogmatic than the Eleven. He rec- of the advanced capitalist countries escaped the crisis. Neither the UK, with a weak economy and strong

22 labour movement, nor the strongest like Japan with a the heady days of the post war boom of the 1950’s and very weak labour movement, avoided the downturn. 1960’s. Brenner asked “is it plausible that what explains the downturn is that workers everywhere accumulated 156. Intriguingly, in the 1980 debate within Militant on this sufficient power to squeeze profits?” (p24) question, our organisation rejected the profits squeeze theory as “politically dangerous”, given that it coin- 152. Secondly, what about the simultaneity of the onset cided with the views of our class enemies that wages and different phases of the crisis? All advanced capi- needed to be reduced and trade union rights curtailed. talist countries experience the onset of the crisis at At that time we were not aware that Lynn sided with the more or less the same moment as he explains…. Andrew Glyn on the profits squeeze analysis. Appar- “These economies have, moreover, experienced the ently Lynn has smuggled this erroneous, un-Marxist, successive stages of the long downturn more or less in and still politically dangerous theory back into the lock step, sustaining simultaneous recessions in 1974- Party by the back door. 75, 1979-82 and from 1990-91” (p24). 157. That Lynn continues to advocate this false theory in 153. Brenner continues that it is one thing to claim that the face of a raft of contradictory theoretical and his- political and economic policy was rather similar, but torical evidence is, in our view, sheer dogmatism, and another “…to contend that the paths of institutional has nothing in common with the scientific approach development and policy formation, the experience of of Marxism. See Walsh 1998 (A Theoretical Exchange: capital accumulation and technological change, and What Are the Causes of the Current World Capitalist the evolution of capital-labour relations─and politics Crisis? Capitalism’s Economic and Political Crisis). Do more generally─could have been so similar in the ma- we really want our Trade Union comrades to have to jor capitalist economies as to have brought about, at argue this line, absent from any work of Marx, Engels, the same moment, virtually identical shifts in the la- Lenin or Trotsky: “If you fight for higher wages, you’ll bour market situation and the balance of class forces cause a crisis!” This is the logic of the profits squeeze so as to determine the same evolution of profitability dogma. in those economies.” (p24)

154. The argument that strong labour movements gaining Invisible Debts versus Corporate Cash Piles high wages could be responsible for a global downturn in the capitalist economy is farfetched in the extreme, 158. In reference to our point about the corporate cash and it also does not explain the length or the depth of hordes, Lynn retorts; “They “don’t reject” our figures, the 1970s crisis. Given that workers’ wages and con- but say the “idea that the capitalists are sitting on cash ditions have been under attack for nearly forty years piles doesn’t match up with the facts”. Corporate cash and that wage growth has stagnated over that period, reserves, they claim, are outweighed by piles of debt.” linked to permanent structural unemployment, this We don’t “claim” anything because corporate debts fact knocks the supports away from the profits squeeze are a matter of public record, as we have already dem- theory completely. If high wages were supposed to onstrated and will emphasise again below. have caused the crisis of the 1970s, how come the effects of the crisis continued for over a quarter of a cen- 159. Lynn sidesteps the issue of the corporate cash piles tury and there was no sustained recovery in the under- having to be balanced against their debts using the lying reason for the crisis; capitalist profitability? handy device of vaporising this debt in his document with a quick reference to where debt is allegedly held: 155. The historical evidence raises too many challenges to “However, the main burden of debt in the US and other Andrew Glyn’s theory for it to be a serious contender ACCs is carried by the public sector and the household to a genuine Marxist explanation for the 1970s crisis. sector. The commercial property sector and the small We contend that the profits squeeze theory is a busted and medium business sector both carry a burden of flush and that the real reason for the 1970s crisis can debt.” only be explained by recourse to the Law of the Ten- dency of the Rate of Profit to Fall; an explanation that 160. One would get the idea from this sentence that only Lynn does not even entertain as relevant to that crisis, fish and chip shops carry debt but big capitalist corpo- from which world capitalism has not even fully recov- rations don’t carry any major debts at all! Lynn cites the ered in the sense of a rebound in the rate of profit to example of Apple; “Moreover, some of the big corpora-

23 tions, while they are hoarding cash, are also borrowing rates. However, should interest rates rise, the debt be- money at cheap rates in order to pay for investment comes a very big problem indeed. and particularly for hand-outs to their shareholders (through dividends and share buybacks). Apple is a 166. Apple is actually lower down the debt league and most prominent example.” US corporations are drowning in debt. The scale of corporate borrowing in the US is staggering, as the Fi- 161. The idea that big corporations can just borrow today nancial Times reported in October 2013: “This month’s without worrying about tomorrow is a fallacy as we US government shutdown also furloughed corporate shall examine. Throughout his document, Lynn sug- debt issuance and now bankers expect a rebound in gests the Eleven can’t recognise real world trends, bond sales by companies. Sales of US investment even with a “cursory reading of capitalist media, such grade bonds have totalled $30.1bn so far this month, as the Financial Times, New York Times, Reuters, after a record breaking $149bn in September, accord- Bloomberg, etc.” but corporate debt is a category that ing to Dealogic.” Lynn refuses to acknowledge. US non-financial corporate debt is larger than US government debt, and the 167. A prominent contemporary example of just how frag- US capitalists are leveraged up to their eyeballs. ile capitalist finance can be is Ineos, who own the Grangemouth oil refinery. The owner of Ineos, Jim 162. We cited a report in our document by McKinsey Global Ratcliffe, is still being described by the Socialist Party in January 2012 entitled “Debt and deleveraging: un- as a billionaire. This is not a true reflection of his cur- even progress on the path to growth”. Lynn ignores rent position as the Guardian reported on 17 October this report and its content, and then goes on to quote 2013: “By 2007, after snapping up a string of unwanted numerous clippings from the financial media to high- chemical businesses, his personal fortune was put at light humongous cash piles. This isn’t taking our criti- £3.3bn by the Sunday Times Rich List. But by 2010, cism seriously, as obviously this report can’t just be after the financial crisis, Ratcliffe’s estimated wealth dismissed as spurious or for having methodological had plunged to £150m. At the heart of Ineos’s troubles faults. Therefore it is simply ignored by Lynn. was its biggest deal ever – the £6bn purchase of BP’s Grangemouth refinery in 2006….. [T]he banks charged 163. In 2011, the US debt, which is made up of household, Ineos £680m in fees and Ratcliffe, who is said to own financial institutions, non-financial corporations and 70% of the company, nearly lost control. “What caused government debt, stood at 279% of GDP. Household Ineos stress was that the banks took all that cash out of debt made up the largest component at 87%, financial Ineos at its moment of need,” he said.” institutions 40%, non-financial corporations 72% and government 80%. The entire US capitalist sector on its 168. As early as 2009, Reuters were warning of the toxicity of own therefore out leveraged the government debt by Ineos describing the company: “The business may be 112% to 80%! a sprawling ragbag of chemical plants which (literally) produce toxic assets like chlorine, but it’s a profitable 164. Apple is also a case in point. Its operating cash flow ragbag, and the new buyers of the debt can afford to was $53.67bn but its leverage free cash flow (debt free) take a more pragmatic view of the company’s five-year was $31.42bn (Yahoo Finance 2013). USA Today not- recovery plan than those banks which have yet to ad- ed in May 2013: “Apple is selling $17 billion in bonds mit they have lost much of their money.” in what’s expected to be the largest corporate bond sale in history, as the cash-rich tech company uses fi- 169. And: “Earlier this month Ineos revealed that it was nancial engineering to return money to shareholders budgeting for revenues of 15.2 billion euros, to gener- while avoiding paying taxes.” ate 1.1 billion euros of EBITDA (earnings before interest, tax, depreciation and amortisation) on current cost 165. This increase in Apple’s debt is possible because of accounting. This is nothing like enough to support 7.5 near zero interest rates, which allows Apple to sit on billion of debt. However, if enough of the debt-hold- its, mostly oversees, cash hoard and pay off share- ers have bought their stock cheaply, a reconstruction holder dividends with the bond sale, but it is, never- might cut that in half, and leave them with better-rated theless, debt. This problem is not stated by Lynn. This paper which could stand closer to par. As for Ratcliffe debt needs to be serviced i.e. interest has to be paid. himself, he has managed to retain a majority stake in Things are fine when government bonds have a higher the huge group he has built in just 11 years. He will interest rate when compared with ordinary borrowing need all his well-honed negotiating skills to hang onto

24 it.” Ratcliffe did indeed hang on, but only after the de- porate Britain, Rolls Royce has been piling up money bacle (for the labour movement) of the Grangemouth for a rainy day. At the end of 2010 it had £2.9 billion defeat in October 2013. in cash stashed away. Its net cash (i.e. excluding debt) rose to £1.5 billion last year, equivalent to around 15% 170. In relation to big business in the US, Andrew Kliman of revenues.’ (The Economist, 19 May 2011).” noted in 2010: “But businesses are typically net debt- ors, not net creditors, and U.S. corporations taken as a 174. This seems like a lot of cash, but UK non-financial debt whole carry a massive load of debt. In the third quarter made up 109% of the incredible 507% debt to GDP of 2009, for instance, their outstanding bond-market ratio. The financial sector was 219%! A UK Economic debt ― which does not include such debts as com- Outlook’ report for 2010 called “Red ink rising” ( by mercial paper and bank loans ― was $6.9 trillion, an untrustworthy for profits and debt, but not cash piles, amount equal to 100% of domestic corporations’ an- Deloitte accountants) noted that actual nonfinancial nual net value added and to 79% of the historical cost corporate debt was £1.7trillion when GDP was only of U.S. corporations’ fixed assets at the end of 2008.” £1.4trillion. Net debt is total debt minus money holdings and bank deposits (the famous cash hordes). Net 171. Currently (2013 second quarter) the US Federal Re- holdings peaked at three times income in 2008. In oth- serve calculations in their Nonfinancial Corporate er words, non-financial corporations had three times Business; Credit Market Instruments; Liability stands as much debt, minus monetary assets, as income. The at a staggering $9 trillion or more than half of the US cash hoard of the British capitalists sounds huge, but it GDP of approximately $16 trillion. Presently non-fi- is only about half of GDP, whilst the debt mountain is nancial corporations Credit Market Debt as a Percent- nearly ten times as large! age of Net Worth (Market Value) stands at 46.36%. 175. We claim that Lynn has failed to take account of this Here is a graphic representation of Lynn’s non-existent US “real trend” in world capitalism i.e. the debt mountain, corporate debt from the US Federal reserve: whereas the Eleven’s “abstract schema” has definitely not “rendered [us] incapable of analysing economic reality and its political repercussions”!

