by Philip Ferguson
No longer lend your strength to that which you wish to be free from – Jewel, “A Life Uncommon”
People who pronounce themselves in favour of the method of legislative reform in place of and in contradiction to the conquest of political power and social revolution, do not really choose a more tranquil, calmer and slower road to the same goal, but a different goal. Instead of taking a stand for the establishment of a new society, they take a stand for the surface modification of the old society. – Rosa Luxemburg, Reform and Revolution
The stock response to the idea of a revolutionary transformation of society is that it is just not realistic. In New Zealand, and much of the rest of the world, especially the First World, the ‘received wisdom’ is that slow, gradual change alone is possible and desirable. The capitalist state has been seen as the suitable mechanism for such change. Advocates of this ‘realism’ used to point to the establishment of what they claimed was a comprehensive welfare state as the mark of the efficacy and achievements of gradualism/reformism.
This overall position was enunciated, for instance, by left-liberal sociologists Paul Spoonley and Steve Maharey who claimed the welfare state and the old two-party system “represented the interest(s) of working people against those of capital” (preface to Paul Spoonley, Race and Ethnicity, Auckland, Oxford University Press, 1988). This was rather ironic as Maharey went on to carve out a career in the capitalist Labour Party, an outfit that systematically represents the interests of capital against the interests of workers. Nevertheless those particular views represent a swathe of opinion on the left.
Other articles on Redline have pointed out that the reason the state played such a large part in socio-economic development in this country was because of the weakness of capitalism. To implant and develop this mode of production required the separation of Maori from the land, large-scale labour immigration, and the construction of a substantial infrastructure, plus a big ‘hand-up’ for private capitalists in getting many of their own operations started. Because the state represents the interests of ‘capital in general’ and has a commensurate access to resources, it alone could play this role.
Necessary for capitalism
The development of the New Zealand state as an instrument of capital can be very well summarised by repeating Australian historian and political scientist Verity Burgmann’s analysis of the case across the ditch:
“Australia was settled by a capitalist state formation disguised as a British military regime. The ‘bourgeois revolution’ occurred even before the First Fleet left Portsmouth. . . this state apparatus became necessarily linked with all aspects of economic development; the overwhelming task of settling the continent accorded to the machinery of state an abnormal degree of economic control. Although this control was used only in the interests of capital, whether British or Australian, the state was able, because of the apparent connection between large-scale developmental schemes and general prosperity, to pose as an independent third force transcending the interests of either capital or labour. Only the state could expect to finance such schemes because of the non-specific return on the investment. Furthermore, the Crown owned the land, so even individual capitalist contributions were dependent on the state.”
The substantial role of the state, necessary for capitalism to be established in colonial locales such as Australia and New Zealand, had debilitating effects on the labour movement. It gave rise to a particular ideological stance in relation to the state and social change. As Burgmann notes:
“The outcome of this impartial posture of the state was that the labour movement developed no thoroughgoing critique of the state as necessarily working in the interests of the employers. . . the Australian labour movement was particularly enthusiastic about the extension of state control in the economy, on the basis that the state, unlike the employers, was impartial. The obvious ideological expression of this concealed class collaboration via the medium of the state was labour nationalism; a serious hindrance to the development of working class consciousness. National loyalty became stronger than class loyalty. (Verity Burgmann, “Capital and Labour”, in Ann Curthoys and Andrew Markus, eds, Who Are Our Enemies? Racism and the Australian working class, Sydney, 1978)
Workers were thus managed by capital, class consciousness was stunted, and even militant strikes were therefore unable to develop into challenges to the system itself. They remained at the level of battling over the conditions under which workers would continue to be exploited. (See the Engels article on the wages system, here.)
Additionally, at the more general level, reformism is given intellectual coherence by the way that the capitalist mode of production, unlike previous modes, formally separates the economic and political spheres. Those who directly exploit us, our capitalist bosses, are not the same individuals as those who rule over us politically and make the laws of the land. So it appears that the political sphere can be used to intervene in the economic sphere to redistribute wealth or to make even more basic changes. What is missed is that the formal separation of these spheres is underlain by – and simultaneously makes disappear – the very process of production in which exploitation actually takes place.
While the do-gooders, and in NZ much of the far left as well, concentrate on the political sphere and also on distribution of wealth, the exploitation process proceeds unimpeded.
But what about the welfare state? Was that not a victory for workers and proof that reformism works? Interestingly, this is a prejudice not only of the social reformers, but is shared by much of the ‘Marxist’ left.
The first thing to note is that in New Zealand, supposedly one of the most welfarist states in the world, the welfare state was actually quite small. In the 1950s and 1960s, for instance, the supposed heyday of the welfare state, there were hardly any officially unemployed people, so the government had very little to spend on dole payments. Married women were excluded from getting the dole. There was no domestic purposes benefit, either. Nor was dental treatment covered over the age of 16. There was nothing like the scale of sickness benefit that exists today.
