Sunday, July 29, 2012

The Healthy Olympics

Endurance athletes in your super-high-calorie-burning sports, like distance running, cycling or the triathlon, elite athletes can burn 15 or 20 calories a minute. At the peak of training, these athletes are working out four or five hours a day. These workouts can burn 4,000 to 6,000 calories, which have to be replenished if you want to train again the next day.

 Refueling can resemble an episode of “Man v. Food,” with dinner consisting of things like a pound of pasta drizzled with olive oil (about 800 calories), a dozen eggs (840 calories), an entire cheese pizza (perhaps 2,000 calories) and a pint of Ben & Jerry’s cheesecake-brownie ice cream (1,000 calories). These foods (although not this exact lineup) were described by dietitians and officials who work with Olympians as common training-table choices for elite endurance athletes, particularly men. Plus beer (about 150 calories a bottle.)

One of the biggest issues, they told me, is that these athletes, in their quest for fuel, often turn to high-calorie but less nutritious processed foods — Snickers bars, store-bought chocolate-chip cookies, Pop-Tarts. Even an athlete who intends to eat healthfully can be defeated by nutritional realities. “You can only eat so much oatmeal and tofu.


 Rick: How can you close me up? On what grounds?
Captain Renault: I'm shocked, shocked to find that gambling is going on in here!
– From the classic scene in Casablanca

 There is a deep rooted and pernicious view that the crisis can be laid primarily at the door of a group of corrupt crooked bankers. It is easy to sympathize with the hostility to the many banks that behaved so recklessly in ways that damaged everyone else as they took on excessive risk in their quests for greater profits. It is described as a “market failure”? The term “market failure” suggests that markets normally function properly and that “market failure” is an exceptional occurrence. It focuses our attention on the exception rather than the norm. It leads us to seeking the the solution in a robust state that regulates markets. But we are not talking of an occasional lapse in how markets function; rather, we are talking of the regular state of markets, of how imperfect markets are when they function the way they are supposed to function. Such alleged solutions simply hide the fundamental character of capitalism. Bankers do not want transparency, because it will seriously cut into their profits.

The nature of banking is understood broadly as financial intermediation: if A has money he’d like to save and B needs money, then rather than A lending directly to B A might lend to C to lend to B, because C—a bank—is a specialist in assessing creditworthiness. To finance its operations C will need to borrow from A at a lower interest rate than the rate it charges B for a loan. It can minimize the interest rate it pays A by borrowing short term (the shortest-term borrowing being a demand deposit). This both reduces the risk of default to A and offers A continued liquidity; should it need the money it’s lent to the bank, it can get it back on demand. And the bank can maximize the interest rate it charges B by making the loan long term, thus transferring liquidity to B and assuming a higher risk of default. C can increase its expected return across the board by lending to borrowers whom the market rates as risky (this pushes up the market interest rate to such borrowers) but whom C thinks less risky than the rest of the market thinks them.

The bank’s business model is thus a risky one. Its capital is short term and thus can disappear with little or no notice (a bank run), while its assets (its loans) are long term and may be illiquid and thus hard to sell should the bank need to replace some of its capital. Government deposit insurance can reduce the risk of runs and by thus making depositors’ capital more secure reduce the interest rate the bank has to pay them. Bank regulatory agencies can further reduce the risk of banks’ defaulting by requiring banks to hold cash or cash-equivalent reserves, such as Treasury bonds.

But risk and return are positively correlated; by reducing risk, government intervention in the banking industry reduces expected return. This is true even at the depositor level: the interest rate that a depositor receives is reduced because the risk of his losing his money is reduced. And at the bank level, deposit insurance is a cost to the bank. The bank may therefore decide to augment its capital base by uninsured borrowing. It may also decide to offset the cost of its reserves (cash on which it receives no return), and amplify the spread between its cost of borrowed capital and its return on investment, by making riskier investments with its borrowed funds than mortgage loans, municipal and corporate bonds, Treasury notes, and other conventional bank investments: it may decide to speculate.

The trade-off between increased risk and increased expected return is attractive for two reasons. First, a risk is less likely to materialize in the short term than in the long term: a 1 percent annual risk of default becomes formidable only when projected over a 10-year or 20-year or longer period. A banker who has a high probability of making very large profits for the next 10 years may feel well compensated for taking a small risk of bankruptcy during that period.

Second, not only a bank’s financial capital but also its human capital is short term; very little financial human capital seems to be firm-specific, judging by the rate at which bankers move from firm to firm. Any firm that has short-term capital is under great pressure to compete ferociously, as it is in constant danger of losing its capital to fiercer, less scrupulous competitors, who can offer its investors and its key employees higher returns.

The complexity of modern finance, the greed and gullibility of individual financial consumers, and the difficulty that so many ordinary people have in understanding credit facilitate financial fraud, and financial sharp practices that fall short of fraud, enabling financial fraudsters to skirt criminal sanctions.  These circumstances make an unregulated banking industry a Darwinian jungle, with bankers as predators and their customers (and each other) as prey. It may also explain why bankers are prone to cut corners—to take excessive risk from a social as distinct from their private standpoint (they like and are compensated for taking risk, remember)—and why banking is a regulated industry. It remains to explain why banking regulation seems largely ineffectual. when banks get into trouble, their capital starts to vanish, and they can’t function. Credit freezes—and the economy, because it runs on credit, also seizes up. Oddly, few economists seem to have understood modern banking, or its role in the economy. The banks resist effective regulation, so far effectively, because their managers are better off with the Darwinian business model, which enables the reaping of short-term profits great enough to compensate—not the country, but the bank’s managers and investors—for an increased risk of bankruptcy.

Financial intermediation was formerly dominated by commercial banks that borrowed short term and lent long term to local and sometimes national businesses. In those days, banking leaders denoted solid, respectable, if not very imaginative, individuals who were the pillars of society. Commercial banks are still important, but modern financial intermediation is dominated by investment banks, mutual funds, and hedge funds that often invest large sums of money in equities, derivatives, and other mainly risky assets, including junk bonds.

Claims that banks create money out of “thin air” are made by The New Economics Foundation (NEF), and repeated by credulous protesters who are convinced Fractional Reserve Banking is a stitch up.  The NEF alleges banks can digitally create money that they then lend out. Naturally, this is nonsense. If this was true then banks would not need depositors. Perhaps you could explain why they do accept depositors. After all, the bank must pay interest on those accounts, deal with cash machines etc. Why not do away with depositors and just make loans "out of nothing"?

Money/cash notes (M0) is not debt based. Only the creation of M3 and M4 money is debt based. M0 is indeed different to M4. We need M0 to create M4. There is a direct correlation. M3 and M4  created by banks which use the cash they have received by depositors to make loans. New loans depend upon deposits. Without a deposit to lend there can be no loan.

Many economists merely use "out of nothing" to provide a simple way to explain the different measures of the money supply. The result is people think banks really can just print money willy nilly. In Double-Entry book-keeping when a loan is made the depositors account does not decrease directly. But the depositor base of the bank decreases instead. It is as though the depositors account has had cash deducted (showing this to customers directly this would merely freak the customer out, who may not understand that the bank will loan out the money they have deposited). But this is *very different* to money being created ex nihilo.

Money created from thin air proponents have  to prove how banks can make loans without depositors (or by borrowing cash themselves from the market in the first place).

What bank reformers who seek the abolition of fractional reserve banking such as Carswell/Positive MoneyUK is doing is suggesting that banks offer safe deposit box style accounts, in which the cash you deposit can't be lent out. Not very radical (just silly, as no interest would be paid on the account. A fee would be levied too, to cover the admin costs of the bank)

Saturday, July 28, 2012

The Taxing Question

Who Pays The Taxes?

In the current presidential election between Obama and Romney a great hue and cry is being raised by the two sections of the capitalist class about the question of taxation. When capitalist political parties are in disagreement, the issue of taxation often looms large. Should income tax be reduced or increased?  The serious-minded worker who does his own thinking will probably at first be amazed at the dexterity exhibited by both the Democrat and the Republican sections of the capitalist class. We watch them handling figures and statistics in a way that must cause a circus juggler to turn green with envy, each proving that the poverty and misery is bound to increase if the proposals of the other side are adopted! If, however, we examine the facts of the situation calmly, our amazement will soon disappear. One aspect of our socialist analysis of capitalism that we have not always found easy to get across is the view that taxation is not an issue that concerns wage and salary workers since in the end it is a burden on property-holders. If then taxation  is not a working class problem whose problem is it? Taxation is the problem of the capitalist class. All of the wealth that the workers produce is the property of the employing class. When the employers have succeeded in selling the goods produced by the workers they employ, and after they have paid wages and met all other expenses of production, they still have to meet the demands of the local and central government for rates and taxes of various kinds. All of the employing class have an interest—as they continually show—in trying to reduce the cost of government. As far as is politically practicable and militarily safe they try to reduce the amount the government raises as taxation and spends on civil service, military service, prisons, police, etc. If they succeed in getting taxation reduced it is in the hope of benefiting themselves; certainly not with the intention of passing on the benefit to the workers. Capitalists are much concerned with trying to place some of the burden of taxation on the shoulders of other sections of their own class. When the brewing interests try to get beer duties reduced (because they hope thereby to increase sales and profits) they do not at all mind if the government meets the situation by putting a corresponding increase of taxation on the capitalists in some other industry—the cinemas for example. But however the struggle between sections of the capitalists over taxation may turn out that is their problem and it involves no interest affecting the working class. The debate between political parties about taxation is over which sections of the propertied capitalist class should most bear the burden of the cost of maintaining the functions of the state machine. The burden of taxation does not rest on the shoulders of workers. Although taxes on wages appear to come out of wages, in reality taxes come out of profits. Workers should therefore ignore all the false promises and baloney about taxes that politicians use in order to try to win votes at election times, and concentrate their efforts instead on the class struggle, seeking to raise their wages and improve their living and working conditions.

