Capital & Class. - 1985. - Issue 24 issue 24

Bharat Bhushan

The origins of the rebellion in the Punjab At the beginning of June, the Indian government used 70,000 troops to put down rebellion in the Punjab . At the height of the operation, tanks, artillery and hundreds of commandos engaged in 3 days and nights of warfare to gain control of the Golden Temple, the holiest shrine of the Sikh religion, which had been heavily fortified by the leaders of the rebellion . In the taking of the Golden Temple more than 100 soldiers, 350 pilgrims and 350 rebels lost their lives - amongst them SantJarnail Singh Bhindranwale the most prominent leader of the rebellion . The Punjab is India's most advanced State . New technologies and capitalist relations have transformed agricultural productivity to the extent that the State now produces over fifty percent of the national marketed surplus of both wheat and rice . But the rebellion raised economic demands alongside those of religious identity -

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`in a land claimed as a model of the success of modern Western technology were reborn the Middle Ages with their springtime of superstitions, prejudices, aggressiveness, religious witch-hunt' . Whilst reporting the rebellion for Business India, Bharat Bhushan was able to interview the main leaders of the Akali Dal, the political party expressing many Sikh and Punjabi demands, including Bhindranwale . Here he analyses the main strands in the agitation, showing how its economic demands are primarily those of rich capitalist farmers but how popular support was ensured by an alliance with the religious identity of the whole Sikh community .

THE INDIAN government's claim that the situation in Punjab is fast returning to normal may ultimately represent nothing more than wishful thinking . After the intervention of the army it has become more difficult than ever to speculate about what `normalcy' might mean to the people of Punjab . The argument that people should forget the past and help the government apply its `healing touch' at worst attempts to deny any history to the Punjab situation and at the very best attempts to collapse it to a few days in the first week of June when the army stormed the Golden Temple . Such a collapsing of history is part of an attempt by the government to impose its particular understanding of the social reality. The whole situation is portrayed as a law and order problem which ultimately left the government with no option but to solve it effectively by sending in the army . Thus, guns were silenced with guns . However, it can be argued that the army action limited only the terrorist manifestation of the forces which have

been emerging in Punjab in the recent past. This has been done by both physically liquidating the terrorists, as was evident in the action in and around the Golden Temple, as well as by arresting a number of individuals allegedly associated with the various terrorist groups that sprang up in Punjab over the last two years . The army action has not in any way affected the various emergent social and political tendencies in Punjab . Indeed by removing the terrorist constraint on these tendencies, it has opened the way for their more broad based manifestations . The backdrop to the current Punjab situation is provided by the growth of at least four analytically differentiable but not entirely independent, tendencies . The last decade saw a degree of growing simultaneity amongst these tendencies making it possible for stronger links to be forged between them . These four different tendencies were - the tapering off of the `green revolution', the changing character of the leadership of the Akali Dal, the incipient conflicts between the various sections of the population and developments that could be perceived as direct challenges to Sikh religion . The green revolution in Punjab saw the growth of a substantial section of rich farmers who, through considerable government subsidies, revolutionised agriculture in the state . Agriculture became a commercial enterprise and Punjab virtually became the granary of India . The onset of the green revolution also started a process which led to a greater concentration of wealth and more labourintensive farming. The benefits of the green revolution went largely to the Sikh community as there are very few Hindu farmers in Punjab . Within the Sikh community, it was the Sikhs of the Jat caste (estimated to constitute about 30 percent of the total population) who gained the most. Geo-

Behind the n ews : The Punjab graphically, it was the Malwa region of Punjab - consisting of the Fazilka subdivision of Ferozepur district, Faridkot, Bhatinda, most of Sangrur and Patiala districts - that got the greatest share of the benefits of the green revolution . Thus, by the mid-seventies, Malwa had emerged as one of the most agriculturally advanced regions of Punjab, marked by higher levels of education among farmers, intensive cropping, scientific farm management and an average size of landholding of 40 to 50 acres, which is way above the figure for the rest of Punjab . This is also the area where the proportion of Jat Sikhs in the total Sikh population is the highest, varying between approximately 37 per cent in Sangrur district to about 42 per cent in Faridkot district . With the rate of rise of profitability from agriculture falling since the midseventies, the emerging class of capitalist farmers in Punjab (largely Jat Sikhs, though not all Jat Sikhs are necessarily capitalist farmers) began establishing forward linkages by branching out into grain trading as well as attempting to set up agro-based and other industries . Once again, nowhere is the phenomenon of rich farmers entering trade more evident than in the Malwa belt, where they have also gone into real estate and built houses for themselves near the market centres . Those in the Fazilka subdivision, for example, have gone to Abohar, those in Faridkot to Muktsar, and those in Bhatinda to Bhatinda city (one of the single largest cotton markets in Asia) . The Akali Dal is the oldest and the single largest political party of the Sikhs in India which has had decisive influence on the politics of post-independence Punjab . Till 1962 the leadership of the Akali Dal was in the hands of urban Sikh traders (Bhapa Sikhs), with Master Tara Singh as the leader of the party . In 1962,

the Akali Dal split into two factions with Master Tara Singh being relegated to the position of the leader of the minority faction . Sant Fatah Singh emerged as the leader of the majority Akali Dal, and control of the party passed firmly into the hands of the Jat Sikh landed interests . So much so that the present top leadership of the Akali Dal consists entirely ofJat Sikhs with a majority of them coming from Malwa. However, it should be kept in mind that the Akali Dal does not represent all the Sikhs of Punjab . In the rural areas, the Akali Dal does not have the support of the landless Sikh workers. These Sikh workers largely come from the scheduled castes - they are the Mazhabi Sikhs, Rai Sikhs, Cheemba Sikhs and Lobar Sikhs . In the urban areas, some of the Sikh traders or Bhapa Sikhs may support the Akali Dal but their support to any political party cannot be seen as stable . They could also support Mrs Indira Gandhi's Congress Party - Congress(I) - and have in fact done so at times in the past . This reflects the feeling amongst the Bhapa Sikhs that since the relegation of the Master Tara Singh Akali Dal they have not been able to acquire the political representation they would have liked . By and large, they have had to be content with little more than becoming presidents and secretaries of the local Lions Clubs or Rotary Clubs . Their unfulfilled political aspirations apart, there is a general difference between the Bhapa Sikhs and the Jat Sikhs . This arises not only because the Bhapas are seen by the Jat Sikhs as part of the general class of traders but also because they consider them less `pure' Sikhs than themselves . This may seem odd at the outset because it is the men from the Jat Sikh community who often trim their beards (against the strictures laid down by the tenth guru of the Sikhs, Guru Gobind Singh) and Bhapas, on all ac-

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8 counts, adhere more strictly to the symbols of Sikhism . The Jat Sikhs claim, however, that in accordance with orthodox Sikhism it is they who live by the `labour of their hands' while the Bhapas, being traders, necessarily fail to live up to the ideal of `truthful living' . The abhorrance ofJat Sikhs to traders is even more evident in their antagonism towards grain traders who happen to be largely Hindus . They think that the Hindu grain traders who also double up as moneylenders always do them down . Taking into account the fact that the grain traders, in acting as middlemen between the farmers and the state grain procurement agencies, do take away a part of the farmers' profits, about three years ago the Food Corporation of India (FCI) made an attempt to make direct purchases from the farmers . But there was strong opposition from the grain traders and the FCI had to accept the inevitability of purchasing through these middlemen . The desire of some of the rich Jat Sikh farmers to get into the role of middlemen themselves is also a factor contributing to the conflict of interests between them and the Hindu grain traders . But that is not all . This emergent class of Sikh agrarian capitalists attempting to diversify into industry also sees a conflict of interest with the relatively better established urban Hindu capitalists . They also perceive their interests being hampered by the rest of the Indian capitalists who they think exercise total control of the markets as well as state power . The emergence of a Jat Sikh agrarian and incipient industrial bourgeoisie was accompanied by a resurgence amongst the Sikhs of fundamentalism and a harking back to the historical roots of Sikhism . This fundamentalist tendency was represented by the Amritdhari Sikhs whose leader Sant Jarnail Singh Bhindranwale

went around re-baptising Sikhs to convert them into 'Khalsas' (or pure ones) . Fundamentalism was fed by two sources . First, a reaction to what the fundamentalists consider distortions of Sikhism such as the Nirankari movement. The Nirankari movement, which started in the earlier part of the 19th century as an off-shoot of Sikhism, was initially acceptable to the Sikhs . But when the sixth leader of the Nirankaris proclaimed himself a Guru in the tradition of Christ, Mohammad, Buddha and Guru Nanak, the Sikh community became agitated . The majority Sikh community recognises no guru after the tenth, Guru Gobind Singh, except the holy book - the Guru Granth Sahib. The Nirankari movement did gain a considerable following though it is difficult to say to what extent it was weaning people away from Sikhism because Nirankaris admit people from all communities into their ranks . The Nirankaris were, however, seen by Sikh fundamentalists as diluting, if not subverting, Sikhism . The fundamentalist tendency was also fed by changes taking place among the younger sections of the Sikh community with a growth in urbanisation especially since independence . Sikh youth had started shaving off their beards and shortening their hair and in the rural areas there was a growth in alcoholism and drug addiction amongst the youngsters. The resurgence of Sikh fundamentalism was also actively encouraged by the Congress (I) who promoted Sant Bhindranwale in order to counter the influence of the Akali Dal amongst the Sikhs . This has to be seen as a part of a long-term strategy of the Congress (I) in Punjab, which consists in countering religious fundamentalism with religious fundamentalism and attempting to divide the Sikh community on religious lines . A striking instance of this is provided by the long march of two horses through Punjab

Behind the news The Punjab conducted at state expenditure by Gyani Zail Singh, the Chief Minister of Punjab during the period of the Emergency (Zail Singh is now the President of India) . The lineages of these horses were traced to the horse ridden by the tenth Guru of the Sikhs - Guru Gobind Singh . The attempt to divide the Sikhs on religious lines is more sharply evident in the recent entrusting of the repair of the Golden Temple to a minority sect of the Sikhs . Despite the fact that all these tendencies were growing over time in Punjab they did not really crystallise until mid1982. What caused this precipitation? In 1980, Mrs Indira Gandhi dismissed the Akali Dal - Janata Party coalition government in the Punjab and called for fresh elections in which the Akali Dal lost to the Congress (I) . Once forced out of power, the Akalis launched a number of agitations against the government. These agitations were further fuelled by a number of government measures which were unpopular with the peasantry, e .g. increase in irrigation tubewells electricity charges by about Rs . 3 per horsepower, increase in electricity connection fees for tubewells from Rs . 500 to Rs. 3,000 (with priority to those who deposited Rs . 10,000), an increase in market fees from one per cent of the total value of the produce sold to two per cent, etc . However, as long as their basis of mobilising support for these agitations was economic, the Akalis met with limited success. And since they wanted the support of the opposition parties, particularly the Communist Party of India (Marxist) and the Communist Party of India (CPI) in these agitations, they could not take recourse to religious issues . The failure of Akali agitations based on economic demands is evident in the case of the agitation against an increase in bus fares in January 1981 and later in the limited success of the agitation launched

by the Akali Dal with the CPI(M) from Kapoori village in Patiala in April-May 1982 against the digging of the link canal between Sutlej and Yamuna rivers . The river water issue is a very touchy one for the Punjab farmers, because it threatens to reduce the availability of irrigation water in the state, yet there was only limited support for this agitation and the government was able to defuse the issue by refusing to arrest the Akali volunteers . It was only when the Akali Dal moved its headquarters to the Golden Temple and joined hands with Sant Jarnail Singh Bhindranwale, leader of the Amritdhari Sikhs, that the agitation really took off again but on a qualitatively different ground . Sant Bhindranwale was at that time protesting against the `oppressive measures' of the Punjab government against Sikhs and more particularly about the arrest on 17 July 1982 of two of his lieutenants . The Akali Dal abandoned its agitation about the Sutlej-Yamuna link canal to join Sant Bhindranwale's agitation at the Golden Temple on 26 July 1982, thus forging a really powerful nexus between religion and politics . The president of the Akali Dal, Sant Harchand Singh Longowal, was made the `dictator' of the agitation (which was called 'Dharam Yudh' or religious war) . This involved a protest against the wrongful distribution of river waters between Punjab and its neighbouring states of Rajasthan and Haryana, `oppression of Sikhs' and a demand for the implementation of a charter of demands adopted by the Akali Dal referred to as the Anandpur Sahib Resolution . Thus, in one stroke the Akali Dal managed to forge an alliance between the religious consciousness common to the Sikh community as a whole and the political and economic demands of one section of the Sikh community, the Jat Sikh capitalist farmers .

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These demands are supposed to be embodied in the Anandpur Sahib Resolution . However, there are three different resolutions that are referred to as the Anandpur Sahib Resolution . One of these was passed by an erstwhile faction of the Akali Dal led by Jathedar Jagdev Singh Talwandi in 1981 at the World Sikh Convention at Amritsar . Hardly any specific economic demands are listed in this resolution, though it stresses the recognition of Sikhs as a separate nation . Besides this there is an Anandpur Sahib Resolution adopted by the Akali Dal during its meeting at Anandpur Sahib on 16-17 October 1973 and a third one adopted `in the light of the Anandpur Sahib Resolution' at the 18th All India Akali Conference held at Ludhiana on 28-29 October 1978 . The 1973 resolution puts forward specific demands for making commercial agriculture more profitable . Quite apart from its avowed objectives it is fairly evident that its demands are heavily weighted in favour of the emergent class ofJat Sikh capitalists . It talks of fixing the price of agricultural produce `on the basis of the returns to the middle class farmers' and wants the state government to have the power to fix such prices. It opposes the demarcation of food zones and the restrictions that go with it on the movement of foodgrains and demands that `the whole country should be a single food zone' . It asks for `increased and cheaper power and irrigation facilities', the completion of the power projects in the state and the establishment of an atomic power station . It also wants the setting up of cooperative societies in rural areas and the setting up of small irrigation projects where canal water is not available . In the industrial sector, this resolution advocates the nationalisation of all key industries including consumer goods industries (so as `to save the poor consumer from exploitation at the hands of the in-

dustrialists and the middlemen') . But it clearly does not see the consumers of foodgrains and other agricultural products being exploited in the same way and does not demand, for example, the setting up of nationalised collective farms . It talks of democratisation of management of industry and profit sharing with workers in industry but does not use the same criteria for agriculture - for example why shouldn't the migrant workers who work on Punjab farms share the profits of commercial agriculture? It also demands a planned effort to establish agro-industries in rural areas and that credit agencies, particularly the nationalised banks, be directed to invest a fixed ratio of their deposits in rural areas . And, finally, it resolves that the Akali Dal would try its best `to fix need based wages for industrial workers' . But for agricultural workers its aim would be `to reassess the minimum wages of agricultural labour and to effect necessary improvements if and when necessary' . Notice the difference in the choice of words and sentence construction in the two cases . In the other Anandpur Sahib Resolution (of 28-29 October 1978), the economic demands are limited to urging a parity between the prices of agricultural produce and that of industrial products, stopping the exploitation of the producers of cash crops such as cotton, oilseeds and sugarcane at the hands of traders by the government offering to purchase their produce at remunerative prices (e .g . the purchase of cotton through the cotton corporation), and demanding a 'perceptible reduction' in the prices of farm machinery like tractors, tube wells, as also of the inputs . The resolution also talks of the river waters issue which, once again, is closely tied up with the interests of this section of the population . So there can be little doubt about the fact that these economic demands, if met,

Behind the news: Th e Punjab would further shift the terms of trade in favour of agriculture. And given the concentration of land, this process is going to help the big farmers much more than those with only small operational holdings . The resolution also speaks of state autonomy and demands the city of Chandigarh for Punjab (currently it serves as capital for both Punjab and the adjacent state of Haryana) . The withholding of Chandigarh from Punjab is seen by all Punjabis - whether Sikhs or Hindus - and quite rightly so, as a case of blatant injustice by the Central Government. The Central Government has been less than honest in dealing with the Chandigarh issue - it was built for Punjab and it should go to Punjab. By linking the Chandigarh issue with the claims of Haryana for the regions of Fazilka and Abohar, the Central Government quite foolishly managed to link up territorial issue with economic interests of the rich farmers because these two areas are some of the highly fertile areas of Punjab . Now, of course, an attempt is being made to delink the two . As far as the aspirations of the rich farmer class to invest in industrial production are concerned, their demands also derive justification from a lack of large-scale industry in Punjab and a very fickle small scale industries base . Fickle because, except for bicycle parts and hosiery, the whole of the small-scale engineering industry is dependent on feeding sub-standard goods to the replacement market . Nowhere is this more evident than in the auto parts business, where mild steel parts are manufactured as replacements for the original alloy steel parts . In pursuance of these demands, however, the methods adopted by the Akali Dal were such that they ended by losing their grip over the course taken by the agitation they had initiated . Because of

the necessary link the Akali had to forge 11 with the fundamentalists, they tried constantly to limit the issues being raised within the framework of Akali demands in order to regain the leadership of the movement. But they were not able to do this for long . The growth of terrorist violence and the failure of the Central Government to negotiate a settlement with the Akali Dal contributed in no small measure to this . By the last quarter of 1983 the present Jat Sikh Akali leadership had virtually lost all credibility with the Sikh masses, particularly the youth, except perhaps for a section of the Sikh traders in urban areas . But their suport did not mean very much because even during the 22 months of the Punjab agitation it shifted from supporting the separatist Sikh tendency to the moderate Akalis when they saw their business interests being ruined because of the instability in the state . The last wheat harvesting season in April and May 1984 saw a further erosion in the mass support of the Akali Dal. The farmers were being fast usurped by another organisation - the Bharatiya Kisan Union - Indian Farmers Union (BKU) - which has been organising farmers primarily on their economic demands, relating to input and procurement prices . The BKU is an avowedly secular organisation whch has not yet attempted to mix the economic demands of the farmers with religion . The major difference between the present Akali leadership and the BKU leadership lies in their social base . While the former has its base amongst the richest section of farmers in Punjab, the BKU leadership comes from the middle farmers and their support base is in the middle and small farmers, i .e . roughly those with land holding sizes of between 3 and 25 acres . Though it has been in existence for more than a decade, till 1981 BKU was

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known as the Zamindara Union (not to be translated as landlords' union, as any farmer is referred to as zamindar in Punjab) and was largely seen as an organ of the Akali Dal . It was in the wake of the farmers' agitation in Maharashtra and Karnataka that its present leadership decided to change its name and to give it an all-India character . However, most of its mass mobilisation took place in late 1983 and early 1984, culminating in a highly successful gherao (a demonstration leading to a seige or house arrest) of the Governor of Punjab in Chandigarh from 12 to 18 March . During the last one year of the agitation in Punjab, the farmers' immediate demands had begun to take a back seat . The dominant politics of the state was being shaped by two factors . First, there was a realisation by the Central Government that the Akali Dal had lost effective control over the agitation . And second, that Sant Bhindranwale with his widespread appeal amongst the Sikhs had been able to combine a backward looking affirmation of Sikh identity with a forward looking goal - a separate Sikh state or at the very least the acceptance of the Anandpur Sahib resolution . Such a going back to the roots in an attempt to create a distinct Sikh identity found immense support particularly amongst the educated, urbanised, and unemployed Jat Sikh youngsters . But Bhindranwale's objectives represented long term political aspirations . The Sikh farmers - particularly the small (more than 65 per cent of the operational land holdings in Punjab are less than 5 acres in size and are perhaps economically unviable) and medium size farmers who form the overwhelming majority in Punjab - may not have been averse to supporting such demands, or even to agitating for them in one way or the other including mobilisation on religious lines . But what this section of farmers could not

afford is the complete ignoring of their short term economic interests for the sake of long term political objectives . Given a fairly tight margin in the economy of small and medium farmers, it is perhaps not surprising that immediately after the last wheat harvesting season, BKU's mobilisation for immediate economic gains found an overwhelming support in the rural areas. BKU's emergence at a juncture when the whole Punjab agitation was being carried out on explicitly religious lines also helped the Central Government . So while BKU launched an agitation, thinking correctly that the Government was in a weak spot because of the Punjab situation and, therefore, more amenable to accepting their demands, the government too wanted the people's attention diverted from the agitation being masterminded from the Golden Temple . How else can one explain the fact that when about 5,000 BKU supporters put the Punjab governor `under house arrest' (to use their own phraseology) from 12 to 18 March, the state machinery did not respond by using any repressive measures when similar agitations in Maharashtra and Karnataka have been forcefully dealt with by the police in the past? The police not only did nothing to the BKU workers, but the government thereafter conceded benefits to the farmers which are estimated to be to the tune of Rs . 320 to 330 crores, in monetary terms . The complete success of the BKU boycott of the grain markets during the peak wheat procurement season - from 1 to 7 May- did not go unnoticed, least of all by the Akalis . It demonstrated to the Akalis that there could be a peasant base in Punjab which was not Akali . The Akali Dal therefore attempted to pre-empt and co-opt the 'gehun roko' (stop the movement of wheat) agitation of BKU by planning to launch it from 3 June - exactly a week before the BKU's own agitation was

Behind the news: Th e Punjab to be launched . The BKU leadership immediately suspended their own agitation and declared that they had nothing to do with the Akali agitation . Then the army moved into the Golden Temple, qualitatively changing the situation . Since the army's intervention, the government of India has been treating Punjab as a closed chapter . But both the tendencies which form a backdrop to the Punjab situation and the factors we have seen as precipitant continue to have a life in the social reality of contemporary Punjab . In the days to come both the farmers' movement and Sikh religious sectarianism will continue to influence political developments .

In the farmers' movement there are two possibilities for the kind of leadership that can emerge as dominant - an Akali leadership or a BKU leadership . The former will continue to be dominated by the Jat Sikh capitalist farmers . In the case of BKU, the numerical support will be of the middle and small farmers . But even in this case we should not have any illusions about the character of the movement . BKU is basically an anti-town and antiworker movement. It is an extremely well-organised and self-righteous organisation . During the gherao of the governor in March 1984, not only did it organise its own police force (with badges to identify them as such) but also had an interrogation room for government spies caught snooping around . A plainclothes deputy superintendent of police who was caught by the BKU workers was interrogated and beaten up by them before he was handed back to the government with a warning that they should not send any policemen to their agitation . One can even venture to suggest that the BKU has proto-fascist tendencies and if it is successful in meeting the economic demands of the farmers it will become

very strong and may just emerge into a peasant fascist organisation . As far as Sikh religious sectarianism is concerned, it is being kept alive by the presence of the Indian army as well as by some very short sighted policies of the Congress (I) . The continued presence of the Indian army in Punjab in a historically unprecedented manner and its search and combing operations in every village for Sikh terrorists has meant that the army is being seen by an increasing number of Sikhs as an alien terrorising force . The Congress (I) is adding in no small measure to the process of alienation of Sikhs . In its extreme shortsightedness, it has enlisted the support of a miniscule minority of Sikhs for repairing the damage done to the Golden Temple during the army action at the cost of festering deep and longer term divisions amongst the Sikh community . Mrs Indira Gandhi and her acolytes do not seem to have realised that the fabric of a liberal democracy requires oppositional movements ; attempts to discredit or threaten the existence of such movements also threaten the appearance of democracy. Perhaps today what we are witnessing is the culmination of a process in which the Congress (I) has consistently played a communal game in the garb of secular politics . Now at least it should be clear that religious fundamentalism cannot be fought by replicating its own strategems . Indeed the outcome of this kind of politics has been that crucial institutions of the state have been deeply fashioned on communal lines . In any situation of inter-community strife it is no longer possible for the state to resort to normal administrative and policing measures . The inevitable result is the calling in of the Indian army - a step fraught with dangerous implications .

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Michael Ball

Coming to terms with owner occupation • COUNCIL HOUSE sales over the past few years now mean that

over 60% of British households are owner occupiers . It is likely that the percentage cannot be pushed much higher, so we are witnessing the culmination of a social revolution that has transformed a key aspect of British society since the First World War. Prior to 1914, almost everyone rented their housing from a private landlord ; less than 10 per cent were owner occupiers and hardly anyone lived in the fledgling council sector . Owner occupation has stultified debate on the Left over housing and has led to an impasse over what a socialist housing policy should be . Political opportunism now dominates discussions of housing policy based on the belief that any serious reform has to go against the economic interests of owner occupiers, who consequently would withdraw their political support from the party proposing such reforms . I want to suggest that the analysis underlying that belief is wrong because it limits itself to a narrow range of consumption issues . An analysis which looks at how housing is provided, in conjunction with the costs and consequences of living in a particular tenure, leads to a much more optimistic view of the possibility of a socialist housing strategy which can win the support of owner occupiers . First, however, it is useful to situate the argument in terms of recent Tory policies towards housing, Labour and other Left alternatives, and some of the suggestions recently put forward in books and journals .

The debate over housing has tended to be confined to tenure choices and hence to consumption issues . The left has failed to confront the problems of owner occupation partly because it has accepted this limited terrain of debate and partly because it has adopted an economistic view of the link between tenure and voting behaviour. The author argues that an adequate 15 strategy can only begin to be developed ifwe challenge structures of housing provision and the institutions involved .



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16 Current housing strategies

The Thatcher Government's The Tory Party has had a consistent long term housing strategy which is an amalgam of a belief in the superiority of the market and the ideology of the property owning democracy . So whenever the Tories come into power, they cut back council housebuilding as soon as possible ; raise council rents to `economic levels'; sell off council housing ; classify public sector housing as a `safety net' for the deserving disadvantaged ; attempt to revive the private rental sector ; and wax lyrically about owner occupation . Thatcherism has not changed the basic tenets of traditional Tory housing policy . Instead it has tried to bring them to reality in a time period so short that no previous government would have dared try for fear of the outcry . In doing so, it has exposed clearly the contradictions and inadequacies of the Tory approach . Council and private sector housing are not substitutable, as the Tories claim. Private housing provision, as ever, cannot deal adequately with low income households, the unemployed or unwaged, or families that do not conform to the small, nuclear, patriarchal form . When emphasis is put on the private sector, either private renting or owner occupation, housing inequalities increase and delapidation mounts . Britain now has a considerable housing crisis, particularly in the major cities and the older industrial areas . Even in global terms, the private sector has failed to replace the new housing output and improvement expenditure lost in council housing cuts .' The cuts in council housing expenditure have been a major component in the government's overall attempt to roll back the socalled `inessential' components of state expenditure . In 1982/83 prices housing expenditure had been cut by £3000m between 1978-9 and 1983-4, 55%, more than has taken place since then, and yet more is on the way.' Receipts from council house sales have boosted state income in the short run ; sales raised £3 .5 thousand million from 1981 to 1983 alone .' Opportunism as much as political ideology is apparent in Tory strategy towards council housing . The speed and the extent of the rundown of council housing has depended primarily on overall public expenditure objectives . Little regard has been taken of the disruptive effects on housing provision, even in terms of the Tories' own social market ideology . The long-term economic and social effects of council house sales are disastrous (see English 1982 and Forrest and Murie 1983 for detailed accounts) . The effect on state revenue after a few years, for instance, reverses and becomes negative as rent income has been lost, yet the 60-year loans taken out to pay for the construction of the houses still have to be paid off . But the sales programme is being stepped up, the maximum discount is to be raised to 60%, the requirement that they are not sold for less than



Owner Occupation their construction cost dropped, and in some cases councils will have to undertake expensive repairs of defects before or after sale . Again political opportunism as much as ideology has influenced the sales programme. Thatcher is said to believe that the sales policy won her key marginal constituencies in 1979 and helped again in 1983 . A sold council house makes one, two, maybe three, permanent Tory voters might be the slogan pinned up in Downing and Marsham Streets. Where Tory opportunism towards housing is greatest is over owner occupation . State subsidies to this sector have grown dramatically. Mortgage interest tax relief cost £1 .6m in 1978/9 and £2 .5m in 1983/4, to which must be added improvement grants, capital gains tax exemptions and cheap public land sales to speculative builders amongst other items (Kilroy 1984) . The subsidies to owner occupation make a mockery of claims of reduced state financial involvement in housing! Some ministers have justified the subsidies in terms reminiscent of those used for the Malvinas/Falklands - if you have to spend a lot to give people their freedom, so be it (e .g. Heseltine's evidence to HCEC 1981) . The commitment is certainly as open ended, and even more expensive . Most tax relief, moreover, goes to higher rate income tax payers and those who have been owner occupiers for some time (especially traders up), rather than the idealised impoverished first time buyer. The inequity of the current system of state housing subsidies is well known and it is rumoured that only Thatcher is stopping her cabinet colleagues and the Treasury from instigating a wide-ranging review aimed at trimming the drain on state funds caused by owner occupation (Guardian 24.5 .84) . But, as every political realist is said to know, the government that abolishes or substantially reduces mortgage interest tax relief or introduces other compensating measures will lose the votes of millions of owner occupiers . The Labour Party in popular mythology is the champion of council housing with a jaundiced view of owner occupation . The image of opposing owner occupation, in fact, is untrue ; although its successful promulgation by the Tories is believed by almost everyone, including most Labour Party members and the Left in general . Labour has given more support to council housing when in power than Conservative governments, but that is not the same as opposing owner occupation . There has been, and still is, a broad consensus between the main political parties in support of owner occupation . Labour's greater commitment in the past to council housing has a number of origins . The first concerns a general acceptance of

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Labour's alternative

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the need to improve the housing conditions of the working class in situations where the private market fails to do so . The second relates to the Labourist ideology of raising the living conditions of the working class under capitalism rather than attempting to overthrow capitalism as such . Housing soon became an important component in the attempt to raise working class living standards . The emphasis on housing was influenced by the local operation of much Labour Party politics in the Party's formative years . Local government was a focus of activity and the only long-term base for Labour to exercise any formal political power . One of the few substantial programmes local authorities could undertake with some degree of autonomy was slum clearance and the building of council housing . The model of council housing devised by Liberal and Conservative governments up to the early 1920s became an ideal means for concerted Labour Party action (Swenarton 1981, Merrett 1979, CDP 1976 and 1978) . When Labour was in power, either locally or nationally, little was done to reform the model of council housing handed down to them, towards something that could be called democratically socialist . Another aspect of Labour's commitment relates to its broader conception of the state in a capitalist society . An important role for the state should be to facilitate accumulation by improving the social infrastructure, including the housing conditions of the workforce . Britain's dilapidated cities offer wide scope for slum clearance, population dispersion (although this fell out of favour in the '70s) and urban renewal (Dickens and Goodwin 1981) . And, from 1945 onwards, it was felt that capital expenditure on housing could also play an important role in operationalising a countercyclical Keynesian demand management policy . The last element of Labour's commitment is perhaps the most significant . Council housing has been and still is, although with weakening effect, a major locus for mobilising the Labour vote at elections . Support for council housing consequently has been a significant electoral consideration . Although, as Party strategists have always been aware, the close support of council tenants for Labour does not mean that Labour always has to implement programmes in the tenure's interest . People living in council housing supported the Labour Party for wider reasons than its housing policies. This general overview' of Labour's long-term position with respect to council housing helps to explain why it has been so easy for many senior Labour Party politicians gradually to step up their concern for the owner occupier, with little opposition . In the immediate years after the Second World War, the extent of the housing crisis made council housing the obvious means of tackling it . But when the shortage was finally overcome - as it was claimed

Owner Occupation to be by the 1970s - the `mixed economy' in housing could then be argued to come to the fore with owner occupation the ideal tenure for the new affluent working class . Significant home-ownership among the working class gives many workers for the first time access to property, and rising and transferable wealth . What could fit better with the Labourist ideology of working class advance? The post-war development of Labour's attitude to housing tenures reflects clearly the underlying dominant attitudes to tenures outlined above . Building controls were used after 1945 to bring owner occupied house-building to a virtual halt, because in Bevan's famous words, `the speculative builder, by his very nature, is not a plannable instrument' (Foot 1975, p .71) . The planning of priorities, necessary in war damaged and overcrowded cities, could only be done via state direction and council housing was the highly successful instrument used for housebuilding . But the speculative builder was not abolished . There was also a thriving and frantic second-hand owner occupied market. The 1945 Labour government did nothing to control it, despite setting up a Committee which recommended that house prices should be regulated to stop the profiteering and speculation taking place (Merrett 1982) . No attempt was made, in other words, to take housing provision out of the context of the market and capitalist forms of provision . Instead, certain aspects of the market were temporarily held in abeyance for the duration of the period of reconstruction . By the 1970s, it was much easier to claim that the post-war housing shortage was over and that working class incomes had risen, so that more emphasis should be put on market criteria . In particular, people should be allowed to realise their `natural' desires to be home-owners . Such a position was articulated in coded language by the Labour government's 1977 Housing Policy Review. It did not confict with traditional Labour Party ideologies . A 1965 Labour Government White Paper on housing, for instance, had argued that : ' . . . once the country has overcome its huge social problem of slumdom and obsolescence, and met the need of the great cities for more houses let at moderate rents, the programme of subsidised council housing should decrease . The expansion of building for owner-occupation on the other hand is normal ; it reflects a long-term social advance which should gradually pervade every region' (MHLG 1965, pp.6-7, quoted in Merrett 1982) . What had happened by the 1970s was that Labour's traditional stance towards council housing was in crisis . The earlier years of acute housing shortage had enabled programmes which could create a widespread consensus within the Party . In the changed circumstances of the late '70s that consensus was beginning to fall apart . Questions had to be asked about what a socialist housing policy should be . As the divergent groupings in the Labour Party have a

19

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variety of definitions of socialism, notions of the correct housing strategy differ between them (if they think about housing at all) . In addition, the structure of provision associated with council housing was itself in crisis . The old-style housing management bureaucracies came under increasing criticism from tenants ; much of the housing built was of low design standards or poorly constructed, particularly the inter-war inner city estates of flats and the industrialised building estates of the '60s and early '70s; and above all council housing finance was poorly equipped to deal with inflation, so costs rocketed . The point of this story about the Labour Party and council housing is to show that the Labour Party, in terms of its programmes, has not switched its line on owner occupation for generations . A crisis may have arisen in the '70s over support for council housing but there has not been a switch to owner occupation . Support for the latter was always there . It also looks like the crisis over the commitment to council housing has temporarily abated, thanks to the effects of Thatcherism . The recognition again in the 1980s of acute housing shortages for low income working class families in the inner cities - and the balance of payments advantages of reflating via the building industry (which has a low proportion of imports in its inputs) - would have allowed the old consensus about council housing to reemerge . The consensus is shaky, as there is still some controversy over council house sales, and some outspoken champions of total owner occupation, like Frank Field . The reform of design principles (no-one now likes the Modern Movement) and of management through catch-all concepts like decentralisation, have furthered the reflowering of broad support for the tenure . Labour has regained its traditional claim of even handedness between council housing and owner occupation . But beneath the apparent veneer of moderate sensibleness, the Labour Party does not have much of a housing strategy and does not seem much interested in having one. Like the Tories, it has relied on political opportunism and chosen to ignore the contradictions between its declared aims and the current problems of housing provision . Nowhere is this clearer than over housing finance . The vexed problem of mortgage interest tax relief is a classic instance . Like most commentators, senior Labour politicians seem convinced that it is politically impossible to reform, while accepting the similarly widespread view that it should be . Vote winning prevails . The blatant opportunism was revealed most clearly in Spring 1984 . In the run-up to the June 1983 election, the Labour Party took up a remarkably principled stand: it refused to let the Finance Bill proceed through Parliament on the nod when the election was

Owner Occupation 21

called, as is normal practice, because the Tories insisted on including an increase in the mortgage income tax relief limit from £25,000 to £30,000 . Nine months later, when rumours were flying of an impending review of mortgage interest subsidies, the Labour front bench led an all-out attack on Thatcher for threatening owner occupation! So many commentaries on housing policy exist that it is impossible to cover every nuance of the debate . So only a few signposts will be given. Housing finance is seen by most as the key to effective reform. Neoclassical economists have been at the forefront of the attack on current subsidies to owner occupation for their distributional and allocative inefficiencies . Their main critique reflects neoclassical economics' faith in the workings of unfettered markets . They argue that the tax benefits of owner occupation distort housing costs, tenure choices and divert too much of consumer savings and expenditure into housing .' A consensus is beginning to emerge among neoclassical economists about tax reforms . In particular, mortgage interest tax relief should remain, at least for the basic 30% tax rate, but the imputed income from home-ownership should be taxed in a similar way to the old Schedule A tax abolished in the early'60s . Neoclassical economics treats owner-occupied housing as capital on which an implicit rate of return is earned - the rent home-owners are said implicitly to pay themselves as landlords for the housing services they consume as tenants, which they term imputed income . Yet as people do not charge themselves rent, there is no way of knowing what the imputed income tax should be, and arbitrary rates would have to be charged. Out of the fictitious landlord-tenant social relation of owner occupiers comes the proposal for a very real and hefty tax, one likely to be higher for most people than their annual rate bills .6 (If the logic of neoclassical economics was consistently followed, moreover, such a tax should be charged on all consumer durables people own for their personal use - cars, hairbrushes, old socks, etc .) . Positions on the Left vary . The Labour Housing Group (1984), in terms of its proposed financial reforms, takes on board the proposals of the neoclassical economists in their entirety ; with taxes on imputed income and council rents linked to a target real rate of return on the `capital' said to be tied up in the council housing stock (to be revalued every year) . So, like the neoclassical economists, the Labour Housing Group wishes to treat council housing above all as a form of capital . In addition, the suggested target real rate of return is higher than most of British industry has managed for years (see also Kilroy and McIntosh 1982) . Apart

