Where we are? Capitalism works, for some

 

If you are a socialist there are three questions you need to ask:

1.  Where are we?

2.  Where do we want to be?

3.  How do we get from 1 to 2?

All we need to do is answer those 3 questions and we’ll be on the way to socialism. So here goes with question 1.

 

The majority of people in the World are living in, broadly speaking, capitalist societies. There are arguments about whether that is a description of Russia, China and Cuba but let’s leave them to one side.

 

Capitalism works well for a minority and not so well for many millions of people who have, literally been left behind.

 

According to the Credit Suisse Global Wealth Report, the world’s richest 1 percent, those with more than $1 million, own 44 percent of the world’s wealth. Their data also shows that adults with less than $10,000 in wealth make up 56.6 percent of the world’s population but hold less than 2 percent of global wealth.

 

In 2018, the three men at the top of the Forbes 400 list — Amazon founder Jeff Bezos, Microsoft founder Bill Gates, and investor Warren Buffett — held combined fortunes worth more than the total wealth of the poorest half of Americans. (Inequality.org)

 

In short, the rich continue to get richer whilst the poorest remain in destitution. We are taught to aspire to be rich rather than to help the poor. By definition rich people are not in debt. By definition poor people are. That debt is often, indirectly, owned by the rich. So, in addition to living in poverty and not having enough to eat, the world’s poor are forced to give what little income they do have to those with huge houses, yachts, cars and extremely comfortable lifestyles. If that is not a definition of immorality, I don’t know what is!

 

In the U.K., according to a House of Commons briefing paper, the total amount of household debt rose from £747 billion in 2001 to £1,785 billion in 2018. The ratio of debt to disposable income increased over the same period from 98.9% to 133%. In simple terms household debt is now running at one-third more than people can afford to pay off, even if all they did was pay down their debts. According to research by the Money Charity the average household in the U.K. was £60,636 in debt in January 2020. This amounts to more than £31k per adult which is 112% of average earnings. 

Just to be clear, debt is only a problem if it is called in. Most debts are repaid over a time period so that people still have enough to live. For many people though debt is out of control and they are robbing Peter to pay Paul. In 2019 there were 4,580 house repossessions in the U.K., an all time low but housing experts predict these numbers could rise again following Brexit and the pandemic. In December 2019, The Big Issue reported:

 

An estimated 320,000 people are homeless in the UK, according to the latest research by Shelter. This equates to one in every 201 Brits and was an increase of four per cent on the previous year’s number.

 

The economic recession of 2008-9 was caused by banks lending ever increasing amounts of money to people who had no realistic chance of paying it back. Those debts were then bundled with other debts and sold on, until eventually the bubble burst. Thousands of people worldwide lost their jobs, their homes and their dignity, and the banks greed led to the policies of austerity that have been responsible for so much misery. I don’t do predictions but it started with unsustainable debt, so what do we think might happen shortly?.

 

By any measure being in debt which you cannot pay is miserable. But it pales into insignificance compared to being forced to live in a war zone. Since 2001 over 800,000 people have been killed in armed conflicts. Currently around one-third of the land mass of this planet have ongoing armed conflicts. If you need proof that our system is dysfunctional it is that 75 years after Hiroshima and Nagasaki heralded the end of World War 2 we still regard war as a legitimate means of solving conflicts. In 2019 the United States alone spent around $718.69 billion on its military. 

 

Wars may be bad for the people caught up in them, but they are good for business. Lockheed Martin Corporation (USA) sold  $44.9 billion of arms in a single year, Boeing  (US) around $26.9 billion, Raytheon (US) $23.8 billion, whilst the UK’s biggest manufacturer BAE Systems (UK) sold $22.9 billion in 2017. 

