Will Marx help to understand the economic and social crisis?

Will Marx help to understand the economic and social crisis?

This will be discussed at the next meeting of the 17 Group.

When?

Wednesday the 6th of October at 7pm,
in unit 6 at 20 Drury St.

The speaker will be left scholar and university lecturer on political theory, David Eden.

Brief summary:

‘Marxs Capital and the politics of crisis’

Crisis plays a special and often unexamined role in Left thought.

Here I want to look at how Marx theorised crisis in Capital and then three contemporary applications of this thought (that of David Harvey, the post-operaismo and the Midnight Notes Collective).

From here I wish to discuss what role thinking about crisis might play in the regeneration of emancipatory anti-capitalist politics.

Usual contretemps with Leon. Thought the first line of notice should have begun: Will Trotsky helpetc.

May still front through force of ideological habit.

But come anyway and bring the family copy of Capital to check the references.

Dan O’Neill

18 responses to “Will Marx help to understand the economic and social crisis?

  1. Marx on banks….

    The Economic Crisis in Europe
    http://www.marxists.org/archive/marx/works/1856/10/09.htm

    Like the mainstream commentary of the recent GFC, Marx identifies the problem as greed and corruption – “Nothing is wanted but English law”

    He fails, just as Obama and the world bank fail, to identify the exploitation and expropriation of the legal and institutional money multiplier effect of banking capital – inherent in fractional reserve banking whether the bank is capitalist or socialist as per the communist manifesto – “Centralisation of credit in the hands of the state”.

    This is no way undermines his astute analysis of greed and corruption in banking, but it is not the whole story.

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  2. Ian,

    It was you who brought up securitisation. Securitisation is just one way of fungible-isation (is that a word?) of wealth, which is the essence of banking.

    As I understand it, securitisation is the reserve bank’s endorsement of the transformation of real wealth into currency, stocks, bonds and any other pieces of paper. The paper (or digital code) itself becomes the commodity rather than a representation of it.

    Securitisation is just the reserve bank’s system of promisary note.

    Although I am still yet to find details of the extent of this in Qld. (but Hacket-Jones’ debt figures gives an indication of the relative extent) I think you will find it is indeed normal budgetary process in Qld. since Beattie. It was an all of government policy that goes down to things like community organisations no longer being funded to purchase capital assets (such as cars) but now have to lease them in order to dovetail in with the fluidity of numbers in account columns.

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  3. Queensland Rail — in the public debt

    Hello John,

    I have written an essay called ‘Queensland Rail – in the public debt‘ where I begin the task of understanding the relation between debt and the sale public assets.

    Please post any comments you have on that subject there.

    Hey, I did not say that Humphrey McQueen’s are ‘a bit of a slog.’ What I said was: ‘Humphrey McQueen provides a guide on how to read the more difficult parts of ‘Capital’. He makes is easier to read Das Kapital which is noted for its difficulty. McQueen is both a clear writer and speaker.

    I would like to add to what I said above about securitisation since this seems have gained some importance to you in your post-marxian analysis of capitalism.

    Securitisation is acurately defined in Edna Carew’s The language of money as:

    Converting an asset such as a loan into a marketable commodity by turning it into securities. The most popular form of securitisation involves mortgages which are pooled and sold, often in unitised form, enabling the lender to reliquefy the asset. Any asset that generates an income stream can be securitised – eg, mortgages, car loans, credit-card receivables.

    So it is the sale of a revenue stream in order to acquire money up front. The Qld state government sells leases to banks to raise capital for acquisitions. This is a form of privatisation, it occurs outside the normal budget process and uses ‘commercial-in-confidence’ contracts to prevent scrutiny of the loans raised.

    Anyway I will explain this is greater details later.
    Ian

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  4. Ian,

    I was not endorsing Hacket-Jones’ ideology, it was just the only info I could find comparing Qld’s debt with the rest of Oz. If you have another source I would be interested to see it.

    The $15,000 per capita is on top of private debt and the two need to be added together, not compared. Then you have Commonwealth loan debt on top of that. This accumulated debt is far from insignificant.

    Furthermore, private debt is serviced by disposable income above and beyond that needed for basics.

    However Qld’s debt is structured that the money that should be used for basics (tax for public services) has been invested to create a cash flow to pay debt and public services. This cash flow from investments collapsed in the GFC, affecting not only the states capacity to repay loans but also to provide services – doubling the impact compared to household debt.

