Harpal Brar makes some insightful remarks while closes a meeting to celebrate the 120th anniversary of Mao Zedong’s Birth. He notes that despite the towering achievements of Mao, and the CPC and the huge advances in literacy, life expectancy, economic and cultural standing, made since the revolution by the masses of the Chinese people, the overwhelming narrative in the western imperialist world is that Mao, like Stalin, we are told, was a monster.
This is not an accurate reflection of the facts, as shown by Utsa Patnaik’s excellent work, previously reproduced in Lalkar.
We note that the same (now Prime Minister) David Cameron, who Lauds Nelson Mandela to the skies after his death, as a young conservative actively campaigned for the (living, political prisoner) Mandela’s death by hanging – along with all other ANC terrorists – who, he declared, unlike their masters among the ‘civilised’ apartheid regime, ‘are Butchers’.
Mandela is being rehabilitated by the bourgeoisie, to console the toiling masses of Africa and the world, but his revolutionary essence, his anti-imperialist history, his advocacy of the armed struggle against apartheid and imperialism, his communist understanding, sympathies, membership and leadership – all this is being air-brushed out of history.
This is simply because the capitalist class currently hold the purse strings, and pay the most mercenary historians handsomely for painting their despotism in pretty colours, while defaming all liberation struggles of the oppressed.
“History has been turned into a commodity, and the best paid historiography is that best falsified to serve the interests of the bourgeoisie.” History is for sale; and if you are planning the ultimate theft, robbery of the masses of humanity of their collective productive wealth, you CAN pay to have it re-written.
Harpal Brar, Chairman of the CPGB-ML, gives a presentation summarising Marx’s teachings on the state. Key quotations and ideas are drawn from Marx and Engel’s seminal work, “The Communist Manifesto”, Engels’ “Origin of the Family, private property and the state”, Marx’s “Critique of the Gotha Program”, Engels’ “Anti Duhring”, Marx’s “18th Brumaire of Louis Bonaparte” and “The Civil War in France”, and Lenin’s “The State and Revolution.”
It’s an excellent introduction to Marxism, and totally exposes the commonly peddled fallacy that workers can simply vote for socialism – or a social democratic party, such as Labour in Britain – in order to solve their problems.
Workers cannot simply lay hold of the ready-made state machinery (the capitalists’ parliament, army, police force, judiciary, etc.) and use it to achieve their own ends. Bourgeois rule, connections and interests run through these institutions, like the lettering in a stick of Brighton Rock.
The capitalists’ ‘democratic’ state must be smashed, and the working class must have a state of its own, to ensure society and the economy are actually organised in our own interests.
This workers’ state – the dictatorship of the proletariat – will then wither away over a historical epoch, as its functions cease to be necessary, in the transition to the higher stage of communism, when the economic formula “from each according to their ability; to each according to their need” will be applied to production and distribution of goods, well-being and culture.
Red Youth welcomes letters and comments from supporters and friends. Below is a heartfelt letter which we have received from a young comrade in the east midlands. We reproduce it below without change…
Having a family member work for the NHS rarely entitles you to any benefits. Working for the NHS in 2013 is synonymous with working unsocial hours trying to manage the work of a dozen on your own, all the while the sword of redundancy hangs precariously above your head. Having a mother who has worked for the NHS for nigh on two decades now, this is the sort of thing I’m used to hearing when she returns home. Nevertheless, despite all this, my mother has consistently come home with some of the most humorous and also some of the most saddening stories from a workplace that I’ve ever heard. Unfortunately, this story falls into the latter category.
Allow me to set the scene for the last tale she came home with. The hospital my mother works at currently, and has done for the best part of 10 years now, has been relatively ‘lucky’ when it comes to NHS cuts. The hospital (which I will not name to spare it the embarrassment) still stands relatively intact and has no major calamities to plague it. To the voyeur, this is one of Britain’s better public hospitals. If there was ever an apple with a rotten core however, then this would be it.
My mother works in the pathology department of the hospital. Or at least, sometimes she does. Her hospital has experienced such a shortage of staff (many of which due to walk outs due to poor treatment, but more on that later) that she and her co-workers often rotate between three and four different departments simply to cover the workload. Of course, this is masqueraded as a ‘varied experience’ for the staff, but in reality means they can’t afford to set on any more staff.
