Socialist Economic Bulletin

February 2019

Despite himself Trump admits the superiority of China’s socialist economy to capitalism

February 21, 2019 Uncategorized

By John Ross

Major events, such as the Trump administration launching tariff aggression against China, inevitably ruthlessly cut away hollow rhetoric and allow the objective facts of a situation to be seen – including revealing how the different forces in a situation really judge it. A particularly striking example of this principle, with deep implications not only for China but for all countries, is that the reasons given by the Trump administration for launching its trade war against China in fact entirely destroy that administration’s own propaganda that socialism is ‘inefficient’ in promoting economic development compared to capitalism. In reality the Trump administration is forced in practice, as will be shown, to acknowledge that China’s socialism is more effective as a path of economic development than capitalism.

It is certainly deeply ironic that President Trump, an avowed supporter of capitalism, is forced in practice to acknowledge the superiority of China’s socialist system – he is certainly not himself aware he is making this admission! But this reality is immediately demonstrated by the Trump administration’s own claim that China has an ‘unfair’ economic advantage due to the consequences of China pursuing a socialist economic path of development. It is therefore equally ironic that neo-liberal commentators in China attempt to claim capitalism is more efficient than socialism at the time when the Trump administration is forced by economic reality to admit the exact opposite.

This fact that the Trump administration, and large parts of the Western media, are themselves unaware that they are stating the superiority of China’s socialist economic system has no bearing on the objective content of what they are admitting. But examining this contradiction between the Trump administration’s propaganda claims, and the reality it is forced to recognise, casts an important light on the superiority of a socialist economic system compared to a capitalist one.

This article, therefore, examines this gap between what the Trump administration is forced to admit in reality and its propaganda. Given such a contradiction, analysing the logic of Trump and Western media statements, and their internal contradictions, also therefore confirms the practical correctness of China’s socialist choice of development.

But, as will be seen, the issues involved in this economic choice between socialist and capitalist paths of economic development, and of the outcome of the Trump administration’s trade aggression against China, are crucial not only for China itself but for all countries – indeed for humanity as a whole. Furthermore, they give a particularly striking and direct confirmation of one the most important principles of Marxism. Therefore, the internal contradictions in Trump’s and similar claims merit examining in detail – after all, when an opponent of socialism is forced in fact to admit the economic superiority of the socialist system this is something worth analysing and thoroughly understanding!

Slowing China

That the aim of the Trump administration’s tariffs against China is to slow China’s economic development is now either scarcely concealed, or is openly admitted, by both that administration and by anti-China sections of the Western media. Numerous examples could be used to illustrate this so simply two especially prominent ones will be taken for examination here – all similar claims have the same logic.

Taking first a leading example from the media, on 18 October, The Economist carried a long cover story ‘The End of Engagement’ that noted: ‘America fears that time is on China’s side. The Chinese economy is growing more than twice as fast as America’s and the state is pouring money into advanced technology, such as artificial intelligence, quantum computing and biotech. Action that is merely daunting today… say… to challenge China in the South China Sea—may be impossible tomorrow.’

Speaking in August, President Trump himself declared: ‘When I came [to office] we were heading in a certain direction that was going to allow China to be bigger than us in a very short period of time. That’s not going to happen any more.’

However the reality is that facts show, as analysed earlier in Trump’s Economy – Cyclical Upturn and Long Term Slow Growth that the Trump administration has failed to significantly accelerate the US economy’s growth rate. In fact, the opposite situation exists:

Peak growth under Trump is the lowest under any US president since World War II.

US growth during the whole of the current business cycle is the slowest during any business cycle since World War II.

As the Trump administration has been unable to substantially accelerate US growth, therefore the only method available to it to prevent China being ‘bigger than us in a very short period of time’ is to slow China’s development. This is, of course, the reason for the Trump administration launching trade aggression against China.

What Trump is in reality admitting

To achieve this goal of slowing China’s economy the common core demand that President Trump’s administration makes is that China’s state should not intervene in the economy – seen notably in its call for China to abandon SOE’s, the attack on state economic priorities in ‘Made in China 2025’ etc. All these are claimed to give China an unfair advantage in competition with the US.

