Defence against Vault 7 attacks

March 13, 2017

In the past cyber attacks were largely carried out by amateurs or criminal gangs. Recent releases of information from Wikileaks have made it clear that a whole range of digital devices have been subverted by intelligence agencies.

More recently they have been commercialised with a market existing in the development and detection of ‘exploits’ or weaknesses. Firms advertise on their websites that they have hacks that allow them to control computers running web browsers such as the latest versions of Internet Explorer or Google Chrome.

Companies that develop these exploits then market them to NATO approved defence and intelligence agencies. In the light of the Snowden revelations it is reasonable to fear that some of the Endpoint attacks exploits in widely used products originating from big US companies like Microsoft, Apple or Google may have been developed on the basis of inside knowledge. Either they are deliberately introduced into the software, or information about the weaknesses may leak to the exploits contractors prior to their being fixed in a subsequent software release.

Government agencies like the UK GCHQ and the US NSA systematically tap communications lines and hack into Internet switches to divert data.

 Historic examples

There is of course a long history of deliberate interception of digital information by intelligence agencies. In the early 20th century the British government operated the ‘red net’, the network of British owned undersea cables connecting the world. It was labeled ‘red’ as the British Empire was marked red on the map. As telegraph and telex information passed through British territories they were systematically copied and decrypted by the intelligence service.

This control of data flows was of decisive importance to British strategic objectives. The first act of hostilities in the First World War was the dredging up and cutting of German controlled sub-sea cables. This occurred with hours of war breaking out. In consequence German diplomatic correspondence had to be encrypted and sent via neutral Holland and then through London to the rest of the world. Using this the British were able to obtain the text of the proposed secret treaty between Germany and Mexico to divide American territory in the even of war. Publication of this treaty in the American newspapers led to the USA declaring war in Germany in 1917.

Later the leaking of secret Commintern telegrams suggesting that the Commintern should support the Labour Party, were used to precipitate the fall of the first Labour Government.

Britain remains a hub for undersea cables, now fibre optic rather than electrical.

Edward Snowden has revealed that all internet communications passing from Europe to North America and on from there are systematically tapped by GCHQ. The revelation that German and other EU communications are still tapped by the UK government caused some controversy when it was revealed by Snowden.

Edward Snowden revealed that within the USA data centers and Internet hubs are linked to the NSA which carries out diversion of information flows similar to GCHQ.

The precautionary principle suggests that chat services like Facebook, Google and Skype can be assumed to be tapped at the premises of the companies running these services.

It is perhaps significant that after Microsoft took over Skype it switched the system to a server based rather than peer to peer based making it easier to tap. Peer to peer traffic does not go through a single server making tapping harder.

From the documents released by Wikileaks it has become clear that the actual encryption algorithms are still secure, but the endpoints are easily compromised. This is one of the motivations behind our proposal: if both endpoints engaging in encrypted communication are secure, it is currently impossible to decrypt the communication.

Traditional viruses  

These install themselves and then propagate copies either by email or external storage media contact ( USB sticks, SD cards, ebook readers etc ). Once installed, what they do is up to the writer of the virus.

The most sinister recent example was the Stuxnet virus, which damaged the equipment in the Iranian gas centrifuge plant. This showed evidence of having been expertly and deliberately constructed in order to produce damage, but not to the computer on which it was run, but to industrial equipment controlled by the computer.

  • The virus was transmitted via USB sticks, copying itself onto any USB sticks inserted in the machine, and copying itself from any USB stick into all machines that the stick was placed in.
  • It specifically targeted a particular type of industrial control software. If the computer it infected had no industrial control equipment it was benign.
  • If it found the equipment, the virus made equipment operate outside safe parameters. It was particularly targeted at centrifuges processing uranium hexaflouride, which were made to run slightly faster than they should, so that they would rapidly wear out.

Although it can not be proven, it is generally assumed that the virus was developed by either Israeli or US stage agencies as part of an attempt to sabotage the Iranian nuclear power programme. It is viewed by commentators as part of an ongoing covert operation that has also involved targeted assassinations of Iranian physicists.

Buffer overflow attacks  

These rely on badly written programmes running on computer A that allow messages sent from computer B to overwrite part of the subroutine linkage area in the data memory of computer A.

  • When this happens the overwriting code gains control over computer A and can install malware. The malware may be activated at some later time to produce effects similar to those due to a virus.
  • Such attacks can be launched from malicious websites.
  • Secuirty exploits in discovered popular web browsers or display programmes such as Adobe Acrobat can take this form.
  • It is important to note that a buffer overflow is a weakness even without injection of code: a buffer overflows can crash e.g. an ssh server, thus effectively resulting in Denial of Service.

Homeric Attacks  

These rely on software that is apparently benign and useful, but which may contain secret malware. They are modelled on Homer’s myth of the giant horse built by the Greeks as a gift to the King of Troy. Typically the malware then copies confidential information from the infected computer to computers controlled by the producer of the malware.

  • The most notorious source of these are freely down-loadable utilities or apparent utilities that the user is induced to deliberately run on their computer.
  • But should government A be able to obtain collaboration from major software companies, it would be possible to introduce Trojan horse software into widely used utilities such as Email readers, word processors, PDF file readers, spreadheets etc. If these were then used by countries B and C in their government offices, then government A might be privy to the confidential reports of governments B and C.
  • In principle, it is possible to guard against this type of attack by stopping the process from communicating over the network, and many firewall products have this ability. However, in practice this is difficult because many applications exchange information with their software company to check for updates, and by blocking the communication, one stops vulnerabilities from being fixed.
  • With our proposed approach however, the need for updates largely disappears as there is much less scope for exploiting vulnerabilities.

Targets

Telephone or internet switching points. These systems fail more gracefully than power networks, but a sufficiently widespread virus attack on switching points could cause significant interruptions to traffic. Air traffic control systems

The use of malware for espionage is an obvious danger, but one has to assume that the Stuxnet virus is just one currently known exemplar of a range of similar designs that have either already been, or could soon be, developed by state cyberwar departments. These would have a wide range of possible infrastructure targets:

  • Modern atomic power stations 1. The Chernobyl accident showed that operation of nuclear power stations outside their design parameters may lead to significant adverse effects.
  • National power grids. Experience in the USA has shown that accidental overloading of a few switching points can lead to cascading failure: safety cut-outs come into operation redirecting current, causing more overloading and further cut-outs. Such cutouts induced by single accident points have led to blackouts lasting hours over substantial parts of the USA and Canada.
  • Telephone or internet switching points. These systems fail more gracefully than power networks, but a sufficiently widespread virus attack on switching points could cause significant interruptions to traffic.
  • Air traffic control systems and air defence radar systems, insofar as these have been upgraded to use modern commodity brand PCs. The hazards here are obvious.

The term ‘computer virus’ is a borrowing from medical terminology. Indeed the very idea of creating computer viruses came from a deliberate copying of biological ideas. It is not surprising that the first technical fix: anti-virus software, also borrowed from biology.

This works on the model of the vertebrate acquired immune system.

Our immune system learns to recognise pathogens and then produces antibodies to them. Our immune system learns to recognise specific amino acid sequences, or motifs, in proteins as belonging to hostile organisms, and produces anti-bodies which bind to and neutralise these proteins.

On first encounter with a new virus we have no defence ( SARS, Ebola etc). Whole races can be wiped out on contact with unfamiliar new viruses: experience of New World and island tribes on exposure to Old World viruses like colds, flu, smallpox.

Likewise, antivirus software relies on the providers of the software recognising motifs in the malicious code and thus identifying it. A software motif is a sequence of bytes invariably found in the code of a particular virus.

A brand new virus will not be detected unless it shares motifs with previous versions.

Monocultures are vulnerable  

 corn_fields blight
Healthy Blighted

Figure Monocultures are vulnerable

All organisms in a monoculture have similar genetic structure if a virus can infect one it can infect all. This is why food crops, where a single species dominates, are particularly vulnerable to infection.

A natural grassland will contain dozens of species, and the ecosystem as a whole is robust against the attack of individual microbial pathogens. A giant field of corn is vulnerable.

   Computer system monocultures

Windows PCs and Android mobile phones are two examples computer system monocultures. The equivalent to the Genome of plants in the cyber environment is the machine code of the microprocessors.

Microprocessors with the same machine code and same operating software can be infected by the same malware. But binary malware for machine code X will not infect a computer with machine code Y.

An machine code is a list of numbers with special meaning to the computer for example

code meaning
0 Load
1 Store
2 ADD
3 SUBTRACT
4 JUMP

Machines can typically recognise hundreds of such codes. Android recognises 256. All programmes run on the system rely on having a standard interpretation of these codes. The meaning of these codes is normally fixed by the electrical circuit of the computer.

In the early days of microprocessors there were many competing code schemes from different manufacturers: Intel, Motorola, Hitatchi, National Semiconductor, Zilog etc all had their own proprietary codes. The process of concentration and monopolisation in the computer industry means that now that computers, tablets and mobile phones nearly all use just two designs of machine code: the US Intel code and the code developed by the UK ARM company. Each of these software companies has licensed their codes to chip manufacturers in other countries, who in turn sell the chips to electronics manufacturers producing final consumer and industrial products.

  • Windows, Apple and Linux computers all use the Intel machine code.
  • Nearly all smartphones and tablets use the ARM machine code.

  Virtual machine codes

Not all programmes depend directly on the raw machine code. Some use a virtual machine code that is interpreted by software rather than hardware. Some widely used virtual machine codes are those from the following US companies :

Oracle:
the JVM into which Java programmes are translated.
Google:
the Dalvik code that is used for Android apps.
Adobe:
the Postscript and subsequent PDF codes used in printers and document viewers.
Microsoft:
the Macro code used in Word documents and Excel spreadsheets.

Whilst the existence of many hardware machine codes protects the computer ecosystem against virus spread, the proliferation of popular virtual codes makes it easier for viruses to spread.

This is because a single computer can now be infected by viruses adapted to several different codes. An Intel PC with virtual machines from Oracle, Microsoft and Adobe installed provides 4 different targets for viruses to infect.

Permuted systems

The basic approach to protecting computer ecosystems should be to create a diversity of machine codes. But this runs up against the high cost of designing computers. A country could not afford to design and build hundreds of completely different microprocessor architectures. The contemporary cheapness of computers is due to millions of identical microprocessors produced by what amounts to a sophisticated printing technology.

We propose to retain this manufacturing advantage, but to introduce as part of the hardware a  permutation unit that shuffles the machine code just before it is executed.

Permuting means re-ordering or shuffling things.

If you construct an chip device with a permuted set of meanings for its machine code no software designed for a standard chip will run on it.

code meaning Permuted meaning
0 Load JUMP
1 Store ADD
2 ADD Load
3 SUBTRACT Store
4 JUMP SUBTRACT

Thus no malware designed for the standard chip machine code will run on it.

It is in principle relatively easy to modify the design of a processor chip so that it incorporates a permutation unit that permutes the machine code. A sensible place to put the permutation unit is between main memory and the instruction cache, meaning that the circuit delay for permutation is only met on loading the cache rather than each time an instruction is executed.

 permuteunit

Figure Permute unit

Suppose you have a machine whose 32 bit codewords looked like this:

field Opcode r1 r2 offset
bits 8 4 4 16

One could use two alternative permutation techniques.

  1. The simplest is to permute the order of the meanings of the opcode field as shown in our previous example. The machine has 256 possible opcodes, so a 256 element permutation table would be needed. This allows 256! different possible unique designs of machine code.
  2. Alternatively one could permute or shuffle the bits in the whole instruction words. Since there are 32 bits, this would allow 32! factorial different codes.

Clearly the first alternative is much better. Each chip would have its unique permutation table stored in non-volatile memory, allowing the permutations to be loaded as a final manufacturing step on chips that were otherwise architecturally identical, and thus run unique machine codes on each of chips coming off the production line. One might allow a facility of field programmability of the permutation table.

Suppose that such chips were available and incorporated into PCs, tablets etc. For markets where there was no particular security problem one could use devices with a null permutation. These would run the native, unpermuted machine code supported by the hardware, but would run the risk of malware infestation.

Suppose the governments of countries B and C want to secure their government ecosystem against viruses, what do they need to do?

  1. Assume that they each settle upon a specific version of Linux for their machines. Country B uses Debian and Country C Ubuntu. Each country has a server for distributing approved copies of Linux to government machines.
  2. Each country maintains a secret database that associates with a identifier of every computer it uses a unique permutation table. The unique id can be conveniently calculated as a hash function of the permutation table.
  3. When the government in country C buys a new computer it sends the machine to a depot containing ServerC . Staff at this depot construct two files: a permutation table, and a boot disk image containing a permuted copy of Linux.
  4. The permutation table is burned into a ROM on the machine and the boot disk installed in the machine.

A binary to binary translator on the server would convert the raw public Linux software to a permuted version able run on a machine with a particular permuted instructionset. A similar binary translation process would be used to provide periodic software upgrades. In this case it would be necessary for the client machine to send its unique identifier when requesting a software upgrade.

Summary

  • ‘Species barriers’ prevent the spread of viruses among the machines of either country B or country C.
  • Buffer overflow attacks launched from country A against either B or C will fail as the introduced malware would not be a valid programme and so would cause an immediate crash on visiting the malicious website in country A. To guard against buffer overflow attacks that could bring down the entire system, the communication stack will be implemented in hardware.
  • Homeric attacks would only be possible if malware was introduced into the source code of the Linux images used by the servers in B and C. The governments would have to insist that software was only mounted on the servers whose source code was:
    • Openly available
    • Had been subjected to inspection to attempt to detect obfuscated malware. This route could not be completely closed, but the ease by which such homeric attacks could be carried out would be much less.
    • Did not contain interpretive code. This is harder to ensure since so many contemporary Linux utilities depend on interpretive code. The consequence would be that the range of software supported on these machines would be strictly limited to a relatively small range of essential utilities.
  • It is not difficult to envisage a similar schema being applied to a range of smart phones which could be distributed with an appropriate permuted operating system.

