Day 272: Anti-Capitalism- A Beginner’s Guide

In a book about anti-capitalism we are naturally enough going to hear all sorts of reasons why it is that we should be opposed to capitalism. Many of these arguments will differ in sometimes surprising and indeed conflicting ways; but one thing they will all have in common is that they know what they are against: ‘Capitalism’ – or, more likely, refinements of the same such as ‘neoliberal capitalism’, ‘transnational capitalism’, ‘economic globalisation’, ‘corporate capitalism’. Whilst anti-capitalist literature is replete with reasons why one should oppose capitalism, they are often less helpful on what capitalism is and how it differs from other forms of social organisation. They are often less than forthcoming, too, on why it is that capitalism is ‘hegemonic’, why it appears natural or normal to so many (as it does). Thus what the beginner to the subject might already have asked him or herself is how it is that anyone came to think that capitalism was worth defending in the first place. So, thinking in terms of how to initiate the beginner into the nature of anti-capitalism, it is as good a place as any to start with some brief thoughts on capitalism itself. In particular we need to think about how capitalism established itself as a dominant economic system, and one accepted as rational and desirable by many across both the developed and developing world.

First of all it will be helpful to think about the central term capitalism itself. What exactly is capitalism? There are two ways of answering this question. The first is to think of it in abstract terms, that is in terms of what it represents as a relationship between people. The second is to think in more historical terms, i.e. of how it is that capitalism came about, and how it developed into the system we see before us today. Why do we need two ways of thinking about the same object? The easy answer is that since the dawn of capitalism in the early modern period (roughly the seventeenth century onwards) capitalism has obviously changed a great deal. Indeed it has changed so much that it is remarkable to be talking about the same ‘thing’ at all, the world of the twenty-first century being radically different to that of even the nineteenth century, let alone the seventeenth. Yet economists and commentators still agree for the most part that there is a fundamental continuity between then and now. What then is the continuity? Fortunately there is little controversy over the matter. Capitalism is not in this sense a particularly contested term in itself. What is contested is whether it is just, rational or otherwise in the best interests of humanity. In abstract terms it is said that we have capitalism where we see the following:

• private ownership over the means of production: land, factories, businesses;
• paid employment or, to put it another way, ‘wage labour’;
• creation of goods – or the offering of services – for profit via a system of exchange, i.e. the market.

This is a pretty anodyne definition, which is to say that most of those who take some professional interest in the matter would regard it with a shrug of the shoulders. This is what is intended. We are looking for a base line here: something that can be agreed on, so that we can understand exactly what it is that pro-capitalists celebrate and anti-capitalists object to. Looking at the definition other questions will, however, arise. Beginners as well as cynics might think that capitalism looks in this view utterly basic to human experience. What other kinds of economic relations might there be?

There is some substance to the concern, the chief among these being the relationship between capitalism and the market, or ‘commodity production’. Hasn’t there always been a market, and thus capitalism? The market or commodity production is indeed much older than capitalism, and there are those who would insist that virtually every society known to us embraced some form of market exchange, whether that be the exchange of shark teeth, beetroot or gold pieces. This is actually a very important point in relation to questions raised in relation to anti-capitalism, and so the need for clarity here is acute. The point is that the market is not an invention of capitalism, nor does the market of itself lead to capitalism. Markets have existed alongside all manner of different economic regimes and different forms of ownership. The mere exchange of equivalents does not necessitate or make inevitable wage labour, which is in turn the key to understanding the distinctiveness of capitalist production. Nor is the market in this sense something new or confined to capitalist economies. Markets have existed for longer than human history itself, which is not to say that the market is inevitable or necessary to human life as such, only that markets frequently arise in the course of human interrelationships, and will probably go on doing so as long as people want to swap things. But the point is, the market is not capitalism, and capitalism is not the market. So what is?

Looking back at the definition what becomes apparent is that one of the distinctive features of capitalism is that it serves a particular kind of market, namely that for labour. In pre-capitalist times labour was sometimes bought, but more often than not it was procured by some other means, classically by the institution of slavery, and more recently by bondage, vassalage, or other arrangement that rendered individuals directly subservient to someone else. Through force of arms, conquest, or some other more or less violent process people were made subjects of a lord or noble. As a slave or serf a person had little or no control over his or her own life, but rather was a mere adjunct of an ‘estate’ to which he or she was personally tied. As feudalism and slavery were overthrown or displaced, so those who were liberated became ‘masterless’ men (and women), freed to try and procure a living for themselves, usually through selling their labour to someone who needed it for the factories, mines and workhouses that accompanied the process of industrialisation. Here, in short, we see a process by which the economic relation of feudalism, namely control over the person is transformed into the capitalist economic relation in which some people buy other people’s labour power. Whereas in the market place of Ancient Rome or of ante bellum America it was people who were bought and sold, in the capitalist market place it is our labour power that is bought and sold. But what is our labour power bought and sold for? Why do people need to buy and sell labour power?

