Commentary on Political Economy

Sunday 31 July 2022

POLITICS AND ECONOMICS - Freedom and Necessity


Contrary to what Lenin is said to have quipped, politics is not a concentrate of economics. It is the other way round: economics is a concentrate of politics. In other words, it is not politics that "boils down" to economics; it is economics that can be reduced to a bundle of politics. The important thing is to focus on the meaning of the phrase "a concentrate of" and the phrase "boils down to". What is it that we mean when we say that "in the final analysis" politics is economics or the opposite, that economics really is politics? What kind of "reality" do we refer to when we speak of the ultimate foundations of economics or politics? As we all know, necessity is not just "the mother of invention" - meaning that there are some needs that are so fundamental that they stir up human imagination and inventiveness. Necessity can also be camouflaged and disguised or simply be rationalised away as "virtue": this is what we do when "we make virtue out of necessity". Differently put, we recognize that there are situations in social relations when we are coerced into doing things that either we would rather not do or else "concentrate the mind" to the point of inducing virtue - the acquiescence to necessity as virtue - or inventiveness, the desperate search for alternative solutions. But in all these cases, in all these instances, what we call ‘necessity’ is a function of social relations, not of physical or physiological necessity. If we accept that our environment offers sufficient resources for human societies to reproduce themselves, then it is evident that economics - which as "the dismal science" is often confused with "the sphere of necessity" - has little to do with physical or physiological necessity but must instead have everything to do with "coercion". The necessity of economics intended as a "science" is therefore in reality the necessity of political coercion. That is why it is correct to insist that "economics is a concentrate of politics", in the sense that what we describe or circumscribe as a separate field of human activity - "the Economic" - is a specific form of coercion imposed by some people on other people in the sphere of the production of and for human needs and their satisfaction.

To accept with Lenin that "politics is a concentrate of economics" would be tantamount to asserting that economic activity is dictated by a "necessity" that is independent of "coercion", that is physical or even physio-bio-logical in nature – and therefore independent of "the Political". This may make sense in terms of the economic determinism – indeed, an eschatology or even a “theodicy” of communism – that Lenin inherited from Marx’s labour theory of value and is implicit in the conception of human history expounded most explicitly in The Communist Manifesto and in the “Preface to A Contribution”.

Bourgeois economic theory, which includes Classical Political Economy and Neoclassical Economic Theory, has always sought to draw a nexus, a substantive link, between the freedom involved in the production of things by human beings and the necessity that limits the quantity of that production given a certain level of technological means. Thus, the value of goods produced has always depended for bourgeois economic theory on the strict link between unbounded human needs and wants, on one side, and the clear limits on our ability to satisfy them. In its effort to present itself as “economic science”, bourgeois economic theory has always presented the value of production as dependent on this interaction between unlimited demand and strictly limited supply.

Consider these two statements made by Joan Robinson in her “Freedom and Necessity” intended as an anthropological introduction to “economic science”:

In so-called civilized societies, it is the poor who spend their days in an anxious search for the means to live and the rich who can indulge in gratuitous activities; but when we compare rich and poor societies, the reverse often appears. The isolated communities, when they were discovered and brought into the frame of reference of ‘national income per head’, were placed very low on the scale, yet for many of them the proportion of energy, skill and mental activity devoted to non-economic aims was much greater than it is with us.” (J. Robinson, Freedom and Necessity, p.25.)

[Cf. also the asinine remarks Robinson makes on adaptation on p.10.]

The survivors of each generation are those whose genetic make-up is propitious to survival, that is, well suited to finding nourishment and avoiding enemies in the particular environment in which they grow up. Thus the pressure of technical conditions has carved out the multiplicity of creatures who appear to us to be so marvellously 'designed' for the life that they lead.¹

For a species, variability itself is propitious, within limits, to survival. The species capable of adaptation are, for the most part, the ones that have survived till today, though there are some which have proved successful with remark ably little variation.

The habits of a species are just as much subject to the pressure of evolution as its physical form. A great variety of types of family life exist in nature - monogamy, polygamy, and group marriage; continuous association, pairing during a limited breeding season or casual mating. The style of life of a species must be consonant with its way of getting a living. (Op.cit., p.10)


The immediate problem with this understanding of value is that it presupposes the existence of property rights whereby the exchange of products between independent producers and, consequently, the settling by these producers of the exchange values of their production can be determined. But it is just as immediately evident that there can be no necessary link of any kind between the human production of goods and the proprietary and legal rights to which producers can lay claim over that aggregated production!

This is quite clearly and incontrovertibly the rock against which all bourgeois economic theory must founder! The presumed and claimed objectivity of bourgeois economic science founders against the rock of the abject arbitrariness of all legal proprietary rights and claims over production by presumed independent producers!

