Plan of the day
1) principles of capitalism (2 hrs)
what is capitalism? group brainstorm 10 mins
what’s wrong with capitalism? 10 mins
example: stalinist central planning 10 mins
small groups: what does a capitalist production process involve? 20 mins
feedback and discussion 30 mins
short break (10 mins)
enclosures and the state: enclosures in history, and today (30 mins)
write up some examples of enclosures
what about enclosures today?
role of state
question to leave with: how are cuts related to enclosures?
LUNCH BREAK (1 hr)
2) crisis game (3 hrs)
– (during break, write up some figures on world GDP and post round walls)
brainstorm: what is crisis? – 10 mins
discussion of growth (and explain GDP etc.) – 10 mins
– sub-prime crisis (game part 1) 30 mins
clarify finance details, questions 10 mins
5 min break
– eurozone crisis (game game part 2) 20 mins +
questions / discussion 20 mins
5 min break
– discussion: — who’s responsible? / what are the causes? 1 hr
(could include — small group bit thinking about causes of crisis
then discussion: different levels of explanation; wage freeze; global shifts)
BREAK 20 mins
3) concluding discussion (1 hr)
questions from the day
positive end: alternatives? What do we do?
1) capitalism: an economic system
What does “capitalism” mean?
* Not just one “correct” definition.
* We will start by looking at capitalism as an economic system.
* Capitalism not “natural”, or the only system possible. Throughout history, many different ways of organising economics.
Organising production and distribution
Economic systems as ways of organising what a society or group produces, and how these products are distributed amongst different people in the group. Questions like:
- Should we put our energy into making toys, or guns? How much time should we spend working, or playing? How should we use land, forests, oil, and other natural resources? Who gets to decide these questions? Who gets all the pies?
Example: Soviet Planning
Each individual soviet republic (Russia, Kazakhstan, etc.) had a planning commission. The central planning commission Gosplan, in Moscow, collected statistics about what resources were available in the economy, and then issued detailed plans for what was to be produced by different regions and sectors (minings, agriculture, manufacturing, etc.)
Other examples …
NB: Systems aren’t monoliths
So what is capital?
18th century: three “factors of production”: land, labour, and capital. Nowadays, land just another kind of capital. So: capital = inputs to the production process except for labour. E.g., factory buildings and machinery, raw materials like steel or electronic components. Neoliberal expansion: human capital, intellectual capital, etc. Finance Capital = “instruments” traded in financial markets = agreements about future distribution — IOUs – not physical things.
From cattle to capital.
No pure “capitalist system”, but many systems which are more or less capitalist. But some basic elements:
Markets. Decisions are made by interactions of buyers and sellers, using prices.
Commodification. Things that are bought and sold in markets are called commodities. Over the history of capitalism new kinds of resources have become commoditised, enclosed.
Private Property. The only people who can buy and sell in markets are those who have ownership rights over commodities. >> Property rules – laws, conventions, regulations about who owns what, and what they can do with their property >> Enforcement – the state.
Profits. Companies chase after profits, e.g. by producing and selling new commodities. Investors finance companies for a share of the profits.
Capital. To make profits you need to own capital, “tangible” or financial.
Profit and markets.
A car company needs to think about a number of markets. On the one hand, it aims to make as much money as possible in the car market. On the other hand, it wants to buy the inputs it needs as cheaply as possible in input markets.
steel etc. = £2.5m
1000 cars = £10m
Electricity = £300k
machines (depreciation) = £500,000
labour = £700,000
Material Costs = £4m
Revenue = £10m
The thing is that, usually, the company will only get the revenue from its car sales after the cars are produced. But it will need to pay for inputs in advance. So it will have to borrow money to fund its production. This brings in another kind of (input) market – financial markets. Financial costs include interest and dividends on borrowing / shares.
Material Costs = £4m
Sales = £10m
Finance Costs = £2m
Total Costs = £6m
Total Revenue = £10
Suppose the car manufacturer got it right and it can sell all its cars for £10,000 each. Then it makes a profit of £4 million (Profit = Revenues – Costs). Governments may take some of that in tax. Out of what is left, the car company owners now have a new decision: how much should they invest in expanding the business, buying more up-to-date machines, etc.? And how much should they keep for themselves to spend?
