Expansionary Austerity is one of the discredited and utterly falsified economic theories the Australian economist John Quiggin attacks in his book Zombie Economics (Princeton: Princeton University Press 2010). It’s the idea that savagely cutting government expenditure will somehow restore economic growth. It was the policy adopted by governments across the world, including Dave Cameron’s Conservative administration in Britain, to save the global economy after it had been comprehensively trashed by the banksters in 2008. It was based on the theories of Albert Alesina and a number of co-authors, most notably Sylvia Ardagna and their study of how austerity had supposedly benefited various countries, Tales of Fiscal Adjustment: Can Austerity Be Expansionary. One of the countries examined in their study was Quiggin’s own, Australia. He went back and looked at what they said about it, and found that it was riddled with inaccuracies and errors. He gives the following examples to show how seriously, seriously flawed their study was:
*Alexina and Ardagna attribute the policy of austerity to “a leftwing government elected in 1985.” In fact, the government was elected in early 1983 at the depths of a severe recession. It implemented an expansionary fiscal policy. The recovery was well under way when the government took measures, beginning in 1984, to wind back the budget deficit.
Alesina and Ardagna assert that the main budget savings came from “cuts in transfer programmes …. mainly concentrated on unemployment insurance.” Spending on unemployment benefits fell but not because of cuts. The unemployment rate was falling, and expenditure on benefits declined as a result. This is the standard Keynesian “automatic stabilizers” at work.
Most strikingly of all they write, “Australia is a clear case of an ‘expansionary fiscal contraction.’ GDP grew faster during and in the aftermath of the adjustment, both in absolute terms and relative to the G7 countries. A private investment boom was associated with profits and easier access to credit following the financial deregulation process that took place in 1985-6. ‘ This is like the story of the man who jumps off a tall buiilding and says, as he passes the 25th floor, “All good so far.” Writing a decade later, in 1998, Alesina and Ardagna must surely have been aware that, almost immediately after their story ends, Australia entered the worst recession in postwar history.’ (pp.225-6).
Quiggin continues
‘Australia’s recession was triggered by contractionary monetary policy, but its severity resulted primarily from the collapse of the investment boom mentioned by Alesina and Ardagna. The boom was dominated by speculative investment projects undertaken by so-called entrepreneurs who took advantage of financial deregulation to build conglomerate empires that failed in the crisis, almost taking down the banking system with them. The Australian experience of the 1980s was a preview of what would happen in the United States and Europe in the 2000s.
To sum up, the tale told by Alesina and Ardagna bears no relation to the actual history of Australia in the 1980s. The most revealing point about their account is their eagerness to shift the burden of adjustment to a crisis onto its most vulnerable victims-the unemployed. In this respect, the literature on expansionary austerity of which this paper was a part might have served as a warning of the brutal policies that were to be adopted in the wake of the Global Financial Crisis.’ (p. 226).
Quiggin then goes on to discuss the global financial crisis and the austerity programmes that followed, showing how they were failures. These policies were nevertheless pushed because they allowed the 1 per cent elite to expand their wealth and power against everyone else. The chapter concludes by showing how the crisis could have been solved using Keynesian economics.
Despite the Tories’ pronouncements that austerity has ended, I’ve seen no evidence that this is the case. They continued to cut public expending catastrophically until forced to do the reverse by the Covid pandemic. And now that the world is going back to some semblance of normality, they’re going to return to it.
The working people of Britain and the west have been forced into poverty and starvation through nonsensical policies based on bad, massively inaccurate and biased research. It’s time austerity was discarded and Keynsianism, with a proper welfare state, was restored.
Thomas Sowell, Intellectuals and Race (New York: Basic Books 2013)
Thomas Sowell is himself a Black American intellectual. A former Marxist, he wrote an excellent book on Marxism which I’ve used on this blog, before crossing the floor to become a conservative. According to the blurb on the back flap, he is the Rose and Milton Friedman Senior Fellow for Public Policy at the Hoover Institution, Stanford University. That’s the same Milton Friedman, I presume, who backed General Pinochet’s Fascist regime in Chile because only a Fascist regime could introduce the free market reforms and abolition of the welfare state Friedman wanted against the wishes of the workers. The same Milton Friedman whose monetarism was considered so daft by economics lecturers in the 1970s that they simply didn’t bother discussing or refuting them. The same Friedman who caused consternation in Tory ranks in the late 1980s when he announced that his policies were a failure.
