Sunday, 21 August 2016

World Beaters

With the close of the Rio Olympics, I was surprised to note a pretty close correlation between the ranking of countries who won gold medals in Brazil with ... the power ranking of the respective countries in the world economy! The data are taken from the official Olympic data and from an index that was updated for my new book, The City: London and the Global Power of Finance.

My book gives a chart derived from 2013-14 data for the top 20 countries for their GDP, FDI, global use of their currencies, their military spending and prominence in international banking. The rank is determined by the score that each country has under each of the five measures. It gives a score of 20 for each country in which it is top, and if one country is half the level of the top country, then it gets a score of 10, and so forth. Below is a cut down version of the chart showing the top 10 countries in the ranking:

Top 10 Power Index Ranking

Countries are listed by their two-letter ISO code, so that GB is the UK, CN is China and DE is Germany, for example. In recent years, China has risen in the rankings, based upon its GDP growth and other measures. The US, not surprisingly, is top overall, although it is second to the UK in terms of international banking. In the power chart, the order of the top three is: US, UK and China.

For the Top 10, this power ranking picture is very close to the Olympic gold medal results! To standardise the two pictures, I have made the US gold medal score (the highest at 46) equal 100, while the UK's at 27, in second position, is then equal to 59 (being 59% of 46), and so forth. The outcome for the top 10 gold medal-winning countries is below:

Top 10 Rio Olympic Gold Medal Ranking (Index, US = 100)

(Note, this was updated on 22 August to correct the US number from 45 to 46)

Compared to the power ranking, South Korea (SK) and Russia (RU) make it into the Top 10 for gold medals, while the Netherlands (NL) and Switzerland (CH) do not. But the top three are the same, and in the same order, in both rankings. Germany, France, Japan and Australia also make a showing in both Top 10 rankings. South Korea makes it into the gold medal ranking, but not the power ranking top rank.

It looks like having an ability to be first in an Olympic event has a close relationship to a country's position in the world economy, at least for the top countries in each ranking.

One aside on the UK is that there has been a ruthless 'medals mean money' approach to granting money to Olympic sports. In unashamed state planning, the UK's National Lottery has done much of the funding on this basis. This diverts money from the regular subscriptions of the masses betting each week, and their need for entertainment, into a national success story. As one might expect, this is principally enjoyed by the privileged classes, exemplified by the funds available for 'horse dancing', otherwise known as dressage.

Tony Norfield, 21 August 2016

Sunday, 14 August 2016


On Thursday, 11 August I was interviewed by George Galloway on RT’s regular ‘Sputnik’ programme. The 15-minute discussion covered some topics in my book, The City, plus finance and government policy in the economic crisis. The video link is here.