Once renewed conditions of slump set in during the 1970s, unemployment skyrocketed and the domestic purposes benefit had to be paid to solo parents, the welfare state became hard to sustain. Eventually, in the ‘mother of all budgets’ in 1991, the dole, solo parents’ benefit and even widows’ benefit were cut by 25%. Those cuts have never been restored.
What about free education and health care, old-age pensions and children’s allowances or family benefit?
It is interesting to look at the thinking that went on with these. Despite the widespread left view that they were introduced because those in power – in particular the first Labour government – were committed to improvements in the lives of the working class, there were two key factors in their introduction. One was, as long-time prominent Labour politician Martyn Findlay noted in a 1991 radio interview, to ensure stability and stave off the dangers of a radical threat to the system. The other – and Findlay noted this as well, was to deal with real problems created by the weaknesses of the free market.
While the welfare state was created in New Zealand with an eye to staving off the dangers of revolution, it was created at a time of working class defeat. The first instalment came with the Liberals in the 1890s, after the unions had been crushed by the previous government in 1890. The second instalment came following the election of Labour in 1935, after the working class had been pounded by years of misery during the Great Depression.
Welfare payments and the provision of health care and education were necessary requirements for capital, but ones that individual capitalists don’t want to pay for. Employers, after all, need the workforce to be educated and physically maintained in a fit state for exploitation. In periods where the working class has been defeated there is a danger that it will become impossible for them to maintain themselves and their families to such a level of fitness. Capital then requires the state to intervene to ensure labour-power – workers’ capacity to work – does not deteriorate to an unusable standard. After all, they will want to hire more workers again in the future. At the same time, capital wishes this maintenance of labour-power to be as cheap as possible.
The place where this is most clear from documentation at the time of the establishment of the welfare state is probably Britain. The welfare state there came later than in New Zealand, but was more comprehensive. The British welfare state was based on the recommendations of the Beveridge Report of 1942, Social Insurance and Allied Services. Beveridge, who was a member of the capitalist Liberal Party, noted that it was “in the interests of employers as such that employees should have security, should be properly maintained during inevitable intervals of unemployment or sickness, should have the content which helps make them efficient producers.”
The Times, hardly a progressive paper, greeted the report as a “momentous document” (December 2, 1942) and Tory MP Quntin Hogg, later Lord Chancellor Hailsham, welcomed its “practical idealism” (House of Commons, February 10, 1943).
Beveridge’s suggestions for the level at which the unemployed should be maintained used tables drawn up in the 1930s Depression, showing the minimum on which a worker could be expected to exist and provide for a family. When the Labour government of Clement Attlee established the welfare state in Britain in the immediate postwar period it introduced even lower benefit levels than these! Ironically, that Labour government is still fantasised about by much of the British left as some kind of example of ‘practical socialism’.
The welfare state has several more useful services for capital. In setting the lowest possible levels of welfare payments, it establishes a low level for wages for employed workers. It also creates a powerful ideological position, dividing workers between the employed and the unemployed. For instance, it establishes in people’s minds the idea that workers who are unemployed at some point due to the inability of the market to provide jobs should themselves be punished for this market failure; they should therefore receive substantially less than those whom the market can continue to exploit in/through paid employment.
After World War 2, capitalism entered a new period of expansion, the postwar boom. The immense increase in productivity and profits represented an actual increase in the rate of exploitation because the gap between what workers received for their work and what the bosses received for the products of that work, expanded. Out of these expanded profits, and what they plundered from the Third World, western capitalists could easily agree to welfare states. (The situation was very different in the plundered countries of the Third World.)
If, during the postwar boom, profits were so high that capitalists could agree to chunks of surplus-value – the value produced by workers over and above what they are paid for – the onset of recessionary trends in the early 1970s began to change this state of affairs. Regardless of whether parties like National and the British Conservatives or Labour parties were in power, inefficient capital had to be let go to the wall (bankruptcies and closures), the rate of exploitation had to be stepped up, and chunks of surplus-value that were used to underwrite the welfare state had to be diverted into becoming profit, whether in the hands of private capital or the state.
It is important here to note that increases in the rate of exploitation take different forms. Of relevance to the present discussion are the different forms taken in a boom and a slump.
In a boom, rates of exploitation usually increase because labour-power is made more productive. This is mainly achieved through the development of newer and better machines and technology. In other words, workers can now reproduce the value of their own labour-power (in money terms, the wage) in a shorter period of time. They therefore spend more of their week engaging in surplus-labour, creating surplus-value.