Race and IQ in the views of the Progressives
The book is a survey of official attitudes to race, intelligence and social, economic and intellectual achievement from the Progressive era around the close of the 19th century and the beginning of the 20th up to the late 20th century and today. These two periods had markedly different attitudes towards race, and especially its supposed links to intelligence. During the Progressive era, senior academics, intellectuals, politicians and policy makers followed the social Darwinist dogmas of their day and believed that race defined intelligence. They believe in a racial hierarchy of peoples, with Nordic Whites at the top, southern Europeans below them, Black Africans below them and right at the bottom aboriginal Australians. This led to brutal, callous and genocidal attitudes towards race. Francis Galton, Darwin’s cousin, declared that ‘we should not be sentimental about the gradual extinction of inferior races’. They were particularly worried about the decline in superior Nordic immigrants from Europe and mass immigration from the supposedly inferior peoples from southern Europe. Hence they were keen to impose legislation limiting the arrival of the latter. They were also afraid that intellectual inferior Whites from the lower orders would also outbreed their more intelligent social superiors, and so imposed legislation providing for their sterilisation and isolation. These men weren’t cranks. They included leading academics from America’s best universities, and politicians like American presidents Theodore Roosevelt and Woodrow Wilson. Most of the examples Sowell gives were on the political left. They believed in conservation, state intervention, publicly owned utilities and strong trade unions. He does, however, mention that over here in Britain eugenics’ supporters included Ernest Beveridge, H.G. Wells and Conservatives like Winston Churchill.
The American authorities thus initiated a programme of IQ testing, the results of which do appear to show that they were right about the average IQ of certain racial groups at the time. But many of the groups whose IQ scores were low have gone on to achieve considerable social and economic success. Blacks had an average IQ of 85, but other immigrant groups like Greeks, various Slavic peoples also had IQs in the low 80s, while Spanish immigrants had an average IQ, on these tests, of 77. These low-scoring peoples also included eastern European Jews, which is astonishing given the massive uplift of the Jewish community and their prominence in academia. As for the Chinese, who believers in the Bell Curve consider are superior to Whites in intelligence, they were found to have an IQ of 98. Interestingly, Blacks from the northern US scored higher on IQ tests than southern Whites. This racist ideology had a direct effect on Black employability. Under Wilson, various state departments, such as the post office, began to sack their Black workers. But not all of those who believed in the link between race and IQ were monsters. One psychologist stated that he took 3 sessions with a child before administering the test. He believed the children he saw were more intelligent than the tests showed. he therefore spent time getting them used to him. In the first three sessions he let them play, drawing on the blackboard, making things with clay. It was at the fourth session he administered the test. Using this technique, the children’s test scores went up by 8 points. This psychiatrist still believed that this was a small amount, but it is roughly half of the 15 per cent average difference between Black and White IQs. The link between IQ and race was later discredited when another psychiatrist issued damning criticisms against it, one of which was that the tests were not often not administered in a language the subjects, often immigrants, understood. The same psychiatrist also did not believe that Blacks were incapable of being educated, but thought that they could achieve much more given better teaching methods.
General Rise in IQ
He also notes that IQs generally are rising, and that no-one really knows the true range of the Black IQ, or even that of the human race as a whole. The reason why average IQs have always remained at 100 is that they’ve been periodically renormed to keep 100 as the average level. If they weren’t, and psychiatrists continued using the same standards, then the average Black IQ would 104. As for the range of Black intelligence, he cites the example of a nine year old girl, who by one set of tests had an IQ of 140, and 200 by another set. Unfortunately, his scepticism towards racial differences in IQ does not extend to the Bell Curve, whose authors and work he defends. He notes that they state in the book that there isn’t enough evidence to decide one way or another if IQ is affected by race.
But IQ alone does not explain why some groups outperform others, even when their intelligence is exactly the same. For example, Chinese with an IQ of 100 perform at the same level in jobs, education and so on, as Whites with IQs of 120 or so.