Conclusion

176. We have shown that the method of Lynn Walsh with regards to economic analysis has more in common with contemporary bourgeois vulgar economics than Marxism. Lynn’s position is primarily based on distorting our arguments and quoting Marx out of context to fit his underconsumptionist position, as well as selectively ignoring the empirical evidence on the rate of profit since World War 2 and the growth of corporate debt. Lynn’s document is full of so many basic mis- 172. Lynn comes up with some big numbers (including takes and contradictions that it is difficult to deduce from the “suspect” source of Deloitte) of monster cash any meaningful conclusions from it. We hope that this piles. In the UK, non-financial companies are esti- document has clarified the scientific method of Marx- mated (by accountants Deloitte) to be holding £731.4 ism and we will investigate the political implications of billion Lynn’s erroneous economic analysis in our next forthcoming document. 173. (Q3 2011), the highest level on record. (Press release, 7 February 2012) As with other countries, this figure does not include cash held in offshore accounts to avoid taxation at home. This hoard is six times bigger than total UK business investment for 2011 (£118 billion). One example is Rolls Royce, one of British capitalism’s most successful companies. ‘Like much of cor-

25 References Tune? Empirical Evidence and Endogenous Theories of the Business Cycle, in Paul Zarembka (ed.) Contra- • Brooks, M (2013) “Capitalist Crisis Theory and dictions: Finance, Greed, and Labor Unequally Paid Practice: A Marxist analysis of the Great Recession” eXpedia • Grogan,B. (2013) “From accumulation to dis- accu- mulation” paper for the Heterodox conference • Brenner, R. (2006) “The Economics of Global Turbu- lence” Veroso • of economists http://www.hetecon.net/documents/ConferencePapers/2011Refereed/Grogan_ • Carchedi, G. (2012) “Behind the Crisis: Marx’s Dialec- AHE2011039R.pdf tic of Value and Knowledge” Historical Materialism books • Grossman, H. (1927) “The Law of Accumulation and the Breakdown of the Capitalist System” Pluto Press • Daly, K. and Broadbent, B. (2009) “The Savings Glut, the Return on Capital and the Rise in Risk Aversion”, • Husson (2010)” La Hausse Tendencielle du Taux Global Economics Paper No 185, Goldman Sachs de Profit (The Tendential Rise of the Rate of Profit)” Global Economics, Commodities and Strategy Re- http://www.lagauche.com/spip.php?article2714 search. • Kliman, A. (2010) “Masters of Words A reply to Michel • Deloitte (2011) “Red Ink Rising:Navigating the Perils Husson on the character of the latest economic of Public Debt” http://www.deloitte.com crisis” http://nongae.gsnu.ac.kr/~issmarx/eng/article/18/18_kliman.pdf • Deloitte (2011) “The Shift Index” http://www.deloitte. com • Kliman, A. (2013) “Whole Lotta Mistakin’ Going On: A Reply to Taaffe, Walsh, and the Executive Commit- • Denning, S (2011) “The Big Shift or Shifty Statistics?” tee of the Socialist Party (England and Wales)” http:// akliman.squarespace.com/ • Forbes http://www.forbes.com/sites/stevedenning/2011/10/19/the-big-shift-or-shifty-statistics/2/ • Marx. K (1863) “Theories of surplus value” http:// www.marxists.org/archive/marx/works/1863/theo- • Document of the Eleven (2013) What is the cause of ries-surplus-value/ch17.htm the current capitalist crisis? Members Bulletin number 2. • Marx, K. (1958) “Grundrisse” http://www.marxists. org/archive/marx/works/1857/grundrisse/ch15.htm • Financial Times (2013) “Corporate debt boom expected after US budget resolution” FT on-line October 18 • Marx, K. (1867) “Capital” Volume I Marxist internet archive http://www.marxists.org/ • Forbes (2013) “Big Banks and Derivatives: Why another financial Crisis is Inevitable”: (Denning) http:// • Marx, K. (1885) “Capital” Volume II Marxist internet www.forbes.com/sites/stevedenning/2013/01/08/ archive http://www.marxists.org/ five-years-after-the-financial-meltdown-the-water-is- still-full-of-big-sharks/ • Marx. K (1894) Capital Volume III Marxist internet archive http://www.marxists.org/archive/marx/ • Guardian (2013) “Ineos boss’s birthday battle will be works/1894-c3/ch15.htm latest in long line” http://www.theguardian.com/ business/2013/oct/17/ineos-boss-battle-latest • Reuters (2009) “Toxic assets maker survives again” http://blogs.reuters.com/commentaries/tag/ineos/ • Global Economic Intersection (2013) Is Consumption Distorted by Income Inequality? http://econintersect. • Roberts (2011) “A world rate of profit: Globalisation com/b2evolution/blog2.php/2013/02/14/is-con- and the world economy” http://thenextrecession. sumption-distorted-by-income-inequality files.wordpress.com/2012/07/roberts_michael-a_ world_rate_of_profit.pdf • Granados, J. A. P. (2013), Does Investment Call the

26 • Roberts, M. (2012) “It’s still a bear market” http:// www.peri.umass.edu/fileadmin/pdf/working_pa- pers/working_papers_251-300/WP284.pdf

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• USA Today (2013) “Cash-rich Apple floats largest-ever corporate bond sale” http://www.usatoday.com/ story/money/markets/2013/04/30/apple-17-billion- bond-offer/2124791/

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27 ‘Socialism Today’ on such issues as China. This is done Building a Revolutionary in order to allow all workers to see and, if needs be, to participate in the discussion of vital issues. Nothing Party in the 21st like these democratic discussions takes place in the Century: I M T.” 180. From this brief passage, one would get the impression of a lively and democratic culture of debate, discussion A Critique of the Socialist and clarification of ideas within the CWI, and specifically the Socialist Party. Unfortunately, Peter does not Party Executive Committee’s appear to heed his own words. This current discussion on the cause of capitalist crisis and the political impli- Methods and Perspectives cations of rejecting Marx’s Law is not public, and neither are any of the produced documents, except for the EC’s pre-emptive reply which is published online. At the time of writing this document, the editorial of our 177. We believe the EC has revised the Marxist theory of journal Socialism Today appears to be self-censoring value through its de facto rejection of The Law of the articles related to economics. The last article written Tendency of the Rate of Profit to Fall (LTRPF) in rela- specifically on the crisis of capitalism was published tion to capitalist crisis. The main argument in favour of back in July 2013. the LTRPF has already been made in the documents “What is the Cause of the Current Capitalist Crisis” and 181. Additionally, throughout the duration of this debate, “In Defence of Marx’s Law of the Tendency of the Rate members of the EC and Party full-timers have con- of Profit To Fall”. This document seeks to explain the stantly informed us that this debate is to remain inter- deeper underlying reasons for the EC’s rejection of the nal, that is, closed off to the working class, and have put Law and its subsequent effect on our programme, as up various roadblocks to stop the circulation of some well as the wider issues that this debate has revealed of our documents. For example, we submitted our sec- with the methods of the EC. ond document “In Defence of Marx’s Law of the Ten- dency of the Rate of Profit to Fall” on 15th November 178. This document is endorsed by the following members 2013, yet there was a refusal by the EC to circulate it on of the CWI: Steve Bush (E&W), Sandra De Andrade the basis that “it is not a Marxist approach to separate (E&W), Steve Dobbs (E&W), Pete Glover (E&W), Georg economic analysis from political conclusions”(!), indi- Kumer (Austria), Rae Lewis-Ayling (E&W), Jordan cating the EC would not circulate it until we had pro- Martinez (US) (sections a to h,k and x), Dave Moran duced our third document. Exactly how the EC came (E&W), Wayne Scott (Scotland), Ryan Thorpe (Cana- to the conclusion that separating the economics from da), Bruce Wallace (Scotland), Steve White (E&W)13th the politics is “not a Marxist approach” isn’t clear. It is January 2014 (First revision 22nd January 2014) especially bizarre, given Marx’s separate publications of “The Communist Manifesto”, followed later by the three volumes of Capital. Another example is Trotsky’s a) Democratic Discussions separation of his economics analysis from the political with “In Defence of Marxism”, containing articles and 179. Peter Taaffe (2010) wrote: “The CWI operates on the letters by Trotsky dealing with dialectics and econom- basis of democratic centralism with full rights for all its ics in relation to the class nature of the Soviet Union, members and sections with, in fact, a greater empha- and “The Struggle for a Proletarian Party”, written by sis at this stage on the need for discussion and debate Cannon following the split where, in taking up a de- rather than the formal aspects of centralism. The pre- fence of their organisational forms, he draws out the sent split in the IMT has been kept under wraps – hid- political conclusions, based primarily on the previous den from some of their members – up to the present articles written by Trotsky. time of writing. Yet all the political disputes in the CWI on a number of issues in the 1990s and the ‘noughties’ 182. It also demonstrates that the EC have a very static were public discussions, and documents were made approach to debate, as opposed to a dialectical one, public while the discussion was going on. Current de- where the arguments and points are made and replied bates are publicly aired, for instance, in our journal to as an ongoing exchange. Only through genuine

28 democratic and honest debate can we clarify our ideas c) Freedom to Criticise as a Party and come closer to the objective truth. This search for the truth should be an ongoing, continuous 185. Unfortunately, it is clear the Party leadership do not process within the Party. Lenin understood this very hold this view. For example, in the pamphlet “Anar- clearly, which is why Bolshevik newspapers like Iskra chism or Marxism?” by Vincent Kolo (2007), Vincent regularly carried differing views and polemics. We will claims that, as opposed to anarchism, “[m]arxism pre- come back more on this later. fers to speak with ‘one voice’ in order to win the con- fidence of the working class’”. Whilst it is absolutely correct that comrades should advocate the agreed b) Democratic Centralism programme and carry out the agreed actions that have previously been reached through a “healthy culture of 183. The EC’s undialectical approach towards discussion debate, criticism and discussion” (ibid), it is not cor- of theoretical differences was highlighted to one of the rect to read from this that speaking with “one voice” authors of this document when he requested a branch implies never raising differences or disagreements debate on the cause of the 2007/8 crisis earlier in the publicly: In effect, self-censorship. year. It was then suggested by a senior member of the Party that the branch should subsequently take a 186. Lenin rejected this approach. In his letter “Freedom to vote on the branch position of the cause of crisis im- Criticise and Unity of Action” (1906), which was a reply mediately afterwards! This shows a complete failure to the Menshevik-controlled Central Committee of the to understand that democratic centralism prescribes RSDLP, he pointed out the bizarre situation where “at unity on the basis of action, such as programmatical Party meetings, members of the Party have the right to action and activity, and not unity on theory. It is com- call for action that runs counter to congress decisions; pletely absurd, not to mention anti-Bolshevik, to have but at public meetings they are not “allowed” full free- an agreed “party line” on the cause of capitalist crisis! dom to “express personal opinions”!! .” Lenin goes on: For example, Lenin and Luxemburg disagreed on this very issue, but their differing views were published 187. “Those who drafted the resolution have a totally wrong and discussed publicly. They also had differences in conception of the relationship between freedom to organisational methods, and even Trotsky publicly po- criticise within the Party and the Party’s unity of action. lemicised against Lenin’s “What Is to Be Done?” with Criticism within the limits of the principles of the Party his “Our Political Tasks”, at a time when Trotsky held a Programme must be quite free (we remind the reader nominally Menshevik and Lasallean approach to Party of what Plekhanov said on this subject at the Second building and organisation. Congress of the R.S.D.L.P.), not only at Party meetings, but also at public meetings. Such criticism or such 184. Of course, certain theoretical positions may imply, or “agitation” (for criticism is inseparable from agitation) favour, certain actions. For example, depending on cannot be prohibited. The Party’s political action must how you classify the Chinese state (as deformed work- be united. No “calls” that violate the unity of definite ers’ state or capitalist) could partly determine the ap- actions can be tolerated either at public meetings, or at proach for comrades in China. It is not unrealistic to Party meetings, or in the Party press…. The resolution state that we have comrades in our international who of the Central Committee, however, creates an impos- disagree with the EC on this question. However, as long sible situation.” as those comrades agree to unite on our programme on China, then open and democratic debate between 188. In the light of the Party’s failure to adopt the Bolshe- differences is acceptable, and should be encouraged. vik method of genuine democratic centralism, the EC This remains completely in line with the Bolsheviks maintains a monolithic stranglehold on theoretical conception of democratic centralism and shows how ideas: Only the leadership of the Party has the correct genuine debate flourished in Lenin’s Party, allowing road to revolution and everyone else who dares to dis- the various ideas held by the working class to be tested agree is wrong. This creates a dangerous amalgam be- in both the field of debate and in practice. tween the ideas of the Party and the leadership itself. Any serious criticism of a political or theoretical position held by the EC is therefore seen as a threat or an “attack” on the leadership personally. Ordinary members are encouraged to adopt this outlook, spurred on by pressure within the branches from full-timers,