Criticisms of the political parties' traditional housing policies

Capital & Class 22

from the tax and subsidy reforms, statutory housing rights are suggested and a variety of changes proposed for other aspects of housing provision, such as council housing management, repairs in all tenures, and measures to improve the situation of women and blacks . As far as owner occupation goes emphasis is put on reforming the buying and selling process, abolishing leaseholds, and tinkering with improvement grants . Despite some remarkably high flown rhetoric about the failings of the Left and `grasping the nettle' (especially in Griffiths and Holmes' summary in Marxism Today, May 1984), the Labour Housing Group's proposals are all rather tame and hackneyed . This is not surprising as the Labour Housing Group has entirely accepted the terms of the traditional debate . There are definitional entities called housing tenures, and the overriding aim is to get them to operate economically as close as possible to an 'undistorted free market', whilst helping the needy through tax deductible universal housing allowances related to family size . All good social market stuff (Gamble 1981) . The title of the Labour Housing Group's 1984 book, The Right to a Home, has an unintended, but telling, ambiguity . Universal home-ownership has been suggested as an alternative socialist policy by Cowling and Smith (1984) . For those with incomes too low to afford it, the DHSS would pay the interest and gradually the capital sum of buying a home . The idea is said to take account of the `facts' that everyone wants to be an owner occupier and that most owner occupiers at present vote Tory. Presumably, all council housing would be sold off and all the poor and delapidated stock would remain. Who gets it? As Cowling and Smith explain, 'DHSS-funded mortagages would presumably be limited to a `reasonable' amount, so that, as today, the poorest would end up with the least attractive housing and the incentive to advancement which that provides' (Cowling and Smith, 1984, p .b7) . Octavia Hill would have approved! The owner occupied housing market would carry on as now . No price control, lots of private agencies out to make a profit, universal bottomless effective demand for their services . A profiteer's dream . While the control the DHSS would have over many people's lives would be even more draconian that at present . It comes as no surprise that the new Right have had exactly the same idea, and have been expounding it for a number of years (e.g . in The Times in a series of articles in Spring 1982) . Much of this alarming shift to the right amongst Left housing experts in recent years has been based on the idea that the Left has in the past been universally hostile to owner occupiers, and on the `new realism' suggested by Hobsbawm and others in Marxism Today (dubbed `The Great Male Moving Right Show' by



Owner Occupation Massey, Segal and Wainwright in New Socialist, Jan-Feb 1984). Theoretically, it is based on a critique of the instrumentalist theory of owner occupation, propounded in the early'70s, whereby it was suggested that owner occupation embourgeoisified the proletariat robbing them of their revolutionary potential (cf. PEHW 1975). That theory, however, has generally been accepted as wrong, in that it is impossible to ascribe a general ideological effect of tenures on the people living in them (cf . Saunders 1979, Gray 1982 and Ball 1983) . So all that remains is an assertion of a generalised hostility on the Left to owner occupation . Yet that does not currently seem to be true . Mesmerisation over the political voting propensities of owner occupiers would seem more correct . A number of people still argue for tipping the scales in favour of council housing by recasting it into `a socialist institution under popular control' through the improvement of legal rights and making housing management fully accountable to tenants and building workers (Ginsberg 1984) . Against such proposals the realists point to the voting propensities of owner occupiers . Many aspects of housing provision have not been covered, like the position of women (Austerberry and Watson 1981) or the need to reconceptualise the nature of the use values provided by housing and related facilities and how those use values are formulated (Cowley 1979) . But tenure does seem to be a stumbling block on any aspect of socialist strategies so attention is being focussed on it . One of the major problems of debates over housing is the way in which tenure is conceptualised, no matter which tenure is preferred or which reform is proposed. The problem is a theoretical one which this section will explore. The dramatic shifts in housing tenures over the past 70 years has led to virtually all debate over housing policy being couched in terms of the relative benefits of particular tenures . The benefits are classified in various ways . The first perspective is that of the consumer: in terms of the effect of tenures on personal housing costs and housing quality and the ability to satisfy (and influence) household preferences and freedom of choice. Alternatively, much academic discussion has adopted the perspective of a benign state doctoring housing markets in an attempt to improve either distributional or fiscal equity . The final perspective has come to be the one that really counts : what do housing tenures do to people's voting propensities? An undifferentiated notion of tenure is mistakenly being accepted . Tenure is seen as a form in which a household gains possession of a dwelling with a particular set of rights and obligations associated with that possession . The object of socialist housing strategies then becomes the doctoring of those rights and

23

The limitations of the left alternatives

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obligations in ways that are regarded as progressive, while taking account of the likely economic, social and political costs and benefits that result. Unwittingly, a definition of the `Housing Question' as laid out by nineteenth-century liberal reformers, and reaffirmed as the legitimate limits of housing policy by the state apparatus ever since, has been accepted as the framework of analysis by most of the Left. Not surprisingly, the conclusions of their analyses are either similar to their more conservative counterparts or presuppose a political situation of heightened revolutionary consciousness that can hardly be said to exist in Britain today . Instead of simply delimiting a means of consumption, housing tenure is associated with historically specific relations of provision. A series of social agencies are associated with housing provision in any tenure form . Their existence is not a necessary consequence of the tenure itself, but the products of long historical struggles. The interrelation of those social agents determines the contemporary characteristics of a tenure form, like house price inflation or jerry built high rise council blocks . To ignore those social agencies leads to a failure to analyse the causes of particular characteristics of housing tenures that are felt to need change . It can also lead to a mis-specification of the central problems with a housing tenure . One characteristic mis-specification is to place sole blame on the state and its subsidy policies for all the ills of housing provision . In theoretical terms, the traditional tenure focus of housing policy is trapped in the spheres of distribution and exchange . One result of ignoring the social relations of housing provision is that the power of the state to transform people's housing situations by financial and other reforms is grossly overrated . The history of housing provision becomes the history of housing policy, with administrative and fiscal failings the prime causes of housing problems . An overevaluation of the consequences of state policy can be seen in Labour and Tory housing strategies, and their Left critiques . None of their strategies focus on the social agents involved in housing provision . Instead they assume that the state can produce effects - through subsidies, legal rights and other exchange and consumption measures - independent of actions of those dominating housing provision . There is an enormous displacement between the ideologies of contemporary housing strategies and the actual operation of structures of housing provision . Owner occupation as a the structure of housing provision

Owner occupied housing as the name implies simply means that household owns the dwelling in which it lives . Such personal ownership, however, has become synonymous in Britain with housing provision via the private market . Instead of simply being

Owner Occupation 25

one way in which housing may be consumed, owner occupation has become associated with a particular way in which housing is provided ; and with all the forms of landownership, building, finance and market exchange that exist there . There is consequently a particular set of social relations involved in the current structure of owner occupied housing provision . Treating owner occupation in this way involves breaking with the idea that housing tenure just refers to the conditions under which people live in housing, the costs they face, and the subsidies they apparently get . Analysing the contemporary social relations associated with owner occupied housing provision in Britain offers an analytical base to a new politics of housing . It enables the ways in which housing is provided to be criticised, and currently all forms of provision are pitifully inadequate to the consumption needs of most households. Only the broad features of the problems of the current nature of owner occupation can be given here but together they provide a devastating indictment of current trends in housing policy . But before discussing them, the idea that owner occupation affects the way people vote has to be shown to be the myth it is . The rundown of council housing over the past decade has begun to produce a sharp polarisation between the social strata living in owner occupation and in other tenures . In the mid-'70s, it was possible to argue that the social mix of council housing and owner occupation overlapped considerably (Holmans 1979) . By the mid'80s, the ghettoisation of council housing and the continued decline of private rental housing means that the non-owner occupied tenures are increasingly becoming the homes of those who for one reason or another cannot afford to become owner occupiers : The low paid, the unwaged, the young and the elderly, and single parent or large families (Social Trends 1984 and Ball 1983) . Traditional regional variations in the proportion of council housing have also diminished, although they are still considerable . 65% of Scotland's dwellings, for instance, were council rented in 1982, compared with only 29% for Britain as a whole . The northern region and Greater London also have significantly lower than average home ownership (52% each), compared with 67% for both South East (excluding the GLC area) and the South West (Housing and Construction Statistics 1972-82) . Within regions, home-ownership is greatest in the suburbs (Hamnett 1983) . It can be seen that the development of both owner occupation and council housing have produced a particular geographic and social distribution of the two tenures, which a number of commentators have correlated with voting patterns (e .g. Dunleavy 1978, Crewe 1981 and 1983) . Such correlations have helped to

Does owner occupation affect people's voting preferences?

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26

entrench some firm beliefs about what owning a house does to people's politics : it turns them Tory. The June 1983 election has been claimed to demonstrate this yet again, with Labour reduced back to the old industrial heartlands and inner city areas where much of the remaining council stock is located . Such conclusions have struck terror into the hearts of Labour Party strategists and the Left in general, as more and more of their potential suporters have joined this modern equivalent of the mortgaged county set . A well-known political commentator (not kindly disposed towards Labour) has gone so far as to suggest that `Twenty years ago the one-third majority of manual workers who voted Conservative arguably did so despite their economic interests; today most of them do so because of their economic interests' (Crew 1983, p .196) . The historical accuracy of this comment is not of interest here but the data used to justify it are . Owner occupation is used as one of the main criteria for the new economically self-interested working class Tory voter . The data used by Crewe, from a BBC/ Gallup survey for the 1983 General Election, are given in Table 1 . What comes out clearly from the data in the table is that the differences between Labour and Conservative are greatest with respect to housing tenure . But what do the differences mean? The data in Table 1 do not quite match up to the interpretation suggested by Crewe . If anything they indicate the opposite . The strength of the Labour vote in the council sector, for instance, is far greater than that shown for the Tories among owner occupiers . The Tory lead among owner occupiers of 22% is not much different from their

Table 1 : The two working classes: % ofthree/party vote New working class Works in Owner Occupiers private sector

Lives in South

Traditional working class Council Works in Lives in public sector Scotland/ tenants North

19 57 24 Lab +38

29 46 25 Lab +17

32 42 26 Lab +10

66 36 45 Category as 43 % of all manual workers Source : BBC/Gallup survey 1983 quote in Crewe 1983, p196 .

34

38

Con Lab Lib/SDP Con/Lab majority

47 25 28 Con +22

36 37 27 Lab + 1

42 26 32 Con +16

Owner Occupation overall electoral lead over labour of 15% . The arithmetic of weighted averages means that the Tories' lead among owner occupiers has to be greater than the average to make up for the overwhelming support of council tenants for Labour. On a tenure basis, given the scale of Labour's defeat in 1983, it seems more convincing to argue that council tenants, not surprisingly, had a voting bias towards Labour whereas in tenurial terms owner occupiers were neutral . In addition, the idea that the characteristics drawn out in Table 1 can be used to identify a new working class is considerably weakened when the correlations between seemingly independent criteria are examined . As was noted earlier, housing tenures are unevenly geographically spread . So `council tenant' and `lives in Scotland/North' are highly correlated. In 1982, these two regions had 54% and 37% council housing respectively ; whereas the South, with the exception of London and some of the new towns, has little council housing . All the Gallup survey seems to show, therefore, is that council tenants (particularly) and public sector workers had a strong voting preference for Labour . But no deduction can be made from that about the preferences of people who are not council tenants or public sector workers . Working class owner occupiers cannot be assumed to be voting Tory to defend the benefits they get from that tenure, for example . It would be difficult to see why they would have to anyway, given Labour's long-term support for owner occupation . Council house sales do not help the argument either, as it would be existing tenants who want to buy, rather than those who have already bought, that would lose out from any curtailment of sales . Crewe's causality is the wrong way round. It seems difficult to argue that owner occupation turns people Tory, and that any left-wing party will have to move well to the right'in its political programme to secure home-owners' votes . In the first place, even if a correlation is found between housing tenure and voting patterns, it is difficult to interpret what that data means . I, for instance, chose above to interpret the high correlation between `council tenants' and `lives in Scotland/North' as being essentially two ways of saying `council tenants'. But `council tenants' could be a surrogate for `lives in Scotland/North' . There is no way of knowing . More generally, opinion surveys based on indirectly inferring people's voting propensities from their social characteristics face intractable methodological problems . They can only produce statistical correlations, in which voting patterns are compared with a small number of measures of social stratification . As the determinants of people's voting patterns are extremely complex, the stratification measures are unlikely to pick up accurately many of

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the true influences on voting propensities . Even the measure of socio-economic status is unlikely to indicate many of the key variations in social status in a rapidly changing society like modern Britain . A correlation between tenure and voting patterns, for example, could easily be signalling some other unmeasured aspect of social stratification rather than be caused by the political effect of tenure itself. (Surrogates, in other words, are not the real thing, and correlation does not mean cause .) Another thing to note about such surveys is that they are not dealing with universals (like the effect of a tenure on voting patterns) but with history. Even if they are indicating that housing tenure strongly influenced the way people voted at a particular election, what are they showing? Only that tenure had an effect then . The reasons must have been historically contingent depending on the contemporary nature of housing problems, the ideological framework in which they were discussed, and the programmes put forward by the political parties . Lessons may be learnt by analysing the details of those circumstances . But such analyses cannot be avoided by the lazy assertion that some mysterious, ever-present, aspect of a tenure was the reason, because that is precisely what the data cannot show . One important reason why it is difficult to believe that owner occupation can have a permanently important influence on the way people vote is the diversity of people and their circumstances within the tenure . As 60 per cent of the population now live in the tenure, a wide variety of political beliefs amongst owner occupiers is to be expected. Similarly the economic consequences of living in the tenure vary considerably . Some owners have no mortgage costs, some have cripplingly high ones ; some realise large money gains, others see the price of their houses drop ; repair costs for some low-income households are burdensome, whereas others `do up' dilapidated houses . In other words, there is no universal political ideology or economic circumstance arising from owner occupation. Such a statement, of course, does not mean that there are not economic interests that owner occupiers might be induced to defend : obviously there are. Abolishing mortgage tax relief is likely to be unpopular (which does not mean to say that owner occupiers will not vote for the government that does it) . Selling off council houses similarly bestows an economic windfall on certain malcontented council tenants . Yet, even in these cases, only segments of the population are directly affected . It is often forgotten, for example, that almost half of owner occupiers get no mortgage interest tax relief, while another significant proportion receive only small amounts - either because they have paid off all or most of their mortgages or, less often, because they bought their houses outright with cash from, say, a legacy .

Owner Occupation 29

Apart from recognising the variety of economic circumstances and political beliefs across all housing tenures, it is also important to remember the historical contingency of economic circumstances and their effects, if any, on people's voting patterns . Most of the economic gains from owner occupation have only emerged over the past 15 years of relatively high general price inflation, and even higher house price rises . The benefits have tailed off considerably in recent years with lower inflation and higher real interest rates (Ermisch 1984) . Permanently rising house prices also cannot be guaranteed as home-owners in other countries have discovered . Britain is virtually unique in Western Europe in not having had sharp falls in actual house prices over the last few years . In West Germany, second-hand house prices have been falling since 1981 ; in the two years up to mid 1984, by 20% in urban areas and up to 40% in rural areas and suburbs. In the Netherlands, house prices fell from the end of 1978 to the beginning of 1982 by 25-30%, stabilised, then have started to fall again. Falls have also occurred in Italy and Denmark (Martens, forthcoming) . In all cases, the general economic crisis seems to have been a major contributor to the collapse of these owner occupied markets . Economic crisis has not yet had the same effect in Britain . But periods of falling house prices may arise over the next few years, and put a totally different complexion on the economics of owner occupation .

What I want to do in the following sections is to illustrate the extent to which the current nature of owner occupation in Britain is a consequence of the social agents that dominate its structure of provision. The object is to show that significant changes can only be made to owner occupation if those agencies are replaced, or if their actions are in some way neutralised . The agencies in question are speculative housebuilders, landowners and building societies . Structures of housing provision operate in complex ways . It is easy to specify the agencies involved in owner occupied housing provision, as is done in Figure 1 . But the linkages between the social agents are not so clear cut, while changes in one part of the structure of provision generate complicated feedback effects in other parts . State subsidies to owner occupiers bring out the complexity of these effects . All the housing strategies discussed earlier argue that owner occupiers are the sole beneficiaries of mortgage tax relief. Yet is that the case? Building societies gain from them as they shield owner occupiers from high interest rates . This enables building societies to expand rapidly by offering savings schemes with attractive interest rates and easy withdrawal terms. This

Interlinkages and the dominant social agents in owner occupied housing provision

Circulation of capital Sales Nature of economic ownership, sources of credit

Exchange Speculative housebuilders Owner occupiers

Purchases

The housing market

Sales Production Land assembly and development

Land and landownership

ofessiona'

Mortgage credit institutions -

Building materials producers

Building workers

building socs ., etc .

The State Influences via :

The structure of owner-occupied housing provision

1 . Housing policy 2 . Individual and corporate taxation 3 . Employment legislation 4 . Planning system and state infrastructure expenditure



Owner Occupation pushes up the interest rates charged by the societies to people who borrow from them . The demand for mortgages is not choked off, however, because the effective interest rate is lowered by the tax relief on the interest . Subsidies to owner occupiers also have the effect of raising house prices, so much of the economic gain from them ends up bolstering builders' profits and land prices (and along the way sustain the current inefficient forms of housing production and exchange) . Removing the subsidies need not necessarily hurt owner occupiers too much, especially if the withdrawal was gradual and sensitively handled. It would most probably lead to a fall in house prices but would be compensated by commensurately lower mortgages . But removal of the subsidies would plunge the capitalist beneficiaries into severe crisis, because a major source of profit has been taken away. The whole structure of housing provision could be threatened with collapse, and it is difficult to see how any government could ignore crashes and distress amongst the big housebuilders and building societies . So subsidies would most probably return in a different form ; an expedient that can only be avoided by tackling those agencies at the same time or prior to the rejigging or removal of subsidies . Houses sold in the housing market are new ones produced by The owner speculative housebuilders and second-hand ones, many of which occupied housing are being sold by owners who wish to move within the tenure . market Unlike some other European countries, the British housing market is dominated by second-hand sales (80% or more is the usual proportion) . Other European countries tend to have segmented markets, with the new housing market being separated from the second-hand one (Martens, forthcoming) . The separation occurs either because people tend not to move, or because subsidies are directed only at new houses and households, or because the house types are so different . All three reasons, for instance, hold in France and Germany. And second-hand houses in Germany frequently sell at a considerable discount on new prices because of the houses' lower quality or because it is the forcible sale of a house by an owner who can no longer pay the mortgage . Where second-hand and new housing sales are closely integrated, such market formations are extremely volatile . The British housing market is a classic instance . This is recognised popularly in the fragility of chains of sales . Periods of market boom are followed by slumps in rapid succession, with cycles of activity averaging around two to three years from trough to trough . Sometimes prices escalate rapidly with a boom in transactions, as they did in 1972-3, 1978-9 and most recently in 1982-3, but they need not necessarily do so . Yet, so far during downturns prices have only

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Class fallen in real terms (as inflation races ahead of house prices), actual house prices have not dropped dramatically . Slight falls were recorded for a few months in 1973-74 and again in 1981, but in such a volatile market a major and prolonged fall in house prices cannot be ruled out . There is no clear regional segmentation in levels of housing market activity. There is much talk in the press of the booming South East and the depressed North, but such cliches are overplayed in the housing market . The picture of price transmission tends to be one of certain regions leading increases in market activity (and price inflation) and the others gradually responding in the following months (Neuberger and Nichol 1975 and Economic Trends 1982) . Only regional variations in the rate of new housebuilding seem to be noticeable, though again they should not be exaggerated . What has a more noticeable geography is the location of the expanding owner occupied stock . New building is overwhelmingly in the suburbs and metropolitan fringes, encouraging as well as following the drift of people from the old urban heartlands (Hamnett 1983) . Factors determining the rate of change of house prices have to be divided into long and short term influences . Short-run booms and slumps are mainly the result of variations in the state of effective demand in relation to sales . As most sales are from the existing stock, aggregate supply is primarily determined by the conditions that influence when existing owner occupiers move . As most sellers will also be buying another house, such supply is essentially determined by the same factors as demand, except that second time buyers have money gains from the house they sell as well . The most important short run influence on demand is the rate of change of disposable incomes ; mortgage interest rates have a lesser but still significant influence as do a series of other influences like the rate of new household formation (BSA 1984) . House price booms start when there is a sudden flood of demand on the market arising from a rapid increase in disposable incomes; a sudden easing of credit; or after a period when the market has stagnated, frustrating the trading-up aspirations of existing owners . Booms are brought to a halt as escalating house prices make purchase unaffordable for a growing number of people (Ball 1983) . The short run volatility of the owner occupied market has led to the blossoming of a large number of, frequently selfinterested, pundits who are prepared to hazard a guess as to the future twists and turns in the market . The media are hungry for such expert advice, even if it is rarely correct . Such types of forecasting have helped, however, to reinforce the dominant view that the housing market is primarily a second hand one in which

Owner Occupation new building plays only a minor passive part . This has led most commentators, including recent governments (e .g. Labour's 1977 Housing Policy Review), to ignore totally the effect of the building industry on the cost and quality of owner occupied housing . But, although new housing is only a relatively small proportion of total supply in the owner occupied market, its impact is much greater . As the prime source of additional owner occupied supply (the other less influential sources being transfers from other tenures and conversions of the existing stock), the cost of new housing over the longer term determines the general price level of owner occupied housing. Most new housing is produced by speculative housebuilders, who New buy up land, and organise the building and selling of houses . Few housebuilding other countries have this sort of capitalist builder - frequently because building capital has not managed to squeeze out independent land dealers (as happened in Britain in the 1930s) or has failed to remain independent of financial capital . Over the past fifteen years, the housebuilding industry has been transformed . It has come to be dominated by a handful of large producers . Volume builders (producing more than 500 houses a year) now build over half of all new private houses . Most of these firms are themselves owned by large conglomerates (like Trafalgar House, Guardian Royal Exchange and P&O) or by rich families (like the Salveson and Joiner families) looking for tax-breaks and good, long-term speculative profits out of land development (Ball 1983) . These firms can ride (and even prosper) from the ups and downs of the housing market in ways that other firms cannot . The success of the new volume builders is based on the type of capital they constitute . Speculative housebuilding is now based on volume builders dominated by long-term development capital . Accumulation strategies are not constrained by the need to finance new investment out of sales or by short-term bank overdrafts . Instead, through their parent companies, they have access to large amounts of capital on a long-term basis . The capital can be used to develop a long-term marketing strategy and to increase market penetration during downturns when smaller, weaker competitors have to cut back production . Alternatively, it can be used to buy land during market downturns or to take over firms stricken by a slump . The economic advantages of long-term development capital are the prime reason for the rapid centralization of capital in the speculative housebuilding industry. Emphasis on development profits in a volatile market means that steady housebuilding rates are impossible, and that when there is a market upturn speed is paramount . This is a costly and inefficient way to build and leads to an expensive, poor quality

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product. Rising building costs, and the incessant desire for speed, have two important effects . First, they encourage the adoption of new, untried techniques requiring less skilled labour and enabling even greater speed . The wholesale adoption of timber-frame housebuilding by volume builders, prior to the furore last year about its structural integrity, is a consequence of this crisis of housing production (Cullen 1982) . Second, they have encouraged further casualisation of building employment. The growth of the big producer has finally completed the casualisation of employment in speculative housebuilding . Labour-only self-employment (the Lump) is now universal . In times of boom, earnings can be good . But the norm is lower earnings, extensive periods without work and poor working conditions . Lump piece rates set the pace and style of work - it is a formula designed by management to minimise the indirect costs of labour (e .g . no wet time, sick or holiday pay), and maximise work rates with little concern for quality . Training is virtually nonexistent, so speculative housebuilders rely on the state to train workers for them (Austrin 1980, Ball 1983 and TRG 1981) . New housebuilding not only affects the price of owner occupied housing, but also its quality and what is done with the existing stock . Over the past twenty years, value for money has dropped dramatically . Space standards for equivalent new dwelling types, both internally and externally, for example, have fallen considerably (Leopold and Bishop 1981) . Concern over the quality and structural integrity of new owner occupied housing reached a peak with two World in Action exposes on television of timber-frame housebuilding and Barratt's hard-sell methods and over pricing . Barratt's sales and particularly its share price have slumped since then . While it makes good journalism to home in on one firm, Barratt have quite rightly retorted that their practices are no different from other volume builders . Yet no generalised campaign on standards has materialised . The declining quality of new housing (and it was never very good) and high prices have made it economically feasible to retain and `do up' large parts of the existing stock, creating a profitable market for small-time speculators sub-dividing old houses into flats . A considerable amount of improvement has been done to the existing stock, either by DIY owners, via generous improvement grants, and by small-time capitalists . But, even when done properly and related to structural rather than cosmetic features, improvements can only ever be temporary, and the cost of maintaining an ageing housing stock mounts considerably . Successive government house condition surveys have shown that the rate of disrepair in the owner occupied stock is increasing dramatically, particularly with houses owned by older and lower income house-



Owner Occupation holds who cannot afford the rising repair bills . The government are so concerned that the next house condition survey is going to be done on a totally new, and less strict, set of criteria (Financial Times 24.8 .84) . The new rules are partly designed to save money, and partly to make long-term comparisons impossible which should help to minimise political complaint at the rising tide of disrepair . At both ends of the housing production process are social agents Housing land and who extract considerable revenue from owner occupied housing the planning provision. The situation of the exchange professionals is well system known. Estate agents, surveyors and solicitors all charge high prices for minimal services . Consumerist complaints against them are strong. The solicitors' conveyancing monopoly, for instance, is currently being watered down . Reform of the exchange process is being argued for by many, and it is difficult to see how the exchange professionals can retain their privileged position much longer ; particularly as the new computer based technologies threaten their mystique of specialist knowledge . Campaigns against landownership, on the other hand, have been muted in recent years . Even the builders, who have to pay the high land prices, have chosen to attack the planners for causing the high price of land, rather than the recipients of those prices themselves . Ideology, perhaps, stops them from doing so . But, in addition, builders are also, through their land banking activities, significant recipients of land gains . Nobody knows too much about the land market . Who owns the land of Britain and individual land transactions are well-kept secret . Land ownership is likely to be more concentrated in areas of urban development than is often thought . The age of the landed aristocracy and gentry is not yet dead - and nowadays you do not have to own that much land to be a multi-millionaire . The prime motive for such secrecy is to avoid the political outcry at the fabulous profits made in the land market . Frequently those profits arise from state expenditure . Just think of the windfall accruing to landowners in outer metropolitan London as a result of the completion of the M25 . The growth of volume housebuilders and their extensive land banking activities (holding stocks of development land for production 1-40 years hence) has added a counterweight to the market power of individual landowners . The planning system has aided the volume builder by the complexity of its procedures and the forms of development it encourages . Attempts by the state since the 1947 Town and Country Planning Act to control the location of speculative developments has been gradually whittled away over the past decade . However, schemes to remove the vast land development profits made by housebuilders have never been

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properly implemented (Massey and Catalano 1978) . Housebuilders pay virtually no tax on their land profits despite an array of taxes, like development land tax and capital gains tax (Ball 1983) . In the imprecise, discretionary procedures of the planning applications process, speculative builders in the main have seen things turn firmly their way since the advent of the Tory Government in 1979 . (Local authorities have also had to sell off the best parts of the land stocks previously earmarked for council housing to speculative builders) .

Building societies

Over a million households each year take out a mortgage - mainly with the building societies although the clearing banks have been trying to muscle in over the past few years . The Building Society Movement is one of the big success stories of British capital in the post-war era. From being a relatively small part of the financial system, deposits with the building societies now account for over half of people's liquid savings . The societies spearhead the propaganda lobby for owner occupation . Few other institutions have such a good media profile . The USA may have General Motors but in Britain - if we are to believe the media - `what's good for the building societies is good for Britain' . The building society movement is highly centralised . The top five societies hold 55% of the movement's total assets (mainly homeowners' mortgages) . The big societies are also expanding rapidly . Their traditional source of income - money deposited over the branch counter - are now proving insufficient for their expansion plans . So the societies are pressing for extensive powers to borrow on the wholesale money markets and to develop general banking, brokering and property activities which at present they cannot legally do . The building societies have been highly successful in implying that they are always doing someone a favour - philanthropy and self-help are the self-images . Yet, their principal concern is to expand as rapidly as possible without making a loss . The drives imposed on them by being a form of capital outweighs their formal constitution as non-profit making, friendly societies . A good example of benign imagery hiding a concern to maximise accumulation is associated with that perennial national obsession : mortgage interest rates . It is commonly held that building societies' mortgage interest rates are `cheap' . This is not true . Building societies have a cheap source of finance, personal sector liquid savings, and an attractive tax environment . They pitch their mortgage interest rates to try and generate a sufficient inflow of funds to finance the maximum volume of funds they can prudently lend, leaving a generous margin for administrative charges, in-

Owner Occupation cluding substantial salaries and perks for senior management . Building society mortgage interest rates traditionally have been high rather than `cheap' compared with wholesale money market rates (see Ball 1983) . Only during the mid-1970s, when the societies were under intense pressure from governments concerned with anti-inflationary strategies, did building society interest rates dip and come on par with the wholesale money market (although this has been partially offset for individual owner occupiers by tax relief on mortgage interest) . At present, it is exceedingly difficult to make accurate comparisons of the interest rates building societies charge owner occupiers with the rates, say, a bank, firm or the state could get on the wholesale market. Problems arise when trying to find out the typical mortgage interest rates charged by building societies . The societies, with the tacit approval of the state, try to present an unreasonably favourable impression of how attractive their mortgage rates are . One difficulty concerns the way in which the societies calculate their basic rates . Other financial institutions are legally required to inform borrowers of the `true' annual percentage rate they are being asked to pay, but not the building societies . In January 1984, for instance, the building society basic rate was avertised as 11 .25%, but in annual percentage rate (APR) terms it was approximately 12% . The government has recently announced that the societies will soon have to switch to giving rates in APR terms . Secondly, it is difficult for many borrowers to get the basic rate, as most of the societies charge extra interest on larger mortgages . In August 1984, for example, the second largest building society, the Abbey National, charged 12 .875% on loans up to £15,000 with a sliding scale of increases up to 14 .375% for loans of £35,000 and over (a 1 .5% surcharge) . It is remarkable that so little adverse publicity has been given to building societies' mortgage interest rate fixing activities . It reflects both the success of the societies' propaganda and the disarray of the Left over housing issues . The most glaring incidence is council house sales . Many of these sales are being financed by the building societies . In the first 9 months of 1983 the building societies were lending from 10% to 12% of their advances to sitting council tenant purchasers : that works out at about £1,500m for the period . As the building societies are keen to tell everyone, they have not been able to reduce mortgage interest rates because of the high demand for mortgages - yet take the council house mortgage advances out of the sum and the demand is not so high. In other words, every owner occupier with a mortgage has been forced to pay substantially more mortgage interest because of the Tories' council house sales programme .

37



Capital & Class 38 Structural change in the mortgage market

The clearing banks only caught on to the profitability of mortgage lending in the late 1970s, having had a tradition of putting emphasis on corporate customers and overseas lending (Coakley and Harris 1983) . Their German counterparts had noticed much earlier and acquired all of Germany's private mortgage banks in the early seventies, a move which turned out to be highly profitable (Oven Smith 1983) . After an initial flurry in 1982-3, when the banks took 40% of the new mortgage market, the presence of the banks has been muted. They now lend about 15% of all new mortgages . The competition over the past 18 months has had little direct effect on building societies, as the recent boom in the housing market and the bonanza of council house sales has enabled the societies to keep their interest rates high . The societies have also reached the limits of their ability to expand through lending out mortgages to owner occupiers, so they want to diversify into real estate and general banking activities . The moves of the banks into mortgage lending and the desire of the building societies to diversify has forced the Government to begin making moves in the taxation and legislative fields . Virtually all of the societies' special tax advantages over the clearing banks have been removed, and a Green Paper has been published, which gives the societies just about all they wished for (Building Societies : a new framework Cmnd 9316) . Competition between the banks and the building societies is bound to intensify over the next few years, which will encourage even further centralisation amongst both institutions . Borrowers will not gain from this competition . The societies' desire to diversify, after all, is a means of them avoiding the adoption of expansion strategies in owner occupation alone ; which would have required them to reduce the powers of selectivity that they have exercised so effectively until now . To attract more mortgage business, they might even have had to offer better deals to minority groups and/or lower interest rates . With the relaxation of the strict controls on the building societies' activities, one characteristic that has been relatively absent from Britain might re-emerge : spectacular failures of imprudent mortgage lenders . The most significant case at present is in the USA in the new era of deregulation . There the FAC Corporation, the largest savings and loan association with assets on a par with ill-fated Continental Illinois, has just had its accounts questioned and revised by the Securities and Exchange Commission . The problems of the FCA are again bringing forward worries about the stability of the us banking system (Financial Times, 28 .8 .84) . The integration into general banking of the previously independent owner occupied mortgage finance system in



Owner Occupation Britain could easily do the same at some time in the future in Britain . A political strategy of the Left towards housing provision has to be What is the based on the housing needs and aspirations of the mass of the alternative? population . In particular, this means that a housing strategy should not set households living in one tenure against others in different tenures . Council housing should not be championed at the expense of owner occupation, nor vice versa. Yet it must be recognised that simple formulae do not exist and that the problems facing households living in those two tenures are different . While there might be no simple formulae, certain principles do seem paramount for an adequate Left strategy . The principles related to housing consumption are well-known and accepted by most commentators . People should have the right to decent, cheap housing and should be able, if they wish, to have a say in the types of housing generally provided and, in particular, the location and design of their own dwelling and the related social facilities and infrastructure . The principle of democratic accountability is as important to a transformation of housing provision as any quantitative improvement in housing conditions . Otherwise popular disillusionment would quickly set in, and the bureaucratic failures of the past be repeated. Without popular support, any new forms of housing provision would soon disappear under the deadweight of apathy or the excuse of economic necessity . Such principles imply rejection of current Labour Party strategies, which are little different from the `housing drives' of the past. Such Labourist housing drives are planned and implemented from above, and imposed on a frequently reluctant population with only token consultation . They only satisfy democratic accountability in the formal sense that a locally elected council has to approve the plans, but can only do so in rubber stamp style . Greater involvement of local people in articulating housing needs must be devised . Here experience in Britain is woefully behind the practice in certain other West European countries, with governments that could hardly be called socialist, as for instance in the Netherlands . Reforming the way in which people as housing consumers relate to the provision of housing has little chance of success unless the actual social constraints facing such reform measures are recognised and confronted . There is little point in mobilising mass campaigns around statutory rights to, say, minimum housing standards, or to a voice in local housing strategies, if the conditions under which those statutory rights could be realised in practice do not exist . The relevant social relations of housing provision must exist to accommodate them .

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What I have tried to argue in this article is that virtually all current housing strategies misspecify the context in which any housing policy intervenes by ignoring the social agents who currently dominate housing provision, and by failing to take account of the effect of their proposed reforms on the structure of provision in question . `Reform subsidies, build more houses' can polemically be said to be the standard slogan of housing reformers . Such a slogan both misunderstands the nature of housing provision and the power of the state. It does so for the same reasons : it looks only at the cost of housing to households not at the whole network of social relations in housing provision . There is no possibility of achieving high housing standards and genuine democratic accountability while the capitalist agencies currently dominating housing provision continue to operate in ways dictated by the requirements of capital accumulation . Another principle of a socialist housing strategy must, therefore, be the removal of the dominance of capital from housing provision . This might be done by devising a series of constraints on the activities of capital or doing some corporatist-style deal with big building capital . But that tactic has been tried so often before - by Bevan for housing in general in the post-1945 Labour Government, and for council housing since its inception - that there seems little chance of it succeeding in the future, even if one believes in the feasibility of such compromises in general . The only alternative is to remove housing provision from the sphere of operation of capital altogether . Removing housing provision from the control of capital requires action on three central components of housing provision : land, building production and finance . Land should be taken into public ownership (with leaseholds for existing users and compensation only on limited `hardship' basis) . Capitalist builders should be excluded from housing and all housebuilding undertaken by public agencies . There is little point in directly nationalising building firms as they own few productive assets themselves . Housing credit could readily and cheaply be brought under state control since the building societies are friendly societies without shareholders in the usual sense of the word . Legislation would only be required to alter the way in which their governing boards are nominated (see Minns 1982) . The content of housing production once it was in the public sphere could take many forms . Experience of nationalised industries to date would suggest that the giant public corporation model should not be followed . Instead locally and regionally based housebuilding enterprises should be encouraged as they would make democratic control and accountability by building workers and users a viable proposition . The public building enterprises

Owner Occupation should operate on the basis of satisfying housing need rather than aim to make the maximum profit . What would happen to the current housing tenures? The advantage of introducing housing reforms via taking control of housing production is that the advantages of people's current housing situations can be maintained whilst the disadvantages are gradually removed . Council housing and owner occupation as tenures could still remain but what they mean, in terms of housing, its availability and cost, transformed . Owner occupied housing could still be built, with owners having the right to sell their houses whenever then wanted . By controlling housing output, however, the price and availability of owner occupied housing would become items of public control instead of outcomes of the vagaries of a speculative market . The reform of housing finance would then be both feasible and supplement the viability of the new forms of housing provision . The central point of the argument here is that the Left has been too hung up about the ways in which people consume housing and has generally failed to consider how it is produced . Once control over production is recognised as central, the ways in which people live in housing and how much they pay for it is essentially a matter for political decision . Winning broad support for such transformations of housing provision and responding to people's articulated housing needs should be the basis on which such political decisions are made . The notion that there is some correct `socialist' housing tenure hinders rather than helps that political process . Once the contemporary nature of owner occupied housing provision is recognised and understood, it is difficult to see how the Left can come to terms with owner occupation by bribing owner occupiers with yet more subsidies (they would disappear in house price inflation anyway), or by exhorting sacrifice and imposing extra taxation like a born-again Stafford Cripps . Nor is it possible to offer tenants the delights of home-ownership by universal sales or equity participation schemes . Only the radical transformation of housing provision is a viable alternative . Owner occupation is often used as an example of the `new realism' that the Left must adopt . The realism is frequently couched in terms of the political compromises that must be basic to socialist principles by accepting and trying to intensify the appeal to consumerism and individualism exploited by Thatcher, and by trying to outbid her in these spheres on her own terms . But the reality of housing provision in Britain is that it is in fundamental structural crisis. This is true for the structure of owner occupied provision which is only being sustained by massive government subsidies and by the extent of the housing shortages generated by

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the rundown of council housing. The next dive in the British economy might easily take this structure of provision with it . A parallel can perhaps be made with the struggles to create a national health service . It might have been politically more realistic instead of trying to bring health care under public provision to have devised strategies that improved the service offered by the old system . But most knew that such compromises would not work . The same is now true of compromises over housing provision except in this case there are no sustained campaigns to convince people of the fact. No matter how carefully worked out are a set of proposals for reform, they have little chance of success unless the present situation is criticised more successfully . The top priority of the Left in the housing sphere at present seems to me to be extensive analysis and criticism of all aspects of current housing provision . There is a need to break out of the politics of tenure and to criticise it as a framework for political debate over housing provision . But, in particular, there is a need to take on the powerful lobbies for owner occupation and against reform of council housing . The agencies dominating owner occupied housing provision, like the building societies, housebuilders and landowners, have much to answer for. It's time they stopped having an easy ride .



