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The Saker
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Dear friends, Here is the latest installment of my quarterly conversations with Catherine Austin Fitts. This time the topic was The US U-Turn in the Middle East. I hope

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This article was written for the Unz Review. Robert Fisk put it best: ?Trump Is About To Really Mess Up In The Middle East?. Following his fantastically stupid decision to

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Human Rights in Ireland

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James O'Brien - Sat Apr 01, 2017 22:54
Martin McGuinness, Political Strategy and the Civil Rights Movement The death of Martin McGuinness has inevitably prompted reflection on his career, with the reactions varying according to one’s political ideology. For the mainstream, McGuinness’s oeuvre is sharply divided into two … Continue reading

Martin McGuinness, Political Strategy and the Civil Rights Movement

A Provisional Sinn Féin poster featuring Joe McCann and other Official IRA members (via Irish Political Ephemera)

The death of Martin McGuinness has inevitably prompted reflection on his career, with the reactions varying according to one’s political ideology. For the mainstream, McGuinness’s oeuvre is sharply divided into two halves, that of paramilitary godfather and political statesman, with the dichotomy arising from their view on the Provisional IRA’s (PIRA) long running campaign.

For Sinn Féin and a wider body of sympathisers, that division is an artificial construct; the two eras – military leader and peacemaker — are different forms of the same struggle. The change in strategy by no means entails an admission that the Provisionals’ military campaign was misconceived, only that it could no longer sustain progress towards their goal.

Interestingly, much of the online commentary sympathetic to Sinn Féin has revolved around how the Provisionals’ armed campaign was a fight for civil rights in Northern Ireland; the military campaign being an inevitable response to the brutality of British State and the loyalist mobs that the campaign’s progress elicited.

That narrative was summed up by Gerry Adams in his comment that “Martin McGuinness never went to war, the war came to him. It came to his streets, it came to his city, it came to his community.” McGuinness, having seen his community take a battering, took the decision to join the PIRA and hit back at the British forces. There is a lot of truth to this explanation, for undoubtedly hundreds and even thousands of people joined both wings of the IRA in these years, fuelled by such anger. But if the explanation is true, it is not the whole truth.

For the impression given by this explanation becoming the primary one for the long running PIRA campaign is that it was waged primarily for equality of civic rights. And while the violent response to the demand for civil rights was the fuel that drove many into the ranks of the IRAs, it was not the objective for which the PIRA fought for a quarter of a century.

Moreover, the very existence of the Official IRA (OIRA) when the conflagration was igniting, and who chose to go down a different path, illustrates that the long military campaign was not an unavoidable outcome, even after Bloody Sunday. This is not to traduce young men and women like McGuinness, whose reaction is understandable given the circumstances. But understanding their motivations does not remove the need for criticism. The question remains, were they, the PIRA, correct to respond militarily and for so long?

The question should be approached as one of strategy and goals, rather than one of just moral outrage. War is itself an outrage and once the guns are firing, atrocities abound. These are to be deplored and minimised, but they never settle the question of whether war is justified or not; that depends on the objectives of the campaign, the context, and whether greater evils can be prevented by recourse to military action now.

And that is a political question, requiring an analysis of the political possibilities and their potential at any given juncture. It is here that the weakness of the early Provisional movement is located. For, contrary to the modern playing up of their support for the northern civil rights movement, they chose instead to prioritise military conflict with the British State. This was not just a reaction to the loyalist mobs or the RUC. The PIRA were very clear that their goal was to force a British withdrawal through military force. The massive increase in recruits, as well as the weakening of the Stormont regime on foot of the civil rights disturbances created a relatively favourable context for waging that campaign; they were not the underlying reason for it.

Danny Morrison made this point in his review of Tommy McKearney’s book on the Provisional IRA:

“He suggests that the IRA by demanding a British withdrawal and an all-Ireland republic left itself no room for manoeuvre to contemplate an alternative to these stark objectives. Surely he appreciates that it was that goal which generated our passion and was what we were actually fighting and prepared to die for? And that during the fighting of a war to anticipate anything less than your sovereign demands is to undermine your struggle? He then confuses the current outcome of the struggle (the Belfast Agreement) as apparently having been the real objective: that the campaign was about reform and redressing the wrongs which the civil rights movement identified, rather than about ending partition and establishing a thirty-two-county socialist republic.”

In fact, it is striking that such a claim has to be defended at all. The persistent demand for British withdrawal, accompanied by a willingness to kill in support of it, was the dominant feature of the PIRA for the first 28 eight years of its existence. That the rights thesis is being promulgated illustrates primarily the cultural influence that Sinn Féin can today wield and thereby shape the narrative circulating, if not in the mainstream media, than at least amongst wider left-leaning circles.

To cap it all; the “Civil Rights First” strategy was the strategy of the Official IRA, not the PIRA, with the former being instrumental in organising the Northern Ireland Civil Rights Association. If the founders of the PIRA had been of the same view, the other differences (e.g., abstentionism) would have been far less likely to result in them splitting off in the first place. Or at least, the inevitable split would have had all the force that O Brádaigh could muster in 1986, i.e., none. Of course, the OIRA, just like the PIRA, with its base in working class areas, got drawn into the vortex of military action. The difference was not that the OIRA were saintly choirboys or the Provos callous thugs, but in the strategic assessment of the respective leaderships. This saw the OIRA call a ceasefire, just as the killing was beginning to escalate in a big way.

In contrast, the Provisional leadership had a fundamentally different strategy, and it wasn’t one that revolved around the struggle for rights. In the words of Seán Mac Stiofain, the first Chief of Staff of the PIRA, their strategy was one of escalating the conflict by “moving from “area defence” to “combined defence and retaliation” and then a “third phase of launching an all-out offensive action against the British occupation system”. The latter phase involved a large-scale bombing campaign, which Mac Stiofain had borrowed from Greek Cypriots he had met in prison. Inevitably this led to a considerable civilian causalities, and a stoking of the already burning sectarian flames.

Absurd though it may seem to have to spell it out, the PIRA’s offensive phase, i.e., the bombings, was not dedicated to winning civil rights for nationalists, but to realising their core aim of British withdrawal. In his obituary to Mac Stiofain, Ruairi O Bradaigh, like Danny Morrison after him, was explicit about those aims:

“The three demands presented to British Ministers by his delegation in 1972 left no doubt as to what the IRA was fighting for: (1) The future of Ireland to be decided by the people of Ireland acting as a unit; (2) a British government Declaration of Intent to withdraw from Ireland by January 1975 and (3) the unconditional release of all political prisoners.”

The OIRA was certainly involved in area defence and retaliation too, even after their ceasefire was declared in 1972. The difference was that at a leadership level, the OIRA aimed to move the struggle from the terrain of military conflict and onto one of social struggle. Hence their general avoidance of bombings and their move to wind down operations. This took some time, and made some of their Volunteers unhappy, resulting in their eventual decamping to form the Irish National Liberation Army (INLA).

The Official leadership, primarily Cathal Goulding, Tomás Mac Giolla, and Seán Garland, with important backing from Billy McMillen, pushed for a civil rights campaign in the North as a way of cracking the Stormont regime, without provoking an intensely violent — and violently sectarian — conflict, which would in turn create the opening for building a class opposition — as opposed to an ethnic or sectarian one — to British imperialism. This was to be coupled with social agitation in the South as a way of building up a working class base in opposition to the compliant regime in Leinster House. Moreover, the Officials expanded their understanding of imperialism beyond the simplicity of London’s territorial control of the six counties to the impact that American capital, via the increasing levels of foreign investment, was beginning to have as well as the implications of EEC membership for Irish sovereignty.