Why law of value really applies in socialist economies

March 5, 2017

The term law of value has exoteric and esoteric meanings. The exoteric or superficial meaning is that in capitalist type economy, relative labour values will act as an attractor for relative prices. The more esoteric meaning is that the distribution relations in all societies are constrained by the distribution of labour. In a capitalist economy the great branches of production subsist by trade and their respective revenues have at least to be roughly proportional to the populations that they support.

New Harmony Utopian community designed by Owen

New Harmony Utopian community designed by Owen

 

Although in a socialist economy the great bulk of the economy is publicly run, the distribution of the population accross sectors of the economy continues to exert an influence as does the fact that the population still live in households. This may seem an unexceptional observation, but communist organisations that grew up within previous class societies dispensed with the household as an institution. Think of a monastic community or Owen’s New Harmony. In such householdless communities there would be no personal property as opposed to community property. Food preparation, was communal, and childcare was either abolished as in monastic orders, or carried out communally. But if you have households then private property of the household is distinct from community property. Since the composition and consumption needs of households differ, it is impractical to give all households a uniform ration of goods. An old couple would have little need for children’s shoes or toys, for example. So a socialist economy with households has to allow some flexibilty in consumption, which they have achieved by distributing a portion of people’s income in money. In principle they could have used something other than coins and notes. They could have kept social credit accounts or labour accounts for people, but in all cases, many goods for household consumption would have something very like a price.

In a socialist society then, with households, how does the esoteric aspect of the law of value, the underlying constraint posed by the social division of labour, express itself?

1.1  Intersectoral relations

I shall divide the socialist economy into three sectors

  1. The production of means of production.
  2. The production of articles of personal consumption that are distributed for sale or charge to individual workers’ families. At this point it makes no difference whether the articles are sold for actual money, or against the debit of a labour account.
  3. The provision of uncharged services such as education, healthcare, defence, and public infrasctucture. This is not to say that being conscripted into the army is not a charge on the conscript, but that they do not individually have to pay in cash or labour credits for their military service. Similarly education costs adult society time and resources, and costs the pupils their play time, but it is assumed that there are no school fees.

I will use the subscripts 1,2,3 to denote these sectors. Sectors 1 and 2 produce physical outputs, that is to say they are materially productive in the sense of Adam Smith’s use of the term productive. I will call the output of sector 1 machines, though it also includes all other means of production, and will use the symbol m, in lowercase to indicate a flow, for the gross output of machines and the stock of machinery and equipment used in the sectors as M1,M2,M3.

Machines wear out. I assume that a fraction δ of them wear out each year. So for the sectors the flow of new machines needed to simply stand still is given as δM1,δM2,δM3. If the economy is growing there will be some surplus flow of machinery over wear and tear, set asside for growth, which I will call mg.

mg = m −( δM1+δM2+δM3)
(1)

I will assume that the working population is P divided into P1,P2,P3 working in the three sectors, and that for each year of work the government credits a person with a wage of w either by paying them cash or by recording some units into their personal consumption account in a database. The state also, for budgetary purposes has to account for the usage of machinery and equipment in different sectors right down to the individual factories, hospitals etc. The accounting unit for such charging is assumed to be the same, either money, labour hours, concievably energy, as is used for personal consumption accounts. I will use c for the charging rate for a machine. This then gives the current accounting costs Ci of each sector, assuming that the government does not charge itself interest, of

C1=cδM1+wP1
(2)

 

C2=cδM2+wP2
(3)

 

C3=cδM3+wP3
(4)

The accounting costs of each sector are made up of the charge for the use of publicly owned machinery , and the payments to the people working there. The first is a charge internal to the public sector but the government has to carry out such sectoral charging if it is to make overall budgetary decisions about the scale of the sectors. The only point at which an actual sale, with change of ownership, happens is when the output of the consumer goods industry is sold to the working population. I will call this the bread or baking industry and label the total output of the industry b and the price of bread p. If we assume for the moment that there is no mechanism by which the working population can save, then we have

pb=w(P1+P2+P3)(1−t)
(5)

where t is the income tax rate. That is to say, the price of bread times the bread output equals the after tax income that the working population gets. This is their money wage but in addition they consume a social wage of education, healthcare etc provided by public sector 3. Equation 5 gives the price of bread as a function of the money wage.

It is not so obvious how the government should set the charge for machinery used by the public sector but one obvious way is to set the charge for machines at their imputed cost of production

c=C1/m
(6)

The tax revenue plus any profit on sales of consumer goods is then used to cover the cost of the free public services and the net accumulation of new machinery

cmg+C3=tw(P1+P2+P3)+pb−C2
(7)

We have 7 equations 1 to 7 with 8 unbound variables mg,c,w,t,p ,C1,C2,C3. I assume that m, b, M1,M2,M3, P1,P2,P3, δ are fixed by the actual structure of activity so in principle the government could fix either the tax rate or the wage rate, but having done that, all the other variables are constrained. Let us look at options.

I will present a simple example and compare the effect of different wage and tax policies.

Sector P M output
1 4000000 250000 100000
2 6000000 250000 1000000000
3 5000000 250000 no physical output
  1. The wage is fixed at 1, this ends up equivalent to valuing things at labour values, no profit is made on the sale of consumer goods and income taxes are adjusted to meet the cost of the public services and accumulation. We end up with
    p c t income tax rev turnover tax rev
    0.0073 53.3 51% 7666570 0
  2. In this scenario income tax is held low at 10% and the price of the consumer goods have to rise to cover the shortfall in government revenue. Given that the physical output of consumer goods stays the same, the only effect of reducing income tax is to increase prices. The net effect is that the goverment raises most of its income from what can either be viewed as a tax on consumer goods, or on the profits of nationalised industry. Wages turn out to be the same, as does the charge for means of production, but consumer goods cost almost twice as much.
    p c t income tax rev turnover tax rev
    0.0135 53.3 10% 1500000 6166666

    The relative prices of machinery and bread now diverge significantly from labour values, with bread being sold at a premium due to the tax being levied on it.

The conclusion is that the extent to which a socialist government can disregard labour values is constrained by the level of income tax that they levy. If they rely on income tax for public revenue, then sectoral prices will be proportional to labour values. If they attempt to curtail income tax to a level too low to support public services, then the price of consumer goods has to be raised in what amounts to a sales tax to prevent the accumulation of purchasing power in the hands of the public, and thus suppressed inflation.

1.2   Intra sectional constraints

Even if you assume that the number of people allocated to make consumption goods does not change, that still leaves considerable flexibility in what consumer goods are made. Asume the intention is to adjust output to consumer wants as expressed by the goods they chose to spend their social credits on. What does this imply for the relative prices of goods?

Should these relative prices correspond to relative labour values?

Yes they must, for it is only under this condition that the attempted adjustments people make in their consumption will be compatible with the pre-determined number of people working making consumer goods. Suppose that one group of goods – say furniture is systematically undervalued compared to another group of goods, let us say clothes. Suppose clothes are priced at par for labour values and furniture is sold at a 50% discount with respect to its labour value. Note that it does not matter if the social credits are measured in hours or in some arbitrary currency units, there will always be some quantity of the currency that, averaged accross all prices, represents an hour of embodied labour. Consumers then attempt to shift part of their clothes consumption to furniture. Suppose they cut clothes consumption by the equivalent of 100 million hours of credits, and switch these credits to furniture. Since the furniture is being marked at a 50% discount, these 100 million hours of credits switched from clothing appear to be enough to buy furniture that took 200 million hours to make. Even if the workers who in the past worked the 100 million hours in the clothing industry were shifted to make furniture, that would not provide enough additional labour to make 200 million hour’s worth of chairs, tables etc.

More generally, if prices are not proportional to labour values, then shifts in purchases from one good to another will lead either to patterns of demand that to big to be met with the existing workforce, or if the demand shift goes from undervalued to overvalued goods, to unemployment and short time working in the consumer goods industry.

Socialism capitalism and population

February 10, 2017

We are now approaching a social revolution in which the economic foundations of monogamy as they have existed hitherto will disappear just as surely as those of its complement-prostitution. Monogamy arose from the concentration of considerable wealth in the hands of a single individuals man-and from the need to bequeath this wealth to the children of that man and of no other. For this purpose, the monogamy of the woman was required, not that of the man, so this monogamy of the woman did not in any way interfere with open or concealed polygamy on the part of the man. But by transforming by far the greater portion, at any rate, of permanent, heritable wealth – the means of production – into social property, the coming social revolution will reduce to a minimum all this anxiety about bequeathing and inheriting. Having arisen from economic causes, will monogamy then disappear when these causes disappear?
One might answer, not without reason: far from disappearing, it will, on the contrary, be realized completely. For with the transformation of the means of production into social property there will disappear also wage-labor, the proletariat, and therefore the necessity for a certain – statistically calculable- number of women to surrender themselves for money. Prostitution disappears; monogamy, instead of collapsing, at last becomes a reality – also for men. ( [Engels and Hunt, 2010])

Societies have characteristic family ideologies and family laws structured by their economies. This was a basic thesis of [Engels and Hunt, 2010], who used this premise to try to predict how the family would change in a post capitalist society. The nice point is that this theory of the history of the family then itself became part of the ideological foundation of socialist family relations.
The professed aim of the Communists was to reform the relations between the sexes along the lines advocated by Engels. The universal participation of women in public industry would have as a consequence the abolition of the monogamous family as the basic economic unit of society. Private household work would be transformed into a social industry and society as a whole would take responsibility for the care and education of all children whether born in or out of marriage.
With considerations of property removed, marriage would be based on mutual love alone. Arranged marriage would vanish. We tend to think of arranged marriages as something oriental, but the underlying principle, of the marriage being a matter of passing down and accumulating property was widespread. Even in the 19th century England, marriages among the upper class centered on the property motive:

It is a truth universally acknowledged, that a single man in possession of a good fortune, must be in want of a wife. ([Austen, 1994] )

Only the poor, Engels maintained, could afford to marry for love. But in the socialist future, love would become the sole basis for marriage.

Under the influence of radical legal theorists[Pashukanis, 1989], the Soviets at first envisaged that marriage law, like other contractual law would be phased out in socialist society. The only interest the state would have in people’s cohabitation was to register it for statistical purposes along with births and deaths[Berman, 1946]; so the RSFSR 1926 Family Code treated sex, marriage and divorce as a private matter in which the state did not interfere. This liberal attitude extended to not prohibiting incest, bigamy, homosexuality or or marriage with post puberty minors. Bigamy or polygamy though not prohibited in marriage law, insofar as they involved economic exploitation of women could be criminally prosecuted under the heading of exploitation. Whilst contemporary Western commentators largely approve of the liberal attitude of the early Soviet state to homosexuality, they are more silent on its liberalism towards incest, bigamy etc.

In 1920 free abortion had been introduced, which produced a rapid decline in the birth rate in urban areas. Over the 1920s the Moscow birth rate fell from 30.6/1000 to 21.7/1000, while abortions rose from 5.7/1000 to 35.2/1000[Berman, 1946]. Given that the overall death rate in the mid 1920s for the RSFSR was 21/1000 this appeared to represent a potential fall to below replacement birth rates[Engelman, 1932]. The birth rate in Moscow was unrepresentative. In rural areas where state hospitals providing abortion did not exist, ie, for the majority of Russia, the birth rate was much higher 44/1000 for the Great Russian population. Clearly there was no general threat to reproduction in the 20s, but projecting forward for a rapidly urban population in the mid 30s or a population vastly depleted by war in the mid 40s the outlook may have seemed different. That failed to take into account the fall in the death rate that could be anticipated to follow rising living standards. On the other hand given the international environment, a sharp rise in deaths due to enemy action may have been anticipated. The subsequent 1936 Law severely restricted abortion to cases of danger maternal health or genetic disorder, and at the same time very introduced substantial subsidies to women with large families. For the 6th and each subsequent child a stipend of 2000 rubles a year, equivalent at the official exchange rate to $2300 was introduced. Given that the average annual wage at that time was 2,700 rubles[Petroff, Feb 1938] this was a large benefit. Paid maternity leave of 112 days was introduced along with birth benefits. One could either see these measures as natalist, or alternatively as measures to protect mothers and children. They introduced, albeit very partially, the principle Engels had advocated: that the cost of raising children should be born by society as a whole. Partial because even as late as 1960 the regular child benefit was paid only to unmarried mothers or mothers with large families[Lantsev, 1962]. The principle that children were to be supported by the joint earnings of the parents for smaller families was thus not questioned, and marriage continued, to have an economic role even before the division of domestic labour between husband and wife was taken into account.

The German Soviet war of 1941 to 1945 caused a huge demographic shortfall – initially of the order of 40 million, rising to around 70 million by the end of the Soviet period (Figure 0.2). But throughout the Soviet period the population continued to grow.
russianbirthrate
Figure 1: Evolution of Russian birth and death rates in Soviet and post-Glasnost periods. Bezier plot.Shaded area post-Glasnost. Source [Pockney, 1991] and UN Demographic Yearbooks.

The USSR underwent its primary demographic transition between the late 30s and late 50s. The main component of this was a shift from the high infant mortality rate of around 200 per 1000 live births at the end of the 30s to around 50 in the late 1950s and down to 25 in the mid 1960s[Shkolnikov and Meslé, 1996]. The decline was largely due to reductions in infectious diseases, particularly food and water born infections. As a result life expectancy at birth rose by 24 years in males and 27 years in females between the end of the 30s and the mid 1960s. Overall birthrates and deathrates declined sharply during the transition, reaching a minimum for death-rate in the mid 1960s, and for birth-rate around 1970 ( Figure 0.1). After that both rates increased. [Allen, 2003] argues that the fall in the birthrate was critical to ensuring that food production per head rose, and that the growth in population was actually significantly slower than would normally have been expected in an industrialising country.

The increase in death rate from the 1970s was most marked in men. It was largely due to a rise in heart disease, accidents, suicide and interpersonal violence. A factor producing the minimum in male death rate in the late 60s was that during the 50s and 60s the age structure of the population was skewed towards younger men. So many who reached maturity in the 30s and early 40s had been war casualties that the number reaching the age when heart diseases strike was unusually low.