Owner Occupation 1 The housing crisis has been extensively covered in the press . Detailed analyses can be found in Fleming and Nellis 1982, Ball 1982 and Labour Housing Group 1984 . 2 Financial Times 3 .2 .83 . Details of the cuts in housing expenditure are given in nominal price terms in the government's Expenditure white paper each year . 3 Housing and Construction Statistics March Quarter 1984 part 2, table 2 .12. 4 Ginsberg 1983 gives a similar description of Labour party policy, although he suggests that there was an ideological switch towards owner occupation during the 60s . The break interpretation, I think, relies too much on Crossman's own inflated view of his ability to transform the Labour party, as expressed in his diaries (Crossman 1975) . 5 King and Atkinson 1980 is well known example of this school of thought, and Ermisch 1984 is one of the most well publicised of the latest . 6 For a detailed critique of this proposal see Ball 1983, ch 13 .

Notes

Austerberry, H . and Watson, S . (1981) A woman's place : a feminist approach to housing in Britain Feminist Review 8, 49-62 Austrin, T . (1980) The `Lump' in the construction industry, in Nichols, T . (ed .) Capital and Labour, Fontana, London Ball, M. 1982, Housing provision and the economic crisis, Capital and Class, 17, 60-78 Ball, M. 1983, Housing policy and economic power : the political economy of owner occupation, Methuen, London BSA (1984) House prices and earnings, BSA Bulletin 39, July, 15-19, Building Societies Association, London CDP (1976) Whatever happened to council housing? Community Development Project, London CDP (1978) Private housing and the working class, Benwell Community Project, Newcastle-upon-Tyne Coakley, J . and Harris, L. (1983) The city ofCapital, Basil Blackwell, Oxford Cowley, J . (1979) Housingforpeople orforprofit Stage 1, London Cowling, M . and Smith, S . (1984) Home ownership, socialism and realistic social policy Critical social policy 9, 64-68 Crewe, I. (1981) Why the Conservatives won in Penniman, H. (ed .) Britain at the polls, 1979, American Enterprise Institute for Public Policy Research, Washington and London Crewe, I . (1983) The electorate : partisan dealignment ten years on West European Politics 6,183-215 Crossman, R . Diaries of a cabinet minister, vol 1, 1964-66, Hamish Hamilton, London Cullen, A . (1982) Speculative housebuilding in Britain . Some notes on the switch to timber-frame production method Proceedings of the third Bartlett Summer School, University College, London Dickens, P. and Goodwin, M . (1981) The political economy of Sheffield's council houses . Paper presented th CSE Housing Workshop . Dunleavy, P. 1978, The urban bases of political alignment British journal of Political Science, 9, 409-43 .

References

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Economic Trends (1982) A new index of house prices Economic Trends, October, 134-38 English, J . (ed .) 1982 Thefuture of council housing, Croom Helm, London Ermisch, J . (1984) Housing finance: who gains:, Policy Studies Institute, London Fleming, M . and Nellis, J . A new housing crisis? Lloyds bank review 144, 38-53 Foot, M . (1975)Aneurin Bevan, volt, Granada, London Forrest, R . and Murie, A . (1984) Right to buy? Issues of need, equity, and polarisation in the sale of council houses, wP39 School for advanced urban studies, Bristol Gamble, A . 1981, Britain in Decline, Macmillan, London . Ginsberg, N. (1983) Home ownership and socialism in Britain : a bulwark against bolshevism Critical social policy, 7, 34-53 Gray, F . 1982, Owner occupation and social relations, ch15 in Merrett, S . with Gray F ., Owner Occupation in Britain, Routledge and Kegan Paul, London . Hamnett, C . (1983) The new geography of housing New Society, 8 Dec, 396-398 HCEC (1981) Third reportfrom the environment committee, HC 383, HMSO Holmans, A . (1979) Housing tenure in Britain - the present situation and recent trends Social Trends 9, 10-19 Housing Policy Review 1977, Housing Policy: a Consultative Document, Cmnd . 6851, Hmtso, London . Kilroy, B . and McIntosh, N . (1982) Housing and the economy, Shelter, London Kilroy, B . (1984) Reforming housing finance, in Labour Housing Group (1984) King, M . and Atkinson, A . 1980, Housing policy, taxation and reform, Midland Bank Review, Spring, 7-15 . Labour Housing Group (1984) Right to a home, Spokesman, Nottingham Leopold, E. and Bishop, D . (1981) Design philosophy andpractice in speculative housebuilding, Building Economics Research Unit, University College, London Massey, D . and Catalano, A . (1978) Capital and land, Edward Arnold, London Martens, M . (forthcoming) Owner occupation in Europe : post-war developments and current dilemmas Environment and planning A forthcoming Merrett, S . with Gray, F . (1982) Owner occupation in Britain, Routledge and Kegan Paul, London MHLG (1965) The housing programme 1965 to 1970, Cmnd 2838, HMSO Minns, R (1982) Take over the City, Pluto, London Neuberger, H. and Nichol, B . (1975) The recent course ofland prices and the factors underlying it, Dept of the Environment, London Owen-Smith, E . The West German Economy, Croom Helm, London PEt-iw 1975, Political Economy and the HousingQuestion, Political Economy of Housing Workshop, Conference of Socialist Economists, London Saunders, P . 1979, Urban Politics, Hutchinson, London . Swenarton, M . 1981, Homesfor Heroes, Heinemann, London. TRG (1981) Training on trail: government policy and the building industry, Training Research Group, Birmingham

Helena Hirata and John Humphrey

Economic crisis and the sexual division of labour : the case of Brazil

Against the backdrop of economic crisis in Brazil, this article looks at patterns of dismissal and rehiring in an electrical factory there . It shows how management maintained intact the established division of labour and discusses the extent to which women were discriminated against . The paper raises 45 interesting questions about the impact of crisis and unemployment on women workers .

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the debate on the impact of crisis and unemployment on women workers has developed considerably. Initially, much of the discussion addressed itself to the issue of whether women would lose their jobs in greater numbers than men. Attention was focussed on the overall levels of job loss for the two sexes, and two polar positions were advanced . Firstly, it was argued that women's role as an industrial reserve army means that in a period of crisis they are sacked in greater numbers than men and are the last to find work when the economy turns up again . This could result from the supposedly higher rates of turnover for women and hence their higher propensity to lose their jobs through natural wastage, or the greater ease of replaceability of mainly unskilled or semi-skilled women workers, or the lower seniority of women, or through direct discrimination by management or unions against women in work . Secondly, it has been suggested that the sexual division of labour itself lends some protection to women against the worst effects of the economic crisis . The concentration of women in certain sectors of economic activity and in predominantly female occupations means that in many sectors and firms, cut-backs in jobs affect predominantly workers of one sex . If the crisis affects heavy industry, for example, male workers will be affected much more than women, while cut-backs in hospital staff would probably affect women more . Within sectors or industries, too, the division of labour by gender is often so pronounced and established that it can protect women against discriminatory dismissals .' The development of the crisis itself has forced modifications and developments of these positions . Even those writers who believe that the reserve army of labour hypothesis provides an adequate explanation of women's employIN RECENT YEARS

ment in the First World War, 1930s and Second World War, realise that events in the 1970s present a rather different picture (Gadry-Turpin, 1982 : 61-63) . Women, particularly married women, may have entered paid employment outside the home on a large scale in the postwar period in a situation of high demand for labour, but there was little sign in the 1970s of any tendency for women to be expelled from employment! Other analyses, however, have stressed that the discrimination against women in a crisis is not merely quantitative, but qualitative also . As the analysis of crisis itself develops, concentrating on the restructuring and transformation of capital rather than either cyclical fluctuations in employment or the final crisis of capitalism, so it becomes apparent that the position of men and women workers is influenced differently by restructuring. Huet (1982) has shown that the continued strength of female employment in France in the latter part of the 1970s has been due in part to the restructuring of labour and the increased use of part-time, fixed-term and temporary labour - much of which is female . The increased precariousness of employment provides jobs for women, but they are jobs with fewer rights than before . In the case of Britain, Ruberry and Tarling (1982 : 69-71) have suggested that certain sectors of the economy may turn to part-time, casual work and home-working as means of increasing flexibility . In contrast, Jane Humphries' recent article in Capital and Class hypothesised that the preliminary data from the USA for the 1970s indicated a fuller and more equal integration of women into the labour force than ever before (1983 : 18-24) . In this case, the impact of the crisis upon women is held to reflect a longer-term tendency for women to be more fully drawn into the labour force . This paper contributes to these

Women workers in Brazil

debates by means of an analysis of economic crisis in Brazil . It examines the patterns of dismissals and rehirings in a large electrical factory in the city of Sao Paulo in 1981-1982 . We will show how a management with few legal, financial or union constraints on its sacking and hiring policies was able to discriminate against women workers and restructure its labour force while at the same time maintaining intact the established sexual division of labour in the plant . In this way, the case study can contribute towards the more general macroeconomic discussions outlined above .

The Brazilian crisis Contrary to the experience of many other countries, Brazil did not stop growing after the first oil price shock in 1973 . Although expansion slowed down considerably in relation to the 15 per cent and 20 per cent rates of industrial growth seen during the `economic miracle' period (1968-1973), the government's willingness to expand the foreign debt to pay for imported oil and to finance large-scale development projects in the fields of energy, steel, transport and capital goods ensured that industrial growth continued until the end of the decade . However, following the second oil-price rise in 1979, the import bill rose sharply, the terms of trade deteriorated and, at the same time, rising world interest rates greatly increased service payments on the foreign debt. Faced by a lack of confidence on the part of the banks, the government found itself obliged to adopt measures to placate the international financial community . Ruling out the possibility of a rupture with the international banking system, the government had little alternative but to adopt an `orthodox' policy of restraint on credit and state expenditure in order to tackle balance of payments and inflation problems .

The government's new policies had 47 an immediate impact. Physical output for manufacturing industry as a whole fell from a level of 117 (1978=100) in the final quarter of 1980 to 105 in the first quarter of 1981 . But this fall was not distributed evenly between the different parts of the industry . Production of nondurable consumer goods (food, clothing etc .), remained fairly steady in 1980-1981, falling by approximately 4 per cent at the beginning of 1981 and holding steady at this level throughout 1981 and 1982 . In contrast, the consumer durables sectors were badly hit by the squeeze on consumer credit and uncertainty about the future course of the economy. Between the last quarter of 1980 and the second quarter of 1981, average monthly production fell by 36 per cent, and there was no overall recuperation until the second quarter of 1982 .' The industry itself appears to have been taken unawares by the crisis . Production had reached an all-time peak in the last quarter of 1980, even after overall manufacturing output (including capital goods and intermediate goods) had begun to fall back, and when the crisis did finally strike the consumer durables sector, the effect was dramatic. Employment also fell, and by June 1981 manufacturing employment as a whole was 10 per cent lower than one year previously . Jobs in the consumer durables sectors were cut back sharply. There were strikes and stoppages over largescale dismissals in the motor vehicle industry in the course of 1981, and overall employment in the sector fell by over 20 per cent according to Ministry of Labour statistics . In two electrical companies and one motor parts company in Sao Paulo (surveyed in 1982), the hourly-paid work-force were reduced by more than 50 per cent in the first half of 1981, and although these firms did start re-hiring at the end of the year they remained with

Capital & Class

48

many fewer workers than at the end of 1980. Employment in the city and State of Sao Paulo, the country's most developed region, was particularly badly hit by the crisis . There is little data available on employment in industry by sex for the period of the crisis . However, unpublished data from the Ministry of Labour's Relacao Anual de Informacoes Sociais (RAIS) for December 1980 and December 1981 show that women's employment in the electrical industry fell more than did men's . Female employment in Brazil as a whole fell by 20% in 1981, compared to a 10% fall for men . In order to further examine the impact of this crisis on male and female workers, we will study events in a large electrical company located in the city of Sao Paulo . We will study the sexual division of labour prior to the crisis, the impact of this division upon manangement policy during the crisis, and the way in which management used (or failed to use) the crisis as an opportunity to restructure the labour force .

The plant studied and its sexual division of labour Clearly, one plant cannot be representative of the wide range of events that will happen even within the confines of one industry and geographical area. However, the study to be presented is of interest because it analyses the impact of a very large fluctuation of employment in a short period of time on the basis of detailed examination of company records, interviews with workers in the plant, and interviews with factory management at various levels . Attention will be concentrated on hourly-paid workers in production jobs, where the main burden of the sackings fell . The firm studied was of mixed Brazilian and foreign capital, producing a variety of consumer electrical products .

In common with many other similar firms it had factories in the city of Sao Paulo and in the free-trade zone in Manaus .` Before the economic crisis in 1981, the firm's factory in Sao Paulo employed more than 1000 people, of whom 587 were direct production workers . The plant produced both electrical products for direct sale, such as radios and tuners, and also components for assembly in Sao Paulo and in Manaus . The sexual division of labour in the plant was firmly established, both along departmental and occupational lines, with the female departments being largely confined to the assembly and production of small electrical components, while heavier work, such as the production of metal frames and wooden cabinets and speaker boxes was done in male departments . Most of the production departments were almost entirely singlesex . In five `female' departments, there were 261 hourly-paid women and only 3 men in December 1980 (excluding supervisors and managers) . In five other departments, there were 200 male production workers and just two women . The five men and women working in departments not of their own sex performed jobs and had job titles distinct from the other workers in their departments . Men and women worked together in just two production departments . In the TV assembly section, transferred to Manaus in 1981, one quarter of the labour force was male, but the men worked either as labourers (expected to do heavier, manual jobs) or as TV technicians, while the women were, without exception, classified as assemblers . It can be assumed that the women and men in the department did not perform similar tasks . In the other mixed department, which produced radios, there were, in fact, a small number of men working side-by-side in identical jobs . Three men and seven women worked as testers and



Women workers in Brazil calibrators, earning the same wages for the work. This was the only case among a total of 587 hourly-paid production workers in the plant where men and women did directly comparable work . Outside of production there was some further integration of male and female tasks . The occupation `cleaner', for example, was evenly divided between female and male workers, and it was paid the same basic rate . However, the only department in which women and men were regularly put to work side-by-side with the same job classification was Quality Control . Even here, women were never promoted to the higher-grade jobs, and promotion to secretary was suggested by management to be the only route to higher pay and status . Female and male activities were quite distinct . The women worked sitting down, making small components . The work was repetitive, each operation requiring a short amount of time, and work rhythms were imposed in part by assembly lines, but principally by direct and authoritarian control exercised by the supervisory staff (female and male) . The work was routine and monotonous, and it required limited initiative and responsibility. The women worked with their hands and with hand tools, whose use required dexterity, care and good eyesight . They were more controlled and more controllable than the male workers, both in terms of physical mobility and in relation to the amount and continuity of work . The male workers made larger items - mainly wooden and metal casings and frames - and much of their work was done on foot . They had more liberty to move around the workshops, and the variety of their work tended to be greater . They often used dangerous and noisy machinery, and physical force was a requirement of the less skilled jobs, but their space and time was less controlled and less controllable than that of the

women . Male and female jobs were not, of course, merely different and noncomparable . Women's work was not only unlike men's, but also paid a much lower wage . Three in four of all female production workers were classified as 'assemblers', which was the lowest-paid occupation in the plant . The wage rate was the same as for the male occupation `labourer', but there was one important difference between the two jobs . Assembler was typically the first and the last job that a woman entering the production areas of the plant could expect to obtain . Even emong the more experienced women who had worked for at least one year in the plant, the assemblers outnumbered the other occupations by almost two to one (excluding supervisors) in December 1980 . For the men, on the other hand, labourer was merely a transitory occupation on the path to something better. Although 32 per cent of male production workers were classified as labourers, most of these were recent entrants to the plant . Among male production workers with at least one year's experience in the plant there were six workers in higher-paid occupations for every one labourer . Similarly, the only entrance point for women was assembler, irrespective of previous experience, whereas men were hired at all grades of production worker. The differences in the structure of employment and the promotion opportunities open to men and women meant that, overall, women were paid much lower wages than men . The average hourly wage rate for male production workers was 40 per cent higher than for women . Most women in the plant were paid little more than the minimum wage rate for metalworkers in the region . Given these differences, it is not surprising that the personal characteristics of the women and men in the plant were

49

Capital & Class 50

quite different . The head of the Personnel Department frankly admitted that the firm pursued a low-wage policy for both men and women . In the case of women, the management deliberately sought, to some extent, inexperienced and often young girls since older and more experienced women were unlikely to accept the low wages. In the case of men, low wages tended to attract men with lower than average educational standards, but not necessarily young men. Not surprisingly, the average age of the women in production and quality control departments was only 22 1/2 years, and only 17 per cent of them were registered as having children under the age of 14 . In contrast, the average age of the male production workers was 33 years, half of them were married, and over 40 per cent had children .

Management policy in the crisis In December 1980, the factory employed nearly 1100 people, including hourlypaid workers and salaried staff (but excluding directors) . 60 per cent of the 587 production workers were women .' As a result of a severe drop in sales, 336 production workers (57 per cent of the total) were sacked by the company in the period January to June 1981 . Towards the end of the year, however, there was some recovery of sales and the factory started hiring workers in November . Overall employment (including directors and others not included on the company's computerised monthly payroll from which most of the data presented here have been taken) fell from a peak of 1121 in December 1980 to a low-point of 608 in July 1981 . But in January 1982 it had moved up again to 726, and by June 1982 (the last month for which information is available) it had reached 846 . The management had a free hand to dismiss whomsoever they wished, and to

re-hire according to their own criteria . At the time of the sackings, the firm faced no overt pressure from either the unions or the workforce . Although the factory was situated in one of the main industrial zones of Sao Paulo, it was very weakly unionised, and there was no overt resistance to the sackings . In the first half of 1981 protests about sackings were confined to the motor and steel industries, and it was not until much later in 1981 and early in 1982 that strikes, stoppages and protests over stability of employment became evident in the region in which the factory was situated. Nor did the firm face any legal or financial constraints on the sacking of workers . Following the reforms of the labour legislation introduced by the military government in 1966, almost all workers could be sacked at any time within one month's notice (or one month's pay in lieu of notice) . Compensation for such dismissals was financed by monthly payments by employers into workers' compensation accounts, and so mass sackings imposed no significant financial burdens on employers . At the time of rehiring in 19811982, the company was in a very favourable situation . Whereas the Personnel Department had experienced difficulties in recruiting both male and female workers in 1979 and 1980, by the end of 1981 they could pick and choose among the thousands of workers unemployed and looking for work in the region . The cycle of sackings and hirings should clearly express unconstrained management preferences . The process of selecting which individuals would be sacked and who would be retained by the company took place at departmental level, with departmental bosses, all male, taking the decisions . As a result of the sexual segregation noted above, there were few opportunities for managers to choose directly between men and women . In most cases, departments

Women workers in Brazil

were staffed almost exclusively by workers of one sex . However, in the course of interviews with departmental heads and the head of the Personnel Department, it became clear that this fact did not rule out the use of criteria that clearly distinguished between the sexes . The first two criteria, common to both sexes, were to dismiss workers that wished to leave the plant (in effect, taking voluntary redundancy), and to sack workers whose performance or discipline were below the acceptable standard . These two criteria were by no means sufficient to select enough workers, and so others, which clearly did vary according to sex, were established by both departmental heads and the Personnel Department . The most important criterion appears to have been the family situation of the workers . Both the head of Personnel and the department chiefs expressed a clear preference for sacking workers without families to support, and argued that the company had a social responsibility to fulfill . In making such a recognition, the firm followed a practice also seen in other firms . In one large electrical company, management claimed to have used similar criteria of family and personal needs when selecting workers for dismissal in 1981, while in another plant the personnel department chose between women workers according to whether or not their families had other people in work . Clearly, the use of this criterion in the plant gave great scope for discrimination against women insofar as their family responsibilities might be judged less than those of males by the (male) departmental heads . Therefore, three issues arise. Firstly, were the criteria mentioned by management actually operative? Secondly, did management only regard men as having family responsibilities? Thirdly, if this was the case, did it significantly influence the total numbers of women and

men dismissed from the factory? Given the sexual division of labour in the plant, there were few direct choices between male and female workers to be made, and it is not clear that a preference for retaining male workers with family responsibilities would lead to a higher dismissal rate for unmarried males, or lead to a higher rate of sacking for women as opposed to men . There is every reason to believe that the family responsibility criterion was much more than just an abstract principle in the case of male workers . The data on sackings revealed that male workers with children were much more likely to stay in the plant than those without. 67 per cent of men with children employed in the plant in December 1980 were still there one year later,' while only 34 per cent of those without children retained their jobs . In part, this difference was due to the fact that male workers with children were older than those without, and given the process of promotion described above, this meant that the older workers were also those in the more skilled occupations. A much greater proportion of skilled workers were parents than was the case for unskilled workers . However, a comparison of stability rates taking into account both skill and parental situation, as seen in Table 1, shows that parental situation as well as skill affected stability . Dividing the male occupations into three groups - labourers, occupations above labourer with a starting wage of less than Crs200 per hour in June 1982, and occupations with a starting rate of more than Crs200 per hour - it can be seen that the higher-paid (and presumably more skilled) male parents were very stable, with a survival rate of 86 per cent, while the non-parent labourers were the most unstable group, with a survival rate of only 22 per cent. For both labourers and the highest-paid workers, parents are significantly more stable than non-

51



to N TABLE ONE

Stability Ratesl'~ by Sex, Occupation and Marital Status : Production Workers, 1981 .IbI

Parental Status Sex

Occupation Group

Non-Parents Of Which No . Employed in Dec . 1980 Still Employed Dec. 81(%)

Parents Remaining No . Employed in Dec . 1980 in Dec . 81 (%)

Total Remaining No . Employed in Dec. 1980 in Dec . 81 (%)

FEMALE Assemblers Higher Grade Occupations TOTAL

210 59 269

19 .5 54.2 27 .1

33 17 50

33 .3 29 .4 32 .0

243 76 319

21 .4 48 .7 27 .9

MALE Labourers Middle-grade Occupations (" Top-grade Occupations TOTAL

50 33 35 118

22 .0 45 .5 40 .0 33 .9

17 30 50 97

58 .8 40 .0 86 .0 67 .0

67 63 85 215

31 .3 42 .9 67 .1 48 .8

Source : company records . Notes : (a) The stability rate is the proportion of workers employed in December 1980 who remain in employment until December 1981 . Workers who left voluntarily are excluded from the calculations . (b) The figures are for production workers only and exclude workers who left voluntarily (and received no redundancy compensation, therefore) during the year . The figures exclude supervisory staff. (c) Occupations above the labourer level, but with a starting wage of less than c200 per hour in June 1982 . The higher-grade female occupations fall into this category.



Women workers in Brazil

parents . Even when the three skill groups are weighted equally, the overall stability of the parents is significantly greater than that of the non-parents . Both skill and parental status have an important impact on the stability of male production workers . In the case of women production workers, the criteria put forward by the departmental bosses were much more confused than was the case for men . One said that he preferred to sack women with children because they gave him more problems (although in fact the few female parents in his department were not sacked in 1981), another talked of sacking single women and assemblers first, while the head of personnel mentioned holding on to long-service workers . Yet another department head implied that married women should be sacked if they had husbands to support them . The analysis of women's stability is further complicated by the concentration of women in one occupation, assembler, and the lack of correlation between occupation, age and parental status . The marked discontinuity of female employment means that older women may be less experienced or have worked for less time in the firm than younger, and often childless women . Overall, female parents were slightly more stable than non-parents, but there were marked variations from department to department . Among assemblers the parents were more stable, but among the other occupations the reverse was true . The conclusion to be drawn from this is that parenthood did not have the same effect on stability of employment for the two sexes. It is an important factor for men, but insignificant for women . It is well known, of course, that in many Brazilian factories being a parent is a disadvantage for a woman. Firms quite often sack women when they marry or have children .

Discrimination and the sexual division of labour The data shows quite clearly, then, that while considerations of family responsibilities had a clear effect on decisions about sacking or retaining male workers, this was not true for female workers . However, by itself, this does not prove that such considerations must have led to a greater overall stability of male workers compared to female . Given the pronounced division of labour in the plant, it is possible that decisions to favour male parents only affected other males . Direct examination of this issue is rather complicated . Overall, male stability was much higher than female : in the first six months of 1981, 65 per cent of hourly-paid women were dismissed, but only 44 per cent of hourly-paid men . However, part of this difference was almost certainly due to the fact that the production of male and female departments did not fall equally . In particular, very high levels of sackings in some female departments can be attributed to the way in which the firm imported components from the parent company in Japan . In the course of 1980, when demand for the company's products was at an all-time high, the firm began to supplement local component production with imports from Japan . This involved building up large stocks, because of the distance and time-lag involved, and giving a commitment to the parent company to import for a given period of time . When output slumped in 1981, the company had both large stocks of components and a commitment to continue imports . Therefore, production of certain components (produced in female departments) fell much more sharply than overall production at the plant .' As a result of this factor, it is not possible to say to what extent management reluctance to sack male workers with children might have led to an overall greater stability for male workers com-

53

Capital f5 Class 54

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Women workers in Brazil

pared to female . Detailed figures for employment by department in the plant are available, but not for production . However, it is possible to isolate a number of factors which might have led to some (although unfortunately unquantifiable) tendency for male workers to be more stable than female . Firstly, managers of male departments did seem to be concerned about the need to retain skilled labour . This could have been due either to the need to retain a wide range of skills whatever the level of production, or because of concern about scarcity of labour in a future period of expansion . In female departments, in contrast, managers were quite willing to retain only a very small number of polyvalent and experienced women workers, who would provide the basis for training and supervising new workers in a later up-turn . Thus, the greater recognition and demarcation of male skills probably led to a greater stability for male workers . Secondly, it is likely that either as a result of the first factor, or possibly because of management concern to avoid sacking 'breadwinners', that managers in male departments reduced their labour forces by less than the amount of the fall in production. The head of the woodworking department, for example, described a number of means by which the severity of the cutbacks in jobs was ameliorated in the first six months of 1981 . Included among these was the use of the department's workers to carry out general repairs around the factory - painting and rehanging doors, for example . In female departments, managers reported no such concern to `make work' for workers . Thirdly, in one of the few cases where management did have a direct choice between women and men performing identical work, in the quality control department, the supervisor said that although the main criterion for dismissal was quality of work, if faced with male and

female workers of equal quality, he would 55 sack a woman worker - with or without children - before sacking a male parent, precisely because he would not expect the woman to have a family to support with her wage . Once again, however, it is not possible to quantify the effect of such a preference . The impact of such practices was limited by the sexual division of labour itself. A major and long-term shift in the proportions of female and male workers in the plant would have necessitated a substitution of female workers by male (or vice versa in a different situation) . In fact, there was no sign of any males having been assigned to what had been previously `female' jobs and no sign of any redefinition of jobs or changes in the labour process that could have caused new male jobs to replace established female ones . This is important for the analysis of what happened when employment in the factory increased again . As was mentioned above, employment in the establishment as a whole (including top management) fell from a peak of 1121 in December 1980 to a trough of 608 in July 1981, and then recovered slowly over the following year. The overall female share of employment was 44 .9 per cent in December 1980 . 8 By July 1981 this had fallen to 34 per cent, but with re-hirings at the end of the year, women's share of employment rose up to 39 .8 per cent by December 1981, and by June 1982 it had reached 43 .1 per cent, only a little below the December 1980 figure . This cyclical movement of female and male participation was the result of two factors . Firstly, as was seen above, male workers were kept on in greater numbers than women in the course of 1981 . In part this was due to the concentration of men in the sections of the plant less affected by the cut-backs, such as the offices and the maintenance departments, but it was also the result of heavier sackings of women in

Capital & Class

56 production, as was seen above. In 1982, when sales increased again, both effects were reversed . Secondly, in spite of the cut-backs and in spite of the existence of widespread male unemployment at the end of the year when the firm was rehiring workers, no attempt was made to change the existing sexual division of labour . Throughout the period studied, in fact, there was no evidence of any shifting of male workers into female sections of the plant, or vice versa, and no cases of men being employed to do the kinds of work previously performed by female employees (or vice versa) Restructuring of the labour force Management's unwillingness to alter the sexual division of labour in the crisis did not, however, rule out other forms of restructuring of the labour force . During the process of dismissals and re-hirings, the firm did, in fact, implement a certain restructuring of the labour force, more so in the case of women than men . Management was extremely selective in its rehiring of workers dismissed in 1981 . By comparing the names of workers employed in December 1980 and June 1982 with the list of those workers dismissed in 1981, it was possible to track down most of the workers who had been dismissed and then re-hired .' Generally speaking, the first women and men to be taken on after October 1981 had been employed previously by the company . Once management had re-hired the few workers it wished to take back, further hirings were of people who had never previously worked in the plant. Overall, 24 per cent of the men and 35 per cent of the women hired between November 1981 and June 1982 were rehired after having been dismissed in the first half of 1981, and for every worker rehired there were another six who did not return to the plant . By sacking the `problem' workers and selectively re-hiring only the most

compliant and able of those dismissed, management improved the quality, submissiveness, and cooperation of the workforce . The crisis itself was a major management weapon . Even for those who had not been unemployed or had not searched for a job in difficult conditions, the threat of the sack weighed heavily on the mind in 1982 . Management were in no doubt that a drastic change had taken place in the behaviour and attitudes of both male and female production workers in the plant . They referred to the decline in disciplinary problems in the plant and the willingness of workers to cooperate with management in order to protect their jobs . One manager (in a male production department) talked of the workers being `rather oppressed' by the crisis and the resulting insecurity . The crisis permitted an increase in social control through the direct threat of further sackings and through this an intensification of work. In interviews with female workers it was mentioned that low output and frequent visits to the toilet could be factors that would weigh against workers when selection for future rounds of dismissals was carried out . In the case of women workers, one further factor was noted by managers . The firm decided to take advantage of the high level of unemployment in 1982 to raise the eudcational standards required for assembly workers. The firm tried to hire women with a full eight years education (in some cases twelve years) and this put pressure on the older, less educated women in the plant. The newcomers were willing to work at a faster pace and could pick up the jobs with greater ease . They were the obvious candidates for promotion . This pressure was reinforced by the practice of rehiring at the level of basic-rate assemblers women who had previously been employed as higher-grade coil-winders and calibrators . Management deliberately put

Women workers in Brazil

these workers at the bottom of the pay scale again `in order to stimulate competition for promotion', according to one manager ." This kind of manipulation was not noticeable in the male sections of the plant, where rehired workers returned to the occupations they had previously held . In conclusion, it should be noted that the restructuring of the female labour force did not include a systematic weeding out of married women or female parents and their replacement by younger female workers . Partly as a result of the slightly greater stability of female parents in the period of mass sackings and partly because a number of women working in the plant had children in 1981 and 1982, the proportion of women in production and quality control with children under the age of 14 actually rose from 16 .6 per cent at the end of 1980, to 21 .2 per cent in June 1982 . Although only 10 per cent of the female workers hired after October 1981 were parents, many women employed in production and quality control in June 1982 had entered the plant without children and then had children afterwards . 40 per cent of all mothers in the plant had entered it without children ." The firm studied did not seem to be concerned about this, and the degree of discrimination against women with children did not appear to have increased as a result of the greater ease of hiring workers after the crisis had begun . Conclusion At the beginning of the paper a number of arguments concerning the impact of the crisis on female employment were outlined . The case study sheds light on some of the issues raised by such arguments . Firstly, the sexual division of labour in the plant was very pronounced and pervasive . Even in a factory with a mixed production labour force, women and men were divided by department and occupation . This division structured management

decisions about sackings . Management 57 did not attempt to alter the sexual division of labour, either at the time of the mass sackings or in the subsequent period of rehiring, and therefore few direct choices between men and women workers were actually made, either during the period of sackings or in the subsequent period of rehirings . To this extent, women were `protected' by the sexual division of labour. Secondly, in spite of this, management was able to adopt criteria for dismissal which emphasised the 'breadwinning' role of men with families and gave less importance to the earnings of women and unmarried men . The firm stabilised the male parents . The greater experience and skill of male parents does not seem to be sufficient to explain their greater stability . It also seems to have been the case that male workers were retained by management by various devices - such as finding odd jobs for them to do - and this must have resulted in a higher rate of stability than would otherwise have been the case. Thirdly, the case study shows that management discriminated against women workers in the period of rehiring, taking experienced women workers on as unskilled operatives, while rehiring men at their previous occupational classification . Fourthly, the restructuring of the labour force during the crisis did not include any attempt to decrease workers' (and particularly women's) job rights, as has been seen in Europe . In the case of Brazil, these rights are so limited that extra measures are not needed ." Finally, the case study illustrates the pervasiveness and complexities of the division of labour by gender and discrimination against women workers . It should be clear that even if women workers were to be as stable as male workers in a period of crisis, this would not, in itself, be an indication of a decline in discrimination against women workers .

Capital f5 Class 58 Notes 1 See Milkman (1976) for an exposition of this argument . 2 For a summary and analysis of the British experience and the debates surrounding it, see Bruegel, (1979) . 3 The figures cited are for monthly physical production, taken from the Ministry of Labour's Empregos a Salarios, no .2, 1983 . 4 Manaus is not a free trade zone of the type seen in South East Asia . It is a zone which is exempt from duties on imports . Firms import complex parts from abroad and assemble them together with domestically produced components for sale in the internal market . 5 The other 500 workers were found in offices and in non-production activities such as toolroom, maintenance, stores and quality control . 6 These calculations refer to hourly-paid production workers only, excluding chargehands, and excluding those workers who left at their own request during 1981 . Therefore, a stability rate of, for example, 67 per cent means that of the total number of workers in that group employed in December 1980 who either retained their employment in 1981 or were sacked by the company, 67 per cent stayed in the company. A stability rate of 20 per cent, therefore, would indicate that for each worker who stayed in the company, four were dismissed . 7 This is the opposite effect to that of subcontracting, where firms cut back on work contracted out to other firms in order to protect their own workers . 8 Figures for all employees in the factory, except apprentices . The figures have been calculated on the assumption that all males under the age of 18 years were apprentices . 9 This matching of names is subject to error . Although the complexity of Brazilian names means that few workers have identical names only two identical names among the 1093 workers registered in December 1980 were found - it is possible that some workers rehired in other departments have been missed . 10 This policy was not found in other firms .

Whereas the firm studied was similar to two others mentioned earlier in the text in most respects, their rehiring policies were different . The other two firms claimed to have rehired women workers at their previous position in the hierarchy, so that they were taken on at the wage they would have been receiving had they not been dismissed . I 1 This information is taken from the dates of birth of children, as given in interviews and in Personnel Department records . If a woman lied about having children on entry to the firm and then later admitted the fact (as seems to happen) this would be taken to be a case of a woman having children on entry. 12 In one firm studied by the authors, management had started to use temporary workers contracted from agencies for unskilled production work. Such workers were either taken on permanently at the end of two months or not recontracted. This and other measures aimed at avoiding the minimal expenses incurred in terminating contracts are more often seen in the construction industry . Bibliography Bruegal, Irene (1979) . `Women as a Reserve Army of Labour : a Note on Recent British Experience,' Feminist Review, 3 . Gadry-Turpin, Nicole (1982) . Travail Feminin, Travail Masculin . Paris . Editions Sociales . Huet, Maryse (1982) . `La Progression de l'Activite Feminine est-elle Irreversible?,' Economie et Statistique, 145 . Humphries, Jane (1983) . `The "Emancipation" of Women in the 1970s and 1980s : From the Latent to the Floating,' Capital and Class, 20 . Milkman, Ruth (1983) . `Female Factory Labour and Industrial Structure: Control and Conflict over "Women's Place" in Auto and Electrical Manufacturing,' Politics and Society, 12(2) . Ruberry, Jill and Roger Tarling (1982). `Women in the Recession,' in D . Currie and M . Sawyer (eds), Socialist Economic Review 1982. London, Merlin Press .