This tale from my mother concerns one of the other employees at the hospital, a co-worker left to manage an entire department on her own during a particularly busy shift of organizing blood samples, which are obviously quite crucial to the maintenance of patients’ health. Aware of the high workload demanded of its staff, the management’s solution to this problem is to send any excess work on to a nearby (by which I mean around 75 miles) hospital to be completed there. So, worrying that that the workload would go uncompleted if she were to carry on by herself, she sends some of the samples on the 150 mile round trip to be completed elsewhere. All done according to the guidelines she was given. Job done, work sorted, everyone carry on.
This hospital has achieved something of a wonderful bureaucracy of late, where staff can be expected to answer to around half a dozen different ‘bosses’, who don’t really do a great deal of work nor management, and any work or managing they do often conflicts with the work or management of a rival boss. The entire hospital appears to consist of little more than bosses, not sure what to do or who to manage. When the employee was questioned about what was done with the excess samples by another ‘senior’ boss. When she replies, confirming that she did was was instructed, this senior boss’ reply is, ‘that costs too much, you should have done it yourself’.
But what about the patients who needed these samples and who would go without if she was left to do them alone? The reply is, ‘stuff the bloody patients’.
So, what’s the point in this story? It might appear to be just another ‘boss from hell’ story, it certainly is, it’s much more than that. This is not just an isolated incident but a reflection of the way the entire hospital is run. The one thing that has plagued this hospital, and by extension the NHS, over the last few years is the complete disregard for human lives. Sure, these type of stories are your average ‘horrible boss’ story when it comes to any other place of work and I’m sure every person you talk to will have one. But when it come down to it, the ‘horrible bosses’ of the NHS are in charge of people’s lives as well as people’s wages.
In one harsh sentence, this senior boss has reduced the lives of patients at this hospital to little more than a monetary exchange, where if the cost is too high then they are left to rot. But it is not just the patients who’ve been reduced, but also the staff. The management at this hospital have long had a reputation for treating both patients and staff as a little less than human, little more than machines. As is common in so many workplaces, the boss is the craftsmen and the workers his tools. Faceless objects of labour, built to work and little more. This senior is the face of capitalism corrupt, where money is deemed more valuable than human lives.
Obviously, to attribute the failings of the NHS to the management based on a story from one hospital would be foolish indeed. But when the senior boss who was so keen to save money puts time aside in his schedule, which is quite frankly bare, to play golf every week with an even more senior management, then I find it hard not to judge the management for being completely detached and incompetent. The management at this hospital showed an attitude of such inconsideration which has no place in a modern society, let alone its health service.
It is the inconsiderate management that is to blame for the catastrophe that is the NHS in 2013, both within and without the institution. Whilst the hospital management do an excellent job of treating patients and employees like dirt, the management of the country do an even better job of treating everyone like that. Needless to say, the NHS is one of the greatest things that Britain has installed, so why is it being left to disintegrate? The simple answer to that question is because of the inconsiderate, incompetent and detached management, that comes in the form of the government. I write this in the wake of austerity measures, and coincidentally on the 65th birthday of the NHS, so we are all fully aware of the extreme measures that cuts to public services are facing. Only a few days ago, we saw that funding to hospitals, schools and other services was being cut again but somehow our government could justify increasing military and intelligence spending. Rather than nurture its own country, our government has chosen war-making and spying on its own citizens instead of caring for and educating its ill and vulnerable.
There is no justification for this. No excuse can warrant the slashing of public services whilst intelligence and military funding increases. Where is the intelligence in that? Its this kind of behaviour that leads me to label the government as incompetent and detached, but there are no other words to describe them (none I wish to put into print, at least). As it has been for so long, the few in our management seek to benefit themselves whilst the majority lay unattended for. The golf trip is paid for, whilst the many struggle. But where are we, the many, to turn to in such times? There was a time when the Labour Party were the obvious candidates to represent the many, who needed the NHS and the many other public services Britain used to provide. If you weren’t turned away from Labour after the Oil Wars, then you were almost certainly turned away when Labour declared they would do nothing to reverse austerity. What’re we to do, when the devil in the red mask is the same as the one in the blue? The words of Karl Marx spring to mind; ‘The oppressed are allowed once every few years to decide which particular representatives of the oppressing class are to represent and repress them.’
The only thing the many who depend on public services can do is to continue fighting for them. Regardless of how powerful the few thing they are, they are still nought when compared to the many. The people you elected to represent you and your needs, now only represent the needs of themselves and the few. So no, this story is not just an isolated case and is not just the failure of management when it comes to the needs of employees and patients, but also the failure of government and ultimately the failure of capitalists when it comes to the needs of the working class.