~~Anti-Capitalism- A Beginner’s Guide -by- Simon Tormey

Day 249: Free Lunch

When, in July 2007, two hedge funds run by the Wall Street investment bank Bear Stearns ran into difficulty, few could have guessed at the scale of the dramatic events that would follow. The funds, which had been worth $1.5 billion at the beginning of the year, were invested in financial products linked to what quickly became the notorious American subprime market. Sub-prime loans, to US households with impaired credit histories (the joke was that they were ‘Ninja’ borrowers, with no income, no job and no assets) had been around for many years. They however, along with adjustable rate mortgages (Arms), had expanded very rapidly from around 2003 and, more significantly, had been used as the basis for financial instruments – structured investment vehicles – sold to investors and traded between the banks. Mortgage-backed securities, as their name suggests, are financial instruments based on household mortgages. Even more sophisticated instruments, so-called credit derivatives based on those securities, ‘sliced and diced’ the original securities up even further and greatly multiplied the potential losses if there were problems with the underlying asset, the mortgage. The upshot was that if enough poor American families in Cleveland, Detroit or Fort Myers fell behind with their payments or defaulted on their mortgages the consequences would be felt by investors and banks many thousands of miles away. Think of it as an inverted pyramid resting on the unstable foundations of risky mortgages.

The Bear Stearns hedge funds were, to risk mixing metaphors, the tip of a very large iceberg, an early warning of the problems that were to follow. Even in early August 2007 after American Home Mortgage had filed for bankruptcy, most experts dismissed talk of a global financial crisis and it seemed that the problems arising from America’s subprime problems would be limited. However, it became clear that an international crisis was brewing when on 9 August the French bank BNP Paribas suspended three of its investment funds because of losses related to the US subprime market. An alarmed European Central Bank responded by pumping tens of billions of euros into Europe’s money markets.

What followed was a kind of domino effect, with banks regarded as weak or excessively dependent on wholesale money markets – rather than savers’ deposits – most heavily exposed. On 13 September, 2007 it was revealed that Northern Rock, Britain’s fifth largest mortgage lender, was being supported by ‘lender of last resort’ assistance from the Bank of England. The following day saw the first run on a British bank since Overend & Gurney in 1866. (Northern Rock was eventually nationalised by Britain’s Labour government, after a five-month attempt to find a viable private-sector buyer.)

After the excitement of August and September, when money markets froze from a lack of confidence between the banks in each other, there were hopes that the worst might be over. It was, however, a vain hope. In March 2008, after months in which Wall Street investment banks and America’s other large banks had announced ever-larger write-downs and losses on their subprime-related investments, Bear Stearns was forced to sell itself at a knockdown price to competitor J. P. Morgan. The deal was only possible because it was accompanied by a $30 billion loan from the Federal Reserve, America’s central bank. Bear Stearns, founded in 1923, had been part of Wall Street’s aristocracy, surviving the infamous crash of 1929 but now unable to weather the credit crunch of 2007–8. Indeed, the problems at its hedge funds eight months earlier had first exposed the crunch; now it was a victim of it. Soon afterwards, the International Monetary Fund said that the world was facing the biggest financial shock since the Great Depression of the 1930s.

Comparisons with the Great Depression and the bank runs of the Victorian era provided confirmation that something highly unusual was happening in the global economy. Indeed, policymakers looked to Walter Bagehot, the nineteenth-century economist, social theorist and constitutional reformer, who was editor of The Economist during the run on Overend & Gurney in the 1860s. Apart from computer technology, the global nature of the crisis and the fact that every move was played out on twenty-four-hour television, very little appeared to have changed since Bagehot’s day. ‘Every great crisis reveals the excessive speculations of many houses which no one before suspected,’ he wrote in Lombard Street: A Description of the Money Market, published in 1873. And, ‘the good times too of high price almost always engender much fraud. There is a happy opportunity for ingenious mendacity. Almost everything will be believed for a little while, and long before discovery the worst and most adroit deceivers are geographically and legally beyond the reach of punishment.’ Bagehot also understood what engendered financial panics: ‘Any notion that money is not to be had, or that it may not be had at any price, only raises alarm to panic and enhances panic to madness.’ As for the way such panics could envelop even those regarding themselves as too good, or too big to fail he comments: ‘A panic grows by what it feeds on; if it devours these second-class men shall we, the first-class, be safe?’

