Looking to the future

The Labour Chair of the Parliamentary Environmental Audit Committee, Mary Creagh MP, has written to the top 25 pension funds to enquire about what they are doing to “safeguard people’s pensions from the financial risk of climate change”. Ms Creagh was reported in City AM on 5 March as saying that “a young person today may be 45 years away from retirement. Over that time scale climate change risks will inevitably grow”.

The lack of understanding implied by this statement is breath-taking. Setting aside the problem that personal pensions[i] , the kind subject to auto- enrolment that pension funds provide – represent poor value for money because of the level of management fees and other expenses and place all the risk on the employee, the issue here is a failure to understand the kind of risk that climate change brings.

Modern Portfolio Theory (MPT) holds that there are two kinds of risk: systemic and unsystemic. As we all live on the one planet, the risk associated with climate change is systemic. It is born by everyone and is independent of any investment decision the individual may make. With systemic risk there are no hedges available, no clever portfolio strategies by which it can be reduced. Ms Creagh might just as well have written to the Met Office to ask about what steps they were taking to stop climate change.

The primary interest of pension funds is to flog their product. They need to attract and retain customers – and the government’s requirement for auto-enrolment ensures a steady stream of these. They market their product by stressing their skill at achieving a good investment return and, to a lesser extent, the level of their fees. MPT holds that the future return on investments is largely independent of investment skill and, perhaps somewhat optimistically, the return will follow the long run average – no more than around 5% per annum real rate of return[ii]. Funds that imply a higher return are either in the snake oil business or taking on more risk that the punter realises. Rock bottom management fees of 0.5% per annum still represent 10% of this anticipated future return. Many management fees and other hidden costs are significantly higher than 0.5% per annum.

The horizons of pension funds are also determined by MPT. At the heart of MPT is the concept of discounting the future. This too is done at the 5% per annum real rate of return. Thus a certain loss in 45 years of £1 is treated as equivalent a certain loss of only some 10 pence today. Even if the pension funds had any way of influencing global warming in 45 years time, this interest would only represent one tenth of their concern about a similar risk today.

We need a solution to global warming, but it isn’t going to come from pension funds – or, regrettably it seems, from Ms Creagh. The only way out of the crisis we face is through genuine democratic control – the kind that promotes the interests of all workers, living and unborn. It’s called Communism.

[i] The alternative is a defined benefit scheme provided by an employer, but they are fast disappearing and, in the case of university and college lecturers, under current attack.

[ii] The only exception is when insider information is exploited. This is only possible for crooks and the super-rich.


Tesco and Equal Pay for Equal Work

Do markets have memory? No, according to a basic tenet of market fundamentalism, the philosophy of the rich and powerful which is endorsed by their high priests, the professors of neoclassical economics. Markets, they contend, are forward looking and respond only to changes in prospects, not past events. This is why they are beyond challenge. They reflect the future and condition what is possible in the present. Furthermore, in the case of financial markets, they respond instantaneously – the so called ‘efficient market hypothesis’. Thus news that Tesco was being pursued through the conciliation service ACAS by the law firm Leigh Day over an equal pay claim that could cost Tesco £4 billion may have dented Tesco’s share price to the extent that investors thought it likely to succeed, but there was no question of customers having to pay for the £4 billion settlement, should it succeed, with higher prices. Future prices would be affected, according to this theory, only to the extent that the average cost of employing staff in future increases.

For communists, two issues arise here.

