Tuesday 14 May 2013

"Scroungers" and Class

I'm sure many readers were depressed to learn that Labour voters have swung to the right over their attitudes toward people who subsist on social security. According to Joseph Rowntree Foundation, who commissioned the research:
* Two-thirds (66%) of the public identify an explanation for child poverty that relates to the characteristics and behaviour of parents, compared to the 28% who say it is down to broader social issues.
* Fifteen per cent of the public in 1994 thought people lived in need because of laziness or lack of willpower, compared to 23% in 2010. Support for the view that people live in poverty because of injustice in society fell from 29% to 21% over the same time period.
* These changes are most marked among Labour supporters: just 27% of supporters cite social injustice as the main cause, down from 41% in 1986; while those identifying laziness and willpower rose from 13% to 22%.
* Labour supporters also increasingly hold the view that welfare recipients are undeserving (from 21% in 1987 to 31% in 2011) and that the welfare state encourages dependency – 46% say if benefits were not as generous, people would learn to stand on their own feet, up from 16% in 1987.
It's one of those moments that anyone with a socialist bone in their body would shake their heads. Throughout the New Labour years not only did its MPs and apparat adapt to the press-orchestrated poison around social security, they actively connived and encouraged it. Workfare and the Work Capability Assessment are New Labour's distinctive contributions to the dehumanisation of unemployment and disability support recipients. Makes you proud, doesn't it?

In a way, Labour people's growing hostility to the less fortunate proves how successful divisive, dog-eat-dog policies and rhetoric can be. It also demonstrates the continued salience of class, albeit in a negative way. As appallingly crass it is, rubbish around the "squeezed middle", "hard-working families/taxpayers", and "strivers" does speak to large swathes of people. The public at large are being explicitly addressed as people who work while on Britain's council estates, bajillions of others are idly living off their taxes. You have to work every hour you can send, while those on JSA or ESA get an income handed to them on a silver dish. It's one class politics of envy card the Tories are never afraid to play because they know it resonates.

What can be done? Labour should never play this game because, ultimately, not only is it repugnant - it damages the party's self-interests. Therefore, positive policies are the answer. Unfortunately, like Gus, I cannot understand why Labour aren't making more of its jobs guarantee policy. Cultures of worklessness are a shaggy dog story - unemployment, after all, is everywhere and always the result of lack of jobs. But a guarantee guillotines the very possibility of scrounger myth-making as well as offering the long-term unemployed a route back into work.

Policy is a means at the labour movement's disposal. But much harder is the tough work of turning the culture around. And, unfortunately, you cannot undo 30 years of relentless rhetoric and lies over night.


Boffy said...


It illustrates a number of facts.

1. Those on the catastrophist Left who hope for some big economic crisis, because they hope it will radicalise workers in a way they have been unable to do with 100 years of propaganda and frantic activity, are hopelessly misguided. As Trotsky pointed out long ago - economic crises cause greater division and weakness within workers ranks.

2. Those views are a reflection of the above. It means competition, between workers, and atomisation increases.

3. It is an aspect of alienation. Workers do not have control over their taxes taken from them, and how they are used by the Capitalist State to pay out in benefits. You don't get this kind of problem with the disbursement, for example, of TU hardship funds, which are under workers direct control. If we had worker owned and controlled Social Insurance Funds administered in the same way, as used to happen with workers Friendly Societies, the problem would go away, because we would be disbursing the funds, and know they were only going to those that deserved them, and we would have means of trying to provide recipients with work or other forms of help. The Welfare State was created by the bosses to keep that control in its hands, for precisely these kinds of reason.

4. You are right that Labour should respond with positive policies. The main one would be to demand a massive rise in the Minimum Wage, to about £18,000 a year, to show a commitment to "making work pay". I'd combine that with scrapping in-work benefits like Housing Benefit, Child benefit, Tax Credit etc, that subsidise low paying bosses, AFTER such a level of Minimum Wage had been introduced, or immediately alongside it.

5. It demonstrates a point I have made before about a socialist society. The idea that you could have "democratic" planning of such a society very quickly is facile. For one reason highlighted by the above, democratic decisions, then implemented from on high by a State will be too removed from the individuals voting, and subject to the results, for them to have ownership of them.