The many must manage themselves when the boss is absent, which is why we have to keep up the defence of public interests, not the interests of those who seek to abuse us. The power has always been with the people, which is why they try so hard to repress us and take away that which we need. That is why its so important to keep fighting for the interests of the many, of the working class, of those who tire of seeing their rewards be reaped by someone else. We must remain defiant in the face of capitalists, for true power is possessed only by the people and the more the few are made aware of this fact, then the sooner we might seek to gain our rightful place as people, not just as tools.
In early December the Greens held a meeting at the University of Manchester attended by Red Youth. The intention of the Green Party on this evening was to reach out to students, and to persuade them to join the Greens in a fight for a better future both environmentally and economically. What they didn’t tell you is that you have to be RED to be GREEN!
The evening began with a brief introduction from the leader of the Manchester Young Greens, introducing their deputy leader and MP for Dudley, Will Duckworth, and the newly elected party leader, Natalie Bennett.
As expected, the speaker’s comments were guided not by values of honesty and truth but by the typical opportunism of bourgeois politicians– say what the audience wants to hear. For the opening period, one may have even mistaken the Green Party for a socialist party (!), talking of abolishing tuition fees and giving everyone an opportunity at higher education, talking of the abolishment of poverty, talking of the need to tackle the agenda put forward by the coalition government, as well as Labour, and stressing the importance of renationalising the railways.
Behind the honeyed words that most left-wingers would agree with, there remains the fact that the Green Party is not that much different in outlook than the ‘old’ Labour Party of 20 to 30 years ago. The Green Party still adopts the system that has caused countless lives to be lost through poverty, neglect, war and oppression – namely capitalism. Just like the Labour Party of the past, they make endless promises to the masses; but the system upon which these promises rest is the very system of imperialism which gives a few crumbs to the workers in the imperialist countries whilst savagely looting the workers in the colonies. What the Green Party has not realised is that capitalism is in profound crisis and the ability of the system to hand down these crumbs is now over.
It is true that many of the policies spoken of, such as electoral reform, opposing the “oil-wars” and the abolishment of poverty, are the policies that we’d all like to see enacted. But these policies can never bring lasting social justice and can never be achieved for the majority of society, and sustained into the future, if we rely upon capitalist economics and private ownership of the means of production. It is for this reason that the Green Party should break its ties with social democracy, and instead should join the resistance against imperialism and unite with the working class and oppressed masses of the world – but don’t hold your breath! They claim to be the only viable alternative – but the rights that they seek to protect are not merely the rights of the planet, critically the Greens defend the right of private property – that is the right of individuals to own land and the natural resources which are bestowed upon individuals by mere flukes of birth or are captured, colonised stolen or forced from the hands of their indigenous people violently expropriated by capitalists, “developers” and “entrepreneurs”, as they run rampage across the planet, poisoning our soil, air and water in their pursuit of maximum profit!
After the meeting, I had a chance to have a few minutes with Will Duckworth. With time being pushed, I decided to opt for questioning him over the imperialist system and its never ending inherent rive for profit and war. He went on to say that war was not the answer, and that “selling arms and weapons to countries isn’t going to create any peace”. But after I elaborated, in the case that if it weren’t for Russian supplies to the Syrian government then the western imperialist predatory takeover may have already happened, he was unable to disagree. Ultimately its not weapons that are the problem, its in who’s hands these weapons are wielded! Based on his reaction, I would say that the Green Party is no different than a liberal-do-gooder party, saying things that they know the public will want to hear. The Greens are too afraid to stand against those real enemies of the people and the planet – the robber barons of finance capital!.
Sincerely, I hope that the Greens and many of their more progressive members make a decisive turn towards socialism, but with the fact that they still base their philosophy on the capitalist system– which is totally dependent on turning man into wage slaves – only reaffirms my conviction that the abolition of private property, the socialisation of the means of production and the taking into common ownership of the natural resources of our planet presents the only long-term sustainable future for our species and our planet!
The following article is translated from Marxist Leninist Henri Houben’s book La Crise de Trente Ans, Chapter 10, with thanks.
It is tempting to try to separate ‘real’ [economic] activity, ie, production, on the one hand, from the financial sphere on the other. This seems to correspond with the modern economy. But is this distinction appropriate? We must return to the fundamentals of capitalist development.
Karl Marx approached this question from the starting point of the concept of accumulation. This process has three phases: first, an enterprise creates a profit; second, a part of this profit is reintroduced into the production process by way of investment; third, these investments allow an expansion of production levels and the creation of extra profit as compared to the first cycle … and so on and so forth.