The birth rate remained well in excess of deaths throughout the first demographic transition giving a steady increase in population.
sovpop
Figure 2: Soviet population suffered a huge demographic setback due to the German Soviet war of 1941-45. Source [Pockney, 1991].

easteurope
Figure 3: The whole socialist area of Europe experienced steady population growth until the transition to capitalism, after which population declined sharply. Calculated from the UN World Population Spreadsheet 2015 edition.

The transition from socialism to capitalism in the USSR in the late 80s early 90s induced a second far more drastic demographic transition. The birth rate fell sharply into the range typical for developed capitalist countries. But while in many capitalist countries the birth rate falls below the death rate, both are normally on a downward trend. In Russia the death rate rose sharply: Figure 0.1 . A rise of this scale in peace was at the time unprecedented in a developed country. Those without university education[Shkolnikov et al., 2006]: that is to say the manual workers and farmers, suffered increased mortality. The intelligentsia experienced no decline in mortality. Subsequently [Case and Deaton, 2015] have pointed out that a similar thing has been happening to white working class men in the USA, with similar causes: mass unemployment and de-industrialisation[Stuckler et al., 2009]. As Figure 0.3 this demographic crisis was a general phenomenon affecting the ex socialist countries. The onset of capitalism and the deterioration of social conditions that followed, meant that the region as a whole went into demographic decline.

The contrast between capitalist and socialist family policy is best illustrated by a comparison of East and West Germany. Both Germanies experienced declines in fertility following the availablity of modern contraceptive technology in the 1960s. By the early 70s it had fallen below replacement levels in both East and West (Figure 0.4). But the birthrate in East Germany recovered to around replacement level by the late 1970s following the 1976 introduction of policies to socialise a considerable part of the burden of child raising[Salles, 2006]. Single mothers had priority access to kindergarten places. If no place was available they could go on sick leave at half pay, with the return of their job guaranteed as soon as a place became available. One year of paid parental leave was available for single women on birth of their first child. For married women this was available only for subsequent children. Along with free nursery schools, birth bonuses, workplace childcare and workplace canteens all helped parents.

The overall effect of these policies was to increase the birthrate in the East above the contemporary rate in the West. The availability of maternal benefits to single mothers increased the proportion of babies born to them, and led to greater social acceptance of their situation. Rents were low, but waiting lists for flats gave priority to single mothers and married couples. A common family pattern emerged of women having their first child before marrying and a second one after marriage[Salles, 2006].
germanies
Figure 4: German total fertility in children per woman. Federal statistical office.

With the union with West Germany, this benefit system was withdrawn and the consequent demographic shock led to East German fertility rates falling as low as 0.7 before converging on the all German average of 1.4. This of course is still well below replacement level.
The combination of capitalist and domestic economies is antagonistic. Capitalist mass production replaces one economic function of the household after another: spinning, weaving, growing food, sewing clothes, baking, etc. The demand for skilled and educated adult workers converted children from being part of the domestic labour force to economic dependents, creating an incentive to limit family size. The development, by the chemical industry, of contraceptive technology then made this possible. The continuing demand for more labour then drew an increasing fraction of women into capitalist employment, which for a few decades allowed the workforce to go on growing. It then became necessary for both parents to work. The cost of private childcare then becomes more of a disincentive to have large families or even have families at all. Socialist states have had the aim of improving the status of women through their participation in the social economy. As such they could have been faced with the same tendency towards sub-replacement fertility. They avoided this because women’s participation in the socialist sector went alongside a deliberate policy of socialization on childcare.
References

[Allen 2003] Robert Allen. Farm to factory: A reinterpretation of the Soviet industrial revolution. Princeton University Press, 2003.
[Austen 1994]Jane Austen. Pride and prejudice. 1813. Project Gutenberg, 1994.
[Berman 1946]Harold J Berman. Soviet family law in the light of russian history and marxist theory. The Yale Law Journal, 56 (1): 26-57, 1946.
[Case and Deaton 2015]Anne Case and Angus Deaton. Rising morbidity and mortality in midlife among white non-hispanic americans in the 21st century. Proceedings of the National Academy of Sciences, 112 (49): 15078-15083, 2015.
[Engelman 1932]Uriah Z Engelman. Vital statistics in the soviet union in 1926. American Journal of Sociology, pages 437-440, 1932.
[Engels and Hunt 2010]Friedrich Engels and Tristram Hunt. The origin of the family, private property and the state. ePenguin, 2010.
[Lantsev 1962]MS Lantsev. Social security in the ussr. Int’l Lab. Rev., 86: 453, 1962.
[Pashukanis 1989]E. B. Pashukanis. Law and Marxism: A General Theory Towards a Critique of the Fundamenta Juridical Concepts. Pluto Publishing, Worcester, 1989.
[Petroff Feb 1938]Peter Petroff. The soviet wages system. Labour, pages 141-2, Feb 1938.
[Pockney 1991]Bertram Patrick Pockney. Soviet statistics since 1950. Aldershot (UK) Dartmouth, 1991.
[Salles 2006]Anne Salles. Les effets de la politique familiale de l’ex-rda sur la nuptialité et les naissances hors mariage. Population, 61 (1): 141-152, 2006.
[Shkolnikov and Meslé 1996]Vladimir M Shkolnikov and France Meslé. The russian epidemiological crisis as mirrored by mortality trends. 1996.
[Shkolnikov et al. 2006]Vladimir M Shkolnikov, Evgueni M Andreev, Domantas Jasilionis, Mall Leinsalu, Olga I Antonova, and Martin McKee. The changing relation between education and life expectancy in central and eastern europe in the 1990s. Journal of Epidemiology and Community Health, 60 (10): 875-881, 2006.
[Stuckler et al. 2009]David Stuckler, Lawrence King, and Martin McKee. Mass privatisation and the post-communist mortality crisis: a cross-national analysis. The Lancet, 373 (9661): 399-407, 2009.

Socialism and direct democracy

February 3, 2017

It is a commonplace enough observation that hithertoo existing socialisms suffered from a lack of democracy, but in the sense that the word democracy is commonly understood, the observation is misleading. For the assumption is that more democracy, as commonly understood, would have been a good thing.

From the standpoint of liberal opinion there is nothing problematic about it. Liberals, quite rightly, saw that the adoption of western style democratic institutions would be the quickest way to get rid of socialism. Historical experience shows that they were dead right. As soon as multi-party elections were instated, pro-capitalist governments came to power.

Faced with this there are various possible responses:

  1. From the Blairite left, the response was welcome an unalloyed triumph for democracy. Good riddance to all that nonsense about a planned economy. We had a historic breakthrough which allowed us in New Labour to become intensely relaxed about the filthy rich.
  2. A relic Communist left, insignificant in Europe, but obviously of much greater significance in East Asia, concluded that it was a big mistake to have ever allowed multi-candidate or multi-party elections in East Europe and the USSR. So socialism was to be preserved by the only way they knew: continued Communist Party monopoly.
  3. Trotskyist left and their sympathisers in the Labour party the responded that what the USSR had actually needed was a revival of Soviet Democracy not ‘bourgeois democracy’.
  4. A final response about which I shall leave you in suspense until I have addressed the others.

Table 1: Excess deaths consequent the introduction of ‘democracy’ in Russia.

 
Year Thousand deaths Excess relative to 1986
1986 1498 0
1987 1531 33
1988 1569 71
1989 1583 85
1990 1656 158
1991 1690 192
1992 1807 309
1993 2129 631
1994 2301 803
1995 2203 705
1996 2082 584
1997 2105 607
1998 1988 490
1999 2144 646
2000 2225 727
2001 2251 753
2002 2332 834
2003 2365 867
2004 2295 797
2005 2303 805
2006 2166 668
2007 2080 582
2008 2075 577
2009 2010 512
total 48388 12436
 

What was presented by liberals and Blairites as a great triumph of democracy was viewed by millions who lived through it as a great catastrophe. The collapse of the Soviet and later the Russian economy under Gorbachov and then Yeltsin was an economic disaster that was otherwise unprecedented in time of peace. The world’s second super-power was reduced to the status of a minor bankrupt economy with a huge decline in industrial production and in living standards. Nothing brings out the scale of the catastrophe than the demographic data which show a huge rise in the mortality rate brought about by poverty, hunger, homelessness and the alcoholism that these brought in their wake (Table 1). A discipline less sure of itself than economics, might question its starting hypothesis when an experiment went so drastically wrong.

Liberal theory held that once enterprises were free from the state, the `magic of the market’ would ensure that they would interact productively and efficiently for the public good. But this vision of the economy greatly overstated the role of markets. Even in so called market economies, markets of the sort described in economics textbooks are the exception restricted to specialist areas like the world oil and currency markets. The main industrial structure of an economy depends on a complex interlinked system of regular producer/consumer relationships in which the same suppliers make regular deliveries to the same customers week in week out.

In the USSR this interlinked system stretched across two continents, and drew into its network other economies: East Europe, Cuba, North Vietnam. Enterprises depended on regular state orders, the contents of which might be dispatched to other enterprises thousands of miles away. Whole towns and communities across the wilds of Siberia relied on these regular orders for their economic survival. Once the state was too bankrupt to continue making these orders, once it could no longer afford to pay wages, and once the planning network which had coordinated these orders was removed, what occurred was not the spontaneous self organisation of the economy promised by liberal theory, but a domino process of collapse.

Without any orders, factories engaged in primary industries closed down. Without deliveries of components and supplies secondary industries could no longer continue production, so they too closed. In a rapid and destructive cascade, industry after industry closed down. The process was made far worse by the way the unitary USSR split into a dozen different countries all with their own separate economies. The industrial system had been designed to work as an integrated whole, split up by national barriers it lay in ruins.

The figures in Table 2 show how far the economy had regressed. These figures show how little recovery there had been, even after 13 years of operation of the free market.

Table 2: Output of Selected Branches of Industry in Russia in 2003 Compared to 1990 (1990 = 100)Source: Goskomstat, 2004, Table 14.3.

Total Industry 66
Electric power 77
Gas 97
Oil extraction 94
Oil refining 70
Ferrous metallurgy 79
Non-ferrous metallurgy 80
Chemicals and petrochemicals 67
Machine building 54
Wood and paper 48
Building materials 42
Light industry 15
Food 67

If the economy had continued to grow even at the modest rate of the later Brezhnev years ( say 2.5%) then industrial production would, on this scale have stood at 140% of 1990 levels. The net effect of 13 years of capitalism was to leave Russia with half the industrial capacity that could have been expected even from the poorest performing years of the socialist economy.

It is no wonder that Communist Parties in Asia took this as an awful experiment not to be repeated. The lesson that they took from it was that the political dominance of the Communist Party was essential, and that any concession to political liberalism would be disastrous. Economically and socially they were willing to concede all sorts of things: foreign investment, private business within the country, freedom to leave the country and study abroad. Officially Marxism remains the ideology in China, all students have to study some variant of it, but the actual ideological spectrum in debate, on the internet, and in academic journals runs the gamut from neo-Maoism, via orthodox Marxism, to social democracy, liberalism and neo- Confucianism [1]. If you establish a mixed economy with contesting classes then you will get mixed and contending ideologies. Within of this structure the ideologies which represent the interests of those who do best out of the social order will become more and more influential, by the same mechanisms that have always operated in socially stratified societies – the differential access to education of different social classes, and the tendency of the educated to express both their own particular interests and those of the groups with whom they seek favour.

Given this gradual ideological shift it becomes a moot point to decide what the CP monopoly achieves in the long run, apart, that is, from the obvious : rapidly rising living standards, high speed trains, peace, longer life expectancy and social stability

Reg: All right, but apart from the sanitation, the medicine, education, wine, public order, irrigation, roads, the fresh-water system, and public health, what have the Romans ever done for us?

PFJ Member: Brought peace?

Reg: Oh, peace? SHUT UP!

([2] )

.

Western Leftist groups look at China, see the widespread corruption, exploitation of workers by private capital, the strike militancy of the workers and conclude that what you need to defend the gains of the workers there is old style Soviet Democracy.

From the liberal left we have a remedy that leads directly to the abolition of socialism and economic catastrophe. From the Chinese we have the advocacy of a political form that is at least known to be practical for three quarters of a century, but which has led to growing social inequality. From the Trotskyist left we have the advocacy of a form which leads dialectically to the very condition whose remedy it is supposed to be.

What the Western far left fails to recognize is that:

  1. The constitutions of both the USSR and the PRC were based on exactly the structure of hierarchical indirect elections that the Western Left hold up as the ideal of Soviet Democracy.
  2. That such a system of indirect election is tailor made for one party rule.
  3. That elections are anyway more an aristocratic than a democratic institution.

Indirect election has, since the days of slave society, been a system prefered by aristocrats. It should be obvious after the 2016 election in the US, that the institution of the Electoral College was tailor made to allow the popular vote to be over-ridden. The US college system only has one level of indirection, and elects only a President and vice President. The Soviet system, and the Chinese system which copied it, have multiple levels of indirection.

In China the president is elected by the National People’s Congress Chinese constitution article 79..

The National People s Congress is composed of deputies elected from the provinces, autonomous regions, municipalities directly under the Central Government, and special administrative regions, and of deputies elected from the armed forces Chinese constitution article 59..

The National deputies are elected by the Local People’s Congresses. Deputies to the people s congresses of provinces, municipalities directly under the Central Government and cities divided into districts are elected by the people s congresses at the next lower level; deputies to the people s congresses of counties, cities not divided into districts, municipal districts, townships, nationality townships, and towns are elected directly by their constituencies Chinese constitution article 97..

At each level of the council/congress system there is a standing committee/presidium which exercises day to day power.

There are at least 4 macro levels of indirection here, 7 if you allow for the effects of the presidia, quite enough to ensure that once one political party takes hold of such a state machine it becomes almost impossible to shift it from dominance. Since the highest level congress, soviet or council has the power to amend the constitution, the party dominating it is free to adjust the constitution in such a way as to cement its rule. It can write itself into the constitution, as the 1977 Soviet constitution did with the CPSU, or it can simply rely on the indirect election system to ensure control.