Riccardo Bellofiore

Marx after Schumpeter Contemporary marxist economic theory has repeatedly raised the issues of structural change and the nature of money. The economic system of Joseph Schumpeter is a key precedent in the integration of exactly those two themes: Schumpeter provides a theory of endogenous structural economic development tied to a theory of bank 60 credit and finance. This paper explores the lessons that can be drawn for Marxist political economy.

• AT FIRST sight Marxism would appear to be in good health, but

in fact it is now undergoing a sort of impasse. This is certainly true of the many tendencies within Marxism breaking away from Marx's thought, such as those relating Marx to Ricardo or Sraffa or Kalecki . But it is also true for the heterodox current which, returning to Marx and opposing him to Marxism, has been able to criticize the latter, without however overcoming the inherent difficulties in Marx's own system. My argument is that a redefinition of the object itself of the critique of political economy is the only way out . In the following pages I shall give some elements supporting my view . First, I shall underline the connection between recent debates on Marx and the controversies occurring during the Second International . I shall illustrate how they discussed the same topics as well as misreading Marx in a similar way . Second, I shall recall Rubin's and Grossmann's heterodox and provocative works . While they rightly stressed the gap between Marx and Ricardo on two distinctive features, i .e . the monetary nature of capitalist economy (Rubin) and structural change (Grossmann), they did not build a coherent theory of the capitalist mode of production linking money to accumulation. In other words, they believe Marx to be irreducible to the widespread versions of Marxism both as far as the analysis of synchronic cohesion and of diachronic change are concerned, but these two dimensions are never really integrated . Third, and as a

Marx after Schumpeter consequence of the above, I shall propose to read Marx after Schumpeter, for the latter's theory is constructed precisely on the essential role of credit-money in capitalism as a structurally unstable process . Lastly, I shall try to show that the difficulties met by the `critical' or heterodox current in Marxian theory can be traced back to Marx's writings . During the '60s and the '70s there was a great revival of interest in The marxist the Marxian theory . To find a comparable debate we have to go debate : prices back to the querelle which took place at the turn of this century . As a and anarchy matter of fact, this relationship between the two periods goes far beyond formal resemblances such as the vehemence of the discussion or the fact that in both cases the controversies included nonMarxists as well . Such features certainly distinguish the period I am considering from the long intervening phase when the interest in Marx was limited to a restricted and isolated group in the economic profession . However, the distinctive feature I would like to emphasize is another one, namely the identity of the topics then and now under discussion, and how the outcome of the second debate stems from the first one .

Value theory as a theory of `equilibrium' relative prices The issues were and are mainly the labour theory of value as a theory of equilibrium relative prices and the theory of accumulation and crises based on the reproduction schemes . As far as value theory is concerned, Bohm-Bawerk's attack on the `clear contradiction between the system and the facts' can be considered the starting point of the debate . The contradiction found by Bohm-Bawerk was between the labour theory of value as a theory of exploitation and as a theory of production prices . As is well known, this contradiction can be detected - according to Bohm in the fact that the determination of relative prices as ratios of the labour values of the commodities is inconsistent with the requirement that in the different sectors capitalists gain an equal rate of profit through competition . Thus, when Marx determined the prices of production in Vol .111 of Capital (with the same rate of profit and the same rate of surplus value in all sectors, but with different organic composition), he must abandon his labour theory of value presented in Vol .I . In my view, Hilferding's reply accepted some key points of Bohm's reasoning. He agreed, first, that the main task of value theory is to explain `equilibrium' relative prices, and, second, that capitalist competition manifests itself in the equality of the rate of profit among industries . Hilferding's proposal was to show that, contrary to Bohm's argument, prices (of production) are different from values, and can be deduced from them. Moreover, he tried to ground Marx's value theory in his

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materialist conception of history : labour is value because in capitalism the relations of production can be regulated only through the functioning of the market. In fact, Hilferding maintained (in his Finance Capital) that the role of value theory is to show the existence of a quantitative regulating principle in the unplanned capitalist market system. The law of the prices of production, which has as its starting point Marx's value theory, is thus the first step toward an understanding of capitalist production and accumulation. On this analysis, value theory is intended only as a theory of `equilibrium' prices and excludes the anarchy of capitalism . This anarchy can be seen in two ways : either it is the chaotic appearance of the `laws of motion' of capitalism (eg . the falling rate of profit) ; or anarchy is the basis of the cyclical interruption, and eventual crash, of the capitalist process and thus represents a break-down of the law of value . In this response to Bohm's critique of Marx it is possible to identify many distinctive features of the debates on Marx's theory . In fact, most of the subsequent developments of value theory remained on the terrain of Bohm and Hilferding's readings . Starting from the conception that value theory is identical to (Bohm), or is the basis of (Hilferding), a theory of `equilibrium' relative prices, many theorists argued that prices of production are the center of gravitation of market prices, and that only on this basis can an analysis of capitalist accumulation be carried out (as I shall try to show below, a Schumpeterian reading of Marx breaks with this position, as well as with the connected reading of competition as merely a tendency towards a uniform rate of profit between industries) . As a consequence, it is not surprising that, apart from few technicalities, the `transformation problem' was already (dis)solved by Tugan-Baranowsky, Bortkiewicz and Dmitriev at the turn of the century . This solution was taken up again and completed by Seton and Sraffa . However, by reducing Marx's abstract labour to Ricardo's embodied labour (as in Bohm and Hilferding), this tradition arrived at the paradoxical result that the equilibrium relative prices can be calculated without necessarily using exchange values as a starting point . In other words, if the Marxian labour theory of value is intended as a theory of natural prices belonging to the Classical paradigm it contradicts itself or can be considered redundant . In a certain sense this conclusion was already implicit in the way in which Marx himself laid out the problem in the third volume of Capital, i .e . as a mathematical derivation of prices from exchange values . On this basis, a growing number of authors (Garegnani and Steedman are the most representative) suggest the need to abandon the labour theory of value, considering it merely a historical precedent of Sraffa's

Marx after Schumpeter solution, i .e . of an `objective' theory of equilibrium exchange ratios . This theory is seen as maintaining the critical character of the Marxian framework because it underscores the conflict between workers and capitalists in the inverse relationship between wages and profits . In fact, as De Vroey has shown, the opposition between the traditional version of Marx's labour theory of value peculiar to Anglo-Saxon Marxism for a long time (Dobb, Sweezy, Meek) and the Neo-Ricardian theory is less relevant than it may appear from the disputes between those defending an embodied labour theory ofvalue and those proposing its rejection . Both share a technological paradigm as well as an eqilibrium framework and this explains - as I shall try to show - the central role of pricesin the interpretation of the capitalist process . Consequently, the switching from an embodied labour theory of value to the Sraffian theory of prices is only a shift within the same paradigm. Equilibrium versus crisis in growth theory I now turn to the theory of reproduction and crisis . As said above, Hilferding's reply to Bohm is typical of the Second International's reading of Marxist value theory as an equilibrium theory, and also of the reductive interpretation of disequilibrium as crisis . TI • ?re is thus inevitably a split between the thinkers who stress equilibrium and those who stress crisis as the `normal' feature of capitalist dynamics (as I shall try to show, a Schumpeterian reading of Marx underlines that disequilibrium is a structural component of capitalist accumulation, and cannot merely be seen as crisis) . On the one hand, there were those maintaining the theoretical possibility of an equilibrium growth independent of the level of consumption demand . Crises were thus only considered as temporary disproportionalities . On the other hand, others saw the cause of the impossibility of a `pure' capitalist system and the root of an unavoidable crash of actual capitalism in a general glut of commodities due to a fall in the wage share . Both sides of the debate referred to the reproduction schemes in the second volume of Capital. The generally accepted opinion - according to which the role of these schemes was to give account of the actual accumulation process in capitalism - is definitely wrong (see the considerations by Rosdolsky and Shaikh) . In fact, the purpose of these schemes was to allow for a critique of Ricardo and Say on the one hand (as theorists of the harmony) and of Malthus and Sismondi on the other (as theorists of the impossibiity of a pure capitalist process) . So the debate inside Marxism on accumulation reproduced the same mistakes which Marx himself had fought in the economic thought which preceded him . The crisis theory debate within the Second International can be compared to the debate around Neo-Keynesian growth

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theory. The aim of Neo-Keynesian comparative statics is not to show how some hypothetical economy could grow but rather to account for the erratic path of actual industrial economies (Eichner-Kregel) . In other words, Harrod-Domar models may be taken not only as pictures of the conditions of equilibrium growth but also as proof that these conditions will only be met by chance . In this approach the equilibrium rate of growth is determined by balance between the growth of productive capacity and the level of savings : the neo-Keynesian growth theorists neglect innovation as a distinctive feature of capitalism . Marxists who identify disequilibrium with crisis repeat the errors of the neo-Keynesians . Marx's statement that equilibrium in capitalism is mere chance is reduced to the thesis that the anarchical nature of the capitalist mode of production makes full employment fortuitous . A good example of this link between Marxian and Neo-Keynesian theories is the essay by Kalecki on reproduction schemes and modern economics (Kalecki, 1968, p .334) . Kalecki suggests that the schemes be interpreted as showing the improbability of full resource utilisation in the long run : Marx's `laws of motion' disappear, giving way to a keynesization of Marx (moreover, this is an impoverished Keynesianism) which has already been criticized by Schumpeter . Thus, in modern economic theory, as in the Marxism of the Second International, there is a split between the theory of equilibrium growth (which Neo-Classical theorists will develop, in opposition to Neo-Keynesian contributions), and the theory of the dynamic instability of capitalism, which is inherent in the model if no mechanism of adjustment is supposed to exist between equilibrium and disequilibrium (=crisis) . However, no theory of how capitalism actually works can be derived from the above . A consequence of the discussion so far is that since both Neo-Classical and Neo-Keynesian growth theories are unable to explain the actual dynamics of the internal transformation of the capitalist system, Marxist theories of accumulation which appeal to the anarchy of capitalism and identify disequilibrium with crisis would face similar difficulties . On the other hand, the crisis theory seems to rely exclusively on the law of the tendency of the rate of profit to fall or the conflict over distribution between workers and capitalists, if one excludes anarchy or underconsumptionism . However, the law of the tendency of the rate of profit to fall is incorrect even remaining within the traditional version of the labour theory of value (for an increase in the organic composition of capital may lead to an increase in the rate of surplus value and a fall in the value composition of capital) ; whereas the `wage explosion' explanation of crisis belongs more to Ricardian or NeoRicardian interpretations than to the Marxian one .



Marx after Schumpeter In the last twenty years there have been some dissenters on the Two heterodox positions recalled in section 2 . In Italy we have Colletti, Napoleoni, readings of Marx: Lunghini, in France De Brunhoff, Aglietta, Lipietz, Benetti, Rubin and Cartelier, in Belgium De Vroey, and in Germany Rosdosky, Grossmann Backhaus, Reichelt, Schmidt . However, these critical stands are increasingly present in the Anglo-Saxon world too, with Shaikh, Weeks, Kay, Pilling, Gerstein, Fine, Harris, Himmelweit, Mohun, and others . In this section I do not intend to review the (often differentiated) arguments advanced by the above mentioned authors . I believe would be more useful to refer to the original sources of this re-reading of Marx, that is to say Rubin's and Grossmann's interpretations . During the twenties and thirties the two authors had already been attacking the limits in the orthodox Marxism we have seen reproduced in or conditioning subsequent debates . Strong and weak points of the critical stream in Marxian theory will be singled out more clearly . Abstract labour and value in Marx Isaac I . Rubin is the author of an important History of Economic Thought and of the fundamental Essays on Marx's Theory of Value (which should be read with the integrations and corrections that can be found in Rubin's answer to his critics, Abstract labour and value in Marx's system) . The core of Rubin's reasoning is that the notion of abstract labour cannot be reduced to the concept of physiologically equal labour nor to that of social labour tout court. In pre-capitalist modes of production labour is immediately social and only derivatively subjected to a process of equalization . In capitalism, on the contrary, the social nature of labour is not given in advance, but rather labour is made social through the equalization of independent, private labours connected to each other in exchange. This necessarily happens in an indirect way : two commodities express their common nature of values, and the abstraction from their use values, only through the exchange with a particular commodity acting as general equivalent . The concrete labour which produces commodity-money thus becomes a manifestation of abstract universal labour . Accordingly, as Rubin himself stresses, `the concept of abstract labour leads unconditionally to the concept of money also, and from the Marxian standpoint that is entirely consistent' (Rubin 1978 : 118) . In Rubin's work one can find a clear formulation of problems that will trouble the subsequent discussion . I shall recall three points. First, Rubin highlights the fact that the contradiction between the deduction of abstract labour from exchange and from production is merely apparent . In fact, exchange is considered by Marx both as a separate phase of the process of reproduction and as the form of the whole process (which can in fact be defined as

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production for exchange) . Only in the latter sense is it correct to say that abstract labour is produced in the act of exchange . When exchange has become general, i.e . in capitalism, labour performed during the production process is potential abstract labour . Second, Rubin shows that Marx's framework breaks away from Ricardo's theory on the very concept of labour as the substance of value . Ricardo's value theory is in fact an ambiguous one, as revealed by subsequent theoretical developments . Sraffa's interpretation demonstrates that Ricardo's labour theory of value is functional to the search of a common (and invariable) standard needed for an `objective' determination of natural prices and the rate of profits . This standard and the system of prices of production may be obtained without the labour theory of value . But, as Rubin's interpretation also demonstrates, the reference to labour in Ricardo's value theory underscores the view that the `difficulty of production' is the cause of changes in the exchange ratios and regulates the reproduction of the system . Thus one can deny (as Rubin does) the presence in Ricardo of a search for an invariable standard of value . The contradiction between Sraffa's and Rubin's readings as well as their respective omissions (including Rubin's omission of the role of an invariable standard of value in Ricardo) are the consequence of the contradictory nature of Ricardo's theory itself. Rubin's unilateral interpretation is thus an ante litteram critique of the similarly unilateral interpretation of Ricardo given by Sraffa. The thread linking Marx and Ricardo is, in fact, the absolute nature of value (Rubin's Ricardo), more than the problem of relative prices (Sraffa's Ricardo) . But it is a peculiar continuity indeed, because Marx does not adopt Ricardo's notion of absolute value . The third point I want to recall is Rubin's argument about the fundamental role of Hegel's Logic in the definition of Marx's `abstract universal' labour. Briefly, Rubin's accomplishments may be summarized in the rupture between the Marxian notion of abstract labour and Ricardo's embodied labour and as a result the essential presence of money in the Marxian system as against Ricardo's picture of capitalism as a barter economy . In this way - though remaining within a reading of Marx's value theory as pertinent to the synchronic cohesion in the capitalist mode of production - Rubin is able to free it from its total identification with relative price theory . Heynrick Grossmann's contribution is equally relevant, interpreting Marx's value theory as a theory of diachronic qualitative change in capitalism . Accumulation as structural change In Marx, Classical Political Economy and the Problem of

Marx after Schumpeter

Dynamics Grossmann criticizes the static conception of market and competition characteristic of the Neo-Classics but also of the Classics . `All of their categories are based on the concept of an equilibrium in which "natural price" (value) asserts itself as an ideal resting point of economic activity, around which market price oscillates' (Grossmann 1977b : 67) . Accordingly, both for the NeoClassics and the Classics, `a consistent application of the arguments of equilibrium theory (which they use) can only explain such disruptions of the equilibrium as being externally produced, i .e . by changes in what is economically given . As far as the theories of equilibrium are concerned the economy will always tend in one direction following changes in these givens : by adjustment - i .e . a tendency towards the creation of a new equilibrium . How crisis can arise in such a system is difficult to see' (p.68) . Hence the inability to explain the structural change genetically . Marx's theory may offer a way out from this theoretical blind alley, but on condition that the reading of Marx stresses the original feature of his labour theory of value, i .e . the twofold character of labour in capitalism, both concrete labour (a 'purposive, productive activity' for the appropriation of the natural world) and abstract labour . Owing to this distinctive element of his theory Marx is able to take value relations as well as use value relations into account in his analysis . Hence, he is able to locate within production the source of `a permanent hunt for extra profit, a continual attempt to secure a privileged island, if only temporary, of surplus profit for the individual capitalist's own plant by the revolutionising of techniques' (p .86) . Grossmann is thus one of the few interpreters who shows, though only tentatively, how Marx based the endogenous nature of technical change in his analysis of the labour process. Consequently Grossmann reads Chapters 14 and 14 of Vol .I of Capital as theoretical and not only historicaldescriptive chapters . It follows that Marxian accumulation is essentially un-balanced and that there is an interaction between trend and cycle in Marx, for he `tried to capture not only the course of the economic cycle, but also the structural changes in the overall system which were its product' (p .87) . Taking Grossmann's reasoning a step forward from where he left it, one can underscore that in Marx's value theory the substance of value is nothing but the use value of labour-power, which is independent from the exchange value of labour-power, i .e. from the quantity of labour embodiedin the commodities acquired by wages . The use value of labour-power is inseparable from the seller, i .e . from the worker . The effective amount of labour-time spent by the worker, i .e . the actual obtainment of the use value of the commodity purchased from the buyer (the capitalist), depends on class confrontation in the workplace . Valoriz-

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ation, intra-capitalist competition and accumulation depend on the outcome of the latter . Grossmann suggests that the paradigm in which the equilibrium exchange ratios are seen as centers of gravity should be abandoned in favour of the paradigm in which accumulation is seen as unbalanced growth due to endogenous waves of innovations and the incessant search for extra-profits . Thanks to Rubin's and Grossmann's interpretation of Marxian value theory the theoretical difficulties of traditional Marxism can be overcome, because both break with the view of Marx as the last of the Classics . At the same time new problems arise . In fact, the two features present in the Marxian framework that Rubin and Grossmann underscore (capitalism as a monetary economy, and the constant revolutions of the means of production and social relations) had never been adequately put together by Marxists or by Marx himself. In the following section I shall compare Marx to Schumpeter as a political economist of this century who distinctly emphasises the endogenous nature both of innovation and of the money supply . Marx after Schumpeter

The interest in a critical appraisal of Schumpeter's model arises from the above mentioned difficulties in binding together the essential role of money and structural change in the Marxian framework . Schumpeter is part of a heterodox current among monetary theorists (started by Wicksell and including Robertson and Keynes), which, like Marx, sees the capitalist process as a monetary circuit . The distinctive feature of Schumpeter's contribution is precisely that he highlights the strong link existing between the endogenous nature of innovation and of the monetary system .

Innovation and credit creation in Schumpeter First of all, the static `circular flow' as well as capitalist development is depicted by Schumpeter as a monetary circuit . In the static case the results obtained are similar to those that can be obtained by an analysis in terms of general economic equilibrium . However, there are two important differences : for Schumpeter the interest rate is zero ; and the analysis is not structured in terms of simultaneous exchanges but in terms of a synchronization of the process . Even taking into account these non-Neo-Classical features of Schumpeter's circular flow, in the latter money is still a veil and the economy is substantially a barter one . On the other hand, in the dynamic case of economic development, ex novo credit creation is essential, and so is the cyclical succession of phases in the process occurring in historical time . The reason is that in the stationary circular flow interest, profits and savings are zero, and

Marx after Schumpeter

there is a full utilization of productive resources . Therefore, the only means to finance new combinations is represented by banks . Accordingly, investments determine savings and `real' analysis of capitalist development is inseparable from `monetary' processes . Innovation, i .e . the introduction of a new production function, is an internal factor of change . In fact, the possibility of new combinations is technically ever-present in the system . In the circular flow (which is an aspect of the dynamic economy and not merely an ideal point of reference) an estimation of costs and proceeds of potential innovations can be made . But when the discontinuous flow of actual innovations gives rise to a general disequilibrium, this calculation becomes impossible, entrepreneurial activity comes to a halt, and recession onsets . One may wonder how - according to Schumpeter - the technical possibilities of new combinations are in fact implemented. The answer lies in the thesis that the main motivation behind entrepreneurial action is the upward mobility that it guarantees, giving the innovators and their families access into the capitalist class . Structural change is thus founded on the competition between entrepreneurs and traditional managers of `old' firms . The return to an equilibrium position is a necessary but not sufficient condition for a renewal of entrepreneurial action (Schumpeter's cycle is not a selfgenerating one), because it must also be accompanied by the permanence of a social and cultural environment favourable to capitalist accumulation . Credit-money enters the circuit due to an entrepreneurial demand for finance . Credit is the lever of a redistribution of resources favouring innovators thanks to a squeeze of the purchasing power of the managers caused by the new expenditure (since there is as yet no growth in the supply of output) . The squeeze of `old' purchasing power may be followed by households' forced saving. The quantity of money (including credit) changes with the shift in entrepreneurial behaviour (though selectively), which means it is endogenous . It also necessarily enters the system in unequal proportions, and gives rise to an alteration of the price structure (during and after the process of innovation-recession) as well as of absolute prices . A radical critique of traditional monetary theory is implicit in the preceding statement : banks follow different rules of behaviour from firms, there is no `dichotomy' and no `neutrality' of money even in the long period (which is simply reduced to a succession of cyclical periods) . Credit is the essential vehicle of a qualitative and irreversible change in the productive and social structure of the system . A briefcomparison with Marx's analysis

I can now briefly compare Marx to Schumpeter. Both see

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technical change as endogenous in capitalism due to an argument that links it to classes or fractions of class in conflict . From this point of view, Schumpeter's theory can be seen as a coherent bourgeois answer to Marxian theory: intra-capitalist competition entirely explains structural change, whereas for Marx innovation has its roots in capital-labour struggle in the immediate process of production . Both Marx and Schumpeter depict competition as a dynamic process of differentiation and struggle among firms rather than the static competition of Classical or Neo-Classical theory (adjustment and tendency to equal profit rates), although for Marx intra-capitalist competition (among and within sectors) can theoretically be traced back to capital's hunger for surplus labour . This brief comparison between Schumpeter and Marx can support three arguments useful for a reconstruction of Marxian critique of political economy : (i) development according to Schumpeter is radically different from mere quantitative growth, likewise Marxian accumulation is not reducible to extended reproduction . In both cases this is so because of the central role in the two theoretical frameworks of disequilibrium and dynamic competition; (ii) for Marx the labour theory of value is not only a theory of relative prices in given conditions, but also and foremost a theory of how these conditions change . In a similar way, in Schumpeter's model the role of prices as optimal resource allocators is drastically reduced, and capitalism is seen as an evolutionary process ; (iii) the weak point in Marxian theory is the missing link between credit creation (i .e . money as essentially signmoney) and the financing of innovations (i .e . the revolutions in the production methods), whereas this is the strong point in Schumpeter's theory. Before embarking in a change in Marxian theory following Schumpeterian lines, we must look more closely at the roots of the difficulties in Marx's own writings . Where we can go from here

In this section I shall try to offer some insights into the analytical consequences that can be drawn from the arguments developed so far . They refer, firstly, to the impact of value theory read as a theory of endogenous innovation on the `center of gravitation' approach, and on traditional Marxist analysis of the relationship between labour market, wage dynamics and technical change ; secondly, to the problems faced by the Marxian theory of money.

A critique of the `center of gravitation' notion of the prices of production This paper contends that value theory is a macroeconomic social analysis . From this perspective, surplus value must originate in the overall exchange between variable capital and labour power (because intra-sectoral exchanges among firms can give individual

Marx after Schumpeter

firms gains only at the expense of other firms) . Furthermore surplus value can be increased through the capitalist's initiative at the point of production . In this approach competition must not only be seen as the tendency to establish a uniform rate of profit among sectors, but also and foremost as the drive to ensure extra-profits through changes in the productive conditions inside each sector . In this way, as I have shown, Marx detaches himself from the Classical notion of competition, as Schumpeter from the Neo-Classical one . What I want to underline is that Marx's theory opens the way to a fundamental critique of the thesis that sees the center of gravity of market prices in prices of production . In fact, in Marx innovation is a process continuous in the economy as a whole, but discontinuous within each sector . The introduction of new methods of production within one sector presupposes the previous establishment of a market (or social) value, because for Marx the extra-surplus value, and thus the extra-profit, is given by the difference between the market value and the individual value . If this is correct, there must certainly be in the industry a cyclical slowing down of the innovation process, allowing the emerging of the new social (market) value . However, nothing in Marx's argument (unlike in Schumpeter's theory) supports the view that the process of innovation is synchronic in the whole economy . Therefore, while innovation is slowing down in one sector, it can (and normally does) proceed in another. According to this approach, prices of production can be defined (relative to different sets of data), but they do not act as `concrete' centers of gravitation, because equilibrium is seen merely as an ideal point of reference and not as a point of convergence . But even if one adopts an interpretation of Marx more akin to Schumpeterian thought, and sees in the capitalist process a cycle of successive phases of entrepreneurial action and of the tendency towards a uniform rate of profit (so that the initiation of, and the halt to, innovation spread through the entire economy), the gravitational paradigm is not resurrected . In this case, starting with a given equilibrium structure of production, the capitalistentrepreneur introducing changes in the methods of production gains an extra-surplus value, even if he sells his commodity below social value (but above its individual value) . An extra surplus profit corresponds to the extra-surplus value, because prices of production are not changed, the bulk of commodities being produced according to old methods . But the reduction in cost-price imposes the new method on the other capitalists within industry . Thus, intra-industry competition leads to a fall in social value and to the extraction of relative surplus value . When changes in the methods of production are temporarily halted and the economic system

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adapts to the new conditions, the generalization of innovation and the process of imitation have produced a new structure of production and a different system of prices in production . Though, in this model, equilibrium is an actual state of the economy at some moment in the cycle, it must nonetheless be viewed as determined by the disequilibrium phase of the capitalist process, and the latter is explained by Marx with value theory as a theory of endogenous technical change . Therefore, the `center of gravitation' approach fails in that it only considers one tendency (toward the uniform rate of profit among industries) and neglects the other (dynamic competition), which is as constitutive of the capitalist mode of production as the former. Moreover, the center of gravitation shifts with the same process of gravitation, undermining the internal consistency of the approach . Thus, the fact that the labour theory of value plays an essential role in explaining structural change provides an answer to those who consider such a theory as redundant, and makes it possible to overcome the difficulties of the `center of gravitation' approach . If my analysis is correct another result follows . According to a widespread reading of Marx (which has its peaks in Dobb and Sweezy), innovation is introduced as a reaction to a squeeze in the industrial reserve army that pulls upward real wages and, productivity being given, the wage share . Although this may happen, the sequence moves the other way around, from innovation (rooted in the class struggle developing in the labour process), to productivity, to higher real wage, to the industrial reserve army .

Where the difficulty lies : Marx's theory ofmoney Many authors in the heterodox stream of Marxian theory think a theory of money as commodity-money is essential to the abstract labour theory of value . In fact, as I have pointed out, it is an issue Rubin has already underscored . I do not want to discuss this matter in detail here, but I shall rather draw from it a consequence and a suggestion for further research . The consequence I wish to emphasize is that there is a contradiction between two points in my reconstruction of the critique of political economy . On one side, I said that commoditymoney is essential to the way Marx built his labour theory of value . On the other, I stressed that credit-money is essential for starting the economic circuit and for accumulation . In my opinion, a way out of this dilemma requires going back to the definition itself of the problem . Marx's labour theory of value has both a synchronic and a dyachronic level of analysis . This means it is designed to explain capitalist development (with its recurring phases of disequilibrium and equilibrium, at least within the sector) as well as crises . Marxian theory of commodity

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money, on the other hand, seems to be constructed only at the synchronic level . Commodity money is introduced in the first pages of Capital at a level of analysis which considers the commodity but before the introduction of the notion of capital, showing the dialectical opposition of equilibrium and crisis in a market society. The contradiction between commodities and money, which manifests itself with the crisis, is nothing but the external form of expression of an internal opposition within the commodity itself, of value against use value . Hence the possibility (though without content, at this point of the analysis) of the split between buying and selling . This is the foundation of the argument according to which capitalist crisis is the return of capitalism to its monetary roots (to commodity-money as the general equivalent) that is present in all three volumes of Capital. Suggestions for further research emerge from what I have just said . The essentiality of commodity-money in Marx derives from the fact that in his theory the introduction of money is first aimed at underlining the opposition equilibrium-crisis at a synchronic level, before taking valorization and accumulation into account. This first step conditions all further development in Capital's monetary theory . In Schumpeter, the absence of commodity-money as an essential feature of his theory is parallel to the absence of a notion of `crisis' similar to the Marxian one . An important task is to verify (probably through a comparison with Keynes' General theory) whether commodity-money is really essential to an analysis of crises within the Marxian framework, or whether the abstract labour theory of value can be reformulated without commodity-money . In either case, the link between (credit) money and accumulation must be introduced into Marxian theory .

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I wish to thank V. Franzinetti and V. Bia for their help in the translation from the Italian manuscript.

Bellifiore, Riccardo. 1983 . Money and development in Schumpeter's analysis (mimeo ; Review ofRadical Political Economics) von Bohm-Bawerk, E . 1975 . Karl Marx and the Close ofhis System London ; Merlin Press Deleplace, Ghislain . 1984. The Theory of Competition in Classical and Marxian Economics . Paper presented to the conference on `gravitation', March Eichner, A . and Kregel, J . 1975 . An Essay on Post-Keynesian Theory : A New Paradigm in Economics . Journal ofEconomic Literature Garagnani, Pierangelo . 1981 . Marx egli economisti classici. Torino : Einaudi Garegnani, Pierangelo . 1983 . On the Labour Theory of Value in Marx and in the Marxist Tradition . Paper presented to Paris Colloque Marx, 6-9 December

References

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Graziani, Augusto . 1982. L'analisi marxista e la struttura del capitalismo modemo . In AA.W . Storia del marxismo, vol .4° . Torino : Einaudi Grossmann, Henryk. 1977a . Marx, Classical Political Economy and the Problem of Dynamics . Part 1 . Capital and Class . Summer Grossmann, Henryk. 1977b . Idem . Part 2 . Capital and Class, Autumn. Hilferding, Rudolf. 1975 . Bohm-Bawerk's Criticism of Marx. In von Bohm-Bawerk, E. 1975 . Hilferding, Rudolf. 1961 . II CapitaleFinanziario. Feltrinelli; Milano Kalecki, Michail. 1968 . Le equazioni della riproduzione di Marx e 1'economia moderna . In Marx vivo . Milano : Mondadori . Lipietz, Alain. 1982 . Credit Money: A Condition Permitting Inflationary Crisis. Review ofRadical Political Economics . Summer Lipietz, Alain. 1983 . Le debat sur la valeur : bilan partiel et perspectives partiales. Paper presented to Paris ColloqueMarx, 6-9 December Marx, Karl . Capital. London: Penguin Messori, Marcello. 1983 . Credit et innovation chez Marx, Schumpeter et Keynes . Paper presented at Paris Conference `L'heterodoxie dans la pensee econoique : Marx, Keynes, Schumpeter' . June Rosdolsky, Roman. 1977 . The Making ofMarx's Capital. London : Pluto Press . Rubin, I . 1972 . Essays on Marx's Value Theory . Detroit: Black and Red Rubin, I. 1978 . Abstract Labour and Value in Marx's System . Capital and Class . Summer Rubin, I . 1979 . A History ofEconomic Thought . London : Ink Links Schumpeter, Joseph A. 1934. The Theory of Economic Development. Cambridge, Mass . : Harvard University Press . Schumpeter, 1939 . Business Cycles . New York : Mc-Graw Hill Semmler, Willi . 1983 . Marx and Schumpeter on Competition, Transient Surplus Profit and Technical Change . Paper presented to the conference `L'heterodoxie dans la penseee economique : Marx, Keynes, Schumpeter', June Semmler, Willi . 1984 . On Stability and Instability in Classical Economics . Paper presented to Paris conference on `gravitation', March Sraffa, Piero. 1950 . Introduction . In Ricardo, David . Collected Works . Cambridge : Cambridge University Press . Steedman, Ian . 1977 . Marx after Sraffa . London : New Left Books . De Vroey, Michel . 1982. On the Obsolescence of the Marxian Theory of Value . Capital and Class . Summer. De Vroey, Michel. 1983 . La theorie marxiste de la valeur . Problemes de coherence et de pertinence . Paper presented to Paris Colloque Marx, 6-9 December

David Byrne

Just haad on a minute there a rejection of Andre Gorz's'Farewell to the Working Class' *JACK COMMON (of whom Orwell said he expressed the socialism of the four ale bar) scripted a war-time propaganda film about the return of skilled workers to the shipyards which ended with the launching of a ship to the accompaniment of a voice-over expressing patriotic sentiments. Half-way down the slip-way the frame freezes at the command of the plater's shop-steward : `Just haad on a minute there', so that the film actually concluded with a forcefully expressed polemic about the nature of capitalism's requirements for skilled labour in war-time and an assertion that there was no going back to the 1930s `Its oor turn next' . When I read Gorz's ` . . . marvellous book, Farewell to the Working Class (Offe, 1984: 283), the image of that Geordie plater, the epitome of the class to which Gorz is bidding an explicit `Farewell' and an implicit `good riddance' sprang to mind . If ever there was a case for calling `Just haad on a minute there' it is in relation to the response of the left to this `marvellous book' . This is why I have chosen to call this article a rejection of Andre Gorz. It is not a review or review article (for which see Hymans, 1983 or Lumley, 1983) . Neither is it a refutation, because a proper refutation would require the marshalling of a great deal of evidence, much of which has not been collected .' Rather it is a response which examines the central elements of the book in relation to responses to them, and finds them to be not merely wanting, but dangerous . Jack Common said : `The man who has never admired capi-

Many on the left have welcomed Gorz's book Farewell to the Working Class. This article argues that such enthusiasm is misplaced. Gorz's analysis is seen to rest on a capitallogic approach that denies the possibility of any form of collective proletarian action and hence provides only individualistic solutions . Whilst rejecting Gorz's particular utopia, the article endorses 75 the development of utopian proposals, where these are collective projects aimed at transforming production and reproduction .

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talism does not understand it, and has not the right to disown it' (1932/1980 : 114) . In a way I can summarize the nature of this article by saying that on the evidence of Farewell to the Working Class this statement could be applied to Andre Gorz . I will proceed by outlining the nature of Gorz's position as expressed in Farewell to the Working Class, contrasting this position with one derived from an analysis of crisis, and reviewing the implications of Gorz's ideas in relation to a discussion of contemporary fictional representations of `utopia' . Farewell to class long live the individual

Gorz's book is not so discursive as it seems on first reading . It does deal with a lot of concerns of importance including feminism, ecology and utopia. However it does so around a central theme which is very clearly expressed in one crucial passage : ' . . . (C)apitalist development has produced a working class which, on the whole, is unable to take command of the means of production and whose immediate interests are not consonant with a socialist rationality . . . . Capitalism has called into being a working class (or, more loosely, a mass of wage earners) whose interests, capacities and skills are functional to the existing productive forces, which themselves are functional solely to the rationality of capital' (Gorz 1982 : 15) . The Social Proletariat

This statement has much broader implications than some critics have realized. For example Lumley (1983), in his useful review, associates Gorz's dismissal of the working class as `the principal force of radical transformation in society', his stress on `people's autonomies' and his concept of 'non-class' with `Italian autonomist theories of the operaio socialie' (Lumley 1983 : 3, 7) . I think this is a mis-reading, albeit a very understandable one . On first reading I too thought Gorz was indeed rejecting autonomous workerism, the `politics of Fiat' as they have been identified in the Italian autonomist movement (see Partridge's interview with Negri 1980) in favour of an endorsement of the `social proletariat' as the transformational subject in late twentieth century capitalism . This sort of position has many attractions to elements of the contemporary left, since it has the effect of displacing a group with whom the left intelligentsia, whether reformist or Leninist, have always been uneasy, from stage centre in the project of changing the world . However this is not what Gorz is saying. He replaces the collective subject of the class by the individual subject, albeit aggregated . When Gorz says `Farewell to the Working Class' he means farewell to the proletariat whether industrial and productive or surplus value, or social

Rejection of Gorz and reproductive of labour power, or (as, say, Negri would have it) both . This criticism of Gorz is by no means original . It is clearly expressed by Hirsh (1981), 2 and, interestingly, in a chapter called `What is wrong with Marxism' in Hodgson's recent book on The Democratic Economy . Hodgson, who is Kinnock's economic advisor, makes some useful and informative criticisms of Gorz, to which I shall return . However he endorses Gorz's ' . . . powerful and valid critique of the theory of the proletariat' and sees it as having `serious consequences for marxism as a whole' (Hodgson 1984: 191) . This is written as a preliminary to a discussion which is summarized thus: `It has been asserted in this chapter that classes are not the primary objects of historical analysis : it is structures and systems that are primary . Thus a working class is defined in terms of its socio-economic integument' (Hodgson 1984 : 198) . Hodgson's arguments are subtle, important and not to be lightly dismissed. If I think that they are in the end to be dismissed,' it is in considerable part because they are 'Gorzian' . I introduce them here as an indication of the use being made of Gorz's central idea when it is recognized for what it is and endorsed for what it is . Gorz and the `Capital-Logic'App roach Gorz is actually very explicit about what he is doing . He is not concerned with divisions within the working class, a topic which many of us would agree is crucially important . Rather he examines problems in the relationship between individual and collective consciousness and concludes that collective consciousness is impossible so individual consciousness is all that remains . This represents a change in Gorz's position as Hirsh (1982 : 239) expresses very clearly with two statements from Gorz : 'There is no crisis in the workers' movement, but there is a crisis in the theory of the workers'movement' (Gorz 1982 : 20) and : 'There is a crisis in Marxist thinking because a crisis has developed within the labour movement . Over the past twenty years the links between the development of the productive forces and the growth of class antagonism has been broken' (Gorz 1982 : 14). This is pessimism of both will and intellect . The views expressed also derive from a fundamentally capital-logic interpretation of the development of the capitalist relations of production . Gorz denies subjective autonomy and innovative capacity to the working class, asserting the idealistic as opposed to historical character of Marx's proletariat (see e .g. 1982 : 19) and then goes on

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to assert a creative autonomy for the abstraction capital : ' . . . (I)t is impossible to see the overall process in its entirety and to get the overall goal that is built into the workings of this gigantic machinery internalised by each individual and reflected in everyone's work, and this impossibility has, of course, been deliberately created in order to guarantee capitalist domination' (Gorz 1982 : 31) . For Gorz the initiative is with capital . Capital has contained the working class and assimilated that class to capital, not by bribing it with a share of surplus value (the material basis of the labour aristocracy according to Lenin), but by its incorporation as dehumanized labour power into a capitalist labour process which cannot be transcended .' Essentially Gorz sees both the organization of capital as a productive system and the organization of the detailed labour process within that system as beyond the capacity of the working class to grasp, and therefore beyond the capacity of the working clas to transcend : ' . . . (T)he sites of production are no longer the sites of decision making and economic power . The social process of production has become opaque, and this opacity has come to affect the work process in every technical unit . Apart from managers nobody knows exactly what the things are being produced for - and in any event nobody gives a toss' (1982 : 48) . There is another way of putting this . Gorz, the archsyndicalist of the 1960s and exponent of the collective capacity of the industrial proletariat to transcend capitalist production by achieving workers' control of production, now sees that project as finished . He dismisses it, and turns for political solutions not to the social proletariat engaged in the reproduction of labour power, but to a revised version of classic liberal theory located in relation to new social movements . For Gorz the war of position at the point of production is over ; capital has broken through into a war of movement and won . Farewell to the working class, says Gorz . Let's begin again . Autonomy' and Necessity' I think it is useful to go through how Gorz proposes to begin again before turning to systematic criticism . Central to his prescription is the separation between the spheres of `autonomy' and `necessity' . Both Lumley (1983) and Hyams (1983) have clearly identified the character of this distinction and reference should be made to them for a more extended treatment . In summary, Gorz asserts that in any imaginable society there will be much work to be done that will be of necessity repetitive, boring and unfulfilling . The aim is to limit this to a minimum and to distribute it fairly .