Monday 25 July 2022


Putin’s attack on the grain deal was despicable. It also shows he’s desperate

For the deal to work and global food supplies to get moving again, Ukraine’s ports and ships need Nato protection

Ukraine: Russian missile strike hits main port of Odesa – video

Over the weekend, Russia signed a deal with Ukraine to allow grain exports to resume from three Ukrainian ports, thereby easing the global food crisis. Before the ink was dry, Russian forces fired precision missiles into the port of Odesa as grain was being readied for export.

This is clearly the behaviour of a tyrannical despot, one whose word cannot be trusted. But it may also be an act of desperation: Richard Moore, the head of MI6, told a US security conference last week that the Russian army is about to “run out of steam”.

The Russian president, Vladimir Putin, has approached the conflict as though it were a second world war tank battle – and, unsurprisingly, his 20th-century tactics are not standing up to 21st-century weaponry. But we know from the Russian playbook in Syria that when the conventional does not work, Putin is quick to turn to the unconventional. In Syria, this meant attacking hospitals and schools, denying aid and, ultimately, using chemical weapons. In Ukraine, another Russian war crime is about to happen in plain sight, even after the grain deal: the weaponisation of food and fuel. If we allow this to happen, it is not such a large step to chemical, biological or nuclear warfare, all of which Russia has already threatened.

The weaponisation of food has already forced up prices for those who can least afford it in Africa and Asia, putting millions at the threat of starvation. The grain deal, brokered by Nato member Turkey, should allow food from Ukraine to reach these countries, but any guarantees of safety for the ships transporting it– especially in the wake of Russia’s attack on Odesa this weekend – should be taken with a pinch of salt.

As soon as these ships get into international waters off the coast of Odesa, they should be protected by Nato fighter jets. The Russian air force has proved scant match for ageing Ukrainian jets, and it will be even less of a match for state-of-the-art Nato ones. The deal also involves lifting some sanctions against Russia, allowing it to generate huge amounts of revenue by selling its own grain and fertilisers on the world markets. This will, of course, allow Putin to rebuild his beleaguered army.

The Ukraine crisis is also one of the things responsible for creating rampant inflation in the UK and elsewhere, contributing to the cost of living crisis. Helping Ukraine defeat Russia is the quickest way to get economies back on track. If this means putting boots on the ground, ships in the sea or planes in the air, then so be it, if it ensures Putin’s war crimes in Ukraine do not also affect the most in need around the globe. There are many war crimes being committed in Ukraine by Russian forces and, as the UN appears powerless or unwilling to act, Nato must.

In Ukraine, as in Syria, Putin appears to have no concern about collateral damage or the rules of war and appears to favour directly targeting civilians as the quickest way to strategic victory. Unfortunately for him, the Ukrainian people have shown that they have the stomach for this fight – Nato must match their bravery and back them to the hilt. We cannot forget that our failure to act in Syria, when up to 1,500 civilians were killed with the nerve agent sarin, no doubt emboldened Putin to invade Ukraine.

Putin is losing in all aspects and on all fronts of this war, and we must help Ukraine to victory at all costs. Last weekend’s events confirm- – if further confirmation were needed – that Putin cannot be trusted. In order for much-needed food to get to those who most need it, Nato must get directly involved to protect its passage through the Black Sea.

  • Hamish de Bretton-Gordon is a chemical and biological weapons expert and a fellow at Magdalene College, Cambridge

Sunday 17 July 2022


How to solve the productivity paradox

Matt Kenyon

By late 2020, many economists saw a silver lining in the pandemic. Stuck at home, people were adopting digital technology at an accelerating pace. Productivity was surging. Perhaps the long, debilitating decline in productivity growth was over. Alas, after peaking above 3 per cent the surge collapsed, exposed as a blip typical during the early stages of a recovery, when businesses are slow to hire new workers.

This leaves unsolved a great paradox. Since the computer age dawned in the 1970s, we have lived with a sense of accelerating progress and innovation. Yet as the computer age began, the postwar productivity boom ended. Except for a revival around the turn of the century, productivity has trended downward for more than 50 years.

Optimists suggest that innovations such as internet search are often free, and so fail to register in productivity measurements, or that the impact of technology comes in waves.

The productivity revival that began in the late 1990s was driven by checkout scanners and other digital inventions, applied in retail stores. The impact of newer advances such as artificial intelligence will come, they say, just wait.

Pessimists respond that in earlier eras capitalism generated advances such as electricity and gas engines, which lifted productivity across industries. Now it produces distractions — digital games and social media.