Speedy said...

Feels like a self-fulfilling prophesy to me - who are these Labour voters?

I suspect there are the ones that go to work while they have neighbours, friends and relatives who do take advantage of the system (I know what I'm talking about) so don't have quite such rose-coloured specs.

There are also those - the bourgeois - who have always secretly harboured contempt for the working class and have contributed to their sense of worthlessness through welfare dependency.

And there are those who are indeed influenced by the media.

The road to hell is paved with good intentions - the system was set up during hard times to help people out, but it has increasingly expanded to become a system of "benefits" in tandem with the decline of large scale industry. As such it became a tool by the right to manage economic realignment - you can see it across Europe.

Provide the poor with just enough to not go hungry and keep a roof over their head, and if you can instill them with a sense of low self esteem all the better, while you reap the real "benefits" for yourself and your offspring.

This is what the benefits system has become - a kind of soma for an Epsilon class, that doesn't grasp its future is being stolen, something in which "New" Labour (the left-bourgeois side of the coin) shamelessly conspired (astounding really, how they promoted immigration with all those people out of work).

It's ironic that IDS comes in for such hate - his Christian conviction is actually driving him to help improve the lives of these people. He is so "off-piste" it's amazing Cameron and Osbourne haven't managed to get rid of him yet, but give them time...

Gary Elsby said...

Nice in theory Boffy.

If I'm on 18K pa, how much will a plumber charge me for a leaky tap?

How much will my building society charge me for the privilege of not being rained on?

How much will the 0.5% interest rate go up because of this?

Who will actually be able to afford to buy those product being produced by the 18K worker, on the presumption that we must export to foot the ultimate bill?

As for the article in question, I find it yet another (EU?) distraction from the real subject of the economy.

Boffy said...


We've already had this discussion. How much the plumber charges you has nothing to do with how much you earn. It depends on the demand and supply of plumbers, and the value of their labour-power, not yours.

I don't understand your point about the building society, but again the price of houses has nothing to do with how much people are paid. House prices like asset prices are in a bubble because of massive money printing. As Mervyn King said today, when interest rates rise, asset prices will fall. The demand for capital is rising relative to its supply, and so interest rates will rise, whatever the Bank of England does.

Again increasing wages does not affect interest rates, which are determined by the demand and supply of capital.

As for who will buy the products, well Germany seems to have no problem selling Mercedes and other high value goods to China and other countries, and its workers earn a lot more than 18k. Moreover, workers earning 18k will themselves create additional aggregate demand for products. China is increasing wages, to develop its domestic economy for precisely that reason.

The price of commodities today for mass produced goods has little to do with wages, and everything to do with productivity, which is determined by how much capital backs the worker. As for those commodities that are correlated to wages, they are high value products the demand for which is not particularly price sensitive. For example, the majority of the cost of an iPad comes from the wages paid to the very highly skilled and paid designers, software engineers and so on. It does't stop Apple selling gazillions of them at high prices, and making huge profits. In fact, its a requirement for it.

Gary Elsby said...

I'm still amazed at your answers Boffy.
You continue to see no link with high pay and inflation.
The lowest paid worker is on 18K and so I ask what pay is the plumber on and how does he gain his 35K?
He costs more to employ or he works 100hours per week?

High pay causes inflation and that inflation goes into housing and it always has.
A vicious circle.
To counter this high inflation, interests rates climb. It is a weapon of choice. The other is to deny demand which forces the dole queue up and a recession.

To pay for an 18K worker, the goods increase in value accordingly and importing EU countries have good choices, the UK or China (import deflation).
We know what the choice is because the UK actually does this.

Boffy said...


Not it doesn't! Trust me I'm an economist. Inflation is caused by a fall in the value of money. In modern economies that means printing more paper money tokens, creating more credit etc.

Germany has high wages and low inflation. Zimbabwe had low wages and hyper inflation.

Marx explained it all more than 100 years ago.


Your argument about housing is clearly false. In both the US and UK from the 1980's, wages were stagnant or even falling. Yet, house prices went astronomical due to massive money printing.

Gary Elsby said...

I take it that if Marx says its true, then all other observations are untrue?