So a firm needs to make as much profit as possible; this is what will determine its entire progress. And it is necessary that enough of this profit should be incorporated in the new process of production to lastingly increase capital. That is the investment. If the greater part of the excess is distributed among shareholders or invested elsewhere, the enterprise will not be able to grow. Finally, capital must itself increase as a result.
These are the three characteristics that will decide whether a company is ‘competitive’ or not. It is not profit alone, because it is the level of capital that will influence future profits. It is not capital alone, because capital on its own does not necessarily give rise to a larger future profit. It is their dynamic combination which gives rise to a company’s ability to accumulate.
A firm that accumulates more, and faster, than its competitors is going to impose its norm on the sector as a whole. Thanks to its extra profits, it is going to be able to invest more, acquire technological innovations more rapidly, and adapt itself more easily to variations in the economic climate and in demand. It is going to ‘grow’, while the others, if they do not keep up the pace, risk being left behind.
For competitors, there are only two possible solutions left: either they must merge, or they must get the capital they need from financial institutions. The supplementary capital supplied by the financial sector (whether through loans or through money raised via the issue of shares on the stock exchange) can give its recipients a real competitive boost.
Just like recourse to drugs in sport, this capital injection can give its user strength at a given moment and even force the market ‘leader’ itself to go in search of funds in order to stay ahead in the sector. In this way, as capitalist competition progresses by means of a furious battle, the financial sector, which started out playing a secondary and supplementary role, becomes absolutely central, because it is this sector that feeds the combatants the capital that is essential for their accumulation.
Historically, it has been the banks that played this essential role. The first to take on this function on a large scale were Belgian establishments, starting with the Société Générale de Belgique, and followed by the Bank of Belgium. From 1835 onwards, they transformed part of their discounting business [ie, the purchase of future assets, especially debts owed to the customer, at a discount in relation to the amount expected to be received, which really amounts to lending at interest against the promise of repayment from future receipts]– that had by then virtually metamorphosed into long-term lending (since ‘discounts’ were being perpetually renewed) – into the purchase of shares in industry, especially in coal and metal mining.
Having acquired control of over 40 percent of Borinage coal production (at the time the most important in the country), the Société Générale reduced the competition between the different mines and attempted to impose monopoly prices on its main markets both in Belgium and in northern France. After 1850, the company became a major player in the development of railways.
The bank thus became a decisive influence in Belgium’s industrialisation, one of the first and most important of the 19th century, having sunk its claws into three crucial sectors: the collieries that provided coke to the metallurgy companies, which were in turn providing rails to the railway companies.
Without the extra funds brought into production by Société Générale, what would have become of Belgian economic development? How many mines would have closed down sooner, not because they were exhausted but because of the bankruptcy of their exploiters? Would the coal-mining companies and the metallurgical industries have been able to stand up to English competition, which was particularly virulent at the time?
The success of the Belgian banks was emulated in other countries. The German banks, soon to be given the nickname of the ‘Four Ds’ because of their names (Deutsche Bank, Dresdner Bank, Disconto Gesellschaft and Darmstädter Bank), modelled themselves on their Belgian counterparts to create institutions that attracted deposits and granted loans, but also took a direct part in industrial and commercial businesses. They were what are called ‘universal’ or ‘mixed’ banks, as opposed to commercial banks, which limit themselves to lending and taking deposits. [In English, a bank whose business involves direct investment in companies would be called a merchant bank, though nowadays most banks are mixed to include a merchant banking business besides other types of banking operation.]
As we have explained, the role of the banks was taken over by other forms of financial institution. After the crash of 1929, several countries introduced laws that forbade the same entity to carry on both ‘commercial’ and ‘investment’ activity. And then, the amounts required for certain types of multinational investment became too large to be provided by a single establishment. The close links between industry and the banks weakened.
But this did not imply that industry had regained its independence. On the one hand, a good number of multinationals created their own finance departments, with assets outstripping those of many banks. At its height, between 2004-5, the financial subsidiary of General Motors (GMAC) had assets to the value of $573bn. Only the largest banks in the world administer larger sums.
On the other hand, as we have already seen, the process leading to dependence reconstituted itself, albeit no longer around banks properly so-called, but around the desiderata (requirements) of new financial players such as pension funds, investment funds, hedge funds, private equity funds, and so on.
This shows that the mechanisms that led to the domination of banks [the need for higher concentrations of invested capital] are still operative. There is still today a battle for accumulation – in fact, it is more active than ever, in certain sectors at least. And the two central features of accumulation remain the creation of profit and the supply of capital.
