Wednesday, May 11, 2011

Vincent Browne versus SWP

Below are some written comments of mine on a piece published on the website. It is called, Reply to Vincent Browne attack on left. It was published on 8th May 2011. Its position is so crassly reactionary that I felt obliged to promptly draft a hasty response to it.‎10 ‎May ‎2011

SWP: The Left has no difficulty with the latter point and indeed goes further. In common with Vincent Browne, we favour higher rates of taxes on incomes over €80,000 as a means of re-distribution. More broadly, we favour progressive taxes rather than regressive indirect taxes which hit the poor disproportionately.

Hackett: "...hit the poor disproportionately." The Socialist Workers Party call themselves marxist (at least they did in the past) and yet ironically they support progressive taxation. Even progressive taxation adversely hits the working class. The poor! The SWP dont even pretend to seriously represent the interests of the working class anymore. Like Father Mc Verygood they represent the interests of the poor. Perhaps the SWP dont understand that sections of the working class can be quite cultured and affluent. Workers dont just live in Ballyfermot. They can live in Foxrock and Templelogue too.

SWP: But why focus solely on income? Why not get to the root of the problem of inequality by also taxing wealth and capital? And why focus just on Irish incomes rather than on wealth generated in Ireland?

Take a simple paradox. In 2008, at the start of the crisis the shortfall in government spending was €11.5 billion. But after three years of ‘deficit reduction’ it has actually increased to more than €18 billion. Why should this be so?

Hackett: The state deficit is caused by falling profitability and not by falls in spending. Spending is, in a sense, a function of profitability. The greater the profit the greater the spending. Spending on capital and consumer goods. The reason for the recent dramatic deficits in the Irish Republic is because of falling profitability which is reflected in falling spending.

SWP: First, ironically, government cuts. The more the government cuts its spending, the less money there is to go around and so there is less work and less taxes raised. If, for example, you cut the wages of public sector workers, fewer people will use barbers or restaurants and so are fewer people employed in these outlets. The problem for ‘deficit hawks’, therefore, is that instead of solving the capitalist crisis, they often make it worse.

Hackett: The question of government spending cuts is not an independent variable. State spending is again a product of profitability. The greater is total profit the more the capitalist state can spend. As profit falls state spending is objectively constrained. The Irish government cut spending and increased taxation because of falling profits. Had the Irish state continued to spend and tax at the levels that existed before the economic collapse the deficit would have grown even greater bringing the Irish economy into an even worse situation. Reduced state spending and increased taxation, at most, leads to a redistribution of profit. It does not necessarily bring about a fall in the amount of money spent. It merely brings about a change in the way that money is spent. If the economy is shrinking as a function of falling profitability then it is necessary for the capitalist state to correspondingly cut back on unproductive spending in order to seek to slow down the falling rate of profit. Marx made this point very clear in his work on the law of the tendency of the rate of profit to fall. By slowing the rate at which profit falls then a corresponding fall in  capital investment tends to take place. In that way the rate of falling unemployment tends to be slowed down somewhat.

Neither can a government (much less a governement representing a minuscule economy such as the economy of the Irish Republic) simply increase spending at will to supposedly prevent an economic depression. To do so just results in galloping inflation. But the Irish government could not even do that because it no longer even owns its own currency. We are forced to use a foreign currency called the Euro. The SWP and the Socialist Party rant on about the launching of public works as forming a key ingredient in the national solution to the economic crisis. However significant public works require large quantities capital. Given that the Irish economy has been suffering from steadily falling profitability there does not exist the profit necessary to provide the necessary capital for such works. Taxing Irish and foreign capitalists to pay for such public investment merely reduces their already falling profits --the fountainhead of the economic crisis. So calling for major public works, even a la Trotsky, makes no sense.

SWP: Third, and this is the crucial point, Ireland is currently experiencing an investment strike by the Irish capitalist class. Capital is the life blood of the current economy and its flow is driven by a desire for profit. When owners of capital decide not to invest, the whole economy seizes up.

Hackett: To claim that there is "an investment strike" inflicting the Irish economy is to misunderstand the very nature of capitalism. Capitalists can only exist by the expansion of capital through the productive investment of its profit as capital. This is the dynamic underlying capitalist investment. It is this dialectical dynamic that drives the capitalist economic system. Now capitalism cannot, even if it wants to, subjectively refuse to invest in industrial capital. To do that is to undermine its very existence.

There is no evidence to support the absurd SWP claim that the Irish capitalist class is gone on strike. Irish capitalism has nothing to gain by such egregious behaviour. Many substantial Irish capitalists, are going to the wall because of the absence of capital investment in Ireland. And there will probably be more such collisions. It makes no sense to suggest that prominent capitalists, some of whom are celeb business people, would deliberately commit commercial suicide. If capitalists are not investing in the Irish economy to the degree that they were it is because of the unavoidable diminution in profit available in Ireland. To maintain and even increase their capital they are compelled to instead invest in China or wherever. They will send their capital anywhere that currently returns a profit under relatively secure conditions. These conditions dont exist, as they did, in Ireland. Fugitive capital will only tend to return to the Irish Republic as indigenous profitability conditions show improvement.  In other words when the Irish economic system hits bottom and can then take off then investment will begin to recover. Whether that actually happens in the forseeable future in another matter.