But a closer look at the timing and location of the productivity slump points to an alternative explanation: the expanding role of government.

It is more than coincidence that starting in the 1970s, major capitalist countries began running budget deficits, in good times and bad. Large bank and corporate bailouts have grown more sweeping since the early 1980s. Government stimulus (both monetary and fiscal) has smashed records in the last three major crises, spiking in developed economies to more than 7 per cent of GDP in 2001, 12 per cent in 2008 and 45 per cent in 2020.

With increasingly generous rescues, corporate defaults have fallen in each crisis, even as recessions deepened after 2000. This decay was most dramatic in Europe, where the default rate on speculative corporate credit fell from around 20 per cent after the 2001 recession to 10 per cent after 2008 and 5 per cent in 2020.

As the cleansing effect of defaults and downturns faded, so too did entrepreneurial dynamism. New business creation plummeted, leaving behind a stock of fewer older, bigger companies. The number of listed US companies fell by half in recent decades. The largest survivors are increasing their share in three out of four US industries and cornering a growing share of the profit.

More active government support has undermined creative destruction, the lifeblood of capitalism. Productivity growth fell further following the global financial crisis of 2008, as bailouts and stimulus grew significantly. In developed economies productivity growth plummeted to just 0.7 per cent in the 2010s — less than half the pace of the already declining trend over prior three decades.

This decline has, however, not been genuinely global. Over much of the last half century, productivity rose steadily in emerging nations, from below zero in the late 1970s to a peak above 5 per cent in the late 2000s. While developed economies increasingly socialised economic losses during that period, China and later India pivoted to more market-orientated economic systems.

Despite backsliding in recent years, new data shows that productivity in emerging countries still grew at 3 per cent in the 2010s — above the trend of the previous decades. Since 2010, nearly all developed countries have seen productivity drop.

Big government has advantages as an explanation for the productivity paradox. For one thing, it does not require scepticism of new technology. It can also account for strong productivity growth in emerging countries, where the role of the state has broadly declined since the 1970s. It does not rely on the idea that the productivity boost from digitisation eludes clear measurement, which cannot explain why this boost was easy to measure during the technology revival around 2000, but impossible before and after.

It also better fits the timeline. As government interventions grew, the cumulative hit started to overwhelm the boost from technology. Studies tie the decline in recent decades to the beneficiaries of government support, including bloated financial markets, monopolies and zombies — lifeless companies that survive on fresh debt.

Zombies barely existed in 2000 but now account for 20 per cent of listed companies in the United States, and higher shares in Europe. The rise of the “zombie economy” has been linked to increasingly easy money pouring out of central banks, amid warnings that zombies lower productivity across industries by sucking resources from more dynamic companies.

Now comes a twist. Inflation is back, possibly ending the era of easy money, which may in turn remove some of the deadwood blocking a new productivity wave. But easy money is only one aspect of big government, entrenched as a new governing culture of bailouts, market rescues and constant stimulus. To revive productivity, the government needs to rethink its role in the economy.




To understand the centrality of value in economic theory, consider these simple situations. If I exchange an apple with another person who is willing to exchange it for a banana, what we have engaged in is simple barter. And the reason why we have exchanged an apple with a banana and vice versa is that the use value of the banana is greater to me than that of the apple, and the opposite is true for my counterpart. In barter, the essence of use value is evident: it is a relationship between human need and objects. Use values are the objectification of human needs.


Now consider a different situation. I sell an apple for one dollar from my counterpart. Next, with the dollar obtained, I purchase a banana from a third party. Here, the ultimate outcome for me is the same: I have obtained the use value of a banana in exchange for the use value of an apple. But the crucial difference is that now I have achieved this outcome not through barter, involving strictly use values, but rather through a monetary medium, one dollar. The difference is that now what the apple and the banana have in common are no longer the respective use values between the bartering parties, but rather the exchange values of the apple and the banana which are socially quantified in the monetary medium of one dollar.


In other words, what is happening in this monetary exchange as against the barter is that now the transaction involves exchange values which, unlike use values, no longer relate purely to the subjective needs of the parties involved (two for barter) but rather to the socially objective valuation of the exchanging parties through the monetary medium. Thus, where the monetary medium is concerned, we can see that exchange value is socially objective instead of being subjective as in the case of barter. Exchange value removes the direct link between human needs and objects by introducing money as filter between them and other human beings. Money as exchange value has now become socially objectified use value or wealth.


The question now is: - how is it at all possible for two very different objects, with utterly incomparable use values – an apple and a banana – to be equated not through direct use values (I need a banana and my counterpart needs an apple, so we agree on the barter), but rather through an abstract socially objective validated exchange value that is fixed through the monetary medium at one dollar? What is the quality that one dollar indicates which makes two utterly different objects measurable and equivalent? This common quality measurable in a socially objective manner we call “exchange value”. But what exactly is the substance, the content - the essence, the quintessence, the quidditas - of this “value”?