29 peer pressure and groupthink, and therefore tend to 192. Why do we use polemics and why do sharp exchanges defend the leadership’s position as a matter of “faith”. play such an important role in the history of Marxism? As a result, many of the arguments used against the To understand why Lenin used this method, and in signatories of this document have been emotionally particular why he used extremely cutting language, irrational, with terms such as “dogmatist”, “ultra-left” we can look for evidence and insight at the example and “fetishist” thrown around. of the early Social Democratic movement in Russia, and the world of Lenin and his newspaper Iskra (‘The 189. Some older comrades have even expressed their “out- Spark’), and his early foes in the revolutionary move- rage” that this debate had partially taken place in pub- ment. Lenin’s polemics reveal not so much a style, but lic, on the internet! We would respectfully point out an unrelenting search for the truth. A quick glance at to these comrades, concerned about the perils of the Lenin’s works is enough to reveal his biting polemical internet, that social media, blogs etc are simply the attitude. However, it may be even more revealing if we modern equivalent to newspapers and other publica- look further afield and examine what Lenin’s contem- tions that the Bolsheviks used a century ago. It should poraries thought about him. also be noted that since the Party leadership does not encourage open and democratic debate in its public 193. Vladimir Akimov was a revolutionary Social Democrat publications, comrades have had little choice but to and a contemporary of Lenin. To take the Akimov ex- resort to other means in order to get their ideas across ample as an illustration: “Akimov saw Iskra as the in- to a wider audience, both within and outside the Par- heritor of this arrogant attitude towards workers. He ty, which is their right under democratic centralism. It cites a case where ‘Iskra’ ridiculed a letter by workers should be obvious that a Party apparatus containing as illiterate.” (Lih 2008, p241). Iskra was seen as arro- full-time salaried employees, editorial controls over all gant and uncomradely, even ridiculing letters written publications and administration of official Facebook by workers on account of their poor grammar, some- groups starts from a significant advantage over any thing that we would object to today, but this was not opposition to their position. It is therefore disappoint- an isolated incident. ing that some comrades have claimed we are trying to “hog the limelight”, or that the Party is conducting the 194. Boris Krichevskii, another opponent of Iskra, also at- debate “at considerable time and expense”. tacked it for its style and its tone. Krichevskii, a polemical target of Lenin in “What is to be done?” would later 190. We are sorry that some comrades feel the clarification become his great friend, but the expert ‘Lenin histo- of theoretical and political ideas is an expensive and rian’ Lars T Lih reveals “… Krichevskii wrote to Kautsky unwelcome diversion from building the Party, but we about “’a method and tone of polemic hitherto un- believe it is precisely this approach that is essential if known in the Russian revolutionary literature’”(ibid, we are to build a Party along Bolshevik lines with the p297). We will come back more on Krichevskii later. best ideas. Criticisms and polemics are not “attacks” However, we believe the debate on tone disguises on the Party or individuals, but a method of ascertain- deeper issues. Polemical debate reveals a dedication to ing the best ideas to equip the Party for the tasks ahead. rooting out any inconsistencies within Marxism. Why such attention to detail and why was there no artificial papering over theoretical differences? Were Lenin and d) The Marxist Method: The Polemic the other Russian Marxists pedantic or, more likely, did they just have a rigorous method of examining the 191. Despite accusations of uncomradely behaviour against theory? us, there are many examples where the “tone” of the debate in the history of Marxism has been far sharper. One needs only to use the example of Lenin’s attacks e) Dogmatic Internet Warriors on Trotsky to understand that the “tone” argument falls flat. Lenin (1911) attacked Trotsky in terms that 195. The authors of this document have been accused of be- would shock us today. He attacked Trotsky in print lit- ing dogmatic. Some of our opponents have used the erally dozens of times. The most memorable example colourful but misleading epithet “internet warriors” to is revealed in the headline: “Judas Trotsky’s Blush of discredit some of the content of personal blogs and Fa- Shame”. It isn’t even necessary to read this to discover cebook interventions. The accusation is that the argu- Lenin’s polemical style- just look at the title. ments we have presented are too concerned with theory, are too dogmatic and not concerned enough with the

30 practical realities of building the workers movement. Foundations of the Critique of Political Economy”, “A Contribution to Critique of Political Economy”, and 196. The charge of dogmatism is a serious one, but more so “Capital: A Critique of Political Economy”. the charge that theoretical debates are a distraction to our activities. Does this charge really stand up when 199. Lenin himself recognized the tendency of some to we look at the importance of theoretical clarity within incorrectly downplay theoretical discussion at the Marxism? expense of “practical tasks.” In “What is to be Done?” Lenin (1901) counters precisely this type of quota- 197. Karl Marx’s famous quotation, in the letter he wrote to tion from Marx “We can judge from that how tactless Bracke (1875), has been used as supporting evidence Rabocheye Delo (‘Worker Cause’) is when, with an air to justify the “stop this distraction from the important of triumph, it quotes Marx’s statement: “Every step of tasks” argument. Marx wrote; “Every step of the real real movement is more important than a dozen pro- movement is more important than a dozen programs” grammes.” To repeat these words in a period of theo- in the Preface to the Critique of the Gotha Program. retical disorder is like wishing mourners at a funeral However, those who use this quote most freely forget many happy returns of the day. Moreover, these words that the Critique of the Gotha Program itself was writ- of Marx are taken from his letter on the Gotha Pro- ten as an acerbic polemic. The Gotha Program was a gramme, in which he sharply condemns eclecticism in proposed platform for the unifying party congress that the formulation of principles. If you must unite, Marx took place in the town of Gotha in 1875. The Eisenach- wrote to the party leaders, then enter into agreements ers and Lassallean factions were about to form a united to satisfy the practical aims of the movement, but do party (later to become the German Social Democratic not allow any bargaining over principles, do not make Party). The draft platform for this united party was sent theoretical “concessions”. This was Marx’s idea, and to Marx for his comments. What Marx wrote was cer- yet there are people among us who seek-in his name tainly not a long epistle about the need for “left unity” to belittle the significance of theory!” or to move the new party forward in practical ways. Such a big step forward in the history of the German working class was not greeted with congratulations. f) Workers are Interested in Theory! The founding document of the new workers party was put to the sword by Marx. 200. The EC position has an inherent arrogance towards those workers who are trying to get to grips with Marx- 198. The Critique of the Gotha Program stands as the clear- ist ideas. It is as though only a couple of leaders have est exposition Marx ever wrote on revolutionary strat- the ability to interpret Marx and Lenin correctly for the egy. It is one of Marx’s shortest yet most important rest of us. This debate on the Law of the Tendency of the works. Clearly the Unity Congress was a landmark for Rate of Profit to Fall is such an example. The leadership the German working class, but this did not stop Marx have said that this discussion brings “more heat than from subjecting incorrect ideas to crushing criticism. light”. The substitution of a free discussion of Marx’s “Critique” and criticism is the method by which ideas ideas in favour of an alternative view- that only a se- develop. If we simply brush theory to one side for the lect group of people with a “feel” for the ideas, those sake of what some see as urgent practical tasks, then who can somehow mysteriously feel the secret Marxist we are profoundly mistaken in our understanding of vibe- only those chosen few can get to grips with the how we get closer to the truth. If we label debate as multi-faceted intricacies of Marxism, is mistaken. The “petty social intrigue”, especially as everyone knows conclusion is that we should let the “leaders” deal with that there is a major theoretical issue being debated the difficult theoretical stuff while the rank and file get within the party, we are not following in the tradi- on with the practical tasks. This is wrong. We should tion of Marxism. We are asking members to trust the look at Lenin’s view of workers’ capacity for theoreti- leader to sort out this “intrigue” and we are disarming cal understanding. Above we have seen one of Lenin’s the party. The Critique of the Gotha Program is a work polemical targets was the Rabocheye Delo newspaper. that we recommend that members read to understand Another rival for the ear of Russian workers was Rabo- an important part of Marx’s method, the method of chaia Mysl (‘Worker Thought’). the Critique. This method of critique is used by Marx in many of his works as well as the “Gotha Program”: 201. Rabochaia Mysl was published from 1897 until 1902. It “The Holy Family: Critique of Critical Criticism”,” Cri- was as long-lived as Iskra, and represented the views tique of Hegel’s Philosophy of Right”, “The Grundrisse: of the St Petersburg Social Democratic committee. By

31 1899, Rabochaia Mysl had become a significant voice retical or practical problem. This does not at all mean in the growing workers’ movement in Russia. The rea- that the newspaper must lower itself to the level of the son for its success can be put down to the working mass of its readers.” (ibid). class contributors who provided a picture of life on the factory floor through articles and in particular letters. 204. Iskra’s opponents firmly believed that its “obsession with dogma” meant it was constantly engaged in a 202. “Ironically these workers’ letters sometimes contained witch-hunt to look for non-existent deviations from criticism of ‘Worker Thought’ for being overly intellec- Marxist theory. There is no trace at all in Lenin that tual and over the heads of ordinary workers- the same “too much” theoretical debate for the rank and file was kind of criticism later levelled at ‘Iskra’.”(Lih, p247). All a form of petty intrigue or a distraction. The concept Social Democratic newspaper, but Iskra in particular, of a one-way theoretical conveyor belt from leaders to contained a high level of theoretical debate. Lenin, workers is the real nonsense. however, criticized Rabochaia Mysl for too much dumbing down! Lenin (1899) talks about their views 205. We believe there is a real need for open, unhindered thus; “Rabochaya Mysl, by ignoring these facts, is mov- and uncensored discussion of ideas within the Party. ing backwards and fully justifies the opinion that it is We propose the Party should have a theoretical jour- not representative of advanced workers, but of the nal, perhaps published quarterly, dedicated to the dis- lower, undeveloped strata of the proletariat.” cussion of ideas, with contributions welcome from all members of the Party and International. Additionally, 203. Lenin knew that workers were more interested in the- this document should be published online, just like ory than ‘Worker Thought’ gave them credit for. In a our newspaper The Socialist and our monthly maga- stunning piece of this article, he cites the absolute re- zine Socialism Today. Such a document would help quirement for theoretical discussion of the entire party create a space where ideas can be proposed, explored and the necessity for not giving workers a simplified and criticised as part of the Party structures. Thus, it version of Marxism under the assumption that their would minimise the need for comrades to resort to al- level of consciousness is ‘insufficient’: “At a time when ternative methods of publication, such as blogs or so- educated society is losing interest in honest, illegal lit- cial media, to put their views across. Finally, we should erature, an impassioned desire for knowledge and for not hide exchanges of theoretical ideas or critiques. socialism is growing among the workers, real heroes Workers, and especially young people, are thirsty for are coming to the fore from amongst the workers, who, new ideas and thrive on lively debate and discussion. despite their wretched living conditions, despite the And on that note, we will now move on to the political stultifying penal servitude of factory labour, possess so critique of the EC’s position. much character and will-power that they study, study, study, and turn themselves into conscious Social- Democrats—“the working-class intelligentsia.” This g) Tendency of the Rate of Profit to Fall, or to Rise? “working-class intelligentsia” already exists in Russia, and we must make every effort to ensure that its ranks 206. Based on the overwhelming amount of evidence refer- are regularly reinforced, that its lofty mental require- enced in our previous documents, we believe that the ments are met and that leaders of the Russian Social- average rate of profit throughout the advanced capi- Democratic Labour Party come from its ranks. The talist countries has trended downwards since the end newspaper that wants to become the organ of all Rus- of World War 2 and that, whilst the rate of profit made sian Social-Democrats must, therefore, be at the level a partial recovery in the 80s, the ‘neoliberal’ boom of the advanced workers; not only must it not lower its came to an end in the late 90s with the advent of the level artificially, but, on the contrary, it must raise it Asian monetary crisis and the dot-com bubble crash. constantly, it must follow up all the tactical, political, The post-2001 upswing saw another partial recovery in and theoretical problems of world Social-Democracy. the rate of profit, only for it to peak in 2005 and then Only then will the demands of the working-class in- decline until the 2009 trough. These movements in the telligentsia be met, and it itself will take the cause of rate of profit and subsequent crises can be explained the Russian workers and, consequently, the cause of through Marx’s Law. the Russian revolution, into its own hands…The average worker will not understand some of the articles in 207. The offensive of the neoliberals certainly led to some a newspaper thataims to be the organ of the Party, he high profile defeats for the working class and a curtail- will not be able to get a full grasp of an intricate theo- ing of the trade union movement’s ability to protect