It is, indeed, perfectly true that China’s state strategically intervenes more in its economy than the US state does in the US economy. That is, as Xi Jinping put it, China uses both the ‘visible hand’ and the ‘invisible hand’ to develop its economy. In contrast, the modern US economy attempts to rely almost exclusively on the ‘invisible hand’. China’s preparedness to use both visible and invisible hands is indeed, of course, a feature flowing from its socialist economic system.

But the contradiction between the Trump administration’s verbal propaganda claims of the efficiency of capitalism, and its actual practical positions regarding the trade war, becomes evident the moment the actual content of Trump’s claims is thought about. Because Trump’s claim that China has an unfair economic advantage simply completely contradict the US propaganda claim that socialism is less efficient than capitalism! For if state enterprises and state intervention in the economy, as part of a socialist system, were less efficient in promoting growth than private capitalism their use would not be an unfair advantage for China – on the contrary state intervention and state enterprises would be a serious disadvantage for China.

If state intervention in the economy, including state enterprises, were really less efficient than capitalism then in fact the best way for the Trump administration to slow China’s economic development would be to call for China to maintain its state intervention in the economy, or even to increase it – not for China to abandon its unfair advantage of state intervention! If state intervention in the economy were really less efficient than private capitalism the greater the state intervention in the economy the slower China’s economy would grow – SOEs, for example, should be a disadvantage for China’s economy not an unfair advantage.

The fact that Trump/The Economist etc claim that state intervention gives China an unfair advantage is therefore in fact an admission that such socialist policies are an economic advantage, not a disadvantage, for China. Naturally Trump and The Economist cannot state this openly, as this would entirely overturn their argument that socialism is less efficient in creating economic development than capitalism. Indeed, so confused are Trump/The Economist, and lacking in self-awareness and understanding of their own arguments, that they certainly do not understand themselves that they are admitting the superiority of socialism in creating economic development. But that is the inevitable and inescapable conclusion of their argument that China is obtaining an unfair advantage by state intervention in the economy – that is, of China’s willingness to use both the visible and the invisible hands in economic development.

The implications for the US

Furthermore, the implications of this de facto admission that socialism gives an advantage in economic development compared to capitalism for the US are obvious and, if considered rationally, produce the exact opposite conclusion to the one the Trump administration advocates. Their logic is that rather than asking China to abandon the unfair advantage of state enterprises and state intervention in the economy, if state intervention in the economy and state-owned enterprise gives China an unfair advantage, allowing its economy to grow more rapidly than the US, then it is urgent for the US to establish SOEs and undertake state intervention in the economy – thereby allowing the US economy to gain the same advantages as China and grow more rapidly! The reasons why the US will not do this are analysed below but, in turn, this allows the real choice facing not only China and the US but all countries to be clearly understood. For what Trump/The Economist, and similar arguments, are in fact admitting is:

1. As they claim state enterprises and state intervention give China an unfair advantage, they are therefore are in reality admitting that a socialist economic system has an unfair advantage compared to a capitalist one – that is why Trump/The Economist demand that China abandon this unfair advantage of its socialist economic system.

2. But if countries adopt a capitalist system, and therefore do not make use of the unfair advantage of a socialist economy, they will grow more slowly. Therefore, what Trump/The Economist are asking is that countries do not adopt the unfair advantage of a socialist economy but instead that they should have a capitalist economy and therefore accept to develop their economy more slowly – i.e. in fact Trump/The Economist argue that the issue of maintaining a capitalist economic system should take priority over the most rapid possible course of economic development.

Speed of China’s economic development

To understand this issue in practice, it is certainly factually true that the admission by Trump/The Economist of the advantage for speed of development of China’s socialist system, compared to a capitalist one, is accurate – as is easily shown by international comparisons.

To summarise the results of the period of development of China’s economy during the construction of a socialist market economy compared to capitalism, from 1978 to the latest available data there are 155 countries, regions or income groups for which there are GDP and per capita GDP data for the period 1978-2017 by standard World Bank classification. As shown in Table 1, during the period 1978-2017, that is the period of China’s socialist market economy, China’s economic growth ranked number one internationally among all countries, regions or income groups. In terms of international comparison China’s GDP growth was:

  • Almost 13 times greater than the US.
  • Over 12 times greater than the EU.
  • Almost 16 times greater than Japan.
  • Almost 7 times faster than the average for developing economies – the overwhelming majority of which are capitalist.