Culture and Historic Environment as the Determining Factors in Ethnic Skills and Performance
Sowell believes that the performance of ethnic groups depends on the environment in which these groups historically lived and their traditional culture. These create skills which have allowed minority groups the world over to achieve prominence in business and academia, such as the Germans in Latvia and Bohemia, the Jews in eastern Europe, and the Chinese in Indonesia and Malaysia. These groups have often prospered despite immense persecution, like the Jews. For example, Italian immigrants to the US and Australia were dirt poor. But they always repaid their debts, hence a separate bank was set up in California, the Bank of Italy, was set up to cater to them. This bank eventually became the Bank of Italy. At the same time there was a marked disparity between the achievements of Jewish and Italian kids at school. The two groups lived in the same areas and attended the same schools. But Jews did much better than Italians. Why? Sowell puts this down to different cultural attitudes towards education. Even the poorest Jews had a respect for learning, while there was a hostility to it in the Italian south, from which many of the latter migrants came. When there Italian government introduced compulsory schooling, there were riots, and attacks on teachers and schools. He takes issue with some of these groups now being described as ‘privileged’. A survey of different races in Toronto declared that the Japanese were the most privileged people in the city. But the Japanese owe their success to their own efforts, not privilege. They were also subjected to restrictive legislation and were interned during the Second World War for far longer in Canada than in the US. He is also highly sceptical that racism accounts for the poor performance of American Blacks. While they’re often the last to be hired, and the first to be fired, the next in line for sacking are Whites. Asians are the last to go, and perform better generally than Whites, even in White owned companies. But this is not mentioned in discussions about race, as it would cast doubt about the poor performance of Blacks being solely due to White racial prejudice.
White Racism as the Cause for Black Marginalisation
And it’s White racial prejudice which is the dominant explanation for Blacks lagging behind Whites and the rest of society today. This began with Gunnar Murdal’s 1944 book, An American Dilemma, which claimed that this was due to ‘confused and contradictory’ attitudes among Whites. But Sowell considers this an insufficient explanation, as American Blacks made their greatest progress, both professionally, economically and educationally, during the period before the Civil Rights Act, when racism and overt discrimination was far more acute. He also describes how White racial attitudes changed over time. For example, from 1840 to 1890 some areas were remarkably racially tolerant. In these cities, Whites and Blacks lived in the same areas. As time went on, Blacks not only exercised their right to vote, but also were elected themselves in areas where the majority of voters were White. There were no zoning regulations and the communities weren’t segregated. Sowell believes this was because the Black communities that had moved north in this period had become acculturated and had the same values and standards of behaviour as their White neighbours. This changed with mass Black migration from the south. Sowell draws on observers to the south, like Alexis de Toqueville, Frederick Olmsted and others, to argue that there is a common southern culture, shared by Blacks and Whites, and ultimately coming from the British immigrants that settled those areas. This culture rejects education in favour of aggressive masculinity., The new Black migrants had none of cultural values of the previous Black arrivals,. Crime rates shot up, dismaying the traditional Black citizens as well as Whites. As a result, these communities introduced zoning laws segregating the two colours.
As time went on, the Progressives called themselves liberals, and the explanation for Black underachievement and poverty changed from intelligence to White racism. The solution for these ills, as proposed by the intellectuals, is multiculturalism. Blacks are to be given greater access to academic places through preferential treatment that allows them to get into universities with lower grades than White applicants. At the same time, the features of Black culture that are holding the Black community back are either excused or simply denied as well as the racist attacks by Black gangs on Whites and Asians. Multiculturalism, according to Sowell, is not only not working, it is actually positively harmful.
Affirmative Action Holding Blacks Back Educationally
The book argues that, contrary to the claims made by some educationalists, there doesn’t need to be a ‘critical mass’ of Blacks in a class to get the bright Black students to do better. What works instead is when bright blacks are put in with Whites at the same intellectual level. As for university admissions, much harm is being done through mismatching Black applicants with the wrong colleges. Elite American universities are giving places to Black students, who without such preferential placements would have gone instead to second tier universities. These students find it difficult to keep up, and drop out. The second tier universities, denied a pool of applicants from these aspiring Blacks, offer places instead to Blacks, who would have gone to third tier institutions. And these two drop out, all the way down the line. This is a controversial assertion, and has been argued against, though the professors doing so have not made their research available to scrutiny by others. The book instead to the academic results achieved by the University of California when they dropped giving such preferential placements. There were drops in admissions at the some campuses, but of the Blacks who attended, more passed with better grades. He also argues from the example of Amhurst College that teaching Black history and insisting on Black culture also isn’t necessary for Blacks to get ahead. Amhurst was a Black only college that sent a small but significant number of students on to Stanford. Alumni from the college have said that they were taught Black history as it affect America, like slavery and abolition. But beyond that, it wasn’t taught and there was no interest in it. They said they knew about as much about Africa as they knew about Finland.