The state, or government as it is more familiarly termed, exists for the purpose of maintaining the authority of the capitalist. It costs money to run a government. The workers have not the necessary money. If they had, the capitalist would find a way to make them pay the expenses of government. Owing to the competition for jobs, the workers’ wages are always at a minimum. On the average they are just sufficient to maintain the existence of the slave. Some, it is true, get more than the average necessary wage, but for one who does there are large numbers who are getting less, and there is a permanent section of the population that gets no wages at all – the unemployed. If the workers could live for a year without eating, paying rent, buying clothes, etc., then they would be able to do little more than pay the taxes of the nation.
 The capitalists know these facts. They know that the workers do not earn enough, so they do the only thing possible, that is, pay the taxes themselves. The tax question is not a working class question. As an issue, it is often used as a political red herring to be drawn across the nose of the working people who are made to believe they are taxpayers. Actually, we don't deny that workers pay, in the sense of themselves handing over the money, some taxes. Our argument is that the burden of taxation does not fall in the end on the working class but on the propertied class and profits. At the moment, workers’ pay slips show deductions for income tax and national insurance contributions (a tax in all but name, as was recognised by the merger a couple of years ago of the DSS’s contributions section with the Inland Revenue), which are paid to the government, and, in some cases, contributions to the company pension scheme. We’ve always pointed out that these are not really paid by the employee, not even in the formal sense of personally paying the money to the government or to the pension scheme – it’s just an administrative exercise – and that what matters to them is their take-home pay, not gross pay before deductions. As far as they are concerned, their employers never really paid them in the first place the amounts deducted and might as well have paid them directly themselves.

The capitalists do not like to pay taxes, but they must surround themselves and their property holdings with an extensive and expensive machinery. The preacher and the policeman have both to be provided for, and many other retainers besides. Taxes are levied by the government in order to raise revenue for the state. The vast bulk of state revenue comes from taxation or borrowing, and as the complexity and functions of the state machine has grown enormously throughout the history of capitalism, so has the tax burden. The armed forces, police, jailers, judiciary, and a whole host of strong men and intellectual retainers must be kept to do their bidding. The state originally arose out of the division of society into classes.  In by-gone days, a brutal chieftain would surround himself with a bodyguard of string men to protect his person and smash and suppress all who threatened his privileges. Such is now the function of the state, carried out on a civilised plane, under the cloak of respectability – law and order. It is controlled by the capitalist class and their political representatives who need to levy tax to pay for the police, the armed forces, civil service, the 'education' system and so on. The various functions of the state machine are necessary if the capitalist class are to maintain their privileged position in society, and, of course, these functions have to be paid for by somebody. Moreover, it is in the interest of the ruling class to maintain the state apparatus because it maintains their dominant social position - though of course that doesn’t stop them complaining about the cost and demanding cuts in its running charges.

Of course, the capitalists present an image of the state as a 'neutral' agency standing above society, before which all are equal, and to which all contribute; state revenue is the 'public purse', which we all have to support through taxation. Our argument is that although some taxes are paid by the working class, the burden of taxation rests on the capitalists and has to be paid out of the profit accruing to them in the form of rent, interest and profit, the basis of which is the unpaid labour of the working class. The agitation over taxes helps to obscure the fact that the worker is robbed as a producer in the industries. Surplus-value is produced by buying labour-power at its value, and selling the product of labour at its value – a much greater value.  If the capitalists could retain all; the surplus produced by labour they would be overwhelmed with joy. But no such luck. The poor capitalist has to give up part of the plunder. The surplus-values which are exploited from the workers do not flow to the capitalists in even quantities. There are different grades of capitalists. The real big fellows try hard, and often successfully, to pay the smallest percentage of taxes. They shift as much as possible on to the shoulders of the small capitalists, and a little of it, as we have already pointed out, on to the shoulders of the higher paid workers and in times of stress they resort to pilfering, such as sales taxes/VAT , which will reduce the workers’ real wages.

Wages are the price of labour power—that is, the price received by workers selling their mental and physical energies to an employer. Labour power is a commodity like so many other things in capitalist society and its price is governed by the type of factors governing the prices of other commodities—principally the amount needed to produce and reproduce it. In the case of labour power, this includes clothing, housing, food, entertainment and the like. On average, wages are enough to keep us fit to work in the type of employment we have been trained for and are working in and it is around this level that market forces, helped by trade union action, tend to establish wage rates.

That taxation is an issue for the working class is a delusion. Is it seriously to be believed that the working class in Britain, for example, was better off before the Second sum received all along. The 'benefit' from the tax cut goes to the employer. If the situation was reversed and the income tax rate was doubled, the 'nominal' wage would then have to rise from $200 to $250 if take home pay was to remain around $150. The increase in this case would be borne entirely by the employer and would come out of surplus value.

It is obvious that the real price of labour power is what is actually received and is not a hypothetical sum  (not some theoretical gross, but what is actually received, what the employer invests as ‘variable capital’), a large part of which is never received by the worker and therefore cannot be spent. In recent years many politicians have argued that if income tax is reduced "we will all be better off". However, this is incorrect and can be demonstrated to be so with a simple example. Say a worker's nominal wages are $200 a week, $50 of which is taken in income tax. If the income tax rate was halved and the amount taken in tax was reduced from $50 to, then Republicans would presumably argue this would lead to an automatic rise in the worker's take home wages from $150 to $175, thereby making him or her "better off". But this is not what will happen in reality. The worker's wage, remember, is the price of his or her labour power, which, all other things being equal, will tend to gravitate around the $150 mark in this instance, which is the real sum received all along. The 'benefit' from the tax cut goes to the employer. If the situation was reversed and the income tax rate was doubled, the 'nominal' wage would then have to rise from $200 to $250 if take home pay was to remain around $150. The increase in this case would be borne entirely by the employer and would come out of surplus value.

This is based on the assumption that in the medium term workers sell their ability to work at its cost of production (or what Marx called its value), i.e. at the cost of what they must buy to keep their skills up to scratch and also to raise a family to take their place on the labour market when they retire. It follows from this that any permanent increase in the workers' cost of living, whether from taxes or from higher prices will be passed on to employers as higher money wages and salaries (On the other hand, any permanent decrease in their cost of living, as from rent control or from subsidies to food or transport, will end up being a subsidy to employers in the form of lower than otherwise money wages.) Having said this, most taxes in Britain are not even paid by workers but are collected and paid by businesses. Obviously, this is the case with corporation tax. It is also the case with income tax on wages and salaries, which in the UK is deducted by employers from nominal wages under the PAYE system and never even get into the hands of bank accounts of employees (income tax, in fact, is mainly a means of ensuring that workers without families don't get that part of wages meant for raising a family).

Some say that sales taxes fall upon the consumer, and therefore the workers will have to pay increased prices for the articles they purchase if a tax is placed upon those. The obvious retort is that as the working class are the only producers, but not the only consumers, it is from the former point of view that they should look at the matter. But apart from this, the statement is not true of itself. Prices are determined primarily by the cost of production, and immediately by supply and demand. The variations in the latter cause prices to fluctuate, but the point above and below which they move, and tend to come to rest, is the value of the article - or, technically, all commodities exchange upon the average at their value. If owing to circumstances a commodity were being sold above its value, fresh capital would soon be turned in that direction, and competition and extra supply would cause prices to fall. If being sold below its value, part of the capital would be withdrawn, and the diminished supply, other things remaining constant, would cause prices to rise to the normal level. Whatever may be the conditions at any given time, the capitalist always sells at the highest price the market will bear at that period.

 It is thus easily seen that if the whole of the taxes were abolished it would not benefit the working class unless competition among the capitalists drove prices down in proportion, and then others would benefit as well, while the workers would have to resist a reduction in wages. The question thus becomes reduced to one of a quarrel between the big and the little thieves as to the apportionment of the cost of maintaining the present system, and is expressed chiefly by the small middle-class forming various tax-reform parties with the object of curtailing the powers of the monopolists and big capitalists. Being only really concerned with the problem of how to stop the robbery under which they suffer, the workers should take no stock of the quarrel over the paying of the expenses of the burglary. Whether he is living in a country is highly taxed or otherwise makes little difference; the worker finds that whatever of the above conditions he may be under, a subsistence is all that upon an average he obtains.

Another argument that has been put to demonstrate why workers should be interested in taxation is concerned with indirect taxes, like the European Value Added Tax (VAT) and excise duties. To increase indirect taxation, it is argued, will mean higher prices and therefore lower real wages and living standards. Perhaps less obviously VAT too falls on and is collected by businesses. As its name implies it is a tax on "value added" which, in capitalist economics, translates into a business's wages bill plus its profits. As we have just seen, wages in the medium term represent the cost of production of labour power, so though the amount of VAT payable is calculated on the amount of "value added" in fact just like corporation tax it only comes out of profits. Firms can't automatically increase their prices by the amount of the tax; they reduce their profits by it. Capitalists will tend to seek the best possible price for their products in the market conditions that are prevailing. Sometimes VAT increases may initially cause some prices to rise as capitalists try to pass on the burden of the increase, but capitalists may well find that they have to reduce prices again when sales dip, as market forces assert themselves. VAT is not usually charged as a separate tax from the price—prices are usually stated to be "inclusive of VAT" which tends to confirm that sellers sell at the highest price the market can bear.

The other main form of indirect taxes, excise duties, are also paid out of their profits by the firms involved. Only in this case prices are raised.  The government in effect creates an artificial monopoly position allowing monopoly prices to be charged - and then taxes away the monopoly profits for its own benefit. lnsofar as these goods (beer, spirits and tobacco, for instance) selling at their monopoly prices, enter into the general cost of living of the working class they are reflected in higher wage levels.

The taxes workers actually pay out of their own pockets are such things as car licences, TV licences and, if they are owner occupiers, council tax - but, once again, in so far as these enter into the general cost of living they are reflected in wage levels.

 In Britain in regards the poll tax, the Thatcher government clearly made a major blunder in imposing a tax which had to be physically paid by every adult. Not only was this not cost-effective in capitalist terms (the extra costs of collecting it) but it led to resentment amongst those who had never paid such taxes and in many cases couldn't afford to anyway. ln the end a combination of nonpayment, riots, demonstrations and the loss of votes in by-elections, caused the government to back down and restore something akin to the old system under which only owner-occupiers paid local taxes.

As to the unwaged, since they depend tor their income mainly on handouts from the state, taxing them does not make much sense from a capitalist point of view - its just takting back part of what's been handed out, so why hand it out in the first place? This is why the government will he introducing so-called "tax credits", under which what is to be paid as tax (if anything) is to be set against what is to be paid as benefit and only the difference paid. So, as with PAYE, the poor will never see the taxes they "pay". Forcing the poor to physically pay a tax like the poll tax doesn't make sense either as the level of income support (formerly supplementary benefit, formerly national assistance, formerly the poor law) is fixed as the minimum supportable level which in theory can't be reduced further. If you try, you get riots even in small peaceful towns .