  • While we agree that markets don’t have memory, the economy we actually experience is one of State Monopoly Capitalism in which institutional pressures are brought to bear to protect capital, including that invested in Tesco. To understand this economy, we need to begin our analysis not, where the neoclassical economists begin, with market prices, efficient or otherwise, and work backwards but with production, labour and the creation of value by workers and work forward, identifying with whom this created value ends up. It doesn’t end up with workers, whether shop floor or warehouse, male or female. After workers receive enough to survive and replicate (assuming their offspring are still needed), it ends up with those who own the capital – the 1% and the 0.1%.
  • While communists fully support equal pay for equal work claims such as that against Tesco, we recognise that capitalism is incapable of achieving this except in the very limited case of a single workplace – and even then it is hard enough to achieve and sustain. Equal pay for equal work across an entire economy is the defining condition of socialism, which Marx defined as from each according to their means to each according to their work. That is not something that social democracy can, or even wishes, to deliver as, it would rent asunder our existing institutions (on which they, themselves, depend) and replace them with the more democratic framework needed for building communism with its ultimate aim of from each according to their means to each according to their need.


Carillion and Marxist Economics

The collapse of Carillion is one of the largest insolvencies experienced in the UK and the biggest ever in the UK construction industry. It puts at risk the jobs of 19,000 employees and an unknown number of employees of its 30,000 subcontractors. In a classic example of the wisdom of hindsight, it will be investigated by the Financial Conduct Authority, who will ask how it happened, the Financial Reporting Council, who will enquire why the auditors, KPMG, failed to warn it would happen, and the Pension Regulator who will investigate how a pension deficit of at least £587m arose before it happened. What these watchdogs should be investigating, of course, is themselves –or rather, they should be investigated by someone else. Quis custodiet ipsos custodes who guards the guards? Parliament needs to face up to its responsibilities and the Parliamentary briefing paper here is a first step – but don’t hold your breath.

Labour’s call for a curtailment of subcontracting of public services and an end to PFI and privatisations is a welcome response to the collapse. It deserves support, but only addresses one aspect of the problem. The real cause of the collapse is capitalism itself, and events like this will continue to affect the lives of millions until the system is changed.

According to neo-classical economics – the only form of economics taught in our schools and universities  – the potential for businesses to fail is essential to ensure that they ‘innovate’. Furthermore, any government action to ameliorate the consequences of corporate failure will result in “moral hazard” – their jargon for the idea that, if businesses knew that governments would bail them out, they would take even bigger risks. The impact on workers is not considered relevant. We can all find other jobs following the collapse.

If economic theories were rejected, or at least modified, when they failed to explain the economy, neo-classical economics would not have survived the 2007 banking crisis. Where was the talk of stifling innovation and “moral hazard” then when the banks were bailed out? Neo-classical economics survived because capitalism survived, confirming that its real purpose is not to guide policy or explain the economy, it is to provide the intellectual basis and justification for capitalism. It remains intact today and still hugely influential amongst social democrats, greens and members of ‘the Labour Party.

Unlike neo-classical economics, Marxist economics has been, and continues to be, subject to rigorous testing and evaluation and this is how it is taught by, amongst others, the Communist University in South London (CUiSL). Teaching by “experts” is foregone and learning by debate and discussion is employed. Students are not seen as mere empty pots to be filled. Instead we learn from each other, always applying the principle “Question Everything”.

CUiSL holds its classes on the third Thursday of every month at 7.30 pm at Ruskin House, 23 Coombe Road, Croydon CR0 1BD. The next class is on 15 February when we will be discussing Marx and Darwin and how their theories continue to interact. There are no fees and no indoctrination. You enrol simply by turning up. If neo-classical economics were taught in this way, we might have avoided the Carillion debacle.


The BBC is required under its new Charter to provide “impartial news and information to help people understand and engage with the world around them”. Its failure to do so renders BBC news coverage increasingly irrelevant. It’s now not only Question Time that leads so many of us immediately to reach for the off button. Much BBC news coverage is more likely to increase blood pressure than increase understanding and engagement.

The requirement to provide “impartial news and information to help people understand and engage with the world around them” has, however, prompted the BBC to propose in its Religion and Ethics Review published this week that its coverage of religious issues should be increased and “greater religious understanding” incorporated into its news reporting. Investigative reporting of the corrosive influence of religiously segregated schools in Northern Ireland and, increasingly, the UK mainland would assist this understanding, but that’s not quite what the authors of the Review had in mind.