He also criticises such academic preferential programmes on the grounds that they don’t work for the poor who really need them. Instead the places offered go to members of the upper classes of the groups targeted. In America, that means the children of lawyers and businessmen. And it’s the same with the Indian version of affirmative action.
The Decline of Black Communities Following the ‘White Racism’ Explanation
Sowell also gets angry about how multiculturalism has led to the decline of life in Black communities. Anything done by Whites for Blacks is immediately suspected of being for some sinister, racist purpose. When a subsidized housing project was built in Harlem in the 1960s, writer James Baldwin declared that it showed how much Whites hated Blacks. That was why people were urinating in the lifts, smashing anything they could, and fornicating in the playground. Sowell argues that there was never a time when this would have been acceptable, and it didn’t occur before the ’60s and White racism became the explanation for everything. He cites the memoirs of other former residents of Harlem, who say that when they lived there, none of this vandalism and loutish behaviour occurred. He cites Theodore Dalrymple, one of the columnists in the Spectator, who declared that the same destructiveness is found among lower class Whites in Britain. They can’t blame racism, so it must come from a common attitude of resentment fostered by the post-60s intelligentsia.
He also argues that most Blacks were against the race riots of the 60s, citing polling data. One of the polls showed that 58 per cent of Blacks thought the riots were harmful for them. But the rioting was excused by the media, which claimed that the anger that fuelled it was quite rightly felt by all Blacks. Sowell is concerned and angry at the way Black culture is being dragged down to the lowest common denominator of rioters, criminals and vandals. He suggests that Black underperformance in schools comes from a resentment of intelligent, academically able Blacks by other students, who will attempt to stop them from achieving. And the same attitude, according to Dalrymple, exists among White Brits. From my own experiences at school forty years ago, I think Sowell has a point. There is a resentment among some Blacks and some Whites, not all, against anybody, who seems to be doing better than them, and they will bully them. For Sowell, this clearly harms the Black community when middle class Blacks feel compelled to emulate the poor behaviour of their less-achieving classmates.
Multiculturalism Preventing Blacks from Acquiring Social Skills Leading to Achievement
This attitude prevents Black Americans from acquiring the same civic qualities and skills that other groups have in their progress upward through society. For example, German Jews were highly acculturated, compared to more recent immigrants from eastern Europe. They took it upon themselves to educate and uplift them. As a result, eastern European Jews from Romania and elsewhere were told to learn English, speak without vulgarity ‘and learn the uses of soap’. Two Black newspapers in one of America’s northern cities advised Black arrivals not to dump their rubbish in the yard or the passage by their houses, watch their language, and not to talk too loudly on the tramcars. In other words, to act couth. Sowell doesn’t mention it, but similar attitudes were impressed on the British working class during the 19th and early 20th century as part of the culture of working class respectability.
Again, there’s a similar example from Britain. In the 1980s or 1990s, according to the Independent, the head of education in one of the northern towns had lost her job following accusations of racism by the Pakistani community. She’d been concerned at the way they took their children out of schools to send to Pakistan for three months at a time. This was damaging their educations. But the Pakistani community denounced her as racist, and had her sacked. It was over a decade before the council realised she was right and had the courage to reverse the policy.
Multiculturalism Creating Anti-White Racism and Violence
And then there’s the racial animosity produced by multiculturalism and its attitude that all Black America’s problems are due to White racism. This has led to racist mob attacks by Blacks against Whites and Asians, but they aren’t reported. In one, where a gang of Blacks attacked a White girl and 10 others, the cops when they arrived weren’t interested in taking down their statements or particulars, but told them simply to go home. As for a girl left bleeding from a punch, they laughed at her and joked ‘White girl bleed a lot’, which became the title of a book arguing that there was more violence by Blacks against Whites than the reverse. When these attacks occur, the race of the attackers is never identified. They are just unspecified ‘youths’. And if the details are given, then racism as a motive is both denied and justified. After a White woman was gangraped in Central Park by Blacks, a New York Times hack declared that racism wasn’t a cause, but it was part of their motivation as resentment against their treatment by White society. At the same time, a White academic has redefined racism so that it depends on power and privilege, as a way of denying Blacks can be racist.
