Marx and the Nation

Many people in Scotland, as indeed throughout the capitalist world, have been observing the most incredible seismic changes in the economic system during which all the ‘rules’ and ‘values’ have been ignored and a new great threat confronts them and their children and grandchildren.

Most people do not spend too much of their time thinking about politics or economics; all they want and expect from the political/economic system is that they are allowed to get on with the important matter of making a living and seeing their family develop and flourish. People like me, and most of us who support the SLR, are not ‘normal’. We spend too much time considering political and economic theories to be normal, and we need sometimes to stand back and see how political ideas are taken up by the people as they confront changes in society imposed on them and how they react.

The capitalist society which we have lived in all our lives has appeared to meet the requirements of most normal people in Scotland as in many other places. People on the whole have had a ‘good’ standard of living. Good of course is a relative term which relates to their experience of their parents situation. They have seen gradual improvement in living standards since the war, and have come to expect that this will continue into the future for their children. The free market system they know can be very harsh on them at times but it is considered ‘fair’; as it has appeared to treat everyone the same, without distinction.

Since 2008 however with the financial crisis everything has changed, the stability of the system is seen to be much more fragile than it appeared. The free market is no longer equitable, big banks which got into huge debts are not to suffer the consequences, as the market demands, but managed to get money from the Government which we have now got to pay for. They are also being told that they can’t afford to have what they expected for their future, and that it will be even worse for their children.

Now at this stage a change starts to take place with normal people; they start to give more attention to what has caused this difficulty (what Marx described as class consciousness) and to look with more attention on what politicians and economists have to say when confronted by this economic maze and what are they finding? Confronted by the seemingly intractable economic problems neo-classical economists are at a loss to explain the situation and resort to uttering irrational clichés which suggest that the ‘market’ is responsible for irrational decisions or demands. This is no better than people suggesting we should make sacrifices to an incomprehensible all powerful god who must be appeased if he is to show us favour.

Adam Smith’s powerful book written in 1776, after having studied early capitalist development in Glasgow, first identified the significance of the ‘free market’ as an idea and his influence into what we now call economics is of the highest order even to this day. After Smith’s death the so called “classical” economists gave extended powers to his free market concept and postulated that such a market would always tend to equilibrium at the maximum use of resources, a sort of self-regulating system which left to its own devices would ‘correct itself’. (Smith himself never made such claims.)

As the capitalist system falls apart small states with good social structures and natural resources will be in a better position to adjust than big states with much of their ‘wealth’ held by big financial institutions

Karl Marx found Adam Smith’s work extremely interesting and he based much of this economic theory on it. While Marx incorporated Smith’s view of the important features of the market in his work Marx had two significant things to say about the market:

(a) He rejected the ‘classical economic’ assertion about the self regulation of the market and indeed demonstrated that it was unstable and cyclical.

(b) He pointed out that the definition of capital (rent in Smith’s original work) as an element of production requiring a return per unit, was flawed and would result in a falling rate of return on capital over time, which in his view would destroy capitalism from within.

Marx’s observations about the cyclical nature of the market is now widely understood because of the work of John Maynard Keynes who addressed this and wrote in a language much easier to understand than Marx had done and indeed wrote at a time when normal people were seeking answers to the economic crisis of their day. Keynesian economists recognise the way out of a cyclical downturn in a free market (to ‘grow your way out’) is the stupid idea of allowing the market to self-regulate its way out is nonsense. However Keynesian economists do not offer a long term solution to the present situation, and can’t explain the high level of debt world wide and the high inflation with recession.

I believe that Marx’s second point is very relevant here: in an investment, production and distribution system based on capital as an element of production then a ‘return per unit’ of capital has to be found for the system to go forward. However as economies develop the ‘capital’ composition of each unit of production relative to the ‘labour’ composition is high and is constantly increasing. Which means that the more advanced an economy is the more capital each worker will need per unit of production. Therefore the more ‘debt’ he/she will accrue in order to produce. Such a system leads to the creation of a small gang of super-super rich and a population in debt to them. Does it sound familiar?

