Posts Tagged ‘Banking Crisis’

Friedrich Engels: Principles of Communism

June 19, 2016

Engels Communism Pamphlet

Looking through one of the secondhand bookshops in Cheltenham last wee, I found a copy of Friedrich Engels’ Principles of Communism, published by Pluto Press. It was written in 1847, and is a very short introduction to Marx and Engels’ ideas of what constituted Communism. It’s 20 pages in length, and is written in the form of a catechism, Engels presenting their ideas as answers to the following questions: What is Communism? What is the proletariat? Proletarians, then, have not always existed? How did the proletariat originate? Under what conditions does this sale of the labour of the proletarians to the bourgeoisie take place? What working classes were there before the industrial revolution? In what way do proletarians differ from slaves? In what way do proletarians differ from serfs? In what way do proletarians differ from handicraftsmen? In what way do proletarians differ from manufacturing workers? What were the immediate consequences of the industrial revolution and the division of society into bourgeoisie and proletariat? What we the further consequences of the industrial revolution? What follows from these periodic commercial crises? What will this new social order have to be like? Was not the abolition of private property possible at an earlier time? Will the peaceful abolition of private property be possible? Will it be possible to abolish private property at one stroke? What will be the course of this revolution? Will it be possible for this revolution to take place in one country alone? What will be the consequences of the ultimate disappearance of private property? What will be the influence of Communist society on the family? What will be the attitude of Communism to existing nationalities? What will be its attitude to existing religions? How do Communists differ from Socialists? What is the attitude of the Communists to the other political parties of our time?

It’s basically the first draft of The Communist Manifesto, and Engels himself wrote to Marx saying the catechetical form should be dropped, and it should just be called the above.

What I found particularly interesting flicking through it was Engels’ discussion of modern industrial capitalism, which he saw as producing periodic economic crises. It was the task of the proletarian – the working class – not just to liberate themselves from capitalism by taking control of the means of production, but also to prevent further commercial crises occurring through the establishment of Communism, which would also be a more efficient economic system.

In answer to question 12: What were the further consequence of the industrial revolution? Engels writes

Big industry created in the steam engine and other machines the means of endlessly expanding industrial production, speeding it up, and cutting its costs. With production thus facilitated, the free competition which is necessarily bound up with big industry assumed the most extreme forms; a multitude of capitalists invaded industry, and in a short while more was produced than was needed. As a consequence, finished commodities could not be sold, and so-called commercial crisis broke out. Factories had to be closed, their owners went bankrupt, and the workers were without bread. Deepest misery reigned everywhere. After a time, the superfluous products were sold, the factories began to operate again, wages rose, and gradually business got better than ever. But it was not long before tooo many commodities were again produced and a new crisis broke out, only to follow the same course as its predecessor. Ever since the beginning of this (nineteenth) century, the condition of industry has constantly fluctuated between periods of prosperity and periods of crisis; nearly every five to seven years a fresh crisis has intervened, always with the greatest hardship for workers, and always accompanied by general revolutionary stirring and the direst peril to the existing order of things.

13: What follows from these periodic commercial crises?
First:
That though big industry in its earliest stage created free competition, it has now outgrown free competition; that for big industry competition and general the individualistic organisation of production have become a fetter which it must and will shatter; that so long as big industry remains on its present footing it can be maintained only at the cost of general chaos every seven years, each time threatening the whole of civilisation and not only plunging the proletarians into misery but also ruining large numbers of the bourgeoisie; hence either that big industry must itself be given up, which is an absolute impossibility, or that it makes unavoidably necessary an entirely new organisation of society in which production is no longer directed by mutually competing individual industrialists but rather by the whole society operating according to a definite plan and taking account of the needs of all.

Second: That big industry and the limitless expansion of production which it makes possible bring within the range of feasibility a social order in which so much is produced that every member of society will be in a position to exercise and develop all his powers and faculties in complete freedom. It thus appears that the very qualities of big industry which in our present-day society produce misery and crises are those which in a different form of society will abolish this misery and these catastrophic depressions. We see with the greatest clarity:
(I) That these evils are from now on to be ascribed solely to a social order which no longer corresponds to the requirements of the real situation; and
(II) That it is possible, through a new social order, to do away with these evils altogether.

14: What will this new social order have to be like?
Above all, it will have to take the control of industry and of all branches of production out of the hands of mutually competing individuals, and instead institute a system in which all these branches of production are operated by society as a whole, that is, for the common account, according to a common plan, and with the participation of all members of society. It will, in other words, abolish competition and replace it with association. Moreover, since the management of industry by individuals necessarily implies private property, and since competition is in reality merely the manner and form in which the control of industry by private property owners expresses itself, it follows that private property cannot be separated from competition and the individual management of industry. Private property must therefore be abolished and in its place must come the common utilisation of all instruments of production and the distribution of all products according to common agreement – an a word, what is called the communal ownership of goods. In fact, the abolition of private property is doubtless the shortest and most significant way to characterise the revolution in the whole social order which has been made necessary by the development of industry, and for this reason it is rightly advanced by Communists as their main demand. (pp.10-12).