People turned to history for the answers because the events of 2007–8 were so unusual in the modern era. What, for example, was a credit crunch? Defined as a sudden reduction in the availability of credit and an increase in its price, this was a modern-day rarity. Recent history is littered with examples of governments or central banks deliberately restricting the flow of credit to the economy and increasing interest rates. For such a phenomenon to occur ‘naturally’ as a result of a sudden collapse of confidence in the banking and financial system was, however, different. It resulted, for example, in a 70 percent downward slide over twelve months in mortgage approvals – the number of new loans being granted – in Britain. The consequence of that extreme mortgage rationing was a dramatic drop in house prices. The discussion of Britain’s housing market and the debate over prices in Chapter Two of this book does not, you will see, even consider this possibility. While interest rates can and do rise and fall, the idea of a sudden turning off of the credit taps did not come into the debate. This was, if not uncharted territory, outside the direct experience of policymakers. The ready availability of credit had almost come to be regarded as the economic equivalent of oxygen or running water.

As comparisons with the Great Depression were made by the IMF and others, economists scurried for their reference works. J. K. Galbraith’s The Great Crash, 1929 first published in the 1950s, jumped back into the bestseller lists. Ben Bernanke, chairman of the Federal Reserve in succession to Alan Greenspan, suddenly appeared to be in the right place at the right time, as one of the foremost academic authorities on Depression-era economics. He had always argued that understanding the Depression was the most important challenge for economists, if only to prevent history from repeating itself. Mention of the Depression also brought John Maynard Keynes, who gets a chapter to himself in this book (Chapter Ten), to the fore.

~~Free Lunch: Easily Digestible Economics -by- David Smith

Day 224: Private Island

Wrightington Hospital, in the countryside near Wigan, grew in fits and starts around an eighteenth-century mansion that Lancashire County Council bought in 1920 after the death of its last resident, a spendthrift with a fanatical attachment to blood sports. The hospital promotes itself as ‘a centre of orthopaedic excellence’. National Health Service hospitals have to promote themselves these days. In 2011 it survived a brush with closure. It’s neat and scrubbed and slightly worn at the edges, unable to justify to itself that few per cent private firms set aside for corporate sheen, although it does have a museum dedicated to John Charnley, who, almost half a century ago, invented a reliable way to replace human hips with artificial ones, creating a benchmark by which the success and failure of the NHS would always be judged.

They still do hips at Wrightington, and knees, and elbows, and shoulders. They deal with joint problems that are too tricky for general hospitals. There’s a sort of blazer and brogues testosterone in the corridors, where the surgeons have a habit of cuffing one another’s faces affectionately. At the end of a hallway lined with untidy stacks of case notes in wrinkled cardboard folders Martyn Porter, a senior surgeon and the hospital’s clinical chairman, waited in his office to be called to the operating theatre. He offered me his intense, tired, humorous gaze. ‘The problem with politicians is they can’t be honest,’ he declared. ‘If they said, “We’re going to privatise the NHS,” they’d be kicked out the next day.’

The patient Porter was about to operate on was a sixty-year-old woman from the Wirral with a complex prosthesis in one leg, running from her knee to her hip. She had a fracture and Porter had got a special device made for her at a workshop in another part of the NHS, the Royal National Orthopaedic Hospital at Stanmore in Middlesex. The idea was for the device to slide over the femoral spur of the knee joint, essentially replacing her whole leg down to the ankle. ‘The case we’re doing this morning, we’re going to make a loss of about £5,000. The private sector wouldn’t do it,’ he said. ‘How do we deal with that? Some procedures the ebitda is about 8 per cent. If you make an ebitda of 12 per cent you’re making a real profit.’ You expect medical jargon from surgeons, but I was surprised to hear the word ebitda from Porter. It’s an accountancy term meaning ‘earnings before interest, taxation, depreciation and amortisation’.

‘Last year we did about 1,400 hip replacements,’ he said. ‘The worrying thing for us is we lost a million pounds doing that. What we worked out is that our length of stay’ – the time patients spend in hospital after an operation – ‘was six days. If we can get it down to five days we break even and if it’s four, we make a million pound profit.’