32 workers from attacks. The economic logic behind this plaining economic crises purely in terms of the Trade offensive was the historic fall in the rate of profit in the Unions, class struggle and wages: They explain the cri- advanced capitalist countries. The capitalists had to sis of the 1970s using the “profits squeeze” thesis i.e. restore it at the expense of the working class in defence that wages were “too high” due to powerful Trade Un- of their system. This offensive had short term results ions, and then they explain the 2007/8 Great Recession for the capitalists, allowing them to boost productiv- due to underconsumption (“lack of money-backed de- ity and curtail wage increase in the advanced capitalist mand”), where wages are now “too low” due to weak- countries. Yet this process must be kept in proportion. ened Trade Unions. This is a purely romantic, subjec- The unions were not “smashed”, and the neoliberal tive account of economic crises and might at first seem offensive was only partially economically successful. “common sense”, but as we have shown in our previ- The rate of profit never rebounded to the heady levels ous two documents, is at odd with the facts. Now, this of the 1950’s or 1960’s as Lynn has argued. should not be interpreted as a defence of the bosses and wage restraint, but rather a revealing of the limits 208. There were increases in both productivity and the rate of traditional Trade Union bargaining in the context of of profit, but the jury is out on how sustained this was. a dying capitalism. If anything, it highlights the urgent Marxist analysis, on some measures, suggests that need for occupation and control of the workplace as there was a restoration, never reaching the level of the the foundation for the revolutionary socialist transfor- post war boom, between 1982-1997. After this, the US mation of society. rate of profit is calculated to have gone into a downward phase again (Roberts, 2009). On the other hand 212. In our view, the falling rate of profit is an indicator that Kliman (2012) calculates that, despite some short term capitalism is unable to produce enough surplus value, surges in the rate of US profit, it did not rebound signif- and therefore unable to fulfil its historic mission of ex- icantly, and was in effect trendless, meaning it showed pansion of capital value. Since the end of the ‘neolib- no significant average recovery. eral’ boom, crises are becoming deeper and increas- ingly frequent in occurrence. In our opinion, this is 209. While the major defeats of the working class during the one of the major proofs that capitalism is a historically 1980’s certainly gave the appearance of a global univer- outmoded system ripe for replacing. The only way out sal bourgeois triumph, its real effects have been exag- of this living nightmare for working class people is gerated. Wage growth, prior to the 2007-9 crisis, slowed through the political act of revolution, the subsequent down but did not plummet as has been suggested by expropriation of the capitalists as a class and workers’ the EC and others. While the wages as a share of GDP in control and ownership of the means of production, the advanced capitalist countries did decline, real wage where production is based on use-value rather than rates actually increased, although they progressively exchange-value. In short, value production is done slowed, as did capital accumulation. away with.

210. At root this process was driven by a historic fall in the 213. The EC’s rejection of the Law is based on their errone- rate of profit. It supports the argument that the deter- ous belief that the rate of profit has, on average, been mining element in the income of the working class is rising since 1983. They believe that the capitalists have not specifically trade union membership or power, but no problem creating surplus value. The problem, ac- market forces themselves. Capital needs labour and cording to Lynn and the EC, is that the full potential the general demand for labour is a crucial contributor of the existing mode of production (i.e. of value pro- to wage levels. For example, in the second half of the duction and generalised commodity production) is 1990’s there was a period of boom in the US and em- not being realised due to high inequality and the huge ployment levels were quite high. Demand for scarcer amounts of value lying idle. If only workers could labour itself pushes up wages. This also explains why, get their hands on this wealth and put it to use! But after the credit crunch, wages increases in both the US if capitalism is capable of producing ever increasing and the UK have been below the rate of inflation and in amounts of value, then how can we seriously claim some cases have been cut. The capitalists can achieve capitalism is a historically outmoded form of produc- this because of the increase of the reserve army of the tion? Why abolish it, when instead we can simply con- unemployed scrambling after fewer available jobs. trol the banks to direct investment and redistribute wealth more equitably?! 211. We cannot understate the importance of this, because the EC seem to have adopted a false method of ex-

33 h) The Husson Method It is identical to Kautsky’s view that crisis occurs because capitalists “suffocate in their own surplus”. This 214. In their defence of a rising rate of profit, Peter and incorrect economic analysis was but one of the fac- Lynn produce a single graph from a single ‘Marxist’ tions that led Kautsky to abandon the revolutionary source, the French economist Husson. However, as conclusions of Marxism. Below we shall consider the Andrew Kliman (2013) has already pointed out, Hus- programmatic aspects of the Socialist Party that have son’s measurement of profit (i.e. surplus value), en- been compromised as a result of the erroneous posi- dorsed by the EC, is not consistent with the Marxist tion on crisis. definition. Husson bizarrely includes the income of self-employed as “profit”, thus greatly inflating the rate of profit, as Kliman explains: i) Bank Nationalisation

215. “In addition, the “private enterprise income” that 218. As we previously explained, Lynn and the EC have Husson, Taaffe, and Walsh treat as profit includes the been advancing a two-stage approach to nationalisa- income––all of the income––of self-employed people tion in Party material, most recently in Hannah Sell’s (sole proprietorships and partnerships). But as the “The Case For Socialism” (2013) pamphlet. We high- U.S. Bureau of the Census (www.census.gov/econ/ lighted this in our first document, and we reproduce smallbus.html) notes, “About three quarters of all some of the content below, starting with a quote from U.S. business firms have no payroll. Most are self-em- an article written by Lynn: ployed persons operating unincorporated businesses ….” Now, if they have no payroll, they have no paid em- 219. “Workers are questioning the legitimacy of the capital- ployees. And even when unincorporated businesses ist system. What is required is a clear alternative. This do have employees, the owners get some of their in- means for a start, taking over the banks, not merely to come through their own work, rather than by exploit- subsidise their losses but to reorganise the banking ing their employees. Consider, for example, small system to act in the interests of society. This would be shopkeepers and plumbers who have one or two as- the first step towards a socialist planned economy, run sistants. Will Taaffe and Walsh please explain why they under workers’ democracy.” (Our emphasis Walsh, think that all of the income of self-employed people 2012c) who either have no employees or just a few employees should be counted as profit?” 220. A similar position is also put across in the Party’s latest pamphlet “The case for Socialism” (2013), published 216. At the time of writing this document, Peter and Lynn this year: have so far failed to answer this point. Capitalists ob- tain surplus value, in monetary form, because they 221. “So what is the alternative to dictatorship of the mar- employ workers to produce commodities and provide kets? As a start we call for the nationalisation of the big services but do not pay them for the full extent of the banking and finance companies...That is why a crucial value they create. Thus surplus value, or profit as un- step towards solving the economic crisis would be to derstood by Marxists, can only be created through the take into democratic public ownership the 125 or so exploitation of labour. It should be quite clear that a big corporations that control around 80% of Britain’s person who is self-employed is unable to “exploit” economy.” (Our emphasis) themselves, because on average they receive the full value of the commodities they produce. They are akin 222. Again, the Socialist Party EC presents the case that the to the artisan commodity producers that have existed banks should be nationalised first, and then the next for thousands of years. Does the leadership of our or- “step” would be to nationalise the economy, after an ganisation really consider a contracted brick layer, undefined amount of time. The Socialist Party EC justi- plumber or IT consultant a capitalist? Of course they fy this position because they claim it is in line with the don’t, but their sheer desperation to show a rising transitional programme and the transitional method. rate of profit has led to them to cling to any poorly re- However, in our view, this shows a failure to under- searched lifeline for supporting evidence, regardless of stand the transitional method itself.” the method employed. 223. We made the point that Lynn “believes that the banks 217. The EC’s position on the cause of crisis does not imply should be nationalised first, and this would ‘unavoid- revolutionary conclusions, but rather reformist ones. ably pose the question’ of nationalisation of the rest of

34 the economy after an undefined amount of time”. Lynn ing his position provided we have misread him, but responds by saying; “This is a ludicrous misrepresen- the content of his position is absolutely clear, not in a tation, a wilful distortion of our actual position”. But publication for general agitation, but in the theoretical is it? Unlike Lynn, we have attempted to avoid wilfully journal of the party! distorting anything by carefully following the content of Lynn’s arguments as they are written. What does 229. In the Transitional Programme Trotsky was abso- Lynn’s text say and what does it mean? For example, lutely clear: “However, the state-ization of the banks Lynn has repeated the content of a review of a book by will produce these favourable results only if the state Paul Krugman in Socialism Today: power itself passes completely from the hands of the exploiters into the hands of the toilers.” 224. “The banks and finance houses would have to be nationalised (not bailed out and propped up at public 230. Given that the nationalisation of the banks could only expense), and run under democratic workers’ con- take place where the working class have taken state trol and management. This would ensure the credit power, unless Lynn sees another political situation required to develop all sectors of the economy. There where this could happen, we question the logic of would also have to be capital controls to prevent any Lynn’s argument that the banks have to be seized as flight of capital. Such measures would undoubtedly a first measure? This is not a question of the order or meet the entrenched resistance of the capitalist class. prominence of demands due to worker’s anger at the State intervention in favour of the working class would bankers and the financial elite in our opinion. This is a unavoidably pose the question of the takeover of the secondary question. commanding heights of the economy, to form the basis of a democratic plan of production (run by elected 231. For example, the Editorial of The Socialist (2012) puts representatives of the workers and the wider commu- forward a different formulation to Lynn: “Does this nity).” mean we should retreat? No! But it poses the need to go further with the demand for nationalisation, under 225. Surely this cannot have any other meaning than that democratic workers’ control and management, of the Lynn proposes: that the banks are nationalised on their banks and the summits of the financial system togeth- own as a first step? It then “poses the question” of the er with the big monopolies that dominate the great takeover of the commanding heights of the economy! majority of the economy.”

226. How on earth can this be regarded as anything else 232. What is it to be? The simultaneous nationalisation of other than as a staged approach to the implementa- the banks and the whole of the economy, as is pro- tion of the socialist programme? How can we be ac- posed above, or a series of stages which begins with cused of distorting anything? Indeed, Lynn confirms the nationalisation of the banks and finance? Lynn this by quoting from another article he wrote in 2012: may plead a misunderstanding on our part, but our “87. Another quote from an article by Lynn (Spain: contention is that the compulsion over the nationali- Bank Bailout Can’t Stop Euro Death-Spiral, The So- sation of the banks as an initial measure has a number cialist No.722, 13 June 2012) calls for taking over the of worrying implications. We find no surprises that it banks “for a start”, as “the first step towards the social- gels with the demands of the left bureaucracy in the ist planned economy…” This does not in any way imply trade unions and the remnants of the left in the La- stages, where one stage has to run its course before we bour Party. A whole raft of left-reformists and radical can move on to further measures.” Keynesians call for the nationalisation of the banks.

227. We are tempted to resist being pedantic, but what do 233. Their ludicrous argument is that the bankers were the terms “for a start” and “the firsts step” mean other responsible for the crisis, and that state control of fi- than a series of stages? The meaning of the word “step”, nance would somehow mitigate further financial crisis amongst others, is “one of a series of actions, process- and lay the basis for bringing the economy out of the es, or measures taken to achieve a goal” and, more doldrums as an alternative to capitalist austerity. This concretely “a stage in a process”. By definition this in- notion is completely utopian. Attempting to appeal to volves a gap between the next “step” of a period of time the fact that there is widespread working class anger unless it is simultaneous. against the bankers is a cop out. Whilst the collapse of the banks triggered the crisis, we cannot describe 228. Lynn can, of course, claim that we are wilfully distort- 2007/8 as simply a monetary crisis rooted in the mal-

35 practice of “greedy bankers”, but rather one rooted in 237. Therefore, whilst we recognise that there is indeed “fu- the low rate of profit of capitalist production. It is this rious anger at the role of the banks”, our task as revolu- low rate of profit in production that led the capitalists tionaries is not to pander to this subjective mood, but to invest in an orgy of financial instruments, including rather to pose questions and demands that help the the infamous sub-prime mortgages. The driving forces workers understand the objective situation in order behind this were the laws of capital, not the psychol- to best equip them for the tasks of the socialist revo- ogy of individuals. Lynn does, of course, finish with lution. As we have explained, the banks and corpora- a clarion call for a socialist plan of production on an tions are not sitting on piles of money simply waiting international scale, but this can be equated with the to be taxed by a future TUSC government, but rather equivalent of referring to the old Clause 4 of the La- they are seriously in debt. Therefore, nationalising the bour Party. The Transitional Programme is a bridge banks and implementing a wealth tax will not only fail to the socialist revolution, not to a plan to reinvigor- to expropriate enough wealth to implement the pro- ate the diseased capitalist economy with some type of gramme of an elected left-reformist government, but it eventual move towards socialism. will also further exacerbate the crisis of the low rate of profit, such that corporations will go on strikes of capital and/or leave the country! j) TUSC and Left-Reformism 238. It seems ironic that we correctly point out the failure 234. This separation of bank nationalisation from the na- of left-reformism in, for example, Allende’s Chile and tionalisation of the means of production into two Chavez’s Venezuela, yet we promote exactly the same steps is uncomfortably close to the position held by approach in practice. Our current programme, along others within the Trade Unionist and Socialist Coali- with that of TUSC’s, is a path to disaster for the work- tion (TUSC) who have a reformist agenda. Theoreti- ing class. Only the achievement of state power by the cal clarity is very important for our party as we enter working class (after smashing the bourgeois state) and into agreements with other political groupings. If the by expropriating the capitalists as a class can we plan Socialist Party stands for two stages of nationalisation, production for use rather than profit. Such a revolu- then our position will come under attack from those in tion would act as a spark for revolutions in other coun- TUSC who stand for only the first stage of nationalising tries, and thus the beginning of the world revolution. the banks.