I was going to write that clearly it is a non-starter to advocate a system of Soviet democracy as a remedy to the ills of China or the old USSR, since the advocated system is no different from what it is supposed to replace. But for some reason this remains obscure rather than clear. Perhaps it is because few on the left bother to look at constitutions.

The great strength of the Soviet and Chinese systems was that they allowed a revolutionary aristocracy to assume absolute power, and use that power to radically transform social relations. The weakness is that of all aristocracies, their tendency to degenerate into self serving oligarchies.

So what is left if we exclude parliamentary democracy and soviet democracy?

Well there is what people now call participatory or direct democracy, but these are misnomers. In the original meaning of democracy, there was no other kind. The democratic form of rule involved direct votes by the entire citizen body. Day to day decisions were relegated to councils chosen by a lottery process. In its original sense, the word democracy did not just mean rule by the poor, the term demos meant something closer to plebs, it meant rule by the plebs, rule by the working classes. It dispensed with professional politicians and handed all decisions over to the common people.

It is clear that neither parliamentary constitutions developed in the West, or the various Soviet/Council/Congress constitutions used in socialist countries were democracies in this sense. They all involved the election of a political elite who took the decisions on behalf of the people. In contrast to this ideas of direct democracy are slowly gaining credibility, most notably in the more frequent calling of referenda. It is in the interests of a modern socialist movement to fight for the extension of such institutions: the right of citizens to call referendum votes once sufficient signatures are collected is one aspect. Other aspects are the replacement of elected parliaments by citizen assemblies, or at the very least ensuring that a majority the parliament is made up of of citizens selected by lot.

Only selection by lot can overcome the huge built in bias that the electoral system has against people of low social status. Whatever the cause, whether the low status is because of class, sex or race, you can see that very few low status people ever get into a parliament. In consequence all parliaments are grossly unrepresentative in class and sex terms. In racially mixed societies they tend to be unrepresentative on race grounds as well.

An assembly selected by lot will be a representative sample of the different classes in society. The elites are invariably suspiscious of direct democracy. They complain that the general public are too ignorant and prejudiced to make decisions on their own behalf – far better to leave decisions to educated and cultured people. But the obvious point is that the educated and cultured will look out for themselves and can certainly not be trusted to have the interests of the poor and less educated at heart. The old 19th century socialist movements knew this and advocated direct popular legislation – an idea that was disliked by the Socialist Party leaderships even then.

Modern technology makes it much easier to hold popular votes. Almost everyone has a mobile phone, and secure, anonymous and verifiable voting can be done this way As an example the Handivote system[4,3] allows voting by SMS with people being able to check that their votes are correctly tallied..

Such digital systems can be easily extended to allow the citizens at large to make the sorts of major strategic choices needed for socialist planning. Planning is only democratic if at least the big ticket headings: health, education, investment are settled by popular decision. It is possible for voters to make numerical choices about levels of public resources. Suppose there are 3 telephone numbers that you can text for a vote on health expenditure:

xxx xxx0 means reduce it by 5%,

xxx xxx1 means leave it unchanged and

xxx xxx2 means increase it by 5%

It is clear that by averaging the votes casy you can get percentage change in health expenditure. The result is the average of what the voters want. This will, in our case, be bounded by -5% to +5%, but these bounds could be varied by those setting the vote, and, at the cost of some slight increase in complexity, a broader range of numbers to dial could be provided without changing the basic procedure.

Now suppose that there are three items to be decided on: income tax, school expenditure and health expenditure. A simple extension would be to set up 9 phone numbers for voting as follows

xxx xx00 Income tax down 5%

xxx xx01 Income tax leave as is

xxx xx02 Income tax up 5%

xxx xx10 Health down 5%

xxx xx11 Health leave as is

xxx xx12 Health up 5%

xxx xx20 Schools down 5%

xxx xx21 Schools leave as is

xxx xx22 Schools up 5%

People could then text in to express their personal decisions. The result would be to obtain an average percentage change for each particular heading. As long as sufficient people vote on each individual issue, the law of large numbers means that will get a reasonably accurate estimate of public opinion on that topic. [5] shows that an opinion aggregated from many non-experts is usually superior to that of a few experts.

2017-01-30

#1 Simultaneously voting on expenditure and taxation.

The obvious danger is that everyone votes for more expenditure and less taxation, but there are easy ways round this. Suppose that the average vote was [4, 2] indicating a 4% increase in school expenditure and only a 2% increase in taxes to cover it (let us make the simplifying assumption for now that schools are the sole form of expenditure). Figure 0.1 shows the average vote at position [4,2] and also a diagonal line representing the feasible combinations of expenditure and tax. The best choice given the constraints is labeled compromise Geometrically, the compromise is the closest point on the feasible combination line to the average vote. It is the choice which minimises voter dissatisfaction..

From a socialist standpoint it is very important that any form of participatory budgeting vote simultaneously on both expenditure and taxation. The right is willing to introduce participatory budgeting provided that it votes only on taxation since they hope, by this, to create a constant downward pressure on taxes and thus on expenditure for public services. By allowing people to simulataneously vote for increases in services and computing the compromise position you stand a good chance of preventing this.

Summary

The combination of labour value accounting, payment in labour credits, computerised planning, markets only in consumption goods, direct democracy and planned economy constitute a feasible new socialist model that builds on the experience of the past without repeating past mistakes.

The practical question is how society could move towards that. It is here that one must take seriously, but in an updated form, the old Lenin criticism of economism. The central point of that critique was that focussing on economic issues was not enough, to build a revolutionary movement it was necessary to bring to the fore the political struggle for democracy. In the context of Czarist Russia that was seen as the struggle for a republican constitution – but one still seen as parliamentary representation with universal adult suffrage. Today the struggle for democracy still has to be in the first place, but the aim has to be to overthrow existing constitutions and replace them with direct democracy.

By consistently advocating this, it should be possible for socialists to mobilise behind us people who may not share our socialist goals, but who are still still hostile to elite domination.

Once a genuinely democratic republic is established, without professional politicians, we would have the best possible environment to win support for a radical transformation of property relations.

References

[1]
William Paul Cockshott. Comments on the “China model”. International Critical Thought, 1(2):148-157, 2011.

[2]
Terry Jones, Graham Chapman, John Cleese, Terry Gilliam, Eric Idle, and Michael Palin. Monty Python’s life of Brian. Hand Made Films, 1979.

[3]
Karen Renaud and Paul Cockshott. Handivote: simple, anonymous, and auditable electronic voting. Journal of Information Technology & Politics, 6(1):60-80, 2009.

[4]
Karen Renaud and WP Cockshott. Electronic plebiscites. 2007.

[5]
J. Surowiecki, M.P. Silverman, et al. The wisdom of crowds. American Journal of Physics, 75:190, 2007.

File translated from TEX by TTH, version 4.08.

No True Scotsman theory of socialism

February 1, 2017

After posting my last article I got the following comment from Marco Procaccini:

The term “socialism,” as defined by Marxist and pre-Marxist, as well as anarchist activists going back to the French Revolution, has always been applied to any economic practice or development generally based on:

democratic control of the means of production and governance by working people and their communities, free association, production for practical use, mutual satisfaction of self-interest via cooperation, etc.–essentially a stateless classless free cooperative society based on “the free development of each as the free development of all.”. This is why socialist economists, including Marx and Engels, often used terms like “socialism” and “communism” interchangeably.

At NO TIME in history has the term defined corporate central planning or state capitalism of any kind.

This is a pretty classic example of the Alibi or No True Scotsman(NTS)1 theory of socialism popular with the American and European far left. Perhaps it is my being a true Scotsman that means I have little truck with it. The problem is that it involves a whole series of falsehoods. Marco’s version of the NTS theory has the advantage of being a reductio ad absurdam of the whole approach.

Firstly he says that at no time in history has socialism refered to central planning or state capitalism. The problem with this is that this is exactly what it has meant for almost the entire history of the socialist movement – provided that is that we assume that his derogatory term ‘state capitalism’ is intended by him to refer to nationalised industry.

He is exhibiting an extraordinary historical amnesia if he has forgotten that throughout the period from the Russian revolution down to the present, the Communist Parties world wide have used the term Socialism to refer to nationalisation of the means of production along with greater or lesser degrees of central planning. But apparently the Communist movement did not exist in historical time, or perhaps for him, history does not include the history of China, India, Vietnam, Korea etc?

Even if we take his implicit Euro-centrism seriously his claims are unfounded. It is impossible to support Marco’s view if we make reference to the programmes of real socialist parties. Let’s ignore the 20th century Communist Parties there and just look at 19th century Communism and 19th and 20th century Socialist Parties, we see that nationalisation and central planning actually represent a relatively extreme position within these parties. Many, like the Scandinavian ones, saw socialism almost exclusively in terms of providing comprehensive welfare systems, and a solidaristic wages policy[4] – ie, setting national wage rates that applied irrespective of company situation.

If we look at Socialism in Britain and France, the Labour Party and French Socialists had as explicit policies the nationalisation of industry. Each Labour Party member had the following written on their card as the party’s aim:

To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service.2

There is some ambiguity of the card as to what the best obtainable system of public administration would be, the practical policy of the party was to set up national boards to run industries, and these boards were answerable to what was taken to be a democratically elected Labour government. The French Socialists also advocated extensive nationalisation[5, Part II, Chap II].

Dans le secteur bancaire et financier, la nationalisation concernera l’ensemble du secteur

Dans l’industrie, un seuil minimum d’extension du sectur public et nationalise sera atteint par les mesures suivantes :

—La nationalisation des secturs suivants:

a) Dans leur ensemble: resources du sous-sol, armament, industrie spatiale et aéronautique, industrie nucléarie, industrie pharmaceutique;

b) Danls leur plus grande partie : industrie électronique (ordinateurs), industrie chimique.

And if we go right back into the 19th century we find that the very first communist programme[2] had the nationalisation of industry as one of its immediate objectives:

The proletariat will use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralise all instruments of production in the hands of the State, i.e., of the proletariat organised as the ruling class; and to increase the total productive forces as rapidly as possible.

5. Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.

6. Centralisation of the means of communication and transport in the hands of the State.

7. Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.

The policies of both socialist and communist parties in the 20th century with respect to nationalisation were probably strongly influenced by this early document.

So we have established that both 19th and 20th century communism and 20th century socialism advocated state ownership in their party programmes. What about taxation?

Marco writes :

Finally, it needs to be pointed out specifically that tradition state ownership and taxation have NOTHING to do with Marxism–as Marx, Engels and legions of their contemporaries wrote.

The problem is that when Marx wrote party programmes, or commented on them, he said exactly the opposite. He consistently advocated an income tax [213]. When one reads how people like Marco so misrepresent him, one understands why he remarked he himself was ’pas marxiste’.

References

[1]   K. Marx. Marginal Notes to the Programme of the German Workers’ Party [Critique of the Gotha Programme]. Marx and Engels Selected Works, 3, 1970.

[2]   Karl Marx and Friederick Engels. Manifesto of the Communist Party, trans. S. Moore. Moscow: Progress.(First published 1848.), 1977.

[3]   Karl Marx and Jules Guesde. The programme of the parti ouvrier, 1880.

[4]   Rudolf Meidner. Why did the swedish model fail? Socialist Register, 29(29), 1993.

[5]   Parti Socialiste and François Mitterrand. Changer la vie: programme de gouvernement du Parti Socialiste. Flammarion, 1972.

Real problems of socialism and some answers

January 31, 2017

In the post Soviet Period the left lost confidence in socialism. This was partly a response to the immediate situation, but partly a realisation that socialist economies had real problems. Since socialists themselves had not come up with any real answers to these problems, and Western socialists never went beyond platitudes here, the arguments of Friedman and Hayek seemed to gain credibility. I will look at some of these real problems and what the potential solutions are.

 Coordination

The main criticism levelled at the socialist economies was that a planned economy was inherently less efficient than a market one, due to the sheer scale of the bureaucratic task involved with planning a major economy. If there are hundreds of thousands, or perhaps millions, of distinct products, no central planning authority could hope to keep track of them all. Instead they were forced to set gross targets for the outputs of different industries. For some industries like gas or electric power, this was not a problem. Electricity and gas are undifferentiated, a kilowatt is a kilowatt – no argument. But even for another bulk industry like steel, there was a wide variety of different rolled plate and bars, different grades of steel with different tensile strength etc. If the planners could not keep track of all these different varieties and just set rolling mills targets in tons, the mills would maximize their tonnage of whatever variety was easiest to produce.

The steel example is a little forced, that degree of differentiation was still fairly readily handled by conventional administrative means. Tonnage targets could still be set in terms of distinct types of steel. But when you turn to consumer goods: clothes, crockery etc the range of products was too big and targets were started to be set in terms of monetary output.

The plan would specify a growth in the value of output of clothing, furniture etc. What this translated into then depended on the price structure. In order to prevent other forms of gaming the plan by enterprises it was important the the prices were economically realistic. If the price for chairs is set too high compared to tables, it becomes rational for factories to concentrate on chair production.

By resorting to monetary targets, the socialist economies were already conceding part of Mises’s argument. They were resorting to the monetary calculation that he had declared to be vital to any economic rationality. Liberal economists argue that it was impossible for planners to come up with a rational set of prices, only the competitive market could do so. Planning required aggregation. Aggregation implied monetary targets. Monetary targets required rational prices. Rational prices required the market. But if you had the market you could dispense with planning. Planning dialectically implied the super-cession of planning.

It is worth noting that this is a largely theoretical argument. It was, in late Soviet days backed up with lots of anecdotal evidence, but empirical evidence for the greater macro-economic efficiency of markets even when compared to classical Soviet planning is much thinner on the ground. As Allen, [2003] shows, the only capitalist economy whose long term growth rate exceeded that of the USSR was Japan, whose own model was some way from unplanned capitalism. Compared to other countries starting out at the same economic level in the 1920s, the USSR grew considerably faster. One could argue that this was due to marcro-economic advantages of planning: that, by removing uncertainty about future market demand, it encouraged a higher level of investment. It is possible that this macro-economic advantage outweighed any micro-economic inefficiency associated with plans.