    However, no matter how big or small debt is, it exists outside the closed circuit of Marxist economics where money is assumed to simply circulate and accumulate rather than – as it actually does in banking – multiply.

    I have read some of McQueen’s articles, although you are right, they are a bit of a slog.

    My questioning was in large part a response to McQueen who seems to say that debt is irrelevant to the present crisis and the problem is only in production. However he defends this only by way of ideological commentary with an apparent blind faith in the Marxist analysis rather than an explanation of the crisis. He is more of a political journalist than an economist.

    Do not assume that because I disagree with McQueen that I have not bothered to see what he says.

    He says….”We have to recognise that the banking and stock-market upheavals are expressing the il-logic of over-production.”

    I say the il-logic of over-production is expressing the artificial creation of investment capital by banks.

    Over-production is a result of over capitalisation which comes from debt, not accumulated surplus value. Just look at how much Alan Bond or Christopher Skase borrowed compared to what accumulated assets they had

    Furthermore, this financial prestidigitation is the only reason that capitalism did not collapse as predicted by Marx. It is worth understanding rather than pretending it doesn’t exist.

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  5. Hello John,

    Humphrey McQueen writes about Marx and the Crisis.

    I have posted his series of articles about the crisis at ‘Humphrey McQueen ‘On the Crisis’ — Marxist analysis of the global financial crisis‘. You can access each article via hyperlinks from the Table of Contents inside that document.

    Humphrey McQueen provides a guide on how to read the more difficult parts of ‘Capital’. His analysis of ‘Marx’s A Contribution to the critique of Political Economy’ is a good place to begin. You may have even started, I hope so.

    I began posting and updating the McQueen analysis during and just after the onset of the GFC. I might add that this is a time consuming and difficult task but not nearly as hard as writing it. I have made attempts to provide graphic support with cartoons and financial graphs.

    Is it the way WBT is laid-out that stops people from reading the articles? Or is the material too dry for the reader? Or are we (who use the internet) all losing our concentration and analytic reading ability? Anyway it is all here on WBT complete with links to other Marxists like Peter Harvey which you may have seen. I know some tricks to search the material efficiently if readers need help with advanced searching using Google.

    Regarding the debt situation in Qld I would be cautious about claims on the websites you mention. The raw data is difficult to analyse and often easily misunderstood. I say this because until recently (the 1990s) the Qld government used ‘jam jar’ accounting. That is, Qld Treasury forecasts and estimates were based on a ‘cash accounting’ system rather than the more widely accepted ‘accruals’ accounting. That is why everything in the budget is reduced to simplistic ‘buckets’ of money. There is another problem with asset valuation in that government trading enterprises (GTE’s) use a different method of valuing assets than the private sector.

    Putting this to one side, the website you referred me to (Revenue Review Foundation) claims that the government has $15,000 of borrowings for each person in the State. How this figure was derived is not explained. Is it a valid form of measuring debt (liabilities)? Even if it is, $15,000 does not strike me as being a particularly large debt when you compare it with mortgages that people owe on their houses.

    Richard Hackett-Jones (‘Revenue Review Foundation’) is arguing that high-income earners should only pay the same rate of tax as the ordinary person. His submission to the Henry Tax Revenue advocates a regressive tax system where ‘a uniform rate of income tax for all’. He is attacking the slightly ‘progressive’ income tax system that we do have. John, you know how important it is to have the rich pay a higher rate of tax than the poor.

    “From each according to her/his ability, to each according to her/his need.”

    That’s all for now.

    Ian Curr
    October 2010

    PS I still have a little to say about securitisation, its role in finance and its impact on the GFC, but will leave that for later.

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  6. Hello Ian,

    There is plenty of stuff around about privatisation in the context that you present it above. What I am curious about is the debt economy – both in an analytical sense (debt as artificial surplus value) and the specifics of what Qld debt is doing here and now.

    Despite the magnitude of debt’s impact on the economy, there is very little public discussion of it. Qld. Treasury’s annual reports are vague and general. You mention public service secrecy rules regarding securitisation but the secrecy regime is broader than that. As soon as state assets are securitised and/or as soon as a loan is taken then the details of this secret as commercial confidentiality. (as prescribed by U.S. securities and exchange commission rules).

