Saturday, October 30, 2010

The Economic Roots of World War Two

Chopping up history is a common method of distorting it and preventing anything being learned from it. Chopped-up history comes to us as a series largely self-contained, unconnected and accidental events which were crucially influenced by the personalities of the leaders of the time. The implication is that there is no overall pattern in what happens in the world, that things would have been different had other people been in charge or if certain events had not coincided. It follows from this that there is no need to make any fundamental changes in society because a bad historical accident at one time can be redressed by a good one at another time.

Mad Dictators versus The Democracies?

The popular account of the last world war goes something like this. After 1918 the victorious Allies made two big mistakes. Firstly, they did not ensure that Germany had been properly finished off as a military power. Secondly, they imposed the Versailles Treaty, a settlement so stringent as to cause a lingering resentment among the German people which was too easily exploited by Hitler, an unusually mad dictator whose consuming ambition was to lead Germany into a conquest of the entire world. Hitler was in league with Mussolini, another mad dictator who was also comical because his belligerent strutting and posturing were a facade behind which the Italian people were disinclined to go to war. His other ally - Japan - was a different matter, for the people there were tradition-bound into a disciplined savagery. These three countries regarded the persecution and murder of human beings as necessary and progressive and they were intent on extending their rule over the entire world. Other countries - Britain, France and America - were democracies. Their leaders were not dictators, they allowed free speech and free association and they treated their people in a humane way. The democracies could not stand aside and allow the dictatorships to take over the world and so, after a few years delay caused by their natural inability to grasp the enormity of Hitler's madness and their laudable reluctance to plunge the world into hostilities, they eventually had no choice but to go to war. After six years of bloodshed which cost at least 15 million dead the dictatorships were beaten, the world recovered frorn some very nasty historical accidents and all was well.

One of the most obvious flaws in this version is the fact that on the side supposedly fighting for democracy was one of the world's most fearsome dictatorships. When Stalin's Russia was forced into the war on the Allied side it had become enduringly notorious for its iron repression of its people, for its ruthless policy of mass murder and for the brutal and cynical way in which Stalin disposed of any opposition among the leadership normally by killing them off. The fact that 'communist' Russia was supposed to be a sworn enemy of Nazi Germany did not stop the two countries, in a typical example of the dirty game called diplomacy, signing, just before the war began, a pact of non-aggression guided, they said, " the desire to strengthen the cause of peace between the USSR and Germany..." The pact - which, although it was supposed to last for ten years, did not stop Germany attacking Russia in June 1941 - also carved up part of Eastern Europe: Lithuania, Poland, Bessarabia. Russia was not the only dictatorship fighting on the side of freedom: Poland and Greece could hardly be described as democracies and they too were in the Allied camp.

Meanwhile, neither the 'democracies' nor the dictatorships were completely united. Mussolini's government was alarmed by Germany's expansion, in particular the occupation of Czechoslovakia which they saw as undermining their interests in Central and South East Europe. They did consider developing closer ties with Britain and France but instead asserted that the Balkans and the Eastern Mediterranean were Italian spheres of influence and annexed Albania. The French were mistrustful of British policy which, as the pressure from Germany mounted. did not rule out a settlement through offering Germany some colonies, which the French saw as a potential threat to their interests in the Middle East.

The British Empire

More important - more influential - was the antagonism between American and British interests. One of the reasons for the opposition in America to that country joining the war was the well-founded suspicion that American power would be used to protect British possessions and so shore up the British Empire, which with its system of Imperial Preference hampered American industry's exports to valuable markels and ils access to vital raw materials. The 'aid' which flowed from America to Britain was thickly festooned with strings. In August 1940 the 'gift' of 50 US destroyers (which were in any case well past their prime as death-dealing machines) was conditional on American occupation of 8 bases on British territory, from Newfoundland to what was then British Guiana. Purchases of American war equipment were to be paid for by the liquidation of overseas assets and lend-lease was agreed to only on the condition that the British ruling class had exhausted all other ability to pay. In August 1941 the Atlantic Charter was exultantly publicised as a declaration of faith in the war for democracy and the well-being of the human race. In reality it was an undertaking to ensure self-determination and free trade in the post-war world - which effectively meant the end of Imperial Preference.

So the objectives of the war were not as chivalrous and humane as its supporters would have us believe. Of course it is true that Nazi Germany was a vicious dictatorship where all opposition was ruthlessly stamped out and where millions of people were systematically killed simply because they were Jews or gypsies or homosexuals or handicapped. And of course the Allied victory did mean the end of the extermination camps at any rate in Germany, for genocide, atrocities and mass political murders did not end in 1945. But these were not the objects of the war, except to those who chop up history. The war came as an episode in an established and continuing system of international relations which were an inevitable result of the social system we live under - of capitalism.

Germany's defeat in the First World War, the Russian revolution and America's withdrawal from the post-war settlements left Britain and France dominant, with the onus to strike a balance between the elite powers. As an outcome of the war these two states, already possessing huge empires, also absorbed former German and Turkish colonies so that Great Britain controlled a quarter of the world and, with France, a third of it. "We have got most of the world already, or the best parts of it" was how it was described in 1934 by the First Sea Lord. The fact that the advantages of empire were largely illusory for the ruling class - and wholly illusory for the working class, who were nevertheless so proud and ready to die for their masters wealth and possessions - did not prevent imperialism being seen as vital to everyone's interests. The 'have-not' states - Germany, Japan and Italy - demanded to be let into the power syslem, to expand to be a part of the balance. "As a result of restrictions our economic situation is such that we can only hold out for a few years...There is nothing else for it, we have to act", said Hitler in August 1939.
These demands were given an emphalic political voice, and a great deal of energy, by the Nazis in Germany and the Fascists in Italy. In many ways the policies of both were, to put it mildly, bizarre; they not only hampered Ihe full development of each state's power bul also gave the Allies, when the war came, a brilliant propaganda theme which they worked for all it was worth. Telling us all about the racism of Nazi Germany, they forgot troublesome facts like the collusion and encouragement the Nazis had received from so many respected and bellicose British politicians and the persecution of blacks in America.

German Industry and Commerce

The Nazis were not the first post-war German government to work for the overturn of the Versailles Treaty and the re-establishment of Germany as a major European power. These policies had also been expounded by the politicians of the Weimar Republic and the implications were the same for them as they were for the Nazis - the annexing of Austria, perhaps also of Czechoslovakia and the extension of Germany's sphere of influence into eastern Europe and the Balkans. Behind the policy stood German commerce and industry with their insistent need to throw off the shackles of the post-war settlements and to expand. When Nazi Germany moved militarily the country's commercial and industrial interests eagerly followed the victorious armies. German banks quickly took over their competitors in Austria and Czechoslovakia and the industrial combine IG Farben did the same to its rivals in those countries so that it became the dominant chemical concern in South East Europe.

Although the Versailles Treaty was supposed to have sorted out the world's problems (for what else were those millions of workers killed in the first world war?) the stresses and crises which followed in peacetime produced a clutch of other treaties, each attempting to deal with a separate point of tension. But the diplomatic edifice erected in the 1920s was severely damaged by the world econornlc collapse. Collective action became dislinctly unfashionable as each country scrambled to protect the wealth and the standing of its ruling class. Tariff barriers went up and Britain abandoned free trade in favour of imperial preference. The industrial powers suffered massive unemployment, with up to a third of their workforces being idle. The despair and disillusionment with parliamentary democracy which this caused undoubtedly helped the Nazis' rise to power as they could blame the economic collapse on alleged corruption and bungling of the Weimar republic and assert that it would not have happened in a racially pure, virile and disciplined Nazi dictatorship.