The strongest evidence that markets may perform better than plans would come from China, and that certainly the orthodox Chinese view. Their claim is that a socialist market economy avoids the macro-economic instability of capitalism whilst harnessing the micro-economic efficiency of the market. As evidence they cite a higher rate of growth after Deng’s restructuring. But China since Deng has followed a mercantilist road. It has the effect of relatively beggaring the workers of China whose products are exported to the US in return for US paper. The latter is of no benefit for the Chinese workers, though it does enable private Chinese companies to buy up assets in the US. From the standpoint of the Chinese state it is a more nuanced issue. On the one hand Chinese state companies too, can buy up overseas firms, but whether this is a long term advantage is a moot point since real goods which could have been used to improve the Chinese economy and living standards have been sacrificed.

Historically the process of having an export led economy allowed China to avoid the technology bans that the West imposed on the USSR, allowing rapid catch-up in manufacturing techniques. Now that China is overtaking the US in some areas of mass production, that advantage is less clear, and a shift towards higher domestic consumption and higher wages makes sense, and is indeed being followed in China unlike Germany. It could be that the growth advantage that China experienced post-Deng owed a lot to a new ability to import the latest productive techniques instead of micro-economic efficiency. But what is abundantly clear is that the pro-market restructuring had the effect of drastically widening economic inequalities and giving rise to a new domestic billionaire class. This in turn produces political pressure to extend private ownership and undermine the still dominant position of state industry.

So the question arises, could a planning system work in a modern economy with a highly diversified product range, and how would it overcome the socialist calculation argument of Mises. I and others have since the late 80s1 been arguing that the answer is yes.

The Mises critique of socialism focused on the need to compare the costs of alternative ways of making things. Unless you can do that you can not chose the most efficient. Our response has been not only that labour time in principle an alternative, which Mises conceded, but that with modern computer technology it is perfectly possible to maintain up to date figures for the labour cost of each input to the production process. Using these, workplaces will have data that are as good as prices for choosing between techniques.

There are limitations to labour values as there are to any scalar measure like price, since the constraints on production are multifactorial. Not only labour power, but also natural resources and ecological considerations constrain what we can make. No single scalar measure can handle this. But the problem of how to deal with multiple constraints like this was already solved by socialist economics way back in the 30s. Kantorovich came up with a completely general technique for how to meet a socialist plan subject to constraints additional to labour time2. Kantorovich’s method is an form of calculation in-kind, ie non-monetary. It was not practical to use it at the level of the whole Soviet economy during his lifetime as the computing resources were too poor, but by the 1990s computers were up to the job. You can get a good lay-person’s introduction to it in the novel Red Plenty by Francis Spufford.

So the basic problem of socialist economic calculation without money had been solved since Mises wrote. It was impractical in the USSR for two reasons: a) the computer technology was not there; b) it would have involved replacing money calculation and payment with non transferable labour accounts. This would have been a radical step towards greater social equality.

Equality

Labour time accounting demystifies or de-fetishizes social relations. Rather than relations appearing to be between people and an objective `thing’ called money, they make it evident that what is involved are people’s lives. If I get with 1 hour of social credit for each hour I work, and can for this credit acquire goods which themselves took an hour to make, then it is clear that I am participating as an equal in social exchange. If, instead, I am only credited with 40mins time for working an hour, it is clear that there is something odd going on. If the difference is made of a 33% income tax that I had a chance to vote on, that is one thing. If instead I see that someone else is getting credited with more than an hour for each hour that they work, I am going to be asking some hard questions.

Labour time accounting has a presumption of equality and equity. If one person gets credited more than they actually work, the a-priori implication is that there is something dodgy about it. Its adoption would thus involve a big pressure towards levelling. Levelling between different categories of work, and levelling between men and women. It of course eliminates completely the possibility of unearned capital income. It makes the moral presumption that labour is the only legitimate source of income. Any other income, to the old, the sick, to families with children has to be an explicit voluntary deduction from the incomes of those who work.

The significance of labour tokens is that they establish the obligation on all to work by abolishing unearned incomes; they make the economic relations between people transparently obvious; and they are egalitarian, ensuring that all labour is counted as equal. It is the last point that ensured that they were never adopted under the bureaucratic state socialisms of the twentieth century. What ruler or manager was willing to see his work as equal to that of a mere labourer?

There is nothing terribly original in this scheme: set out briefly here, but in much more detail in our other articles. It is simply a detailed and literal elaboration of the proposals Marx made in his comments on the draft of the 1875 program of the German Socialists.

The assumption is that people would have electronic labour credit cards whose credits could only be cancelled out not circulated3. You could not pay credits into somebody else’s account but you could get things form communal stores. This completely eliminates the possibility of a black market.

It is absolutely essential that distribution labour values of goods be realistic. A socialist government must avoid the temptation to undervalue necessities in the communal stores. If they are undervalued, there will be excess purchasing power in terms of labour credits. If bread used 300 million person hours to make but was sold for 100 million hours, an excess of 200 million credits would have been issued to the bakers, millers, farmers etc. Such undervaluation, we know from bitter experience, just leads to queues and apparent shortages.

If prices are equal to labour content, then deviations of sales from actual production can be used to adjust plan targets on a real time basis, reallocating labour from products whose demand falls short of production to those that are selling out.

Deviations from of distribution price from labour content would, however, still occur in a planned economy for environmental reasons. If the planning system had a constraint that total production of fossil fuel had to decline by 2% a year, then the planning authorities would be forced either to raise the distribution price of fuel above its labour content, or to ration petrol. If petrol was distributed at a premium, goods which did not contain fossil fuels would have to be distributed to consumers at a discount. There might be a case for the environmental premiums or discounts being displayed on the label.

Free communist distribution of goods and services is only viable for those goods or services for which certain special conditions are met:

  1. The actual allocation can be rationed by deliberate decisions or by queues – this is how the NHS is able to function. You can get free treatment but only if a doctor decides you need it, and you are willing to wait your turn. This rules out, for example, resources being wasted on penis or breast enlargement surgery.
  2. Where the actual usage is easily pre-calculable. We know that demand for primary schooling is set by the number of children reaching school age. Making schools free increased demand up to this limit and no further.
  3. The resources being used would otherwise go to waste. Examples are the free district heating provided in the USSR from waste heat of power stations; providing free travel to pensioners outside of rush hours; free use of Internet once the basic infrastructure has been installed.

Surplus

Socialist planned economy has a distinct form of surplus extraction. The magnitude of the surplus is determined by the planned allocation of labour between that devoted to the reproduction of the working population versus other activities. This is the inverse of the mechanism that operates under capitalism where the monetary division of the value added between wages and profits comes first. In a capitalist economy the allocation of labour between reproduction and other activities occurs as a second order effect when the wages and profits are spent. In a socialist economy it is the allocation of labour that comes first.

If the socialist country retains money, but delivers many services free, has to balance the monetary demand in the hands of workers from their wages with the amount of social labour going into consumer commodities. Since a part of the social working day had been allocated to producing free goods and services, and another part to the accumulation of new buildings, infrastructure and machinery, the disposable income of the working class had to be limited to the money equivalent of the number of hours spent making consumer commodities.

There are a number of ways this could in principle be done:

  1. By selling consumer goods at a mark-up or profit. This profit, since it accrues to state factories, can then become government revenue and be used to fund free services, accumulation etc. In the USSR this was formalized as a turnover tax levied on all government factories.
  2. By levying a sales tax, ie, one that is raised as a percentage of the selling price like VAT4. Both this and the turnover tax are indirect taxation, they differ in where they are collected: at production or at sale.
  3. By levying an income tax or poll tax on employees. This was the consistent policy advocated by Marx5.

I think that there are strong arguments to favour the last option. It may initially have been politically popular to claim that under socialism there was no need for income tax, but that is dishonest, since indirect taxation remained. Wages were still held down to a level that would allow the turnover tax to fund government services, so in terms of take home pay people were no better off. A direct deduction of income tax is more visible, but the converse of that is that something visible is easier to understand, and as a result easier to make open democratic decisions about6.

But more serious than this, the policy of holding down wages and funding public services out of profits had adverse effects on economic efficiency. Suppose that 40% of labour goes on accumulation, 30% on free services and 30% on consumer goods. It follows that the wage has to be only 30% of the real value of labour. The average wage for a 40hr week would only be the monetary equivalent of 12 hours. This made labour appear to be artificially cheap. If machinery was priced at full value, a rational factory management would use 4 workers instead of one machine and 1 worker if the depreciation of the machine amounted to 40 hours a week.

Mechanized production cost mis-valued at : 40 for machine + 12 for labour = 52

Manual production cost mis-valued at : 48 for labour

but the true relative costs of the techniques are reversed

Mechanized production true value : 40 for machine + 40 direct labour = 80

Manual production cost 4 x 40 hrs = 160 hours

So a manual process that was really twice as costly to society would be preferred to a mechanized one. Use of direct labour time calculation would of course have revealed the right answer.

The Soviet solution of a turnover tax was short term populism that hampered efficiency.

References

[Allen 2003]
Robert Allen. Farm to factory: A reinterpretation of the Soviet industrial revolution. Princeton University Press, 2003.

[Cockshott and Cottrell 1989]
Paul Cockshott and Allin Cottrell. Labour value and socialist economic calculation. Economy and Society, 18 (1): 71-99, 1989.

[Cockshott and Renaud 2010]
Paul Cockshott and Karen Renaud. Extending handivote to handle digital economic decisions. In Proceedings of the 2010 ACM-BCS Visions of Computer Science Conference, page 5. British Computer Society, 2010.

[Cockshott 2006]
W Paul Cockshott. Von mises, kantorovich and in-natura calculation. Intervention. European Journal of Economics and Economic Policies, 7 (1): 167-199, 2006.

[Cockshott and Zachriah 2012]
W Paul Cockshott and D Zachriah. Arguments for socialism. 2012.

[Cockshott 2011]
William Paul Cockshott. Comments on the “China model”. International Critical Thought, 1 (2): 148-157, 2011.

[Cottrell and Cockshott 1993a]
AF Cottrell and WP Cockshott. Towards a new socialism. Spokesman Books, 1993a.

[Cottrell and Cockshott 1993b]
Allin Cottrell and W Paul Cockshott. Socialist planning after the collapse of the Soviet Union. Revue européenne des sciences sociales, pages 167-185, 1993b.

[Cottrell et al. 2009]
Allin Cottrell, WP Cockshott, and Greg Michaelson. Cantor diagononlalisation and planning. Journal of Unconventional Computing, 5 (3-4): 223-236, 2009.

[Jones et al. 1979]
Terry Jones, Graham Chapman, John Cleese, Terry Gilliam, Eric Idle, and Michael Palin. Monty Python’s life of Brian. Hand Made Films, 1979.

[Kantorovich 1960]
L.V. Kantorovich. Mathematical Methods of Organizing and Planning Production. Management Science, 6 (4): 366-422, 1960.

[Marx 1970]
K. Marx. Marginal Notes to the Programme of the German Workers’ Party [Critique of the Gotha Programme]. Marx and Engels Selected Works, 3, 1970.

[Marx and Engels 1977]
Karl Marx and Friederick Engels. Manifesto of the Communist Party, trans. S. Moore. Moscow: Progress.(First published 1848.), 1977.

[Marx and Guesde 1880]
Karl Marx and Jules Guesde. The programme of the parti ouvrier. tomado de: http://www.marxists.org/archive/marx/works/1880/05/parti-ouvrier.htm, revisado el, 2, 1880.

[Peters 2000]
A. Peters. Computersozialismus:Gespräche mit Konrad Zuse. Vaduz, 2000.

[Renaud and Cockshott 2009]
Karen Renaud and Paul Cockshott. Handivote: simple, anonymous, and auditable electronic voting. Journal of Information Technology & Politics, 6 (1): 60-80, 2009.

[Renaud and Cockshott 2007]
Karen Renaud and WP Cockshott. Electronic plebiscites. 2007.

[Surowiecki et al. 2007]
J. Surowiecki, M.P. Silverman, et al. The wisdom of crowds. American Journal of Physics, 75: 190, 2007.

Footnotes:

Cockshott and Cottrell [1989], Cottrell and Cockshott [1993b], Cottrell et al. [2009], Cottrell and Cockshott [1993a],Peters [2000].

2 The original paper was Kantorovich [1960], I explained for a modern readership how his technique worked in Cockshott [2006].
3 For a rather old fashioned idea of how this might work read Bellamy’s utopian socialist novel Looking Backward(1888). He invented the whole idea of credit cards. His cards were based on good 19th century punched card technology. You got a new card each month, and for each purchase from a social store an appropriate number of credits were punched out from your card. The store was envisaged as a cross between Argos and Amazon.
You selected goods from a catalogue at the store, and then they were delivered direct to your house by a system of pneumatic tubes.

4 Note that the EU mandated VAT is in German mehrwertsteuer, literally surplus value tax.
5 See Marx and Engels [1977], Marx [1970], Marx and Guesde [1880]
6 How to carry out such democratic budgeting is beyond the scope of this paper but is a topic of our book- Cockshott and Zachriah [2012] and of papers including Cockshott and Renaud [2010].

What is wrong with the idea of basic income

January 25, 2017

The left movement is still stuck in a post-Soviet conjuncture. For the last 25 years it has been in an ideological hiatus, lacking any clear conception of what an actual socialist economy would be. The defeat of hitherto existing socialism in Europe obviously paralyzed the communist and social democratic parties. Each abandoned their visions of socialism and one way or another adapted to capitalism.

That fatalism seemed in the 1990s or early 2000s to have history on its side. Then came 2008, discrediting such accommodation in the eyes of a new generation. Such left revivals as have arisen since then Occupy, Podemos, Syriza the left turn in the Labour Party are, if anything, even more disoriented by the continuing post-Soviet ideological conjuncture, than the Blairites were.

