Cooking the Books 2: Who needs a financial structure?

Building a land route – whether a tunnel or a bridge or a combination of both – between Britain and the Continent was long an obvious thing to do. Eventually a rail tunnel was constructed, and opened in 1994. But under capitalism things are never that simple.

In socialism, after an initial assessment of the need and impact of such a project and after democratic debate and approval, it would go ahead. The physical resources (digging machines, steel supports, etc.) and the skilled labour would be brought together and the bridge or tunnel built. After that, it would be used, the only additional resources needed being those to operate and maintain it.

Under capitalism it was quite different as it was not just a question of deciding to do something, then organising the physical and labour resources, and then doing it. Finance and profit came into the equation. The resources had to bought, and the money for this had to be borrowed, and the lenders had to be paid interest.

So, to build the tunnel under the channel, in the first instance money capital had to be mobilised, and was from private investors, banks and governments. The tunnel was built and trains began to run through it carrying passengers, cars and freight. A profit was made. So everything was alright? No, since not enough profit was made. Although operating costs were more than covered, not enough profit was made to pay the interest on the capital borrowed to construct the tunnel. As a result the company – Eurotunnel – has been in financial difficulties since the start. Its debt is now estimated at £6 billion and rising. A shareholders revolt last April threw out of the previous board of directors, but the new chief executive, Jean-Louis Raymond recently stated that “the financial structure of the group remains fragile and the high interest charges continue to impact on operating results“ (Guardian, 30 October).

But the tunnel would still be useful and could still operate without any “financial structure”. In fact, such a structure is just an unnecessary complication. Unnecessary, that is, from a rational social point of view but of course vitally necessary under capitalism where the general rule is that every productive activity has to aim to yield a financial profit and is in trouble if it doesn’t.