Rejection of Goiz

Such an approach hinges on a rejection of the notion that human purposes are to be fulfilled through participation in a collective social being . Instead it is in the sphere of individual autonomy that human beings will find themselves . This division between `autonomy' and `necessity' has precise implications for the political order. Gorz maintains that the state is not an agency of domination, but rather a sort of mechanism for mediating between the spheres of `autonomy' and `necessity' . Essentially Gorz sees a state separate from civil society as necessary for maintaining the independent character of civil society. This then becomes the domain within which individual autonomy may be realized . I have been deliberately brief here, partly because I do not want to reproduce clear exposition by others and partly because these ideas will be considered again, below, in the context of a discussion of utopias . I would simply wish to note here, as others have already noted, the role of Bahro and Illich in the formation of Gorz's perspectives and to reiterate the individualistic character of fulfillment which Gorz proposes . As Lumley says : 'Gorz tries to appropriate classic liberal conceptions of society and to give them a new potential for freedom in the context of the material possibilities afforded by planning and automation. He sets himself against what he sees as the historical tendency for the centralisation of production and the state to lead to the dissolution of civil society' (1983 : 6) . I would record a note of reservation here . Certainly Gorz is returning to classic liberal conceptions, but it is debateable if he does so in relation to a post-scarcity conception of production . This was my first impression and there are passages in the book which suggest that in the contemporary age of plenty, with the fruits of robot slaves available to all, there is no need for growth . However elsewhere, and more consistently, Gorz in a less ecological mode expresses what Parson (1983) has called a `scarcity theory of autonomy' . Gorz's concern with ecology and his consequent endorsement of `no growth' solutions has implications beyond the specification of the characteristics of utopia . This is not so obvious from Gorz himself but it is certainly obvious from Hodgson's discussion . The degree to which Gorz's themes are assimilable into an account which follows Nove (1981) in importing marginalist economics into a discussion of socialist planning is significant. The point is that it is difficult to conceive of allocative planning in a permanent scarcity situation without some form of market system . This suggests to me that it is difficult to assert a liberal/individualistic autonomy perspective on politics without becoming enmeshed with a liberal political economy . Considered in the abstract and in static terms there are

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worse things than liberalism . But such a consideration is in the abstract. When somebody like Hyams, who has written from such a clear marxist perspective in the past, says: `In my view his (Gorz's) emphasis on the inevitable space between individual and social being is wholly persuasive . The necessity of macro-social determination of many aspects of collective life does not entail that individuals will experience true freedom in submission to such control . Nor should socialism imply the socialisation of all aspects of everyday life : diversity and creativity require the preservation of private social space . Also persuasive is Gorz's insistence that state power is necessary within any form of socialism, but that equally essential are autonomous collectivities to sustain the maximum possible self-determination and also to curb any tendencies to state aggrandisement' (1983 : 290) . then alarm bells start ringing in my head . The rejection of Leninism does not require the endorsement of liberalism . There is an alternative - libertarian socialism . Again a discussion of utopias is useful in elucidating this and the contrast between liberalism and libertarian socialism will be central to my discussion of working class culture . However, before pursuing this I want to turn to the `rejection' of Gorz, beginning with his utter failure to consider the character and implications of crisis in general and of the present crisis in particular. A crisis of the working class or a crisis for the working class

De-industrialisation The subtitle of `Farewell . . .' is `An Essay in Post-Industrial Socialism' and the cover of the 1982 Pluto edition is illustrated by a picture of a middle-aged, flat-capped man climbing up some steps with a deserted railway line and industrial plant in the background . The clear implication of the illustration is that the book is in some serious sense concerned with de-industrialization . Yet despite some passing references (see note 4) the implications of deindustrialization for the working class are not a concern of Gorz . I do not want to be too personal about this (actually I don't mind at all but the editors of Capital and Class might!), but my views on this are affected by living on a hill which overlooks both inner-city Gateshead and Newcastle and the Team Valley . The inner city is one of the oldest industrial capitalist zones in the world and the Team Valley is a very large trading estate begun in the 1930s which contains a large number of light and medium engineering and other manufacturing plants . Put very crudely, I can see the locations of nineteenth century industrialization and twentieth century re-industrialization and there is no longer very much to see . In 1966 Tyne-Wear county had 220,000 manufacturing jobs . The figure is now 100,000 and falling. Only the cover of Gorz's book is

Rejection of Gorz about this, not its contents . Let me come at this from another direction . Gorz is indeed concerned with the character of conflict between capital and the working class but he sees the conflict as having ended and capital as having won . It is important to note that despite his bidding `Farewell to the working . . .' his account remains workerist . Gorz's discussion is almost entirely about production, not reproduction and the social proletariat is simply subsumed into social movements operating in the context of a'non-class' . As I understand the term `social proletariat' it represents an effort to place the reproduction of labour power at the centre of capitalist social relations and assign political primacy to that part of the class engaged in domestic labour and/or as part of the industrial reserve army . The social proletariat may be interpreted as the new vanguard or, in some versions, as in opposition to the industrial proletariat, but it remains a class . Clearly in the context of mass de-industrialization and the separation of ever more people from the processes of industrial production, the ideas represented by the term acquire considerable significance . In contrast, Gorz's notion of 'non-class' is used to ` . . . (D)esignate the process of subtraction from the social sphere of an area of individual sovereignty based beyond economic rationality and external constraints' (1982 : 75-76) . The way in which Gorz dissolves the social proletariat into components of social movements in civil society is markedly reminiscent of `left' Weberian discussions by Saunders (1981), Castells (1982) and a possible reading of Urry (1981) . What goes is the notion of: ' . . . (T)he working class being understood as being within capital yet capable of autonomous power to disrupt the accumulation process and thus break out of capital' (Cleaver, 1979 : 62) .

Crisis and Class Struggle Thus if Gorz sees capital as having won, autonomist writers like Cleaver and O'Connor (in his more recent work) interpret the situation differently. I earlier described Gorz's work as 'capitallogic' and by this meant that he had abandoned the possibility of working-class collective autonomy, saw capital as determining the character of production, and had therefore retreated to the spheres of politics and civil society to mount a defensive action in terms of assertion of individual autonomy. If we attempt a review of the character of crisis we can come to different conclusions . For instance, in his review of The Meaning of Crisis (1981) O'Connor dismisses both traditional and neo-marxist accounts as being congruent and wrong . In a passage that might well be directed at Gorz he asserts : `In fact, the structural functionalist presuppositions of this

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approach (Critical Theory) unexpectedly reinforce orthodox marxism's theory of `capital logic' . Habermas, for example, believes that there are emancipatory possibilities within crisis only in spheres of life not yet totally penetrated by capital . . . . Habermas assumes that the working class classically defined is subsumed under capital not only within the labour process but also culturally and politically . He therefore fails to grasp capital and class struggles as a living contradiction . . . .' (1981 : 322) The view from my window is grim but it is not so much the product of what capital has done to the working class as the response of capital to what the working class has done to capital . Gorz cannot allow that crisis is the product of social action because that would undermine his central thesis of the impossibility of the proletariat being the transformational subject. Thus he includes a long renunciation of syndicalist strategies in production (1982 : 48), which is seriously historically deficient in ignoring responses like Combine Committees and workers' plans which specifically address the problem posed by capital's re-organization in the face of a working class offensive . More importantly, he ignores the nature and effects of struggles in reproduction and the contribution these have made to the contemporary crisis . In 1964 Gorz wrote : ` . . . partial victories won in this way, if they improve living conditions, will not thereby reinforce capitalism . On the contrary : the public expropriation of real estate, the socialization of housing construction, free medicine, the nationalization of the pharmaceutical industry, public cleansing and transportation services, an increase in collective facilities, regional development planning (elaborated and executed under the control of local assemblies and financed by local funds), and the social control of all these sectors which are necessarily outside the criterion of profit, these things weaken and counteract the capitalist system from within' (Gorz, 1964 : 97) . In `Farewell . . .'insofar as these things are mentioned at all they are dismissed as an Illichian denunciation of statism, a dismissal endorsed for example by Hyams (1983 : 289) with specific reference to the UK welfare state . In contesting this approach my aim is not merely to `defend' the welfare state, but rather to recognize collective reproduction as an arena of class conflict and to in turn recognize that conflict as part of the cause of crisis . This is particularly important as a corrective to workerism, precisely because of the role of unwaged people, especially women, in past and present conflicts in this area . These points will be reconsidered in the later discussion of working class culture .



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This discussion of crisis suggests that what we are experiencing is not a `crisis of the working class', as Gorz would have it, nor a crisis of capital as straightforward optimistic capital logic theory would have it . It is a crisis for capital and it is a crisis for the working class. We would be fools indeed if we did not recognize the latter aspect . In the thoroughly `industrial' (becoming post industrial) place in which I live there are some 220,000 people living in 100,000 odd households . About 10,000 households live in poverty in appalling mass housing (see Dunleavy, 198 1 ; Byrne and Parson, 1983) . About 25,000 households live in a degree of adequate affluence . The remaining 65,000 are the old `central' working class (see Friedman, 1977) . They were not too badly off. Indeed through the long boom the circumstances of their lives improved dramatically, but that is now in reverse . They are being immiserated. This is a crisis for the working class . The question is how do we respond. Since Gorz responds with utopian proposals, I want to attempt an answer to this question by examining the nature of Gorz's utopia, alongside three contemporary fictional accounts of utopia . I then want to develop a notion of the utopian project of the working class, or at least of that part of the British and Irish working class with which I am familiar. Gorz's Utopia

The construction of utopias is currently, and rightly, a respectable socialist endeavour and the utopian element in Gorz's exposition has proved a particularly attractive aspect of his work . In fact the actual account of the nature of his utopia in `Farewell . . .' is somewhat sketchy . It starts from an ethnography of contemporary life which I would regard as both speculative and specious . Gorz says, `Essentially the "freedom" which the majority of the population of overdeveloped (sic) nations seek to protect from "collectivism" and the "totalitarian" threat is the freedom to create a private niche protecting one's personal life against all pressures and external social obligations . This niche may be represented by family life, a home of one's own, a back garden, a do-it-yourselfworkshop, a boat, a country cottage, a collection of antiques, music, gastronomy, sport, love, etc . Its importance varies inversely with the degree of job satisfaction and in direct proportion with the intensity of social pressures . It represents a sphere of sovereignity wrested (or to be wrested) from a world governed by the principles of productivity, aggression, competition, hierarchical discipline etc . Capitalism owes its political stability to the fact that, in return for the dispossession and growing constraints

Utopias - for hobbits and others

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experienced at work, individuals enjoy the possibility of building an apparently growing sphere of individual autonomy outside of work' (1982 : 80) . One might see this as a case of the affluent worker meets colour supplement man (it is mainly a male list of little hobbies) .' This debateable ethnography underlies the already cited discussion of the relationships between the sphere of autonomy, the sphere of necessity, the state and civil society . In large part Gorz's utopia consists in the specification of these political forms, coupled with an ecologically influenced renunciation of growth. Insofar as he gives any colour to the description it is by reference to the social organization of Illich's Centre . Here the emphasis is on personal space, observance of rules, and the maintenance of distance between individuals. Fortunately there is, at least in my view, a fictional representation of Gorz's utopia available in Callenbach's two books Ecotopia (1978) and Ecotopia Emerging (1982) . These were written by an American ; in other words by someone in the `overdeveloped' world who has the least possible reason to reject collectivism, and yet his utopia is a lot like Gorz's might be .

Ecotopia - or 'Hobbits Rule OK' I had better explain this hobbit business . A relatively right wing Labour councillor of my acquaintance often denounces things as examples of `Hobbit Socialism' . He contends that all nice middle-class children are brought up on Tolkien's The Hobbit and that this gives them an image of the ideal version of the world in terms of the Shire, i .e . rural, anti-technological and small scale . Ecotopia is like this but sophisticated . The original novel is set in Washington, Oregon and Northern California which have seceded from the US and describes the nature of the society which has resulted by 1999 . Pre-existing affluence is, of course, no problem . A state is retained as a framework for `doing your own thing within limits' and ecology, feminism, `small is beautiful', anticonsumerism and anti-urbanism are all enthusiastically endorsed . Gorz would love it! What is even more interesting is the description in the second of the two books of Ecotopia Emerging (sic) (1982) . Most utopias are set after the revolution . Callenbach describes the `emergence' of his . This process is based on three elements . The first is the discovery by a high school girl of an efficient photovoltaic cell which allows each `household' to supply its own power . The second is an ecological rejection by `cancer commandoes' of the pollution engendered by the chemical industry and in particular pesticides . The third is a dispute between rural residents (both old and new) and Southern California, and especially LA, over water rights. Thus the `emergence' is technologically deter-

Rejection of Gorz mined (in a small is beautiful and anti-industrial fashion) and rural as opposed to urban . The urban working class is completely absent from the process . The revolution is cultural - its party is the `survivalists' . Its colour is green and, although its project is transformational, in an important sense it is regressive . Essentially the project is the restoration of a kind of Jeffersonian democracy based on artisan production and with a great emphasis placed upon individual creativity . I think Ecotopia can be characterized as a liberal dream and the correspondence with Gorz's themes can be understood in this way .

Woman on the Edge of Time Interestingly there are similar elements in Piercy's Woman on the Edge of Time . There is a lot to this book in terms of its account of the contemporary us, but I want to concentrate on its specification of future utopian arrangements . Piercy's desirable future' has much in common with William Morris' as described in News from Nowhere . Like Morris' it is based on small scale artisan craft life-styles but there are two significant differences . Firstly, Piercy does allow for the development of the forces of production . The simple life is dependent on automatic production of goods in what Gorz would call the sphere of necessity . Secondly, a crucial part of Piercy's discussion hinges on the technologicallybased abolition of reproductive sex roles and the development of a system of multiple social motherhood in which both sexes are mothers . As in News from Nowhere this utopia is the product of past (implicity, and with an emphasis on the social proletariat) class struggle, and in fact the battle with the high-tech nightmare alternative is still going on . The thing which I do not like about Piercy's utopia is the element it has in common with Ecotopia.' The same, indeed if anything, greater emphasis is placed on individual creativity as the ultimate means of human fulfilment . Piercy has a character called Jack-rabbit who is special because of his creativity, but who seems to me to be a social nuisance of the first order . It is however the creativity which matters .

The Dispossessed Le Guin's The Dispossessed is rather different . Antarres, the world settled by Odonians, is basically a closed place of exile which functions as a mining colony of capitalist and state capitalist Urras . The book begins with a wonderful image of the wall around the space-field, a wall keeping the rest of the universe out and Antarres in, and is in large part about the crossing of that boundary by the physicist Shevek who goes to Urras and experiences that

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place, including the reality of life for the Urassian proletariat . The social organization of Antarres is much more collectivist than that of Ecotopia and, unlike Piercy's future, this includes the organization of labour in basic production . Indeed apart from interplanetary space flight as a routine, the technological level is 20th century Earth. Le Guin has a real sense of the tensions this engenders between individual and collectivity . Shevek is in fact one of a group of rebels, the Syndicate of Initiative, who challenge the conservatism of the refusal to cross the boundary . However he is also an individual rebel, asserting the right to his individual creativity! And yet there is a tension here too . Le Guin recognizes the contradictions in this position, especially in the passages set on Urras. What is interesting about this utopia is the role of anarchist ideas . Le Guin is a disciple of Thoreau, inter alia, but the social order of Antarres is much more like the Anarcho-Syndicalist communes of Aragon than anything which emerges from the liberal experience . The criticism of Antarres is that the Odonians (Odo is the woman who founded their movement) have done their own collective thing, but have left the social order on Uras as it was . Shevek the individualist is the catalyst for change here . This is a real warts and all utopia. It raises questions ; above all the question of responsibility, of individual to collective, of collective to individual and of collective and individual to those outside the collectivity . Le Guin does not make it seem easy . Antarres is not necessarily to be emulated . I want now to return to the theme of working class culture, in an effort to identify what a utopia emerging from that culture might be like and to assess the prospects for any such development . Class and Culture - the actuality and the potential

Contemporary Working-Class Culture

Gorz is dismissive about the cultural characteristics of the contemporary working class . He says, `Working class demands have turned into consumerist mass demands . An atomized, serialised mass of proletarians demand to be given by society, or more precisely the state, what they are unable to take or produce . The working class struggle for power is reduced to mass mobilization designed to bring representatives of the labour movement into power . The dictatorship of the proletariat as a transitional phase in the constitution of communism is reduced to the welfare state taking care of working class needs . The vision of "power to the people" and "socialism" is replaced by a society in which the state is everything and society nothing, where an atomized mass of proletarians still entirely dispossessed of their own being, is patronized by the

Rejection of Gorz parties that run government and turn into the mouthpiece of government itself. Parties of this sort no longer translate popular into political demands and actions, but rather convey to the masses the necessities of government and the technocratic imperatives of the centralised state' (1982 : 40) . Note that this passage is an assertion rather than a demonstration . It is certainly a possible account of the contemporary situation; one which squares for example with Seabrook's lament for the communality of the working class abandoned by the upwardly mobile who have also left the ever-increasing poor behind them . However a contrast between Seabrook and Gorz is also interesting . As Hirsh puts it : '(Gorz) began with the revisionist critique of the traditional Marxist view of the working class under capitalism . . . this critique recognized the obvious fact (sic) that in modern society the working class is no longer driven to revolt by starvation wages . It has secured its subsistence and a rising standard of living through much social conflict but without a revolutionary cataclysm' (1982 : 216) . At least Seabrook recognizes that such a statement is plainly incorrect in the contemporary situation where for much of the working class increasing immiseration is a dreadful reality . Unfortunately just about the only developed contemporary ethnographies of working class life' deal almost exclusively with the poor (e .g. Seabrook, 1984; Campbell, 1984) . We are really profoundly ignorant about the nature of everyday life in our own society for people who are not in the impoverished groups . Here literary and journalistic sources are useful ." Nonetheless immiseration is a part of the cultural reality and is notably absent from Gorz's account.

The Potentiality of Capitalism Let me return to the quotation from Jack Common . To paraphrase, if you don't admire capitalism, you don't understand it and have no right to change it . Gorz certainly has no admiration for industrial capitalism . His utopia, with its ecological and anticonsumerist content, fits into the mode characterized by Offe as : ' . . . (N)ot a progressive "utopia" of what desirable social arrangements must be achieved, but a conservative utopia of what non-negotiable essentials must not be threatened and sacrificed in the name of "progress"' (1984 : 190) . It is not possible to be comfortable in a denial of `progress' if the reality of immiseration is recognized . Certainly immiseration is a consequence of capitalism, but its solution is not necessarily to be found by reverting to artisan production . Before dismissing socialized production, it is worth reflecting on the potentialities which

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Rejection of Gorz

capitalism as it were prefigures . The point to admire about capitalism is the enormous development of the productive forces which it has engendered . This is not a matter merely of technology nor indeed of the social organization of production . The cultural characteristics of the working class have to be seen as an important aspect of this development . In other words, if we follow Raymond Williams (1980) in extending the concept of `base' we might include in this that aspect of working class culture which constitutes an understanding of the character of capitalist production and the potential for its transformation . Yet the material basis of potential is worth dwelling on . The last `peasant' in my family was a great-grandfather born in Tobercurry, County Sligo in the 1840s. He lived through the great hunger (most people in Tobercurry didn't)," and emigrated to England where he first worked as a navvy contributing his part of that indispensable brute physical labour so necessary to capitalist development (see Thompson, 1968, Chapter 12), in particular to the `improvement' of the River Tyne . This enterprise turned a river which could be waded at low tide at the mouth in 1850 into one which by 1880 would float a battleship at any state of the tide fifteen miles up-stream . He then became a pit-man at which he worked until the 1920s . He died in 1942 at the age of ninety-six . That was a tremendous journey for a lifetime - not in space but historically . His early world was that evoked by Brian Friel in Translations . He ended as a Labour-voting, industrial proletarian whose life style was vastly superior in possibilities to that with which he began . Of course capitalism did not give him this . Women and men like him took it from capitalism and took it by, to a considerable degree, rejecting capitalism, or at the very least capitalism's ideological representations of economic necessity . This jnvolved a lot more than mere economistic struggle at the point of production . Thompson has commented that : ' . . . while one form which opposition to capitalism takes is in direct economic antagonism - resistance to exploitation whether as producer or consumer - another form is, exactly, resistance to capitalism's innate tendency to reduce all known relationships to economic definitions . The two are inter-related of course, but it is by no means certain which may prove to be, in the end, more revolutionary' (1978 : 85) . The importance of images of the past, however idealized, in the creation of class projects is manifest but there is more to such projects than harking back . It seems to me that it is precisely the experience of the potentialities of capitalism which underlies that part of the working class project concerned with development and change for the better. Our utopias have to be something more than a reversion to artisan and petty commodity production .

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Another way of approaching this is in terms of the discussion of class consciousness conducted by Jakobowski (1976) . Jakubowski clearly demonstrates (contrary to Gorz's assertion of their idealistic character) the way in which Marx and Engels' ideas were not imposed on reality but developed in long interaction with the reality of an existing workers movement and consciousness (1976 : 121) . He also points out the dual character of class consciousness in a passage which explicitly rejects the Leninist dogma that by itself the proletariat develops only a trade union reformist consciousness . On the contrary, says Jakubowski, there is also a, ' . . . (u)topian subjectivist consciousness (which) seeks to lift the future directly into the present, while the fatalistic, reformist consciousness sees present reality as everlasting . The two ideologies complement each other and are produced alongside each other by the working class . . . . Both ideologies are the result of the quite contradictory situation of the proletariat, the contradiction between their day to day struggles within the framework of capitalism and their struggle for the overthrow of the whole capitalist order . This contradiction is at the root of the whole existence of the proletariat : in a real sense the proletariat is both a constituent part of capitalism and its negation, its removal' (1976 : 19-20) . Jakowbowski wrote this in 1935 . With the advantage of nearly fifty years of hindsight we might well not equate, as he did, utopian consciousness with anarchism and fatalistic consciousness with the social democratic parties and the trade union movement . Rather we might see both forms as constantly informing all class struggles . Thus the demand for a welfare state, or at least for those parts of the welfare state which the working class did demand (e .g . the decommodified availability of health through a National Health Service) was more than either romantic reaction or simple consumerist mass incorporation within the logic of capital . It involved a pre-figurative specification of a component of utopia . The actuality of the NHS is not utopia, but it is not the product of capital-logic either . It is the ground of a contest . Utopian Projects in Production and Reproduction

I actually find it very easy to identify the previous and potential content of the collective utopian project with regard to reproduction . This is because there are things in existence - the ideal of the NHS, some aspects of public sector housing design and provision, aspects of care services in personal social services - which can and ought to be recognized as achievements . It is much harder to identify the utopian project in production, and almost impossible to identify achievements . Certainly the demand for nationalization of the pits was part of a utopian project but the actual experience of

Rejection of Gorz nationalization having served as the vehicle for restructuring is deeply dispiriting. Nonetheless we need not follow Gorz into pessimism and rejection. Much as I disagree with Hodgson's eventual programme, it seems to me that he identifies, or rather reidentifies, the basis for any optimism in this area in an explicit criticism of 'Farewell . . .' : `The major part of the book is based on a central and unsubstantiated assumption that the problems and principal features of capitalism are the problems and principal features of industrialization . Furthermore, this industrial system is a huge machine-like entity, dominating present society, and reducing its members likewise to robots or machines . Thus workers' control or workers' participation are impossible . There is no way in which democracy or selfmanagement can establish itself within this rigid hierarchical monolith . . . . The fatal weakness of this argument is that it assumes that it is possible for any industrial system to work as if it were a machine . . . . Although the industrial system has mechanistic features, it is not a machine . It has to grant some degree of autonomy and control to those that are doing the work, for complete supervision and control are not possible . Work is a purposeful activity, requiring some measure of self-determination and autonomy . This is a central contradiction within the capitalist industrial system : capitalist control of the labour process conflicting with limited but necessary workers' autonomy in production' (1984 : 190) . This is just the sort of thing Gorz used to say, as a starting point . It will still do, as a starting point, but we saw one possible development in the discussion of Ecotopia. In that utopia the individual creative invention of photo-voltaic cells, which can then be produced by artisan labour, is the technological pre-condition of the new society . Not only does the urban working class play no part in the `emergence' of the new society ; the potentialities of socialized production play no part either . One does not have to fall into the Leninist trap of endorsement of Taylorism in order to reject this .

Combined Heat and Power Campaign Contrast Ecotopia's craft photo-voltaics with Tyne-Wear's worker-community plans for Combined Heat and Power . I don't want to glamourize the CHP campaign or overstate its importance (see Spence 1984 for a description), but it emerges from the class experience of the existing forces of production, i .e . industrial capitalism ; is the cultural product of a group of workers who very precisely are asserting their collective creative autonomy against

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the logic of capital ; and involves collectivities engaged in reproductive struggles, i .e . tenants' groups . It is a product of the urban industrial working class, defined in the widest sense, and it is entirely fitting that the shop-stewards' committee which got it going was based on Parson's Heaton plant, not a stone's throw from Jack Common's birthplace and stamping ground . CHP associated with insulation and a new programme for urban design is ecological, but it is not anti-industrial . TheMiners'Strike I am now much more optimistic about the development of a general utopian reproductive and productive project than I was when I wrote the first version of this paper . The intervening factor is the miners' strike, in its twentieth week as I write this . What has raised my optimism is not the industrial dispute per se, but the class response to it. At the rally which replaced the 101st Durham Miners Gala for the first time ever there were banners from the women's support groups . Within the mining community this dispute has a new character and the mass involvement of women illustrates this . It is about the survival of a class culture and it seems to me that it is precisely this which has engendered such support from other sections of the working class . This is not total but in a region where there are now fewer than 20,000 miners where two decades ago there were 150,000 the fight against closures is a fight for what you are . The labour movement as a whole is intimately involved in this aspect of the conflict . People's social lives revolve around support benefits . There is a mobilization of our potential against capitalism's logic of closure . A big part of this dispute, as an experience for those involved, is about the cultural counteroffensive against `There is no alternative' . Raymond Williams has asserted the necessity for a `cultural revolution', one conducted on the terrain where a war of position is all that is pdssible, but a' . . . revolution and not some unimpeded process of social growth' (1980 : 19), precisely because the ' . . . assertion of possibility against all the learned habits of resignation and scepticism is already a definition of practical hope' (1980 : 18) . And, embedded in a realistic assessment of the difficulties, is a reminder that if: `All significant social movements of the last thirty years have started outside the organised class interests and institutions . . . there is not one of these issues which, followed through, fails to lead us into the central systems of the industrialcapitalist mode of production and among others into the system classes . These movements and the needs and feelings which nourish them are now our major positive resources, but their whole problem is how they relate or can

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relate to the apparently more important institutions which derive from the isolation of employment and wage labour . At the margins of the institutions, in fact, there have been significant developments which make new kinds of linkage possible . The movement for workers' control in its strongest form, is an answer to the question about the willingness to take responsibility for the whole social process' (Williams, 1983 : 173) . Towards 2000 indeed .

Tyne-Wear 2000 Group I want to conclude with an example of action, without making any great claims for the example . The situation in TyneWear has been described above . We can interpret this deindustrialization as a process of underdevelopment, in the sense in which that word is used by Cleaver (1977) . That is to say it is a strategy of capital in which, in the simplest version, income is reduced in order to impose the availability for work . Indeed many aspects of the process as it is affecting Tyne-Wear take precisely this form ; in particular the operations of the Manpower Services Commission with regard to both Youth Training Schemes and the Community Programme can to a considerable degree be interpreted in this light. However, underdevelopment as a strategy of capital has many more components including in particular the relocation of industrial capacity in relation to the new international division of labour12 and indeed the use of locational devices in general in terms of reshaping the labour process to the disadvantage of the working class (see Massey and Meegan, 1982) . The symptoms of this process are all around us . The question is what do we do about it? Gorz tells us (1982 : 14-15) that the development of the productive forces in capitalism ' . . . is functional exclusively to the logic and needs of capital' . We can look to those forces for neither the social nor the material basis of change . The project I want to describe is based upon precisely the contrary proposition . In 1981-82 a group of people met in the form of a WEA class to discuss the nature and implications of the crisis in the TyneWear economy . We decided that description was not enough . The point was to do something about it . We therefore re-constituted ourselves as the Tyne-Wear 2000 group and decided to try to develop a strategy for action - a kind of cultural programme which would be the basis of discussion in the working-class movement . The aim was to push that movement into initiating strategies for change rather than reacting defensively to capital's strategies . This was not an original idea, even locally . The `Technology for Employment' group based in the Trade Union Studies Information Unit has, in association with others, been concerned for some time

Rejection of Gorz

with precisely this project in relation to the productive potential of the engineering sector . In association with TUSIU, Tyne-Wear 2000 has now obtained funding from Tyne-Wear County Council for the production of a `Plan for full employment by 2000' in the country . There are a number of speculative components to this plan but they have a common origin and a common fundamental content . The common origin is the belief that the political power of the working class depends to a very considerable extent on the role of that class in social production and social reproduction . Thus full employment is a basis for power in action . The common content is that all the different proposals which we are talking about are in flat contradiction to the implications of the logic of capital for a place like Tyne-Wear and include taking control over productive capital, in particular, as a key component of their realization . We are saying, here is socially useful work which needs to be done . The doing of it would mean work for all . Getting it done requires taking control over capital and politics . What about it? Clearly this sort of programme is not based on a postscarcity conception of society either in origins or content . It is based precisely upon the collective appropriation of productive capacity, by whatever means, so that that capacity is used in accordance with a socialist rationality . The vehicle for that appropriation is the development of an existing component of class culture as the precondition of collective action . It should be noted that what is being developed is not a `workers plan' . In other words it is not something which can be developed simply by an existing employed workforce taking control of the productive process in which they are presently engaged and transforming it, although clearly such action would form part of the overall movement . Rather what is being proposed is a much more extensive class control over the productive capacity of capital in general . This is a big project and Tyne-Wear 2000 has been accurately described by its members as a `piddling little group' and `the fag-end of a WEA class' . Nonetheless I think we are making a start in the right direction . In circumstances where the future does seem to be a matter of `socialism or barbarism' to dismiss the working class, the combined forces of the social and industrial proletariat, is to dismiss the only chance we have . It has to be a case of: `Forward the working class', not `Farewell' .

Acknowledgement I would like to acknowledge the assistance of Capital and Class referees Bob Lumley and Maureen McNeil and the critical comments of Christine Byrne and Don Parson .

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1 We lack any socialist based ethnography of everyday life for most people in the 1980s . There are accounts of life for the poor but one has to turn to popular entertainment for any general account of how people who are working class but are not immiserated, which despite the spread of immiseration is still the social location of most of us, lead their lives . Gorz's ethnography is speculative. We could do with an equivalent of Mass Observation . 2 As Hirsch says : `in a very real sense, it appears that in "returning to his subjectivity" Gorz has returned to the vintage existentialism of the early Sartre and his own youth' (1981 : 242) . 3 I am using Hogson here but one confrontation leads to another and his work is worthy of serious critical refutation in its own right . This cannot be attempted here for reasons of space . 4 Gorz does retain the notion of a bought and paid for labour aristocracy conceived of in relation to a radical version of dual labour market theory eg. : `A society based on mass unemployment is coming into being before our eyes . It consists of a growing mass of the permanently unemployed on the one hand, an aristocracy of tenured workers on the other, and between them a proletariat of temporary workers carrying out the least skilled and most unpleasant type of work' (1982 : 3) . As is usual with dual labour market based accounts this ignores the relation between employed and non-employed which is the central point of the notion of a reserve army of labour. In other words the role of the reserve army in the restructuring of the relationship between the working class and capital is not discussed ; but then such a discussion would require consideraiton of crisis . 5 Although some of these things are not class bound (or rather status group bound) a lot of them look like the retreats of that part of the left-wing intelligentsia which lives off the working class as poverty professional etc but cannot stand to have anything to do with working class people, particularly non-dependent working class people, in its free time . 6 Piercy's specification of alternatives using the science fiction device of nodal points of decision about splits in time with a future reaching back in time-battle to defend its own existence, is very attractive to voluntaristic marxists who agree with O'Connor that it is not a matter of what will happen : ` . . . but what can be made to happen' (1982 : 329). 7 Just to get my prejudices here clear, I detest Ecotopia, think Woman on the Edge of Time is almost as good as that marvellous book The Dispossessed and like News from Nowhere a lot. Even if I don't like artisan production the idea of the Palace of Westminster as a storage depot for dung cannot be lightly dismissed . 8 Interestingly whereas the emphasis on creativity is usually craft level science of artistic, Shevek is a theoretical physicist whose work is cosmological in character . Nonetheless, in that it leads to an instantaneous communication device and a new social order for the known worlds, it is not abstract in its consequences. 9 See note 1 above . There is every reason why socialists should not adopt the traditional posture of sociology of eyes down, hands up (palm up) . We need to look around us. 10 I have found Ardagh's book Provincial Europe very interesting in this context. Although it is now a bit dated, (the research was done in the early 1970s) I think his observation about the dominant class styles of various countries is important. Thus the dominant style on communist Bologna

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was thoroughly bourgeois whereas in Newcastle which was at that time Tory controlled, it was working class . Part of the explanation for the popularity of `Farewell . . .' seems to me to lie in the excuse it gives people who do not like the assertiveness of sections of the British working class to withdraw from any political dealings with them . This is not to say that every aspect of working class culture is wonderful, far from it, but if it makes some people uncomfortable then that is not always a bad thing. Ardagh actually recognizes this quite clearly . 11 The great hunger was of course actually the great starvation . That is to say it was not a natural disaster but a product of the implications of the capitalist relations of production in the specific context of the colonial rleations of production in the specific context of the colonial relationship between Britain and Ireland . This does not mean that life for the poor peasantry in Ireland would have been idyllic but for the Brits, which is the contention of romantic Irish nationalism . 1 am very conscious of the emphasis in this paper on the proletariat 12 of the central metropolitan capitalist countries . Indeed its origins are even more parochial in that it has difficulty getting outside one county . A general criticism of Gorz is that he has written a book which simply ignores the working class outside the old central metropolitan locales of capitalism . The experience of the new working class in peripheral capitalist production is in flat contradiction to the general character of his theses . This seems to me to be as true for the new working class under state capitalism as for the working class in the new spatial periphery of traditionally conceived capitalism . It should be noted that underpinning my account is the notion that capital is simultaneously taking the factory to the third world and bringing the third world to the factory, in every sense . The implication of this is of course for internationalist action by the working class, but there is no space here to do more than say this .

J . Ardagh, Five Cities, 1977 . D . Byrne & D . Parson, `The State and the Reserve Army' in J . Anderson et al (eds), Redundant Spaces, Academic Press, 1983 . E. Callenback, Ectopia, Pluto Press, 1978 . E . Callenbach, Ectopia Emerging, Bantam, 1982 . B . Campbell, Wigan Pier Revisited, Virago, 1984 . M . Castells, The City and the Grassroots, Arnold, 1983 . H . Cleaver, Reading Capital Politically, Harvester, 1979 . H . Cleaver, `Malaria, the politics of public health and the International Crisis', Review ofRadical Political Economy, Vol. 9, 1977 . J . Common, RevoltAgainst an Age ofPlenty, Strong Words, 1980 . R.L . Davis, U. Murray, and J. Green, `The New Sweatshops', in The State and the Local Economy, CDP-PEC, 1978 . P. Dunleavy, Mass Housing in Britain, Cambridge Univ . Press, 1981 . A Friedman, Industry andLabour, Macmillan, 1977 . B . Friel, Translations, Faber, 1981 . A . Gorz, Strategy for Labour, South End Press, 1964 . A . Gorz, Farewell to the Working Class, Pluto, 1982.