The OIRA, then, prioritised the political and social struggle and therefore the leading role of a revolutionary working class party as the agent of that change. In the context of the early 1970s, this was a difficult strategy to pull off. The conflict entrenched sectarian divisions and stymied the Officials’ strategy in the North. Naturally, neither the British State nor the unionist paramilitaries as defenders of the status quo could be expected to play a progressive role.

The various strands of the republicanism, however, had the potential to play such a role, making the strategic choices they faced all the more important. The choice to engage in war had consequences, not only for hundreds of deaths and a deepening of the divisions, but of narrowing the space for political struggle. The argument from Gerry Adams that only later was it possible to engage in peaceful struggle for democratic rights misses the vital fact that the Official leadership had not only pushed for that in the crucial early years but had also argued, correctly, that a military campaign could not possibly achieve its political objectives; that to defeat imperialism required mass support; that socialism was the necessary modern incarnation of republicanism; that the working class was therefore the key social group to organise.

The subsequent trajectory of both the Officials and the Provisionals tells many tales. Usually this involves a myriad of anecdotes about the various sins of both groups through the 1970s and 1980s. More important, however, is their politics, then and now. Once the Provisionals abandoned their military campaign, they quickly evolved from revolutionary to constitutional nationalism. Not only that, in spite of considerable support from working people, they encased their nationalism in a near-Blairite centre-leftism: reductions in corporation tax, opening the New York Stock Exchange, speaking at rallies for billionaire Seán Quinn. No bridge is left uncrossed.

The Officials moved away from nationalism, embraced state socialism and built up a considerable working class base in the 1970s and 1980s but failed singularly to control their own Blairite cuckoos in Parliament — de Rossa, Gilmore et al. Even here, however, the difference is stark. Whereas the Provisional leadership — Adams, McGuinness, Kelly, MacDonald — are the Blairites, the leadership of the Officials, now named The Workers’ Party — Goulding, MacGiolla, and Garland — rejected the attempts by their protégées to shift the organisation away from socialism and into that bland centre, even at the cost of a massive reduction in size, from which it has thus far not recovered.

Historical context is necessary when appraising the choices of figures like Martin McGuinness. Demonisation as a simple terrorist does not persuade those who understand the context in which he made the choices. But criticism is necessary, particularly if we wish to avoid the romanticisation of a military campaign at the expense of political strategy. There were other options; there were even other revolutionary options. The Provisionals chose instead the traditional nationalist one, and settled into the role as Catholic Defenders with a republican gloss. As such, their present incarnation as modern day Daniel O’Connells is none too surprising.

Cathal Goulding - Mon Dec 26, 2016 17:11
This introduction and interview is from “On Our Knees: Ireland 1972” by Rosita Sweetman Introduction The Irish Republican Army officially came into being when Padraic Pearse read the Proclamation of Irish Independence from the steps of the General Post Office … Continue reading

cathal_gouldingThis introduction and interview is from “On Our Knees: Ireland 1972” by Rosita Sweetman


The Irish Republican Army officially came into being when Padraic Pearse read the Proclamation of Irish Independence from the steps of the General Post Office in Dublin on Easter morning, 1916. The IRA traces its roots right back through all the physical force resistance groups that at various times throughout 700 years of British domination of Ireland had risen up to try and get them out. Its recognised father figure is Theobald Wolfe Tone, of the United Irishmen, and his grave is the scene of an annual re-affirmation of Republicanism.

The IRA was the army of the people during the War of Independence (1919-1921). They secured military victory for the Irish people in that they forced the British to the conference table, but were sold down the Swanee by political leaders who divided on the Treaty offered by Britain. The compromise reached was that Republicans would have a 26 Country “Free State” to run as they wished in theory (in practice of course it was to be run as the British wished as they still held the purse strings), and the 6 remaining counties were to be jointly controlled by the Unionists in Stormont, and Westminster. In the absence of the British enemy the Irish turned on each other and the resulting Civil War saw the IRA defeated, the Free Staters in control and building bourgeois Ireland under President Cosgrave. Thousands of IRA men were imprisoned and interned and Ireland settled down temporarily to trying to become a nation of grocers and big farmers.

In 1927, Eamonn De Valera, a veteran of the 1916 rebellion and leader of the anti-Free Staters, decided that the cold of remaining outside the Free State parliament hitherto unrecognised and boycotted by Republicans (or anti-Treaties), was too cold. By 1932 Dev’s new party, Fianna Fail, was able to secure 72 seats in the General Election, and completing a political Houdini on the Oath of Supremacy to the British Crown, Dev led his new Party into the Dail. The Republican Movement was split down the middle. Some felt Dev was right to enter the political arena and beat the Free Staters at their own game, others believed that compromise would eventually result in a watered down Free State, and more importantly a continued recognition of the Border which separated the Six Counties from the rest of Ireland.

Dev did release Republicans imprisoned by the Free State government, started the Economic War with Britain by refusing to continue paying land annuities to that country, but hopes that Fianna Fail would be the political expression of the ideals of the IRA were soon shattered. The following four years saw Dev consolidating his parliamentary position; the dropping of Sean MacBride as the radical Chief of Staff of the IRA; the appointment of a far more conservative Chief of Staff, Tom Barry; boredom amongst IRA volunteers in the absence of any military action, and 80 of them leaving for Spain to fight alongside Republicans there.

By 1939 the full betrayal on Fianna Fail’s part of Republican principles became startlingly clear to all when the IRA launched a bombing campaign in Britain, designed to show the British and Irish governments that not all Irishmen were happy with the puppet “Republic”. Dev’s answer to his old comrades in arms was the opening of internment camps in Curragh, and military courts which gave widespread powers of arrest and detention of Republican “suspects”.

The IRA staggered on through the forties. A planned campaign against the Northern Ireland state was dropped. Cathal Goulding, a young IRA volunteer, was elected to a provisional Army Council, a few months later all members of the new Council were arrested. In the middle of the forties Sean MacBride, formed “Clann na Poblachta” – designed to be the expression – again – of republican principles inside the regime.

By the late forties the battered remnants of the IRA called a convention at which military campaigns against Britain and Northern Ireland were planned, as well as aggressive military action in the South. IRA volunteers were forbidden to join the Communist Party, and were told summary dismissal faced them if they appeared in court on even the smallest charge. The IRA was to be untarnished by either “the red peril” or shades Chicago gangsterism. The same year Sean MacBride’s new party won ten seats in a General Election, and formed a coalition with the old Free State party, now called Fine Gael. Costello, as Taoiseach, proclaimed the Republic of Ireland. Britain’s answer being the Government of Ireland Act which formally handed over control of the North to the Stormont regime.

The middle fifties saw the IRA’s Border Campaign against Northern Ireland beginning. It was called off in 1962. Militarily and every other way the campaign was a complete flop. The Catholics in the North were on the whole disinterested in the IRA plan. Internment was introduced North and South and thousands of IRA men picked up.

In 1962, Cathal Goulding, just out from internment, and prior to that having served an eight year sentence in Britain, was elected Chief of Staff of the depleted and woe-begone Army. He ordered a complete moratorium (sic) of Republicanism since 1798, on the whole physical force tradition in Ireland, and on why, if so many Irishmen were prepared to die for Ireland, they never succeeded in freeing her.