Taking the criteria of per capita GDP growth, as well as total economic growth, China equally ranked number one. In 1978-2017 China’s total per capita GDP growth was:

  • Almost 13 times that of the US.
  • Over 12 times that of the EU.
  • Almost 12 times that of Japan.
  • Almost 9 times that of all developing countries.

In summary, China’s socialist path of economic development showed overwhelming superiority in generating economic development to that of capitalism – whether capitalism is considered in advanced or developing economies.

The Trump administration/The Economist are therefore quite correct to acknowledge the superiority of the results for economic development of China’s socialist system compared to capitalist alternatives. But then it is entirely illogical for them to argue that China should abandon a socialist system, delivering more rapid economic development, and instead adopt a capitalist one which produces slower economic development. The logical choice is for countries growing more slowly to switch to the system producing the most rapid economic development, not for countries enjoying rapid economic development to switch to a system which produces slower growth!

Consequences for humanity

Finally, in order to understand the significance of these issues, and this choice, not only for China but for the whole of humanity it should be clearly grasped that the question of the rate of economic development is not simply, or even primarily, important in terms of ‘concrete and steel’ – that is physical indicators of output. Economic development has overwhelming implications for the social conditions of every country, for national well-being, and for humanity as a whole. Economic development remains the decisive issue confronting most countries – only 17% of humanity currently lives in ‘high income’ economies by World Bank international classification, that is economic development remains the decisive issue for 83% of humanity, and the consequences for the overall well-being of human beings, and of national wellbeing, of economic development is overwhelming.

Taking simply average life expectancy, which is known by economists to be the most significant indicator of overall living and social conditions:

  • The difference in average life expectancy between a high-income economy and a low-income economy by international standards is 18 years.
  • The difference in average life expectancy between an upper middle-income economy by international classification, such as China, and a high income one is over five years.

Therefore, achieving economic development is the key to improving social living conditions. For countries to abandon, or fail to adopt, the unfair advantages of a socialist economic system is therefore literally a life or death question for their citizens. What Trump is demanding by attempting to slow China’s economy is not simply that China should not achieve economic development, but that China should literally condemn its citizens to die earlier than is necessary. Equally, those who claim that countries should not make use of the unfair advantage of socialist development, or attempt to force countries to abandon them, are in fact condemning the majority of humanity to needless backwardness, suffering, and an unnecessarily early death.

Implications for other countries

These real social implications of economic development therefore show why the consequences of the choice of a socialist path of development is of decisive significance not just for China. It is why in defeating the US trade aggression against China the interests of humanity are on the side of China because:

  • China’s rapid economic development creates a stronger global economic dynamic which in turn aids other countries development – while, equally, US success in slowing China’s economy would therefore make it harder for other countries to pursue their own economic development.
  • China has created the world’s most successful path of economic development. No other country can mechanically copy China’s development, but they can learn from it. Success by the Trump administration in blocking China’s socialist path of development would therefore be a setback for every country.

Indeed, the implications of the outcome of the US trade aggression against China go further even that straightforward economics. The US has repeatedly shown that it is prepared to use military force against weaker countries (Iraq, Libya) to engage in de facto military threats even against powerful countries (expansion of NATO up to the borders of Russia, supply of arms to the separatist leaders of Taiwan Province), and to use the unilateral imposition of economic sanctions (Russia, Iran). Success of the US in trade aggression against China would therefore undoubtedly strengthen such US military and geopolitical threats. Detailed analysis of this, however, would take a further full article so here merely the economic logic of the Trump administration’s positions are considered.

The relation of national development and business development

Returning to this purely economic aspect, if those such as Trump/The Economist cannot see that by their claim that China has an unfair economic advantage that they are in reality acknowledging the superiority of the socialist system why are they blind to the logic of their own argument? Because in reality they place class values, those of the capitalist class, above those of the nation or of humanity. Thereby, despite their own wishes, they are in fact forced to confirm one of the most important arguments of Marxism.