And further we may ask: what then is the difference between use value and exchange value? It is not sufficient to say that use values are subjective and exchange values are socially objective – because surely there is a social dimension to use values as well – that is why they are exchanged through barter just as exchange values are exchanged through money. Indeed, it may be said that use values are more socially significant than exchange values because they relate to the actual organic needs of human beings as against the more mercantilist or transactional or ephemeral desires of social agents who exchange objects for money so as to realise more money than when the exchange began! Because the ultimate aim of agents who engage in exchange through the monetary medium is not so much, and often it is not at all, to obtain a final use value but rather to realise a greater quantity of the monetary medium, of socially objective value, than the one with which they began the exchange!


And yet we know that the objectification of exchange value, the monetary medium, must also have an ultimate use value or human need that justifies the whole process of exchange of exchange values through money. The difference between use value and exchange value is that with the former the focus is on the intrinsic objective usefulness of the object, whereas with exchange value the focus is almost exclusively on the extrinsic ability of the object to generate a profit, on its “exchangeability”. Certainly, in both cases, the use value of the object plays a role. But in the case of exchange value, use value is almost irrelevant or at least comes a distant second to the ulterior motive of the ability of the object to generate a profit. Hence, the contrast between the two kinds of value could not be starker: use value is founded on human needs first and foremost, on the limited and specific function and purpose of the object; exchange value is founded almost entirely on the endless accumulation of exchange value as a source of profit.

The next question then arises: what exactly is the content of exchange value as a source of endless accumulation of value or profit? In other words, what is the use value of exchange value? What human needs does exchange value serve or satisfy?


Hong Kong’s Coming Religious Crackdown

A Vatican envoy warns Catholics in the city of possible persecution.


Cardinal Joseph Zen attends a mass for the Chinese Catholic church in Hong Kong, May 24.


Freedom of speech, assembly and the press are gone in Hong Kong, and there’s good reason to fear religious liberty will be the next target.

That was the warning from Monsignor Javier Herrera-Corona, the Vatican’s unofficial envoy in Hong Kong, as he prepared to leave the city this spring after six years. Reuters reports that in four private meetings he encouraged some 50 Catholic missions in the city to safeguard their property, files and funds in anticipation of more mainland Chinese control.

“Change is coming, and you’d better be prepared,” Monsignor Herrera-Corona warned the missionaries, according to Reuters, which quoted an attendee as summarizing the monsignor’s message: “Hong Kong is not the great Catholic beachhead it was.”

Hong Kong’s Basic Law guarantees freedom of religion, and diverse faiths have flourished there. The city has also long been a haven for mainland Christians, who traveled to Hong Kong to study. Father Laszlo Ladany, a Hungarian Jesuit based in Hong Kong, famously reported on Chinese political and legal developments during the Mao Zedong era.

Yet China has violated other liberties it swore to respect under the Sino-British Joint Declaration, and there’s no reason to believe religious freedom will be an exception.

The Communist Party has installed Xia Baolong —who presided over a crackdown on Catholic and Protestant churches in Zhejiang Province—as the head of its Hong Kong and Macau Affairs Office. In May Hong Kong authorities arrested 90-year-old Cardinal Joseph Zen under the new national security law. His supposed crime is that he was a trustee for the 612 Humanitarian Relief Fund, which supported participants of the 2019 pro-democracy protests.

Communist Party chief Xi Jinping has tightened control over religion in China to a degree not seen since Mao. The U.S. has declared China’s treatment of Uighur Muslims a genocide, and its oppression of Falun Gong practitioners is longstanding. Beijing claims authority to appoint priests and pastors and dictate sermons. It has arrested mainland Catholic clergy and Protestant pastors, razed churches and confiscated religious texts.

Monsignor Herrera-Corona’s warning underscores the folly of the Vatican’s 2018 attempt to appease Beijing by allowing Communist Party discretion over the appointment of Catholic bishops. Cardinal Zen said the secret pact was “selling out the Catholic Church in China,” which is probably the real reason for his arrest. The crackdown on believers has proceeded despite Rome’s concessions, and the deal with Beijing will tarnish Pope Francis’s record as head of the Church.

Beijing reserves special animus for mainland churches that welcome foreign missionaries or maintain ties with believers abroad. Hong Kong’s national security law prohibits “collusion" with vaguely defined foreign forces or external elements. Don’t be surprised if the Communist Party uses this provision against believers. Under the national security law, the maximum sentence is life in prison.