The sixties was a period of re-assessment for the Republican Movement. Those anxious to get back on the border with guns and bombs were told to wait. Marxist intellectuals like Roy Johnston were co-opted on to a kind of “Think Tanks” to draft policies for discussion. By 1964 a nine point document was presented to an extraordinary Army Convention. Suspicions that the Army had “gone soft” were confirmed in the eyes of the old style IRA men, those who felt that the problem in Ireland consisted of the Border and nothing else, and that problem could only be solved by physical force. The new policy of the IRA was based on Marxist ideology. That if political power comes out of the barrel of a gun it’s necessary to gather the political ammunition of the people before firing the gun. Recommendations to the convention included the dropping of the “abstention ban” on Sinn Fein representatives (Sinn Fein being the political wing of the IRA) taking up their seats in the Dail or Stormont; the formation of a popular or national front with other left-wing movements; the engagement of members of the movement in all types of agitationary movements, whether through members of existing pressure groups, or the formation of new ones. If the IRA was really to be “the army of the people” as it claimed, then, it was argued, it must first identify with the people and their everyday struggle for existence.

Advising men whose expression of Republicanism had hitherto been midnight raids on the Northern border to take their place in the picket line alongside Socialists and Communists was not going to be an easy task. Ireland is a deeply conservative country and the Republican Movement as a whole reflected that conservatism. The Republican Movement had been following the holy grail of a “United Ireland” for too long, and at any cost, with the gun, to easily switch to political education and working with the people. De Valera’s accession to power had confused many Republicans, who still thought along Civil War lines, and thought all problems lay North of the border. Awakening them to the fact that bourgeois capitalism, or “green capitalism” existed in the South, that Fianna Fail were just as efficient lackeys of British business interests as the Unionists in the North, just as efficient expressions of the “cois muintir” (working class) was going to prove a long haul.

Some evidence of the threat the new Marxism of the Republican Movement posed to the Irish state, though, can be seen in the events which led up to the split in the Movement in January 1970. Through 1969 paid agents of the Fianna Fail government were told to infiltrate the IRA to reactivate the old physical force elements still living in romantic nationalistic dreams. A renewal of sectarian strife in Northern Ireland in August 1969 ensured that at least some of the old IRA men accepted the money and the arms offered by these agents of the Fianna Fail government in return for breaking away from Dublin Headquarters and its Marxist doctrines and pledging to concentrate activities in the North through the physical force method.

The crisis of August ’69 produced the denouement needed by the establishments North and South. In the North it ensured that the inching progress being made towards smashing sectarian barriers between Catholic and Protestant and the gradual democratisation of the State was halted. In the South it produced the necessary catalyst to call out all the latent nationalism in the people there which blinded them as to their oppression by Fianna Fail and ensured Fianna Fail’s continuance in power as long as the Provisional IRA maintained a physical force campaign.

The intensification of the Provisionals’ military campaign throughout ’71/’72 was, in the words of one Republican, “with the dust of the fucking bombs flying nobody could see where we were going.” Internment succeeded in halting the burgeoning political education programme of the Official IRA, further polarised the two communities as Catholics resisted it with vehemence and violence increased.

With the temporary suspension of Stormont the Provisional IRA went into decline. What they’d been demanding all along was suddenly granted overnight and their lack of political education, even of their own members, let alone the people on whose behalf they professed to be fighting, produced a crisis within the Movement. The Officials see the suspension of Stormont as another “mystification” of the essential problem – British imperialism.

In the short term the Officials believed that one of the basic problems in Northern Ireland was the division of the working class; that this division was no longer useful to Westminster, that therefore some sort of compromise government, or commission, must be established to govern Northern Ireland in Britain’s interest but with less blatant sectarian overtones than the Unionist Party.

While the Provisional IRA sees a United Ireland as one of its most important aims, the Officials feel that a United Ireland could be worked out within the next couple of years, initially through a federal solution linking Dublin, Westminster and Belfast. A United Ireland the Officials believe would confuse many “nationally minded” people who would see the problem as at last being solved.

The problem can only be solved, they say, when the grip Britain has over Ireland, by extension the grip the lackeys of British Imperialism have over Ireland – Fianna Fail and their cohorts – and the Unionists in the North – are all broken, and a socialist republic set up. They have no doubt in their minds that this is a long hard struggle.

Cathal Goulding


“I think from the time I first really started to think about revolution I felt the Republican Movement was the right one for Ireland. It was the people’s instinctive reaction to British Imperialism and through it I felt they would accept Socialist ideas that they mightn’t say accept from something like the Communist Party.

“In 1962, I was elected Chief of Staff of the IRA. The Northern Border Campaign had just been called off. At that stage I felt what we needed to do in the Republican Movement was to sit down and have a good look at the whole revolutionary movement in Ireland – from 1798 up to today, I and others, felt that the Movement as a whole had never given a thought to winning a war. They only thought of starting one. What we lacked was the support of the people. The reason we didn’t have their support was that the people didn’t understand what we meant by freedom. They thought it was a sort of Brian O’Higgins type glorious vindication of the Irish race. This wasn’t our idea at all.

“Our struggle must be a socio/political one. Something to do with the ordinary people. The middle class Irish felt as emancipated as they ever would be, the people who needed the freedom were the people who had nothing. This is what we were fighting for, and we had to make it plain to the people. To do this we had to involve ourselves in their everyday struggles for existence. In housing, land, trade unions, unemployment – maybe it would take ten years of working like this before we could even say we had the basis of a revolutionary movement.

“A meeting of the IRA Army Council was called, and the Army Executive. We set up a committee to study the Movement. Most people felt we should re-organised the fighting units, get more arms and money and start the war all over again. It was pointed out that this had been done before and always ended up as it did in 1962 – the Movement practically smashed.

“In 1964 a nine point document was presented to an extraordinary Army Convention. It was for internal use only and dealt with what we should do as a revolutionary force. The main recommendations were dropping of the abstention ban on participation in parliament and the formation of a national liberation front to unite all the forces fighting against the Establishment. The job of the guerrilla fighter is to fight, or not to fight, according to the tactics that suit him best. There should be no hard and fast rules.

“As far as success goes I think its too early to think of success. We did help in initiating a very good housing action group in Dublin. We’ve been very active with the people in land agitations, in the protection of Irish fisherman, in the fight for the ownership of Irish rivers. The reciprocal support has been small. I don’t think this is the fault of the people, it’s partly that our movement wasn’t geared to this type of action at the time. Most of the people in the Movement were geared to a physical force campaign. First of all political agitation wasn’t as exciting I suppose.

“When we set about initiation our agitation movement in the North we came up against a blank wall. We were amateurs in a sense, and the Republican Movement was completely outlawed in the Six Counties. Before we could get any kind of proper agitation moving we wanted to clear the ground for political action. In other words to gain freedom for political manoeuvrability. The first thing we needed was civil rights. There was a kind of Mickey Mouse movement which wrote letters to the Government about prisoners in South Africa or something, so we decided to revive that. We told Republicans to join the Civil Rights Movement and to develop it, with the idea of gaining civil rights in the North.

“As long as the Civil Rights Movement didn’t look for revolution, or total freedom or unification with the 26 Counties, then we felt this would help get the Protestants involved, and get away from the old divisions. Our objectives were civil rights reform, for Catholic and Protestant working class, and the splitting of the Unionist Party.

“The Civil Rights Movement went from strength to strength. There were a lot of Protestants high up in the Six Counties at the time who were hankering after respectability. They wanted a democratic state like Britain. The people in power, the Unionists, knowing if the Movement did succeed it was the end of Unionism manufactured artificial pogroms on the Catholics to bring up the old enmity between Catholic and Protestant. This is now an established fact. The RUC and the B Specials led the Protestants into the Bogside in ’69 burning the houses and shooting people; the so called pogroms in Belfast were also led by the RUC and the B Specials.