Rises in tax (direct and indirect), by increasing the cost of maintaining employees, are generally passed on, through the operation of market forces, to employers in the form of increased money wages and salaries. However, this process is not automatic but as a result of an economic tendency for the working class to receive the value of its labour power. When there are tax reductions this will be a major factor in stiffening the attitude of the employers. With tax increases, this stiffens the pressure of the workers to demand higher wages, especially when unemployment is low. It should be noted that this tendency for workers to receive the value of their labour power is helped by trade union action. Workers have to struggle for higher wages and salaries. The World Socialist Movement holds then that the question of high or low taxes is not a working class question because what the working class live by is wages and they have to struggle to maintain wage levels whether taxes are high or low and the principal factors in the struggle are, on the one side, the workers' cost of living, and on the other side the factors such as good or bad trade conditions, how much or how little unemployment which help or hinder the trade unions in pressing wage claims. In the long run taxes are a burden on the capitalist class only. Wages and salaries corresponds more or less to the cost of maintaining and reproducing the working skills which employees sell to employers. During their time in employment employees perform surplus labour, they create surplus value which belongs to the employer. The upkeep of the state and its machinery of government ultimately fall on surplus value, or incomes derived from surplus value, through taxation.  Rises in tax (direct and indirect), by increasing the cost of maintaining employees and their skills, are generally passed on, through the operation of market forces, to employers in the form of increased money wages and salaries. However, this process is not automatic or inevitable: workers have to struggle for higher wages and salaries.

Although taxes are one of the largest items of business expenses, there are others as well. The legal profession, insurance, advertising, and a host of other parasitic enterprises feed off the body of the real parasite – capitalism. All these force the capitalist to disgorge a part of the plunder. It is out of the surplus-value that they get their incomes. The capitalists don’t like to give it up. They would like to keep it all but they must maintain their supporters. What is left over in the hands of the capitalists – plenty of course – is profit. How necessary it is to understand the economics of capitalism. Not the capitalist explanation of economics, but the Marxian or working class explanation. How necessary to understand that taxes in general must come from some other source than the worker’s pay envelope – that they are paid by the capitalist out of the surplus wrung from the toil of the workers.

The capitalist class are bound to return to the workers enough of the wealth that members of the working class themselves have produced to maintain them in a state of working efficiency and to keep on reproducing itself. The capitalists may differ among themselves as to the exact level at which this standard may be fixed at, but they are unanimous in fighting to retain as much of the surplus value above this limit for their own spoils. The workers, on the other hand, are always struggling to increase their share of the wealth produced, with varying degrees of success, which results in individual or sectional wages varying, but makes the return to the class as a whole a close approximation to the cost of living under the conditions obtaining in that society. It thus becomes evident that the taxes must be paid out of the surplus value extracted from the workers by the capitalists; this explains not only the latter’s interest in the question of taxation, but also why it is of little importance to the worker in the long run.

The concept of how tax increases lead to increased nominal wages that cut into profits was rather better understood in the past than it is now. Here, for instance, is what the capitalist and British MP David Ricardo wrote in 1817:

"Taxes on wages will raise wages, and therefore will diminish the rate of the profits of stock… a tax on wages is wholly a tax on profits; a tax on necessaries is partly a tax on profits and partly a tax on rich consumers. The ultimate effects which will result from such taxes, then, are precisely the same as those which result from a direct tax on profits." (The Principles of Political Economy and Taxation)

The view that taxes are a burden on the capitalists and not the workers was also put by Karl Marx:

"If all taxes which bear on the working class were abolished root and branch, the necessary consequence would be the reduction of wages by the whole amount of taxes which goes into them. Either the employers' profit would rise as a direct consequence by the same quantity, or else no more than an alteration in the form of tax-collecting would have Our argument is that although some taxes are paid by the working class, the burden of taxation rests on the capitalists and has to be paid out of the profit accruing to them in the form of rent, interest and profit, the basis of which is the unpaid labour" (Criticism and Critical Morality)

 The Marxist analyst Paul Mattick Jr. makes the following argument.

“Tax money appears to be paid by everyone. But despite the appearance that business is undertaxed, only business actually pays taxes. To understand this, remember that the total income produced in a year is the money available for all purposes. Some of this money must go to replace producers’ goods used up in the previous year; some must go in the form of wages to buy consumer goods so that the labour force can reproduce itself; the rest appears as profit, interest, rent – and taxes. The money workers actually get is their ‘after tax’ income; from this perspective, tax increases on employee income are just a way of lowering wages. The money deducted from paycheques, as well as from dividends, capital gains and other forms of business income, could appear as business profits – which, let us remember, is basically the money generated by workers’ activity that they do not receive as wages – if it didn’t flow through paycheques (or other income) into government coffers” (Business As Usual ))

Our point precisely. As Mattick also points out in his book, while “neither economists nor businessmen have an adequate theoretical understanding of capitalism, the latter at least have a practical sense of how it works”. This applies in the case of tax. The capitalist argument that taxes are bad because they raise the costs of labour is very true and the logical implication is that this is a problem for those who pay for labour – the capitalists – not for those obliged to sell it - workers. Capitalists understand that raising taxes on wages will just put upward pressure on wages, raising the cost of labour for the capitalist.

Firmly gripping the above sound and logical position, The World Socialist Movement, truly representing the workers, makes its attack to capture the political machinery and therewith control of economic powers and social forces for the purpose of ending the robbery by overthrowing the system of capitalism, emancipating the working class, and laying the foundations of the socialist co-operative commonwealth.

Wednesday, July 25, 2012

Money and the Banker and the Worker

What Is Money? Money is money of course! It is the currency of the nation with which you can buy things. Very simple, is it not? Money is a great mystery. Even those who have the most of it usually know the least about it. Even the bankers who handle so much of it may know little or nothing. 

These days there is need for explaining the real nature and function of money. Many have come to the conclusion that money is the “invention of the devil,” or at least these devilish evil bankers. They have come to the conclusion that money was invented for the purpose of robbing them, and that the bankers by some sleight-of-hand trick rob them of the values they produce. This is due to their lack of understanding of what money actually is, and how the competitive system is reducing them to poverty.

The saying, “Money makes money.” is false. That crude old saying is but another way of expressing the fact that capitalist accumulation goes on by leaps and bounds in spite of the capitalists themselves. They can be utterly brainless and still accumulate vast wealth. Money makes nothing and the belief that it makes more money is an illusion. What is meant by “money making money” is that those who possess it in sufficient quantities can use it to purchase raw materials, machinery, labour-power, etc., and “make money” by exploiting the productivity of labour, the source of all values. There are many illusions in relation to money today. Common among these illusions is the belief that money circulates commodities, hence the petty-bourgeois outcry for “cheap” money, for a more “elastic currency, etc. But it is not money that circulates commodities. It is just the reverse. It is the circulation of commodities that causes money to flow. When trade is slow, money circulates slowly. When it is stagnant, money lies fallow. It goes to “sleep”, in the bank vaults. There is no work for money. It is “unemployed.” When the finance capitalists cannot find profitable and safe investments for their money, much to their disgust, they are obliged to hoard it. In the present crisis it is estimated that non-finance companies have bank deposit of 3 to 5 trillion dollars

Money is not the dynamic thing under capitalism. It is the production and circulation of commodities that is dynamic. Money is simply a medium through which commodities are exchanged with each other. It is like the wire that transmits power.  The wire itself has no power but simply a medium for circulating power which is generated somewhere else. When the power is shut off, when the current ceases to flow, we say the wire is “dead.” It is so with money. Its resurrection, under capitalism, can only be brought about through the restoration of business, through the machinery of production again being set in motion, and that is outside of the power of money. Of course, a certain amount of stimulation can be made by spending money on non-essential work, or non-profitable business, Keynesian policies of  “priming the pump”. But, if a natural flow does not respond to the “priming” then it should be obvious, that there is no profit in just pumping out what is poured in.

Money itself is simply a commodity set aside for the special purpose of circulating other commodities and measuring their values as well as expressing their prices. The commodity, for instance, of the automobile capitalists is the automobile. The commodity of the bankers is money. The banker, of course, does not sell money like the automobile capitalist sells autos, but he rents the use of it like a landlord capitalist rents out land or a house. Interest is the “rent” paid for the use of money. The banker aims to collect interest on his loans and also to receive the payment of the principal. But where does the interest come from? The debtor capitalist gives up part of the profit, which he realises by exploiting his workers, to the banker. If, however, he has enough capital and if he owns his factory buildings he can hold on to all of the profit instead of parting with some of it for interest and rent.

Money is not a supernatural thing or a mere “government issued script” as many present-day money reformers contend. It is real material. Money functions in three ways: (1) As a medium of exchange; (2) As a standard of prices, and (3) As a measure of value.

(1) The first function of money requires but little explanation. A medium is a go-between. It is the means whereby commodity owners exchange what they have for what they require. For instance, a certain quantity of lumber is sold for a certain quantity of the money commodity. Later the owner of that quantity of money can purchase with it, for instance, a certain amount of cloth. Money, the medium of exchange, has simply been the means of exchanging the lumber for the cloth. This is all there is to money as a medium of exchange.
(2) As for money as a standard of prices, that simply means that it gives nominal expression to value, so many dollars and cents in America, so many pounds, shillings and pence in Britain, and so on with the monetary units of other countries. Money, the golden yardstick that measures the relationship of commodities to each other, gives expression to their value in exchange through a standard of prices that vary with historic circumstances and the custom of different countries. For instance, American money, with exactly the same characteristics as the money of all other modern countries, expresses its standard of prices in dollars and cents; British money in pounds, shillings and pence; German money in marks and pfennings, and so on.
(3) But it is money as a measure of value that mystifies many. All commodities have value. So must money have value. Nobody would want to sell a commodity for something that had no value. Money is a commodity also. It is exchanged for other commodities. If you have a certain quantity of money to spend you can have your choice of an immense variety of things. So for money to measure value it must have value. You cannot measure something with nothing. The quantity of average labour in a table, which gives it value, can, for instance, be exchanged for a coat containing approximately the same quantity of average labour. That is the way exchanging (trade) began, through direct exchange or barter, before there was any medium of exchange. Money was brought into existence, or rather evolved, from trading. The trader who had wares to sell, yet did not desire immediately other wares in exchange, would accept, in preference, something of value that would be easily convertible later into things he did want. Thus money arose. Economists have shown that almost every sort of object has been used as money, such as cattle, corn, tobacco, and even human beings (slaves). Anything that has value could be used as money, but all are not equally as serviceable. Perishable things would function poorly as money. That is why the “precious metals” have crowded out tobacco, cattle etc., as money, and gold has crowded out the less “precious metals,” such as copper and silver, because it contains greater value in smaller bulk. “Precious” simply means big value in small bulk, a lot of social labour in a small quantity of metal. Silver and copper, in modern countries today, are not money any more than paper is. They are but tokens. They are representatives, substitutes for certain quantities of gold held in the bank vaults. If the tokens (the currency) have 100 per cent gold behind them, say, gold to the face value of a dollar, then it makes little difference if the gold itself is circulated, if it is also currency. But if the currency is in excess of the gold backing it, then for that reason gold is withdrawn from circulation, and the effect of the increased ratio of currency (tokens) to gold is that prices rise. The owners of commodities demand more of the “cheap money” (inflated currency) than they would of the dear money. Values are not altered but their monetary expression is higher, prices go up. When currency is deflated, prices fall. Of course, besides this basic factor, there are secondary factors in the rise and fall of prices; for instance, supply and demand.