    Wayne Swan was on Lateline last night, not-answering Questions about the censorship of banking and debt figures in Treasury’s current analysis of Government policies.
    http://www.abc.net.au/lateline/content/2010/s3030414.htm

    Banking and debt is a secret!. Monetary policy is controlled by the reserve bank – an unelected and unaccountable committee of bankers.

    Regarding Qld debt and the rest of Australia. Here is a graph that compares Qld.s debt to the other states which, I suggest, undermines any implication from your national comparative graph that Qld. does not have a debt problem.
    http://www.revenuereview.com.au/qld-govt-borrowings.html

    According to this graph, the Qld. govt. has nearly twice the per capita debt of any other state and three times that of Victoria.

    Don’t feel you have to respond to this. I was just hoping that someone might have known of a Marxist economist who has analysed debt and banking beyond a simple call for nationalisation of banks.

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  7. Hello John,

    I was just about to apologise for answering your last missive agressively but you appear to have taken it in good humour.

    There are legal issues in my telling you what I know about securitisation by Qld treasury as I am bound under the Crimes Act not to divulge information I obtained as a public servant.

    Nevertheless much of what I know is on the public record and so I can answer your questions in the broader sense.

    Firstly, lets put our discussion in its proper framework so we know where we are. This may help you to decide if you (and/or others) wish to participate in the discussion within this framework, it is up to you (them).

    What we are discussing is the role of government.

    More specifically what enterprises should be performed by government and which ones should not. We are discussing this inside the dominant paradigm of capitalism, otherwise what we say makes little sense. Therefore what we are saying is not really part of an ideological analysis, we are not taking sides in the sense of working class against ruling class. We are suspending our natural allegiances briefly.

    What I would like to do is make an economic and therefore intellectual analysis of the situation. If you wish to have a discussion within this framework, I am happy to contribute the little I do know.

    There is one text that will help in this discussion even though it is dated. It is “Privatisation – sell off or sell out. The Australian experience” by Bob and Betty Walker. This book was prompted by the last great asset sale in Australia, namely Telstra. It is written by economic rationalists.

    I worked for Telecom when the Telstra sell off started. I was there for the beginning of the corporatisation process which began as long ago as 1982 -1985. Even though I was a lowly clerk I could see then where it was headed in an ideological sense. But now since the three tranch sale of Telstra in the 1990s I wish to analyse privatisation from the perspective I outline above.

    The unions opposed the sale of Telstra, they also opposed the privatisation of the Commonwealth Employment Service and are now opposed to the sale of QRail. Each of these campaigns ended in defeat for the unions and the loss of hundreds of thousands of jobs. The unions are hard pressed to keep members conditions and wages let alone wage these campaigns. Unions are not really political organisations and lack the ability to stop government sell outs.

    It is in this context that I wish to discuss further government sell offs specifically here in Queensland.

    OK?

    Ian Curr
    October, 2010

    Ian Curr

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  8. Thanks Ian,

    Securitisation is the essence of fractional reserve banking. Fungible assets are represented by promisary notes.

    I would be interested to hear what you know about Qld. govt. securitisation. I believe there are answers to a lot of questions in this. The non-spending of Commonwealth funds on everything from hospitals to Aboriginal housing is much more a response to tax revenue being securitised than to bureacratic incompetence as is the usual reason given for it.

    As tax revenue is securitised – meaning the real wealth is given to a bank to do what it wants with it in exchange for a piece of paper with a conditional promise on it – with strings including the priority of repaying bank debt above and beyond the purposes for which the money was granted by the commonwealth – this real value is withdrawn from we the people and channeled to the banks.

    Similarly in order to get further loans, the tax revenue must remain as bank investments (remain securitised) rather then being spent on the programs for which it was granted.

    This is why Qld has had recurring funding for Aboriginal housing, prioritised for communities like Palm Island, for most of the last decade but has not managed to build any houses. The state govt. brags about how (from memory?) $10 million per year has been allocated to Aboriginal housing prioritised for places like Palm Island but it is never spent. It remains in the account book to justify Federal funding guidelines but the money has been securitised and is therefore being used to develop some capitalist enterprise somewhere else.