“The pogroms of 1969 against the Catholic population produced the Provisional IRA. They in turn are now creating the necessary Protestant backlash, while the Establishment is still trying to ensure that there is no spread of civil rights demands into the Protestant working class.

“In 1969 certain agents and members of the Fianna Fail party were sent to infiltrate the IRA. When they found they couldn’t get any change from us they started working on the men in the North. The members there were told if they broke away from what they (the Fianna Fail agents) called the Marxist/Communist group in Dublin they’d be given arms and money. We were told in the South by these same men to stop attacking the establishment in the 26 Counties, drop all socialist policies and have an all-out attack on the Unionists in the North. What they wanted in fact was a development of Fianna Fail power into the Six Counties through a sectarian war. I told these agents we would decide how the arms and money would be used if we did decide to take them – and then all discussion stopped. We did in fact get money from Fianna Fail people collecting in London – I’ll take money from President Nixon if he offers it, but I’ll spend it the way I want.

“In January 1970 the Republican Movement split. I think it was inevitable. In Ireland you’ve always had this left/right struggle. The provisionals didn’t like our socialist policies. They saw the abolition of Stormont as a primary aim. We see Direct Rule as a retrograde step. You simply have a number of Commissioners regulating the Civil Service and the police. They’ll be the same Civil Service and the same RUC.

“What we want is democratisation of the system in Northern Ireland – more democracy, not less. We want the representatives of the people, to be the civil rights workers and people like Paisley and Boal. This means that the old political power blocs will be broken down. They are breaking down already. With civil rights guaranteed by some Bill of Rights the present regime couldn’t continue – you can’t have a dictatorship administering a democracy. Our aim is to develop the political and passive resistance of the people to the point where the administration just can’t administrate any more.

“I’m a physical force revolutionary. I’m not naive enough to think that we don’t have to use guns. An armed proletariat is the only assurance that they can have the rule of the proletariat.

“But we believe that the most important thing in the Six Counties at the moment is the civil resistance campaign. We have used every effort to try and get the people back on the streets, the demonstrations, non-payment of rent and rates, passive resistance. This is the most important phase of the struggle because it involves the people. You might have 500 armed IRA men in the North but it wouldn’t be as good as 10,000 people resisting in a passive way. The two together would be even better of course! but the most important part of any revolution is the involvement of the people, this ensures that when a settlement comes the people will have to be represented at the talks.

“In 1969-70 you had the Citizens Defence Committees in the different areas – Protestant and Catholic. This was a revolutionary development. Irrespective of the people’s reasons for it. Once they begin thinking along independent lines you slowly break down the power the political parties have over them. There was joint action on a number of occasions between Protestant and Catholic working class. The Protestants wouldn’t be in favour of the IRA, but it was a contact, for a certain limited social objectives – bettering housing, better jobs.

“Due to the sectarian bombing and shooting campaign of the Provisionals this has now broken down. The non-payment of rents could have drawn in the Protestants if it hadn’t been for the Provo’s campaign. If a Protestant worker, working alongside a Catholic, knew that the Catholic was drinking his ten bob rent instead of paying it to the Local Authority, he’d very soon say to the Authority, ‘Well if them Fenian bastards aren’t going to pay their rent, I’m not going to pay me fuckin’ rent either’.

“The main function of the Official IRA in the North at the moment is to see that there is a mass involvement. That the street committees and all kinds of civil resistance committees become kind of People’s Soviets, actually administrating the areas. We would like to see the local IRA units putting themselves at the disposal then of these committees for the defence of the areas, to be the armed cadre of the people. In the case of the IRA administering law and order I don’t think this should be done. I think the people should administer their own law and order and if they want the IRA’s help they could call on them. In the end we won’t have to go out and attack the British Army, but the British Army will have to come in and attack the people in these areas who are opposing the Establishment. They’d have to come in and put a soldier on every doorstep.

“If the people are in control of their own areas they can have a say in any settlement that comes. Even if they’re from the Shankill Defence Association and are bigoted initially, in the final analysis theyll be forced by their own people to represent local interests. It the Catholics then are demanding better houses and better jobs, the Protestants won’t sit around simply demanding a defence of the Constitution – they’ll want the same social demands as the Catholics. Any advance the Catholics make towards civil rights, as workers, the Protestants will want the same. This will bring them both into confrontation with the Establishment, the more this happens the more you will break down the traditional loyalties and power blocs.

“We could produce a crisis situation in the morning in the North, either with the Provos on our own. But what would happen? Would the British say ‘okay, here’s the Six Counties, have your little workers republic’, or would they say, ‘we’re getting out altogether’? I don’t believe they’d say either. What they might do is have some kind of federal solution, or a united Ireland, with the 26 Counties re-enforced to protect the interests of Capitalism, British Capitalism. A United Ireland would confuse a lot of ‘nationally minded’ people in Ireland. They would support it, and this would mean a lessening of support for revolutionary forces. I don’t see any difference between Jack Lynch and Brian Faulkner. I’m sure they could hammer out some solution – but what would that bring? Simply a re-enforcement of the grip that vested interests have in Ireland.

“Political power vested in the people through the street committees, will slowly but surely develop the take over of industrial resources, and the means of production, distribution and exchange in the Six Counties, which will have an effect on the 26 Counties as well, democratising it, and this would allow us to develop towards a 32 County Workers’ Republic.

“At the moment though we consider the anti-EEC campaign to be the most important issue in the country, North and South. If the EEC becomes a fact then the establishment of a socialist Republic in Ireland is going to be put back for maybe hundreds of years. The EEC bloc is one that has been developed by the big cartles of Europe and America, it’s anti-social. Ireland would become a hunting, hooring, and fishing group for the big business elements in Europe.

“In the North we believe we must continue to critise the actions of the Provos because basically they are anti-people. In the sense that onece they alienate any one section of the Irish working class community they are wrong. A Workers’ Republic isn’t possible without the co-ooperation of a fairly large section of the Protestant working class community. Our aims on this line would be to bring in or neutralise, in some shape or form the working class Protestants into the struggle.

“I believe in the long run we’re in a better position organisationally than the Provos. They’ve lost a lot of their Northern leadership through people like Joe Cahill, Martin Meehan and those having to come to the South. The Provos are now coming back to the situation where they can’t mount a decent military operation with the Six Counties, but have to attack over the border from the 26 Counties. As their military leadership begins to decline so will their military activities. What helps the Provos most in the North is that every Catholic youth is a Provo at heart. They can be used individually by the Provisionals for one operation, say planting gelignite in a shop. In this way the campaign can go on for a long time. Anyone who kills a British soldier is “a good fuckin’ man’ in the Catholics’ eyes. They may be more popular too in a military sense, people say – “well they’ve shot more of the bastards than you lot have”, or, “you people are not half as good in an aggressive sort of way as the Provos”. But when it comes down to the cold logic, to a committee of people deciding what they want done, and how they can get it, I think they will trust us far more. We want all our units answerable to these local committees – in the end I think the majority of people will see the difference between the pay-off of violence, and the pay-off of the civil resistance campaign.

“The basic difference between us and the Provos is that they believe that by uniting the Catholics North and South they can have a United Ireland, we say you can’t. The middle class Catholics in the North are just as worried about retaining their stranglehold over the people as the middle class Protestants are. They’d all love some kind of settlement so they can get back to the business of making money.