Successful politics needs political economy for guidance. The old social democratic movement had Marxist economics, and then from the 40s Keynesian theory. Gordon Brown at least had his post neoclassical endogenous growth theory. What has the contemporary left got?

Academic Marxism has not been much help. Only a minority of them focus on political economy. Within that minority the focus is more on `critique’ than political economy. At best they study contemporary capitalism, but have nothing positive to say about what should replace it.

Instead we either have a series of regressions: back to Keynesianism, to a nostalgic Stalinism, or going even further back to to Trotsky, Kautsky, Marx. Even worse, we see the adoption of Hayekian doctrines like the citizen’s income.

Value form theory

I wrote earlier that academic Marxism has been of little use to the political left since it has concerned itself little with political economy. Whilst empirical economic research has been undertaken, it mainly stays at the level of interpreting the capitalist economy rather than explaining how to change it into a socialist one. If you are going to seek change, you need to study not only the institutions of capitalism but also to try and learn lessons from previous struggles to replace it. It is all well and good to have theories about capitalist price systems and the rate of profit, but if you have no theory of socialist political economy you are restricted to protest politics rather than putting forward programmes for economic change.

There is a relapse into an entirely academic ‘Marxology’, becoming expert in interpreting what Marx meant. By itself this would be a harmless, if useless, pursuit, having no more impact on politics than a life devoted to the study of Hegel or Kant. What makes it postively noxious, is that the interpretations channel as Marx by way of Hayek. The German New Marx Reading, explicitly attempts to wrench Marxist theory from its position as an ideology of the Communist movement. A key part of these positions has been a critique of what they describe as the objectivist interpretation of value, and the theory that there is a general tendency for the rate of profit to fall1. They argue that value can not exist indepently of money, that there is no value without prices, and that abstract labour is something specific to capitalist society2.

They accept on the surface, Marx’s idea that value is abstract labour time, but divorce this from the actual division of labour in production. Instead labour becomes abstract by being represented as money when a commodity is sold. In effect this removes the worker and the labour process from being the cause of value, and makes the market the cause. Abstract social labour is brought into being, in this interpretation, by the act of sale. This has certain logical consequences:

  • Labour values can never be known or determined outside of the market.
  • There is no abstract labour without a market.
  • There is therefore no abstract labour in socialist society.

This is all nice and critical, but critically it leaves value theorists theoretically defenceless if faced with the von Mises critique of socialism. He had argued that without money it was impossible to make any rational economic choices, and, in consequence a socialist economy which abolished money would degenerate into a morass of inefficiency. The only alternative to money he said, was the use of labour time, since, like money, that would allow the relative cost of two alternative ways of making something to be compared.

the labor theory of value is inherently necessary for the supporters of socialist production in a sense other than that usually intended. In the main socialist production might only appear rationally realizable, if it provided an objectively recognizable unit of value, which would permit of economic calculation in an economy where neither money nor exchange were present. And only labor can conceivably be considered as such. (von Mises, [1935] )

But labour time, Mises argued suffered from two fatal defects. On the one hand it fails to take into account natural resources, on the other it faces insuperable problems with reducing complex labour to simple labour. As such Mises rules out labour time as a basis for calculation. Let us for now ignore Mises first argument about natural resources, since we know that in practice the market economy he championed, itself leads to wholesale destruction of natural resources. If we focus on the second we see that leading value form theorists argue that only in market exchange can complex labour be reduced to simple labourHeinrich and Locascio, [2012, page 52]. So the logic of Heinrich’s position too, is that without a commodity market, there is no reduction to a single scalar measure of effort, and thus no rational economic calculation. Even the most eminent Marxist commentator implicitly lines up behind the Thatcher’s old TINA slogan ( There Is No Alternative – to the market).

Citizens income theory

Abandoning the idea of radical change in property relations, some on the left are picking up an old right wing idea that the state should pay everyone a basic survival allowance. When I was an economics student at Manchester University in the early 70s we were taught this doctrine by the monetarist Professor Laidler. The idea was popular with people like Hayek and Friedman. The argument for it was that the existing welfare state, by paying means tested benefits created a disincentive to take up low paid jobs. The answer they said, was to abolish all welfare benefits, abolish free education, and instead pay a small state stipend to everyone to enable them to survive at a bare minimum level. Parents would be given either additional cash or vouchers to pay for educating their children in privatised schools.

As far as I know, the first Marxist to endorse this approach, was another Manchester professor Dianne Elson3 (Elson, [1988,Elson, [2009]). It has subsequently been widely discussed. But from a socialist standpoint basic income is a poor policy. We will start by giving some concrete figures for what a citizen or basic income would involve today in the UK. Then we will go on to look at its effect on the class distribution of income. Finally we will contrast this neo-liberal policy to the historic aim of the socialist movement.

I make the starting assumption that the basic citizen income could not be lower than the state pension. It is proposed to abolish all other benefits including the state pension, so to prevent a deterioration in pensioners living standards this sets a floor of £150 per week. We need to work out what this would imply for tax rates.

Our initial assumption is that for a person on an average salary there should be no change to their take home pay as a result of the citizen income, that what they gained in citizen income they would pay in extra tax, whilst those on below average salary would be better off. We also assume that the threshold of £11,000 at which people start paying income tax does not change, and the £43,000 threshold at which they pay higher rate tax also stays the same.

In addition to paying income tax people have to

income tax Nat ins
First estimate Calc Calc
Average UK salary in 2016 £27,500.00
threshold £11,000.00 £8060
high rate threshold £43,000.00
Taxable £16,500.00 £19,440.00
Base rate 20% 12%
Current tax or NI paid £3,300.00 £2,332.80
Citizens income per week £150.00
per year £7,800.00
New pre tax income £35,300.00
New taxable income £24,300.00

Assume that average earner just breaks even on the citizens income. They are getting an additional £7,800 and must pay an equivalent in extra tax. We have to work out by how much the income tax rate would have to go up to take an additional £7,800 out of their new taxable pay of £24,000. They currently pay £3,300 income tax, afterwards they will have to pay £11,100.

Tax NI
Additional tax £7,800.00
Total income tax £11,100.00
New base rate of tax 46% 12%
New higher rate 66% 12%

The base rate of income tax has to go up from 20% to 46%. If we include the effect of national insurance, someone on average wages would be paying a marginal rate of income tax plus national insurance of 58%, if you add in the national average rate of occupational pension deduction of 5% you find that the marginal deduction rate on average pay would be 63%.

But what we have up to now is only a rough estimate. It is an underestimate since it fails to account for those in the working age population who are economically inactive due to child care, sickness or unemployment. I leave out pensioners here, since their £150 a week pension is already being met out of exisiting National Insurance. Currently 21.7% of working age adults are not in employment, 78.3% are in employment. So each working age adult will have to meet the citizens income of [21.7/78.3]=0.28 of an inactive person’s citizen income.

We can scale this down due to the effect of Employment Support Allowance, which is already paid to the ill or disabled, and the Job Seekers Allowance going to the unemployed. Advocates of citizen income assume that these would be abolished. So the average employed person will have to pay the difference between ESA and the new citizen income for these people.

Total employed 31500000
Total on ESA 1320000
Economically inactive 8729885
% inactive on ESA 15.12 %
% inactive who get new money 84.88 %

Adjusting for the effects of ESA and JSA gives us :

Tax NI
Inactive per worker 0.28
Fraction that is new money due to ESA 0.2352344463
which is £1,834.83
% unemployed 0.048
JSA 78
increase for each unemployed £3,744.00
Number of unemployed per employed 0.061
Cost per employed £229.52
So total additional tax £9,864.35
Total tax £13,164.35
New Tax rate 54.2% 12%
total marginal tax+ni 66.2%
Allowing for 5% occupational pension 71.2%
New upper tax rate 77.2% 12%
New upper marginal rate tax +NI 89.2%
Allowing for 5% occupational pension 94.2%

Using this we can compute the breakeven point for who will gain or loose from the scheme. Anyone with an income above £26,000 would loose.

Note that the upper deduction rate of 94% will cut in at a salary of £35,200.00. This amounts to what is effectively a confiscatory tax rate above £35K. It is clearly not worth calculating the effect of the Additional Rate which is currently at 45% on income over £150K. This would rise to 94.2% and allowing for pension deductions, deduction would be effectively 100% on salary income over £142,200. So a side effect of the citizen income is to introduce a maximum salary of around this level.

This may well be desirable on grounds of equity and social justice. It is the effects on people lower in the class structure that are more significant.

The take home pay now of a single person on average wage is £20,492. After introducing the citizen income the take home pay with citizens income and higher tax will be £17,052; clearly a substantial reduction.

A couple with both partners earning average wages would also loose out by about £6,000 a year. On the other hand, for a husband and wife in a rather traditional family arrangement, with only one partner working, there would be a £4,360 improvement in real income. It is debateable whether an income structure that incentivises women to stay at home would be a good thing.

Whilst the average wage earner will be worse off, the median wage earner will be slightly better off, by £16 a week. Recall that 50% earn below the median wage is the wage; a slight majority of wage earners would be better off.

But the political acceptability of the program is debatable. Consider pensioners first, the largest group currently relying on state benefits. The important point to recognize is the for them the citizen income simply replaces the pension on a £ for £ basis. They may well feel that having contributed National Insurance all their life, they are implicitly loosing out if every adult under retirement age gets the equivalent of their pension. It will do nothing to benefit somebody on the existing state pension, and will disadvantage all those pensioners with an occupational pension above £3,200 who will be paying the new much higher rate of income tax on their pension. Whereas a wage earner on median income £22K would be slightly better off, any pensioner whose state pension plus occupational pension was more than £11K, half median income, would be worse of. So pensioners, a group with very high voter turnout, have no reason to favor it, and a good reason to vote against it.

Next consider the impact on workers in full time employment. With a break even threshold of £26K or £500 a week, we need to see what fraction of employees would benefit and what fraction loose. We know that the median worker will benefit slightly, so that means at least 50% will gain. The latest Annual Earnings Survey for 2016 indicates that 40% of employees earn more than £516 a week, so slightly over 40% of employees will loose out. At best, it would be in the interest of a bare majority of those at work to support the measure.

The group who would clearly stand to gain are those who are of working age, but not employed. They would see a clear improvement in their income. This includes the unemployed, the disabled, and those, in the main women, who are at home looking after children.

There are 9.2 million pensioners who would be against, 9.4 million economically inactive who stand to gain and 33.6 million workers who might split something like 55/45 for versus against. On simple calculations of economic self interest a small majority 27.9 million against 24.3 million would be winners. But if one takes the differences in voter turnout – higher for pensioners than for the economically inactive, higher for the better paid than the lower paid, it is doubtful that the proposers of such a measure could pass it even in a referendum. In June last year, a considerably more generous citizens income proposal of more than £400 a week was overwhelmingly voted down in a Swiss referendum, with only 23% voting yes.

This overwhelming rejection must in part be attributed to the strong moral feeling that most workers feel against people getting something for nothing. Even if they might gain marginally, they will oppose the idea that people who do nothing will gain much more. This is a sentiment that, in the past, the socialist movement cultivated. Socialists argued that it was unjust that a few idle rich shareholders, should be paid out of the work done by others. They argued that there should be special benefits for those in need – child benefits, sickness benefit, free treatment for the sick. These arguments chimed with existing moral sentiments.

The original philosophy behind basic income proposals was the complete reverse. It came from neo-liberal economists who where absolutely fine with people getting unearned income. Their entire system of economics was a justification for unearned interest, profit and rent. They were also dead against people getting needs based benefits. The basic income proposal was a wedge to be used to destroy the existing welfare state, and the moral principles on which it stood. Once it was in place, they would go ahead with charging for all sorts of things which were now distributed according to need, and cancel existing needs based benefits. Give people enough cash to barely survive, and then leave the rest to the magic of the market. Minimum wage legislation would go, as would unemployment benefits. Since people would not loose any benefits by going to work, and since their survival was already largely subsidized by the state they would be willing to take on work for lower wages. It would be the ideal support for the gig economy of micro-jobs.

There would be a downward pressure on the lower end of the labour market. The net effect on the class distribution of income would be that those on slightly above average wages subsidize low wages, whilst low wage employers reap the benefit, something which already happened with Gordon Brown’s tax credit scheme.

There would also be a downward pressure on production, since the very high marginal rate of wage taxation needed to fund the citizen income creates a strong incentive to work shorter hours. People on part time work generally benefit, but a lot of people in full time work loose out, so they are incentivized to work part time. Combine this with economic backwardness and inefficiency that always accompany low pay rates, and you have a structure of incentives that penalizes economic growth and efficiency. Hours worked will fall, whilst productivity stagnates. Remember, it is high wages that incentivize firms to improve labour productivity. Any measure that holds down wages slows down productivity growth.

It may be objected that my entire costing has been based on two assumptions:

  1. That the cost of the citizen income must be fully funded by taxation.
  2. That the tax will be raised in the form of income tax.

Were the first criterion not met, the result would be seriously inflationary, so that is not controversial. But could the cost not be met, at least in part, out of taxes on companies, or taxes on property?

In principle yes, but in practice no. Taxes are paid by the working class, the middle class and the modestly rich, but not the super-rich. Men like Trump do not pay tax. As the evidence collected by Winters, [2011] and Piketty, [2014] make clear, in a capitalist economy wealth flows to the top, and the oligarchs are able to so write the tax rules that they pay little or no tax. They can afford to hire sufficient tax advisors, accountants and lawyers to avoid any tax net that the state tries to throw over them. Only wars and revolutions threaten their wealth.