There is nevertheless a very small difference with the past: formerly, a bank that took over a business that was in difficulty, restructured it and reassembled it with a view to this enterprise snatching the role of leader and imposing its authority on others. But the new finance capital is far more destructive, following the logic of immediate profitability: the company taken over has to contribute its share of costs immediately, even if doing so propels it towards certain demise.
The car industry gives an excellent example of this development. In this sector, the uncontested leader is Japanese car maker Toyota. Way back, it put into place a system of production called Toyotism, which perfected traditional Fordism. This system allows it to capture additional surplus value, and to make globally superior profits. Moreover, its methods of providing a return on capital, as is often the case in Japan, offer the possibility of devoting a major part of the profit to investment.
In 1956, Toyota did not make even 50,000 cars. That year, 4 million vehicles rolled out of the General Motors factories. The Nagoya industry’s share only represented 0.4 percent of global production. In 2006, the Japanese car maker overtook General Motors and stripped it of its rank as the world’s foremost vehicle producer.
As far as profits are concerned, the Japanese enterprise has been beating record after record since 2000. In 2003, it was the first car manufacturer to have a net profit higher than $10bn, reaching $15bn in 2007 (Ford had declared a profit of $22bn in 1998, but this was as a result of exceptional circumstances). In 2008, Toyota suffered a loss of $4.3bn as a result of its major exposure to the US market and the fall of the dollar in comparison to the yen.
In 2007, Toyota owned capital amounting to almost $120bn. This total had doubled since 2001! It is a sum equivalent to the combined investment capital of Daimler, Volkswagen and Peugeot.
In order to be able to invest more, the Nagoya company puts pressure on its competitors until they go bankrupt, as is shown by the cases of General Motors and Chrysler. Here, Toyota’s advantage is such that even new finance capital provided by the private equity fund Cerberus, which bought Chrysler and half of GMAC, was unable to save them. That required intervention by the US state.
Finance capital [the domination of industry by banking capital], therefore, is not a deviation from capitalism but a necessity arising from the intense competition between larger and larger enterprises. Its domination over the ‘real economy’ is therefore entirely unsurprising.
Since the beginning of the 1980s, the rivalry between capitalist powers has given rise to two opposing models, which are sometimes called the Anglo-Saxon model and the Rhenish model (‘Rhenish capitalism’ is a term popularised by the work of the French economist Michel Albert in his 1991 book, Capitalism Against Capitalism). These models are models of two different kinds of alliance between the world of finance and the world of production.
On the one hand, there is the model that prevails mainly in Germany and Japan, where industry is supported by banks that are almost omnipotent, and this economic whole receives the support of the state machine, with the links between politicians and business being extremely strong. It is more or less a continuation of the structures put in place in the 19th century based on the universal bank.
This is a game at which the US is a loser. Therefore the US ruling class much prefers its own Anglo-Saxon model of development: ie, the supply of the necessary funds by financial markets (above all stock markets), which supply the funds needed for accumulation and are available more or less throughout the world. The US therefore uses all its power, including its state [military] power, to impose this method on the whole world.
These endeavours have been greatly helped by the fall of the USSR, which gave free rein to Washington, and by the creation of the WTO, which simultaneously sanctified free trade in commodities while at the same time defending intellectual property rights, to the advantage of existing multinationals.
With this ‘globalisation’, the German and Japanese models [being largely circumscribed by their countries’ respective frontiers] were at a disadvantage. Of course, companies like Toyota and Honda came out all right. But the mighty Japanese mechanism for accumulation is at a disadvantage. It is not designed for overseas operations. Its credit establishments were driven to the edge of bankruptcy by the bursting in 1989 of another bubble, affecting both financial and real property assets, that was specific to Japan. In order to avoid failure they were obliged to merge. Today, there are only three large banking groups in the archipelago: SMBC, Mizuho and MUFG.
Financial problems also shook Germany. The Dresdner Bank was taken over in 2002 by Allianz, before being resold in August 2008 to one of the other banking giants, the Commerzbank, which was itself obliged by the European Commission to offload half its assets when it had to receive support from the state to avoid bankruptcy. As for the Deutsche Bank, it gradually transformed itself into a strictly financial institution, abandoning its direct influence over German industry.
Financial development over the last few years has been penalising firms, especially banks, that keep hold of their stocks and shares rather than speculating on their rise and fall.
Today, the US, which once lagged behind Germany and Japan as regards competitiveness, has opted for a finance capital formula that can certainly be described as ‘hard’, ie, for autonomous markets where speculation is welcome and where today’s profits are snatched at the expense of the future, because what matters is one’s stock exchange valuation, ie, values which incorporate expected future profits.