    It would be interesting if you had a graph like the one above that compared Qld. debt to other states. Qld has been a pioneer in all of this and the other states were just catching up when the GFC hit.

    it was all part of Beattie’s reform agenda which included the corporatisation of the parliament. Queensland is unique in Australia as.part of this reform process, the Queen was removed as the owner of the radical and ultimate title to land, as she is in the rest of Australia. In Qld. a corporation called “The Brigalow Corporation” owns the ultimate title to all land in Qld, – that is the title that underlies freehold, leasehold and mineral title. The assets of this corporation – all the land in Qld. – is the collateral for state borrowing.

    Qld. treasury is a corporation listed on with the U.S. securities and exchange commission, as such it has legal obligations enforcible in international law to prioritise cash flows and asset liquidation to keep up with debt payment.

    This is the pickle old Anna finds herself in.

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  9. Hello John,

    It is nonsense to say the banks have the Qld government by the short and curlys. To explain:

    When are levels of government debt (or liability) dangerous?

    If you listen to economic rationalist rhetoric, all debt is dangerous.

    That is why having a balanced budget is the priority of all modern Australian governments.

    However, if comparison were made with the private sector, claims of excessive debt would be regarded as crap.

    Debt financing is an important part of expansion of the firm and may result in greater returns to shareholders.

    It is clear from published international comparison, levels of debt by Australian governments are very low by international standards.

    If Anna Bligh is selling QRail or the ports or the water or the power stations because of high levels of debt she is sadly misled because government debt is low.

    You say that the federal goverment allows state governments to borrow.

    Of course it does.

    If you look at the current picture of government debt in Australia you will see that it is the by far the lowest of the G7 countries.

    The difference in levels of debt with the G7 is qualitative.

    Often Australian government debt as a % of GDP (a rough guide) is 100 times less than OECD economies.

    Sorry John, on any objective measure, privatisation in Australia has little if anything to do with debt (or more correctly, liabilites). See for yourself in the chart below put out by Treasury and OECD.

    However you are right to state that understanding of public sector debt (liabilities) is important.

    Clearly, the Qld Treasurer and Premier do not or, if they do, they don’t care.

    Debt

    Later, if you are interested, I will explain how the Qld government sells revenue streams to banks to avoid having to manage its own assets. It is called securitisation. As a technical officer employed by the federal government I audited one such scheme by the Qld government.

    Ian Curr
    October 2010

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  10. p.s.

    You can’t understand Qld privatisation without understanding debt.

    In times gone by, Canberra allotted tax revenue to states to provide public services. States were not allowed to raise their own revenue. The idea of even the commonwealth government borrowing money was outrageous – just look what happened to Gough.

    However in recent times, States have been allowed to raise their own money including borrowing.

    Under Beattie, Qld took all its revenue from Canberra and invested it on the U.S. stock exchange (This is why Beattie went to the U.S.). From the cash flow of these investments, loans were taken out to pay for government programs. Beattie had tried to do what the banks do, effectively doubling state assets through debt.

    But the shit hit the fan in the GFC and Qld’s stocks plummeted – lost about half its value which meant it got half its cash flow which means it is in serious trouble paying the debt for basic public services. This is why Qld. lost its AAA credit rating.

    Bligh is selling of infrastructure because the banks have got her by the short and curlys – it has nothing to do with neo-liberal ideology.

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  11. Ian,

    Finance is not an industry – it produces nothing. Its basic commodity is debt.

    The social relationship – or distinction – between exploiter and exploited becomes blurry when you consider all Australian workers have superannuation funds and many have personal investments in global energy, agribusiness and other global exploitation. Since the Rockefellers et al flogged of their industrial empires on the stock market, the lifestyle and future security of middle class investors that is maintained by global exploitation, not simply the greed of the capitalist elite.

    Lenin speaks of banks in “Imperialism, the Highest Stage of Capitalism” but, like Marx, he sees banking as simply a matter of “holding” where the domination comes by way of the concentration of capital.

    Lenin, like Marx, does not consider the central role of debt in the banking formula.

    Fractional reserve banking had been practiced in Europe for 2 or 300 years before Marx so, although it was not the norm as today, the practice existed – but Marx and Lenin did not include it in their economic analysis.

    Lenin did say, in concluding his text on banks….”Thus, the twentieth century marks the turning-point from the old capitalism to the new, from the domination of capital in general to the domination of finance capital.”

    Today’s midwives of history need to understand that the domination of finance capital has continued to evolve and mutate in the last 100 years.