In general, values are relatively constant, but prices fluctuate. If there is a lot of wheat available and not many buyers, its price falls. Sometimes the price of certain commodities falls below their value but, in general, prices fluctuate around their value, sometimes above value and sometimes below. These fluctuations, sometimes above value and sometimes below, cancel each other so that on the average commodities exchange at their value. We have previously remarked that we would explain how profits are made by exchanging commodities at their value. We are not forgetting that promise, but we wish to discuss money a little further.

Whenever a crisis develops, when commodities are unsaleable and, as a result money is not changing hands and credit has tightened up - the credit crunch - there usually arises much agitation against the existing monetary system. At present the great bankers with great hoards of gold are anxious to lend it out, but they can find few enterprises to which they can lend safely and at a profit. Countless numbers of businessmen are now trying to borrow. It is always so in a crisis, but fewer than ever can make the grade because of their insecurity. Therefore, at a time when the bankers have most to lend, and are very anxious to so, they find very few secure businessmen to whom they can lend. This condition creates the illusion that business is bad because the bankers will not let out their money. It is easy to see that there are plenty of people without money, but they can offer no security, and, in fact, many “securities” vanish in a crisis, leaving many bankers with no choice but to close their doors. However, the large bankers who survive have plenty of money on hand. Those who believe that the holding back of loans on the part of the bankers is responsible for the depression, or at least for its prolongation Or else they promote the belief that it is actually the extension of credit to create debt that is the problem and desire the abolition of fractional reserves. They all create various movements for money reforms, for new banking laws and regulations or agitate for the return to the gold/silver standard as Ron Paul and Libertarian Right demand. They all believe that a change in the monetary system would be enough to bring prosperity or at least, security. But, since money is merely a measure of value, we know full well that a mere change in its form would not add more value too that which it measures, any more than the shortening or lengthening of a yardstick would add length or quality to the cloth it measures.

This is the stumbling block of the money reformers of the Keynesian sort; they believe that a change in the measuring of value, a change in the money system, will bring about an alteration in the wealth it measures and changes in the possession of wealth. It is the latter, of course, that is aimed at and the belief is that: “If there is a vast increase in money, surely we will have more chance of getting hold of some.” This certainly is an illusion that the present conditions should expose, even if the “money reformers” are unable to follow the mechanism of the monetary system. It is just as great an illusion as the notion that there is an abundance of wheat everyone will have plenty to eat. Of course, there is a real reason for the repeated demands for inflation of the currency. Within the ranks of the capitalist class there are several divisions. One such division is that between those who have borrowed money and those who have loaned it, the debtor section of the capitalist class and the creditor section. If currency is inflated it causes prices to rise, as those who have commodities to sell demand a higher price. The small business people, such as the small farmers, most of them debtors, want inflation and higher prices so that they can pay their debts with the inflated currency. The creditor section of the business class, particularly the bankers, usually fight inflation so as not to be repaid in depreciated currency. The substance of the whole question is the conflict between big business and little business. For those who have no business and no job, it is not something to get exited about. However, where inflation takes place, whatever its ultimate outcome, its first effect amounts to a cut in “real wages,” the spending power of the workers. The cost of living goes up, often without an increase in wages and where increased wages are obtained it usually occurs after and not ahead of an increased cost of living.

Some liberal "money reformers" advocate variants of social credit ideas which aims to remedy all social ills by reforming the monetary system. Other such as Ellen Brown insist upon nationalised state banks and controlled currency is one of the main measures aiming at capitalist recovery. These schemes in themselves are fore-doomed to failure because no mere change in the means of measuring or medium of exchanging values will create new values or cause existing values to circulate more freely.

The banker’s income is in the form of interest. He is a capitalist whose “stock in trade” is money. He “rents” the use of it just as the landlord rents the use of a building, and just as the latter expects back his outlay, plus profit, so does the banker expect the return of his loan, plus profit. But the banker’s profit is no more made off the customer than the landlord’s profit is made off the tenant. The banker collects interest for the money he has “rented” out. If it is an industrial capitalist to whom he has loaned money, the latter has to give up, in the form of interest, part of the surplus-value exploited out of his employees, just as he may also have parted with some of the surplus-value in the form of rent to the landlord. Of course if a capitalist has plenty of his own capital and is able to own his factory buildings and does not have to borrow any of the banker’s capital, he neither has to pay interest nor rent and thus retains a larger share of the surplus-value.

At one time, the taking of interest was condemned by the Church, and the money lender, the forerunner of the modern banker, was a sinner in high disfavour. But now the gentleman who collects income through interest on loans is among the most respectable of citizen’s and usually occupies a prominent place in Church and State. Banking capital of late years has been very powerful. Its leading lights are men of vast wealth. But they produce no merchandise, neither in mill, mine nor factory. They grow no grain or other agricultural produce, but their wealth increases just the same.

This realisation that the banker is not engaged in production has caused many people to conclude that he gets his riches by some evil practice, some sort of financial sleight of and, but on close observation he can be found to be no more dishonest than other businessmen. There are “tricks in all trades” and the bankers have their little tricks, too, but their wealth is gained in the same “legitimate” way as the other capitalists acquire theirs, namely, through the exploitation of wage-labour. If the banker was to pay out as much in wages to his employees and in other expenses as his returns amounted to, he would make no profit. His business, like any other, makes profit or loses according to how much he can retain over and above his necessary outlay. If his employees received high enough wages there would be no profit for him, but he usually can hire all the assistants he needs, pay them on the average the regular wages for such labour, and have a balance left over, a profit.

During the last few years, thousands of banks have required bail-outs to avoid bankruptcy, (did other businesses such as GM Motors), and the general cause was the same. Loss of income in relation to expenditure wiped out so much of their capital that they became insolvent. Reckless speculation, casino capitalism,  helped to hasten their downfall, just as in the case of other speculators. But not all banks failed. The large bankers, the real financiers, are still in a very powerful position today. At one time banking capital was simply auxiliary to industrial capital, the bankers played a secondary role. While banking capital is still at the beck and call of solvent industry, it has gained in many cases such a hold that it has practically absorbed the function of the industrial capitalist. This came about through the bankers becoming more than money lenders. They became direct investors in industry, purchasing large blocks of industrial stock, quite often sufficient to control the financial policies of large industrial concerns. Finance capital has taken the leading role in the directing of industry and commerce. When banking capital developed to the stage where it had a surplus over and above its requirements for industrial and commercial loans, the big bankers began to look for a way of using this surplus profitably. Permanent investments, not loans, were the answer to this problem, and the bankers were in a position to know where such investments would be the most secure and likely to yield the most profit. The “money power” has forged ahead and extended its holdings and consolidated its grip upon an ever-increasing share of the national production and foreign investments.

Finance capital is in the saddle and will probably be riding hard when the old horse capitalism runs its last lap.

It is not banks with their mythical creation of money/credit out of thin air that creates actual wealth. All profit is made by exchanging commodities at their value. When business is good, when there is a brisk demand for products, commodities are bought and sold. The capitalist runs his business for profit, but would never make any if the products were simply stored up in warehouses which is no use to anyone, so  buyers must be found who have use for the produce. The capitalist sells commodities. How does a commodity get its value in the first place? Only when human labour is applied to nature that its “raw materials” are transformed and begin to take on value which can then be exchanged, in proportion to the amount of necessary labour expended.

 Let us follow the production of a wooden table from the forest to the factory, and from the factory to the home.

a) The finest trees in the forest may rot and fall without ever taking on exchange value and likewise growing trees hold only potential value until human labour is applied.  The labour of the lumberjack transforms what were trees into logs which are to be sawed into timber. These logs, we will assume, are the property of a lumber company. The company has no use for the logs but it is out to make profits and so it looks for someone who has a use for them. It offers them on the market at their real value. We will say in this case that the average log, when then tree is felled and trimmed and ready for transportation to the sawmill, exchanges for £10. We will further assume that it costs the company, on average, £1 per tree for wear and tear on its equipment and for auxiliary services used in its business. And let us further suppose that it costs, on average, £2 per tree for labour-power (wage paid to the workers). Thus, the cost to the lumber company will be £3 per tree, leaving a surplus of £7 in the hands of the company. But there may be other capitalists standing ready to collect a share in the surplus value.

This outlay of £3 by the company (£2 for wages and £1 for wear and tear on equipment, etc) comes back again when the £10 exchange value of the log is realised. The £1 for wear and tear on equipment, etc., replaces itself, no more and no less. It is what Marx called constant capital, but the £2 for wages, which he calls variable capital, not only reproduces itself but produces, in this case, £7 of additional value which he has named surplus value. This is the secret of capitalist profit. Its discovery was Marx’s greatest contribution to the science of political economy. With this discovery it was shown that profits arise during the production of commodities and not during the time they are being exchanged and, further, that the surplus-value arose out of the variable capital, the outlay for labour-power, and that the worker receives the value of his labour-power in wages but produces during his working day a much greater value. Of this value added by the worker, the capitalist gets back his outlay in variable capital, in this case the £2 for wages, plus the additional £7 of surplus value.