In 1931, in response to the slump, Britain went off the gold Standard - that is, declared that the pound was no longer convertible into gold. As a result a number of ad hoc arrangements for international payments emerged with the 'outsider' powers such as Germany and Japan entering into bilateral trading deals. This effectively divided the world into two antagonistic blocs - the gold-possessing states and those now reliant on barter. The German ruling class fought their side of the conflict by dumping exports, importing through bulk buying, currency controls and the like. The British government fought back with export guarantees and, in 1938, buying up the entire wheat crop of Rumania in an effort to prevent that country being absorbed into Germany's sphere of influence. In general the Germans made the running in this race and British and French capital became more and more excluded from eastern Europe.

For the British and French capitalists the German threat to Poland was the sticking point, beyond which there could be no further attempts at diplomatic appeasement or economic warfare. The invasion of Poland left the Allies with no choice but to try by military means to force Germany back into 'normal' trading relationships. Behind all the talk about a war to defeat dictatorships and to liberate Europe from the Nazi thrall the real war aim of the Allies was to restore the financial and trading arrangements which benefitted their ruling classes. In July 1944, while some of the wars fiercest battles were being fought, the bloodless battle of Brettan Woods settled a lot about the economy of the post-war world. The Conference set up the International Monetary Fund and the World Bank as the main instruments of a new international payments system based on currencies convertible at fixed rates into gold and, as the Daily Express complained for years afterwards, was another large nail in the coffin of Imperial Preference.

Far from being an historical aberration the Second World War was a predictable episode in capitalism; it was normal to a social system which throws up rivalry and conflict all the time. Those who chop up history, treating the war as if it were a separate incident, unique because of the personalities of the leaders at the time - lunatic Hitler, conceited Mussolini, and Chamberlain - spread confusion and misunderstanding. To understand why that war happened is to understand a lot about society today, and about why it operates as it does. This is a matter of great urgency, if we are to organise the world so that war is abolished. After all, those millions who were killed in the war were supposed to have given their lives to make the world safe for peace yet look at what has happened since 1945 ...


Socialist Standard September 1989

Monday, October 25, 2010

What’s Happening to Canada’s Manufacturing Sector?

Open Letter to the Canadian Auto Workers Union, February 2009

It seems like every day we read in the country’s newspapers of yet another plant closing or shedding jobs. Between 2004 and 2008, according to Statistics Canada, 322 000 manufacturing jobs were lost, 198 600 in Ontario, 18% of its total. The area from Oshawa to Hamilton, known as “The Golden Horseshoe”, has long been recognized as the economic engine of Canada. Now the horseshoe is rusting. While 1.5 million jobs were created in the rest of the economy in the same period, for the most part, they are non unionized, lower paying, and with less benefits. So, for example, we can meet a skilled tool and die maker who has been unable to find work in his trade for three years, working at Canadian Tire for one third of his former salary. Now, with the current recession, the pace of stripping the manufacturing sector is growing at an alarming rate.

All of this is not a new phenomenon. The demise of traditional manufacturing areas in the North-East United states and Ontario and Quebec has been going on for decades, even before the NAFTA free trade agreement in the early nineties. Many areas in the United States have long been described as “rust belts”, Detroit being a prime example. From the 1920s, as the auto industry established there, it grew into a booming metropolis of 1 800 000 people, but today is a mere shell with only half that number and miles of boarded up, abandoned buildings. This has been a long process as production has shifted to other areas and the percentage of manufacturing jobs to total jobs continues to decline.

Globalization, the process of internationalizing trade, has become the scapegoat over the last few years. As production moves to far away places, and job losses at home mount up, fingers are pointed at greedy, uncaring corporations and investors. Yet Karl Marx noted 150 years ago that as capital accumulated and agglomerated, the opportunities to expand production not only became possible, but necessary to keep ahead of competitors. It is a case of grow bigger or be eaten. Thus the search for markets and more profitable opportunities had to expand to cover the globe. The process of globalization, has then, been one that has been going on from the beginning of capitalism and is not something which can be stopped or simply restricted.

Is this recession to blame and will there be a return to former levels of employment in this sector? A recession is a contraction of the economy leading to decreased production, plant closings, and job losses. Once in motion, it has a domino effect as suppliers to those contracting industries and retail businesses in the community also must contract their economic activity. A recession occurs when overproduction creates surplus commodities that cannot be sold quickly enough or must be sold below value. An interruption in the productive cycle and a decrease in profitability is the result. It is the anarchic nature of the capitalist mode of production that creates this situation. There is no concerted attempt to match supply and demand, and, certainly, no company wants to slow production while commodities are selling. On the contrary, production and advertising is ramped up in order not to miss any chance to sell more product. For example, according to one auto industry analyst, it was obvious a long time ago that the over supply of vehicles was coming, but every company must carry on regardless and hope it is the other guy who will cut back or get into difficulty first. The seeds of every recession are, then in every boom – overproduction, overshooting the supply, loss of profitability, and the seeds of every recovery are in every recession – gradual reduction of stockpiles, low costs of raw materials, plant and machinery, and wages. When the chance of higher profitability is seen, then capital will again be invested and a return to normal levels of production. This boom and bust cycle is inherent in capitalist production. The only problem is that the worker is the one whose livelihood is threatened or lost, and who has to ‘tighten his belt’, and wait for the recession to pass. There is no way to predict how and when this cycle will play out, or how long or deep a recession will be. This has certainly affected the job losses, and some will be recovered, but as it is not the only, nor primary, cause of trouble in Canada’s manufacturing sector, it is not likely we will return to former halcyon days of the 1950s and 60s under this present system.

The Real Culprit.

Our current economic system, capitalism, is based on private ownership of the means of producing and distributing wealth produced by the workers i.e. the land, resources, the factories and machinery, the transportation systems etc. Goods are produced with a view to making profit that comes from the extra value that the worker puts into the products over and above his wage. That is, after working for part of the day to create enough value to pay his wage, the worker then continues to work to create the value that becomes profit. In a recent Toronto Star article, CAW economist Jim Stanton, was quoted as saying that the average auto worker earns $65 000 per year and creates $300 000 in value. If the figures are correct, then, if the worker starts his shift at, say, 7am, he has earned his wage by about 8:45am and the rest of the day he works for his employer for free.

Capitalist production is commodity based, meaning that goods are produced only with a view to making profit. If that profit doesn’t materialize, or is less than expected, production ceases, no matter what the need is. Food, in many parts of Africa, is a prime example of this system in action. No profit, no production, can’t pay, can’t have, is the logo of commodity production. Capital accumulation must take place for the system to work. Investors expect to take away more than they put into an enterprise. Capital, then is value in perpetual search of additional value, and it this continual search for augmentation that drives, or derails, the capitalist mode of production. It must be, of course, predicated on continual expansion, ever greater destruction of the earth to extract resources, ever greater factories, machines, and production systems, ever greater markets to absorb the extra products. Capital’s search for greater value means that the managers of the investment funds and the corporations involved in every aspect of production are charged with finding opportunities for producing the greatest value. In this, they are in a life and death struggle with their competitors. Lose the struggle and your capital investment dries up and you are taken over or, worse, you go bankrupt.

Given this analysis of our economic system, it is not surprising that qualities such as ethics, loyalty, or morality are tossed aside when it comes to the economic survival of a business. A Corporation is a paper agreement between groups of risk capital and has no feelings. Its mandate is to protect and augment the capital it has been loaned. If this protection means cutting the payroll, then it is unfortunate but so be it. If returns are better in one area of the globe, then, as water flows with gravity to the lowest level, so capital will flow to the lowest cost area.

What is to be done?