    If we cling to time-frozen analysis such as Marx’s, then we will be ignorant to the economic and social forces of today.

    The spiritual essence of Marx – to which I faithfully adhere – is the importance of understanding and being relevant to economic and historic reality.

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  12. Hello John,

    The current risk to capital is that the real economy has been in recession for the past 30 odd years.

    This is especially true of the United States which has compensated by launching a war economy in the Middle East and Central Asia.

    Remember that the US never repays its debts.

    It extracts the payment of debt from the economies that it destroys i.e. Iraq through the extraction of cheap oil and the theft of billions from the Iraqi economy. The assault on Iraq had nothing to do with 9/11, Islam, the liberation of women or Al Qaeda – Iraq was the most secular society that had the best education for women in the region – the invasion was all about oil.

    As for the GFC, it was the failure of the real economy that ran down wages in the US so much so that workers could not pay their mortgages. Many workers are unemployed (over 10%) as a result of the US industrial recession e.g. in the automotive industry.

    It is true that international capital has mutated so that instead of the joint stock companies being owned by the few ultra-rich like the Rockerfellas, the bulk of shares are held by institutions like pension funds. The levers are now pulled by funds managers in financial institutions.

    Each new crisis of capital is solved by a new bubble. See Peter Nolan and Jin Zhang ‘Global Competition after the Financial Crisis’ –

    While the economies of the us, Europe and Japan are still struggling to emerge from their post-2008 recessions, to date China has continued on its path of upward growth, apparently undaunted by the global financial crisis. In 2009 the PRC (Peoples Republic of China) overtook Germany to become the world’s largest exporter of goods, with 34 firms in the Fortune 500…

    — New Left Review, 64, July-August 2010, pp. 97-108.

    The debt crisis is carried by workers through interest payments in Australia, by low wages in the US and even greater wage exploitation in developing economies.

    “The bourgeoisie has, through its exploitation of the world market, given a cosmopolitan character to production and consumption in every country.

    To the great chagrin of reactionaries, it has drawn from under the feet of industry the national ground on which it stood.

    All old-established national industries have been destroyed or are daily being destroyed.

    They are dislodged by new industries, whose introduction becomes a life and death question for all civilized nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe”

    — Marx and Engles in the Communist Manifesto.

    Whether it be in industrial production or in service industries like finance the social relation is still that of the exploiter and the exploited — it is this social relation wherein lies the contradiction for all humanity.

    We have nothing to lose but our chains. We have a world to win.

    Ian Curr
    October 2010

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  13. And furthermore!

    All the multinational energy, agribusiness, engineering and manufacturing empires that emerged in the first half of the 20th century – having accumulated massive capital as per Marx’s basic analysis – went into banking in the last decades of the 20th century and sold off all their empires on the stock market – lending their clients the money to buy their shares.

    The Marxist analysis just does not explain all this. Capitalism was supposed to have collapsed by now – at least in the industrialised world. Perhaps it would have if the economy operated on the one dimensional framework of simple exchange as described by Marx, but the debt economy has not only rescued capitalism but super-boosted it.

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  14. p.s.

    the 10% reserve rate above is just hypothetical and convenient. It is about that much in the U.S. but (I think???) it is 16% in Australia which is the sole reason why Australia coped better than the U.S. with the GFC.

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  15. Thanks Ian,

    I have read those sections of Capital before and had another quick look now.

    Marx does not analyse banking and seems to see it as simply the administration of the circulation of money. He points out how surplus value from production is used by the capitalist to dominate and manipulate production and exchange in the transformation of money to capital.

    However he does not seem to look at how capital is created out of thin air by banks, not just through the hoarding of surplus value.

    Marx says… (Capital 1 ch5)

    “A may be clever enough to get the advantage of B or C without their being able to retaliate. A sells wine worth £40 to B, and obtains from him in exchange corn to the value of £50. A has converted his £40 into £50, has made more money out of less, and has converted his commodities into capital. Let us examine this a little more closely. Before the exchange we had £40 worth of wine in the hands of A, and £50 worth of corn in those of B, a total value of £90. After the exchange we have still the same total value of £90. The value in circulation has not increased by one iota, it is only distributed differently between A and B.”

    Consider however the involvement of banks and debt on top of this.

    e.g.