This is shown clearly in a criticism of China such as The Economist‘s claim that:

‘Mr Trump is… right that America needs to reset expectations about Chinese behaviour. Today’s trading system fails to prevent China’s state-backed firms from blurring the line between commercial interests and the national interest.’

This alleged confusion by China between ‘national interests’ and ‘commercial interests’ is part of The Economist’s criticism of China’s SOEs. Therefore a criticism that China’s SOEs allow the ‘national interest’ to influence the ‘commercial interest’, and that when there is a conflict the SOE’s place the national interest above the commercial interest. By this, obviously, there is an acknowledgement that in certain situations there may be a conflict between national interests and purely commercial interests.

But if there is a distinction between the ‘national interest’ and the ‘commercial interest’, and The Economist admits there may sometimes be conflicts, which should take precedence? What most people, including in China, would want is that when such conflicts occur the national interest is placed first. The Economist, however, on the contrary makes it a criticism for the national interest to come before the commercial interest. That is, for The Economist the ‘commercial interest’ must come before the ‘national interest’.

But what is this ‘commercial interest’ The Economist is so concerned with? In the West it is, of course, the interest of private capitalist companies – which dominate the Western economies. Therefore, what The Economist is arguing is that the capitalist interest of companies, that is the interests of the capitalist class, should come before the ‘national interest’.

This concept is precisely why the Trump administration/The Economist argue China must not use the unfair advantage of utilising both the visible hand and the invisible hand, that is both the market and state intervention in the economy. The Economist, in line with the Trump administration, are criticising China from the point of view of a framework that in the event there is any conflict between the ‘national interest’ and the ‘commercial interest’, that is between the national interests and the interests of the capitalist class, then the interests of private capitalism must come before the national interest. It is precisely because it has the opposite framework, that the national interest must take precedence of the interests of private capitalism, that allows China’s economy to develop more rapidly than a capitalist economy. The Economist however, in line with the Trump administration, argues capitalist class interests come first – even if this produces slower economic development.

Ironically therefore, although they certainly do not intend to do it, the Trump administration/The Economist in fact prove Marx’s famous formula classically expressed in his Preface to the Critique of Political Economy: ‘At a certain stage of their development, the material productive forces of society come in conflict with the existing relations of production, or – what is but a legal expression for the same thing – with the property relations within which they have been at work hitherto. From forms of development of the productive forces these relations turn into their fetters.’

By arguing that the ‘commercial’, that is the capitalist, interests must come before the national interest, the unfair advantage the Trump administration/The Economist claims that China has is precisely its socialist economy – and its advantages compared to a capitalist economy. What the Trump administration/The Economist are in fact arguing is that countries, starting with China, should not use the advantages of a socialist system but should reduce their rate of economic development to a level compatible with the interests of the capitalist class. In summary the Trump administration/The Economist are, without understanding it, expressing in a completely classical form the contradiction between the class interests of capital and the interests of humanity.

Conclusion

To summarise. From the point of view of China this link between its socialist path of its development and its national rejuvenation concerns the well being of the Chinese people and the Chinese nation. Despite the People’s Republic of China’s gigantic achievements, China started its development from a position where in 1949, after a century of foreign intervention, China was virtually the world’s poorest country – less than 10 countries had a lower per capita GDP than China and its life expectancy was 35. With such a low starting point even the internationally and historically unparalleled economic development created by China’s socialist reform and opening up takes a prolonged period to achieve prosperity for the Chinese people – it will still be two years before China achieves ‘moderate prosperity’ by its national standard and around five years before it achieves the status of a ‘high income economy’ by international World Bank standards. Even with the speed of development of its socialist market economy it will be several decades before China’s living standards reach the highest in the world. The abandonment of the socialist path of development, the acceptance of the demands by the Trump administration, or anyone else, that China abandon its more economically successful path of socialist development, and adopt the slower one of capitalism, would therefore be a catastrophe for the Chinese people and the Chinese nation. It would, as in the former USSR when it adopted capitalism, inevitably lead to the growth of separatism and other deadly threats to the Chinese nation. Experience shows that the weakening of China would encourage the most militarist and other dangerous forces within the US.

But while this issue of the path of development will, of course, be determined by the issue of China’s own national development its consequences will affect every other country. That is why the interests of other countries, and of humanity, coincide with those of China in countering the trade aggression of the Trump administration.