In the short term, there is very little that can be done to reverse the situation. As noted above, when the prospect of profitability returns, capital will be invested again and the recovery will begin. Union activity through pressure on employers, collective bargaining, demonstrations etc. are always available to mitigate the worst aspects of the system, but are even less effective during a recession, as current negotiated concessions of wages and benefits attest. In the longer term, we must examine the system that creates so much wealth but delivers so little to the general population and yet so much to the few owners. It is a change in this ownership that The Socialist Party of Canada proposes. Presently, capital dominates our life. It tells us that we must get a job to survive, then tells us when and how we do it, what the conditions of work will be, and even whether we will work at all. We propose that a new system of producing and distributing wealth is needed, one where the ownership of the world’s resources, and the means to turn them into useful goods, is owned by all, in common, and operated democratically, in the interests of all. That would mean all mankind would get a proper diet, housing, clean water, education, health care, and the need for continual wars over who owns the resources (the major cause of all wars) is ended.

J. Ayers

The Day Won't Come

On a TV chat show many years ago, comedian Jackie Vernon responded to an environmentalist’s dire predictions by saying, “The day will come when the day won’t come.” Since Vernon made this gloomy prediction, that day may be quickly coming. Capitalism’s rapid, rampant, and remorseless rape of the environment is such that our planet may not be habitable in the not-too-distant-future.

The main focus of environmental destruction recently has been, as we all know, global warming. Though socialists welcome such attention to world problems, other aspects of destruction, such as deforestation and poisoning of land and water, are being ignored. One example is the threat to the Great Lakes of North America. In June 1984, a conference was held in Toronto to discuss the water needs for competing capitalist enterprises to gain access to the lakes and how it could be done without damaging them ecologically. They were in a pretty bad way then, especially as they had been used for years as a dumping ground for chemical waste. Lake Erie was killed in this way. Various plans were expressed, such as piping water six hundred miles to the Missouri River basin. Naturally, this was opposed by those living and operating close to the lakes, both in Canada and the US. The conference ended, as one would expect, with competing interests squabbling over access to the resource. It’s typical that the effects of capitalism create a problem for everyday, normal functioning and then its apologists panic when it affects them.

For many years the world was haunted by the fear of nuclear war and its potential to destroy humanity. Throughout this time, the companion parties in The World Socialist Movement alone pointed out the destruction of humanity could occur without nuclear war, and that capitalism was doing just that. Now, it is becoming abundantly clear.

In 2005, more than sixty scientists endorsed a report that said that the Great Lakes eco-system is so stressed it is ‘nearing collapse’. The lakes are immense, covering an area greater than the states of Michigan, Indiana, and Ohio, combined. They were formed after the last ice age and are not renewable, and very fragile despite their size. They are used to ship products, for hydro-electric power, for irrigation, for drinking water, and as a dump for industrial and societal wastes. Since the lakes provide drinking water for 35 million people, you might think their health would be a concern to our politicians, as they are, but way down on the list, far below profits. In fact, the Great Lakes are so polluted that where their waters empty, the Gulf of St. Lawrence, one quarter of the Beluga whales have cancer. The opening of The St. Lawrence Seaway brought companies like Domtar Paper and General Motors that poisoned the fish with mercury and PCBs. Alcoa pumped so much fluoride into the air that, on the surrounding land, cows teeth grew brittle and broke, even resulting in death. Pollution also forced farms in the vicinity into bankruptcy. Furthermore, evaporation caused by global warming and shoreline deforestation, much on lands formerly owned by First Nations peoples, can be added to the list of problems.

The failure of the 1984 conference and the subsequent twenty-five years of pollution have clearly shown that the politicians who seek to preserve and further the interests of the competing sections of the capitalist class will do little or nothing to save the lakes. Nor will the Greens achieve anything substantial because they are concerned with dealing with the effects of pollution, not the cause, i.e. the ownership of the tools of production (the resources, the factories, the land, the transportation systems, the mercantile and banking systems, etc.) by a minority, and the need to produce commodities with a view to profit, that rides roughshod over environmental concerns and other human needs. That destruction of the planet also affects the capitalists themselves, merely highlights the insanity of the system. For a business to survive, it must show a profit quickly and maintain its profitability to compete with other companies. In such a situation, human needs, including those of the capitalists, become meaningless.

In a socialist society, with the abolition of the profit motive, very different priorities will be apparent. Whereas water, and anything else people need may be moved from one place to another, environmental and human considerations would be prime motivators. The latest technology and safe, clean practices would be demanded and care of the eco systems on which human life depends, would be possible as the drive for profit and all that entails would have disappeared.

S. Shannon

Capital Vol II, p185.

Capital may continually circulate, and that circulation is the responsibility of the capitalist, who may then appear as the producer of profit, but it only circulates for one purpose, its self-valorization, or the production of profit. Otherwise, it would not circulate at all. Marx writes,
“Capital, as self-valorizing value, does not just comprise class relations, a definite social character that depends on the existence of labour as wage-labour. It is a movement, a circulatory process through different stages, which itself in turn includes three different forms of the circulatory process. (money capital, production capital, commodity capital – JA) Hence it can only be grasped as a movement, and not as a static thing…it is clear, however, that despite all revolutions in value, capitalist production can exist and continue to exist only so long as the capital value is valorized…The movements of capital appear as actions of the individual industrial capitalist in so far as he functions as buyer of commodities and labour, seller of commodities and productive capitalist and thus mediates the circuit by his own activity.” ( Capital Volume II, p 185, Penguin Classics edition).

Anarchy of Production - Hydro Quebec

The Province of Quebec is a massive hydro producer due to its many fast flowing rivers and dam projects that continue apace. Unfortunately, demand has slowed since the beginning of the recession and several paper mills, large customers, have gone belly-up. Now, Hydro Quebec has to pay $200 million a year to keep the giant Becancour plant closed. In an article entitled, “In a Competitive System, Surpluses Discouraged” (Toronto Star August 21, 2010), Hydro Quebec spokesman says, “If someone can tell us what will happen in three years, I’d like to hear from them.” The article continues, “He’s merely illustrating the system’s fallibility…predictions are made and contracts are signed with electricity producers in order to meet the forecast demand, which can sometimes be wrong.” That about says it all about capitalist production and planning. The anarchy of production and the vagaries of the market will get you every time.

Saturday, October 23, 2010

Canada's New Crime Legislation (Bill C-25)

Canada’s new ‘get tough with crime’ legislation, costing billions in new construction, is going ahead despite an ongoing debate on the validity of locking up large numbers of people in the US. The argument of Tory minister, Stockwell Day, in face of the declining crime figures in Canada, is that there is an increase in ‘unreported crime’. That logic escapes most people with brains. More, and longer, prison terms for misdemeanors only seems to result in wasted lives, angry people on the street on release, and more disrupted families. Neal Pierce (Toronto Star, August 15, 2010) tells the tale of the 65 year old Texas orchid importer who was accosted in his own home by armed police in flak jackets, frisked, held incommunicado for four hours while police ransacked his home and then charged with smuggling flowers. He was thrown into prison with murderers and drug dealers and sentenced to seventeen months, and then, suffering from Parkinson’s disease, was put into solitary confinement for 71 days for bringing prescription drugs with him to prison. Another consequence of higher rates of incarceration will be higher rates of homeless people on the street as it means higher numbers of released prisoners coming out of jail without money, contacts, or jobs. It’s just another form of intimidation by the state.

Thursday, October 21, 2010

Food for Thought

On Poverty

On the poverty front, both The Toronto Star and Gwynne Dyer (EMC newspaper) review progress of the Millennium Development Goals set out in 2000. Both see progress but too slow, and faltering. The Star reports that the number of hungry people has been reduced (other figures contradict this) from 20% to 16%, yet still children are dying at the rate of one every six seconds. Dwyer sees progress in key areas such as literacy, access to clean water, and infant mortality, yet sees a rising population as a barrier to bringing everyone up to Northern Hemisphere standards. Pollution, global warming, and resource depletion would put a halt to any rise in living standards of the Third World. Neither, of course, can think outside the capitalist box and promote a complete reorganization of the economic and social systems under which we live today. To them a shared world of the provision of all needs for all to replace the total madness of capitalist production is not a consideration. It’s about time that it was!