References

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A . Hirsch, The French New Left, South End Press, 1981 . R . Hyams, 'Andre Gorz and his disappearing proletariat', Socialist Register, 198 G. Hodgson, The Democratic Economy, Penguin, 1984. F . Jakubowski, Ideology and Superstructure, Allison and Busby, 1976 . U. Le Guin, The Dispossessed, Panther, 1973 . Bob Lumley, 'Socialism - Utopian and Utopian', Head and Hand, No . 13, Summer, 1983 . D . Massey & R. Meegan, TheAnatomy ofjob Loss, Methuen, 1983 . J. O'Connor, 'The Meaning of Crisis', Int. Jnl. of Urban and Regional Research, Vol. 5, No . 3, 1981 . C . Offe, Contradictions of the Welfare State, Hutchinson, 1984. D . Parson, 'Personal Communication', 1983 . M . Piercy, Woman on the Edge of Time, Woman's Press, 1976 . P . Saunders, Social Theory and the Urban Question, Hutchinson, 1981 . J . Seabrook, The Idea ofNeighbourhood, Pluto, 1984 . M . Spence, In Pursuit ofPower, I .L.P ., 1984 . E .P . Thompson, TheMakingoftheEnglish Working Class, Penguin, 1968 . E .P . Thompson, The Poverty of Theory, Merlin, 1978 . J . Urry, TheAnatomy of Capitalist Societies, MacMillan, 1981 . R. Williams, 'Beyond Actually Existing Socialism', in Problems in Materialism and Culture, Verso, 1980 . R. Williams, 'Towards 2,000', Chatto and Windus, 1983 .

Polity,

ress

Networks of Corporate Power Edited by F N Stokman, R Ziegler and John Scott This volume is the outcome of a six-year research project involving collaborative research by teams based in a variety of countries in Europe and America . It applies techniques of social network analysis to data collected on the top companies in ten countries, presenting a detailed comparative analysis . The material will make a major contribution to current debates on intercorporate structure . c £25.00 hardback 0 7456 0115 4

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Polity Press, 108 Cowley Road, Oxford OX4 1JF

Trevor Evans

Money makes the world go round • THE WORLD ECONOMY has been going through a crisis for just

over ten years . It began with the 1974-75 recession, which was the deepest and most widespread to have occurred since before the second world war. This was followed by a period of recovery that was strong in the us and the newly industrialising countries of Latin America and South-East Asia, but weak in Europe, Japan and the Third World . Then in 1980 the world was plunged into a recession that was even more severe than the previous one . Unemployment increased to record post-war levels in all the advanced capitalist economies, and the fall in primary commodity prices had a devastating effect on the economies of the Third World . Althogh a strong recovery has been underway in the US since 1983, the upturn has been uneven and weak elsewhere . This article is about the relation between the crisis in the world economy and international finance . At the end of the second world war what became known as the Bretton Woods international monetary system was established with the intention of giving governments greater control over international economic relations . This system collapsed in the early 1970s and gave way to one that was dominated by the operation of private markets . I will attempt to show that these private markets have been one of the principal mechanisms by which the crisis has been imposed on national economies. While it is true that in Britain the Thatcher government chose to pursue monetarist policies, it would have been very

Trevor Evans offers a useful survey of the development of the current world financial structures. He particularly emphasises the international role of the dollar and the way in which this role has constrained domestic economic management in the us and other capitalist countries . This latter discussion then 99 leads to a consideration of the generation and transmission of economic crisis .



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difficult for it to have chosen not to . This is not meant to imply that there are no other policies that could be pursued, but rather that any viable alternative would have to mount a more radical challenge to the system of private financial markets than is often envisaged . The article will mainly be concerned with trying to outline how the international financial system has developed in response to accumulation in the advanced capitalist economies, and how it in turn has served to impose limits on those economies . The main focus will be on the us and Britain although, because of its global implications, the international debt crisis will also be touched on . First, however, it might help to say a little about the importance of money .

The power in your purse

Capitalism is a monetary economy . This is in some respects so obvious that it is easy to take it for granted . There are so few activities that do not involve money in some way that it can appear to be a rather ordinary feature of everyday life . Yet it is in reality one of the more remarkable products of human society. A process has been created by which virtually every type of qualitative distinction can be reduced to a difference between one quantity of money and another. Goods and services, artefacts and land, even people's abilities and attributes - all can be expressed as a sum of money . It is the universality of money that makes the task of understanding its social function so difficult . In a capitalist economy, production is organised in a large number of separate enterprises . There is however no institution which consciously decides how much of society's labour should be employed in producing any particular commodity . Instead this is decided after a commodity has been produced by whether it can be sold for money . Money provides the link between producers and consumers, and is the means by which society validates a particular expenditure of labour . Money is therefore a social bond which both unites and regulates people in this decentralised system of production . But money is not just a bond : its possession confers control over social production . Most people have to spend their lives working, often at meaningless tasks, in order to get the money that is necessary to live . As a result, those who have money can command the labour of those that don't . It is this that makes it possible to throw money into circulation and make more money, a profit . Money that circulates in this way is capital and, as capital, it constitutes an enormous concentration of social power. Although capital employs this social power to promote production, in general it will only do so if it is profitable, and it does not

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do so smoothly. On the contrary, periods of profitable investment have always run into social obstacles that impose a limit on the process. The limit manifests itself initially as a widespread inability to sell commodities for money and results in a cutback in investment and a downturn in the economy . This is the basis of the business cycle that has been a permanent feature of capitalist development since the early nineteenth century . It is downturns in the business cycle that underly the financial crises that still periodically rock even the strongest capitalist economies and force them to transform themselves and adapt to a changing world . Because money exercises such a pervasive influence, reaching into every pore of social life, it provides an extremely powerful weapon for curbing any social demands which are incompatible with the pursuit of profit . The fact that money is the bond which links people together in a capitalist society makes it very difficult to resist attacks which are launched through that bond, as the tradeunion movement has found when confronted by the strategy of monetarism . At a time of crisis, therefore, it is through money that the imperatives of a capitalist economy are reasserted over those of social life .

Money used to be made out of valuable commodities such as silver or gold . This type of money is known as commodity money, and its face value was related to the value of the metal it contained . However, in order to avoid having to continuously weigh out quantities of metal in order to use it as money, it needed to be minted into coins of a standard weight . This task required a public authority and it fell to the state, which either minted the coins itself or supervised their production by someone else . From the outset then, money has involved the state and has had a distinctively national character . Commodity money however was expensive to produce and its supply was quite inadequate for the phenomenal growth of a monetary economy which occurred with the development of capitalist commerce and industry . The rise of capitalism was consequently associated with the development of other forms of money . This resulted in a system of national money based on a combination of money issued by the state (state money) and money issued by the banking system (credit money) . There are two ways in which banks can create money : one is to issue bank notes ; the other is to credit an account with a deposit which can then be drawn on by cheque . When a cheque is used to make a payment, the deposit is transferred to another account ; the deposit can be transferred again and again, but it will still exist even after the original advance of credit has been repaid . Most money is

National money

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of this type and it exists only as an entry in a bank's books or, with modern technology, as just a pulse on a computer tape . Banks can provide an extremely flexible supply of money, but because this money can be created so easily, there is a problem about ensuring its quality. (In the United States during the nineteenth century the notes issued by many banks were often only accepted elsewhere at a substantial discount on their face value .) The state has therefore become deeply involved in the regulation of the monetary system and the institution through which this is exercised is the Central Bank . The Central Bank sits at the apex of a banking system. The money it creates is backed by the state and it provides the means by which other banks settle the balance on their transactions with each other . The quality of the credit money created by commercial banks rests on its exchangeability with the state money issued by the Central Bank . The Bank of England has been the Central Bank through which the state has regulated the monetary system in Britain-even though it was privately owned until as late as 1946. The Bank's practice evolved in the course of the nineteenth century as the government attempted to ameliorate the consequences of recurrent financial crises. The issue of bank notes, which had been practised by all banks, was restricted to the Bank of England, and it was only permitted to issue notes up to a ceiling related to the size of its gold reserves . The notes were convertible into gold on request, and the standard of value was a £1 gold coin . The state therefore tried to ensure the quality of the credit money created by commercial banks by linking it, through the Bank of England's money, to the value of gold. The direct link between the value of Bank of England money and gold was finally broken after the international financial crisis in 1931 . Since then the state has tried to ensure the quality of money by a system of reserve requirements . This means that the amount of money that banks can create is supposed to be limited to a fixed multiple of their reserves of state money, which includes Bank of England money and some forms of government debt. Since the state controls the supply of this high quality money, it should be able to control the total amount of money that is created . However, because commercial banks make their profits by extending credit, they tend to be very innovative in finding ways round any restrictions on the ability to meet the demand for loans . Recent evidence from Britain and the us suggests that if reserves are not supplied to the commercial banks, the competition between them for the reserves that are available will send interest rates sharply up, but that this will have little direct effect on the amount of money that the banks create .



Money

The development of a system of national money that is not convertable domestically for gold has meant an important shift in the way that money serves to regulate a capitalist economy . In the nineteenth century, the expenditure of labour on producing a commodity was socially validated when that commodity was sold for money . When there was a downturn in the business cycle and companies could not sell their products, they would be unable to repay their bank loans and a rash of bank failures would follow . Any outstanding money that had been issued by these banks would become worthless, and the destruction of one part of the total money in circulation added a further deflationary twist to the situation. As recession purged the economy of its least productive enterprises those that remained would be the ones that had adopted new techniques . They could produce commodities more cheaply and so sell them at prices commensurate with the reduced level of monetary demand . In order to prevent cyclical downturns escalating into a complete financial collapse, the Bank of England developed the practice of acting as lender of last resort . This ensured that if one bank collapsed, it would not endanger the whole financial system . It should be noted that by lending money to a bank that was threatened with a shortage of liquidity, the Central Bank was effectively guaranteeing the exchangeability of all the money created by the banking system . This was an important change . The role of the Central Bank as lender of last resort and the domestic inconvertibility of money are the two main characteristics of the monetary systems that have operated in the advanced capitalist countries since the second world war . When there is a downturn in the business cycle, this still appears as an inability to sell commodities at their old prices . There is not enough money to buy all the commodities and, as unsold stocks build up, firms will be faced with a shortage of money and so want to borrow more . Freed from the constraint of convertibility the Central Bank can provide the banking system with the reserves necessary to meet the additional demand for credit. This is the strategy of Keynesianism . The commodities will be sold but at a higher price . A deep recession is avoided but the underlying problem has merely been displaced . The problem of validating the labour expended in producing commodities no longer occurs at the point where the commodities are exchanged for money; it has been shifted to the point where the quality of credit money used to buy the commodities is guaranteed through its relation to state money . Because the Central Bank now guarantees the exchangeability of all money, it is no longer possible to devalue the total supply of money by destroying the money created by just a few banks ; what happens instead is that the value of all money is partially devalued through

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inflation . If the Central Bank underwrites the creation of money in this way it facilitates the function of money as a means of circulation . It promotes the exchange of commodities and, at least in the short term, continued economic reproduction . However, there is a contradiction between the function of money as a medium of circulation and that of money as a store of value . A capitalist economy is dependent on the existence of a credit system which collects idle money and concentrates it as capital at that point in the economy where it can most profitably be employed . If money's function as a store ofvalue is seriously undermined, idle capital will be withdrawn from the credit system and stored in some other form, such as oil painting or real estate . If the idle capital can be retained it is only at a rate of interest that is so high that it cuts into profits and undermines the ability of firms to invest . The appeal of the monetarist strategy, whose rationale was based on little more than the dogma of sound money, was that it attempted to reassert the value of money by refusing to provide the reserve assets that would underwrite the creation of money by the banking system . Where governments have chosen to follow this strategy it has resulted in acute recessions . However, where governments have not themselves chosen to follow monetarist policies, they have found their management of the economy constrained by the relation between their national money and the international monetary system.

International money

The type of monetary system which exists in each capitalist economy depends on state regulation and exists on a national basis . Capitalism however has always been an international system . In practice, a stable international monetary system has depended on one state being sufficiently financially dominant to impose its money on the rest of the world economy . Before 1914 this role was played by Britain ; since 1945 it has been fulfilled by the United States . The international monetary system that came into operation after the second world war was set up at a conference attended by 44 nations in 1944 at the North American holiday resort of Bretton Woods . The mighty us economy had finally lifted itself out of depression with the onset of the war, and between 1940 and 1944 its industrial output doubled . As the war drew to a close a debate developed within the us state over how to ensure that this rate of accumulation could be maintained . A younger generation of more radical economists at the Treasury argued for a Keynesianoriented system of national planning . It was however the State

Money Department's view which prevailed . This favoured a free-market system,but argued that its success would depend on the us running a substantial export surplus . To achieve such a surplus, us capital would have to gain access to those large parts of the world economy that were closed by protective barriers, most notably the markets of the British empire . The us therefore set about trying to create a multi-lateral system of international trade, and it was with this aim in mind that it participated in the Bretton Woods conference. At the end of the war the us controlled 70% of the world's reserves of gold, and it used this financial power to achieve an international monetary system in which the dollar played a central role . The British government felt obliged to accept the us proposals because of its dependence on huge us loans to finance dayto-day imports of food and raw materials . (The secret treaties by which the US maintains military bases in Britain were agreed under the same circumstances .) There were three main features of the system that was established at Bretton Woods . Firstly, gold was to act as the international store of value, but the dollar was to act alongside it, , as good as gold', on the basis that the US government would convert dollars into gold at the rate of $35 an ounce . Secondly, the value of other currencies was fixed in terms of the dollar at a rate that was pegged, but could under certain conditions be adjusted . Thirdly, the International Monetary Fund was founded to regulate the exchange-rate system and to provide short-term loans to countries while they overcame balance of payments deficits . The Bretton Woods system provided a framework within which international economic relations could be conducted using a national money, namely the dollar . In countries other than the us, the national money was to be exchangeable with the dollar through the Central Bank . Governments were allowed to impose controls on the exchange of capital for overseas investment, but otherwise different currencies were supposed to be freely convertible, although it was not in fact until the late 1950s that this was fully achieved . The system can be described as politically managed because it required constant intervention in foreign-exchange markets by national monetary authorities in order to maintain the pegged level of exchange rates . This international arrangement made possible an unprecedented expansion of the world economy in the two decades after the second world war, but as the dollar came to play an increasingly large international role, this put us capital in a privileged international position . Since the second world war governments have been responsible for managing their national economies, but they have had to do so

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within limits imposed through the international monetary system . Until the early 1970s this constraint operated through the balance of payments . It was this process that gave rise to the stop-go cycle that dominated British economic policy in the 1950s and `60s . Governments would facilitate accumulation by providing the banking system with the reserves necessary to expand the supply of money . But if this was pursued beyond a certain point, it would result in a balance of payments deficit . Then the government would be forced to introduce a more contractionary policy . Because it was possible to borrow from the IMF, the downturn could be cushioned but it could not be avoided . The one country where this did not apply was the US . Because its national money also served as international money, the US economy was not constrained in the same way from running a balance of payments deficit . If a company in Britain wants to buy something in the world market it needs dollars, and it gets these by purchasing them from the Bank of England . The Bank of England will only be able to supply these if there are companies earning dollars abroad and exchanging them for sterling . Companies in the us, by contrast, could simply buy items in the rest of the world and pay for them with their own national money . Paul Sweezy has likened the situation to having a free gold mine at the bottom of the garden . Since the dollar was as good as gold, and dollars were created in the us, it was possible for the private and government enterprises that make up the US economy to acquire resources from the rest of the world without having to part with items of comparable value themselves . Us enterprises were able, on balance, to spend more abroad than they earned, resulting in the payments deficit . In fact, the US ran a substantial trade surplus through the 1950s and most of the `60s due to the large international demand for its consumer goods and, above all, its sophisticated means of production . However, this trade surplus was more than offset by two other items . One was the aid and military expenditure which the us state incurred as a result of assuming the role of dominant world power . The other was the extensive programme of direct investment which us corporations embarked on first in Canada and then in Europe . The overall balance of payments was consequently in deficit . As a result of the us deficit there was a steady flow of dollars out of the us, although this was initially welcomed by other states who were anxious to build up their reserves of international money . Nevertheless, by the early 1960s the size of the outflow was beginning to create a problem . Under the terms of the Bretton Woods raising the finance for overseas investment in the us and then sending it abroad, these corporations therefore began to use their



Money holdings was already larger than the us reserve of gold . The first serious sign of trouble occurred in 1960 when there was a speculative run on the London gold market . (Speculation occurred because it was believed that if the us government could not convert all the outstanding dollars at the rate of $35 per ounce of gold, the dollar value of gold might have to be increased . In that event anyone holding gold would be able to sell it at a much higher dollar price than they had paid .) The issue came to a head because, in addition to the underlying structural deficit, the us balance of payments was also affected by flows of money capital that were closely related to the business cycle. In 1958 full convertibility had finally been established between the national currencies of the main capitalist countries, and this removed an important barrier to the international mobility of capital . Then in 1960 the us economy entered a recession and, once the demand for credit had declined, interest rates began to fall . This affected international capital flows in two ways . Firstly, there was a spate of bond issues in New York by foreign companies and governments who took advantage of the low interest rate and then exported the capital they had raised . Secondly, an even greater amount of short-term capital left the us in search of higher interest rates elsewhere . The combined effect of these capital flows was to sharply exacerbate the size of the us deficit. The Kennedy government was eager to use Keynesian techniques to boost the economy out of recession, but it was worried by the danger that a further fall in interest rates might, by pumping yet more dollars into the rest of the world, lead to another run on gold. It can therefore be seen that, although the us was not constrained in the same way as other countries from running a balance of payments deficit, it too was subject to limits imposed by the international monetary system. The next move of the us government was to try and increase its room for manoeuvre by controlling the flow of capital out of the country . While this was successful in its immediate objective, it led to a major transformation of the international financial system that resulted in government policy becoming even more tightly constrained by the operation of private capital markets . Between 1963 and 1965 the us government introduced a series of measures to control the flow of capital out of the country. us corporations, however, were already engaged on a strategy of investing overseas, and had a programme of future investments lined up when the capital controls were introduced . Instead of agreement the US was obliged to convert foreign dollar holdings into gold on request, and by the early `60s the scale of these foreign

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overseas subsidiaries to borrow from banks in other countries . A novel feature of this borrowing was that although it was contracted outside the us it was denominated in dollars . If a bank in Europe lent in dollars, because it was located in Europe it could escape the regulation of the US government, and because it was denominated in dollars it was not subject to regulation by a European government . A money market that is based in one country and denominated in the currency of another is known technically as an off-shore, or transnational, money market . But because this market developed initially in Europe it has become known more generally as the Eurocurrency market, or, in view of the predominance of dollar-denominated issues, the Eurodollar market . A small market in Eurodollars had existed since 1949 - it originated because the Soviet and Chinese governmentw wanted to keep their reserves of dollars where they could not be impounded by the us government! It was however the imposition of US capital controls that was a major impetus to the growth of a large-scale Eurodollar market, and in the mid-1960s it began to grow very rapidly . A further impetus to the growth of the Euromarkets came as a result of another, more long-standing US government measure, Regulation Q This imposed a ceiling on the interest rate that banks could pay for deposits, and had been introduced in the

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Money

1930s at the time of the New Deal to keep the price of bank loans down . In 1966, accumulation in the us slackened, and as the demand for credit increased, interest rates hit the maximum permitted level . Banks in the us were unable to raise the interest rate on deposits any further, and this encouraged us corporations to deposit any idle earnings in the Euromarkets, where the interest rate was not controlled . The main centre of this rapidly growing international financial market was the City of London . London had a long history as an international financial centre, although until the 1960s it was still oriented towards the remnants of the British empire . The City quickly recognised the importance of the Eurodollar and, with a zeal that was in marked contrast to that of British industry, it set about restructuring its operations so as to capture the new market for itself . In this, it was aided by the fact that of all the financial centres that then existed, London was one of the least regulated in the world . us banks rushed to open overseas branches, especially in London, and in 1966 they replaced British and European banks as the dominant force in the Euromarkets . By 1967 the importance of the new market had become so established that the us government felt compelled to lift those of its capital controls that affected the overseas branches of us banks so that they would not be handicapped in competing with other banks . The rise of the Euromarkets meant the beginning of an important shift from international financial relations being conducted through the official channels of the Bretton Woods system towards the private markets of the Eurodollar system . An international financial market had already begun to develop in the late 1950s and early 1 960s. us banks appear to have first opened overseas branches as a result of following their corporate customers abroad . It was therefore the increasingly international organisation of production that led to the growth of international movements of money capital . But the growth of large-scale units of capital within banking was itself an impetus to major banks developing their international activities . The imposition of controls on capital flows by the us government determined the form that this international development took . When the government tried to limit the growth of international financial dealings based in the us, the private-market system transformed itself and, with remarkable agility, established itself on a new basis outside the control of any national state . Although the controls succeeded in limiting the size of capital flows out of the us, it failed to stem a growing privatemarket system that was increasingly undermining the tenability of the politically-managed international monetary system based on the dollar.

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110 The crisis of the dollar

The position of the dollar as international money had rested on the massive industrial supremacy of the us economy at the end of the war . The us had acquired a large proportion of the world's international reserves and, through a combination of financial muscle and political dominance, created a new world-market order in its image. The dollar-based system facilitated a rapid expansion of the world economy, but there were several features of this process that tended to undermine its success . Firstly, the boom in other capitalist economies was based on adopting the highly productive techniques that had been pioneered by us industry before the war . This involved new branches of industry and, above all, the introuction of the moving assembly line, or Fordist organisation of production, that enabled employers to impose a far higher intensity of labour on workers than had been possible hitherto . Secondly, while there was a rapid deepening of the economic interconnections between the advanced capitalist economies, firms based in different countries participated in this in different ways . During the 1950s and 1960s, many US companies supplied foreign markets by investing abroad (as did British companies) ; in most other countries companies concentrated on investing in domestic production that could be used to supply exports to other economies . Although productivity in the us remained at a high level by international standards, it grew more slowly than in virtually any other advanced capitalist country, and while the us share of world trade began to fall, that of other economies began to rise . This was particularly marked in the case of Japan and West Germany . The us actually ran a trade deficit in 1968 for the first time since the war, and even with controls on capital flows the size of the overall deficit was growing . Opposition to the massive us deficit began to mount . The French government in particular objected vehemently to the ability of us capital to buy up European companies by just flooding other countries with dollars, and in 1965 it had begun to convert its dollar reserves into gold . Gold was the weak link for the us so long as it was committed to converting dollars held abroad, and in 1967 the us government obtained a promise from the West German government not to convert their dollar reserves into gold . The publication of the 1967 us balance of payments accounts in February 1968 revealed the overall deficit to be larger than ever, and by March there was an enormous rush on gold as market operators tried to beat the revaluation of gold that they felt was inevitable . The Us President, LyndonJohnson, had the British government close the London gold market, and when it opened again two weeks later it was on the basis of a two-tier system . The US government would continue converting dollars into gold at the



Money 111

official rate of $35 an ounce for Central Banks ; private holders of dollars on the other hand would be subject to a free market rate that would certainly be higher . This heralded an important shift in relations between the us and other capitalist states. In the 1950s other capitalist states had welcomed the dollarbased international monetary system . (Britain even played a subordinate part in running it through the minor role that sterling continued to occupy as a reserve currency until the late 1960s .) In the 1960s, as the us deficit grew, the system was still accepted although it was now widely believed that it would have to be reformed so as to end the privileged position of the us economy that enabled it to spend more dollars abroad than it earned . This acceptance in turn gave way in the late 1960s to a situation where more serious differences emerged as the us began to impose its will on the other capitalist countries . The basis for the shift in US policy was laid out in several articles published by academic economists in the late 1960s . These advocated what was known as the `Passive Strategy for the Balance of Payments' . This argued that instead of accepting responsibility for the size of the us balance of payments deficit, the governmnent should pursue the policies that would run the us economy at the optimal level irrespective of the size of the payments deficit ; countries that didn't want to absorb more dollars should revalue their currencies . (If a country revalued, it would make the dollar price of any purchases in that country less attractive . By discouraging purchases by us-based concerns, this was supposed to reduce the size of the dollar inflow into that country's reserves .) The attraction to the us government of this Passive Strategy was that it shifted the responsibility for the US deficit onto the governments of other countries The immediate crisis of the dollar was relieved by the operation of the business cycle . The upturn that begun in the early 1960s finally came to an end in 1969 . This was the first recession to take hold since the Euromarkets had become important . High interest rates in the us now attracted short-term capital from the Euromarkets on a scale that was sufficient to offset the underlying payments deficit . But recession afforded only a precarious relief. In 1970 the recession led to what was then the largest bankruptcy in US history, that of the Penn Central Railroad Company . Because it was linked by short-term loans to many other large corporations, the Federal Reserve was fearful of a widespread financial collapse, and it encouraged a vigorous expansion of credit by commercial banks . As interest rates fell, short-term capital left the us on a scale that was quite unprecedented at the time . From a previous peak balance-of-payments deficit of $3 .4b in 1967, and a

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modest surplus of $2 .7b in 1969, the deficit jumped to $9.8b in 1970 and a staggering $29 .7b in 1971 . This was the Passive Strategy with a vengeance . The scale of these capital flows put irresistible pressure on other countries to revalue their currencies . This achieved what was in effect the first major devaluation of the dollar, but although the us did agree to a small devaluation of the dollar against gold, most of the adjustment between the dollar and other currencies was forced onto the other countries. Because most of the adjustment was not made by devaluing the dollar against gold, the us avoided what would have been a relative increase in the importance of gold at the expense of the dollar . The effective devaluation of the dollar cheapened us exports and, by temporarily overcoming the consequences of the slow growth of productivity in the us, it helped check the decline in the us share of world trade. The us however still faced one vulnerability : the huge sums of dollars that had been pumped into the rest of the world and were now held by Central Banks could, under the two-tier system established in 1968, be presented for conversion into gold . On 15 August 1971 Richard Nixon resolved this problem quite simply by announcing that the us would no longer honour its post-war commitment to convert dollars into gold . The final fixed link between money and gold was broken . Although gold has continued to serve as part of some countries' reserves, its price has fluctuated widely . In the absence of any alternative, the world was forced to accept an international monetary system based on a dollar standard . In 1973 the dollar was effectively devalued for a second time . The publication of figures showing the size of the 1972 balance of payments deficit led to another run on the dollar . As short-term capital flooded out of the us again in an attempt to beat the anticipated devaluation, adjustment was once more forced predominantly onto other countries . The turbulence that was engendered by these huge flows resulted in the closure of foreign exchange markets for two weeks . When they reopened it was not on the basis of the system of fixed exchange rates adopted at Bretton Woods, but a system of floating exchange rates which fluctuated in response to market forces . Floating exchange rates had been advocated for some time by Milton Friedman and other monetarist economists . They argued that if a country ran either a surplus or a deficit on its balance of payments, this would be smoothly and automatically eliminated by allowing the exchange rate to adjust in response to supply and demand in the market for foreign exchange . This is wrong because the main force in foreign exchange markets since the late 1960s has not arisen from trade or investment imbalances, as monetarist

Money theory tended to assume, but from short-term flows of money capital . Multinational banks keep their reserves and idle money capital in the country where it will earn the highest rate of interest . Small changes in interest rates can result in large flows of capital and this has a marked effect on the demand for foreign exchange . Once exchange rates were also free to adjust, this made yet larger flows of short-term capital likely . If the value of a currency was falling, or merely expected to fall, capital would move out in order to avoid a loss of value ; conversely, in the case of a currency's value rising, capital would move in . Far from adjusting smoothly, a system of floating exchange rates is likely to exacerbate any imbalance, and can lead to highly unstable gyrations in the value of exchange rates . The ending of convertibility and the introduction of floating exchange rates marked the collapse of the Bretton Woods system . It had been undermined by large flows of money capital associated with the internationalisation of financial markets . The us government had tried to control these flows so that they didn't inhibit its attempts to boost the us economy, but this only succeeded in driving the emerging international financial market to organise itself outside the control of the us or any other national government . When the '60s boom finally came to an end and threatened widespread bankruptcies, the us state provided the reserves for an enormous expansion of credit . Because of the international role of the dollar, the expansion of credit resulted in huge sums of dollars being pumped into the rest of the world, from where they could be presented to the us for conversion into gold . The link between the dollar and gold was the point at which all the contradictions of private accumulation and the international state system had become focused. When that link could no longer be maintained it signalled, perhaps more clearly than any other single event, that the underlying conditions that had made possible the post-war boom had come to an end. At the same time that the us government was trying to reflate its economy, similar policies were being pursued in the other advanced capitalist economies, which had also been affected by the recession in 1970 . In Britain it was the time of the Heath government's U-turn and the so-called Barber boom . Throughout the advanced capitalist world there was a massive expansion of credit as Central Banks provided the reserves to finance growing government and private debt . For the first time since the war, an upturn in the business cycle occurred simultaneously in all the advanced capitalist economies . The synchronised upturn resulted in an unusually large increase in the demand for primary commodities and their price

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The 1974 slump

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began to rise sharply . On top of this, many of the dollars that had flooded out of the us were deposited in the Eurodollar market by Central Banks eager to earn some interest on their large holdings, and these dollars were then used to finance extensive speculation in primary commodities, so sending prices still higher . Between 1971 and 1974 primary commodity prices tripled and this was a key factor in the world-wide acceleration in inflation that occurred at the time . The upturn itself, however, was largely dependent on government and consumer expenditure, and with very little real investment, it would have been difficult to sustain . According to the us National Bureau of Economic Research, which has a sophisticated procedure for monitoring the business cycle, the upturn had already begun to slow down in Spring 1973 . This was a short time before the us monetary authorities, anxious at the rising rate of inflation, moved to restrict the supply of reserves to the banking system . By Summer 1973, interest rates had risen to record levels, and in November the us economy entered its most serious recession since the 1930s . Expansionary policies in some countries managed to postpone the downturn, but by 1974 the recession had hit all the advanced capitalist economies and in the twelve months between April 1974 and April 1974, industrial production in the OECD economies slumped by 10% . The underlying cause of the slump was that in the course of the post-war boom there had been a massive accumulation of capital. At the same time, it became increasingly difficult to generate a surplus that was large enough to maintain the rate of return on capital, and by the 1960s a decline in the rate of profit was becoming marked in all the advanced capitalist economies . A recession had tried to break in the us in 1966 but had been suppressed following a large increase in government expenditure on the New Society Program and the Vietnam war . In West Germany, a serious recession in 1966-67 had promoted sufficient restructuring to result in a strong cyclical upturn . In Britain, following the Labour government's deflationary response to the balance of payments crisis in 1966, unemployment increased significantly for the first time since the war . Economic growth in the us and other countries became increasingly dependent on a growing expansion of credit to finance expenditure, partly by governments, but above all by private consumers and corporations . The expansion of credit postponed a major slump, but when it finally occurred in 1974 the banking system was very overextended and this led to a serious domestic and international banking crisis . Important banks went bankrupt in several countries, of which the largest were the Franklyn National in the us and the Herstadt in West Germany . In Britain, where a secondary bank

Money

called the London and Counties went bankrupt, the Bank of England mounted a major rescue operation - `the lifeboat' -'to prevent a collapse of secondary banks which had become hopelessly overstretched in the property market . The most serious international aspect of the crisis was in the unregulated Euromarkets, where many banks made substantial losses . In the absence of an international lender of last resort, a serious collapse of confidence between banks was only averted as a result of concerted action by several Central Banks, most notably the US Federal Reserve and the Bank of England . Together with the Bank for International Settlements, the Basle-based bank to Central Banks, a rudimentary system of responsibility for international banking transactions was fashioned . The onset of the recession was marked by mounting stocks of unsold commodities, and financially pressed corporations were anxious for credit. But once production had been cut back and it was clear that capital could not be invested profitably, there was both an abrupt decline in the corporate demand for loans and an increase in deposits as corporations placed their over-accumulated capital in the Euromarkets . This coincided with the influx of petro-dollars from the newly rich oil-exporting countries . The hard-pressed Eurobanks were desperate to find customers to lend this capital to, and their attention shifted from corporate to sovereign borrowers . This initially involved financing the balance of payments deficits incurred, partly because of the oil-price rise, by several of the advanced capitalist countries, of which Britain, Italy and France were the most important . But from 1975 bank lending was directed increasingly towards Third World countries who wanted to finance ambigious development programmes . The capital that could not be invested at a sufficiently attractive rate of profit in the advanced capitalist economies was being deposited in the Euromarkets and from there lent to the Third World . Third World countries until then had to rely for external finance almost entirely on official development aid, either from multilateral institutions such as the World Bank, or from the bilateral aid programmes run by individual countries . The rapid growth of private bank lending therefore meant a shift from official to private, market-based channels of finance . While the official finance had been spread over a large number of countries, often after an extensive appraisal of investment projects, the new private finance was heavily concentrated on a relatively small number of newly industrialising countries . The pressure on the international banking system was relieved by an upturn in the world economy in Spring 1975 . This was exceptionally strong in the us, where a large number of new jobs were created, and it was also strong in the newly industrialising

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countries . In Europe, Japan and the non-oil developing countries, however, the recovery was, by post-war standards, weak . Bankers began to congratulate each other on what they perceived as their success in recycling petro-dollars . But this was based on a very short-term view of the problem .

