For many years we have been monitoring and commenting on the market fundamentalists in their think tanks who have been circling like sharks around Westminster. They now seem to have taken control of the economic policy direction of the Conservative Party and, in particular, the Prime Minister, Liz Truss and her Chancellor Kwasi Kwarteng.
Writing in the ‘Financial Times’, Tim Harford said that Liz Truss is right to acknowledge that under capitalism growth or capital accumulation is important irrespective of the environmental consequences but “she seems to have no idea how to go about it”. Faith in the theologians of the Institute of Economic Affairs (IEA) means the blind leading the blind.
Another economist, Paul Donovan, at UBS Global Wealth Management, referred to this market theology as “doomsday cult” economics. The Institute of Economic Affairs, the Tax Payers Alliance, the CPS and other wild and demonic think tanks certainly are economic cults largely underpinned by secretive dark money from unknown sources. These are the people who believe the science of climate change is a “Marxist conspiracy”. They know the price of everything and the value of nothing.
Ironically, their evangelical pursuit of free markets – markets free from government interference – appeared to have doomed the Conservative government and the Conservative Party itself into electoral oblivion. Although, as Keir Starmer will discover if he ever gets elected into No 10, administrating capitalism is always a poisoned chalice.
Marx dismissed the market economists of his day, like J.B Say, as “vulgar economists”. They were not real economists wanting to know how capitalism worked but were mere apologists, shallow and bereft of economic understanding.
Marx contrasted the “vulgar” or superficial from the classical political economists like Adam Smith and David Ricardo, the latter comprising of “all the economists who since the time of W. Petty have investigated the real internal framework of bourgeois relations of production” (Capital, Vol. I, pp. 174–5). Marx would have seen the ghouls and vampires in the free market think tanks in Tufton Street Westminster as particularly vulgar and shallow,
Vulgar economics, while parasitically drawing upon the materials provided by scientific political economy — and therefore lacking in originality — looked only at ‘appearances’. They mistook social relationship between classes as mere relationship between things. Marx saw, in capitalist production, ‘more than in any other’, a deeper ‘reality’, ‘the inner workings’ of the social system of capitalist class exploitation — which was captured in his critique of political economy over three volumes of ‘Capital’.
Central to Marx’s critique of capitalism was in its analysis locating the generation of surplus value in production. Marx explained the manner in which a surplus value was extracted from the working class and why all capitalist politicians, Starmer and Truss, tell workers to be more productive, to work harder and not be idle. Workers must increase the intensity and extent of their own exploitation; produce more profit and keep the capitalist class in a state of privilege and luxury to which they have become accustomed.
Furthermore, Marx showed that through private property ownership, surplus value is extracted from the working class, appropriated by the owners of the means of production and distributed as the tripartite revenues of the unearned income of rent, profit and interest. Class exploitation brings to light the inevitable and endemic conflicts of class interest and class struggle.
“Britannia Unchained?”
And in her genuflection towards the rich and powerful this is exactly what the Prime Minister has done with her economic reforms. Tax cuts for the rich and attacks on the poor. This should not surprise us.
Let us not forget that Liz Truss was co-author with Kwasi Kwarteng among others, of Britannia Unchained (2012) which described the working class in Britain, particularly those in the north, as perhaps the laziest workers in the world. All workers have to work. It is the capitalist class that parasitically feeds off the work of others and does not have to sell their ability to work on a daily basis. Many workers now have two to three jobs to make ends meet and still have to go to food banks to provide for their families.
Liz Truss holds the unfounded conviction that governments can prepare the grounds for capital to expand faster in Britain than anywhere else in the world. They cannot. The laws of capitalism cannot be affected by government intervention. Chancellors of the Exchequer, the Bank of England, the Treasury and their economic advisors do not have that power.
Already the IEA is distancing itself from Truss. They believe she will tarnish the purity of their beliefs in the market and everything they stand for much as the Spanish inquisition did for the Catholic Church .
(The Observer 2 October 2022)
The Government’s baseless economic belief is that if they decree growth will increase by 2 or 3 percent then it will come to pass. It is similar thinking to the five year plans of the old Soviet Union where Stalin said industrial or agricultural production would reach a certain amount each year with state capitalism having no ability to deliver these targets. Whereas Truss sacks advisors who will tell truth about their baseless economic theories, Stalin had the managers of state enterprises shot. Just as the economy can’t be talked down so it cannot be talked up. Governments react to the economy and events but the anarchic laws of capitalist production dictates the way the market goes; from boom to bust.