    A puts $100 in the bank. The bank keeps $10 in reserve (as per fractional regulation) and lends the remaining $90 to B and gives a promise to A to pay their money on call. Now there is effectively $190 circulating to buy wine and corn – or capital to inject into production.

    If B puts their borrowed $90 into the bank then there is now $190, $19 is held in reserve and $181 is leant out, making a total of $371 dollars in circulation – from the original $100 of money representing the surplus value from production – or wages of workers held in the bank.

    This process goes on and on infinitely generating more and more capital – not under the control of capitalists but under the control of banks that have no direct engagement with production at all.

    The centralisation of banking means all these transactions occur in-house.

    The GFC was a collapse of this banking process and has had nothing to do with production – as evidenced by production’s rapid healing once investment capital was again available from banks.

    Not trying to pick an argument here but this seems like a major gap in Marxist economics.

    Production is not the engine of the economy anymore, debt is.

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  16. Ian Curr - Marx on Banks

    Hello John,

    Firstly, Marx is not a bible that you can pick up and find out how to live or how to struggle. You should know that already.

    Also the global financial crisis is not really something that new, it is one of many recurring crises in capitalism.

    Importantly Marx pointed out that capitalism is a social relationship based on the freedom of the capitalist to exploit the worker.

    In our society the current dominant social relation is the exploitation of workers by the ruling class, the bourgeoisie.

    The means of production and exchange is a capitalist relationship.

    Control of credit and money is in the hands of the bourgeoisie who own and control the banks.

    The two largest crises in capitalism in the past 100 hundred years – the Great Depression and the recent GFC were both financial crises.

    Marx says in the Communist Manifesto that the first step is to raise the working class to that of the ruling class.

    He outlines 10 general points that would form part of that process.

    Point 5 is to centralise all credit into one national bank, that is, into the hands of the state.

    The working class thereby uses its political power to wrest all capital from the ruling class and to place it in the hands of a national bank i.e. the state.

    Successive Labor and Liberal governments in Australia have done the opposite to this, they have placed the banking system in private hands.

    They have then borrowed from those banks to build infrastructure like schools, roads and hospitals. Anna Bligh recently argued that the debt run up with these banks during the GFC is the main reason we need to sell off public assets like QRail i.e. we need to repay the debt to the banks. Her government ignores the revenue that QRail creates could be used to pay back the debt because her government is idelogically committed to the dominant paradigm which is to sell off public assets. There are many arguments against this on both the intellectual and ideological level. On an intellectual level — it is not good to retire debt by losing capital assets. On an ideological level — generations of workers built the railroad and the government has no right to sell out those workers in the interest of the few e.g the stock brokers and lawyers and bankers who will earn big commissions in the public float of QR. These are just two of many propositions against the government sell out. On the other side the government could nationalise the banks and concentrate the wealth in public hands i.e. in the state.

    ‘Capital’
    In Part I of ‘Capital ‘ Marx explains ‘Commodities and Money’ and therefore ‘Exchange’.

    In Part II of ‘Capital’ Marx explains the transformation of Money into Capital.

    The Banking System currently serves the process of capitalist exchange and Marx’s contribution is to explain that this is a social relation that can be changed by the struggle of the exploited class (‘the proletariat’) against the ruling class (‘the bourgeoisie’).

    This class struggle is, of course, a political struggle.

    I hope this answer your question of what Marx had to say on Banks.

    Ian Curr
    October 2010

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  17. This is a curious, not a rhetorical question. What did Marx say about banking?

    I’ve looked and looked and found nothing except an often quoted fake quote. Do any Marxophiles know of anything he wrote about banks?

    A major factor of capital investment today, and in Europe in Marx’s time but to a lesser extent, is fractional reserve banking that allows banks to essentially create money from nothing – and infinitely as long as banks keep lending to each other.

    Apart from fractional reserve banking being the central aspect of the GFC, it cannot be underestimated as a driving force of production.

    Yet Marx and Marxists seem to say little about banks, except calling for them to be nationalised.

    The depth of analysis of surplus value in production is not matched by an analysis of the artificial creation of surplus value in fractional reserve banking. Why?

    Would a socialist bank engage in fractional reserve banking?