In summary the advantages of China’s economic system only appear ‘unfair’ to the US because the US refuses to embark on a socialist path and clings to the slower path of economic development of capitalism. But in that case why should China abandon a more successful path of economic development – as the deeply illogical demands of the Trump would result in?

There is indeed a deep irony. In its empty rhetoric and media propaganda the Trump administration proclaims the superiority of capitalism and the inefficiency of socialism. But in its practical actions the Trump administration is forced to acknowledge the economic advantage of socialism. Which of these two should be taken more seriously?

As the wise English method of judging says – actions speak far louder than words.

* * *

This article was previously published on Learning from China and originally published in Chinese at Guancha.cn on 28/11/2018.

AOC’s Green New Deal is exactly what’s needed to save the planet

February 18, 2019 Uncategorized

By Fiona Edwards

“Many people ask what a Green New Deal entails. We are calling for a wartime-level, just, economic mobilisation plan to get to 100% renewable energy ASAP.”
AOC tweet, 2 January 2019

Alexandria Ocasio-Cortez (AOC) is proposing that the United States become a global leader in the battle to stop climate change by undertaking a rapid and thoroughgoing economic transformation to drastically reduce US greenhouse gas emissions in the next 10 years. The plan being put forward by AOC calls for the US to launch a massive programme of state investment to bring about a ‘Green New Deal’ and the necessary transformation of the economy away from a reliance on fossil fuels to 100% renewables. It is an approach that directly challenges US President Donald Trump who is currently leading the US in precisely the opposite direction. Under his Presidency the exploitation of unconventional fossil fuels has massively expanded which is causing US carbon emissions to rise at a time when they should be rapidly falling.

As AOC’s resolution to Congress points out, the US has “historically been responsible for a disproportionate amount of greenhouse gas emissions” and continues to contribute enormously to the problem of climate change. The US has a moral responsibility to play a leadership role in resolving the international climate crisis, a crisis that poses an existential threat to human civilisation and which the US has played a major role in creating. In addition to being a responsibility, leading a global effort to decarbonise the world economy does also present the US with a “historic opportunity” to break out of “a 4-decade trend of economic stagnation, deindustrialisation and anti-labour policies” to create millions of good, high wage jobs and “provide unprecedented levels of prosperity and economic security for all people of the United States.”

The scale of the planetary emergency the world is facing was underlined by the International Panel on Climate Change (IPCC) ‘Special Report’ of October 2018 which outlined the disastrous impact a 2 degrees Celsius rise in global temperatures would cause: widespread increase in famines, cities and entire countries submerged in water, deadly heatwaves, forest fires, floods and hurricanes. Global temperatures have already risen by approximately 1 degree Celsius since pre-industrial levels and on the current trends the world is on track for 3.3 degrees Celsius of warming by the end of the 21st century. Humanity is currently losing the battle to stop catastrophic climate change. Urgent and massive action is needed to limit global warming to a ‘safer’ 1.5 degrees Celsius rise and major strides forward are needed within the next decade.

In light of this reality AOC’s assertion that the ‘Green New Deal’ is “going to be the Great Society, the moonshot, the civil rights movement of our generation” is not over-blown rhetoric but entirely, as she has put herself, “the scale of the ambition that this movement is going to require.”

In the FAQs section of her draft ‘Green New Deal’ published at the end of 2018 AOC made clear the scale of the investment required to bring about a massive transformation to decarbonise the US economy, citing that “at least $1 trillion” would be needed. She is also made clear about the fact that the state will need to play a “big role” in driving and making such investments.

On how to raise the funds required, her draft proposal stated:

“Many will say, “Massive government investment! How in the world can we pay for this?” The answer is: in the same ways that we paid for the 2008 bank bailout and extended quantitative easing programs, the same ways we paid for World War 2 and many other wars. The Federal Reserve can extend credit to power these projects and investments, new public banks can be created (as in WW2) to extend credit and a combination of various taxation tools (including taxes on carbon and other emissions and progressive wealth taxes) can be employed. In addition to traditional debt tools, there is also a space for the government to take an equity role in projects, as several government-affiliated institutions already do.”

