I reject bureaucratic and authoritarian visions of socialism and look instead to the radical tradition of socialism from below, which believes that liberation can be achieved only through the activity and mobilization of the exploited, and oppressed themselves. My goal is workers’ power; a socialist democracy that is far more democratic than any capitalist society, and that has nothing in common with Stalinism.
Capitalism's current crisis is not the same as the crisis called capitalism. The former was caused by elite efforts to free themselves from constraints on profit making, which not only worsened material conditions for millions of people, but jeopardized their own wealth. The latter is an institutionalized class war waged by elites on the rest of us and is characterized by extreme disparities in material wealth and decision making power. The two combined could prove a detonator for class conflict in the U.S. and some have already begun to fight back.
Conditions for the bottom 80 percent of the U.S. population continue to worsen. Home foreclosures are forecast to be roughly 2.25 million for this year alone, over double the annual rate before today's housing crisis. The month of November saw the loss of over half-a-million jobs bringing total losses to almost 2 million since the start of recession in late 2007. Two-thirds of these losses occurred since last September and there are forecasts for more. The auto industry is undergoing almost certain restructuring with hundreds-of-thousands more jobs and connected businesses in jeopardy. Republican opposition to the auto bailout plan demanded a 50 percent wage cut for workers implemented over the next few months. Now Washington is considering tapping into part of the $700 billion bailout plan under the Troubled Assets Relief Program (TARP). However, Republican opposition to the auto bailout has further antagonized class relations in an already volatile economic environment and uncertain future.
Among those who have fought back---and won---are the 240 workers in the Chicago Republic Windows and Doors factory. They gained international attention on December 5th by occupying their workplace using Depression-era tactics. The detonator to their struggle was also related to class antagonisms in the U.S. Weeks after taking $25 billion in TARP bailout money Bank of America cut off its line of credit to the factory causing the company to halt operations and terminate its workers with only three days notice and without severance. Their struggle and victory earned them a settlement totaling $1.75 million covering eight weeks of pay, two months of continued health coverage, and pay for all accrued and unused vacation. United Electrical Director of Organization Bob Kingsley described the outcome as "a victory for workers everywhere,"..."an historic victory for America's labor movement," and "a win for all working men and women who face uncertainty, unfairness and job loss in a troubled economy." And this is just the beginning of another struggle for the Republic workers who have created a new foundation they have named the "Window of Opportunity Fund," dedicated to reopening the plant.
Victory also occurred last October when Jocelyne Voltaire was scheduled to lose her home in Queens Village where she had lived for 20 years, and where she raised her four children. She was unable to keep up with skyrocketing mortgage payments. A donation call went out and within two hours $15 thousand poured in stopping the auction and saving her home. People came together and succeeded where the state and market have failed.
However these victories exist in a past and present sea of rising economic failures. Many analysts see today's crisis as an accumulation of poor policy choices, bad practices, and ideological decision making, which certainly made conditions worse, but overlooks the huge disparities in wealth and power that existed prior to the current crisis and add to today's class antagonisms.
In 2005 we saw the largest growth in share of national income for the top one percent of Americans since 1928. In that same year the top 300 thousand Americans collectively enjoyed almost as much income as the bottom 150 million. The top ten percent reached a level of income share not seen since before the Great Depression.
Just last year and amid worsening economic conditions, U.S. CEOs were paid 344 times the pay of a typical worker. The top 50 hedge and private equity fund managers earned more than 19 thousand times as much as the average U.S. worker.
Additionally, the myth of class mobility is nearly bankrupt. Most people stay in the class they are born into and their economic fates are pre-determined. In The State of Working America 2006/2007 (Economic Policy Institute, 2007), while looking at intergenerational class mobility, its authors ask "To what extent are children's economic fates tied to their parent's income or wealth? Do most families end up about where they started on the income scale?" and "Is the United States' less-regulated economy characterized by greater economic mobility?" The authors' research found that income, wealth, and opportunity are "significantly" correlated across generations. A daughter of a low-income mother has only a small chance of achieving very high earnings in her adulthood. "Almost two-thirds of children of low wealth parents (those in the bottom 20 percent of wealth scale) will themselves have wealth levels that place them in the bottom 40 percent of the scale." Their research also shows that the U.S. has become "considerably" less mobile over time, and has even less class mobility than other advanced economies.
It is important to note and remember that while less mobility is worse, more mobility isn't the end of injustice. If an elite monopolizes wealth all the time, the fact there is some movement into and out of that elite doesn't diminish the inequality that rules every moment. Additionally, reforms can also be made to increase class mobility while at the same time make wealth and power disparities greater than they were before the reform and also further strengthen elite rule over their class position.
While the current crisis is characterized by job loss, home foreclosures, and uncertain economic futures, the crisis called capitalism is characterized by class rule, alienation of labor and product, merciless competition, and vicious greed. It is an economic system defined by private ownership of productive assets, market roles for buyers and sellers, corporate divisions of labor, and unfair remuneration schemes. It forces workers to decide between either (a) working under conditions where duration, location, production, and remuneration are out of their control, or (b) suffering a pauperized material existence in dire conditions, without work and pay, and with all the associated social, mental, and physical health costs. Market competition not only drives worker wages and bargaining power downward, it hides the social costs and consequences of consuming and producing social bads, and drives consumption towards private goods rather than public ones, for example education and health care. The current crisis is symptomatic of the institutionalized crisis but not the same thing. To end the current crisis with a return to elite enriching business as usual is better than drowning in catastrophe. But ultimately we need to replace the economics of competition, greed, and class rule with the economics of solidarity, self-management, and participatory classlessness, and our efforts in the present would be well served, for short gain and long-term continuity, by leading toward that end.
For American readers, the great virtue of Avraham Burg's important new book is that he says things about Israel and the Jewish people that are hardly ever heard in mainstream discourse in the United States. It is hard to believe how stunted and biased the coverage of Israel is in the American media, not to mention the extent to which our politicians have perfected the art of pandering to the Jewish state. The situation got so bad in the recent presidential campaign that journalists Jeffrey Goldberg and Shmuel Rosner — both staunch defenders of Israel — wrote pieces titled "Enough about Israel Already."
Let's hope that The Holocaust is Over is widely read and discussed, because it makes arguments that need to be heard and considered by Americans of all persuasions, but especially by those who feel a deep attachment to Israel. The fact that Burg wrote this book also matters greatly. He cannot be easily dismissed as a self-hating Jew or a crank, as he comes from a prominent Israeli family and has been deeply involved in mainstream Israeli politics for much of his adult life. Moreover, he clearly loves Israel.
Burg makes many smart points in his book, but I would like to focus on what I take to be his central arguments. His core message is that Israel is in serious trouble at home and there is good reason to think that things could go horribly wrong in the future. He emphasizes that Israel has changed greatly since 1948. He quotes his mother on this point: "This country is not the country that we built. We founded a different country in 1948, but I don't know where it's disappeared." Israel today, he writes, "is frighteningly similar to the countries we never wanted to resemble." Talking about Israel's shift to the right over time, he makes the eye-popping observation that "Jews and Israelis have become thugs."