Finance capital made in Germany or Japan cannot do the trick, quite simply because in the short term it cannot accumulate as fast. This is why it is in decline and is giving way to the financial domination of the American system …
In the 19th century, too, it was the countries that needed to catch up with globally more profitable British companies that sought support from banks and brought about the development of what became the finance capital of the time. In his analysis of the financial structure of capitalism worldwide, Pierre Grou stresses: “The special problem of control that arose at the end of the 19th century is that relating to the later-developing capitalisms of Germany, Russia, Belgium, the US – where industry needed the banks in order to be able to finance the accumulation of capital, with British industrialisation as their common model.”
It is they who in the end imposed the system of finance capitalism on the whole planet. And British capitalism was eventually overtaken, since it did not have enough companies with sufficient concentration of capital to compete with the American or German companies and others.
In the same way today, the US lags ‘behind’ Germany and Japan as far as competitiveness is concerned. So the US has opted for a different formula for finance capital that provides gigantic short-term profits.
The development of what seems to common sense to be ‘financial exuberance’ is not therefore a deviation within a capitalist system that is basically healthy: it is the logical outcome of a battle between the US, European and Japanese giants, expressed in economic, political and military rivalry between these three centres … On this point, too, the financial crisis is a crisis of capitalism as a whole.
The social and the parasitic
This capitalism is destructive. This is not only because of the development of financial excess – the problem is deeper than that. Financial domination over capitalism is not really surprising. It is the domination of money capital that is privileged at every level because competition prevents any other kind of action or reasoning.
The exaction of tribute by powerful financial conglomerates is nothing but the last stage of a process [the redistribution of profit among different sections of the exploiter classes, to the advantage of some and disadvantage of others] that resides in the very heart of production and is where everything begins to totter (something which tends to get forgotten).
Since the 1980s, the major multinationals have been abandoning the diversification strategies that were especially fashionable a decade earlier, as well as the vertical integration that Ford had developed to the extreme at the start of the last century. The multinationals instead focused, in their own words, on their ‘core business’, the central kernel of their activities, leaving other activities to other firms, be they themselves giant providers or merely entirely dependent subcontractors.
In the car industry, Toyota was one of the forerunners, as was Toshiba in electronics. Japanese companies built a system of production on a pyramid of subcontractors. Above them all is the manufacturer, ie, Toyota, which specialises in the assembly of cars and the production of strategically important components such as the motor.
Below are the high-ranking subcontractors, the suppliers of lesser components, often companies in which Toyota has some equity (although not generally very much). These enterprises, of which there are 168, are relatively large. They themselves obtain their supplies from the 5,427 second-ranking companies, which are smaller and which manufacture the components needed by the first-ranking subcontractors.
Finally, the base of the pyramid is made up of third-ranking and even sometimes fourth- or fifth-ranking companies. These 41,703 businesses generally employ fewer than 10 workers and produce parts of components or components of components to second-ranking suppliers. This reliance on the smallest of subcontractors tends to involve workers being subjected to the most precarious of working conditions.
This system has been copied by firms in other countries and in several sectors, including in car production. In the US, this system was accompanied by modularisation, ie, the production of modules, a kind of integrated sub-assembly that can be finished off by franchisees. Whereas Toyota developed a network centred on its geographical location in Toyota City, US companies use the new methods to decide which location will be the most suitable for production. “Thanks to modularisation, one can divide up the system of production and distribute it to the four corners of the earth.” (Suzanne Berger, Made in Monde: Les Nouvelles Frontières de l’Économie Mondiale, Paris, 2006)
As from the middle of the 1990s, giants such as IBM or Hewlett-Packard turned towards the provision of ‘services’ and sold off a proportion of their factories. The owner of Alcatel, Serge Tchuruk, hailed ‘the factory-free enterprise’. Multinationals focused on technological activities: design, research, marketing, image and the manufacture of strategic components.
In the textile industry, a similar phenomenon took place. Phil Knight, the Nike CEO, explained the change within his company: “For years, we thought of ourselves as a production-oriented company, meaning we put all our emphasis on designing and manufacturing the product. But now we understand that the most important thing we do is market the product.” (Quoted in Benjamin R Barber, Consumed – How Markets Corrupt Children, Infantilise Adults and Swallow Citizens Whole, New York, 2007)
Nike no longer makes anything. It gets its subcontractors situated in the third world to do it. This situation is imitated by its competitors Reebok and Adidas.