Talking of poverty, the queen is apparently experiencing difficulties in paying for heating of her drafty old palaces. The Toronto Star reports (25/Sept/2010) that the Queen’s staff applied for subsidized heating in 2004 to a program designed to help people in need. Apart from being one of the richest people in the world, the queen receives household funds from the taxpayers to the tune of $60 million per year. Tough life!

Vale Inco

After going through a year-long strike with its workers, Brazilian mining giant, Vale Inco, is back in the news. They are preparing to dump 400 000 tons of toxic tailings into a Newfoundland Lake known for its prize-winning trout. Apparently, the federal Fisheries Act says that if a lake is re-classified as a ‘tailings impoundment area’ a company cannot be sued for dumping. Why is there such a loophole anyway, one might ask? Vale thinks it is doing nothing wrong and is complying with the law. The second part may be quite true but this is where we ask, for whom does your government work? And, it is just these companies and this government on whom we must rely to put our polluted planet right!

Monk School of Global Affairs

The prevailing ideas of a society are those of the ruling class, Marx stated. Here is one small example of how that happens. The University of Toronto, like all educational institutes, solicits donations from anyone and everyone. Many wealthy businessmen have donated to get their names on plaques, auditoriums, or even whole buildings, depending on the donation. Those so commemorated are the likes of merchant banker Joseph Rotman, pharmaceutical entrepreneur, Leslie Dan, and businessman, Peter Monk, chairman of Barrick Gold, the world’s largest gold mining company. Unfortunately, those without money, even icons such as Tommy Douglas, recently voted the Greatest Canadian of All Time, and considered the father of Canada’s public health care system, do not get their names on walls as a group of professors found out when they proposed naming the Health Studies Program after Douglas. Presumably, being dead, he was unable to contribute hard cash, and didn’t meet the requirements for potential fund raising. Peter Monk donated $35 million to help set up the Monk school of Global Affairs. Linda McQuaig and Neil Brook reveal in their new book, “The Trouble with Billionaires” (reviewed in Toronto Star 12/Sept/2010) that Monk would receive a tax refund of $16 million on the donation, more if he donated the money in the form of shares, reducing his donation to about half. Various levels of government contributed $66million but that didn’t count for anything when it came to naming the building. It gets worse. Monk’s donation will be spread out over many years and will be subject to his family’s approval of the school, i.e. socialist professors need not apply. The school’s director will be required to report annually to a board appointed by Munk ‘to discuss the programs, activities, and initiatives of the school in greater detail.’ Obviously, the school will have to reflect the views of Munk, not those of taxpayer John Ayers, even though I contributed much more (without my consultation, of course.) It is fine to have freedom of speech, but that right to get your ideas and opinions heard depends on how much money you have, as all elections show.

Imperialism, Churchill, and the Shah

Churchill had freedom of speech and used it to his own ends and those of the capitalist class. In a new book by Richard Toye, “Churchill’s Empire”, the author reveals a side of Churchill not usually shown but well known to oppressed peoples of the Third World. Toyne details Churchill’s part in replacing the democratic government of Iran with the Shah after the Iranian government had the audacity to demand a fair share of the profits of their oil, ”The idea that leaders of poor countries would stand up and claim control of their own resources was something that Churchill could never grasp or sympathize with. The mere fact that some valuable resource was sitting under the soil of another country instead of British soil did not mean that Britain shouldn’t have it.” Sounds just like a dozen other imperialist powers!


‘In a survey, Working Less and Earning More’ the Toronto Star reported (4/Sept/2010) that the average wage is $23.10 per hour ($19.93 in 2005) and average hours are 33.24 per week (down from 34.69 in 2000). The largest job increases came in the service sector where hardly anyone is offered a full week to save on benefit payments, and 82% said they would take a pay cut to work at a job that guaranteed a work-life balance.

Prevailing Ideas

Charles C. Mann in “1491” shows how rulers change history to create allegiance to their cause, “Tlacaelel (ruler of the Mexica in ancient Mexico) insisted that in addition to destroying the codices (picture histories) of their former oppressors, the Mexica should set fire to their own codices. His explanation for this idea can only be described as Orwellian: “It is not fitting that our people/ Should know these pictures/ Our people, our subjects will be lost/ And our land destroyed/ For these pictures are full of lies”. The lies were the inconvenient fact that the Mexica past was one of poverty and humiliation. To motivate the people properly, Tlacaelel said, the priesthood should rewrite Mexica history by creating new codices, adding in the great deeds whose lack now seemed embarrassing and adorning their ancestry with ties to the Toltecs and Teotihuacan.” i.e. the Ministry of Truth is established to tell lies. Sounds familiar!

Further on, Mann describes how loyalty to the ruling class can be achieved, “In their penchant for ceremonial public slaughter, the Alliance (of Mexican tribes) and Europe were much more alike than either side grasped. In both places the public death was accompanied by the reading of ritual scripts. And in both the goal was to create a cathartic paroxysm of loyalty to the government – in the Mexica case, by recalling the spiritual justification for the empire; in the European case, to reassert the sovereign’s divine power after it had been injured by a criminal act.”

J. Ayers

Karl's Quotes - On the Valorization of Capital

The capitalist sells dearer than he has bought. Vulgar economists have tried to use this fact to show that profit comes from the wily, clever capitalist who thus earns and deserves his wealth. Marx writes, “The capitalist must indeed ‘sell dearer than he has bought’, but he manages to do this only because the capitalist production process enables him to transform the cheaper, because less valuable, commodities that he has bought into more valuable and hence dearer ones. He sells dearer, not because he sells above the value of his commodities, but because he sells commodities of a value greater than the sum of values of the ingredients required to produce them. The greater the difference between the capitalist’s supply and his demand, i.e. the greater the additional commodity value that he supplies over the commodity value that he demands, the greater the rate at which he valorizes capital. His goal is not simply to cover his demand with his supply, but to have the greatest possible excess of supply over demand. (Capital Vol II, p197). Note that it is the ‘capitalist production process’ that allows him to sell dearer than the sum of the ingredients and that it is the worker who makes that process work.

J. Ayers

Wednesday, October 20, 2010

Do you live in poverty?

Today is Global Dignity Day when we are encouraged " implement globally the universal right of every human being to lead a dignified life This is a paradigm shift in thinking about our global challenges, a new language and a mindset to approach issues of poverty, peace and progress."" and informed that "there is a difference between being broke and being poor.Being broke is a temporary economic condition, but being poor is a state of mind and a depressed condition of one's spirit..." 'What bourgeois, idealistic bilge! You can read more concering the Socialist perspective on 'human rights' here and as for poverty, read on...

POVERTY is an emotive word which must be carefully defined. It cannot be defined by any given quantity or quality, whether of possessions or things freely available. Truly, it can only be defined as a relationship between the actual state of things and the potentiality. The native of a primitive tribal society who is free to help himself to the simple food, clothing and shelter of his environment does not live in poverty. As far as he is concerned he could not be richer because everything that he knows is there to be taken. The moment he becomes poor and dissatisfied is when he develops a greater knowledge of the world and discovers things previously unknown to him. He would develop new needs in response to his changed environment as he found new ways and means to satisfy his physical and social desires. If they were not satisfied he would consider himself deprived and living in poverty.

The above process would occur if our primitive tribesman were suddenly transported to modern-day New York, London or Belgrade. Once he had found an employer (a euphemism for "user") he would now have a vastly greater standard of living but would be living in poverty. He would be denied access to most of the immense mountain of wealth which would be displayed, advertized, and given the hardsell wherever he went. Despite the motorcars, colour TV, holidays abroad, etc., which provide the illusion of increasing social status, the various forms in which these and all other commodities are marketed shatter lthat illusion. They range from the cheap imitations and bare utility models (or futility if you expect them to work) and then gradually upwards to the top-class de-luxe models made for jet-set oneupmanship rather than use. This fact shows clearly the poverty that exists in capitalist society. The production lines of capitalism are geared not to producing good quality but to producing the poor quality that workers can afford.