Does Marx agree with your economic credentials?

The 1980's provided massive pay rises across the board and not the stagnation you suggest.

That meant creeping inflation for the housing boom which was caused by a flood of money (Lawson).

The German high wage-low inflation economy, if true, has to be put down to German people having everything other than a mortgage.
I hope you have not discounted the fact that Germany was re-united with its poor relation East Germany and this would act as a buffer against high inflation.

High pay therefore causes higher inflation and anything other would suggest that the business sector is nothing other than a social service quite willing to give money away on a politicians whim of upping the minimum wage (to a living wage?).

Stoke Council has actually done this. Let me see, hmmm, who will pay for this?
Oh yes, me.
Because I am a benevolent sort who doesn't require a pay rise to cover it.
Cover what?
The council tax rise that the Council will put on me to pay for the increase in minimum wage.

It's called inflation.

Boffy said...


No, just because Marx says it doesn't make it true, but then you haven't actually dealt with the arguments he and I have put to back it up have you?

You haven't dealt with the fact that wages are low in Zimbabwe but there was hyper-inflation. For instance.

Your argument that high pay causes high inflation is just the age old bosses argument. It assumes that bosses can simply raise prices because wages have risen, and that prices are simply an added amount on top of wages. Firstly, that argument is very convenient for the bosses, because it leaves out their profits from the equation! But, also, were it true, then bosses would simply raise prices whether or not wages rose!

In the 1980's wages were stagnant. Jobs paying decent wages in mining etc. disappeared and were replaced by low paying temporary jobs. Its why Thatcher had to convince people to go into massive debt to compensate for their falling incomes! Yes, Thatcher then printed money that pushed up prices, but you have it the wrong way round. It was that, which caused inflation.

You may have noticed that the politicians and the bosses OPPOSE increasing wages. Why? Not because it causes inflation, but because it reduces profits!!!

As for Stoke Council increasing the Council Tax, I'd say that was a good argument for encouraging more efficient provision of services. Secondly, the extra money that goes to Stoke Council is drawn from elsewhere, reducing demand for its products, and thereby causing its prices to fall. No inflation there then.

Gary Elsby said...

Boffy, I believe the world's greatest economists agree with your (wrong) economic theory, here, here, here, here and here!

Of course low wages can cause high inflation as does low pay (no wage increases-freeze) here in the UK.

The Marx example you gave (or he gave) was of a bygone era of which you suggest is relevant today.

Wages 10, costs 10 and sales 10 equals 30.
If I'm reading it correctly, wages 20 etc equals 60.

No it does not.

Wages 10, costs (due to import rise)20, selling price 30 (if lucky).

No profit equal UK 2013.

The mathematics and economics you hold dear to Marx is does not in anyway truly reflect the suffering by British business today.
Profit is of course the aim but that is fairyland this side of a text book.

I hope he thought it was worth the time and effort:


Gary Elsby said...

Ok, so the link didn't work.
I blame the crap blog.
he's the proper link that maybe doesn't work, but it does explain Marx theory more easily:


Boffy said...


I don't know what the maths you gave is supposed to represent. It has nothing to do with anything Marx said, and in fact makes no sense whatsoever.

On the one hand you claim that high wages cause high prices/inflation, then you say low wages also cause high prices/inflation!! That seems like wanting to have your logic cake both ways, rather than admit that the level of prices has nothing to do with the level of wages, but is in fact a function of the value of the commodity itself, and the value of the money in which its measured. In fact, wages are themselves a price, so trying to explain the price of one commodity by the price of another is a circular argument.

The idea that companies in Britain in 2013 are making no profit is ridiculous. In fact, many large companies are making record profits. Of course, some of them like Google, Amazon, Starbucks manage to pay no tax on them, but that's another matter.

But, your argument is also what is known as an exercise in comparative statics. That is it compares two situations, but does not take into consideration any possible, or in fact logical changes that might occur between the two. The whole point is that you can have high wages and low prices, precisely because high wages encourage firms to introduce more efficient methods of production that reduce unit costs.

