Wednesday, 26 April 2017

Capital 150

On the 150th anniversary of the publication of Volume 1 of Marx's Capital, there is a two-day conference to discuss the importance of this work for understanding the world today. This international conference is held on 19-20 September 2017, sponsored by the Department of European and International Studies, King’s College London, and blog.

Venue details: Student Central (formerly ULU), Malet Street, London WC1E 7HY

Speakers include:
  • Tithi Bhattacharya
  • Guglielmo Carchedi
  • Eduardo da Motta e Albuquerque
  • David Harvey
  • Michael Heinrich
  • Paul Mattick Jr
  • Fred Moseley
  • Tony Norfield
  • Lucia Pradella
  • Michael Roberts
  • Beverly Silver
  • Raquel Varela
The cost of attending is £10 for the two days. Other details including booking can be found here.

Tony Norfield, 26 April 2017

Tuesday, 18 April 2017

A May Election in June

Prime Minister Theresa May has called a UK general election on 8 June. Given the 2011 law on fixed term elections, which means that it should have instead been in 2020, this was a surprise announcement. The brought forward date has to be agreed by Parliament first, but this will very likely happen, given that the Labour Party must back it or else appear afraid to go to the electorate. However, the bigger questions are what this election will be about and what it reflects about British politics today.
The news media were puzzled, if not annoyed, in the hour or so ahead of May's Downing Street statement. Why did they not know before what was going to happen, or even have any clue? Surely this was not a declaration of war, or the UK’s own missile strike somewhere?! Could it be a resignation? Her slightly unsteady gait and frail looking pose had already led to gossip that she might be about to step down due to ill health. Surely, sacking Boris Johnson as Foreign Secretary would not demand a Downing Street declaration. A few minutes ahead of time, the tip off came to limit the media’s blushes of ignorance: it was to call a snap UK general election!
Outside 10 Downing Street, May did another of her performances trying to look a determined and decisive leader. But she remained unconvincing to anyone who has paid attention to events. The snap election was claimed to be necessary to bring about a more strongly positioned government to secure successful Brexit terms with the EU – more of a majority than the comfortable Conservative Party one of 17 House of Commons seats.[1] She claimed there was too much opposition to her planned good deeds in this negotiation within the existing parliament. This rather overlooks the problem that it does not matter what the Brits want, whether 100% of their MPs or not. What matters in the Brexit negotiations is what deal will be agreed by the 27 countries in the rest of the EU.
The UK election has instead been called for another reason, basically the dire state of the British Labour Party. Unable to act as an opposition, Labour has slipped in UK opinion polls and May stands well ahead of Labour’s Corbyn. Labour looks unlikely to win back any seats in Scotland after its huge losses to the Scottish National Party in 2015, and the Conservatives have little more to lose there. Changes in Wales or Northern Ireland will make next to no difference to the UK result. Meanwhile, in the main voting country, England, Labour is in dire straits, having been eaten by UKIP and the Conservatives in 2015, and still looking vulnerable to the Conservatives in the lead up to June 2017. The latest polls show the Conservatives with around 44-46% of the UK vote and Labour with 25-26%.
Tactics based on the latest opinion polls are not the best strategic guides, and things could go wrong for May’s latest gambit. Although probably not much wrong, given the politics of the populace. While just under half the UK voting population is not pro-Brexit, and this could grow now that some of the economic consequences for jobs are dawning, there remains a strong base of anti-immigration Brexiteers among English voters, one to which the Labour Party adapts rather than challenges. For example, so far Labour leader Jeremy Corbyn has avoided talking much about immigration: saying it is OK loses him votes; saying it is not OK would embarrass his conscience. A view on Brexit also gets little look in, apart from how it must be the best deal possible, for similar reasons. The trial of moving from being an inconsequential backbencher shuffling in the dust of a moribund left to leading, or even managing, the views of the electorate has clearly been too much for him.
The forthcoming UK general election will be both low level tragedy and farce, and tales told by many media idiots, full of sound and invented fury, signifying nothing new.

Tony Norfield, 18 April 2017

[1] It is possible, nevertheless, that this majority might have been reduced in coming months. Police investigations are taking place into Conservative Party overspending in a number of constituencies in 2015. This could have rendered invalid some Conservative victories, produced new by-elections and cut their majority.