235. Lynn believes that it is ok to present our programme k) In Defence of the Genuine Transitional Approach in such a way where bank nationalisation “poses the question” of taking over more of the economy, be- 239. This does not mean, however, that we simply need cause “[t]here was – and still is – furious anger at the to repeat slogans like “one solution, revolution” and role of the banks and at the huge bailouts at the pub- “smash the state” and hope to one day make an im- lic’s expense.” However, this shows a failure to under- pact. The Transitional Programme is a bridge to stand the method of the Transitional Programme, as the objective situation. Thus, the demands we raise Trotsky (1938) explained: around nationalisation and workers’ control are absolutely correct at this stage. However, we should also 236. “We have repeated many times that the scientific not seek to deliberately mask our desire for revolution; character of our activity consists in the fact that we no matter how “unpopular” we think that may be, as adapt our program not to political conjunctures or the Trotsky said: thought or mood of the masses as this mood is today, but we adapt our program to the objective situation 240. “The reformists have a good smell for what the audience as it is represented by the economic class structure of wants as Norman Thomas – he gives them that. But that society. The mentality can be backward; then the po- is not serious revolutionary activity. We must have the litical task of the party is to bring the mentality into courage to be unpopular, to say “you are fools,” “you harmony with the objective facts, to make the workers are stupid,” “they betray you,” and every once in a while understand the objective task. But we cannot adapt the with a scandal launch our ideas with passion. It is nec- program to the backward mentality of the workers, the essary to shake the worker from time to time, to explain, mentality, the mood is a secondary factor – the prime and then shake him again – that all belongs to the art factor is the objective situation.” (our emphasis). of propaganda. But it must be scientific, not bent to the moods of the masses. We are the most realistic people

36 because we reckon with facts which cannot be changed leads, through logical necessity, to capitalism being by the eloquence of Norman Thomas. If we win imme- unable to develop the productive forces beyond a cer- diate success we swim with the current of the masses tain limit, hence the need for the revolutionary trans- and that current is the revolution.” (ibid) formation of the relationships in the economy and society to overcome these limits. 241. However, the Socialist Party Scotland EC in their erroneously entitled “In Defence of the Transitional 246. It is this objectively scientific understanding that can Programme” claim the exact opposite to Trotsky: “The answer all the illusions held by wide layers of the idea that we don’t articulate that anger [against the working class, that there is an alternative to the over- banks] and see it as an important development of con- throw of capitalism. But, more importantly, it can an- sciousness in our programme by advocating wealth swer the lies and distortions of the bourgeoisie and redistribution, wealth taxes, increased wages etc. as their reformist agents amongst the working-class with part of our programme would leave Marxism as a dry, the razor sharp logic of our arguments. arid concept, completely divorced from the realities of working class life.” 247. This is the real importance of Marx’s Law of the Ten- dency of the Rate of Profit to Fall; Not a technical theo- 242. We must teleport ourselves into the minds of the Scot- retical argument, but the lifeblood of the class struggle. tish EC to try to fathom where on Earth they got the Lest comrades believe this to be an abstract question, idea that we think we should not be in favour of de- we’ll leave the last word on the question of wealth re- manding the seizure of capitalist wealth, progressive distribution to another “academic” doctrinaire sectar- taxes on the rich or increased wages and, horror of ian: horrors, the nationalisation of the banks? Even the Communist Manifesto (1848) made such demands 248. “I have dealt more at length with the “undiminished” over a century and a half ago for “[a] heavy progres- proceeds of labour, on the one hand, and with “equal sive or graduated income tax” and “[c]entralisation of right” and “fair distribution”, on the other, in order to credit in the hands of the state, by means of a national show what a crime it is to attempt, on the one hand, bank with State capital and an exclusive monopoly.” to force on our Party again, as dogmas, ideas which in a certain period had some meaning but have now 243. Even so, a socialist plan of production is not, will not, become obsolete verbal rubbish, while again pervert- and never will be a plan simply for the “redistribution ing, on the other, the realistic outlook, which it cost of wealth”, which raises the idea in the minds of the so much effort to instil into the Party but which has working class that we are merely opposed to the un- now taken root in it, by means of ideological nonsense fairness and inequality of capitalism, no matter if ac- about right and other trash so common among the companied with revolutionary rhetoric. This doesn’t democrats and French socialists.” Marx (1875a) articulate working class anger but reflects back an in- choate misunderstanding as to the true nature of capi- 249. In our view, the pronouncements of the CWI leader- talist exploitation. Our task is to patiently explain the ship on the financial sector and the plan to redistrib- objective true reality of the nature of capitalism. ute wealth through the expropriation of the banks are all so much “verbal rubbish” and not based on a scien- 244. We do, of course, point out in a propagandistic way tific Marxist analysis of the crisis. the evils of inequality, exploitation and oppression of capitalism. We recognise the difference between our programme and our slogans we might use at particular l) The Danger of Political Liquidationism times. For example, the Bolsheviks used slogans like “Peace, brand and land” and “All power to the Sovi- 250. The lack of a culture of open debate within the Party, ets”, but their programme was always one based on the the low level of theory, erroneous economics analysis principles of scientific socialism. and the mainly uncritical approach to the Left Trade Union leaders raises the spectre of political liquida- 245. However, the key element is that revolutionary Marx- tionism: the dissolution of the revolutionary Party ists must patiently explain that the need for socialism into a broader, non-revolutionary formation. This has is not due to these common evils of capitalist society, happened previously, with the majority of the Scottish but is due to an inherent flaw built into in the very fab- CWI dissolving into the Scottish Socialist Party, for ex- ric of the capitalist mode of production itself. This flaw ample. It is not beyond the realms of possibility that a

37 similar scenario could occur with our Party in relation ground can accept. Specifically, it should be built on a to TUSC. left programme which includes such demands as that the rich must be made to pay for the economic crisis; 251. Of course, we do not discount the need for a broader that Ireland’s natural resources must be nationalised; left formation, like the Labour Party used to be, to act that there can be no coalition or alliance with right- as a “stepping stone” used by workers from reformism wing parties.” towards Marxism. The issue is around our approach to such a formation. 257. Of course, it is necessary to take account of workers’ consciousness in formulating a programme and de- 252. Polticial liquidiationism is one of the most extreme mands. However, as socialists we skilfully raise our forms of opportunism, where the long-term aim of programme. If a conference or meeting were organised building the revolutionary Party is sacrificed because to initiate a new party or alliance, the Socialist Party of either 1) the perception that more gains can be won would argue strongly for the new alliance to adopt a for “the movement” by uniting with reformist or bour- socialist programme as the best programme [to fight] geois elements, or 2) the unconscious drift away from against cuts, news taxes etc, but crucially linking these Marxism due to a decline in the level of theoretical day to day issues with the need to fight capitalism. If understanding of the membership and/or leadership. we were not successful, we would not walk away as Marxists are not opposed to working alongside reform- long as we could stand over the programme that was ist or even bourgeois elements, but it must always be adopted. We would, however, continue to fight and done on a principled basis, where the independence argue our ideas inside the new party or alliance and of the revolutionary Party is guaranteed in order to hopefully win people to our ideas. advance the Party’s programme and openly criticise, where necessary, the non-revolutionary elements of 258. The attitude of the SWP is to not even raise the issue the “alliance”, or United Front. The trend towards liqui- of socialism, but to argue for the building of an alli- dationism is therefore facilitated when these rights are ance on a reformist programme. This is an important not maintained and exercised, and where the theoreti- point which is not about words, but about raising and cal foundation of the Party is weak. fighting for socialist ideas – the reality is the SWP have lowered their banner dramatically in recent years. In 253. The Irish Socialist Party (2011) has written on the sub- Britain and to some extent in Ireland they have en- ject in their exchange of letters with the SWP, with re- gaged in a form of political liquidationism where they gards to forming the alliance that became the United throw themselves into broader formations such as the Left Alliance (ULA). These letters were printed in the Scottish Socialist Party, Respect Coalition or even the pamphlet “The United Left Alliance & the SWP”, subti- People Before Profit Alliance at the expense of build- tled “Socialist Party debates with the SWP on forming a ing a revolutionary socialist organisation. left alliance in Ireland & the role of socialists”. 259. The SWP are in favour from the outset of forming an 254. In the letter ‘Socialist Party response to SWP’s first con- unprincipled non-socialist block because they feel tribution to the debate’, under the heading ‘Reformist that people will not support socialist ideas... What is direction of the SWP’, the Irish Socialist Party correctly the logic in trying to fill the vacuum that has emerged criticises the SWP on the issue of liquidationism. We from the capitulation of Labour to the capitalist market feel it is necessary to reproduce the bulk of this text, by launching, from the start, a new reformist party?... It as follows: is vital that socialist policies, which are the only solution to the crisis, are advocated as broadly as possible 255. “It is important that those who claim to be revolution- as soon as possible.” ary socialists play a role raising the consciousness of the working class on political issues. The SWP, in their 260. It should be obvious to comrades in our Party that the reply to the Socialist Party, advocates a “radical left al- same criticisms made against the SWP could easily liance” with a number of proposals including the fol- apply to our approach in TUSC, e.g. “The attitude of lowing: the SWP is to not even raise the issue of socialism, but to argue for the building of an alliance on a reformist 256. “The basis of such an alliance should be the minimum programme.” A peruse of our TUSC literature online, that revolutionary socialists can accept and the maxi- created by our Party, shows in nearly every instance mum that activists coming from a left reformist back- no reference to socialism. In effect, the TUSC litera-