When we understand this we can see how it is possible for the capitalists to sell commodities at their value and still make a big profit. As all commodities sell at their value, on the average, this also holds good for the commodity of the worker, labour-power. Wages are the price paid for labour-power, and although the prices may fluctuate, sometimes above and sometimes below value, in the long run these variations cancel each other and thus, on the average, labour-power sells at its real value. But, of course, labour-power is unlike all other elements that enter into production and which simply replace their own value. During the time it is being used up, labour-power produces a value much greater than its own value, a surplus-value, as we have already pointed out. This surplus-value is appropriated by the owners of the means of production, the capitalists. The process Marx terms “the exploitation of labour.”

Let us return again to the example of the lumber company. We find that out of the £7 surplus-value extracted from the labour of the lumberjacks, the lumber company has to part with £1 to another capitalist, the landlord upon whose land the trees were cut down. The direct exploiter of labour does not always succeed in retaining the full amount of the surplus-value. He has often to share with other capitalists, and that, too, on an average, according to the amount of their capital that he is obliged to use in his business.

The lumber company may also have had to borrow money from another capitalist, a banker, whose commodity is money which he “rents” the use of to other capitalists. They may have to give up a further share of the surplus in payment of interest on this “rented” money. Then they may have to give up another portion in taxes, etc. What is left of the surplus-value (usually plenty) is the lumber company’s profit. Their logs are sold at their real value and their share of the surplus-value, the profit, is realised. It is collected at the point of exchange, where the logs are sold, but it is during the process of transforming the growing trees into logs or timber, during production, that the surplus-value has arisen.

The question may now be asked: “But what about the value of labour-power?” Its value springs from the same source as that of other commodities, namely, the amount of socially necessary labour required to produce or reproduce it. But this socially necessary labour is incorporated in the food, shelter, etc., that the worker must consume, plus that consumed by his family. Adult labour-power must raise a fresh crop of young labour-power for the future market. But this miserable allowance (£2 per tree in the case of the lumberjacks) only represents a fraction of the value that the applied labour-power produced.

And, further, we might point out that what the product sells for is not dependent upon what the worker receives in wages. Neither do his wages depend on the value of the products but basically upon the cost of living, upon what the capitalists must part with in order that labour-power can be reproduced for their service. And this despite the fact that the capitalist is always ready to howl that the product will go up in price if the workers get more wages. The capitalist takes all he can get for the product, whether wages go up or down. Often, when higher wages are paid, the capitalist gets less for the total product and at times he gets more for it when he has paid lower wages. If it was such a simple matter of passing on the increased costs to the consumer he would not resist an increase in wages so vigorously. The reason he fights so hard against wage increases is because its immediate effect is a cut in profits. If the worker gets more in wages, the capitalist gets less in surplus-value. The standard of the working class has not risen with the vast increase in wealth but, in fact, has fallen, taking the class as a whole. For large numbers, the standard of living is at times driven below the subsistence level, through an over-supply of labour and competition for jobs.

But let us see what now becomes of the timber logs. Who buys such logs? We started out to observe the production of furniture. So we will now suppose that the logs were purchased by a sawmill company. When the sawmill capitalists bought the logs they had them transported by railroad to their mill where they are again being transformed. The logs become finished or dressed lumber to be sold at so much per square foot to consumers, such as those who produce furniture, etc.

The first outlay after the sawmill company buys the logs was the cost of transportation, which we will assume brings the value of the logs to £12 each, an increase of £2 in their value, for necessary transportation is part of production and adds value, in this case through the exploitation of railroad workers. If these workers received wages equal to £2 for each log transported, there would be no profit for the railroad capitalists. But they don’t. They are exploited in the same way as other workers, by selling their labour-power at its value and creating much greater values for the railroad company.

At the furniture factory, the finished lumber is passed through the machinery by the furniture workers and it is transformed into useful furniture. It is then packed and shipped to the furniture stores where it is sold to the consumers, the buyers who use it in their homes.

As already happened in the case of the lumberjacks, the railroad workers and the sawmill workers, they (the furniture workers) receive wages and produce values much greater than they receive in wages. The sawmill company sells finished lumber at market price to the furniture producing company, holding on to as much as possible of the surplus-value added by the workers of the sawmill. And the owners of the furniture factory do likewise.

If the capitalists engaged in producing furniture could reach the consumers direct they would be able to retain most of the surplus-value themselves, but unless they have their own stores, they have to sell for less than the exchange value of the furniture. In other words, they have to share surplus-value with the capitalist retailer, the owner of the furniture store. If it also passes through the hands of a wholesale dealer the surplus-value is simply divided up differently.

Let us trace this process. If a table is produced to sell for £10, and it contains £2 in wages and £1 in raw materials, wear and tear on machinery, etc., then there is a surplus value of £7 in the production of the table. The factory capitalist may succeed in retaining only £2 of the surplus and the other £5 goes to the retailer, or may be divided in some proportion between the wholesaler and retailer.

Transportation may play a different part this time. It may be that in the competition between capitalists for markets that furniture makers located elsewhere may ship their goods into the district covered by other producers. Transportation of this kind is socially unnecessary and does not add value. In the case of small articles the costs of transportation may be so small in relation to the value of the commodities that, in practice, they are charged to “overhead” along with heating, window washing, etc., and have no appreciable effect on prices.

To sum up this process of furniture production and exchange, from the forest to the factory and from there through the hands of the dealers to the home, it will be observed that all the value put into the “raw materials” and the finished product has been put there by the workers, by those who did the producing (including transporting), and that the different capitalists have each taken their share of the surplus-value exploited from the employees.

Let us repeat ourselves in another way.  Many people think that profits are made by buying cheap and selling dear. They think that by charging more than commodities are worth the merchants make their profits. That is only the appearance of things and appearances are often deceptive.

If we were to follow the circulation of a £5 note we would soon realise that no profits are made, since circulation, or exchange, as it is sometimes classed, adds no value whatever.

We will assume that a dealer, whom we will call number one – a hatter – sells a hat for £5. Now he can not eat this £5 but he can eat what the money will buy. He goes to the grocer, whom we will call number two, and he buys supplies to the extent of the purchasing value of £5. All that has happened, in effect, in these two transactions, is that the hat dealer has exchanged his commodity, hat, for the grocer’s commodities, sugar, bread, coffee, etc. £5 worth for £5 – value for value.

The grocer, no more than the hatter, can eat the £5 note, nor can he wear it. He needs shoes, we will say, so he goes to dealer number three – the shoe-shop – who exchanges a pair of shoes for £5. Now supposing number three needs to have some carpenter work done. He goes to number four, who owns a carpenter shop. Number four supplies him with £5's worth of joinery work.

The owner of the carpenter shop has now exchanged his woodwork commodity for the same £5. But we will assume that he, the owner of the carpenter shop, decides to buy an entirely different commodity; one that is not put up in cans, bottles or paper bags, one that is not weighed on the scales or measured by the yard. He buys a commodity that is wrapped up in human skin and dressed in overalls. One that is measured by the clock or, if it is piecework, by the amount of product – the commodity of the worker – labour-power.

After investing the £5 in the commodity of the working carpenter, at the end of a certain time agreed upon and covered by the £5 wages, let us say a day’s work, the carpenter has added to the raw materials so much more value than the product of the day’s work now brings, say, £30.

We will assume that the lumber and all other necessary expenses total £10. That amount is called constant capital and the £5 invested in wages is variable capital. These two investments bring the outlay of the boss carpenter up to a total of £15. But £30 was received for the carpenter work. Thus £15 dollars is surplus-value.

It is only the labour (variable capital) that adds value. The materials and wear and tear on the means of production (constant capital) only transfer to the finished commodity their own value – in this case £10 worth of materials, etc. It is the £5 spent on wages that produces the other £15 – the surplus value.

We have seen above that the first four commodity sellers exchanged their commodity evenly – value for value. Nothing was made in the way of profit and nothing lost on the exchange. “But,” you will say, “the hatter, the shoe dealer, the grocer and the boss carpenter are not in business for their health.” They certainly make a profit, but not upon each other as buyers. We have shown that they simply exchanged value for value. Now where does the profit come from? How is it made?

In the case of the hatter, his commodity, the hat, contained its full value when it reached the store. (On many commodities, transportation is often necessary and in this case this transportation expense adds value in proportion to the necessary labour contained in it. When we speak of production in a general sense we also add transportation.) It was the producers in the hat factory who gave the hat its value. The dealer could add no value to the already finished commodity. The hat manufacturer does not sell to the consumer direct. It is usually more economical to have the wholesale and retail dealers handle small quantities and single sales. He, therefore, sells to the wholesaler quantities of hats quite a bit below their value and still makes a profit, the surplus value being so large. The wholesale dealer receives a higher price than he paid but still sells it to the retailer – the storekeeper – at less than its value. The latter, under normal circumstances, sells it at its actual value.

We will say, for example, that the material in the hat cost the manufacturer altogether fifty pence, including other costs. The wages of the worker we will say amount to fifty pence or more. That makes a total cost of £1. However, it is a £5 hat – thus the surplus-value is £4. Of this £4 the manufacturer, the wholesaler and the retailer each get a share.

The hat which cost a £1 to produce we will say sells for £3 dollars in quantities to the wholesaler, leaving £2 of the surplus-value in the hands of the manufacturer. In smaller quantities the wholesaler sells to the retailer, say for £3.50 three, retaining fifty pence of the surplus-value, and the storekeeper, finally selling the hat for £5, keeps £1.50 as the surplus.

Let us repeat again, surplus-value is the difference between what it costs to produce a commodity and what it sells for. It is out of the social labours of the workers in industry that all surplus-values are obtained. The worker is not exploited when he buys things, as some people think, but as a producer where he sells something – labour-power. It is the collective labour of the workers that produces the vast volumes of wealth. In modern industry all functions, from the floor sweeper to the manager, are carried on by hired employees. Hired “hands” and hired “heads” are together engaged in carrying on production. The capitalist is no longer necessary. The future of civilisation is in the hands of the proletariat.

A worker that has been robbed is like a cow that has been milked. The poor dumb animal is incapable of worrying about what becomes of the milk, but the so-called “intelligent” worker takes sides in the quarrel which goes on over that which has been taken from him. When sections of the capitalists, industrial or banker, who exploit the working-class milch-cow squabble over their share of the surplus value, workers who line up and take sides in this quarrel are in the same position as the worker who has been robbed by thieves who then later fight over the division of the booty. It would be funny if it were not so sad and tragic to see the workers take sides, as they often do, with one gang of robbers that has plundered him as against the bunch of thieves.