I felt I’d somehow jumped forward in time. A year had passed since the 2010 election that brought the Conservative-Liberal Democrat coalition to power. The Coalition’s programme promised: ‘We are stopping the top-down reconfigurations of NHS services, imposed from Whitehall.’ A few weeks after they gained power, a new health secretary, the Conservative Andrew Lansley, announced his plans for a top-down reconfiguration of England’s NHS services, imposed from Whitehall. When I talked to Porter, Lansley had barely been in his job a year, and hadn’t yet, supposedly, shaken up the NHS. But here was a leading surgeon in an NHS hospital, about to perform a challenging operation on an NHS patient, telling me exactly how much money the hospital was going to lose by operating on her, and chatting easily about profit and loss, as if he’d been living in Lansleyworld for years. Had the NHS been privatised one day while I was sleeping?

When the NHS was created in 1948, it had three core principles. It would be universal: everyone would get medical treatment whenever they needed it. It would be comprehensive, covering all forms of healthcare, from dentistry to cancer. And it would be free to use. No matter how much the system cost to run, no matter how much or how little any individual had contributed to those costs, no matter how expensive their treatment or how many times they went to the doctor, they’d never be billed for it. Through dozens of reorganisations since then, these principles have remained, along with another: that it’s never a bad time for a fresh reorganisation. Otherwise, much has changed.

The main source of the money that funds the NHS is still, as it was in 1948, general taxation. For the first thirty years of the health service’s existence, civil servants in Whitehall and the regions doled out annual budgets to hospitals and GPs according to the populations they served. Money flowed down from the Treasury, but it didn’t flow horizontally between the different parts of the NHS. Each element got its overall allowance, paid its staff, obtained its equipment and supplies, and co-operated, sometimes well, sometimes not, with the other elements, according to an overarching plan. The aim was fairness, an even spread of care across the country. In a monopoly healthcare system, competition has no place; on the contrary, it seemed sensible to the planners to avoid duplication of services. It was patriarchal and democratic, innovative and hidebound, cumbersome and cheap. For the majority without private insurance, if you were ill, you knew you’d always be cared for; if you were cared for carelessly, you had nowhere else to go.

Trying to describe in generally comprehensible terms how money flows through the NHS today would be hard enough without the shifting channels of policy. In England – Scotland, Wales and Northern Ireland have gone along divergent health paths – the various parts of the NHS had already begun altering or abolishing themselves in response to the reorganisation announced in 2010 when the reorganisation itself was reorganised. In 2012, the Coalition responded to the clamour against Lansley’s reorganisation by sacking Lansley and keeping the reorganisation. Truly you can’t step in the same NHS river twice. The last period of relative stability was just before Lansley came along, when, crudely speaking, the money flowed like this. Every so often – perhaps every year, or every two or three – the Department of Health made its pitch to the Treasury for the amount of money it thought it should get from the overall tax pot, and was then told how much it would actually get. Most of the money came from general taxation – income tax, VAT, corporation tax, duties on booze and tobacco – but a proportion came directly from national insurance, a vitiated form of the link between that levy and the welfare state its architects intended. In the last pre-Lansley allocation, Health got £101.5 billion for the following year, a slight increase. Most of it – £89 billion – was divided up between about 150 local agencies called Primary Care Trusts, or PCTs, spread around the country. PCTs acted as the ‘commissioners’ of health services, ordering a community’s medical care from hospitals, GPs and mental health professionals and paying them accordingly.

~~Private Island: Why England Now Belongs to Someone Else -by- James Meek

Day 29

This was indeed an age—economically, not politically nor ideologically—of enormous self-confidence. That confidence took two forms. There was the view— of neoclassical economists and their followers— that capitalism was doing very well, would continue to do well, and indeed bore within it the sources and resources of its own indefinite renewal. And then there was the parallel and no less modernist perspective which saw in capitalism—whether or not it was thriving in the present—a system doomed to decline and collapse under the weight of its own conflicts and contradictions. From very different starting points these were both, so to speak, forward-looking perspectives, and both more than a little self-satisfied in their analysis.

The two decades following the end of the late-nineteenth century economic depression were the first great age of globalization; the world economy was truly becoming integrated in just the ways Keynes suggested. For precisely this reason, the scale of the collapse during and after the First World War and the rate at which economies contracted between the wars is difficult for us to appreciate even now. Passports were introduced; the gold standard returned (in 1925 in the British case, reinstated by Chancellor of the Exchequer Winston Churchill over Keynes’s objections); currencies collapsed; trade declined.

One way to think of the implications of all this is the following: it took until the mid-1970s for even the core economies of prosperous Western Europe to get back to where they had been in 1914, after many decades of contraction and protection. In short, the industrial economies of the West (with the exception of the United States) experienced a sixty-year decline, marked by two world wars and an unprecedented economic depression. More than anything else, this constitutes the background and context for everything we have been discussing and indeed for the history of the world in the last century.