One problem for the Review was that it couldn’t avoid recognising that an increasing number of people in the UK do not affiliate to any traditional religion. It was in response to this awkward fact that it concluded that the extended coverage it recommends would also have to “reflect beliefs which aren’t founded on religion”. What “beliefs unfounded on religion” the review had in mind was not explained, so one has to speculate. Belief in creationism, that blood transfusion is impermissible  and (I suspect) that the world is flat are all endorsed by followers of some traditional religion. The Review will have to look to belief in flying saucers for truly independent beliefs – or have I missed its endorsement somewhere?  The Review did, however, identify the  target audience for unaffiliated believers: those not engaged with traditional religion who are “spiritual and interested in the big issues affecting them”.

As communists we are most certainly interested in the “big issues”, and not only those that affect us personally. Furthermore, communist philosophy, i.e. Marxism, provides, in our view, the best understanding there has ever been of the world around us. So can we expect to benefit from this envisaged extended coverage by the BBC? Of course not! We will be excluded, ostensibly because we are not “spiritual”. This is correct in the sense that we don’t rely on spirits to understand the world. However, the real reason we will be excluded is because, as Marx wrote, we not only seek to understand the world, we seek to change it. That is the reason the BBC will exclude us; but while it remains the mouthpiece of the ruling class, we would not have it any other way.

The BBC can do what it wants, but if you want to learn about Marxism and how it can help us to understand and change the world, you can join the Communist University of South London (CUiSL) which runs classes at 7.30 pm on the third Thursday of each month at Ruskin House, 23 Coombe Road, Croydon CR2 0BN. In the Spring Term we will be studying eco-socialism. For more details e-mail cuisl@communist-party.org.uk.


The Beginning of the End of Capitalism

The Guardian reported yesterday that Four Seasons Health Care, a private care home provider that looks after 17,000 residents, could go into administration after talks aimed at staving off its collapse were derailed by haggling between private investors. The Guardian article goes on to point out that Labour has criticized the role of high finance in social care.

Is this a sufficient response from Labour? At the root of the problem is a long held reluctance by social democrats to tax wealth and to recognise the contradiction between the need for ‘homes’ for all and the use of housing as private investment. The former requires declining house prices and the latter requires ever increasing ones.

The Labour Party 2017 Manifesto, For the Many, not the Few calls for a comprehensive National Care Service but avoids the question of the provision of care homes and how to pay for them. Under current arrangements we all play the Alzheimer’s lottery game under which some home owners get to pass on their investment to their children while others find they must liquidate their investment to pay for a place in a care home. However, with escalating house prices, essential if housing is to act as an investment, even the children of those who win the Alzheimer lottery may not be able to buy their own homes due to the escalating house prices essential for housing investment.

The other big omission in the Labour Party Manifesto is the taxation of wealth. Despite some recent expressions of interest by Jeremy Corbyn and John McDonnel, it does not feature in For the Many, not the Few. Yet it was included in the Labour Party Manifestos of 1974, 1979 and 1983 before being dropped. Why was this?

For Labour, a wealth tax has always been seen as something to “make the distribution of the tax burden accord more closely with taxable capacities” [i], not a means of redistributing wealth. The essential distinction is whether the tax can be paid for out of income or out of capital. References to ‘taxable capacities’ imply the former. The latter implies the start of what Marx called “expropriating the expropriators”[ii], i.e. the beginning of the end of capitalism.

As Howard Glennerster’s paper Why_was_a_wealth_tax_for_the_UK_abandoned? demonstrates, there will be resistance to even modest proposals for a wealth tax paid out of income. Proposals for a tax paid out of capital are likely to provoke a hysterical response from those required to pay it. No social democratic party, even a Left Labour led by a principled politician freed from the shackles of an entrenched Parliamentary Labour Party, is going to risk provoking such opposition.