“I think the role of the IRA in the North now is to get back to a situation where we can organise in a revolutionary way. I think while the ‘no go’ areas in Derry provide an opportunity for developing revolutionary consciousness among the Catholic working class, they [the barricades] are creating a greater barrier than the old barriers of State sectarianism to our getting across to the Protestant working class.

“I think some form of peace should be established. I don’t mean the peace that will allow the establishment to continue its exploitation of the people, or the peace that will allow them to hunt down men on the run, but peace on our terms.

“These are: (1) an end to all repressive laws (such as the Special Powers Act.) (2) The unconditional release of all internees, an amnesty for men on the run and release of political prisoners. (3) The withdrawal of the British Army to their barracks, pending their complete withdrawal from Northern Ireland. (4) A declaration of intent from the British Government that we in the Republican Movement will have the freedom to operate openly like any other political organisation.”

Gavin Mendel-Gleason - Sat Dec 10, 2016 18:23
In 2012, there was substantial outrage about Russia placing restriction on foreign financing of NGOs and unions which was spurred by the fact that there was significant funding by the United States. The Western media were almost uniformly appalled that … Continue reading

trump-and-putin_zpspfthamxrIn 2012, there was substantial outrage about Russia placing restriction on foreign financing of NGOs and unions which was spurred by the fact that there was significant funding by the United States. The Western media were almost uniformly appalled that such restrictions would be placed. I remember reflecting at the time on what the media angle might be were the roles reversed. What if Russia had tried to interfere in US politics by funding opposition forces? I surmised there would be immediate calls of treason and the response would be at least as intense as the one for which Russia was being condemned.

Well, it turns out I wasn’t wrong in this prediction. The current scenario demonstrates the asymmetry nicely. Russia is currently being accused of hacking the US to subvert the election. This claim is being made by both the power centre of the Democratic Party and by the CIA and is now being featured as a media headline in the Washington Post, the Guardian and other major media outlets.

It’s certainly likely that Russia’s security state is involved in hacking exercises in the US. The US is involved in vast numbers of cybersecurity attacks in Russia, including promulgating some of the most sophisticated worms and viruses ever caught in the wild, so it would only stand to reason that the Russians would be concerned to be competent at cyber-warfare themselves. However, for this specific claim of hacking the DNC or Hillary’s e-mails, we’ve been given virtually no evidence, and the evidence that was supplied is unconvincing to anyone with even passing familiarity of computer security.

But even if we accept that the Russians did directly hack the DNC and/or Hillary, the claim of Russian hacking to subvert the election appears to resolve to Russia having introduced too much transparency into the election. The claim is that Hillary and the DNC were disadvantaged by the leaking of information which demonstrates conclusively what they actually think. That we were swayed by knowledge of the internal Machiavellian machinations that Hillary and co. engaged in to ensure that the Democrats remain firmly in the hands of the billionaire elites and her involvement in creating chaos in the Middle East.

How can any progressive believe that we would all be better off if the real internal nature of the Democrats was opaque to the voting public? The only apparent argument is that this is unfair as there were no leaks about Trump. But what is there to be leaked? The guy was apparently raping people, involved in numerous criminal lawsuits, a xenophobe and an unabashed oligarch. All of this was in the public domain and widely advertised by the media. For my own part, I’m quite confident that there isn’t much that could have harmed Trump which was not already mobilised by the media.

If all of this weren’t bad enough, the CIA are one of the major contributors to the story of Russia as hostile foreign force. They backed Hillary all the way because she represents the interests of empire. She, in her position in the State department, proved a competent administrator of the world system of American military hegemony. Trump is widely hated by this group precisely because he is not considered to be an effective imperialist. The CIA and the rest of the security state have an interest in the centrist elite that Hillary represents and so it is not even slightly surprising that they support her in opposition to Trump.

Aside from the CIA having a stake in the outcomes, their function is precisely to distort truth. One of their core missions is disinformation in the interest of continuing American power. They have lied and lied repeatedly.They are responsible for decades of interference in democratic elections all over the world, often in support of brutal right-wing dictatorships. Being credulous of their claims speaks of either deep ignorance or calculated malfeasance.

We appear to be entering a stage in which the CIA’s operations are, once again, turning inwards to influence politics in the US. This direction could accelerate especially if Trump is bold enough to try to actually dismantle NATO relationships or move the US towards a truly isolationist policy. The well-studied techniques of subversion of democracy abroad can easily become subversion of democracy internally.

The exhortations to patriotism and demonisation of Russia are extremely dangerous. It amounts to siding with the American security state in their aim of keeping a tight grip on world power. This narrative of Russian interference helps to create an “other” that the elites can use to justify the status quo and continuing on the path of growing inequality. It is a narrative which says: “The real threat is abroad, and those who don’t side with us are foreign agents.” If this story goes unchecked, it will be mobilised even more effectively against Socialists than it is currently being mobilised against the Right. It may seem convenient to go along with Hillary and her CIA friends at the present moment as a ballast against Trump, but it will not serve us well in the end.

Gavin Mendel-Gleason - Mon Oct 31, 2016 18:51
After a quick perusal of, it’s clear that the rental situation in Dublin is an absolute catastrophe. Rental prices have gone through the roof. Literally, garden sheds and one-car garages are now going for 900 Euro per month and … Continue reading

The Rent is Too Damn High!After a quick perusal of, it’s clear that the rental situation in Dublin is an absolute catastrophe. Rental prices have gone through the roof. Literally, garden sheds and one-car garages are now going for 900 Euro per month and more. Prices are up more than 30% from their lowest point, and they are now higher than they have ever been, even during the Celtic Tiger. To add insult to injury, you would be hard pressed to find a place to rent even if you could afford one, perhaps by packing in like sardines. The recent saville report says that vacancies are now below 1.5%.

Economists are fond of telling us that it’s all about supply and demand. And of course they are right, but if one is to believe the story of the invisible hand, efficient markets and all the rest, increases in price are supposed to create supply to meet the demand. So why is it that the rental market is so tight, new housing units are not being built, and we’re not only finding things unaffordable, but unavailable in the first place?

David Ricardo, a disciple of Adam Smith, the father of modern economics, decided to take up a similar question in 1817 when he was studying the question of prices of agricultural products. Adam Smith’s theory had said that the price of a good was given by the amount of labour that went to produce it. However, land, a critical component of agricultural production, cannot simply be produced in a factory and according to Ricardo, the price of food will be impacted by with how much it costs to bring suitable land into production. This is known as the theory of marginal production.

The idea is as follows. To make wheat, you’ll need some inputs: seeds, fertiliser, human labour and land. Each of these you are going to have to purchase, as a commodity. If you total these costs up, you need to sell your total output at more than the costs, or you lose money. When there is relatively more land available, you can sell at a relatively lower price, as land will be cheap. As land starts becoming scarce, the cost of wheat will increase by the amount to bring into cultivation the next plot of land, that is, the land at the margins. This might require terracing a mountain, or dredging a swamp, and in the end will probably have a lower productivity per hectare. Bringing this new land into production is expensive, and it requires that the price of wheat is higher than our total costs.

The situation with rent follows the same basic principle because of the non-reproducibility of land. There are landlords who purchased decades ago, who have tiny mortgages are akin to the farmers producing wheat on the high productivity land. The fact that it’s cheap for them, does not set the price. They can be making money hand over fist, but the new producer is the one who has to be assured of profits before supply increases.

Ok, so this story might make sense logically, but is it empirically true? What do rental prices look like, compared to the cost of building new housing when financed at market rates?