The popular theory of why workers live in poverty (i.e. the capitalists, Tory government, shopkeepers etc., putting up prices). is an indication of support for capitalism rather than opposition to it. It implies that if we only had such things as "fair" prices and "fair" wages we could all live in splendid affluence. Without inflation the working class would still live in poverty as they did before inflation "became" the cause of all our economic woes. The poverty of the working class is caused by the exploitation that takes place at the point of production and not by any robbery at the point of distribution, and Marx's Labour Theory of Value explains clearly how the exploitation occurs.

The legalized, and in that sense perfectly "fair", robbery takes place when the worker, having sold his labour-power (ability to work) to some member or section of the capitalist class, gets to work with the machinery and raw materials already purchased by his employer and produces a new commodity. This new commodity has a greater value than the sum-total of its original components - the raw materials, the machinery, and the labour-power that produced it. This surplus value which is created comes solely from the unique character of labour-power which creates new value in the course of 'its use by the purchaser, the capitalist. The basis of exploitation lies in the fact that the value of all commodities is determined by the quantity and' quality of labour required in their production.

Surplus value is created because the capitalist does not pay for the workers' labour but for his ability to labour. Once the worker starts to labour, the work that he does no longer belongs to him; the capitalist has already bought his labour-power for a contracted period of time, and everything produced in that time is the capitalist's property. The value of the worker's labour-power is, like all other commodities, determined by the quantity and quality of labour needed for its production. This, simply stated, is the food, clothing, shelter, etc., that allows the worker to keep himself reasonably fit in mind and body for his work and also allows for the raising of children to eventually be fit for this purpose. The result of this is that:

"The worker receives means of subsistence in exchange for his labour power, but the capitalist receives in exchange for his means of subsistence labour, the productive activity of the worker, the creative power whereby the worker not only replaces what he consumes but gives to ... [the capital laid out, on men, machinery, and materials] . . . a greater value than it previously possessed, " (Wage Labour and Capital. 1970 Moscow ed. Page 30).

This means that the working class must always live in poverty. Having no access to any means of production of their own, in order to live they must seIl their ability to work to the owning class and produce a surplus. The increasing of this surplus is the inexorable motive-force of all capitalist production. It determines which sections of the capitalist class will best be able to expand and crush their competitors, and inevitably leads to the constantly increasing rate at which this surplus is extracted from the working dass. No matter how high their living standards may increase, the workers' relative poverty only increases (profits, which give a deceptively low indication of the true rate of exploitation, increased at approximately double the rate of wages during the past year).

To end this exploitation, whereby the working class gets ever poorer and the idle class ever richer, a revolutionary transformation in the whole basis of society is needed. The present class ownership of the means of life and the relations resulting from it must be completely abolished. Everything in the earth and on it must become the common property of the people of the world to be used to satisfy their needs and wants. Only by this can poverty be ended.

The resources, the organizational ability, and the technology to do this exist today. What is lacking is the social organization that could control and utilize the productive forces in the most effective way. In capitalism a large proportion of these forces are used in the negative capacity of maintaining the divisions in society. The money system, which regulates exchange between owners and non-owners, would be totally unnecessary in a society where all the means and instruments of production and distribution would be commonly owned. The police forces, armies, navies, air forces, and all their expensive ironmongery which is used to maintain the ruling class's supremacy at home and abroad, would have no place in a society without classes or borders.

Finally, the profit motive of capitalist production ensures that many of soeiety's productive forces are never even used. All production is geared to what economists call "effective demand" which is not what people want but what they can afford to buy. This is why factories are closed, men made redundant, and automation plans shelved while people are still obviously still in need. In fact, one of the greatest problems of capitalist production is to avoid producing so much that prices will fall to unprofitable levels and warehouses and stores start to fill with unsaleable goods,

The popular conception of Socialism (or Communism) is of sharing-out poverty by retaining the present social organization but dividing up the existing wealth equally among everybody. This idea is a moralistic fantasy that would probably end up in more vicious divisions than before. The poverty that exists today can only be ended by a real revolutionary transformation - the establishment of a world-wide community of free men and women in total control of the productive forces of society. This is what Socialism means, and it can only be established by your active participation in a world Socialist movement that accepts no compromise with poverty.


Socialist Standard, 1974.

Monday, October 18, 2010

The Socialist Movement

The Socialist Party of Canada and its companion parties in the United States, Great Britain, Australia and New Zealand stand alone in their respective countries in their consistent advocacy of the socialist solution. Their examination of society has taught them that nothing less than socialism can suffice, and they have adopted a common set of socialist principles (first formulated by the Socialist Party of Great Britain) which constitutes the basis of their movement and their conditions of membership. Adherence to these principles makes possible their steady insistence upon the fact that the immediate need of the working class is:

The establishment of a system of society based upon the common ownership and democratic control of the means and instruments for producing and distributing wealth by and in the interest of society as a whole.

These parties at present form only the nucleus of the great working class movement which must finally rise to bring this program into effect. The workers cannot depend upon others to do the job for them. It is a job that requires conscious and deliberate effort on their part. It is a job which they must do themselves.

Many and varied have been the interpretations that have been placed upon Socialism. Stalinism and Hitlerism have both been described as socialism. At different times socialism has been announced in New Zealand, New South Wales, London, Vienna and points west. Labor parties frequently come forward with lengthy lists of reforms or elaborate plans for “nationalization”, or “socialization”, and describe these as socialism. Workers must guard against such nonsense if they are not to be fooled by political highbinders, social quacks, or people who have themselves been fooled. For this reason among others the socialists stress the necessity for socialist education. The workers must understand socialism before they can serve usefully in the struggle for its attainment.

Social reform is not socialism. Neither is government ownership. Socialism has not yet been established in any country. It exists today only as an independent working class movement striving against the opposition of capitalist and labor parties alike, its energies directed without deviation towards a single goal. There are no short cuts to socialism. It can be reached only through the conscious political organization of the working class. But with that organization accomplished, no obstacle can stand in the road. Socialism may be had for the taking. Take it.


The workers must ultimately turn to socialism as the only means of finding release from the problems of capitalism. Even though it were possible (which it is not) for the present system to provide considerably improved conditions for the workers, that would still be no justification in the eyes of an informed persons for its continued existence. It has solved the problem of wealth production, but it has failed to solve the problem of distribution. It divides the labors of the workers between production and a myriad of unnecessary activities related to distribution. It is wasteful and destructive of men and materials. Its conflicts over markets, trade routes and sources of raw materials breed wars that grow ever more terrible in their dimensions. It is a haven of luxury and idleness for a useless parasite class. It is a fetter on further social progress.

Socialism solves the problem of distribution. Its introduction will mean the conversion of all the means of production and distribution from private or class property into the common property of all the members of society. Goods will no longer be produced for sale; they will be produced for use. The guiding principle behind the operations of industry will be the requirements of mankind, not the prospects of profit. Production under socialism will be pre-determined, and distribution effected with neither advertising nor sales staff, thus reducing wasted materials to the minimum and making possible the transfer of great numbers of workers to desired occupations.

The ending of exchange relationships will bring at the same time the ending of an exchange medium. There being neither sale nor profit associated with the production and distribution of goods, neither will there be money in any of its forms. Currency, credit and banking, whether private or “socialized”, will pass out of existence.

The advent of common property means the abolition of private or class property, which in turn means the abolition of class society together with the class struggle. The antagonistic classes of today will become merged in a people with common interests, and the former capitalists will have the opportunity of becoming useful members of society. This will not only remove the greatest of the burdens resting today on the backs of the workers, it will also further augment the available labor supply, by the inclusion of the capitalists and their former personal attendants, thus contributing to the general reduction in labor time needed to produce society’s requirements.