Friday, 7 April 2017

Trump, Syria & the Middle East

The US has hit Syria’s Shayrat military air base near Homs with 59 Tomahawk cruise missiles. Whether there is any more to come nobody can say because the strikes do not appear to have much logic to them and so war aims cannot be drawn from political objectives.
But the central weakness flows not from Trump’s knee-jerk response but from the dubious nature of the event that provoked it. A chemical attack by Syria simply does not make sense. Assad has virtually won his war by sheer perseverance, western incompetence and Russian help. At the least, he has no viable opponents on the ground. His strategy is to sit it out while his opponents exhaust themselves, realise the futility of their actions or just leave the country. The West, when it tried at last to put down some sort of marker in a war it could do nothing about, defined the use of chemical weapons as a red line. The Russians agreed and Assad followed through. He gave them up in a quid quo pro negotiated by the Russians. In return, the West abandoned ‘regime change’ in all but words. Both sides kept to the agreement. Why would Assad now use a weapon that could only provoke the West and which is of very limited military use, and one day ahead of a major international meeting on Syria held in Brussels? Former Congressman Ron Paul, a leading, although sometimes critical Trump supporter, argues that the chemical attack is ‘false flag’ operation: “It doesn’t make any sense for Assad under these conditions to all of a sudden use poison gases – I think there’s zero chance he would have done this deliberately”.
Far from showing Trump’s willingness to ‘go to war’ – reversing his supposed ‘isolationism’ which, in any case, was a silly and unrealistic proposition – the bombings instead show the West’s very limited options in Syria. If the West really wants to eliminate Assad, why slam 59 missiles into an isolated airfield? Why not do some real damage, and show ‘global leadership’, by destroying Assad’s military command and control structure?
The plain fact is that while America has the military means to obliterate whatever it likes, both America and the West as a whole has very little power to influence events.
The West would not be able to contain the fall out if Assad were forcibly removed
The US probably has the capacity to ‘take out’ Assad in a surgical strike, or seriously to degrade his already limited military capacity, though his regime is pretty smart and also has Russian assistance. But how would his removal by force affect regional players?
For example, Iran is currently a stabilising force in the region since it wants to rebuild its relationship with the West and wants to show that it can be a trusted, competent and effective regional manager. A significant section of the Iranian elite, and the Shia community in the region, do not believe this can be pulled off and that such a strategy will only weaken Iran in the long run since Western imperialism cannot change its nature.  How would killing Assad alter this critically-balanced situation? Almost certainly not in the interests of the West. Eliminating Assad by force, and the fall out that comes after it, would significantly alter Iran’s position as a regional manager.
Furthermore, Turkey is currently playing a very dangerous game in pursuit of establishing itself as the main player and arbiter in the region. Its overriding goal had been to join the European Union. But it has abandoned all hope of joining by negotiation. It has realised instead that potential EU entry is not about reason or willingness to be reasonable, but about power. It thinks it has a much better chance of forcing a better long-standing deal with Europe by establishing its status as the region’s key pacifier and manager, which Europe desperately needs. This has led it to meddle in regional politics in hugely irresponsible ways that are often counter to western interests and alarm the West. Indeed, Turkey is now the main obstacle to a settlement in Syria.
It is very likely that Assad’s removal would embolden Turkey to be even more reckless. Turkey would almost certainly want to take a major position in a post-Assad Syria, if not to subjugate Syria under its control, which would immediately snarl up all regional relations. This would reproduce Turkey’s inability to reach a settlement with the Kurds on a much grander scale.
Then there is Russia. The West has been forced to establish an uneasy and very limited ‘partnership’ with Russia, given that it has been unable to handle on its own the mess it has made of the Middle East. This has obliged the West to accept that Russia is a legitimate regional player and to accept its more active military presence in the Eastern Mediterranean – something unthinkable in the Cold War years. Russia plays a peculiar role in the region. Most of the regional players are anti-Russian, but they want Russia to serve as a counterweight to the power of the West. Iran is by no means a Russian ally, but it benefits greatly from Russia’s presence in the region. Assad’s violent removal would not only be a defeat for Russia, it would perturb regional relations.
What replaces the Assad regime?
If the Iraq war and its fall out has shown the West anything, it is that military action alone cannot achieve stability and war has unexpected consequences. As Napoleon once said of the limitations of war, “you can do anything with bayonets except sit on them”. War can be the continuation of politics by other means if there is a plausible political settlement at the end of it. Clausewitz in reverse does not work.
Perhaps all this explains the almost apoplectic Western response to Syria, including that of western liberals and former radicals. It is a response born of their frustration about the absence of a military or political solution they can be in charge of, rather than a willingness to go to war.