This process is sometimes described as the ‘end of the giant dinosaurs’, ie, giant enterprises. But in reality, this network of small units, which all labour in a single chain of value to create the same merchandise, is all under the tight control of the corporation that issues the instructions. This is the case in the car industry, where the manufacturer always retains control over the network by controlling prices or quality criteria. It always sends in its teams to verify how the manufacture is being done and to give appropriate advice as to cost reduction.
In the matter of distribution, the big food or clothing manufacturing chains equally impose their conditions. A giant such as Wal-Mart sits on a network of 68,000 suppliers. To ensure ever-lower prices, it presses on them even to relocate, notably to China. It has established there a purchasing depot in Shenzhen (in the south near Hong Kong), whose purpose is to find companies that can deliver at unbeatable prices, and also to incite competition between its suppliers.
This system facilitates what in Marxist language is called the transfer of surplus value. In other words, the value that is created by a subcontractor is not retained by him. As a result of the low prices at which components or goods are bought, it is the company that places the orders that obtains this advantage.
For example, in the case of Wal-Mart, as is explained by the head of a large sports clothing manufacturer, the following are the conditions in which he is expected to deal: “Wal-Mart’s philosophy is ‘always more’. They don’t always want the cheapest, but the best quality at the lowest price. If I sell a product for ten dollars this year and try to sell it for ten dollars the following year, they won’t be happy. Every year, what we do has to be ‘always more’ advantageous to them.”
Thanks to this constant pressure, the profits of the distribution giant went up from $482,000 in 1967 to $13.4bn in 2008. Since 1967 it has never shown an annual loss.
This is also true in the car industry. Toyota, and following it other car makers, insists on continual rises in productivity among its subcontractors. If necessary, the Nagoya company will assist. In this way, Toyota organised its subcontractors from 1965 onwards to move to just-in-time and total quality management, two fundamental concepts of Toyotism.
If a supplier’s costs remain too high, it is pitilessly eliminated. If, on the other hand, it can reduce them, Toyota will allow it to keep the extra profit obtained in the current year. The following year, however, that profit will be swallowed up in the lower prices that the subordinate company will be required to accept. This system allows Toyota to encourage the supplier to seek out ways of increasing productivity while in the end winning for itself the gain in surplus value.
Furthermore, this method is deployed throughout the production network, since the top-level subcontractor is supplied by second-rank subcontractors, towards whom he will behave in like manner.
US statistics show that in 2006 a production worker in a car factory [apparently] created on average a value of $190 an hour, while his colleague working for a subcontractor only provided $86 – only about half. The only plausible explanation for this difference is the transfer of value (and of surplus value) from the components sector to the assembly sector, a mechanism achieved through the constant lowering of the price of the components purchased by the multinationals. In this way, part of the value created by subcontractors is transferred to the manufacturers and accumulated in the form of profit.
This same process applies when the suppliers come from the third world. Let us stress that the multinational is not only taking advantage of the low wages that prevail there, but also of the under-valuation of values produced abroad, an undervaluation that can be reflected in the continual depreciation of the currencies of the countries of the South.
Table 1 shows the evolution of hourly value added in different countries that are the main exporters to the US.
It can be observed that, in general, there is a large gap between the value attributed to an hour’s labour in the US as opposed to that produced in other countries. In 1981, an hour’s labour was productive of about $16 in the US, $4.6 in Singapore, $2.6 in south Korea, etc.
It is obvious that the hourly added value can depend on the technological structure of the country’s manufacturing industry. If the country attracts a large number of clothing companies it will generate low hourly added value; but if, on the contrary, it is stuffed with IT, pharmaceutical or biotechnology companies, the hourly added value will be large.
Nevertheless, by and large, in 2006 an electronic component produced in Taiwan for the equivalent of £12 was worth on average £15.50 as part of the product when finished in the US. One can readily appreciate the profits to be made by the commissioning companies.
The advantage for these multinationals is not confined to this transfer. It extends also to the great flexibility of production, which would be impossible if the factories belonged to them.
Toyota makes sure it always has two subcontractors for every component it buys. In 1988, feeling that it was becoming too dependent on its electronics subsidiary, Denso (in which it had a 33 percent stake), it built a factory at Hirose (in the north of Hokkaido island) and recruited electronics engineers to work there. It considered that it could not allow itself to be tied to Denso alone for strategic components that made up 30 percent of the value of each vehicle.