Tony Norfield, 14 August 2016

Thursday, 4 August 2016

The Bank of England's National Brexit Policy

The news media has highlighted how the Bank of England's policy move today was the first cut in UK interest rates since 2009. But this completely misses the important points. By itself, the 25bp drop in the official Bank Rate from 0.5% to 0.25% is largely irrelevant, either as a policy move or as having any real economic impact. Instead, the significant policy decisions are elsewhere.
First, is the Bank of England's move away from its official policy target of stabilising CPI inflation at close to 2%, usually taken as meaning over the next two years. Despite the drop in sterling's exchange rate, and the expectation that this will boost UK inflation, the Bank has decided to look further ahead and cut rates today in the expectation that weaker UK economic demand, employment and output will reduce inflation again by the end of the next three years!
This is another sign of the flexibility of policy in this chronic crisis. Of course, it would have been madness to raise interest rates in the wake of the Brexit vote and the likely impact on the UK economy. However, this policy decision shows how far the rejection of previous policy norms has gone. What it really boils down to is the view that wage demands will remain limited, despite a fall in living standards, so the problematic inflation for capitalists, that of wages, will not actually be a problem. The new Bank of England policy is now closer to that of the US Federal Reserve, which has a more mixed inflation/growth/employment mandate when setting US interest rates.
Second, is the extension of Quantitative Easing (buying up financial securities from banks and other private sector holders, to put cash into the system). Until now, the Bank of England had bought £375bn of UK government bonds, but had kept that figure unchanged in recent years. In the early years  of the 2007-08 crisis aftermath, it had had only a small, temporary holding of private sector bonds. That will change with the new policy. Further government bond purchases will occur, an announced £60bn that will take the total to £435bn. All this will do is reduce government bond yields further, as happened today, and further undermine the viability of pension schemes, both public and private, increasing their funding deficits. However, the new angle is for the Bank of England to purchase up to £10bn of corporate bonds.
The latter move is extraordinary, especially in the way the Bank of England poses it as looking to "purchase a portfolio of sterling non-financial investment-grade bonds representative of issuance by firms making a material contribution to the UK economy, in order to impart broad economic stimulus". Leave aside the point that the size of the corporate bond market targeted is only around £150bn, and that they hope that BoE purchases will increase the prices and lower the rates on eligible bonds, also reducing these companies' demand for bank loans that could then be taken up by others, especially smaller companies. The key point is that the Bank of England has now entered the process of deciding to buy bonds only from firms that make a 'material contribution to the UK economy'!
I cannot emphasise enough how far this policy contradicts all the logic that we have heard for decades from policy makers, central banks and governments, of how it is necessary to compete in 'free and fair' global markets. Here we have a central bank from a country at the centre of the world financial system explaining that a part of its new policy is to discriminate in favour of companies that are nationally valuable.
If anyone doubted that the pressures of the chronic global crisis are forcing the major powers to reconsider their positions, and that they are abandoning policies of cooperation - admittedly, cooperation that has been mixed with intense rivalry - then they should consider this latest Bank of England move. The significance is not indicated by the relatively small scale size of the £10bn funds, but of the outlook it offers for future imperial policy.
Tony Norfield, 4 August 2016

Saturday, 30 July 2016

Value of Labour-Power, Wages, Productivity and Imperialism

These are notes from, and for, a series of discussions on imperialism organised by Redline. (See here for other details) As such, they are not a fully rounded analysis, just some guidance on points in these debates.