Susil Gupta, 7 April 2017

Thursday, 6 April 2017

Fed Mountaineering

The US Federal Reserve has stopped so-called quantitative easing, namely the buying of US Treasuries and mortgage bonds. But it has not yet allowed the maturing assets to run off its balance sheet. Instead it has reinvested funds to keep the outstanding sum of assets pretty stable since 2014, at around $4.2 trillion. As recently as the end of March 2017, the Fed still had $2,464bn of Treasury notes and bonds plus $1,769bn of mortgage-backed securities on its books, totalling $4,233bn. In 2017, the Fed is likely to begin reducing this mountain, while trying to avoid an avalanche.

The following chart shows how the mountain grew after the 2007-08 crisis struck:

A Fed study in 2012 estimated that for every $300bn of Treasury bond purchases, yields fell by some 30 basis points. This was believed to be due to a 'stock effect' that lowered the supply of bonds in the market, raised their price and so reduced yields. This is only one influence on the market, but it is evident that there will be upward pressure on yields once the Fed starts selling off its accumulated stock.

The potential impact is widespread. It will run from higher US government borrowing costs and higher mortgage rates to higher corporate bond yields (since these have the government yield as a baseline). Interest rates in international markets will also be influenced by the level of US rates. This is especially so for the more vulnerable 'emerging market' economies. All of these have huge levels of debt that are likely to become more expensive to service.* Much of the latter's debt is also US dollar-denominated, which puts them at further risk if their currency values fall.

Tony Norfield, 6 April 2017

Note: * See the reviews of debt trends in a range of countries in the September 2016 articles on this blog.

Wednesday, 8 March 2017


I will be presenting on a panel at Manchester University's 2017 Post-Crash Economics Society Conference, held on the weekend of 18-19 March.

The panel topic is 'The Global Power of Finance', and the session is held in room 3.213 in the University Place building in Oxford Road M13 9PL, from 14.00-15.30 on Saturday 18 March.

Some organisational and booking details are given here, together with a link to the programme. I reproduce the latter below, but the text may not be clear.

Tony Norfield, 8 March 2017

Sunday, 5 March 2017

The Politics of Counting Billions of Beans

Just in case you were one of the half dozen or so people who thought that Brexit would be a simple affair, the UK's House of Lords European Union Committee has produced a report. Published yesterday, Brexit and the EU Budget is a 65-page analysis, with hyperlinks to the detailed evidence given on more than 70 questions and references to a multitude of EU-related documents. As one expert witness put it, there are 'many unknowns'. The chairman asked: 'Are these known unknowns or unknown unknowns?' The response was: 'All of them'.

The report covers the UK's potential liabilities to the EU and details the kinds of asset over which it might have a claim. Estimates in the media have claimed the net UK exit 'bill' as being anywhere from zero to 60 billion euros or more, and these different takes are analysed. However, the general conclusion is that all of this comes down to politics and a trade-off between different areas as part of the broader exit negotiations. It is not a thrilling read, but an instructive one that spells out the complex web of relationships within the EU.

Tony Norfield, 5 March 2017

Wednesday, 1 March 2017

What is Marx’s Value Theory Worth?