Adapted from John Keracher here and here

Tuesday, July 24, 2012

some chinese capitalists get poorer

A year-long slide on the Shanghai and Shenzhen stock markets has wiped an estimated $89 billion off the financial assets of China's richest 3000 families.

My heart bleeds for them !

poverty triggers shootings

Americans kill each other with guns a lot more than Canadians do while Canadians kill each other with guns a lot more than Britons do. Conservative-inclined states, interestingly, tended to have more gun deaths. Conservative politicians favour making it easier to get guns; ipso facto, conservative states will have more gun death.

 Richard Florida, who works at the University of Toronto and is an editor for Atlantic magazine, looked at all gun deaths – murders to suicides to acts of self-defence – and found them happening less in places like Hawaii, and more in places like Alaska and Louisiana and Mississippi. Gun deaths, he found, happened most often in states where poverty rates were higher, where there were more working-class folks, and where there was more inequality and unemployment. Where gun-related mortality is lower, Florida noted, is where there tended to be a higher standard of living, more immigrants, and tougher gun laws (trigger locks, safe storage rules). And, as it turns out, more Democrats. Places where liberals dominated tended to have markedly lower gun deaths.

What did it all mean? Simple, said Florida. “Our analysis shows fatal gun violence is less likely to occur in richer states with more post-industrial knowledge economies, higher levels of college graduates, and tighter gun laws,” he concluded.

Monday, July 23, 2012

Patenting the revolution

Thanks to the World Trade Organisation and something called the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), we, the people, have no democratic control over intellectual property law in any way, shape, or form.

In 1886, the Berne Convention for the Protection of Literary and Artistic Works was first accepted, the first worldwide treaty with the intention of unifying and internationalising the various individual states' copyright laws. Three years prior, in 1883, the Paris Convention for the Protection of Industrial Property was first accepted. In 1893, the Bureaux Internationaux Réunis pour la Protection de la Propriété Intellectuelle (BIRPI) was set up to oversee these two treaties. The BIRPI was superseded in 1967 by the World Intellectual Property Organisation (WIPO).

This is where things start to go wrong. The WIPO is actually one of the 17 specialised agencies of the United Nations, and this posed a 'problem' for the United States, the European Union, Japan, and several other developed nations, because being a UN agency, every member state's vote counted equally. This meant that in matters related to IP, the world's developing nations could exert far more influence than developed nations. You know, democracy at work at the international state level.

To address this "problem", the developed nations shifted IP regulation out of WIPO and into the World Trade Organisation with the Agreement on Trade-Related Aspects of Intellectual Property Rights, in 1994. This is essentially a re-implementation of the Berne and Paris Conventions, but coupled with international trade, and under an organisation more easily controlled by the developed world. 

Countries can just decide not to sign TRIPS, right? Well, no, not exactly. The most brilliant move corporations in the developed world have ever made is that they managed to get TRIPS tied to membership of the World Trade Organisation. In other words, signing and implementing TRIPS is a requirement for membership of the WTO. Since membership of the WTO is essentially a requirement for participating in international trade, not being a member is not an option for any modern country. Leaving the WTO is a death sentence for a country's economy.

The end result is simple. Even if a majority of voters in a country want a drastic reduction in IP rights to modernise IP law and adapt it to modern times, it simply cannot be implemented. This effectively means that copyright law, patent law, trademark law, and all other associated laws, exist in a protected legal bubble over which we, as voters, have zero democratic control. In other words, current IP law exists entirely outside of the democratic process - effectively making it totalitarian. This far-reaching and incredibly complex set of legal constructs that affect almost every sector of our economy exists entirely outside of the democratic process. In fact, things like ACTA or SOPA? The next step is that they will simply be introduced as part of the WTO, just like TRIPS, or even as an amendment to TRIPS. Outside of any democratic control, they will be enacted in such a way that individual states cannot resist it, because doing so would endanger your WTO membership. You often hear people say, "If you don't like our current IP regime, change it! You live in a democractic country, right? Make your vote heard!" You can vote for all the Pirate Parties in the world, but it won't matter. It won't change anything, because it cannot be changed. Democracy is all fine and dandy, but when it endangers the corporate bottom line, they will find a way to circumvent it.

Sunday, July 22, 2012

can't pay - won't pay

The city of Oakland, California, is fighting back against Goldman Sachs by refusing to pay a penalty for getting out of an interest rate swap contract that is to Goldman's advantage. Goldman and the city of Oakland entered into a deal to protect variable interest rate bonds issued by the city in 1997. Oakland was given a fixed rate of under 6 percent to protect against inflation on those bonds. But if the interest rates declined, Oakland was to pay Goldman Sachs millions of dollars in tribute, or almost as many millions of dollars to get out of the deal. With the LIBOR scandal pushing down lending rates and with the Fed depressing interest rates artificially, this is like stealing. It was a scam even without LIBOR. The scam was that the banks knew what the central banks were going to do with regard to interest rates. The handwriting of financial weakness was on the wall in 1997, when these contracts were set up. The banks knew which way the winds were blowing, and the governments were not privy to that information. LIBOR and the UK financial system seems far away, but in fact, it is an integral part of the scam. Globalization was understood by these bankers, but not by government. Government remembered the 1970's and inflation. But that was then and this is now. It was a massive bank fraud so there no legal requirement to pay. It isn't the unions, but the banks eating away at local government.

The choice is ours to make

The conflict between rich and poor is as old as the hills. The rich being powerful always managed to subdue the lower classes and spared no endeavour to protect their status and privileges.

In ancient Athens, the aristocracy augmented its power and wealth by acquiring agricultural land from peasants,   enslaving them for non-payment of loan. When the peasants reacted against the injustice, a legal system of Draconian laws was introduced to control them. Founded by Dracon, an Athenian statesman, these laws were very strict and the death penalty was applied to almost all crime. Solan another Athenian statesman annulled all mortgages and debts, limited the amount of land anyone might add to his holdings, and outlawed all borrowing in which a person’s liberty might be pledged. The last reform put an end to serfdom and slavery. Other economic reforms included a ban on the export of all agricultural products except olive oil and the granting of citizenship to immigrant artisans. Solon also made important constitutional changes. The assembly was opened to all freemen. His legislature made Athenian democracy strong and allowed the common man to take part in decision making. After completing his work of reform, Solon surrendered his extraordinary authority and left Athens. Cleisthenes further empowered people and is known as the founder of Athenian democracy. Under his system, all men 18 years of age and older were registered as citizens and as members of the deme (village or town) in which they lived. All male citizens over the age of thirty could serve for a term of one year on the Council and no one could serve more than two terms in a lifetime. Such an organisation was necessary, Cleisthenes believed, so that every citizen would learn from direct political experience. With such a personal interest in his democracy, there would be no citizens to conspire and attempt to abolish the system.

Once democratic institutions were established, the Athenian society flourished culturally and socially. Philosophers like Socrates, Plato, and Aristotle introduced radical views in human thinking, enriching the human thought so that Athens became a centre of learning. Its reputation as a city of culture attracted scholars to Athens in quest of knowledge. The Epicureans and Stoics further continued philosophical traditions and the Athenian democracy. Sophists like Aristotle, Plato, and Aristophanes influenced Athenian politicians who learnt to argue and present their case in the democratic assembly.

In ancient Greece, Sparta, another powerful city-state, was quite different from Athens. Most Spartan men were soldiers and Sparta played almost no role in the celebrated scholarly and artistic achievements of other Greek city-states (particularly Athens). Individualism was not valued, instead a patriotic spirit was forged among its citizens. Lycurgus, the mythical law maker transformed the whole city of Sparta into a military camp. Boys were indoctrinated to fight and die in the battlefield. By law at the age of seven, they joined camps where they lived till they were 30. They were rigorously trained for war, walked barefoot, slept on the rough floor, ate sparsely and wore a single outfit for the whole year. Girls were also physically trained like boys. Their strength and dexterity was also aimed at being healthy mothers. When they gave birth, the baby was presented before a committee and unhealthy babies were thrown from the top of a mountain to die. Sparta produced the best soldiers and its army was invincible. But at what price? It produced no philosophers or writers. When its military power collapsed after 70 or 80 years, having no heritage or culture, Sparta  disappeared in the mist of history.

Athens was a democracy, the result of intellectual innovation, contributing richly to civilisation of mankind. Whereas Sparta, a warrior state failed to contribute to culture and wasted energy and talent on war. There is a choice for us; either to become an intellectually barren, warrior state like Sparta or a democratic republic like Athens with rich cultural and intellectual traditions.

Adapted from here 

Religion, thy name is superstition

An awful lot of people try to impose their false beliefs and certain antiquated social traditions on other people by falsely pretending to be speaking for a god without any good evidence of the existence of any god in the first place and even on the basis of pretending that ancient texts written by men came from that god despite the real world facts which unequivocally demonstrate that these ancient texts teach all manner of false empirical ideas and notions of morality that are primitive and barbaric. Christians who pretend that their ideas are from a god, without any good evidence of even the existence of any such god, and despite extensive evidence that their ideas are false. Christians can't even agree with each other on what it means. There are only several hundred different Christian denominations!

Along with most religious traditions, Christianity is based on all sorts of primitive anthropomorphications. The earth is at the center of the universe, create for man, who is the center (purpose) of creation (man was created first, then woman from man). The Old Testament is so parochial in its portrayal of the Yahweh god, that god is so primitive and barbaric that he choose one particular tribe of humans of a special tribe and commands them to take over a particular geographical territory and slaughter ("slaughter" is the word that is actually used in the Bible) all the children, women, and men who happened to have the misfortune of already living in the towns and village there.

Materialism, or science, on the other hand, comes from the objectification of the real world outside of the emotions and desires and limited perceptions of humans, from the recognition through rational thinking that the world exists completely independently of the human psyche, and that how we feel about reality is utterly irrelevant to determining what the facts of the real world are. Reality is what it is regardless of how we feel about it. The universe is far vaster and more complex than anything comprehended in the primitive cosmogony of the Bible. Man is not the purpose of creation. The earth is not the center of the universe. Even our galaxy is but one of a trillion observable galaxies in the universe, and those are merely the ones we are able to observe.