The Communist Party has no such inhibitions. Our aim is not to manage capitalism more humanely, it is to replace it. Thus in our pamphlet From Each according to their Means[iii] we proposed an initial annual wealth tax of 2% per annum, with higher rates for the mega rich. Even without these higher rates, a wealth tax would raise £90 billion per annum, sufficient to break the link between housing as investment and housing as a need and also finance a truly comprehensive National Care Service. Most significantly, however, a 2% + wealth tax would signal the first step in the abolition of capitalism. Let’s start promoting it now.


[i] Labour’s Green Paper following the 1974 election.

[ii] Karl Marx, Capital, Chapter 32

[iii] From Each according to Their Means, Communist Party, 2014. £2.50 from CP shop

Why Should We Celebrate the Russian Revolution?

One question communists can expect to receive is Why should we celebrate the Russian Revolution? It’s a difficult one to answer with soundbites, especially when the questioner isn’t really interested in your answer. There is a wonderful example of this here when the BBC interviewed Rob Griffiths, our General Secretary, during his recent trip to celebrate October 1917 in St Petersburg with CPs across the world. First the loaded question; then the broken link before Rob can answer fully; and then the smear implying that either Rob himself or possibly Putin pulled the connection. Deliberate sabotage or incompetence by the BBC would seem more probable explanations.

In fact any assessment of the Russian Revolution or, more meaningfully, the failed attempt by the USSR to build socialism, is highly complex and the subject of continuing serious study and debate. It has, for example, been a recurring item on the agenda of our own Communist University in South London (CUiSL). Here, however, are ten more or less random reasons why it should be celebrated:

  1. The contribution of the USSR to the defeat of Hitler – without it the Nazis would have won the Second World War and you and I would now be enslaved – or dead. Does anyone think Tsarist Russia could have defeated the Wehrmacht?
  2. The mere existence of the USSR strengthened the confidence of workers in the West and required capitalists from 1945 to offer concessions to workers to dampen demand for a revolution here. This explains why, as the economic performance of the USSR imploded in the 1980s, capitalists in the West no longer saw any need to offer concessions to their workers, resulting in increasing inequality and exploitation thereafter.
  3. With its planned economy, the USSR saved its own population from the ravages of the Great Depression of the 1930s. In the West, only the advent of WW2 achieved this.
  4. The USSR should be recognised for organising through the Comintern opposition to the rise of Hitler and then for seeking collective security agreements which could have to isolated the Nazis. Only when these were rebuffed and it became clear from the Munich Agreement that the USSR stood alone and that the capitalist nations would be happy to see Hitler attack the USSR did the USSR seek its ill-fated, non-aggression pact with Hitler.
  5. The USSR was the only country to provide support for the Spanish government against the Franco putsch and, though the Comintern, organise the International Brigade. The capitalist nations turned their back on Spain and provided implicit support for Franco with the non-intervention pact.
  6. The cultural and artistic achievements of the USSR – dance, music, painting etc
  7. The scientific achievements of the USSR – achievements which matched those of the much wealthier West.
  8. The tangible support the USSR gave to the socialist revolutions in other countries, especially China and Cuba, both of which continue and provide hope for us all.
  9. The tangible support the USSR gave to communist parties in the West and in the developing world.
  10. The USSR’s contribution to the dismantling of colonialism and the ending of apartheid in South Africa. While the Cuban contribution was more tangible, that would not have been possible without the USSR’s support for Cuba.

Can anyone propose two more to make it a dozen? But for a more balanced assessment of the USSR, its successes and failures, and to learn the lessons for the future, we need not only study the former USSR. We can learn from China and Cuba where the building of socialism continues; and we need proper discussion and debate, not soundbites, sneering BBC commentators and mysteriously pulled plugs.