38 ture and platform is promoting the illusion that it is 264. The low rate of profit that plagues the advanced capi- possible to have a reformed, nicer capitalism with no talist countries means that the objective, material ba- cuts. For example, the TUSC leaflet for the Eastleigh sis for reformism, or a programme of reforms beyond by-election in February 2013 stated: anything of a trivial nature, is no longer a viable or realistic programme. Of course, we recognise that the 261. “Austerity and cuts are not working and they’re not subjective consciousness of most workers at this stage necessary either. Recent scandals involving compa- is still mainly reformist. But then our task is not to sow nies such as Amazon and Starbucks show how corpo- illusions in the possibility of reformism, but to help rations routinely avoid paying tax on their profits. The workers understand the severity of the crisis of capital- Public Service Union PCS estimates that up to £120 ism and the need for the revolutionary, socialist trans- billion is avoided or underpaid by wealthy individuals. formation of society. On top of this there is currently £750 billion squirreled away in bank accounts which big business is refusing to invest in the economy. There is no shortage of mon- m) Trotsky on the Trade Unions and the United Front ey to create jobs, build necessary affordable housing, improve transport and other infrastructure etc - It’s 265. Another aspect of our work that is affected is our ap- just not being used for our benefit. It’s time that we had proach to the Trade Unions. Trade Unions are the a voice representing us. TUSC aims to be that voice. basic unit that class struggle takes the form of on the Vote TUSC to help all of us shout louder.” industrial plane. It is essential that revolutionaries en- gage in all struggles within the Trade Unions. However 262. This sort of language would not look out of place if it the orientation we are taking towards sections of the came from the Labour Left or the Green Party. This is Union leaders is incorrect. not a programme that is transitional to socialism, but a reformist one. It flows from the incorrect approach 266. “The sections of the Fourth International should al- our Party has towards the United Front, as pointed out ways strive not only to renew the top leadership of above, but also from our false economic analysis. the trade unions, boldly and resolutely in critical mo- ments advancing new militant leaders in place of rou- 263. Whilst skilfully opposing every cut and highlighting tine functionaries and careerists, but also to create in every wasteful hypocrisy, and while potentially pro- all possible instances independent militant organiza- posing, for example , the use of council reserves as a tions corresponding more closely to the tasks of mass stop-gap while a campaign is built, the blunt idea that struggle against bourgeois society; and, if necessary, “cuts aren’t necessary” is a completely false line of not flinching even in the face of a direct break with logic and shows an utter failure to grasp the cause of the conservative apparatus of the trade unions. If it be the economic crisis. The economic crisis was funda- criminal to turn one’s back on mass organizations for mentally caused by an insufficient rate of profit for the the sake of fostering sectarian factions, it is no less so capitalists in the advanced countries to invest at a suf- passively to tolerate subordination of the revolutionary ficient rate. The rate of profit remains historically low mass movement to the control of openly reactionary (compared to the 1950s-60s) due to the high accumu- or disguised conservative (”progressive”) bureaucratic lation of capital and the high organic composition of cliques. Trade unions are not ends in themselves; they capital. The rate of profit can be restored by devaluing are but means along the road to proletarian revolu- either constant capital or wages. From the capitalist’s tion.” Trotsky (1938a) point of view, it is far more preferable to cut wages, because a devaluation of constant capital in a 1929-style 267. Unfortunately, recent experience in Unite, and the in- crash would lead to a 1930s-style depression and have vitation of Billy Hayes to Socialism 2013, our organisa- severe social, economic and political consequences, tion is overly oriented towards this very Trade Union including raising the spectre of socialist revolution bureaucracy, rather than the rank and file member- which the capitalists clearly want to avoid. Therefore, ship. Our independent and revolutionary programme the capitalists have opted to cut wages in order to re- has been diluted somewhat to the perceived need to duce their costs and raise their rate of profit. Addition- bloc with the reformists in a “United Front”, and thus ally, the state, by reducing the social wage through cuts our criticisms of the bureaucracy are severely reduced. in state spending, can subsequently reduce corpora- The tactic of the genuine United Front is to win the tion tax, raising the capitalist’s post-tax rate of profit. workers to our revolutionary programme by pointing out the short-comings of the reformists, not to bring

39 the politics down to the lowest common denominator appears to be tied much more closely to the bureau- in the name of unity. Trotsky was very clear on how the cratic apparatus. His organic link to Labour, despite his Party should conduct itself in the Unions: prevarication on this issue, has been unmistakeably confirmed. Although certain progress has been made 268. “The party can gain influence in the life of the trade under McCluskey’s leadership in the past period, this unions only to the extent that its members work in was badly damaged with his disastrous attempt to re- the trade unions and carry out the party point of view claim the Labour Party. there.... 273. McCluskey and Unite’s policy of signing up members 269. The minds of all Communists must therefore be com- to the Labour Party to win Parliamentary selection pletely purged of reformist prejudices, in accordance contests was a disaster. The Labour leadership was with which the party is regarded as a political parlia- able to lead an assault upon Unite, including use of mentary organization of the proletariat, and nothing the police, in order to keep the union in line. Also, the more. The Communist Party is the organization of the Unite convenor at Grangemouth was targeted by the proletarian vanguard for the ideological fructification employer Ineos. They saw Labour’s attack on the Un- of the labour movement and the assumption of lead- ion as a green light for victimisation of a Union steward. ership in all spheres – first and foremost in the trade This precipitated the action which led to the suspen- unions. While the trade unions are not subordinate sion of the steward, and has resulted in the workforce to the party but wholly autonomous organizations, being held hostage by the owners and a no-strike deal the Communists inside the trade unions, on the other agreed. Apparently, talks were held between McClus- hand, cannot pretend to any kind of autonomy in their key and our General Secretary, Peter Taaffe. This was trade-union activity but must act as the transmitters of a factor that led our Party to give him critical support their party’s program and tactics.” Trotsky (1924) in the Unite General Secretary election. While we have no illusions in Hicks, our support for pro-Labour Len McCluskey has brought us no credit within the trade n) Unite, McCluskey and Grangemouth union movement, and serious questions must be asked about the value of discussions of our General 270. The EC’s erroneous approach to the Trade Unions has Secretary with McCluksey. clearly been highlighted by recent events. The strategy of the Socialist Party leadership in relation to Unite has 274. The leadership of the Scottish organisation, clearly un- badly backfired. This has had serious implications in der the tactical and ideological direction of our Gen- the dispute in Grangemouth. eral Secretary, committed another serious error. The Scottish paper (2013) says “In the absence of a fighting 271. The role of comrades in Unite has not been the is- strategy by Unite to save the plant, including the oc- sue. The problem lies in the mistaken position taken cupation of the site and the building of a mass cam- at leadership level which has left workers at the plant paign across Scotland to demand that the Scottish/UK disarmed in the face of a disastrous capitulation of the governments nationalise Grangemouth, the pressure Unite leadership. The sacking of the senior steward proved too great for the shop stewards to resist. Never- and the signing of a 3 year no-strike deal was the price theless we recognise the commendable role the stew- paid for an unconscionable strategy. We believe it is ards and union activists have played at Grangemouth still possible to rescue this situation, and mistakes can over the last years in defending trade union rights and be rectified. However, we must look seriously at where conditions at the plant, which was emphasised by the we went wrong in relation to this dispute if we are not successful strike in 2008.” (our emphasis). destined to repeat the same mistakes. We also need to look at our endorsement of Len McCluskey in the 275. While on the one hand correctly commending the Unite election. stewards and union activists, we are implying that, in reality, they are to blame for lacking the mood to fight. 272. Although couched with some caveats, our support of But, never mind blaming the Unite leadership for not Len’s candidacy was posed in positive terms, despite calling for occupation; our organisation did not pose his unequivocal adherence to Labour. Jerry Hicks’s occupation concretely. It has also been raised that the program was similarly unclear and unable to provide Unite leadership in the person of Len McCluskey did a serious strategy for Unite members, like Len’s. Hicks tentatively take up the idea of an occupation but dis- is also seen by many as ultra-Left. However McCluskey covered that the workforce were not ready and unpre-

40 pared. This raises contradiction upon contradiction. confirmed the strength of this demand as a concrete Did McCluskey raise the idea of occupation? And why guide to action. The issue of closure was always a pos- therefore did we then choose to use the much weaker sibility. This would have “prepared” the workers far and rather token slogan of “prepare to occupy”? Also, more than a call to “prepare”. why did we, in our paper, as evidenced by the quotation above, criticise the Unite leadership for failing to 279. The slogan of occupation is clear in the minds of work- provide a fighting strategy if we did not go further? Our ers, yet the very best interpretation of our slogan was it position has more twists than McCluskey’s. was posed in a very unclear way. For example: initially the slogan was “prepare for the occupation of Gran- gemouth”. We don’t think this is adequate as a slogan. o) Occupy, or Prepare to Occupy? Either you call for an occupation or you don’t. That slogan is a half-way house. “Prepare for occupation” 276. The article also states “Following the announcement is only a useful slogan if it lists the preparations to be of the closure of the petrochemical plant Socialist Par- made. An example of preparation might be a call for ty Scotland wrote: “The next hours and days are vital communication with workers in other Unions to en- in ensuring the building of a mass campaign to fight to gage in immediate secondary action and for physical save the Grangemouth plant and retain the jobs and preparation, such filling up of thermos flasks, packing terms and conditions of the workforce. An urgent mass of sleeping bags and sandwiches and checking on any meeting of Unite members at Grangemouth should be urgent health and safety issues. The abstract “Prepare organised. The shop stewards at Grangemouth should to occupy” used in this context was a catch-all phrase draw up a plan of action to put to the workers to seek that looked 2 ways. It wasn’t sufficiently strong to dif- to defeat this act of corporate vandalism by Ineos. De- ferentiate us from elements in the leadership of Unite, cisive action by Unite, including the occupation of an which appears to have been its intent, but it gave the appropriate part of the site, would gain mass support misleading impression to workers that immediate oc- and apply huge political pressure on the Scottish gov- cupation wasn’t an urgent priority. Also it tried to give ernment to carry through the nationalisation of the the impression that we were serious to our own Party plant. Unite should now demand the nationalisation members and those at the forefront of the strike, with- of Grangemouth.” out calling for any action. It hides our real position. We thought that the workforce wouldn’t go for an occupa- 277. So there we have it. Occupation was posed only after tion. the announcement of the closure! We should have used the slogan of an occupation as a rallying call and 280. It appears we thought raising the issue concretely announced our views loudly and clearly- and before would put us out of step with the Grangemouth work- the closure was announced and before the workforce ers, the stewards and the Unite leadership; that this were further pressurised. Even after closure was an- would isolate us and make us “untransitional”. We nounced, it might not have been too late, but only if were afraid of looking “ultra-left”. We seemed to be we had consistently argued for an occupation. obsessed about measuring the consciousness of the workers. But this is abdication. And consciousness 278. On Friday we said “Prepare to occupy”, and on Sun- can change within hours. Woolly slogans like this were day we still continued with that line when comrades clearly thought through. Apparently, every word was were told “[t]here was no mood for occupation”. So it carefully weighed before we printed the leaflets. is disingenuous if we are informed we held the line of an occupation throughout this dispute. This is not 281. We have to ask the comrades involved, when they true, and attempts to hide history in order to rewrite asked the workforce to prepare, exactly what prepara- it later are not the Marxist method. We must not hide tions did they expect Unite members to make? The slo- our own shortcomings behind a defence of the Unite gan was weak, disarming, incorrect and deeply ambig- union which came under attack from the state, the uous. When the idea of occupation was raised on the media and capitalist political parties. If we had posed Socialist Party facebook group, the Secretary of Social- the issue of occupation clearly in the first instance, of ist Party Scotland said that this wasn’t a high priority course, workers may not have agreed with us. But it at this stage, that “there was no mood for occupation”. would have been the right slogan as it represented the reality of the objective situation. Occupation as part of 282. Over the same weekend, the website raised the issue a mass campaign was a necessity. Events would have of occupation, but again it was placed as a future event