Saturday, July 21, 2012

class war

India’s biggest car-maker Maruti Suzuki has shut down a plant  following labor unrest which has left one man dead and at least 40 others injured. The company said the dispute began when a shop floor employee beat up a supervisor due to "objectionable remarks" made by the supervisor. The workers' union then prevented management from taking disciplinary action and blocked managers from leaving the factory after work. Over 1,000 policemen have now been deployed at the factory and work has been suspended indefinitely.

The Manesar plant, in Haryana state, around 50 kilometers (30 miles) from New Delhi, employs 2,000 people. There was no pending union demand or dispute that triggered the event in which a senior human resource manager has been killed. But the details showed discontent and a tinderbox situation. The 'Maruti belt', as the area around Gurgaon's industrial zone is called, has seen labour disputes involving companies such as Honda Motorcycles, Ricoh and Sunbeam in the past few years, indicating a broader influence of labour militancy. Last year was bad for Maruti, as its refusal to recognise an independent trade union in June led to a 12-day strike before an uneasy truce. Another two-week strike erupted over other demands in October. The union has accused India's biggest car manufacturer of anti-worker and anti-union activities. A number of union officials were paid to resign from the company. Slowly, but surely, Maruti has started plans to open another plant in Gujarat, with the probable intent of diversifying its labour risk. The state government of Haryana has been industry-friendly irrespective of which party is in power.

“We will de-recognise this union completely,”
said S.Y. Siddiqui, Maruti’s Chief Operating Officer, in an interview on Friday. “There will be no compromise on violence.”
Union leaders elsewhere in Gurgaon say that the violence in Maruti is symptomatic of industry-wide unrest. “Today, it isn’t as if every plant in Gurgaon is violent, but no plant is totally peaceful,” said Raj Kumar, president of the Autoworkers Union at Rico Auto Industries. “The problem is that the management is unwilling to listen to workers. Today, there are no negotiations… There are only fights.”

The Air Con

In the United States, consumption of energy for air-conditioning homes and vehicles has more than doubled just since the mid-1990s. In India, total consumption for air-conditioning is projected to climb as much as ten-fold over the coming decade; air-conditioners already reportedly account for a staggering 40 per cent of all electricity consumption in the city of Mumbai. In Brazil, air-conditioning demand has more than tripled in just five years, contributing to a surge in electricity consumption. Unusually steep increases in electricity demand in southern European countries are being blamed on the proliferation of air-conditioning. The greatest irony, of course, is that by chilling the indoor environment today, we are helping ensure that future summers will be even hotter. Turning buildings into refrigerators burns fossil fuels, which emits greenhouse gases, which raises global temperatures, which creates a need for -- you guessed it -- more air-conditioning. Air-conditioning's massive energy demand is overwhelming efforts to reduce greenhouse gas emissions. This isn't smart.

Take the output from all of the United States’ renewable electricity sources combined, multiply it by five, and it still could not satisfy current air-conditioning demand - let alone serve other uses. The US department of energy projects that wind, solar, geothermal, and biomass electricity generation will indeed expand almost fivefold, but not until 2030. By that year, if the department's predictions hold, total electrical generation from all renewable sources will be sufficient to satisfy only 75 per cent of air-conditioning demand. For everything else, there will be no green alternative.

 Energy consumption is not the only issue. The cool, still, dry atmosphere of the standard home or office has a variety of other unpleasant and sometimes hazardous side effects. Obviously, air-conditioning can play an important role during killer heat waves. But keeping vulnerable members of our communities alive during heat emergencies is one thing; using that as an excuse for neglecting horrible urban living conditions while at the same time tolerating the routine, lavish deployment of chilled air throughout much of the rest of society is another. Well-insulated buildings often suffer from so-called sick building syndrome. Depending on the extent of outside ventilation, toxins and irritants can be ten to 100 times as concentrated in indoor air as they are outdoors. Researchers in Brazil, the United States, and Europe have found that people who are employed in air-conditioned workplaces visit doctors and hospitals more frequently and generally have a higher risk of poor health than do those who work without air-conditioning. Under natural ventilation, people have been found to experience fewer problems with headaches, colds, other respiratory ailments, circulation problems, eye dryness, allergies, and chest tightness. There is lower absenteeism when employees work near windows and can open them. 

In a world without air con and capitalism, a more flexible, more relaxed workplace helps make summer a more pleasant time, offices close, working hours are reduced. Daily afternoon siestas. Yet for capitalists all the see is slower workdays mean less productivity, shorter hours and closed offices mean lost profits for employers. Socialists envisage more people spending more time outdoors -- particularly in the late afternoon and evening, when temperatures fall more quickly outside than they do inside -- neighborhoods see a boom in spontaneous summertime socializing. Rather than cowering alone in chilly home-entertainment rooms, neighbors get to know one another.

 New construction style such as high ceilings, better cross-ventilation, whole-house fans, screened porches, basements and white "cool roofs" to reflect solar rays.  "Green roofs" of grass, ivy and even food crops sprout on the flat tops of government and commercial buildings around the city, including the White House. These layers of soil and vegetation (on top of a crucially leak-proof surface) insulate interiors from the pounding sun, while water from the plants' leaves provides evaporative cooling. More trees than ever appear in both private and public spaces.

Friday, July 20, 2012

beyond just hope

Our world broken down world should not be revived as many well-meaning radicals propose with various reforms and palliatives. It should be terminated for good, euthansia. It means we have to create a new system, and in that monumental task, granted, the odds are against us. But what we need is not naïve hope but whatever it is that lies beyond naiveté, beyond hope.  We have to believe in something more than hope. We're not talking about heaven and Pie in the Sky. We shouldn’t distract ourselves by looking to somewhere or something that we pray to. It's also not about the science fiction or living in domed cities or blasting off to another planet or even inventiing ourselves out of our problems. So, lets not pay any attention to the claims of the religious fundamentalists and the prophets of technology. Socialists are materialists which means dealing with the what is and not the what if. Avoiding reality by praying for deliverance by the hand of God or waiting for deliverance through the wizardry of gadgets are weak and lazy, because they spin fanciful stories about how we can magically avoid a reckoning.

Averting a planetary-scale destruction demands global cooperation, becoming more efficient in using energy, increasing the efficiency of existing means of food production and distribution, and enhancing efforts to manage our biodiversity and ecosystem systems. Humanity has not done anything really important to stave off the worst because the social structures for doing something just aren’t there. We all have to summon the political will to radically change the way we live. If we can do that, we might have a chance to avert disaster.  A socialist's task is to tell it as it, is as much as one can bear, and then all the rest, whether we can bear it or not. To proclain hard-to-hear truths.

The economic system assumes you care only about yourself yet we become fully human only through embracing our humanity when care for each other and care for the larger living world. Our chance of saving ourselves depends on enough people willing to act. We must throw everything into the endeavor to remake the world into what we say we want it to be.

Tuesday, July 17, 2012

food for thought

The Green Economy movement is really a greenwashed attempt to create a new model of capital accumulation for global corporate capitalism, based on "the commodification of the commons." Green Capitalism, like the first Industrial Revolution, is based on a large-scale process of primitive accumulation (a technical term Marxists use that simply means massive theft). The primitive accumulation preceding the rise of the factory system in industrial Britain involved the enclosure of common lands. The new green model of corporate-state capitalism partly based on agricultural land-grab but also on enclosing digital information and innovation, heavily reliant on patents and copyrights than the existing version of corporate capitalism. The "green capitalist" model is intended as a response to the primary threat facing corporate capitalism and its model of capital accumulation: the technological potential of abundance. If allowed to operate without hindrance, the free adoption of technologies and freely replicable digital information would not only destroy most existing corporate profits but render most investment capital superfluous. It's this threat, all the "progressive" rhetoric aside, that "green capitalism" is intended to head off. It's a last-ditch effort to rescue an entire system of class privilege and economic exploitation based on artificial scarcity from the revolutionary impact of abundance.

Organic food is riding a surge in popularity; across the globe, sales of organic food are burgeoning. And where consumers go, the multinational food companies follow: everyone from Uncle Tobys to Kraft, Heinz, Kelloggs and even Coca-Cola has jumped on the bandwagon. And developing countries are joining in too: China's organic exports grew 200-fold in a decade to reach US$200 million in 2004. Australia is also a major exporter, and plans to increase its organic produce by 50 per cent by 2012. Popular or not, it's clear that organic food is not necessarily healthier, nor more sustainable or better for the environment. With the Earth's climate changing fast, and the human population heading for nine or 10 billion, we need solutions based on scientific evidence rather than faith and good intentions.

Rachel Carson's  1962 book Silent Spring unleashed public concern about the dangers of synthetic chemicals, not just to birds and animals, but to humans. The incidence of human cancers were rising and suspicion fell on man-made farming chemicals. There's no doubt exposure to high doses of pesticides is hazardous to health: in countless studies, high doses given to laboratory animals have caused birth defects, sterility, tumours, and damaged organs. But as any toxicologist will tell you, most chemicals – natural or synthetic, are toxic at high doses. The question is not, "do pesticides cause cancer?" Rather, do the small traces of pesticide residue we eat in our food really cause a problem?

Organic does not mean “small family farm,” though big agriculture tends to want us to think that.  Many organics are what can be considered industrial agriculture, grown in monoculture, and take quite a bit of fossil fuels to grow. Organic does not mean “whole food” or even “fresh food.”  Many organics are highly processed, including organic cookies, chips, sodas, frozen dinners and mixes.  It’s still convenience food, which is fine in a pinch, but also higher calories and in more packaging. Organic does not mean “local” or “seasonal.”  Many organics are packaged in plastic and shipped long distances.  New Zealand organic apples, anyone?

Organic food is no healthier than ordinary food. There is little difference in nutritional value and no evidence of any extra health benefits from eating organic produce. The Food Standards Agency, which commissioned the report, and the researchers from the London School of Hygiene and Tropical Medicine looked at all the evidence on nutrition and health benefits from the past 50 years. Among the 55 of 162 studies that were included in the final analysis, there were a small number of differences in nutrition between organic and conventionally produced food but not large enough to be of any public health relevance. Overall the report found no differences in most nutrients in organically or conventionally grown crops, including in vitamin C, calcium, and iron. The same was true for studies looking at meat, dairy and eggs. Differences that were detected, for example in levels of nitrogen and phosphorus, were most likely to be due to differences in fertilizer use and ripeness at harvest and are unlikely to provide any health benefit. However, the review did not look at pesticides or the environmental impact of different farming practices.  The FSA was neither pro- nor anti-organic food and recognised there were many reasons why people choose to eat organic, including animal welfare or environmental concerns.