AOC’s widely publicised proposal to increase tax on the super-rich to help fund the ‘Green New Deal’, by raising the top marginal tax rate to 70% for those that make above $10million, has been very well received by the US public.

Some have dismissed AOC’s ‘Green New Deal’ as unrealistic. On the contrary, the ambition of the ‘Green New Deal’ – to make a rapid transition to 100% renewable energy and abandon fossil fuels – is entirely consistent with the what the IPCC says is necessary. The world’s carbon emissions must collectively start decreasing now and half from current levels by 2030 and this can only be achieved through the rapid phasing out of fossil fuels which must be replaced by an enormous expansion of renewable energy. And as Dean Baker points out, China is delivering its own Green New Deal right now through enormous, on-going state investment in renewables and electric cars.

It is Donald Trump’s approach that is completely unrealistic and out of step with what the international scientific consensus states is required. The US is now the number one producer of oil and gas in the world as a result of the “fracking revolution” which has seen production of unconventional fossil fuels soar. It’s a trend that the International Energy Agency is anticipating will deepen, with expectations that the US will be responsible for 75% of global oil growth and 40% of global gas growth over the next 6 years. The result of Trump’s policies on climate change has been to increase US carbon emissions, which rose by 3.4% in 2018.

Trump and the fossil fuel industry argue that aggressive exploitation of fossil fuels is necessary for economic development and that green policies are damaging to prosperity.

In reality massive state investment for a ‘Green New Deal’ could get the US economy out of its stagnation and provides a route to improving living standards as well as tackling climate change. As AOC put it in a public event on the climate change in December 2018:

“The idea that we are going to somehow lose economic activity… As a matter of fact it’s not just possible that we will create jobs and economic activity by transitioning to renewable energy but it’s inevitable that we are going to create jobs. It is inevitable that we are going to create industry and it’s inevitable that we can use the transition to 100% renewable energy as the vehicle to truly deliver and establish economic, social and racial justice in the US. That is our proposal.”

AOC’s ‘Green New Deal’ proposal is exactly the ambitious approach needed to save the planet and achieve a decent standard of living for all and it is the type of approach that Jeremy Corbyn and the Labour Party front bench are also pursuing in Britain.

Jeremy Corbyn is right to demand Britain is in a Custom’s Union with the EU

February 12, 2019 Uncategorized

By Tom O’Leary

The importance of Britain being in a Customs Union with the EU is highlighted by the recent exchange of letters between Jeremy Corbyn and Theresa May. Jeremy Corbyn has focused on blocking a ‘No Deal’ outcome, which would be extremely negative for jobs and living standards. He has also set out his support for being in a customs union with the EU. Theresa May continues to threaten No Deal and rejects being in a permanent customs union, it being one of her key red lines.

Although there is much else in the exchange of letters which is also important to note, the principal issue examined here will be the one that Jeremy Corbyn raises, which is the vital necessity of being in a Customs Union with the EU.

Corbyn’s letter demands significant changes to the Political Declaration (which offers an outline of the future relationship with the EU) and insists that these changes need to include, “A permanent and comprehensive UK-wide customs union. This would include alignment with the union customs code, a common external tariff and an agreement on commercial policy that includes a UK say on future EU trade deals. We believe that a customs union is necessary to deliver the frictionless trade that our businesses, workers and consumers need, and is the only viable way to ensure there is no hard border on the island of Ireland. As you are aware, a customs union is supported by most businesses and trade unions.”

The full text of Corbyn’s letter is here. May’s letter rejects this, and falsely claims that the Political Declaration continues the same benefits as the customs union. This is blatantly untrue, as the Political Declaration says only that those same benefits are desired, without any mechanism to achieve that. May’s letter is here.

The nature of the EU

There is no useful purpose, either for serious analysis or promoting the interests of the working class, to suggest that the European Union is anything other than a capitalist club. It is not, as Will Hutton and other propagandists claim a repository of Enlightenment values. First these so called ‘Enlightenment values’ were used to create the greatest colonial Empires the world has ever seen. In the famous words of Gandhi when asked what he thought of Western civilization he replied ‘it would be a good idea’. Today it remains a sickeningly bad joke in light of the EU’s treatment of refugees fleeing across the Mediterranean, its treatment of Greece, the imposition of austerity across the Eurozone and much more besides. The false claims as to the EU Enlightenment project also acts increasingly as a cover for an intensification of vile Islamophobia, antisemitism and other forms of racism within Europe.