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A weak upturn and an even bigger slump

The recovery in Europe and Japan after 1975 was constrained by the balance of payments, which now had to bear the added burden of higher oil prices . In Britain the Labour government attempted to loosen this constraint by devaluing the pound . This was intended to cheapen exports and so compensate for the slow growth of productivity. With the system of floating exchange rates that had existed since 1973, governments did still intervene in foreign exchange markets, in theory just to smoothe out disruptive fluctuations . In practice many governments could not resist the temptation to try and influence the underlying level of the exchange rate too . (That is why the system is sometimes referred to as `dirty floating' .) When it became clear in 1976 that the pound was being nudged down, there was a large outflow of short-term capital from Britain . The Labour government had to introduce a deflationary package in order to stem a collapse of the exchange rate and this was the mechanism that ensured that the recovery in Britain was weak even by European standards. This episode also marked the beginning of explicitly monetarist policies by a British government . The strong recovery in the us from 1975 was made possible because the international role of the dollar enabled the us to run a balance of payments deficit and, now that convertibility had been ended, there was no longer the danger of a run on its gold reserves . The US ran a trade surplus in 1975 as a result of the large fall in imports that accompanied the recession . But once the recovery was underway, the trade balance moved into deficit in 1976 and the size of the deficit increased through 1977 and 1978 . Much of the competitive advantage that us exports had gained after the devaluations of 1971 and 1973 had been eroded as other countries in turn devalued their currencies . The Carter government therefore tried to achieve a third devaluation of the dollar . From late 1977 the dollar was allowed to float down on the foreign exchange market, but this turned to a rout in Autumn 1978 as short-term capital cut and fled, and deflationary measures had to be introduced in order to push up interest rates and stem the flow . This succeeded temporarily by attracting short-term capital back to the us. But it did not touch the problem that as a result of the underlying us deficit, the rest of the world was being forced to accept huge sums of dollars . The situation culminated in a major crisis of the dollar in Autumn 1979 ; as the exchange rate fell there was a massive move

Money

out of the dollar in foreign exchange markets, one result of which was the explosion in the price of gold which occurred at the time . This coincided with a crisis in domestic us credit markets where, as a result of inflation, there was a move out of the dollar and into other stores of value such as real estate . In order to protect the dollar, the Federal Reserve introduced a series of measures that sent the US prime rate of interest shooting up to a then unprecedented level of 15% . This attracted sufficient short-term capital back to the us to stem the fall in the exchange rate, but at the beginning of 1980 the economy entered another recession . The importance of this episode is that it illustrates the bounds within which the us government is able to influence the regulation of its national economy . The ending of convertibility had removed the danger of a run on US gold reserves, but the limits to accumulation were reasserted through the dollar's exchange rate . Once again it showed that the us is also subject to the constraints of the international financial system . The limits of the strategy introduced under Nixon and continued under Carter had been reached even before Ronald Reagan assumed office . The Reagan government inaugurated a new strategy by supporting policies that sent the prime rate of interest soaring to over 20% . The huge sums of capital this attracted pushed the value of the dollar up in a complete reversal of the policies that had been pursued over the previous decade to cheapen exports . As high interest and exchange rates cut into corporate receipts the recession that had followed the policies introduced under Carter was seriously deepened . Monetarist policies had been introduced in Britain in 1976, but after the election of the Thatcher government in 1979 they were pursued with far greater vigour . A tight restriction on the supply of reserves to the banking system led to a sharp rise in interest rates . As in the us, this attracted short-term capital into Britain and pushed up the exchange rate of the pound, thereby reducing the sterling value of foreign earnings . The financial pressure on industrial and commercial companies led to a large fall inoutput and resulted in an even deeper slump than 1974 . The Thatcher government was completely committed to this course, but unless it had cut the financial links between Britain and the rest of the international capitalist economy, it would have found its options seriously limited . The high interest rates that the us had to maintain to protect the dollar meant that short-term capital would be attracted from any country where interest rates were significantly lower . Given the volatility of the floating exchange-rate system, this could rapidly lead to a collapse of the exchange rate . This is what happened in France at the beginning of 1983 when the government was

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forced to abandon its reflationary policies in order to protect the Franc . The 1980-82 recession in the us was consequently transmitted to all the other advanced capitalist economies as a result of the international mobility of money capital The international debt crisis

The most acute impact of the recession was not however on the advanced capitalist economies but on the highly indebted countries of the Third World . By the summer of 1982, the total international debt of the non-OPEC developing countries was $550 billion of which $270 billion was owed to private banks. Furthermore, over half the total bank lending was to just three countries : Argentina, Brazil and Mexico . The onset of recession affected the ability of third world countries to service their debts in two ways . Firstly, there was a sharp decline in the demand for primary commodities and, as a result, their price fell . Since primary commodity exports are a major source of income for most third world countries, this combination of lower sales and lower prices meant a marked reduction in their foreign earnings . Secondly, most of the bank loans had been contracted at variable rates of interest, and these were adjusted at regular intervals to keep them in line with current market rates . Consequently when interest rates shot up, so did the cost of servicing the outstanding debt . Third world sovereign debtors were therefore squeezed between falling incomes and rising interest charges . The debt crisis came to a head in August 1982 when Mexico in effect defaulted on its international payments . The banks, however, were anxious not to declare a formal default as this would have required them to write off their loans to Mexico as a loss . As Keynes said : `If you owe the bank a thousand pounds you have a problem ; if you owe your bank a million pounds your bank has a problem .' Although the loans were arranged through consortia involving in total as many as 200 banks, much of the debt is owed to a small number of very big international banks . In 1982 the nine largest US banks had outstanding loans to the third world that were equal to twice the value of their capital, and their loans to Mexico alone amounted to half the value of their capital . Rather than write these loans off, the banks embarked on what is known as rescheduling. This involves postponing scheduled repayments of capital and, most importantly, lending a country yet more money so that it can meet at least some of its interest payments and thereby avoid having to be declared legally in default . Instead of having to record a substantial loss, by pursuing this course banks could acquire a further interest-earning asset for their books! It is of course a relatively short-term solution

Money since, unless a country can increase its foreign earnings sufficiently, this might just result in an even larger non-performing loan that will have to be written off in the future . Since the Mexican default, the focus of the crisis has shifted from one country to another as Brazil, Venezuela, Argentina and other smaller debtors were unable to meet their debt-service payments . Although banks and debtor countries wanted to avoid a formal default, both sides employed knife-edge tactics while bargaining over the terms of rescheduling agreements, and this inevitably carries a risk . Since every loan is subject to a cross-default clause, declaring any one loan in default would trigger the default clause in every other loan to the same country . Because of the overexposure of the big banks, there was a widespread fear that if a country defaulted, it might bankrupt at least one major bank, and because of banks' interdependence, this might in turn precipitate an international banking collapse . The growth of sovereign lending after 1975 appeared to offer the possibility of appropriating surplus from the third world at a much higher rate than was possible from the working class in the advanced capitalist countries . But when the credit-financed boom in the us threatened a collapse of the dollar in 1979, the consequences of the recession that followed made it impossible for the third world countries to service their debts . The crisis that had broken in the advanced capitalist countries in 1974 had been displaced through the international financial system onto the third world . The immediate crisis in Mexico - and subsequently in Brazil and Argentina - was stalled by the emergence of an international lender of last resort . Coordinated through the Bank for International Settlements, the us Federal Reserve, the Bank of England and the International Monetary Fund assembled shortterm loans and pressured reluctant private banks to participate in new medium-term loans . The position that the IMF had come to occupy was now a far cry from that envisaged at Bretton Woods . The reserves of this official institution had become dwarfed by the huge growth of those associated with private international financial markets . No longer the major source of financing for balance of payments deficits, the IMF became responsible for negotiating the terms of a small pilot loan, and the successful completion of the negotiations would be the signal for private banks to provide the bulk of the new finance required . The IMF's terms are strongly influenced by modern free-market principles, which economists employed by the Fund have played a leading part in elaborating . Instead of making loans that would ensure the political control of a market system, the IMF has therefore become the instrument by which the

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terms of market-based private finance are agreed . The conditions attached to an IMF loan focus on achieving short-term monetary targets . They require a big cut in state intervention and result in a severe deflation . The reduction in the government's need for finance and in the general level of imports is supposed to ensure that the balance of payments will provide enough foreign exchange to meet future debt-service payments . The consequences for living standards, especially for the urban poor, have been horrific, and the introduction of IMF policies has on several occasions led to breakdowns in public order . But the result of the IMF's policies, which occurred at the same time as a large decline in new loans, has been to achieve a substantial net transfer of capital from Latin America to the US . Conclusion : paying for Mx

The possibility of an international banking crisis has receded as a result of the remarkably vigorous recovery that began in the US in 1983 . Interest rates came down slightly and primary commodity prices stopped falling . Quite inadvertently, the Reagan administration appears to have stumbled onto one of the few combinations of policy that could have succeeded in the US . The upturn has been boosted by huge government spending, above all on armaments . This has resulted in a budget deficit that is on a larger scale than that advocated by any European social democratic administration . Reagan's novelty is to run this deficit at the same time as a relatively tight monetary policy. Because government borrowing comes on top of a huge amount of lending to the private sector, interest rates have remained at an unusually high level for a period of recovery. High interest rates have attracted short-term capital to the US and pushed the dollar exchange rate to higher and higher levels. The dilemma that us governments have faced for the last quarter century has been how to boost the national economy while avoiding the international consequences of a balance of payments deficit that could lead to a run on gold or, more recently, a collapse of the exchange rate . The upturn that began in 1983 sucked in imports on a huge scale while the high exchange rate meant that exports remained depressed . The result has been that the US has run a trade deficit of unparallelled proportions . Because of the dollar's role as international money, other countries have had to accept the dollars that have been forced on them . In effect the rest of the world is granting credit to the us equal to the size of its deficit . If foreign holders of dollars began to sell, it could lead to an even more dramatic collapse of the dollar than in 1979 . What has prevented this so far as been the high level of US interest rates. This has ensured that sufficient capital has flowed into the US to

Money temporarily offset the underlying balance of payments deficit . Foreign Central Banks are keeping the dollars that have flowed into their reserves in the US and investing them in short-term Treasury Bills . (These commonly have a maturity of three months but can easily be sold at short notice .) Foreign dollar holdings are therefore simultaneously financing both the US balance of payments deficit and the US government deficit . (Compare the following us estimates for 1984: balance of payments current account deficit, $178 billion ; Federal government deficit, $182 billion; military expenditure, $234 billion.) The rest of the world is not only constrained by high US interest rates, it is also financing the US recovery. As the former basis of us dominance in the world economy was eroded, the us government hit on a strategy of financial manipulation that has helped to re-establish its dominance on a new basis. But it is a precarious strategy . The real strength of the recovery depends on the extent to which both the recession and the upturn have promoted a transformation in the structure of the productive economy . The credit system in the us remains under great stress and the high level of interest and exchange rates squeezes all but the most profitable corporations . The biggest ever bail out amounting to $4 .5 billion had to be mounted by the Federal Reserve in June 1984 in order to prevent a major bank, Continental Illinois, from collapsing . Some estimates have claimed that the dollar is over-valued by as much as 30%, and if us interest rates should fall at all, this would risk a serious run on the dollar . If that happened the monetary authorities would have to act quickly to push up interest rates to whatever level was necessary to attract capital back to the us . At that point the third world debt crisis would again become an immediate issue . us capital has been able to benefit from the current system of international financial relations based on private markets and the dollar . However the shift away from the politically regulated system set up at Bretton Woods has in general meant that the limited space within which national governments could pursue independent economic policies has been yet further constrained . An urgent objective for any government wishing to pursue an independent policy will be to close the channels by which international financial flows impose the logic of the market on elected governments . A democratic economic policy will involve acting at an international level with other countries to construct an alternative to the dollar-based system and to wrest control over international economic relations away from private markets and into the hands of institutions that can be subjected to some type of popular accountability.

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Table 1 Non-Oil Developing Countries Debt Of which Debt Debt Service External ratio to exports Private Service Debt Mkt, % $bn % $bn 14.0 96 .8 50.0 15 .3 1973 11 .5 120 .1 51 .4 17 .1 1974 14.0 146 .8 53 .7 21 .1 1975 24 .6 13 .9 181 .4 54 .7 1976 14.0 221 .8 55 .7 30 .7 1977 44 .7 17.3 1978 276.4 57 .5 18.1 1979 324.4 58 .9 60 .2 16 .3 375 .4 58 .6 68 .1 1980 21 .0 436.9 59 .8 92 .3 1981 22 .3 505 .2 60 .5 107 .8 1982 Source: International Monetary Fund, World Economic Outlook Table 2 Total External Debt, end 1982, $billions 21 major LDC borrowers Latin America Argentina Brazil Chile Colombia Ecuador Mexico Peru Venezuela Asia Indonesia Korea Malaysia Phillippines Taiwan Thailand Middle East and Africa Algeria Egypt Israel Ivory Coast Morocco Nigeria Turkey Source: Morgan Guarantee, World Finance Markets

514.5 288 .1 38 .8 86 .3 17 .2 10 .2 6 .6 84 .6 11 .2 33 .2 108 .8 21 .9 37 .2 8 .6 20 .7 9 .3 11 .1 117 .6 14.8 21 .8 28 .0 8.4 10.8 11 .2 22.6



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This is a revised version of the background paper on International Finance presented at the 1983 Conference of Socialist Economists, `The World Economy in Crisis' . I am grateful to members of the CSE Money and Finance Group and the Open University Financial Studies Group for extensive discussions. I would particularly like to thank Laurence Harris and Jerry Coakly for their many helpful comments .

Bank for International Settlements, Annual Reports Block, Fred (1977) The Origins of the International Economic Disorder, University of California Press . Brett, E . et. al ., article on British position at Bretton Woods in History Workshop Journal, 1982/83 Calleo, David P., (1982) The Imperious Economy, Harvard University Press Coakley, Jerry & Harris, Laurence (1983), City of Capital, Basil Blackwell Harvey, David (1982) Limits to Capital, Basil Blackwell Lipietz, Alain, (1982) Credit Money : A Condition Permitting Inflationary Crisis, Review of Radical Political Economy, Volume 14, Number 2, 49-57 . Mendelsohn, M . Stefan (1979) Money on the Move, The Modern International Capital Market, McGraw Hill Parbonni, Ricardo (1981) The Dollar and its Rivals, New Left Books Wojnilower, A. ( ) The Central Role of Credit Crunches in Recent Financial History, Brookings Papers on EconomicActivity, Number 2, 277-337 .



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John Sender and Sheila Smith

What's right with the Berg Report and what's left of its critics? The Berg Report, Accelerated Development in Sub-Saharan Africa : an Agenda forAction (World Bank, 1981), was written in response to a request in 1979 by the African Governors of the World Bank for a review of sub-Saharan Africa's economic prospects . The Report reviews progress since 1960, in particular the improvements in education, health and infrastructure . The major focus of the Report is on the persistence of balance of payments deficits, which worsened during the 1970s . Although external factors, especially unfavourable movements in the terms of trade, are acknowledged to have contributed to these deficits, the Report argues that the main cause of increased current account deficits in the 1970s has been the slow rate of growth of exports . This poor export performance is attributed to policy biases against both agricultural and export production, to rapid population growth which increases consumption and hence reduces the exportable surplus, and to the inflexibility of African economies . The key policy recommendations are as follows : devaluation, improved price incentives for exports and for agriculture, lower and more uniform protection for industry, and a decrease in the use of direct controls . The Report also argues that the public sector is over-extended, given the scarcity of financial resources, skilled labour and

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organizational capacity, and that this over-extension `has resulted in slower growth than might have been achieved with available resources, and accounts in part for the current crisis'. Thus the Report is highly critical of domestic economic policy in Africa, and although a strong case is made for an increase in the volume of aid, the emphasis is on changes in domestic policy as the key to improved economic prospects.

• The starting point for this paper is that the Berg Report (World Bank 1981) highlights certain problems which are important, and for which solutions have to be found . In particular, many sub-Saharan African (SSA) countries have been experiencing severe balance of trade deficits, falling volumes of exports, and hence a diminishing capacity to import the consumer, intermediate and capital goods needed for economic growth . Part of this is attributed by Berg to overvalued exchange rates, which is very difficult to deny . Berg also discusses the difficulties associated with, and the negative effects resulting from, the use of administrative controls on imports : corruption, delays, underutilisation of capacity, etc . Import-intensive industry has been encouraged, while industrialisation based on the use of local raw materials and labour has been discouraged . In the context of severe shortages of foreign exchange, efficiency in its use ofparticularly vital . Furthermore, the Berg Report indicates that limited benefits have stemmed from public sector activities in many African countries ; the large shares of public expenditure allocated to administration and defence ; the huge expansion of unproductive employment, are all common characteristics of the public sector in African countries . Furthermore, marketing boards and parastatals remove large proportions of potential producer incomes . Trends in world market prices cannot explain the degree to which African agricultural producers have been forced to accept low returns for their crops . We start by criticising the response of some of Berg's critics (IDS 1983 ; Sau 1983 ; Clough and Williams 1984 ; Loxley 1984) . The first section of this paper is entitled : What's Left of Criticisms of Berg? and is divided into eight sub-sections . The second section is entitled : What is wrong with Berg? and outlines a somewhat different critique from those discussed in the first section . Finally we have a section called : What's left of the Alternatives to Berg? in which we criticise the alternative economic strategies put forward by the left as substitutes for the Berg strategy . We will make a virtue of our deficiencies in not detailing our own alternatives . This can

The Berg Report

127

be justified on the grounds that the contents of any alternative should vary as between different SSA countries, for example, the degree of priority which should be accorded to the establishment of a capital goods industry in Nigeria is very different from that accorded in Upper Volta or Mali . We will, however, discuss some of the criteria which any credible alternative must fulfil . A common strand in most critiques of the Berg Report is a `defence of the state' . A defining characteristic of these critiques is a naive and utopian view of the actual or potential role of the state . Some quotations will demonstrate this : Colclough states that, `In the case of poor rural and urban populations . . . government expenditures simultaneously promote both growth and distributional goals' (Colclough 1983 : 28) ; Philip Daniel argues that, `In marked contrast to the thrust of World Bank policies in the recent past, the Report makes very little mention of the redistributive role of the public sector' (Daniel 1983 : 12) ; finally, Sau, on explanations for slow growth rates of food output, states that, `the postindependence governments wanted to respond to the needs and aspirations of people in remote and disfavoured regions of their countries . They hoped to achieve greater regional balance in development, since in the previous decade resources had been concentrated on export-oriented sectors and regions' (Sau 1983 : 19C .i, emphasis in original) . This approach involves a major contradiction ; it implicitly or explicitly rejects the notion of `trickle down' concerning private economic activity, but asserts a powerful 'trickle-down' process concerning state activity . Perhaps this is based on the hope that a huge increase in the already phenomenal level of public sector employment will eventually ensure that all the rural population has a bureaucratic job . Some proponents of this view, for example

What's left of criticisms of Berg?

Table 1:

Percentage Distribution of Government Expenditure 1978 All Countries

African Countries Low Income

Middle Income

Low Income

General Public Service

22.9

20.5

18 .4

14 .2

8 .2

Defence

11 .2

6.5

11 .3

11 .5

6 .9

34.1

27 .0

29 .7

25 .7

15 .1

Source: World

Bank, 1981

Middle Income

Industrial

Capital & Class 128

Colclough, recognise the contradiction to a certain extent . He reproduces Berg Report figures (see Table 1) and then states that what governments ought to do, instead of cutting public expenditure, is, first, reduce expenditure on administration and defence, and increase expenditure on education, health and public services ; secondly, they should reduce public sector wages . No explanation is given of the political processes whereby this dramatic change might occur. Evidence on the distribution of public expenditure within categories of health, education and housing does not support the equity arguments . Even an `acceptable' state, such as that alleged to exist in Tanzania, has a less egalitarian record than is usually assumed : the overwhelming majority of state expenditure on health favours urban and relatively high income sections of the population .' Mbilinyi's work on education (1973) and Coulson's data on the distribution of the benefits of public sector activities also call the `equity' argument into question (Coulson 1982) . The argument that public expenditure is a'good thing', or at least that exhortation can lead to it becoming a `good thing' in terms of its impact on equity and the welfare of the poor, is an utterly apolitical one . It does not attempt to address the question of why public expenditure is what it is, has the effects it has - and implicitly assumes that the politics of public expenditure can be transformed with ease . The Berg Report's political analysis is said by all critics to be inadequate, yet these critics defend the public sector on the grounds that it is already, or can with ease become, a caring and sharing distributor of Basic Needs . The political analysis of Berg's critics leaves everything to be desired .

'Bogey theories ofawfulness' Many criticisms of the Berg Report amount to variations on `Bogey theories of awfulness' and the finger is pointed at foreign agencies such as the World Bank and IMF as Major Bogies . One critique (Daniel 1983) is devoted entirely to demonstrating that the structural adjustment loans and other strategies advocated by the Berg Report are very much consistent with, in fact in his view suspiciously similar to, the IMF approach to adjustment and conditionality . No critique of IMF practice is offered - it is, apparently, enough to indicate similarity to anything done by the IMF to prove that it should be rejected. One problem with these arguments is that Berg is recommending a massive increase in aid, and a switch from project to programme aid. In the past, criticisms of aid have stressed the niggardly level of rigidly project-tied nature of aid . Furthermore, there have always been substantial elements of

TheBergReport

effective conditonality attached to even low levels of project aid disbursed by the IBRD . What new factors have caused the critics to see these positive changes in such a negative light? For those who regard the IMF as a bogey there are certain additional points which it might be useful to stress : as has recently been pointed out by Killick (1982) and Griffith Jones (1981) criticisms of the IMF have frequently diverted attention from domestic policy failures, involving gross neglect of the productive capacity of the economy, absurdly ambitious and long-gestating infrastructure projects, and welfare expenditures that subsidise middle class consumption behind egalitarian rhetoric . Moreover, the IMF has not systematically discriminated against socialist states . The fact that some attempts at `transition to socialism' have generated financial chaos is not primarily attributable to the IMF . This tells us that such transitions are difficult for poor economies attempting to establish or sustain a manufacturing base, and that the capacity of the economy to earn the foreign exchange required for accumulation has to be assured . In fact, a far more substantial and immediate enemy of transitions to socialism than the IMF, apart from domestic class forces opposed to such transitions, is the Reagan regime . The Reagan administration's attempts to restrict IMF resources and IDA ought to tell us something important about the demands that the left should be making with regard to the future role of the IMF . Daniel's substitute for a critique of the new World BankIMF double act is to pose a number of questions (Daniel 1983 : 16), three of which we will quote, briefly answer and/or dismiss as irrelevant . `Is a largely uniform approach to domestic policy appropriate across the whole range of countries in SSA?' The IMF does not take a uniform approach to domestic policy, nor have the terms of its intervention been uniform across countries (see for example Killick 1982) . `Is a sharp move to export orientation justifiable or even practicable in current and expected international conditions?' In section A.4 below, we argue that it is not only justifiable and practicable, but also essential. `Why have questions of income distribution suddenly become unimportant?'

This question assumes that these issues have been important in the recent past . To whom were they important and what difference did it make? In what ways, apart from naive presumptions about the state, can it be demonstrated that Berg's recommendations will lead to particular patterns of income distribution?

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Income distribution The third issue is income distribution . Nearly all critics are united in asserting that Berg's recommendations will inevitably and obviously lead to a worsening income distribution . Aside from those which rely on the very dubious assumption that the public sector invariably has a positive distributional effect and that, therefore, a smaller public sector will worsen distribution, the basis of the `distribution' criticisms of Berg is not made clear .' What are the distribution critics arguing? To what aspects of distribution are they referring: between men and women, poor, middle and rich peasants, farm owners and capitalists, recipients of wages, profits, rents and dividends? Without any clarity about the categories of income recipient being referred to, the argument that Berg's proposals will `worsen' things is no more than empty rhetoric. If the group whose fate is being lamented is `the poor', it might be instructive to consider whether `the poor' are worse off, in terms of nutritional status, life expectancy, etc ., in areas of growing export crop output, or in areas of stagnant, falling or no export crop output . We are unlikely to find that it is the former.' The fourth set of criticisms of Berg concerns the terms of

Tablet: World Market Share of Sub-Saharan Africa in Selected Export Commodities, 1976-78

Beef Palm Oil Bananas Maize Timber

1 .6 5 .7 4 .6 0 .4 5 .1

11 .3 8.9 4.8 4.4

Cotton Tobacco Rubber Hides

Source: World Bank, 1981, Table 3 .5 Table 3: Africa's Share in World Exports of Selected Commodities, %

Cocoa Groundnuts Groundnutoil Palm oil

1970-72

1976-78

1982

80.1 53 .5 55 .7 20 .8

69 .3 35 .5 43 .2 5 .7

65 .0 26 .8 42 .2 2.5

Source: 1970-72 and 1976-78, World Bank, 1981 ; 1982 : FAO, Production Yearbook, 1983

The Berg Report trade and elasticities of demand for primary commodities : it is, apparently, still received wisdom that the terms of trade for ldc's and for primary commodities are inevitably subject to a secular decline, despite the well-trodden ground indicating that empirical evidence does not support such clear and simple conclusions (Spraos 1982) . Sau (1983) and Loxley (1983), for example, assert the secular decline without discussion . Godfrey (1983), more sophisticated than the latter two, uses a different argument : that the elasticities of demand and large share of world markets for many of SSA'S primary commodities are such that increasing the volume of primary exports will be a recipe for reduced, rather than increased, foreign exchange income . This is unconvincing : first, there are also `many' primary commodities for which SSAS share in world markets is very small indeed (see Table 2) . There are, in addition, other primary commodities produced on a large scale in Africa that hardly figure as exports at all, whose share in world markets is therefore miniscule . The exports of these could certainly be increased without any impact on world prices . Secondly, in the case of a long list of agricultural commodities, non-African countries have been increasing exports whilst Africa's share has been falling (cocoa, groundnuts, groundnut oil, palm oil, bananas, maize, timber, tobacco, rubber, hides and skins, sisal) . Table 3 shows the sustained rapidity with which Africa has lost its share of the world market for some of these commodities . It should be noted that even if Africa's share was 50 per cent, one would have to assume a price elasticity of demand with respect to exports of less than 0.5, if one wishes to argue that an increase in the volume of Africa's exports would lead to a reduction in Africa's export earnings .' Thirdly, price movements for several primary commodities have been favourable during 1970-80 : of those commodities which experienced positive rates of growth of price during the 1970s, only coffee increased in export volume from SSA (out of coffee, cocoa, timber, rubber, sisal) . Fourth, if we consider export unit values and volumes for African agricultural exports as a whole, we find that in the aggregate, price trends cannot be regarded as the source of falling export earnings, with export volume in 1982 more than 10 per cent less than in 1971 (see Table 4) . Finally, of those countries which experienced a reduction in their income terms of trade during the 1970s (14 countries), only one (Liberia) had a positive rate of growth of export volume . For the Godfrey hypothesis to be convincing, we would expect that more than one country would have shown a negative association between export volume and export income . In some cases, the decline in export volume has been, and continues to be, dramaticsee Table 5 . Note that, in addition, between 1979-82, in Tanzania,

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Table 4 : African Agricultural Exports Export Unit Value 1971 53 1974-76 100 1982 132 Source: FAO Production

Export Volume 99 100 89

Export Value 52 100 119

Yearbook, 1983

Table 5: Selected SSA Economies : Average Annual Export Growth Rate, Volume, Percentage

1970-79 Benin Sierra Leone Tanzania Sudan Source: World

-11 .4 - 6.5 - 6.6 - 4.4

Bank, 1981, Table 7

Table 6: Total Growth of Cereal Imports, Volume, Percentage

1974-81 Kenya Ivory Coast Nigeria Ghana Source: World

3460 260 527 45

Bank 1983a, Table 6

the volume of cotton and sisal exports has halved ; the volume of cashew exports fell to a quarter of 1979 levels, and the volume of tea exports fell to less than three-quarters of 1979 levels (IMF 1983 : 17) . How can the left deny the significance of these declines and fail to consider their policy implications? It is possible, then, to agree with Godfrey that `The consequences of increasing export incentives on a continent-wide basis have to be looked at extremely carefully, commodity by commodity' (Godfrey 1983 : 40), but it is not clear that the results of such careful scrutiny would support Godfrey's arguments . It is not, however, possible to agree with Griffith Jones' pessimistic critique of Berg's `unrealistic' projections of growth in the volume of world trade in primary commodities of interest to African ex-

The Berg Report porters . Griffith Jones argues that the volume of world trade in these commodities is unlikely to grow as rapidly as Berg suggests, and is generally pessimistic about export growth in the context of slow growth of world trade in the 1980s . This point is irrelevant : the rate of growth of exports of a range of African primary commodities in the 1970s was substantially below the growth of world trade of those commodities (copper, iron ore, zinc, tin, lead, sugar, groundnuts, groundnut oil, beef, palm oil, bananas, timber, cotton, rubber, and hides and skins) .

Food self-sufficiency This leads logically to the next problem : of food imports, food self-sufficiency, food self-insufficiency, self-sufficiency and insufficiency in general . Food imports seem to be regarded very widely as a Bad Thing, that ought to be stopped or at least, made unnecessary, yet it is not clear why this has become a tenet of left thinking. In fact it is amazing that it should have become so . What matters is how much people have to eat, which is not determined by whether countries import food or not . In fact, countries that can afford food imports are more likely to be characterised by sufficient food availability than those which cannot . The world's largest food importers are Japan and the USSR, the SSA countries which increased food imports most rapidly in the 1970s were among the fastest growing (see Table 6), Kenya, Ivory Coast and Nigeria . On the other hand in Ghana, were GDP 197081 fell by an average 0 .2 per cent pa, and where the recorded fall in domestic food output per capita was among the largest, the growth of food imports was relatively tiny . This should not be surprising, since historically, rapid economic development has often been associated with rising food imports - Holland in the seventeenth century, Japan in the twentieth (see Wagstaff 1981) . There is no discernible relationship between changes in food output per head and trends in food imports . There is, instead, a relationship between trends in export earnings and in food imports : of total food imports by sub-Saharan Africa, 50 per cent of all animal and vegetable oils and cereals, and more than 50 per cent of sugar, meat and wheat imports are accounted for, not by the poorest countries facing the most disastrous trade experience, but by oil-exporting countries . In fact, it was only in the category of Middle Income Oil Exporting SSA countries that the share of food imports in total imports failed to fall between 1960-78 - it remained constant at 14 per cent . Wagstaff has shown, for the world as a whole, a significant positive relationship between changes in food imports per head and changes in GDP per head . Furthermore, despite the rapid growth of food imports in Ivory Coast and Kenya, the share of food in total imports fell during 1960-80, from 12 per

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cent to 8 per cent in Kenya, and from 18 per cent to 15 per cent in Ivory Coast . Only in five SSA countries did food imports rise as a percentage of total imports: Central African Republic, Uganda, Sudan, Liberia, Congo . To the extent that there is a relationship between food imports and food availability, it is more likely to be positive than negative, in contrast to the presumptions of many critics of Berg . Devaluation - `not on your nelly'

Another feature unifying Berg's critics is their attitude to devaluation, which can be aptly summarised as the `not on your nelly' (NOYN) approach . This approach excludes posing the most important question, which is : under what circumstances would devaluation increase foreign exchange earnings? This question involves others, concerning the elasticity of demand for imports and of supply of exports. Furthermore, the domestic inflationary consequences need to be analysed, as well as contractionary implications . In addition, there are important questions concerning the form that currency depreciations should take, ie the costs of large infrequent devaluations as compared to small frequent depreciations . Bird's survey of devaluation indicates a dearth of empirical studies of either the short-run or long-run effects of devaluation on SSA countries (Bird 1983) . This is, unfortunately, not surprising given the NOYN approach of perhaps the majority of development economists . Aside from precluding the asking of crucial questions, the NOYN approach involves problems concerning alternatives : Bird argues that alternatives to devaluation have proved to be far more administratively cumbersome, and that most foreign exchange controls in practice involve considerable delays in the acquisition of imports, generating underutilisation of domestic industrial capacity ; that foreign exchange controls in practice frustrate, rather than reduce, the demand for imports . The administrative difficulties of implementing a Kaldorian export-subsidy-cum-multiple-exchange rate system in the SSA context also have to be faced and discussed by the left .' Before concluding our discussion of Berg's critics, it is by no means a waste of time to note some criticisms which are so obviously flawed that they merely discredit the left, allowing the dominant neoclassical `get the factor prices right' strategies to present themselves as the only viable basis for economic policy in ldc's . Sau (1983), for example, presents a three-sector model (export crops, superior food and inferior food), in which a decline in the terms of trade will lead inexorably to a reduction in the output of inferior food, and an increase in the output of superior food . This remarkable conclusion is arrived at by a tautological

The Berg Report

analysis in which resources are perfectly mobile between export crops and superior food, so the terms-of-trade induced decline in export output leads to an increase in superior food output and, since the reduction in export output is assumed to generate fewer' domestic resources for total food production, output of inferior food must fall . Sau states, in addition, that since the deterioration in ldc's' terms of trade for primary exports is largely attributable to the price manipulation of transnational corporations (TNCs), Berg's arguments concerning domestic taxation and price policies are, therefore, irrelevant . Presumably the conclusion is that it is easier to abolish TNCs, and thereby increase export producer prices than it is to change bureaucratic or parastatal price policies . Further, Sau advocates both an indiscriminate (or undiscriminating) reduction in export output and an equally indiscriminate increase in exports of 'resource-based industrial exports' . Aside from the inconsistency, no attempt is made to discuss the feasibility or consequences of these policies for foreignexchange availability in particular countries, or even particular commodities . Finally, Sau resorts to the utopian advocacy of industrialisation based on regional economic integration, without any reference to the fact that ldc experience with economic cooperation, let alone integration, allows very little ground for optimism. A further criticism in this category is by Allison and Green, who substitute nationalism for class analysis : they state that `only Africans are primarily concerned with the well-being of Africa' (Allison and Green 1983 : 9) . To whom are they referring? The dominated classes, or members of Haile Selassie's family, or exEmperor Jean Bedel Bokassa? Secondly, Green states that real producer prices for agricultural producers in general `paralleled the evolution of prices at a global level' (Green 1983 : 32) . This is incorrect : real producer prices fell faster than world market prices in a number of welldocumented cases (Ellis 1983 ; Muhtar 1983) . Further, Allison and Green state that the export targets set by the Berg Report `are not feasible' (1983 : 6) . No arguments or data are adduced to show this . 1983 data indicate that world market prices of non-oil primary commodities exported by African ldc's rose by 8 .4 per cent over 1982, and that, for all low-income ldc's the 1983 increase in export volume was 6 .1 per cent (IMF 1983 : 183) . The final criticism to be noted in this section is by GriffithJones, who argues that the Berg Report is recommending a programme of ultra-orthodoxy similar to that adopted in Chile, involving the rapid elimination of all tariffs and other import restrictions . This is not the case, nor has this ever been a condition of IMF

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loans (see Killick 1984) . Indeed, in another context Griffith Jones herself has argued that the ultra-orthodox policies adopted in Chile had less to do with the requirements of the IMF than with the strength of right-wing domestic political forces (Griffith Jones 1981) . Specificity deserves a brief mention . All critics agree that Berg suffers from not enough of it, but demonstrate very little of it themselves. We have given some indication already of the kinds of specific questions which urgently require answers - such as the conditions for a successful devaluation, the type of distributional questions which need to be addressed, which crops can be exported in increasing quantities with positive effects on income, etc . The problem which arises is that traditional left ways of approaching these issues often lead to the wrong questions being asked . Because of the baggage that many on the left carry around with them, eg the public sector is a good thing; devaluation is a bad thing; TNCs and the World Bank and the IMF are very very bad things; primary products are a bad thing ; prices of primary products decline secularly; external factors are more important in the explanation of ldc economic misfortune than internal factors ; regional cooperation among ldc's is a serious possibility ; etc., it is not surprising that persons such as Deepak Lal write what they write (eg Lal 1983). This is not to say that all of the people believe in silly things all of the time, but that enough continue to carry around so much of this baggage for it to be a problem . What is wrong with the Berg Report?

In this section some of the more important objections to the analysis and, particularly, to the policy prescriptions of the Report will be discussed : these concern the nature of the state, the Report's exaggerated pessimism, the analysis of importsubstituting industrialisation, and the central role of `getting prices right' in Berg's policy recommendations. Politics and the nature ofthe state

According to Berg there are several `mistakes' that most African states have made during the 1970s . The origins, or the historical and political context in which these mistakes arose, are only very briefly and crudely discussed, suggesting that, although Berg's political analysis has some interesting points of similarity with some mechanical marxological simplicities (eg the desire to identify and heap opprobrium upon a bureaucratic bourgeoisie), the most obvious defect of Berg's approach is how very little it has to say about political forces, wars and class realities in Africa . Consequently, the impression conveyed by the Report is that merely reading the lessons of ten years' experience, plus the careful perusal of certain econometric studies helpfully provided by the

TheBergReport Bank, (plus, of course, a little bit of Bank co-ordinated donor leverage), will - like a sudden flash of pure light - illuminate areas of policy choice that were previously murky, allow those silly `mistaken' policies to be jettisoned immediately and the `correct', cost-effective paths for state activity automatically to be chosen . In sum, Berg relies on the notion that ignorance and mistakes (or, at best, the shortsighted selfishness of bureaucrats) can account for the pattern of state intervention in SSA . The Report offers no analysis of how the balance of political and economic forces has changed historically and how these changes have affected different regimes in Africa in the 1970s . This approach leads to naive exhortations and policy prescriptions that are rather confusingly contradictory . For example, we are told that it is the finance ministries in Africa that represent the general interest in the struggle for resources (World Bank 1981 : 83) - as if there were such an animal as the `general interest', and that a package of technocratic reforms would improve the quality (and reduce the quantity) of state intervention : so, improved collection of statistics, the establishment of Project Preparation Units (armed with the most up-to-date Little and Mirrlees Manuals to screen out the line-ministries' non-viable investment proposals), and a reform in the terms of reference of the Planning Ministry - constitute the kernel of the magic institutional reforms that would give the technocrats the upper hand in the allocation of resources and the design of policy . These types of technocratic solution, together with some ritual genuflections in the direction of cooperatives and the beauties of small-scale organisations, would suffice, according to Berg, to override such `mistakes' as the allocation of excessive investment to those projects that provide substantial benefits to the political/ethnic supporters, or the home village, of the Ministers of Health, Agriculture, Transport, etc . This is naive. The contradictions arise because, while the general ideological tenor and thrust of the Report is anti-planning, denying that the state can do anything other than have a retrogressive effect on economic development (as a result of crowding out, for example), the Report at the same time attempts to provide a series of apolitical prescriptions for improved planning and benevolent state interventions in the interests of society as a whole .

Exaggerated pessimism One of the most progressive aspects of the Report is that it makes a serious attempt to argue for the necessity of substantial additional flows of concessional finance . However, these arguments are weakened and the analysis is flawed in more general ways, by Berg's assumption that the more you exaggerate the disastrous performance of capitalism in SSA, the stronger will be

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the case for accepting the pro-aid argument, and all other arguments in the Report. Take the case of agricultural production - central to almost all of Berg's conclusions . The Report states that `Low agricultural growth rates typify all but a few African countries in recent years' (p 49), and claims that there has been a continued, systematic decline in agricultural production over the last two decades (p 45) . We would argue that this, and similar statements in the Report, are exaggerated and misleading : (a) Using the Report's own data, several (seven) African economies had growth rates of agricultural output well over 2 .5 per cent pa, 1969/71 to 1977/79 . We would also question what Berg means by `low' agricultural growth rates . Low relative to what? If one takes a sensible criterion of comparison, such as the rates of growth of agricultural output achieved by France or the UK during their experience of industrialisation in the nineteenth century when growth rates very rarely rose above one per cent per annum and at their very fastest were of the order of 1 .5 per cent - then it should be stressed that over half the population of SSA lived in economies that achieved a faster rate of growth of agricultural production than this (ie a general average rate of growth of agricultural output of more than 1 .6 per cent over the decade) (see Heywood 1981) . There are even more serious problems with the report's treatment of agricultural and food production data . First, all of Berg's stories about declining rates of growth of food production ignore data on the production of fruit, vegetables, fish and meat . 6 Clearly there are problems in collecting consistent time series data for these commodities, although it is hard to believe that the available data covering these items are systematically less reliable than the data on cassava, maize and other cereals that the Report does attempt to provide . Jane Guyer has pointed out that roots and tubers are very much more important in accounting for calorie consumption in Africa than are all the cereals taken together, and that the production figures for roots are nothing like so gloomy as those presented by Berg for cereals : the rate of growth of production of roots and tubers has been more stable than that of any other major food crop, varying between 1 .8 per cent and 2 .0 per cent pa, and the growth rate of per acre yields has been higher than that of almost all other food crops . Furthermore, Guyer presents good micro-based and historical evidence which strongly suggests that the Berg Report has understimated actual levels of yield for these crops in the 1970s (Guyer 1984 : 188) . The failure to provide a satisfactory discussion of roots and tubers and, more generally, the pessimism regarding non-export crop performance can probably be traced to the ludicrous equation

The BergReport

in the Report of all non-export agricultural production with 'subsistence'/'traditional' production (p 12), and to the implicit notion that anything which is not collected in the official export statistics (a) is not marketed and (b) probably is not produced . Given the prevalence of smuggling, the limited and in many countries decreasing coverage by official marketing agencies of the domestic food sector, are there any adequate grounds for making unqualified statements about production levels and trends - let along dogmatic pessimistic assertions? There are similar tendencies toward exaggerated pessimism in Berg's statements concerning current account deficits and debt crises . Here, one of the methods employed (eg p 3) is to provide data in terms of billions of current dollars on current account deficits and external indebtedness - while neglecting to note that between the beginning and end of the 1970s, inflation was by no means an insignificant phenomenon . Another method employed is to measure current account deficits as a percentage of GDP by a procedure that excludes the contribution to the current account of foreign aid grants . Note that even with the use of this procedure current account deficits in Africa only averaged about nine per cent of GNP in 1980. Debt service as a percentage of GNP or as a percentage of exports of goods and services amounted to about two and seven per cent respectively for SSA in 1979 - figures that were dramatically lower than those for other developing countries . For example in the late 1970s newly industrialising countries' debt service amounted for 21 per cent of export earnings . Unfortunately, Most of SSA was unable to finance the enlarged real current account deficits that would have been required if imports were to grow at a satisfactory rate .' Exaggeration of the size of Africa's current account deficits and its debt burden is misleading, because it is clearly desirable, and part of Berg's own project, to argue for the necessity of financing much larger import levels than those achieved by SSA over the last decade . The final comment that we wish to make concerning Berg's exaggerated pessimism relates to certain of his remarks on import substituting industrialisation (ISI) . In common with a major strand of left-dependency theorising, Berg argues that ISI behind protective walls is `quite effective in encouraging simple IS industries, but, once these have been established, industrial development faces an impasse' (p 27) . Does the evidence from SSA provide unambiguous support to this prognostication? We think not : there are about ten African economies that have experienced average annual rates of growth of industrial production of over six per cent for well over a decade . We are still waiting for the apocalyptic moment when the `easy' stage of ISI will peter out and industrial stagnation becomes the order of the day in these SSA countries .