The consequence of this system has been an explosion in the profits of the big manufacturing industry enterprises, as is shown in the graph in Table 2 …
Until 1991 the increase was relatively constant. Then profits doubled in 1995 to $188bn. And then almost doubled again in 2000. The crash of 2000 caused a fall: in one year the companies lost half of what they had gained. But six years later their profits multiplied by five. A record gain of $790bn was realised in 2007, a sum equivalent to the production of the whole of Africa excluding South Africa, or to the production of 900 million people! In 2008, the crisis again brought a fall in profits.
It is from these gains that finance draws its income. Without this phenomenal growth, there is no way of securing the minimum expected return [on invested capital] of 15 percent. Here, too, the disproportionate development of international finance is reflected in the insistence of the ‘industrial’ or ‘commercial’ multinationals on extracting for themselves all surplus created on the planet. It supposes a massive transfer of revenues in favour of those who control these giants’ capital …
It would be presumptuous to affirm that it is the financial sector that has caused this phenomenon and that it was this sector that, by demanding a return of 15 percent, gave rise to subcontracting, relocation and transfers in favour of the north. Even though they are linked to finance capital, Toyota and Wal-Mart are controlled by proprietor families (the Toyoda family in the case of the former and the Waltons in the case of the latter). The relevant changes were often introduced in relatively quiet times, well in advance of any financial exuberance.
It is nevertheless obvious that the requirements of the financial sector for a return of this magnitude had the effect of accelerating the adoption of these methods of capturing profit on a planetary scale …
The income produced by the lowest-level subcontractors, many of whom are in the third world, are not retained by them; they are absorbed by the larger suppliers. Subject to exceptions, the latter cannot retain these advantages; they are obliged to transfer them to the biggest multinationals, which dominate the world market and make everybody pay for the ‘surplus value’ of their technology, their names and their trademarks.
Of course, the mechanisms through which the gains make their way up the chain to the financiers can differ: through payment of dividends, payment of interest or other income, or incorporation into stock exchange values of expected future results.
Contrary to the traditional links between the banks and industry, which put credit in charge of conglomerates that are sometimes totally productive, the new finance capital grabs all it can in whichever way is quickest. Thus the average participation of hedge funds in the capital of major firms has risen to about 10 percent of the latter. Direct control is not the main objective; if the fund is not happy with the management then either it changes it, if it is strong enough to do so, or it moves its investment elsewhere. This predominance of short termism bothers quite a few commentators.
Above all, contrary to what is often believed, the socialisation of production has never been taken to such a level as it is at present. The 200 largest industrial companies in the world have since 1973 employed between 18-19 million people. In fact, they have vastly greater control than did the big enterprises formed at the beginning of the 20th century, and their power stretches across national boundaries.
Analysing this development, David Korten, an active participant in the World Social Forum, writes (retranslated from the French): “The pro-multinational liberals regularly insist that centralised economic planning is totally inefficient and incapable of responding to consumer preference. Nevertheless, the prosperous multinationals exert more control over the economies bordered by their product networks than the planners in Moscow ever had over the Soviet economy.
“Central management buys, sells, dismantles and closes production units according to its whim; it recruits and dismisses individuals with a stroke of the pen; it moves its factories to wherever it wants in the world, and decides on the percentage of receipts to be provided by subsidiaries to the parent company; it appoints and dismisses the directors of the subsidiaries; it fixes the amounts of transfers and other conditions governing the transactions taking place between the different companies that are members of the group; and it decides whether independent suppliers are able to buy and sell on the open market or are restricted to dealing with subsidiaries belonging to the group.”
All this amounts to an unimaginable development of financial parasitism, since the decisions taken by private individuals have only one aim: personal profit. It results in the routine killing of the goose that lays the golden eggs through demanding returns of a magnitude that are unobtainable in the long term. This in turn gives rise to an increase in fraudulent operations [as companies try to pretend they are delivering to the required standard in order to keep their investors happy] (Boesky in the 1980s, Enron in 2001 and Madoff more recently).
Even the defenders of capitalism are worried about these facts. For example, George Soros has said: “If people like me can bring down governments, there is something rotten in the system” …
Joseph Stiglitz makes a comparison with the ‘robber barons’ of the end of the 19th century – the Vanderbilts, Fisks and Goulds – who enriched themselves in a scandalous manner on the backs of the workers of the epoch through operations that were not far off being fraudulent, or were of dubious morality. But he is far more critical of today’s speculators:
“The rail barons of the 19th century, who enriched themselves through use of their political influence, at least left behind them an inheritance: railways, rolling stock, which unified the country and dynamically promoted its growth. What inheritance has been left by so many dot.com millionaires and billionaires, the management of Enron, Global Crossing, WorldCom or Adelphi, except horror stories to tell future generations?”