How we live and how we might live (part 4)
In his 1884 talk, ‘How We Live And How We Might Live’, William Morris set out to describe what socialism can offer to working people that capitalism can’t. He began by inviting his audience to imagine a world without the miseries of poverty and war, curses that class societies like capitalism inflict upon us. In earlier articles in this series we explored how, in the modern world, the source of those ills lies in the deep structure of capitalism itself. This month we will explore those causes a little further and look at some of their consequences.
At the heart of modern capitalist societies lies a property system of universal competition based on the employer/employee relationship. This is a relatively recent development. Earlier ways of making a living by common access to the land or through small-scale craft work, for example, were largely extinguished as capitalism advanced and came to dominate Western Europe and America, and then later, the world. Today, everyone born into a capitalist society is forced to rely on the market to obtain what they need. According to their circumstances, they are forced into the role of an employer or an employee. If they are members of a cooperative or the owners of a small business, they must take on both roles, and manage the conflict between them.
Maximising profits
The aim of any capitalist business is to make a profit. It uses money capital to purchase materials, part-finished goods, machinery, office equipment, and other physical means of production. Crucially also, it buys human labour-power. It sets this and machinery to work on its purchased materials in order to produce goods for sale on the market. If the business has judged the market correctly, it will receive back from the sale of its products a sum of money equal to the capital sum originally advanced plus an additional amount — its profit — derived from workers’ labour. A portion of this money it will put into a fund for reinvestment in future production. Another portion will be used to pay taxes, rent and overhead costs like insurance. A third portion will be taken as revenue by the owners of the business or allocated as interest to shareholders.
If a business wants to stay in the market it must continuously receive back more money than it initially advanced. This is not just an aim but a necessity imposed by capitalism’s competitive property system. This additional sum, the business’s profit, is what allows it to grow. Growth, like profit, is not a choice, but a necessity enforced by the system. Let’s say our business owner has a very simple, inexpensive lifestyle (just for the sake of argument. Bear with us!). Could they not choose to keep their business small and make a minimal profit? For some small businesses who have found a niche market, that might be possible, at least for a while, but capitalism is a competitive society. Businesses compete for the money in your pocket. They know that if they do not grow by introducing labour-saving machinery, for example, or by taking advantage of economies of scale, then their competitors will, and they will be in danger of being priced out of the market. Competition drives growth in a capitalist economy.
To ensure that businesses stay competitive in the market, they must not only grow, but they must also maximise their profits. If at any time our frugal business-owner needs to replace less efficient or worn-out equipment, their low profit levels could well be a liability. If they need to borrow for this same purpose or simply to bridge the gap between investment and return, they may find themselves in difficulty. Lenders and investors aim, like other capitalists, to maximise their revenue, and will not be attracted to invest in businesses which cannot pay a going rate of interest. Thames Water, in the UK, is currently in just such a quandary. It is in dire need of inward investment, yet its inability to generate sufficient profit in the future has led its potential investors to declare it ‘uninvestable’.
To maximise income, businesses need to minimise their costs. In particular, they need to minimise their labour costs by keeping down their workers’ wages. Capitalist competition tends to result in businesses each making the same average rate of profit with respect to their invested capitals. By lacking direct competition, however, near-monopolies and cartels can often raise their individual rate of profit above the average. Exceptionally innovative businesses like those in the high-tech sector can often do the same, at least temporarily. Raised profits in these industries give their highly trained and creative workers scope for negotiating higher wages, especially, as is often the case, if their skills are in short supply on the labour market.
Below average
The bigger the front, however, the bigger the back. While some businesses can raise their profits above the average, others must operate below it. These need to keep wages down more firmly. Businesses of this sort often rely on a lot of partially skilled labour, which is often more plentiful and cheaper to buy in the market place. To get the maximum productivity out of their workers for minimum cost, their work regimes are often pressured, tedious and exhausting, leaving employees dispirited and lacking in self-esteem. Businesses of this kind tend to rely on a heavy disciplinary management style. They can demand long, irregular or unsocial hours of work. And if the law of the country permits, they tend to provide low levels of sick and maternity leave, and scant holiday pay. They often provide workers with little training or career development, giving them fewer chances to better their situation. When the market is in one of its cyclical declines and profits fall, their workers, being easily replaceable, are quickly laid off and find themselves surviving on minimal state benefits or, in the worst case, unable to pay rent and becoming homeless. And so the downward spiral continues.