A key point to note is that the discussion of these topics often mixes up the question of the value of labour-power and that of (the rate of) exploitation. Both are affected by social productivity – how much can be produced in an hour – but are different aspects of labour’s employment by capital.
For example, assume that the value of labour-power, represented by the wage, is the same everywhere. Then the rate of exploitation – how much surplus-value compared to the value of labour-power – is higher if some workers work more hours at the average level of productivity. Even with the same number of hours worked, the rate of exploitation would be higher where workers are more productive per hour than average – usually meaning they are working more intensively, or have better technology or have higher skills. One hour of productive social labour under capitalism produces the same amount of value as another only if it is of the same productivity, intensity, etc.[1]
Of course, the value of labour-power is not the same everywhere, so that adds another variable to how exploitation is calculated. If the value of labour-power is much lower in some countries than others, exploitation might be more, but it might also be less, depending upon hours worked, intensity, productivity, etc. Nevertheless, these are abstract points of theory; the reality of the world economy paints a much more straightforward picture.
1. Wages, value of labour-power
Everybody knows that there are huge disparities in living standards worldwide. Equally, every capitalist company knows that workers in one country may get wages that are a small fraction of those in another country. Recent data from the US Conference Board for 2012-13 show that manufacturing hourly compensation costs (ie wages plus various directly-paid benefits) in China and India were 11.3% and 4.5%, respectively, of the US level, despite a previous increase, especially in China. So, if the US worker got $25 per hour, the Chinese worker got under $3 per hour and the Indian worker still less. In the rich European countries, by contrast, compensation levels were generally above those in the US, although for the UK they were 20% lower, at nearly $21 per hour.
Whether one allows for the impact of exchange rates, local costs, or anything else, it remains the case that a large proportion of the world’s proletariat is living in penury compared to those in the rich countries. The disparity is so huge that, even with so-called globalisation in recent decades, there has clearly been no ‘equalisation’ of wages in the world market, nor really any significant narrowing of differentials. For this reason, it would be wrong to argue that there is an equal value of labour-power everywhere, so that if one group of workers gets paid below this, then they are getting paid below ‘the’ value of labour-power. Instead, it makes much more sense to argue that there are different values of labour-power in different countries, for a variety of historical, political and social reasons.
Taking absolute levels of wages (basically, their purchasing power, or real wages), moves towards an equalisation could potentially occur, but only if there were a free market in labour-power. However, from the late 19th century, when travel became less costly, there was also the growth of passport laws and immigration controls in the richer countries. Governments implemented these not only due to concerns about ‘undesirable aliens’. More importantly, labour unions and workers in the richer countries protested about the pressures on the labour market for lower wages from these migrants and the extra demand for housing, etc.
Such controls have remained in place, in different forms, since then. Where they have been relaxed, as with the EU membership of Eastern European countries from 2004, this has caused political trouble, as witnessed in the latest UK Brexit vote. The ‘exit’ voters (mostly in England and Wales) were those who felt they had suffered from an influx of cheaper ‘Polish plumbers’, etc, who had done them out of jobs, made housing more expensive or less available, and made the queues for medical services and welfare payments longer. Similarly, in the US we have the ‘Trump wall’ proposals to keep out the Mexicans, etc. These political moves, contradicting the usual capitalist search for the lowest labour costs, are responses of the ruling class to the economic discontent of a loyalist, pro-imperialist working class that is demanding protection from its state.
From a Marxist perspective, wages are based on the reproduction costs of labour-power, or what capitalists need to pay workers to get them to be able to show up for work (not just individually, but also to allow for family costs, etc). This, in turn, depends on subsistence costs as a minimum, plus what Marx called a ‘historical and moral element’. This latter element is based on the social conditions prevailing, including the success or otherwise of working class struggle for higher wages, benefits, etc.
This also means that there is not necessarily any direct relationship of wages to productivity. It is true that higher productivity can allow the capitalist to make some concessions on wages and benefits while still making a profit. Equally, low productivity means the capitalist will have to impose harsh conditions in order to survive in competition. However, there is no one-to-one relationship. It depends on the political and social situation. A defeat of the working class can lead to high levels of exploitation and high productivity, but low wages. This was true for the West German ‘economic miracle’ in the 1950s, for example, where exploitation of the working class was comparable to that under Hitler.
In periods of crisis-free growth, it is likely that wages will rise, but commonly we find that wages grow less than productivity. The degree to which that happens is not predetermined. Rising productivity is usually an indication of a rise in the rate of exploitation, despite what may also be improved living standards (higher real wages) for workers. However, this mechanism does not work in the same way for workers in the dominating, imperialist countries and for those in a more subordinate position.
In the imperialist countries, the capitalist class may attack living standards, but it has far less freedom to do so than in the dominated countries. In the latter, it is also starting from a lower level of living standards from which to begin exploitation. In this case, the ‘historical and moral elements’ work in capital’s interests. Especially for countries that are newer entrants to the global economy, the more traditional social relationships can substitute for higher wages paid by the capitalist (eg workers from the countryside working in factories but still growing some of their own food). Wages will be very much lower than in the major countries, even if productivity in the factory is not that much lower, or may even be higher, than in the more developed economies.
2. Productivity