Between them the top 15 arms manufacturers sold $231.6 billion in 2017 amounting to over 50% of their sales. Arms manufacturing might be entirely immoral but it is also highly lucrative. Just 4 of the top arms manufacturers employ close to half a million people. And, there sole business is the destruction of human life. The Watson Institute reports:

 

“The wars in Iraq, Afghanistan, Yemen, Syria, and Pakistan have taken a tremendous human toll on those countries. As of November 2019, 335,000 civilians in these countries have died violent deaths as a result of the wars. Civilian deaths have also resulted from the US military operations in Somalia and other countries in the U.S. war on terrorism.”

 

War, and its toll, is built into the fabric of capitalism. People become socialists for many different reasons but any socialist who supports an imperialistic war is no socialist at all. As I pointed out last week Labour MP’s voted to bomb women and children in Syria mainly so that they could embarrass a leader they didn’t support. War is not about heroic feats on the battleground but the devastation that is left behind including the civilians left displaced.

 

Capitalism’s greed has created a situation where 79.5 million people are displaced (according to UNHCR). This amounts to 1% of the World’s population. Of these people 40% are children. In any civilised social system we would be providing all children with safe environments to enjoy their childhood. These displaced people’s have few rights and what few they do have are under constant threat.

 

UNICEF reports that some 385 million children live in extreme poverty. In the U.K. it is estimated by the Child Poverty Action Group that around 4.2 million children live in poverty. Worldwide, around 3.1 million children die from undernutrition each year. UNICEF estimate that more than half of global child deaths are related to hunger and under nutrition which make children more vulnerable to illness and exacerbate disease. According to the US Department of Agriculture, more than 11 million children in the United States live in, what they term, "food insecure" homes which means that those households don't have enough food for every family member to lead a healthy life.

 

It’s easy to blame parents for childhood poverty, as if that somehow lets the system off the hook. But, if you are born to parents who become impoverished through bad luck, ill health or misfortune, that is hardly their blame. The fact is that we have privatised childhood so that communities rather than caring for children can simply point the finger at those who fail to do so. 

 

The reality is that in our society most people exist by working for a living. Being out of work or unable to work is not like taking a holiday unless your idea of a holiday is not having enough money to eat and pay for luxuries like gas and electric. Yet, unemployment is an endemic feature of the social system. In the U.K. alone there are currently 1.4 million people who are unemployed. Worldwide it is estimated that in the so-called developed economies the unemployment rate is over 8% of the adult population.  This amounts to over 190 million adults with no paid employment and many of those in countries where there are no adequate benefits.

 

Unemployment can seem like a private tragedy rather than a systemic problem. Capitalism has always required a pool of what Karl Marx called a ‘reserve army of labour’ in order to drive down wages and conditions. But, as unemployment grows so does child poverty, crime and prostitution. Whilst that reserve army might benefit capital it does not benefit society as a whole.

 

Workers first line of defence against capital is trade union membership. In the U.K. there has been a decline in union membership as the large industrial sectors – coal, steel, ship building etc – have been destroyed, and production moved elsewhere where labour is cheaper and unorganised. According to the Department of Business, Energy and Industrial Strategy trade union membership in the U.K. now stands at 6.35 million (as of June 2018). However, whilst 52% of public sector employees are in unions, the comparative figure in the private sector is 13%. This represents a real challenge for the left as we are constantly drawn into defending the pay and conditions of public sector trade unions. This has a real danger of promoting a divide amongst workers as private sector workers, already on far worse conditions, become resentful of what to them may appear to be the more pampered conditions of those in the public sector. It is worth making the point that what were termed “essential” workers during this pandemic were probably fairly evenly split between public and private sector.

 

As of December 2019 the ONS estimated that there were 5.44 million people employed in the public sector, of which 1.73 million were employed by the NHS alone. The private sector is 5 times the size of the public sector, accounting for 27.55 million workers. In 2016, the average public sector worker earned 13% more than their private sector counterpart. Despite this, recent research has suggested that some public sector workers are thousands of pounds worse off compared with 2010, before the introduction of limits on public sector pay. Private sector employees are more likely to be in non-unionised, casual work with no holidays or sick pay.