Unfortunately, your approach is typical of the mentality of British industry, which has been to believe that it could simply go on in the same way, obtaining competitiveness by various forms of protectionism, including screwing its workers wages down further, subsidising them with various forms of welfare, rather than actually investing in more efficient methods, or new types of higher value production.

Gary Elsby said...

Boffy, it is you who gave the link to Marx on the 16/05/2013 above entitle wages.

I agree, it make no sense at all.

I am not saying that British business is making no profit at all, I just reject all theories that suggests all companies are making profits.

Your link does not even consider this.

Boffy said...


Nowhere in the link I provided does Marx give the meaningless mathematical example you cite!!!

If some UK companies are not making profits that is not the workers problem, and workers should not be expected to subsidise the capitalists that own those firms by taking inadequate wages or poor conditions. Down that road lies UK workers ending up like those in Bangladesh.

Its up to British capitalists in those firms to solve their own problems. That means investing money in adequate equipment, to raise productivity and so on. Look how the car industry was transformed by Japanese car firms that came here and did that compared with the years of lack of investment by British capitalists.

Its up to UK capitalists to invest in types of production that are high value, and where they are capable of paying high wages whilst remaining internationally competitive.

If they can't or won't do that, and I believe that they will not, in the end, then it is up to workers to do it themselves, which means taking ownership and control of the means of production themselves.

Gary Elsby said...

I think the argument is massively flawed regardless of who says it.
When you say it Boffy, it is still massively flawed.

To think that wages do not have a reflection on commodity price is barmy.
In fact, if a Government demands an artificial minimum wage, then we have an artificial commodity price, as a starting point.

You would answer that the increase from £1 per hour to £6.75 minimum should come out of profits without a bearing on commodity price.
That would be a berserk answer if you agree.

You see Boffy, the boss couldn't but the best machinery to raise quality production that would pay higher wages.

I think you wish to scrap the whole Capitalist system and replace it with something else.

Labour in 2015 will stun us with raising demand by raising supply.
Please read my 2010 manifesto to see how they will do it.

Boffy said...


Simply saying that you think something is barmy, because you can't understand it, or provide any argument against it, is not a very good position for you to argue from.

The prices of commodities are determined by their price of production, which is essentially the cost of production plus the average rate of profit. But wages are only a part, and usually a small part of the cost of production. If wages rise, profits fall, and capital seeks to replace labour with machines and to increase productivity.

Firms cannot simply increase prices when wages rise, because competition prevents them from doing that, and so does the fact that consumers may decide to spend their money elsewhere. But whether you think its barmy or not the facts speak against you. generally where wages are high labour is cheap and vice versa. That is why as Marx says, in the 19th century, British workers wages were 50% higher than in Europe yet, British textiles were far cheaper. Similarly, US agricultural wages were high, yet US agricultural prices were much lower than in the UK. Similarly, German wages are high, yet Germany is the second largest exporting country in the world.

If money supply is held constant there is only a given amount of money to be circulated, so if the price of one commodity rises, the price/s of others must fall, as there is only a given amount of money available. By contrast, prices rise with or without wage rises if the money supply is increased.

The fact you choose to base your argument on an increase in Minimum Wage from £1 an hour to £6.75 shows your argument is weak. I have not suggested any such percentage rise.

Obviously, there is a point beyond which wages cannot, in the short term rise, without anhihilating profits. Even so, that is not the same as causing inflation. But, not everyone in any case is on Minimum Wage, and also the Rate of profit is much higher than reported because the official measure does not take into consideration the rate of turnover of capital.

I don't understand your next statement. Clearly capital can and does buy and improve machinery to raise productivity, and is thereby enabled to pay higher wages, and often make higher profits too. That is exactly what Ford did.

You are absolutely right I want to scrap the whole capitalist system and institute a Co-operative Commonwealth along the lines proposed by marx.

Gary Elsby said...

Boffy, you are right, I just simply do not understand this theory (theory, I doubt it?).

Talk to me about brain synapses, mitochondria, theories of evolution or even historical context, but what you have attempted to explain does not compute. You say it's because I don't understand.

I do understand. I understand it to be a nonsense.

The very ideas you (or is it Marx) that wages can't go up because profits may fall, or competitors halt a domestic wage rise is so flawed, it is probably the reason Marx economics is so rejected the world over.
Cuba being a prime example.