Since unemployment means not only idleness but also severance from the means of subsistence, such a condition could not exist under socialism. That there will be plenty of leisure time, however, is beyond question. It will be the conscious aim of society to constantly reduce the obligations of its members to production, thereby providing ever-increasing leisure time in which to enjoy the proceeds of their labor.

Wars constitute another wretched feature of capitalist society that will come to an end under socialism. Since they arise from the struggle of the capitalists over markets, etc., and since these struggles will no longer play a part in the affairs of society, they will remain only as a ghastly memory from a horrible past.

Socialism will not solve all the problems of human society. But it will solve all the basic economic difficulties that are a constant source of torture to so many of its members. The solution of a single one of these difficulties would warrant its introduction. The solution of them all renders it imperative.

Futility of Reforms

Capitalism can be reformed. It can be reformed in many ways. But it cannot be reformed in such a manner as to effect an essential improvement in the working class conditions of life. It cannot be reformed in such a manner as to raise the workers from the poverty level. Reforms, insofar as they have had any effect, have been effective simply by preventing the workers from sinking too far below the poverty level, their function being to do no more than preserve the workers as able-bodied means of production.

It is not in the nature of capitalist society to provide better conditions for its slave class. The efficient operation of capitalist industry requires not only a capable working class, it requires a working class always at the beck and call of the master class. Only by keeping the workers bordering on necessity at all times can this condition be assured. The whiplash of poverty is far more effective than any coercive force could be in keeping them tied to the machine and subservient to their masters.

Those who would administer the affairs of capitalism are limited in their endeavors by the requirements of capitalism, and even though they would bend every energy to lighten the burdens of the workers, the system itself inevitably reduces the results to disheartening proportions.


Practically all of the reform legislation on the statute books of the capitalist world has been placed there by capitalist parties. The capitalists have never been noted for their generosity towards the workers, but they are practical gentlemen and they have long known that the smooth and economical operation of their system requires periodic additions to the mountains of reforms. Reforms to them are like a vile tasting tonic that must be taken from time to time for the protection of their health and well-being. Workers who live under poor sanitary conditions are ready victims of ailments which often develop into communicable diseases; and diseases do not respect the superior and necessary persons of capitalists. Moreover, workers afflicted by ailments spend time at home that could better be spent in the factory turning out surplus values for the factory owner. They must be protected against these conditions. They must also be protected against malnutrition, accidents, etc., in order that their efficiency as cogs in the wealth producing machine may not be impaired. They must even be provided for when they are unemployed, for the repressive measures of bygone days are no longer sufficient to deal with the vastly increased number of workers thrown periodically into the scrapheap by modern industry. It is now more economical to provide them with necessities than to maintain a coercive force great enough to prevent them from helping themselves. Besides, as in times of war or other periods of trade expansion, their services may be required again.

Hence the measures dealing with sanitation and housing, sickness and accidents, health and unemployment! Hence the reforms piled upon reforms, reaching to the heavens! Hence the gradual conversion of the workers into destitute wards of the state!

There is a further reason for the acceptance of reform measures by the parties of the capitalist class. The workers form the immense majority of the members of society. They are the ones who suffer most from the evils of capitalism. They are only too conscious of the existence, if not the cause, of these evils, and they are ever ready to lend their support to whoever will promise redress. No party can govern without the consent of the workers. The capitalists, in consequence, must be ever ready with the required promises, if they are to protect their exclusive right to govern. Reforms that are not desirable to them can frequently be sidetracked afterwards, together with flattering appeals to the workers for loyalty, understanding and co-operation. Where they cannot be sidetracked, these reforms can always be watered down and presented with fanfares and glowing self-praise. It is an easy game to play, and while it does not give the workers very much, neither does it cost the capitalists very much, and it frequently assures for them a period of contentedness on the part of their slaves.



“The history of all hitherto existing society (that is, all written history) is the history of class struggles. “Freeman and slave, patrician and plebeian, lord and serf, guild master and journeyman, in a word, oppressor and oppressed, stood in constant opposition to one another, carried on an uninterrupted, now hidden, now open fight, a fight that each time ended, either in a revolutionary reconstitution of society at large, or in the common ruin of the contending classes.” – Communist Manifesto.

The class struggle is the product of class-divided society. It exists no less today than in the class societies of history. By means of political action the oppressed classes of the past strove to gain their emancipation. The form that this action took was dictated by the conditions then existing. By means of political action – and by no other means – can the workers gain their emancipation. The politics of the working class form the subject matter to be discussed below.

Society rests on an economic basis. The manner in which wealth is produced and distributed determines the form of existing society. The development of the productive forces calls periodically upon mankind to adapt society to the changed economic conditions. Modern industry ushered capitalism into existence. It now demands that capitalism pass out of the picture, to be replaced by a new form of society, one that will conform to the needs of the developing means of production, and, therefore, to the essential needs of mankind. It is the duty – the imperative mission – of the working class to undertake this task.

Capitalism has outlived its usefulness. Within its confines can be found no solution for the wretchedness and insecurity endured by the workers. Not more than momentary relief has ever resulted from the generations of effort to improve their conditions of life. Even their trade unions – their most potent weapon in these activities – have been forced to remain for the most part on the defensive, struggling not so much to improve their conditions as to prevent these conditions from becoming worse. Socialism offers the only way out. The failure of the workers to recognize this fact – no matter what else they may do – can result only in the preservation of things as they are, with the prospect of darker days ahead.

Capitalist Parties

In the main the world’s workers have in the past given their support to parties openly representing capitalist society. The principal agencies for spreading education and information have, throughout the period of capitalism’s existence, been under the control of the capitalist class and have been used for the purpose of fostering and preserving the illusion that there is no practicable alternative to capitalism. Incessant, insidious propaganda is levelled at the workers from the cradle to the grave, designed to cloud their minds in their own interests and protect the dominant position of the capitalist class. They are taught that their interests are tied up with the interests of their masters and that only in the solution of the latter’s problems can the solution of their own problems be found. It is no wonder, therefore, that for generations they have been only too willing to give their support to one or another of the various capitalist parties.

Capitalist parties represent, first of all, capitalism. They may differ as to the manner in which the affairs of capitalism ought to be conducted. They may differ as to the sections of the capitalist class whose interests ought to be the most favored. But they are united in their opposition to those who would end capitalism. They are united even in opposing any effort to provide the workers with a greater share of the wealth which they produce. These parties are represented in the English speaking world by such groups as the Liberals and Conservatives of Great Britain and Canada and by the Republicans and Democrats of the United States. All of them are servants of the ruling class.


Economics is the scientific study of the mode of wealth production, that is, of the manner and means whereby society procures its food, clothing and shelter, and all that goes to make up its living.

The importance of the study of Economics arises out of the fact that, whereas procuring its living is obviously the most important function of society, it must of necessity very largely influence all other functions or phenomena of society. So much so that it may be taken as an axiom that the mode of production in any society determines its social, political and religious forms; and it is only in the light of a knowledge and understanding of the former that the latter can be accurately understood and explained. Of particular importance to us, therefore, is the study of the economics of our own period – of the capitalist mode of wealth production.


The sum total of all that is produced by human labor is the wealth of the world. Notwithstanding the current use of such terms as “natural wealth”, “mineral wealth”, “forest wealth” and so on, those things known collectively as natural resources are not, for the purposes of political economy, included under the term “wealth”.

It is only when natural resources are, by the hand of labor, worked up into things useful to man, that wealth comes into being. Two factors, then, enters into the production of wealth.