41 and was buried at the bottom of the article and given EUR0.8 billion at Sept. 30, 2012. Aside from the short no prominence. This was because we underestimated sighted cry of “open the books!” to find out where Jim the seriousness of Ineos. Why? Because we were talk- Ratcliffe’s missing pot of gold is, opening the books ing up the idea that Ineos was one of the companies we may reveal profits but they may also reveal even larger identified in our national perspectives as drowning in debts. Remember the scale of the debts hidden at En- profits. Why would a company shut down a profitable ron, which was a manufacturing company. Just look- enterprise? ing at available accounts does not resolve anything. Enron’s accounts were great- a great work of fiction. 283. The confusion continues later in the article when we write “The potential for a mass campaign, similar in its scale to the Upper Clyde Shipbuilders sit-in in the q) Greedy Bosses? early 1970s was inherent in the explosive situation that existed around Grangemouth today.” 287. Later on in the Scottish article we say “…this wasn’t a ‘normal’ dispute and it’s clear that the Unite leader- 284. We are not sure if even the author of these words un- ship was not prepared for an all-out struggle that was derstands what this means. If the potential was there, needed against this particularly vicious and brutal why wasn’t it realised? We could have placed ourselves capitalist employer.” The idea that a “normal” dispute at the forefront of such a sit-in, instead of passively does not entail ferocious attacks from the employer calling upon workers to “prepare”. and came as a surprise to the Unite leadership is a strange concept. Len McCluskey himself had been present at the recent Mayr-Melnhof Packaging (MMP) p) Open The Books lockout of staff in the Bootle print factory. MMP per- manently closed the Bootle carton printing factory as 285. The article has another pearl of wisdom: “During these a result of another “abnormal” industrial dispute.The events at Grangemouth, Socialist Party Scotland has Austrian-owned company gave McCluskey a foretaste consistently demanded the opening of the books of In- of things to come informing workers of its decision not eos and all its subsidiaries to scrutiny by the trade un- to re-open the factory. ions.” This slogan has become prominent in our material. But again, this is a cover for a cock-up. So utopian 288. In a statement, Unite said: “The conduct of the com- is this slogan it barely merits comment, but there are pany is among the most shameful it has encountered. important myths to be busted. The slogan of “open the MMP has waged a war against the workforce, firstly books” may or may not be appropriate at certain times. locking them out of the factory, then sacking 53 work- Does Ineos, in fact, possess any books to be opened? ers in a concerted effort to break the workforce’s spirit The entity that is Ineos is almost 50% owned by Pet- and get them to accept poorer redundancy terms.” roChina. It is entirely utopian to think that the brutal Chinese Government are going to bow to an honest 289. Shameful behaviour by the company- yes! Waging demand to provide financial details. The idea also war against the workers- yes! So our soft-pedaling on that workers are going to be poring over the financial McCluskey, that he was completely unprepared due ledgers of a corporation that has, in all likelihood, par- to the “strange abnormality” of the Grangemouth dis- celled out its debts and assets using deliberately com- pute and the equally strange ferocity of the employers, plex and opaque accounting systems, perhaps verging does not wash. Len McCluskey, to his credit, visited on fraud, is similarly not useful. the MMP factory workforce. The point is, however, that his total unpreparedness and his inadequate industri- 286. As a Reuters report outlined back in 2011: “We still al strategy was based on concession bargaining and a view Ineos’ financial risk profile as “highly leveraged,” fantastic conviction that capitalists who close factories with sizable gross debt of EUR7.4 billion (at end-Sep- are “particularly vicious and brutal”. tember) and adjusted debt to EBITDA of about 5x under our scenario. Other risk factors are concentrated 290. The Scottish paper correctly points out that concession ownership, group complexity, and limited disclosure bargaining is a faulty strategy, but it does not explain on the ultimate parent company.” Although the re- why, other than that the “Socialist Party Scotland fully port also highlighted the liquidity (cash) held by the understands the huge pressures on trade unionists in company, the huge debt overhang is the key feature. this situation of savage capitalist austerity.” So it is the Ineos certainly has surplus cash estimated at about capitalists who have decided upon a policy of auster-

42 ity? No –it is the state which is carrying out austerity. an approach that encouraged Marxists to view their The state is imposing austerity to repair its bankrupt program and their intervention in the working class as finances. The capitalist class on the other hand are a bridge from the present consciousness of workers to supposed to be, according to our leadership, drown- the socialist revolution. ing in profits. Why should the bosses wish to “impose austerity” if they are drowning in surplus? Why close 294. Unfortunately, this concept has been much misunder- factories if they are creating such vast profits? This is a stood. Trotsky did not mean that we should base our ridiculous notion and this ambiguous, confusing and slogans and program on the most dispirited sections lazy phraseology has been generously applied to cover of the working class, as usually these are just a reflec- up an erroneous assessment of the period we are in. tion of the most dispirited sections of the bureaucracy. Trotsky insisted that all demands must reflect the ob- 291. If we really believed that the bosses have never had it jective situation. We have to recognize that, if we are in so good and that somehow the nature of the capital- a period of crisis, the faulty slogans of Grangemouth ist class has changed under neoliberalism to create a derive from a faulty assessment of the crisis of capital- greedier class of meaner capitalists, then we will obvi- ism and an incorrect application and understanding ously view a dispute like Grangemouth as being about of Marxism. a division of the profits- not a life and death struggle for workers at the plant. If the company really is drowning in surplus, then it is hardly likely to shut down a s) Who’s Zoomin’ Who? profitable part of its operation. Ratcliffe, the owner of Ineos, took a call on his yacht in the Med during the 295. The closeness of our Party to the General Secretaries dispute. This is supposed to be a telling insight into of many Unions, particularly CWU’s Billy Hayes, who the nature of the Super mean bosses. But is he acting was given an uncritical platform at Socialism 2013, any differently to capitalism since its beginnings? Can and Unite’s Len McCluskey, who thankfully did not we imagine a Carnegie or Rockefeller or even an Ian make an appearance at Socialism 2013, does not bring MacGregor behaving differently? Merely to pose the forward the day when we create a new workers’ party. question provides the answer. In fact, Hayes and McCluskey are only too eager to cover themselves with the socialist shield provided by the Socialist Party. But in the words of Aretha Franklin, r) Systemic Crisis of Capitalism who’s zoomin’ who? We are not influencing the Trade Union leaders. Rather, they are influencing us. 292. The objective reality is that capitalism, as a system of value production, is in big trouble. We are in a period 296. The reliance on Left Union leaders like Bob Crow is not where the system is generating, overall, a low rate of an alternative to creating clearly defined Left organisa- profit. The rate of return in the refining industry is also tions in these Unions. The present generation of Left notoriously low. Certain companies may have above union leaders do represent a step forward. But if Len average profits, but overall capitalism is struggling to McCluskey or any other Left Union leader has prom- generate enough profits as a system to prevent it from ised to consider the creation of a new workers party af- escaping crisis. This is a permanent feature of the cri- ter the election of Milliband and the implementation sis. Industrial struggles will now take a much sharper of his subsequent austerity program, this is a strategy aspect and we must be prepared to advance bold solu- lost on many workers. Kneeling before Labour and de- tions to the working class. But if we try to stay “in tune” livering Unite members to a Labour Government to with Union officials and dress this up as being in tune somehow teach them a lesson is a mistake. Supporting with workers we will be mistaking a transitional ap- McCluskey in the vague hope he may decide to create proach for another capitulation. a new workers party in the indeterminate future after a “betrayal” by Labour is a hostage to fortune and pro- 293. German Social Democracy had a minimum program foundly wrong. and a maximum program. The minimum program was aimed at the day-to-day struggles of workers, while the 297. We mislead our own members when we don’t fully maximum programme was a summary of what the fu- explain the ramifications of McCluskey’s program. An ture socialist society would look like. Trotsky saw the independent program is the best strategy and is in fact shortcomings in this approach and drew up the Tran- essential, even if the tantalising prize is the promise of sitional Programme. This was a series of demands or a conference to set up a new workers party. The blunt-

43 ing of our criticism of McCluskey is seen as part of to win concessions from a system with little left to give, this “transitional” approach. But this approach is not other than austerity, wage cuts and redundancies. transitional - it is reformist and intensely pessimistic. It judges that the consciousness of the working class is 301. In conjunction for a fighting strategy for the Unions, still affected by the collapse of Stalinism over 20 years a new mass workers party does not have the luxury of ago. an upswing similar to the boom at the turn of the 20th century that accompanied the rise of the Labour Party. British capitalism was then the world’s superpower t) Workers Are Ready to Fight with immense riches and could afford a degree of reform. Today, capitalism is mired in a severe downturn. 298. The creation of a new workers party is seen as a step The room for reforms is evaporating as quickly as the forward in the long process of transforming con- printing presses turn to sustain the artificial boom. A sciousness. A recent poll of Conservative voters told us new mass party of the working class is a crying his- that over 50% were in favour of nationalisation of the toric need but it will not repeat the same path of La- energy companies. The idea that even the advanced bour’s rise. We have to assess this period of history ac- layers of the working class have to be taken through curately and urgently as the crisis is far more serious the tortuous process of “developing consciousness” for the capitalists than we, so far, admit. Capitalism is to a point where they will consider taking serious ac- weak. We can put socialism not just on the agenda but tion is a mistaken application of the transitional ap- make it reality with the correct strategy and tactics. The proach. Workers are looking for a way of fighting back. Grangemouth dispute highlights this historic task. We It is their leaders, like Len McCluskey, who have, due must not fail the working class in the next period. to their pessimism, failed to provide any strategy for victory. We cannot blame setbacks on the supposed backwardness of the consciousness of the working u) The Faux-Transitional Method class. It is a question of leadership and of Party independence from these leaders. 302. The so-called “low level of consciousness” of the working class - the view that working class consciousness 299. Workers are ready to fight, but what are they fighting? is insufficient to deal with the challenges that it faces Are they fighting against an ideological offensive by - is not just an historical curiosity from the annals of the bosses, drowning in riches, who just want to be- Russian Marxism. We saw this arrogant attitude on come richer? Or are they fighting against a capitalist display at our Party event Socialism 2013. In discuss- class that is fighting tooth and nail to defend its very ing the reasons for the defeat of the workers at Gran- existence? The false premise that capitalism has un- gemouth, our General Secretary Peter Taaffe had this covered an historic new stage of capitalism called neo- to say: “We have to take a sober attitude towards the liberalism to exploit workers even more relentlessly struggles of the working people. Ours is not to laugh than in the past is palpable nonsense. Capitalism is in nor to weep but to understand. To better prepare the crisis. Crisis causes the system to lash out at workers to better to be prepared for the struggle that is coming. save its own skin. The main weakness in Grangemouth was that the Unite membership and the working class, we have to 300. This crisis of capitalism is fundamentally brought on be honest about this, had not been fully prepared by by the tendency for the rate of profit to fall. The fall- the events before. By that we mean the consciousness ing rate of profit has meant public debt has built up of the working class was insufficiently developed by enormously, and private companies have to fight to the events previous to Grangemouth, and by the lead- restore their profits. This is a crisis of too little profit, ership as well who have a responsibility in this situa- not too much. This crisis will see many more Grange- tion. That gave the excuse to Ratcliff to pull the house mouths as the capitalist system fights to save itself at down. He gave a very valuable lesson to the working the expense of the working class. The savagery of their class...the only way to defeat the blackmail is by mobi- attacks will intensify as the crisis proceeds. Desperate lising all the powers of the working class.” attempts to appeal to the bosses to see sense, like the Unite demonstration outside the homes of Ineos Exec- 303. Without doubt, the role of the Unite leadership was a utives, fail to highlight the seriousness of the crisis. The major factor in the dispute. It is the ABC of Marxism room for compromises by the employer class has be- that not just the Unite leadership, but in fact the trade come massively eroded. It is becoming more difficult union leaders in general are obstacles in the raising of

44 consciousness. That is a truism. But what does Peter the slogans the strategy and the vision to see a way Taaffe mean when he says that the leadership of Unite to win. Within the early Marxist movement in Russia have a responsibility to raise the consciousness of their there was a huge debate over the role of “conscious- members? Despite McCluskey’s well-established and ness”. ‘Credo’, a document authored by Russian Marx- supine adherence to New Labour, our General Secre- ists Kuskova and Prokopovich, tended to side with the tary bemoans the fact that he has failed to raise the lev- revisionist Bernstein and was considered heresy by el class consciousness of his own members! But why almost all Marxists in Russia. However, the ‘Credo’ is does Peter further compound his error and also lay important for us to look at today because its view of the blame at the door of the workers themselves? Os- how the consciousness of the working class develops car Wilde defined a pessimist as someone, who when chimes so harmoniously with the views of our Gen- confronted by a choice of two evils, chooses both. So, eral Secretary. Credo’s tactic was to bring the workers’ blame Unite’s leadership and the workers insufficient- movement to struggle for immediately realisable aims. ly high level of consciousness! This was defined as “economism” by Lenin. In reality it was a type of reformism. Credo was a key text in Rus- 304. When our General Secretary says “the consciousness sian Social Democracy because it was so roundly con- of the working class was insufficiently developed by demned for its economism. the events previous to Grangemouth” and that the “Unite membership” had not been “fully prepared by the events before”, he is unaware that this is an echo v) Economism of events and debates that we have discussed above. History repeats itself as tragedy, but the fact Peter can 308. Economism as a theoretical concept was a reformist come out with such rubbish is reminiscent of farce. import into Social Democracy/Marxism. It is quite dif- Again, this reflects the view of the Scottish Secretary ficult to compare it to any political trend within Marx- who unfortunately said that “there was no mood for an ism today as its program was related to the political occupation”. But the role of Marxists is precisely to give possibilities under Tsarist autocracy. However Lenin’s a voice to this mood. That is the role of a revolutionary definition is extremely relevant. Below is a lengthy party. quote from Lenin (1901), but we have used it because it describes Economism, not just as an historical se- 305. A recent Unite Executive Council Report, in part con- ries of demands, or a long-dead position on autocracy, tradicting Peter, claims that “[t]he UNITE workforce but more importantly as a political method; A method did in fact consider occupation but immediately ruled which diminishes the role of a revolutionary politi- it out on safety and security grounds alone.” But the cal party in shaping the consciousness of the working very next paragraph states: “It was learned that a sig- class: nificant number of highly skilled technicians - UNITE members - have left in disgust leaving serious staff 309. “Can a connection be established between primitive- shortages on safety critical functions on the site. There ness as growing pains that affect the whole movement, is no way this plant can be run safely and efficiently and Economism, which is one of the currents in Rus- without mutual cooperation and trust between the sian Social-Democracy? We think that it can. Lack of Company and the workforce and trade union.” practical training, of ability to carry on organisational work is certainly common to us all, including those 306. To use “health and safety” as an excuse to refuse an oc- who have from the very outset unswervingly stood for cupation is scandalous. It seems that the Unite leader- revolutionary Marxism. Of course, were it only lack ship, however reluctantly, accept workers on site when of practical training, no one could blame the practi- there are “serious staff shortages on safety critical cal workers. But the term “primitiveness” embraces functions on the site”, but not when there is an occu- something more than lack of training; it denotes a pation to defend said jobs and conditions! It is hardly narrow scope of revolutionary work generally, fail- surprising a “mood for occupation” did not develop ure to understand that a good organisation of revolu- with this approach from Unite. tionaries cannot be built on the basis of such narrow activity, and lastly — and this is the main thing — at- 307. Peter said “Ours is not to laugh or weep but to under- tempts to justify this narrowness and to elevate it to a stand.” However, Marxists must not complain about special “theory”, i.e., subservience to spontaneity on “insufficiently developed” consciousness, but give the this question too. Once such attempts were revealed, workers at the plant and across the country the tools, it became clear that primitiveness is connected with