The purpose of the EU is to enhance and develop the interests of capital, most powerfully German capital, across the continent of Europe. But this development is multi-faceted in the way that the development of capitalism is in general. So, a new factory will usually entail increased labour exploitation and environmental degradation. Yet socialists do not stand against the construction of the new factory and do welcome the jobs, but instead argue for the best possible pay and conditions for all the workers in it, for environmental protections, other safeguards, and so on. Where and when it is possible, socialists are in favour of the factory passing into the hands of the workers.

The nature of a customs union

All goods and services operate in a market, irrespective of whether the producers or consumers understand that as such. For the most advanced manufactured goods in particular that market is increasingly internationalised, even globalised.

The internationalisation occurs at three different levels.
· First, there is the production of inputs for final production, which is everything from basic raw materials to the most sophisticated machinery, equipment or software.
· Secondly, there is the production of finished goods themselves which can take place at a number of different locations internationally.
· Thirdly, there is the market for the goods themselves, where the size of the market is decisive for the efficiency of the production and the Investment that is required.

The production of many services is less easily internationalised for many reasons, including language barriers and lack of labour mobility, although some services such as finance, travel etc are highly internationalised and increasingly legal and accounting services are also heading in the same direction. Many others, such as entertainment services, some aspects of design and publishing are developing in the same way.

The alternative to the customs union

Because the British economy already participates in the Customs Union with the EU and the Single Market, refusal to have any Customs Union with the EU amounts to a protectionist measure, a reduction in this economy’s openness to international trade. The Brexiteer fantasy that barriers to trade with the EU economy can be compensated by trade deals with other countries is mathematically unlikely as the EU constitutes approximately half all trade in goods. But it also ignores that fact that over 60 trade deals with third countries will in fact be ripped up by no longer being a Member of the EU. Trade deals with those countries, most especially the US, but also Japan, South Korea and other countries will have to be renegotiated from a relatively weaker position.

The increasingly internationalised production of manufactured goods has also become a hot topic in the United States because of Trump’s trade wars and protectionism. But Trump’s protectionism in favour of the autos sector has foundered precisely because so much of the content of US-marque cars that are finished in the US is from Canada, Mexico and other countries.

However, these ‘American-made’ cars are actually globally-produced. The 2017 Ford Focus, for example, is built in the United States, but only gets 40% of its parts from the U.S. and Canada, according to Federal data. At the other extreme, only 5% of the parts for 2017 BMW 7 Series Sedan were made in the US. The rest was made in Germany. For some time, the leading automakers in the ‘motor city’ of Detroit have been Japanese, outstripping the production of US marques.

At most, Trump’s protectionist measures (which have been underpinned by huge tax breaks for companies and the rich) have only deferred the further internationalisation of production. Yet the IMF has noted that they could knock $430 billion off global output.

Trump once tweeted that trade wars are easy to win for a country which runs sizeable trade deficits:

Of course, if there was one big set of factories in the US producing cars and another set in Canada and Mexico, then his protectionism might possibly have the impact he desires. Instead, his policy simply interrupts the efficient socialisation of production, in favour of a failed attempt to re-organise it on a national basis. By far the most important effect of his policy is to raise the cost of production in the US, which raises prices to US consumers more and therefore increases the competitive threat to US jobs in cars and associated industries.

A key impediment to the development of these fundamental trends is the existence of tariff and non-tariff barriers (which include product standards, local content rules, and other factors which are all subject to inspection regimes). A customs union operates to remove the tariff barriers between two different economies.

Unfortunately, there are romantic notions in left circles in Britain and Europe that would wish away the concrete issues raised by the existence of multinational or even global supply chains. It is unrealistic to believe workers’ control or ‘Lucas plan’ ideas in relation to current, complex manufacturing supply chains that dominate aerospace, cars, pharmaceuticals and other sectors can ignore these realities. As described in a previous article, aerospace and other advanced producers rely on a vast flow of inputs as part of the production process. It would require a vast, entirely unfeasible level of investment to recreate those on national territory, and for a national market that is simply too small to support even the current level of output.