Burg makes it clear that he is not equating Israel's past behavior with what happened in Nazi Germany, but he does see disturbing similarities between Israel and "the Germany that preceded Hitler." This raises the obvious question: could Israel end up going on a murderous rampage against the Palestinians? Burg thinks it is possible. He writes, "The notion that this cannot happen to us because our history as persecuted people makes us immune to hatred and racism is very dangerous. A look inside Israel shows that the erosion has begun." He even raises the possibility that there might be a civil war inside Israel, which "will be not a war between members of the Jewish people of different shades of beliefs, but an uncompromising struggle between good people and bad people anywhere."
Burg is aware that many American Jews will dismiss his arguments because they are so at odds with the picture of Israel that they have in their heads. Accordingly, he reminds the reader: "I come from there, and my friends and relatives are still there. I listen to their talk, know their ambitions, and feel their heartbeats. I know where they are headed." And where they might be headed worries him greatly. Again, he fears that Israel will end up following in the footsteps of Germany, where "slow processes altered the perception of reality to the degree that insanity became the norm, and then we were exterminated. It happened in the land of poets and philosophers. There it was possible, and here too, in the land of the prophets. The establishment of a state run by rabbis and generals is not an impossible nightmare. I know how difficult this comparison is, but please open your ears, eyes, and hearts."
Many American Jews think that Israel is in trouble today because of anti-Semitism or because it is surrounded by dangerous adversaries who threaten Israel's very existence. Israelis themselves, Burg reminds us, love to emphasize that "the entire world is against us." He dismisses these wrongheaded beliefs: "Today we are armed to the teeth, better equipped than any other generation in Jewish history. We have a tremendous army, an obsession with security, and the safety net of the United States … Anti-Semitism seems ridiculous, even innocuous compared with the strength of the Jewish people of today."
For Burg, Israel's troubles are self-inflicted. Specifically, he maintains that the principal cause of Israel's problems is the legacy of the Holocaust, which has become omnipresent in Israeli life. "Not a day passes," he writes, "without a mention of the Shoah in the only newspaper I read, Ha'aretz." Indeed, Israeli children are taught in school that "we are all Shoah survivors." The result is that Israelis (and most American Jews for that matter) cannot think straight about the world around them. They think that everyone is out to get them, and that the Palestinians are hardly any different than the Nazis. Given this despairing perspective, Israelis believe that almost any means is justified to counter their enemies. The implication of Burg's argument is that if there was less emphasis on the Holocaust, Israelis would change their thinking about "others" in fundamental ways and this would allow them to reach a settlement with the Palestinians and lead a more peaceful and d! ecent life.
There is some truth in this defensive psychological argument, but Burg also provides much evidence for a different interpretation of how the Holocaust relates to Israeli life. In particular, he shows that Israeli society is plagued with a host of serious problems that are threatening to tear it apart and that the Holocaust is a "tool at the service of the Jewish people," which they use to protect Israel from criticism and to keep those centrifugal forces at bay. He identifies three basic problems: 1) Israelis are badly divided among themselves; "the Jewish world always had colossal disputes between colossal figures"; 2) the grave danger that large numbers of Israelis will emigrate to Europe and North America; and 3) the Occupation, which has had a corrupting effect on Israeli society and has drawn criticism from all around the globe. Playing the Holocaust card, Burg shows, is thought to be the best way to deal with these problems. He quotes the Israeli writer, Boaz Evron, to! make this point: the Shoah "is our main asset nowadays. This is the only thing by which we try to unify the Jews. This is the only way to scare Israelis into not emigrating. This is the only thing by which they try to silence the gentiles." Of course, there is another instrument that Israel and its defenders frequently employ, which is the charge of anti-Semitism.
To take my instrumentalist argument a step further, Burg provides evidence that the main reason that Israelis and their supporters constantly invoke the Holocaust is because of the Occupation, and the horrible things that Israel has done and continues to do to the Palestinians. The Shoah is the weapon that Israelis and their supporters in the Diaspora use to fend off criticism and to allow Israel to continue committing crimes against the Palestinians. Burg writes: "All is compared to the Shoah, dwarfed by the Shoah, and therefore all is allowed — be it fences, sieges, crowns, curfews, food and water deprivation, or unexplained killings. All is permitted because we have been through the Shoah and you will not tell us how to behave."
The best evidence that Israel's obsession with the Holocaust is linked with the Occupation is found in Burg's discussion of the evolution of Israeli thinking about the Holocaust itself. He shows clearly that Israeli thinking about the Shoah has varied considerably over time. The leaders of the Yishuv "did very little in response to the annihilation of Europe's Jews" when it was happening. "They did not want to waste emotional resources that could otherwise be channeled into building the Jewish state." Moreover, Israelis did not focus much attention on the Holocaust in the first decade or so after 1948 and they showed surprisingly little sympathy for the survivors who came to Israel after the war. But all that changed in the 1960s, starting with the Eichmann trial, but picking up a head of steam after Israel conquered the West Bank and Gaza in 1967 and began the Occupation. "To understand the wrong turn we took," he writes, "we need to go back to the 1960s, the Eichmann trial! , the Six-Day War, and all that lies in between." He goes even further and notes that the 1990s — and remember that the First Intifada broke out in December 1987 — was the "decade of transition from the mythology of the early state to the obsessive journeys to the scene of the crime." The pattern seems clear: the Holocaust has been the main weapon that Israelis (and their supporter abroad) have employed to provide cover for the horrors Israel has inflicted on the Palestinians in the Occupied Territories.
All of this is to say that the best way to rescue Israel from its plight is not simply to get beyond the Holocaust, but to end the Occupation. Then, the need to talk incessantly about the Holocaust will be greatly reduced and Israel will be a much healthier and secure country. Sadly, there is no end in sight to the Occupation, and thus we are likely to hear more, not less, about the Holocaust in years ahead.
Nerd alert: I know that my videos normally represent the height of fashion. I know that my massive popularity, on the account of all the violence, sex appeal, and sports references have launched me into the top ranks of viral culture, making me a real trendsetter.
But this video will not be like that. So I’m warning you now, this video gets an extremely high nerd rating. It will try to explain the details behind probably one of the nerdiest theoretical debates in marxist economics. But if you watch this video you could very well be set to join the ranks of other fashionable revolutionaries like these guys… (nerd quiz: can anyone name these guys?)…. That being said, the topic I am going to discuss is an important one, but only because the debate behind it lies at the core of claims that Marx’s labor theory of value is “discredited”, “contradictory”, etc. One does not have to look to far into Marxist economic theory before one stumbles upon the quagmire that is “the transformation problem”. And the sheer magnitude of algebra and technical gobbledy-gook involved in most of the discussion of the transformation problem scares most people away from ever really looking into the debate further.