45 Economism and that we shall never rid ourselves of tions to common lack of training and backwardness this narrowness of our organisational activity until we as a “sense for the realities of life”, reveal in practice rid ourselves of Economism generally (i.e., the narrow a failure to understand our most imperative practical conception of Marxist theory, as well as of the role of tasks. To laggards they shout: Keep in step! Don’t run Social-Democracy and of its political tasks). These at- ahead! To people suffering from a lack of energy and tempts manifested themselves in a twofold direction. initiative in organisational work, from a lack of “plans” Some began to say that the working masses themselves for wide and bold activity, they prate about “tactics-as- have not yet advanced the broad and militant politi- process”! The worst sin we commit is that we degrade cal tasks which the revolutionaries are attempting to our political and organisational tasks to the level of “impose” on them; that they must continue to strug- the immediate, “palpable”, “concrete” interests of the gle for immediate political demands, to conduct “the everyday economic struggle; yet they keep singing to economic struggle against the employers and the gov- us the same refrain: Lend the economic struggle itself ernment” (and, naturally, corresponding to this strug- a political character! We repeat: this kind of thing dis- gle which is “accessible” to the mass movement there plays as much “sense for the realities of life” as was dis- must be an organisation that will be “accessible” to the played by the hero in the popular fable who cried out most untrained youth). Others, far removed from any to a passing funeral procession, “Many happy returns theory of “gradualness”, said that it is possible and nec- of the day!” essary to “bring about a political revolution”, but that this does not require building a strong organisation of 311. One of Credo’s authors, Prokopovich, sided with Bern- revolutionaries to train the proletariat in steadfast and stein and his supporters like Edgar David who thought stubborn struggle. All we need do is to snatch up our that the important thing was not theory, but in giving old friend, the “accessible” cudgel. To drop metaphor, practical advice and understanding the insufficient it means that we must organise a general strike, or level of class consciousness amongst workers: “We that we must stimulate the “spiritless” progress of the conquered the sympathy of the masses by practical ac- working-class movement by means of “excitative ter- tivity that responded to the needs of the day. The rev- ror”. Both these trends, the opportunists and the “revo- olutionising of minds will get us only a few students. lutionists”, bow to the prevailing amateurism; neither We can’t get the sympathy of the masses by awakening believes that it can be eliminated, neither understands hopes for the future in them or by ideas that are not our primary and imperative practical task to establish so easy to understand. The revolutionising of the mind an organisation of revolutionaries capable of lending doesn’t start from the mind but from the stomach.” energy, stability, and continuity to the political strug- (Lih, p226) gle. 312. The lesson for us today, and the clear parallel, is the 310. We have quoted the words of B-v: “The growth of the underestimation of the consciousness of the advanced working-class movement is outstripping the growth layer of the working class, not the overestimation, is and development of the revolutionary organisations.” our greatest danger. Yet this is the road the Socialist This “valuable remark of a close observer” (Rabocheye Party Executive Committee have taken. Dyelo’s comment on B-v’s article) has a twofold value for us. It shows that we were right in our opinion that the principal cause of the present crisis in Russian w) Pessimism in the working class Social-Democracy is the lag of the leaders (“ideologists”, revolutionaries, Social-Democrats) behind the 313. Plekhanov took Prokopovich and the Bernsteinians to spontaneous upsurge of the masses. It shows that all task for the same fault: “Prokopovich wants to say that the arguments advanced by the authors of the Econo- the awareness of the masses always falls behind the mist letter (in Iskra, No. 12), by Krichevsky and by Mar- development of social relations. This is more or less tynov, as to the danger of belittling the significance of correct. But the only logical conclusion that follows the spontaneous element, of the drab everyday strug- from this is that the “revolutionary bacilli” should use gle, as to tactics-as-process, etc., are nothing more all means in their power to ensure that the awareness than a glorification and a defence of primitiveness. of the worker falls as little behind the development of These people who cannot pronounce the word “theo- real relations in a given society. The task of the bacilli is retician” without a sneer, who describe their genuflec- precisely the fullest development of the self-awareness of the proletariat.” (Lih, p227). If the consciousness of the working class is lagging behind events, the job of

46 Marxists is to lay out a way forward for them, even 318. In 1901, a group of Social Democrats in internal exile though it may not “chime” with the existing conscious- wrote a ‘Letter to Russian Social Democratic Press’ ness of the working class. where they robustly set out their disagreements with Iskra. Lenin (1901a) published the letter that was criti- 314. In the ‘Credo’ Kuskova said that she and Prokopovich cal of him along with his response. thought that the low level of consciousness was “de- pressing and capable of plunging the most optimistic 319. The letter says: “The principal drawback of the paper, Marxist into gloom.” (Lih, p239). Plekhanov quotes which runs like a scarlet thread through its columns Kopelzon, who said that Kuskova and Prokopovich’s and which is the cause of all its other defects, large view was “to talk to the worker mass in Russia about and small, is the exaggerated importance it attaches the abolition of capitalism, about socialism and in- to the influence which the ideologists of the move- deed the abolition of the autocracy in general (was) ment exert upon its various tendencies. At the same absurd and an unproductive waste of time.” (ibid). time, Iskra gives too little consideration to the material elements and the material environment of the 315. This pessimistic view of the consciousness of the work- movement, whose interaction creates a definite type ing class was an unfortunate feature within Russian of labour movement and determines its path, the path Marxism and was of particular concern to the ‘Iskra’ from which the ideologists, despite all their efforts, are group. Our friend (and Lenin’s friend) Boris Krichevs- incapable of diverting it, even if they are inspired by kii makes a comeback here. His “step-by-step” ap- the finest theories and programmes.” proach is uncannily similar to the position held by the EC over Grangemouth and what they consider to be 320. It is worth quoting more from this letter as Iskra’s fero- the transitional method: ““Krichevskii (around 1900) cious debating style had so many critics: “Thoroughly advanced his soon-to-be notorious ‘stages theory’… imbued with the sectarian intolerance so characteris- Workers advanced to political class awareness through tic of ideologists in the infantile period of social move- a series of predictable stages… Krichevskii did not ar- ments, Iskra is ready to brand every disagreement with gue that the Social Democrats should wait until the it, not only as a departure from Social-Democratic workers themselves worked out this or that interest… principles, but as desertion to the camp of the enemy. What he did advocate was a ‘pedagogical’ approach Of such a nature is its extremely indecent and most to bringing these ideas…The task of the revolutionary reprehensible attack upon Rabochaya Mysl, contained Social-Democrat is only to accelerate objective devel- in the article on Zubatov, in which the latter’s success opment by his conscious work, not to obviate it or sub- among a certain section of the working class was at- stitute his own subjective plans for this development.” tributed to that publication. Negatively disposed to (Lih, p294-5) the other Social-Democratic organisations, which differ from it in their views on the progress and the tasks 316. In other words, for the “economists” the task of Marx- of the Russian labour movement, Iskra, in the heat of ists was not to substitute their ideas for the existing con- controversy, at times forgets the truth and, picking on sciousness of the working class. The “step by step” or isolated unfortunate expressions, attributes to its op- “pedagogical” approach was condemned by Lenin and ponents views they do not hold, emphasises points should have been confined to the dustbin of history. of disagreement that are frequently of little material But this approach has been resurrected by the EC in the importance, and obstinately ignores the numerous twin forms of the “low level of existing consciousness” points of contact in views. We have in mind Iskra’s at- and the erroneously named “transitional approach”. titude towards Rabocheye Dyelo.” (ibid)

317. “Semen Kanatchikov, a Bolshevik full-time worker talks 321. The same Letter also says that Iskra should: “… wait un- about how ‘Rabochaia Mysl’ and ‘Iskra’ were viewed til the workers will have gathered sufficient forces for by workers and how they differed in their conception this struggle”. (ibid) of what the working class was capable of understanding: “Sometimes individual issues of the journal Rabo- 322. The message from the authors of the Letter was that chaia Mysl would come our way, and we would read the consciousness of Russian workers was greatly them with great interest…The mass of workers would, overestimated by Lenin and Iskra. as I would later have many occasions to learn, eagerly swallowed this ‘shop-floor bait’, but still their political 323. The problem of consciousness informs our whole ap- development failed to advance.” (Lih, p341) proach. If we think that the consciousness of workers

47 is insufficiently developed we will make serious errors party. It is time that comrades face up to the tasks of when we approach workers with our slogans and strat- building a revolutionary party in the 21st century. We egy. We will “taylor” our message to suit what we think believe our critique is a starting point for this neces- is the prevailing mood (level of consciousness) of the sary reorientation. working class. This is not the transitional method. This is adapting to what we mistakenly think is what the working class is capable of understanding.

324. A final witness from history is Nadezhdin (Man of Hope), who finished his career as a supporter of terror- ism. Nevertheless, he was a Social Democrat before he became disillusioned. His view of Iskra is illuminating nevertheless: “Iskra’s idea of ‘political agitation’ was to write down learned articles at a time when it should have turned to the mass of workers with direct calls for action.” (Lih, p361) He says “…middle workers simply did not read Iskra and Zaria and …therefore the message was not getting through.” (Lih, p369) Lih makes the point that Nadezhdin’s newspaper ‘Svoboda’ “became for Lenin ‘an emblem of vulgarised ‘literature for workers’”(Lih, p 370).

325. It is clear that we should not dilute our message. Insert- ing the mantra “transitional approach, transitional approach” does not mean inviting representatives of the ilk of Billy Hayes to our platforms in the forlorn hope of winning over a layer of organised workers. If we aim as low as this for the working class then we will hardly be seen as socialists, never mind revolutionaries. x) Conclusion

326. The leadership of our organisation claim to uphold Marxism and Trotskyism, yet in reality they have a false interpretation of the matters discussed in this document. They justify their moulding of Marx into a Keynesian by deriding us as “dogmatists”. They justify their accommodation to the Trade Union bureaucracy by declaring us as “ultra-left” and “cut off from the working class”. They prevent the robust and serious criticisms we make through the use of inflexible methods and distorting democratic centralism. The debate is closed down due to the “tone” in order to put comrades off from engaging in the actual content.

327. On this basis, our party can only offer the working class a stagnant political perspective, based on a stagnant economics analysis. The false methods of the Socialist Party Executive Committee on these issues are failing our comrades and the working class. We believe that these pessimistic, anti-Marxist ideas represent a major block to building a mass revolutionary

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