‘Big Food’ may be much criticised, but  large food producers have millions of dollars invested in their brands and reputations. They also have the scale of operation to put in place specialist safety testing and management.Historically, most food-related diseases are due to bacterial and fungal contamination, so in terms of health consciousness, focussing on pesticides is probably barking up the wrong tree. Three people from E. Coli poisoning related to spinach from a farm being converted to organic production, and 25 deaths from listeriosis caused by cantaloupes from a ‘pesticide-free’, family-operated farm in Colorado. A more recent incident, which may have occurred after the book went to press but confirms the point, is the death of 50 people after eating organic beansprouts from a farm in Germany last year. No matter how hard they try, local organic farmers may not be able to compost their manure properly or to control salmonella.

To achieve high yields from food crops requires disturbing nature to deliver just what the crops need. First off, crops need fertiliser, which is often nitrogen in the form of nitrate and ammonia, because most plants can't draw nitrogen directly from the atmosphere. (Legumes are a famous exception – their root nodules hold bacteria that turn atmospheric nitrogen into nitrate.) Second, there has to be a way of stopping all the other robust plant and insect species from competing with or consuming your crop. Non-organic farmers make use of chemicals to achieve these goals. Just prior to World War I, German chemists Fritz Haber and Carl Bosch learned to make ammonia synthetically. Their chemical reaction is still used today to produce more than 450 million tonnes of artificial fertiliser per year, and sustains the agriculture which feeds about
60 per cent of the Earth's population.

Organic farmers source nitrate from manures, gradually broken down by soil organisms. They use only naturally-occurring products to control pests, such as the elements sulphur and copper; pyrethrins and rotenone (both made by plants); BT spray and Spinosad (both made by bacteria). However, these natural pesticides are not harmless. For instance, sulphur irritates the lungs, and rotenone has been shown to cause Parkinson's disease in rats.

Scientists are unable to test these chemicals directly on humans, so they use rats instead. To establish the maximum dose considered to be safe for humans, they find a dose that's completely safe for rats. Then they divide it by 100. Testing by Australia's national regulator, Food Standards Australia New Zealand, shows that pesticide levels measured in food are either well below the recommended maximum dose or are completely undetectable. People live about 80 years longer than rats: that's 80 years longer for pesticide cocktails to accumulate and wreak havoc. Even so, it turns out that a lifetime's consumption of synthetic pesticides is a drop in the ocean compared to the natural pesticides we consume from the plants we eat. Plants have evolved a vast pharmacopeia of chemical weapons, and we consume many of these 'weapons' daily: caffeine in coffee, solanine in potatoes and psoralens in celery, to name just three.

Even the freshest organic apples – as well as other plant foods – contain natural compounds which, when extracted and given to rats in high doses, cause tumours. Toxicologist Bruce Ames of the University of California became famous in the 1970s for sounding the alarm on the cancer-causing (or carcinogenic) potential of man-made chemicals. But after testing 'natural' pesticides in rats, he called off the warning. A paper he published in 1990 said it all. Entitled, "Dietary Pesticides (99.99 per cent All Natural)", it reported that in a regular diet, people consume about 10,000 times more natural carcinogens than synthetic ones. According to Ames, a single cup of coffee contains more natural carcinogens than a year's worth of the pesticide residues eaten on fruit and vegetables.

A comprehensive review of some 400 scientific papers on the health impacts of organic foods concluded there was no evidence that eating organic food was healthier. If chemical pesticide use was  hazardous to health, then farm workers should be most affected. The results of a 13-year study of nearly 90,000 farmers and their families in Iowa and North Carolina suggests we really don't have much to worry about. These people were exposed to higher doses of agricultural chemicals because of their proximity to spraying, and 65 per cent of them had personally spent more than 10 years applying pesticides. If any group of people were going to show a link between pesticide use and cancer, it would be them. They didn't. Compared to the normal population, their rates of cancer were actually lower. And they did not show any increased rate of brain-damaging diseases like Parkinson's. There was one exception: prostate cancer. This seemed to be linked to farmers using a particular fungicide called methyl bromide, which is now in the process of being phased out. According to James Felton, of the Biosciences Directorate of the Lawrence Livermore National Laboratory in California, who also chairs the study, "The bottom line is the results are coming out surprisingly negative. It's telling us that most of the chemicals we use today are not causing cancer or other disease."

Agriculture, both ancient and modern, has always been about adapting the landscape and finding ways to get more production out of the same land, as the authors point out. The assumption is that what we are seeing is potentially devastating soil degradation and/or enormous losses in biodiversity. In fact, soil degradation is much worse in poorer countries and among nomadic peoples. Big farmers have maintained soil quality and vastly increased yields. The best method to avoid such erosion is ‘no till’ agriculture, which relies on synthetic herbicides and genetically modified crops that food activists decry. The earthworm-rich soils, so prized by organic farmers, are being achieved through contemporary no-till (or no-plough) techniques. One high-tech solution is known as no-till farming. The plough may be the icon of farming, but it turns out that ploughing actually wrecks the soil. Compared to the bad old days where virtually every part of a field was ploughed, these days the scars are restricted to two-centimetre-wide furrows 30 cm apart. No-till systems also win hands down when it comes to hanging on to soils. An 11-year farming experiment by the U.S. Department of Agriculture in Beltsville, Maryland, compared crops grown three ways: conventional tillage, organic methods, or no-till. Compared to the conventional tilled plot, the organic plot was likely to hang on to 30 per cent more soil. But compared to the organic plot, the no-till plot hung on to 80 per cent more soil. (It's possible to combine organic and no-till on a small scale by relying on hand weeding. But that's not practical for large-scale farming. And without tilling, it's difficult to work manures into the soil.) In Australia, most farmers use rotation to get crops out of synchronisation with weeds and to return nutrients to the soil. Natural predators are being used to control pests, and companies such as Dow Chemical are producing safe, short-acting pesticides. In fact Dow's latest pesticide, Spinosad, is also happily used by organic farmers because it is naturally produced by bacteria.

The soil that farmers prize has a structure that resembles a stack of peas with pores running through it. Earthworms and other creatures maintain this structure, and the whole thing is meshed together by the tendrils of fungi and plant roots. In other words – a spongy soil that holds onto water and won't blow away. Too much tillage destroys that structure, so a method of no-till farming had to be developed.  Tillage is used to bury the previous year's crop residue and destroy weeds. But in no-till farming, herbicide removes the weeds and the new seed is sown directly into the stubble of the last crop. Leaving the stubble in the soil means the planet benefits. All that carbon kept in the ground by no-till farming reduces carbon dioxide emissions by up to eight million tonnes per year.

The concept of‘"food miles" and eating local is flawed. Despite its popularity, the concept and its underlying rationale have been convincingly debunked in numerous life-cycle assessment (LCA) studies, a methodology that examines the environmental impact associated with all the stages of a product’s life cycle, from raw-material extraction to disposal of the finished product. Transportation is only one small element of the environmental impact of food production. In the US, for example, researchers have found that the "food miles" segment (the bit from producer to retailer) only accounts for 4% of total emissions, but 83% of a household’s carbon emissions related to food come from the production of the food. Therefore, food should be produced in the most ideal circumstances in order to minimise those emissions. That’s why it makes more sense for British people to eat New Zealand lamb or Spanish tomatoes, environmentally, than eating local, because the efficiency of production more than makes up for the distance travelled. Moreover, buying fresh from around the world makes more sense than storing local production. Indeed, the short hop to the supermarket by car to bring home a comparatively small amount of food may cause more carbon emissions than the shipping - or even flying - of food in bulk from thousands of miles away. You specialise in what you do best rather than being a jack of all trades  , you become more efficient at it and we are all better off. One of the main lessons to be learned from  experience over the last century-and-a-half is that autarkic food policies, relying on their own production or that of their local area can only result in disaster. If improving sustainability and reducing the environmental footprint is the goal, we need to be prepared to use the best tools we have. Going ‘organic’ and/or ‘local’ would mean lower yields and hence more wild land being brought into food production. That hardly seems to count as sane stewardship. Our problem is that we’re not globalised enough. There is one way the world can feed all the billions alive today with organic farming: we all go vegetarian. Half the world's grain is grown for cattle, and this is undeniably a highly inefficient use of soil, farming land and resources. But the reality is that the demand for meat is forecasted to double by 2030.

Modern farming techniques have evolved after decades of pressure from the environmental movement and decades of work by a generation of scientists inspired by environmental awareness. In fact, conventional farming is starting to look a lot like organic farming. For example, organic farmers will use litres of BT spray (BT is a 'natural' pesticide made by the bacterium Bacillus thuringiensis), yet they often demonise the genetically modified (GM) cotton crops that carry an inbuilt supply of BT, and which therefore require less spraying. However, these GM varieties spare farmers – and the environment – from the risks of pesticide overuse. For instance, according to Richard Roush, the Dean of land and food resources at the University of Melbourne, cotton farmers in India have reduced their use of pesticides and accidental poisonings by 80 per cent since the introduction of genetically modified BT cotton.

The free market is seriously flawed, but the answer is not to tinker around with it but to supersede that system with something better and not retreat into the limitations of the past. The real fact of the matter is that there is already enough food to feed the world's population right now and into the future. The US and Europe wastes millions of tonnes of food each year. Quite simply, GM food is not needed to feed the world. Let's farm along with nature, not against it. The message is clear: develop sustainably and conserve thoughtfully. Agricultural biodiversity is the foundation for all food production and our food security. GM crops which have come up in the recent past are the greatest singular threat for biodiversity. A broad genetic base is vital for healthy agriculture and overcoming new epidemics of pests and diseases and for adapting to climate change. Such a base is immensely reduced in the case of GM crops as they encourage monoculture. What socialists seek is a self-organised, decentralised economy, in which ordinary people take advantage of new technologies of abundance. The beauty of the age we live in is that we possess new production technology. So the question is, which model do we want to follow?  Toiling under the domination of bosses and corporations or a society of self-governance, leisure and mutual cooperation. That said, agriculture - of whatever kind - is there to feed people.