Over the last 100 years there has been furious debating back and forth over the meaning of Marx’s theory of “the transformation of values into prices of production” and over the various criticisms of it- debates of such a stunningly polarized and mathematical nature that it is hard for us normal folks to wrap our mind around the issues at stake enough to know what to make of it all.
The goal of this video is to explain the basic nature of the problem and to defend Marx’s transformation procedure on the basis of some new scholarship on the topic. I will do all of this without any math or any algebra. On my wordpress blog ( http://kapitalism101.wordpress.com/transformation-math-supplement/ ) you will be able to find a supplement with a more detailed discussion and some math examples for all of you super-nerds who want to plow into some simple math. [If you aren't afraid of a little division and subtraction I recommend you check out the math supplement and learn how to solve some transformation problems of your own. It's kind of fun- like a sudoku puzzle for marxists. Then you can scribble them out on paper napkins at bars and parties to impress people. It's always a real hit.]
Value
So everything in Marxist economics centers around the idea of value. Without a theory of value we wouldn’t be able to make most of the arguments that are considered a crucial part of marxisim: exploitation, crisis, class, etc. Value is not some abstract, metaphysical concept. It is a real tangible thing that effects all of us everyday. It is the reason we go to work in the morning. It’s what allows us to buy groceries. It’s why countries go to war. It’s why we have banks and railroads and stockmarkets. The unfolding of the “law of value” is the unfolding of the inner mechanisms of a capitalist society. So it’s important that the concept of value is internally consistent and logical or else its status an explanatory concept is questionable.
If you’ve seen many of my videos then you probably know by now that value is created by human labor, and human labor only! Machines can’t create value. Buying and selling commodities doesn’t create value. Differences in subjective preference don’t create value. Let’s review a few different arguments as to why this is the case. The point of any economy is to coordinate human labor in such a way as to provide stuff for people. There are many different ways this labor has been coordinated throughout history, and there will likely be many more ways it will be coordinated in the future. In a capitalist economy labor is coordinated via commodities. That is, I make a commodity and you make a different commodity. When we exchange them we are exchanging our labor. That’s how our collective labors are organized.
The only reason all of these diverse commodities can exchange with each other is because they are all products of human labor in the abstract. This is what gives them their value. But commodities don’t walk around with their value written all over them. (If they did, capitalism would be a lot easier to understand and you wouldn’t need to watch this video.) You can’t buy a toothbrush and read on the toothbrush how many hours it took to make it, how many people worked to make it, what their working conditions were, how it was shipped to the store, who put it on the shelf, etc. Value has to be expressed through money. Money prices are an expression of value.
But here is where things start to get confusing. How is value measured in money prices? Is price always equal to value? What happens when price doesn’t equal value? Since anyone can set any price they want when they sell a commodity it may at first seems hard to see how price could realistically reflect value. But we know from our own lives that there seem to be some sorts of forces at work in the universe- some hidden hand of the market that keeps prices from being totally arbitrary. A toothbrush or a new car costs more or less the same anywhere you buy it. Not only that, but the car will always cost more than the toothbrush. So what are these forces that make prices converge? And is it just a coincidence that things that take more work to make usually cost more than things that take little time to make?
The more perfect competition is in a capitalist society, the harder it is to arbitrarily set prices above values. Perfect competition makes it impossible to just conceive of prices as arbitrary or of profit as a mere “mark-up” above costs. (Of course competition is never perfect, but if we are building an abstract model of a capitalist economy we have to identify the inner logic of capitalism in the abstract before we see how outside forces distort this model.) We also can assume that supply and demand balance each other. Obviously if supply ever shrinks this will create a rise in prices above values. But this rise in prices means a rise in profits for those capitalists producing scarce goods. This rise in profits encourages more capitalists to invest in producing this good and this, in turn, increase the supply until prices are back down to an equilibrium point. The opposite happens with decreases in demand.
The argument of the labor theory of value is that, behind all of these fluctuations there lie equilibrium prices and that these equilibrium prices correspond to the value of commodities. Now, what happens when monopoly, trickery or demand allows someone to get away with arbitrarily charging more for a commodity than its value? The answer to this question is really crucial, so listen closely: The total amount of value in society corresponds to the total amount of prices. So if someone is getting away with arbitrarily high prices it means that someone else is not getting the full value of their commodity. In this way, though profit can’t be created through exchange, it can be shuffled around between people. Through monopoly, fads, whatever people can benefit from an inequality in exchange- a defect in the manifestation of capitalist competition. But such an inequality does not create more value! The real source of profit in a capitalist society is the difference between the value of commodities and the wage paid to workers. This, of course, is the theory of exploitation.
So if we abstract from disturbances in competition, or minor fluctuations in supply and demand we see that commodities, in general, have prices that are relatively proportional to their values…. or at least, they would if there wasn’t one other complicating factor…
It is this other factor that required Marx to theorize about “the transformation of values into prices of production” and which has created all the fuss for all these years. It is very similar to what I just described about the way supply and demand equalize. The same way in which supply and demand fluctuate around equilibrium price also creates an average rate of profit amongst capitalists. That is, if one capitalist is making more profit than the rest, other capitalists will start doing whatever (s)he is doing and thus eat into his/her profits. Through this sort of competition an an “average rate of profit” is established among capitalists.
But this average rate of profit seems, at first, to conflict with something else that I’ve talked about in other videos: the organic composition of capital.
Let’s illustrate this with an example. Let’s say there are two industries: one makes coffee and the other cars. Within both industries there is competition to make their workers the most productive by introducing the newest labor-saving machines. Thus within each industry there is about the same ratio of workers to machines. (This is what the “organic composition of capital” is- the ratio of machines to workers. When there are a lot more machines than workers we say the organic composition is high. When there are more workers, we say the organic composition is low.) But between industries this ratio differs. Some industries just naturally have a higher ratio of machines to workers than others. In our example, the automobile industry uses a lot of machines! The coffee industry uses a lot more workers.
Now if value can only be created by human labor, it would seem that the coffee industry creates a lot more value than the car industry. And, actually this is the case- the more work that’s done in an industry, the more value it creates. Yet, under conditions of competition, under the law of the average rate of profit, both industries receive the same profits, even if one creates much less value. An average rate of profit means that each capitalist receives the same rate of return on their total investments, regardless of what proportion of this investment goes to workers or machines. How is this possible? (Do the workers in the auto industry just work harder? Are they more exploited? There’s no necessary correlation between the ratio of machines to workers and their wages so lets assume that the rate of exploitation is equal in both industries.)
Here is the solution to this puzzle. The total amount of value in society is equal to the total amount of prices. The total amount profit is equal to the total amount of surplus value (Surplus value is the difference between the value of a commodity and the cost of paying workers and paying for raw materials, machines, etc.) The total rate of profit measured in value, in society as a whole, is equal to the total rate of profit measured in money.