This problem is not explained by neo-classical nor Keynesian economists, and can’t be resolved while we continue to evaluate capital as an element of production requiring a return per unit. However it is quite simple to resolve if we reclassify capital as “consolidated labour” a concept Smith was working on, and Marx completed. If we do that then we can pay the full value for the capital required without inhibiting production or incurring un-payable debts. It has social consequences of course in that the increasing flow of capital (surplus value) to the super rich will dry up but while unacceptable to a greedy few this is not a problem for the economy, or the contrary it is a solution.

If we ask people to look at what happened in the Second World War is it clear that the wholesale destruction of capital (without compensation) did not inhibit production, nor were debts allowed to restrict investment – yet the country came our of the war much much more productive than when they went in and inflation was contained. The difficult question is, can we today in a small country like Scotland withstand the huge consequences of the collapse of the multinational capitalist empire which our country has been a founding member off, without dire consequences for the Scottish people. Well that is a question we are going to have to face and which we can’t avoid so it would now be prudent to give it careful attention.

Faced with this approaching economic hurricane many will be tempted to look for protection within some bigger entity such as the British State. I take the very opposite view; I will argue that the big ship ‘UK Enterprise’ is seriously damaged and holed below the water line and that it will be one of the first casualties in the coming storm. So our wisest course of action would be to cut all the ropes and move out a short distance from her so that we are not dragged down in her wake.

The hurricane which is building is centred in the financial sector of the economy and it is from this sector that it will once again strike. The UK economy has a relatively weak manufacturing sector, and a weak raw materials base while having a huge financial services sector. The UK economy will be hit early and hard, if the capitalist financial system collapses. I very much agree with much of the main points being made by Jim and Margaret Cuthbert in their article in SLR Issue 66 and I quote them :“…to redress the problems an essential role has to be played by the nation state”. The “problems” which they are addressing, while described in a different context, are not significantly different from what we should expect as a result of Marx’s analysis of capitalism’s long term instability. I also agree with their assessment that in terms of the nation state required to protect the people from the worst effects of the economic hurricane and to rebuild on a new model of economy then Scotland as a nation state is well suited for this task.

The answer to our present economic problems does not lie in hiding in a multi-national super state.  Indeed as the capitalist system falls apart small states with good social structures and controlling ‘real’ natural resources will be in a better position to adjust to the situation than big states with much of their ‘wealth’ held by big financial institutions which will disappear like “snaw af a dyke”. For those of us on the left in Scotland, if we recognise that a powerful economic storm is about to hit us, whatever its cause, then we have a duty to look for and identify the safest way forward for our families and our nation.

In this regard we are perhaps fortunate; the Scottish Government in Edinburgh has just been given a strong mandate from the people and has a united majority Government which is keen to get full economic powers, and to follow a Keynesian strategy and to defend the public sector, and follow a more egalitarian type of development. This Scottish Government, and this economic strategy will come under massive and sustained attack from the conservative (small c) and the unionist elements in British politics supported of course by multi-national capitalists.

The great Labour Party, which was once the hope for the future of many Scots, is now in open warfare and disintegrating before our very eyes, but the current leadership in Scotland, and any foreseeable leadership, will undoubtedly take a strong unionist stand and attack the SNP Government and it’s policies in its eagerness to be seen in the right light by the right-wing UK leadership of this much corrupted party. But in the political situation we find ourselves political parties are not the most important thing. It is policies which are most important. The Labour left should fight for the dying heart of the Labour Party and attempt to salvage it from the corruption which encircles it even if that does split the party in two. For a new reinvigorated Scottish Labour party which was prepared to support the SNP Government’s position and if necessary criticise it from the left would be a breath of fresh air in Scottish politics and a good service for Scotland’s democratic and economic future. This would ensure that we had a strong left supported Scottish Government in a strong position to face the disruption and confusion which the collapse of capitalism will undoubted bring to Europe and America and much of the world.

This should enable us in Scotland to emerge from this disruption with a strong message for Europe and the rest of the world and an economy which has many of the features which we could recognise as the beginnings of a democratic socialist state. If as socialists we want to play a wide international role and do not want to be restricted within a narrow nationalist classification we need have no fear because if we do emerge from a collapsed capitalist world with our feet firmly on the ground and our economy moving forward strongly again we will get the opportunity to play a full international role without doubt.