There is a striking contrast between the basic income proposal, which aims to retain the capitalist economy, simply streamlining the welfare system, and the traditional aims of socialists:

The liberation of labor demands the transformation of the means of production into the common property of society and the associative regulation of the collective labor with general employment and just distribution of the proceeds of labor.4

The private ownership of the means of production, once the means for securing for the producer the ownership of his product, has today become the means for expropriating farmers, artisans, and small merchants, and for putting the non-workers capitalists, large landowners into possession of the product of the workers. Only the transformation of the capitalist private ownership of the means of production land and soil, pits and mines, raw materials, tools, machines, means of transportation into social property and the transformation of the production of goods into socialist production carried on by and for society can cause the large enterprise and the constantly growing productivity of social labor to change for the hitherto exploited classes from a source of misery and oppression into a source of the greatest welfare and universal, harmonious perfection. 5

The UK left are all familiar with :

To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service.6

which expressed, more concisely, basically the same goals as German Socialism. The key goal was the abolition of exploitation by the abolition of the capitalist system of private ownership. Rather than redistributing income within the working classes, they aimed to abolish all property income so that the whole net product would go to the working classes.

References

[Cockshott 2013]
Paul Cockshott. Heinrich’s idea of abstract labour. Critique, 41 (2): 287-297, 2013.

[Elson 1979]
Diane Elson. Value: The Representation of Labour in Capitalim. CSE Books, 1979.

[Elson 1988]
Diane Elson. Market socialism or socialization of the market? New Left Review, (172): 3, 1988.

[Elson 2009]
Diane Elson. Socialized markets, not market socialism. Socialist register, 36 (36), 2009.

[Heinrich and Locascio 2012]
Michael Heinrich and Alex Locascio. An introduction to the three volumes of Karl Marx’s Capital. NYU Press, 2012.

[Piketty 2014]
Thomas Piketty. Capital in the 21st century. 2014.

[von Mises 1935]
L. von Mises. Economic calculation in the socialist commonwealth. In F A Hayek, editor, Collectivist Economic Planning. Routledge and Kegan Paul, London, 1935.

[Winters 2011]
Jeffrey A Winters. Oligarchy. Wiley Online Library, 2011.

Footnotes:

1Michael Roberts has a good rebutal of the argument on the rate of profit here : https://critiqueofcrisistheory.wordpress.com/michael-heinrichs-new-reading-of-marx-a-critique-pt-1/

2For an argument against their idea of abstract labour see Cockshott, [2013].

3Also a early value form theorist : Elson, [1979].

4Socialist Workers’ Party of Germany, Program,1875.

5Minutes of the Party Congress of the Social Democratic Party of Germany,1891.

6British Labour Party Constitution, 1918.


File translated from TEX by TTH, version 4.08.

Trump not German chancellor circa 1933

January 24, 2017

I do not think that the comparison with Germany in 1933 is helpful.

In terms of class, Trump is not a trumped up corporal but a bonafide member of the super-rich. If there is any historical comparison to be made it is with populist members of the Roman senatorial order like the Gracchi or Ceasar. In terms of nation, what we are dealing with here is not a second rank imperialist power aiming to be the top imperialist power, but the already top imperialist power. The politics of the German government in the 1930s were the outcome of an already long existing imperialist strategy going back many decades(see Fischer). The USA is the super power with  only two rivals, Russia and China both of which are  inferior to it in military power. Neither is able to threaten it. The long term strategy of the US bourgeois state has been to break up first the USSR and then Russia as its most serious military rival.
They have aimed to use Islamic radicalism and Ukrainian fascism as part of this long term strategy: Islamic radicalism being aimed at the states on the southern border and Ukrainian fascism on the western border. The aim is the breakup of Russia into a number of smaller states which can be easily dominated by the USA and by US companies.

In the context of this long term strategy of US imperialism, Clinton was the war candidate, the most aggressively anti-Russian of the two. Trump was the peace candidate with respect to Russia.

What we have is a split within the US Oligarchy between the Trump faction and the existing military intelligence apparatus. This split within the ruling class produces splits within the state apparatus, with the CIA aligning with Clinton and a significant fraction of the military and part of the FBI ( New York office in particular ) aligning with Trump.

This is a period of real instability in the ruling class, unprecedented for different sections of the intelligence community to intervene on different sides in an election.

The question is why Trump has a different strategy?

You only have to listen to his speeches to see: his section of the bourgoisie – real estate, energy see that the internal productive base of the US has been undermined by the policy of outsourcing production to China that has been followed by many manufacturing companies: hence the emphasis on restoring the infrastructure and domestic manufacturing and energy production. The energy sector also stands to gain from good relations with Russia in being able to get concessions on oil extraction there.

The large number of Generals backing him, reflects I think the realisation that whilst the US armed forces have the power to easily subdue minor powers, an actual invasion of Russia would be very foolhardy and that was where the policy of the Democrats was leading.

The instability of the ruling class should, in principle, open up opportunities for the left in the US, but they are so split and alienated from the mass of the working classes there that they have little chance.  Indeed the Republicans are making a convincing move to gain working class support:

(WASHINGTON) – The following is a statement from Teamsters General President James P. Hoffa on President Donald Trump signing an executive order to formally withdraw the United States from the Trans Pacific Partnership. 
“Today, President Trump made good on his campaign promise to withdraw the United States from the Trans-Pacific Partnership. With this decision, the president has taken the first step toward fixing 30 years of bad trade policies that have cost working Americans millions of good-paying jobs.
“The Teamsters Union has been on the frontline of the fight to stop destructive trade deals like the TPP, China PNTR, CAFTA and NAFTA for decades. Millions of working men and women saw their jobs leave the country as free trade policies undermined our manufacturing industry. We hope that President Trump’s meeting with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto on Jan. 31 opens a real dialogue about fixing the flawed NAFTA.
“We take this development as a positive sign that President Trump will continue to fulfill his campaign promises in regard to trade policy reform and instruct the USTR to negotiate future agreements that protect American workers and industry.”
Founded in 1903, the International Brotherhood of Teamsters represents 1.4 million hardworking men and women throughout the United States, Canada and Puerto Rico. Visit www.teamster.org for more information. Follow us on Twitter @Teamsters and “like” us on Facebook at www.facebook.com/teamsters.
You have to take into account that the left/right positioning of these bourgeois parties is contingent on historical circumstances. For a long time the Republicans were the Left and the Democrats the Right – hence the confusing use of red and blue in the US which is the opposite of Europe. In the 19th century the Republicans were the reds aligned with the commune in France and the war against the confederacy. It is quite possible that we are seeing another reversal of the positions of the parties as occurred in the 30s with Roosevelt II, it is only since him that the democrats took up the position of favouring the working class interest. Remember that under Roosevelt I the Republicans were the progressive party.

 

Energy, Science and Capitalism

September 1, 2016

Were fossil fuels necessary?

Did capitalism itself generate its own technical advances?

Why was energy so vital to the development of capitalism?

 

Fundamentally it is because by substituting inanimate energy for human muscle, the amount of human time and effort required to make things was reduced. A powered machine replaced the work of human hands and arms. This produced gains in speed, mass and parallelism.

The natural resonant frequency of human limbs sets a maximum number of strokes per minute with which a hammer, saw or needle can be moved. A powered reciprocating mechanism can operate considerably faster. Contrast the number of stitches per second on an electric sewing machine with what can be done with a hand held needle. When the completely rotary motion of a circular saw replaces the back and forth of a hand saw the acceleration is even more marked.

 Trip-hammer_forgepowerhammer
Figure 1: Water powered trip hammers could strike much heavier blows than a person. Modern hydraulic ones ( right ) are even more powerful. Copyright Wikimedia, license Creative Commons, attribution Rainer Halama.

 

The weight that can be moved with each stroke or motion can be increased hugely by applying power. Trip hammers turned by water wheels were vastly heavier than any blacksmith could wield, steam hammers and hydraulic presses increased the mass of the hammer by further orders of magnitude. The same magnification applies in a comparison between spades and steam excavators.

Alongside gigantism went parallelism. Instead of one woman turning one spindle, a water wheel or steam engine could turn 100 spindles for each horsepower it produced. A megawatt is 1341 horsepower, so the 90 megawatts or so of installed British water power in 1800 could have turned about 12 million spindles. Of course some of these were powering other machines, but this gives some indication of the equivalent number of workers who would have been needed to produce the same result. But it underestimates the gain in productivity from external power, since the speed of the power spindles is so much faster.

Table 1: Installed artificial power in Britain, in MW. Figures computed from Crafts [2004] .
1760 1800 1830 1870 1907
Steam 3.75 26 123 1535 7181
Water 52 89.4 123 186 132
Wind 7 11.2 14.9 7.4 3.7
Total 63 126 260 1713 7332

A hand spinner could attain a productivity of between 2.5lb and 6lb of yarn per week[6]. A water powered spinning mule, the standard device used in the British textile industry, would have hundreds of spindles per worker and each of these spindles could produce between 25lb and 120lb of yarn per week[8]1. In consequence, each water powered spindle was of the order of 10 or 20 times faster than the human powered one. This means that 90 megawatts of water power, devoted to spinning would produce more like the output of 200 million hand spinners.

Table 2: Average output of thermal energy equivalent of UK coal mines assuming 25GJ per ton, from figures in Pollard [1980] and from 1873 from Historical Coal Data: Coal Production, 1853 to 2014, UK Dept of Energy and Climate Change.

 

years MW themal
1760-1765 4122
1800-1805 11019
1830-1835 25367
1873-1882 111219
1903-1912 204565

Capitalist production first took root using the water power technologies available from antiquity, its novelty in this respect was not the power source but the scale on which it was used and its application to highly parallel machinery. The real novelty, steam power, was at first relatively specialised in its application – used exclusively for pumping water, particularly from mines. It was not until the 1830s that steam power overtook water in installed capacity in Britain, even later in the USA. It has been suggested[9] that the reason steam eventually replaced water in the cotton industry was more a matter of class conflict than technical rationality. Water mills were in isolated rural spots where it was easier for the mill workers to organise strikes than in big cities with their abundant potential blacklegs among the unemployed. Steam power enabled masters to move from where labour was scarce and strong to where it was abundant and weak.

Could capitalism have developed differently, in a way which did not rely on fossil fuel?

Was it just a contingent accident that Faraday’s dynamo and electric motor was invented decades after Watt’s engine?

 ukenergy
Figure 2: Growth of different forms of energy use during the development of British capitalism. From Tables 1,2. Given the log scale of the Y axis, a straight line represents an exponential growth rate.

 

Had electro-magnetism been investigated earlier, power could have been transmitted from fast flowing rivers to power factories in cities, thus giving the masters the edge over their workers that steam actually provided. This transformation though, had to await Edison, Tesla and Kelvin in the late 19th century. But even then water power would not have been sufficient to rival steam. In the year 2000 the installed hydro power of the UK was 1400 MW, which is less than the installed steam power was in 1870, and only about a quarter of the total installed power of all types by the end of the 19th century.

We speculated above about a counter-factual situation where Faraday’s generator had been invented before Watt’s engine. There might be conceivable circumstances in which electro-magnetism was developed before steam power, but there are real logical dependencies existing between scientific and technological advances. Heilbroner [1967] argues that it is just this set of dependencies that lie behind Marx’s insistence on the primacy of the productive forces in giving direction to economic and historical development. Knowledge is cumulative. You need prior knowledge of one technology before you can think of improving it. Without the Newcomen engine as a starting point Watt would not have hit on his separate condenser. The possibility of him thinking that it would be worth using a separate condenser, though, depended on him having a prior concept that heat was a quantifiable ‘substance’ that could be saved by not repeatedly cooling the cylinder the way Necomen did. That in turn was only possible because of Watt’s scientific training in Black’s laboratory in Glasgow University[1] – then the leading center for thermodynamic research.

Newcomen and Savery’s pioneering engines in turn depended on the prior disemination of the work of Torricelli on atmospheric pressure, since these devices were, in the language of the day `atmospheric engines’. The power stroke of the engine was driven by atmospheric pressure. The fact that improvements to machines often came not from professional scientists but from technicians like Watt and Cugnot should not be taken to indicate either that the technicians were ignorant of the underlying scientific principles of the machines, or that the discoveries were not dependent on these principles. For example the conversion of rectilinear motion into rotary motion was a considerable engineering problem.2 This was solved by cranks or planetary gears, but that left another problem. With a beam engine you had to combine vertical motion of the piston rod, with rocking motion of the beam which would tend to bend and unseat the piston rod. Watt solved this with his parallelogram linkage[7,[4]. The ability to come up with this requires at least a deep grasp of classical geometry and probably also of Cartesian techniques[3] in order to prove its validity. Something which, when we see it in a museum now, looks literally clunky and crude, actually involved maths which would severely tax most contemporary students.

 wcuparawatt_parallel_motion_simulation
Figure 3: The conversion of the straight line motion of the piston rod into the rocking motion of the beam was a difficult geometry problem solved by Watt’s parallelogram linkage. Solving the problem requires a good level of geometric education.

 

A condition therefore of capitalist civilisation, and the technical advances on which it depends, has been the continuing development of science, and the educational and research base on which science relies. These are not something generated internally by capitalist enterprise. They depended initially on royal and later republican state patronage which well preceded the growth of actual capitalist machine industry. Russo et al. [2013] to what extend the science of the 17th and 18th century still rested on royally funded research of the Hellenistic period in Syracuse or Alexandria. From the 17th century royal patronage of research resumed and the universities in Europe became centres of science rather than just religion.

Scientific knowledge, once published, is not property. There is no profit to be made from it, so it has in the main to be produced by social rather than private research. However great the incentive for capitalists to innovate may have been, the mere existence of commodity relations and wage labour would not have been sufficient to generate the capitalist mode of production, contra the implications of Brenner and Wood. Innovations driven just by trial and error, without theory are slow and limited. They only become rapid when coupled with socially produced and accumulated, non-commodified, theory.

References

[1]
Donald Stephen Lowell Cardwell. From Watt to Clausius: The rise of thermodynamics in the early industrial age. Cornell University Press, 1971.

[2]
Nicholas Crafts. Steam as a general purpose technology: a growth accounting perspective. The Economic Journal, 114 (495): 338-351, 2004.

[3]
David Dennis. Rene Descartes’ curve-drawing devices: Experiments in the relations between mechanical motion and symbolic language. Mathematics Magazine, 70 (3): 163-174, 1997. ISSN 0025570X, 19300980. URLhttp://www.jstor.org/stable/2691256.