These are the “three aggregate equalities” that form the holy trinity of the theory of the prices of production. Individual capitalists can have money prices or profits that diverge from their values, but in the aggregate these equalities prevail. But how?
All capitalists contribute to the total amount of surplus value according to how much labor they employ. So if coffee makers have more workers, they contribute more to the aggregate surplus value than car manufacturers. But capitalists withdraw their money profits from this total surplus value according to the average rate of profit- that is, in proportion to the total cost of their production. Regardless of how many workers they actually employ, they all receive the same rate of return on their investment, even if all of their investment goes into machines!
Thus the price of a commodity is not the cost of inputs plus surplus value. It is the cost of inputs plus the average return on those investments. We call this price the “price of production”. The total prices of production equal the total amount of value. But individual commodities do not trade at their values. They trade at their prices of production. The price of production is still a function of value, but it is not necessarily directly equal to it.
This is why it is possible to have a falling rate or profit (see “Falling Rate of Profit video). Individual capitalists have no way of knowing that they are destabilizing the collective rate of profit, because they don’t receive less profit when they replace workers with machines. It is only when automation has spread throughout the economy to a substantial extent that it can drag down the profit rate.
This relationship between individual action and wider social forces is true to the spirit of much of marxist theory. Individuals are always free to act as they choose. That’s the easy part of social theory. The hard part of a good social theory is to explain why those free actions coalesce around certain norms. For Marx, it is value which is the central mediating force between individuals and so it is the laws of motion of this value that ultimately govern the success or failure of individual actions.
A Little Bit Of History.
Marx took the ideas of classical political economy to their logical end. After Marx one couldn’t operate as a political economist without accepting the notions of exploitation and crisis that he had so thoroughly developed. And so those who were interested in doing truly bourgeois economic theory had to abandon the notion of a labor theory of value if they were to save economic theory from Marx. In so doing, thinkers like Leon Walras developed what is now called “neoclassical economics”. Neoclassical economists abandoned the notion of value altogether. They essentially took price as a given- refusing to look behind it for any deeper meaning. In doing so they also abandoned the whole notion of social class, and all of the other wider social phenomena that Marx had woven into his theory. Their restricted, narrowed perspective soon developed an obsession with number-crunching and fancy algebra.
I say all this because it was out of the neoclassical school that the critique of Marx’s transformation procedure developed. And it was this new way of thinking about economics that produced the sort of assumptions that led to this critique. In 1907, Ladislaus Bortkiewicz, a Russian economist, published a paper which claimed that Marx’s transformation procedure was internally contradictory- that when taken to it’s logical conclusion it produced mathematical results that simply didn’t add up. Ever since, people doing Marxist economics have had to contend with this accusation that their fundamental theoretical category, value, is not logically valid. Over the course of the 20th century many Marxist economists embraced the neoclassical models of Bortkiewicz and his successors in various, attempts to rescue Marx’s value theory from within the framework of bourgeois economics. It wasn’t until the 1980’s that some scholars began to challenge the assumptions behind this neoclassical critique and to construct a defense of Marx from within the logic of value theory. The most promising of these new defenses is the “Temporal Single System Interpretation” or “TSSI” for short. Let’s take a closer look at the Bortkiewicz argument and the TSSI response.
The neoclassical tradition that Bortkiewicz came out of had several major differences from the Marxist tradition. Where Marxist theory builds a model of capitalism that is dynamic, constantly evolving, prone to disproportion and crisis, the neoclassical school views capitalism in a static, unchanging equilibrium state where the hidden hand of the market naturally smoothes out imperfections. It is important to keep this difference in mind when viewing Bortkiewicz’s critique.
It was Bortkiewicz’s fascination with these static, equilibrium models that led him to question Marx’s transformation procedure. Bortkiewicz put Marx’s argument into a standard neoclassical input-output model. On the input side went machines, raw materials and wages all measured in their values. On the output side came newly produced commodities, all now priced at their prices of production. Bortkiewicz then asked, quite logically, shouldn’t the inputs into the production process be bought at their prices of production and not their values?
Indeed Marx himself had acknowledged that it only made sense for inputs to be bought at prices of production, but this did not lead him to the same conclusions as Bortkiewicz. Bortkiewicz took those end prices of production and plugged them back into the input side of his equation. When he did this all hell broke loose with the math. Specifically it became impossible to maintain all three of Marx’s original equalities: total money profits equal total surplus value, total money price equals total value, total money rate of profit equals total value rate of profit. Only one equality could be maintained at a time but only by arbitrarily imposing that condition at the expense of the other two equalities. To Marx’s critics this was the end of the labor theory of value. [Here I decided not to explain the way in which Bortkiewicz created a dual system of value and price.]
The TSSI critique of Bortkiewicz is simple and elegant. They argue that it is illogical to plug output prices back into the inputs of the same production period. They accuse him of two false assumptions: simultaneism and physicalism. Let’s look at each in turn.
Simultaneism
For Bortkiewicz the prices of inputs and outputs are simultaneously determined. In other words, input and output prices have to be equal. Let’s say we have an industry that makes corn. It also needs seed corn as an input. Bortkiewicz would argue that if at the end of the production period corn sells for 10 dollars a bushel then it must also enter production as an input at 10 dollars a bushel. There can be no change in price. But he seems to be arguing for some theory of time travel, as if a farmer would go back in time and sell themselves corn at their future output price. In the real world, the opposite happens. Values change over the course of a growing season due to the productivity of labor and soil, weather, changes in technology, etc. The price of corn at the end of the production period doesn’t have to equal its price at the beginning. The new prices of production become input prices for the NEXT production period, not the one that’s already happened.
In contrast to Bortkiewicz’s simultaneous determination of prices, the TSSI is “temporal”. It tracks changes in the prices of production through time, from one production period to the next. In each period the input prices are the output prices of production from the previous period. In this way the TSSI is much more faithful to the marxist project- to build a dynamic model of value as it moves through time, constantly expanding.
Physicalism
Bortkiewicz, in a way, defended his simultaneism by constructing his model within the framework of an economy with no growth. He argued that in an economy with no growth prices wouldn’t change over time and thus it would make sense to simultaneously determine input and output prices. This model of an economy with no growth actually came from Marx himself who theorized about Simple Reproduction- an economy with no growth in which the entire social product was produced and sold each production period. Simple Reproduction was an abstract model Marx used to simplify some arguments about exchange before he introduced his more complex model of expanded reproduction. Yet, still the theoretical possibility for simple reproduction to occur does exist and so we do need to consider whether the transformation of values into prices of production works under conditions of zero growth.