Or: the factory can only sell 500 cars, or has to sell them all at half price, then it makes a £1 million loss. The input costs and interest payments still have to be paid. If the company can’t borrow more money to keep afloat, it will go bust.
2) enclosures and the state
“The military and the monetary get together whenever they think it’s necessary”. Gil Scott Heron
1500s-1800s: Enclosures in England.
August 1842: The governments of China and Britain sign the Treaty of Nanking, after China loses the first Opium War. China agrees to allow opium imports, to declare free trade in five port cities, and to give Hong Kong to Britain.
January 1933: Adolf Hitler is elected Chancellor of Germany. Massive state spending on arms and infrastructure gets Germany back to growth and full employment. Similar policies also work economic wonders in Japan, the US, the UK, and elsewhere, ending the Great Depression.
July 1945: The Labour Party comes to power in the UK, introducing the post-war welfare state.
August 1953: The British government, working together with the CIA, organises a coup to topple the Iranian government headed by Mossadegh, which had nationalised the Anglo-Iranian Oil Company. This company was then majority owned by the British government, and was a major contributor to the cost of the British Welfare State – but paid little back to Iran. It has since been privatised, and renamed BP.
September 1973: General Pinochet seizes power in Chile from the left-wing Allende government, which had nationalised US corporate property in the country. The “Chicago Boys”, Chilean economists trained at Chicago University, are given control of economic policy. Their “neoliberal” programme of privatisation and deregulation will inspire Reagan and Thatcher.
November 2011: the leaders of two European democracies – Greek prime minister Papandreou, and the Italian Berlusconi – resign. Without elections, they are replaced by bureaucrat economists heading “technical governments”. With one mission: to push through the “austeritypackages” of cuts, privatisations and job losses demanded by Europe’s bankers.
What are “commodities”?
What things can be traded in markets? Can anything be a commodity? How has this changed? Over history? In your lifetime?
What roles does the State play in capitalism?
- Enforcing property rights – legal system.
- Regulating markets.
- Acting as consumer/producer of last resort. (Military, welfare state.)
- Original appropriation – creating new markets, enclosures.
- Manufacturing consent – education etc.
Resistance to enclosure.
Make a list. E.g.,
England, 1549. Kett’s Rebellion. A peasant army of up to 16,000 rebels uprooted enclosure hedges, defeated a government army, and captured Norwich. Their first demand was that “no man shall enclose any more”. When they were eventually defeated, 3500 were massacred.
Chiapas, Mexico, 1994. The Zapatista Uprising. Around 3000 indigenous rebels launched an insurrection on 1 January. Their programme included communal village land rights, as well as rejection of NAFTA, (North American Free Trade Agreement).
3) some global trends
Global income statistics estimated (or “guesstimated”) by economic historian Angus Maddison. GDP per person (annual income measured in 1990 dollars).
Global income and growth stats from http://www.economywatch.com/
Data Sources: IMF, World Bank, UN, OECD, CIA World Factbook, Internet World Statistics, The Heritage Foundation and Transparency International
|$57,920 bn -0.52%
||$ 62,909 bn 5.01%
|$12,476 bn -4.08%
||$ 12,192 bn
|$ 305 bn
World financial assets ($ tr)
|private debt secs.
|govt. debt secs.
4) behind the crisis
Average hourly wages in manufacturing industry, as estimated by the US Bureau of Labor Statistics. 2010 – except China 2006.
Recent employment figures from the UK (source: Turner; Office for National Statistics):
||Financial, business service, and insurance
||Retail, hotels and restaurants
||4.2 million jobs
Wage squeeze, debt bubble (source TUC “Unfair to Middling” 2009, ONS)
Average annual real wage increase UK:
Wage share in UK (Wages as % of GDP):
1975: 64.5% (peak)
1996: 51.7% (post-war low)