[4]
Eugene S Ferguson. Kinematics of Mechanisms from the Time of Watt, volume 27. Smithsonian Institution, 1962.

[5]
Robert L Heilbroner. Do machines make history? Technology and culture, 8 (3): 335-345, 1967.

[6]
Jane Humphries, Benjamin Schneider, et al. Spinning the industrial revolution. Technical report, Economics Group, Nuffield College, University of Oxford, 2016.

[7]
Teunis Koetsier. A contribution to the history of kinematics—i. Mechanism and Machine Theory, 18 (1): 37-42, 1983.

[8]
Timothy Leunig. A British industrial success: productivity in the Lancashire and new England cotton spinning industries a century ago. Economic History Review, pages 90-117, 2003.

[9]
Andreas Malm. The origins of fossil capital: from water to steam in the British cotton industry. Historical Materialism, 21 (1): 15-68, 2013.

[10]
Sidney Pollard. A new estimate of British coal production, 1750-1850. The Economic History Review, 33 (2): 212-235, 1980.

[11]
Lucio Russo et al. The forgotten revolution: how science was born in 300 BC and why it had to be reborn. Springer Science & Business Media, 2013.

Footnotes:

1Finer yarns weigh less so productivity in lbs is lower.

2 The initial solution to generating rotary motion from steam was to use a steam engine to pump water up which was then used to turn a water wheel[4].

Is the USA democratic

July 27, 2016

Earlier this year, at the height of the controversy over the primary elections in the USA I was asked to contribute an article  to the Beijing Peoples Daily on the decline of democracy in the US. The question was I thought, slightly misleading since I dispute that there ever was a democracy in the USA. I send them in the article that follows, but I am unsure if they published it.  However since sufficient time has elapsed, and with the US election looming, I feel that there is no harm in releasing at least the English language text.

In 2014 a study went viral accross the US press and internet. Princeton scholars reported that, by using modern quantitative political science techniques they had been able to conclusively prove that the USA was a political oligarchy not a democracy.

The authors used data from opinion polls to look at huge sample, 1779 different public policy issues from the 1980s onwards, to see what the opinions of Americans of average income and the opinions of richer Americans ( >$140,000 per year ) were on topics. To this they added data on the public positions taken by business lobbying groups on these policies. Next they looked at the legislative outcomes of these 1779 policy debates and compared the outcomes with what people on average income, rich people and business lobbyists wanted. Using a statistical technique called Multivariate Analysis they looked to see how influential the views of these three groups were in deciding the final content of the laws.

The results were striking. They found that in only 3% of the cases did the views of average citizens have any effect on the laws that were finally passed, whereas the views of the rich were influential in 76% and those of the business lobby affected the outcome in 56% of the time1. They conclude:

What do our findings say about democracy in America? They certainly constitute troubling news for advocates of populistic democracy, who want governments to respond primarily or exclusively to the policy preferences of their citizens. In the United States, our findings indicate, the majority does not ruleat least not in the causal sense of actually determining policy outcomes.2

It is not surprising that this research was newsworthy. On the one hand it contradicted the self image of the USA as the world’s foremost champion of democracy. On the other it chimed with the increasingly widespread popular feeling that politics in the USA was corrupt, and that monied elites and lobbyist were manipulating things behind the backs of the ordinary voter.

But of course to Marxists this came as no surprise. This is what they had been saying since the mid 19th century “the bourgeoisie has at last, since the establishment of Modern Industry and of the world market, conquered for itself, in the modern representative State, exclusive political sway. The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie. Marx and Engels, [1848]”. Here was scientific confirmation of what they had always said. But how does this work?

How are the rich able to so completely dominate a state whose constitution is supposed to be democratic?

The short answer is that the US constitution was never intended to be democratic. The long answer involves looking at the economic and class history of the USA to to see how its politics has operated.

It is a mistake to see the American Revolution as a bourgeois democratic one. It was way different from great democratic revolutions like those in 18th century France or 20th century China. The radical character of the latter came from the peasantry rising up, taking over the estates of the landlords and completely transforming property relations in the countryside. This expropriation removed the economic support for the old ruling classes, allowing a complete new state structure to be established.

The French, English and American revolutions all had a republican and anti-monarchial character, but republicanism was more the political ideology of a landlord class defending itself from the encroachments of the King than anything democratic. In France, the rebelling aristocracy lost control, first to the urban bourgeoisie and were then consumed in the fires of peasant revolt. In America this loss of control never happened. The leadership consisted of men of influence and standing, perhaps the most conservative leadership of any revolution in history3. To understand the constitution the Americans adopted you have to use the methods of On Contradiction4 to examine the class contradictions of the day.

During the revolution, the fundamental contradiction was between the slaveowning class of the colonies on one side and the British state and 4 Iroquois nations on the other. Against Britain, they aimed to gain exemption from taxes and tariffs, to get rid of restrictions that the King was imposing on large landed estates and to protect their holdings of slaves from being set free. Against the Iroquois, they wanted territory.

The fundamental contradiction governed the development of the secondary ones: between slave and slave owner, between landlord and tennant farmer. Because their direct oppressors were opposed to the British, slaves and tennant farmers tended to side with the British against the revolution. There was widespread loyalist ( pro British ) sentiment among the tennantry5. The British Governor Lord Dunmore issued a proclamation absolving the tennantry of their feudal quitrents owed to rebel landlords, and liberating all slaves who would take up arms against the rebels. The British raised several regiments of black former slaves during the war. There was a third order contradiction between free farmers and the local capitalists over debts owed by the farmers to the capitalists. The slaveowning and capitalist leaders of the revolution were dependent on free farmers and artisans as soldiers, but feared that a directly democratic government dominated by free farmers would either inflate the currency or pass laws cancelling debts.

The class structure after independence was unlike anything in early capitalist Europe. You had to go back more than 2000 years to find something similar : the slave republic Rome on which the Americans consciously and deliberately modelled themselves. At the top was the slave owning aristorcracy who did no direct productive work, but lived off the labour of the slaves. Below the aristocracy was a class of free citizens who worked for a living. These would be small family farmers or artisans. At the bottom were slaves with no political or civil rights, the private property of aristocrats. The main class conflicts were between the slaveowners and the slaves on the one hand, and between the slave owners and the free citizens on the other. Since the slaves had no political rights either in Rome or the USA the conflict between them and the slave owners was brutally physical, with the owners dominance enforced by whips and chains. Free citizens on the other hand had civil rights, and the fact that they outnumbered the richer slaveowners meant that the political power of the slave owners was potentially threatened by the free peasants and artisans. The main c onflict between the slave owners and free peasants was typically over land ownership. The progress of slavery meant that more and more land tended to be fall under the control of the big slave estates, theatening to proletarianise the free citizens. In both Roman and the US, the free citizen farmers and artisans were allies of the slaveowners. As with expansionist Rome, the external contradiction was beween the propertied classes of the Republic and the surrounding free peoples. The expansionary imperialism of both states was driven by both the desire of the senatorial classes to acquire further estates, and more significantly, to promote colonies in which a potentially threatening proletariat could be settled as independent farmers. As Weber [2013] argued, the parallels between Roman and American peasantry were exact right down to the geometry of landholding. In both cases the land was divided up on a square grid of farm plots with long straight roads – something that only a conquering empire could achieve.

The American constitution is almost a direct copy of that of Rome. The Roman constitution was cleverly designed to give the semblance of power to these free citizens whilst actually concentrating real power in a senatorial class. The state structure in Rome was made up of :

  1. The two Consuls who were elected for a year and who alternated in office on a monthly basis. They were equivalent to the President of the USA today. They had supreme command of the army and civil administration.
  2. The Senate, which could pass decrees and provide the class from which the consuls were generally chosen. The US Senate was explicitly modelled on this.
  3. The comitia centuriata or assembly of the centuries which elected the consuls by indirect election: almost exactly copied by the US electoral college.
  4. The Plebian Council. This was a mass democratic assembly that could pass laws. It could not however set its own agenda, having to vote on motions put to it by magistrates who were invariably from the upper classes.

The effect of this structure was that executive power in Rome was always held by a member of the slave owning patrician class. The Roman Senate likewise was always made up of slaveowners rather than common people. Similar effects were achieved in the USA. Of the first ten presidents of the USA only two, John Adams and John Quincy Adams, were not slave owners.

But a republic also relied on the free citizens as soldiers. These people had to be given the semblance but not the reality of power. In Rome the two mechanisms used to achieve this were elections, specifically indirect elections, and control over the agenda at the popular assembly by upper class magistrates. Elections, ancient political theorists argued, always favour the wealthy. Aristotle said it is thought to be democratic for the offices to be assigned by lot, for them to be elected is oligarchic Aristotle [1988]. The alternative technique, forming a council from a random sample of citizens as used in ancient Athens was rejected for the Roman oligarchic approach.

The rich can spend to influence elections and have an education that prepares them as orators. Indirect election will increase the effects of any bias : for example Bush won the 2000 election on the electoral college system even though he had fewer popular votes than Gore. Having executive power concentrated in the hands of one elected official is great for the wealthy. It takes a huge sume of money to win the election so the candidates inevitably become dependent on oligarchs.

Whilst ancient Rome at least allowed some element of direct democracy, in the US this element, the popular assembly was removed and replaced by the elected house of representatives, where again, money speaks. Election to this body is often funded by wealthy oligarchsWinters [2011].

There have been 3 periods in US history when there was a danger that democracy might triumph: the Civil War, the Populist movement of the late 19th Century and from the New Deal to the 1960s. But in each case the oligarchy re-established power.

The 1860s Civil War marked the transition between the slave and feudal modes of production in the US. Although the war abolished slavery, int freed slaves soon lost civil rights. Klu Klux Klan terror and lynchings reduced them to the semi-feudal status of voteless sharecroppers. Not until the 1960s was their right to vote re-established. The same happened in Russia in the 1860s where freed serfs also became sharecroppers. Neither Alexander nor Lincoln broke the power of their landlord classes.

The next crisis came with the populist movement grounded in the contradiction between the free peasants and the financial oligarchy. Lincoln had moved America to a fiat currency which helped the peasantry since the inflation that accompanied it depreciated their debts. The bankers pressed for ‘sound money’ and the gold standard, which would have threatened the mortgaged farms of the peasantry. The peasant populist movement fought for cheap money and democratic reforms : popular voting on legislation, the right of recall of officials; demands similar to those of Social Democracy in Germany and Russia. Despite victories at state level, they never gained power at the federal level.

The 20th century the US underwent a transition from a predominantly rural economy of semi feudal black peasants and independent white ones to a predominantly urban waged population. The agricultural depression from the 1930s allowed banks to foreclose on farms driving farmers into cities. In the South, the landlords made use of mechanisation to dispense with and evict their black sharecroppers who also moved into the cities. The creation of a bigger working class population led to a strong labor union movement and black civil rights movement. It appeared by the 1960s, that the battle for democracy in America was at last being won.

The period from the New Deal of Roosevelt to the Great Society of Johnston saw a decline in the share of income and wealth held by the oligarchy and a rise in the share going to the rest of the population but from the 1970s this reversed. Wealth in the US became concentrated in a ever smaller fraction of the population(Piketty and Goldhammer, [2014]) and as the study by Gilens and Page shows, this fraction exercised an almost total political control. The country has a police force that have reverted to their old slave patrol roles exercising internationally unprecedented levels of violence against blacks and poor white people, shooting over 450 dead in the first 5 months of 2015. When people protest this brutality they face police armed like commandos fresh from the war in Iraq.

Will democracy eventually come to the US?

We can not just echo Zhou enlai on the outcome of the French Revolution and say it is too early to tell yet.

After 240 years it is not too early.

It is now certain that as long as the US retains its current constitution, the oligarchy there need have no fear of democracy. In the USA radical popular leaders from Lincoln to King had the delusion that the republic was democratic. I would tend to side with Lenin who wrote that a US type republic was the most perfect form of rule by the propertied classes. Once they gain control of it, no change of leaders or parties can shift them. The solid edifice of the republic will survive until some real cataclysm shakes it; something of the scale of those Japanese victories of 1905 and 1941 which unsteadied Russian and British empires.

If we believe Mao, political power grows out of the barrel of a gun, without a peoples army the population has nothing. The American people have the right to carry and bear arms, one of the key liberties they retain, but they have at no point suceeded, even at a local level, in raising popular militias able to resist the armed forces of the state. The state was able to supress strikes, Black and Indian rebellions and even mass protests by ex soldiers. Until such a day as a defeated, mutinous army allies with a renascent populist movement, makes ‘despotic inroads’ on the rights of private property and expropriates the oligarchy, the American oligarchs’ power will rest secure.

References

[Aristotle 1988]
Aristotle. The Politics. Hutchinson, 1988.

[Gilens and Page 2014]
Martin Gilens and Benjamin I Page. Testing theories of American politics: Elites, interest groups, and average citizens. Perspectives on Politics, 12 (03): 564-581, 2014.

[Marx and Engels 1848]
Karl Marx and Frederick Engels. Manifesto of the Communist Party. 1848.

[Morris 1962]
Richard B Morris. Class Struggle and the American Revolution. The William and Mary Quarterly: A Magazine of Early American History, pages 4-29, 1962.

[Piketty and Goldhammer 2014]
Thomas Piketty and Arthur Goldhammer. Capital in the twenty-first century. Belknap Press, 2014.

[Weber 2013]
Max Weber. The agrarian sociology of ancient civilizations. Verso Books, 2013.

[Winters 2011]
Jeffrey A Winters. Oligarchy. Wiley Online Library, 2011.

[Zedong 1987]
Mao Zedong. On contradiction. Chinese Studies in Philosophy, 19 (2): 20-82, 1987.

Footnotes:

1Table 3, Gilens and Page [2014].

2Page 576, Gilens and Page [2014].

3Page 7, Morris, [1962].

4Zedong [1987], in particular Part III.

5Page 16,Morris [1962].