    Wikipedia on fractional reserve banking
    http://en.wikipedia.org/wiki/Fractional-reserve_banking

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  18. ‘Thesis Eleven’ by Humphrey McQueen

    In accepting the 1983 Isaac Deutscher Memorial Prize for his The Class Struggle in the Ancient Greek World, Geoffrey de Ste Croix concluded his Lecture:

    As early as 1845, in the eleventh of his Theses on Feuerbach, Marx wrote, ‘The philosophers have only interpreted the world in various ways; the point however is to change it’.

    Of course before the world can be changed, it must first be thoroughly understood; and we must begin this process by providing ourselves with a set of concepts that will enable us to understand and explain it – and thus to participate in the work to which Marx’s own life was single-mindedly devoted: changing the world indeed, by putting an end to class society, and thus (as Marx himself put it, in a splendidly optimistic phrase in the 1859 Preface) ‘bringing the prehistory of human society to a close’.

    If de Ste. Croix believes all that he says here, he could never have written his splendid book. His flourish suffers from the Utopianism and Idealism that Marx and Engels spent their lives combating in order to bring ‘the prehistory of human society to a close’.

    de Ste Croix is right to challenge the mindless militants who counter interpreting and changing as if they were mutually exclusive. (see item on Thesis Eleven). What is wrong with his statement is laid bare in this extract, with the key words in quotes:

    Of course ‘before’ the world can be changed, it must ‘first’ be ‘thoroughly’ understood; and we must ‘begin’ this process by providing ourselves with a set of concepts that will enable us to understand and explain it …

    The flaw is the presumption that thinking can come before doing. This is the Idealist fallacy of being able to acquire a thorough understanding prior to engagement with the object of inquiry. On the contrary, materialist dialecticians learn that it is only through starting to change the world that we take the first steps towards understanding its laws. The ‘set of concepts’ will be reached later, after being constantly refined in exchanges between reflection and action, as our knowledge approaches – but never reaches – absolute truth.

    de Ste Croix’s paragraph is one more instance of the misleading distinction that Marx made between the architect and bee in Volume One of Capital:

    But what distinguishes the worst architect from the best of bees is this, that the architect raises his structure in his imagination before he erects it in reality. At the end of every labour-process, we get a result that already existed in the imagination of the labourer at its commencement.

    That there is a gulf between the work procedures of bees and architects is true. But Marx went wrong in picturing how architects operate. They start with sketches and develop blueprints, which they revise. The result cannot ‘already’ exist in the imagination. No engineer could have roofed the Sydney Opera House by relying on the drawings that won the prize for Utzon.

    Marx’s distinction is false because it did not go far enough into the materialist precept of learning by doing.
    The inclusion of ‘thoroughly’ is doubly wrong. Our knowledge of even social reality can ever be absolute. Through the dialectic of thought and action we can move towards truths, away from relative ignorance. It is not possible to clear everything up in our minds before we act. The notion that we must begin by providing ourselves with a ‘set of concepts’ is a retreat into Philosophical Idealism, whether the Ideal Forms of Plato or the mental Categories of Kant. Yes, we do need concepts. The way we can attain them is to emulate Marx and Engels who reached them by integrating action in the world with analytical investigations of the structured dynamics of capital expansion. It took them twenty years to grasp the significance of ‘surplus value’.

    de Ste Croix’s final paragraph is an instance of how Idealism seeps into even the most materialist of us. Here, the slip comes as a rhetorical flourish at the end of a lecture that is otherwise modest. The point is not to ‘critically criticise’ de Ste. Croix but to use the fact that even he and Marx can nod to focus our ways of thinking about interpretation and change.

    Before concluding, I half feel like apologising for picking on de Ste Croix since his lecture is otherwise faultless, and his book is a marvel. Above all, I rejoice in his stress on class as an objective category which we can make a subjective one. But my criticism is not nit-picking. On the contrary, it accords with the account that de Ste Croix’s lecture gives of his own process of gaining a thorough understanding of exploitation in the Ancient Greek world through some forty years of research and re-thinking.

    References:
    G de Ste. Croix, The Class Struggle in the Ancient Greek World, Duckworth, 1983 corrected edition.
    G de Ste. Croix, ‘Class in Marx’s Conception of History, Ancient and Modern’, New Left Review, 146, July-August 1984, pp. 94-111.
    Karl Marx, Capital, volume one, Foreign Language Publishing House, Moscow, 1958, p. 178 (Chapter VII)

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