Outside a Customs Union

It is clear that simply to attempt to retain key producers after Brexit, a large increase in public expenditure on subsidies would be required – as this government has already done with Nissan. Even though Ministers attempted to keep the deal with Nissan secret, it was later revealed that is was a subsidy of £80 million. Crucially, with the threat of No Deal still not removed, that subsidy was not enough to get Nissan to meet its commitment to producing new models at its Sunderland plant. As Jeremy Corbyn put it replying to Theresa May in Parliament on 12 February: ‘The Prime Minister has just told members of this House to hold their nerve. Tell that to Nissan workers in Sunderland and the thousands more worried about their job security”.

In the event of No Deal, which means having no Customs Union with the EU, the scale of the compensation needed to offset new tariffs on cars is equivalent to the carmakers’ wage bill. This is untenable over the medium-term as it would be cheaper for government to pay the workers directly. Outside a Custom’s Union with the EU similar these problems would be multiplied in numerous industries.

In general, without the reactionary political interventions from the likes of Trump and the Hard Brexiteers, the underlying economic trends are for greater trans-continental and even global production. A leading Italian transport services provider last year announced the first ever regular roll-on, roll-off route between North America and the Mediterranean. It will be used primarily to connect Turkish to European car production, and then connect the latter to Canada, the US and Mexico. These are the fundamental economic trends the protectionists like Trump and the Hard Brexiteers are attempting to fight.

Marxist theory

Marxism explains these fundamental economic trends. Despite being frequently asserted, it is not the case that Marx begins his analysis of capitalism with analysing only capitalist production. This is for the very good reason that production is not unique to capitalism. It exists in all more primitive societies, feudalism and slavery, and will of course exist under socialism. Production is a given in every form of society.

Marx actually begins ‘Capital’ with what is unique to capitalism, the transformation of commodities into their universal equivalent of money, thus enabling ‘generalised commodity production’. This is decisive in this context if it is recalled that Marx demonstrated that commodities first appear through trade, through exchange.

So, in concluding Chapter One of Volume 1 of Capital Marx writes,
‘As a general rule, articles of utility become commodities, only because they are products of the labour of private individuals or groups of individuals who carry on their work independently of each other. The sum total of the labour of all these private individuals forms the aggregate labour of society. Since the producers do not come into social contact with each other until they exchange their products, the specific social character of each producer’s labour does not show itself except in the act of exchange. In other words, the labour of the individual asserts itself as a part of the labour of society, only by means of the relations which the act of exchange establishes directly between the products, and indirectly, through them, between the producers. To the latter, therefore, the relations connecting the labour of one individual with that of the rest appear, not as direct social relations between individuals at work, but as what they really are, material relations between persons and social relations between things. It is only by being exchanged that the products of labour acquire, as values, one uniform social status, distinct from their varied forms of existence as objects of utility’.

Exchange, of which international trade is one large scale form, is central to the production of commodities. Goods only become commodities through that exchange. Not only is it impossible in the modern era to maintain efficient production on a national basis in an economy of Britain’s scale, it is also impossible to produce efficiently without international exchange. Incidentally, it will be even less possible in an advanced socialist society.

Socialists, and a government pursuing progressive socialist policies, have no interest in the political structures of the EU – which are designed to be as little democratic as possible. But they, and the working class of this country, do have an interest in ensuring access to the markets of the EU. That can be gained either through remaining in the EU, for purely economic and not political reasons, or via a custom’s union and ‘close alignment with the single market’.

As Jeremy Corbyn put it in Parliament on 12 February: ‘In order to stop the UK falling into the backstop you need a permanent customs union and a strong single market deal. That is key to maintaining an open border on the island of Ireland. That is key to protecting jobs, industry and living standards in this country.
‘The Prime Minister says there is no need to negotiate a customs union as her deal provides for the benefits of being in one. I’m afraid… that is simply not the case.
‘The deal the Prime Minister negotiated means there will be barriers to trade in goods and there will not be frictionless trade. Putting manufacturers across the country at a huge disadvantage.’

This is why May’s threat of No Deal and refusing a customs union is a deeply damaging policy, and why Jeremy Corbyn is entirely right to insist on a customs union with the EU.