A few points on productivity measures in commonly used economic statistics, and the differences between imperialist and dominated countries, are also worth bearing in mind.
The national average productivity level in dominated countries may be low, since it will often include a large subsistence-based agriculture or commercial sector and small-scale producers. This can lead economists to argue that differences in wages are a function of differences in productivity (on their assumption that workers get rewarded according to the value of what they produce – something at odds with a Marxist understanding). But this economist argument conveniently ignores that foreign companies from imperialist countries invest in, or are supplied by, companies in sectors of the economy where levels of productivity that are not materially different from those in the major countries.
Foxconn, for example, has greatly mechanised its massive production facilities in China with a huge number of industrial robots. This highlights how the massive gap between wage levels paid in China, India, etc, and the wage levels paid at home is a sign of extra exploitation, in the sense of value produced versus the value of the wage paid. In other words, it is a higher rate of exploitation (s/v) by these companies in India/China, etc, not a sign that they pay low wages because productivity is low.
I think a key point of John Smith’s Imperialism book is to show how GDP-related statistics mean that measures of value ‘production’ are implausibly distorted in favour of the rich countries. With their commercial (and more general) market power, they are able to force a deal upon the producers of the oppressed countries, although this shows up as value accruing in their own domestic economies. This is why Apple Inc, a US company, looks so profitable, despite producing little or nothing in the US.
3. Profitability, rate of profit
Differences in national rates of exploitation may not be the reason or the only reason for the different measured rates of profit. Tax concessions for foreign capital, or other concessionary deals to attract foreign capital can also be important. Equally, cheaper land or other available resources can also help boost profits, separately from whatever wages might be paid.
This raises the question of why ‘all’ capitalist investment does not migrate to the more profitable location, or why it has not all moved to China, etc. John Smith has made some useful points here, both that a lot of the productive capacity has done this – as shown in some details of FDI that distinguish HQs and more marketing-type facilities from production facilities – and that there has been a distinction in the product markets between more high-tech and low-tech operations. The former are in one ‘market’, that run by the major powers making aerospace products, top-end engineering products, etc, with patents and other barriers to entry from competitors. The latter is a separate market making textiles, clothing, simpler components for other products, where competition is fierce.
I would add that there is also an extra ‘value’ given by design patents and intellectual property, plus marketing power. More or less all of this economic benefit accrues to the companies based in the imperialist countries. This is a form of monopolistic control of markets, boosted by the greater buying power of rich consumers – in this respect it is a feature of monopoly control that is self-reinforcing. One interesting angle on this is given by the ‘Smiling Curve of Stan Shih’, where Shih, a former Acer executive, notes that the worst thing to do if you want to make any money is to produce the goods, rather than designing or selling them!
This harks back to British imperialism’s heyday, when Britain was more of a commercial and financial operator than a producer. If anything, the pattern of the world economy today, with the power of Google, Facebook, Amazon, etc, shows that profitability has little to do with producing any value. Don’t be an idiot, get others to do the hard work producing!
Such developments also cast questions on an equalisation of profit rates internationally, as measured by country-based rate of profit measures. Yes, companies will tend to focus on where more profit can be made. But how do they do this, and does this mean they change location? This is one more sign that Marx’s analysis, and even Lenin’s, is only a starting point for analysing imperialism today.
4. Productivity, C/V, rate of profit, imperialism
Higher productivity means producing more use-values with less of an input of value, ie less value (social labour-time) per unit of commodity produced. Usually, and historically, this comes about through mechanisation. But there can be path-breaking innovations that use up far less resources (constant and variable capital) per unit of output (for example, in telecoms, containerisation) and might even involve much less cost of constant capital. So, there is a very common, but not always a necessary link between a higher C/V and higher productivity.
The point I would stress, however, is that in much historical work on imperialism there is a mistaken view that the basic mechanism of exploitation/value transfer is where higher C/V countries (presumably, the more developed) extract value from lower C/V countries (the less developed). This derives from the process marx describes for an equalisation of profit rates in the capitalist market, ie that there is a flow of value (based upon prices of production differing from values) from the low C/V companies to the high C/V companies.
The problem is that this has nothing to do with imperialism as something special in a new phase of capitalism! It is a normal feature of the capitalist market, even within an imperialist country. The economic analysis of imperialism has nothing to do with this aspect. Instead, the economic content of imperialism should show how the more powerful countries exert economic power over the oppressed. Furthermore, this is how a monopolistic market run by the major countries tries to prevent whatever free-market equalisation is meant to occur, whether this is of profitability – to protect their interests – or even of wage levels, to keep their populations onside, when it comes to imperial conflict!
5. Conclusion: the benefits of imperialism
In economic terms, imperialism benefits not only the imperialist governments and corporations, but also the mass of the populations in the powerful countries. This comes through concessions that the former are able to give to the latter, whether in welfare payments or in wages directly. In the major countries, even when wages and working conditions are under pressure, or when unemployment is rising, there remains a clear distinction between the living standards and the state-sponsored social safety net available to workers in rich countries and what workers in poor countries receive. These privileges are an important material basis for the political outlook of the mass of workers in the rich countries.