The problem is that Bortkiewicz assumed that no physical growth meant no growth in value. This is the essence of physicalism: that changes in value are directly tied to changes in the amount of actual physical commodities. ie. If I produce ten apples instead of five I have twice as much value. This seems to make sense. But look at the way this actually plays out in the real world. (21)When a supply expands its value falls. When a supply shrinks its value rises. In a drought the same amount of apples is worth more than in a glut. So just because there is more of something in physical terms doesn’t mean its value is more. In fact, value can change while physical output remains the same if the production process becomes more efficient or input values change.
This is precisely what happens in the TSSI version of the transformation “problem”. From one period to the next the physical outputs stay the same. The same amount of goods are produced and consumed. But the value of those goods changes overtime. Each production period, new work is done; new labor is added to the social product. And so total value rises each production period. This total value becomes the input for the next production period.
From the TSSI illustration it becomes clear that it would be ridiculous to take the prices from the end of the production period (prices representing an increase in value) and plug them back into the equation at the beginning of that same production period. The Bortkiewicz solution flies in the face of the basic logic of value theory and so it necessarily produces absurdist results.
Conclusion Bourgeois economics is often thought of as an objective, rational science for number-crunching specialists, divorced from political bias. But all of these matrices and graphs exist within a very narrow range of assumptions. By leaving out questions of value, by treating capitalism as a static, universal entity without change, and by ignoring class it prevents itself from addressing the most essential elements of economic analysis. It is these assumptions which have led to the entire notion of a “transformation problem”, and to the general attack on Marxian economics.
While it can be intimidating to wade through the specialist literature on a topic, we should never forget that underneath the numbers lie arguments and assumptions about the real world and that these are, in the end, the crucial things to be concerned about. There is no reason why you and I should have to take a graduate course in economics in order to understand the debate over value and price. We should never be intimidated by “experts” into not thinking for ourselves and not challenging assumptions. Such timidness in the face of algebra has led to far too much meekness from the left. In the coming economic crisis it will be crucial to assert our ideas clearly and boldly, and without bowing to the tools of bourgeois economics. It is high time to put an end to this tiresome debate about the transformation problem.
Bibliography
“Reclaiming Marx’s Capital” by Andrew Kliman
“One System or Two? The transformation of values into prices of production vs. the transformation problem” a paper by Andrew Kliman and McGlone. This available on Kliman’s website: http://akliman.squarespace.com/
Marx’s Theory of Value and the ‘Transformation Problem- an essay by Anwar Shaikh from the book “The Subtle Anatomy of Capitalism” ed. Jesse Schwartz
Now that the crisis of the financial markets has become a crisis of the 'real' economy, it is obvious that those who already face poverty (or live on the edge of it) will be hit extraordinarily hard in the days ahead. Over the last three decades, social programs that served to partially redistribute wealth or limit the disciplinary power of unemployment on the working class were massively reduced. With this 'social safety net' seriously compromised, we can expect a rapid and deep process of impoverishment to take effect as the downturn unfolds. The scale and severity of this will pose major challenges but open up huge possibilities in terms of mobilizing poor communities.
In the last weeks since the crisis came to head on Wall Street and scandalous bailouts for the rich ensued, a question has been lurking in the background: who will pay for this crisis of capitalism? That the capitalists and bankers do not intend to pay is more than obvious. That workers and the poor face massive austerity is also very clear. However, in order for this to happen, those in power are going to have to impose their harsh 'solutions' and that will produce suffering and an anger that forms the basis for fighting back. I would like to look at how poor communities may be attacked and at some of the forms that resistance could take. I speak from the standpoint of someone who is active in anti-poverty struggles in Toronto. In some smaller and more heavily industrialized cities, the situation is already further advanced but we may expect a deepening downturn to affect Toronto very seriously. In many smaller centres, systems of social provision are even more inadequate than in Toronto and many people facing conditions of poverty and destitution will be forced to head for the major centre out of necessity.
The Shredded ‘Safety Net’
In assessing the likely impacts of the downturn, the first important question to consider is the fact that 'employment insurance' (EI) has been so drastically undermined. If all that people have to turn to is the welfare system, they will face a devastating shock. EI, while it has highly restrictive rules, considers eligibility from the standpoint of unemployed status. Welfare, in contrast, is a system of last resort that can only be accessed by those on the very edge of destitution. Those with any other sources of income are ineligible by reason of the welfare means test. In conditions of rapid economic downturn, that will translate into a whole mass of people who are without work but who cannot even apply for income support until they have exhausted their savings. Once they have reached the required level of poverty, those who were previously working for living wages will be expected to make do with the degrading pittance that welfare provides. I spoke recently to a man who had just lost his job and wanted to know about accessing welfare if he could not collect EI. He was truly devastated to learn that his very modest bank account would have to be almost emptied before he could go to Social Services. As this kind of thing happens on a major scale, it will send a shock wave of indignation through whole communities.
However, even the miserably low income provided by welfare is not something we can assume will be available. The social assistance system is massively arbitrary in its actual implementation and municipalities have to foot the bill for part of it. Ontario Premier Dalton McGuinty has already made clear that local governments will face cost cutting measures in the months ahead and, in such a situation, it is to be expected that local welfare offices will engage in an intensified drive to deny entitlements by way of a covert process of improper denial. If the crisis becomes deep enough and caseloads reach a high enough level, the very viability of welfare provision will be called into question.
In fact, Toronto's City Council has already set the stage for a disastrous situation to develop in the near future. Under Mayor David Miller and his progressive allies on Council, the City's welfare reserve fund has been depleted to pay for day-to-day operating expenses. From a high point of $94.4 million in 2003, it has been taken down to a mere $8.3 million. This means that we are going into a major international economic downturn with the income support system of the largest city in the country ready to collapse at the first test. Aside from generalized demands for increases in welfare rates, we will have to be ready to fight for the very right of people to obtain even a minimum level of income support.
Nor can we forget that, for hundreds of thousands of low-income people, the undermining of social programs has meant that they must frequently access private charity in order to survive. If food banks and other such services face a big increase in demand, while finding it harder to bring in donations, the costs in terms of hunger and illness will be very great indeed. Food banks have become a de facto second layer of welfare provision that until now has partly concealed the gross inadequacy of social assistance payments and limited the spread of hunger. If they are overwhelmed, the resulting situation will be tragic.
We can expect other impacts in the area of municipal services. 180,000 public housing tenants in Toronto are living in buildings and units that are in a state of massive disrepair. Infusions of cash from Queen's Park have been well short of the hundreds of millions needed to bring this huge quantity of public housing stock up to a standard that even meets legal requirements. In conditions of funding cutbacks, this process can only intensify. Already, despite a waiting list for social housing of some 70,000, City owned buildings are left vacant for want of resources to restore them to a level where they can be occupied. There are not a few buildings that have been neglected to the point where action must be taken soon if they are to continue to house people. The loss of public housing in conditions where growing numbers of people lack the means to pay rent in the private market would be a disastrous addition to the overall crisis.