Workers living on the poverty line and with few prospects sometimes gravitate towards the informal ‘black’ economy. This consists of businesses often operating in a highly competitive market that are fighting to minimise costs. Under these conditions, operating outside the law becomes a risk worth taking. For workers this has some advantages. If they get paid ‘under the table’ they can avoid deductions for tax and national insurance. The downside is that such companies tend to pay low wages, offer no training or possibility of advancement, and provide no arrangements for holiday or sick pay or other statutory benefits.
Another possibility which has always been an option for those with low skills and poor prospects is the criminal economy. For men, today, this generally means theft or burglary, or selling drugs. Most thieves are young men with few saleable skills. Despite the glamorous image perpetuated by heist films, a life of crime for most has few real rewards and the chances of getting caught are high. Selling drugs on the street is often gang-related and dangerous. And for the average dealer it nets little income. For women, entering the criminal economy generally means sex work or shoplifting where the prospects are even worse. Voluntary sex work is inherently dangerous. It is often illegal and dominated by pimps who skim off significant portions of a woman’s earnings. Shoplifting is stressful, provides low levels of income and again carries a high chance of arrest.
Race to the bottom
Poverty is not an unfortunate accident. It is a built-in feature of capitalism’s competitive property system and its employer/employee relationship. Businesses maximise profits by holding down wages, but they will take whatever means they can find to minimise costs. They will use cheap materials in their products like non-biodegradable plastics, or they will externalise costs by pumping waste into rivers and into the atmosphere. And just as the need to minimise costs drives pollution, so the competitive pressure towards growth fuels climate change. Damage to the human and natural environment is also a built-in feature of the capitalist system.
In 2005, Gordon Brown, then UK Chancellor of the Exchequer, commissioned Nicholas Stern to conduct research and report back on how moving to a low-carbon economy in the UK might be managed. The Stern Review, when it was finally delivered in October of the following year, was a vast, 700-page monster of a document. It has since spawned a significant academic industry. Today, however, its arguments seem ridiculously optimistic. It concluded that if states were to cooperate, the drivers of climate change could be economically managed, and CO2 levels kept below a threshold that at that time was thought to be sustainable. Skimming through its summary today, what stands out is the political naiveté on which it rested, its entire weight pirouetting on one tiny, innocent-sounding word: ‘if’ – ‘If states collaborate…’
Capitalism is not a collaborative system, nor is it designed to solve common problems. It is a system of ruthless competition. In the years before and since The Stern Review it has demonstrated over and again just how impossible it is for capitalist states to achieve the level of international cooperation Stern hoped for. Every year since 1995 thousands of scientists, politicians, and ‘stakeholders’ have sat closeted together in the UN’s COP meetings, thrashing out the issues. The effective outcome of all this activity has been negligible. Beyond a legally binding commitment of each participating country to implement its own greenhouse gas reduction measures, little has been achieved. Globally capitalism is still pumping CO2 into the atmosphere like there is no tomorrow. This year alone, CO2 levels have been soaring.
In 2013, George Osborne, Chancellor of the Exchequer in the Cameron government, summarised the problem in a carefully worded statement: ‘I want to provide for the country the cheapest energy possible, consistent with… playing our part in an international effort to tackle climate change. But I don’t want us to be the only people out there in front of the rest of the world’. And there we have it. Cheap energy is the key to keeping businesses competitive in the global marketplace. In a world of international competition, no country can afford to commit to using more expensive forms of energy unless all do. Finding anything but the loosest and most ineffective agreements on this issue has proven impossible. At the opening of the 29th meeting of COP last month in oil-rich Baku, Azerbaijan, Simon Stiell, the Climate Change Executive Secretary for the UN, made yet another plea for international cooperation to stem the rise in global temperatures. It is a plea that over thirty years has yet to generate meaningful results.
And so, here we are. War, poverty, pollution and climate change are just a few of the features damaging human life and disfiguring our world, all of them rooted in capitalism’s wage-labour/capital relationship which sits like a supermassive black hole at our economy’s galactic core. The only real and permanent solution to capitalism’s woes lies in its elimination. Yet, what kind of a society would that produce? In his talk 140 years ago last month, William Morris considered what kind of a world might result from eliminating capitalism’s class society. Yet we can ask, what would such a world look like in its own terms, and what might we be able to say about it? Is it feasible? How would it operate? These are the questions we will turn to next month in the Socialist Standard.
HUD