A Thought for Halloween

Writing this week in City AM, Diego Zuluaga, Head of Financial Services and Tech Policy at the Institute of Economic Affairs, seeks to defend capitalism. His article on 24 October Big Businesses Denigrating Capitalism Don’t Understand It is interesting not for its call on big business leaders not to rock the boat, nor for its arguments in defence of capitalism – even the author must surely recognise, deep down, they are disingenuous – but because it was felt necessary to publish such a defence at all.

For Marxists, a study of history and an analysis of capitalism and its instabilities leads us to conclude that capitalism is merely the penultimate stage in our evolving, class-based society, not the final equilibrium or ‘end of history’ envisaged by Francis Fukuyama. Marxists are sometimes accused of irrational belief, but belief has nothing to do with it. Our approach is a rational and scientific one. It is the defenders of capitalism who exhibit irrational belief. Their confidence that de-regulating markets will lead to the welfare of all is, at best, based on an elegant model built on unrealistic assumptions[1]. In practice, it is based neither on economic theory nor on Zuluaga’s flimsy arguments but on the self-interest of the ruling class and those in their pay. Our theories, on the other hand, have concrete evidence to support them: the 2007 financial crash; historic levels of inequality; Grenfel Tower; global warming; the housing crisis; growing hospital waiting times; bloated expenditure on ‘defence’; and …. Readers of this blog are invited to complete the list.

It may be too soon to claim again, as did Marx and Engels in the Communist Manifesto, that ‘a spectre is haunting Europe, the spectre of communism’, but we can take comfort from the thought that something is spooking our ruling class.

[1] The Arrow-Debreu Model, a mathematical expression of Adam Smith’s ‘hidden hand’. Amongst its many unrealistic assumptions is perfect and complete markets.

Our “Free” Press

It would be a mistake to believe that the power of the capitalist press has been irrevocably damaged by its failure to deliver the Tory vote at the last general election. Social media may have enabled the Left to function without national newspaper support on that occasion but it must not be forgotten that the Tories still gathered 42.4 % of the popular vote against 40.0% for Labour. In the event of a Labour victory next time, unless something is done popular discontent will soon be whipped up against it. If anyone doubts this, look what is happening in Venezuela.

As Rob Griffiths, our General Secretary, reminded readers of the Morning Star this weekend, there is an old aphorism that the Express is read by those who think the country should be run like it used to be run, the Telegraph by those who think the country still is run like it used to be run, the Mail by the wives of those who run the country, the Guardian by those who think they should run the country, the Times by those who do run the country and the Financial Times by those who own it. While this is merely an amusing adage, it retains a germ of truth. But as Bill Barnett pointed out in a letter published in the same edition of the Morning Star, in times of falling readership, the “power of the press” is now largely dependent on the status it is afforded by national broadcasters, especially the BBC. ‘What the papers say’ is still treated as something of consequence to be faithfully reported. The continuing decline in readership is ignored. Every attempt to get the BBC to extend coverage to the Morning Star, despite well supported Early Day Motions in Parliament, is ignored.

A lot of nonsense is talked about the value of a “free” press. If a Corbyn led government is not to be undermined from the start, it should be a matter of priority for it to improve press regulation, require balanced reporting, establish an equal prominence right of reply, dispossess expatriate owners and, if any newspapers are to remain in private ownership, to properly tax the benefit of such ownership. As was pointed out in the Communist Party pamphlet From Each According To Their Means[1], newspapers are not owned for any (modest) profits they may generate, they are owned for the political power they confer on the owner. This pamphlet called for a public debate on newspaper ownership and how it should be taxed. One possibility would a substantial per copy levy on the number of copies distributed (rather than actually sold) in the UK with an exemption for reader owned co-operatives. An extra levy could be charged on any free bottles of water accompanying the purchase!