Let’s look at a breakdown of how much a unit of housing costs to build. According to the
Society of Chartered Surveyors in Ireland, overall build costs of a three-bedroom semi-detached residential home in Dublin was more than €330,000. Of that cost, over €57,000 is land cost. The cost of apartments is even higher per unit, with increased cost in shared infrastructure and parking, although the overall cost of land per unit will decrease.

If we imagine that we have an institutional investor, who is building houses in order to rent them, we might expect they could avail of “cheap” finance at something like 3% over 30 years, so we’re talking about re-payments that are around €1390 per month. And that is in fact about what the rental price is out on the margins of the city in Finglas, Lusk or Clondalkin.

The reward for a new investor is only going to be relatively small profits, not the enormous amounts which accrue to the long term landholder. And because of this, there is no huge rush to increase the housing stock from investors. Even worse, once building does become profitable, it can take a long time before the new supply becomes available, since building takes time. This means there can be a serious lag where rental prices increase, even after it is financially viable for investors.

When we look at houses closer to the city centre, the rents can exceed the above numbers by quite a lot. The price of the next unit is almost meaningless as there simply aren’t many more places to put new units and investors can not easily find any land suitable for a substantial development.

So if we’ve established why the rents are so high, what are we going to do about it? If it’s not a market failure, but rather a market fact, maybe it’s the market which is the problem. The vast differences between the rents derived from landlords who already hold property and those who are building new property gives some indication that the problem is one which needs to have a collective management solution.

The Housing Authority suggests we will need another 80k units of housing nation-wide by 2018. This is going to require a large-scale building programme. This would have to make use of elements only the state has at its disposal. Namely: the ability to use already existing state land, the ability to obtain financing at much lower interest rates than can be obtained by individual investors or builders, the capacity to zone and plan for proper amenities, and the ability to make use of extraordinary legal powers such as compulsory purchase orders or to institute new legal regulations about the use of derelict land or housing which include seizure for failure to develop. In addition the state can utilise the fact that some housing will be cheaper than others to bring into use making a big building plan more financially viable.

Our problem is the market itself and the way to deal with it is to stop trying to solve the problem through the market. The solution is to take land and housing into public ownership and view house building as a public enterprise. When, in the 1920s, Vienna had an extreme housing crisis, the municipality took matters into its own hands and begun a very ambitious building programme which ultimately build some 60,000 houses in Vienna which were entirely public, but which were mixed income and focused at the broad population. They funded this project out of a combination of a newly instituted builder-tax combined with a wealth tax.

This Red Vienna period laid the foundation for cheap publically managed housing that has lasted to the present day. In fact, fully 30% of the stock in Vienna is managed by the municipality and over 60% is social. It is no accident that Vienna is the European city which has the highest quality of life virtually every year. Why not make Dublin one of the cities with the highest quality of life in Europe, by following a similar plan?

Gavin Mendel-Gleason - Sun Oct 30, 2016 16:21
For a long time, neo-classical economics has been the economic orthodoxy. Neo-classical economics is a patchwork of theories all with a general aim of demonstrating how production and distribution takes place under mediation of supply and demand. The theory came … Continue reading

Capitalism: Competition, Conflict, Crisis by Anwar ShaikhFor a long time, neo-classical economics has been the economic orthodoxy. Neo-classical economics is a patchwork of theories all with a general aim of demonstrating how production and distribution takes place under mediation of supply and demand.

The theory came to prominence in the late 1800s, displacing the previous classical economics, a research programme which was initiated by Adam Smith most famously in his great work, “The Wealth of Nations”. This programme was continued by David Ricardo in Principles of Political Economy and Taxation among other works, and later by none other than Karl Marx in his seminal work Das Kapital.

Marx made deeply important contributions to classical economic research. In fact his contributions were so important that they poisoned the well of classical economic theory completely, leaving no room for more conservative theorists to wiggle out of the implications which are brought forward in Das Kapital. To put the central problematic in a nutshell, there was an unresolvable antagonism between wage labourers and capital over value. Yet despite the importance of his additions, Marx’s theories are firmly rooted in the tradition of classical political economy.

The growth of the neo-classical programme can be seen as a direct response to this conundrum. Continuing with the classical programme looked futile for those interested in claiming that capital was due a share of the proceeds of sale, and that labour was already being given what was its right. And so the classical programme has been in decreasing importance for over 100 years.

In his latest book, Capitalism: Competition, Conflict, Crises, Anwar Shaikh has taken on the absolutely mammoth task of reanimating classical political economy. The book is the result of 15 years worth of work both writing, researching and evaluating empirical evidence. Though the task might sound futile in its enormity, Anwar Shaikh’s book is a real contender.

The book is gigantic at 761 pages, or 900 if you include the appendices, which give more detailed mathematics and data on some of the arguments. I confess, that though I spent a week in the Alps without internet access, I was only able to closely read some 465 pages, skimming the rest and reading the conclusion. However, what I found was well worth the slog. I’ll try to put down what I thought were the highlights, only developing a handful of the many elements of the book. Maybe, if you’re more adventurous than me, you’ll forge through the entire tome, and if not, at least you’ll know you can look up the chapter that is of interest to you.

The book serves several purposes, and as such Anwar develops each topic approximately in the following way (though not necessarily in the following order). The first is a critique of the current neo-classical approach to economics and why it is found wanting in the study of some topic. The second is a survey of the literature and approaches taken to these questions usually by neo-classicals, Keynesians, Post-Keynesians, those in the Sraffian tradition, and anyone else who happens to be relevant (for instance Von Neumann’s independent work is mentioned). The third is the demonstration of the classical approach to the question. The fourth is empirical data which demonstrates the strength of the classical approach. This methodology satisfies the reasoning for eschewing the neo-classical approach, and provides evidence that the classical approach is enlightening.

The General Structure of Capitalism

The broad thesis of the book revolves around the idea of “real competition”. This concept essentially originates in Adam Smith but gets a much more detailed description by Marx.

We should understand the production process as composed by a number of firms. Each firm tries to maximise the sale price relative to the costs of its production. The costs are comprised of input commodities and wage labour. Several firms will compete to produce commodities in the same sphere. If a firm is selling at a very high price, other firms will set their prices lower and attempt to eat up market share and sell in larger volumes, driving the price downward. When the price is too low, the profit rate is depressed and fewer investors attempt to increase productive capacity or firms go out of business and the price recovers.

The eventual price is the result of each firm guessing what the highest price they can get on the market subject to their competition. Anwar’s work hopes to demonstrate that the structure of this price is based on these factors, leading, not to equilibrium, but what he terms turbulent gravitation. This is again, in the spirit of Marx, where prices gravitate around values, but are in constant motion and that price structure does not converge to anything, but instead dances around some gravitational centre according to the constraints.

This agent-based evolutionary approach to modeling capitalism sounds very intuitive. In fact it’s largely what Adam Smith had already described in The Wealth of Nations. Further, it’s close to the way that business studies has approached the question, since businesses are quite interested in how they should set their prices in the absence of the market converging to the correct price of its own accord. As Shaikh shows in his book, surveys of industry leaders find that this story is essentially how they understand their own behaviour as they conduct price setting in actual practice.

It might then come as some surprise to those who are not steeped in the stew of neo-classical economics that this is far from the way that modern economics understands the process. The orthodox neo-classicals, the Keynesians, the Kaleckians and the post-Keyensians all start from a totally different standpoint known as “perfect competition”, or a close relative, “imperfect competition”. In none of these are prices determined by the cost-cutting warfare of competing producers.