Even before this downturn really takes hold, hundreds of thousands of low-income tenants in Toronto barely keep themselves housed and pay the rent only by going short on decent food. There are already more evictions taking place under McGuinty than during the Harris years. If jobless rates shoot up and income support systems are further restricted, an epidemic of economic evictions will ensue. Then, as the loss of housing drives people to seek emergency shelter, we see another situation where the course charted before the downturn has horrible implications. Toronto has taken up a relentless drive to remove shelters and services for the homeless from the central part of the city. At present, finding a bed for the night in the overcrowded shelters is a challenge for the homeless. An upsurge in destitution will mean more people trying to access a system that is already inadequate. There will be a great political reluctance to respond to this need. Not only will Toronto City Council want to minimize expenditures but it will also be loath to open facilities in areas it has recently worked to clear of the homeless in the interests of upscale redevelopment. Some of the fights we face ahead will be for the very right to find shelter and stay alive.
Marginalized Communities and the Crisis
It would be hard to overestimate the degree to which this crisis will intensify the abuses faced by precarious workers in the most exploitative and low paying sectors of the job market. The level of enforcement of the most basic legal rights for such workers has already sunk to the level of tokenism. A worker who actually receives the protections of the Employment Standards Act enjoys little enough but these protections are a dead letter in many workplaces. The payment of wages below the level of the minimum wage, failure to provide overtime pay, the disregarding of statutory holidays, blatant safety violations – all these things are widespread now. In conditions of rising unemployment, we may expect employers to intensify the abuses very considerably.
There is one 'service' that has been exempt from austerity and, indeed, has had money thrown at it to the point where its budget has swollen to unheard of proportions. That exception to the rule is, of course, policing. This institution and its repressive role will be preserved and pampered no matter how dire the fiscal situation in the period ahead. The role of the police in poor communities will be stepped up in conditions of worsening poverty and destitution. If we look at the history of the Great Depression, we can see how local authorities responded in that period to the explosion of homelessness that took place. The police were used to ensure that those without work and housing received a very clear message that they were unwelcome and should move on.
Over the last few years, the drive to clear the central part of the city of poor and homeless people in order to make way for the process of gentrification, has given the Toronto cops extensive experience in harassing and terrorizing people the merchants, developers and politicians would rather not have around. Toronto's drive to remove panhandlers has been stepped up greatly in the last couple of years and it has provided the police with a huge training exercise in criminalizing a population and disregarding its most basic legal rights. As pressure on services and the level of visible homelessness increases, we can count on intensified police repression to be a key element of the attack that poor communities will have to respond to.
In every aspect of the unfolding crisis that I have pointed to, it is, very sadly, a given that immigrant communities will face a massively disproportionate level of attack. A few days ago, the Ontario Coalition Against Poverty (OCAP) office took a call from a Central American family who had applied to their local welfare office for a health related benefit. An official informed them that she did not believe they needed the benefit and threatened to make sure they were deported for making false claims. A Somali woman applying for the same benefit was told by another office that she should not expect such assistance because she was already better off in Canada than she had been in Africa. The impending drive to restrict social provision will have a racist, anti-immigrant element that will shape and define it. With immigrant communities already disadvantaged and vulnerable, any movement of resistance to poverty will need to confront racism whether it is sanctioned officially and hides its face or it begins to come out in the open as expressions of political backwardness.
There is a danger that this crisis is going to unfold with such speed and severity that it will create, for a period of time, a numbed passivity in communities under attack. The most effective counter measure to this will be to establish, as rapidly as possible, practical models of effective resistance. Over the last years, OCAP has established a method of work that we have sometimes referred to as ‘direct action casework.’ This uses collective action to resolve the grievances of individuals and families who face the denial of social entitlements and other injustices. It was established with the methods of the unemployed in the 1930s in mind. Such forms of mobilizing could be developed on a very wide scale in response to the crisis.
If the welfare system tries to cut costs by denying assistance to people in need, then 'mass delegations' of the poor and their allies can be used to challenge such abuses. If emergency shelters offer less space than is needed to deal with the growth in homelessness, appropriate locations can be taken over to press demands and ensure people are not left on the streets. OCAP, on a couple of occasions, invaded the Provincial Housing Tribunal to temporarily prevent it from ordering evictions. These actions were modest political statements that only prevented a few evictions from taking place but, in a worsened situation with a rising capacity for mobilization, more serious forms of challenge to eviction procedures could be organized. A veteran of 1930s organizing in Toronto once told me that the movement of those days could pull out large crowds at very short notice to block the efforts of the authorities to put families out of their homes. Such actions, linked to a demand for a moratorium on evictions, might well be possible in the not too distant future. Locally based committees, mandated to mobilize in the defence of people in their communities could crystallize and develop a very dynamic life if a lead were given.
There is no doubt that, beyond defensive local community action, the period ahead will call for broad alliances and for major demands to be placed before those in political power. If measures of 'economic stimulation' are to be adopted, we must be fighting for these to be allocated in ways that meet the needs of communities. Not the least of these is the construction of truly affordable housing on a massive scale. The degraded system of federal unemployment insurance must be restored to a level that meets the needs of the unemployed. The undermining of social assistance systems by the Chretien Government in the early 1990s has left communities desperately vulnerable and federal resources must be used to reverse this situation. The Ontario legacy of Mike Harris, especially the 40% cut in the spending power of welfare income, is another area where movements must go on the offensive. It will take very much more than the McGuinty Government's timid and dishonest measures of 'poverty reduction' to meet the need this crisis will create. At the municipal level, a fight will have to be mounted to ensure that access to vital income support and shelter services is not compromised by cost containment initiatives.
Stabilizing Capitalism or Anti-Capitalistm?
During this crisis, the priority of governments will be to stabilize capitalism at the expense of poor and working class people. Banks and auto manufacturers may be 'too big to fail' but laid-off workers and the communities they live in will be considered highly expendable. Measures of social provision will be freed up, not in any direct proportion to the amount of suffering that occurs but to the extent that a resistance is mobilized that poses enough of threat to force concessions from governments. In this regard, we go into this situation with a major problem on our hands. There is no generalized movement of social resistance in place and the potential components of such a movement, especially the trade unions, are in a severe state of demobilized passivity.
Nor is there any immediate sign that the impact of this crisis is changing that situation. As I write this, the Harper Government is successfully staving off defeat at the hands of a Liberal/NDP alliance, supported by the votes of the Bloc Québécois for a period. Labour leaders are calling for this Coalition to form a Government and have been organizing rallies to press for this. If the Coalition does, indeed, take power next year and the impact of the crisis goes beyond its readiness to respond, the leaders of the very organizations that could lead a fight back may well be entirely opposed to mounting one. Instead, they will be focused on deal-making with 'their' Government and blocking the independent working class action that must be set in motion in the face of this crisis.