However, these new machines and technology create no new additional value. Their own surplus-value, created in the production process in which they were made, has already been realised through their own sale. Thus when deployed in a new production process, they simply transfer their own value, bit by bit, to the new products they help make.
Rising surplus-value – and mass profits – have to be spread over greater and greater investments in the very items which do not create new value. Therefore, actual rates of profit fall. At some point they fall to a level where the accumulation process – the process of reinvesting profits in newer and better machinery and technology and expanding all elements of the production process – is disrupted. Rates of profit have fallen to such a level that there is not a mass of funds sufficient enough to retool and modernise whole chunks of the economy in order to keep ahead of or at least keep up with, the competition.
A slump becomes both the sign that the system has reached crisis point and a way of solving the crisis. The ‘solution’ is in the destruction of inefficient capital (capital which cannot compete efficiently), centralising and concentrating capital (fewer, but bigger, individual capitals), cuts in state spending, especially in those areas which do not directly assist the expansion of capital and cuts in our living standards and attacks on our rights.
In a slump, therefore, exploitation of labour-power is increased by driving its cost to capital (in the form of wages) down below its value (what it costs a worker to keep body and soul together).
In a boom capital can provide crumbs because the rate of exploitation is so high, as is the mass and rate of surplus-value and the mass of profits. In a slump, where a mass of capital is destroyed and rates of exploitation are raised through the more brutal form of making workers work harder and longer for less, capital can and must take away.
Where are we?
Today, then, after more than a century since the Liberals began the welfare state and almost a century since the founding of the Labour Party, where are we? Do we all have free education? Do we all have free health care? Do we all have wages or benefits at which we can make really good lives for ourselves and our families? Anything approaching freedom and plenty in the First World, let alone the Third World? Do we even have the right to strike?
Even the most diehard reformist would have to admit the answer to these questions is a pretty resounding “No”. What they avoid, however, is the two logical follow-up questions: What, then, has been the point? And What is the alternative?
After all, it seems that reformism has simply taken us through something of an historical circle. We’ve certainly made gains in terms of the rights of women, ethnic minorities and homosexuals, but workers remain as exploited as ever. We still produce massive amounts of value over and above what we are paid for. We still have to fight for even the most minimal wage rises and such rises are passed on by the capitalists to workers anyway through price rises. So it’s an endless treadmill.
Unfortunately, instead of adopting a critical approach to the failure of reformism, what few reformists are left standing, and the small far-left groups which share many of the reformists’ illusions, have simply lowered their horizons even further. How low the horizons of the reformists can go remains to be seen. In 1999, for instance, CTU leader Angela Foulkes declared that the unions had grown up sufficiently to realise that four weeks paid holidays a year wasn’t realistic!
More recently, much of the admittedly tiny far left has adopted a position on the issue of the partial sale of “state assets” which refuses to point out that the state in New Zealand is a capitalist state and these “assets” are capitalist companies. They extract surplus-labour from their employees and are driven by the creation of surplus-value and thus profit. They even have a management culture that is the same as private business, as the Solid Energy fiasco has pointed up.
Moreover, even in the days when the state sector wasn’t focused on profit-making, it was still focused on serving the interests of capital. Indeed, without a significant state sector, it would have not been possible for capitalism to get off the ground in New Zealand. Chunks of economic activity were in the hands of the state, for instance, long before the first Labour government. For instance, the Post Office, the railways and electricity production and generation, were wholly or partly state-owned before 1935, a point we make in our pamphlet on the Labour Party (see here).
The kind of projects which require vast investment and in which the turnover time for capital would be substantial – eg, major infrastructural projects – are particularly unattractive for private capital to invest in. Capitalists don’t want to have huge amounts of funds tied up for many years before they they can even get back their investment, let alone start making money.
In the mid-1980s, under the fourth Labour government, large chunks of state sector industry were broken off and turned into businesses. Some of this was done via privatisation, all of it was done via corporatisation – whether sold to private capital or remaining in state ownership, these chunks became corporations based on making the maximum profits possible.
Instead of rejecting the false debate over state assets, however, and posing an alternative to both state capitalism and private capitalism, most of the left has fallen in behind the Greens and the Labour Party. They join in arguing that these assets are somehow “ours” or, at least, are better owned by the capitalist state than having 51% ownership by the capitalist state and 49% shareholding in private hands.
In the course of traveling in a century-long circle, and returning almost to the point of departure in terms of the economy, a gigantic amount of people’s energy has been wasted. No wonder so many people are shell-shocked, demoralised and confused. And there has been so much wreckage, with so many people disillusioned with left-wing politics.
A more realistic and useful project is making a complete political break with reformism, including rejecting the ambits of debate that accept the existing order as the only one possible. We need a new movement which starts from what workers need rather than what capitalism can grant.