Notice the FTSE 100 going ballistic?
You will explain this via chapter xx of Marx.
British business booming?
Money supply bloated?
Money in decline?

British business is in recession/depression. Ask Phil.
FTSE rocketing.
Dole queue up.
Labour in despair.
Artificial interest rate set at 0.5% (QE=£50bn=0.5% increase)
£350bn QE, therefore= 1 base rate@ 0.5%+3.5%=4%.

In other words, the FTSE100 is speculating a massive rise overnight.
This is because when the QE taps are turned off, the money speculators will be asked to fund everything and they want a return for their cash.
Where will it come from?
Share values increasing.
That means real inflation.
That means wage increases.
That means costs (of production) go up.
That means commodity price goes up.

In the world of Marx, that must mean that a boss is a greedy bastard and the worker is also a greedy bastard.

This makes sense Boffy.
I remain baffled by you, just the same.

Boffy said...

Share prices like house prices are rising because of massive money printing. Hence when Bernanke seemed to suggest today in his Senate Testimony that QE might be tapered in a couple of months, US stock markets dropped 100 points, then when it seemed he didn't mean that, they went up 100 points.

Let me explain why wage rises do not cause inflation, using the economists favourite fictional character, Robinson Crusoe. By the way its not just Marx that had this theory. It was held by David Ricardo and Adam Smith, and today is held by Milton Friedman and others.

Robinson can work 10 hours a day 6 days a week, as a good Christian resting on the Sabbath. In this 60 hours he produces 600 items that he can consume or use as means of production. The price of these items then is what he has to give to obtain them i.e. his labour-time, here 60 hours or a tenth of an hour per item.

Out of this 60 hours he can work, he has to work 20 hours to replace the means of production he has used up e.g. seeds. He also needs to work a further 20 hours to produce the food he needs in order to live and work the next day. That leaves him 20 hours as surplus.

So, the second amount here is the equivalent to his wages and the third is the equivalent of profit. Now, if he decides to consume more i.e. to increase his wages, by consuming the product of 30 hours production rather than 20, does this in any way change the price of his output?

Absolutely not. He still produces 600 items, and it still takes him 60 hours, and the price of each item is still then 1/10 hour. It simply means that his surplus/profit is smaller, so the amount he could put to one side as additional seed etc. is reduced. Note that is still not the same as not being able to expand his production.

However, let's look at how the price of his output might be inflated. Suppose, the watch he uses to measure the time he spends on these activities begins to run fast. It shows 2 hours passing when only 1 has done so.

It now appears to him that he has spent 120 hours during the week rather than just 60, producing these 600 items. Their price has doubled, even though his wages have stayed the same.

That is exactly what happens with money printing, the value of each £1 $1 etc. is reduced, so the things they measure, prices, rise proportionately.

Boffy said...

There is an addition to the example above I should have given.

Suppose of the 20 hours that Robinson has surplus, as a good Christian, to assist his devotions, he spends this surplus time, building a church. It does nothing, therefore, to assist in him producing more (investment), or in increasing his own productive power. It is the equivalent of unproductive consumption by capitalists e.g. their buying luxury goods, building weapons, supporting the parasitic classes like the clergy, aristocracy, Monarchy and so on.

But, Robinson in deciding he wants to increase his wages, and thereby consume more, also decides that to assist this, Gold will have to wait a while. So, he stops building the Church, and uses the now 10 hours surplus time to make a better set of agricultural tools, a set of fishing nets and so on.

As a result of this productive investment, his productivity rises. Now in 60 hours he finds that he can produce not 600 items, but 1200 items. The price of each item has now fallen to 1/20 of an hour!

Because he has to maintain these tools, the amount of time he has to spend on reproducing his means of production rises, but the doubling of his productivity means it falls.

Say the increase in his means of production means he would have to previously have spent 30 hours rather than 20. But, now with a doubling of his productivity, it only requires 15. The 30 hours he previously spent to cover his consumption (wages) also falls to 15 for the same reason.

Consequently, not only has he increased his wages by 50%, whilst prices have halved, but now, he also has 30 hours per week left over as surplus, whereas previously he only had 20 hours.