At a recent talk I gave on imperialism, there was an interesting question raised on what I thought about Marx’s theory of value. This seemed to be prompted by my reference to Marx’s theory, while I spent little or no time using the terminology in Capital. So the logic of the question was: what is the point of Marx’s theory if one can do without it when explaining what is going on in the world?
Partly, the question is answered by saying that one does not always have to use specialist terminology to express ideas. For example, I have found it to be simpler in presentations to avoid Marx’s term ‘fictitious capital’, because that concept would take some time to explain properly and most people are not familiar with it. Even those who are commonly misunderstand it. Instead, I usually develop the same ideas more directly through discussing the role played by equities and bonds and their relationship to what the economy produces. However, the question needs to be put in a broader context.
Marx’s value theory analyses social labour under capitalism and the increasingly odd forms that it takes as capitalism develops: from being represented in the prices of commodities, to being the source of interest, profits, dividends, rents and tax revenues, to underlying, in an even more distorted fashion, the prices of financial securities. Marx’s theory shows how the capitalist market gives the system a particular dynamic, one that leads to the monopolisation of production and the creation of a world market as capital accumulates. The labour embodied in commodities may not tally directly with the prices they command in the market, but those prices remain strongly influenced by changes in social productivity. Furthermore, we get a longer-term process by which barriers to capitalist production are set by the tendency of the rate of profit to decline. Since the logic of capitalist production is to make a profit, this is the key underlying problem for capitalism as a social system. It is one that the (sometimes) well-meaning reformers of the system do not want to contemplate, so they exclude this from their analysis or go out of their way to deny this does, or even could, happen.[1]
These fundamental features of capitalism analysed by Marx remain in place, although the system has of course developed a great deal in the 150 years since Capital was written. However, the changing forms of capitalism have led many to argue that Marx’s theory is outdated or invalid today. But a proper Marxist analysis examines the dynamic of the system and the new forms that evolve out of the old, rather than simply to judge whether contemporary capitalism fits completely with an earlier conception of it.
In Capital Volumes 1, 2 and 3, Marx did not investigate relationships between countries in the world market. Some of this was done outside the three volumes, and plans for later volumes included a more systematic coverage of the state, foreign trade and the world market. So, for example, in Capital there was no real discussion of colonies, just brief mentions, nor much on monopoly or national differences in wages.
Lenin updated aspects of Marx’s work in his 1916 pamphlet Imperialism, drawing on other analyses. He correctly put greater emphasis on the division of the world economy between oppressed/oppressor nations, the territorial division of the world between the major powers, the propensity to war, on monopolies, bank/industrial capital and a ‘financial oligarchy’. This was a key advance in the analysis, and consistent with the idea of Marx’s value theory as being a theory of the evolution of and barriers to the capitalist system – hence Lenin’s term ‘moribund capitalism’. Many aspects pointed out by Lenin remain relevant today, even though these century-old forms have, of course, also developed. There is now a largely post-colonial world, although many countries are still clearly underdogs in the imperial hierarchy. There remains a propensity to war, but now with many wars by proxy, sponsored by the major powers.
I have some differences with Lenin’s analysis, as explained in my book, The City: London and the Global Power of Finance, especially on his understanding of finance, which was taken largely from Hilferding. However, perhaps Lenin’s greatest weakness was his analysis of the ‘labour aristocracy’, the unconvincing notion of how a labour elite getting the benefits of imperial privilege influences the broader working class with their pro-imperialist views. Even in Lenin’s time it would have been more convincing to have taken into account how the mass of people in rich countries were patriotic for their own reasons, ones that had a strong basis in reality rather than a supposedly infectious ideology. They saw, and still see, their economic interests tied up with that of their own states, and benefit in their wages and welfare conditions from this imperial privilege. That is another sign of how it is important to conduct a thorough analysis.
I rely on Marxist concepts as starting points for understanding the world today because they provide the best way to explain what is going on. However, this is not to say that one can find the detailed answers in a particular volume of Capital. To think so would be almost as bad as believing in the prophecies of Nostradamus. Instead, the significance of Marx’s theory is that it so clearly spelled out the dynamic of capital accumulation that, much more than one might think plausible, his analysis provides key building blocks from which to understand major features of the world economy today.
Whether I use terms from Marx’s value theory in my analysis, and which terms, depends on the context in which I make my argument and how much time there is to do so. In any case, Marx’s work is used as just described. His concepts, like Lenin’s, might need to be amended – perhaps even rejected – according to an assessment of how the world has developed since they wrote.
The observation that capitalism in various forms has been around for several hundred years is commonly seen as an argument that it will go on forever: that it is an eternal, natural system for organising the economy. While economic crises are an undeniable reality and sometimes bring protests, there remains little understanding or acceptance of the Marxist conclusion that capitalist social relations are an increasingly dysfunctional, reactionary way in which to organise the affairs of humanity.

Tony Norfield, 1 March 2017

[1] I have little confidence in being able to track movements of the rate of profit through official statistics, although one does get indications of the underlying movements from the behaviour of major capitalist companies and reports of investment that suggest a rising organic composition of capital. Official data are focused on an individual country, and do not fully allow for international influences, something especially important for the US. Statistical conventions for counting the ‘value added’ by the financial sector make things worse, as exemplified by UK GDP income data in 2008 showing a higher operating profit for UK banks when the company reports, and Bank of England data, showed a very sharp drop, often into losses! This is apart from the multitude of accounting tricks that large corporations use to relocate the origin of their profits, including through tax havens.