When Keynes came to write his General Theory of Employment, Interest and Money (first published in 1936), he was concerned—obsessed might be a better word— with the problem of stability and disruption. In contrast to the classical economists and their neoclassical heirs (his own teachers) he was convinced that conditions of uncertainty—with the attendant social and political insecurity—should be treated as the norm rather than the exception in capitalist economies. In short, he was proposing a theory of the world he had just lived through: far from being the default condition of perfect markets, stability was an unpredictable and even scarce byproduct of unregulated economic activity. Intervention, in one form or another, was the necessary condition for economic well-being and, on occasion, for the very survival of markets themselves. In a distinctively English key, this conclusion amounted to a version of Zweig:

we once thought everything was stable, now we know that all is in flux.

Yes, it is very striking, isn’t it—the very first chapter in Zweig’s World of Yesterday is about security, as the thing which has been lost. By this Zweig does not merely mean that there was a war and things changed. Everything of his young life that he recalls with such nostalgia and precision—his father’s household, the predictability of the roles that people performed—entailed and required a broader economic security which was never to return.

It seems to me that there’s a negative way of putting the point, as well. In the absence of reassuring and real global trade after the First World War, the project of making national economies self-sufficient is the dark side of the European twentieth century. After all, both the Nazis and the Soviets were consumed by the attraction of scale as the condition for well-being: with enough space, productive capacity and workers you could become self-sufficient and thereby recapture the security of global trade and exchange—on your own terms.

Thus, if you have, as Stalin put it, socialism in one country, it matters less that the world revolution has been indefinitely postponed. If you have sufficient Lebensraum, as Hitler believed, you can achieve something comparable: autarchy for the benefit of the master race.

So there is a desire to create new sorts of empire, combined with the sense that postimperial nation-states were just too small. The Austrians of the 1920s were obsessed with economic Lebensunfähigkeit, the assertion that having lost everything, and being reduced to so small and impoverished an alpine space, Austria could not possibly exist as an independent entity. The word itself illustrates the mood of those years: “incapacity for life.”

Recall, however, that interwar Austria, for all its reduced size and capacity, was blessed with an unusually sophisticated and well-established socialist movement, which was only defeated and ultimately destroyed as the result of successive reactionary coups: first in 1934 and then again in 1938. Austria was the distilled essence of everything that World War I had brought to continental Europe: the risk and even the likelihood of revolution; the longing for (and the impossibility of) a self-sufficient nation-state; the increased difficulty of peaceful political coexistence within a civic space unsupported by economic resources.
One is struck by the great historian Eric Hobsbawm’s comment regarding his childhood and youth in 1920s Vienna: you felt, he writes, as if suspended in limbo between a world that had been destroyed and one that was yet to be born. It was in Austria too that we find the origins of the other great current of economic theorizing in our times, running sharply counter to the conclusions associated with the work of Keynes and identified with the writings of Karl Popper, Ludwig von Mises, Joseph Schumpeter and, supremely, Friedrich Hayek.

~~Thinking The Twentieth Century--Tony Judt relating to Timothy Snyder

Day 27

O.S: Do the particular origins of the US Empire make it in any way different, more prone to ignore or deny history?

T.A: When I think about the origins of the American Empire, the first thing that comes to mind, of course, is that the colonists began by destroying the native population they encountered, and this was linked to a religious fundamentalist belief in their own goodness and greatness. I mean, the fundamentalists who came here, the pilgrim fathers, had a way of thinking that wasn’t basically different from that of the Wahabis or Osama bin Laden. In fact, there are lots of similarities between Protestant fundamentalism and Wahabi fundamentalism, and you see that in how they treat women, all the campaigns.

O.S: The Salem Witch Trials?

T.A: Exactly. You know, women are possessed by the devil. Beat it out of them. So that was the origin. Then you have slavery, the basis for much of the wealth generated inside the United States. Then you have the violent expansion of the empire, which is something Cormac McCarthy describes very well in one of his finest novels, Blood Meridian. Then you have the Civil War, which we are told is about the liberation of slaves, and which is partially to do with that, but which is essentially an attempt to unify the United States by force. So all this created the modern United States as we know it. And from the First World War onward the United States grew in size and influence, and became a dominant power, which after the Cold War has become an ultra-imperialism, unchallenged, unchallengeable militarily, very strong, without rivals. This is the first time in human history that an empire has been without any rivals. The Romans sometimes used to think that they were, but that’s because they weren’t totally aware of the strength of the Persians or even the Chinese. They thought in terms of the Mediterranean world, not globally. So, this is the first time that this has happened. And it made the leaders of this empire extremely complacent, who took the consent of their people for granted.

~~On History -- Tariq Ali In conversation with Oliver Stone