Tony Norfield, 30 July 2016

[1] Also note that whether value is created is socially determined. For example, if too much is produced of a particular product, then part of the social labour allocated to its production is worthless. This will be reflected in unsold commodities and/or falling prices.

Thursday, 28 July 2016

Spain: Fear and Austerity in the EU

It seems that the class struggle, or at least the fear of it, is indeed the motive force of history. The EU has announced that it will not, after all, impose a hefty Є2.2 billion fine on Spain for repeatedly missing its budget reduction targets, as it had been threatening to do for months. EU hard-liners, particularly the Germans, were until recently demanding a Є5 billion fine. Spain has now been given another two years to get its finances in order.
EU Economic Affairs Commissioner Pierre Moscovici, who made the announcement, explained that the Spanish people had already made sacrifices and it was not appropriate to demand more of them, particularly at a time when there is a question mark over the entire European project.  Why has Spain been shown such largesse, when the Greeks were not? The Greek people also made sacrifices, larger than those imposed on Spain.
More significant still is that, according to German press reports, it appears that the change in policy was promoted by none other than German Finance Minister Wolfgang Schäuble, the hard-line archduke of fiscal probity and sticking to the rules. The German business paper Handelsblatt reports that following a long discussion with French, Italian and Spanish ministers at the recent G-20 summit in Beijing, Schäuble himself phoned the EU Commission pressing for a policy change in favour of more carrot and less stick. The Spanish argued that a fine would undermine Spain’s Christian democrats and would only benefit the ‘populist’ Podemos.
The EU’s problem is that the three areas in which it wants to see some major traction – labour market flexibility, pensions, and social spending – are all very politically sensitive and disruptive. This limits how far it can push austerity. Spanish Economy Minister Luis de Guindos has been bragging openly for weeks that the EU would not impose a fine, which was rather undiplomatic.
Greece, with only 2% of the EU’s population and of little economic importance, can be pushed around. Spain, the EU’s fifth-largest economy, is a different matter.  Despite being wrongly dubbed a ruthless neoliberal by the Left, prime minister Rajoy has been resisting on all three fronts.  Sledge-hammer austerity can only knock Spain’s social and constitutional order to pieces and push the popular classes into the arms of Podemos and possibly beyond.


Spain has around 30 different forms of employment contract. Brussels wants these cut down to three or four to make hiring and firing easier. The Spanish labour market is highly differentiated. About a third is ‘protected’, while two thirds form a ‘precariat’ surviving on very short-term contracts with only basic employment rights. The average duration of an employment contact is now 53 days. The effects of this are dramatic. While wages in the protected sector have dropped a few percent since the beginning of the financial crisis, the wages of the ‘precariat’ have dropped 14-17%. This accounts for Spain’s recent improvement in exports, in the absence of any significant rise in productive investment.  So the employment contract reform Brussels wants to see implemented is aimed mainly at the protected sector. But this section of the labour force, which includes much middle class employment, is the bedrock of the two mainstream parties. Destroying employment protection hacks away at political stability. 


Spain has 9.42 million pensioners. Around 45% of the ruling conservative party’s voters are pensioners, as are 40% of socialist party voters. Only 16% of the Podemos vote is made up of pensioners. Moreover, half of those receiving pensions are supporting their offspring’s families. So pensions are a vital source of income in a country where just under half the unemployed no longer receive any benefits at all as their entitlement period has expired.  So deep cuts in pensions, as demanded by the EU, would push a substantial number of families over the brink.