Still, the key to moving forward is precisely a working class movement that rediscovers what it is to fight back. Low-income communities and homeless people will play a very important role in such a movement and they may even give an initial lead as the crisis forces them to act out of a sheer need to survive. However, it is hard to see how a movement of social resistance can be strong enough without the labour movement, with its organizational resources and power in the workplace, coming into action. If union leaderships are not willing or able to respond effectively in the face of an attack of staggering proportions, a rank and file challenge is the only possible response. Individual locals with militant leaderships and oppositional groupings of trade unionists must link up with initiatives emerging from communities under attack. It is true that we are starting with very little that is organized on the ground but a period like this can create prospects very rapidly that might take years to generate in more normal times. Unless such an initiative emerges that can begin to organize resistance and to restore the capacity of our movements to fight back, we will be staring at the most shattering defeats imaginable. If we can offer no solutions to this crisis, the capitalists will solve it in ways we have reason to dread.
Finally, let me return to my initial point about determining who will pay for this crisis. This speaks not just to resistance in the poorest communities but to the situation of the broader working class as well. For decades now, our generally retreating movements have faced representatives of capitalism who have exuded great confidence. They felt that capitalism had won over those who might challenge it and that its victory was so complete as to represent the ‘end of history.’ Now, suddenly, we are seeing a system that is in profound crisis and whose political and ideological mouthpieces are much less self-assured. This crisis of legitimacy is an important element in the situation. Not only will it be possible to mobilize on the basis of demanding that the cost of this downturn not be paid by poor communities and the broader working class but growing numbers of people will be drawn to question the very system that has so obviously failed to meet their needs and offer them a future.
In poor communities, this crisis comes after a long process of pushing them down during the decades of neoliberalism. There is already anger and the realization that bad is going to get much worse – and it will make large numbers of people look for answers. The issue is to demonstrate in practical forms of organized resistance that these worsening conditions are not unstoppable and inevitable. That is the starting point for a movement that can respond to this crisis and pose a bold anti-capitalist vision of what it is fighting for. •
WORKERSOCCUPYING the Republic Windows & Doors factory slated for closure are vowing to remain in the Chicago plant until they win the $1.5 million in severance and vacation pay owed them by management.
In a tactic rarely used in the U.S. since the labor struggles of the 1930s, the workers, members of United Electrical, Radio and Machine Workers of America (UE) Local 1110, refused to leave the plant on December 5, its last scheduled day of operation.
“We decided to do it because this is money that belongs to us,” said Maria Roman, who’s worked at the plant for eight years. “These are our rights.”
Word of the occupation spread quickly both among labor and immigrant rights activists—the overwhelming majority of the workers are Latinos. Seven local TV news stations showed up to do interviews and live reports, and a steady stream of activists arrived to bring donations of food and money and to plan solidarity actions.
Management claims that it can’t continue operations because its main creditor, Bank of America (BoA), refuses to make any more loans to the company. After workers picketed BoA headquarters December 3, bank officials agreed to sit down with Republic management and UE to discuss the matter at a December 5 meeting arranged by U.S. Rep. Luis Gutierrez (D-Ill), said UE organizer Leah Fried.
BoA had said that it couldn’t discuss the matter with the union directly without written approval from Republic’s management. But Republic representatives failed to show up at the meeting, and plant managers prepared to close the doors for good—violating the federal WARN Act that requires 60 days notice of a plant closure.
The workers decided this couldn’t go unchallenged. “The company and Bank of America are throwing the ball to one another, and we’re in the middle,” said Vicente Rangel, a shop steward and former vice president of Local 1110.
Many workers had suspected the company was planning to go out of business—and perhaps restart operations elsewhere. Several said managers had removed both production and office equipment in recent days.
Furthermore, while inventory records indicated there were plenty of parts in the plant, workers on the production line found shortages. And the order books, while certainly down from the peak years of the housing boom, didn’t square with management’s claims of a total collapse. “Where did all those windows go?” one worker asked.
Workers were especially outraged that Bank of America, which recently received a bailout in taxpayer money, won’t provide credit to Republic. “They get $25 billion from the government, and won’t loan a few million to this company so workers can keep their jobs?” said Ricardo Caceres, who has worked at the plant for six years.
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THEMEMBERS of Local 1110 have a history of struggle. In 2004, they decertified the Central States Joint Board—a union notorious for corruption and sweetheart contracts with management—and brought in UE, a far more democratic organization.
In May of this year, Local 1110 mobilized for a contract by organizing a “practice” picket, and 70 workers used their lunch break to confront the boss with a petition listing their demands. The workers were able to turn back company’s effort to win major concessions and won solid pay increases. Now, management is trying to get revenge by pocketing money that belongs to the workers.
UE officials and workers acknowledge that it will be difficult to stop the plant from closing. But they’re determined to get the money owed to them—and they believe that by fighting, they can set an example for other workers facing layoffs and plant closures as the recession deepens.
Negotiations are set for Monday, December 8. Whatever happens, however, the workers have already sent a message to employers that if they violate workers rights and the law, they can expect a fight.
“This is a message to the workers of America,” said Vicente Rangel, the shop steward. “If we stand together, we will prevail until justice is done, and we get what we’re due.”
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Members of Local 1110 need your support. Make checks payable to the UE Local 1110 Solidarity Fund, and mail to: 37 S. Ashland, Chicago, IL 60607. Messages of support can be sent to leahfried@gmail.com. For more information, call UE at 312-829-8300.
At the Jobs with Justice Web site, you can send a message of protest to Bank of America. Click here
The political crisis that has suddenly erupted in Canada adds yet another dimension to the seemingly unending shockwaves set in motion by the global financial crisis. The sheer political escapism that led all the leaders (even the NDP's Jack Layton) to solemnly pledge during the recent federal election not to run a deficit – when it was already clear that the severity of this crisis is such that no government can avoid a deficit even if it wants to – has now rebounded on us with a vengeance.
One shock effect of Finance Minister Jim Flaherty's economic statement was that it so flatly contradicted Prime Minister Stephen Harper's conversion to Keynesianism on the road to Lima. What the statement showed was that while the government was going to talk the talk at international meetings, it was actually going to try to be a free rider on such stimulus as the Americans would undertake. The other shock was that the statement's proclamation of old-fashioned fiscal rectitude was tied to an opportunistic attack on free collective bargaining, pay equity and the public funding of political parties – not only narrowly partisan, but also largely gratuitous.
Without this, the opposition parties may not even have tried to defeat the government. But the ideological cover Barack Obama and Gordon Brown have given them in recent weeks must have helped steel their courage, even after Mr. Harper drew back, to unite behind the claim that their own reconversion to Keynesianism is more genuine – and genuinely multilateralist. And all constitutional precedents suggest that it will be very difficult for the Governor-General to deny them the chance to form and sustain a government so soon after a general election in which they together obtained a clear majority of the vote.
