Roger Blackwell's Scrapbook Website
As I now have a professional photography website and my previous ISP (Homecall) is still hosting my amateur photography website I have decided to turn these pages over to a kind of scrapbook where I will discuss things that are of interest to me and, hopefully others too. It will be a mixture of text and photos and will grow over a period of time in a semi-anarchic way.
Here is my first article for discussion:
9 December 2009
On BBC TV tonight an economics spokesman, Robert Peston, expressed the view that banking was possibly the UK's 'strongest industry'. Well we had better hope not because we will soon be heading back to the stone age! Maybe I exaggerate but it seems clear to me that the City of London financial sector is far too big in proportion to the UK economy.
So how big should a financial sector be? Nobody knows and nobody cares. This is because capitalism is at base an anarchic system of social relations of production and exchange that sectors like finance capital are left to their own devices to grow as they wish. Now as Marxists we know that socially necessary human labour creates value and produces wealth such that one portion is the wages of the worker and the other wealth created is surplus value which divides into profit, rent, interest etc.
The banking sector works entirely with surplus value from the world economy as a whole and does not itself add to the pot of surplus value. You may argue that banks create wealth through investment but that is just moving liquidity into areas that actually do create wealth. Banks don't create wealth they facilitate the creation of wealth and the difference is very important. We all know that 'quantitative easing' is basically devaluing a currency but in a recession it is not so noticeable.
From the above quote of Robert Peston it is clear to me that the thinking that led to the recent financial crisis is being repeated such that any partial recovery will be quickly followed by another financial crisis in circumstances where governments can no longer afford to bail out the banks. This is because for the immediate interests of the imperialists the financial sector has grown to a size that is completely disproportionate to the actual investment needs of capitalist industry.
There is only
one way in which the financial sector can be resized so that it meets the
needs of industry and is not bloated and inefficient as it has grown to be
now. This is for the socialist expropriation, nationalisation and then
internationalisation of the whole finance sector in the major imperialist
countries. That can only be achieved by socialist revolution.
Now consider that the wealth facilitated by the finance sector = $A and the cost of the finance sector to the productive sectors = $B then it is clear that whilst $A is bigger than $B then the finance sector is adding to the world's wealth but if $B become greater than $A then it is a drain upon the development of the world economy. It is easy to imagine an extreme example where half the worlds population work in the finance sector and pretty much everyone would guess that in such a situation it would be a drain upon the world's resources but where the finance sector isn't that extreme size people don't seem that concerned by its growth.
However, this is not only important to an understanding of the current capitalist crisis it is also important for a socialist future where a finance sector will still be needed for a considerable time.
Of course within this 'crude look at the whole' there are millions of individual contradictions but it is especially necessary for Marxists to grasp the nature of the global economy and the bloated development of imperialism since Lenin wrote about it in 1916.
You don't even have to be a Marxist to understand that the US and UK finance sectors are too big in relation to the total production of the world economy. It is empirically verifiable or falsifiable as the case may be.
Update 21 January 2010
The Chinese economy is still growing strongly and soon they will have the second biggest GDP in the world behind the US. There is obviously, despite the recession, still a strong demand for their manufactured goods around the world and locally. However, the Chinese economy is still not big enough to play the role that the US did in 1945 in rescuing many developed countries from slump.
In the US, Barack Obama is trying to regulate Wall Street so that the recent financial meltdowns will become a thing of the past. This is, however, impossible in a capitalist economy because the risk of failure and failure itself is part of the system. If financial speculation is reined in then the speculators will trade in other parts of the world that are more favourable to their parasitic business. The ruling class in the US will try to prevent this from happening and their financial interests in the world's largest economy are far stronger than the presidency. Only the US working class is powerful enough to take on such a force and Obama is not their representative. The US ruling class will want to unleash a new round of financial speculation to enrich themselves until the next huge crash.
In Britain the financial sector has developed far beyond the modest output of the UK economy and has a tendency towards the Iceland and Ireland models in terms of its relative size compared to the rest of the economy. It is beyond the capacity of the UK parliament to deal with the financial sector in the way that Obama wants in the US and besides it will not overcome the crisis because the city of London provides a substantial portion of UK GDP and any attempt to reduce it will prolong mass unemployment and poverty as well. Again it is only the working class that has the strength to take on and win against this powerful but decrepit ruling class in Britain.
Roger Blackwell, Norwich, UK.
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