Taking the first commodity that comes to hand, e.g., gold, it is well known that gold is extracted from gold-bearing quartz, or sand. Given this natural resource, man, by the exercise of his physical energy, his power to labor, produces gold, or wealth. This power to labor is called for short, labor-power. It should not be confused with labor, though this is frequently done. Labor is a condition of labor-power. It is the act of applying labour-power to natural resources in order to produce wealth. The wealth thus produced is the embodiment of the labor performed. Its existence is the evidence that a certain quantity of labor has been performed. The sum total of the world’s wealth, therefore, represents the sum total of the labor performed in its production.

The Value of Wealth

We say that wealth has value, i. e., it is worth something. But what is it that gives it that value? We have seen that it is composed of natural resources and labor. But the natural resources of the earth are the free gifts of Nature and count for nothing in this regard. Therefore, it must be labor. The hand of labor alone confers value.

It may be objected that, as natural resources, such as coal-beds, mineral veins and timber limits, are bought and sold, they must have a value. However, natural resources with which human labor has not entered into the slightest relations cannot be regarded as properly being raw materials. And, furthermore, such natural resources are bought and sold on the strength of their potentialities; that is, the possibilities they may present when converted to human use by labor. Without labor no value can be possible.

Use Value

The wealth of a capitalist society, such as we now live under, “presents itself as an immense accumulation of commodities.”

A commodity is, in the first place, “a product of labor”. It is, in the second place, a “use value”, i. e., it will satisfy some want or desire. Thus the use value of a sack of flour is the length of time it will keep a man alive. The utility of an object is dependent upon its natural properties and qualities, but is independent of the quantity of labor required for its production. Thirdly, a commodity is produced for sale, i.e., for exchange. In the act of exchange, the value conferred by labor will manifest itself as exchange value.

Exchange Value

Exchange value is necessarily comparative. It cannot be used except in comparing the relative values of two or more articles. An article by itself cannot be said to have any exchange value until it is compared with something with which it is proposed to exchange it. Furthermore, that with which it is proposed to exchange must be something else than a loaf of bread, it being self-evident that there would be no advantage in exchanging loaves for similar loaves.

We find, therefore, that exchange value comes into play only when it is proposed to exchange two or more dissimilar commodities.

The two commodities being thus dissimilar, their concrete components are necessarily also dissimilar. While the one may be made of flour, the other may be of steel, spirits or wool. There arises, therefore, the difficulty of comparing them, as there appears to be nothing contained in either by which may be ascertained how much of the one should be given in exchange for a certain quantity of the other. Nor will weights and measures serve for the purpose of this comparison. The one may be measured by the pound, the other by the yard or gallon.

We have seen however, that there is one factor that is embodied in all commodities – labor. And it is the only factor common to all commodities, however dissimilar may be the materials of which they are composed, or the means by which they are weighed or measured. Therefore it stands to reason that dissimilar commodities can be compared one with another only on the basis of the labor contained in each. It is on that basis, then, that commodities must be exchanged.

However, we may observe that exactly similar shoes may be produced in two different factories, but in the one factory, owing to improved methods and machinery, less labor is involved in the production of a pair of shoes than in the other factory under less efficient methods. While the labor contained in these shoes would be different, their exchange value in the open market would be the same, i. e., the average of the time required for their production. No more could be obtained for the shoes in which more labor is embodied than for the pair in which there is less, because no more labor is actually necessary to the production of shoes of that quality. This brings us a step further in our examination into exchange value. We now have the axiom that commodities exchange one with another according to the necessary labor involved in the production of each.

Another aspect of exchange value has yet to be considered. The labor involved in the production of a pair of shoes is no longer the labor of one individual, but of many. Primitive man made things, for his own use himself. From the materials to hand, he laboriously and painstakingly fashioned all the things he required. Not only did he complete each article himself, but he made the crude tools wherewith he worked. This was individual production in its purest form. Today, however, things are different. Individual production has disappeared; social production has taken its place. No individual produces any article in its entirety. It takes a multitude to make a box of matches. Not only are the leather, nails, thread, etc., of which shoes are made the products of many hands, but in the factory itself the shoes passes through the hands of a large number of operatives, each of whom does a little to it until it is finished. Then it has yet to be transported and handled by the labor of others again before it reaches the consumer. So that, from the ox to the consumer, there is embodied in each pair of shoes a fraction of the labor of each of many individuals. All these transmigrations are a part of the process of production. The labor that is embodied in any commodity is not individual but social labor – the collective labor of a large number of individuals. This completes our definition of exchange value. Thus: the exchange value of a commodity is determined by the socially necessary labor embodied therein.

This socially necessary labor is the cost of production of each commodity. Each commodity being the embodiment of a certain amount of labor, it costs just that much labor to produce it. Commodities, therefore, exchange one with another at cost. Which brings us face to face with the following problem: If everything is sold at cost, where does profit come from? For buying and selling is really nothing more than the exchange of one commodity for another with money as the medium through which that exchange is made.

The generally accepted idea of profit is that it is made by buying cheap and selling dear. But, unless our reasoning up to this point can be proved fallacious, buying cheap and selling dear are out of the question, as the relative values of commodities are predetermined by the socially necessary labor involved in their production.

It is true, that a certain amount of fluctuation in the price of commodities, above and below their exchange value, actually takes place according to the supply and demand for them in the market. But these fluctuations are almost negligible, as will be seen later, and cancel one another in the average. Moreover, they offer no solution of our problem as to the source of profit.

Surplus Value

The solution to this mystery is that buying and selling have nothing whatever to do with the making of profit. It is not in the process of exchange, but in that of production that profit comes in. Profit is acquired, not by paying less for a commodity than it is worth, nor by selling it for more than it is worth.

The chattel slaves, as we have seen, produced wealth, which belonged, of course, to their masters. In this wealth was embodied the labor of the slaves. That was its value. A certain amount of this wealth went to feed, clothe and house the slaves, the surplus accrued to the masters at no cost to themselves. The value of the surplus wealth would be surplus value.

The modern worker – the wage slave – is in much the same position. The wealth of the world is produced by the workers of the world. Its value is determined by the labor they have put into it. It belongs to their masters, the owners of the means of wealth production, the natural resources, mines, mills, factories, etc. A portion of this wealth goes to feed, clothe and house the workers through the medium of wages. The remainder accrues to the masters, the capitalist class. Its value is surplus value. It costs them absolutely nothing. The workers have received all that is coming to them. Having produced all the wealth, they have actually paid their own wages. The capitalists have done nothing except own the means of production. The wealth they thus obtain by virtue of ownership is clear gain – profit.

The Commodity Nature of Labor Power

Wealth being a social product, the individual produces nothing, but only fractions of things. The collective labor of the workers is necessary to produce wealth. The individual is a mere cog in the social machine of production. Being thus unable to produce things for himself, he can procure them only by buying them – unless he begs or steals them. To buy them he must first sell something. In other words, in order to procure the things we need we must give something in exchange for them.

The capitalists can very well do this because to them belongs all the wealth that is produced, by virtue of their ownership of the means of production. The workers, however, have no property in the means of production, and therefore own none of that wealth. The vast majority of them have absolutely nothing to give in exchange for their necessities – that is nothing tangible. They have, however, the power to labor. In order to procure food, clothing and shelter they must, then, sell their labor power. This is what working for wages amounts to. The worker is not paid for what he does. He is paid for so much labor power. This is what working for wages amounts to. The worker is not paid for what he does. He is paid for so much labor power, just as he in turn pays the grocer for so much flour and potatoes. He is paid, not for the wealth he produces, but merely for the exertion of producing it. To the wealth he produces, therefore, he has not a vestige or right or title. It belongs by right to those who bought his labor power, by means of which it was produced. To admit the capitalists’ claim to the ownership of the means of production is to admit their right to the whole of the product of labor.

Labor power, being bought and sold, ranks, therefore, as a commodity, and is subject to the law governing the exchange of commodities.