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Class These countries, as well as many other ldc's (such as Brazil), have sustained historically unprecedented rates of growth of industrial output over remarkably long periods, on a basis that was precisely ISI behind protective walls .

`Getting prices right' These comments on industrialisation serve as a convenient starting point for a far more fundamental set of critical points regarding Berg's proposed policy strategy . Berg's whole emphasis, what he calls `the centre of his analysis' (p 55) is on the positive effect of a change in farm gate prices on agricultural output . The fact that an increase in domestic industrial production, via its effects on the availability of incentive goods and producer input, might have an equal or even larger effect on real incentives and the ability to increase agricultural output, is systematically underemphasised . The accumulation of extra kwacha, cedis or shillings is presumably of much less immediate interest to producers than the possibility of exchanging their output with such manufactured goods as soap, kerosene, cooking oil, sugar, batteries, pots and pans, corrugated iron roofing material, radios, bicycles, cloth, etc . Similarly, the decision and ability to invest in increasing yields in the short run will be determined, to an important extent, by the assured availability of pesticides, fertilisers, storage construction materials, agricultural implements, transport equipment, etc. In many African countries the supply of these manufactures can be readily increased by improved capacity utilisation, or an expanded domestic import substituting industrial sector. The acute difficulties faced by domestic infant industries resulting from the reduced protection and other policies stemming from Berg's critique of is will have a serious negative impact on agricultural output .' Besides, Berg chooses to ignore the fact that those SSA countries which achieved high rates of growth of agricultural exports (Ivory Coast, Kenya) can hardly be characterised as having spurned the import substituting road . At a broader level the incentive issue must be viewed as a complex and many-sided one (Sen 1983), and Berg's simplistic analysis of the effects of price manipulation requires considerable qualification . Labour shortages or bottlenecks at peak periods are often the critical constraint on raising the marketed output of particular crops (Richards 1983) ; it is, therefore, vital to appreciate the determinants of labour supply, which will include the relative returns to labour in a range of non-agricultural activities as well as in those agricultural activities (including processing) that are competing for labour in the same season .' These features of the production process have been important in accounting for the failure of simple price elasticity of supply models to explain mar-



The Berg Report keted groundnut output in Nigeria (Muhtar 1983), and marketed cassava flour output (Guyer 1984) . Access to education and health facilities in particular rural areas is also likely to influence labour availability (and productivity), and thus the degree to which output can respond to price changes ." Neither Berg, nor IMF research by Bond (1983) on the empirical response of agricultural output to prices in SSA, show that short run increases in agricultural export volume will be achieved by devaluation or increases in nominal producer prices . Berg, however, often appears to be suggesting that devaluation would be both a necessary and a sufficient condition for achieving increased export volumes . Econometric work suggests that, although short-run own price elasticities may be positive for some export crops, these are very small . This undermines one major thrust of Berg's prescriptions : the immediate problem addressed by Berg, ie the recent falls in export volume of many SSAS, will not be alleviated rapidly by price changes . It is, first, necessary to remind ourselves of the central issue What is left of the addressed by Berg, namely the persistence of structural balance of alternatives to payments disequilibria : the inability of most African countries to Berg? generate enough foreign exchange to cover their import requirements . Berg advocated two sets of measures : and certain domestic policy changes to increase export earnings . The alternatives to Berg must be judged, at least in part, in terms of their effectiveness in relation to this objective . Three critics of Berg -Bienefeld (1983), Loxley (1984) and Sau (1983) - provide general alternatives, while Godfrey provides some suggestions on alternatives for Kenya . The latter are unobjectionable, in proposing specific primary processing activities as a basis for increased export earnings, plus an argument for gradual, as opposed to sudden, changes in trade policy . Neither of these are inconsistent with Berg, in fact Berg explicitly recommends the former . Sau's recommendations are the most easily dismissed, so we will start with these . They are as follows : (a) reduce output of export crops ; (b) increase output of food crops ; (c) promote regional economic integration as a basis for further import-substituting industrialisation ; (d) increase resource-based exports . The third has been mentioned already in terms of its (in)feasibility; the first and second are presumed to go hand-inhand on the grounds that export crops and food crops are substitutes in production, a presumption which is at variance with experience. Those countries which have had relatively successful

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trends in export output are also those with relatively successful trends in food output . The second, taken alone, is based on the implicit assumption that domestic food supply is the single most important determinant of whether people have enough to eat, and of whether their food intake is secure or insecure . This assumption is also at variance with both historical and cross-country experience . So nothing is left of Sau that is of any use for serious thought on African economic problems and policy. Bienefeld and Loxley both present similar alternatives, so they will be discussed together. Bienefeld's alternative is as follows : `some states - under present or new management - may cut back on and change consumption patterns for elites drastically, and place primary emphasis on securing the population's basic necessities on the basis of a less volatile and more controllable domestic production structure which operates with a lower import to output ratio . That would certainly require extensive state intervention, usually by governments which are differently constituted politically than those presently in power' (Bienefeld 1983 : 22) . Loxley's alternative is based on the autocentric model of C Y Thomas (1974), in which production is geared `to utilising local resources to meet democratically defined needs and foreign trade is simply an extension of domestic production, not its determinant. . . . This model presupposes collective ownership of the means of production, economic planning in physical terms, and the desire to build a socialist society . The political prerequisites for implementing this model are obviously very demanding' (Loxley 1983 : 203) . There are several difficulties with both of these, of which three are outstanding : (a) It is, politically, a game of Alice-in-Wonderland to presume that Africa's urgent and immediate problems can be wished away by the invocation of a socialist government . Aside from the far from admirable record of socialist governments in the spheres of democracy, economic success and the ability to control the economy, it is as much use as the joke about assuming a can-opener" to think that a socialist revolution is on the cards in most African countries in the short term. What do these alternatives have to offer to persons living in places where no such revolutionary options are actually on the agenda? This is particularly serious in the light of the criticisms that these same people make of Berg in terms of its inadequate political analysis . Is `taking politics seriously' just another way of saying `socialism now'? (b) There is the usual recourse to the `golden egg' approach to poverty, ie that if imports of luxury goods can be cut, and the excessive consumption of the elite reduced, then problems of poverty can be solved . Cutting the consumption of the rich may be

The Berg Report

important for political reasons, but it will certainly not yield the resources on the scale necessary to significantly affect the lot of the poor . Only a strategy which secures growth of output can make any inroads into the problem of poverty . (c) The advocacy of autarkic -or more autarkic- strategies is fundamentally flawed . There are complex interrelationships between imports and domestic markets, and between exports and domestic markets . Imports have connections with domestic markets through the availability of inputs and incentive goods, exports through the expansion of demand for domestically produced output resulting from increased incomes . The `enclave' story about exports is the opposite of the truth - as Hirschman (1977) has shown for Latin America - increased exports in Africa have been associated with generalised linkages, with an increased, rather than a diminished, domestic market for domestically produced output. The importance of imported inputs (both capital and intermediate) and imported incentive goods in production for both domestic and export markets, is so marked that the alternatives which stress reduced involvement in trade, far from reducing the vulnerability, is utterly at variance with historical experience over the last decade, and indeed over a much longer perspective . By increasing incomes, state revenues, and by increasing the demand for domestically produced consumer goods and inputs, increased export production has developed both the home market and the market for imports . It is a major distortion of African economic history to emphasise the latter to the exclusion of the former, aside from the spurious credence which the enclave story gives to disastrous economic policy recommendations . Those economies in Africa with better performances in export production are also those with larger domestic markets, and more advanced industrialisation, and this is no coincidence . Where is the evidence that compares, in any detail, the full array of forward and backward linkage effects associated with the expansion of different crops, minerals or industries in Africa? It should not be necessary to add, finally, that we are wholeheartedly in favour of policies - such as increased flow of concessional finance - that have the effect of increasing the rate of growth of imports into SSA . A concentration on the remediable defects in the composition of imports should not continue to allow the left to ignore the fact that a very substantial and sustained growth in the total volume of imports is a precondition for the transformation of the productive structure in SSA - and for the alleviations of the brutality of life for most of SSAS inhabitants .

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1 For example, in the early 1970s, 87 per cent of state expenditures on health were concentrated on preventative facilities (Coulson 1982) . See also Mukandala 1983 . 2 There are major contradictions in the literature : for example, Williams (in Clough and Williams 1984) argues that World Bank projects have had unfavourable distributional consequences, while Loxley and Daniel criticise the Berg Report's recommended `programme' aid approach on distributional grounds . 3 Some evidence relating to these questions is available in Anker and Knowles 1983 . This regionally disaggregated study provides no support whatsoever for those distributional critics who assert the negative consequences of export crop production. 4 Take the case of groundnuts : Africa's share of world exports was 26 .8 per cent in 1982 . If Africa's exports rose significantly, say by 10 per cent, world exports would rise by 2 .68 per cent . In order for Africa's export earnings to fall, world prices would have to fall by at least ten per cent, ie the price elasticity of demand would need to be-0 .26 . Berg's critics provide no evidence that the relevant elasticities facing Africa are of this order of magnitude . 5 Of the critics of Berg and the IMF in Africa that we have been able to read, only A Singh's work on Tanzania (1983) makes a serious attempt to assess the circumstances in which, in specific countries, the exchange rate should be changed. But does the left really want to argue that, for example, it was an integral part of socialist strategy that in Tanzania between March 1979 and December 1982 the real effective exchange rate should appreciate by 92 per cent, or that in Nigeria the real effective exchange rate should appreciate by 28 per cent between January 1979 and December 1981? 6 For example, small domestic livestock are very important indeed in farming systems and nutritional provision throughout SSA . See, for example, Richards 1983 . 7 During the 1970s, middle income developing countries achieved an annual average rate of growth of import volumes of 5 per cent, compared with only 3 .3 per cent for SSA (World Bank 1981 : 149) . It should also be noted that current account deficits as a percentage of GDP during 1973-81 were systematically lower in low income ldc's than in other categories of ldc (IMF 1981 : 126) . 8 This is especially so if imports of interest to the mass of rural consumers are the first categories to be cut in the face of periodic balance of payment difficulties . 9 Richards (1983) provides the following data on the share of processing in total labour requirements : groundnuts 35 per cent, cassava 50 per cent, palm oil 50 per cent (p 36). 10 For example, labour mobility in SSA has often been a response to rural/urban differences in social infrastructure . 11 A physicist, an engineer and an economist are stranded on a desert island, with only tins of corned beef to eat . None of them has a can-opener. The physicist and the engineer put their heads together to work out what to do. The economist says: `There is no problem: let us assume a canopener' .



The Berg Report Allison, C and R Green, 1983, `Stagnation and decay in sub-Saharan Africa : dialogues, dialectics and doubts', Bulletin, vol 14 no 1, IDS, Sussex Anker, R and J Knowles, 1983, Population, Growth, Employment and Economic-Demographic Interactions in Kenya : Bachue-Kenya, St Martin's Press, for the ILO, New York Bienefeld, M, 1983, `Efficiency, expertise, NIC's and the Accelerated Development Report', Bulletin, vol 14 no 1, IDS, Sussex Bird; G,1983, `Should developing countries use currency depreciation as a tool of balance of payments adjustment? A review of the theory and evidence, and a guide for the policy maker', Journal ofDevelopment Studies, June Bond, M, 1983, Agricultural Responses to Prices in Sub-Saharan Africa, IMF Research Department, May Clough, P and G Williams, 1984, DecodingBerg: the WorldBank in Northern Nigeria, paper presented at Institute of Development Studies Seminar, Sussex Colclough, C, 1983, `Are African governments as unproductive as the Accelerated Development Report implies?', Bulletin, vol 14 no 1, IDS, Sussex Coulson, A, 1982, Tanzania, A Political Economy, Clarendon Press, Oxford Daniel, P, 1983, `Accelerated development in sub-Saharan Africa : an agenda for structural adjustment lending?', Bulletin, vol 14 no 1, IDS, Sussex Ellis, F, 1983, `Agricultural marketing and peasant-state transfers in Tanzania', Journal ofPeasant Studies, vol 10 no 4, July FAO, 1983, Production Yearbook Godfrey, M, 1983, `Export orientation and structural adjustment in subSaharan Africa', Bulletin, vol 14 no 1, IDS, Sussex Green, R, 1983, `Incentives, policies, participation and response : reflections on World Bank "Policies and priorities in agriculture"', Bulletin, vol 14 no 1, IDS, Sussex Griffith Jones, S, 1981, `The Evolution of External Finance and Development in Chile, 1973-78', Discussion Paper 160, IDS, Sussex `A Chilean perspective', Bulletin, vol 14 no 1, IDS, Sussex Guyer, J I, 1984, `Women's work and production systems : a review of two reports on the agricultural crisis', Review ofAfrican Political Economy, nos 27/8 Heywood, C, 1981, `The role of the peasantry in French industrialisation, 1915-80', Economic History Review, vol 34, no 3, August Hirschman, A, 1977, `A generalised linkage approach to development, with special reference to staples', EconomicDevelopment and Cultural Change, Supplement, 25 IDS, 1983, `Accelerated development in sub-Saharan Africa: what agendas for action?' C Allison and R Green eds, Bulletin, vol 14 no 1 IMF, World Economic Outlook, various issues Jaggi, M, R Muller and S Schmid, 1977, RedBologna, Writers and Readers Publishing Cooperative, London . Killick, T, 1981, IMF Stabilisation Programmes in the Third World, UK Development Studies Association Conference Paper, July, Oxford Killick, (ed),1982,Adjustment and Financing in the Developing World: the role ofthe iMF, Washington Lal, D, 1983, The Poverty of 'Development Economics, Hobart Paperbacks no

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16, Institute of Economic Affairs, London Loxley, J, 1984, `The Berg Report and the model of accumulation in subSaharan Africa', Review ofAfrican Political Economy, nos 27/8 Mbilinyi, M, 1983, `Agricultural Price Policy in Developing Countries Groundnuts in Northern Nigeria', M Phil Dissertation, University of Cambridge Mukandala, R,1983, `Trends in Civil Service size and income in Tanzania 1967-82', Canadian Journal ofAfrican Studies, vol 17 no 2 Richards, P,1983, `The politics of African land use' ,African Studies Review, vol 26 no 2, June Sau, R, 1983, `Africa's options in development strategy', Economic and Political Weekly, vol 18 no 44, October Sen, A K, 1983, `Carrots, sticks and economics : perception problems in economics', Indian Economic Review, vol 18 no I Singh, Ajit, 1983, `The Present Crisis of the Tanzanian Economy : Notes on the Economics and Politics of Devaluation', Department of Applied Economics, University of Cambridge, January Spraos, J, 1983, Inequalising Trade? Clarendon Press, Oxford Thomas, C Y, 1974, Dependence and Transformation, Monthly Review Press, New York Tschannerl, G, 1973, `Rural water supply in Tanzania : is politics or technique in command?' in A Coulson (ed), 1979,African Socialism in Practice, Spokesman, Nottingham Wagstaff, H, 1981, `Food imports in developing countries - trends and dilemmas', Food Policy, Autumn Williamson,J, 1982, The Lending Policies of theInternationalMonetaryFund, Institute for International Economics, Washington DC World Bank (1981), Accelerated development in sub-SaharanAfrica: an agenda for action Washington World Bank, 1983a, World Development Report, Washington World Bank, 1983b, Sub-Saharan Africa:: Progress Report on Development Prospects and Programmes, Washington Zulu, B Z and S M Nsouli, 1984, `Adjustment programmes in Africa . The experience of fund supported programmes, 1980-81', Finance and Development, vol 21 no 1



David Gleicher

Note : a rejoinder to Eldred AbstractLabour, theRubin Schooland theMarxistTheory ofValue

THE SCHEMATIC and quite polemical reply by Michael Eldred (1984) to a recent article of mine published in this journal (Gleicher, 1983) issues forth a good many challenges both to the epistemological presuppositions of my formulation, and to the substantive thesis advanced, namely that the abstraction of labour is neither a logical abstraction, nor one which occurs in the act of exchange between commodity and money, but rather is an historically necessary development of the labour process within the context of capitalist relations of production . It would not be possible here to sort out Eldred's varied objections to my approach, let alone to respond to each of them, and I will not attempt to do so .' Instead, this note will be limited to a clarification of the critique of the 'Rubin school' voiced in my article ; a critique which Eldred, whose piece (Eldred and Hanlon, 1981) was included by me in the Rubin school, contends is inaccurate (Eldred, 1984 : 135-7) . The motivation

behind making such a clarification is not solely that of preserving a particular taxonomy - i.e ., the 'Rubin school'- it is also to help locate the interchange between Eldred and myself within the value theory debates that have occupied Western (and Japanese) Marxists in the post-War period! In the process, some light maybe shed on certain fundamental issues which have fueled much of the continuing controversy surrounding the validity of the labour theory of value and its application to the analysis of contemporary capitalist societies .

Is Money the only measure of abstract labour? I will begin with a somewhat technical point concerning my argument, but one which leads to the more fundamental issues to which I have just alluded. Eldred is correct that the writers referred to by me as the Rubin school to varying degrees do endeavour to refer to labour in terms

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of the `immanent measure' (Elson 1979) or as it is more often (and more accurately) expressed, the `qualitative aspect' of value . However, this does not serve to refute my characterisation of the position taken by these writers as one which asserts that `money is the sole measure of abstract labour ; that labour only becomes abstract in the act of exchange between the commodity and money' (Gleicher, 1983 : 98 ; cited by Eldred, 1984 : 1) . Indeed, a central thrust of each of the articles cited by me is that while labour is said to underly exchange relations, the 'quantitative aspect' of value, that is, its existence as abstract labour, is understood to be exclusively monetary . The notion that value can be directly measured as `embodied labour time' is rejected as a Ricardian error which historically is said to have been corrected by Marx (e .g., see Pilling, 1972 ; cf. de Brunhoff, 1973) . Actual (referred to as `concrete' or `private') labour is presumed to be heterogeneous across commodities, and hence incapable of being the quantitative measure of commodity value . In this regard, Eldred's citation of Elson (Eldred, 1984 : 135) is misleading; the latter states explicitly that `far from entailing that the medium of measurement of value must be labour time . The argument that labour-time is the (immanent) measure of value entails

that labour-time cannot be the medium of measurement . . .The only way that labourtime can be posed as the medium of measurement is by making the arbitrary assumption that there is no qualitative difference between different kinds of labour, . . .' (1979 : 138) . Contrary to Eldred's claim (1984: 136) this is the same as his own stated position that `The abstractness of value-creating labour is determined by the exchange process which accomplishes the abstraction from the multifarious concrete labours objectified in commodities . . . . The commodity represents itself as magnitude of value as

soon as its "magnitude of value" possesses its own form of appearance, and it possesses this form never in isolation but only in price' (Eldred and Hanlon, 1981 : 40-1) .' Thus, despite some internal variation with respect to the notion of 'embodied labour', the Rubin school does have a distinct physiognomy centered on money as the measure of abstract labour, and Eldred's inclusion under this rubric is clearly warranted.

On the Rubin School To comprehend the insistence by the Rubin school on the notion that abstract labour can be measured solely in monetary units, it is instructive to consider the theoretical context in which the school has emerged . From my own point of view the most crucial issue at stake in the Marxist conception of abstract labour is the one addressed in my article ; that is, the sense in which one can say that within a capitalist structure the labouring activity required of workers actually becomes independent of particular use-values . Thus, for example, with respect to Elson's remark that `the only way that labour-time can be posed as the medium of measurement (of value) is by making the arbitrary assumption that there is no qualitative difference between different kinds of labour, . . .' (loc . cit .) my article argues the thesis that the `abstraction of labour' is a necessary historical tendency associated with capitalist relations of production . On that basis the treatment of labour-time as the measure of value does not involve an `arbitrary assumption' at all .' However, this question of the existence per se of abstract labour as a social phenomenon, while never wholly disappearing, has not been the focus of attention in the modern value theory debates . Rather, one can discern two other foci of controversy in the post-War period.

Rejoinder to Eldred

The Bortkiewicz Solution The first of these was created by Sweezy's revival of the 'Bortkiewicz solution' to the transformation problem (1942 : 115-25 ; 1949), and occupied leading Marxist theoreticians throughout the 1950s and'60s . Itwas discovered that by correcting, as Bortkiewicz had, Marx's error of not transforming the values of means of production, the well-known equation of the `value rate of profit' (total surplus value divided by the value of capital `in general') and the uniform rate of profit across industries as yielded by the structure of prices of production is no longer a valid one . Severing the connection between these two rates led to the further discovery (Okishio, 1961) that capitalist industries will not necessarily adopt techniques of production which `maximize labour productivity' (i .e ., minimize the labour-time required per unit produced), nor will an industry adopt a new technique which leads to a decline in the uniform rate of profit across industries once a new structure of prices of production has been established. A positive result of the debate is the 'fundamental theorem' (see Morishima, 1973 : 53-5) that a positive rate of surplus value is a necessary and sufficient condition for a positive rate of profit across industries . Other than these important findings, the controversy surrounding the Bortkiewicz solution degenerated into a series of alternative `solutions' to the transformation problem, each of which through the arbitrary choice of a numeraire preserved an equality either between `total price' and the value generated per period, or between total profit and surplus value, while acknowledging that both equalities will not hold simultaneously (for a survey and critique of these solutions see Itoh (1980 : 66-79)) . The Srafan Critique A second, more recent focus of the

value theory debates, of course, has been 149 the interpretation of Sraffa's work (1960) as laying the foundation for a radical reformulation of Marxist theory via the excision of the labour theory of value coupled with the retention of the conception of capitalism as a structure of antagonistic classes (see Steedman, 1977 ; Lippi, 1979 ; Roemer, 1981 ; and Hodgson, 1982) . The Sraffians claim that the Marxist theory of value is formally inconsistent ; that, for instance, a technical structure which includes the presence of fixed capital (conceived of as a joint product) can lead to the coexistence within the Marxist model of a negative rate of surplus value with a positive uniform rate of profit, thereby calling into question the fundamental theorem . On the other hand, the argument is also made that Sraffa's formulation adequately solves the dual problem of price determination and income distribution (the transformation problem) without recourse to the labour theory of value . The latter is therefore said to be `redundant' . The issues raised by the Sraffian critique have not been fully resolved, and constitute the immediate context of the interchange between Eldred and myself. One of the most prevalent responses forthcoming from Marxists seeking to defend the centrality of labour to Marxist value theory has emerged from the Rubin school. According to the school the Sraffian critique is misdirected, being applicable to a Ricardian notion that quantities of embodied labour-time determine commodity prices, but not applicable to a proper marxist theory in which abstract labour is measurable only in monetary units . The Sraffian contention that the (embodied labour) theory of value is formally inconsistent is therefore not contested in its own right by the Rubin school; indeed, within the context of such a theory the Sraffian results are considered to be correct (e .g ., see

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Rejoinder to Eldred Himmelweit and Mohun, 1978 : 87-91 ; Fine and Harris, 1979 : 39-48) . Rather, the Rubin school re-interprets the labour theory of value itself so to speak . The theory, it is argued, is not one of price determination at all, as a more traditional interpretation would have it, but instead consists of the basic proposition that in an economy regulated by markets (general commodity circulation) labour must be allocated between different industries through the formation of a given structure of market prices . This is what Elson (1979) terms a `value theory of labour' and Eldred calls 'value-form analysis' . Elson goes on to reason that the existence of capitalist structures, reproduced through commodity circulation, implies the constant re-allocation of `social labour' between industries in response to price fluctuations, and so demonstrates that a conception of abstract labour (labour independent of any particular use-value) is not a redundant one despite the fact that there is no measure of such labour apart from price . Eldred disagrees with this, contending that the conception of what Marx terms 'socially-necessary labour', insofar as it implies a nonmonetary measure of abstract labour, is cortradictory and hence should be abandoned altogether .' What nonetheless remains common to all members of the school is the belief that there is no sense in attributing quantities of abstract labour-time to the value of commodities in units other than money . Thus the Sraffian critique, based as it is on anomalies that seem to arise with respect to such quantities of labour-time, is declared irrelevant to a proper Marxist conception of value . Eldred affirms this view when he states in no uncertain terms (Eldred's emphases) : `This is the point of a form-analytic theory of value : to establish that value only gains its material form of existence in money and thereby to criticise all (subjective and objective) theories

of value which maintain dogmatically that there is an essence behind the value-form money, which quantitatively and causally determines prices' (1984 : 137) 6

Weaknesses in theRubin School's Response to Sraffa The response by the Rubin school to the Sraffian critique is quite similar to that offered by the school to BohmBawerk's more established challenge to Marxist value theory. The response by the Rubin school to Biihm-Bawerk is examined in my article (1983) and the reader is referred there for a detailed articulation of my position with respect to the school . Here, in concluding this note, I will merely indicate what I believe to be the chief weaknesses of the Rubin school's response to the Sraffians, and in doing so point toward my reasons for pursuing what I would term a classical Marxist approach to value theory ; that is, one positing price determination according to quantities of labour-time measured in units other than money . In particular, denying the theory of value of any explanatory power on the question of price determination I believe can at best only achieve a Pyrrhic victory . The very same quantitative determination of prices which Eldred so forcefully rejects is what furnishes Marxism with the only scientific explanation of the positive rate of profit across industries ; this within a general model of capitalist relations of production . That is, a model in which the complete freedom of capitalists and labourers inside of and between markets is preserved . The richness of Marx's insights in Capital I would argue derives (taking a classical Marxist position), in the first instance, from the grounding of the market equilibrium price in the abstract, socially-necessary labour-time per unit of the commodity produced . It is further derived from the corollary proposition that the profit realised by indus-

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trial capital is grounded in the excess of value per unit created by workers through labouring, over and above the value of the wage goods required per unit to employ those workers . In this manner, Marxist political economy promises an integrated solution to the dual problem of price and income distribution within a model of capitalist reproduction . It is true that, as the debate concerning the Bortkiewicz solution demonstrates, the quantitative relation between a given structure of (labour) values and the corresponding set of prices of production is complex . For example, relative prices will not equal relative values, nor will a reduction in the value of a commodity necessarily lead to a reduction in its relative price. Nonetheless, it is unclear whether or not the Sraffians have proven that a formal solution linking the structure of prices to that of values is inconsistent . Steedman's most damaging result, that concerning fixed capital, for instance, has been seriously challenged by Wolfstetter (1976) and the framework of an alternative solution to the problem of fixed capital is to be found in Armstrong et al (1978), Flaschel (1980) and Swanson (1984) . Neither is it clear that Sraffa's model is sufficient without the labour theory of value adequately to integrate the solution to the problem of price and distribution (e .g ., see Savran, 1979 ; Hunt, 1982) . It is therefore suggested by some (e .g . Medio, 1972 ; Roncaglia, 1978) that the labour theory of value and Sraffa's work are not incompatible, but are complementary; that is to say, the labour theory of value is not rendered redundant by Sraffa . By contrast, the Rubin school position is that fluctuations in conditions of supply and demand themselves create changes in values . From such a standpoint no comprehension of a price structure capable of reproducing capitalist relations while yielding a determinate rate of profit is possible, even in principle . At the

same time, instead of a theory of price determination, as we have observed the Rubin school proposes a `value theory of labour' . When stripped of its Hegelian garb, the latter reduces to the assertion, already stated above, that the allocation of labour between industries is determined in the context of generalised commodity circulation by the formation of market prices . As such, however, neither the Sraffian, classical Marxist or for that matter neoclassical theorist would deny the validity of this assertion . On the other hand, to the extent that this is taken to define a distinctively Marxist position, the Rubin school's approach invites the fundamental criticism, made by Sraffians and neoclassical economists alike, that the selection of a value theory of labour is arbitrary, since generalised commodity circulation implies the allocation of all productive resources (including raw materials and instruments of production) through the formation of market prices . This variant of Marxist theory can thus be dismissed as a crude `one factor theory of distribution', and rightfully so . In short, the Rubin school leaves open the central theoretical problem posed by the capitalist mode of production - the determination of the structure of prices of production - and replaces it with a proposition whose truth is equalled by its banality . And this in the name of rescuing Marxist theory from its critics! Eldred must forgive some of us for judging such an approach to Marxist value theory to be thoroughly unacceptable . A classical Marxist approach, one which retains a sharp distinction between the (quantitative) measure of value and that of price, both points toward an adequate solution to the transformation problem, while confronting directly the Sraffian and neoclassical critiques of the labour theory of value .



Rejoinder to Eldred

Notes 1 I must, however, briefly protest Eldred's attack on references to a Marxist `political economy' and `historiography' in my piece, and to my understanding of Marxism as a science of history (Eldred, 1984: 3-5) . The power of Marxist theory to serve as an instrument either of revolution in capitalist society, or of socialist construction, it seems to me derives from insights originally articulated in Marx's own work . These insights are more than simply a critique of existing theories however ; moreover, they have since been refined and developed through a long tradition of scholarship that extends well beyond any one author's particular writings, including those of Marx . In this sense then Marxist thought constitutes a positive body of knowledge comprising political economy and, as a necessary adjunct to it, serious historical research . My own views concerning the broad topic of `historical materialism' are sketched in Gleicher (1984 : 1-23) and follow the neo-Kantian line of Marxist epistemology associated with della Volpe (1980), Colletti (1973) and Timpanaro (1975) . 2 T nese debates have lasted since the publication of Sweezy (1942; 1949) ; the debates have gained increasing force with the more recent publication of Sraffa (1960), Rubin (1972) and Uno (1977) . 3 The reader is also invited to compare my characterisation of the Rubin school's position with the following statements made by various members of the school : `There is no way to reduce observable concrete labor in advance, outside of the market which actually effects the reduction . . . . Knowing that the substance of value is abstract labor does not help, for abstract labor can be observed in only one placethe market - where its palpable reality takes the form of money' (Gerstein, 1976 : 250-5 1); `The reduction of labour to abstract labour is something that can only be done by the market . . . . The value of a commodity has no expression except as exchange-value, commensuration of itself against another commodity in the market. But this exchange-value itself has no expression except against one particular commodity, money . Price is this sole expression of value (and exchange-value) . There is no manifestation of value in terms of its substance, abstract labour, nor of its

measure, socially necessary labour time' 153 (Himmelweit and Mohun, 1978 : 74) ; `The creation of value, the establishment of market price, and the formation of the seller's income must occur at one and the same time . Value is a concept that does not pretend to be observable . It is expressed only through the mediation of pice. To speak of a value existing in itself, independent of its expression in a price, makes no sense in my conception . The two concepts can be separated only in intellectual reasoning' (de Vroey, 1982 : 189) ; and finally, to quote Rubin (1978: 121) `It has been said that my explanations give rise to the impression that abstract labour is only produced in the act of exchange, whereas from Marx's standpoint, value and consequently abstract labour too must already exist in the process of production . . .. We will show that in the later editions of Capital Marx increasingly stressed the idea that in commodity production only exchange reduces concrete labour to abstract labour' (this statement is repeated, almost verbatin in Rubin, 1972 :147-48)). 4 Eldred not withstanding, my argument which is predicated upon the operation of capitalism of 'Babbage's principle' (Braverman, 1974: 79-82) - is not simply a `reassertion of passages to be found in the Grundrisse and the Critique' (Eldred, 1984: 4), although I certainly do not apologise for the fact that these works, along with Capital itself, are primary sources of my conception . 5 This abstruse point of contention between Elson (1979) and Eldred and Hanlon (1981) is referred to by Eldred in his response to me as evidence of a lack of theoretical cohesion amongst the various writers I cite as members of the Rubin school (1984: 1). The dispute here is readily seen to be, however, independent of what I state characterises the school, since both parties concur that there is no quantitative measure of value other than money . 6 Members of the Rubin school have countered the Bortkiewicz solution in a like manner - consistently making reference to the so-called transformation problem, so as to make clear their belief that solving for a relation between a structure of values - measured as labour-time - and a determinate structure of prices of production, betrays an incorrect understanding of Marxist value theory . In the most sophisticated models put forward by the school the value of

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labour power (which then determines the rate of surplus value) is derived from a given structure of prices-being defined as the wage share in the measure of final output yielded by existing prices and techniques of production in use (e .g., see Foley, 1982 ; Lipietz, 1982) .

References Armstrong, P ., Glyn, A . and Harrison, J . (1978) In defense of value : a reply to Ian Steedman Capital & Class 5. Braverman, H . (1974) Labor and Monopoly Capital: The Degredation of Work in the Twentieth Century (Monthly Review Press) . Brunhoff, S. de (1973) Marx as an a-Ricardian : value, money and price at the beginning of Capital Economy C5 Society 4. Colletti, L . (1973) Marxism and Hegel (New Left Books) . Eldred, M . (1984) A reply to Gleicher : history: universal concept dissolves any concept! Capital & Class 23. Eldred and Hanlon, M. (1981) Reconstructing value-form analysis Capital & Class 13 . Elson, D . (1979 The value theory of labour, in D . Elson (ed) The Representation ofLabour in Capitalism (CSE Books) . Fine, B . and Harris, L . (1979) Rereading Capital (Columbia University Press) . Flaschel, P. (1980) Definitions of labour value - and labour productivity - in fixed capital models, unpublished . Foley, D . (1982) The value of money, the value of labour power and the Mandan transformation problem Review of Radical Political Economics 2 . Gerstein, I. (1976) Production, circulation and value : the significance of the 'transformation problem' in Marx's critique of political economy Economy &Society 3. Gleicher, D . (1983) A historical approach to the question of abstract labour Capital & Class 21 . Gleicher, D . (1984) Critical studies in the origins of classical value theory, Ph .D . dissertation (Columbia University) . Himmelweit, S. and Mohun, S . (1978) The anomalies of capital Capital & Class 7.

Hodgson, G . (1982) Marx without the labor theory of value Review of Radical Political Economics 4 . Hunt, I . (1982) The labors of Steedman on Marx Review ofRadical PoliticalEconomics 4. Itoh, M . (1980) Value and Crisis : Essays on Marxian Economics in Japan (Monthly Review Press) . Lipietz, A . (1982) The so-called 'transformation problem' revisited Journal of Economic Theory 1 . Lippi, M . (1979) Value and Naturalism in Marx (New Left Books) . Medio, A . (1972) Profits and surplus-value : appearance and reality in capitalist production, in E . Hunt and J . Schwartz (eds)A Critique of Economic Theory (Penguin Books). Morishima, M . (1973) Marx's Economics: A Dual Theory of Value and Growth (Cambridge University Press) . Okishio, N . (1961) Technical change and the rate of profit Kobe University Economic Review 7. Pilling, G. (1972) The law of value in Ricardo and Marx Economy & Society 3 . Roemer, J . (1981) Analytical Foundations of Marxian Economic Theory (Cambridge University Press) . Roncaglia, A. (1978) Sraffa and the Theory of Price (John Wiley) . Rubin, I. (1972) Essays on Marx's Theory of Value (Black and Red) . Rubin, I . (1978) Abstract labour and value in Marx's system, reprinted in Capital &Class 5. Savran, S . (1979) On the theoretical consistency of Sraffa's economics Capital & Class 7. Steedman, I . (1977) Marx after Sraffa (New Left Books) . Swanson, P . (1984) Essays on value theory: fixed capital and socially necessary labor reexamined, Ph .D. dissertation (Columbia University) . Sweezy, P . (1942) The Theory of Capitalist Development (Monthly Review Press). Sweezy, P . ed . (1949) KarlMarx and the Close of

Rejoinder to Eldred His System by E. von Bohm-Bawerk; also includes Bohm-Bawerk's criticism of Marx by R. Hilferding, and On the correction of Marx's fundamental theoretical construction in the third volume of Capital

Theory of a Purely capitalist society (Harvester Press) . Volpe, G . della (1980) Logic as a Positive Science (New Left Books) . Vroey, M . de (1982) Value, production and

by L . von Bortkiewicz (Augustus M . Kelley).

exchange, in I . Steedman et. al. The Value Controversy (New Left Books) .

Timpanaro, S . (1975) On Materialism (New Left Books) . Uno, K . (1977) Principles ofPolitical Economy:

Wolfstetter, E. (1976) Positive profits with negative surplus value : a comment EconomicJournal86.

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