And in reacting to the financial crisis the government will react in the only way it can and that is to impose austerity on the poor by cutting back on social services, unemployment benefits and health care. Already we are being told that there are cuts on the way, although previously we were being told about “world beating social services”.
It is not tax cuts per se but the fact that it is investment and higher productivity which grows the economy. Tax cuts do not necessarily mean future investment. Truss said that she supported the profit motive but she did not understand when and why capitalists invest. Nor does she understand – how could she with Free Market Think Tanks advising her – where profit comes from. ‘Capital’ and Marx’s theory of surplus value is a closed book to her.
If the economy looks like it is not going to make a profit then the money going to the rich will only be used to buy luxury goods or invested in savings particularly when interest rates are going up. In times of uncertainty or during trade depressions capitalist firms do not invest, in fact, they even lend to banks for interest or create “cash mountains”.
Truss: Another Thatcher?
Truss believes she is another Thatcher with all the certainty and arrogance of how to prevent another slump and increase growth forever. Truss believes she has economic policies to prevent economic slumps occurring and “unchain Britannia” to make British capitalism as competitive as it was in the 19th century.
In her speeches she’s spelt it out: get rid of inflation, nationalisation and monopolies, cut government spending, borrowing and interest rates, expand the manufacturing industry and export, through low interest rates, and a strong pound, weaken the trade unions, to cut trade union laws, encourage free trade and competition, and last but not least have strong Tory government following strict free market and free trade doctrines. .
Now here you’ve got Truss’s policies spelt out, it’s quite clear this is what she believes and what she thinks will in fact happen in the future when she enacts her economic policies. But there was a certain year which all of these things were in existence.
There had been no inflation for half a century, British manufacture was highly competitive, in fact, Britain was then the workshop of the world and there were no monopolies because it was not till later, in the nineteenth century, that monopolies began to develop, Government spending in real terms was only one fifth of what it is now and there was no government borrowing.
When we say in real terms, you compare government spending now with the total of the national income and the government spending in that year we are going to name was only a fifth of what it is now.
Taxation was low, income tax was only three pence in the pound and interest rates were also generally low, the bank rate at that time was 3% (as against the current predictions of 6 to 7%), the pound was strong, it was worth $4.86 dollars, that’s about four times as much as it is now.
The unions were weak and small and subject to much tougher anti-trade union laws than they are now. There was no Government welfare, no state pensions, no National Insurance no NHS and minimal state education There was no Labour Party to worry about and the Prime Minister was the Tory idol, Benjamin Disraeli. .
Now, if all these conditions were recreated now Ms Truss would say there will be no slumps, no trade depression and constant rising growth. Well, the year was 1875. And if you look up your history books, you’ll find that the reason why the year 1875 was known to historians is because it was the year in which began what was known as the Great Depression.
The Great Depression started in 1875 and lasted twenty years. And to tell you it was nothing of any consequence would be a big mistake. A damning description of it was given in Parliament by Winston Churchill’s father, Lord Randolph Churchill, who served as Chancellor of the Exchequer, in the middle of the Great Depression.
“We are suffering from a depression of trade extending as far back as 1875, ten years of trade depression, in the most hopeful either among our capitalists or among our artisans can discover no signs of a revival, your iron industry is dead, dead as mutton, your coal industries, which depend greatly on the iron industries, are languishing. Your silk industry is dead assassinated by the foreigner. Your woollen industry is in articulo mortis gasping and struggling. Your cotton industries is seriously sick. The ship building industry which held out longest of all is come to a standstill. Turn your eyes where you will, survey any branch of British industry life you like, you will find signs of mortal disease“. .
Now this is the twenty years Great Depression, a depression that Ms Truss believes will never happen if her economic policies are enacted. But it did occur. It went on for twenty years. It merely marked the permanent decline of British manufacturing in the world.
At the time, they held lots of committees of enquiry, and racked up all sorts of information but they did what capitalists do after every depression they say we will see that it doesn’t happen again, and of course it happens scores of time and it will happen again in the future. .
What Lord Randolph Churchill said about the Great Depression undermines Truss’s belief about her ability to prevent another depression. There is one very good reason for this.
Politicians and economists throughout the world simply do not understand the economic system they defend. They could go on, year after year, facing economic depressions but they only have to look up their history books to see that these depressions have happened scores of times before, but they still cannot find out or explain why they happen.