Milton Friedman’s most famous response to the criticism that the structure of neo-classical theories was demonstrably totally at odds with the real practice of the firm stated that: “assumptions don’t matter”, his point being that only predictions do. From this argument, we see that Friedman is clearly aware of how unrealistic the models of neo-classical economics really are.

Shaikh spends a good deal of time describing the deficiencies of each of the different schools in turn, with special attention given to the orthodoxy. However, more interestingly, he also shows that a realistic theory in the classical tradition can give us good, new and interesting predictions. He names this classical theory “the theory of real competition”, since it is more consonant with empirical research of competition in firms. He describes the theory thusly:

In real competition, firms set prices in light of market conditions and competitive consequences, cutting these prices in order to gain an advantage over their existing competitors and to keep potential ones at bay. Except for distress sales, price cuts are ultimately limited by costs. However, luring more customers to your door with lower prices is of little benefit unless you can increase your normal level of production. The advantage therefore resides in the lowest cost reproducible conditions of production (i.e. in regulating conditions).

We will look at regulating conditions in more detail later.

The Consumer

Neo-classical economics includes individual consumers and their preferences as a core part of its argument. Individuals are asserted to make choices about how much they favour one good as compared to another. All of these choices, pair-wise between every two goods can be assembled into a utility function. A single slice of this utility function on which any two goods can be exchanged with “indifference” according to the consumer is called an indifference curve. The neo-classisist then tells us that these can be aggregated into a representative agent with a similar utility function.

There are a whole host of technical problems with this theory, and Anwar points out most of them so I will not bother to go through too much detail. Suffice it to say that it’s implausible that individuals have any such complex of goods of indifference in their heads, and behavioural economics supports the idea that they do not, but also that even if they did, one could not in a mathematically plausible way arrive at an aggregate utility function with the kinds of properties which would mimic a “representative agent” without some unmotivated mathematical side-conditions.

However, most importantly, classical economics has long suggested that price doesn’t really care much about individual preferences anyhow. So not only is the theory implausible empirically and mathematically, but it wouldn’t matter even if it were true if, in fact, the classical economists are right.

Anwar Shaikh proceeds to demonstrate how agents with constrained budgets already yield a situation which is robustly “indifferent” to this “indifference curve” scenario. The consumer, far from impacting the price structure in any deep way, can only increase what price they are willing to pay within the constraint of income, potentially leading to price increases by producers and subsequently changes in investment which increase supply and tend to move the price back towards costs of production again. It is a diversion of the price, rather than a change in structure. The cost structure of production is still driven by wages, input costs and normal profits.

It’s perhaps worth noting that this is also in contrast to some Marxist theories such as those expressed by Michael Heinrich in An Introduction to the Three Volumes of Karl Marx’s Capital. His reading appears to claim that the consumer impresses itself deeply on the price structure by varying the conditions of production.

If we accept the more classical interpretation however, this has important repercussions on how we should understand the economy. Take for instance the situation of rent in Dublin. Currently rents are very high indeed. There is clearly a supply problem (as of August 2016) as reports some 40 properties for the North Side in total. Rents are indeed very high, and have gone up a tremendous amount. However, they are not unbounded since they will only be rented if someone can afford to pay the bill. People will simply fail to pay for a good if it exceeds their income – all demands are truncated within the scope of what we can afford.

At the same time, the cost of building new properties must include the land, the build costs, assorted tax, levies, advertisement, infrastructure and the profit rate. The profit rate is critically important here. Capitalists will not loan money to a builder who will not pay them back. Similarly a builder will not take on building property out of the goodness of their heart but must find that they get a profit rate (usually between 10 and 20%). So even though demand might be tremendously high subjectively as we talk to lots of people with housing needs, the producer only cares about costs of production and expected profit, and could not give a wit about the utility to a consumer. As soon as builders are assured they can realise the profits and the financiers are assured their interest rates, relative to the perceived risk of the projects, supply will increase, but not before.

The Class Struggle

Arguably Marx’s most important contribution to political economy is in describing the relationship between the working class and the capitalist class in the relations of production. In this vision the amount of labour performed by the worker, and the remuneration they receive for that labour is seen as changeable and in accordance with relative institutional powers – the organisation of the workers relative the employers – as well as other external factors such as the supply of labour. It is seen as a central aspect which must be investigated if we hope to understand the economy.

That employers struggle to intensify and extend the working day is plainly clear to anyone who has worked at wage labour, but somehow economists have done an excellent job of removing it from the equation!

Anwar devotes a significant section of the book to looking at this relationship, empirical evidence of the relationship and presenting implications to marginalist approaches. Marginalism simply doesn’t make much sense when presented with the real facts of production processes in actual industries. However, Ricardo’s original reason for introducing diminishing returns to marginal production, before it was seized on by neo-classicals leads us neatly into the next subject.

Regulating Capitals

Perhaps one of the most interesting parts of the book is on the theory of regulating conditions and regulating capitals. Shaikh intimates that this notion was introduced by Ricardo, and extended and remarked on later by Marx.

In an example due to Marx, we are given a scenario in which we produce a commodity (perhaps a woven linen cloth) which makes use of two different sources of power. The first utilises a water-wheel, the second uses coal. The cost of production making use by the water-wheel is lower than the cost of production utilising the coal, as the water flows by naturally and the only cost of power acquisition is in depreciation of the wheel.

However, this is a very geographically situated and limited power source that not all producers can avail of. The consequence of this is that when demand increases for finished linen products, after the water-wheel is at productive capacity additional producers must do so utilising coal. Each new unit will then require investment in coal production. Since coal production is more expensive, this will not occur until demand causes an increase in the price of linen up until investors see some return approaching the normal profit rate. The normal profit rate is required as no investor is going to sink money into something which obtains a smaller profit than some other industry.

Hence in determining the price structure of linen, the normal profit rate is added to the coal cost of production and not the water-wheel cost of production! This argument is similar to the one made by Ricardo regarding fertile land, and the consequences of increasing supply by utilising less fertile land “at the margins” which sets a similar price structure. In both cases, it is the highest cost of production which sets the price.

Such a regulating profit rate does not drive all producers to obtain the normal profit rate. Instead, some producers in this scenario will obtain persistently higher profit rates.

Shaikh shows that a range of different regulating capital scenarios occur in practice ranging from the regulating capital being the highest cost, to those in which it is the lowest cost and some in between.

To see a case in which it is the lowest cost of production, we can look at industries in which newer technologies undercut production costs. In this scenario the older methods of production are still technically viable, but each new added unit costs less than those produced by older capital. Therefore the price leaders will be those in the newer introduced capitals, leading to older firms having persistently lower profit rates, or indeed requiring them to liquidate if they should end up with negative profit rates.

The Labour Theory of Value

The Labour Theory of value has been much derided by neoclassical economists. Generally undergraduates in economics are not given a very faithful rendering of the arguments, but instead are given some story about mud-pies or precious artworks or some other rather unusual limiting case (this was certainly the case for me).

However, evidence has been available for a very long time that in fact the labour theory of value is very predictive of price. In fact some early explorations came from Anwar Shaikh. Anwar states that:

The classical theory of relative prices is a highly structured argument. The average market price of a sector fluctuates around the regulating price of production. New regulating capitals with their lower unit costs make room for themselves in the market by cutting prices, and existing capitals respond by lowering their own prices enough to at least slow down the inevitable erosion of their market shares.Hence at any one moment there is always a spectrum of selling prices correlated with the corresponding spectrum of costs. Relative sectoral prices then drift up or down primarily in response to the corresponding drift in relative sectoral costs.

Anwar takes an argument from Ricardo, namely that:

Ricardo was the first to establish the relative prices of production differ in a systematic manner from relatie total labor times. Yet he also famously argued that these differences are quite limited, being on the order of 7%.