Something very much like this has happened in Britain. Back at the end of the 20th century and the beginning of this one, Whites were briefly the ethnic group suffering most racist assaults. And it was noted that the number of racist murders of Whites was nearly at the same level as the White racist murder of Blacks. And then there were the Asian grooming gangs, were allowed to get away with their predations for 20 years because the police and authorities were afraid of being accused of racism. And there have been the same accusations of the media cover-up of racist assaults and murders of Whites.
Another White academic felt that it was only right that young Whites should be denied places under academic preference schemes, considering how he had benefited from White privilege. Sowell states that he was therefore punishing someone younger, who had nothing to do with it, for something he himself had done. He makes the point that these decision are not about abstract people, but affect real individuals.
Slavery
He also discusses slavery, which is now held to be simply a case of Whites enslaving Blacks. But it has existed all over the world, from the days of the Roman Empire onwards. Before the arrival of Europeans, Africans enslaved other Africans, and there were more slaves in India than in the whole of the USA, and slavery was also extensive in China and southeast Asia. White Europeans were also enslaved by the Barbary pirates. Before the technology existed to transport slaves en masse, most civilisations enslaved people of their own race. As for racist lynchings, fewer Blacks were lynched in American history than Armenians were killed by Turks, or Ibo tribesmen by Nigerians in one year.
The Racism Industry and Its Assault on Business
He is also critical of what he terms the race industry and particularly the American equivalent of the Equal Opportunities Commission/ Equalities and Human Rights Commission. This prosecutes companies for not employing the correct number of ethnic employees according to demographic statistics, leading to long, expensive cases costing millions of dollars which drag out over the years from court to court. And this is despite no individual actually claiming they were subjected to racism by that corporation. Few companies can afford this process, and so they settle out of court. While this technically means that no offence has been made, it is taken by the department as an admission of guilt and a victory for them.
And what also infuriates Sowell is that none of the intellectuals, who ever pushed these policies, whether it is the racism and genetic determinism of the Progressive era or contemporary multiculturalism, ever has to take the consequences of their views. But academics, news people, politicians and educators will pay the price if they speak out against these orthodoxies. But intellectuals, meanwhile, promote these views with impunity, seeing themselves as the anointed on the side of the angels.
Sowell’s Right-Wing Bias
The book has a clear conservative bias. It’s no accident that Sowell marks out the Progressives as the promoters of social Darwinism, despite the same views being held by the right. Big businessmen during the Silver Age of the 19th century used social Darwinist arguments to oppose welfare and safety at work legislation. It was no use passing these laws, they argued, because the poor would never really benefit and would instead become a burden on society while outbreeding their brighter, more successful social superiors. But American conservatives are now using past racism to discredit anything left-wing. Previous generations of left-wingers were supposedly racist, so you shouldn’t back their policies today. It’s pure guilt by association. He likewise blames the expansion of the welfare state for the decline of the Black family, and argues that Black employment fell as a result of minimum wage laws passed in the 1930s. The motive of some of those arguing for them was that they were needed to prevent Chinese workers undercutting Whites. But this did happen, and resulted in race riots against the Chinese in 1909 in Britain. Then a number of companies sacked their White workers and replaced them with Chinese, causing the riots and racist attacks on Chinese people. After this, the firms sacked the Chinese workers and rehired the Whites. As for minimum wage laws today, these are desperately needed whether the workers are White, Black, Brown, Yellow or whatever. Without them the mass poverty we’re already seeing thanks to neoliberalism and the war in Ukraine will become particularly acute.