The law governing the exchange of commodities is that they shall exchange, on the average, at their cost of production, as has been shown. The cost of production of any commodity is the social labor necessary for its production. Labor power is the physical energy of the individual. The labor necessary to produce this is the labor that is involved in producing the individual’s living. The exchange value of labor power then, is determined by the socially necessary labor involved in the production of those things that go to make up the laborer’s living from day to day. And that is exactly what the workers get on average – their living according to the prevailing standard. It is true that some of them get a little more than is actually necessary for them to exist on, but, on the other hand, millions get less and are actually dying of slow starvation at their work.


Wages are generally regarded as so much money: two dollars a day or sixty a month. A closer examination shows two other aspects before which the mere money wage dwindles into insignificance. These are the “relative wage”, and the “real wage”.

The Relative Wage

The relative wage is that which the worker receives in comparison with what he produces.

Owing to the improvements in the machinery of production, the relative wage has fallen greatly during the last century, and is continually becoming less. Under handicraft production the worker could not produce very much more than he consumed. Under modern machine production the worker produces far more than he consumes, even if the standard of living has risen.

The Real Wage

The real wage is what is bought with the money wage, the food, clothing, housing, etc., of the worker. It is what the workers actually receive in exchange for their labor power. While the money wage, the price of labor power may rise, the real wage may at the same time be falling. Thus during the last decade, United States statistics show a rise in wages of some 20 per cent, and a rise in the cost of living of some 30 per cent. Here the money wage would be raised 20 per cent, but the real wage would have fallen 10 per cent, so that in place of receiving 20 per cent more, the workers are actually receiving 10 per cent less in exchange for their labor power. [This was written before 1914.] A rise in prices, therefore, means to the worker, not so much a rise in his cost of living as a fall in his real wage, that is, a reduction in his standard of living.


As the money wage has been referred to as the price of labour power, a consideration of price itself would not be out of place. Price is the approximate monetary expression of the exchange value of a commodity. Money itself arises out of the inconveniences attendant upon the direct exchange, or barter, of one commodity for another. To overcome these inconveniences one commodity is employed to which all other commodities are compared, and their exchange values are expressed in terms of this commodity.

The commodity employed becomes in time segregated from all others and is looked upon as having a fixed value. Nevertheless it should be remembered that in reality it remains a commodity, and is subject to such fluctuations in exchange value as are other commodities.

At present, gold is the money commodity. In terms of gold the exchange value of other commodities are expressed. Actually this is equivalent to comparing the exchange values of other commodities with that of gold. Thus if we say a pair of shoes is worth five dollars, we assert that the same quantity of necessary social labor is embodied in a pair of shoes as in five dollars of gold. The coinage of gold merely signifies that the government certifies the coin to contain so much gold of such and such a fineness. The gold itself being the product of labor, its exchange value is determined by the labor it embodies.

Fluctuations in Value and Price

Fluctuations in the exchange value of a commodity can only take place when changes take place in the quantity of labor involved in its production. Thus, with the development of labor-saving machinery, the production of commodities involves less labor, and their exchange value decreases. Price, being the approximate monetary expression of exchange value, necessarily follows these fluctuations. It is, however, subject to fluctuations from other causes, one of the most important being the fluctuations in the exchange value of gold itself.

So great has been the saving of labor recently in the production of gold, that its exchange value has decreased more than has been the case in other commodities, which accounts largely for the so-called “high cost of living”.

The minor fluctuations in prices that are continually taking place are due mainly to supply and demand. In a staple market, wherein the supply of, and demand for, all commodities exactly balanced one another, prices and exchange values would be equivalent. But, as such is not the case, as supply and demand do not balance, prices of commodities continually fluctuate above and below their exchange values. When the demand for a commodity is greater than the supply, its price rises. When the supply is greater than the demand, the price falls. But, whenever from this cause, the price of a commodity rises, a flow of capital takes place in that direction and the price is brought down to its normal level, and wherever the price falls, production is retarded until the normal level is resumed. So that these fluctuations in process of time cancel one another, and commodities exchange, on the average, at their cost of production, that is, according to the socially necessary labor involved in their production.

Fluctuations in Wages

The money wage, being the price of the commodity labor power, is subject to the same fluctuations as in the price of any other commodity. That the supply of labor power exceeds the demand at most times, and often to such an extent as to produce a veritable glut, is so patent that it may be taken as proved.

This excess of supply over demand naturally gives the price of labor power a constantly downward trend.

Apparently, however, wages have risen. This apparent rise is due to the decrease in the value of gold. As has been shown, the real wage has fallen 10 per cent, even in a period of capitalist prosperity. And now that that period is over and the industrial depression following it has immeasurably swelled the ranks of the unemployed, thus increasing the disproportion between supply and demand in the labor market, the money wage has come tumbling down.

In the case of a fall in the prices of other commodities this would be remedied by a restriction of production, but no such restriction of the production of labour power is possible. The worker’s labor power being his physical energy, his very life force, he must continue producing it while he lives, and he will not continue to live very long if he does not find a buyer for it.

The inevitable result of the downward trend of wages is an ever-increasing portion of misery and privation for the workers, in spite of the constant struggle which they are compelled to carry on in the industrial field to obtain a better price for their labor power, etc. Strikes have been fought with the greatest determination; privation and suffering have been endured with a heroism of which the working class alone is capable; millions of dollars have been spent; the unions were never so strong as during the first decade of this century, and yet, in spite of it all, the wage has fallen. Here and there, in favored trades, they have attained some success. Capitalism is the great leveller of the working class, the great abolisher of individuality. All trades are being reduced to a common level. In one line after another the skilled worker has been replaced by a machine and a “hand”. And locality after locality is being brought more and more within the full dominance of capitalism.

At one time, when the workers fought against individual capitalists with no great capital, some measure of success was possible. But now the odds are against them. Monster Capitalism sits enthroned! Employers are now grown to giant corporations, with millions at their command. Out of the very rise and fall in stocks consequent upon strikes and lockouts, the masters may reap a richer harvest than what they lose by stoppage of industries. And all the powers of government are theirs to do their bidding, the policeman and his club, the thug with his revolver, the soldier with his rifle, the court with its injunctions, and the legislature with its law. Weapon after weapon has been wrested from the hands of the workers until today, in the words of a Western labor union official, “the only remaining usefulness of the labor unions is in resisting the petty tyrannies of the masters”.

The workers today are fighting not only against the man-made laws of capitalism, but also against all the laws of economics. So long as their labour power remains a commodity they cannot essentially better their condition. So long as they allow the capitalists’ claim to the resources of the earth and the machinery of production, slaves they must remain, and as slaves they must expect to be treated. Their only hope lies in their emancipation from slavery – and they alone can achieve that emancipation.

All the wealth the capitalist class possess has been produced by the working class. In taking it the working class would but be taking it back. Wealth is not a fixed and indestructible quantity. It is being constantly destroyed and renewed. Even the most stable portions are being constantly worn out and replaced. The workers of one generation may be said to produce with their own hands practically all the wealth in existence at the end of their generation, so that in taking it they would actually be taking the very things they themselves produced, things taken from them without any compensation. They would therefore owe compensation for them to none. And, indeed, there can be no question of compensating the capitalists.

The outcome of the struggle between the capitalist class and the working class will be the Social Revolution. By political force the working class must wrest from the capitalist class the reins of government and must use the powers of the State to legislate in its own interests. By that stroke classes will be overthrown and labor power cease to be a commodity; production will be for use and not for profit; government of persons will die out and be replaced by an administration of things. The workers, controlling the means of production, will also control the resultant wealth and they will then be able to individually enjoy what they collectively produce.

From an understanding of the foregoing facts of history and of economics the Socialist Party came into being. We now propose to outline the principles governing the policy of the Socialist Party in the field of politics.