 

Work is dominated by the demands of a handful of multi-national companies. The largest of these used to be General Motors which has a net worth of $228 billion, and employs 164,000 people in 396 facilities on 6 different continents. But in a sign of the times General Motors is no longer in the top ten companies in the world. All of those are technology or financial companies including Microsoft (151,000 employees), Apple (137,000 employees), Amazon (840,000 employees), Alphabet/Google (123,000 employees), Facebook (52,000 employees) and Visa (19,500 employees).  These multi-nationals are often not subjected to legal restrictions, often avoid paying tax and act, in effect, as mini-states. Governments court these companies with sweetheart deals to encourage what has come to be called ‘inward investment’. The emphasis on inward investment distorts local labour markets and creates an economic dependency on companies who have no loyalty to any particular government.

 

Capitalism works on the basis of investing capital for a return. Capital cares little, if anything, about the welfare of ordinary people. What drives investment is the rate of return. Michael Roberts, a Marxist economist has analysed historical data to show that Marx was right, the rate of profit does have a tendency to decline. The basis of these calculations is quite technical but his summary is interesting:

 

“…whatever measure is used, the rate of profit in 2015 is lower than in 2012; lower than in 2006 (the peak of the last cycle); and lower than in 1997 when most measures peaked.  So there is currently a downward phase in the rate of profit. .”

 

This is significant because if Marx is right, and historically his analysis has been shown to be remarkably prescient, capitalism exists in a cycle of peaks and troughs with the gap between them getting shorter over time. The way in which larger companies stay competitive is by eating up the competition. As Michael Roberts says in another blog post, whilst the American economy is contracting the ‘fearsome four’ (Microsoft, Amazon, Apple and Alphabet Google) are continuing to be competitive. They have achieved this domination by effectively squeezing out competitors, often by acquiring companies simply to destroy them:

 

“But this is not new in the history of capitalism.  Successful companies in new expanding fields of capitalist accumulation have grown from small to large and eventually to ‘monopoly’ positions: railways, oil, motor vehicles, finance and telecoms.”

 

So, where are we? As socialists we are about where we have always been. Caught between our internationalist impulses and seeing the World as ending at our national borders. A seeming minority that probably has far more support than we realise. At the dawn of a new era, but not entirely sure when the current one will end.

 

Capitalism is in crisis, but this is nothing new. Capitalism is nothing if not flexible. It is a system driven purely by acquisition without moral responsibility. What is rational for a single capital may destroy lives, may even destroy the planet, but will provide the short term adrenaline rush of success measured in the accumulation of wealth.

 

Those who think that capitalism can be beaten by rational, or moral, argument entirely misunderstand, that whilst capitalists (and their many acolytes) may be rational, and moral, the system they exist within is neither of those things. 

 

So, we face a World riven apart by ethnic tensions, nationalist and imperialistic war, environmental degradation and now the threat of untreatable disease. A world where for a few people to live in opulence previously unimaginable, and a supporting layer to live relatively comfortably, millions, literally hundreds of millions, have lives of destitution, degradation and demoralisation. For the richest citizens of this planet to “enjoy” their bounty the poorest must be driven into ever more extreme poverty.

 

But, because capitalism is constantly lurching from one crisis to the next, there are possibilities for socialists and, more importantly, for socialism. As more and more people are pushed into in-work poverty, as debt rises and working conditions deteriorate in order to maintain unobtainable rates of profit, then workers have a choice. Accept the lowering of their own living standards and see their children’s opportunities diminished, or organise and fight back. First in trade unions but also in progressive political parties. 

 

Whether capital or worker wins is largely determined by material factors which are difficult to predict. General strikes in France and Bolivia show that workers can only be pushed so far before they push back. The concessions granted are a sign of the relative strength of the ruling class. An audit of where we are shows that for many millions of people capitalism isn’t working, for many millions more it is working only to keep them just above the poverty level. The question is: where do we want to be. And, that is the question for next week’s blog.

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