The question remains, however, whether the opposition parties themselves have taken on board, any more than Mr. Obama or Mr. Brown, just how much of a break is needed with the basic logic of capitalist markets in such a severe crisis. Sauve qui peut, each firm lays off workers and tries to pay less to those kept on; taken together, this has the effect of undercutting the overall demand in the economy. It's the classic case of micro-rational behaviour having the worst macro-rational outcome.
It was such illogic that initially led the Tories to use the statement to try to set an example for the private sector by restricting the collective bargaining rights of the secretaries and statisticians, cleaners and computer programmers who work for the government. This was exactly what the federal Liberal government did in the recession of the early 1980s and Bob Rae's Ontario NDP government did in the recession of the early 1990s. But even without this, whatever either any government might now do by way of direct public spending or adjusting taxes to encourage consumption will likely not be enough to offset the private sector's own tendencies to engage in the macro-illogic of cutting jobs and wages, and thus workers' main sources of income.
The specific problem in this particular crisis is that all the massive drops of liquidity that governments everywhere have helicoptered onto the financial system in the past 15 months have not restored the banks' capacity or willingness to lend at anything like previous rates – even to each other, let alone to firms or to consumers. The recent British and U.S. decisions to infuse their banks with public capital by buying some of their shares reflected the hope that this would overcome the banks' mistrust of each other's solvency. Mr. Flaherty's statement showed that the Tories are prepared, "if necessary," to do the same thing.
But nor does this type of capital infusion work to unclog the financial system, as may be seen by the latest hundreds of billions the U.S. Federal Reserve and Treasury committed to buying or guaranteeing the banks' bad debt, even after their capital infusions. And it was also seen in the Bank of England's lowering of interest rates by 1.5 per cent, only to find that the banks wouldn't lower their own rates accordingly. Her Majesty's Treasury could only use moral suasion to try to get the banks to do so, while reassuring them that all the state wanted as a shareholder was that the banks would operate prudentially on commercial criteria.
But it may be that banks cannot lend sufficiently to lead us out of the crisis. This is precisely because the whole system of securitized finance that has grown up over the past few decades – whereby the risk on mortgages, consumer credit and business loans is sliced, diced, repackaged and traded around the world – has imploded. Even the Financial Times now warns in its editorials that it may not be possible to avoid much longer the issue of really taking the whole banking system into public ownership, given its current disfunctionality. Indeed, there has long been a strong case for turning the banks into a public utility, given that they can't exist in complex modern society without states guaranteeing their deposits and central banks constantly acting as lenders of last resort.
In Canada, as the New Democrats prepare themselves for federal office for the first time in their history, the prospect of turning banking into a public utility might be seen as laying the groundwork for the democratization of the economy that the party was originally committed to when it was founded as the Co-operative Commonwealth Federation, four years into the Great Depression. But there is no need for the bankers to set up barricades on Bay Street just yet. As the Globe and Mail reported, the Liberals took pains last week "to reassure Canada's banks ... that a Liberal-led coalition would not harm the economy or financial institutions." And even the NDP has taken it for granted for the past 50 years that all that democratic socialist public ownership stuff was more or less all behind us.
But as the current crisis goes to show, we are far indeed from the end of history. Capitalism is full of surprises. And, for that matter, so is socialism – which is very likely to be soon heard from again as a serious democratic political force. When the logic of capitalist markets goes haywire, people can see the point, and the possibility, of new systemic alternatives to it.
Leo Panitch is the Canada Research Chair in comparative political economy at York University. His most recently published books are American Empire and the Political Economy of International Finance and Renewing Socialism: Transforming Democracy, Strategy and Imagination. This article first appeared in the Globe and Mail.
The Harper government's economic proposals, announced November 27, aroused a cry of outrage from unions and social activists across the country: "Throw the bums out."
The Conservative plan for cutbacks, combined with and attacks on the rights of unions and women, showed clearly, as CLC President Ken Georgetti said [1], that the Conservative government aims "to make working people pay for a crisis they did not create."
Efforts by the Liberals and NDP to forge an alternative government have won wide of support in progressive circles, where many see a coalition as the only way to bring the hated government down.
Leaders of four major national unions and three influential progressive advocacy groups joined November 28 in an appeal to the Liberals and NDP [2] to join in pursuing this goal, since "only a coalition government can provide the leadership Canada needs."
These calls all assume that the coalition would be Liberal-led - and none of them has raised any programmatic agenda for such a government.
Is the prospect of a Liberal-led government really so appealing as to deserve a blank cheque? Have the advocates of coalition forgotten that it was the last Liberal government that originated most of the hated "Harper" policies, including the gutting of social services, attacks on civil liberties dressed up as "anti-terrorism" and Canada's disastrous war in Afghanistan?
From all reports, the NDP is not calling for changes in those policies in its negotiations with the Liberals. The Globe and Mail noted November 29 that "a senior NDP official said that no policy issues are considered deal-breakers."
The Liberals say they favour "an economic stimulus package," but its content is unknown. Certainly the Liberals will give government a much bigger role in managing the economy. Every major capitalist government is doing that - and Harper will do it too, once he gets his signals straight.
As Margaret Thatcher might say, "There Is No Alternative." Neo-liberalism is in shambles; the economies are in utter crisis; government intervention is capitalism's only hope.
But there is no assurance that increased government spending will be associated with social reform - massive deficits were the hallmarks not only of Roosevelt, but also of Reagan and Bush. A Liberal "stimulus" package is most likely to combine massive handouts to big business with attacks on workers' wages and pensions.
The aim of progressive policy must not be to enhance the power of capitalist governments but to increase that of working people. We cannot expect Stéphane, Iggy and Bob to do any such thing, even if the NDP has a few Cabinet posts.
The only force we can depend on is the pressure of independent popular and labour movements. In a situation of social and economic crisis, these movements can become an irresistible force.
And here is the fatal weakness of the coalition government scheme. Locked inside a Liberal-dominated coalition, the NDP would be unable to campaign against capitalist attacks. Accepting responsibility for the anti-labour measures of such a government could rapidly discredit the NDP and end its ability to continue as the bearer of popular hopes for social change.
At the same time, labour leaders' current pledges of unconditional support to a coalition will undermine the unions' ability to act independently in defence of workers' rights and needs.
Tying ourselves down in this manner is particularly dangerous in the midst of an economic crisis that is unprecedented, and shifting rapidly in unpredictable ways.
Here the Bloc Québécois sets a positive example: whatever parliamentary manoeuvres they wisely or unwisely engage in, they are determined not to enter a Liberal-led government.
The best way to resist big business attacks and win immediate and specific gains is to stick to the path of independence from big business and its parties, and rely on the potential of popular movements.
On such a course, and in present conditions, it is by no means excluded that we could prepare the ground for a Venezuelan-type outcome: a sweeping shift in power relationships in favour of working people, the poor and the oppressed, and their organizations.
To move forward in this time of crisis, we must avoid falling into the deadly embrace of our enemies. As Muhammed Ali said, to be free to fight, you need to float like a butterfly – and sting like a bee.