State spending

Due to Spain’s very late development as a modern economy, and the weakness of its central state, Spanish politics remains very regional, often parochial, and is dominated by local elites and parties, which are voted in with the express aim of getting as much as possible out of Madrid. The regional federations of both the main parties are very strong.
A significant part of state spending, such as health and education, is channelled through regional governments, the majority of which are conservative. Cuts in social spending have an immediate effect on regional politics and immediately create intra-party revolt.  For example, the main impetus behind Catalans' apparent bid for independence is really a ploy to pressure Madrid to allow Catalans to keep all or a larger part of their taxation, a privilege the Basques already enjoy. So, although the ruling conservative party is hostile to everything Catalan that smacks of independence, it continues to make large concessions to the region in the hope that those wanting only tax autonomy will curb those backing complete independence.
No one really believes that Spain can turn its economy around in two years or meet its budget reduction targets, which have been raised to 4.6% of GDP for 2017. But, for a while, the EU has put this problem on the back burner because it now has its hands full with Brexit.

Susil Gupta, 28 July 2016

Friday, 22 July 2016


On Wednesday 3 August at 7pm, there will be a discussion of my book The City at Housmans bookshop, 5 Caledonian Road, King’s Cross, London, N1 9DX. See here for this and other events at the bookshop.

Tony Norfield, 22 July 2016

Thursday, 21 July 2016

A Dreadful Waste of Money

'Crowdfunding' has become common in recent years to accumulate small sums of money from many people to achieve a particular objective. So far, so social and, potentially at least, progressive. But what is one to think of the reported 180,000-plus people who have recently joined the British Labour Party at a cost of £25 each, giving it some £5 million? Even with the lower value of sterling, that is a dreadful waste of money.

The Labour Party deserves disdain, at a minimum, even if one were ignorant of its blood-strewn history as a defender of (British) imperialism when in government. In all manner of wars and subterfuges, from the partition of India, to Vietnam, to Ireland, to Iraq and the Middle East in general, the Labour party has been the proponent of, or an ally in, a wide variety of imperial crimes.
An apparently saintly Jeremy Corbyn, embattled leader of the Labour Party, shares the same sins. Apart from being a member of the Labour Party for more than 30 years, he is now a member of the Privy Council. This Council includes senior political figures from all major parties, who are informed about the ill-doings of the British state and pledge not to tell. The oath is as follows:
“You do swear by Almighty God to be a true and faithful Servant unto the Queen’s Majesty, as one of Her Majesty’s Privy Council. You will not know or understand of any manner of thing to be attempted, done, or spoken against Her Majesty’s Person, Honour, Crown, or Dignity Royal, but you will let [ie stop] and withstand [ie prevent] the same to the uttermost of your Power, and either cause it to be revealed to Her Majesty Herself, or to such of Her Privy Council as shall advertise Her Majesty of the same. You will, in all things to be moved, treated, and debated in Council, faithfully and truly declare your Mind and Opinion, according to your Heart and Conscience; and will keep secret all Matters committed and revealed unto you, or that shall be treated of secretly in Council. And if any of the said Treaties or Counsels shall touch any of the Counsellors, you will not reveal it unto him, but will keep the same until such time as, by the Consent of Her Majesty, or of the Council, Publication shall be made thereof. You will to your uttermost bear Faith and Allegiance unto the Queen’s Majesty; and will assist and defend all Jurisdictions, Pre-eminences, and Authorities, granted to Her Majesty, and annexed to the Crown by Acts of Parliament, or otherwise, against all Foreign Princes, Persons, Prelates, States, or Potentates. And generally in all things you will do as a faithful and true Servant ought to do to Her Majesty. So help you God.”

Corbyn's principal divergence from this blood-oath loyalty to the British state shortly after becoming Labour Party leader was ... not to kneel before the Queen. Perhaps his knees were playing him up a bit.

My message to those who have already pledged their £25 to the Labour Party, or may do so, is that they would have a much better chance of a positive outcome by betting on a three-legged horse next running in the Grand National.

Still better a reward would be secured by purchasing, reading and reflecting upon an informative book by, admittedly, a right-wing, former Labour Party member, Edmund Dell: A Strange Eventful History, Democratic Socialism in Britain, Harper Collins, 2000. It should be read with critical eyes (what should not?), but this book is well-written, full of enlightening information and is available at much less than the otherwise wasted £25.

Tony Norfield, 21 July 2016