SWP: Some capital has been wiped out in the crash – but not all of it. Figures from the Central Statistics Office indicate that private savings for 2009 amount to €37 billion. (This figure is based on gross saving minus the public sector deficit) ‘Savings’, however, is not simply composed of the extra money PAYE workers have in bank accounts – mainly it includes the additional income accruing to the rich. In addition, there has been a huge capital flight. In 2010, €100 billion was withdrawn from Irish banks and 73% of those withdrawals came from corporations.

So the rich have plenty of money – but they have chosen to stage an investment strike. Their aim is to re-configure Ireland as a low-wage tax haven and only AFTER that has occurred, might they re-start the engine of capitalist accumulation.

Hackett: The above SWP conspiracy theory is so obviously naive and threadbare. If the Irish capitalist class was staging an investment strike then why would it stage one now? Why would it stage one at a time when the economy was said to have been undergoing unprecedented expansion? The motive for an investment strike makes little sense since capitalism generally seeks to perenially keep the price of labour power down so that it can sustain maximum profit. Why would a low wage economy be something capitalism would seek for Ireland now than say at other times? Marx has shown in his work, Capital, that the accelerated accumulation of capital is not the result of subjective factors such as the decisions of the capitalist class. It is an objective process driven by the prevailing objective conditions --profit conditions. The accumulation process is independent of the intentions of the Irish capitalist class.

SWP: Irish society will not be going back to a Celtic Tiger-style normality because the economic model of development based on low corporation taxes and de-regulation has run its course. We shall either live in a society that is permanently ravaged by emigration and poverty – or we can re-organise the economy on socialist lines where control over accumulated resources is in the hands of the majority and subject to the needs of society as a whole.

Hackett: The above piece contradicts Kieran Allen's claim, a leading figure in the SWP, that there has been a "corporate takeover of Ireland". In his book The Corpoate Takeover of Ireland he claims that "the corporations also wants a state that reduces overall taxation." In his book he never, as I understand it, argued that the then "economic model of development based on low corporation taxes and de-regulation had run its course." In fact he seemed to be suggesting the very opposite. If "the Irish capitalist class" have mounted an investment strike in Ireland, as the SWP claim, while multinational corporate investment appear to be faring relatively well in Ireland then surely there is a conflict between indigenous capital and global corporations from abroad. This apparent dichotomy between the two forms of capital must mean that there has been no "corporate takeover of Ireland" with the help of Irish foreign policy and the indigenous bourgeoisie or certainly significant sections of it?

SWP: However, the Left advocates a more radical approach. It is to get to the root of the issue by increasingly taking control over capital and depriving the wealthy of their ability to sabotage the economy.

Hackett: To call for the need "to increasingly take control over capital" amounts to no better than an oxymoron. Capital by its very nature denotes the absence of popular control. It is a reified social relation of production. By virtue of that very fact, expounded by Marx, it is not possible to exert popular support over capital. However I take it that by increasingly taking control over capital the SWP are advocating, in a disguised way, some version of reformism. Nowhere in the world has capitalism been reformed out of existence. Nor can it be. The SWP apparently claims to be  Marxist, indeed a Trotskyist organisation, yet it has been stridently and publicly espousing reformist politics. For it a nationalist capitalist solution, and not world social revolution, is the answer.

Its leadership has been publicly espousing a national solution to the Irish economic crisis. A minuscule capitalist economy, such as is the Irish one, certainly cannot realise a reformist programme. An Irish workers' republic in which the wealth is owned and controlled by the state or even by "the people" would be crushed in no time by ambient imperialism. The solution to the economic crisis afflicting Ireland is only possible on the basis of a European revolution spreading out from core countries such as France, Germany or Britain. Given the international character of capitalism the solution has to be international --world revolution.

The SWP and the Socialist Party publicly maintain that there is an Irish solution to Irish economic crises. These false pronouncements are nothing but attempts to fool and mislead the working class. The probable outcome of parties such as the SP and the SWP gaining significant influence over the working class is significant sustained deep-seated economic and political instability involving enormous popular pain and suffering.  However there is also, on the other hand, the distinct liklihood that  parties, such as the SP and SWP, will instead opportunistically capitulate to capitalism a la Rabbitte and de Rossa should their electoral strength grow. This is on the assumption that a revolutionary communist movement fails to emerge and grow into a competing force culminating in social revolution. Communism means European and world social revolution together with the elimination of the state in all its diverse oppresssive forms.

And yes, then, in a perverse way, I do think Vincent Browne has a point. In the short term there is no way out other than, more or less, what is being officially advocated by the establishment i.e. outside of revolution. At present neither Ireland nor Western Europe have the popular culture nor organised forms to develop social revolution into communism. In the absence of these conditions Europe can secure no other than the model of a chaotic present day Iraq on a European scale --nihilism. This is why the building of a communist movement is such a necessity.
Ah sure I think I'll read McCarthy's novel 'The Road' again!