In a nutshell, labour values will not be the exact gravitation centre of prices, yet they also will not be too far off of them. The difference between the two should be systematically different by a factor related to the (integrated) profit/wage ratio.

This gives us a number of possible tests. We can attempt to estimate labour values and look at their correlation to price, and we can look at the systematic deviation of labour values from costs of production. However, there is another ancillary prediction which can be evaluated empirically and that is:

No matter how the prices are regulated…the law of value dominates price movements with reductions or increases in required labour-time making prices of production fall or rise. It is in this sense that Ricardo (who doubtlessly realised that his prices of production deviated from the value of commodities) says that “the inquiry to which I wish to draw the reader’s attention relates to the effect of the variations in the relative values of commodities and not their absolute value.” – Marx 1967c, 179

In effect, the ancillary prediction is that movements in relative prices are dominated by movements in labour time.

Anwar pursues the empirical evidence for this predictions. He finds that:

Over the half century from 1947 to 1998, market prices encompassing all non-competitive and disequilibrium factors only differ from direct prices by about 15% according to the two mean absolute deviation measures…
…in cross sectional data, actual market prices are remarkably close to direct prices.

In addition he continues to look at the evidence from time-series analysis to see if indeed labour times dominate changes in relative price and asserts that the data responds in the affirmative.

Modern Money

No serious economic theory can exist without having some model of money suitable for use in a modern economy, although this hasn’t stopped monetarists from trying. In Smith, Ricardo, and Marx’s time all serious currencies were metal based – either being composed of, or requiring the exchange of, some precious metal. Consequently, fiat currencies were simply not dealt with by classical political economy.

Marx despite living in an era of metalism, did not accept the quantity theory of money, at least not in his later works. His argument for rejecting it was empirical. During the 1848-1855 Gold Rush the quantity of gold on the market increased rapidly, and consequently so did prices in gold terms. However, prices did not rise as fast as the supply as the total economic activity in the market grew even faster. Previously idle labour and other capital capacities were absorbed. This lead Marx to posit that the velocity of money must also be important and, indeed, variable. This made any quantity theory of money untenable.

Shaikh demonstrates just how important the change to fiat currency has been. While prices remained largely stable for over 100 years, the introduction of fiat currency lead to a massive increase in inflation.

He also points out just how important the supply of money can be:

Fiat money potentially frees the state from its budget constraint. It successfully fueled the American, French, Chinese and other revolutions. And it led to the failures of the corresponding national currencies. The latter events and their modern counterparts have left a deep impression on monetary theory and practice. As a result, the Treasuries of most advanced countries are now inhibited from creating money to finance the excess of their desired expenditures over incoming tax and borrowing revenues.

Shaikh reviews monetarist, chartalist and neo-chartalist theories and comes to a somewhat unique theory which he describes as follows:

… modern inflation is the balance between a demand-pull generated by new purchasing power and a supply-response depending on the profitability and the degree of growth utilisation

It appears that Anwar takes an endogenous money theory which is profit lead: new profit opportunities increase loans, and thereby the supply of money. However, the maximum rate of growth of this system is limited by real constraints on output growth and depends on the structure of production, something often missing in Keyensian and Modern Money Theory accounts.


Finance is one of the great missing pieces of classical accounts of economics. The stock market and finance in general were important by the time Marx wrote capital, even if they were a vastly smaller fraction of the economy than they are today. Unfortunately Marx died prior to completing his planned work on finance and as such he left a hole which has not yet been adequately filled.

Anwar Shaikh attempts to address this problem by creating a classical theory of interest rates based on the cost of production of finance itself. This analysis leads to an entire hierarchy of debt instruments with interest rates related to the normal profit rate. The reasoning is as follows:

Competition within an industry leads to roughly similar prices for a given type of commodity. Competition between industries leads to production prices that yield roughly similar profit rates for the regulating capitals of each industry. The same processes operate for the interest rate: competition within the financial sector equalizes interest rates for a given type of instrument, and competition across sectors establishes a level of the interest rate that yields a normal rate of profit for the financial regulating capitals In this regard, it is useful to begin with the oldest financial instrument, which is a bank loan.

In order to show that this is indeed the case, Shaikh provides a graph (10.1) of the incremental rates of profit relative to the profit rate for all industries. However, it seems that the graph is only vaguely suggestive, and indeed looks as if the direction of motion is anti-correlated if anything.

More persuasive is the argument that interest rates do not reflect fixed markups on the base rate as is often assumed in standard post-Keynesian literature, a fact that is clearly reflected in graph 10.4

This classical approach is also able to explain a well known empirical conundrum in which bond rate of returns will tend to be below the equity rate of return which is sometimes known as the “equity premium puzzle”.

The Transformation Problem

Perhaps the greatest conundrum in classical political economy is generally known as the transformation problem. This is widely accepted as a serious problem for the labour theory of value, especially as it is presented by Marx. The basic idea is that Marx wants to, using prices of production, relate the total profit rate to the total aggregate surplus value. Unfortunately attempting to form a direct equivalence between these two leads to an inconsistency.

Shaikh lays the blame of this apparent inconsistency on transfers. The concept of transfers originates with Sir James Steuart who identifies “positive profit” and “relative profit”.

Positive profit, implies no loss to anybody; it results from the augmentation of labour, industry, or ingenuity, and has the effect of swelling or augmenting the public good… Relative profit, is what implies a loss to som Cebody; it marks a vibration of the balance of wealth between parties, but it implies no addition to the general stock… the compoud [is]…that species of profit…which is partly relative, and partly positive…both kinds may subsist inseparably in the same transaction.

Marx re-terms these “profit on alienation” and “profit on production of surplus value”. Shaikh demonstrates how changes in relative prices can shift apparent profits by moving things around between the circuit of capital and the circuit of revenue. He gives a number of numerical examples and then claims that it is a general feature of all theories of price.

Odds and Ends

In addition to the highlights provided above, there are a large number of interesting observations, many of them about different schools of thought in economics. One thing that struck me in particular was in reference to the “Cambridge capital controversy”. This controversy between those defending neo-classical approaches and those who believed that there was a fundamental inconsistency in the way in which capital was treated was resolved but in a way perhaps unsatisfactorily for both schools.

Those attacking the neo-classical approach demonstrated that “reswitching” can occur. “Reswitching” refers to the fact that there is no simple monotonic relationship between production method and the profit rate. Essentially the idea is that, for instance, reducing the interest rate could make a production technique move from feasible to infeasible and then again to feasible. This makes reference to capital in concrete physical terms difficult because its value itself depends on the profit rates, a complicated circularity that is hard for neo-classical theories to accommodate. The anti-neo-classicals won the battle, but lost the war. They conceded the fact (as it is a mathematical truth) but claimed that it didn’t really matter in practice.

Shaik looks at both the history of this problem and the more the modern literature. Perhaps surprisingly to those of us who would have been very happy at the disruption to the neo-classical programme caused by reswitching, Shaikh contends that more recent investigations show that it is not a serious problem. Instead, the conditions which lead to reswitching appear to be rare, and difficult to construct, though they are of course technically possible.


There are few who would take on a project as enormous as rejuvenating classical political economy with a work ranging from mathematical developments through empirical verification. However, Shaikh has not only taken up the task but made a remarkable and convincing stab at it. This book should serve as an excellent starting point for further elaborations and investigations in classical political economy; a launching point for a programme to put labour and workers back at the centre of investigations of economics.

Spirit of Contradiction >>

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