In practice, central planning of a large, complex industrial society is far too difficult, and the results are massive economic inefficiencies and an acute shortage of goods. It’s one of the reasons Communism fell. However, since the adoption of neo-liberalism as the economic creed of the main political parties in the West, we’ve seen the same kind of economic crises that afflicted 19th century capitalism return with the banking crisis in 2008, along with the ‘iron law of wages’ which Marx and Engels observed in the Communist Manifesto was forcing down more and more of the lower middle class into the ranks of the workers, and impoverishing the workers as employers tried to cut wages.

But if it’s impossible to plan a nation’s economy absolutely completely, nevertheless Ha-Joon Chang in his book, 23 Things They Don’t Tell You About Capitalism makes the point that governments still carry out some forms of economic planning, not least in supporting research and development, in which private industry is reluctant to invest on its own. Thus some form of state planning is nevertheless effective in avoiding and ameliorating the economic crises which neoliberal economics create.

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From 2013: Private Eye on Energy Miss-selling and Connections to Banks

March 22, 2015

One of the other scandals to have hit this country is overcharging and miss-selling by the energy companies. The majority of people in this country would like to see the power companies renationalised. It has, however, become the modern economic dogma that as much of the economy should be in private hands as possible, ever since they were privatised, along with gas and water, by the Tories. Nevertheless, public outrage has been so intense that Cameron recently made a few gestures towards getting energy prices. Much more optimistic is Ed Miliband’s pledge to lower electricity prices and to make sure that they stay down and affordable.

In their edition for 19th April – 2nd May 2013, Private Eye published this article on Scottish and Southern Energy’s miss-selling. They also revealed the involvement of senior bankers, including officials from the Bank of England, who should have been guarding against such fraud.

Energy Miss-Selling
Fried Rice

The shockwave caused by the record £10.tm fine for Scottish and Southern Energy (SSE), punished by regulators for lying to customers about non-existent savings, has reached all the way to the Bank of England.

According to Ofgen, there was a “woeful catalogue of failure” by SSE managers, who allowed “a culture of miss-selling to continue. They weren’t doing enough to prevent sharp selling practices from their selling agents. They actually provided misleading sales scripts.”

All this is very embarrassing for Lady Susan Rice, SSE Group’s senior independent director, who has been on the SSE board since 2003 – and since 2007 has also been a director of the Bank of England where, somewhat alarmingly as a seasoned blind-eye turner, she chairs the audit and risk committee.

“Independent” directors are meant to ask uncomfortable questions that puncture “groupthink”. But this clearly didn’t happen at SSE, which caused “substantial harm” to its customers, Ofgem says. “Failings did not just take place on the doorstep but also in the management.”

Attempts to rein in misbehaviour were also ineffective. While “SSE terminated doorstep sales in July 2011, failure in telephone and in-store sales persisted”. SSE staff were given sales scripts which claimed that switching to SSE was “just like the government intended”. One dishonest spiel ran: “What I’m here to do today is show you a government thing called deregulation which results in your energy prices being lowered by doing nothing at all.” The false claims actually led to bigger bills for customers.

“Lady Susan Rice is, and will continue to be, a highly valued director on the Court of the Bank of England,” was the reply when the Eye asked if the SSE scandal meant she should perhaps resign from her Threadneedle Street Post.

Rice was appointed at SSE thanks to her other job as managing director of Lloyds in Scotland, which she fits in between sitting on Scottish first minister Alex Salmond’s council of economic advisers, chairing the Edinburgh Festivals forum and the city’s book festival, chairing the Chartered Banker Professional Standards Board and sitting on the Oxford Said Business School advisory council. Not to mention the National Galleries Scotland’s patrons committee and something called the Finance Group on Climate Change.

Busy bee Rice isn’t the only member of the miss-selling SSE’s board with a banking background. Chairman Lord Robert Smith was a director of Standard Chartered, which was fined $340m for money laundering in deals with Iran – and like Rice he has a government job, too; last May Nick Clegg announced that he would lead the government-funded Green Investment Bank. He is also chairing the 2014 Commonwealth Games Organising Committee.

Also paying less attention that he should have been as SSE was Richard Gillingwater, a director (£54,000 last year) since 2007. Eye readers will remember him as chief executive of the government’s Shareholder Executive when it oversaw the sale of taxpayer-owned development fund CDC’s fund management arm, Actis, to its former managers for a pittance. Gillingwater is now chairman of CDC itself and has just retired as dean of the Cass business school, teaching up-and-coming suits, er, how to run businesses properly.

In other words, the culture of miss-selling in the banking sector, which led to the collapse of Northern Rock, and the present global economic crisis, spread to the energy companies, on whose boards bankers sat. Contributing to the banking crisis was the fact that the ‘independent’ directors there, who were supposed to check miss-selling and misconduct there, did no such thing. They turned a blind eye, just as Rice turned a blind eye to miss-selling by Scottish and Southern Energy.

Deregulation has not caused energy prices to come down, just as it the deregulation of the banks did not lead to improved and responsible trading. Anything but. It’s time these sectors were cleaned up. And Miliband is a far better bet to do this, than either the Tories or their Lib Dem sycophants. They won’t do anything at all.