Decline of Marriage Not Due to Welfare State
I also disagree with his statement that the decline of marriage and the two-parent family among Black Americans is due to the welfare state or its expansion. I’m sure he’s right that this occurred in America about the same time as LBJ passed the welfare legislation of the late 60s, but as Sowell himself says, correlation is not causation. In Britain the marriage rate declined as a result of the sexual revolution of the 60s, but only really got going in the 1970s,, several decades after the introduction of the welfare state by Clement Attlee’s Labour government in 1948. The decline of marriage as an institution might have been aided by the socially liberal legislation passed by Roy Jenkins in the 1960s, which made divorce much easier, but I think it has far more to do with a changing attitude towards sexual morality than greater welfare provision. At least over here in Britain.
Racial Tensions Increasing
But I do think he has a point about multiculturalism and the way it is leading to greater racial tensions. At one point in the book he states that in the 30s, 40s and 50s Whites would go into Harlem for entertainment and parties. This rings true, if only because this was the heyday of some of the great Jazz musicians and their orchestras – Louis Armstrong, Dizzy Gillespie, Howlin’ Wolf, Duke Ellington. Yeah, I know, some of these were really in New Orleans, while Howling Wolf was in Chicago. At the end of a good evening’s fun, people were even able to sleep in Central Park unmolested. I believe that as well, as I’ve read interviews with various writers – I think one of them was veteran journalist of UFOs and the weird John Keel – who have done so.
And I do believe that attributing all of Black America’s problems to racism is making the situation worse. Note here that Sowell doesn’t deny racism existed or exists now. He just doesn’t believe that it’s the ultimate cause of Black America’s dire situation, not when other groups have suffered the same persecution, started out with the same low IQ scores, but have managed to rise and prosper like Jews, Asians and the Chinese. And here the book becomes a warning. Throughout history the resentment of the success of one ethnic group by the others, from the Czechs’ resentment of the Sudetenland Germans, to the Chinese in southeast Asia and Malaya, the Indians and Sinhalese in Sri Lanka, and the Jews in eastern Europe, has resulted in terrible official persecution and ethnic cleansing. Here he could have added the White farmers in Zimbabwe, attacked, beaten and murdered by Robert Mugabe’s thugs. These tensions have been exacerbated by versions of affirmative action. This suggestion also contains another veiled criticism of socialism, as the resentments he criticise also apply to those at the bottom of society against those at the top, and he is very much against redistributive economics. But redistributive economics through a strong welfare state in Britain has meant that there hasn’t been the level of grinding poverty that there is in the US, where the living standards of some parts are worse than some developing countries. This may be one of the reasons why the crime rate here in Britain and Europe has traditionally been lower than the US. People traditionally haven’t been as desperate. Quite apart from the fact that if social tensions in America and Britain have got worse, it’s because of an increasing gap between the rich and everyone else, so that ordinary Americans and Brits don’t feel that the system is rewarding them as it should for their hard work.
Critical Race Theory as an Explanation for the Failure of Affirmative Action Programmes
Sowell states that these affirmative actions programmes were, in many cases, only supposed to be temporary. But they have always been renewed. We’ve had positive discrimination in Britain for forty years now, ever since riots of 1981/2. These were also supposed to be only temporary. I think the intention was that after Blacks gained proper demographic representation proportional to the White majority, the situation would become self-sustaining. The programmes could be discontinued because Blacks would no longer need such official help. But this hasn’t happened. Blacks still lag behind, and have been particularly hard hit by austerity and the banking crisis.
I think this is one reason why the radical left is pushing Critical Race Theory and White privilege, even though some of this is obvious nonsense. CRT holds that the level of racism is the same today as 100 years ago. It’s just better hidden. But I doubt that very, very much. At the same time, all Whites are racist and benefit from the privilege of having White skin. But this is also not true, as shown by the White vagrants you can see on the streets and the very fact that many of the BLM protesters were White. There is institutional racism, but I don’t think it can be held to be the source of all the Black community’s problems. And I do fear that the belief that White racism is responsible for Black poverty and marginalisation is just increasing racial tensions. CRT and White privilege seem to me to be a desperate attempt to explain why previous anti-racism policies haven’t worked, and making even more dubious claims. Sowell states that the supporters of multiculturalism never give any supporting evidence for their views, and are never asked for any. It’s just assumed they’re right. The Black Tory MP, Kemi Badenoch, has today been reported as stating that the concentration on race is resulting in greater segregation. She may well have a point.
Perhaps now’s the time that multiculturalism and its accusations of racism as the cause of Black poverty and marginalisation should be questioned.
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.
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.
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