[1] £2.50 including postage Follow link

It’s impossible to say whether the extreme destructiveness of Hurricane Irma was due to global warming, but its intensity demonstrates the forces we can expect to be unleashed now average global temperature is above that 125,000 years ago during the last interglacial. During this interglacial, when homo sapiens was confined to Africa, the Greenland and West Antarctic ice caps melted. The current interglacial which we are now living through began only 11 thousand years ago. The Greenland and West Antarctic ice caps have yet to melt, but, accelerated by human CO2 emission, this is now happening. When the Greenland and West Antarctic ice caps melted 125,000 years ago, sea levels rose some 4 to 6 meters above the current level. If they melt again, as is expected, sea levels will again rise by a similar amount.

No one knows for sure how quickly the ice sheets will melt or where the process will stop. A completely ice free world would result in a drowned world with sea levels some 70 metres above current levels. Unless a tipping point is reached first, this is currently thought unlikely in this century, but the direction of travel given our dependency on fossil fuels and the profits that can be derived from their extraction is clear enough.

Can humanity cope with increases in sea levels of 4 to 6 meters or more? Go to http://flood.firetree.net, feed in your own predictions and fears and judge for yourself the effect on shorelines and how you and yours will be directly affected. But the amount of currently dry land that will be below sea level is only part of the problem. As Hurricane Irma and recent floods in Texas, the Caribbean and India demonstrate, water moves and it is surges, precipitous rainfall and wind that cause the real damage rather than the slow encroachment of the sea. Living a few hundred feet above sea level will not secure your future or that of your children – unless, that is, you are part of the capitalist elite.

One reason for the lack of enthusiasm in tackling CO2 emissions – look for example at how the issue was ignored in reaching the decision on Heathrow expansion – is that capitalists, those who own the means of production and thus don’t have to sell their labour to live, are pretty confident that they will survive the coming global climatic catastrophe. They are strengthened in this view by robotisation, the accelerating substitution of labour by machines, giving them an implicit belief that they can become self-sufficient provided they are supported by a servant class. The 1% need, say, 2% to serve them, leaving the 97% superfluous to their needs.

Scared? You should be. Global warming is probably unstoppable even if the political will existed to try. But that doesn’t mean that it cannot be slowed or that our world will shortly (i.e. by the end of the century) become uninhabitable. The choice is between: letting the 3% survive and the rest of us perish; and starting out on the road to building a communist society which meets the needs of everyone. Given where we are starting from, that means building the Communist Party – now, in Croydon and everywhere.

Open Universities?

The CUiSL class on 20 July on What comes after capitalism? was well attended and got the new term off to a lively start. The next class will be on 21 September, 7 pm at Ruskin House. The topic will then be Universal Basic Income – do we want it?

CUiSL is an open, free university which treats its students as a resource, not empty vessels to be filled by experts. It is therefore very different from what we have come to expect from commoditised university education. These differences have been highlighted by two items covered in news reports over the summer. The first is the report that I have personally had confirmed by the supposedly Open University: that it is refusing to accept students from Cuba on the grounds that the OU, a British institution funded by British taxpayers, lacks a license from the US Treasury Department’s Office for Foreign Assets Control to do so. Such supine acceptance of US extraterritorial jurisdiction is breath-taking and says much about the independence of thought we can now expect from that once noble institution. The second event is the ongoing debate on student fees and who should pay them. Writing in City AM today (23 August), Paul Omerod, Visiting Professor at the UCL Centre for Decision-Making Uncertainty, acknowledges that universities have no incentive to reduce their fees as to do so would signal that their degrees were less valuable than others. His half-baked solution is to offer discounts to students with higher grades. How this fits with the ethos that universities are businesses left free to charge “what the market will bear” defies logic. A better solution would be, as we have argued below, for universities to reassume their responsibilities for providing the nation with further education and research and for the state to pay fees and subsistance grants financed by progressive taxation, including that on graduate incomes. One useful saving that could, however, be made would be for future free university education to be confined to those educated in state schools. For as long as we tolerate private education, why should those wealthy enough to pay for private education (i.e. ‘public’ schools) for their kids be allowed once more to access state funded further education for free?